The ACT budget quantifies 'the Trump effect' at $2.3m a day. But homegrown decisions are more costly

Donald Trump wouldn't have a clue — and if he did — he almost certainly couldn't care less about the state of the ACT's budget.

Yet the US President, arguably more than the territory's own Treasurer Chris Steel, is very directly adding to the heavy weight dragging on public finances in the nation's capital.

In the latest Steel budget covering the 2026-27 financial year, we can now quantify 'the Trump effect' at $2.3 million a day.

Here's how.

Earlier this year, as the treasurer stood to unveil an update to the territory's books, US forces were resuming retaliatory strikes on Iran in a war that's run, on and off, since February 28.

There's an odd symmetry in that date, because President Trump's war kicked off on exactly the same day Mr Steel handed down his review of the state of the ACT budget.

In the 103 days between then and now, the forecast bottom line deficit for the territory budget has blown out by a massive $240 million — or more than $2 million each day — from $79.7 million on February 28 to $323 million this week.

To be clear, the war alone can't be held solely responsible as the cause of yet another serious deterioration, which was grown at home by the Barr Labor government's own decisions. But the higher energy costs and choked global supply chains it has created are certainly not helping the economy.

If Mr Steel feels his efforts at budget repair are being unfairly impaired by decisions in Washington, Jerusalem and Tehran, the bad news is: it could get much, much worse.

Ever the optimist, the treasurer's second budget is built on assumptions that the Middle East war will settle and that oil prices have peaked and will gradually fall along with inflation from here.

But what if it doesn't?

Nobody knows, especially not the federal and ACT treasuries, whether these assumptions will be valid or not.

And if they're not, the war will wreak economic carnage in ways that can barely be imagined.

Just to prove their mettle, treasury officials in Civic have at least tried to turn their minds to the almost unimaginable "downside scenario" of a "prolonged conflict": inflation raging at almost 4 per cent, pushed along by higher fuel prices and shortages of goods and services, as all the while the Reserve Bank hikes interest rates to tamp down the flames.

They don't take the further step to translate these quadruple whammies into recession or deeper deficits, but both would be highly likely.

A strategy might help

Canberra residents and regular budget watchers know full well how wildly ACT budget forecasts are revised in only a matter of months, so some might be quite relaxed about the fiscal year we're about to enter being $323m in the red by the time it ends.

Through it all, Mr Steel clearly maintains a very low resting heart rate, calmly assuring all residents and ratepayers, in effect, that after a very grim journey through the abyss, the darkest moments are almost over and everyone should now look forward to sunnier times — if they can just bear with him for another two or three years.

Which not only sounds very familiar, it's also a political necessity for a government mid-way through its third decade in power and plotting for a further extension in 2028.

"We're still on track with the fiscal strategy we set out in the last budget", the treasurer valiantly asserts.

In the most thorough and independent review of what ails the government's operations, respected economist Saul Eslake was highly critical of the "'vagueness" of that vaunted strategy underpinning all of the budget's key settings.

The Barr cabinet must have heeded some of the economist's advice, because it has now set itself a few measurable goals.

End of an infrastructure era… maybe

One goal is that the debt-fuelled splurge on infrastructure over the last four years be brought to an end.

Whether it be on roads, hospitals, schools or transport, the treasurer has until now justified the spending and borrowing because "we are a progressive government" and "we don't shy away from the investments".

He's more timid now though, having decided to self-impose 'rules' to reach and maintain surpluses and attempt to cap debt as a share of the overall territory economy.

Central to this is a "reset" — Steel's euphemism — for infrastructure spending, which has been cut in this budget and is meant to "not exceed $1 billion a year from 2028-29," according to the government.

The infrastructure spend is presented in the budget papers as a fixed figure, apparently not linked to inflation, so its buying power will presumably be worth much less as we move into the 2030s.

Some healthy scepticism might need to be applied here, as many may ask: 

If the answer becomes 'yes' after the next election, then it's obviously not going to be paid for out of a shrinking kitty of $1 billion a year.

This is where the government will turn to its 'trading enterprises' to own the debt — a practice Mr Eslake noted had put the total territory debt on the public purse at levels comparably higher than NSW, Queensland and Western Australia.

Too much going out, not enough in

Depending which way you look it, the horrible state of the territory's finances has been a decade in the making or about half that time, since the most serious run-up in debt has occurred since the pandemic.

Either way, the instability in global, national and local economies makes it a tough time to be whacking residents for significantly higher land rates, charges or fines.

That is why last year's $100 health levy won't continue and why rates, on average, are being held to 5 per cent.

Abolishing stamp duty for first home buyers, together with other concessions to encourage older Canberrans to downsize, are very much in keeping with the entire national project to tilt the field in favour of greater home ownership for younger Australians.

Other increased charges are relatively modest and applied fairly narrowly to areas like professional licensing fees and gun owners.

Assuming everything goes to plan — and it rarely does — the government could be on a path back towards some budget repair, or debt reduction, within three years.

But that path is narrow.

Despite the emergence of new 'rules' for fiscal discipline, the budget papers once again confirm the long-running trend of new spending commitments growing at a faster rate than new savings or revenue can be found — and we all know where that leads.

Still, in an era when opinion poll after poll tells us most people despair over what established political parties and governments do for them, there's one aspect of life where Canberrans are behaviourally taking matters into their own hands.

Canberrans reject 'voluntary taxes'

Surprisingly, the budget reveals that when it comes to a choice between responsibility and rebellion on our roads, we're choosing compliance.

So much so, the government's slashing all previous estimates for what it rakes in from traffic fines.

Due to recent patterns in fines issued, treasury is now banking on $114m less being collected in fines over the next three years than it once thought achievable.

In the struggle to manage their own budgets, drivers seem to be opting out, en masse, to speeding and parking fines we often hear described as 'voluntary taxes'.

Maybe they're driving slower to conserve fuel in the face of elevated prices at the bowser, hoping Donald Trump will soon brings his war to an end so the Strait of Hormuz can reopen.

That much they have in common with Treasurer Steel.