The ACT is forecast to be the nation's fastest-growing economy this financial year, a new report has revealed.
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Strong growth in government spending is expected to help drive the territory's economy up 2.8 per cent in the 2024-25 financial year, according to Deloitte's latest quarterly Business Outlook.
Meanwhile, the firm says the next cash rate decision will be a pivotal moment for the economy, though it remains optimistic another pause is on the cards.
The prediction for economic growth is in line with the territory government's own forecasts and comes after an estimated 2.5 per cent growth in the 2023-24 financial year.
Government spending, including on more public service roles and in key areas such as health, will help drive the growth, Deloitte Access Economics partner Stephen Smith said.
"The ACT is always benefiting from a bit more stability than what the rest of the country is, just because of that large public sector employment base," he said.
Deloitte estimates real public sector demand in the ACT grew by 3.4 per cent in 2023-24 and could increase another 4.4 per cent this financial year.
Federal government spending in the health sector is among the key drivers of this demand.
Deloitte's predictions for the years ahead reveal more subdued growth.
The report forecasts ACT's real gross state product - which measures a region's total economic output - will rise 1.9 per cent in the 2025-26 financial year before a growth rate of 2.1 per cent the following two years.
Strong economic growth can mean more jobs and bigger wage gains in the public and private sectors, Mr Smith said.
![Deloitte Access Economics partner Stephen Smith said government spending would continue to drive the ACT's economic growth. Picture by Keegan Carroll Deloitte Access Economics partner Stephen Smith said government spending would continue to drive the ACT's economic growth. Picture by Keegan Carroll](/images/transform/v1/crop/frm/146508744/53312846-9dd0-4500-8ef8-c74f162ebb6f.jpg/r0_256_5000_3078_w1200_h678_fmax.jpg)
"It also means stronger population growth, more development, a bigger city, and higher house prices for people who already own their own home," he said.
"There's lots of positives that can have a real impact on the family budget and people's prosperity more generally."
How the other states and territories stack up
The report revealed a varied forecast among the states and territories.
Following the ACT, the next strongest growth is forecast for Queensland, with projected economic growth of 1.9 per cent, followed by Western Australia (1.7 per cent).
Victoria is expected to see economic growth of 1.6 per cent, while NSW could see a more modest growth rate of 0.6 per cent, the report notes.
"Larger mortgages in NSW and Victoria mean higher interest rates hit home buyers harder in those states, though tax cuts and energy bill support for households are now providing some respite," the report states.
Two clear paths ahead
The Reserve Bank board is due to meet again in August and continues to maintain its position that it will not rule "anything in or out".
Two clear paths had emerged, Mr Smith said, and upcoming inflation data would be critical to the RBA's decision.
Down one road, a high June inflation result could force the RBA to lift rates, "further crushing household and business confidence", he said.
Down the other, a more benign result would see the central bank hold rates steady.
"Deloitte Access Economics' forecasts most closely resemble the second road," Mr Smith said.