EXHIBIT (f)
Description of Queensland and
Queensland Treasury Corporation
QUEENSLAND TREASURY CORPORATION
In 1982 the Queensland Government established the Queensland Government
Development Authority as a corporation sole constituted by the Under Treasurer
pursuant to the Statutory Bodies Financial Arrangements Act 1982 to act as a
central borrowing authority for the State. The powers of that statutory body
were expanded in 1988 and the name changed to Queensland Treasury Corporation
("Corporation") pursuant to the Queensland Treasury Corporation Act 1988 (the
"Act").
Under section 10 of the Act, the Corporation established the Queensland Treasury
Corporation Capital Markets Board (the "Board") to determine and implement
ongoing strategies for capital market operations.
Under the Act, the Corporation has as its statutory objectives:
(a) to act as a financial institution for the benefit of and the provision of
financial resources and services to statutory bodies and the State;
(b) to enhance the financial position of the Corporation, other statutory
bodies and the State; and
(c) to enter into and perform financial and other arrangements that in the
opinion of the Corporation have as their objective:
(i) the advancement of the financial interests of the State;
(ii) the development of the State or any part thereof; or
(iii) the benefit of persons or classes of persons resident in or having or
likely to have an association with Queensland.
In furtherance of these objectives, the Act also provides that the Corporation
has the following functions:
(a) to borrow, raise or otherwise obtain financial accommodation in Australia
or elsewhere;
(b) to advance money or otherwise make financial accommodation available;
(c) to act as a central borrowing and capital raising authority for the
statutory bodies of the State;
(d) to act as agent for statutory bodies in negotiating, entering into and
performing financial arrangements;
(e) to provide a medium for the investment of funds of the Treasurer, statutory
bodies or any other persons; and
(f) to manage or cause to be managed the Corporation's financial rights and
obligations.
As at June 30, 2003, the Corporation had a total of $26.866 billion in assets
compared to $26.039 billion at June 30, 2002.
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Organisation of Queensland Treasury Corporation
The present Under Treasurer of the State is Mr. Gerard P. Bradley.
The powers, functions and duties of the Under Treasurer have been delegated to
the Board (Chairman: Sir Leo Hielscher). Members of the Board are appointed by
the Governor in Council of the State and are not employees of the Corporation.
The Chief Executive of the Corporation is Stephen Rochester. The Organisation
Management Team ("OMT") comprises the Chief Executive and senior management of
the Corporation. The OMT provides management oversight of Corporation's
performance of the corporate objectives outlined in Corporation's strategic plan
and manages human resource performance. The business address of the Corporation
and the Board is Level 14, Queensland Minerals and Energy Centre, 61 Mary
Street, Brisbane, Queensland.
With respect to borrowings, the Corporation raises funds in domestic and
international capital markets for on-lending to Queensland's statutory
authorities. At June 30, 2003, the total borrowings of the Corporation were
$22.219 billion. This amount included overseas debt equivalent to $7.229 billion
based on the prevailing rates of exchange at June 30, 2003. Included in these
overseas borrowings were Australian dollar denominated borrowings of $5.930
billion raised in the Euro Australian dollar market. All foreign currency
borrowings are fully hedged back to Australian dollars by way of cross currency
swaps and exchange contracts.
The repayment of principal and the payment of interest on all Domestic A$ Bonds
(which, for purposes of the Act and certain other purposes, have been and are
identified as "Inscribed Stock") issued by the Corporation is unconditionally
guaranteed by the Treasurer on behalf of the Government of Queensland pursuant
to section 32 of the Act. In relation to all other liabilities of the
Corporation, section 33 of the Act provides that the Treasurer on behalf of the
Government of Queensland may guarantee with the approval of the Governor in
Council the performance of the Corporation's obligations under any financial
arrangements entered into by the Corporation. Pursuant to this provision, the
Securities and all other public bond issues and commercial paper facilities
undertaken by the Corporation have been guaranteed by the Treasurer.
The Corporation's borrowing and on-lending functions are separated. This results
in the Corporation borrowing in the markets in an orderly manner and, at the
same time, reduces the negative impact on interest rates of borrowing large
amounts to meet funding requirements when funds are required by Government
Bodies. Surplus borrowings are held in funding pools with investments being made
in high quality credit counterparties until the borrowings are required to
assist with the funding of the infrastructure requirements of Government Bodies
or refinance maturing debt of the Corporation.
Under its on-lending arrangements, the Corporation has established a series of
generic debt pools from which smaller Government Bodies access funds. Large
Government Bodies utilise debt pools which have been specifically designed to
meet their unique needs. Generally, Government Bodies make principal and
interest payments. However, the large corporatised Government Bodies normally
have constant debt/equity ratios and therefore make interest payments only or
payments that ensure that appropriate debt/equity ratios are maintained.
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Section 15 of the Act provides that profits made by the Corporation shall accrue
to the benefit of the State's Consolidated Fund and any losses shall be the
responsibility of the State's Consolidated Fund.
The financial statements of the Corporation, comprised of an "Statement of
Financial Performance for the Year Ended 30 June" for 2002 and 2003, a
"Statement of Financial Position as at 30 June " for 2002 and 2003, a "Statement
of Cash Flows for the Year Ended 30 June " for 2002 and 2003 and notes to the
financial statements, are set forth in "Notes to and Forming Part of the
Financial Statements".
For detailed information regarding outstanding indebtedness of the Corporation
and the public debt of the State to the Commonwealth, see "Supplementary Tables
and Information".
Cross Border Lease Transactions
The Corporation, on behalf of Government Bodies ("Queensland lessees"), has been
an active participant in international asset financing transactions for many
years, predominantly in the nature of cross border leasing transactions. The
vast majority of cross border lease transactions entered into by the Corporation
relate to rail and electricity assets.
The following table details the exposure faced by the State of Queensland under
existing cross border lease transactions involving Queensland lessees. For the
purposes of the table:
"Total Termination Value" refers to the amount payable by Queensland lessees at
various times during the term of the leases, in the event of an early
termination of the leases. Total Termination Value establishes the maximum
liability of the Queensland lessee to the lessor if the leased equipment is lost
or rendered unusable during the lease term due to casualty loss or some other
grounds for early lease termination.
"Total Strip Value" refers to the difference between the termination value
payable by the lessee and the amounts held to defease obligations under these
transactions, which are used to pay part of the termination values, in the event
of early termination of a transaction. The difference (shortfall) will usually
be the responsibility of the Queensland lessee and is referred to as the "strip
loss". Total Strip Value is the net potential exposure of Queensland under the
cross border leases upon early termination of all leases.
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Monthly Exposure Report - Whole of Queensland
- ----------------------------------------------------------------
Month - Year Total Termination Value A$ Total Strip Value A$
- ----------------------------------------------------------------
Jun-03 8,500,800,755.02 447,120,026.45
- ----------------------------------------------------------------
Jun-04 8,533,480,598.52 784,009,697.73
- ----------------------------------------------------------------
Jun-05 8,518,429,945.47 786,629,606.96
- ----------------------------------------------------------------
Jun-06 8,548,249,095.22 815,872,126.07
- ----------------------------------------------------------------
Jun-07 8,315,711,320.84 816,592,103.90
- ----------------------------------------------------------------
Jun-08 7,914,830,264.25 855,414,729.25
- ----------------------------------------------------------------
Jun-09 6,707,637,970.36 805,784,727.26
- ----------------------------------------------------------------
Jun-10 6,623,961,481.52 905,156,492.01
- ----------------------------------------------------------------
Jun-11 6,047,525,013.65 771,467,086.23
- ----------------------------------------------------------------
Jun-12 5,703,974,948.99 701,204,228.34
- ----------------------------------------------------------------
Jun-13 5,604,544,099.67 648,161,540.52
- ----------------------------------------------------------------
Jun-14 5,005,974,359.52 580,169,730.36
- ----------------------------------------------------------------
Jun-15 4,986,591,583.00 524,604,678.38
- ----------------------------------------------------------------
Jun-16 4,912,777,101.81 449,870,104.08
- ----------------------------------------------------------------
Jun-17 4,712,040,818.21 377,357,587.30
- ----------------------------------------------------------------
Jun-18 4,746,473,485.31 269,107,011.12
- ----------------------------------------------------------------
Jun-19 2,845,856,238.34 201,822,871.10
- ----------------------------------------------------------------
Jun-20 2,875,630,447.92 155,372,534.65
- ----------------------------------------------------------------
Jun-21 2,901,861,981.14 104,046,547.10
- ----------------------------------------------------------------
Jun-22 2,924,137,792.86 48,623,430.86
- ----------------------------------------------------------------
Jun-23 2,942,083,252.65 -13,577,704.17
- ----------------------------------------------------------------
Jun-24 2,938,839,538.75 -68,911,110.32
- ----------------------------------------------------------------
Jun-25 2,956,199,510.84 -116,787,061.31
- ----------------------------------------------------------------
Jun-26 2,974,689,395.05 -59,433,167.47
- ----------------------------------------------------------------
Jun-27 1,053,296,276.68 13,491,891.88
- ----------------------------------------------------------------
Jun-28 1,108,613,039.59 45,843,102.14
- ----------------------------------------------------------------
Jun-29 0.00 0.00
- ----------------------------------------------------------------
Monthly Exposure Report - Whole of Queensland
[CHART]
[Line Chart]
QUEENSLAND
General
The State of Queensland (the "State" or "Queensland") has the second largest
land area of the six Australian States and the largest habitable area. It
occupies the northeastern quarter of Australia, covering 1.7 million square
kilometres, stretching from the sub-tropical and densely populated southeast to
the tropical, sparsely populated Cape York Peninsula in the north. The State's
geography and climate are suitable for the production of a wide variety of
agricultural products, the most important being meat, grains, sugar and wool. In
addition, the State has extensive deposits of minerals (including large reserves
of coal and one of the world's largest known bauxite deposits), a diverse
industrial base, well-developed ports and transportation systems and an educated
workforce. A land transportation network of approximately 10,000 kilometers of
railway lines and 170,000 kilometers of roads supports the development of the
State's resources.
Queensland is the third most populous State in Australia with a population of
over 3.655 million persons, or 19.3% of Australia's population at August 2001.
Approximately two-thirds of Queensland's population lives in the Brisbane and
Moreton region in the south-eastern corner of the State, an area with mild
climate and a developed industrial base. The remainder of the State's population
is spread quite widely, making Queensland's population the most dispersed of the
Australian States.
Brisbane, the capital of Queensland, with its surrounding metropolitan area has
approximately 1.7 million residents. There are seven other population centres in
Queensland with over 50,000 residents.
