The ACT has Australia's most prudent government and its economy is among the best-placed in the country, thanks in part to its controversial land tax reforms, a financial modelling firm says.
Yet Macroeconomics's mid-year budget bulletin also warns that slowing construction and the possible election of an Abbott government may undermine the territory's strengths.
The bulletin, issued yesterday, examines data for each state and territory, as well as the Commonwealth, and uses the firm's modelling to assess the health of their economies.
It predicts a federal budget deficit this financial year of $7 billion - compared with Treasury's latest forecast of a $1.1 billion surplus - mostly due to lower commodity prices and slower-than-expected growth.
Earlier this week, another forecaster, Deloitte Access Economics, predicted a deficit of $4.2 billion for the Commonwealth.
Macroeconomics's budget and forecasting director, Stephen Anthony, described this year as a lost opportunity for improving the Commonwealth's financial position.
''The 2012-13 budget and [last month's mid-year budget update] should have contained more real spending cuts, to minimise the short-term political damage before the next election and maximise the medium-term positive economic impact …
''We recognise the political straitjacket of minority government, but this government has a track record of promising big spending cuts and delivering modest tax increases.''
However, he praised the ACT economy, saying the territory, Tasmania and South Australia ''will be the best-performing jurisdictions in terms of fiscal management over the period since the China boom began''. He told The Canberra Times: ''You look at every other Australian government: a lot of them signed up to a tax review process, and none of them carried it through.
''Only one of them - the ACT - had the guts to take it to an election, too, and it paid for it.''
The Gallagher government began to phase out several taxes and fees this year, such as stamp duty, and replace them with higher household rates. The Canberra Liberals strongly opposed the changes, which became the focal issue of last month's ACT election.
Mr Anthony said the tax reform, as well as past efforts to reduce spending, meant the ACT government ''can be regarded as the most prudent, having undertaken an extensive savings round at the height of the boom to position itself to manage the downturn which came in 2009''.
Macroeconomics predicts the ACT's budget outcome for 2012-13 will be a deficit of about $218 million, much smaller than the ACT Treasury's estimate of $381 million.
But it expects Canberra's building industry boom to end in 2013-14, ''after which the economy is likely to slow''.
''A further risk to the ACT economy is the election of an Abbott Coalition government at the next federal election, which has promised to reduce the Commonwealth public sector by 12,000 places, and presumably a high proportion of these job losses will come from the ACT and surrounding regions,'' it says.
ACT Treasurer Andrew Barr said last night he was pleased the firm had endorsed the government's tax policies. ''It demonstrates that taking a narrow-minded austerity approach, and slashing and burning the budget, would have been economic folly,'' Mr Barr said.