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That is what the underlying deficit is - more than $8 billion once asset sales and increased debt repayment from the States are taken out. It is a cosmetic approach, highlighted by the fact that, despite expectations of a turnaround in the nation’s trade performance, from a deficit to a surplus, and a budget supposedly targeted at improving the level of national savings, the Labor Party has still forecast an unchanged current account deficit of $27 billion.
It is important to note, Mr Speaker, that the $5.3 billion in asset sales is not in itself some windfall gain. It is false accounting to count the proceeds of sales without bringing to account at the same time the loss of future dividends and the increased leasing costs, which the budget papers, at least on the surface, fail to do. This is headline accounting and it is not good business sense. It is a fire sale to cover up a failure to address fundamental economic problems. That is not to say, Mr Speaker, that there are not some goodies in the Federal budget which, of course, my Government welcomes. It is good to see the maintenance of a healthy capital works program in Canberra.
But offsetting that positive stimulus to the ACT economy are measures that inevitably will hamper key industries. New revenue measures in the Federal budget are estimated at $2.4 billion. These include a 3 per cent increase in the company tax rate from 33 per cent to 36 per cent. This increase is of concern as it will affect the profitability and capacity of ACT businesses to invest and to employ staff. This is at a time when job opportunities in the private sector are sorely needed, not just in the ACT but nationally. The sales tax applying to non-luxury motor vehicles has been raised from 16 per cent to 21 per cent. Mr Speaker, that will mean that the ordinary, everyday family car bought by Canberrans every day will go up by $1,000. Home buyers and renovators will be slugged by a 12 per cent sales tax increase on building materials. This will raise the cost of building an average home by more than $2,000, and the cost of something as simple as a kitchen renovation by some $1,200. This is a major disincentive for home renovations, which really have been what has been keeping the Canberra building industry in business over the last few months. Mr Speaker, this comes at a particularly bad time for the ACT building industry, given the current slump in new housing developments and the trend towards renovations of existing properties.
We then come to the Medicare levy, which has been increased from 1.4 per cent to 1.5 per cent, raising $230m. This will reduce disposable income and affect the consumption of goods and services. The Commonwealth has recognised the increasing cost of health services in their decision to raise the Medicare levy. However, no additional funding has been provided to States and Territories under the Medicare agreement, to improve hospital services or to reduce waiting lists. A mooted review of the Medicare arrangements may provide the ACT with increased certainty in funding, but no more than a possible marginal increase in funding is foreshadowed in the budget. The overall effect of these revenue measures, Mr Speaker, will simply be to reduce the capacity for investment and growth in jobs at a time when the ACT's biggest challenge is to attract more private business.