ACT’s 'business-lite' budget ignores potential for economic winter

The ACT’s major areas of focus in its 2021-22 budget include infrastructure, health and education.

For business, the budget doesn’t yield many major new announcements, but it does fund previously announced COVID business support measures to help those heavily impacted throughout the lockdown.

The lack of support for businesses post-lockdown has disappointed CPA Australia.

CPA Australia’s General Manager External Affairs Dr Jane Rennie comments: “Delivered on the eve of the ACT’s re-opening, this budget was an opportunity to support business recovery and set out a longer-term plan to diversify the economy.

“Tellingly, the budget speech only mentions business twice, in the context of existing supports, and doesn’t specifically mention small business.”

Dr Rennie warned that Canberra’s economy may be ill-prepared should the Federal Government begin budget repair in 2022 to pay down the debts it racked up in response to the pandemic.

“There’s a sense that an economic winter is coming but the ACT Government isn’t prepared to pack away its sunscreen and get out the winter woollies.

“We saw this with the failure to prepare a business support scheme in anticipation of a lockdown, and now the government has delivered a ‘business-lite’ budget, especially when it comes to small business recovery.”

The ACT fiscal deficit is forecast to hit $951.5 million in 2021-22, which is $477 million higher than previously forecast and reflects the costs associated with lockdown support. The budget is expected to remain in deficit over each of the next four years.

The Territory’s economy is forecast to grow 2.5 per cent in 2021-22, increasing to 3.25 per cent in 2022-23.

“Although the re-opening is likely to deliver an initial bounce, local businesses may face a lean summer quarter if Canberrans make their traditional exodus from the capital,” says Rennie.

The budget includes $1.6 billion in spending on education, which will be beneficial for young Canberrans. However, there doesn’t appear to be any focus on addressing the ACT’s professional skills shortage, which has been exacerbated by border closures and the loss of international students.

“The war for professional talent is heating up. There is a severe shortage of accounting and business professionals in the ACT, especially in the mid to senior ranks,” says Rennie.

“Without initiatives to encourage professionals to relocate to Canberra or to foster home-grown talent, this shortage will become more acute.”

The government has committed $234 million towards environmental protection and to help it reach the goal of net-zero emissions by 2045.

“It’s pleasing to see the ACT taking a strong leadership position by embedding sustainability into its economy through a range of environmental initiatives,” Rennie adds.

ACT economic and fiscal outlook

In the 2020-21 budget, the ACT government forecast a deficit of $603 million. The government is now reporting a deficit of $363 million for that fiscal year.

The smaller-than-forecast deficit for the previous financial year is due mainly to lower-than-expected spending, as COVID-19 didn’t hit Canberra until after the end of that financial year.

An increase in spending on health and business support due to COVID-19 in 2021-22 is expected to see the deficit grow to $951 million. The deficit would have been higher but for a forecast $425 million jump in revenue, largely due to the strength of the property market.

The ACT economy is forecast to grow by 2.5 per cent in 2021-22, lower than the government’s previous forecast of 2.75 per cent growth. The pace of growth is forecast to quicken to 3.25 per cent in 2022-23.

Population growth, a key factor in economic growth and meeting Canberra’s labour shortages is expected to be low, at 0.25 per cent in 2021-22 and 1.0 per cent in 2022-23, down from 2019-20’s gain of 1.2 per cent.

The government is forecasting that ACT’s wages will grow 1.75 per cent in 2021-22, while inflation will rise by the same amount, meaning no real wages growth. The government is forecasting small real wages growth in 2022-23, 2023-24 and 2024-25.

ACT’s net debt is forecast to reach $5.7 billion at 30 June 2022. In comparison, Western Australia (WA) is forecasting its net debt of $32.1 billion and Victoria is projecting its net debt to be $102.1 billion (and that is before its most recent lockdown).

By 30 June 2025, ACT’s net debt is expected to reach $9.6 billion. In comparison, WA is forecasting its net debt to reach $36 billion, and Victoria’s estimated net debt will be $156.3 billion (before their current lockdown).

Major announcements from ACT’s 2021-22 budget

The following does not include information on COVID business support grants, which have been previously announced.

Infrastructure

The government announced $6.4 billion in infrastructure spending over the next five years, including $1.3 billion in this financial year:

• $80 million over the next three years for maintenance across some of the existing 12,000 public housing properties
• $28 million for upgrading the Monaro Highway
• $13 million to upgrade Canberra Venues
• $3 million to design, construct and maintain a park in Casey
• $2 million for upgrades at the Tuggeranong Arts Centre Theatre
• duplicating William Hovell Drive from the intersection of Drake Brockman Drive to John Gorton Drive.

Work on extending the light rail to Woden and the John Gorton Drive and Molonglo River Bridge were funded in previous budgets. Work on those major projects will continue in 2021-22.

Education and training

The government announced it would spend $1.6 billion on education in 2021-22:

• $99 million to improve the amenity, functionality and inclusivity of schools, including replacing heating systems and roofs, installing solar and battery energy storage systems, and providing bike storage facilities
• free education to 500 priority three-year-olds for two days per week, 48 weeks per year
• funding for 42 full-time learning professionals and support staff
• recruiting additional youth and social workers by 2024-25 to support teachers, students,

  and families across ACT public schools

• continued funding to support the Muliyan Off-Campus Flexible Learning program to support 30 vulnerable students
• $20 million for the installation of new Modular Learning Centres across Canberra
• $15 million to accelerate the removal of hazardous materials from ACT public schools
• funding for 50 senior secondary school students with the opportunity to complete an apprenticeship
• $13 million for a Future of Education Equity fund to provide grants to disadvantaged families to support them to meet their educational expenses
• progressing works to expand the Margaret Hendry Primary School, construct a new high school in Taylor; modernise and expand Garran Primary School; and design works for a new primary school in Strathnairn
• Partnering with the Commonwealth to extend the JobTrainer Fund to provide free training places in areas of skills need or employment growth for young people

Health

The government announced $2.1 billion in spending on health on 2021-22:

• $90 million to continue the government’s COVID-19 health response, including supporting the Health Emergency Control Centre, quarantine and compliance activities, hospital and testing services, additional cleaning of public schools and public transport, the vaccination program and community and mental health
• $43 million to provide ten additional acute mental health inpatient beds at the Canberra Hospital and funding for additional High Dependency capacity at the Adult Mental Health Unit
• $50 million in funding for the phased introduction of minimum nurse/midwifery-to-patient ratios at the Canberra Hospital and Calvary Public Hospital Bruce
• An expansion of the Canberra Hospital Emergency Department
• $15 million to support for the ACT Ambulance Service to transition to a more patient-centred service
• $7.5 million to deliver a phased implementation of integrated face-to-face and digital mental health care for young people
• an increase in home-based palliative care services
• supporting five new inpatient beds at Clare Holland House hospice
• $2 million to expand endoscopy services
• New capital initiatives in the health budget include:
  • $36 million for a range of infrastructure upgrades at Calvary Public Hospital Bruce
  • $13.5 million for the continuation of planning and design work for future hospital infrastructure in Canberra’s north
  • $7 million to establish a new Cancer Research Centre at the Canberra Region Cancer Centre.