The Australian Capital Territory is barrelling towards an annual interest bill of one billion dollars and faces potential further credit rating downgrades unless its government takes decisive action to restore the budget to surplus, a damning new report from the Auditor-General has revealed.
Structural Deficits and Soaring Debt
Auditor-General Michael Harris, in his assessment of the 2024-25 financial audits across ACT government agencies, found the territory is grappling with significant and persistent fiscal challenges. The report, released on Thursday, paints a picture of a budget under severe structural strain, where spending growth consistently outpaces revenue.
The 2024-25 net operating deficit ballooned to $1.5 billion, a figure that is $497 million worse than what was budgeted and represents a staggering 133 per cent increase since the 2020-21 financial year.
"The territory's finances need to be managed carefully going forward as net operating deficits continue to be incurred as the growth in expenditure outpaces the growth in revenue and debt continues to increase," the audit states.
The Looming Billion-Dollar Interest Milestone
The most alarming projection centres on the territory's escalating debt. The audit warns that debt has grown substantially in recent years and is forecast to climb even higher.
By 2029, annual interest payments alone are expected to reach $1 billion, which would consume a massive 9 per cent of the ACT's entire budget. This growing liability threatens to divert crucial funds away from essential public services like health, education, and infrastructure.
"This sustained pressure from higher expenses highlights structural challenges and reinforces the need for tighter cost controls and efficiency measures to restore fiscal sustainability over the longer term," the report emphasises.
Superannuation Shortfall and IT Weaknesses
The audit also identified other critical pressure points. The government's timeline to fully fund its defined-benefits superannuation liabilities for public servants by June 2030 is now unlikely to be met. Despite strong long-term investment returns, the ACT still needs to cover a further $3.8 billion by the deadline, with the audit estimating only 79 per cent of the liability will be funded by 2029.
Furthermore, the Audit Office flagged widespread issues with information technology controls across agencies. A majority of significant audit findings—53 per cent—were related to IT weaknesses, including problems with user access management and system security. Fourteen new IT control findings were raised in the current year.
Political Response and the Path Forward
The report is set to intensify the already heated political debate over the management of the ACT's finances. The territory's budget is due for scrutiny through both an independent review and a parliamentary inquiry.
While a Legislative Assembly committee prepares to examine the financial state and commission an external review, Chief Minister Andrew Barr has previously cautioned that there are "no silver bullets" for balancing the books. The audit itself noted that the ACT's per capita tax collection is already near the state and territory average, suggesting that simply raising taxes would place an additional burden on Canberra's taxpayers.
The report serves as a stark warning as Auditor-General Michael Harris prepares to conclude his tenure in February, to be replaced by long-serving Audit Office executive Ajay Sharma. The findings underscore the urgent need for disciplined fiscal management to secure the territory's economic future.
