Fiscal and Economic Outlook - Department of …The following provides an outline of the...

Fiscal and Economic Outlook2007-08

Budget Paper No. 2

2007-08 budget

Table of Contents UnderTreasurer’sCertification 3

1 Overview 5

2 FiscalPositionandOutlook 9

3 FiscalStrategy 27

4 BudgetInitiatives 35

5 ImplicationsofDemographicChangefortheTerritory 45

AppendixA:MeasurementofAustralianOfficialPopulationStatistics 57

AppendixB:NTG-CDUPopulationProjectionsModel 59

6 IndigenousExpenditureReview 63

7 AustralianGovernmentGrants 69

8 TerritoryOwn-SourceRevenue 83

9 CommercialIssues 99

10 EconomyOverview 113

11 UniformPresentationFramework 129

Appendix:ClassificationofEntitiesinthe 149 NorthernTerritoryPublicSector

Glossary 151

Inthisbook,theterm‘state’or‘states’includestheAustralianCapitalTerritoryandtheNorthernTerritory,unlessthecontextindicatesotherwise.

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2007-08 budget

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Under Treasurer’s CertificationInaccordancewiththeprovisionsoftheFiscal Integrity and Transparency Act,IcertifythatthefinancialprojectionsincludedintheMay2007BudgetdocumentationwerebasedonGovernmentdecisionsthatIwasawareoforthatweremadeavailabletomebytheTreasurerbefore24April2007.TheprojectionsarepresentedinaccordancewiththeUniformPresentationFramework.

JenniferPrince

UnderTreasurer

26April2007

2007-08 budget

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OverviewThisBudgetPaperpresentswholeofgovernmentfinancialinformationandrelatedissuesandbringstogetherinformationincludedinotherBudgetPapersinaconsolidatedform.ItalsomeetstherequirementsoftheFiscal Integrity and Transparency Act(FITA)andcomplieswiththeUniformPresentationFramework,asagreedbyallAustralianjurisdictions,whichisbasedonthereportingstandardsoftheAustralianBureauofStatistics(ABS)GovernmentFinanceStatistics(GFS).

Fiscalhighlightsinthe2007-08Budgetinclude:

• improvedcashpositionfor2006-07,withallothercashtargetsremainingunchanged;

• operatingsurplusprojectedforallyears;

• fiscalbalancecontinuesonatrendtowardssurplus,inlinewiththefiscalstrategytargetofabalanceby2012-13;

• contributionof$60millionin2006-07towardstheTerritory’ssuperannuationliabilities;

• capitalinvestmentof$629millionin2007-08atthenonfinancialpublicsector;

• netdebttorevenueratiotofallto42percentby2010-11,asignificantimprovementonthe67percentrecordedin2001-02;and

• netdebtplusemployeeliabilitiestorevenueratiotofallto110percentby2010-11,asignificantimprovementonthe134percentrecordedin2001-02.

Tables1.1and1.2presentstheTerritory’skeyaggregatesatthetimeofthe2006-07Budgetandthe2007-08Budget.

2006-07 2007-08 2008-09 2009-10 2010-11

Estimate Budget ForwardEstimates

$M $M $M $M $M

Cash Outcome

2006-07Budget -56 -40 17 na

2007-08Budget -11 -40 17 34

Operating Result

2006-07Budget 17 -18 -15 4 na

2007-08Budget 31 29 8 15 38

Fiscal Balance

2006-07Budget -105 -98 -56 -35 na

2007-08Budget -71 -96 -41 -32 -10

Net Debt

2006-07Budget 1251 1277 1261 1227 na

2007-08Budget 1225 1245 1225 1186 1129

Net Debt + Employee Liabilities

2006-07Budget 3418 3501 3536 3548 na

2007-08Budget 3820 3911 3933 3949 3939

Source:NorthernTerritoryTreasury.

Chapter 1Chapter 1

FiscalPositionandOutlook

FiscalPositionandOutlook

Table 1.1: Estimated Outcomes – General Government

Table 1.1: Estimated Outcomes – General Government

0

0

� Overview

2007-08 budget

2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M

Net Debt

2006-07Budget 1776 1804 1794 1770 na

2007-08Budget 1578 1693 1748 1749 1742

Net Debt + Employee Liabilities

2006-07Budget 3943 4028 4069 4091 na

2007-08Budget 4196 4382 4481 4537 4578


Theimprovedcashpositionin2006-07ispredominantlytheresultofincreasedrevenuerelatedtominingroyaltiesandstampdutyonconveyancesandtherevisedtimingofcapitalpayments,largelyrelatedtotheDarwinWaterfront.Thisresultsinanimprovementof$105millionin2006-07comparedwiththatprojectedinMay2006.

Inthe2007-08Budget,theGovernmenthasannouncedthatitwillcontributeadditionalsuperannuationpaymentstooffsettheTerritory’sgrowingsuperannuationliabilities,toreducethissignificantburdenonfutureBudgets.Asthesecontributionsarenotavailableforcurrentspending,anoutcomewhichreflectsthishasbeenusedandisreferredtoasanunderlyingoutcome.For2006-07,theGovernmentexpectstocontribute$60million,resultinginanunderlyingcashoutcomefor2006-07ofan$11milliondeficit.Thiscontributionresultsinanimprovementintheoperatingandfiscalbalancesofaround$4millionfrom2007-08,duetoareductioninthenominalsuperannuationinterest.

TheseunderlyingtargetsforthegeneralgovernmentsectorwillbetheprimarymeasuresadoptedwhenassessingtheTerritoryGovernment’slikelyachievementagainstfiscalstrategytargets.Accordinglyitistheseunderlyingtargets,ratherthantheGFStargets,thatarediscussedintheremainderofthisBudgetPaper.

AmoredetaileddiscussionontheBudgettreatmentofadditionalTerritorysuperannuationcontributionsispresentedinChapter2.

Allotheryears’cashtargetsremainunchangedfromMay2006withtheBudgetstillprojectedtoreturntobalancein2008-09andintosurplusthereafter.Asurplusof$34millioniscurrentlyprojectedfor2010-11.

Theoperatingresulthasimprovedinallyearssincethe2006-07Budget.Thesmallimprovementin2006-07isaresultofincreasedrevenuethathascontributedtotheimprovedcashposition,buthasbeenlargelyoffsetbyincreasedsuperannuationexpensesandaone-offreductionindividends.Neitheroftheseaffectsthecashresult.For2007-08andforwardyearstheimprovementrepresentstheflowoneffectofanimprovedGSTrelativityandthetimingoftherecognitionofpaymentsfromtheAustralianGovernment.By2010-11theoperatingresultisexpectedtobeasurplusof$38million.

Thefiscalbalancehasalsoimprovedsincethe2006-07Budgetconsistentwiththeimprovedcashandoperatingresults.Asshowninthe2006-07Budget,thedeficitpeaksin2006-07and2007-08duetotheTerritory’scapitalcontributionstotheDarwinWaterfrontDevelopmentbutfrom2008-09isexpectedtomovetowardssurplus.Thenetborrowingof$10millionin2010-11indicatesthatthefiscalstrategytargetofbalanceby2012-13willbeachieved.

Table 1.2: Estimated Outcomes – Non Financial Public SectorTable 1.2: Estimated Outcomes – Non Financial Public Sector

7

Theincreaseinnetdebtfrom2006-07throughto2009-10representsthesignificantinvestmentintheTerritory’sinfrastructureovertheforwardyearsinboththeDarwinWaterfrontDevelopmentandthePowerandWaterCorporation,butstillremainsbelowMay2006projections.NetdebtasaproportionofrevenuehasimprovedforboththegeneralgovernmentandnonfinancialpublicsectorsonthatprojectedatthetimeoftheMay2006Budget,droppingto31and42percentrespectivelyby2010-11.Thisislargelyaresultoftheimprovedgeneralgovernmentcashpositionin2005-06andimprovementfor2006-07,whichflowsthroughtoforwardyears.Itrepresentsasignificantreductiononthe67percentrecordedforthenonfinancialpublicsectorin2001-02.

