The flip side of the coin

COMMENT by ALEX NELSON

 

A very interesting segment from the article “The lighter side of lawmaking”, published in the Alice Springs News on 11 August, 2011, is repeated below:

Shadow Treasurer John Elferink says under Labor, the Territory’s net debt has blown out to $6.7billion, including liabilities. A dollar coin weighs 9 grams, is 25mm in diameter and 3mm thick. There are 111 dollar coins in a kilo, 111,111 in a tonne.

He says the Territory’s debt takes on mind-boggling proportions when considering:

– It would take $2.2million to fill a 20 tonne road train trailer and $6.7million to fill a three trailer road train.

– It would take 1000 road trains – extending about 50km – to haul the Territory’s debt plus liabilities.

– A $1 coin covers an area of about 500mm square and it would take $2million to fill 1km square.

– Darwin’s area is 112km square. Placing all our dollar coins within Darwin’s footprint would make a stack 90cm high.

– Stacked on the Parliament House footprint, which is 12,900 metres square, the Territory’s debt with liabilities would make a stack 7.8km high.

– Joined end to end, the $6.8billion debt with liabilities in dollar coins would stretch 167,500km – over four times around the world.

– Under Labor, the Territory has accumulated a mountain of debt – approximately $29,000 for every man woman and child and $56,000 per taxpayer.

Says Mr Elferink: “The Labor Government is addicted to spending – and Territory taxpayers are paying.”

John Elferink’s hammering of the current NT Labor Government on the issue of net Territory government debt is yet another issue that has a long pedigree in recent NT history.

Mr Elferink – who, incidentally, first joined the Alice Springs Young CLP branch in January 1987 (I was in attendance at the meeting and still have the minutes) – might be interested to read the Viewpoint article entitled “ALP’s tired old story still going strong” by former CLP Chief Minister Marshall Perron, published in the Centralian Advocate edition of 23-24 April 1991.

The points made in this article published two decades ago, especially about the need for capital works projects, sounds awfully familiar in the current debate; it’s just that the boots are now being worn on the other feet!

 

“Opposition leader Brian Ede has made a quiet start to his term in Labor’s top job and he had me and others fooled into thinking the new broom was preparing to sweep clean.

But the resurrection of the same tired story about the NT’s per capita debt seems to show that new ideas in the Labor camp are few and far between.

Mr Ede’s contention that per capita debt is some sort of problem is misleading, irrelevant and highlights the fact that Mr Ede still doesn’t understand government finances.

Government debt is incurred to build schools, roads, hospitals, police stations and other important items of capital works.

These items are built with debt because it would be inequitable for the taxpayer of today to pay up front for assets which will be used for decades.

Any reasonable person will agree – except Mr Ede, who appears to be suggesting that if we build a $5 million school the local parents should pay a one-off levy of $20,000 each to pay for it.

So that is why we have debt. Next question – why is Territory per capita debt relatively high in comparison with the states?

Simply because at self-Government, less than 13 years ago, we did not have the facilities the States enjoyed and with the full approval of both Coalition and Labor treasurers over that period we embarked on a capital works program to bring our facilities up to scratch.

What the states have built up over two centuries we have had to build up in just over a decade. That’s why our per capita public sector debt is relatively high.

So why is it not the problem Mr Ede says it is? Well, this is the bit Mr Ede never tells you about.

The Grants Commission, a Federal Government body, has assessed the cost to all states and Territories of delivering services to the public and it recommends distribution of Federal funding on that basis.

Because of the difficulty of delivering services to so few people scattered across a sixth of Australia, the NT rightly gets about five times as much in per capita funding as do the heavily populated states, NSW and Victoria.

So while we have a slightly higher per capita debt than Victoria we have a far greater ability to pay for it.

To illustrate this in simple terms, imagine two people. One has a $100,000 mortgage and earns $50,000; the other has an $80,000 mortgage but earns just $20,000 a year.

The one with the $100,000 mortgage has a higher per capita debt. But everyone except Mr Ede would agree the person with the low income is the one with the problem!

If Mr Ede wants to talk about governments with financial problems he can tell how his Labor mates have almost bankrupted WA, Victoria and SA.

But in the NT’s case we use less of our income to pay debts than any State but Queensland, our financial position is sound and the Estimates Review process is ensuring future funding shortfalls caused by the Federal Government’s inability to run the economy are addressed before they become a problem.”

Perron’s reference to the Estimates Review process in the final paragraph is especially noteworthy in light of current circumstances.

Perron presented the Report of the Northern Territory Government Estimates Review in the NT Legislative Assembly on 23 April, 1991 – the same day as the publication of the article reproduced above.

It introduced sweeping changes across almost the whole of the NT Public Service and government authorities aimed at sharply reducing costs and increasing revenue for the NT Government within the context of a worsening national economic recession (infamously described by then Federal Treasurer Paul Keating as “the recession we had to have”).

In particular one’s attention can be drawn to – at first glance – a rather bland and non-specific statement located under the banner for Lands and Housing: “The Government’s overall involvement in housing will be reduced and available resources directed primarily to those in need.”

Here we find, in light of subsequent history, the origin of the current chronic shortage of land release for urban development across the Territory, especially in Central Australia, through which the NT Government has maximised its revenue derived from stamp duty.

But that’s another story.

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