13 February 2020

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

| Ian Bushnell
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Chief Minister Andrew Barr

Chief Minister Andrew Barr: it’s time for the government to step up and support the economy. Photo: Dominic Giannini.

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.

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Secondly, relying on “Land sales” to balance budget is:
a) Selling off non-renewable assets
b) Exactly what Labor always blames Liberals for.
Labor governments seem to have this viewpoint that spending lots of money is always a good thing (Remebering Gillard/Rudd school halls and laptops). The local version is “We are spending $60M on the hospital” If they could get the same output for $30M, they’s still spend $60M because they think it will be twice as good.

Question to voters:
Name 3 good things that ACT Labor has done for (Belconnen/Woden/Tuggeranong)
{select your locality}
If that is too difficult, name ONE good thing…
There does not seem to be any valid reason for re-electing Barr’s mob, and the one really valid reason for NOT electing them is Barr’s willingness to spend billions on trams that are not needed whilst education, health and infrastructure maintenance get worse.

Always gets me when people praise the ACT Government for implementing the Stamp Duty changes and higher rates. Problem is Andrew Barr cherry picked Ken Henry’s recommendation.

Rents have risen because Mr Barr didn’t follow Henry review recommendation to reduce Land Tax on rental properties.

Social inequality has happened because the ACT Government didn’t apply the recommendation for a more progressive marginal tax rate starting at zero dollars.

ACT Government were meant to introduce transitional mechanisms on rates charges for home buyers who paid Stamp Duty in the years leading up to the change.

The government were meant to increase land supply and social housing to reduce house price pressures and tenure security.

They were meant to make it revenue neutral!

It’s funny that people were crowing about the “success” of light rail the other day, when here is the actually reality that it has caused, a massive strain on the budget going forward because it has been prioritised above other spending and services.

Capital Retro10:46 pm 14 Feb 20

The solution is simple. Double the tram and bus fares and make money from public transport. People have no other way to travel; it’s a captive market out there.

Another cutting edge, world leading Canberra inititiave.

Mike of Canberra11:30 am 14 Feb 20

Barr has listed a range of pretty worthwhile priorities that have contributed to the deficit blowout. What he hasn’t done is indicate how, as new priorities arise, he is reviewing and re-prioritising existing programs to find savings that can help pay for the new priorities. This is a fundamental aspect of budgeting at all levels, from the household to small and larger business and to government. If Barr can’t manage this rigorous but very necessary task, then he not only has no hope of ever really balancing the budget, let alone producing a surplus, but is also showing yet more signs of the hubris that inevitably bedevils long-term governments. How’s this for “vision”: Canberra with the reputation as one of the most expensive places in Australia to live or do business, resulting in a steady stream of residents and businesses moving across the border to much more affordable places in neighbouring NSW.

If Canberrans think that voting for Barr is voting Labor, they should think again. Far from being Labor in the tradition of Stanhope and, going way back, Jim Fraser, Barr is a despot who is turning Canberra into a place strictly for the “haves” and “have nots”, with precious little in between. This old, tired and hubristic government has to go.

So now he is blaming the bushfires, which had no actual impact on Canberras economy for his governments reckless spending? And corona virus? Seriously?

Anybody who believes this is brainwashed beyond belief. Coe is absolutely right. Rate payers are going to have to repay this debt, with interest. That then flows down to renters. Keep voting for them and you’re voting for an increased cost of living.

Hi grim123, the bushfires didn’t impact Canberra but the smoke from the bushfires certainly did. Ask anyone involved in tourism, they took a huge hit right over the holiday period.

Whilst Coronavirys isn’t a big factor in the budget downturn yet, it will be in coming months as thousands of foreign students are prevented from coming to university here. It will be a massive hit to revenue and our economy.

michael quirk9:37 am 14 Feb 20

The Emperor has no clothes. An immediate response should be to defer the extension of light rail which would save hundreds of millions and allow consideration of alternatives including the fast improving high capacity electric bus technology. Savings if they eventuate, could be used to provide social housing. improve the health system and city and Territory maintenance.

Barr has an inability to focus on the basics of Government. Too much time, money and ACT public servant effort is getting spent on the side issues.

Shift the high level of focus from Marijuana reform, tree canopy percentage, motorcycle gang rights etc and focus on the core but boring problems of hospital waiting times, bus services, education performance, budget management…..

Raising rates, fees, charges, spending and debt, but raising much hope for the future.

Hospital waiting times worst in the country, housing and rental unaffordability, rates increasing 10% every year, land taxes up, buses a mess, LDA land deals to Integrity Commission, school performances dropping, land price gouging….. And Canberra voters are so blinded by ideology they continue to vote for this incompetent arrogant government, well past its used by date.

HiddenDragon9:07 pm 13 Feb 20

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

“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.”

If you reflect on the first statement (net debt increasing by nearly one third in the space of a few years), and still believe the second, Andrew has a Harbour Bridge that you might be interested in buying.

Thank goodness for a government with vision. Heaven forbid if we end up with a Coe Conservative government in October.

Capital Retro7:35 am 14 Feb 20


A vision for our future financial bankruptcy.

rationalobserver1:20 am 20 Feb 20

If, or when?

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