Qld’s bolshie budget – my latest thoughts

Reading the Courier-Mail’s latest state budget reporting, quoting Cameron Dick as a self-proclaimed Robin Hood Treasurer, it’s clear the state government no longer gives a damn what business thinks. It’s gone full-on economic populist with its royalties hike ($1.2bn over four years) and its payroll tax hike ($1.4bn over four years) masquerading as a Mental Health Levy, as if mental health problems are the fault of business alone. I would argue that, by providing jobs, business overall is making a great positive contribution to mental wellbeing. We know from decades of empirical research that unemployment is a major life stressor and contributor to mental illness.

In fairness, I should note the state government is providing some relief to businesses with payrolls of under $10 million, but overall it’s increasing the burden of payroll tax on Queensland business collectively. Over the forward estimates to 2025-26, the Mental Health Levy will bring in $1.4 billion while its payroll tax relief for smaller businesses is only worth $210 million (see page 25 of Budget Paper 4).

The state Treasurer argues that it’s only fair that big business ($10M+ in payroll by his definition) pays more, given it has done well in recent years, especially with the overly generous JobKeeper. Sure, vertical equity, that those with a greater ability to pay should pay more in tax, is a well-established principle of taxation. But governments need to be mindful they don’t unduly burden business with additional taxes that either: a) reduce their profitability and capacity to invest and expand, costing jobs b) they pass onto consumers by hiking prices, contributing to inflation, and reducing their interstate and international competitiveness, or c) they pay for partly by paying their workforce less than otherwise in the future.  

Tax per capita remains lower in Queensland than in NSW and Victoria, but we lost the Low Tax State label, for the state with the lowest tax burden, over a decade ago, and SA, Tasmania, and NT now have lower tax burdens (see Chart 4.5 on p. 97 of Budget Paper 2). 

Regarding royalties, one point I forgot to mention in yesterday’s post is that Queensland’s royalty regime was already delivering a greater share of the value of our minerals to taxpayers than those in other states, according to Michael West Media estimates produced last year:

“Western Australia, Australia’s largest commodity exporting state, captures just 5% of its commodity export value as royalties.

In comparison, over the past 10 years, Queensland’s royalty scheme has collected double that – 10% of the total commodity export value. In fact, in 2020, royalty payments reached a record 15% of export value.

Queensland is followed by the Northern Territory at 8%, New South Wales at 7% and South Australia at 6%.”

It wasn’t obvious we were missing out and needed higher royalty rates, but the Queensland Government needs to fund its various SEQ-centric vanity projects such as Cross River Rail and Olympics infrastructure, and the miners looked like an easy target. After all, many of them are foreign-owned and they’re contributing to climate change they were probably thinking in 1 William Street. 

Finally, one of my long-time regular readers has asked me:

“My question on the energy generators… Qld Govt is going to reap huge dividends from them but nothing will be passed onto Qld tax payers… why is this so?”

This is well observed (see Chart 1). While the Government is providing a one-off $175 cost of living rebate, as announced last month, it can’t do much more because it needs to fund the aforementioned vanity projects as well as fix up the state hospital system, among other problems. I’d also note that current financial year (i.e. 2021-22) dividends are less than previously forecast last December as the Government is allowing government-owned corporations to retain some of their profits for reinvestment in new assets and refurbishment of existing assets (i.e. to ensure we have working generators and a reliable power grid), as the Government notes on page 160 of Budget Paper 2. 

Please feel free to comment below. Alternatively, you can email comments, questions, suggestions, or hot tips to contact@queenslandeconomywatch.com. Also please check out my Economics Explored podcast, which has a new episode each week.

This entry was posted in Budget and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s