The ACT Government plunges deep into deficit in the coming year, in a budget whose impact Canberrans will feel in an across-the-board rise in rates, increased water charges and higher parking and traffic fines.
The ranks of parking inspectors will be boosted by a third, with eight extra inspectors on the beat in a move the government expects to boost income from parking fines by $1.6 million. That comes on top of a 6 per cent hike in traffic and parking fines in the coming year and another 6 per cent each year after that.
Ratepayers will feel the impact of a 10 per cent average rise in rates. If you own an apartment that you rent out, you’ll pay more in land tax. Commercial properties worth more than $2 million will be hit with a higher fire and emergency services levy.
The Government will borrow half a billion extra over the next 12 months and $1.1 billion over four years, pushing debt from 1 per cent to 3 per cent of gross state product, to help fund what it described as the biggest ever capital program undertaken by the territory. Asset sales are also part of the mix, with Treasurer Andrew Barr outlining plans to potentially sell the city’s streetlight network, some car parks, public housing, the Callum offices in Woden, Macarthur House on Northbourne Avenue, the ACTTAB betting agency and government land.
The government plans to spend $2.5 billion over four years on “transformational projects”, such as the Gungahlin tram line, the convention centre, the “city to the lake” project, and new courts buildings. Other projects are a Canberra Institute of Technology campus in Tuggeranong, a new public hospital at the University of Canberra, work on the Woden town centre, more cycle paths and new road works. It has not attached a figure to most of its big projects, many of which are to be delivered in partnerships with the private sector, Mr Barr saying there was “a huge amount of commercial sensitivity” about putting a figure on the asset sales and infrastructure spend.
He forecasts a $333 million deficit in the coming 12 months, which is more than $200 million worse than previously forecast. He has also abandoned hopes of a surplus before the next election, with a modest surplus not projected until 2017-18.
Asked how confident he was about delivering that surplus, Mr Barr said it was reasonable to assume that after two years of particularly difficult economic times, the economy would begin to return to normal economic activity. He also did not expect the Commonwealth’s pre-election budget in 2016 to be as harsh as the one just delivered.
"Obviously, every budget is a year to year proposition and we will respond according to the year to year circumstances,” he said. But he said he did not want to deepen an economic downturn with more cuts.
Mr Barr laid the blame for the territory’s deteriorating financial position at the feet of the Commonwealth, saying before the federal budget he had expected to deliver a modest deficit then surpluses. Updated figures show a Commonwealth hit to the ACT of $375 million over four years. But the budget papers make it clear the hit to the bottom line is not only about lower Commonwealth grants and slower land release as a result of federal job cuts. The ACT’s own increased spending plays at least as significant a part.
The budget shows slowing economic conditions, but not recession, with employment growing at just 0.5 per cent, population growth 1.5 per cent, and gross state product growing at 1.75 per cent (well below national GDP of 2.5 per cent). Canberra is at the end of a rosy decade in which 35,000 new jobs were created, or 10 a day.
The government declared it was “not choosing the austerity path taken by conservative governments around Australia”.
“We will not sacrifice essential services for the sake of the budget bottom line,” the budget says.
Mr Barr did not accept the increased debt would see a downgrade in the territory’s AAA credit rating, and said the new borrowing was fundamentally sound economic and social policy.
“We only borrow for infrastructure,’’ he said. ‘‘We do not borrow to cover, for example, public service salaries."
He foreshadowed a program of replacing public housing, beginning with the Northbourne Avenue flats, home to 472 tenants. He said at the current renewal rate, of about 1 per cent a year, the housing stock would take 100 years to renew. Detailed plans would be revealed in the coming months, but Mr Barr said new housing estates would all contain a “strong and consistent” public housing presence.
The asset sales are designed to take advantage of a federal incentive payment for state asset sales approved by June 2016.
Mr Barr said the ACT was the only Government that still owned its streetlights, which had a considerable running cost. He did not anticipate a sale for a couple of years.
The Gungahlin tram line made its presence felt with $21 million directly on the project, but also $20 million for roadworks on the city to Gungahlin corridor and more for Dickson intersections. Chief Minister Katy Gallagher said it had been a difficult budget to put together, but was fair, supported the most vulnerable and created opportunity.
While the budget raises an extra $24 million through increased charges and caps on some concessions, on the flip side, over 60s will be largely exempted from paying stamp duty when they buy a house, and pre-programmed cuts to stamp duty will benefit everyone who buys a house. Changes to payroll tax will benefit businesses with a payroll of more than $3 million, but an exemption for contractors employed through recruitment agencies will be scrapped. Commercial properties will be hit with a higher fire levy.