The Northern Territory’s Net Debt will increase from $2.7billion to $6.2billion over the forward estimates period unless there is a significant change in the Government’s financial direction.
Releasing the Renewal Management Board’s progress report today Chief Minister Terry Mills and Treasurer Robyn Lambley said in a media release the board’s progress report identifies the extent of the Northern Territory’s debt position and the capacity of that debt to drain revenue from future capital and service delivery programs.
They say the report shows that interest payments, which totalled $239million last financial year, will blow out to $460million at current interest rates by the end of Forward Estimates in 2015-16.
“The pace of the Territory’s financial outlays significantly out-strip revenues with the $767million fiscal imbalance projected in the May 2012-13 Budget increasing to $867million three months later in the Pre-Election Fiscal Outlook,” they say.
“Legacy issues continue to create uncertainty around the Territory’s financial position. These include:-
• A $35million black hole in the Department of Children and Families budget brought on by unfunded staff recruitment.
• A $25million blow-out in the Correctional Services budget caused by high growth in prisoner number.
• An expectation Youth Justice initiatives will require an additional $35million over four years.
• Anticipation of a ‘large’ additional expenditure on general asset maintenance including police facilities and roads.
“The report finds unfunded or anticipated spending by departments means the Territory’s fiscal imbalance would blow-out to $981million in 2012-13, which represents 18 per cent of total revenue.
“The report identifies that a reduction in the Territory’s debt between 2003-04 and 2007-08 was based around larger than expected Commonwealth revenues and not through planned Net Debt reductions by Government.
“The NT is now in a seriously weakened financial position. While hindsight clearly indicates that the NT could have been in a very strong financial position had it saved more of the large increases in GST revenues and been more moderate in the capital expenditures that were undertaken, that is in the past and nothing can be done about it.
“There is an enormous amount of work to be done to bring the Territory budget back into a balanced or surplus position,” says Mr Mills.
“It is a key goal of my administration to restore the Territory’s budget to a position of strength to maximise service delivery at the front-line and pave the way for capital expenditure when required.”
Mrs Lambley says interest payments are a millstone around the neck of every Territorian.
“Interest payments approaching half-a-billion dollars every year will be completely unsustainable and divert money away from Government’s core function,” she says.
“The board’s findings will inform and help shape the development of the December 4 Mini Budget.”
Meanwhile Opposition Leader Delia Lawrie says in a media release the progress report released by the board is a blueprint of the government’s plans to send the Territory backwards.
“The CLP Government has put this document together as part of their plan to sack public servants and slash services to Territorians to pay for their unfunded election commitments,” Ms Lawrie says.
“This document lacks credibility. It has been constructed by hand-picked mates of Chief Minister Terry Mills and is not endorsed by Treasury.
“A disclaimer at the front states: ‘The views expressed in this report are those of the RMB and not necessarily those of the Government. Unless otherwise stated, all financial estimates and projects in this report refer to the Non-Financial Public Sector (NFPS) and, while largely based on NT Treasury information, are in some instances estimated by the [board]‘.
“One of the report’s authors has been a subject of a Public Accounts Committee report before and was found to have artificially amended Territory Budget figures.
“The CLP Government has made it clear that they are more concerned about profits than people,” Ms Lawrie say.
“The Labor Government had a responsible Budget and financial position with a step down in deficit across the forward years through fiscal management of staffing caps, efficiency dividends and a reduction in the capital works program.
“Labor deliberately went into deficit after eight surplus budgets in a row, shaving $582 million off debt. We took responsible action to keep Territorians in jobs, businesses open and the economy in growth to ward off the worst effects of the Global Financial Crisis.
“In the 11-12 Treasurer’s Annual Financial Report tabled in Parliament last night, the audited account of the Territory’s finances shows an improvement in deficit position to $425 million.
“The Territory’s Treasurer has admitted that the financial situation ‘isn’t dire’. Our economy is the envy of the nation – predicted to grow at the fastest rate over the next five years and credit ratings agency Moodys confirmed our AA1 status with a stable outlook in August.
“At a time when the Territory is poised to benefit from economic growth, the new government is putting it at risk with job cuts, service cuts, plans to sell public assets and attack visionary projects like the Marine Supply Base because they need to fund a raft of irresponsible unfunded election commitments,” says Ms Lawrie.
Power & Water in dire trouble
Meanwhile Ms Lambley says the government owned Power Water Corporation is in dire financial trouble and remedial actionis urgently needed to save the corporation.
The board report has brought to light “our worst fears” having found that it is the single largest contributor to the Territory’s fiscal imbalance problem and growing mountain of debt.
“The report says a review of PWC has revealed a significant shortfall in its ability to meet operating expenses and fund asset replacement.
“The [board] also says the former Government repeatedly ignored independent advice and warning signs that pricing adjustments to tariffs, in line with the rest of Australia, were required to keep PWC in a sound financial position.
“Instead, it found the former Government borrowed hundreds of millions of dollars to ‘prop up a deteriorating situation’.
“This means that PWC was actually making a significant loss when reporting a profit, allowing the former Government to create the illusion to Territorians that price increases to tariffs were not needed.
“The reality is price increases are needed to enable PWC to operate without this Government using tax-payers money to act as a ‘lender of last resort’.
“If we don’t address this issue now, price rises will be considerably higher in the future.”