The Reserve Bank's next move on interest rates is just as likely to be up as down, meaning bad news for the ''one large mortgage belt'' of the ACT, according to a new report.
Access Economics' Chris Richardson said Canberra house prices had remained ''relatively resilient''.
''The danger time for housing is really now with interest rates where they are. If housing prices can survive the next six months they should be fine,'' Mr Richardson said.
The official cash rate is 7.25per cent, which means mortgage rates of about 9per cent.
The recent resiliency was because population growth had picked up and the territory had not been hit as hard by the May federal budget as many had expected.
''So employment and population growth in the ACT remain fine, which is why house prices are not falling as they are in Sydney. That is not to say that every house in Canberra is immune from price falls at the moment, that is not true, but as an average we are doing fine,'' he said.
His company's latest quarterly Business Outlook, to be issued today, says that if official interest rates were to change this year, ''they are just as likely to go up as down'', because the two-speed split in the Australian economy was deepening.
''The Reserve has thrown out the anchors, with a notable impact on retail demand and the pace of housing construction, but the feds are still showering huge tax cuts on the punters, while China and other emerging economies are still showering commodity revenue on the wider economy,'' it said. China remained the key to the world economy, too. If it succumbed to the slowdown in other nations, ''the downturn will become a genuinely global one''.
''The rich world slowdown is proceeding slowly but inexorably, with the roll call of the wounded like a 'Who's who' of Australian trading partners the United States is in recession, and the 'R' word has already been bandied around as a risk for Japan and New Zealand, with the United Kingdom slowing too.
''Moreover, higher headline inflation means rich world interest-rate cuts may be ending, suggesting their slowdown will linger well into 2009.''
Access said only two sectors would have stronger output growth in 2008-09 compared with 2007-08 farmers and miners. It expected weaker growth in every other sector, especially finance, which was tipped to have a ''rotten year''.
Locally, Mr Richardson said weakening commercial construction was one of the main factors dragging the ACT economy down.
''It is not that commercial construction in the ACT is weak, it is just that it has been very strong and it is now not quite as strong as it was in the second half of 2006 and through 2007,'' he said.
The report said that although the federal budget was not as bad as expected for Canberra, there was going to be a net fall of about 1200 public service positions this year.
''There also remains the question of how the 2per cent federal efficiency dividend affects departmental employment prospects ...'' it said.