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Legislative Assembly for the ACT: 2002 Week 7 Hansard (4 June) . . Page.. 1810 ..

MR HUMPHRIES (continuing):

Mr Speaker, as I said, this is only part of a rates reform package. Other measures will come forward in the future, measures which, on the face of them, will be also representing a serious erosion of the integrity of our rates system; but they are not for debate today, so I will not go into the details of them. At the very least, if you are going to have a rates system which is based on the value of people's properties and if you are going to have a system which rises by approximately the rate at which the cost of providing services is rising, then it seems to me that you have an obligation to match the rise in what you are collecting with the rise in what you are spending. That is not happening with this bill.

I urge members to reject the legislation and require the government to bring forward legislation that will deal with the rates on the basis of the previous year's calculation of the CPI, which is a projection for the coming financial year. The Treasurer may argue that in previous years the treasury has overestimated the extent of inflation for a coming year. I am not sure whether that is true.

Mr Quinlan: It is true.

MR HUMPHRIES: In some years it has and in some years it may have underestimated the amount of inflation for the coming year. First of all, it is the federal treasury, I think, on which we are reliant for our estimate of rates of inflation, rather than the ACT one. Secondly, if he is concerned about too much being collected from the rates because of treasury overestimating the inflation rate, he can build in a rolling average system whereby the rates are reduced slightly in the following year to account for the fact that he has collected too much in the previous year. In that way, the territory would not be out of pocket when it comes to providing services to the ACT community. But with this system, it will be. In some years, it will be seriously short of money if there are large increases in inflation. Mr Speaker, we should not walk into that problem as it is. I think that we should retain the integrity of the rate system. I argue that, for that reason, this legislation should be rejected.

MS TUCKER (11.15): This bill implements the Labor Party's election promise to cap rate increases for individual properties to the movement in the consumer price index over the previous year. The figure determined for this bill is 2.9 per cent. This approach varies significantly from that of the previous Liberal government. The Liberal government worked out the total revenue it wanted from rates based on the expected CPI increase for the coming year. It then juggled the rates for individual properties, based on the average unimproved value over the previous three years, to achieve a total figure. The result was that the rates for properties in suburbs of increasing land value went up, while the rates for suburbs that decreased in value went down. But overall the total increase in rates was linked to the CPI.

I criticised the Liberals' approach at the time because I thought that it did not create sufficient variation in rates from the lowest to the highest rated properties. There has been a longstanding principle with rates that those property owners who can afford to live on highly valued land should pay proportionately more than those people in low-value properties. The Liberals steadily eroded this principle through increasing the fixed rates charge over time, so that rates were reduced to a narrower band which proportionately increased the rates for lower income earners and favoured the wealthy land owners. I think that that is an inequitable approach to raising rates revenue.

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