A Never Never Budget for deluded dreamers
COMMENT by Dr DON FULLER
The Northern Territory now has, by far, the highest debt per-capita of any jurisdiction in Australia.
This will inevitably see the NT credit rating downgraded, making it even more expensive to borrow money and pay back the rapidly increasing debt.
The NT will be paying interest of more than $2m a day by 2026-27.
This will impact severely on the ability to deliver basic services in the areas of crime and justice, health, education and community services, for example.
It is now apparent that the Finocchiaro CLP government is committed to an increasing trajectory of high level expenditure and unsustainable debt that is likely to ashame even previous Labor governments.
Some commentators now predict Federal intervention is just a matter of time because the rest of Australia can’t keep paying for the increasing waste and mismanagement of Territory governments, with more than 70% of NT revenue coming from the rest of Australia.
The NT increasingly resembles a failed, African or Southern American state, with little difference in economic development strategies between either of the main political parties and development led by public servants and politicians, who employ a coterie of mates and friends, unwilling and unable to listen to expert advice.
Following the latest NT Budget, the NT government has committed $168.7 million for Alice Springs, “to bring back liveability, pride and community safety".
That includes:
$123.5 million for the Aboriginal and Torres Strait Islander Art Gallery.
$14.1 million for a multisports precinct in Gillen.
$8.9 million for a new multicultural centre.
$450,000 for free pool access at the Alice Springs Aquatic & Leisure Centre over summer weekends.
It is also finally committed to expenditure on a number of important roads in the region.
However, expenditure on police appears to be little more than to maintain existing levels of personal security, according to reports by the ABC, which lists police as being a “neutral beneficiary” from the Budget.
Such expenditure will have little impact on economic development and growth in the region without attempts to build important projects in the key areas of tourism, mining, primary industries and the development of renewable energy, for example.
The 2025-26 Budget papers prepared by the NT government state that the Finocchiaro CLP Government’s budget is aimed at reducing crime, rebuilding the economy and restoring the Territory lifestyle.
However, while the first two of these may be understandable objectives, absent are any clear and proven strategies or policies that will reduce crime and rebuild the economy.
As far as “restoring the Territory lifestyle” it is patently unclear what this means. What is sure is that it means vastly different things to different people.
In a startling example of double speak the Budget papers state: “Cognisant of the quantum of budget repair and austerity measures that would be required to remain within the ceiling and the detrimental impact these would have on the Territory economy, the government has repealed the former Labor Governments’ $15 billion debt ceiling."
And: “Removal of the debt ceiling provides government with more flexibility in its approach to budget repair and allows it to focus efforts on growing own-source revenue, increasing private sector investment and enhancing the effectiveness of government spending.”
However, it is far more likely that it will create the opposite effect.
Any further increase in debt levels as proposed, is likely to reduce the effectiveness of government expenditure as increasingly high levels of repayment bite into existing program expenditures.
In addition, increasing government debt is likely to further discourage private investment and reduce the capacity for the Territory to raise its own revenue.
The Budget predicts net debt of $12.19 billion in 2025-26, with a net debt to revenue ratio of 121%.
As reported by the ABC, the budget shows the government will have to borrow $265 million to fund its day-to-day operations next financial year, and another $101 million in 2026-27.
When infrastructure funding and the financial performance of government corporations are added to the bottom line, the government will run a fiscal balance deficit of $1.3 billion in 2025-26.
By 2028-29, the net debt is forecast to hit almost $14 billion, with even higher interest repayments.
Of major concern is the very high ratio of debt to revenue which illustrates the ability of the NT to pay back the debt with the money received by the government.
The current budget papers highlight the inability of the NT government to put in place effective strategies to overcome the spiralling debt and mismanagement of affairs.
Rather, the Budget papers are replete with clichés and platitudes about supposed objectives the government has in mind to control the escalating situation but with no indication of what the strategies and policies are that are going to achieve these mythical objectives.
This Budget is unashamedly based on spending an additional $2.26 billion in new policy commitments with little idea of how this will achieve the objectives sought.
The fact that the senior NT public servants within Treasury appear complicit in allowing such a financially irresponsible approach to proceed is beyond reasonable comprehension.
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.
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.
If the Territory is to survive as a separate, self-governing jurisdiction, this very high level of debt along with a limited capacity to raise revenue, is likely accordion to economist Saul Eslake, to lead to discussions aimed at achieving a Commonwealth bailout.
However, as pointed out, the Commonwealth would not give the NT a bail-out without imposing some harsh conditions. This could include the NT do more to raise its own revenue, through increased taxes and to substantially cut spending.
Such intervention will call into sharp question, the capacity of the NT to govern itself.
However, new Chief Minister Lia Finocchiaro said her government would grow the NT economy rather than impose more taxes.
How this can be achieved rapidly remains a mystery.
“I don’t think it’s time for austerity measures now,” she said.
But is it ever the right time in the Northern Territory and how bad can things get before government faces up to their fundamental responsibilities?
Current governments seem more concerned with maintaining power than exercising their responsibilities to take principled leadership decisions following honest and transparent communication with the voters.
It is also likely that as the social and cultural problems escalate in Territory centres, more and more money will be borrowed to throw at the problem.
It can be expected that social dislocation will escalate further.
However, neither of the main parties in the NT has been prepared to face how debt should be wound back as it requires austerity measures likely to have a relatively large impact on non-productive areas of the public service.
The government's largest expenditure is public service employee costs, which are expected to grow by 4.9% in 2025-26.
