Government Fiscal Principles
The government’s fiscal strategy is guided by the Charter of Fiscal Responsibility (the Charter) fiscal principles and objective measures supporting the restoration of fiscal buffers. An update of progress towards achievement of medium-term goals is outlined below.
Principle 1 – Stabilise the General Government Sector net debt to revenue ratio at sustainable levels in the medium term, and target reductions in the net debt to revenue ratio in the long term
Stabilising debt at a sustainable level is key to having capacity to invest in infrastructure and respond to future external shocks.
Since the development of the current Charter as part of the 2021–22 Budget, significant progress has been made against Fiscal Principle 1. Revenue strength in 2022–23 resulted in a lower debt requirement in that year with a net debt to revenue ratio outcome of 3 per cent, a significant reduction from the 15 per cent outcome for 2021–22.
The downwards revisions to net debt since the 2021–22 Budget are the result of the prudent management of the unprecedented, but short term, revenue uplifts experienced over successive budget cycles. This has allowed the establishment of a buffer to accommodate additional borrowings over later years to fund Queensland’s large capital program.
The 2023–24 Budget Update results in the ratio being broadly consistent with the 2023–24 Budget. It is expected to be 17 per cent in 2023–24 and is forecast to reach 54 per cent in 2026–27.
Chart 11: Ratio of General Government net debt to revenue
Queensland’s net debt to revenue ratio of 17 per cent in 2023–24 compares favourably to that of its peers. Based on 2023–24 Budget estimates, the net debt to revenue ratio in 2023–24 is 82 per cent for New South Wales and 152 per cent for Victoria.
Principle 2 – Ensure that average annual growth in General Government Sector expenditure in the medium term is below the average annual growth in General Government Sector revenue to deliver fiscally sustainable net operating surpluses
Maintaining a lower rate of expenses growth than revenue growth will in general ensure the restoration of an operating surplus and assist debt stabilisation.
Revenue growth over the forward estimates continues to reflect significant volatility driven by some temporary factors. While royalties have been boosted in the last few years from high commodity prices, they are expected to normalise at much lower levels.
With royalties continuing to be a very volatile source of revenue, an adjusted measure removing royalties is reported to better reflect underlying growth. Excluding royalties revenue, revenue and expenses are expected to grow at a consistent average annual rate of 3.4 per cent over the 4 years to 2026–27. Across the 5 years to
2026–27, average revenue growth is expected to be 4.6 per cent, compared to expenses growth of 4.4 per cent.
Principle 3 – Target continual improvements in net operating surpluses to ensure that, in the medium term, net cash flows from investments in non-financial assets (capital) will be funded primarily from net cash inflows from operating activities. The capital program will focus on supporting a productive economy, jobs, and ensuring a pipeline of infrastructure that responds to population growth
Capital investment supporting jobs and enhances productivity remains a key priority. The 2023–24 Budget Update includes a current capital program of $96.2 billion over the 4 years to 2026–27. The capital program supports service delivery and the productive flow of goods and services to the community and economy. Enhancements that have been incorporated into the capital program in recent budgets include delivering increased health system capacity, decarbonisation of the state’s energy system, improving water security and preparing for the Brisbane 2032 Olympic and Paralympic Games.
Funding a large capital program primarily through operating cash surpluses rather than additional borrowings is key to stabilising net debt. However, volatility in revenue growth combined with the profile of capital expenditure, which is uneven by nature, means a degree of volatility can be expected in the outcomes for Fiscal Principle 3 on an individual year basis.
In 2022–23, net cash inflows from operating activities greatly exceeded investments in non-financial assets. In 2023–24 the ratio is expected to reduce to 35 per cent and then reach 47 per cent in 2026–27.
On average across the period 2022–23 to 2026–27, 66 per cent of the capital program will be funded from net cash inflows from operating activities.
Chart 12: Share of General Government Sector investments in non-financial assets funded from operating cash surpluses
Principle 4 – Maintain competitive taxation by ensuring that, on a per capita basis, Queensland has lower taxation than the average of other states
This principle directly measures Queensland’s competitiveness relative to other jurisdictions, providing a meaningful indication of the comparative impact of Queensland’s tax regime and policies.
Based on the latest available outcomes, Queensland’s taxation per capita was $708 less than the average of other jurisdictions in 2021–22. On average, Queenslanders paid $1,073 less tax than New South Wales residents and $919 less than Victorian residents.
Using the latest forecasts, Queensland’s taxation per capita of $4,048 in 2023–24 compares favourably to the average of other jurisdictions of $4,821 per capita. Chart 13 demonstrates that Queensland is expected to maintain a highly competitive tax environment.
Chart 13: Taxation per capita, Queensland and other states and territories
Principle 5 – Target the full funding of long-term liabilities such as superannuation and workers’ compensation in accordance with actuarial advice
The full funding of superannuation and other long-term liabilities is a long-standing Queensland Government priority and a key element of Queensland’s financial management.
The triennial actuarial investigation of the Defined Benefit Fund as at 30 June 2021 found it to be in surplus. As at 30 June 2023, WorkCover Queensland was fully funded.
