ACT budget forecast to fall $250 million into the red, as economic threats of coronavirus, bushfires loom large

There are fears the 2019-20 territory budget, to be delivered in June, could go even deeper into deficit with the threat of coronavirus and the bushfire crisis expected to have a negative effect on the budget bottom line.

Looming changes to how GST revenue is distributed also threatens to put significant pressure on the government's financial position.

Opposition leader Alistair Coe said the blowout, along with escalating debt levels, was "staggering" given the territory was raking in record revenue.

Mr Barr handed down the mid-year budget review on Thursday, which forecasts a $255.6 million deficit for 2019-2020 financial year, well up on the projected $89 million deficit.

Forward estimates have also taken a hit with the territory expected to return to a wafer-thin surplus of $9.6 million in 2021-22, revised down from the $135 million projected in last year's budget.

The deficit blow comes after financial statements released last year revealed the $43 million surplus promised in last June's budget never eventuated. The territory ended the past financial year $118 million in deficit.

Mr Barr defended the new spending that contributed to deficit and said the ACT economy remained in a strong position on the back of stable population growth, increasing employment opportunities, strong demand for goods and services and health export performance.

"The territory remains one of Australia's strongest economic performers," he said.

"In 2018-19, our real gross state product increased by three per cent, the second highest equal growth rate of any jurisdiction in Australia."

Revenue is expected to be down more than $104 million than predicted at the June budget.

The budget papers blame the downturn on a $17.6 million decrease in Commonwealth government grants, largely due to lower GST revenue, as well as lower income from land sales. Revenue from GST grants is set to decrease by $245.6 million across the next four years.

Net debt for 2019-20, excluding superannuation, is forecast to rise more than $300 million from June projections. Estimates for the 2022-23 net debt have ballooned by almost $1 billion.

Mr Coe said the escalating level of debt was alarming.

"The fact that we now have debt in the ACT at $3 billion and that's going to be escalating to $4 billion in just a couple of years should be of real concerns to Canberrans," he said.

"This is a government that cannot manage our finances and their only response is to tax people more and more."

The mid-year budget review allocated funding for an extra $163 million in new expense initiatives and $121 million for infrastructure projects over the next four years.

Health was given an extra $60 million to avoid service and staffing cuts this year, while $16.4 million has gone to tourism.

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Some $31 million has been allocated towards the next stage of light rail from Alinga Street to Commonwealth Park, with a further $2.5 million budgeted for the raising of London Circuit.

Mr Barr said the ACT was facing a challenging economic environment, with the devastating bushfires in the surrounding region and the smoke haze expected to hit the ACT's tourism, business and construction activities.

Coronavirus is threatening the ACT's crucial international education sector, with 4300 students from Australian National University and the University of Canberra stuck in China as of February 7.

Late on Thursday afternoon, the federal government announced a ban on tourists travelling from mainland China to Australia has been extended for another week due to ongoing concerns about coronavirus

"The smoke haze in the ACT and associated economic disruption at the end of 2019 and continuing in to 2020 has emerged as a new risk to the economic outlook," Mr Barr said.

"The hailstorm on January 20 caused significant damage to motor vehicles and property, and bushfires have burnt much of our national park.

"There are unknown economic implications of the coronavirus outbreak in China which will directly affect two major sectors - international education and tourism - of the ACT economy.

"We know that there are challenges ahead, but we will not back away from our commitment to delivering the better services and support for our community that we promised."

Mr Coe acknowledged the external threats facing the ACT economy. But he said given the government had reaped record revenue in the past decade, it should be well prepared to "fend off" any economic downturn or recession.

"Unfortunately, over the same time we've had record revenue, we've had debt escalate at a very quick rate," he said.

The government will be keenly awaiting the release of the Commonwealth Grants Commission's review into GST sharing arrangements, which is due in March.

The territory is bracing for a "significant downward adjustment" to its revenue share in 2020-21 and beyond, based on the findings of the commission's draft report.