'Our greatest challenge': How to rebuild the ACT's virus-struck economy?

In coronavirus, the ACT is grappling with the greatest health and economic challenge in its history, according to Chief Minister Andrew Barr.

On the health front, the territory could hardly have performed better. It has been three weeks since the most recent case of COVID-19 was recorded, despite increased testing.

But it is the economic crisis, which Australian governments inflicted upon themselves through efforts to contain the virus, which is likely to prove more difficult to overcome.

While the full toll of the shutdown won't be known for months, maybe years, the latest batch of unemployment figures - which showed 594,000 Australians, including 8700 Canberrans lost their job in April - provide some indication of its potential scale.

The latest quarterly update on the ACT's budget position only captured a few days of the lockdown, but sounded warnings about the "significant" financial hit to come.

The projected $255 million deficit for 2019-20 will almost certainly have blown out further by years end, with cratering revenue coinciding with $350 million in emergency government spending to combat the two-headed crisis.

Repairing the damage to the budget, and rebuilding the previously thriving economy, will be a long and laborious task.

As business start to reopen and the ACT takes its first tentative steps on the road to recovery, The Canberra Times canvassed the views of politicians, academics, economists and industry groups on the best approach to rebuilding the economy.

'We're in the strongest position in the nation'

While conscious that the health emergency is not yet over, Mr Barr said the ACT government's "major focus" was now on the economic recovery.

The chief minister, who in early April described the pandemic as "this generation's Second World War", was buoyant about the prospects of a strong rebound. The territory entered the crisis with the nation's lowest unemployment rate (2.9 per cent), fastest rate of employment (4.3 per cent) and highest number of Canberrans with a job (240,000) on record.

"This puts the territory in the strongest position in the nation to begin our economic recovery," Mr Barr said.

With consumer demand, business investment and exports expected to remain "subdued" in the short term, Mr Barr said responsibility for creating economic growth and reducing unemployment would fall more on the public sector than "any time in living memory".

"The last time we would have experienced the level of public sector investment that is going to be necessary in the Australian economy would go back to the days of the Great Depression," he said.

"We are very conscious of the role that we need to play."

Beyond its own spending, the ACT government is working on a package of policy reforms to aid the recovery, including to the planning system, skills sector and public service.

Mr Barr will also use a speech next month, in what would have been ACT budget week, to outline new fiscal policy settings to support the rebuild in the coming years. He's keeping his cards close to his chest, but has hinted there could be changes to payroll tax and further reductions in stamp duty.

He's also set to unveil a support package for Canberra's hospitality sector later this week.

There have been renewed calls for GST reform in the wake of the crisis, but Mr Barr said he could not see those amounting to much.

'We should be the best'

Opposition Leader Alistair Coe, who is hoping to be the man in charge of leading the recovery after October's ACT election, said the territory should be the jurisdiction best placed to recover from the crisis.

"Being a state and council government, in addition to being a city-state, means the ACT government has an extraordinary scope of regulatory authority ... whether you're talking about planning, business regulation, public service or tax," he said.

"Often, being a small jurisdiction is inefficient and is a hindrance, but for the way out of this [crisis] ... it is potentially a benefit."

Mr Coe said now more than ever the territory needed a "competitive" commercial and residential rate regime and policies to support business investment, such as payroll tax relief.

The opposition has pledged to act on both fronts - freezing residential rate in its first term and phasing out payroll tax - if they win the October 17 election.

'Debt is secondary'

The territory's debt burden was expected to eclipse $3 billion at the end of this financial year, increasing to $4 billion by 2021-2022.

Mr Coe regularly cites the figures when attacking Labor's record on economic management, questioning how any fiscally responsible government could take record borrowings at the same time as it was raking in record revenue.

But when it comes to nursing the ACT economy back to good health in the wake of the pandemic, reigning in debt - and spending - should not be at the forefront of the government's mind. With households and businesses under financial pressure, and with interests rates at record lows, now is the time to spend, not save.

That's the view of ANZ senior economist Cherelle Murphy.

"The debt has to be secondary at this time to get the economy moving along," Ms Murphy said.

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Ms Murphy said governments - territory and federal - had to lead the recovery, pumping money into the economy while pulling policy levers to encourage private investment.

"Government has to help things along, without government we will struggle," she said.

"We know that the household sector has been decimated. In the business sector there are some sparks, but also concerns."

"This is a very difficult economic hole to pull ourselves out of without the government's help."

'Recovery will need to be led by the private sector'

Canberra Business Chamber chief executive Graham Catt has a slightly different view, saying the economic recovery needs to be led by the private sector.

