In Brief
- Treasurer Chris Steel MLA has handed down his first budget, which he says will implement “progressive, practical and proven plans” for Canberra.
- The good news is the land release program of almost 26,000 homes over the next five years – the highest on record. 3,184 homes are expected in 25-26.
- Bad news story is rates. $250 health levy on all commercial and residential rates. Modest increases on rates across the board – the issue isn’t this year’s increase, but that the level of commercial rates is unsustainable.
- New infrastructure announcements include funding for the construction of the Aquatic Centre and early works on the new Convention Centre. Ongoing funding for Light Rail, the Northside Hospital, and investigations for a new stadium.
In-depth
1. ACT & Capital Region Executive Director View
Is this the budget “we had to have”? Perhaps, perhaps not.
The ACT Government, like most States and Territories, has a fundamental issue where their revenue base is just not keeping up with expenditure requirements, let alone expectations. With increasing pressure on health and education, the Treasurer certainly has an unenviable task of dividing up the spoils and delivering for Canberra.
Steel’s first Budget is ambitious in some respects. We have the highest land release program on record – which if all sold, will deliver significant returns to the Territory. We know that there are blocks available for purchase over the counter now, which was unheard of pre-pandemic. There are also a number of blocks being re-released. More analysis is required but if that is because of planning delays, construction costs, taxes, and overall development feasibility, then we might be in trouble as there doesn’t appear to be any relief on those fronts in sight.
We welcome the establishment of the Development Solutions team, a measure for which the Property Council has been advocating – industry needs a concierge, a team inside Government to navigate the complex inter-agency idiosyncrasies that are causing conflicts and delays. We would like to see this go one step further and have the ACT Government adopt a NSW Housing Taskforce for the Territory, to get through the planning backlog and allow industry to turn plans into homes.
The infrastructure pipeline is consistent and again, the biggest we have seen in the Territory’s history. Most of this is consumed in Light Rail Stage 2A, and the Northside Hospital. We have welcomed announcements on the new Convention Centre and Aquatic Centre. Our focus now will be on ensuring that the procurement is efficient and timely, that there are no unnecessary delays which will prolong disruptions and add to uncertainty.
Commercial rates in the ACT are becoming a critical threat to business confidence and property investment.
While this year’s increase in the commercial rate may appear modest on the surface, the reinstatement of a single set of tax rates will disproportionately impact properties with an AUV under $2 million – many of which are occupied by small and medium businesses. There has been no adjustment to the rate brackets, leading to clear bracket creep that delivers windfall revenue to the Territory at the direct expense of local landowners and tenants. This is not sustainable.
The continued layering of levies on commercial property without a corresponding strategy to support affordability, viability or economic growth risks undermining the Territory’s investment appeal and broader competitiveness.
Rates reform must be elevated as a top economic priority in the coming year. Alongside other leading industry groups, we have formally called on the ACT Government to initiate a comprehensive review or inquiry into the commercial rating system. This is an increasingly urgent issue – and it will remain at the very top of our advocacy agenda.
2. Economic Overview
The 2025-26 Budget has been framed against a challenging fiscal context. This includes a significant increase in health funding to meet growing demand and cost, reductions in land sales revenue, and reduced GST income from the Commonwealth government.
The outlook for the ACT economy remains positive, including a strong labour market, growth in real wages and productivity, which mean the economy is supposedly well placed to weather any adverse shocks.
Government’s investment to support the delivery of public health services – almost 33% of the Budget – is a primary contributor to the Government’s fiscal position. This has resulted in higher-than-expected Headline Net Operating Balance deficits in the near term, and contributed to the increase in commercial rates, and the efficiency dividends implemented within the ACT Public Service.
3. Spending and Surplus
This year’s expenditure on health shows a record investment – although rising health care costs are not unique to the Territory.
The Government is focused on consolidating the Territory’s debt, with a key strategy to progressively improve the operating cash surpluses, providing the capacity to reduce borrowings and fund a greater proportion of the ongoing capital investment requirements from these cash surpluses. We are expecting a Headline Net Operating Balance (HNOB) surplus in 2027-28, twelve months later than previously forecast, primarily due to the continued increase in health expenditure.
See below the Net debt to Gross State Product table, which shows the ACT is third highest (not a statistic you want to be leading) across Australia.
4. Population
The ACT’s population is expected to grow by 2 per cent in 2024-25, an increase of ¼ of a percentage point, relative to the 2024-25 Budget Review. The ACT population is expected to stabilise at 1¾ per cent each year over the forward estimates, largely in response to lower net overseas migration.
Continued strength in the ACT’s economy, labour market, and international student arrivals are expected to support population growth. The ACT gets a higher share of the international student population relative to its share of the Australian population. However, any Commonwealth Government decisions that adversely affect the international student cohort present a downside risk to the ACT’s population growth forecasts.
