THE property downturn led by the country’s two biggest housing markets is partly eroding Queensland’s revenue gains from reforms to GST funding, a new report warns.
While the sunshine state is weathering the correction better than most states, Moody’s Investor Services says government debt levels remain high and could outpace revenue growth on capital spending programs.
And while the recent GST reform has given Queensland an extra $518 million over the next eight years, the rating agency says it may not enough to offset the fall in stamp duty.
The report singles out Queensland as being vulnerable to rising health and education costs because of its recent “rapid population growth”.
It forecasts an increase in capital spending in the state as a result, which would erode cash reserves and prompt the state government to issue additional debt.
“Debt levels remain elevated, and we expect debt will continue to rise more rapidly than revenue as most states embark on record capital spending programs,” Moody’s senior credit officer John Manning said.
In its most recent budget update, the Queensland government also marked down stamp duties by $240 million.
But NSW and Victoria are expected to be hit the hardest.
“Despite already projecting lower property-related revenue in their fiscal year 2019 budgets, the larger states of NSW and Victoria now forecast further declines in transfer duty and land tax revenue as a result of weakening residential property market prices and falling sales volumes,” Mr Manning said in the report.
“Concurrently, Queensland projects a marginal decrease in average revenue growth over the forecast period, reflecting lower income from GST and dividends, more than offsetting increased royalties in FY2019, largely on higher coal prices.”
Earlier this month, CoreLogic data revealed national home values dropped 4.8 per cent in 2018, marking the weakest housing market since 2008.
Brisbane bucked the trend, with values rising 1.2 per cent for the year.