The ACT's retail sector is now the weakest in the nation as consumer confidence in the territory takes a hit from federal government cutbacks to the public service.
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Retail sales in Canberra fell 2.5 per cent in the March quarter and job gains have been limited by the public sector cuts.
The gloomy assessment for the ACT is made in a report to be published on Monday by Deloitte Access Economics.
"In the current fiscally constrained environment, the outlook for the ACT's retail sector remains weak," the report says.
"The ACT's retail sector is now the weakest of all states/territories.
"With the ACT heavily exposed to public sector employment and spending, the federal government's cutbacks to the public sector have taken a toll on confidence.
"Job gains have been limited by those public sector cutbacks while underperformance is also being seen in the housing market, with Canberra house prices showing no increase over the past year."
However the report paints a brighter picture for retailing in other states and territories, despite uncertainty after the federal budget.
"After a torrid few years, retailers have enjoyed much improved trading conditions of late, spurred by low interest rates and a recovery in both house building and housing prices," it says.
However the net impact of the Coalition Government's first budget will be households losing $10 billion in spending.
"The hit to income doesn’t come immediately – it is expected to be felt the hardest at the beginning of 2015-16 when GP co-payments and reductions to a range of family benefits commence," the report says.
While the budget should not derail the consumer spending recovery, consumer confidence has slumped in its aftermath.
"How permanent that confidence slump is will be interesting to watch in the coming weeks," the report says.
"On the view that consumers will respond to actual influences on their ability to spend rather than perceived ones, the budget shouldn’t stop 2014-15 from being a strong year for retail.
"The annual rate of retail sales growth may peak during the next year and then start to move back down again as housing activity peaks.
"A more modest rate of retail sales growth is expected during 2015-16, as Budget cutbacks will hit a little more fiercely in that year."
Earlier this month it was revealed Canberra had recorded a decline in year-on-year April retail spending for the first time since the Australian Bureau of Statistics began recording monthly data in April 1982.
Retail sales in the ACT fell to $406.3 million in April, a 0.7 per cent decline on the $409.3 million posted in March.
Last month the federal government confirmed it planned to shed about 16,500 full-time equivalent staff over four years.
The ACT Treasury expects about 6500 of those jobs to be in Canberra, and many of the losses will take place over the coming 12 months.
The ACT Budget papers said 2000 public servants in Canberra were expected to lose their jobs over the next year.
"This will have flow-on effects in other areas such as retail and hospitality," the papers said.
The cuts to the federal bureaucracy are expected to be offset by increases in other areas of government, while employment in private businesses is also tipped to rise modestly.
ACT Treasurer Andrew Barr has promised his government would maintain its staffing levels over the coming year, using the territory's budget as a buffer against the federal spending cuts.