Employee costs account for about 41% of the government's total expenses, at around $4 billion per year.
The Northern Territory is losing more people to interstate migration with the government unlikely to meet its population target of 300,000 people by 2030.
Plagued by high levels of crime, and with a declining economy, it is becoming increasingly difficult to attract skilled workers to the Territory.
The Finocchiaro government, in a disheartening manner, has continued to show little understanding of the essential economic requirements that the private sector needs to be encouraged to expand.
This has been pointed out by a number of independent experts, involving a reduction in the size of the public sector with its associated red-tape and over-regulation and economic waste.
Funding expended on non-productive areas of the public service is required to further support business and industry development.
A private sector led economic development strategy is needed for the NT, not one led by increasing levels of public sector expenditure and business decisions made by inexperienced and naïve public servants and politicians.
Emphasis should be provided on building the private sector in the fields of tourism, agribusiness, energy, resources, communication and manufacturing and advanced technologies.
It will become increasingly difficult to attract business investment to the NT and the number of people deciding to leave the Territory can be expected to accelerate further, creating additional problems for an economy and society already facing daunting challenges.
Budget Paper number 2 outlines in general terms the risk to NT Budget sustainability by erosion of revenue. This refers to the ongoing decline in the ability to generate sufficient revenue to cover expenses. This can occur as a result of a lack of economic policies and strategies aimed at building the Territory economy.
The Budget is particularly deficient in this area.
Such policy changes depend on the building and implementation of major strategies to promote economic development and the growth and diversification of the industrial base.
A substantial effort was attempted to do this when the Territory Economic Reconstruction Commission was established by the NT government in May 2020.
It remains the only major effort to identify economic development strategies, along with their implementation by a Territory government.
However, successive Territory governments have shown themselves to be incapable of further developing and implementing these strategies.
This is the case with the current CLP government.
There are four major resources that power economic development and growth. They are (1) Resource Endowments, (2) Highly Skilled People, (3) Investment and Technology and (4) 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.
It is becoming an Australian economic disaster that these fabulous resources are not being utilised.
Compared with other jurisdictions in Australia, it is currently 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.
These disadvantages are preventing the development of such abundant, superb resources for the benefit of all Australians.
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 – skilled people.
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.
This is evident in the Northern Territory.
Many now believe that while the more traditional foundation industries are important there also needs to be a Government focus on kick-starting advanced manufacturing, which is becoming increasingly and rapidly important in the international economy.
These industries are essentially knowledge based and concerned with the innovation of high-end technology products in almost all established and evolving industries.
Such sectors can locate almost anywhere because they are computer driven. What they need is high quality technical and computer based skills. There is a huge export potential in such knowledge driven industries. Exports are growing rapidly.
Advanced manufacturers share a number of important characteristics.
They are globally oriented. They produce new, innovative products with high levels of design. These products are technologically complex, reliable, affordable and available.
They are underpinned by a high component of intellectual property control and sophisticated, state of the art computer based skills and systems.
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.
If the Northern Territory is to develop a viable, competitive, forward-looking and potent manufacturing sector it will require far more strategic understanding and involvement by in establishing collaborative partnerships with industry.
There remain the big questions as to whether the Government has the ability, commitment and resources available, to implement such policies.
Given the Budgetary position that the Labor and now Finocchiaro governments have put the Territory in this task has been made far more difficult, if not almost impossible, for a number of years.
Irresponsible government financial management and a lack of policy development, understanding, vision and detail, can fatally derail a bright and prosperous future for the Territory and Australia as a whole.
The Alice Springs News has offered the right of reply to Treasurer Bill Yan.
PHOTO: The art gallery, or whatever it will look like, is in the NT Budget – again.
Dr Don Fuller holds a first class Honours degree and PhD in economics from the University of Adelaide and has worked as a 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. Dr Fuller was also an adviser to the former CLP MLA Maralampuwi Francis Xavier, was briefly the senior private secretary to Chief Minister Paul Everingham, and is a former member of the CLP and the ALP.
UPDATE May 20, 2025, 3:20pm:
ED – Whatever the NT Government is doing on the law-and-order front, it ain’t working.
According to the latest available government statistics, in March this year there were 226 crimes against the person, seven more than in March 2024.
There were 421 crimes against property, 115 more than in March last year.
The March 25 numbers include 132 domestic violence related assaults, 102 alcohol related assaults and seven sexual assaults, six more than last year.
"The Finocchiaro CLP Government" – this is how every single media handout from the government starts – came to power at 10am on Monday, September 9, 2024 with the declaration of the results for the 2024 Territory Election.
UPDATE May 20, 2025, 6:30pm:
The Northern Territory receives a significantly higher per capita share of GST revenue compared to the rest of Australia. The NT's per capita relativity is 4.66, meaning they receive $4.66 for every $1 they contribute to the GST pool. This results in a per capita GST share of approximately $17,605, more than double Tasmania and almost seven times Western Australia.
The NT receives over five times the national average.
The Grants Commission takes into account the higher cost of service delivery between the States and Territories, the lower level of infrastructure development, and especially in the case of the NT, the need to improve delivery of services to remote Aboriginal communities.
However, there is no legal requirement for the NT to spend the money in the manner identified by the Commonwealth Grants Commission and the NT has come under increasing criticism for not spending sufficient funding to overcome Aboriginal disadvantage.
Rather, governments have directed funding received from the Commonwealth Grants Commission into urban centres for local political purposes. It has been estimated that $800 million meant for Aboriginal disadvantage has been misdirected by NT governments.
Don Fuller