Context crucial in ACT Budget

As a marketing exercise, the recent ACT Budget was a populist pitch with pre-budget promises of green bins, free city loop bus services, and rates increases that will be "considerably lower".

Economic psychologists have suggested we can be influenced to behave in a certain way when given certain cues. And in many respects, the build-up to last Tuesday's budget was an interesting priming exercise.

Such initiatives ignore the reality that people come with different experiences, and in turn, draw different conclusions to particular cues. A much welcomed green bins program for some is potentially the loss of business for others.

Likewise, that free city loop bus service may not be ideal if you're a parent running errands and doing the shopping with children in tow. And the lower rates increases looks quite disingenuous if you're living in a unit, and are now facing a 20 per cent rates increase. Context really does matter with budgets.

The economic pitch on budget day was rosy, as to be expected in an election year. Truth is, this budget will be fuelled by the property industry with bottom-line revenue increases driven by increased taxation revenue (primarily from stamp duty) and land sales.

The tax initiatives in this budget are telling—commercial rates up 7 per cent in 2016-17 with the fixed charge having increased 84 per cent since the tax reforms. Whilst the government is enjoying windfall profits from increased transactions as a result of stamp duty cuts, they continue to punish residents and business owners through rates increases that have no clear forecast beyond the next budget. It's a double whammy.

There are good arguments for getting rid of stamp duty—it's an unpredictable tax base for governments, and limits sales and transactions. That said, replacing stamp duty through ever higher commercial and residential rates is proving unpopular.

The government claims that the ACT economy is "bouncing back" and growing, yet for many residents and businesses, the true litmus test will be whether they feel better off in the coming financial year. Again, context matters.

First published in the Sydney Morning Herald, 11 June 2016.