Government of Queensland
The Commonwealth of Australia ("Australia" or the "Commonwealth") was formed as
a federal union on January 1, 1901, when the six British colonies of New South
Wales, Victoria, Queensland, South Australia, Western Australia and Tasmania
were united as States in a federation. In addition to the six States, Australia
has a number of territories including the Northern Territory and the Australian
Capital Territory which contains the nation's capital of Canberra. The
Commonwealth Parliament has power to legislate on specific matters of national
interest, such as defence, external affairs, overseas and interstate trade and
commerce, currency and banking. It also has exclusive power to impose customs
and excise duties and power exercisable concurrently with the States to levy
other forms of taxation. The State Parliaments retain powers over all matters
other than those granted to the Commonwealth under the Constitution. State
powers include control over education, public health, police and justice,
transport, roads and railways, industry, mining and agriculture, public works,
ports, forestry, electricity, gas, and water supply and irrigation.
While Queensland has autonomy and control in respect of those functions which
are its constitutional responsibility, it forms a part of the Commonwealth and
in many important respects its economic performance and prospects are closely
interrelated with those of Australia as a whole. In particular, primary
responsibility for overall economic management in Australia rests with the
Commonwealth Government. For example, the Commonwealth Government has
responsibility for monetary policy, national budget policy, fiscal policy,
exchange rates and external policy. In addition, while most wage rates have been
traditionally centrally determined through Federal and State conciliation and
arbitration
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tribunals, recent legislation underpins a move away from central wage fixation
toward enterprise based agreements. This move is expected to make the labour
market more flexible.
Legislative powers in Queensland are vested in the State Parliament, which
consists of a single chamber, the Legislative Assembly, elected by the
compulsory vote of all persons 18 years of age or over, for a term not exceeding
three years.
The Australian Labor Party, forms the current government of Queensland. The
Premier is the Honourable Peter Beattie.
The executive power of the State is formally exercised by the Governor of
Queensland (the "Governor"), who is the representative of the Crown and is
advised by the Executive Council. The Executive Council is comprised of the
Governor and the Ministry. The Ministers are members of the party or coalition
of parties which command the support of a majority in the Legislative Assembly.
Including the Premier, there are at present a total of 19 Ministers. In
practice, the executive power of the State is exercised by the Cabinet (which in
Queensland, consists of all Ministers) with the decisions of the Cabinet being
formally ratified by the Governor when necessary. As is the case federally, it
is a well established convention that, except in extraordinary circumstances,
the Governor acts on the advice of the Cabinet.
The authority of Queensland's Parliament is required for the raising of all
State revenues and for all State expenditures. The State's accounts (including
the accounts of the Corporation) are audited on a continuing basis by the
State's Auditor-General, who is an appointee of the Governor in Council and who
reports annually to the Queensland Parliament on each year's financial
operations.
Each Minister is responsible to Parliament for the operation of one or more
Government departments, as well as any associated statutory authorities.
Departments are staffed by career public servants with each department having a
"permanent head" who is responsible for the financial administration of the
funds provided by Parliament for use by that department.
The State judicial system operates principally through the Magistrates Court,
the District Court, the Supreme Court and the Court of Appeal. The judiciary in
Queensland is appointed by the Crown, as represented by the Governor, acting
upon the advice of the Cabinet.
A number of separate entities have been established in Queensland under special
Acts of Parliament to carry out particular functions or to provide specific
community services. These entities are variously referred to as "Statutory
Authorities", "Statutory Bodies", "Semi-Government Authorities", "Local
Authorities", "Local Governments" or "public enterprises".
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QUEENSLAND ECONOMY
Overview
Queensland has a well diversified economic base, with strong agricultural and
mining sectors, an established manufacturing sector and a wide range of
services, including a well-developed tourism sector and a fast developing
business services sector.
Agriculture provided the original base for the development of the Queensland
economy, with grains, wool and beef being the principal constituents. While
these commodities remain important, they have been supplemented by a large range
of other agricultural products, including sugar cane, tropical and citrus
fruits, dairy products, vegetables, livestock, cotton and tobacco.
Substantial mining of metals such as gold, copper, lead and zinc commenced early
in the State's history. Queensland's Northwest Minerals Province is one of the
world's premier base metals and silver producing regions and ranks in the top
ten in copper and zinc production. The State's coal and bauxite reserves are
among the largest in the world, and are generally of high grade and are easily
accessible.
The acceleration of mineral production and processing during the early 1980s
provided a significant stimulus for the expansion of the Queensland economy.
Minerals processing was encouraged by the availability of economical electrical
energy produced from extensive supplies of inexpensive coal. In the future,
further developments are likely with the development of alternate competitive
energy sources such as natural gas and coal seam methane.
Historically, Queensland has not participated as extensively as other Australian
States in the development of manufacturing industries. In particular,
manufacturing industries in Queensland have developed to meet the internal
requirements of the Queensland economy, supporting energy intensive mineral
processing and agricultural industries. However, the manufacturing sector has,
in recent years, diversified and expanded into higher value-added and high
technology industries.
In the last ten years, international tourism in Queensland has experienced rapid
growth based on its many natural attractions, including the Great Barrier Reef,
the Gold Coast, extensive beaches, island resorts and tropical rainforests.
Queensland has an extensive services sector initially developed to support the
mining and agricultural sectors and which now covers a diverse range of
activities, including construction, wholesale and retail trade, communications,
business and financial services, as well as those industries servicing the
tourism sector.
There have been significant structural changes in the Queensland economy over
the past 20 years with the mining and tertiary sectors growing strongly and the
relative importance of the rural sector declining. In 2001-02 the rural sector
accounted for approximately 4.9% of Gross State Product ("GSP") and 21.7% of the
agricultural sector in Australia. The mining sector accounted for approximately
7.8% of GSP in the State and 24.4% of mineral production in Australia.
Meanwhile, the manufacturing sector accounted for approximately 10.1% of GSP and
14.6% of the manufacturing sector in Australia. Finally, the tertiary sector
accounted for approximately 77.2% of GSP and 16.5% of the tertiary sector in
Australia.
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Economic Strategy
The Queensland Government (the "Government") has taken a fundamental step in
improving public transparency and accountability, with legislation requiring the
preparation and tabling of a Charter of Social and Fiscal Responsibility (the
"Charter"). The legislation governing the Charter requires the Government to
announce its objectives and how it will achieve those objectives.
Queensland's first Charter under the legislation was tabled by the Premier and
then Acting Treasurer in August 1999. The Charter draws together the
Government's key policy priorities and its guiding financial principles, and
details how the Government will report on delivering its commitments.
The Government's five key social and fiscal priorities, as outlined in the
Charter are:
1. More jobs for Queensland - skills and innovation - the Smart State;
2. Safer and more supportive communities;
3. Community engagement and a better quality of life;
4. Valuing the environment; and
5. Building Queensland's regions.
In addition, the Government's core fiscal policy principles, as outlined in the
Charter are:
.. To ensure that State taxes and charges remain competitive with the other
States and Territories.
.. To ensure that the Government's level of service provision is sustainable
by maintaining an overall General Government operating surplus, as measured
in Government Finance Statistics terms.
.. Borrowings or other financial arrangements will only be undertaken for
capital investments and only where these can be serviced within the
operating surplus, consistent with maintaining a AAA credit rating.
.. To ensure that the State's financial assets cover all accruing and expected
future liabilities of the General Government sector.
.. To at least maintain and seek to increase Total State Net Worth.
The Queensland Government's economic strategy is aimed at achieving these key
social priorities and fiscal principles. Queensland's economic strategy is
focused on raising the productive capacity of the State's labour force and
industries, given the importance of productivity in achieving sustainable
economic growth, higher living standards and more employment opportunities - the
key economic policy priorities of the State Government.
The rise in real incomes and employment generated by productivity growth also
increases the tax revenue base available for Government, helping to address
fiscal principles such as maintaining a competitive taxation environment and
affordable service provision.
The economic strategy, by increasing productivity growth and real incomes, and
therefore taxation revenue, also allows the Government to more easily increase
spending on education, crime and poverty
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prevention, cultural activities, regional development, health and aged care, and
environmental protection - the other key social policy priorities outlined in
the Charter.
The economic strategy complements sound economic fundamentals with a 'Smart
State' strategy that fosters innovation and invests in human capital, as these
are the main drivers of productivity growth in a modern diversified economy.
Economic Growth
The Queensland economy continued to record strong growth in 2002-03.
Queensland's State Budget Papers for 2003-04 stated that real GSP is estimated
to have grown by 4 3/4% in 2002-03 following growth of 5.5% in 2001-02. With the
exception of 1995-96, Queensland's economic growth has been at or above the
national average for more than a decade. Over the past decade, economic growth
in Queensland has been an average of 1.0% point a year above the rest of the
nation. Based on estimated growth rates for 2002-03, Queensland's GSP has grown
in real terms at an average annual compound rate of 4.7% from 1992-93 to 2002-03
(nationally, 3.8%).
Real Economic Growth - Queensland and Australia
(1997-98 to 2002-03)
Queensland GSP/(a)/ Australia GDP/(b)/
------------------------- ------------------------
Year $ Billion/(a)/ % Change $ Billion/(a)/ %Change
- ------------ -------------- -------- -------------- -------
1997-98 95.1 6.2 615.3 4.5
1998-99 102.2 7.4 647.9 5.3
1999-2000 107.4 5.1 673.8 4.0
2000-01 110.9 3.3 685.7 1.8
2001-02 117.0 5.5 711.5 3.8
2002-03/(c)/ 122.6 4 3/4 731.0 2.7
/(a)/ Chain volume measure (reference year 2000-01)
/(b)/ Chain volume measure (reference year 2001-02)
/(c)/ Based on estimated actual growth rates
Source: Queensland Treasury; Commonwealth Treasury and Australian Bureau of
Statistics "ABS" Cat.No. 5206.0
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Major Economic Indicators
The following table lists selected major economic indicators for Queensland:
Queensland Major Economic Indicators
1998-99 1999-2000 2000-01 2001-02 2002-03
------- --------- ------- -------- -------
Overseas Merchandise Exports ($ billion)............ 15.9 16.6 21.5 23.2 21.4
Retail Turnover ($ billion)......................... 25.6 27.0 29.0 30.8 33.3
Private Gross Fixed Capital Formation ($ billion)... 20.7 21.9 19.9 24.5 28.7
Mineral Production ($ billion)...................... 7.5 8.0 10.9 11.8. n.a.
Agricultural Production ($ billion)................. 6.4 6.8 7.0 7.9. n.a.
Employment ('000) /(a)/............................. 1,629.1 1,665.4 1,695.0 1,727.2 1,785.1
Unemployment Rate (%) /(a)/......................... 8.0 7.7 8.0 7.9 7.0
Increase in Consumer Prices (%)/(a)/ /(b)/.......... 1.0 1.8 5.9 2.9 3.2
Average weekly ordinary time earnings ($)/(a)/...... 699.1 713.6 759.2 793.1 824.9
/(a)/ Year-average
/(b)/ Includes impact of introduction of the Goods and Services Tax (GST) in
2000-01.
Source: ABS and Queensland Treasury
Structure of the Queensland Economy
Queensland's contribution to the Australian economy is reflected in the
following table. They show the annual changes and contributions to growth in
GSP/GDP in Queensland and Australia for 2001-02 and 2002-03.
