Page 893 - Week 03 - Tuesday, 24 February 2009
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stimulate the demand in the local economy, given the causes and magnitude of the global economic downturn and the relative size of our own ACT budget. However, we can maximise the stimulatory impact coming from the commonwealth government by running fiscal policies supportive of these packages.
All governments strive for surplus, but now is not a time to be running counter-fiscal policy in an attempt to maintain budget surpluses. If all the states and territories were to do this, this would negate the massive efforts by the commonwealth to cushion our national economy from the global economic slowdown.
As I have said a number of times, now is not the time to make knee-jerk reactions. In response to the deteriorating global economy and consequent fall in tax revenue, the commonwealth has recently released its updated economic and fiscal outlook. This outlined a significant reduction again in government revenue and forecasted a budget deficit of $23 billion, down from a surplus of $5 billion over a few months earlier. Included in the update was a $42 billion stimulus package, the nation building and jobs plan. Although the plan will add to the commonwealth deficit, it is considered necessary to support growth and jobs.
So, while budget deficits may not seem appealing, responsible deficits serve a purpose during economic downturns by supporting jobs and growth, and this is what sound economists and commentators are saying. Indeed, Mr Smyth, we found a nice little quote from you very much along those lines, so I look forward to hearing what you have got to say about that when you stand to speak.
Mr Smyth: Good. I’m glad you listen.
MS GALLAGHER: I always listen to you, Mr Smyth. I do not often agree with you, but I always listen.
The ACT government can now use its previous good economic management to allow it to run an operating deficit during the slowdown while still maintaining service and delivering a record capital investment program.
I have previously advised the Assembly and the community that the finances of the territory have suffered considerably due to the impacts of the global financial crisis and the resulting national economic downturn. The midyear review published in December outlined that the forecast budget outcome for 2008-09 and the forward years had weakened substantially, and this is consistent with the expected budget outcomes of all other states and the commonwealth. The factors influencing these changes are largely external, unprecedented and beyond our direct control.
The weaker budget outlook for the territory largely reflects the ongoing effects associated with the deterioration in the global markets, the flow-on effect of interest rate cuts, a decrease in the GST revenue pool due to lower consumption spending at the national level, and a reduction in forecast taxation revenue due to a decline in activity in the housing market impacting on conveyancing revenue. These four factors alone are driving our budget into deficit, and none of these is of the ACT government’s doing. They reflect the circumstances happening elsewhere internationally and nationally and we cannot influence these factors.
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