Queensland, Australia’s most indebted state, is aiming to return its budget to surplus in 2014-15 as Premier Campbell Newman attempts to win back its AAA credit rating.
The deficit will be A$10.8 billion ($11.2 billion) in the fiscal year ending June 30, 2013, Treasurer Tim Nicholls said in handing down the Liberal National Party’s first budget since ending 14 years of Labor rule in a landslide election victory in March. The state will cut 14,000 public service jobs this fiscal year, he said.
“We have had to make the hard decisions necessary to get the great state of Queensland’s finances back on track and back in the black,” Nicholls told the state parliament in Brisbane. “This afternoon we reset the clock and we break from the addiction to debt and deficit that characterized Queensland’s finances under Labor.”
Newman is slashing jobs and services to curb spending that he said earlier this year risked turning Queensland into an Australian version of Spain. His challenge is complicated by falling commodity prices that threaten to reduce revenues in resource-rich Queensland, which accounts for about one-fifth of the Australia’s A$1.4 trillion economy and is the third-biggest state by population.
The government forecast net borrowings of A$11.2 billion this fiscal year, up from the estimated A$6.3 billion in 2011-12, the budget papers showed.
From Oct. 1, the royalty on coal sold for between A$100 and A$150 per ton will be increased to 12.5 percent, and 15 percent for greater than A$150 per ton, Nicholls said. The state expects to raise an extra A$1.6 billion in revenue over four years from the increase and pledged no further changes to the rates for 10 years.
BHP Billiton Ltd., the world’s largest mining company, said it was “disappointed” in the size of the royalties increase. The new rates will directly impact the profitability of the company’s operations and affect its business decisions on capital growth allocations in the state, it said.
BHP said yesterday it will halt production at its open-cut Gregory mine in Queensland and cut almost 300 jobs, the second coal pit to be shut by the company in the state this year.
Nicholls said the government would increase the first home owners grant on new homes to A$15,000 from A$7,000 to support construction.
Moody’s Investors Service said in a statement after the announcement that Queensland “faces considerable challenges in achieving it budgetary targets.” Standard & Poor’s said a near-term movement in the state’s credit rating is currently unlikely, adding that “upward movement in the rating may be possible over the mid-to-long term, following a sustained improvement in Queensland’s budgetary performance and debt burden.”
Fitch Ratings said it will respond to the budget later in the week.
Queensland lost its top credit rating in 2009, after the Labor state government spent A$54 billion to fix ailing infrastructure. The state has A$75.5 billion in outstanding bonds, about A$20 billion more than the next biggest debtor state, New South Wales, according to data compiled by Bloomberg.
“Queensland has been bankrupted -- is on the way to being bankrupted -- by poor and reckless financial management,” Newman, a former Brisbane mayor, said in July. “I’m saying that if we’d failed to act in the way that we are, that Queensland would ultimately be the Spain of Australian states.”
Queensland holds a AA+ score from S&P and Fitch Ratings, the second highest rating, and the equivalent Aa1 ranking from Moody’s.
The 6.25 percent Queensland note due in 2020 yielded 121 basis points more than Federal government debt, according to Australia & New Zealand Banking Group Ltd. prices. The equivalent spread on New South Wales notes due in May 2020 is 84 basis points.
A private report today showed business confidence weakened across most Australian states in August, “with a significant loss in sentiment recorded in Queensland,” National Australia Bank Ltd. Chief Economist Alan Oster said.
Queensland recorded the biggest fall in consumer confidence in Australia, a Westpac Banking Corp. and Melbourne Institute survey taken Aug. 6-10 showed.
The state’s jobless rate rose for a second month in August to 5.9 percent, compared with national unemployment of 5.1 percent, government data released last week showed.
The Liberal National Party won 78 of the Queensland parliament’s 89 seats in the March state election. The result was a rebuke to former state premier Anna Bligh, whose popularity sank after she raised A$15 billion from selling off state assets, including a stake in coal-train operator QR National Ltd. The government still holds a 35 percent stake in QR, which has a market value of A$8.4 billion.