The 2014-2015 ACT Budget handed down last reflects the current economic environment with a number of positive initiatives which will be of direct benefit to the Territory, although there are also some significant tax increases that may have the perverse outcome of slowing economic growth.
There are some strong positives in this Budget, particularly the strong investment in infrastructure, which will help to create jobs for Canberrans and stimulate the economy. This includes investment in projects such as the University of Canberra Public Hospital, the Australian Forum, and initiatives aimed at revitalising the City and Woden Town Centre.
The ACT Government has also outlined a prudent approach to borrowing funds to invest in major capital works and infrastructure projects, leveraging the Territory’s strong credit rating and low levels of debt in order to invest in infrastructure which will serve the community for many years to come.
There are strong economic and equity arguments for borrowing to fund infrastructure as it spreads the costs and benefits across generations and so is better and fairer approach than paying for infrastructure straight from the balance sheet.
While the property industry also continues to support the Government’s tax reform program, with the goal of creating a tax system which is fairer, simpler, and efficient, it is lamentable to see an ever-increasing tax burden fall on the ACT property sector.
The sharp increases in general rates casts doubt on the credibility of the ACT’s 20-year tax reform program. Equity needs to be at the centre of genuine tax reform. Excessive taxation on property owners and business operators will limit private investment, particularly in property.
Alarmingly, the Fire and Emergency Services Levy (FESL) is set to rise for commercial properties by an average of 35 per cent. The FESL should be removed, with funding for services covered through general revenue.
The property sector is a lynchpin of the ACT economy, contributing more tax than any other industry. It more than pays its dues.
While the ACT Budget largely represents a positive response to current economic conditions, the hikes in rates and taxes could undo the otherwise good work done through leveraging economic opportunities from infrastructure spending.
Catherine Carter is ACT Executive Director of the Property Council of Australia