As well as confirming Australia is in a deep recession, with a 7% fall in GDP in June quarter, the National Accounts published by the ABS earlier today revealed Queensland state and local governments (mostly the state government) are spending big in their COVID responses. In the chart below, check out the 7.5% growth in Queensland state and local general government consumption spending, which includes employee expenses, in June quarter, the highest growth rate in Australia.
We’ll learn more about what’s been happening when the Queensland Government publishes its budget update next Monday. So far the Government has only disclosed part of the story, such as estimated net operating balances (see the Treasurer’s 23 July update and this briefing from Nick Behrens). Expect lots of red ink, with a deterioration of up to $20 billion in fiscal balances (the budget balance including net capital spending) over 2019-20 to 2023-24, as taxes, royalties, and GOC earnings have plunged and spending has surged, including $6 billion in stimulus/emergency measures. We will probably see fiscal deficits of around $10 billion in 2019-20 and $14-15 billion in 2020-21 with total state debt climbing to $105-110 billion by mid-2024. General government debt will approach $70 billion and the interest bill will climb toward $2 billion a year.