Normally we would expect a hearing of the ACT's public accounts committee looking into the Territory's latest budget update to be a fairly boring affair.
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That was not the case on February 29 when Chief Minister and Treasurer Andrew Barr sensationally claimed that no treasurer in the history of self-government had ever delivered a surplus budget under what's known as the uniform presentation framework (UPF), while trying to defend his own failure to do so.
The UPF is the reporting standard used across Australian governments and was adopted at the Premiers' Conference of May 1991. Today, however, the ACT government uses the headline net operating balance (HNOB) reporting method as its primary reporting method, and is the only Australian jurisdiction to do so.
The main difference in the accounting methods is that income earned on the ACT's superannuation investments is included as income under HNOB despite being quarantined to pay superannuation pensions to retired ACT public servants.
That income is not available to pay for infrastructure or other government costs and is therefore not included in determining surpluses or deficits under the UPF.
To put it bluntly, Andrew Barr's claim is incorrect. As treasurer of the last Liberal ACT government, we delivered the territory's first surplus budget in 1999/2000, our government having made painful decisions to rein in the $344 million deficit inherited when we won the 1995 election.
Subsequently, Labor's Jon Stanhope and Katy Gallagher also delivered surplus budgets in the financial years ending June 30 2007, 2008, 2010, 2011 and 2012. All of these outcomes were confirmed as UPF surpluses in the audited end of year financial statements.
My co-author, James Daniels, a certified practising accountant, has compared my 2000/01 budget and the latest update for Andrew Barr's 2023/24 budget. In order to make the two budgets comparable, his first task was to examine population growth and inflation figures using data from the ABS.
The second was to choose an accessible set of figures from 2000/01 that could be compared to the latest 2023/24 update. The estimated final position for 2000/01 as reported in the 2001/02 budget was subsequently chosen.
A simple summary of the analysis is that, since 2000/01, ACT government revenue per capita has increased by more than 40% in real terms, or in other words after adjusting for inflation.
Given such a huge increase in revenue, it would be reasonable to assume that the ACT budget was in a very strong position, however the data also showed that while there was an expected surplus of more than 2% of revenue in 2000/01, the 2023/24 expected deficit is more than 13% of revenue, a substantial deterioration in the ACT's budget position.
Even more concerning is that the latest budget update predicts the ACT government's net financial liabilities will have increased to almost $13 billion by June 30 of this year. To put that into context, that's 172% of government revenue for 2023/24, or approaching $70,000 for each and every household in the ACT.
There's no relief on the horizon in coming years either, with the budget update predicting liabilities to have increased to 179% of revenue by the end of the 2026/27 financial year.
With the deficit having blown out and debt continuing to build across coming years, it's not hard to see why the ACT lost its AAA credit rating. Keeping that credit rating would have enabled the ACT government to service it borrowings at the cheapest rates possible - a goal which is now beyond our reach.
Delivering balanced budgets is a hard political slog. Every government that makes electorally-painful decisions, like closing the Royal Canberra Hospital and closing schools in the 1990s and 2000s, knows that the payoff is a strong financial outcome.
Having that payoff "snatched away" undermines confidence in our political process.
We are greatly saddened to see the hard work and fiscal discipline practiced by the Carnell, Humphries, Stanhope and Gallagher governments undone by the Barr-Rattenbury government of more recent years.
As voters go into this October's ACT election it would be reasonable to ask the government parties where all those taxes they've paid have gone and what do we have to show for this explosion in spending and debt?
- Gary Humphries was ACT treasurer from 1999 to 2001.
- James Daniels is a certified practicing accountant and a Liberal candidate in Brindabella for the coming ACT election.