Netdebtplusemployeeliabilitieshaveworsenedsincethe2006-07Budgetasaresultofrevisedactuarialsuperannuationprojections,predominantlyrelatedtotheCommonwealthSuperannuationScheme.Despitethisincreaseinabsoluteterms,themeasureofnetdebtplusemployeeliabilitiesasaproportionofrevenueforthenonfinancialpublicsectorisprojectedtocontinuetofallfromthe134percentrecordedin2001-02to110percentby2010-11.Asimilartrendisprojectedforgeneralgovernment.

Thefollowingprovidesanoutlineofthefiscal-relatedchaptersinthisBudgetPaper.

• Chapter2providesamoredetaileddiscussionofthemovementsduring2006-07and2007-08andacrossthethreeforwardestimateyears.ItalsoincludesaStatementofRisks,asrequiredbytheFITA.

• Chapter3outlinestheTerritoryGovernment’sFiscalStrategy,settingoutitsmedium-termfiscalobjectivesandfinancialtargetsandprovidesadetaileddiscussionofachievementagainstthetargets.The2007-08FiscalStrategyandunderlyingtargetsremainunchangedfromthe2006-07targets.

• Chapter4outlinesthenewandexpandedexpenditureandrevenueinitiativesincludedinthe2007-08Budgetcontributingtotheoutcomessetoutabove.

• Chapter11providesdetailedconsolidatedfinancialstatements,bysector,onaUniformPresentationFrameworkbasis,includingtablespresentinggeneralgovernmentsectorexpensesbyfunction,generalgovernmentsectortaxesandLoanCouncilAllocations.ThesefinancialstatementsformthebasisofallanalysespresentedinthisBudgetPaper.

Fromaneconomicperspectivethehighlightsfor2007-08are:

• forecastgrossstateproduct(GSP)growthof3.7percent;and

• economicgrowthunderpinnedbysolidresidentemploymentandpopulationgrowth.

2002-03 2003-04 2004-05 2005-06 2006-07e 2007-08f

% % % % % %

RealGSP 0.2 0.2 6.0 7.5 7.2 3.7

ResidentEmployment -0.1 -2.2 -2.0 4.0 4.4 2.3

Population1 0.1 0.3 1.2 2.0 1.6 1.4

DarwinCPI2 2.2 2.1 1.6 2.6 4.4 3.0

e:estimatef:forecast1 AsatDecember,annualpercentagechange(compareslatestquarterwiththesamequarterin

previousyear).2 AsatDecember,yearonyearpercentagechange(compareslatest12monthstoprevious

12months).

EconomicOutlook

EconomicOutlook

Table 1.3: Summary of Territory Economic Indicators


8 Overview

2007-08 budget

GSPgrowthof3.7percentisforecastfor2007-08,asbusinessinvestmentreturnstomorenormallevels,andthecontributionfromexportspeak,asproductioncapacityisachieved.

Residentemploymentgrowthof2.3percentisforecastfor2007-08underpinnedbymajorprojectssuchastheDarwinWaterfrontDevelopmentandtheBlacktiptoAmadeuspipelineaswellasresidentialconstructionactivity.Thenumberoffly-infly-outworkerswilldeclineandthecompositionofemploymentisexpectedtochangesubstantially,resultinginlowerrealgrowthinemploymentincome.

Residentpopulationgrowthof1.4percentisforecastfor2007and2008.Thisrepresentsmoderationfromthestrongergrowthratesof2.0and1.6percentin2005and2006respectively,butneverthelessremainsabovenationalgrowth.Territorypopulationgrowthinboth2005and2006wasinfluencedbymajoremployment-generatingmegaprojectswhichledtopositivenetinterstatemigration.Withthecompletionofthesemegaprojects,Territorypopulationgrowthisforecasttomoderate.

GrowthintheDarwinconsumerpriceindex(CPI)issettomoderatefromthestronggrowthof4.4percentreportedfor2006.TheDarwinCPIisestimatedtoincreaseby3percentin2007andby2.5percentin2008.Themoderationin2007and2008isdrivenbylowergrowthinhouseprices,loweraveragecrudeoilpricesandthelastinflationaryeffectsofCycloneLarry(onbananaprices).

WagesgrowthintheTerritoryisexpectedtomoderatein2007asmajorprojectssuchastheAlcanG3refineryexpansionarecompleted,andgrowthinpublicsectorwagesisconstrainedbytheTerritoryGovernment’spublicsectorwagespolicy.

Chapter10presentsanoverviewoftheeconomy,withgreaterdetailprovidedintheNorthernTerritoryEconomyBudget-relatedpaper.

Inadditiontothespecificchaptersonthefiscalandeconomicoutlook,thefollowingchaptersalsoprovideadditionalinformationanddiscussionabouttheTerritory’sdemography,revenuesourcesandcommercialissues.

• Chapter5providesananalysisontheTerritory’sdemographicchangeanditsimplicationsforthefuture,withparticularemphasisontheeffectsofageing.

• Chapter6providesfurtheranalysisontheresultsoftheIndigenous-relatedexpenditureandrevenuereviewconductedin2006.

• Chapter7providesinformationonrevenuefromtheAustralianGovernment,includingtheframeworkwithinwhichitisprovided.Thisincludesadiscussionofnationaltaxreformissues,withanemphasisonGSTrevenue.

• Chapter8presentsinformationontheTerritory’sownsourcerevenue,includingcomparisonswithotherAustralianjurisdictions,bytaxtype.ThischapteralsocomplieswiththeFITAbyincludingaStatementofTaxExpenditures.

• Chapter9outlinesanumberoftheGovernment’scommercialissuesincludingadiscussionofcommunityserviceobligationpaymentsto,anddividendsandtaxespaidby,Territorygovernmentbusinesses.ThechapteralsocomplieswiththeFITAbyincludingadiscussionofcontingentliabilities.

IssuesinPublicFinance


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Fiscal Position and OutlookThischapterpresentstheupdatedfiscalprojectionsforthecash,operatingandfiscalbalancetargets,togetherwiththeassetsandliabilitiesofboththegeneralgovernmentandnonfinancialpublicsectorsfor2006-07throughto2010-11.ItprovidesanexplanationofthemovementssincetheMay2006Budget,analysisoftheBudgetandForwardEstimateyears,alongwiththeidentificationofpossibleriskstotheTerritoryBudgetandForwardEstimates.

Keytargetsforexpenditureandrevenue,includingthecashoutcome,operatingresultandfiscalbalance,arebasedontheexpectedoutcomesforthegeneralgovernmentsector.

Inregardtotargetsfornetdebtandnetdebtplusemployeeliabilities,thefocushastraditionallyturnedtothenonfinancialpublicsector(theconsolidatedsectorforgeneralgovernmentandpublicnonfinancialcorporations).ThisisonthebasisthattheTerritoryretainsmostofitsassetsandliabilitiesinthegeneralgovernmentsector,whereasotherjurisdictionsholdasignificantproportionoftheirassetsandliabilitiesinthepublicnonfinancialcorporationsector.

