The Queensland business community has today greeted the State Budget with caution.

This Budget delivers vitally needed infrastructure and commences the long process of re-establishing a competitive tax environment, but offers only limited monetary benefit to individual businesses.

Queensland businesses are currently doing it tough, with business confidence at a seven-year low and consumer sentiment is also in decline.

Businesses are grappling with higher interest rates, rising fuel prices and the rapidly changing economic environment has further compounded the challenges of doing business.

Commerce Queensland supports the State Government continuing to invest in the building blocks for the state's economy, in particular infrastructure and employment and training to address skills shortages.

Ideally it would be best if the State Government did not need to borrow for a massive infrastructure upgrade, but the use of debt financing for key projects generates long-term benefits for the state, which can become the cornerstone to support greater economic and social prosperity. 

Borrowing at this rate is unsustainable and eventually the state will have to revert to running surpluses to ensure the Queensland’s credit rating is not downgraded.  Commerce Queensland will monitor this situation closely.

State taxes remain the key issue for business. The State Budget papers today confirm Queensland is no longer the low tax state and is now in the middle of the pack.

This affects individual businesses as well as the state's overall competitiveness to attract and retain investment.  Further steps to improve our position in the tax rankings will have to be taken to promote ongoing economic growth as has occurred in Victoria and New South Wales.

Commerce Queensland strongly supports the move to extend the payroll tax emption threshold to companies with a payroll of $5 million.  This initiative will benefit more than 6,800 businesses saving $20 million.

To put this in perspective there are a total of 405,000 businesses in this state and it is estimated that $2.7 billion will be collected in payroll tax in 2008-09.  This Budget is only a start of what has to occur and we will watch with particular interest the State Government’s involvement in the Henry Review of Taxes.

The business community has been sent a measured message that the State Government is conscious of the need to enhance the competitiveness of the state’s business operating environment through both infrastructure spending and committing to review state taxes.

It is a question of whether the initiatives announced today are enough to improve the confidence within, and the performance of, the Queensland Economy. 

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The General Government sector is forecast to have a headline net operating deficit of $995 million in 2007-08.  This is primarily due to the subdued performance of investment markets, which has impacted on the returns the State receives on the substantial funds set aside to meet future liabilities.

The 2008-09 budgeted net operating surplus for the General Government sector is $809 million with a strong surplus of $540 million in 2009-10 and a surplus of $265 million by 2011-12.

Cash deficits in the General Government sector are projected for each year across the forward estimates and are the result of the State's significant planned capital expansion.

The State's capital program is an estimated $17 billion, a 19% increase on 2007-08 estimated outlays. The capital outlays of Public Non-financial Corporations (commercial) sector entities constitute approximately 52% of total outlays in 2008-09.

The State's net worth is forecast to increase to $128.563 billion in 2008-09 and rise to $140.243 billion by 2011-12.

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The Queensland economy is estimated to expand by 3.75% in 2007-08 and exceed growth nationally for the 12th successive year.

Economic growth in Queensland is forecast to strengthen to 4.25% in 2008-09, compared with an anticipated moderation in growth for the nation as a whole.

Queensland is forecast to experience some rebalancing in economic growth, with improved trade sector performance and stronger growth in business investment more than offsetting an easing in household consumption growth.

Capacity expansions and improved weather conditions are forecast to drive exports growth of 4.25% in 2008-09, the strongest rate in four years. Business investment is forecast to grow by 9.25% to a total of $36 billion, representing a doubling in real investment over the past six years.

Reflecting some easing in domestic demand growth, jobs growth is forecast to ease to 2.75% in 2007-08 and 2.5% in 2008-09. This growth still represents an increase in employment of more than 105,000 persons over the two years.

The State’s year-average unemployment rate is estimated to fall to a 34 year low of 3.75% in 2007-08 and remain there in 2008-09, representing a rate well below that nationally for the fifth consecutive year.

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Total General Government sector revenue is estimated to be $36.582 billion in 2008-09. The increase of $4.306 billion (or 13.3%) on 2007-08 estimated actual revenue primarily reflects increased coal royalty revenue, along with moderate growth in taxation revenue, relative to recent years.

The land tax schedule will be revised and simplified from 1 July 2008, reducing the number of rate bands from five to three for resident individuals and from four to two for companies, trustees and absentees.

The amount of tax payable at the land tax threshold will be reduced from $1,200 to $500 for resident individuals and reduced from $2,250 to $1,450 for companies, trustees and absentees.