5. Planning
The Government has previously announced their intention to modernise residential zones RZ1 and RZ2, with the ‘Missing Middle’ policy currently under consultation with the community. Property Council ACT has long advocated for this and continues to speak with the ACT Government about the implementation of this policy and what is required to make it effect – tax review, third party appeal rights, planning system efficiency.
There is no funding in the Budget as such for the Missing Middle policy, however we note from 1 July the new ACT Government Directorate, the City and Environment Directorate, will commence. This will include a new department – Development Solutions. We look forward to engaging with the Government on the establishment of these new roles and reiterate our calls for the establishment of a NSW-style Housing Taskforce.
We’re encouraged by the Government’s efforts to implement the National Competition Policy and their construction productivity agenda for the ACT through reforms to planning, zoning, building and construction processes. We understand this initiative will be partially offset by payments from the Commonwealth under the Agreement and will continue to work with the Government on implementation.
6. Housing
The ACT housing market remains challenged. The Government’s data suggests that the level of property transfers for both houses and attached dwellings has remained high in the ACT, despite tighter monetary conditions in recent years. What is clear though, is that without reform, that supposed positivity won’t continue. Building activity for new dwellings has moderated in the face of higher supply costs and costs of financing, after peaking in 2020-21 on the back of very low interest rates. As interest rates begin to ease throughout the rest of this calendar year (according to most economists), real wages grow and our population expands, building activity is forecast to increase over the forward estimates.
It is interesting – and not surprising – to note that the dwellings approved but not yet commenced figures remain high. The Government forecasts that this stock of approvals will be worked through, but that is optimistic if feasibility, tax, and other issues are not worked through. It is possible this is constrained by laws implemented several years ago preventing developers from relying on sunset clauses to terminate off the plan contracts without Supreme Court approval.
The ACT Government released the Housing Supply and Land Release Program (formerly known as the Indicative Land Release Program) on Monday this week. Key highlights from the Program include:
- Re-release of both residential and commercial sites in Belconnen, Coombs, Wright, and Gowrie. We need to understand why they are being re-released and adjust the expectations if the offering isn’t right or development doesn’t stack up.
- Less than 10% of the dwellings are for single residential homes. That is a clear signal to the housing market of the type of homes you’re going to be able to purchase in Canberra into the future.
- Commitment to deliver 5,000 additional public, community, and affordable dwellings by 2030 – but in 2025-26, there are only 352 expected. When the public housing waitlist is in the thousands and growing by the day, this isn’t enough.
- The Affordable Housing Project Fund has increased again by another $20 million in the 25-26 budget.
- Build-to-Rent initiatives are welcome, but the policy misunderstands this asset class. Build-to-Rent is a choice and lifestyle decision. Including affordable components can make offerings hard to stack up. For it to truly work in the ACT and deliver more housing, we need to remove the cap on income.
- The allocation of new Industrial Land has plummeted. This will have a significant impact on our economy – yes, we need houses, but we also need places for people to work, service their car, and shop.
7. Infrastructure
The Infrastructure Pipeline remains consistent, with an investment of $8.1 billion over the five years to 2028-29. The key infrastructure commitments for the ACT Government are no secret and have been committed to long before this Budget was released – including the Canberra Theatre Redevelopment, a new Commonwealth Park Pool, Light Rail Stage 2A, further investments in public, social and affordable housing, and planning for the new northside hospital.
Below is an overview of the Government’s 25-26 investment in infrastructure.
Health infrastructure
- Early planning and design of a North Gungahlin Health Centre in Casey
- New northside hospital
- Establishing a new Medical Imaging Outpatient Service at the Belconnen Community Health Centre
- Construction of the Inner South Health Centre
- Continued development of the Watson Health precinct
- Continuing redevelopment of the Canberra Hospital, including future car parking
- Construction of a new community-based health centre for South Tuggeranong, including delivering a new Child and Adolescent Mental Health Service (CAMHS) facility in the community.
Housing, land release and city planning
- Supporting more affordably and community homes in Gungahlin in partnership with community organisations, plus release of sites in Jacka, Kenny and Gungahlin for residential, mixed use, and community housing
- More affordable housing in Belconnen, including release of sites for community housing in Belconnen town centre and Macnamara
- Working with MacKillop House, as well as the PCYC, CHC and the Snow Foundation development of affordable homes in Turner, and releasing mixed use urban infill sites in the City with more affordable and community housing
- Construction of social and community housing through the MyHome development in Curtin and affordable rentals
- Planning initiatives to support housing shopping centres and transport corridors to revitalise the Tuggeranong Town Centre, and activate and release land at Richardson shops.
