Overview

Total key state revenues (royalties, taxes, and GST) in 2023–24 are estimated to be $4.248 billion (7.4 per cent) lower than in 2022–23 but $4.336 billion (8.9 per cent) higher than estimated at the time of the 2023–24 Queensland Budget.  

Over the later years of the forecast period, total key revenues have also been revised upwards, but more modestly, by $854 million in 2024–25, $690 million in 2025–26 and $1.468 billion in 2026–27. 

Reflecting this, total General Government Sector revenue in 2023–24 is estimated to be $4.022 billion (4.5 per cent) lower than in 2022–23 but $3.709 billion (4.5 per cent) higher than estimated at the time of the 2023–24 Queensland Budget.  

The improved revenue outlook in 2023–24 primarily reflects upward revisions to coal and petroleum royalties, due to higher-than-expected global metallurgical coal and oil prices being received by Queensland’s key commodity producers. 

In addition, given key commodity exports are traded globally in $US terms, a weaker than expected Australian dollar has contributed to the increased revenues. 

Taxation revenue in 2023–24 and across the forecast period is also now expected to be somewhat stronger than anticipated at the time of the 2023–24 Budget. The improved outlook is due to stronger than anticipated collections across a number of taxes but, in particular, the sharper and earlier than expected turnaround in dwelling prices has led to upward revisions for transfer duty and land tax. 

Beyond 2023–24, the upward revision to key revenues compared with the 2023–24 Budget estimates is more modest, reflecting the expected return of coal and oil prices to more sustainable levels over time, although the lower $A exchange rate is expected to continue to support revenues across 2024–25 and 2025–26 as it gradually returns to its medium-term level.

The stronger than expected dwelling prices, and the expectation of resulting increases in land values, have led to solid upward revisions to transfer duty and land tax collections across the forward estimates, while the outlook in general for most other taxes remains largely consistent with that expected at the time of the 2023–24 Budget.  

The higher-than-expected royalty revenue in the near-term will flow through to Queensland’s GST share in later years. Queensland’s GST revenue is expected to be lower than previously forecast in both 2024–25 and 2025–26. However, the impact on GST revenues is partially offset by the expected increases in tax revenues in other major states as reflected in their latest published budget forecasts.  

When combined with Australian Government grants and other revenue sources, total General Government Sector revenue forecasts over the later years of the forecast period have been revised upwards by $2.029 billion in 2024–25, $1.520 billion in 2025–26 and $1.895 billion in 2026–27. 

Chart 7 outlines the revisions to forecasts in key revenues (i.e. taxes, royalties and GST) since the 2023–24 Queensland Budget.

Chart 7: Revisions in key revenues since 2023–24 Budget

Taxation

Taxation revenue is estimated to total $22.210 billion in 2023–24, $1.609 billion (7.8 per cent) higher than received in 2022–23 and $272 million (1.2 per cent) higher than estimated in the 2023–24 Queensland Budget. This modest revision to in tax revenues in 2023–24 reflects stronger than anticipated collections across a number of tax streams including payroll tax and duties. 

Tax revenue is then expected to grow, on average, by around 5.9 per cent per annum over the 3 years ending 2026–27, reflecting broad-based growth across most key taxes. 

This reflects the ongoing strength of the Queensland economy and labour market more broadly, while the unexpected strength in the property market is expected to support moderate upward revisions to transfer duty and land tax across the forward estimates period compared with the 2023–24 Budget.  

Overall, compared with the 2023–24 Budget estimates, there have been upward revisions to total taxation revenue totalling $2.733 billion over the 4 years to 2026–27. 

Royalties

Royalty revenue is expected to total $11.388 billion in 2023–24, $6.826 billion (37.5 per cent) lower than in
2022–23 but $4.265 billion higher than forecast at the 2023–24 Budget. 

This uplift in royalties in 2023–24 is primarily driven by stronger than expected coal royalties, reflecting the ongoing high coal prices being received by Queensland’s coal producers.  

As outlined at Budget, global coal prices are still expected to moderate from the exceptionally high levels experienced in 2022–23. However, the latest forecast recognises the continued strength in hard coking coal (HCC) prices since mid-2023 as well as the impacts of the continued weakness in the $A/$US exchange rate.   

HCC prices have traded much higher in recent months than previously expected. Premium HCC spot prices averaged US$264/t across the September quarter 2023. The recent increase in HCC prices has been driven by a range of largely temporary factors impacting production and resulting in supply tightness, evidenced in weaker export volumes of coking coal from Queensland.

