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Hearing senior Treasury staff describe the Northern Territory's budget as being in "dire straits" is the bureaucratic equivalent to saying, "we're stuffed".
And so it was with some surprise that on a Friday morning, not two weeks from Christmas and more than two years since winning office, NT Labor owned up to the Northern Territory's spiralling debt crisis in plain English.
Not only is the NT Government borrowing cash to cover basic operating expenses, but it's also borrowing just to pay the interest on its spiralling loans.
Without 'radical changes' to its structural deficit, the NT will be $35.7 billion in debt by 2029-30.
It's a state of affairs the Opposition labelled "scary", but the Government blamed the previous Country Liberal Party (CLP) government.
In a statement released shortly after the Government's interim report, Treasurer Nicole Manison blamed the NT's $3 billion debt and ballooning expenditure on three key things:
- A declining economy after construction wound up on the Japanese-run INPEX LNG project, with no plan by the previous CLP government to fix the budget
- A significant GST drop of $500 million a year, along with a slowing economy and increased demand for Government services
- Increasing long-term demands on Government expenditure (health, youth justice and child protection, police)
"Why is the NT in such financial strife?" wondered Diana.
She was one of a number of people to contact the ABC asking for an explanation.
Curious Darwin is our story series where you ask us the questions, vote for your favourite, and we investigate. You can submit your questions on any topic at all, or vote on our next investigation.
The Ichthys-INPEX LNG project
The benefits of constructing the $34 billion Ichthys-INPEX LNG gas plant in Darwin were oversold by both sides of politics, which also failed to plan for the end of the boom, believes Ken Parish, a former Labor MLA and senior law lecturer at Charles Darwin University.
He said the NT faced similar problems with the ConocoPhillips expansion back in the early 2000s.
"There was a huge, short-lived boom: lots of fly-in, fly-out workers coming in and going out, and again with INPEX," he said.
"Negotiating that huge but very short stimulus in a tiny narrowly based economy like the NT's is really, really difficult."
Mr Parish said the CLP initially had a pragmatic approach to managing the INPEX construction phase, by cutting expenditure and squirreling money away towards a budget surplus.
"When you're in a boom, as we were, that's when you move to surplus budgeting to fill the cupboard, so that when the boom ends, the government is in a position to engage in fiscal stimulus without digging a much bigger hole," Mr Parish said.
"But that wasn't done."
Indeed, when the CLP lost government in 2016, the budget was still $1.7 billion in the red — a figure that's ballooned under Labor to around $3 billion.
But former long-time public servant Bob Beadman argued that it was poor stewardship of the boom and bust impacts from INPEX that have so exaggerated its effect.
He said for a decade it's been known that INPEX would end: "We've known across that time that there is no other project of that scale that will replace it," he said.
Government should have planned for boom and bust
Economics Professor Rolf Gerritsen from CDU's Northern Institute argued that stimulus spending now aimed at the tourism sector would take quite some time to be felt.
"The real problem during the INPEX project was that all accommodation and rental accommodation was taken by workers, and prices went up," Professor Gerritsen said.
"So tourism started to fall because tourists couldn't afford to go to Darwin.
"It's going to take some time to recover from that because an awful lot of tourism is word-of-mouth."
Mr Gerritsen said it was incumbent on Paul Henderson's former Labor government when the project agreement was signed in 2011 to start planning for both the boom and the project's end.
"The big projects like that take a while to ramp up — usually about a year to 18 months — and then they go like mad for, say, two years, and then they suddenly stop and replace 4,000 people being employed with 400," he said.
"So, no, I don't think the current Government is entirely to blame for this.
"The previous government were equally culpable, and nobody said, 'well how is this project going to distort the economy?' and then start a conversation with the public in the NT about … what's going to happen."
Mr Parish said major resource projects were still worth it for the NT because they forced growth on the economy, but that politicians were generally irresponsible in overstating the economic return.
"The overwhelming majority of the revenue goes to either the Commonwealth or the West Australian governments, so there were always going to be very limited ongoing employment ramifications to it, and very limited ongoing revenue implications," he said.
The GST
According to the NT Treasury, the Federal Government's changes to the way GST revenue is allocated to the states and territories will hand the NT a $500 million shortfall of long-term revenue forecasts year-on-year.
