This is news that should not be leaked to Capital Hill, because our continued survival probably depends on the perpetuation of the idea that we have been battered for some time, are reeling under the prospect of mass federal government redundancies and reduced general programs, and are in extra trouble because of the explicit withdrawal of some of the funds supposed to be coming for our hospitals, schools and universities.
The shape and extent of the reduced money coming from the Commonwealth as a result of the Abbott-Hockey budget has yet to be seen, given the uncertainty about what will make it through the Senate. But it is worth bearing in mind, first, that the ACT economy took a serious whack from the Gillard-Rudd and Swan-Bowen governments, yet managed to grow anyway. It grew by 2.25 per cent, nearly as much as the Australian economy as a whole. Employment grew despite perhaps 12,000 redundancies over the year. Wages also grew, modestly, as well as the population.
It is perfectly true that those projecting the next few years see the economy developing a bit of a cold. In the year ahead, for example, gross state product for the ACT economy is expected to increase by only 1.75 per cent, the primary causes for the reduced rate of growth expected to be a combination of consumer caution and reduced federal public spending. Employment growth, probably as a result of fresh waves of redundancies, is expected to grow only by 0.5 per cent. State final demand is projected to grow by 1.5 per cent.
The projections for the years ahead assume a relatively quick return to normality, with GDP growth of about 2.5 per cent. Moreover the size of the direct hit of conservative Commonwealth budgeting on the ACT – estimated at $375 million over four years – must be seen as relatively modest compared with the impact of Howardism in 1996-97, or Fraserism in 1976-77. It represents about half the damage done to the community fabric by the 2003 bushfire.
It is, of course, important to emphasise that the ACT Treasury, and federal Treasury, are making these projections bearing in mind the ACT government's intention to pump extra money into the economy as a deliberate counter-cyclical effort to overcome the effect of reduced federal spending in the Canberra area. That pump, achieved primarily by a major capital expenditure program, is designed to keep the economy afloat, if hardly booming. Yet the relatively conservative size of the extra money being put into the economy would seem to reflect a good deal of confidence in the flexibility of the ACT economy, the likelihood that most of the displaced labour will find new jobs, probably in private sector provision of government services, and perhaps that redundancy money will also stimulate the local economy.
That a good proportion of the extra expenditure is focused towards capital development should also be a good thing, at least if (and it is an if) the development projects are good things in themselves. Bringing forward projects does more than create and maintain jobs, it also increases the stock of community capital and itself becomes a stock of goods and services. Projects such as work on new hospital facilities at Bruce, TAFE facilities in Tuggeranong, road and bike path works and further development at Woden Town Centre are good examples. The economic wisdom of the light rail project, and the general vagueness of repeatedly revised and recycled City-to-the-Lake projects suggests that a good deal more deliberation is required, even assuming that both projects provide short-term help to the economy.
For some, the size of borrowing now (about $500 million) and over the next five years ($2.5 billion) suggests the risk of a transition into bankruptcy. In fact, ACT net debt is modest even by Australian standards, and there is hardly a federal entity in the world that would not die for it. Likewise with the projected immediate increased deficits and the expected transition towards a surplus, though the suggestion that hard yards are being run will probably be accentuated by significant rate increases.
Treasurer Andrew Barr, indeed, has a good deal of flexibility and room to manoeuvre if the economy picks up more quickly than expected, or if it deteriorates more sharply than he expects. That's not, necessarily, because he lacks a plan, or because the ACT government is without ideas, so much as a realisation that much is beyond the ACT government's capacity to control. What he must juggle – rather more than the money itself – is a certain smugness about how relatively well he seems to be doing, while crying poor and holding out the begging bowl towards Joe Hockey and Tony Abbott.