However, the recent high coal prices are considered unsustainable with prices still expected to moderate substantially in 2024, as the current drivers of higher prices diminish, and international markets continue to adjust.

The HCC price is now expected to return to medium term levels of US$175/t by December 2024, slightly later than the 2023–24 Budget expectation of returning to this level by March quarter 2024, thereby also supporting slightly higher coal royalty revenues than previously forecast in 2024–25. 

There is a general consensus among most forecasters that coal prices will decline significantly over the coming years, although there are differences around the expected timing and magnitude of this decline. 

The 2023–24 Budget Update forecasts reflect a slightly quicker adjustment of HCC prices to medium term levels than some forecasters, but the forecast prices across the forward estimates period are consistently higher than those currently forecast by the Commonwealth Treasury. A comparison of HCC price forecasts with other key forecasters is shown below (Chart 8).

Chart 8: Comparison of hard coking coal forecasts

Conversely, PCI (pulverised coal injection) coal prices fell by more than anticipated, with PCI spot prices averaging US$168/t (A$257/t) across September quarter 2023, due to Russian PCI coal re-entering the global market more quickly than expected.    

In terms of volumes, a slightly weaker outlook for industrial production of Queensland’s major trading partners since the 2023–24 Budget has resulted in a downward revision to metallurgical coal export volumes across the later years of the forecast period. However, in contrast, thermal coal export volumes have been upgraded slightly, reflecting increased thermal coal exports to China. 

Thermal coal prices have tracked broadly in line with Budget forecasts since mid-2023 and are still expected to reach a mid-term anchor of US$120/t by September 2024, as forecast in the 2023–24 Budget.

The new progressive coal royalty rates, introduced on 1 July 2022, generated additional royalty revenue of around $5.8 billion in 2022–23, reflecting the impacts of the sustained high global prices during the year, with coal producers also enjoying the benefits of exceptionally high revenues. 

The recent strength in HCC prices is estimated to result in a revenue uplift due to the new progressive coal royalty rates of around $2.8 billion in 2023–24 (compared to $783 million expected in the 2023–24 Budget). As coal prices moderate beyond 2023–24, the revenue attributed to the new tiers is forecast to be around $280 million per annum on average across the 3 years to 2026–27 (slightly above the average of $235 million per annum forecast at Budget).

Revenue from petroleum royalties is forecast to total $1.650 billion in 2023–24, $699 million (29.8 per cent) lower than 2022–23 but $375 million higher than expected at the 2023–24 Budget. 

This expected decline from 2022–23 levels is consistent with 2023–24 Budget expectations that oil prices, and therefore LNG prices, would unwind from recent highs. However, while global oil prices are still expected to moderate, this has not occurred as quickly as anticipated, leading to higher-than-expected petroleum royalties. 

The long-term nature of LNG contracts mean LNG prices are expected to remain elevated for longer, leading to an upward revision of 13.8 per cent in petroleum royalties in 2024–25 compared to Budget, which is also supported by the lower $A.  LNG prices and petroleum royalties are then expected to decline across the forecast period.

As discussed earlier in terms of the economic outlook, the current conflict in the Middle East could pose a potential risk to global oil prices going forward, and any material or sustained change in oil prices would flow through to LNG prices and, therefore, petroleum royalties.  

GST 

Queensland’s GST revenue is estimated to total $19.275 billion in 2023–24, $969 million (5.3 per cent) higher than in 2022–23 but $202 million (1.0 per cent) lower than forecast at Budget. 

This increase compared to the previous year is primarily driven by forecast growth in the national GST pool. However, the downward revision from Budget reflects the expectation that GST collections across 2023–24 will be lower than previously anticipated.

GST revenue is forecast to be $18.238 billion in 2024–25 and remain more subdued at $18.570 billion in 2025–26, reflecting the flow-on impacts of the higher state revenues in the near term on Queensland’s GST share in the later years.

Given the higher-than-expected royalties revenue in 2023–24, Queensland’s GST revenue is now forecast to be slightly lower in 2024–25 and 2025–26 than forecast in the Budget.

However, GST revenue is forecast to rebound solidly in 2026–27, growing by 11.5 per cent to $20.704 billion, driven by ongoing growth in the national GST pool and the expectation that the impact on Queensland’s GST share from the high coal royalties in recent years will begin to subside. 

In early 2024, the Commonwealth Grants Commission is expected to deliver its recommended relativities for distributing the GST among states and territories for the 2024–25 financial year.    

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