The ACT’s financial position is “not sustainable”, with government policy decisions driving persistent deficits, rising debt and increasing interest costs, a Legislative Assembly inquiry has found.
The Select Committee on the Fiscal Sustainability of the ACT found the Territory’s finances had deteriorated over the past decade, with the decline accelerating over the past three years as expenditure growth consistently outpaced revenue.
Its final report draws heavily on independent economist Saul Eslake’s analysis commissioned by the committee, which found the ACT was not in a fiscal crisis but had become increasingly vulnerable after successive governments increased spending on services and infrastructure without fully matching it with additional revenue or Commonwealth funding.
The committee found there was greater scope to improve the ACT’s finances through expenditure restraint than through raising additional revenue, with the Territory’s narrow tax base limiting its options.
It also criticised the government’s financial reporting, finding it did not provide enough detail to identify which programs were driving expenditure growth. It recommended program-level spending be included in budget papers and annual reports, stronger Treasury oversight of directorate spending and rolling reviews of major programs to identify savings and productivity improvements.
The committee found the government did not distinguish between frontline and non-frontline public service positions, leaving it unable to determine whether slowing workforce growth or voluntary redundancies would reduce frontline services.
Eslake found that while some pandemic-era spending was unavoidable, many more recent decisions were discretionary. He warned sustained deficits and rising debt could not continue indefinitely and that maintaining existing levels of government services would ultimately require higher taxes or charges if sufficient spending restraint could not be achieved.
He recommended a more disciplined fiscal strategy aimed not only at returning the operating budget to surplus but achieving cash surpluses after capital spending before the end of the decade, and maintaining them into the 2030s until net debt fell below the national average relative to revenue and economic output.
Eslake also called for explicit numerical limits for debt and interest costs as a proportion of revenue, with regular public reporting against those benchmarks.
ACT Greens leader and committee chair Jo Clay seized on the finding, saying the government had been assuring Canberrans frontline services would be protected without tracking which workers were actually frontline.
“Budgets are about choices. This report shows the ACT Labor Government grew their spending faster than revenue,” Ms Clay said, pointing to recent industrial action by public sector workers and cuts to library hours.
Public housing was also singled out, with the committee finding its supply had failed to keep pace with population growth since 2018 and recommending public and community housing stock increase in line with Canberra’s population.
There were 3652 applications for public housing at March 31, compared with 3002 in late 2024, while standard applicants were waiting an average of more than five years.
Ms Clay criticised the government for not applying in the first round of the Housing Australia Future Fund and securing funding for 85 homes in the second.
The committee separately found the government lacked a strategic and coordinated approach to pursuing Commonwealth funding and recommended establishing a system to identify, pursue and publicly report on funding opportunities.
Canberra Liberals shadow treasurer Ed Cocks said the multipartisan report showed Labor was responsible for the Territory’s deteriorating finances through spending that had grown faster than revenue.
“Labor has locked the ACT into a cycle of rising debt and spiralling interest costs, putting ever greater pressure on the Government to raise more revenue, leaving less money for the services Canberrans depend on, and leaving Canberra vulnerable to future economic shocks,” Mr Cocks said.
He also criticised the government’s 2026-27 Budget response, arguing it relied on cuts to employee expenses, incompletely funded election commitments and programs whose funding disappeared from the forward estimates.
“There is now a narrow window to get the Territory’s finances back onto a sustainable path,” he said.
The committee also identified structural disadvantages facing the Territory, including its inability to levy payroll tax on Commonwealth employees and a General Revenue Assistance Payment that had failed to keep pace with inflation. It recommended seeking a higher payment from the Commonwealth and publishing estimates of payroll tax forgone because of the Commonwealth exemption.
Health was identified as the main area in which the government should pursue spending efficiencies, while infrastructure was singled out as a significant contributor to debt growth. The committee found infrastructure spending needed stronger prioritisation and greater transparency around how projects were selected.
The committee also recommended examining whether the ACT’s GST allocation adequately compensated the Territory for educating NSW students and, if not, negotiating with the NSW Government for additional funding.
On gambling, the committee recommended considering increased taxation revenue and directing additional money towards harm minimisation and regulation.
Ms Clay backed that approach, saying ACT gambling taxes were below the national average while the government was providing $8.6 million this year to the horseracing industry.
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