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Components of Economic Growth/(a)/
(based on Queensland State Accounts)
Queensland /(a)/ Australia /(b)/
------------------------------------- -------------------------------------
Contribution to Contribution to
GSP growth (% GSP growth (%
Annual Growth(%) points) Annual Growth(%) points)
----------------- ----------------- ----------------- -----------------
2002-03 2002-03
2001-02 /(d)/ 2001-02 /(d)/ 2001-02 2002-03 2001-02 2002-03
------- ------- ------- ------- ------- ------- ------- -------
Household consumption expenditure ........... 2.7 5 1.6 3 3.3 3.9 2.0 2.4
Priv. gross fixed capital formation ......... 20.0 18 1/2 3.6 3 3/4 9.8 14.2 1.7 2.6
- - Dwellings ................................. 30.9 21 1.7 1 1/2 19.5 15.9 0.9 0.9
- - Business Investment ....................... 11.5 23 1/2 1.1 2 1/4 4.8 18.1 0.4 1.7
(i) Other buildings and structures /(e)/..... -3.0 27 1/4 -0.1 3/4 9.8 28.8 0.3 0.9
(ii) Machinery and equipment ................ 20.1 21 3/4 1.2 1 1/2 2.5 13.1 0.2 0.8
- - Ownership transfer costs .................. 42.2 na 0.5 na 25.2 4.2 0.4 0.1
Private final demand /(c)/ .................. 6.6 8 1/2 5.2 6 3/4 4.8 6.4 3.7 5.0
Public final demand /(c)/ /(e)/ ............. 4.7 2 1.1 1/2 4.0 3.7 0.9 0.8
Gross State/National Expenditure ............ 6.3 7 6.4 7 1/4 4.6 5.9 4.6 5.9
Exports of goods and services ............... 5.1 3 3/4 1.9 1 1/2 -1.4 -0.7 -0.3 -0.1
Imports of goods and services ............... 7.1 9 1/4 2.8 -3 3/4 2.2 13.8 -0.5 -3.0
GSP/GDP ..................................... 5.5 4 3/4 5.5 4 3/4 3.8 2.7 3.8 2.7
/(a)/ Chain volume measure (reference year 2000-01)
/(b)/ Chain volume measure (reference year 2001-02)
/(c)/ Final demand constitutes final consumption expenditure plus gross fixed
capital formation
/(d)/ Estimated actual
/(e)/ Queensland data adjusted for asset sales but national data not adjusted,
as information not available.
Source: Queensland Treasury, Commonwealth Treasury and ABS Cat.No. 5206.0
The table above provides growth rates for components of economic activity based
on the Queensland State Accounts (QSA), Queensland Treasury's preferred measure
of State economic activity. However, Queensland growth rates for 2002-03 are
estimated actuals as at the time of the 2003-04 State Budget in June 2003, as
QSA data for the entire 2002-03 financial year are not yet available. The table
below shows ABS State Accounts estimates for State final demand in Queensland
for 2002-03. This table implies that major components of economic activity, such
as private household consumption, dwelling investment and business investment,
grew at a faster rate in 2002-03 than that estimated at the time of the 2003-04
State Budget.
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Components of State Final Demand, Queensland /(a)/
(based on ABS National Accounts - State Details)
Annual Growth Contribution to
(%) SFD growth (% points)
----------------- ---------------------
2001-02 2002-03 2001-02 2002-03
------- ------- --------- ---------
Household consumption expenditure ............ 3.4 5.5 2.0 3.2
Private gross fixed capital formation ........ 20.2 19.9 3.4 3.8
- - Dwellings .................................. 31.0 24.2 1.6 1.6
- - Business Investment ........................ 11.8 26.2 1.0 2.4
(i) Other buildings and structures /(c)/ ..... -2.9 33.3 -0.1 1.0
(ii) Machinery and equipment ................. 20.4 22.8 1.1 1.4
Private final demand /(b)/ ................... 7.1 9.1 5.5 7.0
Public final demand /(b)//(c)/ ............... 4.4 1.6 1.0 0.4
State Final Demand (SFD) ..................... 6.5 7.4 6.5 7.4
/(a)/ Chain volume measure (reference year 2001-02)
/(b)/ Final demand constitutes final consumption expenditure plus gross fixed
capital formation
/(c)/ Adjusted for asset sale
Source: ABS Cat. No. 5206.0
Key features are:
.. Despite the difficult external environment induced by the slowing world
economy, Queensland is estimated to have recorded strong growth in 2002-03
of 4 3/4%, higher than national growth of 2.7%.
.. While private demand has been stronger than estimated at the time of the
Budget, it is likely that net exports will detract more from growth in
2002-03 than estimated in the Budget (2 1/4% points).
.. Household consumption expenditure in Queensland increased by 5.5% in
2002-03, following growth of 3.4% in 2001-02. Consumption expenditure in
Australia grew by 3.9% in 2002-03, following growth of 3.3% in 2001-02.
.. Total private gross fixed capital formation increased by 19.9% in the State
in 2002-03, maintaining the growth of 20.2% recorded in 2001-02.
.. Dwelling investment rose by 24.2% in the State in 2002-03, following growth
of 31.0% in 2001-02. Australia also experienced strong growth of 15.9% in
dwelling investment in 2002-03.
.. Public final demand in Queensland grew by 1.6% in 2002-03, following growth
of 4.4% in 2001-02.
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Exports
Queensland is one of Australia's major exporting States. The nominal value of
Queensland's overseas merchandise exports in 2002-03 totalled $21.4 billion,
accounting for 19.5% of Australia's total merchandise exports during the year.
Due to subdued economic growth in some of Queensland's major overseas trading
partners during the year and reflecting the impact of the solid appreciation of
the $A during the year, the nominal value of Queensland's overseas merchandise
exports for 2002-03 fell by 7.7% compared with the previous year.
Rural exports fell sharply in 2002-03 (down 13.9%), due, in part, to a 50.7%
fall in the value of cereals exports and a 29.5% decline in earnings from
exports of textile fibres because of severe drought conditions during the year.
Meat exports, the largest single component of rural exports, decreased by 3.2%
in 2002-03. Mining exports, including both crude minerals and processed minerals
and metals, also fell significantly in value terms in 2002-03, down 15.0% and
12.6% respectively, as weaker commodity prices offset increases in the volume of
mining exports.
The fall in Queensland's overseas merchandise exports was greater than the
national decline of 5.3%. This was primarily the result of a greater impact of
drought-induced declines in the volume of some agricultural commodity exports
and weaker mineral commodity prices on the value of exports in Queensland, with
commodity exports representing a larger share of total merchandise exports in
Queensland than nationally.
Overseas Exports of Goods and Services, Queensland
($ million at current prices)
Export Categories/(a)/ 2000-01 2001-02 2002-03/(p)/
---------------------- -------- -------- ------------
Rural
Meat .................................................... 2,758.2 2,810.9 2,721.1
Fish and other seafood .................................. 403.1 379.3 280.5
Cereals ................................................. 312.5 304.7 150.2
Vegetables and fruits ................................... 242.9 289.6 227.7
Sugar and honey/(b)/ .................................... 1,221.0 1,478.0 80.3
Textile fibres .......................................... 925.7 791.1 586.4
Animal oils and fats .................................... 99.3 100.3 119.5
Other rural ............................................. 827.9 778.0 646.3
Total 5,692.2 5,588.4 4,812.0
Crude Minerals
Metalliferous ores ...................................... 1,543.2 1,458.0 1,317.7
Coal, coke and briquettes ............................... 7,001.8 8,078.8 6,692.0
Petroleum and related products/materials ................ 315.7 298.3 335.5
Other crude minerals .................................... 73.8 72.6 74.8
Total 8,934.5 9,907.7 8,420.0
Processed minerals and metals
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Export Categories/(a)/ 2000-01 2001-02 2002-03/(p)/
---------------------- -------- -------- ------------
Non-ferrous metals ...................................... 2,725.7 2,494.1 2,162.5
Other processed minerals and metals ..................... 231.0 228.8 217.5
Total 2,956.6 2,722.9 2,380.0
Other manufactures
Chemicals and related products .......................... 358.7 409.1 406.7
Manufactured goods classified by material ............... 160.3 170.9 199.8
Machinery ............................................... 679.0 774.5 767.4
Transport equipment ..................................... 250.7 311.2 317.9
Miscellaneous manufactures .............................. 215.4 253.3 268.6
Total 1,664.2 1,919.0 1,963.7
Manufactures (sum of processed minerals and metals
and other) 4,620.8 4,641.9 4,343.7
Confidential and special 2,224.3 3,013.1 3,794.1
Total overseas exports of goods 21,471.9 23,151.0 21,369.9
Tourism/(c)/ ............................................ 2,096.0 1,886.0 1,753.3
Other services/(c)/ ..................................... 3,638.0 3,322.0 3,398.0
Total overseas exports of services/(c)/ 5,734.0 5,208.0 5,151.3
TOTAL OVERSEAS EXPORTS OF GOODS AND SERVICES/(d)/ 27,205.9 28,359.0 26,521.2
/(p)/ preliminary.
/(a)/ Based on the Standard International Trade Classification (SITC3).
/(b)/ Sugar data are confidential for Queensland for 2002-03.
Source: ABS, unpublished foreign trade data.
/(c)/ 2002-03 figures for tourism and other services exports are based on an
estimate of total yearly growth. This estimate has been made by calculating
the growth rate for the three-quarters to March quarter 2003, compared with
a year earlier, and applying this growth rate to the yearly total for
2001-02.
Note: Amounts have been rounded to the nearest million. Consequently amounts may
not add to rounded totals.
Queensland produces a wide variety of mineral and agricultural commodities for
export. The development of large capacity port facilities has increased
Queensland's competitiveness in world markets and has improved access to
significant European markets.
Queensland exports to a range of overseas markets. Japan has been Queensland's
largest export market for most of the past decade and currently accepts over one
quarter (26.1%) of the State's merchandise exports. Other major export markets
include the European Union (14.8%), South Korea (11.0%), the United States of
America (7.4%), India (5.5%) and Taiwan (4.5%).
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The major destinations for Queensland's exports in recent years are outlined in
the following table:
Queensland's Major Overseas Markets for Exports of Goods
(% of total at current prices)
2000-01 2001-02 2002-03
------- ------- -------
North Asia Total 47.5 46.5 48.4
South Korea 9.0 9.8 11.1
China 4.2 4.0 4.9
Japan 28.3 26.7 26.1
Taiwan 4.1 4.1 4.5
Hong Kong 1.9 1.8 1.8
South Asia Total 14.0 14.5 14.1
Indonesia 2.4 2.3 2.4
PNG 1.7 1.6 1.6
Singapore 1.3 1.2 1.1
India 4.6 5.4 5.5
Malaysia 2.5 2.8 2.5
Thailand 1.4 1.2 1.1
North America 9.5 10.6 9.8
Canada 1.9 2.2 2.0
US 7.6 8.5 7.7
European Union 14.9 15.9 14.8
New Zealand 3.3 3.2 3.6
Brazil 1.5 1.4 1.3
Other 8.2 8.8 8.9
100.0 100.0 100.0
Imports
The nominal value of Queensland's merchandise imports rose 16.6% in 2002-03, to
$16.6 billion.
