Page 1907 - Week 06 - Tuesday, 5 May 2009
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And during the unfolding of the global financial crisis, the Territory’s economy has shown remarkable resilience.
However, the ACT economy cannot remain isolated from the effects of the freeze on credit markets or turmoil on equity markets.
Overall, the ACT’s economic growth has been moderating. This is to be expected given we are coming from a peak of extraordinarily strong growth of more than 10 per cent in 2006-07.
Mr Speaker, the ACT economy is forecast to grow by 2 per cent in 2009-10.
In 2008-09, State Final Demand is forecast to grow by three-quarters of a per cent. This is as a result of a sharper than expected softening in the housing market in the earlier part of the financial year, and relatively flat consumer spending in the environment of increasing interest rates that existed last year.
While the engine room of our economy—the labour market—remains strong there are emerging signs of some softening. Although we have remained close to full employment throughout the unfolding of the global crisis, our forecasts suggest that unemployment in the ACT will reach 3½ per cent by the middle of next year, still below the national rate.
Mr Speaker, the impact on our budget has been more severe.
Since our last Budget, our revenue base has dropped by around $230 million in 2009-10, and annually across the forward years.
This is due to contraction of the national GST pool, loss of income on financial assets, interest earnings on general cash and investments, and the subdued activity in the housing market.
These factors alone contribute to a revenue loss of around $1.1 billion since the last Budget, and around two years growth off our revenue base.
The loss of superannuation investment assets is around $350 million against a forecast growth of $200 million. Our superannuation liability is now only 47 per cent funded compared to 65 per cent coverage at June 2008.
Mr Speaker, these are unprecedented contractions in our operating budget capacity and our financial assets over a very short period of not much more than six months.
An immediate adjustment to reduce expenditure to respond to this contraction is simply not possible without severely impacting on the services we provide to the community.
The Government carefully considered all the options available to us. The easy option would have been to remove our provision for growth in health services, to remove our wages provision or to make massive spending cuts to get us out of deficit.
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