A new analysis of the project questions whether the Gungahlin-to-the-city line is justified on population grounds and whether it will be delivered on budget. It also points to the risk it brings to the ACT’s budget.

Also on Thursday, Housing Minister Shane Rattenbury said he would move 70 to 80 public housing tenants a year from the Northbourne corridor as part of redevelopment for the light rail.

And Chief Minister Katy Gallagher defended the rail line at a meeting of the Property Council, saying Canberra did not want to find itself playing catch up on public transport like other cities.

She conceded a rapid bus might stack up better on “a single equation of capital cost and passenger journeys”, but said light rail improved land values, attracted more passengers, was more accessible for the elderly and disabled, took more people than buses, was faster loading, and was less polluting and more visually appealing.

Ms Gallagher said the case was compelling and she assured the property group that providing attractive opportunities to developers was a central part of the project.

Sustainable Development Minister Simon Corbell will set out a plan on Friday to “favourably weight local suppliers”, support small and medium businesses to be part of the project, and encourage major developers to establish bases in the territory. Companies will have to state their local commitment.

The plan says decisions might be made on other issues than lowest price, including the benefits to the community. But there would be “no protectionism, subsidies or premiums on price”. The government would also push for jobs for youth and indigenous people.

The latest assessment of the tram project comes from the Centre for International Economics, which was commissioned by the Assembly’s estimates committee to assess the budget.

It warned that the cost of the tram line was “subject to a high degree of uncertainty and is a source of risk for the fiscal position of the ACT”.

Transport projects were often subject to large risks causing cost over-runs, it said.

And it pointed out that Canberra’s population growth was expected to slow, a trend that might persist. More people leaving the territory “would not support the case for the construction of the Capital Metro”, it said, warning “the justification for the construction of the Capital Metro may rely on uncertain grounds”.

It questioned the justification of the project on the grounds of stimulating the economy in a slowdown. It pointed out that the project could only stimulate private sector activity if it was shovel ready, and if there were any delays it would not help economic activity in the short term.

Another problem was the likelihood that it would require significant investment from interstate and overseas – which meant “a leakage of expenditure” outside the territory.

The Greens' Mr Rattenbury faced questioning from Labor backbencher Yvette Berry at the estimates hearings yesterday. She was concerned about whether there would be sufficient public housing close to the city when the Northbourne units were demolished. The reply from officials was that it was better to talk about support than location. They were looking for housing within 800 metres to one kilometre of the tram line or bus transport.