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ACT Budget heads $200 million in the hole

johnboy 6 March 2009 26

It was a weird thing at the last election. In our candidate questionaire (which many candidates lacked the intestinal fortitude to reply to) we asked this question:

    1) What will be your number 1 spending priority, and what are you willing to de-fund in order to pay for it?

I was appalled that most candidates didn’t seem able comprehend the basic concept that when the good times end they’ll have to choose which spending items they can continue, rather than the last decade of the only choice being where extra funding goes.

Today the Canberra Times reports that the ACT Government is now looking at a $200 million deficit.

    “Mr Stanhope told a Legislative Assembly committee that the May budget figures would reflect the toll the global financial crisis was having on the territory’s bottom line.

    ”That reflects reduced GST, reduced stamp duty, reduced conveyancing duty, reduced [Land Development Agency] dividend, reduced returns on superannuation, and combined it represents at this stage an estimate somewhere in the order of $200million,” he said.”

(Note: That number is an extrapolation of current trends not a hard figure.)

At some point, soon, they’re going to have to start cutting instead of racking up debt.


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26 Responses to ACT Budget heads $200 million in the hole
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vg vg 9:57 pm 09 Mar 09

Stanhope is only following a long held Labor tradition of spending every budget surplus ever left behind by an outgoing Liberal government, be that State/Territory or National.

Maybe he’ll ‘accidentally’ say ‘sh*tstorm’ on CM’s talkback just to sound like a ‘real bloke’, like good old Kev07. Kevvy, you’re a nerd. We can live with that. Just stop acting like something you ain’t

miz miz 6:55 pm 09 Mar 09

Last time they thought they were broke, they closed a heap of schools. (Then lo and behold, they were not in deficit and closed them all for nought). This time, what are they gonna do?

ant ant 9:02 am 07 Mar 09

I cannot make sense of Kods’ “argument” at all. I have worked in the budgets areas of Federal and NSW government. I’m speaking about facts as they exist, not speculating as he/she appears to be doing.

Fact is, the federal government runs a sensible budgetting system across its various entities, it requires its departments to plan and spend in a transparent and responsible manner, and gives its departments the tools to do this.

The NSW State government does none of this. Which is why it is broke. There’s a story in teh SMH today highlighting a result of this. Expect to read many more.

I hope the ACT gov’t runs a system similar to the commonwealth one, or else prepare to get worried.

taco taco 8:37 pm 06 Mar 09

Caf, I agree in principle that governments should try and avoid slashing and burning their expenditure during recessions, but there is productive spending and non productive spending.

I would go more the route that AG Canberra mentions, but use the money that is freed up to invest in something grand that will provide economic benefits once the good times come around again – like dramatic improvements to public transport (light rail or otherwise), buying transact and doing their network rollout properly like they planned a decade ago before ACTEW bought it and ballsed it up, building goverment owned wind or solar farms – I am sure there are a bunch of projects that people could think of that are better for the community than a million dollars here for mostly pointless arts projects, $400k there for the next pointless “drive N text U B next” signs, millions of dollars on poor quality resurfacing on roads that don’t need it and all the other government spending fat.

Governments that survive recessions by racking up a massive deficit with nothing to show for it leave a legacy of higher taxes that reduce the economy’s effectiveness well into the future, or at least that’s just my non-university educated opinion.

caf caf 4:43 pm 06 Mar 09

Oh and this thing about the $400k being for a “STUDY” rather than the signs themselves appears to be a line of prize bullsh|t. The budget papers just say its for additional “Road Saftey Message Signage”, nothing about a study. If you believe otherwise, provide a source.

caf caf 4:39 pm 06 Mar 09

That is exactly the wrong response. Don’t go anywhere near the levers of power, please.

The road safety sign funding was part of a package of measures specifically brought forward to this year – exactly the opposite to what you’re suggesting. The reason why is that if Governments reduce spending in depressed parts of the business cycle and spend up big in the boom times, it makes the cycles worse (bigger booms and crucially, bigger busts).

AG Canberra AG Canberra 4:31 pm 06 Mar 09

In tough times someone has to make the tough decisions. Identify what is non negotiable spending – health, education, garbage collection etc and then decide what can be put off till next year (or the year after). For instance, I reckon we don’t need to spend $400 000 on a STUDY of where to put road safety signs….

Mr Evil Mr Evil 4:06 pm 06 Mar 09

I know of at least one statue they could sell to another town, and it’d look good in the main street of somewhere like Griffith!

I trust Katy to make all the right decisions…………….they’re coming to take me away, a ha – they’re coming……

jakez jakez 3:32 pm 06 Mar 09

proofpositive said :

Former Liberal MLA Jacki Bourke had the right idea http://www.abc.net.au/news/stories/2004/06/30/1143576.htm
If they couldn’t sell it to reduce the deficit then they can always smoke it – but would anyone notice the difference?

I totally understand that you are making a joke, however as someone who always hears dumb stuff about hemp I feel its necessary to point out that commercial hemp does not have nearly enough THC to get you high. Furthermore, it is an extremely useful crop.

I of course would support legalisation of the THC rich variety however I’m not sure that’s going to get much play.

proofpositive proofpositive 2:38 pm 06 Mar 09

Former Liberal MLA Jacki Bourke had the right idea http://www.abc.net.au/news/stories/2004/06/30/1143576.htm
If they couldn’t sell it to reduce the deficit then they can always smoke it – but would anyone notice the difference?

