The ‘quirky’ superannuation arrangements of Canberra’s Commonwealth public servants have been singled out as a threat to the ACT economy in the latest Deloitte Access Economics Business Outlook.
The report lashes what it calls the stupidity of incentives for public servants to retire before 54 years and 11 months at a time when the rest of the nation is being to encouraged to work longer to boost workforce participation.
Intergenerational Reports have cited the importance of Australians working longer to deal with challenges facing the economy and the Federal Budget from an ageing population and rapid increases in the cost of healthcare technologies.
The Business Outlook says the ACT has not shared in the “key national good news story” of higher workforce participation, especially among older Australians and women. A key reason being the perverse incentive for workers to leave the workforce in their mid-50s in the ACT.
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“One of the great strengths of this economy has been that we’ve had lots of workers given the size of our population. But that key outperformance has been fading faster than a Floriade flower in October,” the report says.
“In fact, the gap by which Canberra’s participation rate exceeds its national cousin has eroded by almost two-thirds since the mid-2000s (from eight percentage points down to three percentage points). And while a bit of that slide is because relatively more Australians are choosing to grow old in the nation’s capital than was formerly the case, the bulk of it is because of stupidity.”
The super rules don’t stop people working in a different job but it’s the wrong age for retirement if people would like to work longer, the report says.
Acknowledging that there is no easy fix to the problem, the report says it may slowly eat into what has been a long-running pillar of Canberra’s relative prosperity.
The Outlook sees the ACT growing at a steady rate amid sluggish job growth, slowing residential construction and some uncertainty around Commonwealth Government spending, but strong population growth, ACT Government spending and a solid higher education sector will help sustain demand.
The public service efficiency dividend will continue to hold jobs back and the salary cap will keep wages down but a better Budget position due to commodity prices may give the Commonwealth some ‘wiggle room’ in the spending area.
“The number of job vacancies as a share of the labour force continues to increase, which suggests that the employment outlook can improve,” it says.
And the ACT continues to have the lowest unemployment rate in the country.
The resilience of the housing market is also a factor that will maintain confidence and give retail a boost, with home prices continuing to hold up compared with other centres and interest rate cuts likely to attract more buyers. The negative side will be persistently high rents, growing well above the rates elsewhere in Australia
Identified risks to the economy include a decline in housing approvals, the number of apartments being built and a cooling off in commercial construction, with the value of work done falling for the first time since late 2017.
“Building approvals have been heading backwards since late 2018. That points to the potential for some lean times ahead for ACT commercial construction,” the report says.
Engineering construction is taking a breather with the completion of light rail stage 1 but this year’s ACT Budget set aside half a billion dollars for new capital works over the next four years, and more than a billion dollars for future capital works, including light rail stage 2, the $420 million expansion at Canberra Hospital and the $100 million housing strategy.
There is also a range of mixed-use projects under construction. On the Commonwealth side, the $500 million expansion of the Australian War memorial is due to to start in 2020.
The low Australian dollar is helping to draw international tourists and students to the ACT, but the education boom faces challenges, including a looming cap on international students at the ANU.