“The taxation measures in this budget are indeed tough. They are also heartless, thoughtless, lazy and regressive.” JON STANHOPE & KHALID AHMED are strident in their criticism of blundering Treasurer Steel’s budget debut.
Will Chris Steel be any different or better as treasurer than Andrew Barr and his 13 successive deficits?
His minders have presented him as someone willing to make the tough decisions and claim that, while committed to “Labor values”, he acknowledges that an increase in taxes and the withdrawal of concessions are all necessary.
They’re all needed in order to ensure the sustainability of services and to cover the funding shortfall from the Commonwealth and, of course, to repay the ACT’s mountain of debt.
If you believe the story-telling, the underlying message is that Steel will fix the mess that Barr created.
A close look at the actual budget reveals that none of the explanations for increased taxation are valid.
Expenditure growth is an “anaemic” 2.6 per cent per annum, which is not even enough to cover inflation and wage growth.
Unless some magic efficiencies have been found in this budget, it is impossible to accept that service levels can be maintained with the budgeted funding growth.
For example, the budgeted expenditure on health in 2025-26 is less than the 2024-25 estimated expenditure. In a similar vein, the budget makes no allowance for growth in wages, for inflation, for staffing or an increase in demand.
As for the Commonwealth funding for hospitals, Federal Health Minister Mark Butler has directly rebutted Mr Steel and pointed out that the ACT hospital system will in fact receive the largest increase in funding of all states and territories.
Bizarrely, the debt management strategy means more debt
Far from repaying debt, the budget increases net debt by just on a billion dollars. Bizarrely, the debt management strategy in the budget papers will result in more debt.
The taxation measures in this budget are indeed tough. They are also heartless, thoughtless, lazy and regressive. So much for “Labor values”.
We will provide in a subsequent article a detailed analysis and comments on these matters, with the hope that in the interim Mr Steel will have provided a detailed explanation of the outcomes he anticipates this budget will generate.
To be fair, he has been handed the Treasury portfolio at a time the ACT’s finances are in the worst state of all Australian jurisdictions, not just due to some recent external factors, but because of sustained neglect and mismanagement by his predecessor, Andrew Barr.
Steel’s limited experience and lack of attention to detail or recognition of the depth and breadth of policy, and susceptibility to gaffes and blunders, which are on display in this budget, do not give us confidence that the territory’s finances are on the path to improvement.
Compounding Mr Steel’s lack of experience are worrying questions about the professionalism and capacity of Treasury, including the soundness and independence of its advice.
The design of the taxation measures in this budget is one example of that. The apparent failure to appreciate the true state of the budget or to realise the almost certain underfunding of health in the Pre Election Budget Update (PEBU) last year is indicative of capacity problems within Treasury.
The PEBU is prepared by Treasury in the lead up to elections, independent of the government, under the provisions of the Financial Management Act 1996, and is designed to provide an independent assessment of the government’s fiscal performance.
Table 1 details the forecasts in PEBU, 2025-26 Budget and the changes to those forecasts.
The table highlights that the budget just handed down contains estimates that revenue will be $272 million less, and expenses will be $238 million more than forecast by Treasury in the PEBU.
The combined effect of the overestimate of revenue and underestimate of expenses is a blowout in the deficit of $509 million (42 per cent) against the PEBU forecast.
We have previously pointed out that the so-called blowout in health costs could and should have been anticipated and that the revenue estimates were unrealistic. Surely Canberrans deserve better than this from their professional, well paid, public servants.
Table 2 illustrates a pattern of a blowout in the deficit accompanied by a promise of an improvement in the following year, only for that to be blown out, and a further promise of improvement.
Mr Steel appears to have continued this embarrassing budget tradition – a shortfall in revenue, a blowout in expenditure, a more than billion-dollar deficit in the current year, but a forecast of a miraculous recovery in the coming year.
Commenting on the 2024-25 Budget, we wrote: “Regrettably, our view of the budget remains the same as last year, ie that the budget papers have an Alice in Wonderland feeling of make-believe about them”.
Regrettably, our view of the 2025-26 Budget is no different. We will provide further analysis and discussion of the budget estimates and measures in the coming weeks.
Barr’s fallacious budget claims
When then-Treasurer Andrew Barr presented his 12th ACT budget (2023-24) we said: “Based on the 10 years of actual results against the budget forecasts, the estimate in the current budget spend of $9.021 billion for 2026-27 is almost certainly understated and, in reality, will be in the order of $9.6 billion.”
According to the 2025-26 Budget presented by Chris Steel, expenditure will be $9.6 billion in the coming year, that is, one year ahead of our estimate. The 2026-27 estimate is now $9.8 billion!
When Andrew Barr presented the 2024-25 Budget – his 13th – we observed that the forecast increase in revenue and control on expenditure was simply not credible.
We made that observation in the context of a revenue shortfall of $209 million and an expenditure blowout (coincidentally) of $209 million in 2023-24.
In other words, at the very time that revenue shortfalls and expenditure blowouts were occurring, Mr Barr was claiming that revenue would increase, and expenditure would be constrained in the following year. Those claims were fallacious as indeed were claims he made in his previous 12 budgets.
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