Infrastructure spend in the Queensland Budget: A Tale of Two Regions

Monday 19 June, 2017 | By: Joseph Kelly

There was a clear focus in the Palaszczuk Government’s State budget to spread the infrastructure spend across the State in an attempt to woo both the inner-city voters and regional voters leading up to the next State election.

With the spend on infrastructure split relatively equally between the south-east corner and the rest of the State (56% and 44% respectively), the actual figures themselves should be of statewide concern.

Despite headline infrastructure spending, particularly for Cross River Rail, the State Government has committed 7% less funding than it did in the 2016-17 budget overall.

Capital Purchases by Region1

Private business investment has strengthened in SEQ, led by the big upturn in residential building construction, which has kept the unemployment rate for the region relatively low. Conversely, business investment has almost collapsed in the regions which has seen the unemployment rate soar.

Executive Director of BDO, Mark Ingham, says the government must prioritise and spur private sector investment to balance government infrastructure spend.

“All this public money is being spent on infrastructure, but this cannot replace the job creation impact of private investment which has still not recovered following the mining boom”, Mr Ingham says.

“Private investment into infrastructure must also be encouraged in a broader sense, and place focus on the types of infrastructure that can diversifying our regional economies and provide opportunities for workforce skilling.”

CCIQ’s Economist and Data Analyst, Steven Gosarevski, believes there are clear “winners and losers” from the breakdown in Government infrastructure spending by region.

“Outback Queensland will see almost a 31% reduction of its capital funding despite having the highest level of unemployment in the State, and in fact the entire country. 

“The largest reduction in infrastructure spend is in the Sunshine Coast region, but this is off the back of the completion of the Sunshine Coast Hospital.

“It is a good news story for the Sunshine Coast region in the end, with an expected additional 1,000 full-time equivalent roles to be created from the hospital next financial year. 

“Regions to benefit from increased infrastructure spend will be Brisbane, Logan, Far North Queensland and Townsville off the back of some major projects proposed there.

“It is important to keep in mind that south-east Queensland is still receiving the lion’s share of funds when you look at it in terms of real dollars.”

Capital Purchases by Region

Cross River Rail, a top infrastructure priority for the State Government, received additional funding of $129 million for the 2017/18 financial year but raised further concerns from industry.

Mr Gosarevski clarifies that although the Premier says the project is now “fully funded”, Federal funding remains critical to fulfilling the budgeted dollars in the State Government’s forecasts.

“The Budget itself spells out that it is expected that the cost to the State, over the forward estimates, will be reduced through future Australian Government contributions and the proceeds of commercial funding sources,” Mr Gosarevski said.

“The Queensland Government has said that they will need to work with the Australian Government to secure a contribution that properly reflects the strategic importance of this project and its contribution to the nation.”

Mr Ingham also expressed concerns over the State Government’s promise to solely fund Cross River Rail in the absence of guaranteed Federal funding.

This early promise may compromise the future fiscal position of the State government and may in fact flow through to an increased future debt burden,” Mr Ingham said.

Ultimately, CCIQ believes the State Government must continue to look at how they can increase infrastructure spending further, and in a way which builds a sustainable pipeline of works to boost job creation and private sector investment.

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