Barr defends new spending as GST blow helps drive Budget deeper into red

Less GST revenue, fewer land sales and extra spending has sent the ACT deeper into the red but Chief Minister Andrew Barr is unrepentant, saying the times demand greater government support for the economy after a summer of disasters and the unknown impact of the coronavirus outbreak.

The Mid Year Budget Review released today (13 February) shows next year’s forecast $89 million deficit has blown out to $255 million, with a small surplus of just $9 million expected in 2021-22, and only $250 million the following year instead of the projected $400 million.

With the full impacts of disaster recovery and the coronavirus still to come, there are fears the Budget situation could be much worse by June.

Revenue this year has taken a $103 million hit, with $422 million less over the four years to 2022-23

A big chunk of that is Commonwealth grants revenue from the GST, which is now down $17.6 million in 2019-20 and expected to cost the Budget $172.6 million over the forward estimates, while there is $51.3 million less from the Suburban Land Agency and the City Renewal Authority.

A higher take-up of the home buyer concession scheme has impacted conveyance revenue by $15 million and an expected $45 million over the forward estimates, although Mr Barr sees this as a good sign for the housing market.

Net debt has increased by $300 million and over the forward estimates it will blow out by $1 billion.

There is $80 million worth of new spending this year, and $164 million over four years, much of which has already been announced, including $60 million to keep the Canberra Hospital running.

The Budget Review papers also show separate infrastructure initiatives of $57 million in 2019-20 and $121.8 million over four years, including $31 million for design work for light rail Stage 2A and $2.5 million for raising London Circuit.

Mr Barr said that with the bushfires and unknown impact of the coronavirus crisis, now was not the time for a government to be concerned about Budget surpluses, noting that even the Federal Coalition Government had dropped its surplus goal as a priority.

“Now is the time for government play a larger role in supporting the bushfire recovery, and supporting the tourism and hospitality, and higher education sectors through the coronavirus period and investing in long-term infrastructure,” he said.

Mr Barr said the ACT economy remained strong and the Budget situation would have been worse, with the loss in GST revenue, if the government had not embarked on its tax reform program to ensure a more reliable revenue base.

He said the government’s next phase of rates increases would continue but at about half the rate as before, with the heavy lifting behind the government.

He attacked the Canberra Liberals’ rates freeze pledge saying they would be digging an even bigger budgetary hole that they would have to pay for through cuts in services or increases in other taxes.

Mr Barr rejected suggestions that the government had lost control of the budget.

“If there is a proposition that we shouldn’t be investing in the health system, in bushfire recovery and responding to the coronavirus and supporting the economy then they [the Liberals] are welcome to put that position to the people of Canberra,” he said.

“What the Opposition can’t do is criticise the government for making these investments but then seek to walk both sides of the street.”

He defended the $60 million top-up for the health system, saying demand ebbed and flowed and last year’s flu season had taken its toll.

“You can’t just close the emergency department because your 250,000th patient walked through the doors in May rather than the end of June,” he said. “You simply have to keep services operating.”

He warned that with the coronavirus being a flu-like illness “this kind of public health investment is going to be necessary over this fiscal year and into the future”.

Mr Barr said the economic impact of the virus on the ACT was being felt, with thousands of Chinese students stuck in China that would be otherwise spending money in Canberra, not to mention their friends and relatives.

He said tourism and higher education had been big anchor’s of the ACT economy over the past five years and it would be necessary to put in place quite significant support levels.

The situation highlighted the need for the education market to diversify beyond China.

Asked whether the situation also allowed a government in an election year to spend more, Mr Barr said the circumstances provided the government with an opportunity to demonstrate its capacity to respond to economic shocks and that its budget management philosophy allowed it to do so.

Opposition Leader Alistair Coe said Labor’s ticking debt bomb of over $3 billion was something that Canberra’s families would have to pay back with interest.

“Once again, Labor is refusing to take responsibility for their financial management,” he said.

Mr Coe said Mr Barr was using the fall in GST payments as an excuse for Labor’s ballooning borrowing.

“It’s clear that after 19 years of Labor, there are no excuses for this repeated financial mismanagement that is costing Canberra families more and more every day,” he said.

Mr Coe said Commonwealth funding to the Territory in 2019-20 was still expected to be $50 million more than last year.