Deloitte downgraded its forecasts in its latest business outlook, predicting economic growth would be slower with inflation and interest rates now higher. Both the national and global outlook were uncertain and volatile, the new report said.

It said while ACT consumers were well-placed to withstand household budget pressures from rising prices, inflation was biting and growth in the local Consumer Price Index had outpaced national headline inflation through the year to March 2022.

The report predicted growth in the Australian Public Service would support Canberra's economy, while a recovery in the university sector after the reopening of international borders would also drive growth over the next 12 months.

Deloitte Access Economics partner and report lead author Stephen Smith said the economic forecasts showed there would be a lift in public service employment, however the trend was not necessarily tied to the new Labor government, which has promised to increase internal staffing for the APS.

"We would have expected Canberra to remain a pretty solid performer in terms of the labour market, irrespective of the election outcome," Mr Smith said.

The business outlook said the ACT's high share of public sector employment helped insulate the territory from the economic shocks of COVID by smoothing the impact of lockdowns on household demand.

Increased government spending in response to the pandemic also benefited the local economy, including its labour market.

However employment in the ACT was still slightly below the pre-pandemic peak set in March 2020, the report said.

International students would also help the local hospitality industry, and could also help it fill jobs amid high labour demand, Mr Smith said.

"The loss of that labour has been really very detrimental to some sectors in Canberra in the last couple of years as well. So having international students back at the Australian National University and the University of Canberra will be really important for the economy going forward," he said.

Homebuyer sentiment appeared to be softening as median prices peaked at one-third above their pre-pandemic level, and a slowdown in housing transfers would detract from the ACT's economic growth over the next year, according to the Deloitte Access Economics report.

Higher inflation, rising interest rates, falling house prices and weakening consumer confidence were testing the resilience of the recovery, just as COVID virus began to surge again in Australia, Mr Smith said.

Deloitte Access Economics forecast economic growth of 3 per cent in Australia for 2022-23, calling it a middle ground between the continued recovery from the pandemic, and the dampening impact of uncertainty, rising interest rates, higher inflation and softer consumer confidence.

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It also predicted price growth would peak later in 2022, but warned this was not a certainty. Interest rates set by the Reserve Bank could peak below 2.5 per cent in the current cycle of rises, well below market expectations, Mr Smith said.

"However, any sign of further acceleration in price growth would see the RBA lift rates further and make the balance between fighting inflation and supporting economic growth more challenging. That would inch Australia closer to 'stagflation' - a central banker's worst nightmare," the report said.

"Setting interest rates in the current environment is more than a little tricky. Rising inflation is one thing, but it is also clear that growth is slowing. The post-pandemic high is fading quickly as house prices begin to turn downward and consumer confidence continues to slip.

"Add in the darkening global outlook and it becomes quickly apparent that the risk of raising interest rates too much needs to be balanced against the risk of not raising them enough. It's the job of central bankers to thread that particular needle right now, and the degree of difficulty could not be higher."

The business outlook said global economics conditions were softening but low unemployment was cause for optimism that the US would avoid recession - or a large recession.

The report said the growth of the Chinese economy would slow after a recent rebound, and would fall short of the official target of about 5.5% in 2022.

Mr Smith said wage growth in Australia was expected to trend higher more quickly than previously expected, but real wages would still go backwards in the near term. While wage growth "with a three in front of it" was reasonable, any potential for wages to chase prices any higher would be detrimental to workers in the long term, he said.

Think tank The Australia Institute will release a report on Monday finding wages accounted for only 0.6 percentage points of the 4.1 percent increase in prices so far this financial year.