It will be a sobering experience as she cuts and prunes, adjusting her aspirations and ambitions for the coming financial year.

The source of her headache is, of course, just over the lake where Tony Abbott has broken his promise to the nation and his specific promise to the national capital.

''I was promised by the Prime Minister that he was not about to cause economic harm to the ACT, and I just cannot see how he can stand by those comments,'' she says. ''I took him at his word but Tuesday night told the truth. I think there is a level of disdain for the city shown in this budget.''

The federal government is playing by the well-used idea of bashing Canberra – which is always applauded by the shock-jocks – as well as delivering the toughest budget of its first term as far away as possible from the next election.

The Prime Minister is keeping his overarching promise to return the budget to surplus, but at the cost of breaking his promises over tax, pensions and the ABC.

The public service will be cut but it is not like we did not see it coming. Late last year the Finance Department advised 14,743 staff would need to leave their jobs voluntarily over the next four years to pay for the economy drive Labor had already built into the budget.

The Abbott government said it had just discovered "Labor's secret public service cuts". As if. But the reality makes it easy for Abbott to ride that particular wave.

Before the election, he vowed to reduce the public service by 12,000, nationally, through natural attrition. That was not possible but by piggybacking on Labor's deep cuts, he will abolish 16,500 jobs over three years, with about 6500 to be cut in Canberra alone.

And there is further dislocation, with 600 federal public service jobs to be relocated to the NSW central coast, half of them from the embattled Tax Office.

Canberra is looking at three hard years, with the retail industry expected to slow and property values in the balance. But the private sector does not expect a repeat of the John Howard-inspired 1996 Armageddon, as the economy is now larger and more diverse, and people are believed to be more willing to think positively, rather than wallow in doom and gloom.

And some good news for Canberra emerged in the budget, with the decision to keep the Department of Social Services in struggling Tuggeranong. With the department's lease on its present premises drawing to a close, the valley has been gripped by speculation the huge workforce would be shifted to vacant government offices in Woden or Civic.

Liberal senator Zed Seselja lobbied hard within the government to prevent that happening.

''It's great, not just with the 2000 odd staff who will be staying in Tuggeranong, but also there will be a significant capital investment in a new building, effectively a public-private partnership, with the federal government spending $26 million and the private sector spending in the vicinity of $150 million,'' Seselja says.

He believes the new medical research fund will create opportunities for Canberra researchers. ''Hopefully we can get some great cures and that will benefit all Australians and in fact the world, but also the John Curtin Medical School would be well placed to be a significant player in an expanded medical research industry in Australia.''

The fund is to be built on the back of another broken promise, on health costs, however the co-payment to see a doctor – to raise money towards the fund – may be blocked in the Senate.

How does Seselja respond to constituents alarmed by the mass job cuts? ''I would say that our fundamentals are strong and it will be challenging, but we are well placed to deal with it,'' he says.

''The magnitude of the reductions is significantly less in actual terms and in proportional terms to what we saw back in 1996,and so we are better placed but also, I think, what we will see is, as we see that reduction, there will be opportunities for the private sector to continue to innovate and provide services to government.

''I think our private sector is more mature than it was 20 years ago and it is bigger. We need to work with the ACT government and the federal government and the business community to make sure that opportunities continue to be there in Canberra.''

Abbott refused the ACT's request for seed money of $8 million over three years to get the proposal for the Australia Forum convention centre to the investment-ready stage.

The snub was despite the territory private sector uniting as never before to pick the project as the highest priority. And also despite Abbott asking for a private sector project. The ACT government hoped to get the project going to create jobs as a buffer against the economy slowing under the public service job cuts.

''There is no other city in Australia that's been treated the way we were treated in the Treasurer's speech,” the Chief Minister says. ''Next financial year we are being asked to shoulder 50 per cent of all the Commonwealth job cuts.''

Gallagher says the ''no harm'' promise by the Prime Minister was given in their first conversation after the election, and repeated afterwards. ''That's when he asked me what was the top private sector infrastructure project for Canberra.''

When John Howard got his budget in order, thanks partly to the savaging of Canberra, he began to build. Perhaps he was thinking of his hero, Bob Menzies, who was very partial towards the national capital, when Howard began cementing his legacy in Canberra.

He signed off on the National Museum, the National Portrait Gallery, the extensions to the War Memorial and the National Gallery, and Commonwealth Place, and greatly expanded ASIO and the Australian Federal Police. So, what is the bet that Abbott throws a bone to Canberra, in the form of help for a new convention centre, close to the next election?

Seselja sees a possibility for that. "Once we get the budget under control there will be opportunities for greater investment,” he says.

"We've seen that in the past – we saw that at the back end of the Howard government with significant investments in Canberra, we saw our unemployment go [down] to 2.5 per cent in 2007, so there are opportunities there.

''I think the ACT government does need to show that if it is serious about this project – and I hope it is – it should be bringing the project to the shovel-ready stage because that would make it far more likely that the Commonwealth would invest in the project in future.''

So there is a problem – the ACT government has obligations under its agreement with the Greens to get cracking on the convention centre and light rail, but the predicted slowdown in the territory's economy will reduce its receipts.

Gallagher says: ''As part of our refinement of our own budget we will look at how we can keep the Australia Forum progressing because we do think it is an important project for Canberra in the long term, but we've also been dumped with a whole range of other priorities now. So we've got a lot of issues that have been put on our table that we need to deal with over the next couple of weeks.

