EXHIBIT (c)(vii)

Queensland Budget Papers
for 2005-2006

2005-06 Budget Papers

1. Budget Speech

2. Budget Strategy and Outlook

3. Capital Statement

Budget Highlights

Appropriation Bills

Ministerial Portfolio Statements

The Budget Papers are on sale through Goprint, individually or as a set, phone (07) 3246 3500 and are online at www.budget.qld.gov.au

© Crown copyright
All rights reserved
Queensland Government 2005

Excerpts from this publication may be reproduced, with appropriate acknowledgement, as permitted under the Copyright Act.

Budget Paper No. 1 — Budget Speech
ISSN 1445-4890 (Print)
ISSN 1445-4904 (On-line)

APPROPRIATION BILL 2005

(Second Reading Speech, 7 June 2005)

TREASURER

The Honourable Terry Mackenroth MP
Deputy Premier, Treasurer and Minister for Sport

APPROPRIATION BILL 2005

(Second Reading Speech, 7 June 2005)

TREASURER

The Honourable Terry Mackenroth MP
Deputy Premier, Treasurer and Minister for Sport

Mr Speaker, I move that the Bill now be read a second time.

INTRODUCTION

The Budget that I present today will do more than any other in living memory to shape the future of Queensland.

Seven years of sound, disciplined financial and economic management by the Beattie Government has built the foundation for the future prosperity of the State.

The Beattie Government, from the outset, has had a clear vision for the future of Queensland.

We have been delivering our vision to create the Smart State.

The quality and range of services has been enhanced.

The Smart State Building Fund has seen our capital program grow.

Our economy has grown and strengthened and our unemployment rate is now the lowest in 30 years.

This Budget represents a landmark in the delivery of our vision for Queensland by providing for:

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In addition, this Budget provides an unprecedented commitment to the progressive abolition of six stamp duties together with a significant land tax relief and simplification package.

ECONOMIC OUTLOOK

Mr Speaker, the Queensland economy has once again outperformed the national economy – for the ninth consecutive year. Economic growth in 2004-05 is estimated to be 4¹/4%, more than double the 2% growth estimated nationally.

This growth has seen a number of records being set in Queensland in 2004-05:

During 2004-05, Queensland has been responsible for around 40% of all jobs created in Australia – double our population weight of just under 20%.

A booming domestic sector has driven overall economic and employment growth in Queensland in 2004-05.

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Consumer spending is estimated to grow at an above-average rate for the third consecutive year, underpinned by increases in household wealth, strong growth in incomes and exceptional labour market conditions.

Housing investment in the State is expected to rise a further 5% in 2004-05 and business investment by an estimated 13¹/4% .

The Queensland economy is forecast to maintain momentum into 2005-06, with economic activity predicted to rise a further 4¹/4%, exceeding forecast growth nationally for the tenth consecutive year.

With Queensland’s economic growth remaining strong, overall employment in the State is forecast to grow a further 2¹/2%, well above the 1³/4% growth forecast nationally in 2005-06.

As a result, the unemployment rate is forecast to remain around its 30-year low of 5% in 2005-06.

Growth in consumer spending in Queensland, at 4¹/4%, is forecast to again outpace that nationally in 2005-06, reflecting our faster rate of population growth and superior labour market performance.

Capital investment is expected to make a significant contribution to growth in 2005-06, with both private and public sector investment forecast to continue to grow solidly.

Importantly, strong global demand and increases in domestic production capacity are forecast to see exports grow at a five-year high of 6³/4% in 2005-06, despite Queensland’s current drought conditions. Being Australia’s major coal producer, Queensland is forecast to continue to reap the benefits from the global resources boom, while other mineral exports are also forecast to rise.

This excellent performance of the Queensland economy has not been by accident. Since 1998, the Beattie Government has laid the foundations for Queensland’s strong growth in its Smart State vision. Initiatives such as our Smart State Strategy and our commitment to investment in infrastructure will see the Queensland economy continue to grow strongly.

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GROWING A DIVERSE ECONOMY AND CREATING JOBS

Our 10 year Smart State Strategy is founded on a vision of Queensland where knowledge, creativity and innovation drive economic growth to improve prosperity and quality of life for all Queenslanders.

As part of our Strategy, the Beattie Government will speed up industry innovation through substantial investments in research and development and boosting commercial capacity for global export and trade gains.

We have already invested heavily in innovation infrastructure establishing a range of new world class research facilities.

Building on the success of the Smart State Research Facilities Fund, this Budget provides $128 million over four years for an Innovation Building Fund to stimulate research, development, commercialisation and technology diffusion. The fund will support the establishment of pioneering research and innovation institutes, facilities and centres of excellence as well as fund major items of research equipment.

This Budget also increases funding for the Smart State Research Facilities Fund by $20 million which will bring the total committed under the Fund since it was launched to $170 million.

The Innovation Building Fund will be complemented by the establishment of a $60 million four year Innovations Project Fund which will provide operational funding for collaborative projects and research projects that are strategically important to Queensland both in terms of established and emerging industries.

To help ensure Queensland research facilities have access to top researchers and PhD students, we will invest $12 million over four years in an Innovation Skills Fund to provide scholarships and fellowships to attract and retain top research talent.

As part of the redevelopment of the former Boggo Road Gaol site, we will establish an integrated knowledge precinct focussing on ecoscience. A Health and Food Sciences Precinct will be developed at Coopers Plains by co-locating and integrating the research capabilities of several research organisations.

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Support will also be provided for the development of a facility to manufacture pharmaceuticals to international regulatory standards for use in pre-clinical and clinical trials.

Mr Speaker, 60% of Queensland is currently drought declared under our Drought Relief Assistance Scheme. The Beattie Government will participate in and contribute funding to the expanded Commonwealth-State Exceptional Circumstances Scheme recently announced by the Australian Government which will provide much needed additional support to farmers suffering from prolonged drought conditions.

The Beattie Government is committed to supporting and strengthening the international competitiveness of our established industries such as agriculture, mining, tourism and business services.

As well as continuing to support a range of industry development and export programs, this Budget will provide for initiatives such as the Queensland Aquaculture Development Initiative, the development of new Asian markets for horticulture and $20 million over four years to establish the Smart Exploration Program to identify and support new opportunities for mineral exploration in Queensland.

REALISING THE SMART STATE THROUGH EDUCATION, SKILLS AND INNOVATION.

In addition to providing an immediate stimulus for innovation, our Smart State Strategy takes a long-term view of investing in knowledge and skills to build our capacity as an innovative society.

We are reshaping Queensland’s education system as part of our Education and Training Reforms for the Future Initiative.

Full implementation of the Prep year will occur in 2007. Leading up to 2007, an additional 25 State and non-State schools will phase-in the preparatory year in 2006, bringing the total number of schools with the new preparatory year program to 121. In addition, a major building program for the Prep year forms part of our record education capital program of $455 million.

Our $56 million over four years Smart Classrooms initiative will enable our 1,300 State schools to allow students, their parents and teachers to have access to class work and on-line learning materials anywhere, anytime.

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Laptops or personal computers will be provided to 1,500 teachers in 2006 as part of a $3.5 million trial to improve learning and communication through technology.

To nurture excellence among our best students, this Budget provides $40 million for the construction and fit-out of two new Queensland Smart Academies for senior students who excel in science, maths, technology and the creative arts.

A new Queensland Curriculum Assessment and Reporting Framework will be developed and progressively implemented at a cost of $8.25 million over three years. The Framework will provide a consistent approach to assessing and reporting student achievements and performance.

The Vocational Education and Training (VET) sector is critical to the State’s prosperity. We will continue to implement our three-year Smart VET Strategy which is increasing training places in priority industry areas.

As outlined in our Smart State Strategy, we will also undertake a comprehensive review of the VET system in order to develop a range of strategies to make the system flexible and responsive to rapidly changing skills needs in the economy.

MANAGING URBAN GROWTH AND BUILDING QUEENSLAND’S REGIONS

By 2026 the population of South East Queensland is expected to reach around 3.7 million – an increase of over one million people.

Mr Speaker, the Beattie Government has made the management and co-ordination of urban growth in South East Queensland a priority.

We have released the draft South East Queensland Regional Plan which sets out the future pattern of development for the region. The final plan will be released later this month.

We have also released the South East Queensland Infrastructure Plan and Program which outlines our infrastructure priorities to support the regional plan.

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Our infrastructure plan identifies projects amounting to around $55 billion over the next 20 years.

The first phase of the plan involves an increase over current Budget commitments of approximately $2 billion over the next four years including:

In addition to dealing with the population growth challenge for South East Queensland, the Beattie Government is addressing the need for infrastructure and services for Queensland’s regions.

This year the overall capital program is $8 billion, $1.9 billion more than last year’s record program. Almost 60% of this investment is outside the Brisbane region, including:

Our capital program for 2005-06 includes $2.28 billion for energy projects, $1.25 billion for roads, $538 million for ports and $760 million for rail infrastructure which will support State economic growth and build Queensland’s regions.

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We have also committed $100 million over three years for a joint program with local governments throughout the State for capital projects which will be practical tributes to Queensland’s 150^th birthday in 2009.

IMPROVING HEALTH CARE AND STRENGTHENING SERVICES TO THE COMMUNITY

Mr Speaker, the Beattie Government is strongly committed to the ongoing improvement of hospital and health services for Queenslanders.

The Health Budget will increase by $413 million or 8.4% on last year’s comparable Budget.

To ensure that this substantial investment is producing the best possible health outcomes for Queenslanders, we have initiated a comprehensive review of Queensland Health’s administration, management and performance systems.

As part of our third term agenda, the Beattie Government is delivering on our commitments in areas such as elective surgery, cardiac services, oral health care, emergency departments, mental health services and child health initiatives.

In addition, this Budget provides service enhancements and expansions including:

Queensland’s health infrastructure is world class and we will continue to invest strongly in this area.

Additional capital funding of $96 million over four years is provided for the expansion of the Caloundra Health Service and integrated ambulatory and community health services in Robina and Caboolture.

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Our health capital program also includes the reconstruction of the public component of the Mater Hospital, continuation of our residential aged care upgrade program and the construction of six new primary health care centres across the State.

Mr Speaker, the Beattie Government is very committed to improving the quality of life for Indigenous Queenslanders through partnership with Aboriginal and Torres Strait Islander communities.

This Budget provides an additional $89.5 million over four years for Indigenous health initiatives, including measures to reduce demand for alcohol and other substances, renal and cancer services and to build enhanced capacity to address Indigenous health issues by increasing the number of Aboriginal and Torres Strait Islander people employed in the health system.

Good basic infrastructure is essential to improving health in our Indigenous communities and we have allocated an additional $100 million over five years for new environmental health infrastructure such as water supply and sewerage in mainland Indigenous communities. We will also be seeking the support of the Australian Government to provide a matching funding contribution to this key priority.

Our last two Budgets have provided for major enhancements to disability services and this Budget is no exception.

New funding of $180 million over four years will further advance our program of enhancing respite care, emergency and crisis care, early intervention and viability support for service providers.

The Disability Services Budget for 2005-06 will be $520 million. This is 90.2% higher than in 2000-01.

In addition to supporting non-Government providers of disability services, the Budget allocates an additional $24.3 million over four years to support non-Government organisations providing Government funded services in areas such as family support, domestic violence and homelessness.

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People who are homeless are among the most disadvantaged in our community. Over the next four years, we will provide $120.4 million in recurrent funding and $115.1 million in capital funding to build on existing responses to homelessness and to establish new and innovative responses including:

PROTECTING OUR CHILDREN AND ENHANCING COMMUNITY SAFETY

Last year’s Budget included a major funding increase to implement our child protection Blueprint. This Budget builds further on that funding commitment.

The Budget for the Department of Child Safety will total $395 million in 2005-06, an increase of 45% on the previous year’s comparable Budget.

The increased funding provides for accelerated implementation of key Blueprint recommendations including complete funding by the end of 2005-06 of the two main elements, increased frontline staff and additional alternative care placements, which were previously planned for 2007-08.

The Beattie Government is on track to achieve our target of 9,150 police officers by September 2005 and we will continue to grow the number of police officers consistent with our commitment to keep the police to population ratio at or above the national average.

We are also implementing a three year police civilianisation program which will see 500 police officers return to operational policing duties.

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As well as enhancing staffing resources, policing infrastructure and resources are being enhanced including additional capital funding of $60 million over four years for new and upgraded police stations, watchhouses and police housing and $16.9 million additional funding in 2005-06 for police information and communications technology.

Queensland’s successful Youth Justice conferencing program will be expanded at a cost of $10 million over four years.

Early intervention services for men who perpetrate domestic and family violence are a critical preventative measure and will be improved with additional funding of $3.75 million over four years.

