Business investment in the ACT plunged in the March quarter of this year
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The bank's State of the States report released this month showed business investment in the ACT totalled $90 million in the past quarter, 17.1 per cent below the decade average for the territory and ranking Canberra last out of all Australian jurisdictions.
In addition, retail spending in the ACT was among the weakest nationwide, falling well below the huge growth in Western Australia and the Northern Territory.
This was offset by strong population growth and dwelling commencements, where the ACT economy ranked second overall and showed a 32.3 per cent improvement on the decade average.
Overall, the ACT was the sixth best performing economy in Australia, according to the bank's report.
Commonwealth Bank chief economist Craig James said the ACT economy had lost momentum due to the uncertainty caused by the federal government's public service job cuts.
"Retail spending in the ACT is going backwards and businesses aren't keen to invest. If they believe the job market is going to go backward why would you be looking to invest?" he said.
Mr James said the ACT government needed to consider why businesses weren't interested in investing at a time of high population growth and low unemployment.
He said the government needed to look at spending money in the right places to stimulate the economy. However he added that Canberra was in a good position to capitalise on growth.
"The ACT is very well positioned compared to other states because people are still coming in and you've still got growth in the housing sector... Some states like South Australia and Tasmania would be giving their back teeth for some of the same strengths that the ACT possesses," he said.
Canberra Business Council chief executive Chris Faulks said although the full effect of the federal government's public service job cuts was yet to be seen, she believed the ACT economy had good medium-term prospects.
"Business investment, like consumer spending, is good when there is certainty both about the economy and about jobs and at the moment we've had a long period of uncertainty," she said.
