Introduction
The Australian Capital Territory (ACT) has long been a focal point for debates on governance, accountability, and fiscal responsibility. For more than two decades, whistleblowers and critics have raised alarms about the systemic shielding of corrupt and underperforming public servants, arguing that this practice not only undermines public confidence, but also poses existential risks to the economy through entrenched incompetence and corruption. Specific individuals, such as Angel Marina, accused of authoring a racist letter in 2002 that targeted Indigenous Australians, and Tu Pham, the former ACT Auditor-General implicated in perjury and obstructing investigations, have become emblematic of these deeper issues. These allegations, documented extensively in public records and whistleblower accounts, suggest a culture where ethical lapses are protected at the expense of effective administration.
This narrative gains renewed urgency with the release of economist Saul Eslake’s interim report on the ACT’s fiscal sustainability on March 2, 2026. Eslake’s analysis paints a picture of a government that taxes and spends excessively while failing to deliver commensurate outcomes in critical sectors like health and education, prompting the pointed question: where is the money going? As Eslake states, “The deterioration in the ACT’s fiscal position over the past decade is entirely attributable to ‘policy decisions’ … ‘Policy decisions (to increase or decrease spending or revenue) have detracted at least $6.3 billion from the ‘net operating balance’ over the past 11 Budgets (of which $2.6 billion has been since 2022-23).” However, the ACT Government’s response to Eslake’s criticisms has been notably defensive, often attributing fiscal challenges to external factors like the COVID-19 pandemic and the Territory’s small scale, rather than engaging substantively with the report’s emphasis on policy-driven inefficiencies. Chief Minister Andrew Barr, in statements following the report’s release, has dismissed aspects of Eslake’s findings as overlooking Canberra’s unique circumstances, such as its role as the national capital and associated cost pressures. This approach risks perpetuating the problems Eslake identifies, as it deflects from internal reforms and accountability measures.
To provide a comprehensive perspective, this essay merges an examination of the ACT’s fiscal mismanagement – framed by Eslake’s report and whistleblower allegations – with a comparative analysis of New South Wales (NSW), highlighting shared fiscal pressures like rising debt but underscoring the ACT’s relative inefficiencies due to demographic advantages not being leveraged effectively. NSW, with its larger and more diverse economy, navigates similar deficits toward projected surpluses more robustly, offering lessons for the ACT. By critiquing the ACT’s handling of Eslake’s report – characterised by vagueness in fiscal strategy and reluctance to address underlying corruption – we argue that unchecked incompetence, as exemplified by cases like Marina and Pham, exacerbates economic vulnerabilities. Drawing on historical contexts, detailed report analyses, case studies, economic implications, and reform recommendations, this essay calls for a paradigm shift in ACT governance to restore fiscal health and equity.
The essay will proceed by first outlining the historical governance and fiscal challenges in both jurisdictions, then delving into Eslake’s findings and the ACT’s critiqued response, followed by case studies of incompetence, broader economic implications, and finally, actionable recommendations. Through this merged lens, we reveal how the ACT’s defensive posture toward Eslake’s criticisms not only misses opportunities for reform but also amplifies the long-term risks posed by shielded corruption.
Historical Context: Governance and Fiscal Challenges in the ACT and NSW
Understanding the fiscal predicaments of the ACT and NSW requires a deep dive into their governance histories, demographic profiles, and policy evolutions. The ACT, established as a self-governing territory in 1989, operates in a unique federal-state hybrid model, managing state-like functions such as health, education, and infrastructure while heavily reliant on Commonwealth grants and property-based revenues. Its population, approximately 450,000 as of 2026, is predominantly urban, younger, more educated, and affluent than the national average, with higher rates of private health insurance and school enrolment. These factors should, in theory, enable lower per capita public spending to achieve equivalent service levels, as Eslake notes in his report: “The ACT doesn’t need to spend as much (per capita) as other states & territories in order to provide its population with the same range and quality of public services as other jurisdictions (because it is more compact, and has fewer needs).”
However, since the Australian Labor Party (ALP) assumed continuous control in 2001 under Chief Minister Jon Stanhope, the ACT has pursued expansive policies, including landmark human rights legislation (which has proven ineffective to the point of being farcical) and ambitious infrastructure projects like the light rail network, which many argue is nothing more than a vanity project with no real practical purpose). This era has coincided with escalating debt, from negligible levels in the early 2000s to projections of 19.5% of Gross State Product (GSP) by 2026-27. Eslake echoes historical reviews, noting that “the ACT was not facing ‘an immediate budget crisis’, the budget position had ‘deteriorated considerably’ and that the ACT ‘would face a crisis in the next few years unless strong action is taken by the Government urgently’” from a 2006 review. Whistleblowers attribute much of this to a culture of impunity, where underperforming officials are shielded. For instance, allegations of racial discrimination emerged within ACT Treasury, centring on Angel Marina’s letter dated 9 May, 2002, to Chief Executive Howard Ronaldson. The letter derogatorily framed Indigenous people as problematic, allegedly aimed at undermining Indigenous whistleblower Mark Mullins, then Commissioner for ACT Revenue. Whistleblower accounts claim this was protected by bureaucratic hierarchies, leading to Mullins’ dismissal and prosecution on fabricated charges, diverting attention from potential fraud in projects like the Belconnen Pool.
