The ACT budget deficit is forecast to improve from $1.1 billion in 2024-25 to $499.1 million in 2025-26 — a $632 million turnaround, the ACT Government announced in its mid-year budget update.

Across the forward estimates, the budget is forecast to return to balance and then surplus.

“This strong fiscal recovery is being achieved through ongoing economic growth, budget discipline, and the strengthening and streamlining of the public service through machinery of government changes,” treasurer Chris Steel and finance minister Rachel Stephen-Smith said.

Gross State Product increased by 3.5 per cent in 2024-25, marking 29 consecutive years of economic growth.

“Our economy is growing faster than most other states and territories, and well above the growth in the national economy,” ministers said.

Ongoing investments in community and suburban infrastructure will continue. The government acknowledged structural funding pressures in delivering core services, due to increasing costs and rising demand, but said these would be covered within appropriations passed last year. 

Additional or continued funding includes $43.4 million for public schools; $17.2 million for financial assistance and administering victims’ services; $15.4 million for Housing ACT repairs and maintenance; $14.1 million for Children, Youth and Family Services (including out-of-home care); $11.8 million to continue the Human Rights Commission’s Intermediary Program; and $778,000 to support the Aboriginal and Torres Strait Islander Elected Body.

The mid-year update does not include funding from the new National Health Reform Agreement, which will deliver $4.1 billion in Commonwealth funding for the public health system over five years from July 2026. Adjustments from this agreement will appear in June’s 2026-27 Budget.

Mr Steel said: “Today’s mid-year Budget update shows the Government’s sensible fiscal strategy is working, as we deliver the services and infrastructure Canberrans expect and continue to improve our fiscal position. Our local economy continues to perform strongly, growing faster than any state or territory in the country. We’ll continue to make sure we deliver on our progressive agenda to support the wellbeing of our community — without resorting to deep cuts.”

Ms Stephen-Smithsaid: “The Budget Review reflects the hard work we’ve done to embed the fiscal turnaround forecast in the Budget. Our strategy is on track to deliver ongoing improvements in the Budget bottom line without compromising government services or public sector jobs.

“I thank the public servants who are delivering for our community every day. We will continue the important work of identifying further prioritisation opportunities to ensure the Government can continue to meet its commitments to Canberrans.”

Canberra Liberals

However, shadow treasurer Ed Cocks MLA (Canberra Liberals) argued the deficit was worse than forecast last year, not better.

“The Treasurer has been out trying to claim an improvement in the budget deficit over the last week or so, but the numbers he’s revealed today are actually getting worse,” Mr Cocks said. “Instead of the 100 and $17 million deficit that they were forecasting this time last year, we’ve seen a half billion-dollar deficit for this year alone that’s going backwards by four times the amount they said last year. Things are getting worse, not better.”

Mr Cocks claimed the government had repeatedly promised surpluses in the forward estimates without delivering them, and warned of rising interest costs approaching $1 billion per year, growing reliance on own-source taxation, and a high existing tax burden amid cost-of-living pressures.

“How many times has the government promised that we were going to get back to surplus?” Mr Cocks said. “By my account, it’s at least 20 times they’ve promised that they would get a surplus in the forward estimates, and they just can’t get there consistently. The estimates process last year called this out. The Auditor-General’s called it out. And it’s about time that the ACT government started coming clean with the ACT people and with the community about just how bad the budget situation is.

“Year after year, they promise the surplus, but we never get there. Every year we look at the budget, we’re looking for the problems, but the truth is that it is structurally going backwards. We’re heading towards a billion dollars per year in interest payments. We are seeing a billion dollar increase over the course of the forward estimates in own source taxation. The numbers just can’t keep on going in this direction. It’s very clear that the ACT Government has not focused enough on controlling the way it spends money. There is an absolute problem there. The Auditor-General was out there in his most recent report talking about how difficult it’s going to be to try and apply any higher tax burden to people in the ACT. We’re already carrying such a high tax burden, and so many people are struggling with the cost of living now we can’t just keep slugging them for more and more money.”

Mr Cocks said spending was not sufficiently controlled, and alleged waste on failed projects. He called for all projects to be reviewed, arguing some infrastructure, wage, and community service commitments may not be fully funded.

“What we’ve got to cut is the waste,” Mr Cocks said. “We’ve got a minister in charge of the Treasury now who’s been responsible for hundreds of millions of dollars in waste, wasted money on projects that he has oversight. We can’t keep on going throwing away money on projects that are failing. We can’t keep on going on the trajectory that this government’s putting put us on, and keep leaving the burden to future generations.

“Every project needs to be looked at. Every project needs to be understood. Right now, from the numbers that we’ve seen, we can’t see that all of their current infrastructure pipeline is actually in the budget. It’s not clear that their commitments to ACT public servants for pay rises are in the budget. It’s not clear that their commitments to community services and community organizations are in the budget. Everything needs to be looked at to make sure that we’re spending the money in the right places and not leaving the burden for future generations.”

Master Builders ACT

Master Builders ACT was pleased the government was investing more in local housing and infrastructure, but was concerned property sector taxation remained above 50 per cent — higher than the national average of property-related taxes as a share of total taxation revenue (40 per cent), CEO Anna Neelagama said.

“The ACT Government’s 2025-26 Budget Review shows some welcome investment in our local housing and infrastructure sectors, but needs more to ensure that our building and construction sector can deliver on the Government’s ambitious aims.

“The ACT Government’s own figures show that dwelling investment is growing more slowly than anticipated, demonstrating that the building and construction sector needs help to deliver the Government’s own priority of 30,000 homes by 2030.

“Reducing the Lease Variation Charge (LVC) for Community Housing Providers is a welcome first step, and we would encourage the ACT Government to go further by providing LVC reductions for small- to medium-sized housing developments to facilitate more ‘Missing Middle’ housing.

“Additional funding for infrastructure projects, particularly for ACT schools, should also be structured to ensure a pipeline of work for the local building and construction sector.  

“Our community facilities such as schools and police stations should be delivered by local builders, and we look forward to robust procurement processes that promote local jobs and skills.

“We are a little disappointed that there is not more investment in encouraging a skilled construction workforce. Significant challenges remain for the building and construction sector, especially in skills shortages, and we look forward to continuing to work with the ACT Government on achieving its ambitious housing and infrastructure program.”