Kods Kods 12:54 pm 06 Mar 09

attention to detail – 0

Kods Kods 12:52 pm 06 Mar 09

jakez said :

Kods said :

We aren’t talking about a Federal budget though, we are talking about an ACT Budget. This budget is not worn by the whole country either.

Lol @ myself…. So we are…..

jakez jakez 12:44 pm 06 Mar 09

caf said :

Running debts when times are good is inexcusable. Running them when times are bad is good policy. Over the long run debts and surpluses need to cancel out, but in the short term government spending shouldn’t either go up during booms or down during busts.

The economics of that aside (and I am mildy symathetic to the concept) it seems to me that the concept is like a red rag to a bull for politicians. They hardly spend to the business cycle. It’s more that one party spends like a lunatic, eventually the voting public go hmm. The other side get in and gradually pay it down (through token cuts and revenue increases). Once they’ve paid it down they go ‘ooh aren’t we great, time to invest the fruits of our labour’, then they spend like lunatics.

It’s easier to let revenue naturally increase and profligate (read Howard Govt post 2000 for a great example) and pretend you are great economic managers because you’ve allowed the blood flow (taxes) to increase faster than you’ve spent.

jakez jakez 12:39 pm 06 Mar 09

Kods said :

People are scared and sensationalism in the media and propaganda from different political parties just keeps feeding their fear. People start making half formed opinions on something they know little about, thinking they have the whole picture.

$200 million is a relatively small amount when you are talking a federal budget of billions. It could be a lot worse. Think of all the debtors that the Govt would have, that alone would more then pay off a debt of this size.

We aren’t talking about a Federal budget though, we are talking about an ACT Budget. This budget is not worn by the whole country either.

Kods Kods 12:37 pm 06 Mar 09

Okay….*sigh* I was speaking in simple terms for lack of wanting to go into detail. I would have to be quite ill-informed to think that these things aren’t factored into forecasting.

You tell all the APS staff (economists, accountants etc) in the central agencies who work 24/7 in the months leading up to budget that they are not forecasting adequately, and controlling expenditure as best as possible. It’s a tough economic climate and while the govt is still trying to keep people in jobs etc to avoid increased $$ pressure on other areas (such as the welfare system), they may have to borrow some money to do it. No forecast is set in stone, and there will always be contributing factors that will affect expenditure.

By your ‘rule,’ there would be very few people who own their own homes in the country, as they would be unable afford one spending just the money the have in the bank (100% of a home long – a mere $450k minimum should be easy for the average household to save right?).

There is little I can say to counter an argument where you have done a complete 360 on yourself; however, I will say this. Government expenditure is controlled down to the $10 in majority of government entities (excluding defence, because they do whatever they like) and other entities who don’t have this ‘mentality’ are going to have fun justifying themselves at senate estimates.

ant ant 11:53 am 06 Mar 09

Kods said :

It’s a bit different when you are talking Commonwealth Budget. Yeah you can work out what you have and do a sensible forecast. However, you can’t simply not pay for hosipatal X to get supplies if you run out of money, or colse down Department X when you need and extra 100 million to finish building Road X because the cost of materials has gone up.

Yes, but proper budget forecasting does a lot to prevent this. “unforeseen” cost increases should not have a devastating effect on an entire big budget. and there is usually a mechanism to go looking for the shortfall if it is a biggie. the point is, the budget is controlled.

I’m talking about budgets where there’s no proper forecasting, so as you start to run into the red early in the FY, NO ONE KNOWS! Until you are totally in the red and can’t pay your bills.

How can you assess how you are spending your money if there’s no forecasting and monitoring? How do you know if you are being efficient with the money?

The Fed gov’t is on the whole quite good at this. The repercussions for spending money you don’t have in your pot are quite large and in my experience, most avoid doing it (excepting DoD). I ran budgets for a large and wealthy department, and expenditure was controlled down to the $10 mark (can we afford to buy this book?).

However, other large entities don’t have this mentality and I’m quite saucer-eyed as the full extent of it is revealed.

Kods Kods 11:09 am 06 Mar 09

People are scared and sensationalism in the media and propaganda from different political parties just keeps feeding their fear. People start making half formed opinions on something they know little about, thinking they have the whole picture.

$200 million is a relatively small amount when you are talking a federal budget of billions. It could be a lot worse. Think of all the debtors that the Govt would have, that alone would more then pay off a debt of this size.

caf caf 11:03 am 06 Mar 09

Running debts when times are good is inexcusable. Running them when times are bad is good policy. Over the long run debts and surpluses need to cancel out, but in the short term government spending shouldn’t either go up during booms or down during busts.

jakez jakez 10:44 am 06 Mar 09

Kods said :

Anyone who thinks the government isn’t trying to cut expenditure is ignorant. You just have to scroll though the threads and read peoples horror from the reccomendations that they should cut IT expenditure from the Gershon review. Lets face it, you can’t please everyone all the time. They are the bad guys if they dont spend, and the bad guys if they do.

So it seems you are right, most people don’t have any idea about public accounts, or running a budget.

I think that is in truth a fair comment as well. Everyone believes in getting rid of wasteful programs….except for the one that benefits them.

http://en.wikipedia.org/wiki/Public_choice_theory

jakez jakez 10:42 am 06 Mar 09

On one hand you have the ALP, and on the other hand you have the Canberra Liberals who define the party platforms commitment to small Government as ‘increasing spending less than Labor’ (which is almost a direct quote of those that matter).

There’s nothing in the LA that represents a commitment or even a desire to give the ACT taxpayer value for money. That kind of thing is all too hard.

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