Interest costs a 'dead weight' on NT budget, says economist

UPDATED October 25, 2012, 11.55 am.
 
Reducing debt means reducing the size of the public service 
 
 
By KIERAN FINNANE
 
Economist Rolf Gerritsen welcomes the Country Liberals Government’s “fiscal rectitude”: “Let us hope that [it] lasts longer than the Government’s first budget (which is as long as it lasted when the Martin Government was elected).”
 
He describes the Government’s intentions to return the NT budget to surplus by the end of its first term and then to begin repaying debt as “laudable”.
 
“Interest costs are a dead weight on the budget,” says The Northern Institute’s Professor Gerritsen, based on the Alice Springs campus of Charles Darwin University.
 
This is particularly so  “when the debts were not invested in activities or infrastructure that provides a productive return to the economy and thus, indirectly, to the budget – for example, the Darwin waterfront precinct.”
 
He describes the best way to rein in the total liabilities of the Territory:
 
• Reduce the size of the NT public service (which reduces the contingent liability of superannuation); and
• Contain fiscal outlays within current levels of general purpose grants (ie assume that the current level is the level at which the GST revenue will be in the intermediate term).
• Then (soon hopefully) when the Australian consumer starts to spend more and the Territory receives more GST-derived general purpose funds from the Commonwealth, this extra cash can be used to draw down debt.
 
“In the meantime I would support balanced budgets,” he says.
 
Government and Opposition exchanged blows over the budget on the second day of Legislative Assembly Sittings, with the Government’s focus on the size of the Territory’s debt and what must be done to reduce it while retaining affordable frontline services. In a media release Chief Minister Terry Mills described the state of its finances as “the biggest challenge facing the Northern Territory”.
 
“Already, the Renewal Management Board has discovered that the projected fiscal deficit for 2012-13 in May of $767 million is actually closer to $900 million,” he said. “That means Territorians are paying $750,000 per day in interest repayments alone to service our debt.
 
“The Renewal Management Board has also provided disturbing examples of where commitments were made by the previous government where activities were part-funded and not reflected in the forward estimates on an ongoing basis. For example, 90 child protection staff were employed but not a single cent allocated to meet the ongoing costs of paying these workers [“Not true”, said Ms Lawrie, when this was said in parliament].
 
“There are also worrying signs emerging from the Public Sector. Over the past 5 years the number of Executive Contract Officers employed has increased by 50%.
 
“This is simply not sustainable and the Renewal Management board is currently working to identify more efficient ways to deliver better frontline services for Territorians. Their recommendations will drive my Government’s mini budget to be delivered on December 4.”
 
Opposition Leader Delia Lawrie is sceptical about Mr Mills’ approach to “Cut Labor’s Waste and Reduce Debt”: “So far they have created ten new departments, hired ten new CEOs, paid out all the sacked CEOs and are relocating two Departments to Alice Springs,” she said in her media release. She was particularly critical of the move of Tourism to Alice – “1500kms away from Asia, where the future of Tourism exists”.
 
In parliament Ms Lawrie questioned Mr Mills further about the move: “You have taken key Tourism staff away from the small businesses they need to work with and moved the aviation unit away from our major international airport [Darwin]. How does this create the three-hub economy?”
 
Mr Mills replied: “Unlike the former government, we recognise Central Australia as a nationally and globally identified – most people around the world know this – tourism icon. We are able to consider the support for the regions and think for the whole Territory. We can operate the marketing of the Northern Territory with headquarters in Alice Springs quite well.
 
“The relocation of Tourism headquarters to Alice Springs will motivate a regional focus on the Territory. We have a plan and we have a vision to grow the Territory and strengthen, in this case, decision-making and marketing for the Territory from Alice Springs … We will be thinking for the whole Territory, marketing the whole Territory, and demonstrating that we are governing for the Territory, strengthening regional economies, and developing a broader focus for the Northern Territory.”