4 June 2019

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

| Ian Bushnell
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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.

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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justin heywood10:13 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.

Capital Retro6:41 pm 05 Jun 19

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

What exactly do you mean?

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 Retro4:14 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.

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.

HiddenDragon5:53 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 Retro11:40 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.

Capital Retro9:05 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?

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 Retro2:55 pm 05 Jun 19

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

Tell me again and again if you have to.

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.

$3.36billion debt!

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.

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.

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