Page 2985 - Week 07 - Wednesday, 30 June 2010
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I would like to turn to the ACIL Tasman report, which is, of course, the best independent economic analysis of the budget that we have available to us. The key finding on page 1 is that the budgetary position is sustainable but there are some emerging fiscal pressures, particularly the very large capital works program.
The particular set of economic circumstances that we face makes it somewhat difficult to define the budget as having a cyclical or structural deficit. We are in a period of low unemployment, below the five per cent threshold at which deficits can be said to be structural. However, given the particular nature of recent economic events, the recovery period that we are now in, and the fact that the reason for the deficit is the capital works program rather than service delivery, there is an argument that the deficit is consistent with cyclical activity.
The short to medium-term economic circumstances we find ourselves in appear to necessitate this level of spending to maintain employment and correct the cyclical activity we are experiencing. However, as the ACIL Tasman report notes, the large infrastructure program in light of the territory continuing to have a strong market needs to be justified.
The deficit will not impact upon our credit rating, which will remain at AAA. I note that our net financial liabilities to revenue are the lowest in the country. Whilst we did express concern about the repayment time frame for some of the bonds, we are generally happy with the proposed means to fund the deficit. The Greens do support the revised deficit strategy and are, indeed, very pleased that we will be returning to surplus sooner than previously forecast. We do agree that a measured approach should be adopted, and we recognise that there are still significant international economic uncertainties, as well as domestic ones, and, most particularly, commonwealth spending decisions that must be taken into account in the determination of our fiscal policy.
That said, I would take the opportunity to reiterate the ACIL Tasman report concern that the required savings to achieve a surplus have not been identified and whilst it is, as the government said in its response to the estimates committee report, appropriate that these measures are not incorporated in the published forward estimates, it is important to recognise that traditional savings measures such as efficiency dividends and staffing freezes may well be insufficient to properly address the situation. I note that one of the listed priorities for Treasury in the budget papers is to identify options to achieve savings to ensure that the budget returns to surplus in 2013-14.
The ACIL Tasman report finds that the long-term forecasts appear reasonable and that the outlined strategy eventually improves the fiscal sustainability of the ACT. The key concern expressed in the ACIL Tasman report is that the budget has gone into deficit to fund the capital works program. The beneficiary principle and intergenerational equity principles operate to some extent to mitigate these concerns. However, as I said earlier in the debate, the nature of the particular expenditure initiatives must be carefully considered to ensure that these principles are applicable and that the infrastructure does in fact represent a sustainable and desirable long-term asset for future generations.
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