Queensland is staring down the barrel of a credit rating downgrade, with the state’s debt forecast to surge to an eye-watering $218 billion within just four years. Delivering his first budget update since taking office, Treasurer David Janetski painted a grim picture of the state’s finances, warning that Queensland is on track to become the most indebted state in the nation.
Former Government’s “Deception” Blamed for Budget Blowout
Janetski pulled no punches in laying the blame squarely at the feet of the previous Labor government, accusing them of “deception” and revealing that the state’s debt trajectory is a staggering $46 billion higher by 2027-28 than Labor had estimated. The treasurer pointed to significant cost blowouts in the state’s ambitious infrastructure program as a key driver of the spiraling debt.
It is a serious challenge to get the operating balance back into surplus, but it is a challenge we’re up for…
– David Janetski, Queensland Treasurer
Infrastructure Overspend Fuels Debt Crisis
Queensland’s “Big Build” capital works program is now expected to cost a mammoth $129.9 billion over the forward estimates – a whopping $22.6 billion more than Labor had forecast. Janetski attributed this to “significant cost escalations”, the program’s impact on construction sector capacity, and union workplace agreements.
The treasurer also singled out the “magnitude and pace” of Labor’s Queensland Energy and Jobs Plan, which aims for 75% renewable energy by 2035, as another factor in the budget blowout. However, he stopped short of saying whether the new government could actually afford its planned infrastructure spend going forward.
Plummeting Coal Royalties Add to Budget Woes
Compounding Queensland’s fiscal challenges is the forecast nosedive in coal royalties, historically a key source of state revenue. Royalties are projected to plummet from a peak of $10.5 billion in 2023-24 to just $4.5 billion by 2027-28, as coal prices retreat from record highs. This revenue collapse will only deepen the budget deficit in the years ahead.
Treasurer Vows No Cuts, Asset Sales as Debt Mounts
Despite the dire fiscal outlook, Janetski was adamant that his government will not resort to slashing services, raising taxes or selling public assets to balance the books. He emphasized that “service delivery is paramount” and pledged to borrow less than Labor would have, while still delivering “more and better frontline services”.
We are committed to delivering the services that Queensland needs… Queensland deserves more and better services.
– David Janetski, Queensland Treasurer
Yet with the state careening towards a record $218 billion debt, and coal revenues in structural decline, serious questions remain over how the government can rein in spending and get the budget back on a sustainable footing – all while avoiding politically unpalatable cuts or privatizations.
Credit Downgrade “Highly Likely” as Debt Burden Grows
The gloomy budget update has only heightened the risk of Queensland losing its coveted AA+ credit rating. Rating agency S&P Global has already placed the state on a negative outlook, and Janetski conceded a downgrade is now “highly likely” given Queensland is set to overtake other states in debt per capita.
A ratings cut would push up borrowing costs at a time when the state can least afford it. But unless the government can chart a credible path back to surplus and get debt under control, Queensland’s cherished credit rating – and its economic future – hangs in the balance.
Tough Choices Ahead for Queensland’s Economic Future
As the $218 billion debt bomb looms ever larger, the new Queensland government faces a monumental task in steering the state’s finances back to safety. But with infrastructure costs blowing out, coal revenues collapsing, and service demands only growing, there are no easy answers.
Will Janetski and his team find a way to trim the capital works program without derailing the state’s development? Can they offset falling royalties by luring new industries and boosting other revenue sources? Or will Queenslanders ultimately pay the price for past “deception” with a painful round of budget repair?
As the treasurer himself acknowledged, getting Queensland back to surplus while protecting frontline services poses a “serious challenge”. But it’s a challenge he and his government must confront head-on. Because with the state’s economic future on the line, failure is simply not an option.
