QLD Budget’s housing black hole

Following last weeks article, WA Budget’s housing black hole, reader amdweb82 requested that I undertake a similar analysis of Queensland’s (QLD) budgetary situation to gauge whether it is experiencing similar pressures to WA from falling home prices and lower housing transactions.

Thanks to an anonymous reader, who emailed me the data set, I now possess reliable transactions data for QLD, which has enabled me to undertake this analysis.

First up, consider the below chart, extracted from the latest QLD State Government Budget, showing the rapid rise and fall of property-related stamp duty revenues.

Throughout most of the 2000s, the QLD Government rode on the back of the housing market, where stamp duty receipts rose four-fold from around $700m in 2000-01 to around $2.8 billion in 2007-08. However, in the wake of the global financial crisis, stamp duty receipts plummeted and remain around $1 billion lower than their peak level reached in 2007-08.

In its latest Budget, the QLD Government forecast that the housing market will recover gradually, leading to a steady increase in stamp duty receipts back towards their 2007-08 peak by 2014-15.

However, the data flow since the release of the Budget in June has worsened, casting doubt on the Government’s forecasts.

First, Brisbane housing prices have continued to fall, and are now down 6.1% over the past 12-months:

To add insult to injury, both housing transfers and mortgages lodged remain near decade lows:

As long as home prices, transaction volumes, and mortgage commitments remain depressed, QLD Budget revenues will remain under pressure.

Once again, Queensland highlights why it is risky for a government to pin its financial well being on an inefficient, volatile transactions-based tax like stamp duty, instead of more efficient, equitable and stable sources like broad-based land value taxes.

[email protected]

www.twitter.com/leithvo

Comments

  1. One has to question what our managers at state level were doing and thinking when the rivers of gold flowed during the credit boom years 2003 to 2008 when their stamp duty and land tax soared.

    We know what they did with it- they expanded their empires such that NSW employed 320,000 people and Victoria 242,000 and in the last year of the NSW government they spent about $290m on outside legal advice.

    Now we are stuck with them attempting to raise revenue from taxes on business when GST revenue is plummeting and when the RBA attempt to deflate the residential property bubble is deflating business with ridiculous lending rates compared to trading partners,very low M1 and a ridiclulously overvalued dollar on a PPP basis.

  2. Diogenes the CynicMEMBER

    +1 nice work, the forecasted section is hideously out of line with reality.

    It looks like all the States are in the same boat. More support for a broad land based tax coming up.

    • DtC, I couldn’t agree more – “the forecasted section is hideously out of line with reality”

      Great stuff UE. This issue needs to be properly acknowledged in the public debate.

  3. That’s a massive likely budgetary revenue hole for 2011-12 if the fall in transfers is mirrored in stamp duty revenue, as is sure to be the case.

    The QLD Govt can’t borrow too much more, and have just sold off a large chunk of state assets, so what’s next? I assume they’ll be sticking their hands out for Fed Govt assistance to pay for the Gold Coast Commonwealth Games construction on top of all that!

    Wow, they really could do with a larger mining tax income stream. But again it’s likely to be utilities and land tax hikes to produce an ongoing fixed income stream.

    • Gold Coast Commonwealth Games construction
      .
      Builders must be rubbing their hands in glee. Some more government pork to chew on.

      • Apparently it is going up 15% each year, out until 2014 (if Ten News is to be believed). Ridiculous prices for transport in Brisbane, when considering international comparisons.

        Also, I’d like to add to Axel F’s comment, that the Qld Govt has also just offloaded a ton of permanent staff via the voluntary separation packages. Things must be pretty grim.

  4. State Govt’s have had little choice but to rely on limited sources of revenue raising. Although i do admit the NSW labor government was a master, particularly re Tripodi etc. The whole federal/state GST/Royalties revenue needs reform. The idealogies of privatisation and assisting the banking lobby at all cost have led us to this point.
    NSW is getting rid of 5000 workers, cutting back on services, imposing austerity this will feed back into the property demand loop and further weaken revenues. It will be interesting to see how this all pans out.

  5. Does this take into account the fact that the increased stamp duty (from a removal of an exemption) needs to cover the ambulance levy?

    I havn’t been paying attention to the removal of the stamp duty exemption, so not 100% on this, but I find it funny that it has been removed from something we all pay (electricity) to something only a segment pay (stamp duty)

  6. State governments will change tax laws and introduce broad property tax instead of stamp duty. They will use all sorts of arguments to justify this change. One of main arguments will be that property tax stops bubbles from creating although this theory is proven wrong in USA.

    To be able to change tax laws, bubble has to burst first.

    • … or better:

      Squeeze the budgets to pre-bubble proportions by reducing expenses including lay-offs.

      Any Government body has an inherent inclination to continuous bloating. A crisis and knowledgable voters is all that’s needed to cut away the bloat.

      I would interested to see some comparisons on the total nr of state employees per resident (clean comparison) over different states and countries as I suspect QLD in particular is not very efficient.

      We need the political will to reduce staff nrs – that way more taxes are not necessary.

      • Simple public work force comparison between different countries is not useful because of different levels of services provided by different levels of governments in different countries.

        It is very hard to make any useful comparison because of large differences among services provided. In some countries, health care and education are entirely public; while in some other is largely private. In some countries state level government provides most of infrastructure services (roads, public transportation, hospitals, utilities …) while in others these services are provided by local, central governments or private companies.

        It would be completely pointless to simply compare public workforce in one USA state and one German state or Spanish province. Size of the government is not problem by itself, it’s the size relative to what it provides to residents that matters.