The ACT government breathed a sigh of relief at news the Commonwealth retains its credit rating, which means the ACT is also safe from a downgrade for now.
But the mid-year federal budget update brings less welcome news in the shape of cuts to funding under some national partnership programs.
Chief Minister Andrew Barr was not specific about the funding cuts, saying the impact was being analysed. But he said commonwealth funding was a major source of revenue for Canberra so any reduction was a concern.
The ACT has an AAA credit rating, but was put on negative outlook this year mirroring the federal downgrade. It cannot hold a higher rating than the Commonwealth and a downgrade following this week's federal budget update would have seen the ACT's rating follow suit.
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The Commonwealth has axed its asset recycling scheme, but the ACT's first-round agreement remains in place. The scheme makes incentive payments to the states for selling assets to pay for new infrastructure - and the ACT government is selling $400 million of buildings in return for $67 million in federal bonuses to help pay for light rail. Mr Barr said the money was unaffected.
Last week, new Liberal Leader Alistair Coe began the Liberals' parliamentary agenda with an attack on Mr Barr's budget management, showing the influence of his new chief of staff, economist David Hughes.
Mr Coe said over the last eight years, revenue had increased 43 per cent but expenses 61 per cent. The territory had been a "net borrower" since 2008-09, now to the tune of $631 million, he said, comparing Mr Barr's economic management to the "fiscal responsibility" of former Labor chief minister Jon Stanhope.
Mr Coe said the net borrowing figure, which included the operating balance and the sale and purchase of physical assets, indicated the financial impact of the ACT government on the economy.
The deterioration of the territory's finances was a spending problem rather than a revenue problem, he said. Since 2007‑08 commonwealth grants had increased by 43 per cent and ACT tax revenue by 53 per cent. Spending had increased 61 per cent. Therefore we are spending beyond our means.
Mr Barr dismissed Mr Coe's attack as "a conservative rant", saying Mr Coe was demonstrating "a style of hard-line fiscal conservatism" with an aversion to any government role in the economy.
"He would cut and he would cut hard in order to pursue an ideological agenda. He would look at this and the territory budget solely through the prism of an accountant, not of an economist," Mr Barr said.
The trajectories of the ACT and commonwealth budgets were intertwined with the ACT set to return to surplus before the commonwealth, Mr Barr said.
But the ACT was very susceptible to federal decisions, and a sharp contracting to commonwealth spending was a big risk.
Mr Barr said he had used the territory budget to support the economy and keep it growing, and the real issue the ACT confronted was how to ensure that growth continued.
"The opposition leader can hold all of the conservative economic views he wants, but for the next four years, thankfully, his views are largely irrelevant," Mr Barr said.
Mr Barr is yet to name a date for his mid-year budget review, but says it won't be before Christmas. Last year, he released it on December 18. The year before it was about January 20. It must be tabled in February.
The pre-election update from under treasurer David Nicol predicted a deficit of $205 million this financial year but also listed a series of announcements and projects that remained unfunded, including design work for stage 2 of light rail, which Transport Minister Meegan Fitzharris said recently would cost about $25 million.
The under treasurer pointed to $43.2 million of programs for which funding runs out this year, and the government's election promises must also be factored in.
Mr Nicol's update forecast the budget returning to a slim $16 million surplus in 2018-19.