ACT Treasurer Chris Steel’s difficult decisions are far from over. Photo: Ian Bushnell.
Treasurer Chris Steel’s first ACT Budget could have been a lot worse and some would say it should have been.
Handing down a billion-dollar deficit and slugging Canberrans with an array of new taxes and hiking existing ones to repair the Budget is some blooding.
Mr Steel is blaming the blow-out and the remedies on the ACT’s runaway health costs, a combination of entrenched growing demand in the hospital system and a falling contribution rate from the Commonwealth.
He hopes that the Commonwealth will increase its contribution to the agreed 45 per cent of the ACT’s health costs over the next decade.
Otherwise Canberrans will be wondering just how temporary the health levy will be.
There are questions about whether such a measure should even be used, given Canberrans already pay the Medicare levy.
But this is where the ACT Government has found itself, after several years of COVID and cost of living support plus the growing demands on the health system, all the while maintaining its infrastructure program.
In hindsight, some of this spending may have been too generous, given the limitations of the ACT’s resources and should have been curtailed sooner.
But that is also a political and moral question.
What Canberrans, the ACT Government and the Commonwealth have to face up to is that the Territory’s narrow tax base, which relies mainly on revenue from the sale and taxing of property, is inadequate to meet the needs of a growing national capital.
Canberra’s ballooning health coasts are draining the coffers. Photo: James Coleman.
The ACT’s biggest revenue source is GST and this has been underestimated for years due to the flawed measure of the Territory’s population. This has been acknowledged to some degree but the ACT is still being shortchanged.
The ACT is not alone in its health cost woes – most of the other jurisdictions are all facing these pressures, but the smaller ones in particular.
An ageing population is one reason but the explosion in lifestyle illnesses such as obesity, diabetes and heart disease is also to blame, as well as the propensity for expensive surgical solutions.
We have a society that is literally making people sick and like the carbon polluters behind global heating, the processed food and beverage industry is getting off scot-free while taxpayers pick up the tab.
So short of introducing something like a sugar tax, regulating dangerous products out of existence, or a change in behaviour, this health spending binge will continue.
But even accounting for the ACT’s bigger health bill, Canberra’s growing population and development as not just a public service town but a regional hub means that the demands on the local government are outpacing its capacity to pay.
The ACT Government is run both as a state and local government, having to provide big infrastructure such as hospitals and schools, but also basic council services such as roads and rubbish.
Work to diversify the local economy and focus on its strengths such as education and technology, which has synergies with the business of government, is ongoing and having some success, but the structural economic deficiencies remain.
The ACT also serves a national purpose so it is important that Canberra not be allowed to fall into decay outside the parliamentary triangle.
Canberrans, some of the wealthiest people in the country, expect first-rate services for their taxes but it may be that it can’t always be the local government that delivers them.
The government’s infrastructure program also supports projects – such as new hospitals, light rail and the Convention Centre – that provide services and drive the local economy, but these in turn have regional and national benefits.
Those suggesting that the national capital stop growing and projects to meet its needs be shelved are not being realistic.
How they are to be financed is another question. The Albanese Government is already making significant contributions but why not more, given the ACT’s limited resources.
Yes, the government could have started fiscal repair sooner and yes, the community could also lower its expectations about what this government can do, but the big conversation is about the need for the federal-territory relationship to be reviewed.
Without a reappraisal of the current financial and governmental arrangements, the ACT risks collapsing under its own weight, something that the opponents of self-government warned about.
Of course, the ACT Government could wind its activities back to the bare basics without a new deal with the Commonwealth.
But that would be a much leaner and meaner Canberra and not really a national capital of which to be proud.
