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ACT Budget 2019: ACT to go into deficit to pay for infrastructure splurge

Ian Bushnell 4 June 2019 75
ACT Chief Minister Andrew Barr outlined the 2019 ACT Budget this afternoon. Photo: George Tsotsos.

ACT Chief Minister Andrew Barr outlined the 2019 ACT Budget this afternoon. Photo: George Tsotsos.

The ACT will dip into deficit over the next two years as the Government ramps up infrastructure spending to meet the demands of a fast-growing national capital and the shortfall left by the federal Coalition’s re-election.

Chief Minister Andrew Barr says with interest rates at historic lows and Canberra growing by 8000 residents a year there is no reason to wait, and the ACT will borrow more within its AAA rating framework to deliver the biggest infrastructure program in the history of self-government.

This amounts to a $469.5 million investment in services and a $787.2 million pipeline of capital projects over the next four years.

As a result, net debt will increase from $2.1 billion to peak at more than $3.36 billion in 2021-22, before receding slightly in 2022-23, but Mr Barr says this is prudent and affordable.

While there will be deficits of $89 million and $66 million in 2019-20 and 2020-21, Mr Barr says there will be a return to a $400 million surplus in 2022-23, with cumulative surpluses of $500 million over the next six years.

ACT Budget 2019

Chief Minister Andrew Barr says the Territory government will forge ahead with infrastructure spending plans despite the coming deficit. But crunching the numbers is a challenge post Federal election.

Posted by The RiotACT on Monday, 3 June 2019

Mr Barr is banking on the ACT’s resilient housing market, whose outlook remains positive despite declines in other overheated cities such as Sydney and Melbourne.

On the revenue side, residential rates revenue will rise from nearly $360 million to $388.4 million in 2019-20 due to a larger property base and tax reform.

But for the first time, rates for houses and units will be rated differently in response to the 2018 Legislative Assembly inquiry into the methodology for setting unit rates.

Rates for houses will go up 7 per cent, the same as last year, while unit owners will face an 11 per cent rise, which the Government say will mean around 98 per cent of unit owners having to fork out $100 more per quarter or less.

Mr Barr says the Government is aware that households are hurting from the impacts of tax reform, and that the heavy lifting is now over, with the rate of growth in rates to slow as the ACT moves towards the next five-year phase of the tax reform program.

Commercial rates, which have also drawn the ire of businesses, will go up 6 per cent, with 2018-19 revenue of $199.1 million, increasing to $211 million for 2019-20.

From 2020-21 the Government will lengthen the period used to calculate the average unimproved value for commercial properties, a change that will be implemented in consultation with industry over the coming year to deliver more predictable rates bills for commercial property owners.

Stamp duty will continue to decline as a revenue source but it will still contribute about $190 million in 2018-19, less than expected due to a softening in the housing market, and much the same in 2020-21 before picking up again.

Household fees and charges will be held to the Wage Price Index, but motor vehicle registration will also include a levy of $16 per vehicle to help establish the new Motor Accident Injuries Commission.

Much of the infrastructure program has already been announced, such as the Canberra Hospital expansion and the new schools in Gungahlin.

But there is money for a new opioid addiction clinic on the northside and planning for a new college also on the northside where population pressures are building.

The Government will also press ahead with planning for a safe injecting facility.

Light rail may be off the fast track, but Mr Barr says the Government remains committed to extending the line to Woden, with $68 million earmarked for design and enabling work, and getting the Woden interchange ready.

Affordable housing is on the agenda with a new Common Ground project to be built in Dickson delivering 40 units.

In the coming year, the Government will commence the next stage of its $100 million housing strategy to deliver 200 more homes and renew 1000 properties.

The 2019-20 Indicative Land Release Program will see another 15,600 sites for homes released to the market over the next four years in a mix of urban renewal areas and new suburban estates. In 2019-20, this will include 488 affordable housing blocks, 140 sites for social and community housing, and 294,085 square metres of land for community uses.

The Government has moved to speed up development applications with an immediate $1 million for extra staff, growing to $3.8 million over the forward estimates, funded by an increase in application fees.

