New government spending will be highly targeted, as the ACT works to manage rapidly escalating costs and shave back spending without cutting into services.
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More than $80 million will be cut from the ACT's public service over the next four years, with the government to find savings through spending less on consultants, computer services, travel and supplies.
The government will also bring forward higher tax rates for multinational companies operating in the ACT and new taxes on short-term rentals will be introduced.
Deficit double last year's forecast
The budget deficit will reach $830.8 million in 2023-24, more than double what was forecast last year, with considerable growth in health spending.
But it will shrink back to $624.1 million in 2024-25 and return to a small surplus of $79.7 million in 2026-27, a significant reduction from the $212.1 million surplus forecast in last year's budget.
Real wages growth and cuts to interest rates factored in next year are expected to help boost the ACT's economy, with the domestic economy the source of the greatest uncertainty.
What it means for ACT's public service
The ACT's public service cuts are expected to save about $20 million a year but no public servants will lose their jobs as part of the cost-cutting drive.
Chief Minister Andrew Barr said smaller government agencies, including ACT Policing, Housing ACT and the ACT Integrity Commission, would be excluded from the spending cuts.
It would mean about $1 million would be cut from the annual budget of most agencies, while larger agencies make cost savings of between $2 and $3 million.
"In large part they're focused on government advertising, travel, supplies and services and use of consultants," Mr Barr said.
![Chief Minister Andrew Barr, who handed down the ACT budget on Tuesday afternoon. Picture by Elesa Kurtz Chief Minister Andrew Barr, who handed down the ACT budget on Tuesday afternoon. Picture by Elesa Kurtz](/images/transform/v1/crop/frm/35sFyBanpD896MKnAH5FRtj/cc0e6ac6-6c78-459d-9047-b528d219c476.jpg/r0_440_8256_5100_w1200_h678_fmax.jpg)
Changes for business
To make up for revenue shortfalls, multinational companies operating in the ACT will face higher taxes. The government has brought forward the proposed payroll tax changes by one year and the government expects it will collect $79.2 million over four years.
Large companies with an Australia-wide wages bill above $50 million will pay a 0.25 percentage point surcharge on their ACT payroll tax liability, while companies with a total wages bill above $100 million will pay a 0.5 percentage point surcharge.
Mr Barr said he expected the surcharge would hit about 700 businesses in the territory. He said the government was introducing the measure to make up for the shortfall in payroll taxes from the federal government's crackdown on consultants.
"I don't meet many Canberrans who think large multinationals and the big banks and supermarkets are paying too much tax at the moment," he said.
"I think it's fair and reasonable they make an additional contribution given the scale of profits that they have made."
A new tax on short-term rentals is expected to collect about $12 million in its first three years of operation.
Owners who let their properties using short-term rental applications, such as Airbnb, will need to pay 5 per cent of their revenue from July 1, 2025.
How the ACT economy is looking
The ACT is pinning its hopes for continued economic growth on higher consumer spending once federal income tax cuts flow through the economy from July 1, and real growth in wages.
The ACT's gross state product, a measure of total economic performance, is forecast to grow by 2.75 per cent in 2024-25, higher than the 2 per cent growth forecast for Australian gross domestic product.
Economic growth is forecast to reach 3.25 per cent in 2025-26 and remain higher than expected national growth across the forward estimates.
"An easing but still strong labour market, public demand, wages growth and population inflows are expected to continue to underpin economic activity in the ACT," budget papers said.
Treasury has assumed interest rates will remain at current levels this year before falling in 2025, which will further help the territory's economy.
High interest rates are dampening activity in the housing market, with building approvals down and lower turnover of homes.
But ACT Treasury officials believe the housing market has stabilised and demand for dwellings would stay the same, helped by stamp duty exemptions targeted at first-home buyers.
"While wages are expected to grow in real terms, mortgage paying households are responding to higher interest rates and cost of living pressures. The impact is largely being felt through discretionary spending, which almost all consumers have reduced substantially," budget papers said.
The budget papers said gross state product would gradually return to long-term trends over the next three years as household spending recovers.
"Growth is expected to be broad based, with growth in both public demand and private investment. Dwelling investment is expected to pick up and strengthen from 2025-26 as interest rates decrease and higher population and real wages push up demand," budget papers said.
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