Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .

Legislative Assembly for the ACT: 2004 Week 05 Hansard (Friday, 14 May 2004) . . Page.. 1962 ..

I won’t bore members, who, unlike the Treasurer, got it the first time, with the reasons as to why this usage is so incorrect. However, if the Treasurer is interested, he can go to page 1724 of last year’s Hansard where it is explained fully.

To further compound his error: I think it’s fair to say that I don’t believe the Treasurer understands the significance of budgeting for a deficit. In his budget for 2003-04 the Treasurer budgeted for a deficit of $8 million in the general government sector. He was mistaken by a mere $100 million—luckily, in the positive—but that is not the point I wish to make.

A deficit of itself is not especially unusual. What is unusual in the situation is the context in which this deficit was proposed. Why do governments budget for deficits? The answer is very simple. Governments budget for deficits when economic activity has been slowing down and activity is predicted to remain slow, perhaps even depressed. Governments should use deficits when economic circumstances dictate that this is the appropriate policy response; for example, the great depression in the 1930s or the Labor Party’s recession we had to have of the late 1980s. Deficits are used to provide a stimulus to an economy that is otherwise not performing strongly.

This is a very simple proposition, and one that I would have thought the Treasurer would have readily understood. It is amazing that this Treasurer budgeted for a deficit when the ACT’s economy was continuing to perform strongly, gross state product has been increasing by more than 3 per cent a year recently, and the growth in revenues, particularly those revenues derived from property transactions, has resulted in a substantial and continuing boost to the ACT government coffers.

Rather than budget for a deficit in 2003-04 the Treasurer should have budgeted for a surplus. Budgeting for a deficit at a time of economic prosperity sends all the wrong signals to financial markets and businesses and to the community.

Fortunately the Treasurer’s prediction of a deficit for 2003-04 was treated with the derision it deserved. It was a nonsense when he announced it at budget time, and it proved to be a nonsense when further financial information was released soon after the budget. As the latest budget papers show, we still recorded a surplus of $93 million in 2003-04, even after the additional spend of $60 million in the third approp.

Why the Treasurer and his government sent a very specific and incorrect message about the economic condition of the ACT in last year’s budget is anyone’s guess. I wonder if he was really listening to Stephen Kates’s comment at the budget breakfast at the National Museum the other day about the power of surpluses when things are going well?

Despite this history, the Treasurer is at it again in this year’s budget and he’s budgeting for a deficit of $26 million in the 2005-06 financial year. Yes, $26 million. Why? Because Labor wants to continue spending to the limit. Mr Speaker, this is simply not a sustainable strategy.

At the same time questions have to be asked about the government’s strategy in various wage negotiations that are currently under way. The way these negotiations are

Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .