Page 894 - Week 03 - Tuesday, 24 February 2009
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At the time of the midyear review the revised general government sector net operating balance was forecast to be a surplus of $15.2 million, with deficits forecast across the forward estimates. These forecasts have now been further affected by recent announcements by the commonwealth government and the Reserve Bank of Australia. As mentioned, the commonwealth government released its updated economic and fiscal outlook in conjunction with the nation building and jobs plan. The UEFO identified an expected further deterioration in GST revenue.
This will have an impact on the ACT bottom line of around $32 million in 2008-09, rising to $50 million per annum from 2009-10. Additionally, the recent further interest rate reduction of one percentage point equates to approximately a $14 million reduction in the territory’s interest income. I hope you find that information useful in terms of your calling for a picture of the real state of the ACT budget; that is as up to date as I am able to provide to the Assembly.
Notwithstanding the current environment, the ACT economy continues to be relatively sound, with low unemployment levels, an anticipated boost to consumer confidence from falling interest rates, and continued strong activity in the ACT construction sector.
Although the budget is now moving into deficit due to factors that are well beyond our control, the underlying budget structure is sound, owing to our own prudent financial management in the past. If we had not undertaken those structural reforms to our budget three years ago, the majority of which the opposition opposed, there would be no doubt that our current fiscal position would be a lot worse than it is now.
The budget will be in deficit and that is the reality not just for the ACT but for most, if not all, other jurisdictions as well. The budget is expected to be in deficit for factors well beyond our control. We have recently seen governments of all nations struggle to deal with this unprecedented crisis.
The government’s fiscal strategy has been to target reasonable surpluses to provide a buffer against unforeseen circumstances and shocks and to ensure the sustainability of high quality services. However, the magnitude of this unprecedented fiscal shock is larger than the buffer. This could not have been foreseen; I think we have gone over this a bit in question time as well. In fact, today the Australian markets fell to five-year lows, and world markets dropped as Wall Street fell to its lowest level since 1997. But the buffer we had has worked to ameliorate the full impact of the shock.
Where to from now? I believe it would be irresponsible economic management to make policy decisions for the sole purpose of delivering surpluses. Many other considerations such as core service delivery, community safety, risk mitigation and protection also have to be considered. In the interim, we will introduce into the Assembly on Thursday a local initiatives package, delivering a modest program of additional capital projects for the remainder of this financial year.
Given the employment market uncertainty that is now evident as an outcome of the global credit crisis—and it is happening here; I spoke with one training company that
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