''I just refuse to accept that the ACT government should be the sole area of financing for this. It's not our number one infrastructure project because we have others like hospitals and schools that are our bread-and-butter areas that we have to focus on and we can't just push aside, but it is the number one private sector project for the city.

''I do find it a bit tough to think that we will have to be the ones to fund all of the next stage but that's where it's at because we're not getting it from the Commonwealth and we would like to see it get to the investment-ready stage.”

Gallagher is alive to the federal government's strategy to pressure premiers and chief ministers to ask for more GST to make up for the cut in federal funding for health and education, a key topic for Sunday's summit.

"This is a threat to everyone's budget ... a very clever tactic – you cover your own budget by stuffing up everyone else's," she says. "It is a clever political game a game of chess being played by the federal government, I think the states and territories need to work together to manage this so it doesn't look like we're all squabbling amongst ourselves."

There is widespread consensus that Canberra has been hit disproportionately hard in the budget because of the cuts to the public service, but it garners no sympathy from the rest of Australia and has not won a Holden-style rescue package.

Welfare agencies are concerned at the swingeing nature of the cuts, which permeate down to programs such as Youth Connections that helps young people complete their education and find work.

Susan Helyar, head of the ACT Council of Social Service, worries the budget is destroying Canberra's social infrastructure.

"They are increasing the cost of accessing basic services like healthcare and dental care," she says. "They are reducing income support payments, they are cutting some basic and effective programs like the Youth Connections program and education supplements for people trying to get educated to get a job, and the employment support program for people with disability.

''The more wealthy end of town has got off lightly from this budget because the measures to increase their contribution only go for a couple of years, whereas the measures for low-income households are permanent. I think Canberra will bear a disproportionate impact with around 7000 jobs being cut in the coming 12 months."

Helyar says the Youth Connections program was working with the most disadvantaged young people who are struggling with learning or earning.

"In Canberra that is more than 320 young people who have been really locked out of employment and education," she says. "Not only will they be really struggling but, potentially, they will not be able to get income support for six months of every year, so the expectation is their families will support them but that's not always possible."

The big slowdown in the public service could provide openings for private sector entrepreneurs, such as consultants, according to the business community.

Andrew Blyth, head of the ACT Chamber of Commerce and Industry, says Canberra does well when the federal government has its books in order.

"However, in order to achieve this, the budget imposes a disproportionate impact on Canberra with 6500 federal public service jobs being cut locally out of a national target of 16,500 jobs," he says in a message to members. "In addition, there are cuts to important productivity enhancing measures in trade, vocational education and training and small business support programs that will have a negative effect on business.

"The impact of the federal budget will be felt by many local businesses, prompting the need for the ACT government to work together with the business community in implementing innovative economic stimulus measures to allow businesses to weather the storm. Importantly, the ACT economy is today much stronger and more diverse than it was when federal and ACT government cuts impacted our city in the mid-'90s.

"There is no doubt the federal budget will hit our community hard and its impacts will be felt widely. However, with the right mix of economic stimulus measures and strong resilience on the part of business owners, we can get through this tough time together and build an even stronger and more prosperous economy than today."

Chris Faulks, from the Canberra Business Council, understands the need for hard fiscal decisions to repair the budget.

''We would also say that we are concerned that Canberrans are being asked to do more than their fair share because of the disproportionate effect of the job cuts on the economy in Canberra,'' she says.

''What we really needed in Canberra was some investment in infrastructure that would drive industry development, jobs and growth.

''If you look at those areas that are affected by job losses associated with the end of the car industry in Geelong, there's $155 million in the budget structural adjustment for those. However, on a more positive note, we think there will definitely be opportunities for the private sector coming out of the cutbacks to the public sector.''

The council had led the push for the Australia Forum and Faulks says she remains confident the project will proceed to the investment-ready stage over the next 18 months to two years. ''At that point we would still like to have the engagement of the federal government, primarily because this is meant to be a national meeting place where the federal government could hold meetings of heads of government,'' she says.

Labor senator Kate Lundy is alarmed by proposed cuts to higher education and information technology, and will pursue the issues at Senate estimates hearings.

''We will hold the government to account and not let them walk the path of the mistakes of the past because it did so much damage to local business involvement in government procurement,'' Lundy says.

''We are a university town and a huge proportion of our economy is linked to higher education in our four universities but primarily our two biggest ones – the budget means that all of the universities will suffer.''

She is concerned about cuts to research that will impact on universities, such as the cut of $111 million from CSIRO over the forward estimates and $75 million from the Australian Research Council that funds much basic research. ''The intersection between research and higher education is structurally weakened by the budget,'' she says.

Lundy says the Howard government had cut local firms out of contracts. ''I am worried and afraid we will go down the same path,'' she says.

''It was 18 years ago but I was there and I remember, and I'll be doing what I can to fight to protect the participation of our local companies within government contracting and outsourcing.''

Lundy is also concerned about uncertainty about NICTA, which is dedicated to ICT research.

''It has a wonderful presence here in Canberra, including with the e-government cluster in Civic in partnership with the ANU,'' she says.

''They do an enormous amount of work innovating on solutions that government agencies require to really deploy tech cleverly.''

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