In its quarterly Business Outlook, Access Economics said the territory's economy remained ''extremely dependent'' on just one sector, the public service.

The next phase of the economic cycle did not look vicious, but the community and businesses needed to be on ''high alert'' when Treasurer Wayne Swan hands down the budget on May 8.

Access Economics said there was ''no doubt'' that a lot of federal spending was ''ill-directed and some entire programs could be cut'' without the nation being worse off.

''Wearing our other hat, as Canberrans, we note that those cutbacks will come with local costs,'' the report said, but ''we merely project poor growth in the short term'' rather than a contraction.

Gross state product is forecast to slow to 1.7 per cent in 2012-13 from 1.9 per cent in 2011-12.

Queensland is tipped to have growth in 2012-13 of 4.8 per cent, followed by Western Australia (4.6 per cent), Northern Territory (3.7 per cent), NSW (4 per cent) and Victoria (2.3 per cent).

ACT growth will pick up to 2.1 per cent in 2013-14 and 2.2 per cent in 2014-15.

In painting an overall picture of Australia, Access Economics partner Chris Richardson said the two-speed split in the economy was widening, though the surge in mining and energy investments outweighed the negatives elsewhere.

''Although it's true that families are saving rather than spending, that housing construction is weak and getting weaker, that federal stimulus is almost a thing of the past, and that the deadly duo of strength in our interest and exchange rate is playing merry hell with many businesses and business models, those negatives aren't enough to put paid to Australia's expansion,'' Mr Richardson said. ''It may be a lopsided period in Australian growth, but growth it will be.''

The risks from Europe's sovereign debt crisis had receded slightly from ''terrifying'' to ''quite worrying'', Mr Richardson said, but the central forecast of a small European recession, a slower Asia, and more evidence of the US recovery was now more likely.