ACT Treasurer Chris Steel is set to deliver a significant financial turnaround when he presents the territory's mid-year budget review on Thursday afternoon. The update will reveal a $632 million improvement in the ACT's deficit position, marking a substantial shift from previous projections.
Deficit Figures Show Mixed Picture
The mid-year budget update will show a headline net operating balance deficit of $499.1 million for the 2025-26 financial year. While this represents a dramatic improvement from the record $1.13 billion deficit recorded in 2024-25, it remains more than $74 million larger than the $424.9 million deficit originally forecast in last year's budget.
Treasurer Steel attributed the improved position to the Barr Labor government's strong financial management approach. "The Barr Labor government's strong financial management has ensured we can continue to support the delivery of high-quality services for the entire community and deliver on our progressive agenda to support community wellbeing," Mr Steel said.
Health Funding Deal and Fiscal Strategy
The Treasurer highlighted a significant health funding agreement as a key factor in the improved budget position. "Rather than an approach floated by our political opponents of cuts, we've worked with the Albanese Labor government on a five-year health funding deal worth $4.1 billion to the ACT over the next five years," he explained.
Finance Minister Rachel Stephen-Smith reinforced the government's commitment to returning the budget to surplus by 2027-28. "To support this, we have introduced an expenditure prioritisation framework and strengthened budget controls and reporting to cabinet on spending trends, to ensure funding is focused on current priorities and the most pressing needs of our community," she told the Legislative Assembly.
Long-Term Budget Projections
The government maintains that the budget remains on track to return to balance before the next election. According to the 2025-26 ACT budget released last year, the headline net operating balance is projected to return to a slender $49.9 million surplus in 2027-28.
However, the territory faces ongoing financial challenges. The ACT's September quarter financial report revealed that the deficit had blown out to more than $1.13 billion in 2024-25, representing the highest level since self-government began in 1989.
Revenue Management and Compliance
Finance Minister Stephen-Smith also addressed revenue management in her speech outlining priorities for the year. "I will also continue to work with the ACT Revenue Office to improve its compliance processes and ensure the important work of maintaining a fair and sustainable revenue base is balanced with the need for transparent and trauma-informed engagement with taxpayers," she said.
Warning from Auditor-General
The improved budget position comes against a backdrop of warnings from the Auditor-General, who last year cautioned that the ACT was on track to pay $1 billion annually in interest on government borrowings. The territory's credit rating faces potential further downgrades unless the government takes strong action to deliver a meaningful surplus.
The government had previously indicated that public schools would receive additional funding in the mid-year update, though specific details will be revealed when the full document is tabled in the Legislative Assembly on Thursday afternoon.
The mid-year budget review represents a critical moment for the ACT government as it balances competing priorities of service delivery, infrastructure investment, and fiscal responsibility while working toward its stated goal of returning the budget to surplus within the current term.
