An economist's review of the ACT government's finances has concluded "conscious policy decisions" to spend on services and infrastructure without raising revenue has led to the territory's deteriorating financial position.
Economist Saul Eslake has delivered his final findings on the ACT's fiscal sustainability in a brutal report criticising decisions made by the ACT government.
In the report's executive summary, Mr Eslake said the ACT economy had performed strongly compared to other states and territories over the past decade, making the government's worsening financial position "more surprising".
"There has been a significant deterioration in the financial position of the ACT public sector over the past decade, and in particular during the past five years, as a result both of the Covid-19 pandemic in the early years of the current decade, and of decisions taken during the years immediately after the end of the pandemic," he said.
"This deterioration has been entirely due to conscious policy decisions taken by the ACT government- to spend more on both delivering services and providing new infrastructure, without raising sufficient additional revenue.
"Some of those additional spending decisions... were unavoidable: but many others, especially during the past three years, were not."
Mr Eslake noted the ACT government had departed from general principles of "sound public finance" over the past decade by allocating the payment of long-lived public assets entirely to future generations.
The economist's final report on the ACT's fiscal sustainability is part of a parliamentary inquiry established after the Greens and Liberals worked together to force the government's hand in late 2025.
In March 2026, Mr Eslake found the fiscal position of the territory's general government sector had deteriorated over the past decade "entirely" due to policy decisions, declaring the territory "ought to be able to spend less" per capita on key sectors including education and health.
ACT Chief Minister Andrew Barr defended the territory's finances in March, blaming the fiscal crunch on COVID-19 losses.
The ACT was not in as bad a financial position as the Northern Territory, Tasmania or Victoria, Mr Eslake's final report noted, but the territory was "clearly inferior in most respects" to NSW, Queensland and WA.
General net government debt increased from $910 million at the end of the 2014-15 financial year to $9.15 billion at the end of the 2024-25 financial year, with more than half of the $8.2 billion increase occurring over the past three years.
That net debt has been greater, as a percentage of gross state product, than the all-states-and-territories average since the 2015-16 financial year.
"This Assessment considers that the ACT's financial position cannot be characterized as 'sustainable'," the report stated.
The report also cautioned that the ACT was "increasingly vulnerable to finding itself" needing external financial help in a crisis.
Mr Eslake acknowledged the ACT government's 2025-26 budget included "tight control" over operations expenditure and infrastructure investment, but remained concerned the forward estimates could be derailed by conditions less favourable than predicted.
"That risk is all the more concerning given the vagueness of the fiscal strategy set out in last year's budget and the ensuing mid-year budget review," he said.
The economist recommended the government adopt a more disciplined fiscal strategy aimed at delivering cash surpluses before 2030, set numerical targets for interest expense as a percentage of revenues and establish mechanisms for regular reporting on progress towards those targets.
"Those democratic political processes should be informed by an understanding that tolerating continued deficits, and ever-increasing levels of public debt, will ultimately prove unsustainable: and that if Canberrans, through their elected representatives, wish to maintain relatively high levels of public spending in order to provide a wide range of high-quality public services, they will also have to be asked to pay higher taxes and charges," he said.
Mr Eslake also targeted health spending as "likely to offer the greatest opportunities" for cutting back on expenditure and contributing to the territory's fiscal sustainability. The ACT's secondary college system "almost certainly entails higher unit costs" than year 7 to 12 campuses, he added.
He likewise noted that the ACT "would seem to have a strong case" for its historic housing debt to be forgiven by the federal government.
In terms of revenue, the economist recommended the ACT government reconsider its high payroll tax-free threshold, which is the highest in Australia after the NT, and increase the revenue collected from gambling taxes.
The mid-year budget released in February 2026 showed the ACT was expected to post a $499.1 million deficit this financial year after the deficit blew out to $1.1 billion in 2024-25.
