By ERWIN CHLANDA
If the Territory’s mammoth debt under our Labor government is keeping you awake at night, consider this: “It would now be damaging to the economy, and unrealistic, to target surpluses over forward estimates.”
For how long? “Until the unemployment rate is comfortably back under 6%. It could be years.”
What a change a pandemic makes: These quotes on Sunday’s ABC Insiders were not from a left wing radical.
They came from Josh Frydenberg, the Treasurer in a very conservative government traditionally utterly committed to a balanced budget.
But it is also a government that was $85 billion in debt as of the end of June and is now heading towards twice that figure or more.
At home the NT Government, ruling over 1% of the nation’s population, was around $8 billion in debt.
This means every Australian owes $3400 while every Territorian owes $32,000 – roughly 10 times as much.
In Alice Springs the book Deficit Myth by US economist Stephanie Kelton is doing the rounds, claiming that printing lots of money can be a really good thing.
And yesterday in the blog Social Europe Peter Bofinger, a German academic expert on monetary policy, argued that large-scale injections of money to bring economies out of the COVID coma have vindicated Kelton’s Modern Monetary Theory (MMT).
While it may work for the rest of the world, applying MMT to the NT and The Centre’s special economy would not be easy.
There are now enough pieces of the puzzle to put together a picture of the Territory which isn’t exactly pretty.
CLP Senator Sam McMahon has made it clear that whatever mess the Gunner Government is creating the Feds will need to pick up the pieces: we are not a State and so the buck stops with Canberra.
Many people can’t believe how long the national Government has been turning a blind eye to Gunner’s throwing money around.
On the other hand some are saying: “Onja Michael, go for it, keep splashing around the handouts and pay for the Red Centre NATS and Parrtjimas (at left, supplied) before they come down on you like a ton of bricks, any day now.”
That nobody really knows what to do about COVID is clearly giving Gunner more time to blow public cash.
When he says the collateral for the NT’s whopping debt is “commercial in confidence”, God only knows what he’s talking about.
The Chamber of Commerce and the CLP Opposition are clear that royalties from the vast gas reserves – mostly in the Beetaloo Basin about half-way between Alice Springs and Darwin – are pretty well our only hope for paying off Gunner’s debt.
Not so, says the local Left, whose prominent voice is Jimmy Cocking, head of the Arid Lands Environment Centre with which the Lock The Gate and other environmentalist groups are associated.
He is also the current Deputy Mayor, although the underperforming (judging by her motions, discussion, contribution of ideas and initiatives) Councillor Jacinta Price is now tipped for that position.
Mr Cocking articulated his views in the lead-up to a demonstration last week, and broadened the pro-renewables push like this:
The Frack Free Alliance has relied on an Australian Institute report in its pre-election claims that the governments – NT and Canberra – are subsidising the gas industry in a variety of ways ranging from building roads and pipelines, funding feasibility studies, giving grants and reducing taxes.
The NT Government has a unit developing the fracking industry.
There are plans for putting a pipeline (as far as Darwin) in the ditch to be dug for the SunCable DC line that will take Tennant Creek solar power to Singapore.
At the end of it all, says Mr Cocking, is the planned Middle Arm Industrial Precinct where petrochemistry will turn gas into lots of goodies.
All this will be pushed by the Territory Economic Reconstruction Commission led by global oil and gas tzar Andrew Liveris, in cahoots with former Labor Chief Minister Paul Henderson who, Mr Cocking says, opened up the Territory to fracking in 2011.
The gas industry denies Mr Cocking’s assertions.
Keld Knudsen, from the Australian Petroleum Production & Exploration Association (APPEA), rejects the claim that the fracking industry has received $100m of seed and support payments from the NT Government.
“This claim arises from a report from Lock the Gate that claims that $94m was spent on the industry.”
The money was spent by governments included things loosely related to gas over the last 10 years, and primarily relates to regulation and offshore gas, he says.
“This ‘report’ included land development in Alice Springs (Brewer Estate), education, and research into fuel technology. It also includes Australian Government expenditure into energy and groundwater through the Exploring for the Future Program.
“Some of the lines claimed to be ‘subsidies’ are actually for mining activity, not petroleum,” says Mr Knudsen.
“Financially the Inpex project has an estimated $2.6 billion in taxation payments that will be made to the NT Government, with $56m on average per annum flowing to the Northern Territory – enough to build and operate one new school each year – much more than the approximately $9m annual spend estimated by activist funded research and a far cry from no return.”
Jemena’s Michael Pintabona, asked to comment on Mr Cocking’s claims, says the Northern Gas Pipeline “did not receive any government funding or subsidies, and we don’t have any active projects in the Territory where the government is financially involved.”
With these utterly conflicting claims from the two sides, and the COVID catastrophe still unfolding, the future looks scary.
Mr Bofinger, writing about the USA, says in the second quarter of 2020 the federal government’s fiscal balance reached minus 30.2% of gross domestic product.
“This value by far exceeds the previous quarterly record deficit of 11.6%, in the second quarter of 2010. What did the government do with all the money?”
This is a question we should ask ourselves.
“A large amount was used for transfers to private households [giving] the unemployed an extra $600 a week in benefits,” continues Mr Bofinger. “This supplement played a crucial role in limiting extreme hardship; poverty may even have gone down.
“[This] had an immediate impact on disposable personal income — again, way beyond any precedent. Net transfers (after tax) reached almost one-fifth of GDP; in the Great Recession the maximum was 7.5%, in the first quarter of 2010.
“Thus, the transfer payments did not only compensate for the decline in wage incomes: they boosted the disposable incomes of American households to a record high.
“What did households do with all the money? Due to the coronavirus-related restrictions in the second quarter, they nevertheless reduced their consumption significantly,” writes Bofinger.
“The key question is whether the MMT ‘bazooka’ … was successful” concluding “above all, 11 million people in the payroll survey have gone back to work, out of 22 million who lost their jobs in March and April.”
So how does MMT work – and would it for us?
Its theorist Kelton says Uncle Sam – or our Federal Government, by extension – cannot go broke because they are able to print as much money as they like, or create it by a key stroke on a computer keyboard.
Individuals, companies, states and Territories can go broke but not nations in charge of their money supply.
Ah, but what about inflation, you say?
Kelton is equally concerned about inflation and this is how she deals with it: The extra money created must have purpose, creating services and infrastructure that we need: Schools, hospitals, roads, railways, water supply, data, IT tools, for example.
She claims (and some disagree) that we should pay idle people for producing what society needs or what would make our existence more pleasant.
So long as the extra money created represents a corresponding increase in public assets, inflation will not occur, and we’ll all be better off, irrespective of the size of the deficit.
Also, there needs to be no foreign debt; and raising taxes – not universally popular – is part of the inflation control mechanism.
Robert Menzies was proud of running large deficits to ensure full employment.
This sounds brilliant except would it work in the Territory?
The stumbling block is likely to be: Would the unemployed be willing to work?
A simple answer would be: If they are, how come we have to import fruit pickers from interstate and overseas?
But why worry? We’re just 1% of the continent’s population, living in our little bubble, and we have an aggressive sense of entitlement which no-one really wants to challenge.