Page 258 - Week 01 - Wednesday, 10 December 2008
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I do not think anyone here can remember interest rate cuts of that magnitude in such a short time. Throughout the year, and in particular in the lead-up to the pre-election update, every time it appeared that the markets had stabilised there was a plunge. For example, the ASX all ordinaries index fell from around 6,000 in late May to around 5,000 in July, a fall of 17 per cent to the lowest level since 2006. From July 2008 to September 2008—
Mrs Dunne: That was before the ACT election.
MS GALLAGHER: Thank you, Mrs Dunne. Nice to see you are listening. Just before the beginning of the caretaker period the index was relatively stable at 5,000; so that does not go to support your point. However, if you are still listening, over the ACT election period the index again fell sharply. In the space of a month, the index fell from around 5,000 to 4,000, a fall of an additional 20 per cent.
The index rallied in early November reaching around 4,300. However, as it turned out the rally was only brief and the index quickly plummeted to 3,400 a few weeks later, a fall of another 20 per cent. Would Mr Smyth have foreseen all of this during the caretaker period? Would he have foreseen that the all ordinaries index would fall by around 30 per cent in just a couple of months? Your motion certainly implies that this was foreseeable.
Lehman Brothers collapsed around the second week of September. This is the investment bank that predates the American civil war. This is the bank that weathered the Great Depression. Was the collapse of such an institution foreseeable? Within one day the Dow Jones industrial average lost 500 points and within one day about $700 billion evaporated from investment portfolios.
These are the external factors—the unforeseeable factors, uncontrollable factors—because of which the territory budget will almost definitely fall into a deficit position. What is important to note is that this position is mainly being driven by external factors, not reckless spending as the opposition would have you believe. This includes decreased GST revenues from the commonwealth—once again, members should note that this revision came just a few months after their budget—declines in economic activity, particularly housing market impacts on conveyance revenue; declines in financial market impacting on investment returns; and lower interest rates impacting on earnings on cash balances. These factors are simply beyond the scope of the ACT government to change and influence.
If we go to what the Chief Minister said during the election campaign, it was that government spending would not put the budget into deficit. Those words were true then and they are true now. The words, the principle, the sentiment stand and they will continue to stand. This government will not spend beyond its means and the nature of its spending will be appropriate for the economic and social circumstances in both the shorter and longer term.
What has changed since the government went into caretaker mode, and since the election, is the magnitude of the global financial crisis and the impact on consumer and business confidence and decision making. These circumstances were
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