A crisis meeting will be held in Canberra tomorrow to discuss the alarming slump in housing construction that could threaten the territory's economic growth.
The housing downturn is highlighted in two reports to be published today by economic forecasters, with both reports giving differing scenarios for the territory's economic health.
The ACT economy is seen as one of the strongest in the country but is facing a slowdown as housing construction falls and public service cuts begin to bite deeper.
CommSec's quarterly State of the States again puts the ACT in the second tier of economies, with Western Australia first ''and daylight second''.
The Housing Industry Association says it is convening the emergency summit at Parliament House against the backdrop of the worst conditions in the residential construction industry across the nation in decades.
''Residential construction is experiencing its second recession in four years,'' the association's managing director Shane Goodwin said last night.
Growth in the ACT has to date shrugged off public sector layoffs and fast cooling housing construction, according to Deloitte Access Economics.
''However some of the negatives associated with these two big growth engines are still worsening so the capital's growth is projected to fall back through 2012-13 as a result,'' the group's Business Outlook says.
''Housing starts and leading indicators of construction have fallen further in the ACT than anywhere else in the last year, yet the fall is merely back to the levels seen as recently as 2008.
''Canberra is now witnessing the end of one of its occasional bursts of home building, with an astonishing level of apartment construction now coming on to the market.
''What happens next will depend on the key drivers of housing construction in the territory - population (the fastest outside of the surging West, though that's unlikely to last) and federal government spending (where falls, even with increasing demands for doing-more-with-less, are truly yet to bite into local employment levels).
''Both could turn sour and drag housing demand lower, though these forecasts take a more measured view.''
Mr Goodwin said 20,000 fewer homes were being built each year, compared to the average for the past 20 years.
''This represents thousands of employees and contractors that won't have work and millions of dollars in materials and related services that won't be purchased,'' he said.
''Without the right policy responses from federal, state and territory, and local government to address the on-going contraction in the industry, we will continue to see real consequences for jobs, businesses, the supply of new housing and rental costs.''
CommSec says the strongest growth areas for the ACT are housing finance and dwelling starts, flowing from an above-average population and a strong growth market.
For each state and territory, latest readings for the key economic indicators were compared with decade averages, that is, against the ''normal'' performance.
''The ACT remains the second strongest economy, benefiting from low unemployment and solid population growth,'' the analysis says.
''The housing market is losing momentum but the territory government has trimmed taxes in an attempt to counteract weaker public service jobs.''
The measure of decade averages puts retail trade in the ACT as the second lowest in the nation, with growth of 8.1 per cent, just above Tasmania.
''The jobless rate stands at 3.6 per cent in the ACT, the lowest in the nation, but that jobless rate is actually 5.6 per cent higher than its 'normal' level or decade average,'' the study says.
''Annual population growth [in the ACT] of 1.79 per second is second strongest and this is 24.7 per cent above 'normal'.
''In the ACT, the number of housing finance commitments is 5.0 per cent above the decade average and commitments in May were also 4.4 per cent higher than a year ago.
''The ACT is in the strongest position for new housing construction but even in this economy, the position is deteriorating.
''In the March quarter the number of dwellings started was up 12.9 per cent on the decade average but dwelling starts are now down 36 per cent on a year ago - the biggest slide in 11 years and the biggest decline of any of the state and territory economies.''
ACT Treasurer Andrew Barr said the report reaffirmed the territory economy was travelling strongly.
''While the housing market remains strong, it is softening off a high base,'' he said. ''The ACT has Australia's third highest economic growth, at 19.7 per cent above the decade-long average. The ACT is the only state or territory to record housing finance commitments above the decade average.
''The ACT is in the strongest position for new housing construction … and the ACT has the lowest jobless rate in the nation.''
Deloitte Access Economics says Australia's national growth continues to be a multiple of that seen in many other rich nations.
''Yet we didn't celebrate our happy 21st birthday without a recession on July 1 because we were too busy seeing a glass half empty,'' it says. ''Although the pace of housing construction continues to fade, consumer spending is surprisingly strong. Yet much still hinges on Europe and China.''