The Government will release a new Climate Change Strategy and Living Infrastructure Plans in coming months. They say the first investments will be in transport, reducing natural gas use, and mitigating the heat island effect by increasing tree canopy and other living infrastructure.

Amid concerns that the city’s urban forest is not being replenished, the Government plans to plant 17,000 more trees over the next four years.

It will also re-establish the Ingledene Forest, which was destroyed in the 2003 bushfire, at a cost of $1.7 million over four years, and create a new special purpose reserve in the Molonglo River area for the conservation of native plants and wildlife by remediating the former Molonglo Sewerage Treatment Plant.

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75 Responses to ACT Budget 2019: ACT to go into deficit to pay for infrastructure splurge
Chris Hobbs Chris Hobbs 10:20 am 10 Jun 19

First world problems

Ursula Gamal Ursula Gamal 12:08 pm 07 Jun 19

So, is it coming in the form of super rate hikes? Put paid parking in the Federal Government triangle. Get the embassies to pay a decent amount for land. Make Canberra an IT hub for international investors.

justin heywood justin heywood 10:13 am 07 Jun 19

A ‘SHORTFALL’ based on the assumption that his team would win the election?

I had $100 on the Blues to win the State of Origin. I wish I could get some poor schmuck to make up my shortfall.

I know Barr thinks he’s preaching to the converted, but I’m amazed he can keep a straight face when he peddles this argument.

Blake Anthony Cross Blake Anthony Cross 8:01 am 07 Jun 19

Laughing all the way to his home thou

Neil Gavin Neil Gavin 7:54 pm 05 Jun 19

Rates for houses will rise on average by 7 per cent while unit rates will increase 11 per cent, the 2019 budget handed down on Tuesday.

Capital Retro Capital Retro 6:41 pm 05 Jun 19

Daniel Königs refers to “pandering to boomers” like most of the rest of Australia.

What exactly do you mean?

    Gilavon Gilavon 3:06 pm 06 Jun 19

    Daniel doesn’t like it that the boomers hold the greatest amount of wealth in Australia and won’t readily hand it over to …. ha, ha …. ha ha ha …. “progressives” … ha ha ha …. whatever “progressives” are supposed to be. They seem to be pretty good on soy latte and signalling their virtue but do nothing productive or constructive.

    Capital Retro Capital Retro 4:14 pm 06 Jun 19

    Oh, he means baby boomers – for a moment I thought he was some sort of tree-hugger speaking on behalf of oppressed kangaroos.

    Gilavon Gilavon 9:02 pm 06 Jun 19

    OMG!! How iggorant of me to think he might have been talking about people like me! Roo’s are oppressed, I o’press my roo into the skillet along with onions, garlic, then add a touch of mild English mustard, goes down well with Lerida Estate 2017 Cullerin Syrah.

HiddenDragon HiddenDragon 5:53 pm 05 Jun 19

“The ACT will dip into deficit over the next two years as the Government ramps up infrastructure spending to meet the demands of a fast-growing national capital and the shortfall left by the federal Coalition’s re-election.”

The spin is always the same, deficits – and the associated rapidly rising taxes – are always presented as being solely due to spending which is relatively easy to promote and defend, and not so easy to criticise.

Interestingly, deficits (and taxes which rise far more quickly than incomes) are never, for instance, due to the combined costs of spending on follies and frolics, pet projects (some of which may be small, but they all add up), extensive propaganda operations and an instinctive tendency to see ever-expanding regulation and bureaucracy as the solution to every issue and problem (real or imagined) which surfaces in the meandering stream of public discourse in the ACT.

    Capital Retro Capital Retro 11:40 am 06 Jun 19

    Spot on. The ACT government with it’s increased number of seats now has 22,000 public servants who are compelled to support Labor.

    It’s now impossible for this nexus to be disrupted by election of the opposition however an administrator could do it and that’s the way things are heading.

