David Pocock fires warning after Katy Gallagher rules out ACT housing debt waiver

ACT senator and Finance Minister Katy Gallagher ignited a political row on Wednesday after confirming her government was "not in a position" to forgive the decades-old loan.

With the states and territories owing a combined $1.6 billion in housing debts to the Commonwealth, Senator Gallagher argued that simply forgiving the ACT's loan was "not that easy".

In a veiled message to Senator Pocock, she said the government wouldn't do special deals in exchange for votes on contentious bills - as the previous Coalition government did with Tasmanian Jacqui Lambie to waive her state's $150 million housing debt in 2019.

"I'm not Finance Minister for the ACT - as much as at times I would like to be - I'm Finance Minister of the country and I don't think it's right to waive debts for the price of a vote on the Senate floor, which is how it's happened in the past," Senator Gallagher said.

But Senator Pocock is digging in, again signaling that he's prepared to use his powerful position on the crossbench to get a deal done.

Labor needs the vote of at least one of Senator Pocock, Senator Lambie or her colleague Tammy Tyrell to pass legislation which the Coalition opposes, giving each some leverage over the Albanese government.

"Senator Gallagher may, of course, say the government won't be doing any deals but the fact remains, the government doesn't have a majority in the Senate," Senator Pocock told The Canberra Times.

"I wouldn't be doing the right thing by the people who elected me if I didn't try everything possible to see this debt forgiven."

The Labor government has been under pressure from Senator Pocock and Labor Chief Minister Andrew Barr to forgive the debt since winning the federal election in May.

Senator Gallagher had criticised the former government's decision not to waive the debt while she was in opposition, leaving herself exposed to accusations of hypocrisy.

Facing questions on Wednesday, the now senior cabinet minister said the ACT wasn't the only jurisdiction pushing to have their historic loans forgiven.

"The Commonwealth has state housing debts in the order of about $1.6 billion," she said.

"I think we have to acknowledge that it's not an ACT-specific issue."

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The ACT government has promised that if the debt was waived, the millions which would have gone into servicing it would be invested into much-needed social and affordable housing in the nation's capital.

Mr Barr was disappointed that the debt would not be wiped in this month's federal budget, but said the ACT would continue to work with the Commonwealth to find a way to make it happen.

"In parallel, the ACT will seek to partner with the Commonwealth on other ways to increase housing supply and lower the cost of housing," Mr Barr said.

Senator Gallagher hasn't completely shut the door on waiving the debt in the future, saying the Commonwealth would continue talks with the ACT.

She stressed the Albanese government was committed to tackling the nation's housing crisis, highlighting Labor's proposed $10 billion fund to build 30,000 social and affordable homes in the next five years.

Senator Pocock said if the new government was serious about increasing the supply of social and affordable housing then forgiving the debt was a "sensible first step".

"We have a crippling shortage of social and affordable housing in Canberra," he said.

"More than half of the funding the ACT currently receives from the federal government under the National Housing and Homelessness Agreement is returned in interest payments on the historic debt. That money needs to be going towards new supply."

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