The decision was made to ban the Black Magic balloon, also known as "Golly", after an Events ACT staff member raised concerns about its name, the department's director, Jo Verden, said.

The owner and pilot of the hot air balloon, Kay Turnbull, said on Wednesday evening that her family and friends only ever refer to it by its official registered name, Black Magic. The term Golly more refers to its design.

"Progressing reconciliation between Aboriginal and Torres Strait Islander peoples and the broader Canberra community is a key priority for the ACT government," Ms Verden said.

"The use of words and/or visual depictions that may be considered racist and offensive by many in our community ... is not supported."

Ms Turnbull has been a participant in the event for 20 years. She has accepted ACT Events' offer to fly the balloon with a new facade this year, but is disappointed by the decision, she says.

Ms Turnbull is lobbying the ACT government to cover some of the cost of the new facade, or "envelope", which she has been asked to hire using her own money. It will be coloured blue, red and yellow, and will have no real distinguishing features, she said.

"My philosophy is that I'm incredibly disappointed rather than anything else. In 20 years of flying the design of the balloon all over Australia, we haven't had one single complaint," Ms Turnbull said.

"We've caused so much fun for people and we have a huge following with children and, I must say, some Aboriginal and Torres Strait Islander people too.

"It is not our intention ever to offend anybody. The fact that it has a smiling face – it's not directed at Aboriginals or anyone that might be a different colour."

The name of the hot air balloon, Golly, refers to the black fictional character golliwog that appeared in children's books in the 19th century and in the 1970s had great popularity when reproduced as a rag doll.

In 2019 they are often considered a symbol of Australia's racist past. The word magic in Black Magic appears in the names of Ms Turnbull's other hot air balloons, she said, and the name Golly is insignificant.

"The name of the balloon is just the name. Most balloon pilots are hard pressed to name their hot air balloons ... I hope that people could perhaps think about the smiling face instead," Ms Turnbull said.

She insists her family will continue to fly the balloon over Canberra despite the ban, as it is one of their favourite places to travel. She was unsure about participating in the Balloon Spectacular next year as she did not expect the ruling to change.

"It is [Events ACT's] opinion that the public feeling is changing. They are a government organisation and they need to be aware of changing perceptions towards our Indigenous people," Ms Turnbull said.

Both the ACT government's Office of Aboriginal and Torres Strait Islander Affairs and the Chair of the Aboriginal and Torres Strait Islander Elected Body were consulted in making the decision, Ms Verden said.