Entertainment, arts, and sports
- Planning and design of new district playing fields in Taylor, construction of a new tennis facility in Amaroo and new cricket nets at Bonner
- Charnwood Netball Courts expansion and upgrade, Latham Oval, and Charnwood Skate Park upgrades, female-friendly changeroom upgrades at Giralang, Macquarie, and Kaleen
- Female friendly changerooms at Griffith, Ainslie, and Reid
- Upgrades at EPIC to enhance staff and visitor safety, option to use Albert Hall as a community asset, and conservation works at the Mugga Mugga Cottage
- Construction of the Stromlo District Playing Fields, Stage 1 of the UC Stromlo Forest Park Tracks and Trails Masterplan, female-friendly changeroom upgrades at Mawson, Phillip, and Hughes, and toilet upgrades at North Curtin Oval
- Improving the Tuggeranong Skate Park, female friendly improvements at Calwell and Chisholm, new cricket nets at Gowrie, portable grandstand established at Gordon Oval, and upgrades to the Tuggeranong Lakeside Leisure Centre
- Territory projects – delivering the redevelopment of the Canberra Theatre Centre and partnering with the Commonwealth Government to deliver a new Canberra Convention and Entertainment Centre, the Canberra Aquatic Centre, and progressing development of the Bruce Sports, Health and Education Precinct.
Education infrastructure
- Planning and design for future public-school facilities, including a second college for Gungahlin families in Nicholls
- Construction of the Strathnairn Primary School, upgrades to Fraser Primary School and Melba Secondary School, progressing work on the CIT Yurauna building
- Modernisation of Majura Primary School, Telopea Park High School, and Narrabundah College, and establish a TAFE Centre of Excellence for Electric Vehicles at CIT Fyshwick
- Completing the CIT Campus Woden, progressing the construction of the Whitlam School
- Progressing upgrades to the Birrigai Outdoor School to support student participation and outdoor learning. Accessibility requirements in Calwell, Gilmore, Richardson, and Lanyon.
City services, recreation and community influence
- Construction of a Gungahlin Community Centre near the light rail and bus interchange
- A new playground at Margaret Timpson Park; Progressing the next stages of upgrades for
- Continued construction on the Acton Waterfront Park (Ngamawari), as well as further renewal of Canberra’s city precinct including upgrades to Garema Place and the City Police Station.
- Upgrading public spaces at Mawson Group Centre, progressing planning work for future police accommodation in the Molonglo Valley and Woden
- Upgrading public spaces at the Erindale Group Centre, upgraded playgrounds in the suburbs.
Transport
- Roadworks in Gungahlin’s east
- Active travel in improvements in Belconnen, with a footprint development fund, further upgrades to the Lake Ginninderra Share Path
- Advancing the next approvals and planning to bring light rail to Woden including construction of Light Rail Stage 2A, progress design for 2B, and completing the John Gorton Drive bridge across the Molonglo River.
- Continuing road improvements along Atthlon Drive, and upgrades to the Molonglo Highway.
Climate action, energy and investment
- More funding for new battery electric buses to further support the transition to a zero-emission bus fleet by 2040 and continuing to support the operation and maintenance of the Transport Canberra bus fleet
- Continued electrification to gas in Government-owned buildings
- Accelerated funding to upgrade gas appliances
Below is an overview of the infrastructure spend next year and beyond.
8. Taxes, Fees and Charges
As outlined above, the ACT Government has introduced a $250 flat fee on all properties (residential and commercial) to fund the increasing health expenditure, introduced a new high-value threshold across all rates. Combined with over measures, this leads to an additional $383 million (over the next 4 years) in revenue higher than the 2024-25 Budget estimates.
The key changes are:
- Payroll tax: From 1 July 2026, the payroll tax-free threshold will reduce to $1.75 million, and the tax rate will reduce to 6.75 per cent for firms with national wages below $20 million. The Government will retain the existing rate of 6.85 per cent for firms with national wages between $20 million and $50 million.
- Introduction of a new Health Levy – $250 on all general rates bills.
- Increase of 3.75 per cent for commercial and general rates, already announced under the Government’s Tax Reform program (as part of their commitment to removing stamp duty).
- Commercial rates: increases as outlined above, and a new AUV threshold at $5 million (all thresholds and new rates below). For every $1,000 over $5 million, you will be paying an extra $1.01. There continues to be double dipping with the Government benefitting from more properties increasing in value at the same time as they increase the rate.
- Residential rates: similar narrative to commercial rates, with the introduction of a new AUV threshold at $1 million (all thresholds and new rates below). For every $1,000 over $1 million, you will be paying an extra $0.90. Again, there continues to be double dipping with the Government benefitting from more properties increasing in value at the same time as they increase the rate.
- The Police, Fire and Emergency Services Levy (PFESL) continues to climb, significantly adding to the costs for commercial landowners. In the 2023-24 Budget, the Government committed to an increase in the 2025-26 year of 4.3 percentage points above These increases are unsustainable.
- Disappointing that there were no concessions on the City Centre Marketing and Improvements Levy, noting the continued disruption in the city centre due to the light rail construction.