Light rail to Woden still in a fog but Canberra’s economy remains strong, says report

Glynis Quinlan 17 July 2019 3
View from Mount Ainslie

The nation’s capital continues to benefit from strong growth in public spending and the second highest population growth in the nation, according to the latest Deloitte Access Economics report. Photo: Jack Mohr.

The starting date and cost of the extension of light rail through to Woden may be “still as foggy as a Canberra winter morning” but the nation’s capital continues to benefit from public spending and population growth, according to the latest Deloitte Access Economics report.

The June 2019 business outlook report released this week said that Canberra remains one of the best performing economies in the nation with reduced risk of cutbacks in public sector spending due to the Federal Budget being in its best shape since 2009.

However, the report states that “efficiency dividends in the Commonwealth public sector remain a headwind” for Canberra following the unexpected return of the Federal Government.

“When it comes to public sector spending there is both good and bad news for the ACT,” the report states.

“The push to relocate public service jobs to bush towns is gathering steam. Efficiency dividends are too, with the Commonwealth Government announcing it will maintain the 2 per cent annual efficiency dividend for another two years, easing back to 1.5 per cent in mid-2021 and 1 per cent the following year.

“This will weigh on the public sector headcount, particularly as those departments and agencies that are exempt – such as the financial regulators – tend to have large shares of their workforces outside the nation’s capital.

“That said, the renewed focus on the NDIS will support public sector employment in the ACT, as well as broader employment in the health care and social industry where the ‘on the ground’ staff are located.

“There is also some good news. Sky-high commodity prices and spending restraint have helped the Federal Budget balance into its best position in over a decade. This should reduce the need for any further staff cuts for now.”

Public sector not the only game in town

The ACT’s rate of population growth is second only to that of Victoria. This has propped up spending in the Territory’s shops and kept a floor under housing market activity.

The business outlook report also says that, luckily for the ACT, the public sector is not the only game in town.

“There has been substantial job creation in areas outside the public sector, including in construction and the tertiary education and research sectors.”

The ACT has the second-highest rate of population growth in Australia and the report says this has propped up spending at the Territory’s shops despite Canberra sharing in the weak wage growth evident across the country.

“Strong rates of population growth have also kept a floor under housing market activity and supported jobs in the construction sector even though construction of Stage 1 of the Light Rail project wrapped up earlier this year,” the report stated.

“While housing prices have fallen, they have not fallen nearly as far as those in most major Australian markets. That healthier tone to housing markets also explains why residential rents continue to grow well above the rates seen elsewhere in Australia.”

The ‘light rail is now running’ slump

The ACT’s engineering construction activity has fallen into a slump following the opening of the first stage of the light rail project. Photo: George Tsotsos.

The business outlook report says that engineering construction activity in the ACT has fallen into a ‘the light rail is now running’ slump.

“The value of work done has fallen by a fifth from a peak in early 2018, due in large part to an almost halving in rail work following the opening of the first stage of the ACT light rail.

“Elsewhere, there were some pretty big falls in the telecommunications sector as work also wraps up on the NBN.”

However, the report states that there is some good news as well, with the latest ACT Budget setting aside more than half a billion dollars for new capital works over the next four years, up from a quarter of a billion last year.

“A further $1.2 billion has been promised beyond the forward estimates as well. Some of that $1.2 billion is likely to be for the big project that’s sitting in the pipeline: the second stage of the light rail.”

However, the report notes that because of the complex approvals process, extending the light rail to Woden “could be a way off yet”.

Commercial construction set to cool

The report says that Canberra’s commercial construction sector has been “running hot” for a while, but the latest data suggests that things are set to cool.

It says that the value of work underway has pulled back, particularly in the retail, education and entertainment and recreation sectors. However, there are some bright spots, particularly in the offices, accommodation and health sectors.


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3 Responses to Light rail to Woden still in a fog but Canberra’s economy remains strong, says report
HiddenDragon HiddenDragon 7:09 pm 19 Jul 19

Reading between the lines, there is still heavy dependency on federal spending, even for jobs which are seen as non-government and there is also considerable exposure to sectors over which the ACT Government has limited influence – particularly overseas student numbers, which could drop significantly if things get difficult in our relations with emerging power(s).

Stas Idowu Stas Idowu 6:49 pm 19 Jul 19

No tram to Woden till 2025. Lock it in, Eddie!

michael quirk michael quirk 3:10 pm 19 Jul 19

The ongoing development of light rail is not essential the the future economic growth of the Territory.

In a slowing economy, the effective use of limited funds is essential. The construction of light rail 2a should be assessed against infrastructure alternatives including the construction of social housing, accelerating health and education infrastructure, addressing road black spots, improving the cycleway network and extending the coverage and frequency of the bus network.

It is negligent of the ACT government not to have undertaken an assessment of the extension of light rail to Woden. The 2a extension would provide more benefits than digging a hole and filling it in, but possibly not much more. An independent analysis is required of LR2, including an assessment of alternatives including a bus rapid transport.

There would be a silver lining if a lower rate of growth were to eventuate as it would enable deficiencies in the housing, health and public transport systems and increasing congestion to be appropriately analysed and addressed.

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