TerritoryHousinghashistoricallybeenincludedinthepublicnonfinancialcorporationsectorduetoitsbreadthoffunctionsincludingtheprovisionofpublichousing,governmentemployeehousingandsharedequityloans.However,TerritoryHousingwillnowhaveprimeresponsibilityforIndigenoushousingpolicyandprograms,alongwiththedeliveryandmanagementofpublichousingtoremotecommunities.Giventhisshiftinfocus,TerritoryHousinghasbeentransferredintothegeneralgovernmentsector,whileretainingitsstatusasagovernmentbusinessdivision.The2006-07Estimate,2007-08BudgetandForwardEstimateshaveallbeenpreparedonthisbasis.

Giventhischange,targetsfornetdebtandnetdebtplusemployeeliabilitiesareshownforboththegeneralgovernmentandnonfinancialpublicsectors.

Chapter 2 Chapter 2

�0 Fiscal Position and Outlook

2007-08 budget

Table2.1presentsthekeyfiscalaggregates,bysector.

2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M

GENERAL GOVERNMENT

Operating Statement

Revenue 3198 3339 3445 3509 3632

Less:Expenses 3168 3311 3437 3494 3595

Net Operating Balance �� 2� 8 �� 8

NetAcquisitionofNonFinancialAssets 102 124 48 47 48

Net Lending/Borrowing (Fiscal Balance)

- 7� - �� - 4� - �2 - �0

Cashflow Statement

OperatingReceipts 3207 3324 3443 3502 3626

Less:OperatingPayments 2895 3066 3220 3260 3364

NetCapitalPayments 214 264 222 224 227

FinanceLeases 48 34 1 1 1

SuperannuationContribution 60

Cash Surplus (+) / Deficit (-) - �� - 40 0 �7 �4

Balance Sheet

TotalAssets 7261 7396 7468 7575 7705

TotalLiabilities 4904 4962 4972 5018 5064

NetWorth(Assets-Liabilities) 2357 2434 2496 2557 2641

Net Debt � 22� � 24� � 22� � �8� � �2�

Net Debt + Employee Liabilities � 820 � �� 4� � ��

NON FINANCIAL PUBLIC SECTOR

Balance Sheet

TotalAssets 7710 7939 8081 8233 8422

TotalLiabilities 5352 5505 5585 5676 5781

NetWorth(Assets-Liabilities) 2357 2434 2496 2557 2641

Net Debt � �78 � �� 748 � 74� � 742

Net Debt + Employee Liabilities 4 �� 4 �82 4 48� 4 ��7 4 �78


The2007-08Budgetshowsanimprovingfiscalpositionasaresultofincreasedown-sourcerevenuelinkedtotheeconomicgrowthintheTerritory,includingthecommodityboom,increasedrevenuefromtheAustralianGovernment,largelyasaresultoftheimprovementintheTerritory’sGSTrelativity,andongoingexpenditurerestraintbytheTerritoryGovernment.Theoperatingbalanceisinsurplusinallyears.Theestimatedcashdeficitin2006-07islowerthanpreviouslyprojected.

FiscalOutlookFiscalOutlookTable 2.1: Key Fiscal

AggregatesTable 2.1: Key Fiscal

Aggregates

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Allotheryears’cashtargetsremainunchangedwiththeBudgetstillprojectedtoreturntobalancein2008-09andintosurplusthereafter.Asurplusof$34millioniscurrentlyprojectedfor2010-11.By2010-11theoperatingresultisexpectedtobeasurplusof$38million.

Thenetborrowingin2010-11isestimatedtobe$10million,indicatingthatthefiscalstrategytargetofbalanceby2012-13willbeachieved.Consistentwiththeestimatesinthe2006-07Budget,therearesignificantnetborrowingsin2006-07and2007-08asaresultoftheTerritory’scapitalcontributionstotheDarwinWaterfrontDevelopment.However,from2008-09thefiscalbalanceisexpectedtomovetowardsasurplus.

TheinclusionofTerritoryHousingwithingeneralgovernmenthashadamarginaleffectonthegeneralgovernmentcashandaccrualBudgetandforwardestimatestargets.OvertheBudgetandforwardestimatesperiod,itresultsinanaverageannualcashandfiscalbalanceimprovementofapproximately$7millionwithacorrespondingreductioninthenetoperatingbalance.Theimprovedeffectin2006-07relatestoacarryoverof$8.5millioninexpenditureto2007-08.Thisresultsinacorrespondingworseninginthe2007-08effect,togetherwithagreatercapitalspendingrequirementin2007-08.

Netdebtfor2006-07hasreducedsignificantlysincethe2006-07Budgetduetothesurplusachievedin2005-06andtheprojectedimprovementinthecashoutcome.Overtheforwardestimateperiod,netdebtforthegeneralgovernmentsectorisexpectedtopeakat$1245millionin2007-08,asaresultoftheDarwinWaterfrontDevelopment,beforedecliningto$1129millionby2010-11.

Forthenonfinancialpublicsector,netdebtpeaksin2009-10at$1749millionbeforeimprovingto$1742millionby2010-11.Theincreasethroughto2009-10islargelyduetothesignificantinvestmentofaround$600millionincapitalbythePowerandWaterCorporationovertheforwardyears.Despitethisincreaseinabsoluteterms,whenmeasuredasaproportionofrevenuethereisanimprovementfrom45percentin2007-08to42percentin2010-11.

Netdebtplusemployeeliabilitiesissettoincreaseto$4578millionin2010-11forthenonfinancialpublicsector,withsmallerincreasesexpectedforgeneralgovernmentduetothedecliningnetdebtforthissector.

TheincreaserelatesalmostentirelytotheTerritory’ssuperannuationliabilitywhichhasbeenrevisedupwardsbytheactuaryfollowingcompletionofthetriennialmajorreviewfortheCommonwealthSuperannuationScheme(CSS).However,themeasureofnetdebtplusemployeeliabilitiesasaproportionofrevenueisstillexpectedtoimproveovertheforwardestimateperiod.

Table2.2setsoutthevariationsintheestimatesfor2006-07and2007-08sincetheMay2006Budget.


2007-08 budget

2006-07 2007-08Estimate Budget

$M $M

200�-07 Budget

CashOutcome -56 -40

OperatingResult 17 -18

2007-08 Budget

CashOutcome -11 -40

OperatingResult 31 29

Variation

CashOutcome 45

OperatingResult 14 47


Theimprovedcashpositionin2006-07islargelytheresultof:

• increasedtaxationrevenueof$31millionduetoincreasedeconomicactivity,predominantlyrelatedtostampdutyonconveyances;

• increasedminingroyaltiesof$16millionassociatedwithincreasedminingproductionandcommodityprices;and

• revisedtimingofpaymentsfortheDarwinWaterfrontbetween2006-07and2007-08.

Thisresultsinanimprovementof$105millionintheprovisionalGFScashoutcomein2006-07,comparedwiththatprojectedinMay2006butisoffsetbyacontributiontowardsfuturesuperannuationliabilitiesof$60million.ThesecontributionswillbeinvestedintheConditionsofServiceReserveinvestmentportfolio,whichisincludedinthegeneralgovernmentsector.Asthesefundsarenotavailableforcurrentspending,anunderlyingcashoutcome,whichreflectsthecontributiontosuperannuation,hasbeenusedasthemainoutcomeindicator.Onthisbasis,theprojectedcashdeficitis$11million.FurtherinformationontheadditionalcontributionsandtheirBudgettreatmentisdiscussedinmoredetailbelow.

Theoperatingresulthasimprovedin2006-07,althoughnottotheextentofthecashoutcome,duetoincreasesinsuperannuationexpensesfollowinganactuarialreassessmenttogetherwithaone-offreductionindividends.Neitheroftheseaffectsthecashresult.Theoperatingbalancein2007-08hasimprovedinallotheryearssincethe2006-07Budget,largelyasaresultoftheflow-oneffectoftheimprovementinthe2007relativityincreasingGSTrevenueandthetimingoftherecognitionofcapitalpaymentsfromtheAustralianGovernment.Theincreaseinsuperannuationexpensesaffecting2006-07alsoflowsthroughto2007-08butislargelyoffsetbytheincreaseinrevenueestimates.

