Page 215 - Week 01 - Wednesday, 26 February 2014
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In the context of the 2013-14 budget review, the territory faces a period of growing economic uncertainty caused by the Liberals, beyond our control locally. Perhaps it is within the purview of some influence by the shadow treasurer, although I acknowledge that there are limitations even to his powerful influence within the Liberals. But it is the Liberals who are going to cause this significant mugging of the ACT economy in the coming budget.
The economic outlook for the ACT has undoubtedly weakened since the 2013-14 budget. We see daily reminders in the nation’s media about the effects of the fiscal consolidation by the commonwealth government, the Liberals, on the territory. The full extent of the mugging of our economy by the Liberals remains unclear, but presumably we will hear more about it with the release—we hope with the release—of a National Commission of Audit report prior to the federal budget.
What I can say very clearly is that, regardless of what the Liberals do to the ACT economy, this ACT Labor government will continue to support our community to face this uncertainty. We will do so through prudent and sensible management of our public finances and of the territory economy.
We are forecasting a return to a balanced budget in a managed way that does not add to that uncertainty. Why a balanced budget? It is important, in the context of public debate about surpluses and deficits, and also in the context of public debate about the different levels of government within this federation, and the responsibilities that these levels of government have, to realise that, simply, running a surplus or a deficit for the ACT does not crowd out private sector investment in our economy; it does not impact on interest rates or the capacity for the private sector to access finance. The ACT government’s budgetary position does not impact upon the private sector at all. It does not impact on their ability to borrow money. That is different from the national government, which is obviously a much larger player in the territory economy.
For that reason, the idea that the ACT’s fiscal position can crowd out private investment is simply a furphy. The important point for us to consider as we go into the next budget round, and what I anticipate will be a difficult period for this economy over the next few years, is that critical question: if we are not investing in our economy, if we are not investing in our people, who else is going to do it?
To go to the specifics of Mr Smyth’s motion, there are a number of items that have affected the budget bottom line. The most significant of those is a change in the valuation of our superannuation liabilities, a long-term liability. That accounts for $50.4 million of the fiscal impact that Mr Smyth is so interested about. That simply relates to an accounting treatment based upon the prevailing 10-year commonwealth bond rate and how that relates to the discount rate that is applied for this long-term liability.
Let me give a plain-speaking understanding of this. In essence, when interest rates are low, our expenses will be higher. When interest rates increase above the long-term rate that is set in the accounting treatment, which is six per cent—when that commonwealth bond rate goes above six per cent—this figure would swing around to
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