Athletes say, “No pain, no gain”.
Last year’s ACT Budget was full of pain: big taxes increases; new taxes; slashes to health and slashes to education.
This year’s Budget has some gains. They are not spectacular, not gold medals nor even personal bests. But they do set the groundwork for Labor’s Jon Stanhope to be re-elected in 2008.
It is not that he has amassed himself a war chest to spend up big in next year’s Budget just before the election. After all, the same war chest would be available to the Opposition when it costed its election promises.
No; the politics and economics are a bit more subtle than that.
People imagine that Canberra is a naturally Labor town, but that is true only at a federal level, and only true at that level because Canberrans, like every other voter responds well to the hip pocket nerve. Federal Labor is seen as the party of bigger government which is good business for Canberra, even for its small business people who elsewhere would be more likely to be Coalition supporters.
At a local level, Canberra has not been a Labor town. Indeed, the 2004 election returned the only Labor majority in the nearly 40 years of elections for the Assembly (whether pre or and post self-government).
The slash and burn last year followed by this year’s Most Boring Budget since Self-Government were not to build up reserves for spending next year. They were to address other fears and hopes.
Labor fears being seen as fiscally irresponsible. Stanhope well knows this was the undoing of Gough Whitlam and Rosemary Follett and was the main reason Labor’s Wayne Berry lost to the Liberal’s Kate Carnell.
Perception is more important than reality, of course. The Libs can get away with fiscal irresponsibility – witness Trevor Kaine or federal Treasurer John Howard in the Fraser years.
This is the Stanhope Government’s sixth surplus Budget. Even so, before last year’s slash-and-burn Budget the ACT was heading down the financial gurgler. Half-empty schools, an extravagantly costly heath system and over-the-top public service superannuation would have, after a time, caught the Government out. Unless Stanhope had fixed them last year, the Government would have had to raise taxes substantially.
And therein lies the rub. In the ACT, raising taxes has been shown to be more electorally damaging for Labor than cutting spending.
This is for two reasons. One is that voters objecting to spending cuts have nowhere else to go. The Libs are not going to be more spendthrift. The other reason is a more peculiar to the ACT. In other jurisdictions, a spending cut like, for example, the closing of a school in Cook, would result in a heavy campaign against the local member, and perhaps the loss of a seat. But the ACT’s multi-member system precludes the effectiveness of that sort of voter backlash.
There was no tax relief and there was nothing for business, but taxes did not go up.
On the hope side, Stanhope wants to prove his fiscal rectitude so he can stay in office to deliver what he sees as an important human and civil rights agenda – unlike any other political leader in Australia today.
He also knows that perceptions on the ground are important in Canberrans. Canberrans, with their history of a newish, well-planned city are averse to seeing run-down public infrastructure. That is why this Budget contains quite a bit of maintenance, which is not especially costly, and new capital works – again not very expensive when amortised over the works lifespan.
So, expect another steady-as-she-goes Budget next year, too.
Having said that, the Budget contained a few policy follies and inconsistencies, and no doubt more will come out in the next week or two as people scan the thousands of pages of fine print.
The housing affordability spending is a joke. The Budget provides $9 million for it. Well, about 9000 dwellings are sold each year in Canberra. So that is $1000 each, or even if you are dealing with only the bottom half, $2000. It is a classic of seeing to be doing something. It is an utter waste of money for government to bash its head against market forces when it has other more important things to do.
The fine print on traffic fines is astonishing. The Government is going to add $10 to every fine to raise money for victims of crime. Worse, the Budget predicts a 44 per cent increase in revenue from fines in 2007-08 – from $14 million to $20.5 million. This is because of the recently announced increase in speed and red-light cameras and a program to fast-track maintenance on existing cameras.
The Government often responds to the accusation of “revenue-raising” by saying it hopes to lower revenue by using the cameras to make people slow down. That would be credible until you look at the estimated revenue for 2008-09, 2009-10 and 2010-11. It goes steadily up. Clearly the Government does not think the cameras are road-safety measures. Either that or it is not putting enough of them in to make more motorists think twice about speeding.
The doozy, of course, is water. The Government gets $60 million a year from Actew. In the short term it may enforce Stage 4 restrictions and loose revenue. In the long term, though, it wants to keep that revenue stream up.
It plans to spend somewhere between $250 million and $600 million in the next four years on every big engineering idea imaginable to ensure Actew remains the monopoly supplier. Heaven forbid that you spend the $600 million – about $6000 per household – on rain-water tanks and grey-water recycling. That would remove high-priced top-end Actew water from household consumption.
On the federal level, the ACT Budget – along with those of all states bar NSW — could help put a chink in Prime Minister John Howard’s argument about the fiscal danger of wall-to-wall Labor Governments. Nearly all of them have been producing surplus Budgets year in and year out. Further, these Budgets show that the Commonwealth is the big spender and big taxer – bigger now than it has ever been.
Yes it was a boring Budget, but as they say about Switzerland, life can be pretty good under boring government.
crispin.hull@netspeed.com.au