GR

EA

T

BA

RR

IE

R

RE

EF

Gold Coast

Cairns

Brisbane

QUEENSLAND

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 17

Queenslandoverview

Queensland is Australia’s second largest state by land area, covering more than 22 per cent of the continent. The economy is the third largest in Australia, after New South Wales and Victoria.

Queensland’s natural wonder, the Great Barrier Reef, extends over some 2,000km, covering more than a quarter of the state’s 7,400km of coastline. With a population of 4.55 million, more than 20 per cent of Australians live in Queensland. Some 2.5 million Queenslanders live in the state’s south-east corner.

Queensland—Quick facts

Land area 1.73 million km2

Queensland population (December 2011) 4.51 million

Brisbane population* (June 2011) 2.07 million

Language English

Currency Australian dollar (AUD)

Gross State Product (year end June 2011) AUD255 billion (USD269 billion)

GrossStateProduct,annualgrowthrate(fiveyearaverageto2010-11) 2.63%

Flight time: Brisbane to Sydney 1.5 hours

Workforce** (May 2012) 2.3 million

Inflationrate(yearendMarch2012) 1.3%

Overseas visitors (year end March 2012) 1.9 million

* Statistical Division ABS cat.no.3101.0 . ** Total number of people employed.Sources: Queensland Treasury, Office of Economic and Statistical Research, Tourism Research Australia and the Australian Bureau of Statistics.

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 18

Queensland’s economic standingQUeeNSLaNd goverNmeNt’S ecoNomic priNcipLeS

¡ Strong and stable public finances ¡ Economic diversity – four pillars – resources, agriculture, tourism and construction ¡ Invigorate investment by reducing regulation and improving approval processes ¡ Tax policies that encourage business and employment growth ¡ Bigger role for private sector innovation in public policy and services

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 19

diverSe ecoNomy

Queensland’s economy is diversified across many sectors. Natural resources are traditionally the largest single sector but the natural disasters in early 2011 disrupted production in that sector.

Figure 8: Queensland’s economic output by sector

Sources: Australian Bureau of Statistics# Natural resources includes the extraction

of naturally occurring mineral solids, such as coal and ores; liquid minerals, such as crude petroleum; and gases, such as natural gas.

* Other includes: dwellings; professional, scientific and technical services, accommodation and food services; other services; administrative and support services; arts and recreation.

** Public sector includes: health; education; public administration and safety.

Other*

Public sector**

Agriculture

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%22%22%

19%20%

3%4% 2010-20112000-2001

Natural resources#

Finance and property services

Wholesale and retail trade

Manufacturing

Transport and communications

Construction

8%11%

10%7%

11%11%

8%11%

9%8%

10%7%

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 20

Over the past 25 years Queensland’s economy has grown rapidly; exceeding the average growth for both Australia and OECD member countries.

Figure 9: Economic growth comparisons

* From Queensland Government 2011-12 MYFER, released 13 January 2012.** From Australian Government 2012-13 Budget released 08 May 2012. *** From the OECD Economic Outlook Database.

growth

INDE

X (1

986-

87=1

00)

QUEENSLAND AUSTRALIA OECD

0.0

40.0

80.0

120.0

160.0

200.0

240.0

280.0

320.0

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-08

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-09

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2010

-11

2011

-12 (

f)*

2012

-13 (

f)*

PAST (AVERAGE) ACTUAL FORECAST

10 years 5 years 2010-11 2011-12 2012-13

Queensland* 4.19% 2.63% 0.18% 4.25% 5.00%

Australia** 3.05% 2.62% 1.90% 3.25% 3.25%

OECD*** 1.62% 0.93% 2.68% 1.59% 1.83%

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 21

Despite natural disasters in 2010-11, Queensland’s economic growth rate is expected to rise above its long-run trend as well as above the national average rate, over coming years.

2011-12 to 2012-13 are forecasts. Source: Australian Bureau of Statistics, Australian Government Budget, released 08 May 2012 and Queensland Government MYFER, released 13 January 2012.

Figure 10: Queensland’s economic growth compared to Australia’s

ANNU

AL %

CHA

NGE

1990

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1991

-92

1992

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1993

-94

1994

-95

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7HOUSING BOOM

GLOBALFINANCIAL

CRISIS

QUEENSLAND AUSTRALIA

QUEENSLANDDISASTERSAND RECOVERY

MINING BOOM

AUSTRALIA’S1990sRECESSION

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 22

Strong investment and growth in recent years have accelerated Queensland economic activity relative to the rest of Australia.

