Chief Minister Katy Gallagher has warned of a deterioration in the Budget deficit to the tune of "hundreds of millions of dollars" as a result of the Fluffy buyback, as she prepares to table a $750 million appropriation Bill on Tuesday.
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The Fluffy hit comes to a Budget already in trouble, with the latest figures showing the ACT's economy growing at a slower rate than any other in the country, and slower than at any time since 1996, when John Howard became prime minister.
Ms Gallagher will ask the Assembly to approve $750 million to pay for the buyback and demolition of 1021 asbestos-contaminated homes. She hopes to have the Bill passed on December 4 after a whirlwind inquiry, so money can flow to homeowners from December 6. Another $250 million will be appropriated in the 2015-16 financial year. Treasurer Andrew Barr said the total impact on the operating balance could be up to $500 million over three years.
Ms Gallagher would not give specifics on the expected budget deficit this financial year, but it was forecast at $333 million in the red when the Budget was released in June, before the Fluffy crisis hit the books. A deterioration of "hundreds of millions" would clearly see it blow out to more than half a billion dollars, with no prospect of recovery before the next election.
The Government is borrowing up to $1 billion from the Commonwealth for the Fluffy buyback and demolition, but the loan won't stop the impact hitting the bottom line.
"There will be be significant deterioration in the bottom line," Ms Gallagher said, adding that it would have more of an impact on the operating balance over the next two years than on the balance sheet. When pushed for a more specific number, she said, "I'm not going to speculate beyond the fact that there will be hundreds of millions of dollars of deterioration based on the Mr Fluffy buyback scheme."
Ms Gallagher said the next week and a half were critical, because once the details of the buyback were settled they would not be changed.
"Once we buy the first house, that really is the scheme design locked in because you can't disadvantage people if you start changing the scheme beyond that," she said.
In another blow for the budget, the latest Australian Bureau of Statistics data show Canberra's economy grew at just 0.7 per cent in the 12 months to June, the slowest of any jurisdiction and well under the national rate of 2.5 per cent.
The figure for gross state product was nowhere near the figure in the 2013-14 budget, released in June this year, which estimated the ACT's final outcome for 2013-14 at 2.25 per cent. The disparity between the budgeted expectation and the 0.7 per cent outcome is not good news for the budget.
Mr Barr said the figures reflected the impact of federal government decisions, not just the federal public service job cuts, but across the board. He pointed out that the main contributor to growth in the ACT was the "public administration and safety" category, whereas whereas growth nationally was mainly driven by the mining industry. Other key areas of growth in the territory were health care and education, highlighting the importance of the ACT Government maintaining spending.
The ACT had the highest household disposable income per capita by far of any state or territory, at $87,343. The next highest was Western Australia $52,962, with NSW at $46,429. The bureau said a major reason was the much higher labour force participation rate in the ACT.
