Canberra faces more tough years ahead as the ''bitter pill'' of delayed cuts to the public service take effect, an economic study to be published on Monday predicts.
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''Although there’s been talk of cuts for a long time, the rubber hasn’t yet hit Northbourne Avenue – but it will, it will,'' the Business Outlook report by Deloitte Access Economics says.
However, the blocking of some budget measures by the Palmer United Party may ameliorate the impact of program cuts on the territory’s economy.
Another report published on Monday, the CommSec State of the States, says the ACT and the Northern Territory have arguably the strongest job markets in the nation.
''In the ACT, trend unemployment is the lowest in the nation,'' it says.
While NSW remains the strongest in the nation for new home construction, the ACT is now in the second spot, with starts more than 32 per cent above decade averages.
''The ACT economy is supported by low unemployment and solid home building,'' CommSec says.
Deloitte Access Economics says engineering construction in the territory remains ''morose'' while commercial construction is ''pretty forlorn'', but points to a brighter medium- to longer-term outlook for Canberra.
''The Clive and Bill show is likely to strip further risks out of the ACT's outlook by knocking back what would otherwise manifest as program cuts (and hence as impacts on the local economy),'' it says.
''In essence, the bad news is that Canberra's cuts have had very little impact on public service numbers in the nation's capital thus far, meaning the ACT economy has a bitter pill to swallow as the decisions of Labor and the Coalition finally flow through.
''For all the screaming headlines about the federal budget, it didn't really add that much to the woes faced by Canberra’s economy.
''Labor's decisions while still in power had produced a pipeline effect that will reduce the size of the federal public service by 14,500 people, and the Coalition's budget has merely topped that up by an extra 2000 people.
''Chances are that some 6000 or 7000 jobs will come out of the federal public service over the next two years. That's a figure substantially smaller than the national one (of 16,500) for the simple reason that Canberra only accounts for about two out of every five federal public servants.
''Nonetheless, that still means a tough couple of years lie ahead. The fact that next to no net cuts in public service numbers in the ACT have occurred to date doesn't mean that nothing at all will happen.
''These effects are delayed, not denied. Yet the medium- to longer-term outlook really hasn't changed much.''
CommSec says the outlook for the ACT economy has not changed since its last assessment three months ago.
''Low unemployment is a clear strength for the ACT economy but weak confidence is constraining retail and business spending and future economic performance,'' it says.
ACT Treasurer Andrew Barr said both reports showed a softening of some conditions as a result of the previous federal budget.
However, Deloitte Access Economics also noted a number of positives for the ACT, he said.
''[It says] the policy pursued by the ACT government will somewhat offset restraint by the Commonwealth,'' Mr Barr said.
''Low interest rates coupled with cuts to stamp duty and construction stimulus measures has meant that dwelling starts will remain a strength of the ACT, alongside low unemployment.
''Both of these reports reinforce the need for the ACT government to invest in the ACT economy – to offset cuts from Tony Abbott.
''So far there are positive signs, and we will continue to work with the private sector to grow business and invest in infrastructure in Canberra.''
Canberra Business Council chief executive Chris Faulks said the Deloitte Access Economics report simply confirmed what business in Canberra already knew.
''We are in for a challenging time over the next 12 to 24 months as Labor's 14,500 and the Coalition's 2000 cuts to the Australian Public Service numbers finally flow through,'' she said.
''The big issue for the Canberra economy is the ongoing fragility of business and consumer confidence, which impacts on consumer spending and business investment.
''While rising unemployment levels will be a concern over the next three to four years, retail spending should pick up and the export and tourism industries are looking very positive.''