Figure 11: Share of national output by state

Source: Australian Bureau of Statistics.Forecasts from various State Budgets and mid-year reviews.

NatioNaL oUtpUt

INDE

X (1

989-

90=1

00)

75

80

85

90

95

100

105

110

115

120

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130

QUEENSLAND WESTERN AUSTRALIANEW SOUTH WALES VICTORIA SOUTH AUSTRALIA TASMANIA

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-13

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 23

Business investment and household consumption are expected to be the biggest contributors to Queensland’s economic growth in the next few years.

1. CVM, 2008-09 reference year, 2011-12 and 2012-13 are forecasts.Sources: Queensland Treasury.

Figure 12: Contributions to growth in Queensland’s Gross State Product1 (actual and forecast)

ANNU

AL %

POI

NT C

ONTR

IBUT

ION

2009-10-6

-4

-2

0

2

4

6

HOUSEHOLDCONSUMPTION

DWELLINGINVESTMENT

BUSINESSINVESTMENT

PUBLIC FINALDEMAND

EXPORTS IMPORTS GSP

2010-11 2011-12 2012-13

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 24

Queensland’s employment growth rate has consistently exceeded that of the national economy. Over the forecast period, employment growth in Queensland is again expected to exceed the national average.

Sources: State forecasts from Queensland Government 2011-12 MYFER, released 12 January 2012.National forecasts are from Australian Government 2012-13 Budget released 08 May 2012.State employment projections from 2011-12 State Budget

Figure 13: Queensland’s employment growth compared to Australia’s

Figure 14: Queensland’s unemployment rate

ANNU

AL %

CHA

NGE

QUEENSLAND AUSTRALIA

-3

-2

-1

0

1

2

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4

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-88

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-91

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-11

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-12

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-13

QUEENSLANDLONG TERM AVERAGE

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 25

Figure 14: Queensland’s unemployment rate

* From 2011-12 Queensland MYFER, released 13 January 2012.** National Forecasts from Australian Government 2012-13 Budget released 08 May 2012. Forecast growth rates are year to 31 December.

Solid population growth has underpinned Queensland’s strong economic growth.

Figure 15: Queensland’s population growth compared to Australia’s

demographicS

Inde

x (19

87-8

8=10

0)

QUEENSLAND AUSTRALIA

90.00

100.00

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PAST (AVERAGE) FORECAST

10 years 5 years 2010-11 2011-12 2012-13

Queensland* 2.37% 2.34% 1.67% 1.75% 2.00%

Australia** 1.54% 1.79% 1.44% 1.50% 1.50%

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 26

Economic driversexportS

Source: Australian Bureau of Statistics, Queensland Government Office of Economics and Statistical Research.* Comprises mainly agricultural commodities

MAY 2012MAY 2002

0% 5% 10% 15% 20% 25% 30%

Japan

India

China

South Korea

Europe and UK

Other

Taiwan

United States

Indonesia

New Zealand

Malaysia

Singapore

Thailand

Hong Kong

MAY 2002 MAY 2012

OTHER(INCLUDES SUGAR)*27% (30%)

CEREALS ANDCEREAL PREPARATIONS1% (1%)TEXTILE FIBRESAND THEIR WASTES3% (4%)METALLIFEROUSORES AND SCRAP 7% (6%)

NON-FERROUSMETALS 7% (11%)

MEAT6% (12%)

COAL48% (35%)0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Figure 16: Queensland’s merchandise exports by commodity

Figure 17: Queensland’s merchandise exports by country/region

In 2010-11, exports made up around one-third of the Queensland economy. Around four-fifths of Queensland’s exports are goods with the remainder being services. Coal is Queensland’s largest single export.

Around three-quarters of Queensland’s goods exports go overseas, with the remainder going elsewhere in Australia.

The Asian region remains by far Queensland’s most important export market.

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 27

exportStradiNg partNerS

Queensland’s economic prospects are closely linked to that of its major trading partners. Consistently strong economic growth outcomes are forecast for Queensland’s major trading partners over coming years. This should underpin the State’s economic recovery.

Figure 18: Economic growth performance of Queensland’s major trading partners

Note: Forecasts constructed assuming most recent top 10 destinations remain fixed over forecast period and that the trading partners not part of the top 10 grow in line with the global average. Also assumed that trading partners have same year-on-year growth.Source: Australian Bureau of Statistics, IMF, QTC

ANNU

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QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 28

Business investment and exports are expected to drive Queensland’s economic growth in coming years.