Queensland's imports of manufactures totalled $11.7 billion in 2002-03,
increasing from $10.4 billion in 2001-02. The value of rural imports increased
from $718.8 million in 2001-02 to $874.2 million in 2002-03.
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The value of Queensland's imports in recent years are outlined in detail in the
following table:
Overseas Imports of Goods and Services, Queensland
($ million at current prices)
Import Categories/(a)/ 2000-01 2001-02 2002-03 /(p)/
--------------------- -------- -------- -------------
Live animals, food, beverages & tobacco 492.0 550.3 639.6
Mineral fuels, petroleum and lubricants 2,565.0 2,069.2 2,793.6
Chemicals 972.3 1,043.7 986.5
Road motor vehicles 2,737.7 3,105.0 3,444.3
Other machinery and transport equipment 3,000.7 3,252.0 3,833.7
Other manufactured goods 2,772.5 2,957.8 3,424.0
Other 1,248.2 1,239.6 1,455.1
Total overseas imports of goods 13,788.4 14,217.3 16,576.8
Tourism /(b)/ .............................. 955.0 883.0 907.8
Other services /(b)/ ....................... 4456.0 4,376.0 4,688.5
Total overseas imports of services /(b)/ 5,411.0 5,259.0 5,596.3
TOTAL OVERSEAS IMPORTS OF GOODS AND SERVICES 19,199.4 19,476.3 22,173.1
/(p)/ preliminary.
/(a)/ Based on the Standard International Trade Classification (SITC3).
/(b)/ 2002-03 figures for tourism and other services imports are based on an
estimate of total yearly growth. This estimate has been made by calculating
the growth rate for the three-quarters to March quarter 2003, compared with
a year earlier, and applying this growth rate to the yearly total for
2001-02.
Source: ABS, unpublished foreign trade data.
Note: Amounts have been rounded to the nearest million. Consequently amounts may
not add to rounded totals.
Employment and Income
Queensland's population, as at March quarter 2003, totalled 3,774,292 persons.
Over the five years to the year ending March quarter 2003, the State's
population increased at an average annual growth rate of 1.8%, compared with
1.1% in the rest of Australia.
During the five year period to 2002-03, Queensland's labour force increased by
10.6%, (2.0% per annum on average) due primarily to strong population growth,
with the State's labour force participation
(g)-16
rate remaining consistently higher than that in the rest of Australia but
virtually unchanged throughout the period. Queensland's labour force has
continued to grow at rates above that for the rest of Australia.
Employment growth in Queensland strengthened substantially in 2002-03 to 3.3%
compared with growth of 1.9% in 2001-02. Queensland's employment growth in
2002-03 was well above that of the rest of Australia of 2.2%. Over the five
years to 2002-03, employment in Queensland increased by 12.6% compared with
10.7% for the rest of Australia. As a result, Queensland created 199,300 new
jobs or 21.2% of all jobs created in Australia. The following table shows
changes in Queensland's employment by industry over the past five years.
Employed Persons by Industry, Queensland
% Share of
% Change Total
1997-98 2002-03 1997-98 Employment
('000) ('000) 2002-03 2002-03
------- ------- -------- ----------
Agriculture, Forestry, Fishing ................. 96.4 95.6 -0.8 5.4
Mining ......................................... 19.1 18.4 -3.7 1.0
Manufacturing .................................. 173.9 183.4 5.5 10.3
Electricity, Gas and Water ..................... 12.2 12.0 -1.6 0.7
Construction ................................... 123.7 149.3 20.7 8.4
Wholesale and Retail Trade ..................... 332.5 371.1 11.6 20.8
Accommodation, Cafes and Restaurants ........... 84.5 97.4 15.3 5.5
Transport and Storage .......................... 87.2 82.2 -5.7 4.6
Communication Services ......................... 26.2 27.6 5.3 1.5
Finance, Property and Business Services ........ 204.2 235.3 15.3 13.2
Government Administration ...................... 54.9 86.7 57.9 4.9
Community Services (Education and Health)....... 262.0 298.4 13.9 16.7
Recreation, Personnel and Other Services........ 100.2 128.4 28.1 7.2
------ ------ ---- -----
TOTAL (a) ................................... 1576.9 1785.9 13.3 100.0
====== ====== ==== =====
(a) Industry estimates of employment are compiled on the mid-month of each
quarter. Therefore, the total of industry employment does not match aggregate
estimates of employed persons
Note: Due to rounding, amounts may not add to rounded totals.
Source: ABS Cat. No.6203.0
Queensland's average unemployment rate was 7.0% in 2002-03, down from 7.9% in
the previous year (rest of Australia 5.9% and 6.3% respectively). This
substantial improvement in Queensland's unemployment rate reflects the fact that
growth in employment over 2002-03 outpaced labour force growth. The average
participation rate in Queensland in 2002-03 was 65.0%, compared with 63.7% in
the rest of Australia.
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Prices
The Queensland Consumer Price Index "CPI" rose 3.2% in 2002-03, comparable with
an inflation rate of 2.9% in 2001-02. The CPI for Australia rose 3.1% and 2.9%
in 2002-03 and 2001-02 respectively.
Income
Average weekly earnings and household income per capita in Queensland are below
the Australian average. The most recent figures available are given below:
Measures of Income
Household Income per Average Weekly
Capita Earnings
State 2001-02 2002-03
$ $
- ----------------- -------------------- --------------
Queensland 27,636 649.1
New South Wales 33,028 750.1
Victoria 31,862 723.1
South Australia 28,177 667.5
Western Australia 31,279 690.7
Tasmania 25,117 622.2
Australia 31,140 710.5
Source: ABS Cat. No. 5220.0 and 6302.0
In Queensland, growth in average weekly earnings moderated substantially to 0.6%
(4.3% nationally) in 2002-03.
Wages Policy
Historically, wages in Australia have been strongly influenced by the Australian
Industrial Relations Commission and its predecessors through a system of
'awards', which establish minimum wage rates payable in particular occupations.
A central component of the previous Commonwealth Government's industrial
relations policy from 1983 to 1996 was the Prices and Incomes Accord, an
agreement between the Commonwealth Government and the Australian Council of
Trade Unions (ACTU). From 1983 to 1991, the wage fixing system was highly
centralised. Wage rises were constrained in an effort to foster growth in GDP
and employment.
Since 1991, the focus of wages policy has shifted to the enterprise level.
Enterprise agreements have been pursued to allow more flexible and productive
workplace-based arrangements. The emphasis has changed from across-the-board
wage increases flowing to most employees throughout the economy, to
differentiated wage increases at the workplace level, in exchange for
productivity improvements. Aggregate wage outcomes have remained moderate during
the transition to a more decentralised system, enabling an economic environment
of low inflation and strong employment growth.
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The current Commonwealth Government, elected in 1996, has further encouraged
this shift to a more decentralised wage fixing system. Nevertheless, employees
on minimum award rates who have not been able to secure pay increases under
enterprise agreements have been protected through a series of award safety net
adjustments, to ensure that basic living standards are maintained.
Enterprise bargaining has become widely accepted in Australia since its
introduction in October 1991 and has gradually replaced the Award system of
centralised wage-fixing as the dominant method of structured wages negotiation
in Australia. As of May 2002, 38.2% of Australian workers were covered by
collective agreements, compared with only 20.5% covered by Awards only, with
Individual agreements (41.3%) the most common type of wage-setting agreement.
In 1999, the Queensland Government enacted the Industrial Relations Act 1999,
which applies to the estimated 55% of employees in Queensland who are covered by
the State industrial relations system. The Act provides greater choice in
agreement types to suit individual industries, enterprises and workplaces. It
also provides enhanced powers for the Queensland Industrial Relations Commission
to assist parties in negotiating agreements, including a greater focus on
conciliation and mediation.
PRINCIPAL SECTORS OF THE QUEENSLAND ECONOMY
The following table shows the main components of Queensland's GSP and
Australia's GDP.
Queensland/Australian Gross Product-Major Industry Sectors /(a)/
(Current prices, 2001-02)
Queensland Australia Queensland as a
Sector ($ millions) ($ millions) % of Australia
- ------------------------------------- ------------ ------------ ---------------
Agriculture, forestry and fishing ... 5,204 23,940 21.7
Mining............................... 8,200 33,567 24.4
Manufacturing........................ 10,709 73,306 14.6
Services/(b)/........................ 81,520 493,265 16.4
------- ------- ----
TOTAL 105,633 624,078 16.9
======= ======= ----
/(a)/ Based on total factor income
/(b)/ Includes general government and ownership of dwellings gross operating
surplus
Source: ABS Cat. No.5220.0
Mining
Over the past decade, the mining sector of Queensland's economy has provided a
strong stimulus to State growth. Queensland has large reserves of coal, bauxite,
gold, copper, silver, lead, zinc, nickel, phosphate rock and limestone currently
being mined, and largely unexploited resources of magnesite, oil shale, uranium,
tin, mineral sands, clay and salt.
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In 2001-02, Queensland provided 24.4% of the nation's mining output, the second
largest contribution of any State to Australia's total mining output. The
industry accounted for around 7.8% of GSP in Queensland.
The Queensland mining industry is a major export earner and makes a substantial
contribution to capital investment, direct and indirect employment, and regional
development. Mining also provides a base for a number of the State's leading
value-added industries.
The value of Queensland mineral production from 1997-98 to 2001-02 is shown in
the following table.
Queensland Mineral Production - Value ($ millions)
Mineral 1997-98 1998-99 1999-2000 2000-01 2001-02
- ----------------------- ------- ------- --------- ------- -------
Black coal (a)......... 4,735 4,981 4,761 6,228 8,062
Copper concentrate..... 619 688 785 1,138 994
Gold Bullion (b)....... 464 364 395 447 317
Bauxite................ 214 249 173 252 280
Lead Concentrate (c)... 312 411 465 700 534
Crude Oil.............. 62 59 122 146 109
Zinc Concentrate....... 140 174 559 951 647
Natural Gas............ 193 138 339 322 403
Other.................. 319 445 366 722 468
----- ----- ----- ------ ------
TOTAL 7,058 7,509 7,965 10,906 11,813
===== ===== ===== ====== ======
(a) Value of production does not include transport or handling costs or other
by-products such as coke or briquettes.
(b) Includes alluvial gold.
(c) Includes a significant component of silver.
Source: Queensland Department of Natural Resources and Mines.
Estimated production volumes of many of Queensland's principal minerals and
energy commodities increased in 2001-02, with the strongest increases occurring
in the production of natural gas (up 21.4%), zinc concentrate (up 8.1%), and
black coal (up 7.2%). Production of crude oil fell in 2001-02, as shown below.
World mineral prices fell slightly in 2001-02, down by 6.4% (measured in SDR
terms) compared with the previous year.
