It’s a wonderful problem to have — how to spend a $7 billion windfall.
Welcome to Queensland Treasurer Cameron Dick’s world.
On Wednesday, Dick delivered an update for Queensland’s Budget for 2022-23 that revealed a projected $7.3 billion revenue surge from estimates of just six months prior.
That translates into a record $5.2 billion surplus for the year.
Most of the increase is courtesy of coal prices remaining far higher than conservative Treasury estimates and a weaker-than-expected US dollar.
The state government’s controversial new coal royalty regime, introduced without warning on June 30 and designed as a sort of super-profits tax, is also producing much better returns than originally projected.
Treasury estimated at the time that the new royalty structure would collect an extra $765 million for this financial year. The mid-year update predicts a figure of around $3 billion.
“As any Treasury official will tell you, forecasting is a complex task at the best of times,” Dick told the Australian Financial Review by way of defence.
And so, how to spend it?
The government has earmarked much of the new money for programs supporting regional Queensland, with a strong focus on mining districts.
“It’s important to re-invest back in the resources communities that deliver for all of Queensland through the royalties their mines generate,” Dick said.
The government has taken the politically smart decision to corral all of the extra income being raised from the new royalty structure in what it describes as “a $3 billion, long-term asset held by the Consolidated Fund, dedicated to future infrastructure in regional Queensland.”
It offers no further detail, but no doubt will between now and the next state election, scheduled for October 24, 2024.
The government is also investing $1 billion in equity in government-owned corporations to support priority regional infrastructure projects, again unspecified, for now at least.
Elsewhere, it is adding a further $120 million to its Resource Community Infrastructure Fund — a voluntary government/industry partnership — “with a special focus on coal-producing regions”.
As for the rest of the windfall, fortunately, just two months ago, the state government unveiled its Queensland Energy and Jobs Plan for getting Queensland to net-zero carbon emissions by 2050, costed at $62 billion but largely unfunded.
And so, $150 million will go to support workers in Queensland’s state-owned coal-fired power stations and $200 million to a Regional Economic Futures Fund, previously announced in the plan.
The government is also using new funds to help develop the critical minerals industry.
This includes $150 million for common-user infrastructure “to support development, extraction and production of critical minerals” and $100 million to establish a Queensland Critical Minerals Investment Fund “to position Queensland for the next resources boom in the critical minerals needed for the clean energy revolution”.
It has also committed $100 million to establishing a Queensland Critical Minerals Investment Fund.
“This will create more jobs as we harness north-west Queensland’s abundant critical mineral deposits to supply surging global demand for resources that are critical to manufacturing renewable energy technologies such as batteries, hydrogen electrolysers, and electric vehicles,” Dick said.
In deciding its new spending priorities, the government has sensibly avoided programs and schemes that would bake in additional higher spending, with Dick acknowledging the windfall was temporary.
“Today’s record surplus is a high-water mark that won’t be sustained, so we’re reinvesting responsibly, building stronger buffers in times of international uncertainty,” he said.
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