ACT’s Dire Fiscal Situation Defies Simple Solutions

Morgan Winslow

Published: March 4, 2026 6:16 PM ET

The financial outlook for the Australian Capital Territory (ACT) reveals a troubling picture. Chief Minister Andrew Barr’s administration is facing intense scrutiny over its fiscal policies as an independent economist highlights critical imbalances in spending and outcomes.

ACT’s Dire Fiscal Situation

The inquiry conducted by economist Saul Eslake underscores the deteriorating fiscal sustainability of the ACT, attributing the issues to government spending that exceeds the benefits received. The interim report indicates that recent increases in spending—particularly in health and education—have not yielded corresponding improvements in outcomes, in stark contrast to national averages.

Spending Critiques

The ACT spends more per capita on public hospitals than the national average, yet experiences long wait times for elective surgeries, second only to New South Wales.
Education funding is similarly scrutinized; the ACT boasts the highest per-student spending yet struggles with NAPLAN scores that lag behind national averages.
Despite a wealthier population with higher private school attendance, academic results do not reflect this advantage.

Eslake emphasized that the ACT’s fiscal position is projected to remain weaker than other Australian states and territories. In June 2025, the budget deficit was estimated at $1.1 billion, prompting the government to introduce a new health levy for ratepayers to mitigate the shortfall.

Government Response

In light of these findings, Treasurer Chris Steel and Chief Minister Barr defend current spending levels. They cite ongoing commitments to health, education, and infrastructure as necessary investments, especially during the economic turbulence caused by the COVID-19 pandemic. They argue that these investments were made at a time of low borrowing costs to stimulate the economy.

Steel mentioned efforts to rein in public service funding and a recent agreement with federal Labor to secure $4.1 billion over five years. However, Eslake branded their fiscal strategy as “vague,” suggesting a need for clearer revenue policies.

Unique Challenges Facing the ACT

The ACT’s capacity for revenue generation is hampered by its lack of significant industries, such as mining, and the inability to levy taxes on the Commonwealth, its primary landholder and employer. Eslake acknowledged that while the ACT collects substantial revenue from existing tax bases, the potential for raising additional funds is limited without adopting a high-tax model.

Future Considerations

Both Eslake and local leaders recognize the need for a strategic approach to rectify the territory’s fiscal challenges. Calls for efficiency improvements, scrutiny of all expenditures, and enhancing revenue collection without resorting to austerity measures are emphasized.

As legislators pursue solutions, the focus must remain on sustaining essential services while exploring avenues for long-term financial health. The report provides a foundation for foundational changes, with Eslake’s final recommendations expected by the end of April.

The conversation around ACT’s fiscal situation is ongoing, with pressure mounting on the government to demonstrate accountability and effectiveness in its spending strategies.