The ACT's budget deficit is expected to blow out by more than $340 million with the government blaming the increase on lower than expected revenue from taxes.
The federal government's crackdown on consultants in the public service has affected the territory government's budget bottom line, forcing a downgrade to payroll tax forecasts.
The territory is also set to lose out on GST with payments to be $59 million less in 2023-24 than initially forecast.
The territory's forecast deficit is expected to reach $782 million at the end of the 2023-24 year, the government's mid-year budget review has revealed. It was initially expected to be $442 million.
Revenue is estimated to be $7.5 billion this year, which is $189 million lower than what was forecast in the budget.
Chief Minister Andrew Barr said the year had been challenging due to declining consumer confidence and consumer spending.
"2023 has certainly proved to be a challenging year for both household and government budgets," he said.
"The ACT, like a number of other states and territories, has experienced a decline in revenues and the need for increased expenditure in priority areas."
Revenue from payroll tax is expected to be nearly $59 million lower this year than anticipated, with the government saying this was due, in part, to federal government's crackdown on outsourcing.
"While the ACT labour market continues to perform strongly, a noticeable shift was observed in 2023 in the source of employment growth from the taxable, private sector to the public sector," budget papers say.
"The shift reflected a change in Commonwealth employment practices from labour hire and contractors in favour of direct (non-taxable) employment."
Overall, payroll tax revenue is expected to be $144 million lower over the next four years, but the government does expect it will grow at 8.9 per cent a year.
Mr Barr said he expected this would balance out with the federal government to increase the ACT's GST share in light of the lower payroll tax.
"The GST relativity will adjust to reflect that but it doesn't happen in real time," he said.
"We anticipate over the next period and the periods beyond, particularly if this direction continues, where there is less Commonwealth outsourcing that our assessed capacity to raise payroll tax will be reassessed and we will receive a greater share of the GST to reflect the fact we can't tax the Commonwealth payroll."
GST payments to the territory were also lower due to slower consumer spending growth from cost-of-living pressures and interest rate rises. The ACT is expected to get $9 million less in payments this year due to overpayments in the 2022-23 year, this will result in a $59 million reduction in GST grants.
The government's expenses are forecast to be higher at $619 million over the forward estimates, with the government saying this will include higher spending on health, including an extra $170 million for new initiatives in 2023-24.
The government is banking on economic growth to strengthen from the 2025-26 year, saying its infrastructure program will help in boosting this.
"The government's substantial investment in infrastructure to meet the needs of a growing city will also continue to support the ACT economy," budget papers said.
Opposition Leader Elizabeth Lee said the increased deficit was a reflection on Mr Barr's poor economic management.
"The figures we are seeing out of this budget review are staggering," she said.
"What Andrew Barr does not seen to realise or care about is that when he plunges Canberra further into debt, it makes it harder to provide cost of living relief to Canberrans doing it tough.
"This budget black hole means that taxes under Andrew Barr will increase to pay for the debt."
Ms Lee claimed Canberrans would pay almost $2 million a day in interest to service the debts and took aim at the government for relying on the Commonwealth.
"Andrew Barr has always blamed the federal Liberals for his economic failures and now he's expecting federal Labor to bail him out of his woeful budget black hole," she said.
