It might not be everyone’s idea of entertainment, but the release of yesterday’s Queensland budget was a lot of fun.
I sat in a room with lots of tea and sandwiches and a hundred other people who love talking about economics. The Treasurer, the Premier and lots of Treasury people were there to help when I had any questions or ran out of tea.
The only downside is that you have to ask permission to go to the toilet – a bit of a problem with all that tea. But it’s important because no-one can be allowed to tell the outside world all the funny bits in the budget ahead of time. The Treasurer gets to do that later. Here’s some of what he said:
When Labor was last in government we set out a blueprint for the establishment of a $60 billion LNG industry. This investment was both historic and significant, and as a result a new industry is now a reality. $648 million worth of LNG exports have left the Port of Gladstone so far in 2015.
Pretty funny hey? Did you see how $60 billion became $648 million? Clearly how much an industry is “worth” is a tricky thing. And just how much the gas industry is worth to Queensland is trickier still, as shown much later in the budget papers. Budget Paper 2, page 191 to be precise:
This table shows most of Queensland’s “own source” revenue – the revenue Queensland collects itself, as opposed to the $25 billion it gets from the Commonwealth this year.
Look at the line fourth from the bottom of the table, titled “Petroleum”. It’s called petroleum, but the bulk of it is royalties that Queensland gets from coal seam gas. You can see that the “$60 billion LNG industry” paid just $51 million to the Queensland Government in the last budget year.
That’s the same year that Treasurer Curtis Pitt referred to when he said that $648 million worth of gas had been sold this year so far. The Queensland taxpayer has collected around 4 per cent of that based on the budget papers.
Further into the projections in yesterday’s budget, we see that gas royalties are expected to get to $518 million in 2018-19, depending on gas prices and production rates. Putting this in the context of the rest of the budget, this represents 0.1 per cent of Queensland Government revenue this year, increasing to 0.9 per cent by 2018-19, when the current gas export plants should be at full production.
Let me say that again. Even at full production, Queensland’s government will get less than one per cent of its revenues from the coal seam gas industry. 99 per cent of Queensland’s public sector will be funded by other industries.
Queensland has nearly 7,000 active gas wells, many of which require fracking to keep producing gas. Public concern about the effects of this on groundwater and other aspects of the environment is well known. The 1 per cent increase in government revenue hardly seems worthwhile.
Worse still, it is Queensland’s export gas projects that have led to major increases in domestic gas prices on Australia’s wider east coast gas market. By linking our gas production with world markets, our prices have increased to world market prices and they’re never coming back. This will affect household bills and also the manufacturing industry, which has been screaming blue murder over gas price rises for some time.
So if the government isn’t making much, households are paying more and the manufacturers are complaining… who is doing well out of Queensland’s gas industry? Ironically, not even the gas producers. World gas and oil prices have declined to the point where shares in some were declared “worthless” at one stage earlier this year. Seems like no-one has been a winner from this “historic and significant” industry.
Another funny part of the budget is in the table above. Look at “Motor Vehicle Registration” for the 2015-16 budget year. You’ll see that car rego is expected to raise $1.654 billion.
Now look at coal royalties, which will bring in $1.684 billion. Now look again at car rego. Now back to royalties. Now back at rego.
Now back to me. That’s right, they’re both worth around 3 per cent of government revenue apiece.
Yep, you saw it. Queensland makes as much money from car rego as from coal. When former premier Campbell Newman said that Queensland was “in the coal business”, he really meant to add that Queensland is in the car registering business. Which it undeniably is. Coal and car rego. Important. “If [Queenslanders] want decent hospitals, schools and police on the beat we all need to understand that.”
So if having a laugh at the fossil fuel industry and drinking tea with the Treasurer is your idea of a good time, make sure you get to the next budget. As all economists know, there’s no such thing as a free lunch, but there are plenty of sandwiches. I’m sure they’re in the budget papers somewhere.