The ACT’s financial position is not sustainable: government policy decisions have driven a decade-long deterioration in the Budget, the Legislative Assembly’s multipartisan fiscal sustainability inquiry has found.

The ACT has spent more than it raised across the total Territory sector every year since 2011-12. Net debt rose from less than $1 billion to $11.2 billion by June 2025. 45 per cent of that deterioration occurred after 2021-22. The fiscal position has worsened particularly rapidly in the past three years, with persistent deficits, rising debt, and interest costs. All states and territories except WA are financially worse off than they were a decade ago.

Independent economist Saul Eslake’s analysis, published earlier this year, informed the inquiry.

General government interest costs rose from about $100 million in 2011-12 to $629 million in 2025-26, and were forecast to reach $974 million by 2028-29 – equivalent to 9 per cent of revenue. The committee says that leaves less money for services including health and education.

“The budget deterioration has been driven by government policy decisions,” the committee found.

Changes outside government control improved the fiscal position by $1.5 billion between 2015-16 and 2025-26, but government policy decisions – particularly expense decisions – worsened it by $6.2 billion.

ACT Greens leader Jo Clay – who chaired the committee – said the report showed Labor had “mistook spending for delivering”, while Housing ACT staff, public school teachers and school assistants, and waste collection workers went on strike over pay and conditions, and public library hours were cut.

Shadow treasurer Ed Cocks said the report showed Labor had “betrayed the trust” of Canberrans, and argued that the government was responsible for the deterioration. Labor “chose to increase spending even faster than it was increasing taxation, running persistent deficits and driving debt to record levels”, Mr Cocks said, resulting in rising interest costs; increasing pressure on taxes, rates, fees and charges; and less money for services.

“This is a betrayal that will be felt for decades,” Mr Cocks said. “Labor has locked the ACT into a cycle of rising debt and spiralling interest costs, putting ever greater pressure on the Government to raise more revenue, leaving less money for the services Canberrans depend on, and leaving Canberra vulnerable to future economic shocks.”

The committee warns that the ACT has limited scope to tax its way out of trouble, as further tax increases could hurt households, businesses, and ultimately the revenue base. It suggests increasing gambling-tax revenue, which sits below the national average. Ms Clay noted that the government would give the horseracing industry $8.6 million in public funds this year.

The committee wants more detailed reporting of individual government programs and spending; tighter Treasury control over spending; rolling reviews of government expenditure; a coordinated system for pursuing Commonwealth funding; and health treated as the primary area for finding expenditure efficiencies.

As infrastructure investment has significantly contributed to debt, and project priorities have not been determined transparently enough, the committee recommends assessing projects for affordability, need, benefit-cost, wellbeing, equity and deliverability, and publication of lifecycle costs and reasons for delays.

The committee also recommends increasing public and community housing to reduce the long-term costs of homelessness. Housing has not increased in line with population growth since 2018. Ms Clay said that the government had no systematic strategy for increasing Commonwealth funding.

“The ACT didn’t even apply in the first round of the Housing Australia Future Fund,” Ms Clay said. “We scraped together just 85 homes in round two. While we’re gambling everything on round three, the last round, our public housing waitlist grew from 3,000 to over 3,600 households this term – and it’s still rising.

“When there isn’t enough public housing, low-income Canberrans are forced to compete in an expensive private rental market, or pushed into homelessness or crisis accommodation.”

The committee acknowledged that the 2026-27 Budget had begun fiscal repair, including $700 million in delayed infrastructure spending and $282 million in operational savings, but questioned whether its targets were sufficient.

Mr Cocks said the budget relied on cuts to employee expenses, election commitments that were not fully funded, and service funding through programs that disappear from the forward estimates.

“The Government has taken the smallest step it possibly could and then tried to spin it as Budget repair,” Mr Cocks said. “Labor is still relying on unrealistic assumptions, short-term fixes for long-term pressures, and fiscal measures that make the books look better than they really are…

“You can’t claim to have repaired the Budget while leaving hundreds of millions of dollars of known spending outside it. There is now a narrow window to get the Territory’s finances back onto a sustainable path. That means honest Budgets, disciplined control of spending, difficult choices about priorities and getting genuine value from every dollar Canberrans hand over.”

ACT Government response

The ACT Government said it would consider the committee’s report and provide a formal response “in due course”.

Treasurer Chris Steel said there were “no silver bullets” when it came to addressing the fiscal pressures facing states and territories, which had “limited revenue sources and high expectations and demand for services”.

“This report identifies no specific savings measures but calls on the Government to spend even more,” Mr Steel said.

“Process answers don’t deal with the core questions about what Canberrans need, and want to fund. The Canberra Liberals should be up front about where they want to cut the public service, and what services they want to defund.”

Mr Steel said the government had set out “a clear and measured pathway to return the Budget to balance and surplus over the forward estimates” through its revised fiscal strategy.

He said the 2025–26 Interim Outcome showed the government was “making strong progress on this strategy”, delivering a net cash operating surplus two years ahead of target.

Chief Minister Andrew Barr said fiscal sustainability required discipline from all sides of the Assembly.

“It is no longer credible for parties and independents to advocate simultaneously for significantly increased spending and reduced revenue while expressing concern about debt and deficits,” Mr Barr said.

“Fiscal sustainability requires discipline from all parties and Members, not just government.”

“The era of simultaneously demanding more infrastructure, more services, lower taxes and lower debt must come to an end.”