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Legislative Assembly for the ACT: 1999 Week 2 Hansard (9 March) . . Page.. 391 ..

MS CARNELL

in budgets in the future, certainly not in this one. Continued operating losses, too, will inevitably impact on our AAA credit rating. This will in turn increase the cost of borrowings, producing a further deterioration in our operating loss.

Eliminating the operating loss is not an option, Mr Speaker; it is a necessity. So, those people who believe that we can continue to spend more money than we have and that somehow operating losses are all right are simply not coming to grips with the reality. What they are saying is that we will never fund our unfunded superannuation liability. What they are saying is that we really will have to borrow money or sell assets to fund our capital works program, because where else would the money come from? This is an extremely important part of this whole debate.

Mr Speaker, I am very pleased that Mr Quinlan - I understand from his press releases, or at least one of his press releases - has agreed with that. He made the point himself that the operating loss that was currently running in the ACT was unsustainable. I could not agree more. We must address the operating loss, and the only way we can do that, Mr Speaker, is to reduce expenditure and/or increase revenue. If we are ruling out, as this Assembly seems to have done, major asset sales, as the Auditor-General says, "You have got two choices - decrease expenditure and/or increase revenue". Everything else will simply delay the inevitable.

The projected 1999-2000 operating loss is made up of expenses of $1.707 billion and revenues of $1.568 billion. To reduce expenditure we can either reduce the cost of our services or reduce the quality or quantity of services delivered. On the other side of the equation, we can raise more money. We receive most of our money from either the Commonwealth Grants Commission or taxes, fees and fines. Firstly, Commonwealth grants make up just under 40 per cent of our revenue. Commonwealth general purpose funding has dramatically decreased since self-government, by 49 per cent in real terms. Our recent success in regaining some of that loss through the most recent Commonwealth Grants Commission assessment will only fill part of the budget gap, even if adopted in full by the Federal Government. Mr Speaker, it is important to remember that, until we get our offers from the Commonwealth Government prior to the 9 April Premiers Conference, we simply do not know what the offer from the Federal Government will be.

Secondly, Mr Speaker, taxes, fees and fines constitute another 40 per cent of our revenue. We have maintained a policy of setting the levels of taxes, fees and fines to generally align with levels of New South Wales. Departure from this policy may result in revenue loss as businesses relocate to a cheaper location. Any decision by the New South Wales Government to reduce taxes, as they currently foreshadow in the area of payroll tax, will need to be watched closely to ensure that we do not give surrounding New South Wales a competitive advantage.

So, Mr Speaker, it is simply not an option, as I think some people would like, to just put up our business taxes. If we just put them up, 500 metres across the border in Queanbeyan it will be cheaper to do business. Mr Speaker, the problem with that is patently obvious to anybody who has a look. If businesses relocate, not only do we lose the increased tax rate, but we lose the total tax base. Those businesses then pay their

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