The Northern Territory will return to surplus earlier than previously forecast however debt levels will continue to grow before then, in a budget revealed as Chief Minister Michael Gunner announced his surprise resignation.
The better-than-expected prognosis is largely due to factors beyond the government's control, including a surge in consumer confidence across the country and multi-billion corporate investments in several major projects in the NT.
In his third budget as treasurer, Mr Gunner said the NT was on a path to surplus after staring down a series of fiscal and economic challenges.
"Despite the extraordinary pressures placed on the budget in recent years, from the construction downturn, to increased demand for government services, and the fiscal hit from COVID-19 … the budget position is better this year," he said.
The deficit for the upcoming financial year is expected to max out at $1.1 billion — a $105 million improvement on forecasts made last year.
By the end of the forward estimates period in 2025-26, the deficit is set to fall to just $17 million, with a small surplus anticipated the following year.
"That all comes down to one word: confidence – confidence in the state of our economy today, and confidence in our future," Mr Gunner said.
How big will debt levels get?
The Territory's net debt is expected to reach $8.7 billion in the upcoming financial year – about $1.45 billion better than anticipated a year ago.
It is forecast to peak at $9.3 billion by the end of the forward estimates, which will equate to a net debt-to-revenue ratio of 121 per cent.
While the peak debt figure is an improvement of almost $2 billion compared with last year's forecast, taxpayers will still have to cover an annual interest bill of more than half a billion dollars by 2025-26.
Why are the budget books looking better?
The biggest factor in the budget's improved bottom line is a massive surge in GST projections.
An extra $2.4 billion in GST revenue is set to spill into the NT's coffers over the next four years, largely because consumers across the country opened their wallets following the easing of COVID restrictions.
Despite the heavy reliance on GST revenue, which makes up almost half of the NT's revenue, Mr Gunner said the NT was adopting a conservative approach by using forecasts about $200 million below the Commonwealth's GST projections.
In addition to the GST boost, the government's own-source revenue from mining royalties and taxes is expected to be $122 million better off in the current financial year.
This is largely due to higher-than-expected conveyance duty revenue from increased residential property sales and one-off large commercial investments, including the sale of Darwin's biggest shopping centre at Casuarina.
Own-source revenue from taxes on employers, gambling and motor vehicles is expected to dip slightly next financial year and then remain stable over the forward estimates.
Where is the money going?
The government has announced new operational commitments of $663 million over the forward estimates period.
Extra money is being set aside for a range of core services that have been overwhelmed in recent times, including:
- $60 million and $7.5 million over the current and upcoming financial years to deal with COVID-19 demand pressures at Royal Darwin Hospital
- $13.5 million and $14.4 million over the current and upcoming financial years to support increased capacity at the Darwin Correctional Centre
- $8 million per year for youth detention services
- $6.1 million per year to increase police numbers and $4.1 million for remote policing
- $3.2 million per year to implement the Aboriginal Justice Agreement
Funding has also been allocated for a range of capital projects, including:
- $100 million per year over the next two years to progress Territory-funded capital projects
- $60 million over six years to install electricity lines underground Darwin
- $15 million over the forward estimates to facilitate land acquisition to progress the Adelaide River Off-Stream Water Storage project
Other funding initiatives aimed at attracting new industries and jobs include:
- More than $4 million in each of the next three years to accelerate hydrogen industry development and biosecurity and aquaculture activities
- $6 million over the next two financial years for new and upgraded port facilities at Gove
- $3.2 million per year for enhanced water assessment and planning
What savings measures have been locked in?
The only savings measure implemented as part of this year's budget relates to a controversial four-year wage freeze for the public service.
Several thousand public servants are yet to agree to the wage freeze, however $108 million in savings has been baked into the budget over the forward estimates.
It means that if the workers refuse to sign up to the deal, alternative savings measures may be needed.
However, Mr Gunner flagged a potential shift in government policy if the budget bottom line continues to improve.
"If we can lock these (improvements) in, and continue to make gains in future budgets, then hopefully the current wages policy could be revisited down the track," he said.
"This cannot happen right now, but it could happen in the future if we stay the track."
What about the economy?
The NT's economy is forging ahead at a greater speed than previously anticipated.
State final demand is expected to grow by 8.8 per cent in the current financial year, before shifting down to 5.4 per cent next financial year, and going into negative growth by the end of the forward estimates.
The surge in economic growth is largely due to private sector investment, including the construction phase of Santos' US$3.6 billion offshore Barossa gas project.
Other major construction investments include Core Lithium's Finniss project and Crowley's US defence fuel storage facility at East Arm.
The budget does not include the $2.6 billion promised over the next 10 years by the Federal Government for a sustainable development precinct at Middle Arm.
After population growth declined in recent years, it is set to grow by 0.6 per cent next financial year, and by 0.9 per cent in 2025-26.
Unemployment is forecast to rise to 4.2 per cent next financial year, up from 3.9 per cent this year, before hovering at 4.4 per cent for the remaining three years.
The consumer price index, which shows the level of inflation in the NT, is expected to rise by 5.7 per cent this financial year, largely due to fuel, housing and food price increases.
However, it will reduce to 3.1 per cent in the upcoming financial year, and 1.7 per cent by the end of the forward estimates.
Mr Gunner said the overall fiscal and economic outlook shows the potential of the NT.
"We are leaving the Territory's boom-and-bust days behind us, we are leaving the days of FIFO-led jobs growth behind us, and we are doing that by setting strong foundations for long-term, sustainable and widespread growth," he said.
What have observers and critics had to say?
Credit ratings agency Moody's, which previously downgraded the NT's rating as debt levels began to rise and GST revenue dropped, was positive about the budget outlook.
The agency said the NT's revenue recovery had "exceeded initial expectations", but chalked up the improvements to external factors including the GST increases and higher commodity prices.
Vice president John Manning described the GST support for the NT as "a reflection of the territory's strong revenue ties – and strategic importance to – the Commonwealth".
But he said it remained to be seen if the government's budget repair promises would deliver the savings baked into the forward estimates.
Country Liberal leader Lia Finocchiaro accused Mr Gunner of using his resignation announcement to distract from a budget she described as "visionless".
She said the budget failed to address crime rates and cost of living pressures, criticising the recent scrapping of a solar rebate scheme and the public service wage freeze.
"This is a quitter's budget — a budget that quits on Territorians and also sees Chief Minister Michael Gunner walk away from his duties in the middle of his budget speech," Ms Finocchiaro said.