Federal Budget 2012

This is the speech I gave to the Chamber of Commerce and Industry Federal Budget Breakfast this week:

I acknowledge the traditional custodians of the land we are meeting on, the Ngunnawal people. I acknowledge and respect their continuing culture and the contribution they make to the life of this city and this region.

Can I begin by acknowledging the challenge of putting a budget together in these economic circumstances and there are highlights but I will begin by saying this is not a great day for Canberrans.

We’ve taken a disproportionate hit in this budget.

We’ve been asked to accept more than our share of the burden of returning the Commonwealth Budget to surplus – including what looks to be around 1400 job losses in the first year. We’re still analysing the impact in the out years, extrapolating from pretty raw numbers, but it’s clear that there will be further losses across the budget years and here in Canberra we are going to face a tough few years.

As a community we know that the burden could have been and should have been more fairly distributed. Now that the budget has been released and we know what we are dealing with at least in the 12-13 financial year it means we can get on with responding to that. These job losses will be hard to absorb but the fundamentals of our economy remain strong and these predicted job losses are not on the scale that was delivered back in 1996 when the public service was slashed by 20,000 jobs .There is no doubt that as a city and community, we are much better positioned and better prepared than we have been in the past.

To start with, we are better placed because we have, here at the Territory level, a government that is experienced and stable and that has been doing the necessary work for to respond to situations like these.

Some of that work has been announced in the past few weeks, in the shape of the Targeted Assistance Strategy, the Business Development Strategy, and, most recently, the Tax Review.

Some of the commitments we’ve made recently, such as the raising of the payroll tax threshold, will give our economy greater capacity to create jobs where it can, and help absorb those who join the ranks of job-seekers.

We have a couple of other advantages – our low unemployment rate and the knowledge base of our economy, which means that workers displaced by these cuts have the sort of skills that will be in demand in other workplaces.

The ACT treasurer’s decision to delay our budget until June means we will be able to use our budget to respond to the Commonwealth. 

We have faced difficult times in the past few years navigating through the depths of the Global Financial Crisis and whilst our budget is still in the recovery phase I believe our economy remained strong because of the joint decisions of government and industry.

What’s needed today, tomorrow and the months ahead is stability, coolness heads, and a determination to do what is right by Canberrans.

In the short term, we’ll need to pull together as a community to minimise the impact on Canberra workers – private and public sector.

There are some concrete actions we can start straight away in our response

Firstly, the ACT Public Service may have some limited capacity to absorb workers affected by the Federal Government’s cuts. I’ve asked the Head of the ACT Public Service and the ACT Commissioner for Public Administration to confer with the Australian Public Service Commissioner about opportunities there may be.

Secondly, use the commonwealth budget to inform our own final decisions. Many would argue that maintaining our own expenditures, in the upcoming ACT Budget, is essential. This will place additional pressure on our own bottom line but we have a strong balance sheet a AAA credit rating, and we have a tough couple of years ahead where our budget can provide some economic stability to the town.

The budget last night indicated that we – like every other jurisdiction – have taken a hit from a reduced GST pool, losing about $177 million from 2011-12 to 2014-15, this may mean enduring a local deficit for longer than we would have liked, but a budget surplus is cold comfort in a Canberra winter for people who are watching their businesses lose profitability.

Thirdly, we need to represent Canberra’s interest (again) to the Prime Minister and seek an urgent meeting to discuss the implications of the Budget, the years ahead and the way ahead.

Fourthly, for the first time I will establish a sub-committee of Cabinet which will draw in business and community leaders, to work through ideas and utilise particular expertise in shaping our on-going  response to this budget.

Any true analysis of any budget includes the highlights and whilst we need to acknowledge we’ve taken a hit, there were some positives last night. It was good to see, in black and white, confirmation of funding for significant Territory projects like the Majura Parkway and Constitution Avenue, the centenary – projects that will have significant benefits for the local and regional economy and for productivity.

The extra $11.9 million for the National Capital Authority and the boost to the War Memorial were welcome, though it seems other national institutions have not been entirely protected, as we had hoped.

More generally, about 20,000 Canberra households will benefit from the Schoolkids initiative.  About 110,000 will be compensated for the impact of the carbon price -  around 78,000 will be better off after the price increases.  The raising of the tax-free threshold to $18,000 will see 13,000 households in the ACT pay no income tax.

We also welcome the announcements around health and skills development, Public dental health and the small-business carry-back tax measure.

We very much welcome the investment in the social agenda such as funding for NDIS and reforms in aged care.

On the efficiency dividend, there comes a point at which the Commonwealth has to stop describing what it is doing to the funding of the APS as an ‘efficiency dividend’. An efficiency dividend delivers the same level of output, for less money. I think we’ve passed the point where anyone believes that the same level of output will be possible, or even seriously intended, given the cummulative budget cuts of recent years. So let’s call a spade a spade.

It’s quite plausible that all or most of the job cuts – at least in the first year  – can be achieved by attrition or voluntary redundancy – I am sure there will be 1400 public servants who put their hands up.  But the professional and personal impact on those left behind, those battling to keep serving the public, will be significant.

Canberrans are also rightly concerned about the knock-on effects for the private sector. In the past, this has been where much of the collateral pain has ended up.

When departments cut costs they don’t just look in-house, they look at what they spend on services from the private sector: ICT solutions, consultancies, couriers, legal services.

The public-sector cuts will have a real impact on local businesses which provide goods and services to the Commonwealth.

As this audience knows, the ACT Government has been working hard to diversify the economy so that our dependence on the Commonwealth reduces over time, but a significant section of our service economy is still geared towards the needs of government. And if those sectors are hit there are knock-ons for other sectors, such as construction.

That’s why some of the discussion we have been having with many of you in recent months are so important to continue with – for example the need to turn our sights beyond our borders and develop as a regional economic and service hub – in part to further insulate us from future Commonwealth spending decisions. But these are conversations for another time.

In the days and weeks ahead we’ll need strategies for the short-term. Some of those strategies I outlined earlier are, I think, a good first step.

As Chief Minister of this city, a city I love, I can assure you that I will do everything I can to support our community through these times, to look for opportunities ahead and to advocate strongly in the interests of the people of the ACT.