LETTER TO THE EDITOR
The Gunner Government’s so-called debt ceiling is a false and inaccurate label for a toothless measure, designed to get the Chief Minister out of a political hole rather than to reduce debt and improve the Territory economy.
The ceiling is not a cap on debt or liabilities, it is cap on borrowings with the sole purpose of preventing another Moody’s ratings downgrade. A downgrade would confirm what we already know – this Chief Minister is utterly incompetent when it comes to handling the Territory’s economy.
A debt ceiling was a key recommendation of the Langoulant Plan for Budget Repair but the Chief Minister’s proposed legislation isn’t worth the paper it’s printed on.
This is simply a box-ticking exercise so Government can say “we are following the Langoulant recommendations”, rather than a serious move to cut the Territory’s crippling debt and stop departments exceeding their budgets at a time when the Government should be showing strict fiscal restraint.
Rather than being a cap on net debt or liabilities, the ceiling is a cap on total borrowings, minus finance leases. Put simply, it actually gives the Gunner Government the green light to keep spending beyond its means.
Currently, our total assessable debt is $8.7 billion. That is projected by Treasury to increase to $13.1 billion in 2024-25. We still don’t know how high net debt will be if borrowings hit the so-called cap of $15 billion. We have asked, but no answer has been given.
Borrowings of around $15 billion would mean our debt to revenue ratio, which is currently at 111% and forecast to increase to 166% in 2024-25, would be a staggering 180%. At that point, Government expect Moody’s would chop our credit rating.
Our current Moody’s credit rating is Aa3. If it drops into the Bs, it puts the Territory below investment grade. This would label the Territory high-risk for investment, increase our interest payments and smash private sector investor confidence due to Labor’s spectacular mismanagement of the NT’s finances.
Moody’s has a nine-level rating system with the first tier being best. Currently the Territory is ranked seventh.
Instead of a measure to yank up the spending handbrake, the Labor Government is calling this ceiling an “orange light” for remedial action.
There are mechanisms to suspend the ceiling in the event of a natural disaster or medical emergency like the current global pandemic, but there’s nothing that would prevent the Gunner Government from raising the ceiling or scrapping it all together.
This could include a dollar figure being excluded from the cap or a period of time giving Government plenty of room to spin its way out of hitting the cap.
There are absolutely no penalties for Government if it hits the cap. If there is a breach, the only recourse is the responsible Minister will have to report to parliament detailing the cause, impact and response within three months. That’s it. No mandated consequences. Nothing.
Another concern we have is the fact the Chief Minister is repealing penalties under the Financial Management Act 1995 for CEOs who breach their agency budget limit – despite talking tough on cracking down on departmental budget blow outs.
That Act already imposes fines of up to 100 penalty points, which is around $16,000 for agency bosses who overspend, but the Gunner Government wants to scrap this.
Two years ago Michael Gunner promised tough new accountability measures for senior staff and consequences for poor performance, yet instead of using the power he already has to sanction CEOs, he is creating meaningless thresholds for CEOs to blow their budget.
The Chief Minister’s so-called debt ceiling is a false ceiling that will do nothing to reduce debt and everything to avoid Labor keeping its budgets in check.
Leader of the Opposition, Lia Finocchiaro
PHOTO: Lia Finocchiaro (2nd from right). Twitter.