Page 1593 - Week 05 - Tuesday, 31 March 2009
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Following on—in terms of whether we have a narrow revenue base—all states and territories have a narrow revenue base because, under the constitution, as I have outlined, states cannot tax income or consumption. This leaves transactions and property as the areas that states and territories can tax. Around 82 per cent of taxation in the federation is by the federal government; that is, around 18 per cent is left for the states and territories to raise. However, around 45 per cent of the expenditure is at the state level. The issue of a narrow revenue base for states and territories has been well recognised by the federal government in establishing the Henry tax review.
In terms of diversifying the ACT economy—and this is something that the opposition have argued at some length—I do not think you would find anyone who would disagree with having a diverse economy. But to say that would mean the ACT economy does not have a diverse economy, we would say, is not the case.
It is important to recognise that there are some industries that the ACT economy can simply not support. For example, mining and agriculture are highly unlikely to ever be sources of economic activity in the ACT. On the other hand, the ACT will have a large government sector for a long time to come, and hopefully forever, as Canberra is the seat of the national government. This could be viewed as a positive, as it provides a strong and generally stable source of economic activity. Government administration and defence count for about 30 per cent of the ACT economy and, abstracting from these sectors, however, the ACT economy is not that different to the rest of the country.
The main differences are that the ACT has relatively greater shares of property in business, services, education and construction and relatively lower shares in manufacturing, finance and insurance and wholesale trade. The calls for a more diverse economy are really calls, I think—and maybe Mr Smyth will go to this—for greater manufacturing and wholesaling sectors for the ACT and perhaps less emphasis on business services and education.
But the ACT government’s business policy is not to pick winners. Our policy is to create an environment where all businesses can operate efficiently. It is not that clear that artificially generating manufacturing or wholesaling, for example, is the best direction to take the ACT. The value added per worker in these sectors is lower than in the service sector. It could also be argued that the strength of the ACT’s education and business services is something that should be supported as adding significant value to the economy.
The government would rather focus on ensuring that the private sector can grow strongly, and this is already happening. The December 2008 ABS quarterly business indicator survey showed that both sales and wages and salaries in the ACT private sector are growing more strongly than in almost every state or territory. The 2008-09 budget supports an unprecedented investment of $1.4 billion in the territory’s infrastructure to increase the productive capacity of the economy, support the growth of the city and improve its amenities to provide a competitive edge to attract people in business. And we will continue along the path that we have already established.
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