The ACT has retained its AA+ credit rating, despite the territory's operating performance being weaker than all other subnational governments with the same rating.
But Chief Minister Andrew Barr has seized on the rating as evidence of his government's prudent management of a "tight" budget, and called on other parties to explain how their election promises can be funded.
S&P Global said it had lowered its assessment of the ACT's financial management.
"We view ACT's financial management to be strong, although we believe it is weaker than in the past because of its protracted fiscal recovery and high debt compared with peers," the ratings agency said.
"We revised the outlook on our long-term rating on ACT to negative from stable, reflecting our view that the territory's fiscal outcomes could underperform our forecasts over the next two years."
Opposition Leader Elizabeth Lee said the result showed Mr Barr had "botched" another territory budget and another credit rating downgrade was almost inevitable.
Mr Barr, however, took aim at the big spending promises made by the ACT Greens and the Canberra Liberals ahead of the October 19 election.
The decision to cancel plans for a city stadium was justified given it was currently "fiscally irresponsible" to add large infrastructure projects to the budget, he said.
"$10 billion public housing spends, city stadiums, accelerated delivery of light rail, and aggressive tax cuts are either unachievable or will have a significant impact on the ACT budget over the next decade," Mr Barr said.
S&P Global said it expected the ACT to run cash surpluses from 2025-26 and that operating revenue would grow faster than expenses in each of the next three years.
"ACT's operating performance has been weaker than all 'AA+' rated subnational governments globally. ACT's operating balances will be the weakest of all Australian states and territories over fiscal years 2022-2026, including Victoria," the agency said.
Ms Lee said after 13 years as Treasurer, the responsibility for the "ACT's parlous financial position rests exclusively" with Mr Barr.
"Throughout this term alone we have also seen hundreds of millions of taxpayer dollars wasted by the Labor-Greens government including the $76 million failed HR system, dodgy CIT contracts and cost blowouts of projects that have long been delayed," Ms Lee said.
Mr Barr said the budget was tight due to current economic conditions, infrastructure and labour costs, along with the need to increase targeted government support to alleviate cost of living pressures.
"In the 2024-25 ACT Budget, and throughout this term of government, we have invested in health and education services, targeted cost of living support and the infrastructure projects that our growing city needs," he said.
"The budget also delivers a strong increase in the net operating cash position over the four years to 2027-28, increasing our capacity to fund key infrastructures projects like new schools, roads and hospitals that will meet the needs of Canberra for decades to come. There is an immediate need for government investment to support people in homes that are affordable, accessible and appropriate to their needs."
Mr Barr said the government could have taken action to improve the territory's fiscal position faster, but this would have done more harm than good in the long term.
"This would involve cutting or reducing government services, cutting public service jobs, raising taxes and charges or not providing wage increases to our workforce. ... This would lead to a weaker local economy, and hurt local businesses and families," he said.
New recurrent spending would need to be offset against the expected growth of the budget, new revenue and redirected government money, the Chief Minister said.
"Parties contesting the ACT election will have to outline how their promises can be achieved in these economic and fiscal circumstances," he said.
S&P Global said looser control of spending and a lack of clear fiscal targets in the territory had weakened the ACT's view of financial management.
Ms Lee said: "Good governments manage the economy responsibly and invest in projects that bring the most social, cultural and economic benefit to the ACT, and that good management leads to benefits for all the community."
S&P Global downgraded the ACT's credit rating from AAA to AA+ in September 2023, citing a slower-than-expected budget recovery after the COVID-19 pandemic.
