News from the May federal budget that the Abbott government would add a further 2000 Australian public service staff reductions to the 14,500 previously planned by Labor, has created some concerns about the future state of the Canberra economy.

While the dust has not yet entirely settled on the budget, due to continuing political haggling within the Senate over the governmentʼs planned expenditure savings, the Gallagher territory government has already pre‑empted its policy response.

Despite its own parlous budgetary circumstances, rather than cutting its own unproductive spending and providing tax relief to Canberrans, the ACT government is looking to implement a big‑spending capital program, in what is effectively a Keynesian response to the reduction in APS employment.

In its essence, the idea motivating the Gallagher governmentʼs policy stance is that public sector spending on local capital works will at least offset some of the consequent reduction in consumption spending generated by the retrenchment of federal employees.

Even if the contentious notion that expenditure, and not value-adding production, ought to be taken as the appropriate lens for economic analysis, it should, nonetheless, be recognised that not all spending proposals, not least those to be carried out by government, are created equal.

It is in this context that the $620 million Capital Metro light rail project has elicited major controversy, in that the Gallagher government has chosen to press ahead with this infrastructure proposal despite doubts about the economic viability of light rail for Canberra.

Certainly, the government has touted the job‑creation potential of the project, estimating about 3500 jobs generated during the construction phase, although it is inconceivable that these numbers would incorporate masses of redundant white‑collar public servants donning the fluoro vests and pounding the pavement with jackhammers.

For even a visitor to Canberra, observing the cityʼs low population density and urban sprawl, excellent road quality and dominant car usage, and complementary bus and cycling options already available, it would seem obvious, at first glance, that the odds are stacked against light rail.

But it may be conceivable that there are less perceptible, but nonetheless real, benefits, such as reduced traffic congestion or reduced greenhouse gas emissions, that may be attributed to the Capital Metro system, which should be considered in a more rigorous analysis.

In April 2012 the ACT government hired consultants to undertake a ''triple bottom‑line'' evaluation, which came out in favour of light rail, over a bus rapid transit alternative, despite criticisms of the non‑robustness of the project evaluation methodology such as using ''star ratings'' to determine selected project benefits and costs.

A few months later the government presented a separate economic evaluation to federal project appraisal and funding approval body Infrastructure Australia, in which the benefit-to-cost ratio for light rail was positive, but marginal, and considerably lower than the cheaper alternative of the bus rapid transit project.

In a recent inquiry report into public infrastructure, the Productivity Commission cited the Gallagher government's decision to proceed with the Capital Metro project, on the basis of the less rigorous triple bottom‑line analysis, as ''an example of where the results of cost‑benefit analysis have been ignored without a valid explanation''.

If the economic analysts are right, and the Capital Metro program does not deliver the substantial stream of benefits as touted by the Gallagher government, it would, regrettably, not be for the first time that territory politicians have lumbered taxpayers with failed or costly projects, ranging from the Australian International Hotel School to Bruce Stadium redevelopment.

Within the modern democratic political process there seems to be an incentive for aspirant office‑holders to promise awe‑inspiring capital projects in efforts to garner the support of swinging voters in the short term.

Despite the high‑minded rhetoric to ensure best value for money to the taxpayer, economy of capital expenditure is not always accorded the highest political priority given the costs and limitations of projects usually become fully apparent to voters much later, and often long after the capital pump‑priming politicians have departed the scene.

In the case of Capital Metro, concerns over the potential lack of economic viability appear to have been strongly discounted, if not ignored, by virtue of the political agreement by Labor to build the system within four years, as a condition for maintaining a minority government with the Greens.

Major projects developed by the public sector are also susceptible to cost inflation, for example through conditions imposed during the construction phase which emphasise the employment of unionised labour.

The difficulty in compressing major project costs can be influenced by a litany of other factors such as rising construction costs, increasing land values, unforeseen regulation‑induced delays, wrangling over funding, and so on.

Even if the government, in conjunction with potential private sector proponents selected to build, own and operate the light rail line, succeeded in holding down project costs, there is the not insignificant matter of ensuring an adequate stream of revenue from consistent patronage over many years.

According to the Bureau of Infrastructure, Transport and Regional Economics, car firmly remains king in Canberra, accounting for 87 per cent of total passenger kilometres travelled in 2011‑12, and only down by less than one percentage point since the mid‑1970s.

In terms of the preferred method of travelling to work, census surveys show cycling has risen from about one per cent of trips in 1976 to three per cent in 2011, but is nowhere near displacing the 81 per cent of work trips made by car.

Rather tellingly, using the bus as the preferred method of work commuting has slightly declined in relative popularity over the last few decades, from 9 per cent of trips in 1976 to 8 per cent in 2011.

For many years Canberrans, perhaps more than any other Australians, have revealed their preference to drive their cars on arguably the best-quality roads in the country, enabling them the freedom to arrive at destinations selecting their own routes, and at a time of their own choosing.

It is these circumstances of car usage, which seem deeply ingrained in Canberra's culture much to the chagrin of environmentalists and urban planning types, that would likely mean the proposed light rail system risks representing little more than a scarcely used, economically inefficient novelty.

Dr Julie Novak is a Senior Fellow at the Institute of Public Affairs