Infrastructure on backburner as Bligh grapples with $5bn flood bill


Queensland Government to delay underground rail and redirect revenue from the sale of state assets to fund flood recovery efforts

By Brad Gardner | January 28, 2011

The Queensland Government will delay one of its big-ticket infrastructure projects and redirect revenue from the sale of state assets to fund flood recovery efforts.

The Brisbane Cross River Rail project will be delayed by two years to 2015, while the anticipated $1.5 billion from the sale of the Abbot Point Coal Terminal will also go to recovery efforts.

The Government made the announcement during today’s release of the mid year economic review, which estimates the floods to cost the state $5 billion between 2010 and 2013.

The damage to the road network alone is estimated to be $2.5 billion, the Government says.

"Our priority needs to be rebuilding Queensland, and that means putting some projects on the backburner in the short-term," Treasurer Andrew Fraser says.

With the floods inundating businesses and homes, the mid-year review says the Queensland economy suffered a $4 billion loss. Economic growth has been revised down from 3 percent to 1.25 percent.

Premier Anna Bligh says rebuilding the state will take years and that the final damage bill is likely to rise.

"We have just faced the greatest natural disaster to ever hit this state, and with that comes enormous economic and financial cost," Bligh says.

While the review says the true cost of the floods is still uncertain, Fraser claims Queensland stands to lose $159 million in royalties, $1.4 billion in transfer duty and $1 billion in GST over four years.

"The total taxation and royalty revenue write down across the forward estimates is projected to be more than $1.5 billion since the Budget," he says.

HIGHER INFLATION; TIGHT LABOUR MARKET
The review forecasts inflation to rise by 3.25 percent instead of the Budget figure of 3 percent due to the impact of the primary produce.

Business will need to grapple with a tight labour market, with the rebuilding effort tipped to cut the unemployment rate to 5.25 percent.

"Employment growth is expected to weaken in the second half of 2010-11, partly reflecting the temporary disruption to business activity due to floods, but then accelerate through 2011-12 as the rebuilding effort gathers pace," the review says.

The twin pressures of higher inflation and lower unemployment are expected to push the wage price index to 4 percent next financial year, eclipsing the forecasted figure of 3.75 percent.

According to the review, businesses continue to struggle under tight credit conditions imposed in the wake of the global financial crisis, with the housing sector one of the hardest hit.

"Ongoing restrictive credit conditions and tighter monetary policy…have delayed the recovery in dwelling investment, while financing difficulties and excess supply have also weakened the outlook for commercial property," it says.

Business investment is expected to be lower than originally anticipated, but the review forecasts a positive medium term outlook by saying investment will gather momentum next financial year.

The Government has announced measures to help businesses, including a $5 million advertising program for Tourism Queensland. The Federal Government has agreed to match the funding.

Another $3 million will be spent on a job assistance program aimed at helping businesses in trouble.

Councils will receive an advance payment of $400 million on their estimated damage bill of $2 billion to help rebuild local infrastructure.

The Queensland floods left 75 percent of the state declared a disaster zone, while northern NSW and Victoria were also inundated.

The Federal Government yesterday announced a levy and delays to road infrastructure spending to help pay for the damage caused by the floods.




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