2011-12 to 2012-13 are forecasts.Source: Queensland Treasury and Australian Bureau of Statistics.

Figure 19: Queensland’s business investment and exports

iNveStmeNt

AUD

BILL

ION,

YEA

R AV

ERAG

E AUD BILLION, YEAR AVERAGE

EXPORTS (LHS) BUSINESS INVESTMENT (RHS)

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115

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64

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 29

Figure 19: Queensland’s business investment and exports

Liquefied natural gas and coal projects underpin the large volume of investment expected in Queensland in coming years.

Source: Queensland Treasury.

Figure 20: Queensland’s major infrastructure projects

Mount Isa

Burketown

Gladstone

Townsville

Cairns

Roma BRISBANE

Tad’sCorner

CoalProject

WandoanCoal Project

Caval Ridge

Byerwen CoalProject

Kevin’sCorner

ChinaFirst

GrosvenorProject

Abbot Point Coal Terminal Expansion (T2-T3)

QueenslandCurtis LNG

GladstoneLNG

AustraliaPacific LNG

KestrelMine

Extension

Moranbah Ammonium Nitrate Project

Lake VermontCoal MineExpansion

Daunia Mine

Yarwun2

BroadmeadowMine Hay Point Coal Terminal

Expansion (HPX3)

Ernest HenryMine Extension

Xstrata Mount IsaExpansion

MiddlemountCoal Project

Wiggins IslandCoal ExportTerminal

Committed orunder construction

Under consideration

$500 million to $3 billion

$3 billion to $10 billion

$10 billion +

CLASSIFICATION

PIPELINE PROJECTS

CAPITAL EXPENDITURE

Northern Missing Link

QSN3 Pipeline Project

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 30

Queensland’s fiscal positionQUeeNSLaNd goverNmeNt’S fiScaL priNcipLeS

The Queensland Government has adopted the following principles as the prime determinant for its fiscal strategy:

principle 1: Stabilise, then significantly reduce, debt

¡ Return the budget to operating surplus by 2014-15 and pay down debt

¡ Subject major capital projects to cost benefit analysis

¡ Put in place a plan to regain the AAA credit rating to reduce the cost of borrowing

¡ Ensure expenses growth does not exceed revenue growth

principle 2: Achieve and maintain a General Government sector fiscal balance by 2014-15

¡ A positive fiscal balance ensures funds are available for investment and/or debt reduction

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 31

QUeeNSLaNd goverNmeNt’S fiScaL priNcipLeS continued

principle 3: Maintain a competitive tax environment for business

¡ Despite increases in taxes over the past decade, Queensland maintains a relatively competitive tax environment for business

principle 4: Target full funding of long-term liabilities, such as superannuation in accordance with actuarial advice

¡ The Government is committed to ensuring Queensland’s employee entitlements remain fully funded

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 32

BUdgeted reveNUeSFigure 21: Queensland budgeted revenues

2011-12

NOTE: THESE CHARTS WILL BE UPDATED FOLLOWING THE RELEASE OF QUEENSLAND’S STATE BUDGET ON 11 SEPTEMBER 2012.* This comprises the taxes and levies listed in Figure 22. Source: Queensland 2011-12 MYFER, released 13 January 2012. # Grants from the Australian Government are almost evenly split between general and specific purpose payments. General purpose payments include GST revenue grants and associated payments, are ‘untied’ and used for both recurrent and capital purposes. Specific purpose payments are used to meet Australian Government and shared policy objectives.

Total grants# (including those from the Australian Government) of AUD21.9 billion are expected to account for 49% of Queensland’s total government revenue in 2010-11.

Figure 22: Queensland budgeted taxation revenues 2011-12

ROYALTIES AND LAND RENTS 7%INTEREST INCOME 6%OTHER REVENUE 2%DIVIDEND AND TAX EQUIVALENT REVENUE 2%TOTAL ESTIMATED BUDGETED REVENUE:AUD44.4 BILLION

SALES OF GOODS AND SERVICES 10%TAXATION REVENUE* 24%

GRANTS INCLUDING FROMAUSTRALIAN GOVERNMENT# 49%

MOTOR VEHICLE REGISTRATION 13%LAND TAX 10%GAMBLING TAXES AND LEVIES 9%OTHER TAXES 6%

DUTIES 30%PAYROLL TAX 31%

TOTAL ESTIMATED BUDGETED TAXATION REVENUE: AUD10.5 BILLION

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 33

Figure 23: Total Australian Government payments to all states and territories, deviation from population share (2012-13)

The chart does not include the Northern Territory, which has a corresponding deviation from population share of 452.82%. Payments to states and territories from the Australian Government are made according to the principal of Horizontal Fiscal Equalisation (HFE). HFE is defined in Appendix D.Source: Commonwealth Grants Commission 2012 Update.

