Land tax and tight supply of new land has not greatly contributed to a rapid rise in housing costs in Canberra, while the territory budget remains in a strong position, the ACT government has said in response to an independent analysis.
The government also defended its more optimistic inflation assumptions and stronger population growth estimates in response to the Pegasus Economics report, prepared as part of the budget estimates process.
The government also criticised the independent analysis for having "limited evidence" to support its claim land supply constraints had pushed up house prices in Canberra.
"In a period of weak population growth from border closures, the recent strong house price growth in the ACT and across all of Australia has been driven by supportive fiscal policies and unprecedented expansionary monetary policy, including record low interest rates," the government said.
"Property transactions reflect both established dwellings and new dwellings. Land release is a small part of the volume of transactions. The number of properties being sold in 2021-22 was under 9 per cent of the total dwelling stock. The number of dwellings increased by around 3 per cent from new constructions."
The government said return on investments in rental properties remained high in the territory and its land tax regime was not making renting unaffordable in the ACT.
"The key reason for increases in rental prices is a function of low rental vacancy rates, due to strong population growth. Rents are now rising in many states across Australia, where many areas are now also experiencing vacancy rates of just above zero," the government's response said.
"The ACT supports tenants through regulations that require landlords to justify increases in rent significantly higher than increases in inflation."
The independent analysis said the budget was not sustainable in the long term and said "all of the territory's key balance sheet measures are expected to deteriorate over the budget and forward estimates period".
While the government acknowledged its net debt position had worsened, it said the territory was well placed to service and reduce the debt over time.
"The growth in debt reflects the ACT government's significant investments in infrastructure to meet the needs of a growing population," the government said.
"While these investments require borrowing to meet the upfront cost of their construction, the community benefits generated by these investments will extend for many years during which a growing tax base will support the government's ability to meet its debt obligations."
The government also reiterated its 20-year tax reform program - which will cut duties and replace lost revenue with higher rates - would be revenue neutral over the transition period.
The Pegasus Economics report had noted increased rates would cover just a third of lost revenue when commercial and residential stamp duties are reduced, and could be a sign the government did not intend to make up the shortfall with rates alone
The government's response said: "Using the share of total own source revenue to measure the effectiveness and revenue neutrality of tax reform is flawed, as there are other own source revenue streams outside of the scope of the tax reform program," the government said.
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