Treasurer Ted Quinlan’s first Budget yesterday was a slow-and-steady affair. That was probably just as well. Now is not the time for grand fiscal adventures. Interest rates are on the rise. Tourism is having a tough time following September 11 and the collapse of Ansett and the Federal Government is not in an expansive mood. Rather there has been a contraction in Federal spending in Canberra because of the electoral period last year.
Mr Quinlan scrapped into surplus. He bemoaned the legacy of the Liberal Government, but for every negative he mentioned – the Totalcare quarry venture, the V8 race and Stadium loses – there was the overall positive of the Liberal years of turning the fiscal direction of the ACT around for deficit and debt to surplus and debt reduction.
There are some welcome things about this Budget. There is no new debt. There has been a marked concentration on health and education – particularly the main public hospital, the medical school and public education — and police. These are core matters of government.
The capital works program – also another core matter – is a worthwhile list. But the Government should make up its mind about the jail – should there be one; where should it be; how should it be financed. It has committed $3.1 million for a temporary remand centre and announced $50 million for a new remand centre to replace the 30-year old Belconnen remand Centre. It would make sense – if we are to have a jail — to have the remand centre and jail build in the same location and the same time.
The main trouble with this Budget is that the Government did not look hard enough at all its programs. In failing to do that it was faced with increasing taxes in order to keep the Budget in surplus, and even then only just and just for one year before going into deficit the following year. The increases in stamp duty cannot be justified. The existing rates already were sharply progressive and were already too high overall all. Asking $10,000 or more from someone buying a dwelling is a big ask. It is also contradictory when another arm of government is spending money inquiring into housing affordability. Stamp duty is now an even greater barrier to people moving to more efficient and appropriate housing. It is an inefficient tax. The increase in payroll tax might tidy up some anomalies, but that could have been done without increasing the overall take.
Ultimately, these taxes will affect business and jobs.
The Government should have taken a harder look at its spending on occupational health and safety enforcement; its very large buses subsidy; and some ideologically driven pet projects.
The transfer to public development of land will send the Budget into deficit in the following financial year for an unlikely gain. The key to better land-development standards was not whether it was done by the private sector or the public sector, but to set down standards and to enforce them. It might have been more efficient to let the private sector continue to develop land, under better guidelines.
Mr Quinlan says that, with the groundwork in this Budget, over a four-year cycle the Budgets will be in balance. It is too convenient. This year balances only just. The following year is in deficit – happily coinciding with the election. And the hard yards are left for the two following years. It would have been more believable if the Treasurer had earned the deficit year and the just balance year with a couple of good surpluses first, instead of engaging in the credit-card mentality of spend now and pay later.
The Government will have to take care that there are no overruns on the spending side in the next year and it should revise its spending the following year to eliminate the prospective deficit.