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Australian Capital Territory: Chief Minister discusses tax and charge increases due to impending Budget

MATTHEW ABRAHAM: The Chief Minister and Treasurer, Rosemary Follett, has a $73 million budget hangover, this morning. Ms Follett revealed the deficit as a precursor to her September budget, so we can stand back, now, for a raft of tax and charge increases over the next few weeks, as the Government plays the usual game of getting the bad news off the agenda in advance of the budget, to allow it to maximise publicity on budget day for its good news, its spending initiatives. Rosemary Follett is with me, now. Good morning.

ROSEMARY FOLLETT: Good morning, Matt.

MATTHEW ABRAHAM: Was this deficit expected?

ROSEMARY FOLLETT: I certainly expected to face a pretty major gap. If you can remember, last year we had a gap, pre-budget, of some $54-$55 million, which was successfully bridged, and because of a number of factors - not the least of which is the Commonwealth's continual reduction of funding to the ACT - this year, we face a somewhat larger gap. But I think the more important point, at the moment, is to look at the kind of strategy that's needed over the coming three years in order to make sure we do live within our means and, at the same time, we deliver the community the services that they need.

MATTHEW ABRAHAM: Can we just break these down? That's a combined budget deficit or a shortfall - projected shortfall - over capital and recurrent budgets. What's the breakdown for capital - obviously, you want to have a balance on your recurrent budget, but what's the projected shortfall on both of those?

ROSEMARY FOLLETT: Well, the vast majority of that gap is, of course, on the capital side, and I'll be aiming - as always - to balance the recurrent budget. But of course, the task gets more and more difficult if you bear in mind that we have had a recession, we have had an increased demand for the Government services, particularly in the welfare and concessions area, and we've had a shift from the private services to public services in education and in health. So obviously, there's a bigger demand on what the Government provides, and that accounts for part of that gap, as well.

MATTHEW ABRAHAM: Now, you're one year into a three-year term. Surely, we've got to take the pain now, politically and economically, before the transitional funds dry up?

ROSEMARY FOLLETT: Well, my intention, of course, is to make sure that the budget is fair and that it does really add to social justice by protecting those people in the community who most need to be looked after. So I'll be looking to ensure that the actions that the Government has to take are spread fairly over the community and no one sector has to bear an unreasonable burden.

MATTHEW ABRAHAM: Let's talk about tax. If you're going to have a balanced recurrent budget, obviously, you're going to need to do something about taxes and charges, and I imagine the first thing you have to do is bring cigarette prices in line with the rises announced in New South Wales, otherwise there'll be a roaring black-market trade across the border with Queanbeyan.

ROSEMARY FOLLETT: Indeed, we have to look at all of our revenue sources and, of course, in some areas it makes a lot of sense to be in line with New South Wales. At this point, I have to say that the Government hasn't made decisions on those precise taxes, although we will be doing so, shortly. And for instance, on the general charges and fees issue, the Ministers responsible will be making announcements within a couple of weeks on what their fees and charges regimes will be.

MATTHEW ABRAHAM: Will those regimes be restricted to the CPI?

ROSEMARY FOLLETT: Well, I don't want to pre-empt what they announce, but certainly there's that general intention, yes.

MATTHEW ABRAHAM: That they will be restricted to the CPI.

ROSEMARY FOLLETT: Well, I don't - as I say, I can't pre-empt what the Ministers are going to announce, but, quite clearly, we're conscious that everyone in the community's been having a pretty tough time of it lately, and anxious not to add unduly to their burden.

MATTHEW ABRAHAM: You'd have to, surely, on cigarettes alone, have to keep in line with New South Wales.

ROSEMARY FOLLETT: We'll be looking at that, and, as I said, I believe that there are a number of taxes in the ACT where it makes sense to be in line with New South Wales because of our cross-border arrangements.

MATTHEW ABRAHAM: The same on petrol? You wouldn't be expecting to drop the 3 cent a litre petrol levy, now, in view of the ....

ROSEMARY FOLLETT: We haven't made a decision on the petrol levy, yet. We will be doing so, shortly, because the operative date, there, is 1 July, so I'll be making an announcement before that date, obviously.

MATTHEW ABRAHAM: Do you have any choice on petrol, though, realistically?

ROSEMARY FOLLETT: It's a large amount of money, and I think it was Mr Tomlinson from ACTCOS who pointed out that it is one of the more discretionary expenditures that people have in the community, although not totally, of course. So it's one of the revenues that we'll be having a hard look at.

MATTHEW ABRAHAM: What about selling off some assets, not, of course, to go into the current budget, but to knock some deficit and therefore save money on interest bills?

