The ACT’s economy is on track for its thirty-fourth year of consecutive growth, leading the nation for a decade, Chief Minister Andrew Barr told the Canberra business community today. However, the Canberra Business Chamber warns that business confidence is at an all-time low, and that the ACT is a less attractive jurisdiction to do business than other parts of the country.

“Despite rising costs of service delivery and infrastructure, as well as downgrades to some revenue estimates, the Territory’s financial position remains strong,” Mr Barr said.

The real Gross State Product (the value of all goods and services produced within the ACT, the equivalent of Gross Domestic Product) grew at 3.5 per cent per annum, compared to 2.4 per cent nationally. In 2022–23, the ACT’s GSP grew by 4.3 per cent – the highest growth of any state or territory. Since June 2015, the ACT is the only jurisdiction where annual State Final Demand (the total value of goods and services sold) continuously grew on a per capita basis.

“These outcomes have been achieved despite a pandemic, geopolitical tensions, and the more recent interventions by the reserve bank to reduce inflation,” Mr Barr said.

However, Mr Barr cautioned, the rate of growth would be slower this year; parts of the community experience cost of living pressures, which stymies business investment; and some local businesses report reduced turnover.

Inflation in Canberra grew by 3.3 per cent through the year to the March quarter 2024, well below its peak of 7.1 per cent in December 2022.

However, Mr Barr forecast real wage growth across the forward estimates (budget projections for revenue, expenses, and financial position for the three years beyond the current fiscal year), due to  a strong and resilient labour market.

The ACT’s labour market is one of the strongest in the country, Mr Barr stated. Employment grew by more than 56,000 (26.5 per cent) between May 2014 and May 2024, an average growth rate of 2.4 per cent per annum. While the nation is at historically high participation rates, over the past decade the ACT has outperformed the nation by 5.5 percentage points.

There were 8,700 vacant jobs in the ACT in February 2024 – 31.1 per cent more than the pre-pandemic levels in February 2020. However, tight conditions in the labour market are easing; the number of job vacancies relative to unemployment is falling from the historical highs observed in 2022-23, Mr Barr said.

There are 36,000 businesses in the ACT, employing two-thirds of all workers (164,000 people), Archie Tsirimokos, chair of the Canberra Business Chamber.

Private sector jobs grew by 33.9 per cent between August 2015 and May 2024, in contrast to public sector job growth of 23.1 per cent, Mr Barr stated. The Australian Public Service employed 29.3 per cent of ACT workers in December 2013, and 25.2 per cent in December 2023.

“The workforce of this city is dynamic and growing,” Mr Barr said. “Proving that while the Federal and ACT Governments remain two of our most important employers and can be a significant buffer to external shocks, we also have an increasingly diverse labour market improving growth opportunities for our economy.”

Over the past ten years, the number of new businesses grew by 40 per cent, from 25,000 to 35,000, “adding to the vibrancy of our city, the diversity of job opportunities and proving that Canberra continues to be a great place to invest and do business,” Mr Barr said.

However, Mr Tsirimokos revealed today that business confidence was at an all-time low.

In September 2023, 45 per cent of ACT businesses were optimistic about their prospects; now, only 29 per cent were. Conversely, 20 per cent were pessimistic nine months ago; now, 44 per cent are.

“Anecdotally, people are hurting as interest rates are impacting, and businesses are adjusting to a less than optimistic economic outlook, reduced demand, increased cost of doing business, and challenges around workers,” Mr Tsirimokos said.

“The retail and hospitality sector is suffering; there are concerning signs for the construction number over the number of failures and other building companies [are] facing uncertainty. Our construction and development clients are telling us there are few projects in the residential space coming out of the ground.”

Regulations, cost impacts, and rates “made it less attractive to do business in this town than in other jurisdictions”, Mr Tsirimokos said. “It’s not at all times the best environment to invest.”

Mr Barr emphasised growth in education exports and tourism, which he said have rebounded strongly from COVID-19, and will contribute significantly to employment diversity and growth.

The T2030 Tourism Strategy set an interim target for the ACT’s visitor economy to be worth $3.1 billion by the end of 2025, and $4 billion by the end of 2030. The ACT has met its interim target well ahead of schedule, Mr Barr said: in March, the visitor economy was more than $3.7 billion. However, the domestic leisure travel market is ‘softening’ (slowing) due to cost-of-living pressures. This dip in the market is offset by a recovery in international travel, including from China, Mr Barr said.

International education exports are the ACT’s highest export by value, worth more than $1.1 billion each year. The ACT’s biggest markets are China and India, followed by Nepal, Bhutan, and Vietnam. Students from more than 100 countries study in Canberra. International and interstate students account for more than half of the 60,000 enrolments in our tertiary education institutions – “representing a major contribution to GSP, a strong pipeline for our workforce, and a central component of our knowledge economy,” Mr Barr said.

Mr Barr expected household consumption to increase, as all taxpayers will receive a tax cut on 1 July, due to the stage 3 tax cuts, and monetary policy settings potentially ease.

Mr Barr encouraged Canberrans to spend their July 1 tax cuts locally, in Canberra businesses.

The Budget’s Headline Net Operating Balance position (a measure of the ongoing sustainability of the operations of government) is forecast to improve each year, and will return to balance over the forward estimates, Mr Barr said. The operating cash balance is improving.

Population growth will be slightly lower, due to the national migration program.

“Our fiscal strategy is calm and measured,” Mr Barr said. “We will continue to seek balance in public finances as the community and economy recovers from the impacts of COVID-19 and persistent inflation.”