Economist Chris Richardson has rejected the suggestion the federal budget inflicted deep cuts on the ACT, saying the outlook remains largely unchanged.
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“Don’t get scared by what’s happening. Yes, there are cuts in the short term. They are not nearly as dangerous as you think,” he said. “The job cuts are real and most of that pain is yet to hit, but the underlying driver of the ACT economy hasn’t changed."
Federal spending was the biggest driver of the ACT economy, and the good news for the ACT was it was “exactly the same, the dial hasn’t moved”.
If all the cuts eventuated, federal spending would still grow at 2.7 per cent a year, Mr Richardson said. But he doesn’t believe all the budget measures will pass the Senate, and is forecasting spending to grow at 3 per cent over the next decade, the same rate as the past decade, and better than promised by Labor.
The job cuts would cause some pain in 2015 and 2016, but even that wasn’t as bad as believed. Most of the cuts were already in the pipeline, if yet to bite, with 14,500 public service cuts planned at the time of the election, and 16,500 now.
“Why has the ACT economy been so resilient? Answer, we have been talking about job cuts really without feeling them, and answer, we’re one big fat mortgage belt and lower mortgage rates have helped cushion [the territory],” he said.
Mr Richardson spoke at a Deloitte Access Economics post-budget panel discussion on Wednesday night.
His analysis is in marked contrast to the ACT government, which has blamed the Commonwealth for creating a “massive black hole”. Delivering the ACT budget, Treasurer Andrew Barr said before the federal budget he had expected to deliver a modest deficit, followed by surpluses. In the event, he delivered a much worse deficit than forecast, at $333 million, with more deficits in the out years.
Mr Richardson’s analysis points out that the worsening ACT deficit is as much to do with increases in spending as cuts to revenue. ACT government spending is up $139 million; revenue down $86 million.
Asked about the size of the territory deficits, Mr Richardson said: “In the short term I have no problem with the ACT leaning into the wind [to cushion the impact of the federal job cuts]. Longer term, the ACT budget has to be sustainable too. But they can provide a bridging role and they should.”
Deloitte’s Canberra Office managing partner Lynne Pezzullo said the ACT budget was in worse shape than the ACT economy. The economy would benefit on a number of fronts – including the ACT’s stimulus package of infrastructure investment, such as light rail and ActewAGL capital works.
“In addition, the deceleration of land releases will assist in supporting property prices, and inbound Asian capital injections are helping fund new construction, as well as assisting international airlines to expand capacity to Canberra routes,” she said
