ACT News

Andrew Barr sees reasons for optimism in ACT economy despite global volatility

The ACT government says turmoil on international financial markets is unlikely to have any significant or direct effect on the territory's budget or public service superannuation account values.

The Turnbull federal government has called for caution as international economic data and Wall Street's record worst start to a year sent shockwaves through global markets. The Australian dollar reached a near seven year low on Monday, coming after an average 2.5 per cent was wiped from Australian's superannuation accounts in the first six trading days of 2016.

Chief Minister Andrew Barr said on Monday the Canberra economy had plenty of cause for optimism in 2016, as a new report by Deloitte Access Economics showed the ACT's recovery remained dependent on future moves in federal government policy.

ACT government Under Treasurer David Nicol said market movements were to be expected and proper risk management and investment planning were in place. 

"The largest effect we see is on superannuation provision accounts. That fund is invested both domestically and internationally, across various asset classes and partly in equities.

"To the extent equities markets fall, that fund can fall in value," he said. "But we've had a fairly good run in equity values in the past three or four years and they tend to go up and down." 

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Mr Nicol said government assets were invested conservatively and with a diverse asset base. 

The government closely monitors financial market conditions and Mr Nicol said low interest rates were generally better for the government's budget bottom line because of borrowings and rising asset prices. 

On Monday the Australian dollar fell to US68.55¢, the currency's lowest price value since March 2009. 

Mr Nicol said the fall in the dollar meant overseas superannuation investments had seen values increase.

"Different factors are having difference effects. These changes in asset values in a two-week period, we generally look through in terms of concern.

"We are much more concerned about long term returns, rather than short term changes," he said. 

On Monday, federal Treasurer Scott Morrison said Australia needed to better diversify to beat the economic volatility stemming from China.

The federal budget's exposure to iron ore prices and single markets needed to be broadened, Mr Morrison said, but December's mid-year economic and fiscal update had forecast Chinese conditions in line with International Monetary Fund and World Bank outlooks.

Mr Morrison welcomed caution but said Australians could have faith in the resilience of the local economy amid global volatility.

Chief Minister Andrew Barr said the outlook for the Canberra economy was strong going into the new year, as long as there were no major further federal government cuts to the city or the public service. He cited low interest rates, drops in petrol prices and population growth as reasons for optimism in the ACT.

"I think Canberra is poised for an exciting phase of growth, provided we don't get clubbed around the head again by the federal Liberal Party," Mr Barr told the ABC.

"I think you'd have to go back a reasonable period of time to find a set of broader economic parameters that would be as encouraging as these ones."

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