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Slowdown, but milder than 1996: business

Date

Daniel Morrissey

The ACT will avoid sliding into recession but the federal budget cutbacks in jobs and spending and the fall in GST revenue to territory coffers will cause the economy to slow.

ANZ senior economist Cherelle Murphy said the budget cuts would result in a detraction in the territory's gross state product of about 1 per cent a year over the next three years.

She said this was ''not an enormous number'' but the effect on confidence should not be understated, particularly in the property and the retail sectors.

''People will notice a bit of a slowdown in the economy,'' said Ms Murphy, although this would be partly offset by the budget payments to middle and low-income families.

ACT Chamber of Commerce and Industry chief executive Chris Peters said the cuts were not as deep as those under John Howard in 1996.

The territory's economy was more flexible than 16 years ago, with the major structural change being the increase in the number of people employed by the private sector, Mr Peters said.

About 60 per cent of Canberra's workforce in the 1996 era was in the public service, compared with about 45 per cent today. Putting aside the ACT government's employees, fewer than 40 per cent were federal bureaucrats.

''It is certainly not as bad as what happened in 1996 when there were significantly larger job cuts,'' he said.

''This will not be enough to drive the ACT back into recession, as it did back then, but it will be enough to have a noticeable negative impact on our economy.''

A total of about 4000 jobs, when military recruitment is excluded, are being chopped from the federal bureaucracy nationally in 2012-13.

It is estimated that 1600 of those jobs losses will be in Canberra because just under 40 per cent of the bureaucracy is based in the nation's capital.

Canberra Business Council chief executive Chris Faulks said those cuts could be bigger in Canberra because the government would want to keep public-facing staff in other parts of the country.

On top of job losses, the efficiency dividend - an annual cut in agencies' administrative budgets - is set to rise to 4 per cent from July 1, which is likely to reduce procurement of private sector goods and services and may even lead to deeper job losses in the bureaucracy.

''Overall we think the combination of the job losses, the increase in the efficiency dividend and the fall in GST revenue will have a net negative impact on the ACT,'' Ms Faulks said.

She said, however, that many public servants who took redundancy would be able to find jobs in the private sector as long as confidence among consumers and business was not badly damaged.

''Our economy is very strong here,'' Ms Faulks said.

Consultancy firm Ernst & Young's federal government and public sector lead partner, Mark Nixon, estimated as many as 2000 Canberra-based public servants could lose their jobs.

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