State to lose $345M in GST revenue
THE Palaszczuk Government's anaemic Budget will be bled of $345 million in forecast GST revenue this year after drought, trade tensions and frugal spenders weakened the Australian economy.
Treasurer Josh Frydenberg yesterday revealed in his mid-year economic update that the states would receive almost $10 billion less in GST cash over the next four years, but trumpeted billions of dollars in infrastructure spending to help spark employment.
Mr Frydenberg championed the resilience of the economy, pointing to better days ahead, despite almost $22 billion being slashed from budget surpluses over the four years.
However, the Morrison Government says it is still on track to be in surplus this financial year - albeit revised down from $7 billion to $5 billion, prompting industry and Opposition calls to start spending to boost the economy.
The Commonwealth Government Mid-Year Economic and Fiscal Outlook (MYEFO) reveals Queensland Government coffers will be stripped of $345 million in GST revenue this year alone. The MYEFO does not include four-year projections of individual states' GST revenue - only projections for this financial year - however, last week the Queensland Government released its own mid-year review, downgrading its forecast GST revenue by $824 million to 2022-23.
The Commonwealth will hand Queensland $13.8 billion in GST revenue this financial year - $140 million less than what the State Government budgeted for in its own mid-year update.
Mr Frydenberg said the reduction in GST receipts shouldn't be a surprise.
"(GST revenue is) lower than the states would have hoped, indeed the Government would have hoped, but, in fact, they're pretty consistent with where the states have been forecasting it," Mr Frydenberg said.
The economic heartburn has cruelled Prime Minister Scott Morrison's ambition to abolish net debt by 2030, with updated figures showing net debt about 2 per cent of GDP in 2030.
While household spending is weak, the Commonwealth forecasts released yesterday predict it will pick up as consumers reduce their savings.
Finance Minister Mathias Cormann moved to allay fears about wage growth, which has continued to frustrate households.
"Disposable incomes are growing at their fastest rate in more than 10 years and we remain on track to return to surplus this financial year," Senator Cormann said.
"That is even after significant revenue write downs, after legislating significant income tax relief, after continuing to provide record funding for the essential services Australians rely on, and after the additional investment into key priority areas in this budget update."
Iron ore continues to buffer the economy, especially while the Government maintains its conservative price estimations.
And while company tax receipts this year have been slashed by $700 million - $7.9 billion over the next four years - the updated figures do not consider Boris Johnson's crushing election victory and potential end to Brexit uncertainty, or a potential ceasefire between the US and China on trade.
Drought continues to be a drag on the economy, with an 8.5 per cent fall in rural exports and farm GDP down 3 per cent this financial year.
There was no MYEFO Christmas splurge - it only accounting for what has been announced since the April Budget, including an extra $4.2 billion on road and rail projects, a $1 billion water infrastructure package, a $540 million Australian Business Growth Fund and $624 million over four years for aged care.
Labor shadow treasurer Jim Chalmers slammed the Government's economic record.
"We have been saying that for some time now and not just us; the Reserve Bank, the business community, credible economists and others, peak industry groups, have been calling for the Government to do more," Dr Chalmers said.
"The fact that the government, in quite a pig-headed way, has refused to do more is one of the reasons that we have these very disappointing numbers in the MYEFO."
S&P Global Ratings said the Government's spending restraint would help deliver a surplus, which would help maintain its AAA credit rating.