The Mr Fluffy buyback and demolition of one in 80 Canberra homes are the only bright spots in an otherwise gloomy picture of Canberra's economy in the coming years, according to Deloitte Access Economics.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The economic forecaster points to an otherwise "quiet as a grave" housing sector, sluggish retail spending and few major projects putting the ACT economy the slowest in the country.
In its national business outlook released on Monday, the forecaster said the future of the ACT economy came down to just how many jobs would be lost under the federal cuts. While the cuts were necessary to help return the budget to health and Canberra's share didn't appear to be bigger than its share of the federal public service (about two-fifths), the cuts were exacerbating a slowdown already hitting the local economy.
The national resources boom and the federal spending boom had supported the territory's economy for some years, at the same time as residential housing construction was especially strong.
"Now the cyclical boot is on the other foot, with a housing slowdown happening at the same time as federal cutbacks finally starting to bite," Deloitte noted. The ACT was now "slugging it out with the Northern Territory for worst place in terms of housing construction trends".
Building approvals had stalled and residential property prices had done little at a time when prices had roared ahead nationally. As well, vacancies in homes for rent had been climbing sharply, making for "a pretty ugly combination".
The Mr Fluffy buyback, while rotten news for the families affected, was one piece of good news for the housing construction sector.
"A thousand homes, or about one in 80 freestanding residences in the territory, will have to be rebuilt," it said. "Although that's a one-off, it's a big one-off, and it implies a boost to housing construction at a time when the latter would otherwise be as quiet as the grave."
Stressing the Fluffy crisis was terrible for the families, Deloitte partner Chris Richardson said while not an enormous positive for the economy, it would hold it up during the slowdown.
Private housing investment was down 8 per cent in 2013-14 and is predicted to fluctuate, up 3.4 per cent this year, then falling another 6.5 per cent in 2015-16.
On the flip side, the ACT Government had pushed back engineering-related construction to find the money for the Fluffy buyback.
"That puts a shadow over projects, such as the $783 million light rail project, as well as several projects slated under Canberra's masterplan," Deloitte's outlook said, also noting work had all but wrapped up on the airport, the Royalla solar farm and other projects. With nothing new entering the pipeline, completions might outpace new projects this year.
Commercial construction was looking healthier, with new hotels in Barton and at the airport, and CSIRO construction.
The biggest question was jobs, Deloitte said, predicting unemployment to jump from 3.9 per cent to 5.1 per cent in 2014-15, then to 5.7 per cent for the next two financial years. Canberra's unemployment rate is still better than the national picture, with 6 per cent forecast for NSW and 6.7 per cent for Victoria.
Population growth was the weakest since 2006 and probably had further to fall, Deloitte said. It is forecast at 1.1 per cent this year and 1.2 per cent in the years ahead.
Growth in the ACT's gross state product is the lowest of any state or territory, forecast at just 1.1 per cent this year. The gross state product of every other jurisdiction bar Tasmania is forecast to rise at 2 per cent or well over.
The retail picture is not good, with growth in retail turnover in the ACT of just 0.1 per cent in 2013-14, and 2.1 per cent forecast for 2014-15. That compares with more than 4 per cent in NSW and more than 3 per cent in Victoria.
Mr Richardson pointed to the Queensland election drubbing for the Liberals as a bright sport for the ACT, likely to make the federal government more reluctant still to pursue significant job cuts in the coming budget.
"The take away from the Queensland election is, sure, Canberra remains at risk – the government would like to save money and one of the levers at its disposal is departmental funding – but the electorate is sending a very clear smoke signal to the government not to do much and I suspect they'll be listening."
The ACT government, which is predicting its worst budget deficit by far this year, at $770 million, has not delayed the tram to pay for the Fluffy crisis, but has pushed back work on its City to the Lake project, including lowering Parkes Way, building a stadium and building a swimming pool on the lakeside.
