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Legislative Assembly for the ACT: 2002 Week 7 Hansard (4 June) . . Page.. 1808 ..

MR HUMPHRIES (continuing):

Members will be aware that in previous years the arrangement was that an estimate was made, usually by the federal treasury, of what the inflation rate in Australia would be likely to be for the coming year and governments would then set the total increase in rates for that year based on the previous year plus the projected CPI increase for the coming financial year, the year in which the rates were actually going to be collected. The government has criticised that arrangement, saying that it results in differences between the actual inflation rate and the inflation rate which is forecast before the beginning of the particular financial year.

Let me concede at the outset that it is true that sometimes the estimates which are made of the coming year's inflation rate are not accurate. Like any projection or prediction, they depend on a number of factors which cannot be fully assessed and sometimes the inflation rate turns out to be different from the one that was forecast. I think that the government will be creating a problem of even greater dimension by what it is doing to remedy that problem. The government is saying that, rather than taking what it expects to be the inflation rate for the coming year as the basis for levying an increase in rates to match that projected inflation rate, it is going to take a previous period of inflation as the basis on which to calculate the collection for the coming year. What the government has chosen is not the CPI for 2001-02, despite earlier indications that it would, for the obvious reason that 2001-02 has not ended yet. We do not know yet what the inflation rate will be for that year. Rather, the government has taken an inflation rate which is calculated on the rise in the consumer price index between the December quarter of 2000 and the December quarter of 2001.

The government has described that as the actual inflation rate. Mr Speaker, it is the actual inflation rate for a period in the past, a period which has now ended. It does not bear a relationship to the period for which the rates are going to be collected. I would put to this house that it is sensible to have the rates collected matched to an inflation rate for the period in which they are going to be collected. Why? It is because the rates collected will be used to fund services in the community and the cost of providing those services presumably will rise by the inflation rate for that period, not by the inflation rate for a previous period.

If I can take an illustration of that. Let us suppose that between the December quarter of a particular year and the December quarter of the following year the inflation rate is worked out to be 2 per cent, but it is projected at the time of this bill or its equivalent being debated in future years that the inflation rate for the coming year will be 5 per cent. That means that the government will be collecting 2 per cent more in rates for that year to provide services in the community, but the actual cost of providing those services will be going up by 5 per cent, which leaves a gap of 3 per cent of the total rates take not being covered by the amount collected.

Conversely, in other years, the government will make rather more money, if the reverse happens, than it needs to provide services in those years. The nexus between raising money from the community to spend it on behalf of the community is broken by this bill. Yes, it has the merit that it is tied to an actual rate of inflation, but the rate of inflation is not the rate of inflation for the period we are talking about. Why should taxpayers in the territory be paying for increases in inflation which do not relate to the period for which the rates are being collected?

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