Former ACT chief minister Kate Carnell says business confidence will suffer if a Liberal territory government tears up light rail contracts, but warned Labor not to commence a major project so close to the next election.
The Australian Chamber of Commerce and Industry chief executive did not criticise the Liberal position on the $800 million project and said former political leaders should stay out of local debates after they leave office.
She said the industry group believed it was important for major infrastructure projects to have bipartisan support in the run up to elections "because tearing up contracts does impact on business confidence in doing deals."
The comments come after lobbying firm the Canberra Institute said opposition plans to tear up contracts after the October 2016 election were hurting international business confidence in Canberra as an investment location.
Lobbyist Peter Conway wrote to Ms Carnell to request she use her "considerable sway" within the Canberra Liberals to warn Opposition Leader Jeremy Hanson and transport spokesman Alistair Coe about the risk of "voiding" contracts.
A Labor Party member, Mr Conway said he represented a major overseas sovereign wealth fund which was considering investment in a new Canberra convention centre or a new city stadium but was uncomfortable with talk of sovereign risk.
Ms Carnell laughed off claims she had any sway with the opposition and declined to buy into debate about the lobby group's letter.
She will co-host a Canberra Liberals fundraising cocktail party with Mr Hanson on August 26.
The Victorian government's decision to pay hundreds of millions in compensation to exit contracts for the East West Link road tunnel was similarly problematic and a political bun fight should be avoided over the tram, Ms Carnell said.
In April Mr Coe welcomed the Victorian Labor government's compensation payout as "reasonable".
"This is a two-sided street," Ms Carnell said. "It was two-sided in Victoria and it is here too. For governments to go ahead and sign contracts, major major contracts, 12 months out from an election without bipartisan support is a real problem.
"Similarly it is a real problem to decide to tear up contracts that have been signed by the government of the day."
Prime Minister Tony Abbott and Assistant Infrastructure Minister Jamie Briggs have both said contracts for major projects should be honoured, leaving the Canberra Liberals at odds with the federal Coalition government.
Liberal leader and Chief Minister from 1995 to 2000, Ms Carnell has previously questioned projected patronage levels and said population density along the proposed route to Gungahlin was insufficient to justify a tram line.
A 1990s business case considered by the Carnell government found tram services weren't viable in Canberra as the required density was unlikely to be achieved around the Northbourne Avenue corridor.
"The reality is ex-leaders shouldn't get involved," Ms Carnell said.
Recently, a report from University of Canberra experts found mid-size cities in Australia and overseas had recorded increases in property values and public transport use through the construction of light rail lines.
The ACT government has shortlisted two consortiums to build and operate the tram, with contracts due to be signed in the first half of 2016.
Chief Minister Andrew Barr said the government would not put its agenda on hold because of Liberal opposition, saying the move would make Canberra "ungovernable".
"If you look at the reality of governing this territory, that would be an argument against any infrastructure project ever being delivered if there was any degree of political conflict," Mr Barr said.
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