A new economic report has found the Federal Government's push for a budget surplus is adversely impacting the ACT's economy.
The Deloitte Access Economics Investment Monitor expects the annual rate of economic growth in the Territory over the next five years to be 1.8 per cent, well behind the 3.2 per cent forecast nationally.
The report notes Canberra's economy is more susceptible to funding decisions in the public sector than any other jurisdiction in Australia.
"The Government's grip on Canberra's economy extends far beyond its employees," the report says.
"To name a few examples, much of Canberra's 'non-government' white collar workers are themselves dependent on government clients, with Canberra's restaurateurs and hoteliers dependent on visitors flying in for meetings or events with federal departments, while the construction sector is dependent on steady growth in government employment." A downturn in the ACT's housing construction industry and a glut of vacant office space is also behind the slowing economy.
"Put all that together and it says that the ACT's dominant public sector is pulling back, and that the key drivers of its private sector are doing the same.
That means only slow growth for the ACT economy," the report says.
ACT Chief Minister Katy Gallagher says while the report is concerning, efforts are in place to shift the economic growth away from Government spending.
"That's why all of our other plans around universities, around the region are so important to get right," she said.
"Andrew Barr is doing a whole lot of work around cutting red tape, making sure we are looking at our own business processes so it's not inhibiting business.
"The payroll tax cuts, looking at our tax reform, all of that is designed to make sure our economy stays in a strong position." Ms Gallagher says the biggest threat to the Territory is the proposed cuts to the Federal public service under a Coalition government.
ACT Deputy Opposition Leader Brendan Smyth says the Government is to blame for the projected downfall because it has failed to diversify the economy.
"There is uncertainty out there, people aren't spending, they're not going to the restaurants and cafes and the hospitality outlets like they used to because of the uncertainty and so you have this continual knock-on effect," he said.
"What we need is an economy that is strong, what we need is a return to the levels of private sector employment, to help have some protection against any federal downturn."