18 May 2021

Public service changes cloud ACT economic success story

| Ian Bushnell
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Majura Park

Commercial and residential construction is expected to grow. Photo: Michelle Kroll.

Dampened public service wage growth may take the steam out of the ACT’s booming economy, according to the latest Deloitte Access Economics business outlook.

A bigger Australian Public Service during the public health response to the pandemic has been good for Canberra, but those numbers have been declining as the crisis recedes, and Deloitte says the scrapping of the 2 per cent wages cap and tying of APS salaries to the private sector will also take the zing out of public servants’ buying power.

“In good times, that’ll see government wages grow faster than the old 2 per cent threshold. But when times are less good (as they are now – with the private sector wage price index at just 1.4 per cent), public sector wages will be more muted,” Deloitte says.

While the mainly COVID-free ACT may have sailed through the recession compared with the rest of the country, the ACT is starting to return to the national average.

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The disruption to the ACT’s lucrative international student market, worth more than a billion dollars a year to the economy, also remains a concern long term.

“Uni students are a key driver of the ACT’s success and their return will be crucial to the territory’s growth trajectory in the longer term,” Deloitte says.

The ACT will welcome a reopening of international borders to get those students back, but overseas migration also accounts for half of ACT annual population growth, and the Territory’s international visitor numbers had been picking up a head of steam before the pandemic hit.

Deloitte also identifies the uncertainty of the COVID-19 vaccine rollout and less exuberant government spending as brakes on the local economy.

But overall, it tips the ACT economy to continue to perform well, supported by enthusiastic consumer spending, government infrastructure projects and the property market.

It says cashed-up Canberrans have swapped holidays for updating household goods and renovating their homes.

“Looking ahead, consumer spending by families is likely to be a major driver of growth for ACT’s economy as confidence grows and households continue to spend excess pandemic savings,” Deloitte says.

READ ALSO Light rail patronage rebounding after COVID-19 hit

The HomeBuilder grants, which Canberrans have enthusiastically embraced, will provide a much-needed boost to the Territory’s construction sector, along with government infrastructure and sustainability measures announced in the budget.

“Infrastructure projects – like the extension of the light rail and Canberra hospital – as well as expansion of new and existing public schools, should further support the recovery of the construction sector,” Deloitte says.

“The budget also provides funding for sustainable industries by committing big dollars to a Sustainable Housing Scheme, the development of the Big Canberra Battery and Sustainable Household Scheme to realise its net zero-emissions energy target by 2045.”

The ACT jobs market has rebounded and the ACT has the lowest unemployment rate in the country. Participation has also increased.

Deloitte sees the ACT economy continuing to grow, with governments still spending and consumers buoyant.

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ChrisinTurner8:39 am 14 Apr 21

Interestingly they don’t seem to identify servicing the huge capital cost of Light Rail and its doubling of the subsidy per passenger trip as factors affecting the ACT economy.

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