$1.6m a day for NT debt as Alice is in strife

COMMENT by Dr DON FULLER

The Labor government's big-spending budget ahead of the NT election will hit a record net debt of $11 billion by next year – $2 billion more than expected last year.

The NT will be paying interest of $1.6m a day – increasing to more than $2m a day by 2026-27, with net debt to forecasted levels of $12 billion.

This puts debt at around a whopping 34% of Territory Gross State Product (GSP). This is very high for a small economy where a lot of wealth earned through gas exports for example, leaves the NT.

In addition, the measure of GSP does not take account of the very large interest payments leaving the NT to pay for the government debt. Taking into account these factors, debt is likely to be over 40% of the productive capabilities of the NT economy.

Such an enormous debt from such a small economy as the NT compares to that of South Australia at around 11% and the largest economy in the nation, that of NSW, at around 12%.

Not only is the NT being supported by very large revenue transfers from the rest of Australia through the Commonwealth Grants Commission but the only government capable of picking up the tab for the major waste and inefficiencies of government in the NT is the Federal Government.

It is also likely that as the social and cultural problems escalate in the Territory and Alice Springs in particular, and more and more money is borrowed to "throw at the problem" the expenditure and debt levels will increase to such an extent that the cost of servicing the debt will start to have a major impact on the funding available to meet basic program requirements.

In the absence of thoughtful policies and management, designed to deal with the rapidly emerging problems, it can be expected that social dislocation will escalate further.

As the substantial waste in the Territory begins to affect the revenues available from the Commonwealth to the other States, they are bound to start applying pressure to the Commonwealth to take control of the waste and misuse of resources being supplied to the NT by other Australians.

It is important as a minimum, to the rest of Australia, that the North remain a centre for population for the defence of Australia. But the question is now being asked as to whether there is a far better way this could be achieved.

It has been suggested that the Territory should be placed under alternative governance arrangements, given it does not appear after nearly 50 years of trying, to have the abilities and human capital available to manage its own affairs in an ethical, effective and efficient manner.

Recent comments by the NT Chief Minister and Treasurer on the release of the Budget that ‘’you cannot just breathe hot air on the issues and give them a bit of a shine with your t-shirt’’ – are an example of the naïve, unacceptably uninformed and complete lack of understanding of the urgent need to deal with the complex problems facing the NT and Alice in particular.

The availability of "easy money" is seen as the way to proceed.

The NT Budget predicts private investment is expected to contract although public expenditure will increase by 12%.

There has been insufficient effort and success in establishing productive sectors within the NT economy that can drive growth and employment on a sustainable basis.

Around a very high 40% of total employment in the Territory works in government and community services. While this may assist governments to win elections, it acts as a major brake on Territory growth and development.

Such a very high level of government involvement in the economy "crowds out" private sector investment and employment generation activities and stifles entrepreneurship andinnovation,essential to economic growth and development.

Far more effort needs to be directed at diversifying and growing the Territory economy. This should involve the use of gas and importantly solar, as a feedstock to industry and a source of power.

In addition, far more focus and effort should be given to high technology sectors such as advanced computing that are not restricted by high transport costs and distance from markets.

Such products include new computer software technologies and applications (e.g. for defence), high precision cutting and welding and building technologies, advanced robotics and intelligent computer based production systems, automation of processes, control systems to monitor manufacturing processes and products and systems for environmental management.

There are four major factors that power economic development and growth: resource endowments, highly skilled people, investment and technology, and innovative management and organisational know-how.

The NT is most fortunate to have very strong resource endowments in the form of location, land, water and mineral resources, for example.

However, compared with other jurisdictions in Australia, it is very weak with regard to highly skilled people and innovative management and organisational know-how. This includes the critical role of governance in the NT.

Given continuing failures in the education system at the primary, secondary and tertiary levels it is also severely constrained in its ability to contribute to the second very important requirement.

This has been further worsened by the declining attraction of the Territory as a home destination by skilled people and families wishing to move and work in the NT.

Such significant constraints mean that the NT is unable to successfully take advantage of its high quality resources which should act as a major competitive advantage.

These constraints restrict the willingness of investors to risk capital investment in such an uncertain environment.

Without skilled people, organisational know-how and investment, economic and social development comes to a halt.

Unfortunately, this is worsening in the Northern Territory. This cannot be solved by borrowing and spending more on government projects – a road to collapse.

Complex problems requiring talented people cannot be solved by with other peoples’ money nor employing mates as part of an old boys’ or old girls’ network, worsening the problems.

Unless this can be rapidly appreciated the Territory faces a very uncertain future.

This is being recognised by an increasing number of people as out-migration to other regions and centres in Australia, continues to climb from NT centres such as Alice Springs.

An important example of such chaotic governance and administration is provided by Alice Springs. Additional major construction activity is indicative of an inability to face and deal with complex underlying social and economic problems. But throwing money at these problems, in a classic example of pork barreling, will not solve the issues.

Such construction includes the controversial art gallery, in the early phase of construction just in time for the election; the Supreme Court building, regarded by many residents along with the gallery as being well placed to win a competition as the ugliest and most inappropriate building in Alice Springs; and a new "juvie" prison building near the adult prison for the detention of young offenders.

None of this construction activity can be regarded as improving the longer term economic prospects and employment opportunities for the people of Alice Springs, or as improving the serious problems associated with social dislocation and crime.

Such activities are directed at government and NGO self-serving activities, with little focus and concern on the major disadvantages facing Aboriginal people living in ill-health and poverty with little education and training opportunities or employment.

Rather, it is more likely to enrich the pockets of developers and their associates.

It is sadly ironic that many peak Aboriginal organisations appear to be following the lead of the NT Government in a lack of willingness to face and deal with the substantial problems facing Aboriginal people on the ground.

Some for example, are moving into major land and building development such as the Melanka development on Todd Street.

This aims to build 174 multi-level dwellings at a cost of $90m. Directors include David Ross, a former director of the Central Land Council and Randle Walker, who heads up the Aboriginal Investment Company Centre Corp which has as shareholders the Central Land Council, the Central Australian Aboriginal Congress and Tangentyere, responsible for the delivery of services to Town Camps.

Discussions about "problems" are usually articulated in millions of dollars.

The Central Australian Aboriginal Congress for example, receives over $65m a year to provide health services to Aboriginal people. Paradoxically it is located in a large facility opposite the Alice Springs hospital.

One is left wondering why a close on-going partnership with a major hospital containing highly skilled medical staff would not achieve better outcomes at far less cost to the Australian taxpayer.

The NT government may have expected such pork-barrelling to have acted as a stimulus to population and economic growth in Alice Springs. In fact the reverse is happening. House sales in Alice Springs are double the level normal for this time of year as the population votes with its feet.

This can be expected to occur increasingly, in other Territory centres due to major problems of governance, both in terms of NT government failures and that of Aboriginal run organisations.

PHOTO: The poetically named Aboriginal and Torres Strait Islander Art Gallery of Australia (ATSIAGA), costing – at current estimates – $150m.

Dr Don Fuller holds a first class Honours degree and PhD in economics from the University of Adelaide. He has worked as senior public servant in the Territory and as Professor of Governance and Head of the Schools of Law and Business at Charles Darwin University. He grew up in Darwin and attended Darwin High School.