Similarly, Tu Pham’s rise to Acting Chief Executive of Treasury in 2002 and later to ACT Auditor-General in 2006 is marred by accusations of incompetence and perjury. Pham allegedly approved but obstructed audits into fraud disclosures, such as the 2002 Rates and Land Taxes audit. These incidents illustrate how personal vendettas and biases erode efficiency. A February 2026 Blakandblack.com X post states, “Not one of the people involved in this quarter of a century of human rights abuse are Muslim … all but one (Tu Pham who is of Vietnamese origin) are white.” Such protectionism, critics argue, has allowed inefficiencies to compound, contributing to the fiscal deterioration Eslake describes as “entirely attributable to ‘policy decisions'” like unchecked spending increases.
In contrast, NSW’s governance history reflects a larger, more complex state with over 8 million residents, encompassing urban, regional, and rural disparities. NSW has experienced alternating governments, with periods of Liberal-National Coalition rule (2011-2023) followed by Labor under Premier Chris Minns since 2023. Fiscal challenges intensified post-2019 with bushfires, floods, and COVID-19, leading to debt rising from 6.2% of GSP in 2019 to around 20% by 2026. The 2025-26 NSW Budget projects a $3.4 billion deficit, improving from $5.7 billion in 2024-25, with surpluses of $1.1-1.3 billion anticipated by 2027-28. This trajectory is supported by diversified revenues, including transfer duty, land tax, payroll tax, and GST shares, alongside targeted investments in housing ($5.1 billion for social homes) and disaster relief ($4.2 billion).
NSW’s accountability mechanisms, such as the Independent Commission Against Corruption (ICAC), have exposed scandals, fostering reforms that mitigate corruption risks more effectively than in the ACT. For example, ICAC investigations into planning and procurement have led to transparency enhancements, contrasting the ACT’s alleged shielding of figures like Marina and Pham. Both jurisdictions share debt-funded infrastructure booms – the ACT’s $5.7 billion in capital initiatives mirror NSW’s $12.4 billion in health infrastructure – but NSW’s larger scale and economic diversity (contributing one-third of Australia’s GDP) provide greater resilience. Critics note that while NSW faces wage pressures from removing public sector caps, its fiscal repair strategy – reducing expense growth to 2.4% annually – outpaces the ACT’s persistent deficits.
This historical divergence sets the stage for Eslake’s critique: the ACT’s compact advantages are squandered through policy choices and internal dysfunctions, while NSW leverages its size for stabilisation. The ACT’s response to Eslake, blaming external factors, underscores a reluctance to confront these roots, perpetuating vulnerabilities.
Analysing Saul Eslake’s Interim Report: Key Findings, Responses, and Critiques
Saul Eslake, an independent economist with extensive advisory experience, was appointed by the ACT Legislative Assembly’s Select Committee on Fiscal Sustainability to evaluate the territory’s long-term financial health. His 46-page interim report, presented on 27 February 2026, and released publicly on 2 March, offers a rigorous, data-driven assessment. At its heart, Eslake attributes the ACT’s fiscal decline to deliberate policy decisions, particularly spending hikes that outstrip revenue growth, with only one-sixth offset by new measures. The report quantifies a decade-long deterioration, with the general government fiscal position worse than the national average, though not as severe as Victoria’s or Tasmania’s. As Eslake elaborates, “‘Expense policy decisions’ have worsened the ‘net operating balance’ by at least $7.2 billion over the past decade (of which $3.6 billion has occurred since 2022-23), while ‘revenue policy decisions’ have improved the ‘net operating balance’ by only $0.9 billion (nearly all of which has occurred since 2023-24).”