"The Territory couldn't have foreseen that crash in GST revenues that's arisen since they were elected to office," Mr Beadman said.
But, the caveat was that the relatively small change in revenue highlighted the NT's reliance on Commonwealth funds, and its inability to raise enough of its own-source revenue.
About 80 per cent of the NT's income is funded federally.
Mr Beadman said that when he was treasurer, Prime Minister Scott Morrison pointed out the methodology behind GST allocations penalised states that maximised own-purpose revenue collection, but rewarded those who took policy decisions reducing the possibility of revenue flow, highlighting the NT's fracking moratorium.
"Fracking is a very emotive issue when it gets to the ballot box, but it's probably the key reason why there's a lack of sympathy in Canberra to the Territory right now," Mr Beadman said.
"Because there was WA, maximising iron ore royalties at the same time as that Territory was blocking a revenue flow and asking for more money from the Commonwealth."
Mr Parish said the former CLP government foresaw the cut, but its final budget demonstrated a lack of management plans, forecasting an $800 million deficit.
"There was $1.7 billion in accumulated public-sector debt; of course that's now grown to $3 billion," he said.
"But it was $1.7 billion when Labor came in, so the CLP also didn't really have a meaningful strategy to get rid of that.
"You can't really see anything in the 2016-17 CLP budget that that would have resulted in anything different than what we're now facing."
Increasing Expenditure
Ms Manison said she would seek to reduce the annual growth in expenditure to "a much more manageable" 3 per cent, half of the current level.
She refused to say what figure she had considered "manageable" for annual expenditure growth when she became Treasurer in 2016, and why there was still no concrete plan on how to cap spending.
In November, the NT auditor-general highlighted that amid a rise in capital grants and employee expenses to the tune of $350 million in the last year alone, spending in those areas could be "reduced".
What's more, Labor came to government promising to cut the executive-level jobs in the public service by 250 positions — instead, overall public sector jobs have grown by roughly that same number.
"We did see that those executive levels were reduced, but there is no doubt that going forward we are looking at ways we can make more savings and more efficiencies, and we'll continue to look at this very issue," Ms Manison said.
All of the experts the ABC approached said they believed both sides of NT politics spent too much taxpayer money on grants, subsidies, an engorged bureaucracy and services that needn't be borne by government.
Inflated public service entrenched in statehood aspirations
Professor Gerritsen said he believed issues with an inflated public service were entrenched in aspirations for statehood.
"It has a gestation that goes way back to the achievement of self-government, when the assumption was that the Territory was going to be a state," he said.
"So we set up a state-like structure and always had a bureaucracy that's bigger than the jurisdiction of this population would suggest."
Mr Parish said the fact there were twice as many senior executives in the NT Government than any other state or territory was "quite extraordinary".
"The trouble is that the Territory is and always has been so radically dependent on the public sector to maintain prosperity, that if you did any sort of radical quick cut in public service numbers you would push [the NT] much deeper into a recession from which we would quite possibly never [recover]," he said.
There needed to be a gradual reduction of public servants carefully over time by attrition, "not mass sackings and redundancies, because that would cause a recession", he said.
Professor Gerritsen said the current economic conditions were a prime opportunity for the Government to cut the apron strings to the local business sector.
"You stimulate when the economy is down not when it's up, yet there is this feeling in the Territory business community that somehow the Territory Government is responsible for not just the general state of the economy but the state of their particular industry, and even to a degree their particular enterprise — and that's an expectation that, given the small electorates in the Territory, is very hard to break," he said.
Mr Beadman agreed, saying there was an expectation that the Government could provide "gold-plated services to every small pocket of the population spread right across the vast Territory, on a small revenue base, and that simply can't be done".
But, Mr Parish said he believed that the past 40 years of self-government had proved that there was little difference between the long-term aspirations of both CLP and ALP governments.
"Neither [party] have managed that well either economically or politically, and that's why we've hit the wall now," he said.
"But luckily, [I believe] we will bounce back from the wall, and I'm almost absolutely certain that in two or three years' time, things will be back and looking pretty good."
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Topics: budget, government-and-politics, business-economics-and-finance, nt
First posted