Thefiscalbalancefor2006-07hasimprovedsincethe2006-07Budgetlargelyasaresultoftimingdifferencesincapitalspendingbetween2006-07and2007-08.In2007-08onwards,thefiscalbalanceshowsanimprovingtrendlargelyconsistentwiththenetoperatingbalance.

Table 2.2: General Government Operating

Statement and Cash Flow Statement

Table 2.2: General Government Operating

Statement and Cash Flow Statement

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Since2005aseriesofupdatedactuarialassessmentshasincreasedtheTerritory’sprojectedunfundedsuperannuationliabilityin2010by$900million,from$1.5billionto$2.4billion.ThisisdespitetheclosureofthemajorityoftheTerritory’sdefinedbenefitschemessince1999.Accordingly,inthe2007-08Budget,theGovernmenthasannouncedthatitwillmakeadditionalsuperannuationcontributionsfromBudgetsurplusestooffsettheTerritory’sgrowingsuperannuationliabilitiesinordertoreducethissignificantburdenonfuturebudgets.

TheTerritory’scontributionswillbeinvestedinabroadrangeoffinancialassetswithintheConditionsofServiceReservewhichismanagedbyindependentfundmanagers.ItisanticipatedthatthisinvestmentwillearnareturnequaltotheyieldsonsimilarinvestmentsheldbytheTerritoryGovernment.For2006-07theGovernmentexpectstocontribute$60million,withanyfuturecontributionsbeingdecidedannually.

Ascontributionswillbeinvestedtomeetfuturesuperannuationpaymentsandthereforenotbeavailableforcurrentspending,theyaretreatedaspaymentsinordertodeterminetheunderlyingcashresult.

IntheTerritorythesuperannuationcontributionswillberecordedasageneralgovernmentfinancialassetforthepurposeofmeetingfuturesuperannuationliabilities.Thereforeintermsoftheoperatingstatement,thissuperannuationcontributionreducesthenominalsuperannuationinterestexpensebyanamountequaltoexpectedearningsoncontributionsmade,resultinginanunderlyingimprovementinthenetoperatingbalance.

The$60millioninitialcontributiontowardsthesuperannuationliabilityresultsinanunderlyingcashoutcomeofan$11milliondeficitin2006-07andanimprovementintheunderlyingoperatingresultandthefiscalbalanceofaround$4millionin2007-08andallforwardyears.TheTerritorywilladopttheseunderlyingtargetsfromthe2006-07estimateasitsprimarybudgetmeasures.

BudgetTreatment

ofAdditionalTerritory

SuperannuationContributions

BudgetTreatment

ofAdditionalTerritory

SuperannuationContributions


2007-08 budget

Table2.3setsoutthematerialvariationsinbothcashandaccrualestimatesfor2006-07and2007-08sincetheMay2006Budget.

ChangesSinceMay2006Budget

ChangesSinceMay2006Budget

Table 2.3: Variations to the Cash Flow and Operating Statements Since May 2006

2006-07 2007-08Accrual Cash Accrual Cash

$M $M $M $M200�-07 BUDGET �7.0 - ��.4 - �8.2 - 40.4OPERATING REVENUE/RECEIPTSPolicy-relatedRoadSafetyInitiatives 1.7 1.7 4.1 4.1IncreaseinFirstHomeOwnerConcession -0.6 -0.6 -3.9 -3.9Sub-total �.� �.� 0.2 0.2Non-discretionaryTaxation 32.5 32.5 39.3 39.3GSTRevenue 8.2 8.2 61.1 61.1SpecificPurposePayments 52.7 52.7 47.1 47.1AgencyOwn-SourceRevenue 13.3 13.3 3.2 3.2Interest 18.0 18.0 9.7 9.7MiningRoyalties 15.5 15.5 13.4 13.4TaxEquivalents 5.6 12.0 0.8 1.5Dividends -18.0 -0.3 -4.8 -18.0TransferofTerritoryHousingtoGeneralGovernment 36.4 37.0 36.5 37.1Other 2.7 -2.1 -2.5 -6.8Sub-total ��.� �8�.8 20�.8 �87.�TOTAL OPERATING REVENUE/RECEIPTS ��8.0 �87.� 204.0 �87.8OPERATING EXPENSES/PAYMENTSPolicy-relatedDemandandPriceGrowth 2.9 2.9 22.6 22.6NewandExpandedInitiatives 22.0 22.0 23.2 23.2Sub-total 24.� 24.� 4�.8 4�.8Non-discretionaryCarryoverfrom2005-06 25.7 25.7EmployeeLiabilities 31.0 -4.0 22.7 5.0SpecificPurposePayments 45.7 45.7 31.1 31.1ExpenditureLinkedtoAgencyRevenue 6.4 6.4DepreciationandAmortisation 6.7 7.1Treasurer’sAdvance -30.0 -30.0SuperannuationContribution/Earnings 60.0 -3.6TransferofTerritoryHousingtoGeneralGovernment 38.9 19.6 54.1 34.7Other 4.9 1.0 0.1 -2.9Sub-total �2�.� �24.4 ��.� �7.�TOTAL OPERATING EXPENSES/PAYMENTS ��4.2 �4�.� ��7.� ��.7NET CAPITALCarryoverfrom2005-06 7.0SalesofAssets -13.1 -12.4PurchasesofAssets 8.2 16.6CapitalWorksCash 10.0 15.0SpecificPurposePayments–Capital 6.7 16.0RevisedTimingofWaterfront -26.3 26.3TransferofTerritoryHousingtoGeneralGovernment 0.9 12.3

TOTAL NET CAPITAL - �.� 7�.8

TOTAL VARIATION ��.8 4�.2 4�.7 0.�

2007-08 BUDGET �0.8 - ��.2 28.� - 40.�

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Generalgovernmentoperatingrevenue(accrual)hasincreasedfromthe2006-07Budgetby$168millionin2006-07and$204millionin2007-08.Operatingreceipts(cash)haveincreasedby$187.9millionin2006-07and$187.8millionin2007-08.Thedifferencebetweenthecashandaccrualmovementsislargelyduetothetimingoftaxequivalentsanddividendsreceivedfromgovernmentbusinesses.̀

Themainpolicyvariationsinclude:

• anincreaseinanticipatedrevenueduetoadditionalfinesarisingfromtheRoadSafetyInitiative;and

• theGovernment’scommitmenttoincreasethestampdutyfirsthomeownerconcessionfrom$225000to$350000witheffectfrom1May2007.

Themainnon-discretionaryvariationstorevenuesincetheMay2006Budgetinclude:

• upwardrevisiontoTerritorytaxrevenueof$32.5millionin2006-07and$39.3millionin2007-08,largelyduetoincreasedlevelsofeconomicactivityaffectingpayrolltaxandconveyancingstampduty;

• additionalGSTrevenueof$8.2millionin2006-07and$61.1millionin2007-08asaresultofanincreaseintheGSTpoolavailableforredistribution,anincreaseintheTerritory’spopulationgrowthasaproportionofAustralia’s,andtheeffectoftheCommonwealthGrantsCommission’s2007UpdateofRelativities;

• increasedspecificpurposepayments(SPPs)of$52.7millionin2006-07and$47.1millionin2007-08,duetothefinalisationofseveralagreementslargelyrelatedtoeducation,health,publicsafetyandIndigenoushousinggrants;

• minorincreasesinagencyrevenueacrossallagencies,largelylinkedwithadditionalexpenditurecommitments;

• increasedinterestrevenueof$18millionin2006-07and$9.7millionin2007-08duetohighercashholdingsacrossgovernmentandinterestraterises;

• increasedminingroyaltyrevenueof$15.5millionin2006-07and$13.4millionin2007-08duetoincreasedminingproductionandcommodityprices;and

• changesintaxequivalentsanddividendstobepaidandaccruedfromtheGovernment’stradingentities,largelyrelatedtothePowerandWaterCorporation.