Over the next three years $231 million of additional capital funding has been provided for the replacement of Townsville Women’s Correctional Centre, the expansion of the Arthur Gorrie Correctional Centre and the redevelopment of the Sir David Longland Correctional Centre.

PROTECTING THE ENVIRONMENT FOR A SUSTAINABLE FUTURE

The actions of the Beattie Government show the priority we give to protecting the environment.

Sensitive South East Queensland native forests are being protected.

Water resource management is being reformed.

Broad scale land clearing is being phased out.

The management of national parks has been enhanced.

To support recent initiatives, this Budget provides an additional $9 million over two years for the implementation of the New Vegetation Management Framework and $10 million over four years to improve capacity to address non-compliance with our natural resource management legislation.

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The Queensland Parks and Wildlife Service estate will grow by an estimated 3.46 million hectares as a result of our election commitments including the Western Hardwood forest transfer process and Daintree land acquisition. The management needs of the expanded estate will be addressed with additional operating funding of $58 million and $25 million in capital funding over four years. This includes funding for the employment of 50 former Western Hardwood’s timber workers.

Our EcoBiz program will continue with $10 million funding over four years to support Queensland industries adopting resource-efficient practices, particularly in water, energy and materials management.

An additional $4.4 million over four years is allocated for the Queensland Sustainable Energy Innovation Fund which will encourage local innovation to develop, demonstrate and commercialise world-best sustainable technologies.

GOVERNMENT FINANCES AND REVENUES

The Beattie Government has demonstrated its financial management credentials over the last seven years.

Queensland’s fiscal position is now stronger than it has ever been.

Fiscal strength is not an end in itself, but it provides the means for the long-term service and infrastructure commitments that this Budget provides.

Queensland’s strong economic and employment growth coupled with a boom in our coal mining industry and strong investment returns have contributed to a forecast operating surplus in 2004-05 of over $2.7 billion.

The Budgeted operating surplus for 2005-06 is $934 million with lower forecast operating surpluses over the forward estimates reflecting a combination of long term investment return expectations, tax reductions, service enhancements and growing operating expenses flowing from our record infrastructure program.

We will finance our record capital program through a prudent combination of borrowings and operating sources which will see our AAA credit rating comfortably maintained.

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Mr Speaker, Queensland has and will continue to have a competitive tax structure.

In last year’s Budget, we improved stamp duty concessions for home buyers, reduced the duty rate for Class 1 general insurance, abolished credit card duty and committed to the abolition of the Bank Accounts Debits Tax from 1 July this year.

This Budget provides for an unprecedented commitment to the abolition of a further six taxes.

Over a five year period from January 2006 to January 2011 we have committed to a staged program of abolishing:

In aggregate the abolition of these stamp duties will save taxpayers around $1.6 billion over the next five years.

Queensland’s property market has enjoyed a sustained boom period bringing enormous benefits to property owners and investors.

It has also meant that as property prices have risen, many property owners have been faced with increased land tax bills or have had to pay it for the first time.

I am pleased to announce that this Budget provides a substantial package of land tax relief and simplification at a cost to revenue of $847 million over the next four years.

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Having watched with interest the land tax changes in other state budgets, it is clear that none come near the scope and breadth of the changes I am announcing today.

The key features of our relief package which will take effect from 1 July 2005 are:

In addition, caravan or residential parks which have more than 50% long-term residents will be exempted from land tax. This will complement our existing exemption for retirement homes.

Currently, a land tax exemption applies where a principal place of residence is used exclusively as a home. In recognition of changing work arrangements, we will develop legislation which will have effect for land tax in 2005-06 to allow a full exemption where certain working arrangements are incidental to the residential use and where there is limited letting of a home for residential purposes. An apportionment of the exemption will apply in other circumstances.

This relief package will reduce the number of taxpayers in 2005-06 by around 50,000 relative to the number of taxpayers in the absence of these changes and around 21,000 fewer taxpayers compared to 2004-05.

Two new simplified tax schedules, one for residents and one for companies, trustees and absentees will replace the current 19 step schedule, statutory deductions, resident rebate and phasing-in rebates.

The effective reduction in land tax rates will be greatest for smaller business and resident investors. Nevertheless, companies, trustees and absentees with high value landholdings will have their tax rate reduced from 1.8% to 1.5% and higher value resident investors will have a tax rate of 1.25%.

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The scope and capacity for further land tax relief will be reviewed in each annual Budget context, taking into account future property market conditions.

CONCLUSION

Mr Speaker, this is a landmark Budget for Queensland.

We have committed to an unprecedented program of tax reform which will secure our competitiveness.

We have maintained our focus on improving services, particularly for those most in need in our community.

Our South East Queensland Regional Plan and our long-term infrastructure plan will shape the future development of the fastest growing urban region in Australia.

Our 10 year Smart State Strategy will shape the way we develop our skills and innovate to secure a better quality of life.

All of this will be achieved without jeopardising our strong financial position.

This Budget, more than any other Budget before, will shape the future of Queensland.

I commend the Bill to the House.

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By authority: Government Printer, Queensland-2005

State Budget 2005-06
Budget Speech
Budget Paper No. 1
www.budget.qld.gov.au

State Budget 2005-06
Budget Speech
Budget Paper No. 1
www.budget.qld.gov.au

2005-06 Budget Papers

1. Budget Speech

2. Budget Strategy and Outlook

3. Capital Statement

Budget Highlights

Appropriation Bills

Ministerial Portfolio Statements

The Budget Papers are on sale through Goprint, individually or as a set, phone (07) 3246 3500 and are online at www.budget.qld.gov.au

© Crown copyright
All rights reserved
Queensland Government 2005

Excerpts from this publication may be reproduced, with appropriate acknowledgement, as permitted under the Copyright Act.

Budget Paper No. 2 – Budget Strategy and Outlook
ISSN 1445-4890 (Print)
ISSN 1445-4904 (On-line)

STATE BUDGET
2005-06

BUDGET STRATEGY AND OUTLOOK

Budget Paper No. 2

TABLE OF CONTENTS

1. Budget Strategy, Performance and Outlook			1
Summary of Key Financial Aggregates			1
Budget Outcomes 2004-05			2
Budget 2005-06 and Outyear Projections			4
Reconciliation of Operating Result			6
Fiscal Strategy			7
Indicators of Fiscal Condition			10
2. Economic Performance and Outlook			13
Introduction			13
External Environment			14
The Queensland Economy			18
3. Economic Strategy			37
Positioning Queensland for Continued Growth			37
Queensland’s Economic Strategy			38
Infrastructure			40
Knowledge and Information Infrastructure			47
4. Budget Priorities and Initiatives			53
Introduction			53
Growing a Diverse Economy and Creating Jobs			55
Realising the Smart State Through Education, Skills and Innovation			59
Managing Urban Growth and Building Queensland’s Regions			62
Improving Health Care and Strengthening Services to the Community			66
Protecting Our Children and Enhancing Community Safety			70
Protecting the Environment for a Sustainable Future			73
Delivering Responsive Government			74
5. Revenue			75
Introduction			75
Revenue by Operating Statement Category			77
Taxation Revenue			78
Queensland’s Competitive Tax Status			83
Grants and Subsidies			85
Sales of Goods and Services			89
Interest Income			91
Other Revenue			92

1. BUDGET STRATEGY, PERFORMANCE AND OUTLOOK

This chapter discusses:

SUMMARY OF KEY FINANCIAL AGGREGATES

Table 1.1 provides aggregate estimated actual outcome information for 2004-05, forecasts for 2005-06 and projections for the outyears.

Table 1.1

Budget Strategy and Outlook 2005-06

1

BUDGET OUTCOMES 2004-05

Key Financial Aggregates

Table 1.2
General Government Sector — Key Financial Aggregates¹

Operating Result

The operating result expected for 2004-05 is a surplus of $2.725 billion. The estimated 2004-05 surplus reflects the continuing strength of the economy flowing through to taxation and related revenues, upward revisions to GST payments from the Australian Government and investment returns above the long-term assumed rate of return.

At the time of the 2004-05 Budget, a reduction in taxation revenues was expected, primarily due to an anticipated large fall in property market activity. The expected decline in transfer duties has been modest, and more than offset by increases in other taxation revenues flowing from the strong economy. This has led to upward revisions to revenues at both the Mid Year Review and in the context of the 2005-06 Budget.

Estimates of royalty revenue have also increased reflecting higher commodity prices and growth in export volumes.

With over $17 billion in funds invested in a portfolio of equities, property, cash and fixed interest, the performance of international financial markets has a major influence on the Budget result. While Budget and Mid Year Review estimates for investment returns were based on the expected long-term average return for the portfolio of 7.5%, the 2004-05 estimated actual is now based on a forecast rate of return of 14%, reflecting the strong performance of investment markets.

Budget Strategy and Outlook 2005-06

2

The Underlying Operating Result

Investment market volatility impacts on the Queensland Budget more in Government Finance Statistics (GFS) terms than it does for other states. This is in part due to differences in the way Queensland’s public sector superannuation arrangements are structured. Queensland’s financial assets set aside to meet future employer superannuation liabilities are held as General Government sector assets and associated superannuation liabilities are similarly recorded as General Government sector financial liabilities. In contrast, other jurisdictions generally have structures whereby all investments are held in superannuation funds and only the net superannuation liability is recorded in the balance sheet.

The differing superannuation structure leads to a significant difference in GFS accounting treatment between states.

If Queensland’s superannuation arrangements were structured on the same basis as generally applies in other states, the General Government sector underlying operating result for 2004-05 would be a surplus of approximately $2 billion, as outlined in Table 1.3 below.

For the 2005-06 Budget, no adjustment is required to the forecast operating result as the earnings rate on financial assets for the revenue estimates is the long-term assumed rate of return that is used in the calculation of the superannuation interest expense.

Table 1.3
Calculation of Underlying Result

Cash Surplus

The General Government sector is estimated to achieve a cash surplus in 2004-05 of $3.127 billion.

At Mid Year Review, the cash surplus for 2004-05 was an estimated $1.509 billion. Factors contributing to the improvement in the estimated surplus again include the cash impact of the upward revision to investment returns from 7.5% to 14%, high levels of receipts from taxation revenues and upward revisions to GST payments from the Australian Government.

The underlying strength of the General Government cash flow for 2004-05 is demonstrated by a modest borrowing requirement of $119 million.

Budget Strategy and Outlook 2005-06

3

Capital Purchases

General Government investment in capital in 2004-05 is estimated to be $2.769 billion, slightly below Mid Year Review estimates, reflecting a modest level of capital deferrals.

Borrowing

Despite estimated net capital acquisitions of $972 million in 2004-05, the strong cash position has meant the General Government sector’s borrowing requirement has been negligible. Net borrowings of $119 million are expected for 2004-05, reflecting the individual borrowing intentions of the entities which comprise the General Government sector rather than the liquidity requirements of the sector as a whole.

Net Worth

The net worth, or equity, of the State is the amount by which the State’s assets exceed its liabilities. This is the value of the investment held on behalf of the people of Queensland by public sector instrumentalities. The net worth of the General Government sector at 30 June 2005 is estimated at $85.005 billion. This is $3.274 billion higher than net worth forecast at Mid Year Review, reflecting the improved operating position together with an increase in the value of the State’s equity holding in Government-owned corporations.

BUDGET 2005-06 AND OUTYEAR PROJECTIONS

Key Financial Aggregates

Table 1.4
General Government Sector — Key Financial Aggregates¹

Operating Result

The budgeted position for the General Government sector is for an operating surplus of $934 million in 2005-06.

The forecast budget surpluses are expected to moderate over the period 2006-07 to 2008-09. Key factors leading to the expected reduction in Budget surpluses are:

Budget Strategy and Outlook 2005-06

4

Further details on revenue and expenditure projections are contained in Chapters 5 and 6 respectively.

Cash Surplus and Capital Purchases

A cash surplus of $98 million is expected in 2005-06 for the General Government sector. The cash result is forecast to move into deficit in 2006-07, while modest surplus positions are forecast for 2007-08 and 2008-09.

Apart from the cash impact of smaller recurrent operating surpluses relative to 2004-05, the reasons for which are outlined above, the major factor contributing to lower cash results is the significant planned capital expansion.

Total General Government capital purchases of $3.616 billion are budgeted for 2005-06, reflecting a range of infrastructure initiatives including those announced in the South East Queensland Infrastructure Plan and Program 2005-2026 (SEQIPP), released in April 2005. Budget Paper No. 3 – Capital Statement provides details, by portfolio, of budgeted 2005-06 capital outlays.

Over the period 2005-06 to 2008-09, net additions (i.e. after deducting depreciation and asset sales) to the General Government capital stock of approximately $6 billion are planned. This substantial investment in additional capital will impact on the GFS cash result.

Borrowing

Borrowing for capital purposes is entirely consistent with the Government’s fiscal principles. Net borrowings of $827 million are budgeted for 2005-06 in support of $1.742 billion in net additions to the capital stock.