Central to Eslake’s analysis are inefficiencies in health and education, which absorb over half the budget. Despite a younger population and higher private sector reliance, the ACT spends more per capita than required for average service levels, as assessed by the Commonwealth Grants Commission. In education, per-student expenditure exceeds all jurisdictions, yet outcomes in NAPLAN scores, graduation rates, and equity lag. Eslake states, “The ACT ought to be able to spend less (per head) on education given a slightly smaller school-age cohort and greater use of private schools.” He adds, “In fact, the ACT spends more per student on school education than any other state or territory – but doesn’t get better outcomes,” and “ACT Year 9 NAPLAN scores don’t compare favourably with national averages after taking account of parental education levels.” Health, consuming one-third of the budget, shows similar disparities: elevated spending yields longer wait times and lower efficiency metrics. Eslake notes, “The ACT ought to be able to spend less (per head) on health than other jurisdictions given younger population,” and “The proportion of the ACT’s population which is aged 65 & over is smaller than, and has been increasing less rapidly than, the corresponding proportion of the population of Australia as a whole.” Furthermore, “66.5% of ACT taxpayers have private health insurance – a higher proportion than of any other jurisdiction except WA, and more than 10 percentage points above the national average,” yet “The ACT spends more per person on public hospitals than the national average, but in important respects patients get worse results.”
Infrastructure scrutiny reveals $5.7 billion in debt-funded capital initiatives amid deficits, with Eslake criticising opaque accounting that excludes capital from operating balances, obscuring the true fiscal state. He states, “Budgets over the past decade have also included provisions for ‘capital initiatives’ totalling at least $5.7 billion – which have been entirely funded by debt (since the net operating balance has been in deficit throughout this period).” On comparisons, “The ACT’s general government finances aren’t in as bad a condition as Victoria’s, Tasmania’s or the NT’s – but they’re worse than other states,” and “The ACT’s overall public sector finances are the third or fourth-worst of all states and territories.” Eslake also highlights, “The ACT spends more per capita on most areas of service provision (apart from welfare) than the Grants Commission assesses as being necessary to provide the all-states-and-territories average level of services with average efficiency,” and “Conceptually, the ACT Government could have reduced spending by $739 million (6.4%) if it spent the amounts assessed by the Grants Commission as being required to provide the average level of services with average efficiency.”
Eslake’s recommendations shift focus to cash balances for debt reduction, urging surpluses until net debt falls below 15% of GSP. He warns against blunt cuts, advocating ceilings on spending growth below nominal GSP and transparent project selection. As he proposes, “Setting a ceiling on the growth rate of aggregate spending – for example, at less than the growth rate of nominal GSP – might provide a useful discipline,” and “A more rigorous and transparent process for setting the overall level of capital expenditure, and for determining which projects are selected for funding, would also be useful.” Sceptical of forecasts promising restraint amid inflation and wages, Eslake describes the government’s strategy as “vague and unspecific ? there are no numerical targets for any of the objectives laid out in the strategy.” He contrasts this with South Australia’s approach: “By contrast, the South Australian Government’s fiscal strategy has explicit numerical targets ? which provide for greater budget discipline and greater accountability.”
The ACT government’s response has been critiqued for defensiveness. Chief Minister Barr, in ABC interviews, attributes woes to the pandemic and small size, arguing Eslake underestimates unique costs like federal service provision and cross-border demands. Treasurer Chris Steel echoed this, emphasising necessary investments over austerity. Former officials, in The Canberra Times op-eds, contend the report overlooks specialist shortages in health. This posture, while highlighting valid nuances, risks diluting Eslake’s call for efficiency, framing critiques as adversarial rather than constructive. As Region Canberra noted, “Treasurer Chris Steel and the Legislative Assembly should take economist Saul Eslake’s review of the ACT’s finances seriously.”
Comparatively, NSW’s 2025-26 Budget lacks a similar independent review but addresses analogous issues through targeted measures. Allocating $3.5 billion to hospitals and $5 billion to early education, NSW frames spending as investments amid repair, without overt inefficiency flags. Its deficit-to-surplus path relies on revenue diversity and modest growth projections (1.75% GSP in 2025-26), contrasting the ACT’s policy-driven overspend. Eslake’s implicit critique of ACT opacity finds parallels in NSW’s transparent disaster funding, suggesting models for reform.
Critically, Eslake’s policy focus may underplay corruption’s role. Allegations against Pham and Marina suggest inefficiencies stem from shielded lapses, not just choices. The government’s rebuttal ignores this, potentially entrenching problems. Eslake also notes revenue opportunities: “The ACT could consider reducing its ‘tax expenditures’ – especially the small business exemption from payroll tax,” and “The ACT could raise more revenue from taxes on gambling,” given “The ACT collects $165 per head (47%) less from taxes on gambling than the average of all states & territories.”
Case Studies: Angel Marina, Tu Pham, and Systemic Incompetence in the ACT Versus NSW Accountability
To illustrate how shielding underperformers fuels fiscal woes, examine allegations against Marina and Pham, drawn from court records, blogs, and X posts. Marina’s 9 May 2002, letter derogated Indigenous qualifications, targeting Mullins to derail fraud probes. Protected, Marina advanced, while Mullins faced fabricated charges. A 2020 BlakandBlack post details this as part of efforts to obstruct Belconnen Pool investigations.
