Page 1894 - Week 05 - Thursday, 6 May 2010
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It should also be noted that the economic consensus now appears to be that the RBA will raise the official cash rate to around five per cent by the end of the year.
The global financial crisis demonstrated harshly that a reliance on traditional economic stabilisers, with little thought to the improvement of those traditional stabilisers, will leave us in a perilous position in future downturns. The default position must be to create fiscal space and ensure that positive economic times lead to improved fiscal positions. Economists have identified the need to create new automatic fiscal stabilisers to help ease economic cycles. The ACT is limited in what it can do in this regard; however, we should all apply ourselves to the task of building on measures such as the energy concession scheme, to ensure that we allocate and provide assistance and services to the more vulnerable in our community in the event of future economic downturns. We very much welcome the energy concessions scheme increase; however, this year we will still see a proportionate decline in the level of assistance provided to low income households.
The next decade will be rich with challenges and opportunities. Our challenge is to maintain our position as an economic leader as we move to a more sustainable economy, build in sufficient safeguards to ensure the prosperity of the ACT during future economic difficulties and have the foresight to take advantage of the opportunities rather than lagging behind and ending up as bystanders to the economic benefits reaped by those who acted earlier.
The GFC compels us to re-assess the aims behind, and the criteria used to evaluate, future fiscal policy decisions. Governments across Australia spent at record levels to combat the crisis. However, very little analysis was done to assess the broader impact of that spending and it appears that very little has been done to ensure that we are protected from such future events.
Economic results this year mean that we will return to the black sooner. This is of course a positive development, and the Greens are pleased to support the revised deficit strategy. We have consistently said that we support a strategy that takes a measured rather than a slash-and-burn approach. There are benefits in governments spending beyond their means to smooth out economic cycles, and deficit spending is appropriate provided it is suitable for the prevailing economic conditions. The Greens’ view is that we should maintain a balanced budget over the economic cycle.
We must be very mindful of our underlying position and our ability to deliver services when the commonwealth stimulus money dries up. It is important that whilst we are in deficit we are using borrowed money wisely. Borrowing money for future prosperity is a good thing provided the gains are clear and identifiable. Two key examples that the Greens believe should be pursued, but unfortunately have not been, are preventive health spending and energy efficiency spending. These are areas where investment would reap long-term benefits for the whole community.
It is worth noting that the underlying deficit will peak in the 2010-11 financial year at $172.7 million and the expectation for this financial year is a net operating surplus of $54.2 million. This illustrates just how significant commonwealth money is to our economy.
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