Barr's private school offer

Barr's private school offer

Predictions of tough economic times for Canberra are ''overly pessimistic'', ACT Treasurer Andrew Barr says.

But the Canberra Liberals say hard times are coming and the opposition blames Labor, accusing the government of making Canberra a one-dimensional economy.

Private sector research published on Monday predicted the federal government's push for a budget surplus would hurt the ACT economy as the public sector is forced to further tighten its belt.

Deloitte Access Economics said the local economy would grow at an average annual rate of just 1.8 per cent in the next five years.

However, Mr Barr said the ACT Treasury predicted growth would return to 3 per cent during the next financial year.

The Treasurer was also optimistic Commonwealth spending would begin to grow again if the federal government achieved its promised budget surplus.

''Deloitte's projections seem overly pessimistic,'' Mr Barr said.

''The pre-election budget update forecast trend growth in 2013-14 to return to 3 per cent.

''The current federal government contraction is directly aimed at returning the budget to surplus, and we expect the Commonwealth's employment and spending to then increase in line with broader economic growth across the country.''

Mr Barr said the Commonwealth's contraction might help the private sector ease its skills shortage problem, and pledged to maintain his government's stimulatory fiscal strategies.

''We expect the private sector to step up to help maintain growth,'' he said.

''Though the influence of the public sector on our economy is significant, the Commonwealth's contraction will alleviate any problems of the public service crowding out private sector employment and investment.

''For example, lower public sector employment will alleviate many skills shortages in the private sector and help to constrain private sector wage growth.''

But ACT shadow treasurer Brendan Smyth said Deloitte's warnings were accurate and blamed federal Labor job cuts for the gloom.

''During the [election] campaign, the only job cuts they were willing to talk about were Liberal job cuts but now after the campaign, we find out that federal Labor job cuts are having a dramatic impact on the ACT,'' Mr Smyth said. ''That's not unexpected when you haven't got a plan to diversify the economy.

''As a town, we're totally dependent on the public service and construction, and the construction is almost totally dependent on the public service and that's what has left the ACT economy in such a precarious position.''

The Liberals' deputy leader said the Treasury growth forecast was optimistic.

''Treasury will have to detail how they make it achievable, given that we know construction is slowing, and several major projects are coming to an end,'' Mr Smyth said.

''I think there are hard times coming because you've got a federal government that is not interested in the ACT and you've got a local Labor government that has made no effort over the past 11 years to diversify the economy.

'' They've lived off the fruits of the good times but have made absolutely no effort to prepare for the downtimes,'' he said.