ACT Auditor-General Maxine Cooper has highlighted an ongoing failure by the ACT government to bring spending in line with revenue, and points out that hopes of a surplus are pinned on volatile investment markets.
Dr Cooper has released her audit of the territory's 2015-16 results, warning the territory's costs "have not been managed to within revenue streams".
"The costs of providing public services exceed revenue," she said in her report. "These deficits will eventually have to be paid for in the future by higher revenue (for example, by increases in Commonwealth government grants, land sales and taxes) and/or reductions in costs (for example, through efficiencies or reducing public services)."
The deficits covered nine years in a row from 2011-12.
The budget forecasts a gap of about $200 million a year in spending and revenue, ongoing through 2019-2020.
"Achievement of these lower deficits is dependent on higher revenue, in particular, increases in taxation (general rates and payroll tax) and the ACT's share of the national GST revenue pool," Dr Cooper warns.
By the time it factors in gains from investments and land revenue, the government forecasts a slim operating surplus in 2018-19.
But with expenses still outstripping revenue in 2018‐19 and 2019‐20, the projected surpluses relied on gains from investments which depended on investment markets.
"As investment markets are volatile, the territory's exposure to more deficits remains high," she said.
Chief Minister Andrew Barr said the report showed the government was improving the budget situation each year and remained on a steady path to balance.
The budget was a means to support the economy and community, he said.
"You can look at the ACT Budget through the narrow view of an accountant and focus only on the net operating balance or you can take the broader view of an economist and look at the wider range of measures that evaluate the overall health of the territory economy," he said, insisting the ACT had low unemployment, and strong employment and population growth.
Dr Cooper's audit follows a warning in November about the state of the budget from former Treasury official Khalid Ahmed. He said there were "two parallel worlds" – the government's budget forecasts and what happened in reality, he said.
He said that since 2008-09, revenue had grown at 4.9 per cent a year and spending at 5.4 per cent, whereas in the coming four years, revenue was forecast to grow at 3.9 per cent and spending at 3.7 per cent. Dr Ahmed said either spending would need to be cut or revenue increased even to meet current targets.
His analysis was rejected by the ACT government which insisted the budget was on track to return to balance in 2018, with no spending cuts needed to meet forecasts.
Dr Cooper said the territory had the capacity to meet its liabilities. But net assets were much less than anticipated in the budget, mainly because of the higher than expected unfunded superannuation liability ($7.3 million instead of the budgeted $2.5 billion).
Dr Cooper said the 2015-16 result had been better than budgeted. The deficit in the net operating balance (revenue minus expenses) had been budgeted at $649 million but had come in at $373 million.
The improvement was due to to higher than expected revenue (up $242 million, or 5 per cent on budget), including from land and tax.
Revenue in 2015-16 was up $270 million on the year before, as a result of:
- Payroll tax revenue jumping $65 million, or 19 per cent
- Stamp duty on property sales up $57 million, or 21 per cent
- Rates up $45 million or 12.4 per cent
Liberal leader Alistair Coe said the audit report showed the need for Chief Minister Andrew Barr to get control of the budget.
"The deficit problem is not a revenue problem but a problem of wasteful spending of taxpayers' money," he said.