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All of this occurred against a background of strong growth in the national economy. Since this Government assumed office, some key economic indicators have shown a more positive outlook. There is renewed business and consumer confidence that this Government can turn the slump around. Total employment in the ACT has increased by almost 5,000 full-time and part-time jobs since March, in a stunning reversal of the downward trend that occurred during the last seven months of the Labor Government. Our participation rate is the highest on record. Retail spending has also turned around, evidenced by the fact that the ACT is now recording the largest growth in retail turnover of all States and Territories. Already spending is up by 4.5 per cent since February 1995. Despite these encouraging trends, the outlook for the housing and construction industry remains a concern. At best, the substantial decline in residential building activity is expected to level off, whereas activity in the non-residential construction sector is anticipated to remain at solid levels. Growth in the economy is therefore forecast to remain stable at 2.5 per cent during the next three years.

Employment prospects are anticipated to improve only marginally during 1995-96, with growth forecast to rise to 1.5 per cent. In line with national price pressures, inflation in the ACT is forecast to increase to 4 per cent this year but fall back to 3 per cent in later years. Population growth is estimated to remain at one per cent over the next three years, while housing approvals are expected to begin growing again by 1996-97. In summary, the economic outlook for the ACT is one of having to arrest a serious slide while seeking out opportunities for growth.

During this Government's first term we will be managing the final years of the ACT’s transition to State-type financing. In recognition of this, at the 1995 Premiers Conference I sought from the Commonwealth a measured and sustainable funding strategy to assist the ACT in completing this very difficult task, a task which has seen a real reduction of 49 per cent in Commonwealth financial assistance since 1989-90. The ACT received special revenue assistance of $15m this year. The end result is that we are faced with a reduction this year in Commonwealth total general revenue payments of $35.3m. This is 11 per cent below the actual payments received in 1994-95 and is equivalent to a $117 cut for each ACT resident in just one year. The transition may be harsh but it is nonetheless inevitable.

Together with the other States, the ACT was, however, able to reach agreement with the Commonwealth on the sharing of dividends from the national competition policy. For the Territory this represents, at today's values, an additional $3.4m from 1997-98, rising to $10.4m per annum from 2001-02. Payment is conditional upon the ACT implementing key financial reforms over the next three years, reforms that are already part of this Government's economic agenda.

Central to the framing of this budget has been the legacy of escalating deficits left to us, and to the Canberra community, by the Labor Government. Since 1989 the ACT Government has been running down its bank account. In the first year of self-government the general government sector budget had a surplus of $70m.

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