Roger Mungummary Roger Mungummary 3:17 pm 05 Jun 19

Yeah let's prioritise red elephants over things we can't put our name on, like say community housing to reduce the years long waiting lists. I mean who cares if pensioners and the unemployed can't afford a roof over their heads! Labor party? What a joke

Capital Retro Capital Retro 9:05 am 05 Jun 19

That unfunded public service defined benefit pension liability has blown out by another $1 billion and it will peak at around $10 billion but who cares?

    chewy14 chewy14 10:39 am 05 Jun 19

    I don’t know how many times this needs to be explained to you but the government has planned and is actively funding the account based on actuarial assessments.

    The liability is predicted to peak in 2032 at $9.6 billion and we already have over $4Billion locked away in the provision fund, with a few hundred million being added each year.

    It’s not an issue that is forgotten, it’s actively being managed and is readily affordable.

    Were these schemes extremely generous and should have been changed earlier? Yes.

    Are we dealing with that historic problem? Yes.

    Capital Retro Capital Retro 2:55 pm 05 Jun 19

    So, why don’t they declare the aggregate liability?

    Tell me again and again if you have to.

    chewy14 chewy14 9:03 pm 05 Jun 19

    What are you talking about?

    This isn’t an insured liability, it’s simply a liability. That actuaries assess against expected investment returns, likely pensions and people’s lifespans to work out because of the complexities of the defined benefit schemes.

    The point is that you keep ignoring the fact that it’s actively being planned for and we have over $4billion saved. Even if the assessment are wrong, it would only mean a couple of years of extra payments that we’ve already been paying for years without people really noticing.

Gavin Mcmullan Gavin Mcmullan 9:03 am 05 Jun 19

Yes the interest rates suck but with such low interest rates it’s a perfect time to go into a deficit.

I swear to god , why does every Australian (with a mortgage, credit card and car loan) start freaking out when they hear “Government debt”

    Daniel Königs Daniel Königs 10:22 am 05 Jun 19

    Gavin Mcmullan because the Liberals have taught them it’s a dirty word through decades of propaganda while selling the farm and leaving themselves no future income.

Kate O'Hara Kate O'Hara 8:42 am 05 Jun 19

Anthony O'Hara thank God we moved when we did.

nothappyjan nothappyjan 8:21 am 05 Jun 19

Everyone knows Labor means reckless spending and living beyond their means, which means higher taxes through rates, stamp duty, land tax, parking, annual dog registration etc etc. Yet the majority of Canberra keep voting them in despite knowing it will mean much higher costs for home owners, and therefore high flow on costs renters too. Yet we get some of the worst public health in the country, public transport that actively discourages use, and increased debt and taxes year on year. Surely if people like to be punished with extreme pain then there are businesses in Fyshwick and Mitchell that could cater for them instead of continuing to vote in Labor? But let’s face it, the majority of Canberra probably doesn’t even know who is charge of the opposition, who seem to be veey content with doing absolutely nothing. Surely this self harm of voting for ACT Labor has to stop.

maxblues maxblues 11:50 pm 04 Jun 19

$3.36billion debt!

Daniel Königs Daniel Königs 11:31 pm 04 Jun 19

Deficit isn’t a dirty word. Governments should be spending money on infrastructure to encourage future growth. Only the liberals like to bank it and scream surplus while the future suffers.

Dorinda Lillington Dorinda Lillington 11:19 pm 04 Jun 19

Going into debt is never a good idea. What are we teaching our children that is okay to live beyond your means. I don’t think so.

    Dave Shelling Dave Shelling 6:21 am 05 Jun 19

    Dorinda Lillington speaking as an economist, going into debt at this time is a very good idea.

    At a time when interest rates are the lowest in human history, the territory is likely to see negative growth due to Commonwealth policies and general global economic conditions area terrible, this is exactly when we should be in deficit. We borrow money now to build infrastructure (creating jobs), which generates a return on the future.

    Think of it this way. If "our children" were sticking clothes and movie tickets on a 22% interest rate credit card then it would be living beyond their means. If they buy a house right now with a loan at 3.5% interest then they are investing in their own future. Running an infrastructure-spend deficit right now is the latter.