Queensland is currently receiving slightly less from the Australian Government than would be the case if all states and territories had equal sized populations.

paymeNtS from aUStraLiaN goverNmeNt

WESTERNAUSTRALIA

QUEENSLAND NEW SOUTHWALES

VICTORIA SOUTHAUSTRALIA

TASMANIA AUSTRALIAN CAPITALTERRITORY

-1.52%-4.69%

-7.89%

-44.90%

28.47%

58.09%

19.76%

-60%

-40%

-20%

0%

20%

40%

60%

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 34

aUStraLiaN goverNmeNt fiScaL SUpport

The Australian Government provides explicit financial support to all Australian states and territories in the form of:

¡ The payment of grants. (In Queensland this accounts for 50 per cent of revenue).

¡ The Horizontal Fiscal Equalisation scheme, which seeks to reduce the revenue-raising and cost disparities between the Australian states and territories.

¡ The Australian Government’s National Disaster Relief and Recovery Arrangements, which provides reimbursement for eligible costs for natural disasters. (These arrangements are currently providing Queensland with 75 per cent reimbursement for the eligible costs relating to the summer of 2010-11 natural disasters.)

¡ The offer of a time limited, voluntary guarantee over Australian state and territory borrowings from July 2009 to December 2010. (See Appendix C)

See Appendix D for more information on tax sharing arrangements.

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 35

Figure 24: Tax per capita by states and territories (2011-12)

Queensland’s taxation environment is favourable compared to other Australian states and territories.

Source: All data from 2012-13 Budgets except Queensland which is from 2011-12 MYFER.

taxatioN

AUD

WEIGHTED AVERAGE OF OTHER STATES AND TERRITORIES (EXCLUDING QUEENSLAND)

QUEENSLAND NEW SOUTHWALES

VICTORIA WESTERNAUSTRALIA

SOUTHAUSTRALIA

TASMANIA AUSTRALIANCAPITAL TERRITORY

NORTHERNTERRITORY

0

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1,000

1,500

2,000

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3,500

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 36

Figure 25: Queensland budgeted expenses 2011-12

Health and education make up a significant proportion of the State’s 2011-12 budgeted expenses.

NOTE: THIS CHART WILL BE UPDATED FOLLOWING THE RELEASE OF QUEENSLAND’S STATE BUDGET ON 11 SEPTEMBER 2012.Source: Queensland Government 2011-12 Budget, released 14 June 2011.

BUdgeted expeNSeS

TOTAL ESTIMATED EXPENSES: AUD47.1 BILLION

HEALTH 25%

EDUCATION 22%

TRANSPORT AND COMMUNICATIONS 14%

SOCIAL WELFARE, HOUSING AND OTHER COMMUNITY SERVICES 13%

OTHER SERVICES 13%

PUBLIC ORDER AND SAFETY 8%

ECONOMIC SERVICES 5%

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 37

Figure 26: Cost of Queensland’s 2010-11 summer of natural disasters

Source: Queensland Government 2011-12 MYFER, released 13 January 2012.

The majority of the costs incurred following the 2010-11 natural disasters relate to repairing and replacing damaged roads or local government assets.

Like other states and territories, Queensland receives a reimbursement from the Australian Government of 75% of eligible costs related to natural disasters.

coSt of NatUraL diSaSterS

STATE ROADS $2,894m

LOCAL GOVERNMENT ASSETS $3,114m

LOANS AND GRANTS $358m

PAYMENTS AND SUPPORT SERVICES TOINDIVIDUALS AND COMMUNITIES $496m

OTHER $150m

Figure 25: Queensland budgeted expenses 2011-12

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 38

An operating surplus is expected to be achieved in 2014-15. Fiscal balance will replace the operating balance as the primary fiscal target of the Government.

BUdget BaLaNce

Source: Actuals - Australian Bureau of Statistics Cat. No. 5512, Forecasts - Queensland Government 2011-12 MYFER, released 13 January 2012.

Figure 27: General government sector net operating balance

AUD

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ION

NET OPERATING BALANCE (ACTUAL)NET OPERATING BALANCE (FORECAST)

-10,000

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QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 39

goverNmeNt capitaL expeNditUre

Figure 28: Queensland’s disaggregated state infrastructure spending

Spending on improving Queensland’s transport, health and energy services comprises the bulk of the Government’s capital works program in 2011-12.

