Page 1878 - Week 06 - Thursday, 5 May 2005
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Deficits are used at these times to prime an economy—a government literally pumps resources into the economy to build up and maintain satisfactory levels of economic activity, until such time as the broader circumstances of the economy improve. Clearly, therefore, deficits are used to provide a stimulus to an economy when that economy is not performing strongly.
Let us apply that test to the ACT economy. Our economy is performing strongly. The government has told us so. The Chief Minister told us so in a speech to the Labor Party faithful in the middle of last year; the Treasurer told us so in the lead-up to the 2004 ACT election. Indeed, as late as Tuesday of this week, the Treasurer said, “The ACT economy is strong, growth is continuing.”
What do these comments from our own ACT government tell us? They tell us that the ACT does not need priming. Our economy does not need the government to pump further resources into it. Our deficit does not need to be $91 million, because there is sufficient momentum within the ACT economy at present to provide an appropriate level of activity in output and employment. Put simply, deficit budgeting at the top of the cycle is a farce.
There is an even more serious concern about the government’s budget strategy for next year, however, and this is the prospect of the deficit being larger than forecast. I would like to put it to you in perspective. What we already know is that we have a funding gap of more than $20 million in health. We have concerns about whether funds will be needed for investment in public housing. We have now got limited capacity to respond to emergencies, and recurrent spending for the prison does not appear—to name just a few. From our perspective, I am extremely concerned about the future budgetary position of the ACT.
Mr Speaker, unfortunately for the ACT community, the experience of the mid-1990s and the proposed outcome of this latest budget appear to be the reality of the way Labor governments manage economies: spend, spend, spend, with little regard for the consequences. It certainly is the way this government is managing the ACT economy. Of course, this government will engage in all the rhetoric to suggest that all that it has done has been correct. Unfortunately, that is not the case, and there have been many warnings that this would be the outcome.
Consider the comments made by the ACT Auditor-General in her report on financial audits for 2003-04, where she says:
The projected “in balance” [budget] results mean that the Territory is vulnerable to significant deficits should there be negative fluctuations in revenue and expenses from adverse events.
The auditor also provides a salutary warning about the territory’s long-term financial position when she says:
[This] is expected to decline rapidly over the next few years with the expected shortfall [that is, an excess of liabilities over assets] increasing by $658 million [by 2007-08].
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