The Mid-Year Fiscal and Economic Review released this afternoon (download here) will have made happy reading for QLD Treasurer Curtis Pitt. Surging coal royalties have resulted in a better than expected surplus and allowed the government to “splash some cash” ahead of a probable election next year.
Although the fiscal position has improved, the expectations for most economic indicators remain unchanged from the Budget (see below) except for employment growth which is now forecast to grow at only half the rate forecast at Budget time (without any adjustment to expected unemployment rate, this would suggest that Treasury are expecting the Participation Rate to fall further). The Gross State Product outcome for 2015-16 is given at +3,2% which was the Queensland Treasury result; the ABS came in at +2%. The Review notes this difference and we have written on the subject of the difference recently (see here).
The additional $1.5 bn in coal royalties sees the fiscal position improve sharply in 2016-17 although the increases to future years is much less. Clearly there is a realisation in Treasury that the coal wind-fall is unlikely to persist. Some of the additional revenue has been earmarked to an expansion of the regional jobs program as well as the (much talked of) $20m over 2 years for the Made in Queensland manufacturing program. The net result is a $1bn improvement to the bottom line. Pitt should be a happy man tonight.
However, there was also an acknowledgment of the two-speed economy that we have been highlighting for some time and the inclusion of additional funds for regional (and particular youth) jobs was supported by the chart below; similar to ones that we have been promoting for months.
UPDATE: More on the MYFER from Gene Tunny at Adept Economics here.