Chief Minister Andrew Barr has defended a major blowout to the territory's budget saying it would be "crazy" to prioritise a surplus amid the threat of coronavirus and the bushfire recovery.
The mid-year budget review released on Tuesday revealed the 2019-20 budget deficit is projected to almost triple to $255.6 million from the $89 million that was forecast at the June budget.
Mr Barr conceded future planned surpluses might not be achieved and the ACT could be in deficit for years to come.
Opposition Leader Alistair Coe said the hit to the government's bottom line, along with escalating debt levels, was "staggering" given the territory was raking in record revenue.
Revenue is expected to be down more than $104 million than predicted at the June budget. Much of the downturn was blamed on falling GST revenue as well as lower land sales.
Mr Barr defended increased spending that contributed to the deficit, including $60 million towards health, saying now was not the time to tighten the government's purse strings with Australia facing a "dramatic economic shock".
"People would think we were crazy if given all that has happened over this summer that we prioritise a budget surplus in this fiscal year ahead of bushfire recovery, or response to the coronavirus or the needs of the health system," he told The Canberra Times.
Mr Barr said if 4000 Chinese students enrolled at ANU could not make it to Canberra - almost one per cent of the ACT's population - it would flow through to the whole economy with a lot of lost expenditure.
"This is not just us, this is everybody, every Australian state and territory has had to downgrade their GST forecast, everyone will be hit by the coronavirus, so yes, this is the most dramatic economic shock that this country has experienced since the global financial crisis," Mr Barr said.
He said surpluses were only appropriate in the right context and almost meaningless in a small jurisdiction like the ACT.
"We could cut back all of our spending to get the budget back to balance but it would not be replaced by anything because there is no economic activity because our biggest economic trading partner has had their border closed," Mr Barr said.
"The measure for us now is will we keep our economy out of recession, will the Australian economy stay out of recession."
Looming changes to how GST revenue is distributed also threatens to put significant pressure on the government's financial position.
The next surplus is still expected in 2021-22, but it has been revised down from $135 million to a wafer-thin $9.6 million.
This is not just us, this is everybody, every Australian state and territory has had to downgrade their GST forecast, everyone will be hit by the coronavirus, so yes, this is the most dramatic economic shock that this country has experienced since the global financial crisis.Andrew Barr
The territory's net debt, excluding superannuation, will rise by more than $300 million this financial year compared to what was previously predicted.
Debt will increase by almost $1 billion - to almost $4 billion - by 2022-23 compared to past forecasts.
Mr Coe said the escalating level of debt was alarming.
"The fact that we now have debt in the ACT at $3 billion and that's going to be escalating to $4 billion in just a couple of years should be of real concerns to Canberrans," he said.
"This is a government that cannot manage our finances and their only response is to tax people more and more."
Mr Coe acknowledged the external threats facing the ACT economy. But he said given the government had reaped record revenue in the past decade, it should be well prepared to "fend off" any economic downturn or recession.
"Unfortunately, over the same time we've had record revenue, we've had debt escalate at a very quick rate," he said.
He noted Commonwealth funding to the territory this financial year was still expected to be $50 million more than last year.
The deficit blow comes after financial statements released last year revealed the $43 million surplus promised in last June's budget never eventuated. The territory ended the past financial year $118 million in deficit.
The mid-year budget review allocated funding for an extra $163 million in new expense initiatives and $121 million for infrastructure projects over the next four years.
This year, health was given an extra $60 million to avoid service and staffing cuts this year, while $16.4 million has gone to tourism.
Some $31 million has been allocated towards the next stage of light rail from Alinga Street to Commonwealth Park, with a further $2.5 million budgeted for the raising of London Circuit.
The government will be keenly awaiting the release of the Commonwealth Grants Commission's review into GST sharing arrangements, which is due in March.