Mr Catt believes the government's role is that of a facilitator, responsible for creating an environment which encourages businesses to grow and invest.

The business lobby, together with the Property Council and Master Builders Association, earlier this month called on the Barr government to fast-track some of the the big ticket items on its $13 billion infrastructure agenda - including the long-awaited new sports stadium - to help support the sector and wider economy.

The Chief Minister rejected their request, but Mr Catt continues to advocate for the idea. He is also calling for increased investment in public housing, which he believes would achieve the "twin objectives" of creating jobs and activity in the residential construction sector while injecting much-needed stock into the market.

"In addition to supporting the local construction sector, these projects will help support the recovery of our tourism and events sector which has been decimated by the COVID-19 shutdowns," he said.

"Infrastructure spending will not only provide immediate construction-related employment, but depending on the projects funded, can provide health, environmental, community and social benefits for generations to come."

The Master Builders Association has pitched a package of stimulus measures to head off a crisis in Canberra's once-booming construction sector, headlined by a $40,000 cash bonus to new home buyers.

Mr Barr was open to some of the ideas, but has flatly rejected the $40,000 grant scheme, which he said would worsen housing affordability in the nation's capital.

'We'll be picking up the pieces for years'

Demand for community services has skyrocketed amid the pandemic, placing an unprecedented level of pressure on already stretched government and non-government providers.

The ACT government has made a raft of funding announcements since the crisis started, including $1.5 million to deliver urgent food relief, $1 million to help providers adapt to new service delivery models and funding for upgrades to community centres across Canberra.

There's also been millions pledged for mental health services and support for victims of domestic and family violence.

But ACT Council of Social Services policy manager Craig Wallace said more needed to be done.

"This crisis is going to have a long tail ... and it will be the community sector which will be picking up the pieces of years," he said.

Mr Wallace said the sector needed "proper" funding to ensure it was equipped to both support Canberrans through the recovery, and prepared should another emergency arise. He said further upgrades to buildings which house community service providers, many of which he said were no longer "not fit for purpose", would deliver an economic stimulus.

Mr Barr last week tasked community services minister Suzanne Orr with overseeing the government's "community recovery plan", which will see additional support for providers and extra investment in mental health care.

'We are limited in what we can do'

While the ACT government has some policy levers it can pull, University of Canberra professor John Hawkins said the territory, given its size, was "quite limited" in its capacity to shape the recovery.

The ACT's sits at the mercy of factors outside its control; What happens after the federal government's JobKeeper wage subsidy scheme ends in September? What if a second wave of the virus sweeps through the population, forcing another shutdown?

Professor Hawkins said one risk for the ACT was the prospect of the Coalition making cuts to the public service - through an extension or expansion of the efficiency dividend - to help pay off debt.

He said there were concerns for the higher education sector, which has been one of the pillars of the ACT's economic strength.

The foreign student market was worth more than $1 billion to the ACT economy in the past financial year, accounting for more than 40 per cent of the value of all international service exports.

The closure of Australia's borders to contain the virus has decimated sector, denying universities tens of thousands of full-fee paying international students. There is no time frame for reopening the borders and even when they do, there are no guarantees that students will rush back in the same numbers.

'I am optimistic'

Blake Proberts owns nine cafes across Canberra, including Two Before Ten and The Front in Lyneham.

Reflecting on the rush into lockdown in late March, he said the uncertainty which surrounded the rapidly evolving situation was the biggest cause for concern.

While his cafes were allowed to remain open to serve takeaway, Mr Proberts said the decision to keep trading wasn't straightforward.

"There was a decision that we had to make about whether it was worth it. There was quite a drastic drop in trade. It actually probably cost money to be open, whereas it was probably better to shut the doors," Mr Proberts said.

Mr Proberts said the business benefited from the federal government's initial $17 billion stimulus package, while the JobKeeper wage subsidy scheme helped retain some employees. He said keeping staff on meant that service wasn't so greatly diminished that it could threaten the cafes' reputation.

"It is much harder to repair a damaged reputation than it is to start a fresh business," he said.

Mr Proberts praised the ACT government for changing liquor licensing rules at the height of the crisis to allow restaurants and cafes to serve takeaway alcohol. He said the cafes' landlords had already agreed to reduce their rent, but any more relief would be appreciated.

A continuation of the wage subsidy scheme would be nice, too.

As for his cafes' prospects, Mr Proberts said he was optimistic.

"You face all sorts of odd challenges when you open a hospitality venue," he said.

"But obviously not as big as this one."