Rates will be effectively frozen for the majority of Canberra households next year in an effort to stimulate the ACT economy as it endures the coronavirus recession.
- The rates freeze combined with a further $150 rebate to all ACT households from July 1 means about two-thirds of households will pay less overall
- Rates have consistently risen well above inflation in the ACT in recent years
- The Canberra Liberals have long called for rates to be frozen, announcing it as one of their key promises for the upcoming ACT election
Under an ACT Government economic recovery plan, residential rates will not rise above current levels for 2020-21 for most Canberra households.
When combined with the $150 rates rebate being issued to all households from July 1, roughly two-thirds of the city’s households will see a fall in their overall rates bill.
ACT Chief Minister Andrew Barr detailed the plan in his State of the Territory Address to the Canberra Business Chamber on Wednesday morning.
As well as providing a cash injection to the ACT economy, the measure will go some way to blunting one of the Canberra Liberals’ most potent political attacks, having promised a rates freeze for their full term in government if elected in October.
A pause on years of rate hikes
Rates have consistently risen well above inflation in the ACT in recent years, in line with Mr Barr’s long-term plan to phase out “inefficient” transaction fees such as stamp duty, and replace the lost revenue with “fairer” charges through increased rates.
The program has been underway since 2012.
This year’s budget was expected to provide the details of the next five years of that plan, but it has been put off until October.
The measure being announced today will see those rate hikes paused, at least for the next financial year.
But the freeze will not be universal. For most of Canberra’s households, with the $150 rates rebate, it will effectively see their rates cut.
But about 22,000 households are expected to come out even, and some will see a small increase in their rates bill.
That burden is expected to fall on households that have seen a sharp increase in their land value over the past 12 months.
Mr Barr said he hoped that households would spend the money that would have gone on their increased rates bill.
“Right now, we also need to inject more cash into our economy,” he said.
A convenient political fix
Wednesday’s announcement was in no way couched in political terms.
It was delivered solely as an economic stimulus measure, like the freeze on a whole range of other rates and charges — for example, vehicle registration — announced by Mr Barr’s Labor Government earlier this week.
But there is a broader context: in particular, the Canberra Liberals’ long-standing pledge to freeze residential rates should they take office.
ACT Opposition Leader Alistair Coe said the announcement had more to do with being an election year than being a financial reprieve from the impact of COVID-19.
He labelled Mr Barr’s announcement as “the ACT Government’s admission that their tax reform and rates regime is unfair and that it’s hurting Canberra families”.
“We’ve been talking about this for a long time and now it seems that in a ‘flash in the pan’-type moment the ACT Government is giving a pause in their aggressive rates regime. It will start again next year.”
Mr Coe reiterated that his party’s pledge would stretch further, with the Canberra Liberals’ promising to hold rates at their current levels for the duration of their first term should they win October’s election.
Mr Coe said, according to the latest budget figures available to him, the planned four-year rates freeze would cost $175 million over a period where the ACT Government would receive $29 billion.
He said by those numbers Canberra households would not lose services their rates were currently providing.
“It’s a small amount for Government, but means a lots for Canberra families,” he said.
An unfolding economic crisis
Mr Barr also used his speech to paint a picture of the difficult post-COVID-19 economic outlook for the territory as it tries to recover from the shock of a widespread shutdown.
Accommodation, hospitality, entertainment and retail sectors have been singled out as having felt the worst impacts from physical distancing restrictions.
And, like other Australian jurisdictions, the ACT economy is only now slowly beginning to reopen, with the most significant easing of restrictions yet to take effect from Friday.
Mr Barr said the ACT was well placed to handle a shock like COVID-19, but that will not necessarily make recovery easy.
“A year ago, the ACT was well placed to face any challenges that lay ahead,” he said.
“These challenges have truly come, overwhelming nations around the world. We are an open knowledge, services-based economy and we’re not immune to this uncertainty.”
The ACT was expected to record a $255 million deficit in 2019-20, and was forecast to bring in a surplus by 2021-22.
On Wednesday Mr Barr made it clear that those sorts of targets were no longer the priority.
“Of course, like every other government around Australia and the world, our fiscal position will deteriorate, and net debt will rise,” he said.
“Right now, economic and support and growth is the priority, not chasing budget surpluses.”