A controversial health levy will be abandoned and the ACT will set a new target to tame its fast-rising levels of debt in a budget that outlines more than $10 billion in annual spending for the first time.
But Canberrans' rates bills will rise by 5 per cent on average and they will wait another year to see a surplus while the war in the Middle East continues to push up prices and lowers economic growth expectations.
Budget papers handed down on Wednesday show the territory's headline net operating balance posting a deficit of $323.4 million in 2026-27 and returning to a $244.2 million surplus in 2028-29.
Treasurer Chris Steel said the government prioritised investing in frontline services rather than returning to surplus ahead of meeting community needs in a budget that added new targets to its fiscal strategy.
"We're not delaying budget repair, but we have been measured in this budget, recognising that the impact of the war in the Middle East and the oil shock that's come from it has not only impacted the government but impacted on households," Mr Steel said.
"So we've had to be measured about the decisions that we've made in the budget about revenue."
The government has set a new target for net debt not to exceed 19 per cent of gross state product in any year of the forward estimates, with a decline into the future.
Net debt is expected to reach close to $12.5 billion in in 2026-28 and grow every year of the forward estimates, but it is expected to sit at 18.4 per cent of gross state product on June 30, the budget papers said.
"The ACT's net debt to GSP ratio is around the average for states and territories, noting this average can be significantly impacted by the circumstances of individual jurisdictions (such as Queensland and Western Australia, which benefit considerably from natural resource revenue)," the budget said.
Mr Steel said: "What we'll see over the forward estimates is that level drop down closer to 17 per cent, which is further in line with other states and territories around the country."
The government's new fiscal targets also include a return to surplus by 2029-30 and maintaining surpluses into the future, along with operating cash surpluses from 2028-29.
Last year's budget showed a return to a $47.9 million surplus in 2027-28, with a net cash operating surplus in 2026-27.
This year's budget maintains the net cash operating surplus in 2026-27 but instead estimates a $20.9 million deficit in 2027-28. The budget sets out a return to a surplus of $244.2 million in 2028-29.
The budget outlines $10.2 billion in spending in 2026-27 with the government expected to collect nearly $9.6 billion in revenue.
Mr Steel said the government's move to find $700 million in savings from its infrastructure pipeline over four years would make the pipeline more realistic.
"That will see the level of growth in debt not going up as much as was projected. And compared to the last budget, the next two years will actually see a lower level of net debt," he said.
Mr Steel said the ACT was in an uncertain economic climate as a result of the Middle East conflict and the budget outlined alternative scenarios, including one where the oil price hits $150 a barrel and higher costs flow through to the territory.
"It would soften economic growth this year and next year, and that is certainly a risk. But what we forecast is that the economy will still continue to grow and will continue to remain resilient, with inflation lower than the rest of the country and continued low unemployment," he said.
Households and businesses will no longer pay a health levy after the ACT struck a new health funding deal with the Commonwealth. The levy was introduced last year as the government sought to raise revenue to cover a sharp increase in hospital operating costs.
Finance and Health Minister Rachel Stephen-Smith said the levy had not been a mistake but an extra $75 million in federal funding to cover the higher cost of running the health system in a small jurisdiction meant it could be removed.
"They're still not going to be funding us at 40.5 per cent or 41 per cent over the next couple of years on the trajectory that National Cabinet had previously agreed, but [the Commonwealth] funding is certainly much higher than we had forecast in our last budget," she said.
The average residential rates bill would rise by 5 per cent but 27,000 households would get an actual cut to their bill because the health levy had been dropped.
"The general rates component of each bill will increase by an average of 8 per cent, however the reduction in the levy component means the average total rates bill increase remains at 5 per cent or below," the budget said.
