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Stop the tram and start caring for the community 

“By averaging the level of debt accumulated over the eight years before the arrival of the coronavirus, the ACT government has in each of those years spent, on average, around $475 million more than it has earned,” writes columnist JON STANHOPE.

I’M sure Alistair Coe and his Liberal colleagues will have had a really good laugh at the outrage from Labor and the Greens following Coe’s World Environment Day commitment to plant one million trees in the ACT over the next 10 years, if the Liberals win the October election.

Jon Stanhope.

The shock and horror in Labor and Greens ranks that the Liberal Party had out-greened them, and on World Environment Day of all days, was palpable. How dare Alistair Coe and the Liberals make promises about protecting the environment? What a nerve.

Minister for City Services Chris Steel spluttered about the cost of planting trees and decried Coe’s fiscal irresponsibility.

It will not have gone unnoticed that for Chris Steel, or indeed any Labor or Greens Minister in the current ACT government, to lecture Alistair Coe about fiscal responsibility is akin to Tony Abbott lecturing Julia Gillard about sexism and misogyny.

One does not have to look too hard at the state of the ACT’s books to realise how crook things are. 

The numbers speak for themselves.

Since becoming Treasurer in 2011, Andrew Barr has, for example, turned the level of net debt in that year from a negative of $736 million to $3.1 billion this year, that is, an increase of $3.8 billion. This was before the coronavirus pandemic.

It was estimated, also before the pandemic struck, that net debt would exceed $4 billion by 2021. In other words, a turnaround of just under $5 billion. With the advent of coronavirus and its immediate impact on both territory revenue and expenditure it is likely that ACT net debt will now close in on $4.5 billion. 

To put that in perspective and to understand the magnitude of that level of debt for a small jurisdiction with an annual budget of around $6 billion, debt of $4.5 billion equates to roughly 75 per cent of total operating revenue.

It is also instructive to reflect, if one averages out the level of debt accumulated over the eight years before the arrival of the coronavirus, the ACT government has in each of those years spent, on average, in the order of $475 million more than it has earned.

It would be interesting, if not a little depressing, to know how the government spent the $475 million a year that it has racked up on the never-never. I admit I don’t have a clue. 

There are a few areas of expenditure where it clearly didn’t spend it, notably it has not been spent on hospitals, health care, affordable or social housing, pensioner concessions or on addressing poverty or indigenous disadvantage or, for that matter, in planting trees. 

If asked to try and identify the most likely use to which the borrowings were put I would guess that the tram would be among the favourites. However, the tram would have consumed only a fraction of the $4 billion in existing borrowings. We will, I fear, need to wait for a change of government and an independent audit to discover the truth about where the $475 million a year, on average, that the Treasurer has been borrowing actually went. 

What we do know, from the audited financial statements, is that over the eight years of this mad spending spree the accumulated operating deficit amounts to $2.018 billion and the accumulated cash deficit is $1.7 billion in the General Government Sector and $2.3 billion in total.

In light of Steel’s new-found concern for fiscal discipline and wise budgeting it’s surprising that he refuses to release the business case and cost benefit analysis (BCR) for stage 2 of light rail.

As we know the auditor-general reported that the BCR for stage 1 of the project was a mere 0.49 and even then there were a range of costs, including an estimated $200 million to move a range of underground services, $192 million to relocate public housing, and costs of park-and-ride facilities, associated bus interchange works and road works which were not included in that analysis.

Gossip emanating from within the ACT government is that the BCR for stage 2a is in the order of 0.20 or, in other words, for every dollar spent the economic return will be 20 cents. 

In light of the extremely poor state of the ACT’s finances and hence limited capacity to cushion the ACT from the economic impact of the pandemic, the Chief Minister should emulate the strength and political courage shown by NSW Premier Gladys Berejiklian who postponed, because of the new economic reality, the construction of a promised football stadium in order to free up funds for projects of higher economic and social value, and announce that Stage 2 of the tram will be postponed indefinitely.

The state of the ACT Budget should not, of course, be assessed by looking only at the level of debt. Unfortunately there is no comfort to be had from any of the other major fiscal measures such as net financial worth, net financial liabilities or the budget deficit as expressed through the net operating balance.

The ACT’s finances are in a demonstrably worse state than at any time since self-government and that is, mind you, at a time that the growth in taxation has never been higher.

Jon Stanhope was chief minister from 2001 to 2011 and represented Ginninderra for the Labor Party from 1998. He is the only chief minister to have governed with a majority in the Assembly.


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Jon Stanhope

Jon Stanhope

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3 Responses to Stop the tram and start caring for the community 

Robin Eckermann says: June 24, 2020 at 1:50 pm

We need your common sense back, Jon! The ACT Labor Government is leading us towards a financial disaster, and the Liberals don’t present a strong alternative given their right-wing conservative bias. I suspect many Canberrans would leap to embrace a sensible, middle-of-the road alternative. Unfortunately party politics make it unlikely we’ll ever get such a choice! It seems to me our best hope lies in a *group* of intelligent independents (not a single individual like Rattenbury) securing the balance of power and forcing some considered thinking around key issues affecting our future – rather than being locked into idealogical positions (such as the current irrational love affair with traditional tram technology). Right now, our future is being sold down the drain!

Mark Boast says: June 24, 2020 at 4:32 pm

Whilst expenditure is often easy to see I do wonder whether the ACT’s biggest constraint and therefore challenge is income. We’re on the road to having a significant population needing a future looking city, yet have an income model based on yesteryear. Is it time for a review of the overall Canberra vision that takes account of future transport, revised physical boundaries, regional role and new industry? Or should we forgo vision and muddle along coping with each emergency as it arises? As a Canberra lover I think we owe our following generations the inspiration that created the city over 100 years ago.

Palmerston's Lament says: June 25, 2020 at 8:43 am

The question that remains unanswered, and has been prime in my mind for the past two election cycles, is “where has all the money gone”? Each year we are charged well above CPI in rates, fees and charges, Stamp Duty remains and other regressive taxes remain but services (ie Quality of Life) appear to have decreased.

With Labor having seized the middle right with such a vice-like grip, there has to be a day of reckoning surely? It happens under every regime that goes beyond its day and we are facing a bloated and moribund structure that certainly deserves a good flushing.


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