Canberra's COVID-19 lockdown has led to the "most significant shock" for the ACT's finances, with the territory recording its largest budget deficit.
ACT Chief Minister and Treasurer Andrew Barr on Wednesday delivered his 10th budget, which showed a deficit of $951.5 million for 2021/22.
The deficit was $476 million more than forecast, largely due to ongoing support mechanisms for Canberrans during the pandemic.
The territory's books are expected to remain in the red for some time, with declining deficits predicted for the next three financial years.
Budget papers show economic activity is set to decline sharply during the September quarter, driven by the impact of Canberra's two-month lockdown.
However, the economy is set to rebound strongly following the end of lockdown.
"As restrictions are eased, household consumption is expected to rebound strongly in 2022, supported by the current high savings rate and increasing consumer confidence," the budget papers said.
While the budget was made on the assumption the ACT's lockdown would end as expected, forecasts could change if additional restrictions were imposed.
"If hospital capacity becomes stretched, further lockdowns or more stringent public health and social measures may be required, which could delay the recovery of economic activity and employment," the budget papers said.
The territory's debt is set to increase to $5.7 billion in 2021/22, before expanding to $9.6 billion by 2024/25.
Despite the dire budget forecasts, the ACT's revenue is expected to be $425 million higher, largely due to Canberra's strong property market.
Mr Barr aims to "turbocharge" the ACT's economy as Canberra recovers financially from the impact of COVID-19.
"Today's budget, and our longer-term fiscal strategy, is designed with a simple purpose: to invest in essential services, to protect and create the maximum number of jobs across our city, and to continue to support Canberrans who need it most," he said in his budget speech.
"There will be challenging weeks and months ahead as we deal with the spread of COVID-19 in our community.
"But there is a path to return to the life that we want ... a path to rebuild our economy and protect the most vulnerable."
The ACT government has outlined an infrastructure spend of $5 billion over the next five years as part of its COVID-19 recovery, including $1.4 billion for the second stage of Canberra's light rail.
The budget has set aside $2.1 billion in health spending, with $90 million allocated for the territory's COVID-19 response, including $22.5 million for its vaccine program.
The territory budget was set to be handed down in August but was delayed almost two months due to the ACT lockdown.