(g)-20
Queensland's Principal Mineral Production -Volumes
Mineral 1997-98 1998-99 1999-2000 2000-01 2001-02
- -------------------------------- ------- ------- --------- ------- -------
Black coal ('000t).............. 105,752 112,634 124,348 138,352 148,363
Copper concentrate('000t)....... 941 1,195 1,351 1,490 1,501
Gold Bullion(kg) /(a)/.......... 42,679 38,301 42,078 43,503 34,666
Bauxite ('000t)................. 9,247 10,761 11,546 11,731 11,256
Lead Concentrate('000t) /(b)/... 412 485 566 702 677
Zinc Concentrate('000t)......... 383 387 657 1,232 1,332
Crude Oil (megalitres).......... 690 651 566 522 474
Natural Gas (gigalitres)........ 2,497 3,282 4,486 4,549 5,523
/(a)/ Includes alluvial gold.
/(b)/ Includes a significant component of silver.
Source: Queensland Department of Natural Resources and Mines.
Coal
Coal remained Queensland's major mineral commodity during 2001-02, accounting
for around 68% of total mineral production value. Coal is also Queensland's
leading export commodity, with the value of exports (including coke and
briquettes) totalling $6.7 billion in 2002-03.
The volume of coal production in Queensland during 2001-02 rose by 7.2% to 148.4
million tonnes. The value of production rose by a greater 29.3% to $8.1 billion,
due to an increase in average coal export prices in Australian dollar terms.
Copper
In 2001-02, the value of copper concentrate production fell 12.7%. The decrease
in value produced was mainly the result of weaker world copper prices, however a
slight increase in the volume of production (up 0.7%) partly offset the fall in
value resulting from lower prices over the year.
Gold
The value of gold production fell 29.2% in Queensland in 2001-02. This was
mostly as a result of the fall in the volume of gold production, which decreased
by 20.3% in 2001-02. The major gold mines of Kidston and Mt Leyshon reached the
end of their mine lives over the period and their closures were the main factor
behind the fall in Queensland's gold production.
Bauxite
Bauxite is mined in the north of Queensland with indicated reserves of
approximately 3 billion tonnes. The Weipa deposit in northern Queensland is the
largest known bauxite deposit in the world.
(g)-21
The value of Queensland bauxite production rose by 11.1% in 2001-02 to $280
million, due to a rise in bauxite prices, with production volume falling 4.0%
compared with the previous year.
Lead and Zinc
The value of lead concentrate production fell 23.7% in 2001-02, due primarily to
weaker prices. The volume of production decreased by 3.6% over the year. The
value of zinc concentrate decreased by 31.9% in 2001-02, also as a result of
lower prices and despite an 8.1% increase in the volume of production.
Crude Oil and Natural Gas
The estimated volume of crude oil produced in Queensland decreased 9.2% in
2001-02. However, lower oil prices resulted in the value of production
decreasing 25.6%.
Production of natural gas increased by a strong 21.4% in Queensland in 2001-02.
The value of production was in line with this, increasing 24.9% to $403 million
in 2001-02.
Agriculture
The agriculture, forestry and fisheries sector in Queensland accounted for
around 4.9% of GSP and for around 21.7% of Australia's total agricultural
production in 2001-02. The bulk of Queensland's agricultural production has
traditionally been exported, providing a significant contribution to Australia's
foreign earnings.
In 2001-02 around 64% of the gross value of Queensland's agricultural production
was derived from four products - beef, sugar, grain and cotton, each of which is
produced primarily for export.
Queensland also produces tropical and citrus fruits, tobacco, rice, cotton,
vegetables, timber, peanuts, oilseeds, eggs and dairy products, principally for
domestic markets.
In 2001-02, Queensland's gross value of agricultural production increased 13.5%
to $7.9 billion.
The following table presents figures on the gross value and volume of
agricultural commodities produced in Queensland over the past five years.
(g)-22
Queensland's Major Agricultural Commodities
Value and Volume of Production
1997-98 1998-99 1999-2000 2000-01 2001-02
------- ------- --------- --------- -------
Gross Value ($m)
Slaughtering and other disposals ........ 1,872 2,274 2,668 3,278 3,700
Cattle and calves .................... 1,499 1,914 2,276 2,873 3,227
Poultry .............................. 169 158 157 160 180
Pigs ................................. 143 150 177 177 208
Sheep ................................ 56 48 54 65 78
Sugar cane for crushing ................. 1,171 961 813 641 927
Wool (shorn) ............................ 202 170 165 194 189
Cereals for grain ....................... 457 596 593 536 545
Horticulture (a) ........................ 941 1,037 1,091 1,138 1,367
Dairying (total whole milk production)... 337 341 322 232 257
Cotton .................................. 372 528 581 397 348
Other ................................... 435 477 538 543 575
Total ................................... 5,787 6,384 6,771 6,959 7,901
Volume of Production
Beef and veal (tonnes) .................. 805,300 910,034 938,602 1,040,310 977,601
Sugar cane ('000 tonnes) ................ 36,790 35,587 35,316 28,277 28.250
Wool ('000 kg) .......................... 45,905 51,874 45,660 40,723 38,743
Wheat ('000 tonnes) ..................... 1,392 1,941 1,904 1,289 901
Cotton lint ('000 tonnes) ............... 190.3 241.2 247.8 249.2 197
- ----------
(a) Vegetables, fruits and nuts, and grapes.
Sources: ABS, Cat. No 7121.0, 7215.0 and 7501.0
Growth in production volumes of most of Queensland's major agricultural
commodities in 2001-02 was weak. Production of each of the major crops and
livestock products decreased over the year, primarily reflecting the impact of
the drought.
Agricultural commodity prices declined in $A terms by 22.4% in 2001-02 largely
the result of steady falls in the prices of exported sugar and beef. The outlook
for agricultural commodity prices remains relatively subdued as a result of the
relatively weak economic growth in Queensland's major trading partners, as well
as the increasing supply of some cropping products which is expected following
the recovery from the recent drought throughout Australia.
Meat and Poultry
Meat products are Queensland's most valuable rural commodity, accounting for
46.7% of the State's total value of agriculture production in 2001-02.
Grains
Queensland's grain production accounted for 6.2% of total Australian grain
production in 2001-02.
(g)-23
Queensland wheat production fell for the third year in a row in 2001-02, down
388,000 tonnes to 901,000 tonnes.
Sugar
Australia is the world's second largest exporter of raw sugar and Queensland
accounts for around 90% of Australian production.
Queensland's sugar cane production was 28.3 million tonnes in 2001-02, ranking
second only to meat in terms of its contribution to the value of total
Queensland agriculture production. Overall production fell in 2001-02 due to a
number of setbacks in the industry over the year, including poor weather
conditions and the outbreak of disease and pests.
Wool
Queensland's gross value of wool production fell marginally from $194 million in
2000-01 to $189 million in 2001-02. A decline in the volume of wool production
more than offset an overall rise in wool prices over the year.
Other Primary Industries
Timber-Based Industries
Queensland has significant timber resources with approximately 3.8 million
hectares of forest and timber resources controlled by the Department of Primary
Industries. Rainforest timber plantations predominate in north Queensland while
the south-east coastal area includes large plantations of cultivated pine
forests and natural forests. There are also extensive cypress woodlands in
south-west Queensland.
The gross value of forestry production for 2002-03 is estimated to be $103
million, which is 6% above that recorded in the previous year. The estimated
increase in the gross value of forest production in 2002-03 reflects the strong
recovery in housing construction since mid 2001. The turnover of the entire
timber-based industry is considerably higher, given a product range that
includes sawn timber, veneers, manufactured board, wooden and corrugated fibre
board containers, paper bags and furniture, mainly for the domestic market.
Fisheries
The gross value of fisheries production for 2002-03 is estimated to be $395
million, a slight decrease compared with 2001-02.
Manufacturing
In 2001-02, the manufacturing sector accounted for 10.1% of GSP in Queensland.
In common with most Western industrialised nations, the relative importance of
manufacturing has been declining in favour of service-based industries. However,
the manufacturing sector's share of GSP has declined less rapidly in
(g)-24
Queensland than in other States, so that Queensland's share of national
manufacturing output continued to rise to 14.6% in 2001-02 from 14.2% in
2000-01.
Manufacturing in Queensland developed historically to service and process the
State's agricultural and mineral resources. It is estimated that approximately
two-thirds of manufacturing in Queensland is related to processing, servicing or
the provision of machinery and equipment involved in the agricultural and mining
sectors.
In the past, Australia's border protection policy (primarily tariffs and quotas)
has imposed costs on Queensland's industries without off-setting benefits. The
winding back of protection has benefited manufacturing industry in the State, in
part because of its beneficial impact on mining and agriculture.
Almost half of the manufacturing industry's turnover is accounted for in the two
categories of food, beverages and tobacco (30.6%) and metal products (18.1%).
In 2000-01 (the latest available data), Queensland's manufacturing turnover
increased by 18.1%, to average 6.9% per annum growth in the five years since
1995-96.
Manufacturing output has grown strongly across most sectors, as shown in the
following table:
Queensland Manufacturing Industry Turnover/(a)/
Average Annual Growth by Sector
Average
Annual
1995-96 2000-01 Growth
Subsector ($ million) ($ million) (%)
- ------------------------------------------- ----------- ----------- ------
Food, beverages and tobacco ............... 8,675 12,313.6 7.3
Textile, clothing, footwear and leather ... 568 686.6 3.9
Wood and paper products ................... 1,558 2,490.5 9.8
Printing, publishing and recorded media .. 1,343 1,675.7 4.5
Chemical, petroleum and coal products ..... 3,897 7,288.4 13.3
Non-metallic mineral products ............. 1,688 1,891.5 2.3
Metal products ............................ 6,812 7,281.9 1.3
Machinery and equipment ................... 3,349 5,535.3 10.6
Miscellaneous manufacturing ............... 912 1,128.9 4.4
------ -------- ----
TOTAL TURNOVER 28,801 40,292.3 6.9
====== ======== ====
(a) Due to changes in the ABS' collection methodology in 2000-01, the
measurement of Manufacturing Industry Turnover changed slightly. Therefore, the
2000-01 figures are not entirely comparable with earlier years and growth rates
should therefore be considered as approximations.
Note: Figures are rounded to the nearest million. Consequently, figures may not
add to the rounded total.
Source: ABS Cat. No. 8221.0
(g)-25
Overseas exports of Queensland manufactured goods, including processed minerals
and metals, totalled $4.3 billion in 2002-03. Total manufactured overseas
exports fell 6.4% in 2002-03, following growth of 0.5% in 2001-02, reflecting
the weak global economy and partially the appreciation of the $A.
Services
Transport
Queensland has 14 deepwater ports, most of which are equipped with bulk handling
facilities for the major products of their respective regions. In addition,
Queensland has two community ports and a number of non-trading ports located at
regular intervals from Brisbane in the south-east to Karumba in the north-west.
The Queensland railway network encompasses approximately 10,000 kilometres of
track, which includes the electric main railroad line and heavy haul lines
serving the major coal mines in central Queensland.
The Queensland road network, extending approximately 177,000 kilometres, is
constantly being upgraded and extended to maintain a safe and viable road
network.
