Surging revenue has given the ACT government a chance to chart a path back to surplus for the first time since the COVID-19 crisis, but the budget warns of slower growth and falling household spending as inflation-busting efforts bite.
The deficit is expected to fall to $442.7 million in 2023-24, drop again to $161.5 million the following fiscal year and then return to surplus in 2025-26. The budget papers estimate a surplus of $212.1 million in 2026-27.
Revenue from the Commonwealth's goods and services tax will grow by $165 million in the next year, and more than $500 million over three years, as a result of a recalibration in the way the territory's share of the tax is calculated.
Stronger payroll tax growth, higher interest earnings on ACT investments, a bigger share of Commonwealth grants, and more land tax collected as a result of higher property values has all contributed to the $177.5 million in extra revenue in the next financial year.
However, the government expects to receive $99 million less than it had forecast mainly as a result of fewer land sales in 2023-24. Market conditions would affect the profitability of the government's land release program, the budget papers said.
The government's net-debt is expected to rise to more than $10 billion by the end of the forward estimates. Net debt will be $7.25 billion in 2023-24, and represent 13.6 per cent of gross state product.
The government does not expect to deliver an operating cash surplus in 2023-24 - when it will have a deficit of $6.5 million - but predicts it will have a surplus in the following three years.
"Delivering operating cash surpluses ensures that the government's borrowings are restricted to financing its investments in new and upgraded infrastructure which will provide ongoing benefits to the community for many years," the budget papers said.
The budget forecast real wages growth would pick up over the forward estimates and said that while inflation was persistent, it appeared to have peaked in Australia.
The budget forecast inflation to ease to 3.25 per cent in 2023-24 and wages would grow by 3.75 per cent.
ACT Treasury has forecast wages growth to remain higher than inflation across the forward estimates. The annual consumer price index would fall from a peak of 5 per cent in 2022-23 to 2.5 per cent in 2025-26 and 2026-27, budget papers said.
But wages would continue to grow above 3 per cent each year across the forward estimates.
Gross state product - a measure of the total value of goods and services produced in the territory - will grow by 3.75 per cent in 2022-23, but fall to 2.25 per cent in 2023-24. It will sit between 3 and 3.5 per cent over the rest of the forward estimates.
"We have made significant strides away from our historical employment base as the seat of government - thus reducing our reliance on public administration as the major source of employment in the ACT while also expanding our tax base as larger businesses are liable for payroll tax," the budget papers said.
Canberra would grow by almost 10,000 people a year, a "historically high" rate of 2.25 per cent in 2022-23 and 2023-24, budget papers said.
The budget defended the growth of net debt, arguing the government was "making significant long-term investments to meet the needs of a jurisdiction with the fastest growing population in Australia - particularly in multi-generational infrastructure".
While economic risks remained, particularly centred on consumer spending and the housing market, the budget downplayed the risk of global economic conditions.
"The ACT economy is increasingly diversified, and with the lowest unemployment rate in Australia, is well placed to manage these risks and continue to grow and improve the wellbeing of Canberrans," the budget outlook said.
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