Yesterday’s ACT Budget involved a lot of back-slapping and self-congratulation by the ACT Government. But that should be tempered by the fact that a lot of work is yet to be done on the expenditure side. The Government has, indeed, improved the fiscal outlook for the ACT considerably over the position at this time last year. However, much of that has to be put down to extra revenue, particularly revenue from the Commonwealth or easy revenue options that merely match the position in NSW or rely on the old milch cows of utilities and gambling.
The Government got an extra $85 million from the Commonwealth (admittedly some of it capital). That represents all but $1 million of the Budget turnaround from an actual loss of $150 million in 1998-99 to the budgeted loss of $64 million in this Budget. So $85 million of the $86 million improvement can be put down to the Feds.
True, the ACT did a huge amount of work to convince the Commonwealth Grants Commission and the Federal Government to come up with the extra money, and for that it should be congratulated. But at the end of the day it is still federal money, not ACT-raised money.
We can at least be thankful for the small mercy that the Federal money is not squandered. The fiscal responsibility should not be underestimated. Too often Governments that find themselves with extra revenue, either from improved economic conditions or from external sources, blow it on vote-buying. Vote-buying in boom times has been a chronic sin of government. The extent that this government avoided the temptation, it is to be congratulated.
Moreover, the Government has laid out a plan to get the Budget into surplus by 2000-01, well before the projection of 2005 that was laid out in last year’s budget. Now that will require some hard decisions, even courageous ones. It means the Government will go into an election year preferring a Budget surplus and fiscal responsibility over budget splurging to buy votes. Thankfully, it defies short-term political gravity. But it makes long-term sense, because governments cannot deliver the service they are supposed to unless the fundamentals are sound.
But a Budget is one matter and reality another. Last year’s Budget was for an operating loss of $139 million which blew out to $150 million.
On the spending side, the Government has been commendably restrained, though it has by no means addressed some of the remaining costly service delivery questions, with perhaps the exception of the Canberra Institute of Technology.
Some alarm will go out in the ACT Public Service over the decision to axe 450 jobs, which would bring to nearly 3000 the number of jobs that Kate Carnell has cut from the Public Service since self-government. But the alarm is misplaced. The ACT is in the fortunate position of having a highly educated workforce. With the high education comes flexibility and the ability to get employment outside government. This is unlike the situation in rust-belt towns and cities in Australia. In those places, high, chronic unemployment has followed cuts to their major industry. Cuts to the ACT’s major industry (public administration) have not resulted in chronically high unemployment. It blipped up, but now employment, participation rates and economic growth are among the highest (if not the highest) in Australia.
The lesson there is to nutter education. It is an essential role of government. It is as important as attracting business.
One of the most disquieting features of the Budget is the targeted redundancies in education, under which only people over 45 can apply. The thinking is too short-term. We will be crying out for teachers in a decade. In any event, people over 45 are by no means over hill in their profession. Older teachers can no longer rely on the protective hand of Michael Moore.
That said, education should not be immune from scrutiny. Class sizes and school sizes remain issues. The Grants Commission reveals that the ACT is not as cost-effective as other jurisdictions in education or health. And it is not a question of paying more to deliver a better service. The service is not as good, according to surveys of customers.
Also on the spending side, the Government has tried to face what it has trumpeted as the single most important fiscal problem facing the ACT – public sector superannuation. It said it wanted to sell Actew to fund it. Another view might be that it wanted to sell Actew and used superannuation as an excuse for doing so. But it did not get its way.
So now it tries another trick. It will take a lump sum of $300 million out of Actew to fund superannuation. There are several things wrong with this. First, it will have to be rethought if Actew merges with neighbouring company Great Southern Energy. Secondly, it is just account shuffling and ultimately the customers of Actew, the ACT taxpayer, will have to pay. The liability remains. Whether the item gets through the Assembly is another matter. In effect it is selling $300 million worth of Actew to fund superannuation.
On the revenue side, the utilities cop it again with the new water tax. Perhaps voter anger is once removed.
And gambling is becoming a too-easy target for state and territory governments. This is an alarming trend. Gambling taxes are now at $54.8 million, or nearly 10 per cent of ACT taxes. They are more than half the amount raised by rates. And more than a third of the amount raised by payroll taxes. They are double the amount raised by land tax. In short, the ACT Government, like its state and territory counterparts elsewhere in Australia, is becoming dangerous reliant on gambling as a revenue raiser. Last year gambling taxes were 9.2 per cent of ACT taxes; this year it is 9.8 per cent.
The absurdity of it is that the Government feels obliged this Budget to spend an extra $0.5 million to research the social costs of gambling while itself reaping more from this social scourge.