The majority of the General Government capital program has and will continue to be financed through recurrent cash flow.

Over the Budget and forward estimates period, total General Government borrowings of $6.3 billion are planned. Of this amount, some $1.9 billion (including $271 million in 2005-06) is to fund equity injections to Queensland’s Government-owned corporations to support expansion of the State’s electricity, rail and ports infrastructure.

Net Worth

State net worth is projected to increase from the 2004-05 estimated actual by $339 million to $85.344 billion at 30 June 2006. Net worth is also expected to increase in all forward estimate years.

More information on the State’s net worth, assets and liabilities is provided in Chapter 7.

Budget Strategy and Outlook 2005-06

5

RECONCILIATION OF OPERATING RESULT

Table 1.5 provides a reconciliation of the General Government sector operating result for 2004-05 and 2005-06 published in the Mid Year Fiscal and Economic Review (MYFER) and current Budget estimates.

Table 1.5
Reconciliation of 2004-05 and 2005-06 Operating Result to MYFER Estimates¹

Budget Strategy and Outlook 2005-06

6

FISCAL STRATEGY

The Charter of Social and Fiscal Responsibility outlines the Government’s fiscal principles and is an integral part of the Government’s commitment to the community. The fiscal principles, detailed in Box 1.1, have been framed to meet a number of objectives, with the overriding requirement to maintain the integrity of the State’s finances.

The fiscal principles establish the basis for sustainability of the Government’s policies. They require that the services provided by Government be funded from tax and other revenue sources over the long-term. The principles are supported by an accrual budgeting framework, which recognises future liabilities of the State and highlights the full cost of sustaining the Government’s operations on an ongoing basis.

The principles recognise the importance of a strong financial position for the State. A state government, because of its more limited tax base, does not have the same capacity as a national government to cushion economic and financial shocks. At the same time, state governments have a responsibility to provide continuity of services, such as health, police and education. A strong financial position, as indicated by a AAA credit rating, enables lower borrowing costs and is an indication of the soundness of the financial position and policies of the Government, rather than a goal in itself.

The success of Queensland’s financial and economic management has been consistently affirmed by international ratings agencies. These agencies have cited Queensland’s strong balance sheet, sound financial operations, modest debt levels and dynamic economic base as reasons underpinning the State’s AAA credit rating.

Box 1.1
The Fiscal Principles of the Queensland Government

Budget Strategy and Outlook 2005-06

7

Competitive tax environment

One of the Queensland Government’s key social and fiscal objectives is to maintain a competitive tax environment which raises sufficient revenue to meet the infrastructure and government service delivery needs of the people of Queensland, while at the same time providing a low cost environment for business to promote economic development and jobs growth.

The competitiveness of a state’s tax system is usually assessed by using one of the following measures:

Queensland’s competitive tax position is confirmed by all three measures.

The 2005-06 Budget includes reductions in land tax and the phased abolition of a number of taxes. Details of these changes and other revenue items are provided in Chapter 5.

Affordable service provision

The objective of maintaining affordable service provision requires the maintenance of a budget operating surplus, to ensure recurrent services can be funded from recurrent sources.

The Government’s expenditure strategy is based around providing targeted funding for high priority community services. The strategy is built upon the delivery of commitments made in the context of the most recent State election. These commitments are also reflected in the Government’s outcomes and priorities for Queensland as outlined in its Charter of Social and Fiscal Responsibility.

Consistent with the Government’s stated priorities, the 2005-06 Budget provides for the implementation of a range of service enhancements in key areas including child safety, health and disability services.

The 2005-06 Budget and forward estimates also continues the implementation of the
Government’s Education and Training Reforms for the Future including a preparatory year of schooling from 2007 and substantial investment in innovation, research and development as part of the Government’s 10 year Smart State Strategy.

More information on these initiatives is provided in Chapter 4.

Budget Strategy and Outlook 2005-06

8

Queensland is already one of the more efficient providers of government services among the states. Nevertheless, further improving the efficiency and effectiveness of government services is an essential element of delivering on these key policy priorities in a way that is both affordable and sustainable.

In this context, the Government’s Shared Service Initiative, designed to achieve best practice in corporate services across Government, commenced in July 2003. The savings achieved from this initiative through consolidation and standardisation of core corporate services and systems will be directed to service delivery.

Sustainable borrowings for capital investment

The provision of adequate levels of infrastructure is an ongoing challenge for a state such as Queensland which continues to experience high levels of economic and population growth. Meeting this challenge, the Government provides for consistently higher levels of capital expenditure per capita than any other state.

Investment in core infrastructure is a key feature of the 2005-06 Budget with a record capital program of $8 billion. This represents an increase of 32% over the estimated 2004-05 outlays.

In recognition of Queensland’s capital requirements, the Charter allows borrowing for capital where the costs of the borrowing can be serviced within the context of an overall operating surplus.

Queensland’s 2005-06 capital program will be funded from a mix of recurrent sources, cash balances and borrowings. Details of the State capital program for 2005-06 and sources of funds are provided in Budget Paper No. 3 — Capital Statement.

Prudent management of financial risk

Queensland has a long-standing policy of setting aside funds to accumulate financial assets sufficient to meet future liabilities, the largest being for future employee entitlements, most notably superannuation.

In this respect, Queensland is far better placed than any of the other state or territory governments, or indeed the Australian Government, to fund future accruing liabilities as most other jurisdictions have substantial unfunded superannuation liabilities.

In 2003-04 significant growth in equity markets produced investment returns well in excess of actuarially assumed long-term rates of return. In 2004-05 investment returns are estimated at 14%.

The State’s policy of setting aside funds to meet future liabilities and reinvesting all earnings provides the capacity to manage cycles in investment markets without impacting on the Government’s ability to fund ongoing services to the community.

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Building the State’s net worth

The Charter policy of building the State’s net worth is intended to ensure that infrastructure and other assets are not run-down to the detriment of future citizens and taxpayers. It is an important element in ensuring intergenerational equity.

Queensland’s net worth is forecast to grow over the forward estimates. Queensland’s per capita net worth is expected to be 40% greater in 2005-06 than the average per capita net worth of the other states.

Further information on State net worth and other balance sheet aggregates can be found in Chapter 7.

INDICATORS OF FISCAL CONDITION

The indicators shown in Table 1.6 provide additional perspectives on the Government’s financial condition — service delivery capacity, financial sustainability and financial capacity.

Service Delivery Capacity

These financial data provide an indication of the non-financial capital resources of the General Government sector. In general, these resources relate to capital infrastructure and therefore provide an indication of the capacity of the Government to provide services to the community. The data, showing increasing levels and additions of non-financial assets, reflect the State’s heightened commitment to infrastructure provision of recent years.

Financial Sustainability

These ratios provide an indication of the sustainability of current policy settings — including the size of the operating surplus (relative to expenses) and the level of debt servicing costs (relative to revenue). A large operating balance and stable low debt servicing costs indicate that current policies are sustainable.

Financial Capacity

These ratios provide an indication of the State’s capacity to respond to unexpected events or opportunities. Relatively low levels of borrowing and taxation, and large negative net debt, provide the State with the capacity, if events require, for additional resources to be called upon.

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Table 1.6
Indicators of Fiscal Condition — General Government Sector

Source: State Budget Papers.

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2. ECONOMIC PERFORMANCE AND OUTLOOK

INTRODUCTION

This chapter presents the economic framework within which the 2005-06 Budget has been produced. It examines recent developments in Queensland’s external economic environment, reviews the performance and outlook for the Queensland economy, and highlights any risks and opportunities to Queensland economic growth during the forecast horizon. The chapter details estimated actuals and forecasts for the major components of State economic activity for 2004-05 and 2005-06 respectively (see Table 2.2), and presents projections for key State economic variables over the medium-term to 2008-09¹ (see Table 2.3).

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EXTERNAL ENVIRONMENT

Current conditions

International

The outlook for the international economy remains strong, following on from exceptional growth of above 4% in Queensland’s major trading partners in 2004. Economic activity in the United States and China continued to expand rapidly during the year. Partly offsetting this, the latter part of 2004 saw a slowdown in some major European countries and Japan, where economic output fell in some quarters. Looking forward, growth is expected to remain strong in India, while growth in the United States and China is expected to ease slightly. Further, the economies of Europe and Japan are expected to improve into 2006 from a forecast slowing in growth in 2005. As a result, major trading partner growth is expected to ease to 3¼% in 2005, before strengthening to 3½% in 2006 (see Chart 2.1).

Chart 2.1
Economic Growth in Queensland’s Major Trading Partners¹

Sources: Queensland Treasury and Consensus Economics.

The United States continued to grow strongly over 2004, recording annual growth of 4% or above in each quarter of the year. A primary driver of activity has been a resurgence in business investment, supported by an improvement in corporate profitability, following a period of falling investment during 2001 and 2002. However, part of the strong growth in the United States has come at the expense of weaker growth in other countries, with a depreciation of the US$ helping to boost export growth in the United States.

The performance of the United States economy over the past year and a half has led the Federal Reserve to raise official interest rates from 1.0% in the middle of 2004, to 3.0% in early May 2005. The impact of higher interest rates, combined with higher crude oil prices, is likely to lead to a moderation in economic growth in both 2005 and 2006. Further, the persistence of large budget and trade deficits in the United States may result in a tightening of fiscal policy, leading to lower growth in both the United States and the global economy more generally, relative to 2004.

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Non-Japan Asia continues to be the key driver of growth in Queensland’s major trading partners, led by rapid growth in China and India. Government measures implemented to slow the Chinese economy, including moderating credit growth and a rise in official interest rates, have had little impact so far, with the economy growing by 9.5% in annual terms in the final quarter of 2004. Despite further interest rate rises anticipated by most analysts, the Chinese economy is forecast to grow by around 9% in 2005 and 8% in 2006. Economic growth in South Korea (Queensland’s second largest trading partner) was weak in the early part of 2005, with the strong value of the Korean Won against the US$ hampering exports and higher oil prices constraining domestic activity. Growth in South Korea is expected to improve in 2006, driven primarily by a recovery in household spending.

Economic activity in Europe is expected to strengthen over 2005, following a slowdown in late 2004, where the economies of Germany and Italy both contracted in the December quarter. However, several factors may constrain longer-term growth prospects in the region, including the increase in oil prices in early 2005, as well as the strength of the Euro against the US$, which has placed pressure on export-focused industries. Persistent high unemployment throughout much of the region may also threaten any recovery in household spending. As a result, Consensus Economics forecasts calendar year growth in Europe to average around 2% in both 2005 and 2006, similar to growth in 2004.

The Japanese economy recorded its strongest growth rate in eight years in 2004, growing by 2.6%. Activity stalled in late 2004, leading to a downward revision to economic growth forecasts for 2005 in expectation of continued weakness. However, the Japanese economy expanded by 1.3% in March quarter 2005, more than double market expectations of a 0.6% rise. The Japanese economy is forecast to continue to strengthen into 2006.

National

Strong domestic demand continues to be the key driver of the Australian economy, which is expected to grow by 2% in 2004-05. Gross national expenditure is estimated to grow by 3½% in 2004-05, driven by growth in household consumption and business investment.

The strength of private consumption and business investment is expected to be partially offset by weakness in the housing market and the trade sector. Dwelling investment is expected to decline by 2% in 2004-05, following very strong growth over the past three years (see Chart 2.2). Net exports are expected to detract 2 percentage points from growth in 2004-05. Export growth has continued to be subdued, partly due to the high value of the A$ and some capacity constraints in the resources sector, while imports have grown strongly in response to solid domestic demand.

The composition of growth is likely to slowly rebalance over 2005-06, with economic growth forecast to improve to 3%. Gross national expenditure is forecast to show slight improvement in growth to 3¼%. However, this improvement is due solely to a rebuilding of inventories. All other components of domestic demand, including household consumption, private dwelling and business investment, and public final demand, are forecast to grow at a slower, or similar, pace over the year.

Net exports are forecast to detract only 1 percentage point from total growth in 2005-06, as exports rise in response to strong investment in productive capacity over previous years and rural exports benefit from an assumed return to more normal seasonal conditions in the farm sector. Imports growth is forecast to moderate slightly in response to slower growth in consumer and business spending in 2005-06.

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Chart 2.2
Building Approvals and Dwelling Investment, Australia¹

Sources: Australian Bureau of Statistics (ABS) 5206.0 and 8731.0.

Chart 2.3
World Economic Growth and Exports, Australia¹

Sources: ABS 5206.0 and OECD Main economic indicators.

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External assumptions

Queensland is a diversified open economy, characterised by trade and investment links with other parts of Australia and the rest of the world. The State’s economic performance is therefore partly dependent on the outlook for both the national and international economy. As a result, the forecasts for the Queensland economy in 2005-06 are based on key assumptions about the State’s external environment, including the national economy, major trading partners and financial markets (see Table 2.1).

