Canberra’s economy is leading the nation in earnings, employment, and retail growth, but business investment is plummeting, according to the 2022-23 State Statistical Bulletin figures published by the Parliamentary Library last week.

The ACT had the highest average weekly earnings ($2,021); the second highest labour force participation rate (72.8 per cent); the lowest unemployment rate (3.2 per cent); and the second highest employment increase (5.2 per cent) of any jurisdiction.

A government spokesperson said the figures reflected the ACT’s high standard of living and strong fiscal position.

“Gross State Product grew 4.3 per cent in 2022-23, and Gross State Product per capita grew 2.4 per cent over the same period. The ACT’s labour productivity is third behind the mining states of WA and the NT, with an unemployment rate of 3.9 per cent in January 2024.

“These positive results reflect that the ACT is the fastest growing economy in Australia, with 33 years of consecutive economic growth. The ACT Government’s continual investment in infrastructure and services, including quality public healthcare, education and transport has highlighted the ACT as a destination of choice.

“The ACT’s recent 2023-24 Budget included significant investment in quality public healthcare and education, an increased supply of diverse and affordable housing options, and accessible public transport. These infrastructure projects continue to create thousands of jobs, strengthening our economy.”

Business investment

However, the ACT was the only jurisdiction where business investment fell into the negative: by 9.5 per cent. (This is 10.2 points below the next lowest jurisdiction, Tasmania.) Other mainland states showed a 7.2 per cent average increase. On the other hand, the ACT had the highest growth in value of retail sales (13.1 per cent).

A government spokesperson stated that over the past five years, the ACT’s average annual business investment was $3.2 billion, with an increase between 2021 and 2022 of 21.3 per cent. Over the past decade, the territory’s economy grew by 40.8 per cent, more than the national growth rate (26.8 per cent). The ACT had the highest business growth in Australia, 21.2 per cent growth from July 2019 to June 2023, above the national average of 14.1 per cent.

Canberra Liberals MLA Leanne Castley, Shadow Minister for Business, said the fall in business investment was concerning.

“While business investment can fluctuate, to be so far removed and such an outlier from any other jurisdiction indicates that the business sector is clearly not confident in investing in Canberra and is avoiding the ACT,” Ms Castley said.

Ms Castley predicted that the 9.5 per cent decrease would have a greater impact amid rising inflation, and that “this shocking business investment number”, would contribute to the ACT’s “deteriorating budgetary position … led by a reckless Labor-Greens government”.

Greg Harford, CEO of the Canberra Business Chamber, attributed the decline in business investment in the ACT to several factors, including high interest rates and banning consultants from public service core work.

“It is not surprising that there has been a drop in business investment in the ACT,” Mr Harford said.

“The high interest rate environment, coupled with declining business confidence here in the ACT has led businesses to reduce their investment. The ACT economy is disproportionately impacted by Federal Government spending decisions, including the move away from consultants, which is part of the issue. Anecdotally, the market is small, and businesses may think that there are better opportunities for investment in other states.

“A third of our members say that it’s harder to do business here in the ACT compared to other states and territories. The Canberra Business Chamber thinks that the ACT Government needs to focus hard on reducing compliance and red tape, lifting responsiveness, and delivering a customer-focused experience.”

In its pre-budget submission, published last month, the Canberra Business Chamber had called for fewer restrictions and lower taxes. “The perception is that it is often harder and more difficult to do business here, and, as a small market, we need to work harder to attract and retain businesses,” the Chamber had stated.

Ms Castley said the Bulletin’s figures showed that the ACT Government was not business-friendly, but rather treated business as a funding source for its spending.

“These figures provide proof to what the Canberra Business Chamber have been telling us and shows that the business sector is voting with their wallet and avoiding investment in Canberra,” Ms Castley said.

“The ACT Labor-Greens government claim to be business friendly but treat business as a milk cow to fund its big spending.

“ACT businesses, particularly small businesses are facing rising input costs, waning consumer confidence, workforce shortages and supply chain pressures.”

Government response

A government spokesperson said: “The ACT is open for investment, and has a range of incentives and attributes that make investing in Canberra a straightforward and rewarding experience.

“We offer businesses:

• No insurance duty
• No commercial land tax
• Commercial property sales under $1.8 million pay no stamp duty
• Lower costs for A and B-Grade office space for Eastern Australia state capital cities
• Average gross face rents are the lowest on the Eastern seaboard
• Highest payroll tax threshold in the country

 “Recently, we have seen a number of positive business investment decisions in the ACT, including:

• new business entries into the ACT (Uniqlo, Botswana Butchery)
• business people flagging their intentions to invest (Matt Moran)
• contracts signed for Light Rail Stage 2A
• the announcement by Batik Air that they will fly direct between Canberra and Denpasar, and
• significant land sales including key parcels of land in the city centre, including the block near Vernon Circle to the Capital Property Group for $17.75 million in November.

“Our economic development priorities are outlined in CBR Switched On, which highlights Canberra’s place as the knowledge capital of Australia. We actively encourage businesses both in Australia and abroad to invest in Canberra, with recent trade missions to India and Singapore, the United States, South Korea, and Japan focused on attracting investment in renewables, tourism and aviation, and key sectors including space, cyber and healthcare.

“The ACT Government is continuing to support business confidence in a range of ways, and last year released the ACT Small Business Strategy which outlines a range of actions to support local businesses.”

The business community’s reaction to the Strategy was mixed. While the Canberra Business Chamber said it addressed many issues, the Phillip Business Community called it mere ‘lip-service’, and said the government did not consult with small business groups about their needs.

The government is planning an inaugural CBR Small Business Expo to support local businesses. ICON grants are open to support start-ups and entrepreneurs.