    Helen Kendall Helen Kendall 8:54 am 05 Jun 19

    I agree Dorinda time we lived within our means which is becoming increasingly harder in Canberra when you retire and ACT Government changes the rules on Stamp Duty and ridiculous rate increases every year. People budget for retirement. Anyone who paid stamp duty should not be double dipped by this Government with these ridiculous rate increases especially when we get our taxes wasted on useless projects ie trams, paying football teams millions to play in Canberra meanwhile people wait for years for elective surgery. Debt debt is a Labor mentality. Time MLAs were more accountable for their actions and there was a qualification to become a MLA.

    Gavin Mcmullan Gavin Mcmullan 9:01 am 05 Jun 19

    Dorinda Lillington people go into debt all the time for good reasons 🤦‍♂️

    Dave Shelling Dave Shelling 10:02 am 05 Jun 19

    Helen Kendall I'm one of those getting "double dipped" for both stamp duty (I bought at nearly the height of the market) and rates. It's still a sensible tax reform, moving from a transaction based tax that is a disincentive to moving to a broadbased ownership tax.

    And there is a qualification to being an MLA - getting enough votes. That's not going to change, unless we make qualifications for voting.

    Daniel Königs Daniel Königs 10:19 am 05 Jun 19

    Dorinda Lillington I hope you’ve never bought a car on finance and you bought your house outright. Heaven forbid you have an investment property you couldn’t dream of affording but are negative gearing. That’s some awful deficit you have there...

    Dorinda Lillington Dorinda Lillington 11:21 am 05 Jun 19

    The only real debt people should have is for a house

    Dave Shelling Dave Shelling 7:24 am 06 Jun 19

    Dorinda Lillington what about HECS? Or should people have to save 30k for an arts degree?

    Car loan?

    Tradies tools? I know a lot of apprentices who have to borrow to get decent tools.

    Business start up loan? Not many people can buy the stock needed for a shop out of pocket.

    Properly managed debt is not some kind of evil spirit - it's a tool for enabling earning, or making life livable.

    All of that is a red herring anyway. Because a government is nothing like a household. Buying tools for a job is something that affects an individual. Fiscal policy at a state/territory or federal level affects hundreds of thousands of people.

    As I said before, in a slowing economy the responsible thing for a government to do is to go into debt to simulate the economy, build expensive infrastructure while government borrowing is incredibly cheap (which in the ACT it is thanks to our AAA credit rating), and get more cash into the employment market.

    Dorinda Lillington Dorinda Lillington 2:11 pm 06 Jun 19

    You have made some good points Dave. But I still fear that is not how things are going. Australia has a massive credit card debt which is very scary. Who is owed all this money? Small investors/ large investors??? You would be able to tell me that being an economist. Given the low interest rates etc surely this is a time to pay debt off. I still don’t think being in debt is a good thing.

    Jeff Smith Jeff Smith 5:13 pm 06 Jun 19

    No problem going into debt, but if the debt is used to cover everyday expenditures then its bad debt. ACT Government should be delivering more infrastructure to the areas in need.

    Dave Shelling Dave Shelling 6:42 pm 06 Jun 19

    Dorinda Lillington generally speaking, the debt is financed through government bonds. They are sold to a wide variety of domestic and international investors, in large and small quantities.

    The ACT government has a AAA rating, and Australian governments are generally considered excellent risks for investors.

    I'll be honest, I'm not actually positive whether the ACT issues it's own bonds or if they use the federal government's system - I'll find out, I'm curious now.

    In terms of paying off debt when rates are low, think about it this way. Everything has an opportunity cost. If I invest in a term deposit account then I'll get maybe 3% interest, on money that's unavailable. Compare that with not paying 22% interest on the same amount if I pay it off my credit card - I'm far better off paying down the debt. On the other hand, I negotiated a very good rate on my mortgage. Call it 4% for the sake of example. If interest rates go up then that term deposit might be worth 5% interest, and I'd be better off saving the money than paying off the mortgage. For the government, interest rates at the moment sit at (probably, at a guess) around 2%. Most business cases for business expenditure need to have a return on investment of around $1.50 for every $1 invested. Assuming governments are responsible and want decent ROI, then their infrastructure spend would get them the equivalent of 30% interest returned.

