NT Budget 2020: Spending continues with no plan to address financial crisis

by | Nov 10, 2020 | NT Politics | 1 comment

Chief Minister Michael Gunner has delivered his first NT Budget as Treasurer that will see spending continue relatively unabated over the next decade as the Territory continues to plunge into record debt and deficit.

Critics have argued the budget shows no commitment to rein in spending, despite a government announced financial crisis two years ago that it still shows no current plan for getting out of.

The economy is predicted to remain stagnant as the government adds to its recurrent costs over the next three years.

The Gunner Government will run a record $2.45 billion deficit this year with net debt now expected at $8.4 billion by the end of the year, up slightly from its July projection of $8.2 billion. The net debt was $5.7 billion last year.

Mr Gunner said the budget was about dealing with COVID-19.

“The Northern Territory’s 2020 budget is being delivered in a world very different to the one we were in last year,” he said. “The coronavirus pandemic – and the global recession that has followed – was not the fault of anyone in the Territory. We did not cause it, and we did not want it. We just had to deal with it.”

But the figures show that despite the roughly $383 million earmarked for the coronavirus response, the deficit will grow to $2.45 billion this year. Savings measures that were expected to be implemented have not been achieved.

There is no surplus in sight, with deficits predicted for the next 10 years and an estimated total net debt of $12 billion by 2023-24 and $16 billion by the end of the decade, as spending continues.

Perhaps the most alarming trend is the net debt to revenue ratio which shows the government continues to live outside of its means by spending more than it brings in. That figure was at 89 per cent last financial year but has now ballooned to 132 per cent this financial year and is predicted to blow out to 179 per cent by 2023-24.

CDU research fellow Rolf Gerritsen said the debt to revenue ratio raised questions about the ongoing sustainability of the Northern Territory.

“It tells us the Commonwealth might need to intervene,” he said. “It belies the argument the Chief Minister made that in 2023 we would have a better debt to revenue ratio than the Commonwealth, which we clearly won’t.

“We will be paying a lot higher interest rates on our borrowings. The government thinks we can grow our way out of debt and I’m not convinced of that.”

Biggest cut to spending will see projected savings of $106 million a year in wages as debt hurdles toward $16 billion; own source revenue to take hit

Mr Gunner said the biggest cut to recurrent spending would be found through a new wages policy on the public service that he said would save $424 million over four years – or $106 million a year – through implementing a $1000 “bonus” annually instead of a two per cent annual pay increase.

He ruled out any cuts to the continuously growing public service.

“We believe this is what we have to do to save jobs and have that budget discipline,” he said. “Let’s be clear we need our public service, (we’re) the smallest population in the country with the biggest challenges in the country.”

But the new wages policy would still have to approved by the public service union who said on Monday that they weren’t consulted by Mr Gunner before his budget announcement.

“This is not a good way of repaying them (for their work during the pandemic) by just imposing this on them,” CPSU secretary Kay Densley told Mix 104.9.

Mr Gunner said other savings would be found by ending current economic stimulus programs such as the Home Improvement Scheme. But he said the government will continue with another “record infrastructure spend” of $1.6 billion this year.

And the government is also adding to their spending in departments and through increasing the public service by 400 permanent jobs last financial year despite previously pledging to implement a hiring cap and job freeze.

“All those jobs are essentially in frontline health services,” he said. “I’d be pretty hard to argue right now that our health people are not working for us and we don’t need them.”

The government’s most positive economic news continues to be a “pipeline of major projects that have not yet reached final investment decision”.

“If these projects commence over the forward estimates, it will have a positive impact on the economic outlook,” the budget papers said.

Own source revenue down as expenditure increases from previous budget estimates

The government’s own sources of revenue are also expected to take a hit with taxation and mining royalties to drop as well as payroll and property taxes.

GST payments are expected to be down by $1.6 billion over four years, coming in at $141 million less this year or five per cent less than the 2019-20 figures.

According to the budgeted figures, overall expenditure will decline slightly over the forward estimates from $9.3 billion this year to $8.4 billion by 2023-24. Treasury officials explained the decrease would be “reflecting one-off operational and maintenance costs of running quarantine facilities in 2020-21, combined with a reduction in CPI indexation in agency budgets”.

But that $8.4 billion figure in three years is roughly the same as the 2019-20 budgeted spend and the projected 2022-23 expenditure figure has increased over forward estimates provided last year.

The government will continue to borrow to pay for day-to-day operations with interest this year forecast at just under $400 million, expected to jump to $511 million or $1.4 million a day in interests costs by 2023-24.

Opposition says budget a “disappointment’

CLP Oppostion leader Lia Finocchiaro said the budget will hurt for a long time after COVID-19.

“The Chief Minister likes to blame the COVID-19 crisis for the budget damage, but by his own admission, our COVID response has cost $400 million in stimulus, $63 million in frontline services and this Budget allocates a further $120 million to our response. This is a far cry from the $8.4 billion debt Territorians have been saddled with this year,” she said.

“This Budget is a disappointment, heaping a massive burden on Territorians and outlines absolutely no plan to grow our economy and stop the waste. The Budget falls at the feet of the Chief Minister who cannot keep turning his back on Territorians. What we really need, is a clear path out of this.”

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