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ACT Budget heads $200 million in the hole

By 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.

What’s Your opinion?


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26 Responses to
ACT Budget heads $200 million in the hole
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 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 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 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 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 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 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 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 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.

Kods 10:41 am 06 Mar 09

ant said :

I’m always flabbergasted by the financial ignorance of people in public life. I’m inumerate, and add with dots, but have been forced to look after budgets and things over the past years (as no one ever wants to do it), and even my facile knowledge has revealed to me that many just do not have the first clue about public accounts and running a budget.

Even utterly basic stuff like working out how much money you have, then working out a sensible forecast on how and when it’s going to be spent, and then assessing if it’s going to work. People with whopping budgets aren’t even getting to that step, they just spend away without keeping an eye on where it’s going (and in the absence of a proper forecast there’s nothign to really chart it with) and if they’re in the red by the 4th month, they keep spending! It beggers belief.

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.

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.

ant 10:31 am 06 Mar 09

vg said :

When my wallet is empty I cannot spend any more. It ain’t that hard to work out

The big trick, especially for a large entity like a gov’t, is to ensure that the wallet doesn’t become empty, at least until the night before teh new financial year. And right now, some very large public entities have empty wallets and with no mechanism to monitor the wallet for teh threat of emptiness.

vg 10:28 am 06 Mar 09

Remember, you voted for them. And Labor have historically been strong financial managers…..haven’t they?

When my wallet is empty I cannot spend any more. It ain’t that hard to work out

Skidbladnir 10:05 am 06 Mar 09

(At least my question used the phrase ‘local recession’).
The ACT has a finite income, most recently sustained through property and land sales. …
Should there be a major impact from this ‘credit crunch’ or an economic downtown\local recession, it would most likly arrive during your term in the Assembly.
Which ACT Government projects, initiatives, or expenditures would you scrutinise most closely, or even support the axing of, in order to prevent an ACT budget blowout?

Skidbladnir 10:02 am 06 Mar 09

Your 1) question left enough wiggle room for candidates to say something along the lines of “Shoes. The ACT is a radiant beacon of hope, prosperity, and financial stability. Do not worry about the budget, brief mortal.”

ant 10:02 am 06 Mar 09

I’m always flabbergasted by the financial ignorance of people in public life. I’m inumerate, and add with dots, but have been forced to look after budgets and things over the past years (as no one ever wants to do it), and even my facile knowledge has revealed to me that many just do not have the first clue about public accounts and running a budget.

Even utterly basic stuff like working out how much money you have, then working out a sensible forecast on how and when it’s going to be spent, and then assessing if it’s going to work. People with whopping budgets aren’t even getting to that step, they just spend away without keeping an eye on where it’s going (and in the absence of a proper forecast there’s nothign to really chart it with) and if they’re in the red by the 4th month, they keep spending! It beggers belief.

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