A discussion of the risks to these assumptions is contained in a later section of this chapter.

Table 2.1
External Assumptions

Sources: Queensland Treasury, ABS 5206.0, ABS 6401.0, Australian Treasury and Consensus Forecasts.

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THE QUEENSLAND ECONOMY

Overall economic growth

A strong domestic sector is expected to underpin Queensland economic growth for the fourth year in a row in 2004-05. With a further improvement in exports, the Queensland economy is forecast to grow by 4¼%, more than double the estimated national growth for 2004-05.

Household consumption is expected to grow at an above average rate of 5% in 2004-05, driven by the ongoing wealth effects of the recent housing boom, growth in real incomes and exceptional labour market conditions. Defying the national trend, dwelling investment is expected to again rise, by 5%, sustained by high levels of interstate and overseas migration. Strong corporate profitability and global economic growth are expected to see business investment rise by an estimated 13¼% in 2004-05, while a positive external environment is also expected to strengthen growth in exports to 4%. However, imports are again predicted to grow rapidly (9¾%), reflecting high levels of consumer and business spending. As a result, net exports are estimated to detract 2¾ percentage points from growth in 2004-05.

The State economy is forecast to grow by a further 4¼% in 2005-06, exceeding growth nationally for the tenth consecutive year. Queensland’s rebalancing in growth is expected to continue into 2005-06, with activity in the domestic sector easing and net exports improving significantly (see Chart 2.4). Growth in consumer spending is anticipated to ease to 4¼%, while dwelling investment is forecast to fall marginally, by 3%, in 2005-06. However, capital investment is forecast to make an important contribution to growth in 2005-06. Business investment is predicted to increase a further 4¾%, while public final demand is anticipated to grow 10%, reflecting the Government’s significant capital infrastructure program.

The performance of the trade sector is forecast to improve further in 2005-06, with net exports anticipated to detract only ¾ percentage point from growth. Export growth is anticipated to strengthen to 6¾%, driven by higher coal and other mineral exports and production capacity, while imports growth is expected to ease in line with domestic activity .

Chart 2.4
Queensland Economic Growth¹

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Table 2.2
State and National Economic Forecasts⁸

na — Indicates not available.

Sources: Queensland Treasury, Australian Treasury and ABS 5206.0.

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Chart 2.5
Contribution to Growth in Queensland’s Gross State Product¹

Source: Queensland Treasury.

Chart 2.6
Contribution to Growth in Australia’s Gross Domestic Product¹

Sources: Queensland Treasury and Australian Treasury.

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Household Consumption

As the largest sector of the Queensland economy, household consumption continued to be one of the key drivers of economic activity in Queensland over the first three quarters of 2004-05. Following near record growth of 9.4% in 2003-04, household consumption is estimated to grow by 5% in 2004-05, once more above its long-term average growth rate. Consumption expenditure has been driven by the continued effects of increased household wealth, sustained high levels of consumer confidence, exceptional labour market conditions and above average rates of interstate and overseas migration. In addition, a strong A$, which has made imported goods less expensive, has supported spending on consumer durables, such as motor vehicles and household furnishings and equipment.

A number of factors are expected to dampen consumer spending in late 2004-05 and into 2005-06. An increase in petrol prices in A$ terms, particularly since December 2004, will act to reduce discretionary incomes, as will the impact of the interest rate increase in March 2005. While the recently announced income tax cuts should provide a partial offset to these contractionary influences, this effect is anticipated to be limited, with higher household debt levels seeing consumers save (rather than spend) a greater proportion of their tax cuts than would normally be the case.

Overall, growth in household consumption is forecast to moderate to 4¼% in 2005-06. This reflects an anticipated easing in the growth of both housing-related consumer purchases and wealth-related spending, as the effects of the recent stabilisation of house prices flow through to consumption. Higher household debt levels may also act to dampen consumption growth in 2005-06. However, continued strength in the labour market, gains in consumer wealth from higher equity prices, rising real incomes (with the increase in average earnings once again expected to outpace inflation) and solid population growth are expected to underpin robust growth in consumption expenditure in 2005-06, albeit at a more moderate rate when compared with the very strong growth of recent years.

Chart 2.7
Household Consumption¹, House Prices² and Real Average Earnings, Queensland

Sources: Queensland Treasury and ABS 3101.0, 6202.0, 6401.0 and 6416.0.

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Dwelling Investment

Following remarkably strong growth in each of the past three years, dwelling investment has continued to grow through 2004-05 and is expected to rise by 5% over the year.

Despite reaching record levels in 2003-04, housing construction continued to grow over the first three quarters of 2004-05. Although monthly dwelling approvals have been easing steadily since October 2003, new dwelling construction has been maintained by a large volume of approved work still to be completed (see Chart 2.8). Strong population growth, low home loan interest rates and a very buoyant labour market have also continued to support the demand for house construction. The rapid increase in residential house prices in recent years abated during 2004-05, yet housing finance data suggest that investor demand for house construction currently remains at relatively high levels. After three years of rapid growth, renovation spending now represents almost half of total dwelling investment and has continued to increase in the first three quarters of 2004-05.

While the pace of growth in dwelling investment has begun to ease, a large volume of approved work in the pipeline should support construction levels through much of 2005-06. Continued strength in renovation activity is forecast to partially offset an expected decline in new dwelling construction, with alterations and additions spending continuing to grow as home owners utilise higher property valuations to improve their homes. Overall, dwelling investment in Queensland is forecast to decline slightly, by 3%, in 2005-06.

The anticipated turnaround in dwelling investment beginning in 2005-06 is a product of the recent boom, which has seen housing construction activity increase by over 90% since 2000-01, rather than any deterioration in the economic fundamentals that drive dwelling construction.

Chart 2.8
Dwelling Investment and Work Yet to be Done, Queensland¹

Sources: ABS 8371.0, 8752.0, 6416.0, Queensland Treasury.

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Business Investment

Following three years of very strong growth, business investment is anticipated to increase by a further 13¼% in 2004-05. Both of the major components of business investment are anticipated to rise, with other buildings and structures investment expected to grow 12¾% and machinery and equipment investment forecast to increase 13½%.

The current business investment cycle began in 2001-02, driven by an acceleration in consumer demand, capacity constraints beginning to be felt, and a recovery in world economic growth from 2002-03 onwards. Domestic demand, which remains one of the primary drivers of business investment, eased through the first three quarters of 2004-05, following very strong growth in 2003-04. Reflecting this, survey data suggest that business confidence has moderated early in 2005, after reaching very high levels in late 2004. However, businesses continue to enjoy relatively low borrowing costs and experience strong profitability.

Offsetting the easing in domestic conditions, demand for Queensland’s major exports has continued to accelerate, driven by strong growth in the State’s trading partners. This has been accompanied by a sharp rise in world prices of mineral and energy products, some of which reached 15 year highs during 2004-05. The impact of high commodity prices on corporate profitability has, and should continue to, facilitate investment in additional productive capacity in mining-related and metals manufacturing industries.

Recent economic developments suggest that domestic-focused business investment may ease in 2005-06, while those industries linked to world markets should continue to seek increased capacity. In particular, the positive outlook for economic growth in China and non-Japan Asia should continue to fuel strong demand for mineral and energy commodities. Overall, business investment is forecast to rise by 4¾% in 2005-06, with other buildings and structures investment expected to grow by 5½% and equipment and machinery investment forecast to increase by 4½%.

Chart 2.9
Major Components of Business Investment, Queensland¹

Source: Queensland Treasury.

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Public Final Demand

After strong growth in 2003-04, total public final demand in Queensland is estimated to increase sharply in 2004-05, rising by 10%. Building on this growth, public final demand is forecast to increase a further 10% in 2005-06, largely reflecting the commencement of the State Government’s significant investment program in infrastructure as outlined in the South East Queensland Infrastructure Plan and Program 2005-2026. In addition, Queensland’s Government-owned corporations plan to undertake increased capital expenditure in response to growing demands on the State’s infrastructure base, both from rapid population growth and a strong world economy.

Capital works to be undertaken in 2004-05 and 2005-06 reflect key Government priorities and include transport and water infrastructure, education and training, health, housing and child safety. Major transport projects will provide further improvements to the State’s arterial roads, passenger rail services and busways. Other capital projects include the ongoing redevelopment and upgrading of the State’s schools and hospitals.

Capital expenditure by Queensland’s Government-owned corporations is also forecast to rise substantially in 2005-06. This includes the construction of the Kogan Creek base load power station through 2005-06, reflecting the State Government’s commitment to increasing electricity generation capacity in Queensland, as well as ongoing improvements to the State’s electricity transmission and distribution systems.

In response to surging demand for the State’s coal exports, key investments by Government-owned corporations include further upgrades to the State’s coal rail network and coal rollingstock, as well as expansion of the RG Tanna coal terminal. In addition, upgrades to infrastructure at the Port of Brisbane and Cairns airport will facilitate increased volumes of merchandise and tourism exports.

Chart 2.10
Public final demand, Queensland¹

Source: Queensland Treasury.

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Net Exports

Despite growth in imports continuing to exceed growth in exports, the relative performance of the trade sector improved in 2004-05. Net exports are estimated to detract 2¾ percentage points from growth in 2004-05, following a very large detraction from growth in 2003-04.

Overseas merchandise and tourism exports from Queensland are expected to grow strongly in 2004-05. Despite an appreciation in the A$ against the US$ over the first half of the year, a number of factors have supported exports of goods overseas. Strong world economic growth has sustained growth in coal exports, while the Japanese ban on beef imports from the United States and Canada also saw a strong rise in meat exports. Further, a continued recovery from the drought saw a rebound in rural exports during the year. Tourism exports also appear to have recovered from the adverse effects of major international shocks in recent years (such as SARS and avian influenza), which had previously affected international visitor arrivals. However, with domestic demand in the rest of Australia easing in 2004-05, growth in Queensland’s interstate exports is expected to be more subdued compared with overseas exports. As a result, total exports are estimated to grow by 4% in 2004-05.

Meanwhile, imports are expected to rise by 9¾% in 2004-05. Robust domestic growth, due to high levels of household spending and business investment, has led to increased demand for imported consumer durables, such as motor vehicles, and imported capital equipment.

The performance of trade sector is forecast to improve further in 2005-06, with net exports predicted to detract only ¾ percentage point from economic growth. Growth in exports is expected to strengthen to a five-year high of 6¾% in 2005-06, supported by continuing strong economic growth in Queensland’s major trading partners, particularly in emerging economies such as China and India. Box 2.1 outlines the implications of strong growth in China and India on the State’s trade sector. A forecast increase in coal exports is expected to contribute to the overall rise in exports, as producers respond to higher prices by expanding production capacity. Meanwhile, imports growth is expected to moderate to 6¼%, in line with an anticipated easing in growth in the domestic economy.

Chart 2.11
Exports and Imports, Queensland¹

Source: Queensland Treasury.

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Employment

Queensland is set to record exceptional jobs growth in 2004-05. The number of persons employed in Queensland, in year-average terms, is estimated to rise by 5¾%, an increase of around 104,000 jobs, representing the fastest rate of annual growth in 16 years. Despite an increase in labour force participation to an historic high of 65¾%, the State’s jobs growth has been stronger than labour force growth throughout 2004-05. As a result, the State’s year-average unemployment rate is forecast to fall to 5%, its lowest rate since 1974-75. This is the first time in 10 years that Queensland’s unemployment rate has been below the national rate (5¼%).

The employment-related effects of the recent housing boom and high levels of interstate and overseas migration continued to be seen in 2004-05, notably in the consumption and housing sectors of the domestic economy. As a result, jobs growth was strong in labour-intensive industries, such as construction, retail trade, as well as health and community services, which more than offset a decline in agricultural employment, due to poor agricultural conditions following the drought of recent years.

While jobs growth has remained solid in the second half of 2004-05, it is expected to moderate into 2005-06. This reflects an expected easing in growth in the labour-intensive domestic sector of the Queensland economy. However, partly offsetting this trend, employment is expected to remain strong in trade-related industries, such as mining, manufacturing and transport, reflecting the positive global outlook. Overall, the State’s employment growth is forecast to moderate to 2½% in 2005-06, but to remain above the forecast national growth of 1¾%.

Queensland’s forecast employment growth translates into the creation of around 47,000 additional jobs in Queensland in 2005-06. With labour force growth predicted to match employment growth in 2005-06, the year-average unemployment rate is forecast to remain at its 30-year low of 5%.

Chart 2.12
Employment Growth, Labour Force Growth and Unemployment Rate, Queensland¹

Sources: Queensland Treasury and ABS 6202.0.

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Population

Queensland is estimated to experience solid population growth of 2% in 2004-05, with similar growth forecast for 2005-06. Consequently, the State’s population is expected to increase by approximately 150,000 persons over the two years, to total more than four million persons by the end of 2005-06, representing around one fifth of the national population.