Queensland has four international airports as well as a large network of
commercial domestic airports and private airfields. Brisbane airport is the
third busiest in the country behind Sydney and Melbourne. While growth is based
predominantly on tourism, the increase in flights has provided a variety of
non-tourism related business opportunities. Following the collapse of Ansett in
2001, both Qantas and Virgin Blue have increased air capacity to many key
destinations, taking up the market share previously occupied by Ansett. The
securing of the Australian Airlines operational hub at Cairns was positive for
the Queensland aviation industry and represents a major advance in improving
international air access to the State.
Communications
Queensland is served on a State-wide basis by the national postal system and a
number of major telecommunications companies. Two-way satellite communications
are available in remote areas, providing education and other services to
isolated residents. The State has a widespread non-commercial television network
principally operated by the Australian Broadcasting Corporation(ABC) and the
Special Broadcasting Service (SBS). In addition, three commercial television
networks operate within the State. Queensland also has a widespread cable and
satellite pay television service in operation, while broadband internet services
are also available in all major centres across the State.
Construction
The Queensland building and construction industry provided 8.4% of employment in
the State during 2002-03.
Dwelling investment rose by 24.2% in 2002-03, following an increase of 31.0% in
2001-02. This compares with an increase of 15.9% nationally, following a 19.5%
increase in 2001-02. Demand from first home buyers subsided in 2002-03,
following the removal of the additional component of the First Home Owners
Grant. However, rising house prices fuelled demand for investment properties in
Queensland and led to many home owners drawing on their increased equity to
renovate their properties. This has resulted in a surge in alterations and
additions activity, with the nominal value of private residential alterations
and additions increasing 36.4% in 2002-03.
(g)-26
Private non-dwelling construction investment rose by 33.3% in 2002-03
(nationally, up 28.8%), following a 2.9% fall in the previous year (nationally,
up 9.8%).
Tourism
Tourism is one of Queensland's most important and fastest growing sectors,
accounting for an estimated 6.4% of overall GSP in the State. The success of
tourism in Queensland is to a great extent attributable to certain natural
advantages such as a favourable climate for vacations and one of the finest
arrays of natural attractions in Australia, including the Great Barrier Reef and
its islands, hundreds of kilometres of beaches, large wilderness areas, mountain
panoramas, national parks, the tropical north, the Darling Downs, and the
outback.
South of Brisbane is the Gold Coast, Australia's largest and most popular resort
area. The Gold Coast is famous for its 32 kilometres of beaches and its
extensive canal developments which provide facilities for surfing, water-skiing,
fishing, cruising, and a variety of other sporting activities. West of the
coast, the rugged rainforest-covered slopes of the MacPherson Range extend the
Gold Coast's appeal to include mountain climbing, bushwalking, horse riding,
national parks, waterfalls, and panoramic views. The Gold Coast's natural
attractions have been supplemented by developments including theme parks and
internationally-recognised restaurants and entertainment venues.
The Great Barrier Reef is a major attraction for both domestic and international
tourists, and resorts have been developed on islands and centres on the coast.
In all, there are more than 20 resort islands located off the Queensland coast.
The waters of the Great Barrier Reef offer some of the best fishing in the
world, and Cairns has become an international centre for big-game fishing,
notably for black marlin. The Whitsunday Coast, on the mainland near the
Whitsunday Group of islands, has developed in the last decade in response to the
increasing popularity of the Great Barrier Reef and its islands. The area offers
reef and island holidays with daytrips and extended cruises to places of
interest.
Queensland recorded growth in total tourism services exports, including overseas
and interstate tourism, of 1.4% in the three quarters to March quarter 2003,
compared with a year earlier. Queensland's overseas tourism exports have
declined since late 2000, as a result of the global economic downturn,
international terrorist attacks, the war in Iraq and the outbreak of Severe
Acute Respiratory Syndrome (SARS). However, the decline has been more than
offset by growth in interstate arrivals. This trend is expected to continue in
coming quarters while travellers remain concerned about their health and safety
and, therefore, tend to plan domestic holidays rather than travel overseas. The
short term outlook for overseas visitor arrivals will depend on the strength of
the global economic recovery, and Australia's international competitiveness as a
tourist destination. This is largely determined by the value of the Australian
dollar, which, appreciated by more than 13% in trade weighted terms in 2002-03.
A number of new hotel and resort projects are either already under construction
or under consideration in Queensland valued at $2.6 billion. Some of these
projects include:
.. Coomera Waters Resort, Gold Coast;
.. Port Hinchinbrook resort;
.. Cobaki Lakes resort, Gold Coast; and
.. Rainbow Harbour Resort, Cairns.
(g)-27
FINANCIAL RELATIONSHIP WITH THE COMMONWEALTH OF AUSTRALIA
Prior to 1927, each State and the Commonwealth undertook borrowings on their own
behalf, both domestically and in overseas financial markets. Limitations in the
size of the capital markets and the inherent competition between the States and
the Commonwealth led to an agreement between the States and the Commonwealth in
1927, recognising that it was in the interests of all to cooperate when
borrowing in these markets. This agreement, known as the Financial Agreement,
established the Australian Loan Council to determine and coordinate the public
borrowings of the Commonwealth and the State Governments.
The Financial Agreement does not bind the many bodies set up under Commonwealth
or State statutes. These bodies, which include central borrowing authorities and
local governments, government owned corporations and other statutory bodies may
enter the market directly and issue stock either in their own names or through a
central borrowing authority. The central borrowing authority for Queensland is
Queensland Treasury Corporation. Until June 1984, borrowings by these
semi-government and local governments were controlled by the Loan Council under
what was known as the Gentlemen's Agreement, which was an understanding agreed
upon in 1936 (and subsequently amended as necessary). The Gentlemen's Agreement
had no legal status.
From 1984 until 1993, borrowing arrangements for these authorities were
determined by reference to the Global Approach. The main feature of the Global
Approach was the imposition of aggregate quantitative controls (global limits)
on borrowing by Commonwealth and State authorities. Over the period of its
operation, there were progressive modifications and refinements of the Global
Approach.
The Financial Agreement also established the State Government's Loan Council
Program (the "Loan Program") to provide a mechanism by which the Commonwealth
borrowed on behalf of the States for the purpose of financing capital
expenditure. The rationale for this coordinated approach was that funds could be
raised for the States on more favourable terms than if States individually
undertook their own borrowings.
Until the early 1970s the Loan Program was the main source of funds for capital
expenditure by the States. However, since that time, the nature of the Loan
Program has changed and its significance in overall State finances has declined.
States found it necessary to rely increasingly on borrowing by semi-government
authorities to fund capital expenditures. This occurred in particular during the
late 1970s and early 1980s. Most States established central borrowing
authorities (such as Queensland Treasury Corporation) to co-ordinate the
borrowings of semi-government authorities, which were monitored in the framework
of the Global Approach.
Over the last 20 years of its existence, the Loan Program has consisted of both
a loan component and a grant component (in the form of interest-free
non-repayable capital grants to assist State governments to finance capital
expenditure). During the 1980s, the loan component was primarily concessional
loans for public housing. At the 1989 Loan Council meeting, it was agreed that
the loan component of the Loan Program would be replaced by additional grants to
the States under the Commonwealth State Housing Agreement. After 1989-90, the
Loan Program has consisted solely of general purpose capital grants. (From
1991-92, the "Building Better Cities" program has also been classified as
general purpose capital assistance.) These have since been abolished.
(g)-28
Until 1990-91, under the Financial Agreement, the Commonwealth Government
undertook borrowings in the market in its own name and then on-lent the funds to
the States. The Loan Council determined the terms and conditions of all loans
raised by the Commonwealth on behalf of the States as well as the terms and
conditions for loans raised by the Commonwealth for its own use. States were
unrestricted in their use of these funds as they were directly substitutable for
direct general purpose borrowings by the States in their own names in the
market.
The June 1990 Loan Council meeting agreed that the States would progressively
take over responsibility for the debt issued by the Commonwealth on their behalf
under the Financial Agreement, and that the Financial Agreement would be amended
to permit the States to borrow in their own names in domestic and overseas
markets. (Analogous arrangements were to apply for the Territories).
In line with the Loan Council decision, the States were required to make
additional payments to the National Debt Sinking Fund sufficient to permit
redemption at their maturity of all Commonwealth Government securities issued on
their behalf. With the passage of legislation related to the new Financial
Agreement through all jurisdictions' parliaments, the National Debt Sinking Fund
was replaced on July 1, 1995 by the Debt Retirement Reserve Trust Account. A
total of $7.6 billion of Commonwealth Government securities was on issue on
behalf of the States and Territories as at June 30, 1995. Under the new
arrangement, this debt will be fully taken over by the States and Territories by
2005-06. The Loan Council decision has also meant that from June 30, 1990 there
have been no additional allocations of Commonwealth Government securities to the
States and Territories.
The Commonwealth compensates the States and Territories for the additional
borrowing cost to them of this change based on the interest margins between
Commonwealth and State debt applying at, and prior to, the change. (State
central borrowing authorities, which are the major borrowers on behalf of the
State/local sector, generally borrow at somewhat higher rates than the
Commonwealth Government, with margins varying from time to time depending on
market conditions.) In addition, the Commonwealth provides compensation for its
reduced sinking fund contributions due to the accelerated decline in outstanding
net debt on which those contributions are based.
Overall, these new arrangements replace Commonwealth debt to the private sector
with State and Territory debt; they do not alter the financial position of the
public sector as a whole. They do, however, represent a significant structural
reform in Commonwealth/State (and Territory) financial relations. They place
full responsibility on the States and Territories for the financing and managing
of their own debt, thereby subjecting the fiscal and debt management strategies
of individual State and Territory Governments to greater scrutiny by the
community and financial markets.
As from 1993-94, new Loan Council monitoring and reporting arrangements apply to
the financing activities of Commonwealth and State Governments. The new
arrangements were endorsed in principle at a special Loan Council meeting in
Perth in December 1992 and were approved for implementation at the July 1993
Loan Council meeting.
The major feature of the new Loan Council arrangements is the switch in focus
from gross borrowings to an aggregate based on net borrowings as indicated by a
jurisdiction's deficit/surplus. The rationale for the switch in focus from
global limits to an aggregate based on the deficit/surplus as a measure of the
financing requirement is that the Global Approach focussed on gross new
borrowings by jurisdictions rather than their net call on financial markets; the
latter is a more meaningful indicator of the impact of the public sector on the
economy.
(g)-29
Under the new Loan Council arrangements the Commonwealth and each State and
Territory is responsible for nominating its intended allocation, known as the
Loan Council Allocation ("LCA"), and is based on its net borrowings adjusted to
reflect certain transactions which may have the characteristics of borrowings
but do not constitute formal borrowings (for example finance and operating
leases).
