Queensland Budget 2024-25

GLOBAL AND NATIONAL ECONOMIC OUTLOOK

Queensland is home to over 273,000 Aboriginal and Torres Strait Islander peoples, making up 5.2 per cent of our population in 2021. Our Aboriginal and Torres Strait Islander population is also growing, up by 23.5 per cent since 2016.

Global inflation fell faster than expected over 2023, primarily driven by falling goods inflation as global supply chain constraints that emerged during the COVID-19 pandemic gradually unwound.

With inflation across most major economies approaching central bank targets, official interest rates appear to have generally peaked, and discussion has shifted to a focus on when (and by how much) rates will need to be eased to successfully navigate a soft economic landing.

The International Monetary Fund forecasts the global economy to grow 3.2 per cent in 2024, below the 20-year pre COVID average growth of 3.8 per cent. Global growth is then expected to remain at 3.2 per cent in both 2025 and 2026.

National economic growth has slowed since the post COVID rebound in 2021, primarily reflecting weaker national household consumption growth. The slowdown in growth has progressed as expected, with activity supported by significant accumulated household savings and a large number of fixed rate mortgages, which has likely partially mitigated the immediate impact of interest rate increases on these households’ disposable incomes.

Australia’s economic growth is expected to continue to slow in the near term, with the Reserve Bank of Australia forecasting growth of 1.3 per cent in 2024, slowing from the 2.0 per cent recorded in 2023.

QUEENSLAND’S ECONOMIC OUTLOOK

Following growth of 2.3 per cent in 2022–23, Queensland’s overall economic growth is forecast to strengthen to 3 per cent in both 2023–24 and 2024–25, driven by a substantial rebound in exports, in part due to an unwinding of capacity constraints, and continued strong growth in public infrastructure investment.

Household budgets continue to be constrained by higher mortgage rates and other cost-of-living pressures, which have resulted in slower consumption growth in 2023–24. Growth in consumption is expected to recover to around pre-pandemic averages in 2025–26.

In the dwelling sector, higher construction costs and ongoing capacity constraints have limited overall residential construction activity, particularly renovation activity. The large amount of work in the pipeline is supporting new and used dwelling investment, which is continuing to add to the housing stock.

Growth in business investment is expected to be modest over the next 2 years as higher interest rates, elevated construction costs and softening commodity prices impact investment intentions.

Growth in public final demand is expected to continue to be a key driver of overall economic growth in Queensland. This outlook is supported by the Queensland Government’s ongoing substantial capital program, committing $107.262 billion over 4 years to essential economic and social infrastructure investment across the state.

Queensland’s overseas trade sector is forecast to be a substantial contributor to the economy in 2023–24. This improved trade performance is due to increased export volumes of coal, LNG, metals, and beef, as well as the continued recovery of services exports.

Economic growth, Queensland

Queensland’s economy is projected to continue to grow solidly at 2½ per cent in 2025–26, sustained by continuing growth in domestic activity but tempered by a moderation in population growth.

Labour market

Employment growth since pre COVID March 2020, by state

Queensland continues to enjoy exceptionally strong labour market conditions. As of April 2024, Queensland (up 366,900 persons) had recorded the largest employment growth of any state or territory since March 2020.

The state’s unemployment rate averaged 3.7 per cent in 2022–23, its lowest year average unemployment rate since ABS monthly data began in 1978. As tightness in the labour market continues to unwind gradually, the unemployment rate is expected to edge slightly higher over the forward estimates period but remain low by historical standards.

Inflation

Inflationary pressures eased significantly during 2023. This has largely been due to a marked slowing in goods inflation, whereas services inflation has been more persistent – in line with global trends.

In year-average terms, inflation in Brisbane is forecast to ease from 7.3 per cent in 2022–23 to 4 per cent in 2023–24. Services inflation is expected to moderate going forward, while the Queensland Government’s cost-of-living measures, supported by the Commonwealth’s additional electricity and rent support, is expected to detract around 1¼ percentage points from CPI growth next year. This results in annual CPI growth falling to 2 per cent in 2024–25.

Population

Queensland population, Actual less Budget forecasts by iteration ^1,2

The COVID-19 pandemic drove divergent trends in key components of population growth, both nationally and in Queensland, across the period during and following the pandemic.

In particular, the recent unexpected surge in national net overseas migration has resulted in Queensland’s overall population growth being much stronger than previously expected in 2022–23 and 2023–24. Cumulatively, across the 3 years to 2023–24, Queensland’s population growth is estimated to have exceeded forecasts by a total of 135,500 persons.

Queensland’s population growth is expected to strengthen to 2½ per cent in 2023–24, reflecting the elevated levels of net overseas migration, before easing to 1½ per cent in both 2024–25 and 2025–26, as net overseas migration normalises, partially reflecting the likely impacts of the recent changes as part of the Australian Government’s migration strategy.

Risks to the outlook

Global geopolitical tensions remain a key risk to the economic outlook. However, with expectations that most central banks are close to the peak in the interest rate cycle, concerns over a hard landing for the international and national economies have eased.

Global supply chain disruptions have generally eased, but labour supply shortages remain a challenge. In particular, this poses risks in terms of the capacity of the construction industry to meet expected demand.

RESPONSIBLE BUDGET MANAGEMENT – FISCAL OVERVIEW

The Queensland Government is deploying its fiscal capacity to support Queenslanders with additional spending measures that strike the right balance between providing strong responses to immediate, but temporary, challenges and continuing to take the long view on the importance of delivering long-lived transformational recurrent and capital spending programs.

Prudent management of record royalty revenue over past budgets has Queensland well-positioned to deliver on the centrepiece of the 2024–25 Budget providing critical, but temporary additional cost-of-living relief through further electricity bill rebates, slashing public transport fares and vehicle registration relief.

A strong net operating surplus of $564 million is expected for 2023–24 compared to the deficit of $2.182 billion estimated in the 2023–24 Budget. This estimated outcome is the result of careful management of revenue improvements, including royalties and taxes, so that a surplus has been achieved at the same time as providing additional electricity bill support for Queensland households and small businesses in 2024–25. The 2023–24 estimated actual represents the third consecutive operating surplus of this term of government and follows a record surplus of $13.9 billion in 2022–23.

Across 2024–25 and 2025–26, a deficit is forecast as revenue growth is flat and the government prioritises the provision of elevated cost-of-living support when the community most needs it, as well as boosting health, housing, and community safety measures in response to strong demand. As temporary relief measures are wound back, and revenue strengthens, Queensland’s net operating position is expected to improve.

The recovery of the net operating position is also underpinned by a targeted $3 billion savings plan over 4 years to 2027–28.

Forecast borrowings in 2023–24 are lower for the fifth consecutive year since the 2023–24 estimates were first reported in the 2020–21 Budget. This reflects prudent management of an extraordinary revenue uplift, particularly in 2021–22 and 2022–23, which was driven by higher royalties.

These revenue windfalls have been used to substantially lower borrowing requirements in the near term, providing the capacity to then fund an expanded infrastructure program over time.

The 2024–25 Budget will see an increase in the size of the capital program. The capital program continues to invest in transformative infrastructure such as boosting health system capacity, decarbonisation of the state’s energy system, preparing for the Brisbane 2032 Olympic and Paralympic Games, Homes for Queenslanders, and major transport infrastructure investment such as the Direct Sunshine Coast Rail.