The federal government is cutting public service jobs to bring the budget back into the black, and Canberra's retail sector is suffering.

With revenue dropping, and the light rail about to drain the coffers, the ACT Government is already struggling with deficit.

However, the announcement on Tuesday of the Mr Fluffy buyback is a huge relief for homeowners whose lives have been on hold since the shock discovery they were living in a house contaminated with amosite asbestos.

That's the good news. The bad news is n

The tightfisted approach by the federal government means the Chief Minister has many sleepless nights ahead.

Already she is talking about deferring or halting projects - excluding light rail - and cutting other costs.

Her problem is the net cost to ACT taxpayers of the Mr Fluffy clean up will be at least $300 million. That will have a huge impact on the small jurisdiction.

The ACT government will have to pay for each house and land, but will only be selling the land.

Gallagher declared all Mr Fluffy-affected houses would be demolished under what would become akin to a "scorched earth" policy, with each house bulldozed and each block scrapped bare.

The federal government has helped Gallagher out enormously - and the owners of around 1000 Mr Fluffy houses - by making a line of credit available.

With its triple A national government credit rating, it can borrow the $1 billion needed to buy back the houses, at a slight discount.

That loan is passed on directly, saving the ACT government $30 million in interest. Obviously this deal could not have happened without the federal government's goodwill - but that's where the federal largesse stops.

Queanbeyan victims fare even worse - they have been left out entirely.

Many questions of detail remain to be sorted, such as whether some houses will have to be compulsorily acquired.

But those details will pale into insignificance for the Chief Minister as she wrestles with the huge impact of the net cost of the clean up on the ACT's relatively small budget.

She admits she did not get all she wanted in the negotiations with the federal government .

She will now be under relentless political pressure, with a "bad" budget ahead.

She cannot expect the Opposition to give much credit for finding a solution to the decades-long Mr Fluffy mess.

The Opposition will campaign relentlessly - again - on rising rates and the political marriage between Labor and the Greens and its offspring, the light rail project.

None of this is any surprise to Gallagher but now she must redouble her efforts and use all her considerable political skills, in a pitch to ratepayers that puts care for Mr Fluffy victims in the forefront of their minds, rather than the too-hot-to-touch rates notice.

It's the stuff of political nightmares - a political leader who is prepared to bravely take on a huge burden to help distressed citizens without knowing how it will be received in the wider community.

@rosspeakeCT