The Carnell Government’s proposal to bring down a three year has merit, but it has risks. It will give business, community groups and government agencies a greater degree of certainty for planning. Some community groups, of course, have already been promised three-year funding. Business will take some comfort in the knowledge that no new imposts will be sprung upon them. The three-year plan will also be a demonstration that the Government is determined to get into genuine fiscal surplus by the end of the three years. The Government will be tested by the benchmark it sets itself, provided, of course, that it does not engage in figure massaging which has been a hallmark of Governments throughout Australia in the past decade.
The lack of government financing standards will result in a fair amount of political dispute about the underlying deficit and level of borrowing, but it appears the ACT has been chewing through reserves at an unsustainable rate and borrowing for recurrent spending.
The three-year proposal will help provide a better framework for the ACT to compete against other states to attract desirable business.
In an ideal world, the nonsense of states and territories competing to give the most freebies to business at the expense of the revenue base and services to the population would be prevented. Perhaps the Grants Commission should penalise states that engage in it. However, the ACT has to deal with the fact of the NSW and Victorian Governments engaging in Kings Cross finance and St Kilda Road economics and is forced to respond.
A three-year budget can help that response in creating a more certain business climate. But in the rush to flaunt our fiscal rectitude to business, the ACT Government should remember that one of the major reasons that many businesses find Canberra attractive is the governmental infrastructure available to the business and its employees and their families, particularly education, roads, health services, water quality, low crime rates and so on. It may be sensible to give some cash incentives to business (provided the extent of them is ultimately disclosed to the public), but it would be counter-productive if so many are made that the very infrastructure that makes Canberra attractive is threatened.
On the down side, there is a risk that the Government will get locked in to its spending and revenue levels and will fear responding to new circumstances appropriately because it will be accused of breaking promises. A lot will depend, of course, on the amount of detail provided for the second and third year Budgets. The greater the detail, the more the Government will be locked in.
On balance, there is a lot to be said for a Government setting bottom-line results over several years. It will make the Government more accountable … it will be accountable to targets that it set itself. It should prevent pre-election spending sprees and discipline the Government to properly fund expenditure programs.
The proposal tempers the ACT’s situation with some realism … that in the face of reduced Commonwealth grants and reduced Commonwealth spending, the territory must develop a business base that is deeper than tourism and developing and redeveloping land to house federal public servants. Otherwise most young people will have to leave Canberra to get work.