Population growth of 2% in Queensland in both 2004-05 and 2005-06 represents a slight easing when compared with growth in the previous three years, reflecting an expected moderation in the level of net interstate and overseas migration. While net migration has steadily eased from a near-record annual inflow of around 69,000 persons in March quarter 2003, annual net migration remains well above its long-run average. Above average levels of interstate migration reflect the lagged impact of greater economic growth in Queensland and the national housing boom, which have encouraged persons from southern states to migrate north in search of job opportunities and a lower cost of living.

Despite the expected easing in 2004-05, population growth in Queensland is forecast to remain substantially higher than that nationally over the current and upcoming financial years, with Queensland maintaining its position as the dominant state in terms of net interstate migration. Migration to Queensland will also continue to be supported by long-established factors such as the State’s stronger employment growth, generally lower cost of living and other factors such as Queensland’s desirable climate.

Chart 2.13
Components of Population Growth, Queensland

Source: ABS 3101.0.

Average Earnings

Queensland is expected to show strong nominal average earnings growth of 4½% in 2004-05, driven by the exceptional labour market conditions experienced over the year. Nominal earnings are anticipated to outpace estimated inflation over 2004-05, implying a rise in real average earnings. Nominal earnings growth is expected to moderate slightly to around 4% in 2005-06. However, this is still well above anticipated inflation for the year, leading to another forecast increase in real earnings in 2005-06.

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Inflation

Inflation in Queensland continues to be driven by domestic pressures. Over the year to March quarter 2005, inflation in non-traded goods and services, which generally reflects the rate of domestic economic activity, continued to outpace inflation in tradable products, though the gap has narrowed in recent quarters (see Chart 2.14). The primary driver of non-tradables inflation was rising housing costs, which contributed more than one third of the increase in Brisbane consumer prices over the year to March quarter 2005.

In comparison, tradables inflation has been low over the past couple of years. This has been due to an appreciation of the A$ against the US$, which has placed downward pressure on import prices, as well as cheaper imports of manufactured goods from China and a reduction in tariffs on some imported goods. Overall, consumer prices are expected to rise by 2¾% in 2004-05.

Consumer price inflation is forecast to remain steady at 2¾% in 2005-06, but a change in the composition of price pressures relative to 2004-05 is anticipated. Current tight labour market conditions are expected to provide some support to domestic inflationary pressures. However, house price growth is likely to contribute less in 2005-06 as activity in the housing market slows, putting downward pressure on non-tradables inflation, as will a forecast easing in domestic economic activity more generally.

Meanwhile, tradables inflation is expected to continue to move upwards into 2005-06, as world economic activity continues to expand, the impact of the A$ appreciation over the past three years on import prices dissipates, and as higher crude oil prices push up transport costs. Inflation in Queensland in 2005-06 is forecast to be similar to the 2¾% forecast nationally.

Chart 2.14
Tradables and Non-tradables inflation, Queensland

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Risks and opportunities

As a diversified open economy, forecasts for economic growth in Queensland are partly dependent on economic conditions internationally and nationally. External factors that will influence growth in 2005-06 include the strength of the world economy and its impact on commodity prices and the exchange rate, while the possibility of higher oil prices and domestic inflation also represent key risks. In addition, economic growth in Queensland will also be influenced by domestic factors, such as the outlook for the housing sector, seasonal conditions for the rural sector and the strength of population growth.

Major trading partner growth

The ongoing strength and resilience of the United States and Chinese economies, two major drivers of world growth, represents a significant opportunity for the Queensland economy in 2005-06. Growth in these two economies alone is forecast to contribute one quarter of total major trading partner growth for Queensland in 2005.

The United States and Chinese economies have outperformed market expectations in recent quarters. Consensus Economics have progressively revised upwards their 2005 growth forecast for China from 7.7% in September 2004 to 8.9% in May 2005. In the United States, employment growth — the primary indicator used to gauge the sustainability of growth in the economy — has significantly exceeded market expectations in recent months. If growth in these economies is higher than forecast in 2005 and 2006, this may result in stronger exports and economic growth in Queensland than currently anticipated. This is particularly the case with China, with the State’s share of exports to this country rising in each of the last seven years (see Box 2.1).

However, lower than expected world growth also represents a risk in 2005-06. There is some evidence that higher fuel prices are beginning to feed into global producer and consumer prices, by acting as a tax on consumer and business spending. Any further increase in oil prices has the potential to slow economic growth in the United States and the rest of the world. Similarly, some analysts remain concerned whether China can engineer a soft landing, predicting more severe increases in interest rates, in addition to tighter mortgage lending to slow rapid growth in fixed-asset and residential investment.

Slower growth in the United States and China would also adversely affect Queensland’s other major trading partners, such as Japan and Europe, given ongoing growth in these economies may rely to some extent on export growth. In addition, any further adjustment to the value of the US$ in light of the economy’s ‘twin deficits’ (budget and trade deficits) may also hamper an export-led recovery in other parts of the global economy.

Commodity prices

Strong global economic growth has resulted in higher world commodity prices, particularly for some of Queensland’s major exports, such as coal. As a result, the State has benefited significantly from the national improvement in the terms of trade, with higher A$ returns to exporters enhancing incentives for business investment (primarily in the mining and metal processing industries) and providing increases in consumer wealth via sharemarket gains. Stronger than anticipated world growth may place upward pressure on commodity prices. On the other hand, if significant increases in global supply occur in 2005-06, this may have some dampening affect on commodity prices. If either scenario eventuates, this may influence exports growth, and business and consumer spending during the year.

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It should also be noted that slower than expected world growth and therefore lower commodity prices may place downward pressure on the A$/US$ exchange rate. The possibility of an A$ depreciation would be heightened if the upward trend in global interest rates proved sharper than expected, which would also lower Australia’s interest rate differential with major economies and reduce the attractiveness of A$-denominated investments. Given Queensland forecasts are based on the A$/US$ exchange rate remaining largely unchanged, any depreciation in the A$ may have an offsetting beneficial impact on economic growth in 2005-06, by reducing imports growth and raising the A$ returns to exporters.

Oil prices

The price of oil more than doubled over the past two years to US$57 in March 2005, due to strong global demand and a sequence of events that have constrained supply. The potential for further increases in oil prices continues to pose a risk through its influence on the State’s major trading partners and, more directly, by affecting domestic consumption.

Until recently, the direct impact on Queensland has been alleviated to some extent, by an appreciation in the A$ to around US80c in March 2005. However, the A$ has since depreciated slightly, while oil prices have remained around US$50 per barrel. As a result, petrol prices have risen from 80c per litre in December 2004 to around $1 per litre in May 2005. Any significant increase in oil prices, assuming a steady A$/US$ exchange rate, may begin to directly affect economic growth in Queensland by reducing discretionary incomes and therefore growth in consumer spending in 2004-05. Box 2.2 places the recent rise in oil prices in context and discusses its implications for Queensland in more detail.

Inflation

While the Australian Government has forecast national inflation to average 2¾% in 2005-06, there are a number of factors that may push inflation higher over the year. High oil prices may begin to feed through to ‘underlying’ inflation, if producers begin to pass on this increased cost to consumers (as seen in the airline industry fuel levy). A tight labour market has also pushed unit labour costs higher. Indeed, productivity recorded its second consecutive annual fall in March quarter 2005, while annual growth in real earnings strengthened in the quarter. Finally, any depreciation in the A$ exchange rate may increase inflation in tradable goods, reversing the dampening effect the A$ appreciation (and the subsequent decline in tradable goods prices) has had on headline inflation in 2004.

If these factors push underlying inflation toward the upper limit of the Reserve Bank of Australia’s 2-3% target band, this may require a further rise in official interest rates, adversely affecting both national and Queensland economic growth in 2005-06.

Housing sector

The outlook for the housing sector will also be an important influence on economic growth in Queensland. The forecast easing in housing investment in 2005-06 is based on the assumption of broadly unchanged interest rates during the year, as well as a stabilisation in house prices. Any rise in interest rates, or significant fall in house prices, may reduce new construction in owner-occupier and investor markets, as well as reduce renovation activity, which has been supported by the wealth effects of house price growth.

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Box 2.2
Recent Oil Price Movements and their implications for Queensland

One of the most important developments in the world economy over recent years has been the rapid rise in the price of crude oil. The West Texas Intermediate, or WTI, price rose to over US$50 per barrel in late February 2005 from around US$20 per barrel in early 2002 (see Chart 1). Being an essential part of both business and household spending, a rise in the price of oil is expected to constrain activity in most economies, including Queensland. This is certainly the case when looking at the rise in oil prices in isolation. However, these price rise need to be viewed in the context of what factors have driven prices higher and how these factors have affected commodity prices and the value of the A$. This provides a more balanced picture of the overall impact on the Queensland economy.

Chart 1: WTI oil price and A$/US$ exchange rate

A range of factors has driven oil prices higher over recent years, but importantly, one of these factors is higher growth in global economic activity. The rapid rise in world oil consumption has been driven to a large extent by exceptional growth in China and India (see Box 2.1 for more information on these economies), as well as a recovery in the world economy generally. Global oil supply has not kept pace with the rise in demand, and spare production capacity (largely from Saudia Arabia) has fallen to around 20-year lows, limiting the extent to which new production can be brought on line. These supply constraints, combined with an increase in demand, has led to a sharp rise in the price of oil.

Higher oil prices dampen economic activity through a variety of channels. The most obvious channel is through higher petrol prices, to which consumers need to devote a larger share of their disposable incomes, leaving less to spend on other consumables. Higher oil prices raise business costs, which may lead to a reduction in business profits. If prolonged, this may result in a reduction in business spending on capital and labour. If profit margins are maintained by businesses, by passing on the cost of higher oil prices to consumers, then this may invoke a reaction from the central bank raising interest rates to combat the threat of higher inflation. This may dampen economic activity by raising borrowing costs to business and households. To the extent to which these channels adversely affect economies globally, another impact on Queensland may be reduced demand for exports.

The first point to consider in placing oil prices in context is that the increase in the price of oil must be compared with the rise in the cost of other business inputs and consumer prices generally. Although, in US$ terms, oil prices are currently roughly double what they were at the peak of the oil price boom in the late 1970s, consumer prices are more than 200% higher. For the current increase in oil prices to have an equivalent economic impact to the 1970s oil price boom, oil prices would need to increase significantly from current levels.

Secondly, the fact that the current increase in oil prices has been due in large part to demand factors rather than purely supply-side factors has resulted in some offsetting benefits to economic growth. The rise in global demand for oil has extended to mineral and energy commodities more generally, particularly coal, which has seen the value of Queensland’s merchandise exports increase rapidly.

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Additionally, with Australia being a major exporter of commodities, the rise in commodity prices has led to a large appreciation of the A$. As a result, the greater purchasing power of the A$ has partially offset the rise in US$ oil prices. Since late 2000, WTI oil prices in A$ terms have increased by only A$5 per barrel, against a US$20 per barrel increase in US$ terms (see Chart 2).

Chart 2: WTI oil price

When considering the impact of a rise in petrol prices on consumer spending in Queensland, it is therefore important to look at the price converted to A$, rather than the crude oil price reported in the media, which is generally the WTI price denominated in US$. Chart 3 shows how, over time, there is a fairly close relationship between Brisbane petrol prices at the pump, and crude oil prices denominated in A$ terms. Since the beginning of 2005, petrol prices have increased from around 80c per litre to around $1 in May.

A final consideration in determining the impact of a rise in oil prices on the economy is the share of total consumer spending that is devoted to petrol. In 2004, spending on petrol accounted for 2.7% of total household consumption in Queensland. This is a small share compared with the proportion of consumer spending accounted for by rent (17.2%), recreation and culture (12.3%), food (11.1%), hospitality (8.9%), insurance (6.6%) and household furnishings (5.9%). In general, petrol is an essential consumption item, and unlike other items the ability to switch to cheaper products is limited. Therefore, the 25% rise in petrol prices since December 2004 is likely to add around 0.7% point to the share of total spending devoted to petrol. If households act to maintain a given level of consumption, households would have to spend slightly less (0.7% less) on other consumables.

In summary, while rising petrol prices are a constraint on the economy, several factors have worked to alleviate the impact on Queensland. This includes the fact that the rise in oil prices in real terms has been more modest than in nominal terms, and has also been less marked in A$ terms. Further, oil price increases have been largely demand-led, benefiting commodity exports and prices. Finally, petrol expenses continue to represent only a small share of total consumer spending.

Chart 3: A$ oil prices and Brisbane petrol price
(7-day moving average)

 

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On the other hand, the volume of construction work yet to be completed in the housing sector remains around three times its historical average. This backlog of construction work in the pipeline, combined with stronger population growth in Queensland, may see dwelling investment continuing to grow in 2005-06, with related positive impacts on household consumption and employment during the year.