Generalgovernmentexpenses(accrual)haveincreasedby$154.2millionin2006-07and$157.3millionin2007-08,withpayments(cash)increasingby$149.3millionin2006-07and$113.7millionin2007-08.ThereasonforthevariancebetweenthecashandtheaccrualmovementsispredominantlyduetosuperannuationliabilitiesandthetransferofTerritoryHousingintogeneralgovernment.

Themainpolicyvariationsinclude:

• fundingtomeetdemandpressuresandpricegrowth,includingfundingfordisabilityandrenalservices;and

• fundingfornewandexpandedinitiatives,includingJobsPlan,RoadSafety,BringingForwardDiscoveryandMiddleYearsschooling.

�� Fiscal Position and Outlook

2007-08 budget

FurtherinformationontheabovedecisionsareincludedinChapter4ofthisBudgetPaper.Thekeynon-discretionaryvariationsare:

• thecarryoverofexpensesfrom2005-06of$25.7millioninto2006-07,largelyrelatedtotimingofAustralianGovernmentfunding;

• increasedsuperannuationexpenses(accrual),includingnominalinterestcharges,of$31millionin2006-07and$22.7millionin2007-08andsuperannuationpayments(cash)of$5millionin2007-08,duetoupdatedactuarialreassessment,largelyrelatedtotheCommonwealthSuperannuationScheme.Thereductioninsuperannuationcashpaymentsof$4millionin2006-07representsanadjustmenttothetimingofbenefitpaymentsnowexpectedtooccurin2007-08andfutureyears;

• matchingexpenditurerequirementsforSPPsandagencyown-sourcerevenuehaveincreasedinlinewiththerevenue,withsometimingdifferencesbetweenyears;and

• additionaldepreciationexpense,recognisingthecompletionofinfrastructureassets.

Inadditiontotheaboveoperatingpaymentvariations,therehavebeensomechangestocapitalspendingandreceipts.ThesearereflectedintheCashFlowStatement,butnottheOperatingStatement.Thekeyvariationsare:

• purchaseofassetsandequipmentacrossagencies,includingfurniture,fitoutandequipmentforMiddleYears;

• additionalcapitalworkscashprovidedtomeetthehighinfrastructurerequirementsin2006-07and2007-08;

• revisedsaleofassetestimates,largelyduetothedevelopmentoflandattheDarwinBusinessParkandLittleMindil;

• capitalpaymentsasaresultofSPPsfromtheAustralianGovernment;and

• revisedtimingofthecommitmentsfortheDarwinWaterfrontDevelopmentinordertoalignthecompletionofthehospitalityandresidentialcomponentsofthedevelopment,nowexpectedtobedeliveredinlate2008.

Inadditiontotheseitems,thetransferofTerritoryHousingintogeneralgovernmenthasaffectedvariouscomponentsofthefinancialstatementswiththenetaccrualeffectovertwoyearsbeinga$19millionworseningandacashimprovementof$7million.

BasisofForwardEstimatesAgencyforwardestimatesarebasedontheapplicationofparameters(inflatorsanddeflators)tothebudgetyearonanopolicychangebasis.Newpolicydecisionsandfundingdecisionslinkedtodemandorcostgrowthalsoaddtoeachagency’sbudgetandforwardestimates.

TheBudgetyearestimatesaredevelopedfromwhatwaspreviouslyaforwardestimate.ThisprovidestheframeworkwithinwhichagenciesplanandalsoprovidesthebasisfortheGovernment’sfiscalstrategy.

2007-08Budgetand2008-09to

2010-11ForwardEstimates

2007-08Budgetand2008-09to

2010-11ForwardEstimates

�7

Inaccordancewiththe Fiscal Integrity and Transparency Act,fiveyearsofestimatesaremaintainedandusedbyGovernment,bothasaplanningandanoperationaltool.Themainparametersusedtoadjustestimatesare:

• ConsumerPriceIndex(CPI)–inflator;

• wages–inflator;and

• productivitydividend–deflator.

TheCPIfactorisgenerallyappliedtooperationalitemsand25percentofgrants,andisprovidedinrecognitionthatpriceswillincreaseandagencieswillrequiremoreoperationalfundsinfutureyears.For2007-08,CPIis4.4percent,beingCPIgrowthincalendaryear2006comparedwithcalendaryear2005.AlthoughitisrecognisedthattherewillbetimingdifferencesbetweentheCPIfactorusedforbudgetpurposesandCPIinthebudgetyear,themethodadoptedprovidesforreliabilityandpredictabilityforagenciesandproducesmorestableoutcomesovertime.Anestimateof2.5percentisusedforCPIovertheforwardestimateperiod.Thewagefactorof3percentisbasedontheGovernment’swagespolicyandisappliedtoemployeecostsand75percentofgrants.

Theproductivitydividendisappliedtooperationalandemployeecostspremisedonagenciesimprovingprocessesanddeliveringservicesmoreefficiently,asisthecasewithprivatesectorenterprises.Forkeyservicedeliveryagencieswithfixedstaffingcosts(police,health,educationandcorrectionalservices)onequarterofthedividendisapplied.

Aspartofthedevelopmentofthe2007-08Budget,anadditional1percentdividendwasappliedto2007-08throughto2009-10.Thishasbeenappliedinordertoachievereductionsinbackofficestaff,withanexpectationthatservicedeliverystaffnumberswillcontinuetoincrease.Bytheendof2009-10,thereductioninbackofficestaffisestimatedtobearound240.

Thisapplicationtobackofficestaffonlyandnotfrontlineservicedeliverystaffisconsistentwiththerecognitiongiventothelimitedcapacityofcertainserviceagencies,whosebudgetsprimarilycomprisefrontlineformula-basedstaffnumbers,toreducecosts.Inaddition,thoseagencieswithlessthan30staffhavebeenexemptedfromthefurther1percentdividendduetotheirlimitedcapacitytoreducestaffingnumbers.

GeneralGovernmentSectorOperatingandCashFlowForwardEstimatesThefollowingsectionoutlinesthegrowthintheforwardestimatesforcomponentsoftheOperatingStatementandCashFlowStatement.


2007-08 budget

Table2.4providesabreakdownofoperatingrevenueandreceiptsfor2007-08to2010-11.

2007-08 2008-09 2009-10 2010-11

Budget ForwardEstimates

$M $M $M $M

Revenue

TaxationRevenue 367 379 381 398

GrantsandSubsidies 2529 2653 2719 2831

CapitalGrants 124 101 88 88

SalesofGoodsandServices 131 130 129 130

InterestIncome 38 38 39 39

OtherIncome 150 144 152 145

Total Revenue � �� 44� � �0� � ��2

YearonYearPercentageIncrease(%) 4 3 2 4

Receipts

TaxesReceived 367 379 381 398

SalesofGoodsandServices 131 131 130 131


OtherReceipts 173 179 184 178

CapitalReceipts 65 68 55 56

Total Receipts � ��0 � ��0 � ��7 � �82



Totaloperatingrevenue/receiptsareprojectedtogrowatanaverageof2.9percentovertheforwardestimateperiod,withrevenuefromtheAustralianGovernmentgrowingatanaverageof3.3percentandtheTerritory’sown-sourcerevenueincreasingatanaverageof1.3percent.

