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Legislative Assembly for the ACT: 2004 Week 05 Hansard (Friday, 14 May 2004) . . Page.. 1964 ..

be relatively benign. There have been some developments in the very recent past, however, that could create some pressure on those important economic variables. Over the last week the value of the Australian dollar has fallen to levels not seen since late in 2003, and oil prices have risen suddenly to their highest levels in more than 10 years. Each of these factors is acknowledged in the federal budget as potentially having a material effect on economic forecasts such as on estimates for prices.

Globally, Australia’s major trading partners, and in particular the US, are all experiencing greater demand and moving into a more inflationary phase. The global economy is recovering, although the federal budget states that continued excess capacity around the world should restrain inflationary expectations.

Nevertheless, there is strong expectation that interest rates around the world will rise from the historic lows that they have been at, and this trend will have significant impact on developed and developing economies. Through all this, the Reserve Bank of Australia has again signalled its concern about the risk of inflation, which is code for saying that interest rates are likely to go up.

We know why the Reserve Bank will consider raising interest rates. It will be to suppress high levels of demand. With spending by households, currently running at 127 per cent of incomes, clearly the party cannot last; something has to give. We can only hope that there will be a gentle easing back or a so-called soft landing rather than a crash, but we would still have to be prepared for an adjustment of some kind.

This has direct and immediate implications for the ACT budget, although the Treasurer seems quite oblivious to it. Budget paper 3, written, as we know, by worried Treasury officials, discusses that risk on page 15, but the Treasurer does nothing about it. He seems to think it’s not real. He just keeps on spending.

The statement of sensitivity of budget estimates on BP3 page 13 points out some interesting coefficients but says nothing about the government’s policy response. The government seems incapable of reading the signs and incapable of controlling its big spending instincts. What I would like to know and what the community would be most interested in—and I’m sure the Treasurer’s wrap-up speech will answer—is: what contingencies does the government have in place in the event that some of its assumptions about the economy turn sour? How will the sensitivity analysis in this budget be used as the basis for action? What will the Treasurer do if demand for property falls and prices come down? What does a turnaround in the property market mean for revenue and the bottom line? And the really big question is: where will the cuts be and by how much, or will the Treasurer keep up the spending spree as though nothing has changed? We are looking forward to another $344 million operating loss.

The key point of budgets is to spell out the government’s priorities, to formalise how the government is going to implement its programs and to allocate resources, including taxpayers’ funds, to achieve the outcome it has promised. The Stanhope Labor government has come to office promising much but it has failed to deliver. The people of Canberra understandably feel left out; many feel disappointed; and many feel deceived.

As one citizen complained recently, public trees are in danger of falling over from lack of maintenance; cycle-ways and recreation paths are dangerous because of the uneven

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