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Spending cuts threat to the ACT economy

Date

Daniel Morrissey

Spending cuts in the federal budget pose the biggest risk to the ACT economy, which is suffering from sluggish retail sales, the CommSec quarterly State of the States report says.

Except for Western Australia, all states and territories were struggling for momentum, with a common weakness being the housing sector, CommSec chief economist Craig James said.

The thriving mining state is in front on economic growth, construction work, employment, retail trade and equipment investment, according to the report, which analyses eight key indicators.

ACT Treasurer Andrew Barr said the CommSec report affirmed the territory's economy was ranked second again, equal with Victoria, and was ''travelling well''.

The ACT was on top in home building, although the report found dwelling construction starts had suffered the biggest decline in 5½ years in the year to the December quarter. Mr James said: ''The ACT continues to benefit from above-average population growth.

''So while the housing market is softening, it has fundamental supports in terms of population growth and relatively low unemployment.

''The ACT is most at risk from spending cuts in the budget in May.'' Business leaders have warned of the risks to the territory's economy from squeezing federal agencies' budgets, which means less spending on goods and services provided by the private sector.

There also are concerns of big job cuts in the bureaucracy as the government returns the budget to surplus in 2012-13. Prime Minister Julia Gillard declared last week that it was ''time to get back in the black'', despite business leaders saying it was a political decision, not an economic necessity.

In the ACT, business leaders argue concerns about federal cuts in jobs and spending are weighing on business confidence and causing consumers to tighten spending. About 45 per cent of the workforce in the ACT is in the public sector.

Mr James said the ACT was at the ''bottom of the leaderboard'' in retail spending, compared to its decade average, and along with NSW had the weakest annual trend growth rates on retail trade.

Even though the ACT had the lowest unemployment rate in Australia of 3.6 per cent, it was above the decade average of 3.4 per cent and the gap in percentage terms was higher than ''all but two economies, affecting activity in the retail sector,'' Mr James said.

The ACT had the slowest wages growth, at 2.9 per cent, in the December quarter but was negative when adjusted for inflation of 3.6 per cent in the territory.

10 comments so far

  • Blame the ridiculous mortgage and rents in Canberra. Completely unsustainable, and the real reason that retail and other busineses are shot here.
    Things are going to get much worse once the government departments budget cuts and subsequent jobs cuts really take hold. Canberra's property market is at the pointy head of the whole ponzi housing scam in Australia, and will crash hardest.

    Commenter
    Emma
    Location
    Canberra
    Date and time
    April 23, 2012, 8:06AM
    • The ACT Governments ridiculous and shameful grab for cash under the 'change of usage' guise is a primary contributor for this. For a large dwelling (over 900 sq/m) to be subdivided into smaller, more affordable housing, the ACT Government will charge $300,000 for the privelige! $150,000 for each dwelling!!

      It is the shameful wasteage and cash grabbing by the ACT government that results in the high real estate prices we see today.

      Commenter
      Gay Refugee
      Location
      Canberra
      Date and time
      April 23, 2012, 10:24AM
  • I agree. The housing market in Canberra needs a huge shake up. It is completely unrealistic in terms of sustainability and its economic future. I feel for those trying to buy into that market.

    Commenter
    Fdee
    Location
    NSW
    Date and time
    April 23, 2012, 9:34AM
    • '...Blame the ridiculous mortgage and rents in Canberra...'

      And blame those in the ACT Government who use housing as a piggy bank to keep the budget in the black.

      Blame their developer mates and then ask yourself why companies like Village Building (riddled with ex-Public Servant friends of the ALP) can afford to throw away millions on projects like the tree zoo. Millions funded by the homebuyers of Canberra who can't afford a coffee after the mortgage payment.

      It stinks, but the last place you'd read about it all would be in a real-estate ad-revenue dependent newspaper.

      Commenter
      Bec
      Date and time
      April 23, 2012, 10:12AM
      • And yet the Canberra voters, like lemmings to a cliff, will line up in droves to vote Labor come the next federal election.
        What mugs they are. !

        Commenter
        Ernie
        Location
        Holt
        Date and time
        April 23, 2012, 10:13AM
        • Oh yes, because the Liberals threats to the Public Service won't affect Canberra in any way at all...... What Abbott is suggesting will kill Canberra's economy.

          Commenter
          Ben
          Date and time
          April 23, 2012, 2:21PM
      • Neither side of politics give a hoot in hell about Canberra. Labor know they have it regardless of what they do or don't do, the Libs know that they will never win federal seats here - so slash and burn the public service is a good one - popular with those outside Canberra and the pollies don't give a rats about those inside Canberra.

        Turn Canberra into a number of marginal seats and watch the difference.

        Housing is not the only issue - yes it is an issue - but it is not the only one.

        Commenter
        Irene
        Date and time
        April 23, 2012, 10:23AM
        • Gary Humphries?

          Commenter
          The Redman
          Location
          Canberra
          Date and time
          April 23, 2012, 4:04PM
      • This Government has `milked' the Canberra public for rates, land tax, development fees and every conceivable item it can charge fees for. There was a time when there was an honest (then Federal) Government managing Canberra - one could go to the land authority, look up blocks that were developed and see the prices and buy; people could then choose the style of home they wanted and truly engage in the building process. Now the government's motto is give to the highest bidder - this usually is the developer (the middleman or woman) who pays a huge premium to buy huge parcels of land and then redevelop for the public; that public has less choice as the developers then try to shove home and land packages down your throat with standard items included. The government is also happy to vary lease clauses as long as the big bucks continue to roll in - what was earned on 10 blocks, the govt now earns on multiple units with 2-3 blocks! This government is greedy and sadly there are the people working there who call themselves public servants - the rot in government is unimaginable but now we're about to have a shake up; jobs will go and real estate will crash. I say let it happen so our kids have a future. Also at what point will this sadistic government be satisfied with population growth?

        Commenter
        Conscious
        Location
        Canberra
        Date and time
        April 23, 2012, 8:14PM
        • I agree with the comments above re ridiculous housing costs. The general cost of living here is also crazy. Business rents are high just like residential, hence retail and hospitality is expensive (breakfast out is around $17-$20 these days - what the?). I'm considering voting Liberal here for the first time. They actually seem like they genuinely want to get back to core business, lower the cost of living and get things done. The other option I'm considering is leaving Canberra for the countryside. After 36 years of living here, I just feel complete frustration these days.

          Commenter
          Singledom
          Location
          Canberra
          Date and time
          April 23, 2012, 8:57PM

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