Queensland and NSW brace for big budget deficits

Businesses in New South Wales are bracing for big budget deficits and cost cutting as the state governments prepare to hand down their budgets for the 2009-10 year.

Queensland treasurer Andrew Fraser will deliver the state’s budget this afternoon, which is expected to reveal $3.16 billion deficit due to a dramatic fall in government revenue.

The state’s business investment is also expected to decline by 17% during 2009-10, after having tripled during the past eight years. Additionally, in a hit to small businesses, the state’s eight cent per litre fuel subsidy will be scrapped, while car registration costs are set to increase.

The state’s unemployment rate is expected to grow to 4.25% for the current year, and to reach 6.25% during 2009/10. The Bligh government hopes to offset the rising unemployment with large infrastructure works and it will also sell off several public assets to pay down debt.

While official economic figures for the state will be released in the budget papers, but the economy is expected to contract by 0.25% during the next financial year, down from February’s predictions of 1% growth.

Queensland does not anticipate the state will receive its AAA credit rating back after the budget figures are released.

In NSW, premier Nathan Rees and treasurer Eric Roozendaal will hand down the state’s budget around noon, with the treasurer hinting that local businesses may benefit from some new measures.

“There may be some increased costs, but frankly, if it’s going to support local jobs … in NSW, we think it’s appropriate,” Roozendaal said yesterday.

It is expected that measures will be introduced to give preference for Australian businesses tendering for NSW Government contracts.

Currently NSW has the highest unemployment rate of all states at 6.4%, while Roozendaal has said the State budget deficit will reach $1.3 billion.

The budget is expected to include $14.7 billion for education, $15.1 billion for health services and $4.4 billion for road works. A massive $62.9 billion is estimated to be put away for a large infrastructure program, with $5 billion received from the Federal Government’s stimulus package.