ROSEMARY FOLLETT: Certainly, we have to have a look at the holdings that the Government has and make a pretty realistic assessment of whether they are all needed, or whether the community would be better served by perhaps selling some of them. We'll be looking at the depots that the administration holds around Canberra, first, and making an assessment of whether they're all needed ....

MATTHEW ABRAHAM: What sort of depots?

ROSEMARY FOLLETT: .... or whether it might be more efficient to combine some of those. Well, there are a range of them for all sorts of uses, and I have asked the Minister, Mr Connolly, who's got responsibility for most of them, to have a hard look at that and report back to me on whether there are any that we could dispose of in order to make efficiencies in that area of his operation.

MATTHEW ABRAHAM: What about NATEX? I understand that negotiations are already in train to sell off all or part of NATEX. Is that correct?

ROSEMARY FOLLETT: Not that I know of. I know there's the review going on, of NATEX. I expect, again, to be hearing from Mr Connolly on whether he's got any big plans for that, but I'm not aware that there's a plan to sell it off.

MATTHEW ABRAHAM: I understand people are already waving the cheque book around.

ROSEMARY FOLLETT: Oh, well, you're ahead of me then, Matt.

MATTHEW ABRAHAM: All right. Now, the question on health - the shift from private to public which is going on as a result of the recession - is the health budget still on track, or has that blown that out?

ROSEMARY FOLLETT: Well, with the health budget, what we have done is set in place business rules so that when there are movements in their costs such as occurs with this change from private to public patients, then we can accommodate that within their budget. So we've sought to put control on health, while, at the same time, recognising that there are factors that change within their budgets, such as this shift, and within the business rules, yes, the health budget is on track.

MATTHEW ABRAHAM: We've had one caller, this morning, saying there's a board meeting, tomorrow, considering privatising ACTEW. Is that on the agenda?

ROSEMARY FOLLETT: No. ACTEW - the decision has been made on that, and the Government has been quite clear that that public facility will remain as it is. It's corporatised, so it does operate on commercial lines. It returns a dividend to the whole of the ACT community and that's a very important dividend, but privatisation is not on this Government's agenda.

MATTHEW ABRAHAM: Now, Mr Keating gave you some money at the Premiers' Conference - some $10 million - for setting up our own public service here, or breaking away from the federal public service. Is that enough? I mean, what are you looking at on staff numbers when you talk about that and also about program efficiencies?

ROSEMARY FOLLETT: Well, Mr Keating has written to me about setting up our own ACT public service, and it's another step, I suppose, in self-government. What I've replied to him is that we do need some sort of establishment grant if we're to do that, and, most importantly at this stage, we need to ensure that there's proper consultation with the unions and the peak bodies, especially. That's actually a legislative requirement. I haven't heard back from Mr Keating on that, but I would certainly press our case for both of those conditions to be met.

MATTHEW ABRAHAM: Does your statement factor in the cost of the new superannuation levy at 5 per cent? Of course, it's come down now to - well, at the last minute, over night - to 4 per cent.

ROSEMARY FOLLETT: Yes. The superannuation levy would involve the ACT budget in about $2 million of extra expenditure in the first year - that's at the 5 per cent figure. So it would come down a little bit if it comes in at 4 per cent. But nevertheless, that is a Federal Government policy which I support in principle, but they have imposed it on the ACT Government without additional funding. I think that's a pretty harsh outcome, and whilst it's something under $2 million this year, by the turn of the century, I expect it to rise to about $10 million, and I believe that the Federal Government does have to compensate all of the States for that policy.

MATTHEW ABRAHAM: Now, we had the Treasurer, Joh Dawkins, appealing to the States at the Premiers' Conference not to lift taxes because of the flow-on to the CPI. What's your message to him, this morning?

ROSEMARY FOLLETT: Well, Mr Dawkins, I think, has made an unrealistic demand on the ACT. You have to bear in mind that the Federal Government has cut the ACT's revenue by 6.5 per cent. Now, how on earth we're to continue our services to the community and look after people who are in need without doing something about revenue, is beyond me, and I think it's totally unrealistic.

MATTHEW ABRAHAM: Chief Minister and Treasurer, Ms Rosemary Follett, thank you.

ROSEMARY FOLLETT: Thank you.

MATTHEW ABRAHAM: There we have it - the whole kit and caboodle. And stand by over the next few weeks as we get the bad news on what charges and taxes are going up, and clear the decks in advance of the budget. This isn't, of course, new. It's a strategy adopted by all State and Federal governments, really.