The Australian Capital Territory’s Chief Minister, Katy Gallagher has hit out hard at the Abbott government for indulging in a punitive bout of Canberra bashing, warning that the axing of at least 6000 jobs will cruel the Capital’s economy local economy into stagnation – but not yet recession.

Ms Gallagher accused the Prime Minister of singling out Territorians for punishment in the Budget, telling ABC Radio National’s Breakfast program that she did not believe the government would have singled out any other city in Australia meted out to Canberra.

The possibility of a potential localised recession in Canberra is highly delicate issue for politicians representing the city because with growth set to stall, there are fears that just using the ‘R’ word could send its private sector employers and population backwards.

Cuts made by the Howard Government after 1996 triggered a sharp downturn in the city, a scenario locals are understandably keen to avoid.

However many public servants feel that the Coalition has now returned to the Howard-era mindset of using the town as a whipping boy for government waste, a stereotype amplified by both the former Prime Minister and present Prime Ministers’ shunning of the Lodge.

An added factor that deeply worries locals is that the ACT Government has allowed a deluge of new flats and townhouses to come onto the market as part of an effort to boost population and its revenue base.

In the event there is negative growth, many new property buyers and investors in the city could potentially be hit with the phenomenon of ‘negative equity’ or when the value of their property goes down below what they paid for it.

With just 380,000 people living there, Canberra’s problem is that the at least 6000 APS cuts will hit hard and be compounded by other across the board funding cuts.

In a clear sign of just how fragile the ACT economy is, Ms Gallagher has gone against a stand by federal Labor to oppose any hike for the Goods and Services Tax (GST), saying that it needs to considered in the context of broader tax reform.

The Abbott Government is planning a Tax White Paper and a Federation White Paper is part of its bid to sort out funding flows and duplication of administration.

“I’ve always felt that if you are going to look at tax reform in this country, you can’t exclude the GST,” Ms Gallagher said, adding that it should have been in the terms of reference for the previous Henry tax review.

“If that puts me in opposition with my federal colleagues, then so be it.”

Ms Gallagher said that the ACT would now be forced to revise its economic forecasts down after the Budget.