Canberrans should consider spending some of their income tax cuts on a "little treat" locally to boost the city's economy as growth slows, Chief Minister Andrew Barr says.
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"That, I think, would be very timely," Mr Barr said, ahead of handing down the last budget before the ACT election.
The Chief Minister said how Australians choose to use income tax cuts from July 1 was the "$23 billion question" for the Australian economy.
"Our forecasts for economic growth for the coming 12 months are still that we will grow, but by a below trend amount," he said.
"So the economy is slowing, but it's not going backwards."
The absolute sweet spot would be for people to spend, if they were able to, in parts of the economy without inflationary pressure in a way that supported businesses, he said.
Mr Barr told The Canberra Times Tuesday's budget would make it clear to the public the values and priorities of a Labor and Greens government.
"You'll see that very clearly in the budget from the health, housing and cost-of-living investments, through to the climate change and energy investments, as well as the city building, employment, job-generating investments as well," he said.
Mr Barr said cost-of-living relief would be targeted to those in the community who were experiencing the toughest financial hardship, and go further in areas the federal budget missed.
"We've got some pretty good data out of the banking sector on what's happened to people's discretionary and non-discretionary spend, and there's quite a different depending on the age of the bank customer," he said.
The only cohort spending more now than before the onset of the COVID-19 pandemic were those aged over 65, Mr Barr said, while people aged 40 to 64 were "treading water, essentially".
"The cohort that is being hit the hardest are people aged 25 to 39, and their spending has gone back quite dramatically," he said.
"They either have a mortgage and are hit with higher interest repayments or they're in the rental market."
The budget will include a one-off $250 payment to support apprentices and trainees in the ACT, along with an expanded equity fund to support school students and their families in need.
A rent relief fund will be extended, while the value of utilities hardship fund vouchers will grow from $100 to $300.
Low-income health care holders will be able to access concession public transport fares in the ACT and extra funding will be handed to community organisations supporting vulnerable people, including Roundabout Canberra, Fearless Women and Women's Health Matters.
"We have used this budget to address some of the immediate priorities the community have identified, to complete the delivery of commitments that we we made at the 2020 election, but also to outline a vision for the next four years," Mr Barr said.
The ACT expects cost-of-living pressures to ease from July 1 when Commonwealth income tax cuts and slated wage increases flow into workers' pay slips.
The average Australian worker earning $73,000 a year is set to receive a $1500 annual tax cut. Canberrans have the highest average incomes in the country.
"But there will still be some people for whom the benefits of that don't flow as strongly because they're not paying as much tax," Mr Barr said.
"We've also looked at things like our rent relief fund and our emergency food support programs and those sorts of things to provide some additional assistance."
The ACT's infrastructure spend would top $1 billion in a single financial year for the first time, Mr Barr said, thanks to the Canberra Hospital expansion and Canberra Institute of Technology Woden campus both operating at full tilt.
"We looked at that delivery capacity and essentially set that as a benchmark, for around that figure is what we can deliver. And so the budget seeks to smooth that profile effectively over the forward estimates period," he said.
"So that means bringing down and reprofiling some expenditure across the forward estimates."
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Mr Barr defended the territory's level of debt as a means of financing infrastructure projects, arguing infrastructure costs were rising between 4 and 5 per cent every year and the ACT needed to compete against an "enormous" program of infrastructure spending planned by surrounding states.
"If your only concern was the level of debt, then you could go, OK, we are not going to have any of this infrastructure. We will wait until 2035 before commencing when the capacity [is greater]," he said.
"Or we can bring forward some of that infrastructure and spread it out over a pretty consistent program."
Mr Barr said the government had decided, for reasons of service delivery and a growing population, to stage the "once-in-a-half-century or once-in-a-century" projects.
The government was responding to community expectation to prioritise health and education infrastructure, along with public transport and housing, he said.
"It's a little bit like, from a household perspective, saying, 'Right, will I save until I can buy my property outright in cash and then buy it or will I take out a mortgage because I want the house earlier?'," he said.
Mr Barr said the broader fiscal strategy for the territory depended on fully funding the defined-benefits superannuation liability and completing changes to the tax system and phasing out stamp duty in the early 2030s.
"If they are both completed in that time frame, then that will free up a huge amount of capacity within the territory budget for a debt repayment plan," he said.
Jasper Lindell
Jasper Lindell joined The Canberra Times in 2018. He is a Legislative Assembly reporter, covering ACT politics and government. He also writes about development, transport, heritage, local history, literature and the arts, as well as contributing to the Times' Panorama magazine. He was previously a Sunday Canberra Times reporter.
Jasper Lindell joined The Canberra Times in 2018. He is a Legislative Assembly reporter, covering ACT politics and government. He also writes about development, transport, heritage, local history, literature and the arts, as well as contributing to the Times' Panorama magazine. He was previously a Sunday Canberra Times reporter.
