CreditorWatch Experts Finance Guest Contribution
5 mins read

A Deep Dive Into the Queensland Economy

CreditorWatch QLD Sales Manager, George Wolf, interviews Economist Dr. Marcus Smith

What a year it’s been. I know my customers speak for most of the country when they say they’re keen to “get back to normal” as soon as possible. 

Queensland’s belated budget reiterated the need for the state government to borrow to fund their economic recovery initiatives. It’s also easy to forget that 65% of Queensland is still affected by drought and both our agriculture and primary resources sector may suffer if ongoing political tensions with China continue.

As 2020 winds down and we refocus on the new – and hopefully more stable – year ahead, I chatted to Dr Marcus Smith for an expert opinion on the key facts and figures that have defined Queensland’s year.

– George Wolf, CreditorWatch QLD Sales Manager

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What were your thoughts on the Queensland 2020 budget?

On December 1, the Queensland State Treasurer, Cameron Dick, delivered his first budget. It provided pundits with a glimpse of the harrowing devastation the COVID-19 pandemic has wreaked upon the state’s economy and public finances, revealing a sea of red ink and write-downs from key revenue sources of the state government and an eye-watering gross debt approaching $130 billion.

While the deterioration in the budget bottom line was widely expected, what has surprised many economists has been the actual magnitude of the operating deficits and the growth of the state’s gross debt, which over the five years from 2018-19 to 2023-24 is projected to grow by a staggering 83% from $70.908 billion to $129.723 billion.

Earlier this year the Queensland Audit Office released a report on its assessment of the Queensland Government State Finances in 2018-19, which highlighted that declining revenues from GST redistributions as well as growth in expenses outpacing growth in revenues over the past couple of years was a cause for concern.

Despite the collapse in public revenues, the government expenses will continue to increase with the most contentious being associated with employee expenses, which has been increasing as a proportion of revenue over the past few years to be 47% in the 2020-21 Budget.

Queensland Government workforce statistics to September 2020 show that the number of FTE employees within the state’s public service workforce has increased by 18.9% to 234,142 since the Palaszczuk Labor Government took office in January 2015.

Employee expenses are projected to grow by $3.302 billion (12.9%) to $28.962 billion over the five years from 2019-20 to 2023-24.

The budget numbers show that employee expenses are anticipated to climb by $3.302 billion (12.9%), by an average of around 2.6% per year, over the five years to 2023-24.

To the Treasurer’s credit, he has announced his intentions to reduce the burden of these expenses on the budget bottom line, according to the ABC in July. These saving measures include:

  • Reducing the number of senior executives through natural attrition
  • A hiring freeze on public service positions, excluding frontline staff, for 12 months
  • Cutting contractors jobs, and reducing the use of consultancies
  • Moving Government staff away from One William Street in Brisbane’s CBD and into under-utilised urban office space, to free up building assets for leasing to the private sector
  • Cutting advertising, glossy marketing materials and shutting down redundant social media accounts.

What is the difference between “good debt” and “bad debt” and why does it matter? Where does Queensland sit on this scale?

  • Good debt is borrowing to invest in capital works projects including assets such as dams, roads, rail, schools and hospitals that essentially increase the productive capacity of the economy to enable the government to grow its revenue base to pay for its services (including nurses, doctors, teachers and police).
  • Bad debt is borrowing to pay for the day-to-day operations of the government, whereby revenues are not sufficient to cover frontline services and operating costs.

The following graph shows how the proportion of public infrastructure in the state has been falling while public services expenses have been growing, indicating the government has been focused on redistributing the pie rather than growing it.

The volume of agricultural exports fell 8% last financial year and is expected to drop by a further 6% this financial year. What’s the outlook for regional QLD in 2021?

The Department of Foreign Affairs and Trade 3-digit breakdowns for the 2019-20 financial year show that the FOB value of Queensland agricultural exports increased by $865.316 million (9.9%) to over $9.6 billion, buoyed by a substantial increase to beef exports driven by increased slaughter rates over the year due to the drought.

The risk going forward is that herds of cattle will need to be replenished, which will likely put a drag on growth in the near-term as beef production is not like a perennial crop. In addition, ongoing trade tensions with China may also affect exports to this key destination.

How has Queensland fared compared to other Australian states in 2020?

I think it’s too early to tell, but generally speaking Queensland’s credit rating for the moment is stable depending on things turning out as the government expect, while both NSW and VIC have had their credit ratings downgraded to be with QLD at AA+.

Queensland merchandise exports have fallen, but are still relatively strong (and these are the same size as NSW and VIC together) while services exports (largest in the southern states) have been hit relatively harder.

Construction has also been a relatively less affected industry, so going forward, infrastructure spending and construction activity will be very important in driving the economic recovery within all states. As I’ve pointed out this has not been the priority it should have been in Queensland for at least a decade – which goes a long way to explaining its sluggish economic growth.

In order to repair and consolidate the state’s public finances the government must necessarily exercise the highest level of financial discipline with respect to the taxpayer dollar. Key projects will require clear and concise approval processes and regulation reform must be undertaken so as to underpin agricultural and mining export opportunities as well as fostering a more business-friendly environment.

If you’re a Queensland business looking for credit risk management solutions and support, reach out to George and his team by emailing

Dr. Marcus Smith

Dr. Marcus Smith holds a PhD in Economics from Griffith University, specialising in agriculture and resources evaluation and currently works as a consultant and Adjunct Lecturer of Economics and Finance.

Marcus was formerly the Chief Economist of the Chamber of Commerce and Industry Queensland and a Lecturer and Subjects Coordinator of Finance at James Cook University. He has previously held roles working for the Queensland Government as well as in private sector consulting.

budget economist interview NewsHub Queensland economy
QLD Sales Manager
Based in Brisbane, George joined CreditorWatch in 2019 and is the Queensland Sales Manager. Using his extensive experience in fintech sales, he helps his team achieve success by improving their skills and growing their experience in this area.
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