Employers with eligible wages between $1 million and $5 million will benefit from an extended payroll tax deduction, from 1 July 2008.

Overall, the tax changes will result in a net tax reduction of $157.4 million in 2008-09.

A two tier royalty on coal will be introduced from 1 July 2008, with the current 7% rate to apply to coal revenue up to $100 per tonne, with a higher 10% rate to apply to the portion of revenue above $100 per tonne.

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• Estimated capital spending of more than $17 billion in 2008-09 – a 21% increase on the 2007-08 Budget - supporting some 119,000 full-time jobs.
• Capital outlays include:

  • $6.968 billion for transport and roads, including Airport Link;
  • $1.024 billion for health;         
  • $929.7 million for education, training and the arts;
  • $2.551 billion for water; and
  • $3.108 billion in energy infrastructure.

More specifically includes:

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In 2008-09, the State Government will continue its key vocational education and training activities by continuing to implement the Queensland Skills Plan to help address skills shortages through:

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The Budget invests $120 million over four years ($25 million in 2008-09) for the SmartState Strategy 2008-2012 to focus on attracting and retaining researchers, developing and commercialising ideas, and encouraging collaboration between the industry and research sectors.

Significant initiatives under this strategy include:

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The State Government has prepared the following regional budget statements:

• Far North Queensland
• North Queensland
• Mackay and Whitsunday
• Fitzroy
• Wide Bay and Burnett
• North Coast
• Western Queensland
• Darling Downs and West Moreton
• Brisbane
• South Coast

To view the regional budget statements, visit www.budget.qld.gov.au/regional-budget-statements/index.shtml.

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The full range of Budget papers, incorporating the Budget Speech, Budget Strategy and Outlook, Capital Statement and Regional Budget Statements is available on the State Budget 2008-2009 website, www.budget.qld.gov.au.

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In the lead up to the 2008 - 2009 State Budget Commerce Queensland prepared a blueprint document for the economic development of the Queensland economy which identified 50 key recommendations that must be implemented to continue leading Australia as a powerhouse State.

A key challenge for the State Government must be keeping Queensland's economy competitive in the face of fierce interstate and overseas competition as well as providing infrastructure for a State where an extra 1.2 million people will be living by 2026. The rapidly changing economic environment now confronting Queensland in terms of the national economy coming off the boil will further compound these challenges.

However, we must respond to these challenges in a concerted and decisive manner. Queensland must lay the foundations today if the State is to ensure that it continues to enjoy strong economic growth and prosperity well into the future. Quite simply there is no substitute for good forward planning and timely action.

Commerce Queensland urged the State government to:

• Manage the State's finances in a fiscally responsible manner.
• Implement a business tax regime which is the most competitive of all states.
• Ensure that essential public infrastructure encourages economic growth and maximises the use of the private sector.
• Ensure that charges imposed by public utilities are the most competitive of all states.
• Provide a range and level of Government services which meet reasonable community expectations at a cost consistent with best practice.

Priorities

Commerce Queensland recognised that the adoption of all the recommendations within the Blueprint could not be implemented immediately and accordingly shortlisted those actions that should be implemented in the 2008-2009 State Budget:

• A reduction in the payroll tax rate from 4.75% to 4.5% to ensure Queensland remains the most competitive state.
• The removal of the diminishing exemption threshold to be replaced by a flat exemption threshold set at least at $1 million and to be indexed to annual wages growth.
• Employers to be eligible to offset from their payroll tax wages and salaries base expenditure on broader business training to assist with the state's skills crisis.
• Stamp duties on first home purchases for targeted skilled international and interstate migrants to Queensland should be removed.
• A significant increase in assistance and broadening of criteria used under the Business Water Efficiency Program (BWEP) and the extension of the Home Water Wise Program to business.
• Tougher rules for the making of new regulations, including rigorous cost benefit analysis requirements and the adoption of a 'one in one out' approach to regulation whereby policy makers can only introduce a new regulation if they remove a redundant or superseded regulation.
• Introduction of an annual regulatory statement in the State Budget to review the regulations that have been introduced in the previous year and are planned to be introduced in the coming year for business.
• Establish a one-stop shop, both online and on the ground, for business to access State Government.

Commerce Queensland believes it was an imperative that the 2008-2009 State Budget demonstrated to the Queensland businesses that creating a supportive environment where business can grow and innovate is a continuing priority of this Government.

Related links

• Commerce Queensland's Submission to the 2008-09 State Budget (PDF)
• Business Priorities for Taxation Reform (PDF)
• Commerce Queensland policy submissions

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