Page 336 - Week 01 - Thursday, 11 February 2010
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Additionally, there has been a $209 million aggregate improvement in the net operating balance over the forward years.
A more positive outlook for the ACT economy combined with stronger levels of commonwealth spending in 2009-10 is forecast to have a positive impact on the budget. Consumer and business confidence is rebounding, in large part due to the strength of the Australian economy, the commonwealth stimulus packages and the territory’s own capital initiatives aimed at cushioning the effect of the economic slowdown to support jobs and to support activity in the housing and construction markets.
Housing market activity also continues to be supported by relatively low interest rate settings. Treasury now forecasts ACT state final demand to recover from its low of 0.4 per cent in 2008-09 to growth of 3¾ per cent in 2009-10, an improvement 1¾ percentage points over previous forecasts. Our GST revenue estimates have been revised upwards, as have our payroll tax estimates. Additionally, the territory’s investments have been performing better than previously anticipated due to the recovery in debt and equity markets. The budget improvement is quite pronounced in the current year, due to the continued impact of the commonwealth stimulus measures, in particular the impact of the first homeowner boost on the housing market.
Revenues this year have also benefited from some large commercial property transactions, again demonstrating confidence in the economy. As a result of the improved net operating balance, the general government sector borrowing requirement is now estimated to be in the order of $250 million by the end of 2010-11, which is down from the estimate of $550 million in the 2009 budget update.
The strength of the territory’s balance sheet has always been a positive factor which assisted us through the crisis and ensured that we have maintained our AAA credit rating. I quote from Standard & Poor’s most recent update on the ACT:
… the strength of the government’s balance sheet provides flexibility to absorb cyclical deficit …
This stems from a fiscal strategy to achieve general government sector net operating surpluses, and prudent debt management that has left the government in a strong net-creditor starting point position.
The financial position of the general government sector, as assessed through a number of balance sheet measures, remains strong, with a significant improvement since the budget. The changes in the balance sheet largely relate to increased investment values as a result of the recovery of the financial markets and the increased value of infrastructure assets following re-evaluations.
Our budget plan was based on contributions from cyclical economic recovery, expenditure restraint and savings. The updated forecast suggests that the cyclical recovery is occurring earlier than we, and indeed most others, had envisaged. The strength of our budget plan is that we will be able to adjust it to changed circumstances and outlook. That is what a flexible plan does. The budget plan remains as relevant today as it was when I presented the 2010 budget last May. Our approach to managing the budget was right, and this update just confirms that.
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