Seasonal conditions

With the rural sector generating over one quarter of Queensland’s total overseas exports, the forecast of 6¾% growth in overall exports in 2005-06 is based on the assumption that seasonal conditions will allow a gradual return towards average production performance in the rural sector. However, there is a risk that current borderline El Nino conditions, associated with reduced rainfalls, may continue into 2005-06. While rainfall in Queensland has been higher over the past 12 months than in the past three years, several years of below-average rainfall has created challenges for the farm sector, such as very low soil moisture levels for crop production and low stock levels in the cattle industry.

Current rainfall conditions suggest winter crop production in 2005-06 is likely to be below average. If poor seasonal conditions continue throughout 2005 and into 2006, this is likely to have an adverse effect on overall agricultural production and exports in Queensland in 2005-06.

Population growth

Despite moderating slightly in recent quarters, the net inflow of interstate and overseas migrants has remained higher than its long-run average annual rate in recent years. This partly reflects the lagged impact of greater economic and employment growth in Queensland and the impact of the recent national house price boom, which has caused persons to migrate from southern states to Queensland.

Accordingly, the forecast for 2% population growth in 2004-05 assumes that net interstate and overseas migration, while continuing to ease slightly, will remain above their long-run levels reflecting continuing stronger State economic conditions than nationally. However, if net migration falls below its long-run level, this would result in slightly lower population growth and weaker economic growth than currently forecast, particularly in relation to household consumption and dwelling investment.

Medium-term outlook

Queensland Treasury provides projections for key economic parameters for the three years following the immediate forecast period in the annual Budget and in the Mid Year Fiscal and Economic Review. The projections for the years 2006-07 to 2008-09, shown in Table 2.3, provide a broad indication of the likely path of economic conditions in the State and nationally over the medium term, rather than point estimates of actual growth for this period.

After exceptionally strong growth in 2004, economic growth in Queensland’s major trading partners is forecast to ease marginally in 2005 and, following an improvement in 2006, world economic conditions are expected to remain relatively stable over the projection period. As discussed earlier, key risks to global growth include the ability of China to engineer a soft landing and, should oil prices remain high, maintaining growth in countries that are large users of oil, such as the United States, Japan and South Korea.

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The projections also assume a continuation of the longer-term Australian Government fiscal policy and the monetary policy stance of the Reserve Bank of Australia. These policies aim to maintain a stable budget position and a low inflation environment to foster sustainable economic growth. The projections incorporate the anticipated impacts of the 2005-06 Commonwealth Budget released on 10 May 2005.

Economic growth in Queensland is projected to return towards its average growth rate over the past decade, around 4½% per annum, projected for the period to 2008-09. Jobs growth of 2½% per annum over this period is projected to outpace population growth of 1¾% per annum. This implies a moderate increase in labour force participation and the maintenance of a relatively low unemployment rate over the medium term.

The Queensland Government’s economic strategy targets productivity growth and innovation, the key drivers of economic growth, by investing in infrastructure and human capital. This strategy, described in detail in the following chapter, is expected to see Queensland’s economic growth continue to outperform that nationally over the longer term.

Table 2.3
Economic Parameters/Projections¹
(annual % change)

Notes:

Sources: Queensland Treasury and Australian Treasury.

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3. ECONOMIC STRATEGY

POSITIONING QUEENSLAND FOR CONTINUED GROWTH

The Queensland Government’s economic strategy aims to continue Queensland’s strong economic growth performance and, by achieving strong growth, enable a better quality of life for all Queenslanders, in keeping with the Government’s key economic and social policy priorities outlined in its Charter of Social and Fiscal Responsibility.

The rapidly evolving global marketplace and the associated increase in competition means the Government faces many challenges and opportunities as it positions Queensland’s economy for the future. It must also meet these challenges and opportunities within an environment of ever-growing demands on Government’s limited resources.

Consequently, all levels of government have a shared responsibility to achieve the key objectives of the economic strategy. In particular, infrastructure provision as a platform for sustainable economic growth requires effective collaboration and coordination across government to ensure economic, social and ‘smart’ infrastructure is appropriately planned, funded and delivered.

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QUEENSLAND’S ECONOMIC STRATEGY

Figure 3.1
Queensland’s Economic Strategy

Queensland’s economic strategy is to raise the productivity of Queensland’s labour force, and subsequently increase industry productivity, with productivity growth leading to higher rates of sustainable economic growth, improved living standards and greater employment opportunities — key economic and social policy priorities of the State Government.

At its simplest, productivity growth creates more output from given inputs. Productivity growth can be passed on to employees in the form of higher real wages, to consumers in the form of lower prices, or to employers and businesses in the form of lower input costs and higher profits. In each case, productivity gains ultimately result in higher real incomes and improved standards of living.

The key drivers of productivity growth across the labour force and industry are:

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Over the past decade and a half, Queensland has generated average annual economic growth of 4.6%, well above the 3.1% growth recorded for the rest of Australia (see Chart 3.1). Two-fifths of the economic growth differential was due to increased productivity, illustrating the relationship between productivity growth and sustainable long-term economic growth.

Chart 3.1
Employed Labour, Labour Productivity and Real Output: 1998-99 to 2003-04

Source: Queensland State Accounts, ABS 6202.0 unpublished data.

The remaining differential in economic growth between Queensland and the rest of Australia has been due to stronger growth in employment. Importantly, stronger growth in employment in Queensland in recent years has not only been due to stronger population growth. As Chart 3.2 shows, employment as a share of the population is estimated to reach an historical high in 2004-05, well above that in the rest of Australia.

Chart 3.2
Labour Force Participation Rate¹ and Employment Rate²

Source: ABS 6202.0, Queensland Treasury, Australian Treasury.

(e) represents estimated actual for 2004-05.

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This also reflects historically faster growth in labour force participation in Queensland and highlights the relationship between productivity and participation as the major drivers of sustainable productivity growth. Increases in traditional infrastructure or knowledge and information infrastructure (including human capital), which raise productivity growth, also increases the demand for and supply of labour, which increases participation. Increases in real incomes driven by productivity growth also create greater employment demand and participation in the work force.

Productivity growth also plays an important role in maintaining a sound fiscal and economic environment, as it maintains a long-term revenue base for Government to effectively target its key economic and social policy objectives. For instance, higher real incomes, generated through productivity growth, increase the State’s revenue base, which allows the Government to enhance delivery of a wide range of goods and services throughout Queensland including education, health and aged care, transport, water, energy, crime prevention, cultural activities, regional development and environmental protection.

A sound fiscal position also allows for a competitive tax environment, enhancing business competitiveness. The Queensland Government’s AAA credit rating reflects the positive assessment of the State’s fiscal policy settings by independent ratings agencies. A sound economic environment allows the State’s businesses to make economic choices with a reasonable degree of certainty and confidence. This facilitates new investment to lay down the foundation for the development of the State’s industries and regions, which leads to increased employment opportunities for all Queenslanders, now and into the future. Strong business investment in Queensland over recent years underlines the Queensland Government’s success in ensuring a supportive and stable economic environment.

INFRASTRUCTURE

The role of infrastructure in productivity growth

Public investment in capital infrastructure has played a key role in promoting and facilitating productivity growth in Queensland. This is because infrastructure, such as roads, railways, bridges, electricity, water, educational and health facilities, plays a central role in underpinning the economy’s development and productivity growth.

Queensland’s public infrastructure investment program during the second half of the twentieth century was integral to the State’s increased economic growth, productivity growth and population growth. Public infrastructure investment in port, rail, road and water infrastructure facilitated the development of export oriented industries in Queensland, in particular, promoting and facilitating the growth of Queensland’s mining industry.

Queensland experienced its most rapid decade of export growth during the 1970s following a period of substantial investment in public infrastructure. Merchandise exports overseas rose by more than five fold over the 1970s decade, predominantly driven by an increase in the value of coal exported. The mining industry in Queensland is now one of our largest industries and is a major export earner for Australia. Consequently, the Government’s investment in capital infrastructure provides considerable economic benefit to the State by contributing to the State’s economic growth and productivity growth through enabling changes to the production processes of firms that result in more efficient production and distribution networks, reducing overall production costs. Public investment in infrastructure can also improve service levels by increasing infrastructure capacity or improving the condition of existing infrastructure.

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The extent to which services provided by infrastructure contribute to economic growth depends not only on the extent and type of infrastructure investment, but on the effectiveness and efficiency with which existing infrastructure is used.

Increasing the State’s infrastructure base

The Government’s commitment to increasing the State’s capital infrastructure base is reflected in the scale of the State’s capital program over the last decade. On a per capita basis, the Queensland Government will continue to fund the largest capital program of any State (see Chart 3.3). Capital outlays are estimated to be around $8 billion in 2005-06, representing a 32% increase on the 2004-05 Budget. Budget Paper No. 3 — Capital Statement details the Government’s proposed capital outlays in 2005-06.

Chart 3.3
General Government Purchases of Non-financial Assets $  per capita

Sources: Unpublished ABS data; ABS 5512.0 and 3101.0; various state Budget papers; population estimates from Commonwealth Budget Paper No.3, 2005-06. Average includes all States and Territories, per capita in nominal dollars.

Increasing the efficiency of existing capital infrastructure stock

Government investment in capital infrastructure is not the only platform for improving the State’s productive capacity. Increasing the efficiency of existing capital infrastructure stock given current technology can also improve productivity, as it enables higher levels of outputs to be provided with the same level of inputs. Indeed, improving the efficiency with which existing infrastructure is used may confer greater economic benefits to society than new infrastructure investment, as it minimises the need to draw upon Government’s limited resources for new infrastructure investment. The Government can then use these resources for other Government priorities, such as health, education and the environment.

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Increasing the efficiency of existing infrastructure can be achieved through policy or regulatory mechanisms, such as demand management, regulatory reforms and effective and responsive planning. In the case of demand management, it is based on the premise of changing behaviours of infrastructure users by introducing educational or incentive measures to bring about voluntary changes to consumer behaviour.

Efficiency-enhancing regulatory reforms are based on reducing the costs of infrastructure inputs, removing competition impediments and providing the appropriate incentives for investment. For example, third party access to Government-owned rail lines promotes greater competition in Queensland’s rail freight market and therefore will help create a more efficient and productive rail network.

Effective and responsive planning of infrastructure networks can improve the efficiency with which current and future infrastructure is used. For example, coordinated planning can assist in ensuring that infrastructure assets function effectively as part of an integrated network. An integrated network improves connectivity and efficiency between hubs of economic activity, thereby boosting productivity. The State Infrastructure Plan (SIP), which was released in 2001, is an example of the Government proactively developing an integrated and coordinated plan to ensure connectivity and efficiency between hubs of economic activity, as is the recently released South East Queensland Infrastructure Plan and Program 2005-2026 (SEQIPP).

The Government will continue to explore efficiency-enhancing mechanisms for the State’s existing infrastructure to extract the maximum possible economic and social benefits from its use.

Infrastructure provision and the role of government

Infrastructure, by its nature, requires the involvement of government. As indicated above, infrastructure is often supported by government regulation to ensure that natural monopolistic characteristics of infrastructure are not exploited to the disadvantage of public consumers. Direct government involvement in infrastructure provision may also be warranted when the public benefits of such provision clearly exceed the costs.

Infrastructure provision in Australia is a shared responsibility between the Australian, state and local governments and the private sector. In some areas of infrastructure provision there is a clear delineation of provision and funding responsibility between governments. For example, the Australian Government is constitutionally responsible for the funding and provision of defence, postal infrastructure and telecommunications. Road infrastructure is an example of shared responsibility, with reasonably clear delineation of provision and funding responsibilities between governments: the Australian Government is responsible for national highways; the State Government is responsible for state highways, motorways and major roads linking towns and cities; and local governments are responsible for local road networks. However, in other areas, such as education infrastructure, there is a lack of clarity in the roles to be played by various levels of government in respect of provision and funding. This ambiguity in responsibilities merits further discussion of the roles of the various levels of government, in particular whether the Australian Government should be doing more to support infrastructure provision by state and local governments and the private sector.

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For many years, governments (at all levels) have utilised the private sector to design and construct major capital works. Consequently, most public capital infrastructure projects have involved the private sector through conventional tender arrangements. Over recent years, the nature of private sector participation in the provision of infrastructure has changed to also include infrastructure financing and operation. The importance of private sector participation and provision is highlighted in Chart 3.4. The private sector accounted for around 73% of the State’s non-dwelling fixed capital investment on average over the past five years compared with the State and local governments’ contribution of around 22% over this period.

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Chart 3.4
Non-Dwelling Fixed Capital Investment in Queensland — Five Year Average, 1999-00 to 2003-04

     Source: Queensland State Accounts.

