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ACT risks election day fiscal cliff: analyst

The ACT economy risks stalling next financial year under the strain of federal government cutbacks, an economic study will warn on Tuesday.

The Business Outlook report from Deloitte Access Economics suggests the territory could experience the bleakest economic conditions of any jurisdiction in the nation.

Director Chris Richardson said decisions taken after the September election would have a crucial impact.

If an incoming government decided to get harsh cuts out of the way early in its term, Canberra's economy would be firmly in ''the firing line'', he said on Monday evening.

The report says early indications are ''the axe will be swung after the federal election'' and ''likely harder this time''. It forecasts the ACT's gross state product will fall from 2 per cent this financial year to 0.4 per cent in the next one, before recovering strongly in future years.

In a worrying trend, employment growth is forecast to be 0 per cent during next financial year.


However, the report also has good news for the territory's economy.

''The big question for the ACT economy was how it was going to respond to the federal government's 'return-to-surplus' budget cuts of 2012-13,'' the report says.

''The great news from the ACT economy's perspective is that the Feds have pushed the surplus objective out into the future, while the Reserve Bank's rate cuts are proving to be just what the doctor ordered for the ACT's families.

''Far from being curled up in a ball of fear, consumers in the capital are feeling confident enough to be spending up big.''

The report says the biggest driver of that spending is food - groceries, takeaway meals and eating out at cafes and restaurants.

''Spending on recreational

activities and education services is up strongly as well; yet, little of that spending growth is being seen at department stores, which is why news of a big spending consumer might come as news to some retailers,'' it says.

The report says the high Australian dollar and low interest rates are helping drive a huge jump in Canberra car sales.

''The latter - the willingness to lay out big dollars for a car - would indeed suggest a feeling of reasonable job security in the nation's capital,'' it says. ''It's true that many of the budget cuts were to payments or purchases being made nationwide, rather than job cuts concentrated in Canberra's government departments.

''That said, it is hard for Canberra's job market to be completely immune when the federal government pulls back - this is still a one-company town and many in the private sector provide services to the Feds, so it's no surprise that the rate of job growth is easing and unemployment has gone from 3.5 per cent to 4.5 per cent over the past year.''

A big plus for both housing construction and the broader ACT economy is that population growth remains strong, the report says.

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