Queensland Deputy Premier and Treasurer Jackie Trad and her senior Treasury officials will be vexed by the implications of the shock federal Coalition victory yesterday for Cross River Rail funding and the state budget. I expect Trad and state Treasury were counting on a couple of billion dollars from a Shorten federal government to help pay for Cross River Rail. The state government will now have to borrow more money if Trad wants to fund the project. On Friday, Mark Ludlow from the AFR speculated:
Prime Minister Scott Morrison’s decision to deny funding for Queensland’s number one infrastructure project, the $5.4 billion Cross River Rail in Brisbane, could hurt the Coalition as it attempts to hold a string of key seats in the state’s south-east corner in Saturday’s election.
When Bill Shorten and Labor last year committed $2 billion to the congestion-busting project in Brisbane’s CBD, there was an expectation the Coalition would eventually match it, even as late as during the election campaign.
It appears that very few Queenslanders care about Cross River Rail in inner city Brisbane. Many more Queenslanders were obviously concerned about proposed changes to negative gearing and the taxation of capital gains, and the refundable nature of franking credits. Labor’s perceived opposition to the Adani mega mine also appears to have played a role in its defeat in regional Queensland.
The federal election result is devastating to Trad’s fiscal plans. Given that recent upward revisions to coal royalties (see this QRC media release) have been offset by reductions in stamp duty revenues associated with a slowing property market (see this ABC News report), I expect the state government is still on a path to $80-85 billion of debt in the early 2020s. Trad has been relying heavily on a change of federal government and will now have to revise her plans. The state budget is due to be handed down on Tuesday 11 June. State Treasury officials should be expecting some long days at the office over the next few weeks.
The Cross River Rail project in inner city Brisbane