Increased Commonwealth spending on infrastructure will be "essential" over the next decade to overcome the ACT's limited ability to raise its own revenue, the Chief Minister says.
Andrew Barr said increased levels of debt had been required to fund "the very long list" of infrastructure projects that were needed to serve the growing capital.
The government would also take a more "aggressive" approach to selling land to fund projects, he revealed.
"All eight states and territories retain excellent access to capital markets. We're all highly rated entities - some more highly than others. There's no denying looking across state and territory budgets an increasing reliance on debt financing," Mr Barr said.
This was not without controversy but the ACT faced a "once-in-a-generation" period of fast population growth requiring greater reliance on debt to finance infrastructure needs, he said.
Mr Barr used his annual "State of the Territory" speech to a Committee for Economic Development of Australia event to outline a 10-year agenda for Canberra, which he described as a "productive and working city".
"This is a tremendous economic base on which to build a diverse territory economy," he said of the base provided by federal government employment.
The Chief Minister said states and territories with a diminishing capacity to raise revenue and fast-growing populations faced greater budgeting difficulties.
"Our growing population means we need to invest in infrastructure now to retain our world-leading living standards, boost the capacity of our economy and improve the wellbeing of our community," Mr Barr said.
The alternative, he said, would be to do nothing and fail to deliver necessary projects, putting Canberra's "15-minute city" reputation at risk.
"That would mean delaying projects that are needed and worsening intergenerational outcomes. Infrastructure matters. It really matters. It's why we talk about it so much in the public domain," he said.
"And we shouldn't lose sight of why we spend so much time talking about it. What you build matters, where you build it matters, and when you build it matters."
Mr Barr said the government's longer-term infrastructure priorities need to be based on demand, well-planned and financed.
"There is a long-list of infrastructure that will need to be built as Canberra grows. It can't all be delivered at once, or even in the short-term, but it will need to be delivered over time. It will be financed by a combination of operating cash surpluses, commonwealth co-contributions, asset sales and borrowings," he said.
Mr Barr said state and territory debts were expected to be twice the size of the Commonwealth in 2024, unlike 2021 when the federal government's debt was twice the size of sub-national government debt.
The reversal reflected a growing demand for infrastructure and a growing vertical fiscal imbalance, he said.
The imbalance arises because the Commonwealth is able to raise more revenue than the states and territories, which have the responsibility to deliver services and infrastructure to the community.
The ACT's vertical fiscal imbalance is made worse because the territory could not tax the Commonwealth and the goods and services tax did not fix the problem, Mr Barr said. One quarter of the ACT's labour market, which works for the federal government, was exempt from territory payroll tax, he said.
"This is why we have pursued a tax reform program," he said, pointing to the long-running changes to stamp duties in favour of high rates.
"I greatly welcome the measured and reasonable approach of the federal Infrastructure Minister Catherine King and this new Federal Government have brought to national infrastructure partnerships."
Mr Barr said Canberra's employment base had become more diverse, the city did not struggle in attracting young people and more retirees choosing to stay in the ACT also supported the economy.
But this led to an "elevated" demand for housing, which would be a key issue for the ACT government to address, he said.
"That can mean making some challenging decisions about how and where new housing will be located and that does mean some change in parts of suburban Canberra," he said.
Planning changes made last year would support the renewal of the "heart" of some Canberra suburbs, and the government wanted more people living in the city centre, Mr Barr said.
