State Budget 2010–11 Budget Strategy and Outlook Budget Paper No.2 State Budget 2010–11 Budget State Budget Strategy and Outlook Budget Paper No.2 Paper Budget and Outlook Strategy Budget State Budget 2010–11 Budget Strategy and Outlook Budget Paper No.2 www.budget.qld.gov.au 2010–11 State Budget Papers 1. Budget Speech 2. Budget Strategy and Outlook 3. Capital Statement 4. Budget Measures 5. Service Delivery Statements Budget Highlights This suite of Budget Papers is similar to that published in 2009–10. The Budget Papers are available online at www.budget.qld.gov.au. They can be purchased through the Queensland Government Bookshop – individually or as a set – by phoning 1800 801 123 or at www.bookshop.qld.gov.au © Crown copyright All rights reserved Queensland Government 2010 Excerpts from this publication may be reproduced, with appropriate State Budget 2010–11 acknowledgement, as permitted under the Copyright Act. Budget Strategy and Outlook Budget Paper No.2 Budget Strategy and Outlook www.budget.qld.gov.au Budget Paper No.2 ISSN 1445-4890 (Print) ISSN 1445-4904 (Online) STATE BUDGET 2010-11 BUDGET STRATEGY AND OUTLOOK Budget Paper No. 2 TABLE OF CONTENTS 1 Fiscal Strategy, Performance and Outlook................................1 Fiscal Strategy ...............................................................................3 Path Back to Surplus......................................................................6 Fiscal Principles .............................................................................7 Summary of Key Financial Aggregates........................................12 Budget Outcomes 2009-10 ..........................................................13 Budget 2010-11 and Outyear Projections ....................................16 Reconciliation of Net Operating Balance......................................19 2 Economic Performance and Outlook.......................................21 External Environment...................................................................22 The Queensland Economy...........................................................26 3 Economic Strategy for a Growing and Ageing Population...............................................................43 Queensland’s Demographic Challenges ......................................44 Long Term Economic Strategy.....................................................51 4 Revenue ......................................................................................63 Introduction ..................................................................................64 Changes in Revenue since the 2009-10 Budget..........................66 Revenue by Operating Statement Category ................................68 Taxation Revenue........................................................................70 Queensland’s Competitive Tax Status .........................................78 Grants Revenue...........................................................................80 Sales of Goods and Services.......................................................83 Interest Income ............................................................................85 Dividend and Income Tax Equivalent Income ..............................85 Other Revenue.............................................................................86 5 Expenses......................................................................................89 Introduction....................................................................................89 Expenses by Operating Statement Category.................................92 Details of Expenses.......................................................................93 Operating Expenses by Purpose ...................................................97 Departmental Expenses ..............................................................101 6 Balance Sheet and Cash Flows................................................105 Introduction..................................................................................105 Balance Sheet .............................................................................106 Cash Flows..................................................................................112 Reconciliation of Operating Cash Flows to the Operating Statement.............................................................................120 7 Intergovernmental Financial Relations....................................121 Federal Financial Arrangements..................................................122 Australian Government Payments for Specific Purposes ............125 GST Revenue Payments.............................................................131 Other Commonwealth Payments.................................................138 Health Reforms............................................................................138 Review of Australia’s Tax System ...............................................141 State-Local Government Financial Relations...............................143 8 Public Non-financial Corporations Sector...............................145 Prior Year Key Performance Indicators .......................................146 Net Flows to Government ............................................................152 Asset Sales Program...................................................................154 Capital Structure Review .............................................................156 GOC Reporting Reforms .............................................................157 Implementation of GOC Reforms ................................................158 Energy Sector..............................................................................161 Transport Sector..........................................................................163 Water Sector................................................................................168 9 Uniform Presentation Framework............................................171 Introduction..................................................................................171 General Government Sector........................................................171 Public Non-Financial Corporations Sector...................................172 Uniform Presentation Framework Financial Information..............174 Reconciliation of Net Operating Balance to Accounting Operating Result ..................................................................184 General Government Time Series...............................................185 Other General Government UPF Data ........................................186 Contingent Liabilities ...................................................................192 Background and Interpretation of Uniform Presentation Framework ...........................................................................193 Sector Classification....................................................................195 Reporting Entities ........................................................................196 Appendix A – Tax Expenditure Statement....................................199 Appendix B – Concessions Statements .......................................207 Appendix C – Statement of Risks and Sensitivity Analysis........215 1 FISCAL STRATEGY, PERFORMANCE AND OUTLOOK FEATURES • The forecast General Government net operating balance is expected to be a deficit of $287 million in 2009-10 compared to a forecast deficit of $2.351 billion at the time of the Mid Year Fiscal and Economic Review in December 2009 and $1.954 billion at the time of the 2009-10 Budget. • The improvement in the forecast net operating balance across the forward estimates since the Mid Year Fiscal and Economic Review primarily reflects an improvement in global economic conditions and the resulting revisions to royalty and GST revenue. • The improvement in the 2009-10 net operating balance is also due to the bring forward of Australian Government payments for transport projects, such as the Ipswich Motorway, with funding brought forward primarily from 2010-11. Australian Government funding for Gold Coast Rapid Transit, which had previously been considered to be an equity contribution, will now be received as a grant in 2009-10. • Despite an improved revenue outlook, the General Government sector is forecast to incur a net operating deficit in 2010-11 ($1.745 billion), associated with the withdrawal of Australian Government stimulus payments. Improvements in the operating position are expected across each of the forward estimate years, with a return to surplus now projected in 2015-16. • Cash deficits in the General Government sector are projected for each year across the forward estimates, reflecting the State’s significant capital program. • The State’s 2010-11 capital program is an estimated $17.1 billion, a 1.2% decrease on 2009-10 estimated outlays. The capital outlays of Public Non-financial Corporations (commercial) sector entities constitute approximately 41% of total outlays in 2010-11. Budget Strategy and Outlook 2010-11 1 The operating balance expected for 2009-10 is a deficit of $287 million compared to a forecast deficit of $2.351 billion anticipated in the Mid Year Fiscal and Economic Review (MYFER). As identified in Table 1.1 below, the forecast General Government sector operating balances have improved across the forward estimates, with the forecast deficits more than halved from the 2009-10 Budget forecasts. Table 1.1 1 General Government sector – revisions to net operating balance forecasts 2008-09