Loan Council considers the appropriateness of nominated LCAs from two
perspective's: firstly, if the aggregate of the nominated LCAs is inconsistent
with macroeconomic policy objectives there may need to be some adjustment. The
nature of any adjustment and its allocation across governments would be
negotiated by Loan Council members. Important considerations in these
negotiations would be the comparative fiscal circumstances, infrastructure
requirements and capital needs of particular governments. Secondly, if Loan
Council has concerns about the fiscal outlook for a jurisdiction it may require
a more comprehensive justification for its proposed LCA or, in some cases, may
request the government to modify its fiscal strategy. This should occur only
rarely.
It should be noted that the LCA nominations are now based on the new accrual GFS
derived cash flow statement. A measure of the surplus (deficit) is derived from
information contained in the cash flow statement. This new measure whilst
broadly comparable with the previous cash GFS measure, conceptually is different
due to the nature of the derived accrual cash flow and the inclusion in the
earlier GFS cash measure of accrual adjustments.
The emphasis of the new arrangements is on credible budgetary processes,
ensuring a high level of public understanding of public sector financing
developments and facilitating increased financial market scrutiny, rather than
on Loan Council attempting to enforce rigid compliance with a particular LCA.
The new arrangements are supported by uniform and more comprehensive
arrangements for the reporting of public sector finances. These are designed to
meet the needs of the markets for accurate and meaningful information about the
level of net borrowings.
The 2002-03 LCA outcome, using the accrual based GFS measure, is for a deficit
of $190 million. For 2003-04, Queensland Budget-time LCA is estimated to be a
deficit of $658 million.
Commonwealth Grants
Since World War II, the Commonwealth has acted as the sole income taxing
authority, and annual general revenue grants have been paid by the Commonwealth
to the States. The Commonwealth also has exclusive constitutional power to
impose excise duty, goods and services tax and customs duty. There are no
general taxes on capital gains in respect of assets purchased or acquired before
September 20, 1985, although gains on the sale of such property in particular
circumstances are taxed as income. There are no Commonwealth wealth taxes,
estate or gift duties. The States, however, impose payroll taxes, stamp duties
and land taxes, and local governments impose rates based on the value of real
property.
At the 1985 Premiers' Conference it was agreed that tax sharing arrangements
which had operated between 1976-77 and 1984-85 should be replaced by financial
assistance grants to the States. The Commonwealth Grants Commission continued to
make recommendations for the distribution of these general purpose payments by
the Commonwealth to the States. The level of financial assistance granted to the
States was decided in the context of the annual Premiers' Conference with the
Commonwealth.
(g)-30
At the 1994 Premiers' Conference, the financial arrangements adopted were for a
real per capita terms guarantee to apply to the total amount of financial
assistance grants over the three year period from 1994-5 to 1996-7, subject to
review should Australia experience a major deterioration in its economic
circumstances. At the 1996 Premiers' Conference, it was agreed that the real per
capita guarantee for financial assistance grants would be extended to 1998-99
but would be conditional upon States complying with their obligations under the
Agreement to Implement the National Competition Policy and Related Reforms. At
the 1998 Premiers' Conference, the real per capita guarantee was extended again
until 2000-2001. Application of the guarantee in 2000 was overtaken by the
introduction of the Commonwealth's Goods and Services Tax on 1 July 2000 and the
associated reform of Commonwealth-State financial relations.
Commonwealth-State Relations under National Tax Reform
The introduction of a Goods and Services Tax (GST) was the cornerstone of
national tax reform introduced by the Commonwealth Government on 1 July 2000.
The reforms include significant changes to Commonwealth-State financial
relations. All Australian governments signed an Intergovernmental Agreement on
the Reform of Commonwealth-State Financial Relations (IGA).
The main features of the IGA include:
.. the States will receive, for any purpose, all the revenue raised by the
Goods and Services Tax (GST);
.. the Commonwealth has committed to provide financial assistance to the
States to cover any temporary shortfalls in their budgets resulting from
the implementation of tax reform;
.. a number of State taxes have been abolished. Bed tax (which Queensland did
not levy) was abolished from 1 July 2000. Financial Institutions Duty
(which Queensland also did not levy) and stamp duty on the transfer of
listed marketable securities were abolished from 1 July 2001. States agreed
to abolish debits tax by 2005, subject to review by Ministerial Council.
The need to retain stamp duties on non-residential conveyances,
non-quotable market securities, leases, mortgages, bonds, debentures and
other loan securities, credit arrangements, instalment purchase
arrangements and rental arrangements and stamp duty on cheques, bills of
exchange and promissory notes will be reviewed by Ministerial Council by
2005; and
.. the Commonwealth will continue to provide Specific Purpose Payments (SPPs)
to the States and has stated it has no intention of cutting aggregate SPPs
as part of the reform process set out in the IGA.
The IGA contains important features for future Commonwealth-State
relations, including:
.. Providing the States with access to the revenue from a broad-based growth
tax, which over time should strengthen State finances. The IGA reforms
provided Queensland with a small net budgetary gain in 2002-03. A gain is
also expected in 2003-04.
.. Endorsing the principle of horizontal fiscal equalisation as the method for
distributing GST revenue amongst the States, after a two-year transition
period which ended on June 30, 2002.
.. Establishing a Ministerial Council comprising the Treasurers of the
Commonwealth, States and Territories to oversee the operation of the GST
and the IGA.
(g)-31
QUEENSLAND GOVERNMENT FINANCES
State Budgetary Strategy
Budget Process
The Budget for each fiscal year is normally presented by the Treasurer to the
Legislative Assembly in June prior to the commencement of the fiscal year, and
incorporates details of estimated actual revenue and expenditures in the current
fiscal year and budgeted revenue and the expenditure of moneys in the next
fiscal year. Approval for the raising of revenue is provided under various Acts
of Parliament while Parliament approves of expenditure in Appropriation Acts (of
which there are four each year).
In an early Budget year (i.e. a June Budget), the major Appropriation Acts are
passed by Parliament in about August/September and approve expenditure for the
next financial year (i.e. the Budget year). These Acts also approve an aggregate
amount of expenditure sufficient to provide for the normal services of
Government for the first few months of the next succeeding financial year until
the Bill receives assent. There is one Act for the Legislative Assembly and one
for all other agencies. The minor Appropriation Acts are passed early in the
fiscal year and validate expenditure variations from the previous financial year
(the variations having already been approved by the Governor in Council). When
the Budget is delivered in September (late Budget), however, two Appropriation
Acts (one for Legislative Assembly and one for other agencies) are passed by
Parliament in about November/December and provide appropriation for:
.. The current fiscal year;
.. Supplementary appropriation for the previous fiscal year for unforseen
expenses that occurred in that fiscal year; and
.. Initial appropriation for the succeeding fiscal year to allow normal
operations of Government to continue until the Appropriation Bills gain
assent.
Policy Settings for the 2003-2004 Budget
The policy settings used to develop the 2003-04 Budget are guided by continued
adherence to the Charter and the Government's five key policy priorities.
Queensland's economic growth outlook is positive with gross state product
forecast to rise by 4% in 2003-04. Domestic economic activity, in particular
household consumption and business investment, is expected to continue to
support overall growth in the State through the year. While demand for
Queensland exports is expected to increase in line with the recovery in the
global economy, increased domestic activity is expected to sustain demand for
imports. On balance, net exports are forecast to detract slightly from overall
economic growth.
Labour market conditions are forecast to remain strong in 2003-04 given the
forecast solid growth in private investment, household consumption and continued
growth in exports. It is expected this growth will result in employment growth
of 2 1/4% in year-average terms. This represents the creation of an additional
38,000 jobs which is forecast to yield an average unemployment rate of 7%.
(g)-32
In 2003-04 inflation is expected to moderate slightly to around 2.75% with
continued productivity gains helping to contain price inflation in the State.
Increased growth in average earnings of 4% is forecast over the year.
Historically, Queensland has maintained a very strong fiscal position relative
to the other Australian States. Queensland consistently has maintained a cash
surplus over time, whereas the other States, on average, only started recently
to strengthen their fiscal positions. Consistently achieving cash surpluses has
ensured Queensland maintains a strong balance sheet position and is the only
State to fully fund employee entitlements.
In recent years, the Government has embarked on significant capital expenditure
programs to enhance the State's infrastructure and drive employment creation.
For example, Queensland has recently completed a number of major capital works
projects such as the State-wide Health Building program, the Pacific Motorway
upgrade and a number of new correctional centres. These large projects have a
significant impact on the overall size of the capital program, but are driven by
demand, service delivery issues and the life cycle of various assets. For this
reason it is unlikely the capital works program will exhibit a smooth pattern
over time. State taxes and charges will remain competitive with those of other
States and Territories. Therefore, the aim is to deliver the level of services
expected by the public at the lowest possible cost. This will be achieved by
improving the efficiency with which the Government delivers services and by
continued fiscal restraint.
Fiscal Strategy
The Charter outlines the Government's fiscal strategy, and is an integral part
of the Government's commitment to the community. The fiscal strategy principles
have been framed to meet a number of objectives, with the overriding requirement
to maintain the integrity of the State's finances. These key principles are
detailed below:
.. Competitive tax environment
The Government will ensure that State taxes and charges remain competitive
with the other States and Territories;
.. Affordable service provision
The Government will ensure that its level of service provision is
sustainable by maintaining an overall Government operating surplus, as measured
in Government Finance Statistics terms;
.. Capital funding
Borrowings or other financial arrangements will only be undertaken for
capital investments and only where these can be serviced within the
operating surplus, consistent with maintaining a AAA credit rating;
.. Managing financial risk
(g)-33
The Government will ensure that the State's financial assets cover all
accruing and expected future liabilities of the General Government sector;
and
.. Building the State's net worth
The Government will at least maintain and seek to increase Total State Net
Worth.
The fiscal principles establish the basis for sustainability of the Government's
policies. Essentially, they require over the long term that the services
provided by the Government be funded from tax and other revenue sources. The
principles are supported by an accrual budgeting framework, which recognises
future liabilities and highlights the full cost of sustaining the Government's
operations on an ongoing basis.
The principles recognise the importance of a strong financial position for the
State. A State government, because of its more limited tax base, does not have
the same capacity as a national government to cushion economic and financial
shocks. At the same time, State governments have a responsibility to provide
continuity of services, such as health care, police and education.
The principles recognise intergenerational equity in government service delivery
and taxation. Broadly, each generation should pay for the services it consumes.
It would not be equitable for the present generation to leave a debt for
services they enjoyed, to be paid for by future generations. Conversely, future
generations should pay for that part of the services they consume from long life
assets, such as infrastructure.
Policy Priorities and Objectives
The Government has identified five key policy priorities that it seeks to
achieve for Queenslanders, regardless of where they live in the State. The
priorities complement one another and the services or outputs provided by
agencies generally contribute to more than one priority.
These five key policy priorities provide the framework for specifying policy and
service delivery across all portfolio areas for the longer term. The five key
policy priorities are set out below:
1. More jobs for Queensland - skills and innovation - the Smart State;
2. Safer and more supportive communities;
3. Community engagement and a better quality of life;
4. Valuing the environment; and
5. Building Queensland's regions.
The Government has articulated a range of specific initiatives consistent with
these key policy priorities. Implementing these is a key feature of the 2003-04
Budget. In addition, there is increased funding across a range of areas to
enhance existing Government services.