ThemajorityoftheTerritory’srevenuecontinuestobefromtheAustralianGovernmentintheformofGSTrevenue(around65percent)andSPPs(around15percent).ThereforethegreatestexposuretotheTerritory’sbudgetandforwardestimatesisthevolatilityofGSTrevenue.Thisriskisdiscussedlaterinthechapter,andinChapter7ofthisBudgetPaper.

TheincreaseingrantsandsubsidiesrevenuefromtheAustralianGovernmentovertheforwardestimateperiodof3.3percentisduepredominantlytoanexpectedgrowthinGSTrevenueof5.4percent.ThisgrowthinGSTlargelyreflectsanupwardrevisiontorelativitiesasassessedbytheCommonwealthGrantsCommissioninits2007Update,togetherwithanticipatedgrowthintheGSTpoolandtheTerritory’spopulation,basedonlatestestimatesprovidedbytheAustralianGovernment.ThisgrowthinGSTrevenueisoffsetbyadeclineinSPPsof5percent.Thisdeclineisnotunusual,asmanyoftheseagreementsareforfixedperiodsandarenotincludedintheforwardestimatesbeyondthelifeoftheagreement.Duringeachbudgetyear,therearesignificantchangesinSPPestimatesasagreementsarefinalised.Theseadjustmentstendnottoaffectthefiscaloutcomeasincreasesinrevenuearegenerallymatchedbyacorrespondingincreaseinexpenditure,althoughtimingdifferencesmayoccur.

Operating Revenue/Receipts

Operating Revenue/Receipts

Table 2.4: General Government Sector Operating Revenues

Table 2.4: General Government Sector Operating Revenues

��

TaxationrevenueisthemostsignificantcomponentoftheTerritory’sown-sourcerevenueandisexpectedtogrowby2.9percentovertheforwardestimateperiod.Thisgrowthistheresultofcontinuedincreasesineconomicactivityandpopulationgrowth,offsetbytheGovernment’scommitmenttopayrolltaxratereductionsandstampdutyreforms.FurtherinformationontheTerritoryGovernment’staxreforminitiativescanbefoundinChapters4and8ofthisBudgetPaper.

Thebalanceofown-sourcerevenueisfromagencyrevenue,interest,royaltiesanddividendsandtaxesfromgovernmenttradingenterprises.Theseareexpectedtodeclinebyanaverageof0.5percentfrom2007-08to2010-11,duelargelytoanticipatedreductionsintaxequivalentsanddividendsfromtheGovernment’stradingenterprises.

Thisisoffsetbya6.2percentexpectedincreaseovertheperiodinminingroyalties,duetoincreasedminingproductionandcommodityprices.Miningroyaltiesareexpectedtoexceed$85millionby2010-11,morethandoublingfromthe$39millioncollectedin2002-03.

TheCashFlowStatementalsoincludescapitalreceipts.Thesearelargelysaleofvehiclesandlandandshowadeclinetomorehistoriclevelsacrosstheforwardestimateperiod.Thepeakin2007-08and2008-09isduetotheexpectedone-offlandsalesfromLittleMindilandstage1oftheDarwinWaterfrontDevelopment.

Table2.5showsgeneralgovernmentsectoroperatingexpensesandpaymentsfor2007-08andforwardyears.

2007-08 2008-09 2009-10 2010-11

Budget ForwardEstimates

$M $M $M $M

Expenses

Depreciation 172 175 177 180

EmployeeExpenses 1333 1377 1408 1437

OtherOperatingExpenses 843 899 944 1004

NominalSuperannuationInterestExpense 123 126 128 131

OtherInterestExpense 142 141 141 143

CurrentTransfers 592 591 580 586

CapitalTransfers 106 129 116 114

Total Expenses � �� 4�7 � 4�4 � ��


Payments

PaymentsforGoodsandServices 2229 2359 2423 2521


InterestPaid 142 141 141 143

PurchasesofNonFinancialAssets 330 290 279 283

SuperannuationContribution

Total Payments � �� 0� � �40 � �47



Operating Expenses/Payments

Operating Expenses/Payments

Table 2.5: General Government Sector Operating

Expenses and Payments

Table 2.5: General Government Sector Operating

Expenses and Payments

20 Fiscal Position and Outlook

2007-08 budget

Operatingexpensesandpaymentsareexpectedtogrowatanaverageof2.7percentovertheforwardestimateperiod,slightlylowerthanrevenuegrowth,resultinginincreasingsurplusesinboththeOperatingandCashFlowStatementsin2008-09throughto2010-11.

Slightlyhighergrowthisexpectedin2008-09thaninotheryearsduetotheinclusionofacontingencyallowanceofaround1percentoftotaloperatingexpensesinallforwardestimateyears.

Theinclusionofacontingencyallowanceisconsistentwithpracticesinotherjurisdictionsandrepresentsanallowance,includedinaggregateexpenses,toreflectthefollowing:

• recognitionthatunexpectedeventsmayoccurinfutureyears;

• allowanceforcostsofnewpolicydecisionstoriseonimplementation;

• commercial-in-confidenceitemsthatcannotbeseparatelydisclosed;

• decisionsmadetoolateforinclusionagainstindividualagencyestimates;and

• allowsfortheprovisionofeventsandpressuresthatcanbereasonablyexpectedtoaffectbudgetestimateswithouthavingtoresetfiscaltargets.

Thisreserveensuresthatbudgetestimatesarebasedonthebestinformationavailableatthetimeofpublicationandareascloseaspossibletoexpectedoutcomes.TheallowanceisheldwithintheCentralHoldingAuthorityandisremovedandappropriatedtorelevantagenciesclosertothetimethateventsoccur.

Overtheforwardestimatesperiod,employeeexpensesareestimatedtoincrease,onaverage,by2.6percentperannum.Thisreflectssuperannuationexpenses,benefitpaymentsandwagesgrowthinagenciesoffsetbytheproductivitydividend.Agencieswillberequiredtomanagetheirforwardestimatestoensurethatproductivitydividendsareachieved,togetherwithtargetedreductionsinbackofficestaffacrossgovernment.

Underlyinggrowthinotheroperatingexpensesisminimalatonly1percentperannumoncethecontingencyallowanceisremoved,duetotheCPIinflatorincludedinagencybudgets,offsetbytheproductivitydividend.

Thereisnogrowthestimatedincurrentandcapitaltransfers,orgrantsandsubsidiespaid,reflectingthelevelofSPPsfromtheAustralianGovernment,whicharedecliningovertheforwardestimateperiodasdiscussedpreviously.HoweverthedeclineinSPPsisoffsetbytheapplicationofparameterstoTerritory-fundedgrants,withthewagesinflatorappliedto75percentofeachgrantandtheCPIinflatorto25percent.Aproductivitydividendisnotappliedtograntsasthemajorityofthesearepaidtonongovernmentorganisations.

Aswithreceipts,theCashFlowStatementincludescapitalpayments.ThiselementoftheCashFlowStatementisexpectedtoremainhigh,withapeakin2007-08duetotheinvestmentintheDarwinWaterfront.From2008-09capitalpaymentsarestillsignificantlyhigherthanhistoriclevelsduetotheongoinginfrastructurerequirementsoftheTerritory.

BalanceSheet–GeneralGovernmentandNonFinancialPublicSectorsTables2.6and2.7provideasummaryofassets,liabilitiesandbalancesheetmeasuresforboththegeneralgovernmentandnonfinancialpublicsectors.

