Mr Fluffy clean-up puts brakes on infrastructure projects

Large parts of the $2.5 billion infrastructure package announced by Treasurer Andrew Barr will be significantly delayed, including the City to the Lake development, a new city sports stadium and a new national convention centre, with money reallocated for likely buybacks and remediation of 1000 properties in the ACT.

As the Commonwealth announced a heightening of Australia's terror alert levels on Friday, Chief Minister Katy Gallagher told The Canberra Times her government's priorities remained health and education funding, as well as the planned light rail line to Gungahlin.

Cabinet has agreed the fourth priority for the coming five years should be the demolition or remediation of homes with the toxic loose-fill asbestos, but Ms Gallagher stressed negotiations over cost and expert advice were ongoing with Employment Minister Eric Abetz.

"The cabinet has agreed that hospitals, schools, public transport and asbestos are now the four key priorities for the government to work on for the next five years," Ms Gallagher said

"Outside of that, there isn't going to be much else."

An audit of government spending is under way and the mid-year budget update, due in February, will see reconsideration of all large calls on territory revenue.

"Should demolition occur, and occur over a five-year period, we are still looking at a very substantial bill, probably in excess of $300 million," Ms Gallagher said.

"I don't expect [the Commonwealth] will offer to come and pay for everything."

What had been key priorities, including a new convention centre, are now considered too costly in the short to medium term.

The government has allocated $12 million to get the convention project to procurement stage, but Ms Gallagher said it was unlikely the required $200 million for construction would be available in the coming years.

While the City to the Lake project and a new city sports stadium remain commitments of the government, their delivery appears in question in the medium term. However the more than $600 million tram line to Gungahlin will not be reconsidered by cabinet.

Ms Gallagher said light rail's public-private partnership model means it does not require significant funding in the period.

Construction on the line is due to begin by mid-2016, as campaigning for the next territory election gears up.

"I guess the difference with light rail is potentially there is no call on the budget within the next five years," Ms Gallagher said.

"Our planning is there is no call on capital for that project but we are also not walking away from it. Public transport is one of our four priorities, both Capital Metro and ACTION," Ms Gallagher said.

She said the territory had discussed a possible one-off levy to pay for the Mr Fluffy clean-up, as a Commonwealth-led response in the late 1980s missed more than 1000 homes in the ACT.

NSW has moved to inspect houses and could also face emergency funding demands for removal of the affected homes.

"I don't even want to countenance the fact that the Commonwealth won't help us," Ms Gallagher said. "In the event that we have to find a much greater amount of revenue, those things would have to be on the table."

She said the Commonwealth had historically provided revenue to deal with similar property loss and in some cases levies had been established.

Acknowledging the current performance of the territory's property market, Ms Gallagher said now was not the worst time to have to buy properties across the ACT.

Land will likely be sold on the open market after homes were demolished and property remediated.

Expecting criticism from the Liberal opposition, Ms Gallagher said some people would continue to question the motivation for projects such as light rail in the new economic climate but improved public transport was critical to the city's future.

"The cabinet is locked in behind that and agree it should be a priority," she said.