The Government continually strives to develop and implement improved and lower-cost procurement of infrastructure and encourage private sector involvement in public infrastructure provision where it can be shown that the State will achieve better value for money. The Queensland Government released its Public Private Partnerships policy in 2001, which provides a framework for the partnership of Government and the private sector, to develop ‘Value for Money’ solutions to public infrastructure services. In summary the principles of the policy and framework are to:

Infrastructure to manage growth in South East Queensland

Population growth in South East Queensland (SEQ) continues to grow faster than both Queensland as a whole and Australia (see Chart 3.5), with the population in the South East expected to reach 3.7 million by 2026 — an increase of more than one million people. SEQ is the largest economic region of Queensland, with more than 60% of the State’s employed persons. In recent years, the SEQ economy has been growing considerably faster than the Australian average, driven by business investment, dwelling and non-dwelling investment, population growth, consumption and exports.

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Chart 3.5
SEQ — annual average % population growth from 1976 to 2004

     Source: ABS 3216.0, Queensland Year Books (various).

Population growth is a major driver of infrastructure demand and government spending. As discussed above, infrastructure’s unique characteristics such as long asset life and capital intensive nature means that it is provided within a strategic and forward-looking planning framework in order to sustain and improve productivity, economic growth and standards of living. For these reasons the Government developed and recently released the SEQIPP.

SEQIPP outlines the State’s infrastructure priorities and investment intentions for South East Queensland in three distinct phases over a 20 year period. It provides for transport, water, energy infrastructure, as well as community infrastructure, rural development infrastructure and information and communication technology infrastructure.

Transport infrastructure is a key infrastructure priority of SEQIPP, due to the expected strong growth in passenger and freight trips in South East Queensland over the medium term. Road freight in particular is expected to double by 2020, as a result of the rapidly expanding import and export activities of the Port of Brisbane. This will place increasing demands on the existing transport infrastructure and could lead to an augmentation of traffic congestion, declining air quality and lower productivity. Therefore, the Government has placed a high priority on roads and transport systems initiatives within SEQIPP. Major initiatives include:

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These major initiatives will help ensure that population growth does not compromise the region’s liveability or environmental values, while at the same time contributing to Queensland’s productivity and economic development through:

Infrastructure throughout Queensland

Regional Queensland constitutes a vital part of the Queensland economy, accounting for around 64% of the State’s merchandise exports overseas. The Queensland Government is committed to investing in capital infrastructure in regional Queensland to support ongoing economic and social development.

In Queensland, a major challenge of infrastructure provision in regional areas is to identify and provide infrastructure that increases productivity in these regions. The Government responded to this challenge by releasing the SIP in 2001. This five year plan was developed to provide a strategic and coordinated approach to developing the infrastructure requirements for the State and its regions.

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The main objectives of SIP are to coordinate and integrate infrastructure provision to support economic development, establish strategic economic development objectives for all public and private sector infrastructure planning, identify those possible infrastructure responses likely to strongly support sustainable economic development, optimise the use of existing infrastructure, establish economic infrastructure priorities for the State Budget, provide a mechanism for identifying private sector investment opportunities in infrastructure provision and provide greater confidence for businesses to expand and invest in new developments.

There are nine regional infrastructure strategies in the SIP. These include South East, South West, Wide Bay Burnett, Gladstone, Central, Mackay, Northern, Far North and North West of Queensland. The Government’s commitment to improve the State’s regional infrastructure base is reflected in the level of investment in 2005-06. Budget Paper No. 3 — Capital Statement details the Government’s proposed capital outlays for Queensland in 2005-06.

KNOWLEDGE AND INFORMATION INFRASTRUCTURE

Complementing the provision of traditional infrastructure, such as roads and water, is the provision of knowledge and information infrastructure. Knowledge and information infrastructure refers to infrastructure that facilitates and promotes creativity, innovation and skills such as research and scientific institutions, information and communications technology networks and education and training facilities. This infrastructure also provides the building blocks for Queensland’s Smart State Strategy, which is at the centrepiece of the Queensland Government’s broader economic development strategy.

Enabling technologies

Technological advancement has typically occurred in stages or waves (see Box 3.1). The current wave of technological advancement is information and communications technology (ICT). Key sectors within this wave are computers, software, integrated digital networks, ICT services, biotechnology, nanotechnology, space/satellite and environmental technologies. History shows that nations that adapt and respond to these waves are likely to experience higher economic and social prosperity than nations that lag. The Smart State Strategy, including the recently released Smart Queensland: Smart State Strategy 2005-2015 is the Government’s blueprint and action plan for responding to the current wave of enabling technological development and securing Queensland’s future in the 21^st century.

ICT infrastructure, such as computer networks, servers and storage devices supports many technology-led applications, such as broadband e-commerce, m-commerce, e-learning and e-health. These applications have yet to fully develop but are likely to have a large impact on future growth, productivity, living standards and international competitiveness.

Consequently, ICT infrastructure is vital to the Queensland economy to:

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The Government has introduced a number of initiatives to facilitate ICT infrastructure investment and development throughout the State. These include:

As with traditional infrastructure, the provision and regulation of knowledge and information infrastructure is a shared responsibility between all levels of government. However, the legislative and regulatory responsibility for the provision of telecommunications networks in Australia rests largely with the Australian Government. These networks underpin ICT-led applications and investment. The regulatory framework and market structure in the telecommunications market is therefore critical to support investment that ensures a pro-competitive and innovative communications market, which is able to keep pace with the requirements of the global market place. In addition, the regulatory and market structure should also support the provision of services to remote, rural and regional Queensland to allow all Queenslanders to participate in the global market via telecommunications infrastructure and have the opportunity to access interstate and overseas markets.

The Queensland Government believes that a truly competitive environment is essential to ensuring all Queenslanders have the opportunity to access the benefits available to them in the information age. These benefits are multi-faceted, including innovation and productivity growth from e-commerce and social benefits from electronic service delivery and improved communication systems, as well as benefits through industry and regional development.

However, a truly competitive environment is still not present in the majority of telecommunications market. Telstra’s continued domination of some markets, notably the local loop, is one example of this. Consequently, access and competitive conduct regulation remains essential to delivering effective outcomes. As the most decentralised mainland state, telecommunication networks and markets are particularly important, as Queensland’s economic base is dependant upon decentralised industries of mining and mineral processing, agribusiness and tourism. As a result, the Queensland Government will continue to work with the Australian Government to ensure legislative and regulatory arrangements facilitate a more competitive and innovative telecommunications market for all Queenslanders.

Nanotechnology is a key sector within the current wave of technological development and is an example of an emerging enabling technology. Nanotechnology, or molecular level engineering, allows for the manipulation of individual atoms and molecules, making it possible to build machines the size of a human cell or create materials with desired properties. Nanotechnology has the potential to create revolutionary new products and processes, make products and processes smaller, cheaper and more environmentally friendly, create new industries and job opportunities, as well as helping existing industries to improve their productivity relative to international competitors.

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The Queensland Government recently contributed $20 million to the new $50 million Australian Institute for Bioengineering and Nanotechnology at the Queensland Biosciences Precinct at the University of Queensland in Brisbane. This investment will help develop one of the largest research and development clusters in nanotechnology in the Southern Hemisphere.

Source and adapted from: Dodgson, M. (2003). The Management of Technological Innovation: An International Strategic Approach. Oxford University Press.

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Innovation and Research and Development

Innovation involves the development of new or improved products or services or developing more efficient production processes. Innovation is a key driver of productivity growth, economic growth and higher living standards. The Organisation for Economic Co-operation and Development (OECD) estimates that innovation accounts for 50% of long-term economic growth in advanced economies, which is why innovation and fostering innovation is at the heart of the Smart State Strategy.

Research and development (R&D) represents an important input into innovation.

Recognising the importance of R&D to innovation the Queensland Government has taken an active role in this area by providing R&D infrastructure to increase innovation in the State’s economy. Over the past five years, the Queensland Government has invested more than $2.4 billion in research projects and infrastructure including:

Building on the successes of the Smart State Research Facilities Fund, and as part of the recently released Smart Queensland: Smart State Strategy 2005-2015, the Queensland Government will, in 2005-06, establish the Innovation Building Fund, with $128 million over four years, to further stimulate research, development, commercialisation and technology diffusion. This major infrastructure program will establish pioneering research and innovation institutes, facilities, and centres of excellence in Queensland. It will also fund major items of research equipment.

Chart 3.6 illustrates Queensland’s average annual growth in R&D expenditure by business, higher education institutions, the Australian Government and state governments. Queensland has outperformed the rest of Australia in all four categories over the 1994-95 to 2002-03 period, which illustrates the Government’s ongoing commitment to R&D expenditure.

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Chart 3.6
Growth in R&D expenditure, 1994-95 to 2002-03 (average annual % change)

Skilling human capital

The term human capital refers to the stock of knowledge, skills and attributes available in the workforce. Human capital can be enhanced by formal education and training, informal training, including work and life experiences, increased participation in the labour force and skilled immigration. The enhancement of human capital has a positive effect on productivity and economic growth in an economy. Human capital also influences productivity and economic growth through innovation, as it is people’s analytical and creative skills that determine the rate at which an economy can create better products or absorb and improve upon technology developed elsewhere.

As a result, and to achieve and sustain the Government’s Smart State vision, the Government recognises the importance of investment in human capital through education and training. Statistics show people with higher levels of education and training tend to achieve better employment outcomes and higher paid jobs. Increasing the levels of education and training for all Queenslanders has been, and continues to be, a key priority for the Government. In 2005-06, more than $800 million will be invested in publicly funded vocational education and training in Queensland. In addition, $140 million will be allocated towards Education and Training Reforms for the Future to cater for students’ individual needs, enhance academic achievement and equip students for the world of work.

The Government will also commence a comprehensive review of Queensland’s vocational education and training system and develop a range of strategies to make it more flexible and responsive to rapidly changing skill needs of the economy, and deliver up-to-date training to more Queenslanders. The Government is also implementing a range of labour market initiatives in 2005-06 to address the skill shortages in some key industries such as building and construction and engineering.

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4. BUDGET PRIORITIES AND INITIATIVES

INTRODUCTION

This chapter details:

As part of its commitment to ensuring a better quality of life for all Queenslanders, the Government has identified eight outcomes that it is working to achieve for the people of Queensland. These outcomes are outlined in the Charter of Social and Fiscal Responsibility and include economic development, community wellbeing and environmental sustainability. All government services contribute to one or more of these outcomes for the community.

To support the achievement of these outcomes, the Government has a clear policy agenda, currently targeting seven priority areas in which the Government will concentrate efforts to improve performance and respond to changing community needs and expectations.

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The alignment of the Government’s desired outcomes for the community and its priorities is shown in Box 4.1.

Each year, the Government releases a Priorities in Progress report to inform the community about its activities in delivering its priorities and community outcomes. The fifth Priorities in Progress report (January 2005) informs the community about the impact of the Government’s policies and initiatives in the 2003-04 financial year. The report highlights areas where Queensland is performing well, and identifies opportunities for improvement. The Priorities in Progress Report 2003-04 may be viewed online at www.treasury.qld.gov.au.

The 2005-06 Budget provides for a range of specific initiatives and service developments that will assist in achieving these key policy priorities. The major revenue initiatives to achieve the Government’s priorities in this year’s Budget relate to State taxation, specifically land tax and stamp duties. A full discussion of the revenue initiatives and issues is in Chapter 5.

Spending to achieve these priorities falls into two categories: operating and capital. Operating expenses are the costs incurred in providing services and running and maintaining assets and are addressed in detail in Chapter 6. Capital expenditure relates almost exclusively to the purchase and construction of assets that are used to support service delivery, such as hospitals, schools, courthouses, police stations, fire and ambulance stations and roads. Capital expenditure is discussed in Budget Paper No. 3 — Capital Statement.

This year, many of these initiatives are contained in two policy documents recently released by the Government:

Details of some of the service delivery initiatives in the 2005-06 Budget that support the achievement of the Government’s priorities are described below. While highlights of the Budget are described in terms of their primary impact on the community, many assist the Government in pursuing more than one key priority. More detailed information on service delivery can be found in individual Ministerial Portfolio Statements.

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GROWING A DIVERSE ECONOMY AND CREATING JOBS

Smart State programs

New grants programs

In the 2005-06 Budget the Government will commit $136 million in recurrent and $64 million in capital funding over four years for three new grants programs to build research facilities and support innovation across a broad range of fields, including health and medical, environmental, agriculture and mining.

Research Facilities Fund

The 2005-06 Budget increases funding under the current and final round of the Smart State Research Facilities Fund by $20 million in capital funding, which will bring the value of the funding committed since the fund was launched in 2001 to $170 million.

University Internships

Additional funding of $1 million over three years has been provided for the Smart State University Internships. The program will provide support for the coordination of industry placements for undergraduate and postgraduate students from Queensland universities. The program aims to expose students to other disciplines and career options and increase the attractiveness of science, technology and engineering as a career path.

