Page 1105 - Week 04 - Thursday, 29 March 1990
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real 1987-88 levels for three years when it established self-government. Despite the Federal Labor Government's guarantee to the ACT community, its assistance in 1989-90 falls some $14m short of its guarantee, even after allowing for the $7m of transitional assistance finally offered by the Prime Minister in December 1989, and I note that that still has not been received.
The Alliance Government expects that the Commonwealth will not, again, ignore this commitment to maintain ACT grants in real terms. At the very least, 1990-91 grants should be at real 1989-90 levels.
The 1989-90 recurrent budget dealt with $10m of the overfunding situation passed to the ACT by the Commonwealth. Given that the gap is of the order of $100m, this contribution does not significantly close the gap. The Forward Estimates assume this initial provision will be maintained. The contribution must progressively increase if the ACT is to operate on a financial basis comparable with the States. We are currently examining the consequences of doubling this provision to $20m for 1990-91.
Overall, the Forward Estimates indicate that an adjustment of almost $24m is required to achieve a balanced recurrent budget for the next fiscal year. The gap decreases to $18m in the later years as a result of the expected growth in revenue flowing from the increasing population and economic activity of the ACT.
The large adjustment of $24m for 1990-91 arises because of the expectation that pressure on services will be greater because of population growth and other increasing demands.
When the likely effect of inflation during the budget year is allowed for, the shortfall in recurrent funds available for 1990-91 widens by a further $3m. This brings our task of achieving a balanced recurrent budget in 1990-91 to $27m. If we increase the contribution to overfunding, to which I referred earlier, to $20m, the total task for next year becomes $37m. Any cut in the real level of Commonwealth grants will add to this already extremely difficult situation.
It is against that background, Mr Speaker, that Ministers were asked to examine strategic options for a 4 per cent recurrent expenditure cut. I shall come back to this matter later.
The contribution to the overfunding position is, in effect, a contingency provision, at this stage, against the drop in Commonwealth funding after 1991-92. In the meantime, these funds will be available to assist in our restructuring process to achieve future recurrent savings.
The major assumption made in arriving at the outlook on the 1990-91 capital budget is that the Commonwealth will
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