Donald Trump and the fog of war engulf the ACT budget, again

The Australian Capital Territory's budget is facing significant strain, with global conflicts, particularly in the Middle East, contributing to a substantial increase in its deficit. The territory's Treasurer, Chris Steel, unveiled a budget for the 2026-27 financial year that shows a projected deficit blowout of $240 million since February 28. This translates to an estimated daily impact of $2.3 million, a figure the article dubs 'the Trump effect.'

“

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

While the war alone is not solely responsible for the deterioration, the conflict's impact on global energy costs and supply chains is undeniably exacerbating the economic situation. The forecast deficit has grown from $79.7 million on February 28 to $323 million this week. This surge is attributed not only to external factors but also to decisions made by the governing Barr Labor government.

Treasurer Steel's budget is built on optimistic assumptions that the Middle East conflict will de-escalate and that oil prices have peaked and will begin to fall, leading to a reduction in inflation. However, the article questions the validity of these assumptions, warning that if they prove incorrect, the economic consequences could be far more severe than currently imagined.

“

But what if it doesn't?

Treasury officials have considered a "downside scenario" involving prolonged conflict, which could lead to inflation nearing 4 percent, driven by higher fuel prices and goods shortages. This, coupled with potential interest rate hikes by the Reserve Bank, could result in recession and even deeper deficits. Despite these risks, Steel maintains a calm demeanor, assuring residents that the most challenging economic moments may be nearing an end.

“

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