The ACT government will try save the local economy from a plunge into recession by running budget deficits for the next three years as a response to Tuesday's federal budget.
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In the wake of news of big cuts to the federal public service, Treasurer Andrew Barr has told The Canberra Times that he will revert to his government's original post-global financial crisis position of a return to surplus in 2015-16.
The Treasurer also pledged yesterday that there would be no cuts to staffing numbers in the ACT public service. Capital spending in next months' territory budget will be boosted to more than $800 million in the coming financial year as part of the ''stimulatory'' effort.
But Mr Barr said that nothing could save Canberra from a deep recession if the Liberal Party made good on what he says is the party's threat to cut another 20,000 public service jobs if victorious at the next federal election.
ACT Treasury modelling on the full effect of the Tuesday's budget will not be available for some days. But Mr Barr said he was concerned at the effects that spending cuts might have on the local economy.
Mr Barr said that annual federal consumption - before Tuesday - accounted for $22 billion or 47 per cent of the ACT's economy compared to the territory government's 5.4 per cent in consumption.
''It's very hard for us, with that level of leverage, to make a dramatic impact, so we can't run our budget policy in a way that can ameliorate entirely the impacts of what the Commonwealth has done.
''But we can seek to and we will be running a more stimulatory set of policy settings in 2012-13 in particular.
''We will have deficits and my choice now is to either plunge the economy of the ACT into recession by withdrawing from our capital program and our recurrent spend or maintain the ACT Government's current capital program.''
Mr Barr said that he also had to cope with a cut to the territory's slice of the national GST pie, which will wipe $177 million over the four-year budget cycle.
''The deficit we were anticipating this year was $160 million,'' Mr Barr said.
''It will be larger than that now as a result of all of the gains of the redistribution, the changed allocation, being swept away by a reduced pool.
''So even though we have a greater share of the GST pool, the size of the GST pool has decreased, so that $60 million gain we were anticipating has been swept away.''
Ratings agency Standard & Poor's said in March that a failure to produce a surplus in 2013-14 would not necessarily be a trigger to downgrade the territory's AAA credit rating. We will revert to our original seven-year budget surplus plan, we brought it forward by two years,'' Mr Barr said.
Canberra Liberals Leader Zed Seselja indicated that his party may support Mr Barr's stimulus efforts.
The government planned to boost infrastructure spending.
It would look to spend more than $800 million in 2012-13 - up from a projected $715 million this financial year - in an effort to keep jobs and economic activity in Canberra.
''Given the amount of large capital projects that will wash out of the economy, namely the half-billion ASIO building, the [Cotter] dam and a couple of others, so you're starting to see those big stimulus projects washing out and Majura Parkway is the only other large project on the horizon in terms of significant public infrastructure,'' he said.
Mr Seselja said his party would not be dogmatic in responding to Mr Barr's plans.
''We would look at the circumstances … what I would do is responsibly manage the ACT budget and look at what settings we can put in place… that may involve some government spending, it may involve some taxes being looked at.''