Chief Minister Jon Stanhope was right when he said a couple of weeks ago that “Canberra is booming”.
There are many reasons for that. It takes time for an economy to boom — and time for it to falter.
Canberra has had artificial booms in the past when the Federal Government has poured money in: Menzies in the 1950s and Whitlam in the early 1970s.
This boom has stronger foundations, but foundations that can be eaten away by profligate governments. And we are seeing some signs of that now. A good example is the long-service leave proposal. More of that anon.
Canberra’s boom had it seeds in the slash and burn of the early days of John Howard’s Prime Ministership. It was a micro example of Margaret Thatcher’s efforts in Britain: pretty ugly early on, but – as with a garden – responsible for some vibrant growth later.
It was helped by the ACT Liberal Government of the time getting the ACT Budget back into the black and ensuring taxes, charges and other burdens on business compared well with NSW.
Stanhope inherited an economy on an upward trajectory. No matter what he did, it was going to be good for several years.
He was further helped by the property boom which delivers money straight into state and territory coffers, and also by the GST arrangements. The Federal Government collects the GST and pays all of it to the states. The revenue has boomed in confluence with the credit blow-out as people pay GST on the goods and services that they buy with their new-found credit.
The GST is fine, but the arrangement whereby it all goes to the states will be Howard’s most damning legacy because (unlike his other errors) it cannot be remedied because it requires the concurrence of all states. By and large state and territory governments are not as competent or resistant to special interests as the Commonwealth and yet they have been handed a GST windfall to misspend.
They have shown no inclination to reduce other taxes in line with the GST boom. To the contrary. And the ACT has been one of the worst offenders in the past couple of years.
Half a dozen actual and attempted ACT Government tax and business impositions show a horrible tendency.
The Government budgeted for a small deficit in a boom year when solid fiscal management demanded a large surplus. When the boom was bigger than predicted and federal money was greater than predicted, the Budget position improved, but the Government promptly earmarked the new surplus for spending.
The Government abandoned the previous Government’s easing of payroll tax. Payroll tax is 6.85 per cent on all the payroll above $1.25m. It should have gone to $1.5m, but that was abandoned. So we have a legislated insidious bracket creep. The message to employers is: do not employ more employees. In fact, cut your employment numbers as wages rise to stay under the $1.25m threshold. Worse, the message for prospective employers is: do not come to the ACT at all.
Opposition Leader Brendan Smyth has rightly being making a fuss about payroll tax and other anti-business measures.
The proposed portability of long-service leave is a private members’ Bill put up by Labor MLA Wayne Berry. Stanhope would be wise to quietly abandon this Bill or at least amend it heavily. Long service leave was supposed to be for people who stayed with one employer for a long time to encourage loyalty and to give people a chance for a long break. People who flit from job to job get chances for a long break. This Bill is a 1970s-style, bureaucratic nightmare. It sets up a board of six members plus staff and a fund. The fund will be made up of a levy of about 2 per cent on total payroll. The Minister can vary the rate. It will be administered by quarterly returns provided by all employers. The administration costs are huge and wasteful. Once again the message to employers is: don’t employ people in the ACT; go to NSW. This is not doing the workers any good. Two percent may not sound much, but for some business it is the survival margin.
The same message comes with industrial manslaughter laws. Existing manslaughter laws cover death caused by negligent employers. This special category is unique to the ACT. It says: set up business in NSW rather than the ACT.
The new occupational health and safety rules allow for union officials to have inspection rights. This is about power, not safety. Occupational-health-and-safety inspection should not be done by employer or employee representatives; they should be done independently.
True, there has been a lot of scaremongering from employers, but perception is sometimes reality. National employers could be getting a view that the ACT is making it tough for business.
Failure to index land tax has meant ACT land tax is much higher than in NSW (except for the very highest-value properties). Stamp duty was increased two years ago. It means that the increases now apply to averagely priced homes. Again, an invitation for investment and job seekers to bother with the ACT.
Several other taxes have been defeated or abandoned after campaigns by the Opposition, business and others: the revamped rates; the stamp duty on loan securities and the bushfire tax.
The Government has produced an economic paper which has worthwhile aims, including to make Canberra a good place to do business. The Opposition calls it a “statement of the bleeding obvious”. Maybe. But it is a statement of the Government’s intention and the Government’s detailed arrangements have to be measured against it.
Long-service leave is a test for Stanhope. What is more important, the ideals of his economic white paper or pandering to the left-union faction of his party?
The trouble is, none of these economic items will affect the vote much this year or even the election beyond. Business decisions – to employ or not, to move or set up in the ACT or not – take a while to drip through. When they drip through they inevitably affect the very people Labor professes to represent. Over-spending, over-taxing Labor Governments can last quite a while, but ultimately the economics catches up with them, and then all of their worthwhile social aims get reversed or go out the window when the other lot gets in – all because of a simple failure to keep an eye on the purse strings.