The ACT has held on to its AAA credit rating despite the coronavirus-induced economic slump, with predictions the territory's budget will start to recover in the next two years.
But ratings agency Standard & Poor's has cast doubt on a re-elected Labor government's capacity to deliver the centerpiece of its economic recovery plan, predicting it will fail to deliver about 20 per cent of its planned multi-billion infrastructure program.
The rating agency on Thursday reaffirmed its confidence in the strength of the ACT economy, delivering a timely boost to Chief Minister Andrew Barr as he starts an election campaign in which he'll aim to position himself as the right person to steer Canberra's rebuild.
The agency's assessment was informed by the ACT government's economic update, which predicted the shock of the coronavirus pandemic would plunge the territory budget more than $900 million into deficit this financial year. The territory's debt burden was expected to grow to $4.7 billion this year, and swell to $7.7 billion in 2023-24.
But the agency believed the deterioration of the budget, while severe, would only be temporary, with the territory's financial position to start recovering in the next two to three years.
It had confidence in the ACT because of "robust financial management", Canberra's high income-earning population and the territory's "exceptional" level of liquidity.
The agency predicted the ACT would outperform the other states and territories, noting the territory had by far Australia's best performing labor market, with unemployment almost three percentage points above the national rate of 7.6 per cent.
But while it painted a relatively optimistic picture overall, the agency's assessment did raise doubts over the Labor government's capacity to deliver on its promise to build Canberra out of the recession.
Mr Barr's has put construction work at the centre of his four-year vision to rebuild the ACT's economy, with spending on infrastructure projects accounting for $4 billion of his $4.9 billion recovery plan.
The pipeline of projects is filled with proposals which have been on the government's agenda for years, such as the $500 million Canberra Hospital upgrade and the extension of light rail to Woden.
But Standard & Poors said it expected the government would only be able to deliver about 80 per cent of the program in the next three years.
Part of the reason was the existing "capacity constraints" in the engineering and construction sector.
The task will be made harder by the fact that the other states and territories are set to embark on their own infrastructure spending blitzes, at the insistence of Reserve Bank governor Phillip Lowe.
"Delivering this enlarged pipeline will be a challenge," the agency said.
The agency's assessment echoed concerns aired by the Master Builders Association of the ACT immediately after Mr Barr unveiled the $4.9 billion recovery plan late last month.
The association's chief executive, Michael Hopkins, doubted the government could deliver the pipeline, pointing out that it had spend 23 per cent less on capital works than it had promised in each of the past four financial years.
Mr Barr has previously expressed confidence that a re-elected Labor government could deliver the projects, many of which are well progressed in the planning phase.