Pham’s case involves approving but blocking audits, lying under oath. As Auditor-General, her tenure saw incomplete fraud inquiries. A December 2025 X post alleges. Despite claims, Pham was promoted.
These link to mismanagement: obstructed probes waste resources, biases impair efficiency. Eslake’s high-spending-poor-outcomes critique aligns, but the ACT’s Eslake response sidesteps accountability. Eslake warns of debt risks: “If debt is allowed to keep rising, investors and credit rating agencies may be concerned about the State’s [or Territory’s] ability to repay debt, leading to lower credit ratings and higher debt servicing costs,” and “The level at which debt becomes unsustainable will vary according to each jurisdiction and its circumstances.”
NSW contrasts with ICAC exposing issues, enhancing transparency. While not perfect, NSW’s mechanisms reduce impunity risks, offering ACT lessons.
Broader studies, like Journal of Political Economy, witing on impunity, show performance erosion is amplified by systems similar to the ACT’s bureaucracy.
Broader Economic Implications: Comparative Risks and Inefficiencies
Shielding in the ACT inflates costs, creating Eslake’s vicious cycle: biases lead to poor hiring, subpar services, more spending. Economic fallout includes confidence erosion, with the consequence that the 2025 credit downgrade. Nationally, it strains grants; racism harms Indigenous productivity. Eslake emphasises sustainability: “It is important for governments to maintain fiscal sustainability so that they can – provide the level of goods and services required by the community; – be able to invest in necessary infrastructure and initiate new programs; – promote intergenerational equity so that unsustainable debt burdens are not transferred to future generations; and – have the fiscal capacity to manage unforeseen events.”
NSW shares the same kinds of risks, but absorbs via scale: steady unemployment, proactive housing. The IMF warns that state debt will reach 16% of Australia’s GDP by 2029; NSW stabilises at 20% GSP, ACT peaks higher relatively. Eslake notes the ACT’s unique traits: “The ACT has less capacity to raise revenue than most other jurisdictions, principally because it can’t tax the largest employer and landholder (the Commonwealth), and it has no mining industry on which it can levy royalties.” However, he also notes that, “The ACT does however collect relatively more revenue from the tax bases it does have than other jurisdictions, partly because it also collects municipal rates, but also because most of its tax rates are relatively high.”
Singapore’s anti-corruption yields efficiency; the ACT’s defences risk decline. Inflation from spending compounds disparities. As Eslake cautions, “If debt is allowed to reach unsustainable levels, then governments may be forced to introduce harsh measures in return for financial assistance from external parties … any form of significant external intervention by the Australian Government would result in lower levels of autonomy over the State’s [or Territory’s] finances.”
Recommendations for Reform: Balancing Critique and Action
Eslake’s proposals provide a roadmap, but the ACT must implement amid criticism. He advises: “The principal focus of the ACT Government’s fiscal strategy, and of analysis and commentary on the ACT’s fiscal position, should be on the cash balance, not the ‘operating balance’ (headline or otherwise) – the ‘operating balance’ excludes capital expenditures – and it’s the cash balance, not the ‘operating balance’, that primarily drives changes in net debt.” Also, “the ACT Government should continue to run cash surpluses until ‘general government’ net debt (currently forecast to peak at 19.5% of GSP in 2026-27) is reduced to less than the average of all states and territories (about 15% of GSP).” He also advises that, “It should also seek to run cash surplus for the Territory public sector as a whole, with a view to stabilising the Territory’s total public sector debt at around the average of all states and territories (around 21% of GSP).”
Blakandblack has long advocated that the ACT needs to establish an ICAC-like body with teeth and prosecute those suspected of perjury and/or racism. Federal oversight, ethics training and whistleblower protections are essential.
Eslake notes, “The mix of measures to achieve a cash surplus – revenue increases, expenditure savings and/or asset sales – is largely a matter of political choices, rather than being suggested by economic principles or theories ? as a practical matter, there appear to be more feasible options on the expenditure side than the revenue side of the Budget, given that the ACT is already a relatively high-taxing jurisdiction ? but spending reductions should be carefully thought through, with a view to avoiding arbitrary measures such as ‘efficiency dividends’ or ‘vacancy control’.”
NSW’s revenue options increase is capacity to structure its budget to reach both political and financial objectives and response to audits demonstrate a mature government model where accountability is understood necessary to an effective and responsible government. Performance tied to funding can drive improvement of services and fiscal standing.
Conclusion
Eslake’s report exposes ACT fiscal jeopardy from overspending and opacity, mirroring warnings on incompetence by individuals such as Marina and Pham. Defensive responses warrant critique, deepening crises. NSW’s trajectory highlights reform paths. Confronting scandals restores health; failure destroys economies.
