I raised my eyebrows when I read Queensland Treasurer Cameron Dick’s acknowledgement to the media today that there would be new “significant borrowings” in the forthcoming 2020-21 state budget (see the Courier-Mail report). Describing the additional borrowings to be revealed on Tuesday as “significant” is a bit of an understatement. It’s pretty clear the budget will have to reveal at least $10-15 billion in additional borrowings out to 2023-24, as Joe Branigan and I projected in our Qld Budget Update Report for the Australian Institute for Progress back in September. It could be an even greater amount, say an additional $20 billion, if there are new spending programs or state Treasury makes relatively pessimistic assumptions about the economic outlook. China trade tensions are a major concern, obviously.
I should note there appears to be some confusion in the media around what the Treasury has revealed about the budget outlook so far. The media often reports the
$4 billion of borrowings associated with the funding of the Government’s election commitments, as if that was all the additional borrowing the Government was undertaking. But that $4 billion was just for the new loan initiatives revealed in the September COVID-19 Fiscal and Economic Review and for $3 billion of election commitment which at the time were not announced. It was additional to the borrowing necessary to pay for the emergency measures the government had previously announced and to cover the loss of revenue associated with the COVID-recession. The total additional borrowing the Government revealed in its COVID-19 Fiscal and Economic Review, relative to the Mid Year Fiscal and Economic Review from last December, was actually $18 billion. The $4 billion was part of that much larger amount.
The $18 billion in additional debt (more-or-less all in the general government sector, I should add) gives us a good indication of the starting point for Queensland’s state debt to be revealed in the forthcoming budget. In the December 2019 MYFER, Queensland Treasury projected total (non-financial public sector) debt would rise to around
$92 billion by 2022-23. Add the $18 billion debt blow out (revealed in the September update) on to that and you get $110 billion by 2022-23. Then you need to add at least a few billion to cover the deficit in 2023-24, a year which is now included in the forward estimates, as well as borrowings to make up for revenue shortfalls in 2021-22 and 2022-23.
So, the 2023-24 total state debt will be at least $10-15 billion higher than the
$102 billion total for 2020-21 revealed in September. Based on our budget projections model, which also accounted for loan repayments by businesses to the state government, the range Joe and I gave for total state debt in 2023-24 was
$113-118 billion. It could end up being much higher, but there is very little chance it would be any lower than this.
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