Reporting on Social and Fiscal Outcomes
A critical part of government accountability is the requirement to publish
regular, informative reports on the outcomes of the Government's activities
against previously announced objectives. The Charter
(g)-34
details the reports and information the Government will provide on its
performance against its objectives for the community and its financial
commitments.
In December 2002, the Government released its third annual report on the
efficiency and effectiveness of its activities in meeting its objectives for the
community during 2001-02.
The report, Priorities in Progress, is part of a process by which the Government
is becoming increasingly accountable to its community stakeholders, not just for
money spent but for the outcomes achieved. Priorities in Progress endeavours to
provide Queenslanders with information on the outcomes of the five priorities
outlined in the Charter.
The third annual Priorities in Progress report represents a significant step
forward in terms of public sector accountability. Nevertheless, the Government
recognises that the outcome indicators used will need to be further refined and
developed. This will be an ongoing process, with the direct involvement of key
stakeholders, that will improve the ability to measure the effectiveness of
initiatives and policies in meeting the community's needs.
Operating Statement
2002-03 Actual Outcome
On a Government Finance Statistics (GFS) basis, the General Government sector
returned an operating surplus of $15 million and a cash surplus of $645 million.
The 2002-03 operating outcome is a $365 million improvement from that estimated
at the time of the 2003-04 Budget, due largely to improvements across a range of
revenue items.
The 2002-03 operating surplus would have been significantly higher if not for
the poor performance of equity markets, in particular international equities in
2002-03.
The Queensland Government operates a superannuation scheme whereby investment
funds are set aside to meet all accruing employee entitlements. These funds are
invested in a diversified portfolio of growth assets, including domestic and
international equities and property. With investment balances approaching $13
billion, the General Government operating result will be impacted by the year to
year performance of investment markets. Budget estimates for investment returns
are based on the expected long-term average return for the portfolio of 7.5%.
These estimates are then revised upwards or downwards during the year based on
actual experience.
2002-03 was a challenging year for investment markets. The actual earning rate
in 2002-03 was -1.86%. During the 1990s investment markets performed well. Above
average performance during this period combined with prudential reinvestment of
these funds, has ensured that the Government has the capacity to absorb periods
of under performance such as that experienced in 2001-02 and 2002-03. Despite
the volatility of investment returns, the policy of setting aside and investing
funds for future employee entitlements remains sound and one of the key features
of the State's strong balance sheet.
Table 1 below provides aggregate outcome information for 2002-03 and projections
for 2003-04.
(g)-35
- --------------------------------------------------------------------------------
Table 1
Key Financial Aggregates
(GFS Basis)
- --------------------------------------------------------------------------------------------
2001-02 2002-03 2002-03 2003-04
Actual Budget Actual Budgeted
$ million $ million $ million $ million
--------- --------- --------- ---------
General Government Sector:
Revenue 18,857 20,181 20,256 21,382
Expenses 19,751 20,157 20,241 21,229
------ ------ ------ ------
Net operating balance (894) 23 15 153
Cash surplus/(deficit) 188 354 645 152
Gross fixed capital formation 2,220 1,712 1,607 2,319
Net worth 58,093 58,498 64,894 60,312
Public Non-Financial Corporations Sector:
Net operating balance (192) (307) (52) (176)
Gross fixed capital formation 1,434 1,831 1,948 2,193
- --------------------------------------------------------------------------------------------
2003-04 Budget Projections
A surplus of revenue over operating expenses of $153 million is expected for
2003-04 for the General Government Sector. The Total State net operating result
for 2003-04 is expected to be a deficit of $23 million, with the Public
Non-Financial Corporations sector expected to record a net operating deficit of
$176 million.
The operating result in the Public Non-Financial Corporations sector reflects
the treatment of dividends under Government Finance Statistics rather than a
reflection of the underlying operating performance of the PTE sector. Under a
normal accounting presentation, the net operating result excludes dividend
payments which are treated as returns to shareholders and therefore "below the
line". Under GFS, dividends are an expense "above the line". It also reflects
the inclusion in the sector of some entities which, in the course of their
normal operations, do not operate in surplus.
Revenue
General Government Revenue is budgeted to increase by $1,126 million (5.6%) to
$21.382 billion in 2003-04. Current grants and subsidies, together with taxation
are the principal forms of revenue for the State, accounting for around
two-thirds of General Government revenue.
Expenses
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In GFS terms, General Government expenses are budgeted to increase by $988
million to $21.229. billion in 2003-04.
Balance Sheet
2002-03 Outcome
Table 2 below provides data on the State's capital program and net worth. On a
GFS basis, the General Government's Total Gross Fixed Capital Formation (GFCF)
in 2002-03 is $ $1.607 billion, compared with the budgeted figure of $1.712
billion. Lower than estimated capital purchases reflect end-of-year carryovers
of some capital allocations from 2002-03 to 2003-04.
- --------------------------------------------------------------------------------
Table 2
2002-03 Capital Program and Balance Sheet Results
and 2003-04 Budget Projections
(GFS Basis)
- -------------------------------------------------------------------------------------------------
Actual Budget Actual Budgeted
2001-02 2002-03 2002-03 2003-04
$ million $ million $ million $ million
- -------------------------------------------------------------------------------------------------
Gross Fixed Capital Formation:
General Government Sector 2,220 1,712 1,607 2,319
Public Non-Financial Corporations 1,434 1,831 1,948 2,193
Total State Gross Fixed Capital Formation /1/,/2/ 3,632 3,543 3,555 4,512
Net Worth:
General Government Sector (Total State) /3/ 58,093 58,498 64,894 60,312
Incorporating Equity Investment in:
Public Non-Financial Corporations 12,169 11,816 12,096 12,802
Public Financial Enterprise Sector 690 684
- -------------------------------------------------------------------------------------------------
(g)-37
Notes:
/1/. Under present Loan Council Uniform Presentation Framework arrangements,
budget and forward estimate data are not required for Public Financial
Enterprises (PFEs), due to the difficulties in preparing robust projections
of activity. No capital expenditure is assumed for this sector.
/2/. Gross Fixed Capital Formation comprises net expenditure on new and
second-hand fixed assets, plus land and intangible assets. Fixed assets are
durable goods intended to be employed in the production process for longer
than a year. It also includes net expenditure on mineral deposits, timber
tracts and similar non-reproducible tangible assets, and net expenditure on
intangible assets such as patents and copyrights. Gross Fixed Capital
Formation differs from the total State capital program reported in Budget
Paper No. 4 due to asset sales being netted off for GFS data, only net
movements in inventories being reflected in GFS data and capital grants
being included in the Capital Works Program.
/3/. As no budget data are collected for PFEs, the forecast net worth in the
2002-03 Budget figures assumes that PFE net worth (equity investment for
which is held by the State, and recorded in the General Government Sector)
remains constant.
- --------------------------------------------------------------------------------
Gross Fixed Capital Formation in the General Government sector varies from year
to year reflecting the service delivery requirements of the State, including the
completion of a number of major capital works programs.
The net worth, or equity, of the State is the amount by which the State's assets
exceed its liabilities. This is the value of the investment held on behalf of
the people of Queensland by public sector instrumentalities.
Net worth of the General Government sector grew by $6,801 million over the
2001-02 actual net worth. This growth in net worth has occurred despite the
impact of lower than expected returns on investments. The main contributor has
been an increase in asset values arising from the revaluation of major assets in
line with the State's asset revaluation cycle. In the Public Non-Financial
Corporations sector net worth was $12.169 billion in 2001-02. It decreased to
$12,096 billion in 2002-03 and is forecast to increase to $12.8 billion in
2003-04.
Net Financial Assets
The net financial assets measure is an indicator of financial strength. Net
financial assets are defined as financial assets less all existing and accruing
liabilities. Financial assets include cash and deposits, advances, financial
investments, loans, receivables and equity in public enterprises.
The net financial assets measure is broader than the alternative measure, net
debt, which measures only cash, advances and investments on the assets side and
borrowings and advances on the liabilities side. Because of its comprehensive
nature, the net financial assets measure is more appropriate in an accrual
accounting framework.
(g)-38
The net financial assets of the General Government sector reflect the cumulative
impact of sound fiscal policies and mean the State is fully capable of meeting
all its current and recognised future obligations, without recourse to material
adjustments in fiscal policy settings.
After excluding the value of equity investments of public enterprises, financial
assets in the General Government sector are still more than sufficient to meet
all the liabilities of the sector. Accordingly, the financial position of the
State remains very strong, with sufficient financial assets available to meet
liabilities as they fall due, in accordance with the requirements of the
Government's Charter.
Queensland has consistently pursued sound long-term fiscal policies such as
ensuring all employee superannuation and long service leave entitlements are
fully funded. The strong balance sheet and high levels of liquidity in the
General Government Sector clearly demonstrate the success of these policies.
2003-04 Capital Program
The 2003-04 Budget saw the continuation of the trend of sizeable State capital
works programs, in both nominal and per capita terms. Queensland's General
Government capital expenditure in 2003-04 is expected to account for more than
27% of all General Government capital expenditure by Australian state
governments. On a per capita basis, Queensland has the largest capital program
of any State. Total State Gross Fixed Capital Formation on a GFS basis is
budgeted to be $606 per capita in 2003-04. This is high relative to an average
of $360 per capita for other States. In the Public Non-Financial Corporations
sector Gross Fixed Capital Formation is projected to increase by $245 million
over the actual outcome to $2.193 billion in 2003-04.
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Forward Estimates
Table 3 below provides a summary of the State's Forward Estimates on a GFS
basis.
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Table 3
Key Financial Aggregates (Summary)
(GFS Basis)
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Budgeted Projected Projected Projected
2003-04 2004-05 2005-06 2006-07
$ million $ million $ million $ million
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General Government Sector:
Revenue 21,382 22,186 23,107 24,097
Expenses 21,229 22,024 22,909 23,814
------ ------ ------ ------
Net operating balance 153 162 198 283
Cash surplus/deficit 152 521 622 885
Gross fixed capital formation 2,319 1,866 1,691 1,608
Net worth 60,312 62,396 64,636 67,012
Public Non-Financial Corporations Sector:
Net operating balance (176) 87 117 177
Gross fixed capital formation 2,193 2,500 1,932 1,431
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The key trends in these projections are:
.. The General Government sector is budgeted to achieve increased operating
surpluses in the outyears;
.. State tax revenue is expected to continue to grow in the outyears due to
factors such as economic and population growth. The forward estimates
forecast moderate growth in funding from the Commonwealth;
.. Expenses are also forecast to grow, with employee entitlements increasing
in line with expected growth in wages and planned growth in services;
.. The State is projecting an increasing cash surplus in the outyears due to a
moderation in net capital purchases from the high levels budgeted for
2003-04;
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.. General Government's net worth is forecast to grow, consistent with the
Government's Charter of Social and Fiscal Responsibility; and
.. The PTE sector net operating balance is expected to improve over the
forward estimates with a return to surpluses in 2004-05.
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