2�

Table 2.6: General Government Sector Balance Sheet

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Outcome Estimate Budget ForwardEstimates

$M $M $M $M $M $M

TotalAssets 7203 7261 7396 7468 7575 7705

FinancialAssets 2191 2145 2152 2162 2221 2301

NonFinancialAssets 5012 5116 5244 5306 5354 5403

TotalLiabilities 4458 4904 4962 4972 5018 5064

Net Worth (Assets - Liabilities) 2 74� 2 ��7 2 4�4 2 4�� 2 ��7 2 �4�

Net Debt � 2�� 22� � 24� � 22� � �8� � �2�

NetDebttoRevenue(%) 43 38 37 36 34 31

NetDebt+EmployeeLiabilities 3433 3820 3911 3933 3949 3939

NetDebt+EmployeeLiabilitiestoRevenue(%) 113 119 117 114 113 108


Table 2.6: General Government Sector Balance Sheet

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M $M

TotalAssets 7203 7261 7396 7468 7575 7705




Net Worth (Assets - Liabilities) 2 74� 2 ��7 2 4�4 2 4�� 2 ��7 2 �4�

Net Debt � 2�� 22� � 24� � 22� � �8� � �2�





Table 2.7: Non Financial Public Sector Balance Sheet

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M $M

TotalAssets 7600 7710 7939 8081 8233 8422




Net Worth (Assets - Liabilities) 2744 2357 2434 2496 2557 2641

Net Debt 1594 1578 1693 1748 1749 1742





Table 2.7: Non Financial Public Sector Balance Sheet

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M $M

TotalAssets 7600 7710 7939 8081 8233 8422




Net Worth (Assets - Liabilities) 2744 2357 2434 2496 2557 2641

Net Debt 1594 1578 1693 1748 1749 1742






2007-08 budget

NetworthforbothsectorsissettoriseovertheBudgetandforwardyearstobemoreinlinewiththatrecordedin2005-06.Thisfollowsasignificantdropin2006-07,largelyattributableto:

• therestatementoftheTerritory’sunfundedsuperannuationliabilityfollowingactuarialreview;and

• aprojectedwrite-downofwaterandsewerageassets,followingareviewoftheapplicationoftherecoverableamountstest(RAT)accountingtreatment.

Theimprovingtrendover2007-08andtheforwardyearsisdueto:

• cashsurplusesovertheforwardyearsforgeneralgovernment;

• increasesintheprojectednetworthofgovernmentfinancialtradingentities;

• projectedincreasesinthevalueoftheTerritory’sfinancialassets;and

• continuingsignificantinvestmentininfrastructureacrosstheTerritory,includingtheDarwinWaterfrontDevelopmentandutilityassetsofthePowerandWaterCorporation.

Sincetheintroductionofaccrualaccountingin2002-03,theTerritory’snetworthhasriseninsuccessiveyearsfrom$1910millionin2002-03to$2727millionin2005-06(actualoutcomes).Theactualincreasefrom2002-03to2005-06islargelytheresultofcontinuedimprovementinthevaluationoftheTerritory’sassetsbaseasassessedbytheAustralianValuationOffice,togetherwithsuccessivecashsurplusesinthegeneralgovernmentsector.

FurthervaluationimprovementsoftheTerritory’sassetbasehavenotbeenfactoredintotheforwardestimates.

TheTerritoryisstilladevelopingeconomycomparedwithotherjurisdictionsand,assuch,hasagreatercallondebtfinancingtofurtherenhanceitsinfrastructurerequirements.AsaresulttheTerritory’scurrentlevelofdebtishigherthanotherjurisdictionsonanetdebttorevenuebasis.

Overtheforwardestimateperiod,netdebtforthegeneralgovernmentsectorisexpectedtodeclineby$116millionto$1129millionin2010-11,duetoprojectedcashsurplusesin2008-09throughto2010-11.Thisissignificantlylowerthanthe$1506millionrecordedin2001-02and,whenmeasuredasaproportionofrevenue,hasmorethanhalvedfrom65percentin2001-02to31percentin2010-11.

Forthenonfinancialpublicsector,the2010-11estimateismarginallybelowthe$1753millionrecordedin2001-02.Thishasoccuredwhileprovidingsignificantinvestmentincapitalofaround$600millionbythePowerandWaterCorporationovertheforwardyears.Whenmeasuredasaproportionofrevenue,thereisanimprovementfrom45percentin2007-08to42percentin2010-11.

Netdebtplusemployeeliabilitiesisabroadermeasurethannetdebtinthatitencompassesunfundedemployeeentitlements,largelysuperannuation.Overtheforwardestimateperiod,netdebtplusemployeeliabilitiesissettoincreaseto$4578millionin2010-11forthenonfinancialpublicsector.Thereductioninnetdebtforthegeneralgovernmentsectorresultsinasmallerincreaseforthissectorovertheforwardyearsto$3939millionin2010-11.

Net WorthNet Worth

Net DebtNet Debt

2�

TheincreaserelatesalmostentirelytotheTerritory’ssuperannuationliabilitywhichhasbeenrevisedupwardsbytheactuaryfollowingcompletionofthetriennialmajorreviewfortheCommonwealthSuperannuationScheme(CSS).ThisisthethirdsuchsignificantreassessmentoftheTerritory’sliabilitiessince2005,withthetwopreviousincrementsbeingrelatedtochangesinmethodologyandvariousassumptionsandtheintroductionofInternationalFinancialReportingStandards.ThislatestincreaserelatestotheCSSschemeandreflectsimprovingmortalityratesandtheallocationbytheCSSofresponsibilityforadditionalpensionerstotheTerritory.

Despiteincreasinginabsoluteterms,whenmeasuredasaproportionofrevenue,netdebtplusemployeeliabilitiesforthenonfinancialpublicsectorwillcontinuetofallovertheforwardestimatesperiodfrom116percentin2007-08to110percentin2010-11,representingasignificantreductiononthe134percentrecordedin2001-02withasimilartrendforgeneralgovernment.

Theadditionalsuperannuationcontributionof$60millionin2006-07aimstoaddressthesignificantburdenonfuturebudgetsbyoffsettingthegrowingunfundedsuperannuationliability.Atpresent,theunfundedliabilityisprojectedtopeakinaround2012andwillnotbefullyextinguisheduntil2065.Byfundingtheliabilityfromfuturebudgetsurpluses,theTerritoryaimstobeinafullyfundedpositionfarearlierthanthis.

FurtheranalysisofnetdebtandnetdebtplusemployeeliabilitiesisprovidedinChapter3ofthisBudgetPaper.

The Fiscal Integrity and Transparency ActrequiresthattheFiscalOutlookReport(Budget)mustcontain“astatementofrisks,quantifiedasfaraspractical,thatcouldmateriallyaffecttheupdatedfinancialprojections,includinganycontingentliabilitiesandanyGovernmentnegotiationsthathaveyettobefinalised.”

ThisstatementoutlinesthepotentialeffectofriskstotheBudgetduetochangesinrevenueandexpenseestimatesandthelikelihoodofcontingentliabilitiesbecomingactualliabilities.

RevenueThelargestrisktotheTerritory’sforwardestimatesisvariationsinGSTrevenue.AsGSTrevenueaccountsforalmosttwothirdsoftheTerritory’stotalrevenue,changesinestimateshaveasignificanteffectontheGovernment’sfundingcapacityandbudgetoutcome.

TheestimationofGSTrevenueinanyyearisdifficult,duetovolatilityinthevariablesthatdeterminethedistributionofGSTamongthestatesandparticularlyshouldadverseeconomicconditionsarise.Eachofthevariablesisprovidedbelow,withtherisktothesecomponentsdiscussed.

