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Growing uncertainty about job opportunities in Canberra has shaken investors' confidence and reduced locals' willingness to spend. CommSec's State of the States report, which usually lauds the ACT's relative strengths, says the capital's economy is now the second worst performing in Australia, ahead only of Tasmania's. The investment firm even raised doubts about what it called the ACT's only positive – relatively strong housing growth – saying this could eventually lead to a damaging oversupply. Canberra's unemployment rate is still the nation's second lowest, at just 4.6 per cent. But CommSec economist Savanth Sebastian said this was far above the decade average of 3.4 per cent. "We thought Western Australia would take a hit, given the slowdown in the mining sector, but Canberra's been the real surprise for us," he said. Mr Sebastian said federal government job cuts and proposals to shift parts of the public service interstate had worsened the city's economic indicators faster than expected. "It started off with a significant decline, about nine months ago, in business investment. But now it's broadening and affecting the whole Canberra economy." It was very difficult to see what would spark the ACT economy into higher growth in the mid to long term, he said. "The one positive in the ACT is no doubt housing finance - in the short term. But it can create risks of a longer-term oversupply." The ACT government responded to the worsening economic outlook in June, cutting its land release program by about 1000 dwellings a year over the next three years. Chief Minister Katy Gallagher said on Sunday that housing construction remained crucial for creating jobs but too many new properties could undermine the value of owners' investments. "This is an issue discussed at the cabinet table regularly, but I don't think there would be any reason for us to increase land supply at this time," she said. "We want to look to the long term and not respond dramatically in a way that could affect the investments people have made. It's about trying to find that balance, to grow without exceeding demand." Ms Gallagher said the CommSec report reinforced "the need to get on with our major projects". "If there is anything that will create jobs at this time, it's projects like the new hospital and the light-rail project. "This is where the [Canberra] Liberals frustrate me. They don't want to do anything. They oppose everything and don't have any other ideas about what to do, when they know the Commonwealth won't help us." Opposition Leader Jeremy Hanson said it was "very disappointing that the ACT economy has gone from best performing to close to the worst under Katy Gallagher". He said the Liberals strongly supported new infrastructure that would improve the city's productivity, "but we don't support bad infrastructure like the light rail". "It's ironic that the Chief Minister, who just cancelled City to the Lake and cancelled the city stadium, would then complain about a lack of major infrastructure programs," he said. "The reality is that under Labor, all roads lead to light rail. They're spending $800 million on a train track that will not increase productivity, nor will it generate any significant income for Canberra. "Other projects, like the convention centre, would create jobs. But they are simply off the table so she [Ms Gallagher] can fund light rail."

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