* Mainly includes general government sector equipment investment expenditures not classified elsewhere. 2010-11 is an estimated actual. 2011-12 is a forecast. Sources: 2011-12 Budget and previous years’ Budgets (Budget Paper No.3, Capital Statement).

AUD

BILL

ION

HEALTH, HOUSING & COMMUNITY SERVICESLAW, ORDER & PUBLIC SAFETY

OTHER INFRASTRUCTURE*TRANSPORT INFRASTRUCTURE

EDUCATION & TRAININGWATER INFRASTRUCTUREENERGY INFRASTRUCTURE

0

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2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 40

Credit ratingsratiNgS ageNcieS ratioNaLe

moody’SAa1/Stable/P1Outlook: Stable as at 10 February 2012

n Strongbudgetflexibility,commonwealthgovernmentsupport,ample levelsofinternalliquidity,anddiverseeconomicbasewithsignificant growth potential.

n QueenslandisuniqueamongAustralianstatesinholdingsufficientfunds to fully fund its superannuation liability and the State’s position remains strong when compared to its peers.

StaNdard & poor’SAA+/Stable/A-1+Outlook: Stable as at 4 September 2011

n AstronginstitutionalframeworkbenefitingstategovernmentsinAustralia.

n TheState’srobustanddiversifiedeconomy.

n Excellentfinancialmanagementonverypositiveliquidity.

“ The predicability of Commonwealth-state relations makes Australia’s system one of the strongest in the world”. Standard & Poor’s 2011*

“ The institutional framework which encompasses the arrangements determining intergovernmental relations and jurisdictional powers and responsibilities, is well-established and stable. The institutional framework provides the Australian states and territories with policy flexibility over own source revenues and discretion over expenditure decisions thereby giving them the tools to respond to adverse budgetary developments”. Moody’s February 2012**

* Source: Standard & Poor’s, Ratings Direct on the Global Credit Portal, 31 March 2011.** Source: Moody’s Investor Service, Credit Analysis, Queensland (State of ) Australia, 10 February 2012.

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 41

Figure 29: Ratio of financial assets* to total liabilities for the General Government sector (as at 30 June 2012)

domeStic peer compariSoN

Queensland’s ratio of financial assets to total liabilities indicates its relative financial strength compared with other Australian states (when including each state’s investments to meet future employee entitlements for superannuation and long-service leave).

* Excluding investments in public enterprises.Source: All data from 2012-13 Budgets except Queensland which is from 2011-12 MYFER.See Appendix G for more information on Queensland’s domestic peers.

QUEENSLAND NEW SOUTHWALES

VICTORIA WESTERNAUSTRALIA

SOUTHAUSTRALIA

TASMANIA

RATI

O

0

0.1

0.2

0.3

0.4

0.5

0.6

Figure 30: Net debt to revenue ratio (as at 30 June 2010)

Figure 31: Queensland has a far lower level of General Government net debt, relative to operating revenue, compared to other similar international semi-sovereign issuers, according to information provided by Standard & Poor’s in a recent peer comparison analysis.

Figure 32: The amount of money spent by Queensland on interest payments, when expressed as a share of revenue, is also low relative to its international peers, according to Standard & Poor’s.

Figure 31* Queensland’s net debt to revenue ratio is negative as the state has established a net asset position by accumulating financial assets to meet future liabilities (eg, employee entitlements).Source: Standard & Poor’s, Ratings Direct on the Global Credit Portal, 31 March 2011.Figure 32Source: Standard & Poor’s, Ratings Direct on the Global Credit Portal, 31 March 2011.See Appendix H for more information on QTC’s international peers.

-50%

-25%

0%

25%

50%

75%

100%

125%

150%

175%

200%

225%

250%

QUEE

NSLA

ND

ALBE

RTA

BASE

L-CI

TY

BRIT

ISH

COLU

MBIA

BURG

ENLA

ND

SAXO

NY-A

NHAL

T

VAUD

STYR

IA

Figure 31: Interest expense/operating revenue (as at 30 June 2010)

QUEE

NSLA

ND

ALBE

RTA

BASE

L-CI

TY

BRIT

ISH

COLU

MBIA

BURG

ENLA

ND

SAXO

NY-A

NHAL

T

VAUD

STYR

IA

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

11.0%

7.0%

8.0%

9.0%

10.0%

iNterNatioNaL peer compariSoNS

QUEENSLAND TREASURY CORPORATION 30 JUNE 2012 Queensland – 42