Page 1429 - Week 05 - Wednesday, 10 May 2006
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Unlike other states and territories, the ACT’s annual government operating expenses are currently being funded to a significant extent by asset sales and investment windfalls. Such a financing strategy is not sustainable in the medium to long run.
Although the Chief Minister would have the public believe that he was surprised when he discovered the deterioration in the government’s finances, it is obvious from his own papers that there was a budgetary collapse already under way two years ago. There is no point in feigning surprise when the GFS operating balance for 2003-04 collapsed from a forecast loss of $5.1 million to an actual loss of $203 million. That rapid deterioration could not have occurred without a wake-up call from officials. The Chief Minister must have known but did nothing. What is puzzling is why he took no corrective action.
His lack of response to the looming crisis in the years 2003-04 and 2004-05 is reminiscent of the bushfires. The following year, in 2004-05, the GFS operating loss was forecast at $16.6 million, but by the end of that year it had blown out to an actual loss of $293 million. The public are rightly demanding to know how this deterioration, a blow-out of $275 million in the deficit, could possibly occur when government revenue was booming and they were told that everything was in safe hands.
I well remember standing at the convention centre last year after the budget—Mr Smyth also was there—and being dismissed as to my concerns about the state of the ACT budget, and being told, “No, you are being a gloom and doom merchant.” Boy, hasn’t the truth come home in the last few months! Of course, Mr Quinlan has hit the exit door. He is gone. He has taken his money and run and has left the Chief Minister with this nightmare as to how to solve the fact that they failed to keep their eye on the job during the period when the windfall gains from GST were coming into our territory.
The basic reason is that government spending has run out of control and the government has shown that it is not capable of restraining itself. The spending binge has been compounded by spending on the wrong things. Over the four-year period from 2001-02 to 2004-05 government expenditure blew out by $707 million over budget. We are not talking here about minor variations or one-off events. They attach so much to inquiries and reports, but there has to be a point when you have to start living within your means.
The territory simply cannot afford the level of expenditure that is occurring, with poor efficiencies in some of the key areas. The government has now got a major problem on its hands. A large percentage of this budget goes on education, justice and health. There is clearly a need for efficiencies in the health area, but I think that there will be too little, too late, and we are going to be faced with enormous pain in the next several years.
Looking at the position over the years of this government, the average amount by which the actual spending exceeded the budget was $177 million per annum. There has been a consistent pattern of poor management. The Chief Minister will no doubt repeat his defence that all manner of things have had to have money spent on them, but his pleas have been unconvincing because most of the items were budgeted for.
On a GFS basis, government expenditure in 2004-05 increased by 13.6 per cent. At the same time, revenue declined by 6.6 per cent. That is clearly unsustainable, but the key
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