Budget 2021: Debt continues to climb despite better than expected revenue

by | May 4, 2021 | News, NT Politics | 0 comments

The 2021 Budget has been handed down by Chief Minister and Treasurer Michael Gunner with few surprises, including no forecast surpluses for the next decade and continued debt and deficit – although the books are slightly better than expected.

The improvement however is not the result of fiscal restraint by the Gunner Government, but rather comes from an unexpected increase in federal GST payments and a better than expected economic performance during the pandemic.

The Territory’s net debt is forecast to hit $9 billion next financial year – nearly $1 billion better than expected, while it is still expected to increase to nearly $14 billion by the end of the decade.

The $1 billion improvement in net debt is the result of the increased GST payments estimated at $738 million over this year and the next, which could actually be more after the Federal Budget is released next week.

The deficit for the upcoming financial year is forecast to be $1.4 billion – down from the record $2.4 billion this year.

Mr Gunner referenced the COVID-19 pandemic repeatedly during his budget speech, suggesting it was responsible for a “big whack” to the Territory’s financial position, which had in fact been slipping for years before the pandemic hit.

Mr Gunner framed the Budget around the NT’s recovery from the economic effects of the pandemic.

“The last budget showed Territorians the beginnings of our recovery,” Mr Gunner told Parliament.

“This budget shows that the comeback is stronger than we expected.”

CDU research fellow Rolf Gerritsen said today’s budget was a classic election cycle budget where the government attempts to rein in spending, however slightly, after the promises of last year’s election.

But he said while the Territory’s position was better than expected last year, there were some worrying trends.

“The thing that’s worrying is why the debt and deficit goes up when they say the revenue is going up,” he said.

“That implies something is going on. I suspect that a lot of those small grants are hiding new public servants.”

The government is forecasting improvements in own source revenue, including mining royalties and higher than expected tax income.

Mr Gunner once again pointed to future private projects, such as Sun Cable and Project Sea Dragon, as crucial to the NT’s future economic health, but he has pointed to those projects for the last half-decade with nothing yet coming to fruition.

He said the population is forecast to increase over the forward estimates and after years of people leaving the NT.

“This is good news. Even better is the knowledge that this is just the beginning,” he said.

“These forecasts are conservative, because they do not factor in growth from projects that are coming down the track.”

Government introduces debt ceiling of $15 billion

Among the biggest financial announcements is the introduction of a debt ceiling, which Mr Gunner said would be set at a hard $15 billion, excluding finance leases.

“This will strengthen accountability for our long-term debt reduction goal and sends a clear message to ratings agencies that the government is continuing its budget repair program and helps ensure any future government maintains this discipline,” he said.

Mr Gunner claimed all the recommendations from the Langoulant Budget Repair report have now been adopted, however, the increase in public servants year over year is in direct conflict with its recommendations.

The government has now scrapped the public service staffing cap and intends to force department chief executives to instead keep costs of staffing at a set limit, with the warning that any overspends will see repercussions.

“Now that we are moving out of a health emergency phase, I’m giving two new directions to CEOs: don’t blow your budget and don’t blow your wages bill,” Mr Gunner said.

“In the future, if any CEO breaches their budget by anything more than one per cent, the Chief Minister will use his powers to act. These powers range from a formal explanation to an independent financial audit to a suspension of the CEO, right through to the sacking of the CEO.”

The previously announced “wages policy” for public servants, that will see a four-year pay freeze in exchange for a $1,000 annual retention payment, was tipped by Mr Gunner again as a cost-savings initiative that will save $424 million over four years – or $106 million a year.

However, the union representing public servants has repeatedly rejected the idea, saying it will result in people leaving the NT amid growing cost pressures.

Mr Gerritsen said he did not believe the government would be able to sustain its new wages policy over the four years projected.

“There’s too many public servants in the northern suburbs,” he said. “They will hold it for possibly two years and then let it go. So the projections for the deficit are understated. I don’t think they’ll get away with just giving them two per cent [when they lift it]. The public servants will want more.”

He added a lot of new spending announcements may have new public servant hires worked into them.

Spending announcements include $5 million for another round of tourism vouchers

The government has announced $378 million in new funding commitments over the next four years, including $23 million per year in additional funding for NT Police, $15 million more for corrections services and $40 million over two years for COVID-related costs including vaccines.

The local jobs fund, that was originally started with recovered money from the failed Infrastructure Development Fund, will see increases of $120 million over tow years for small and emerging businesses to access concessional loans and equity financing.

Other spending highlights include $15 million over five years for new land releases in Holtze and Kowandi; $2 million to help the hospitality and tourism industry attract workers; $12 million to continue and Aboriginal rangers program and $4 million previously announced for roadhouse improvements.

Mr Gunner also announced $5 million in the next financial year for another round of Territory tourism vouchers.

The government is also celebrating a forecast $1.6 billion infrastructure spend for the next financial year despite not coming anywhere close to getting the money out the door this financial year.

Opposition CLP Leader Lia Finocchiaro said the budget was a “spectacular flop” that dives further into debt. She also raised concerns over the government’s spending announcements.

“Alarmingly, budget papers show $900 million of last year’s $1.4 billion Department of Infrastructure, Planning and Logistics infrastructure program allocation wasn’t spent and has been carried over,” she said.

“There are pages and pages dedicated to projects which were earmarked for funding in the last financial year that haven’t seen a cent spent.”

Ms Finocchiaro said the biggest problem with the budget was the continued interest payments on the net debt and Labor’s lack of action to address the problem.

“Our interest payments continue to balloon,” she said.

“Debt per Territorian will be close to $50,000 and our daily interest payments will be $1.15 million. Labor is still putting $3.7 million on the credit card every single day just to keep the lights on.

“For the first time, the Chief Minister has admitted his fiscal ineptitude, by introducing a net debt ceiling of $15 billion. This is simply because he doesn’t trust himself, or his Labor government to rein in spending. What’s most concerning is Michael Gunner may use this as a safety net, instead of a target to avoid at all costs.”

 

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