    Where all that falls over is that government ROI is complex and doesn't equate to pure dollars. What's the dollar value of getting an at-risk kid into foster care? What is the value of a lake that didn't stink (actually about $4m/year in pure economic terms, but that doesn't take into account non-economic factors)? So pure ROI doesn't cut it. But the equivalent to dollars in a business case would (I hope) stack up.

    I also take Jeff's point about debt for infrastructure vs debt for everyday expenditure. If a business borrows money for a new, improved coffee machine then it's an investment. If it borrows to pay for coffee beans then it's going out backwards. So point taken on making sure that the debt is appropriate.

    Jeff Smith Jeff Smith 6:53 pm 06 Jun 19

    Dave Shelling great analysis Dave. Some informative details.

Malcolm Campbell Malcolm Campbell 8:49 pm 04 Jun 19

Isn’t voting labour all the time just grand

Glenn Beaumaris Glenn Beaumaris 7:28 pm 04 Jun 19

So as an ACT resident, I'm being penalised for the rest of Australia voting a particular way last month. How is that fair?? A load of bull. October 2020 can't come soon enough.

    Daniel Königs Daniel Königs 10:23 am 05 Jun 19

    Glenn Beaumaris why is that? Are you rubbing your hands together hoping to see the ACT become Vatican City?

    Steve Wood Steve Wood 12:44 pm 05 Jun 19

    Glenn Beaumaris we all said the same thing last election and Barr still won.. its our own once the pain of 20 and 30% rate rises starts to bite Labor voters it will be to late.. I want my 2003 Stamp Duty back with interest.

    Alan Dalling Alan Dalling 3:44 pm 05 Jun 19

    Daniel Königs no. But being a SWOG, straight white old guy, Barr refuses to govern for me.

    Daniel Königs Daniel Königs 5:44 pm 05 Jun 19

    As a straight white young guy, I hope Canberra continues to build for the future, and does not become a regressive city of the past pandering to boomers like most of the rest of Australia.

    Bob Zeitlhofer Bob Zeitlhofer 5:29 pm 06 Jun 19

    Daniel Königs Mate, boomers bult everything you enjoy today. Got and iphone? Boomer. and so on.

    Alan Dalling Alan Dalling 5:59 pm 06 Jun 19

    Bob Zeitlhofer ahhh Daniel. No generation generates so much waste as this generation. No generation has been as narcissistic as this generation. No generation has ever been as self indulgent as this one. No generation has been as reliant on toys (phones, Netflix, gaming) as this one. Boomers went through 17% home interest rates which you never will. A recession, which I hope you never go through, as well. Boomers knew if they were male or female. Boomers are also engaged in politics more as witnessed by the fact that the younger generations, despite Get Up and the Watermelons leading them by the nose to the ballot box, didn't get what they wanted. Here's some advice for you. Everyone's a socialist at 20, capitalist at 40 and if they are smart, don't give a stuff at 60. Daniel my young friend, the socialists can't hurt me anymore and frankly, I don't give a stuff what X's, Y's, Millennials or Oompa Loompas think. We had cooler cars, way cooler music and weren't jealous of older generations like you are. Now run along and have a gluten free skinny chai soy latte with a twist, meet up with your LGBTI, GTHO, RS, XU1 buddies and keep feeling sorry for yourself. Mmmmm I think i prefer vanilla...

    Daniel Königs Daniel Königs 6:40 pm 06 Jun 19

    Alan Dalling oh is that why your generation clings so hard to their welfare and government handouts like franking credits and negative gearing? You have never seen a tantrum until you’ve seen a boomer with an expired coupon, or who read a sale sign incorrectly. Try working in a service industry and come back after you’ve seen the kind of behaviour coming from 50-60+ year olds that would make a four year old blush.

