ACT News

Really, it's only mildly stimulating

Three months from now, Andrew Barr, as a loyal member of the ALP suicide watch, will be telling ACT voters - and anyone elsewhere who will listen - that an Abbott Coalition government will be an economic catastrophe for the ACT.

There will be the spectre of John Howard and Peter Costello, the ''black hole'' cuts of 1996, and the ACT recession that followed, and, probably, for those with even longer memories, the impact of Malcolm Fraser's cutting off the tap in 1977.

Treasurer Andrew Barr.
Treasurer Andrew Barr. Photo: Jay Cronan

We will be warned that thousands of federal public servants will be sacked, in a manner somewhat similar to what happened in Queensland last year, that there will be flow and slumps across the local economy, and that house prices - at the centre of many citizens' sense of wellbeing - will slump.

They will point to the supposed impossibility of the Coalition's meeting its targets for spending cuts without such a bloodbath. And despite Abbott's and general Liberal denials of a mission to hurt Canberra, it will be suggested that the certain punishment will also occasion some ideological glee among Coalition members.

But if Katy Gallagher and Andrew Barr really believe that the sky is about to fall in on the local economy, thanks to emphatic Australian rejection of Julia Gillard, they have a rather strange way of demonstrating it in territory budgeting for the year ahead.

Theirs is a budget only mildly stimulatory, and hardly able to be called counter-cyclical in the sense of seeming to be designed to sop up any local excess supply of people or resources thrown overboard by Abbott, or of much feeding into local demand.

It is not a budget that imagines local population growth coming to a complete stop, or actually going backwards, but a budget that anticipates the sale of an extra 4000 blocks of land in the year ahead.

In 1977, virtually all of Tuggeranong lay bare, kerbed, guttered, sewered and powered, but without a resident, as land demand collapsed for several years. The projections in this year's budget anticipate that the ACT land development agency will be continuing cheerily to destroy the territory's asset base without any real federal impact on price or net demand.

This is not to say that the ACT Treasury, or the Treasurer, are totally optimistic. There are deep uncertainties, national and international, affecting the economy, and, overall, they expect that we have a few tight years ahead.

Without actually saying so, they think that the primary problem will be federal government expenditure cutbacks, but their projections are also based on the fact that the Gillard government has been cutting, in recent times, at much the same rate that Abbott has been promising.

Moreover, the ACT government, without actually saying so, seems to take Abbott at his word that net federal public service staff cuts will be achieved by attrition, rather than sackings or heavy retrenchment policies. Indeed they seem to expect that Abbott, far from playing the radical smaller government man, will be careful and cautious, and without much in the way of an agenda.

Yet it would be hard to say that this budget's spending proposals have been carefully calculated to counter the local impact of federal expenditure cuts, or even to be opportunistic about buying cheaper, for local purposes, people and resources about to come onto the market. And only the fact that there is an operating deficit - essentially a modest one - is there to say that the levers are being pushed and pulled so as to try to balance the local economy, as opposed to the territory's own fiscus.

In the middle, moreover, is the cynical view that zeal for heavy staffing cuts does not last long in the minds of Coalition ministers. In due course, employment growth resumes, as ministers develop new plans, policies and programs and discover that a public administration is quite useful in making things happen. This is what happened with Robert Menzies in the late 1950s, with Malcolm Fraser by 1980, and with John Howard by 2000. All of these ultimately ran public administrations that were bigger and more expensive, proportionately to net employment or net spending, than those run today by the Gillard government.

This is not to say that the budget is without inspiration. Barr deserves considerable credit for continuing with - indeed accelerating - a program of trying to wean the territory away from transaction-based taxes (such as stamp duties and payroll taxes) of a sort that punish business entrepreneurialism, towards taxes on land and wealth. Rates will increase by an average of 10 per cent - to a point, given the way ACT Liberals campaigned on the issue at the last election, Labor might even say it has a mandate for this. This is from where the headline screams will come, and, if Barr is planning further reform, he may well think of more quickly amalgamating rates and land taxes.

Against that are further increases in local tax thresholds, some modest structural savings, matched by modest new spending proposals, some new, but hardly extravagant infrastructure expenditure, and a plan to have the budget in balance in two years' time. It is hardly radical in its plans and assumptions, or over-optimistic about the significant trends - and the effect is to keep the ACT on course with some of the best figures, and credit ratings, of any of the Australian states or regions.

Consistently with this, the government has planned for growth in expenditure on health and education - primarily by aligning itself with Commonwealth plans from Gonski education and national health reform plans. What is missing, however, is a sense of vision of where the ACT will be in such matters not over the three or four-year estimates period, but 15 years from now.

That is, of course, a long time ahead, difficult to plan for, especially when the immediate economic outlook is uncertain and unpromising as a result of the almost inevitable change of federal government. The thing is, however, that health and education programs can only be organised on long time scales.

If the ACT Treasury has it right, Andrew Barr may even find that he has some flexibility to do some big planning this time next year.