Page 3415 - Week 08 - Tuesday, 17 August 2010
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video
are in a very different position. We know that the public sector is the major sector in the ACT economy.
A recent Access Economics report found that “the territory’s medium term prospects have hung in the balance ever since it became clear that federal government expenditure needed to be reined back over the next few years”. In another Access Economics report they stated that the ACT is a “small and open economy, and that combination makes it especially sensitive to changes in the economic environment”. We note that a significant reduction in public expenditure in the ACT will not only have an impact on the quality of the outcomes for the whole of Australia but also it has the potential to significantly reduce growth in state final demand and gross state product.
Canberrans remember 1996 and 1997 when the last round of significant public service cuts took place. Big public service cuts led to unemployment for families and a recession in Canberra, as well as house prices falling by around 30 per cent. It has taken a long time for the local economy to recover, with the knock-on effects being felt by Canberra’s small business community for years after. We are now a very strong economy, only recently having just missed out on top spot, in comparison to other states and the Northern Territory, by one measure, a place we occupied for the previous two quarters. As well as this, we have just learned that we are in a much healthier fiscal position than previously thought.
There are currently around 7,000 Canberrans out of work. Imagine what it would mean to our fiscal position if all of a sudden our unemployment rate almost doubled. If we lost more than 30 per cent of our stamp duty revenue, as well as all the other revenue losses that would result, what would that mean for our ability to deliver the services that Canberrans need?
The ACIL Tasman report prepared for this year’s estimates committee inquiry states that the ACT is an economy whose outcomes are heavily influenced by the consumption and investment decisions of the Australian government. In 2008-09, the Australian government represented 51.3 per cent of total demand in the ACT economy, compared to household consumption that made up 31.6 per cent of total demand, private investment which made up 10.2 per cent, and 6.9 per cent for the ACT government. In total, the government sector, including all levels of government, made up over 58 per cent of demand for the ACT economy in 2008-09 as compared to just over 21 per cent for the New South Wales economy.
By another measure, workers in the commonwealth government administration contribute around 35 per cent of our gross state product. What also need to be considered are the flow-on effects of such cuts to the public sector that would have a devastating impact on the private sector as well. A senior economist at ANZ, Shane Lee, said on the construction industry:
For the rest of the year I think the public sector will still be a reasonable support for demand, so if the public sector wasn’t there activity would probably be falling because outside work done by the public sector there really isn’t too much.
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video