Page 3491 - Week 08 - Thursday, 18 August 2011
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Because of its current monetary policy stance and sound fiscal position, Australia has options in both monetary and fiscal policy to respond to a global downturn. Although it is clear that some sectors, particularly tourism and education, currently face challenges from a high Australian dollar, overall the ACT economy is well placed to face any adverse impacts.
But as I indicated earlier, the budget does now face noticeable risks. There is a risk of slower growth in the GST pool due to lower household consumption. If this does eventuate, it will have implications for the ACT budget. There could also be direct impacts if the financial environment changes substantially. These include lower investment returns for both our superannuation investments and the territory’s cash balances, and higher superannuation liability and expenses.
There could be revenue impacts as well, as uncertainty may restrict private investment, which would affect revenue such as conveyance duty and payroll tax. All of these impacts, though, could be partially offset by lower borrowing costs. However, as I indicated earlier, international and domestic economic fundamentals remain strong and the situation is unclear. The risks remain just that—risks only.
The ACT government stands ready to deal with any negative shocks to our economy. We have a track record of sound and sustainable economic and financial management. We will maintain a close watch on events abroad, in Australia and here in the territory. And, if necessary, we will act. The underlying budget structure is sound as a result of prudent financial management. If a negative economic scenario unfolds, we will adjust our policy settings to maintain the territory’s strong financial position.
The ACT economy continues to perform well, and we benefit from a strong demographic base and an economic structure that will substantially shield us from negative global economic shocks. The territory’s high income demographic and our young, well educated population contribute to a strong workforce participation rate, which, as I indicated earlier, is currently the highest of the Australian jurisdictions.
Public sector employment is a solid and stable driver of skilled employment in the ACT, delivering job security and a stable income source. It is also a driver of population growth and reduces uncertainty, allowing local businesses to invest with confidence and contribute to the territory’s economic growth. Existing ACT government policy settings will also provide some buffer.
Through our record investments in education and training and our skilled and business migration program, the ACT government are working hard to enhance our already skilled workforce. We are ensuring housing demand is met and we work actively with the private sector over the timing of our comprehensive public works program. And we are working to ensure that our tertiary institutions are positioned for growth ahead in what will be challenging times.
Of course, the commonwealth government’s presence will remain important to the ACT economy. We continue to engage with our commonwealth colleagues so that they are aware of the impact of their decisions on our economy. We know that global uncertainties and soft domestic economic data might put the commonwealth budget
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