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Smart State Industry Innovation Program

The Government will provide $1.5 million over three years to the Smart State Industry Innovation Program to encourage companies to collaborate on projects that will improve industry operations and introduce smart practices in line with the Smart State Strategy.

Innovation Start-up Scheme

Further funding of $1.9 million over three years has been provided for the Innovation Start-Up Scheme that aims to support Smart State high technology projects which show scientific excellence and commercial promise.

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Smart Exploration Program

Additional funding of $20 million over four years ($5 million in 2005-06) is provided under the Smart State Strategy to establish the Smart Exploration Program to identify and support new opportunities for mineral exploration in Queensland by collecting and combining geological and geophysical data to create an expanded geoscience knowledge base.

Industry initiatives

Biosecurity protection and response

Increased funding of $2.2 million per year, including an additional $1.2 million per year in the 2005-06 Budget, is provided to ensure market access and to maintain consumer confidence for primary products. The Government will increase biosecurity preparedness in emergent domestic and international issues affecting Queensland’s compliance with biosecurity and food safety standards. Increased funding will strengthen Queensland’s response to national threats such as exotic fruit flies, foot and mouth disease, Transmissable Spongiform Encephalopathies, Johne’s disease, tuberculosis and arboviruses in collaboration with Australian and other state governments.

Citrus canker eradication

An additional $0.3 million is provided for eradication of the exotic citrus canker disease detected on two Emerald district properties. The $11 million program is jointly funded with the Australian Government and citrus-growing states and territories.

New Asian markets for horticulture

An additional $1.5 million over three years will enable the Government to spearhead a horticultural export drive into Asian markets. Valued at an estimated $3 billion in 2004-05, the horticulture industry in Queensland is the second largest primary industry and underpins the employment and economic fabric of many Queensland regional communities. In conjunction with industry, the department will prioritise market potential for fresh and value added products, identify impediments along the supply chain and develop and implement initiatives to facilitate exports.

Aquaculture industry growth

The Government will provide an additional $4 million over four years to Queensland’s Aquaculture Development Initiative. In partnership with industry, this initiative invests in increased research and development, support and export market development in the fast growing sectors of the aquaculture industry such as prawns and barramundi and the emerging sectors — crabs, sea scallops and reef fish.

Wine industry development

The Budget provides an additional $0.5 million in 2005-06 as well as ongoing funding to increase the Government’s capacity in delivering viticulture advice and technical services to Queensland’s wine industry.

State-wide forests process

Additional funding of $18.8 million over seven years is provided to implement the Western Hardwoods Plan. The plan aims to develop sustainable forest management and Crown timber supply options.

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Ethanol Industry Action Plan

The Ethanol Industry Action Plan has been formulated in response to a need to progress industry growth and investment in the Ethanol Industry. The Government has allocated $7.3 million over two years for implementation of rebates for cleaning storage tanks in order to hold E10 fuel; a marketing campaign to raise public awareness; operational guidelines for diesel ethanol blends, engine conversion and related issues; and blending and distribution facilities for E10 and diesel ethanol blends.

Forestry plantation expansion

To facilitate the phase out of native forest logging in South East Queensland (SEQ) by 2024 and strengthen the growth potential of the timber industry, $6 million in recurrent and $0.7 million in capital funding is allocated in 2005-06 to plant a further 1,000 hectares of hardwood plantations, and maintain existing plantations. In addition, $9.6 million is allocated in 2005-06 to establish and re-establish 6,554 hectares of State-owned softwood plantation to provide for future timber supplies to Queensland’s timber industry.

Other initiatives

Drought relief

The Government will participate in and contribute funding to the expanded Exceptional Circumstances Scheme recently announced by the Australian Government which will provide much needed additional support to farmers suffering from prolonged drought conditions.

Breaking the Unemployment Cycle

The successful Breaking the Unemployment Cycle initiative provides a suite of employment programs aimed at assisting the most disadvantaged job seekers and increasing Queensland’s labour force participation rate to counteract the effect of an ageing workforce. The initiative includes a new Back to Work: Parents and Carers Program, which will provide a range of employment assistance services to 1,000 parents and carers. Additionally, the Community Jobs Plan will pilot arrangements in six locations across Queensland to further integrate employment services with nationally recognised training. The pilot will target areas and specific groups in the community that experience persistent levels of unemployment.

Knowledge Based Research and Business Precincts

The Budget provides an initial investment of $2 million to facilitate the detailed specification and design process for the Knowledge Based Research and Business Precincts incorporating an Ecosystems Science Precinct at the Boggo Road Gaol and a Health and Food Science Precinct at Coopers Plains. The development of the precincts will provide opportunities to combine research skills, facilities and infrastructure of State and Australian Government agencies and support the Smart State initiative.

Capital funding of $45.5 million is also provided in 2005-06 under the South East Queensland Infrastructure Plan and Program (SEQIPP) towards site preparation and infrastructure works for the Boggo Road Precinct redevelopment. The redevelopment will contribute significantly to the Smart State initiatives with the first stage of the proposed knowledge based research and business component providing approximately 60,000 m²gross of office and laboratory space for scientific research into eco-science.

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REALISING THE SMART STATE THROUGH EDUCATION, SKILLS AND INNOVATION

Education initiatives

A projected additional 286 teachers will be employed from Semester 1, 2006 for enrolment growth.

Enhanced levels of education and training will facilitate and sustain the Government’s Smart Queensland: Smart State Strategy 2005-06 agenda. Key initiatives funded by the 2005-06 Budget to support this strategy are outlined below.

Queensland Smart Academies

An additional $45.8 million is provided over four years, including $40 million in construction and fit-out costs, to establish two new Queensland Smart Academies for senior students who excel in science, maths and technology and the creative arts. Students will be able to complete a Queensland Certificate of Education, fast track studies, study university subjects, or work with industry to combine career-based and university-level studies. Years 10 and 11 students will start in 2007 and Year 12 students in 2008.

Education and Training Reforms for the Future

The Education and Training Reforms for the Future (ETRF) cater for students’ individual needs, enhance academic achievement, and equip students for the world of work. As part of the reforms, the three-year ICTs for Learning initiative has exceeded targets and been successfully completed. The remaining elements of ETRF are the early, middle and senior phases of learning. The 2005-06 Budget provides $139.9 million to ensure the ETRF becomes a reality for more Queensland young people and includes: ·

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Information and communication technology

$80.1 million in 2005-06 is provided to improve information and communication technologies (ICT) access, technical support and skills for students and teachers including:

Queensland Curriculum, Assessment and Reporting Framework

An additional $8.3 million over three years is provided to develop and progressively implement the Queensland Curriculum, Assessment and Reporting Framework. The new framework will provide greater clarity about what must be taught in Queensland schools, more rigorous and comprehensive assessment of student achievements against set standards and increased comparability in reported student performance.

Implementation of the framework will increase the consistency and quality of schooling in Queensland, equip teachers with high quality assessment tools and provide an education that prepares young Queenslanders to contribute effectively to Smart Queensland.

Education capital works program

The 2005-06 education capital works program of $455.1 million (including $67.8 million for expensed items) will invest substantial funds in educational facilities to ensure students can thrive in quality learning environments, including:

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Asbestos replacement

The Budget provides $7.2 million in 2005-06 as part of a 10-year, $120 million accelerated asbestos replacement program, replacing all asbestos roofs in state schools.

Vocational education and training initiatives

In 2005-06 the Government will commence a comprehensive review of Queensland’s vocational education and training system to ensure that the system is able to respond to current skilling challenges. Other key initiatives and service developments in the 2005-06 Budget in the area of vocational education and training are outlined below.

SmartVET

As part of the Government’s previously announced $1 billion three year SmartVET strategy, $291.9 million in recurrent funding and $62.7 million in capital funding is allocated in 2005-06, bringing total investment since 1 July 2004 to $580.9 million in recurrent funding and $109 million in capital funding. This continues the range of innovative, new pilot programs and existing skilling initiatives including:

Other vocational education and training initiatives

The Department of Employment and Training will also allocate:

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MANAGING URBAN GROWTH AND BUILDING QUEENSLAND’S REGIONS

Water Infrastructure initiatives

Water Reform — Continuity of Supply

Additional funding over four years of $31 million in recurrent funding and $4.5 million in capital funding is provided as part of the Smart State Strategy for a package of water related projects to ensure security of supply, maximise efficiency of use, promote recycling and improve knowledge and understanding of water systems, demand and use. This funding is in addition to funding for water initiatives associated with SEQIPP.

New State Water Infrastructure

Under SEQIPP, additional funding of $243 million is allocated for new state water infrastructure. This infrastructure includes two new weirs, on the Mary and Logan rivers, a new dam at Wyaralong and new water storage options on the Mary River. All of these projects are subject to the outcomes of the South East Queensland Regional Water Supply Strategy (to which the State will contribute a further $1.6 million) and the outcomes of detailed investigation and approval processes, expected to be completed by the end of 2006.

Recurrent Water Initiatives

Additional funding of $69 million is allocated over ten years for a suite of recurrent water programs as part of SEQIPP. This is in addition to funding of $9 million over five years provided in 2004-05 to accelerate water resource and water supply planning in SEQ. The initiatives contained in this package include: urban water accounting; rural water use efficiency; integrated urban water management including water recycling; groundwater investigations; desalination investigations; and water quality improvement.

Dam Spillway Upgrades

The State has set aside $89.9 million over 10 years to fund high priority dam safety upgrades and to improve dam safety regulation. The Government will prepare new dam safety guidelines which reflect the new national safety guidelines for spillway adequacy and other dam safety matters.

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Transport initiatives

Road network

The recently released SEQIPP provides extra state funding for the road network of $691 million over four years from 2005-06, including additional allocations for the following major state-funded projects:

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In addition to this substantial investment, the State Government is providing additional funding of $359 million over a period of four years from 2005-06 for the Rural and Regional Roads Funding Initiative in Southern, Central and North Queensland.

Other significant projects that are being progressed in 2005-06 are:

Busway networks

The Budget includes $306.2 million over four years to continue the Government’s investment in the Inner Northern Busway, including $82 million in 2005-06 towards the Queen Street Bus Station to Roma Street extension, $9.4 million in 2005-06 to complete construction of the Royal Children’s Hospital and Normanby Bus Stations and an additional $2 million in 2005-06 to commence construction of the Roma Street Bus Station.

The Budget also provides additional funding for busway networks, including $27 million in 2005-06 provided under SEQIPP to commence construction of a two-lane Eastern Busway corridor connection from Buranda to Boggo Road to Green Bridge.

TransLink

The Budget provides a further $28.7 million in capital funding in 2005-06 towards the implementation of TransLink — improving the integration and coordination of bus, ferry and rail services in SEQ by progressing integrated ticketing, the use of smartcard technology, together with standardising concessions and fares. This amount includes an additional $3 million in 2005-06 to include school transport in the TransLink smartcard.

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Other Transport initiatives

The Budget also provides additional funding of:

Other urban services initiatives

Local government infrastructure grant and subsidy funding

The Government will provide additional funding through grant and subsidy payments to local governments to improve water, sewerage and water recycling infrastructure services to their communities, including:

Ipswich central business district (CBD) revitalisation

The Government will provide up to $1.1 million in 2005-06 as a contribution towards a $2.2 million planning study for the redevelopment and revitalisation of the Ipswich CBD. The need to redevelop and revitalise the Ipswich CBD as a key regional centre was highlighted in the draft SEQ Regional Plan.

Queensland’s 150^th birthday

$100 million over three years is allocated towards a joint program with local governments throughout Queensland for capital projects which will be practical tributes to Queensland’s 150^th birthday in 2009.

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IMPROVING HEALTH CARE AND STRENGTHENING SERVICES TO THE COMMUNITY

Health initiatives

Chronic disease

A $151 million funding package over the next four years is committed towards preventing chronic diseases and their key risk factors, reducing avoidable hospital admissions, and improving the quality of life for people with chronic diseases. This includes an initial investment of $10 million in 2005-06.

Elective surgery

Recurrent funding of $20 million is provided over two years, targeting public hospital waiting times, so a further 4,000 people can receive operations and surgical procedures on time. This funding is in addition to $110 million provided over three and a half years to continue to target elective surgery waiting times across the State.

Other health services

The Government is allocating:

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Health infrastructure investment

The Government will provide:

Initiatives to address homelessness and housing

Responding to homelessness

The Budget provides $115.1 million in capital funding and $120.4 million in recurrent funding over four years to further develop responses to homelessness. State Government agencies are working together to improve and add to existing responses and better integrate services for people who are homeless, particularly without access to any shelter. These initiatives will minimise the impacts of homelessness on individuals and the community by enhancing the capacity of the service system to provide early responses. This funding has been distributed amongst seven government agencies and includes:

Other housing initiatives

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