Photo: Glenn Hunt
Canberra's economy will have to rely on its buoyant housing market to keep afloat as job cuts in the federal public service begin to bite, according to leading private sector economists.
In reports to be published on Monday, Deloitte Access Economics says the territory is unlikely to plumb the depths of the mid-1990s recession and Commonwealth Securities has again confirmed the territory as the nation's second-highest performing economy.
But both forecasters have identified the housing sector as the city's lifeline with one respected economist describing Canberra as ''one big mortgage belt'', and predicting low interest rates will allow the local industry to offset stagnation in other sectors in the coming years.
CommSec's State of the States report for the July quarter shows home loan approvals and building starts in the territory well above long-term trends with new housing construction up 53 per cent on the 10-year trend.
The report has the ACT holding on as the nation's second-strongest economy, despite the gloomy predictions thrown around during the federal election campaign, with housing demand underpinned by strong population growth cited as the key factors.
''The ACT economy remains the second-strongest economy with the main strengths being dwelling starts, housing finance and population growth,'' the report says.
''The ACT is now third strongest on business investment and fourth on economic growth.''
CommSec reported the territory led the nation in the vital home building sector but identified retail spending as a weakness.
''In the strongest economy of the ACT, the number of housing finance commitments was 10.7 per cent above the decade-average
level and commitments in August were 18.9 per cent higher than a year ago,'' the report says.
''The ACT is in the strongest position for new housing construction, with starts almost 53 per cent above decade averages.
''In addition in the June quarter the number of dwellings started was 11.7 per cent higher than a year earlier, the first annual gain in almost two years.''
Chris Richardson of Deloitte Access Economics says the territory is in for a modest period with public service cuts by both Labor and Liberal governments likely to slow the economy considerably.
But the economist said there was no need for a ''big screaming'' panic, predicting the housing sector, supported by a prolonged period of low interest rates, would save Canberra from a repeat of the dark days of the mid-1990s.
''We do see a weak period, yes and that will have an impact,'' Mr Richardson said. ''Mortgage rates are really important to Canberra's economy and that's a good news story. We're one big fat mortgage belt.''
He said he believed the impact of public sector cuts on the economy would not be as bad as feared.
''We now know that Labor had piled up a whole heap of efficiency dividends and other saving, most of which had barely had time to have an impact.
''Atop that, the Coalition government says another 12,000 jobs by attrition, but that's certainly not 12,000 jobs from Canberra … It's not going to happen fast and I believe the government when it says it will be attrition and attrition is relatively slow and I suspect more of it will [be from] outside of Canberra than people give it credit.''