“Interest increases by $179 million and is forecast to rise beyond a billion dollars in 2028-29, growing at an astounding rate of 20.4 per cent a year.” JON STANHOPE & KHALID AHMED return to Treasurer Steel’s furtive Budget Review.
Following the release of the 2025-26 Budget Review, we noted media reporting avoided the impact of the mid-year update on the budget position.
What is most surprising about that omission is that even a cursory glance at the summary table in the Budget Review document reveals that the budget had gone backwards – by around $100 million – in the current year.
The reporting, by an unquestioning media, appeared to reflect the government spin that the budget was on track to return to surplus. However, nowhere was it reported that the financial statements incorporated a cut of more than a billion dollars in capital expenditure in the last two years!
A return to surplus, based on a measure that only the ACT Government, of all governments in Australia uses, should not really have been news at all. It was forecast in the 2025-26 Budget eight months ago.
A similar forecast, always for the last forward year, had been made a dozen times previously by then Treasurer Andrew Barr, only to be postponed for every one of those 12 years.
We have provided a detailed analysis of the 2025-26 Budget (“Unrealistic budget: brace for another blowout”, CN July 23) to point out that the budget estimates of revenue and expenses were unrealistic, and that the ACT’s debt and interest costs were growing at an alarming rate.
The current Budget Review has confirmed many of the concerns we raised at that time.
While the changes in estimates for the current year (2025-26) are readily discernible in the Budget Review document, for changes to the forward estimates one needs to refer back to the original document.
It is no surprise the government has not been open about those changes, but has tried to spin a different picture.
In the accompanying tables we provide a comparison of the forecasts in the 2025-26 Budget and the revised figures in the Budget Review, and leave it to you to decide if the budget position has improved.
The Budget Review estimates reflect a drop of $21 million in the current year but a total increase in revenue of $295 million over the estimates period, lifting the revenue trajectory to 6.7 per cent, which is more than double the growth rate of the economy, or the wages or the Consumer Price Index.
The Budget Review lifts expenditure growth to 2.6 per cent a year, with an increase of $79 million in the current year and a total of $444 million over the estimates period.
The expenditure growth of 2.3 per cent in the original budget was below the forecast wage growth or CPI, and that it was unrealistic to expect that expenditure could be held at that level.
It would be a miracle if Treasurer Chris Steel can even hold expenditure growth at this new level (ie, below wage growth) without affecting the quantity or quality of services.
The nominal surplus in the original budget for 2028-29 was illusory, as indeed we had noted, now turning into a deficit of $64 million on the national measure. We would welcome this, if it could be achieved, compared to what the government is expected to deliver in that year. Overall, the Budget Review adds $149 million to the deficits across the estimates period, which now totals $1.443 billion.
The Budget Review forecasts an increase in net debt of more than $200 million, which now is forecast to grow at a compounding rate of 10.9 per cent a year.
For Andrew Barr’s infamous debt management strategy to be successful – not mentioned since we pointed it out – the economy would need to grow at a greater rate year on year.
Interest costs increase by $179 million over the estimate period, and are forecast to increase beyond a billion dollars in 2028-29, growing at an astounding rate of 20.4 per cent a year compared to the original budget forecast of 18.5 per cent.
The increase in interest costs consumes 40 per cent of the additional spending incorporated in the Budget Review.
For space considerations, we are unable to present Table 2 at the total Territory level. Notably, total borrowings increase by $546 million reaching $22.5 billion. The debt-to-revenue ratio reaches 215 per cent in 2028.
Notwithstanding the above financial information, the Budget Review document includes the following perplexing statement in three different places:
“Progressive improvements in the operating cash surpluses will provide the capacity to reduce borrowings and fund a greater proportion of the ongoing capital investment requirements from these cash surpluses.”
And, of course, pigs may fly.
Jon Stanhope is a former chief minister of the ACT and Dr Khalid Ahmed a former senior ACT Treasury official.
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