RP Data’s Cameron Kusher makes some good points regarding the risk to the budget from relying on stamp duty revenue, which varies with the total value of property sales, as reported in the Townsville Bulletin yesterday (Governments facing stamp duty shortfall):
GOVERNMENTS are likely to seek new ways to raise revenue following a major drop in the value of property sales across the nation in the 2010/11 financial year, according to RP Data.
RP Data says the value of home sales across Australia fell by 18.2 per cent in the 2010/11 financial year, the largest annual fall in more than a decade, with Queensland recording the largest drop of 27.5 per cent…
…RP Data’s Cameron Kusher says state and local governments are heavily reliant on property transactions as a source of revenue, with stamp duty, council rates and land tax calculated off either the unimproved value of land or the value of a property transaction.
“With the total value of sales down by 18.2 per cent over the 2010-11 year, there will be substantial holes in state and local government budgets,” he says.
To an extent, Queensland Treasury has already taken this into account in its budgetary estimates. At the time of the 2010-11 Budget in June 2010, Treasury was forecasting total stamp duty revenue of $2.2 billion in 2010-11. But at the time of the 2011-12 Budget in June 2011, Treasury had revised this forecast to $2.0 billion (i.e. a reduction of around 9%). RP Data’s figures suggest a further revision is possible and this could increase the 2010-11 deficit by several hundreds of millions of dollars.
I expect the property market (and stamp duty revenue) will rebound strongly over the current financial year as the full impact of the resources boom starts to flow through the Queensland and broader Australian economies. Stamp duty revenue is also being bolstered in 2011-12 by the removal of the principal place of residence concession. On this issue, see my previous post: