24 February 2020

Fires, coronavirus give Barr cover to spend up in an election year

| Ian Bushnell
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Chief Minister Andrew Barr

Chief Minister Andrew Barr is facing a difficult Budget position in an election year. Photo: Dominic Giannini.

Chief Minister and Treasurer Andrew Barr was keen to set the scene from the start when talking to media before he handed down the Mid-Year Budget Review late last week.

It was all about our summer of disasters and the looming impact of the coronavirus on the economy, which had little to do with the deterioration in the Budget position over the past six months.

The tripling of the forecast deficit from $89 million to $255 million is due to a fall in GST payments as the national economy slows, fewer land sales and the cost of home buyer concessions. But Mr Barr was preparing the ground for a possibly even bigger deficit than the $255 million now forecast and positioning the government in an election year to keep the ACT’s strong economy ticking over.

It also provides cover for that extra expenditure, which may be more than he would have wanted to spend, as the government exploits to the fullest the power of incumbency and rolls out the “announceables” leading up to the October poll to in a bid to steamroll the Opposition.

When Mr Barr delivered his Budget review speech to the Legislative Assembly on Thursday afternoon, missing was any mention of the actual Budget position, the deficit or the increase in borrowing and debt.

The focus was on the ACT’s acknowledged strong economy, high growth and jobs, and that the government would continue to invest in the services and infrastructure the Territory needs despite the challenges ahead.

A total of $147 million in extra spending across the priority areas of transport, health, and education was outlined, and Mr Barr was unapologetic, saying the times demand government step up.

With the GST situation likely to worsen, the cost of bushfire and hailstorm recovery, and the unknown coronavirus hit to the economy still to be factored in, the government may be doing a lot of stepping up.

Alinga Street station

The Alinga Street station in the city: progressing light rail Stage 2A to Commonwealth Park will be an important part of the Barr Government’s election plans. Photo: Ian Bushnell.

The forecasts still have the Budget returning to surplus, albeit a tiny one of $9.6 million, in 2021-22, and then $250 million in 2022-23, but those assumptions will be labelled heroic in the circumstances.

Compounding the situation will be the political needs of the government in an election year. The budget theme is ”building for the future” and Mr Barr will want to maintain momentum with sod turnings, launches and ribbon cuttings.

Symbolic of this is light rail and it seems it is full steam ahead for Stage 2A to Commonwealth Park at least with $31 million brought forward for design work and contracts due to be signed this year. Mr Barr has already alluded to this by saying in an election pitch in the Assembly that now is not the time to go backwards by changing the government.

More problematic is the $500 million SPIRE project at Canberra Hospital where spending and performance has not kept pace with demand, and there are doubts about whether the planned expansion will still cope. A big chunk of the new spending in the Budget Review was $60 million to keep the ED running and elective surgery on track.

Mr Barr is right to assert that there are no economic trophies for producing a surplus and as needs be there is nothing wrong with running deficits. From the federal government down the prized surplus is no longer a priority with disaster management and recovery, and now coronavirus, taking precedence.

And he insists there was some fat in the system to cope with these emerging issues.

Nonetheless, Opposition Leader Alistair Coe will accuse Labor of profligacy and losing control of the Budget at a time when rates are at a record high and still to increase further.

For Mr Barr, this gives voters a clear choice between his “sound economic management” and an Opposition that has pledged to return to surplus faster and cut rates but has so far not identified what spending it will rein in to lower deficits and borrowing.

In the end, Mr Barr will spend what he thinks is necessary to maintain the ACT economy, including on infrastructure such as light rail and services, and for his government to be returned for a sixth term.

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Thinking about the reaction to the Coronavirus, the expenditure on the train set and the possibility that there will be more money will go out the door you have to wonder how the hell we are going to pay for this.

rationalobserver7:45 am 19 Feb 20

Deciding on your spending priorities is normal.
Ensuring that the tax payers get real and long lasting value for money is not high on his priorities.

Capital Retro9:45 pm 17 Feb 20

Don’t be surprised if they announce a huge waste to energy incinerator somewhere in Tuggeranong where they can’t win anymore seats.

HiddenDragon8:47 pm 17 Feb 20

The economic policy of this Government is a form of “have your cake and eat it too” Keynesianism, mixed with bits and pieces of cherry-picked economic rationalism (usually for the purpose of justifying increased revenue-raising).

In their view it is never the right time to rein in spending. When things are slow(ish) that becomes the excuse for spending up, and when things are going well, then it’s “let’s spend up because we’ve got the money, and we’re growing etc. etc.”

For all the talk about looking to the future, there is no serious long-term fiscal plan for the Territory – i.e. when land sale revenues taper off to insignificance. Making up the difference through even higher annual rates is simply not an option for the many Canberra households which do not have one or more fat salaries and/or defined benefit pensions rolling in every fortnight.

A government which actually cared about this big problem would not go on pretending that every dollar of public spending is “investment” (in the true sense of that word) and would, instead be looking at every opportunity to chart a tight fiscal future for the ACT.

Potential disasters – of all sorts including, natural, crime/terror, mass medical emergency et al are good ways to highlight how disastrous the tramway will be if disaster hits – crowding, electricity failure, rail failure, signal failure and completely inflexible routing are just a start to realising how useless and vulnerable this bit of exorbitantly expensive infrastructure will be.

Keep in mind that a simple thing like telling passengers at Alinga St which platform the next tram leaves on is beyond the current software. Shows how much thought has gone into city-wide emergency (evacuation say) planning.

Perhaps there’s a stable of other ‘progressive’ white elephants ready for the call to action to cart us around.

Budget deficits occur when government expenditure exceeds revenue. An accumulation of yearly budget deficits is debt. Debt can be paid off by cutting expenditure on hospitals/schools/roads etc, or by raising rates and taxes, or by passing the debt on to be paid by the next generation of taxpayers. Take your pick. The problem with deficit running Barr is that he will eventually run out of other people’s money.

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