As many as 6500 Canberrans, or 3 per cent of the city’s workforce, could lose their jobs if the mooted cuts to the public service go ahead, Chief Minister Katy Gallagher has warned.

That would be a hit worse that the dark economic days following the election of John Howard in 1996, when 3318 federal public servants lost their jobs in the first year, which represented 2 per cent of the workforce.

The result was to send Canberra into recession, an outcome the ACT government also fears with the Abbott cutbacks this year.

The Commission of Audit recommendations would slash 16,000 jobs from the public service. Speaking on the eve of the federal budget, Ms Gallagher said Canberra’s share would be 6500 jobs.

Dismissing the suggestion that Canberra should simply “diversify”, she said it was, and always would be, a government town.

The public service  was “our BHP, our Holden”.

“Even though we’ll see some change on the fringes we’re going to be an economy that relies on government work, whether it be the private sector or through jobs directly in the public system. And we should be OK with that, that was why the city was built,” she said.

“I am very pleased with the work we have been doing in supporting diversification within the private sector and some of the ideas that they have had. But we’ve also got to acknowledge that as a small government, which constitutes 9 per cent of our local economy, that we don’t have the answers to everything and can’t be held responsible when the federal government acts …

“If they are going to hit us with big job losses, the ACT government can’t absorb that and shouldn’t, but we can work with others to try and support the city through what will be a pretty tough couple of years.”

While the jobs hit could be worse than 1996, the Canberra economy was in a better position now, Ms Gallagher said, with a bigger economy, a larger population and a larger private sector.

“I am not going to stand here and say it is all doom and gloom, I don’t think that is the case,” she said, anticipating a shift in the federal government's  focus from the public to private sector, which could open up opportunities for Canberra.