In the wake of a tough Federal Budget, the 2014-15 ACT Budget recognised two fundamental realities. This is not the time for the ACT Government to add to the economic pressures by also cutting its spending. Rather it is the time to support our economy by investing in infrastructure and stimulating economic activity to create jobs. Second, the private sector has a significant role to play, as the engine of economic growth in the ACT, in helping to counter the impact of the Commonwealth cutbacks and continue to build a strong ACT and region economy.
The direct impact on the ACT of the contraction in Commonwealth consumption and employment in Canberra will be in the vicinity of $375 million over the next four years. Approximately 6,500 APS jobs will be cut in the ACT over the next four years, 2000 in the next year alone. Economic growth (measured by GSP) will be just 1¾% in 2014-15, down from 2¼% in 2013-14 and below the national average of 2½%, and employment growth will moderate to just ½% in 2014-15, down from ¾% in 2013-14. However, while the outlook is weaker, the Government is still forecasting growth and believes the ACT will avoid recession, unlike the situation in 1996.
This is not the time for the ACT Government to add to the economic pressures by also cutting its spending.
Canberra Business Council supported the ACT Government’s intention to continue to build resilience and diversify our economic base by investing in a number of key industry sectors where the ACT can leverage off its strengths and growth potential – tourism, innovation and the digital economy, education and building and construction.
In the tourism industry, funding for the Australia Forum, the Cooperative Airline Stimulus Fund to support direct international flights, the Arboretum, Brand Canberra, delivering major events such as the Cricket World Cup and stimulating an increase in overnight visitor expenditure will ultimately increase the number of tourists who visit Canberra and enable us to showcase Canberra nationally and internationally.
Funding for business innovation programs and programs to support early stage businesses is welcomed. The CBR Innovation Network, the Young Business Connect program, the Supporting Local Business Fund and the Private Sector Transition Fund, while relatively small in size, will all support local businesses to establish and grow.
In the area of Information and Communication Technology, the ACT Government will invest $85m into the Digital First approach to streamlining the back-end of government, providing better services as well as savings. iConnect, e-tendering, smart parking, and upgrading internal government ICT systems will not only simplify the way businesses and individuals interact with government and make it more efficient, they will provide opportunities for local ICT businesses to bid for this important work.
The Budget includes record investment in infrastructure, with roughly one third expected to be spent within the next two years. The University of Canberra Public Hospital, a new school at Coombs, fast-tracking land release and a number of other projects will provide much-needed work for local building companies over the next few years before the larger construction projects such as Capital Metro, the City to the Lake project and the Civic to Gungahlin Corridor come on line. This will boost home-buyer, business and investor confidence at a critical time.
Canberra Business Council believes it is reasonable to borrow to invest in productive infrastructure to support growth and jobs at times like this even though the unfortunate outcome of the combined impact of Commonwealth contraction and the investment program outlined in the ACT Budget is a large deficit, to the tune of $333 million in 2014- 15. While the ACT Government forecasts a return to surplus in 2017-18, the Council believes that this outcome is predicated on very optimistic predictions about future economic growth and revenue and may not be achievable.
Despite the challenges ahead, here is a sense of confidence that the economy and the business community are more robust and resilient than in previous periods of Commonwealth contraction; that this time around the majority of exiting APS staff will find employment in the ACT rather than leave town and that, in the medium-term, the private sector will expand substantially as the economy picks up.
What is required now is a close partnership with the private sector to implement the initiatives outlined in the Budget documents.