The ACT Government should adopt stricter fiscal targets, including returning to cash surpluses and setting clear debt limits, according to a report to the Legislative Assembly by independent economist Saul Eslake.
In his final report to the Select Committee on the Fiscal Sustainability of the ACT, Eslake warns that while the territory is not currently in a fiscal crisis, its financial position has deteriorated significantly over the past decade and could become increasingly vulnerable if current trends continue.
He finds the deterioration is largely the result of deliberate policy decisions by successive ACT Governments to increase spending on services and infrastructure without fully matching that spending with additional revenue or Commonwealth support. While some pandemic-era measures were unavoidable, he says many recent spending decisions were discretionary.
Eslake recommends the government adopt a more disciplined fiscal strategy aimed not only at returning the operating budget to surplus, but also achieving cash surpluses – after capital spending – before the end of the decade. He says this should be sustained into the 2030s until net debt falls below the national average relative to revenue and economic output.
The report also calls for the government to set explicit numerical targets for debt levels and interest costs as a share of revenue, and to establish regular public reporting against those benchmarks to improve transparency and accountability.
Eslake suggests there is greater scope to improve the fiscal position through spending restraint than revenue increases, but stresses that the balance between cuts and tax changes is ultimately a matter for elected representatives.
However, he warns that sustained deficits and rising debt are not sustainable long term, and that maintaining high levels of public services will likely require higher taxes or charges.
The ACT Government flagged tighter spending controls and revenue measures in its 2025-26 Budget, which Eslake notes could stabilise the position under favourable conditions – but he cautions that weaker-than-expected outcomes could see finances continue to deteriorate.
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