    Alan Dalling Alan Dalling 6:52 pm 06 Jun 19

    Daniel Königs poor job of profiling. I've worked in retail and hospitality as a teenager and I'd say done some jobs you wouldn't even consider. Your attack weapon of franking credits exhibits your ignorance. I'd lay money rgat hadn't even heard of franking credits 2 months ago. Jump on that bandwagon! You're just pissed off that you wont get a massive inheritance, unlike my child and most children if Boomers will. 50 to 60 year olds rule mate! Just to piss you off more, a mate of mine retired a couple of years ago at 55. His super is $1490 a week, indexed for life and when he carks it, his missus gets 80% of that for life. It's good being a Boomer.🌞

    Netflix and chill brother.

    Daniel Königs Daniel Königs 7:01 pm 06 Jun 19

    I mean unless we tax reform with property prices decreasing and all that “wealth” they’ve accumulated goes down the toilet? Right? 🤔 bet that would be totally unfair wouldn’t it? You worked hard to have an economic boom carry you with it through no skill of your own 🙄

    Glenn Beaumaris Glenn Beaumaris 7:06 pm 06 Jun 19

    Daniel not rubbing my hands together. Just sick and tired of the current ACT govt governing for the few and not the majority.

    Alan Dalling Alan Dalling 7:06 pm 06 Jun 19

    Glenn Beaumaris agree totally. Barr needs to start governing for everyone.

    Daniel Königs Daniel Königs 7:09 pm 06 Jun 19

    You mean doing nothing for the future so you can enjoy your twilight years a little more and leave us all screwed when you’re dead?

    Glenn Beaumaris Glenn Beaumaris 7:14 pm 06 Jun 19

    Daniel it's not about doing nothing, it's about doing the right thing. This has not been happening for the last few years in the ACT. You don't know me, so please don't assume I'm looking at this from my own point of view. The way things are going, the future will bite all of us in the ass sooner than you would expect. Also given that I'm 46, my twilight years are a long time into the future.

    Daniel Königs Daniel Königs 7:22 pm 06 Jun 19

    All I know is Canberra 7-8 years ago was a dull shithole of surface level carparks. We’ve had rapid change, and you’re never going to make everyone happy with that. Especially those who live in the quiet outer suburbs and any a quiet driving city.

Ian Ian 7:26 pm 04 Jun 19

I’m curious about the justification for higher DA fees. Doesn’t more DA’s of itself increase revenue even at the old price, and some of that increased revenue then can be diverted to additional staff to process them? Increasing volume and price seems to be double dipping.

    JS9 JS9 10:54 am 05 Jun 19

    Quite possibly, if the original fee was set at a proper cost recovery level – but if the fee was too low to begin with, then there would be an ever increasing gap between what it would cost to provide the service (in total) vs revenue coming in.

    Who knows with this mob though whats really going on.

Jorge Da Silva Jorge Da Silva 7:08 pm 04 Jun 19

You mean we have to pay for the tram we did not need...

Peter McMahon Peter McMahon 6:42 pm 04 Jun 19

“And the shortfall left by the federal Coalition’s re-election”. Public being treated with contempt yet again by a useless Territory Gov. Cut back on your spending and live within your means just as we members of the public are required to do.

    Lin Van Oevelen Lin Van Oevelen 6:50 pm 04 Jun 19

    A government budget is nothing like a household budget. Infrastructure spending boosts the economy and you would get endless whingeing from ACT residents if they wouldn't spend enough money on it either.

    Annie Mills Annie Mills 7:02 pm 04 Jun 19

    Lin Van Oevelen erp you usin’ logic? You know this is the interwebs right?

    Peter McMahon Peter McMahon 7:05 pm 04 Jun 19

    Lin Van Oevelen Either way it does not condone Politicians relying or speculating and spending on electioneering promises that may not come to fruition (now called a shortfall HA HA HA). Just like the people smugglers were convinced that Labor were going to be elected and accordingly put boats to sea.

    Daniel Königs Daniel Königs 11:32 pm 04 Jun 19

    Peter McMahon that’s not how governments work. Plus I hope you never purchased a vehicle on finance, or heaven forbid a home? How many years did you run at deficit? 🤭

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