The ACT's budget deficit is expected to swell to almost $1 billion this financial year, as the economic impact of the COVID-19 pandemic takes a huge toll on the budget's bottom line.
The deficit for 2019-20 is set to increase to almost $700 million, the largest in the territory's history, and almost triple what was predicted in the last budget update in February.
Chief Minister Andrew Barr said the only alternative to the "fiscal shock" was years of misery for Canberrans, with increased public spending needed to steer the territory out of economic shock.
The territory's net debt is predicted to go up to more than $4.7 billion this financial year - 11.1 per cent of gross state product.
That figure is expected to swell to $7.7 billion by 2023-24 - or 15.6 per cent of gross state product.
The forecasts are made under the assumption that the economy will open up further in September, and social distancing restrictions will be lifted by July 2021, with international travel back on the cards.
The ACT budget has been delayed until after the territory election, but the government on Thursday released a fiscal update.
It revealed the deficit is set to peak in 2020-21 at $909.5 million.
The forecasts predict the budget will start to recover by 2021-22, reducing to just under $400 million by 2023-24.
The update lays bare the impact the pandemic has had on the government's coffers.
Over the four years to 2022-23, it is expecting to lose $1.8 billion in previously anticipated revenue.
Almost $1 billion of that figure comes down to a shortfall in GST, thanks to the shrinking of the national pool of funds.
The government is anticipating an almost $500 million shortfall in cash from the suburban land agency and city renewal authority, largely due to a downturn in land sales.
The update predicts there will be a $412 million decrease in tax revenue over four years, thanks to a downturn in economic activity. Meanwhile $163 million is expected to be lost as a result of government freezes on fees and tax relief.
The ACT economy is likely to shrink by 1.5 per cent in 2020-21, despite economic activity starting to pick-up gradually from the September quarter 2020 in line with the easing of the restrictions.
The figures are assuming restrictions will not tighten.
If this does occur, the territory's forecast revenue from taxes and fees could be $250 million lower over four years, the update said. Its share of GST revenue would also significantly shrink.
Chief Minister Andrew Barr said the size of the fiscal shock was easily the most significant faced in the territory's history.
"These are a set of forecasts that will be repeated around the nation and the world as governments face rapid write downs in revenue, and increase expenditure to support their communities," he said.
"These are not the eye-watering numbers we have seen in other jurisdictions, but they reflect significant reductions in GST revenue, primarily due to reduced GST pool receipts; further reductions in our own-source taxation revenue resulting from a downturn in overall economic activity; and significant impacts on expenditure to support the COVID-19 response, including the ACT Government's Economic Survival Package."
Mr Barr said the territory needed high levels of public spending, and people should not be alarmed a the size of the deficit.
"If the commonwealth government can run a $185 billion deficit, then it is entirely appropriate for the ACT government to be in deficit at this time," he said.