THE Budget’s estimated operating loss for 2012-13 is almost $400 million. To make it worse, the ACT Government expects to make operating losses for the next three years.
How reliable are those estimates? Not at all, if Treasury’s track record is any guide.
Treasury’s average error when it comes to estimating Government revenue is more than $200 million.
Only one year ago, Treasury estimated that the fiscal balance for 2012-13 would be minus $425 million, but now it looks like blowing out to a shortfall of $1016 million. This is an error of more than 100 per cent.
The unreliability of these estimates could be lessened if Treasury listened more closely to advice from industries whose survival and prosperity depends on accurately predicting demand for their products and services.
For example, the property industry warned last year that the Treasury had over-estimated its revenue from stamp duty on conveyances. Characteristically, Treasury ignored the advice and as a result, it looks like falling short by $30 million. But instead of acknowledging that it was advised of the impending slow-down in property sales, Treasury now blames a slow 10 months of the current year for the shortfall!
“Dodgy” estimates for the coming year include:
More stamp duty revenue, even though stamp duty rates on commercial property have increased to 7.25 per cent, competing with 5.85 per cent in NSW and Treasury is warning of a “moderating economy” (code for a downturn);
Sales of 5000 dwellings in a moderating market; and
The lease variation charge to deliver $23.5 million, even though in the nine months to the end of March only $9 million of an estimated $22 million had been received.
We all suffer because every year the Government formulates policy that turns out to be inappropriate because it is based on Budget numbers that are woefully inaccurate.
We would all be better off if Treasury were more accountable to the public and listened more attentively to advice from industries that survive by creating value.
However, there is one silver lining. ACT Treasurer Andrew Barr has committed to a bold program of tax reform, with a number of really good initiatives designed to lead to greater efficiencies in the Territory’s taxation system.
Although the early initiatives may prove to be a bit of a mixed bag, such as increasing stamp duty for property owners who would previously have paid 6.75 per cent stamp duty under the former regime, to a new rate of 7.25 per cent, when tax reform is actually intended to phase out stamp duties… maybe now we’re finally on the path to a better tax system in the ACT.
Catherine Carter is ACT executive director of the Property Council of Australia