“On average, net debt rose by more than $5 million a day, every day, including weekends and public holidays, including Easter and Christmas!” If you read only one of JON STANHOPE & KHALID AHMED’s columns this year – this one will shock you!

The staggering $369 million blowout in expenditure in the ACT budget, as revealed in the independent audit of the 2024/25 accounts, is the largest overspend in the territory’s history.

It equates to more than a million dollars a day over and above the budgeted amount.

Compounding this budgetary mismanagement, there was also a $175 million shortfall in revenue compared to what the government had forecast in the budget.

The combination of these two factors – a significant overspend and a notable revenue shortfall – produced a record $543 million increase in the overall deficit.

It is important to note that this figure represents only the increase. The total deficit expanded to a staggering $1.4 billion, which amounts to 14.9 per cent of the total budget. This, too, stands as the largest deficit the ACT has ever recorded.

While the 2024-25 budget was initially delivered by then-treasurer, Andrew Barr, it was subsequently managed, for the majority of the financial year (November 2024 to June 2025) by Treasurer Chris Steel.

That’s odd: $114m budget blowout, but for what?

Despite the magnitude of the blowout, neither of them has bothered to explain the genesis of these damning outcomes. However, both now share the dubious honour of presiding over these historic records.

Unfortunately, these concerning results are not restricted to only budget deficits.

Net debt, for example, has surged by $1.858 billion – a 25.5 per cent increase – from $7.3 billion in 2023-24 to $9.2 billion in 2024-25, as shown in Table 1. On average, net debt rose by more than $5 million a day, every day, including weekends and public holidays, including Easter and Christmas!

With the extraordinary increase in debt at five times revenue growth, the Net Debt to Revenue ratio jumped from 96 per cent to 115 per cent. The judgment from the rating agency was swift, and blunt, in the form of another credit downgrade from AA+ to AA.

It is sobering and deeply disturbing to note that in 2019, net debt was $2.2 billion, and that in just one year, Messrs Barr and Steel have accumulated almost the same amount of debt that Mr Barr accrued in the seven years to 2019.

The territory is now, indisputably, well and truly in a debt spiral, with debt more than doubling in four years and borrowings required to pay the interest.

You were warned, but you didn’t listen, Mr Barr

This begs the questions: What has the government to show for the $1.9 billion increase in debt, and who will pay it off?

The usual banal rhetoric from the government, its coalition partners (the Greens), and its apologists is that debt funds investment in infrastructure for the future.

In reality, other than funding the operating deficit, paying the interest on previous borrowings, wasting on failed projects, or routine expenditure on capital works, there is little tangible or lasting benefit to justify this $1.9 billion escalation in debt.

Even if debt was stabilised at current levels – and clearly this is unlikely for the near future, particularly under the current administration – a Canberra child entering kindergarten today is likely to be contributing to its repayment well into their retirement.

To the extent debt has funded infrastructure, the duration of the debt obligation is projected to outlast the economic lifespan of that infrastructure, imposing an enduring burden on future generations of Canberrans who will not only be responsible for its repayment but also for funding the replacement of ageing assets.

The Financial Management Act 1996 requires adherence to prudent financial management and the principle of inter-generational equity.

One wonders whether it would not be more prudent, and intergenerationally equitable, to leave subsequent generations free from such financial burdens, thereby enabling them to address the challenges of their time with greater flexibility?

However, it is not only future generations of Canberrans who will bear the burden of the cost of the runaway debt. Existing Canberrans – including those who are least able to afford to do so – are already paying through higher taxes and reduced services-most notably health and housing. 

Table 2 details the increase in interest costs in 2024-25 over the previous year, and the share of the expenditure consumed by interest payments.

Interest costs grew by $114 million – an increase of 30 per cent – from $380 million in 2023-24 to $494 million in 2024-25.

The increase is likely the combined effect of the increase in debt and an increase in the cost of borrowing due to the downgrade in the credit rating from AAA to AA.

Interest costs as a proportion of total expenditure increased to 5.3 per cent in 2024-25. This may appear relatively small, however, relative to the increase in expenditure from 2023-24 to 2024-25 (ie, $712 million), the increase in interest costs comprised 16 per cent.

Noting that a considerable part of the expenditure growth related to the CPI and wage increases, we estimate interest actually consumed more than a quarter of all discretionary new spending. What might that $114 million have delivered if it was not spent on interest?

For a start, just a fraction of this amount would have achieved the budget target on elective surgery that the government failed to deliver by 885 occasions of service.

It could have closed the gap in elective surgery wait times for Aboriginal patients who wait – on the latest data available – 32 per cent longer than non-Aboriginal Canberrans.

It could clear all patients with extended waits beyond those clinically recommended.

There could of course be other desirable areas, such as teacher support, community services and housing, that would benefit significantly and in the long term from some of these funds.

Canberrans, particularly those suffering from poor services, are entitled to question the prudence of the government’s debt accumulation strategy.

Jon Stanhope is a former chief minister of the ACT and Dr Khalid Ahmed a former senior ACT Treasury official.