Dramatic changes to general rates and stamp duty in the ACT would be needed if the territory still wants to meet its 20-year commitment to phase out conveyance duties, an independent review says.
Pegasus Economics' analysis of the ACT budget said meeting new fiscal targets would help improve the credibility of the territory's fiscal position but warned annual increases in rates a few percentage points above wage growth was unlikely to generate the sufficient revenue to eliminate stamp duty any time in the foreseeable future.
"Unless the ACT government is going to announce some dramatic changes in forthcoming budgets in relation to both conveyance duties and general rates, then it is extremely unlikely the ACT government will meet its original deadline of eliminating conveyance duties following 20 years of tax reform," the firm's report said.
The report, commissioned by the Legislative Assembly's budget estimates committee, said conveyance duty revenue would still be about 10 per cent of the ACT government's own-source revenue in 2029-30, with only two years left in the original 20-year timetable to overhaul the tax system.
"Over the budget and forward years, the rate of substitution of declining revenue from conveyance duties being made from an increasing revenue from general rates appears to have come to a complete stop as the percentage of total own-source revenue from general rates is forecast to remain flat at around 29 per cent from 2025-26 onwards," the report said.
Rates bills will rise by 5 per cent on average this financial year and the government expects to collect $944.2 million in general rates revenue out of a near $3.3 billion total tax take in 2026-27.
The third stage of the government's tax changes lasted from 2021-22 to 2025-26 but the Pegasus report noted ACT Treasury had indicated the future shape of the fourth stage was subject to further government consideration, but the elimination of stamp duty for all first home buyers was part of the next stage.
The ACT may also find it difficult to meet the government's target of providing 30,000 new homes by 2030 despite the target being consistent with long-run trends, the report said.
Most of the economic forecasts in the budget appeared reasonable but the gross state product and population growth figures were on the optimistic side, the report said, while public sector demand would be the "main engine of growth" for the territory in 2026-27.
"The ACT government's forecasts for [gross state product] assume the ACT economy will grow at a considerably faster pace than the national economy when compared to both the Commonwealth government budget forecasts and the most recent growth forecasts from the Reserve Bank of Australia (RBA)," the report said.
"This forecast appears optimistic given that the budget papers acknowledge that the risks in the economic outlook are weighted towards the downside in light of great uncertainty within the domestic and international economy."
The report noted the government's interest bill would grow from $811 million a year in 2026-27 to $1.2 billion in 2029-30, and warned the territory had a poor record in meeting forecasts for expenses.
"The ACT has moved from the position of being a net creditor at the beginning of the last decade to having a substantial and growing debt and interest burden in the budget and forward years," the report said.
The first budget estimates hearing, featuring community organisations, will be held on Friday. Ministers and directorate officials will appear at hearings from July 21 to August 4.
