Finance Minister Rachel Stephen-Smith and Treasurer Chris Steel announcing the 2025-26 ACT Budget. Photo: Ian Bushnell.
An inquiry into the ACT 2025-26 Budget has found the government’s interest expense will equate to a quarter of taxation revenue within four years and effective scrutiny of infrastructure spending isn’t possible.
The budget estimates report made a total of eight findings and 65 recommendations based on two weeks of hearings with ministers, statutory officials, statutory authorities and community groups.
It found interest expenses were the fastest-growing element of ACT expenditure and that the General Government Sector interest expense by 2028-29 will be “the equivalent of 26 per cent of taxation revenue and represent around 9 per cent of expenditure”.
The 2025-26 ACT Budget forecast a headline net operating deficit of $424.9 million and a cash operating deficit of $63 million.
Interest expenses were more than $522 million for 2024-25 and predicted to exceed $1 billion in 2028-29.
“The fastest-growing area of the Budget is interest expense, which will reach nearly 10 per cent of General Government Sector (GGS) expenditure over the course of the Budget,” the committee report stated.
“Concerningly, the trend in the ACT over time has been toward increased debt-to-GSP (Gross State Product), while the projected moderation in the increase depends on the achievement of future Budget surpluses.
“The committee is concerned that the ACT is now borrowing to pay for everyday operational expenses.”
The report labelled the growth in interest expenditure as “unsustainable”.
The government had indicated a continued rise in health expenditure had been a “major contributor” to the growth of the ACT’s operational expenses.
It was recommended the government implement “more robust monitoring and management mechanisms” for health costs and hold an independent review into health demand and expenditure.
It also called for the government to publicly report all cost-saving measures in health quarterly.
Infrastructure was another significant source of expenditure for the 2025-26 Budget.
The committee made a number of findings in this space: that current reporting on funding for infrastructure lacks transparency, “effective scrutiny” of future infrastructure spending wasn’t possible with the currently available information, future commitments to deliver infrastructure (including through public-private partnerships) would further increase Territory debt, and the government’s public reporting on its infrastructure plans needed to be more transparent.
New capital works will total $161 million in 2025-26 ($394 million through to 2029-30) and the asset renewal program will cost $124 million in 2025-26 ($630 million through to 2029-30).
Works currently in progress total $1.3 billion for this financial year and will amount to $5.8 billion through to 2029-30.
The committee noted several cost uncertainties in the Budget, such as the remaining costs associated with the implementation of the Canberra Hospital Master Plan, which don’t appear to be funded at present.
“The way in which infrastructure is reported via the budget lacked transparency in some aspects,” it noted.
“[Another example shows] funding is reprofiled between budgets without explanation, or clarity on exactly what stage the project is at and what its likely future trajectory is.
“There is room for improvement in the quality of reporting and budgeting, and there is a risk that forward estimates do not provide a reflection of likely future spending.”
The commercial sensitivity argument by the ACT Government was noted, but the committee still felt there was value in setting “post-project detailed reporting above a reasonable threshold”.
“Relying on the drawdown on the Central Capital Provision in post-procurement budgets does not offer sufficient transparency to support effective scrutiny,” it stated.
The committee also found the ACT Government may be underestimating the full cost of payroll tax concessions (in relation to Commonwealth employees), reporting-related cost burdens on non-government organisations may not be reflected in the funding they were receiving, and that changes to payroll tax are likely to impact on the “behaviour and choices of businesses”, including healthcare providers.
The legislation for the 2025-26 ACT Budget will be debated this month.
