Property slump hits budget
The cooling property market is tipped to deliver a $334 million hit to ACT government revenue during the next four years.
The ACT government's budget position has improved by nearly $20 million according to the latest economic update but taxpayers have been warned to brace for a deficit of more than $360 million at the end of this financial year.
According to the mid-year budget update, published on Thursday, government income continues to soften, led by worse-than-expected results in residential land sales, a vital supply of scarce self-generated revenue.
But the slowdown in land sales, blamed on "market conditions" and environmental red tape imposed by the Commonwealth, has been offset by improvements in GST allocation from the federal government.
The extra income has allowed Treasury to revise down the expected deficit from $381 million to $363 million.
But the overall gross income from the land sales program for the four-year forward estimates period has been revised down by $287 million, with total revenue from the program estimated at more than $2 billion.
The update predicts income for the government's Land Development Agency from commercial land and large residential parcels will slump by more than $78 million in the next three years.
Cooling conditions in the property market are expected to hit stamp duty receipts by more than $47 million during the forward estimates period.
The government predicts it will pay another $33 million interest on its borrowings while a write-down in the value of the territory assets in the education and training sector is also expected to hit the budget bottom line.
ACT Treasurer Andrew Barr said the government still expected to be able to achieve a budget surplus by 2015, despite the land sales and stamp duty write-downs.
"You'll see in the budget review a write-down of expectations in terms of conveyance duties and also in terms of land sales," the Treasurer said.
He said much of the land sales write-downs were due to stringent new environmental processes imposed by the Commonwealth but that market conditions were also playing a part.
The Treasurer used the expected slump in stamp duty receipts to advance the tax reforms that defined the 2012 territory election campaign.
"If ever there was evidence of the need for taxation reform, you'll see that in the volatility of our conveyancing revenue," he said.
"So a transition away from those inefficient and highly volatile taxes towards a more efficient and sustainable revenue base is critical for the territory's future."
The Canberra Liberals were scathing of the government's economic performance after the update was issued, with opposition treasury spokesman Brendan Smyth accusing Labor of leaving the budget $82 million worse off over the next four years while at the same time increasing public borrowing.
Mr Smyth predicted the government would "struggle" to achieve its budget surplus target.
"The budget outlook is $82 million worse off over the next four years, because the government continues to spend beyond their means," Mr Smyth said.
"Despite this, the government still wants us to believe that they can return the budget to surplus in 2015-2016.
"The update also reveals that the government will borrow almost $100 million more this year than anticipated."