• NationalGSTrevenuecollections–TheestimatesforGSTrevenuecollectionsfor2007-08to2010-11arebasedonthemostrecentadvicefromtheAustralianGovernment.Growthincollectionsof6.4percentand6.0percentisforecastin2007-08and2008-09respectively.Theimpactofaone-offonepercentagepointvariationfromtheseforecastsisestimatedat±$18millionin2007-08and±$20millionin2008-09.Ifthisvariationoccursinbothyears,theimpactis±$39million,withthepotentialtoriseto±$85millionby2010-11.

StatementofRisks

StatementofRisks

GST RevenueGST Revenue


2007-08 budget

• Territory’sshareofnationalpopulation–PopulationestimatesoverthebudgetandforwardestimatesperiodarebasedonAustralianGovernmentprojections.Inpreviousbudgets,populationforecastsincludedTerritory-specificconsiderationssuchasthecommencementandfinalisationofmajoremploymentprojects.Forthe2007-08Budget,AustralianGovernmentestimateshavebeenutilised.Thisisduetouncertaintyassociatedwiththeoutcomeofthe2006Censusrebasingofpopulationestimates,theimpactofanewpost-enumerationsurveymethodologyonthe2006Censuswhereremoteareaswereincludedforthefirsttime(greatestimpactwillbeintheTerritory),andtheintroductionofanewapproachforestimatingnetoverseasmigration.Thesedevelopmentshavethepotentialtointroducesubstantialcorrections,eitherpositiveornegativetotheTerritory’spopulationestimates.Theeffectofaone-offpercentagepointvariationintheAustralianGovernment’spopulationforecastsisestimatedat±$21millionin2007-08and±$22millionin2008-09.Ifthesevariationsweretooccurinbothyears,theeffectwouldbe±$45millionandcouldriseto±$97millionby2010-11.

• Territory’spercapitarelativityasassessedbytheCommonwealthGrantsCommission(theCommission)–TheTerritory’spercapitarelativityfor2007-08is4.36824.NeithertheAustralianGovernmentnortheCommissionprovideestimatesoffuturerelativities,therefore,consideringthepotentialforbothupsideanddownsidemovement,theTerritoryhasadoptedthe2007Updaterelativitiesfortheforwardestimates.ConsideringGSTrevenuerepresentstwothirdsoftheTerritory’stotalrevenue,theCommission’s2010ReviewofStateRevenueSharingRelativitiesrepresentsaconsiderableriskfrom2010-11.TheCommission’sTermsofReferencerequireittosimplifythemethodologywhichwillmakethelikelyoutcomemoreuncertainthanpreviousreviews.Consideringthisuncertainty,thereispotentialscopeforsignificantdownsideorupsidemovementintheTerritory’srelativity.Theapproximateeffectofaone-offonepercentagepointvariationinrelativityestimatesis±$22million,withacumulativeeffectto2010-11of±$73million.

Itisimportanttonotethatchangestothesevariablescanbeeitherpositiveornegativeand,iftakentogether,by2010-11couldresultinvariationsashighas$255million.Thisisunlikelytooccur,asallthreecomponentswouldneedtovaryby1percentperannumandinthesamedirection,howeveritdemonstratestheinherentvolatilityintheestimates.

AmoredetaileddiscussionofGSTrevenueispresentedinChapter7ofthisBudgetPaper.

Specificpurposepayment(SPP)agreementsposeriskstostatebudgetsinseveralways:

• budgetflexibilityisrestrictedbyinputcontrols,suchasmatchingandmaintenanceofeffortprovisionsthatareusedbytheAustralianGovernmenttoleverageitsownfinancialcommitments;

• inadequateindexationofgrantscancausepressureontheTerritory’sbudget,particularlywheretheinjectionofAustralianGovernmentSPPfundinggeneratesarateofgrowthindemandforservicesabovethefundingprovided;and

• theprovisionofseedfundingbytheAustralianGovernmentthroughfixed-termSPPagreements,resultinginraisedcommunityexpectationsandleavingtheTerritorytomeetthefinancialburdenwhentheoriginalagreementsexpire.

TheleveloffinancialriskrelatingtoSPPagreementscannotbequantified.

Other Australian Government Grants

and Subsidies

Other Australian Government Grants

and Subsidies

2�

TheamountofrevenuereceivedfromTerritorytaxesandroyaltiesisdependentupontheperformanceoftheTerritoryeconomyandotherexternalfactors.ForecastingsuchrevenueinvolvesjudgmentsandassumptionsbeingmadeabouttheperformanceofthevariouseconomicfactorsandindicatorsthatimpactdirectlyonTerritorytaxesandroyalties,suchasgrowthinwages,employmentandprices.

Itisdifficulttoaccuratelypredictrevenuecollectionsintothefuture,particularlyforthelateryearsoftheforwardestimates.Themostdifficultsourceofrevenuetoforecastisconveyancestampduty,asitislinkedtoactivityinthepropertymarket,whichcanbevolatile.TheNorthernTerritorypropertymarkethasexperiencedunusuallyhighactivitysince2003-04andthishasbeenamajorcontributortoincreasedstampdutycollections.Althoughthereisevidencethatthegrowthinactivitylevelsintheresidentialpropertymarkethaseasedrecently,theextentandtimingofanydropinactivityisdifficulttopredictandcouldhaveasignificantimpactonconveyancestampdutycollections.

Itisestimatedthatavariationof±1percenttotheparametersusedtoforecastTerritorytaxesandroyaltieswouldaffectrevenuebyabout$4.5millionfor2007-08.

ExpensesTheforwardestimatesforexpensesarebasedonknownpolicydecisions,withadjustmentsforparameters.

TheparametersusedintheForwardEstimatesarewagesgrowthof3percent,CPIof2.5percentandaproductivitydividendof3percentin2008-09,2percentin2009-10and1percentin2010-11.

Themostsignificantrisktotheseestimatesontheexpensesideisincreasingbudgetpressureduetoincreasedcostanddemandinfluences.

Afurtherriskisinrelationtoanyfutureenterprisebargainingagreements.Awageinflatorof3percentiscurrentlyfactoredintotheforwardestimates,howeveranyagreementsoverthisamountcouldaffectfuturebudgetoutcomes.Thisisparticularlyrelevantduring2007-08asaround80percentoftheNorthernTerritoryPublicSectorwageagreementsaredueforrenegotiation.

TheDarwinWaterfrontDevelopmentprojectpresentsarisktotheexpenseestimatesinasfarasinterestratefluctuationsaffectthepaymentsoverthelifeofthepublicprivatepartnershipagreement.Thisriskisnotexpectedtobesignificantandwillbereassessedeachyear.

ContingentLiabilitiesContingentliabilitiesarecoststhattheGovernmentmayberequiredtomeetshouldaparticulareventoccur.Usually,contingentliabilitiesconsistofguaranteesandindemnities,aswellaslegalandcontractualclaims,andconstituterisktotheTerritory’sfinancialposition.

Detailsofestimatedamounts,at30June2006,ofmaterialcontingentliabilitiesresultingfromguaranteesorindemnitiesinclude:

• AmadeusBasintoDarwinGasPipeline($189million);

• PineCreek/McArthurRiverElectricityPurchaseAgreements($88million);and

• PublicTrusteeCommonFunds($33million).

Own-Source RevenueOwn-Source Revenue

2� Fiscal Position and Outlook

2007-08 budget

TherearealsosomerisksinrelationtotheDarwinWaterfrontDevelopmentthatmayresultinpaymentsbeingmadebytheTerritory.Theserisksrelatetodiscriminatorychangesinlaw,nativetitleandenvironmentalcleanupcosts.TheamountoftheserisksisunabletobeestimatedaccuratelybutprovisionhasbeenmadeintheforwardestimatesforenvironmentalcleanupcostsanditiswithintheTerritory’sdiscretionwhethertomakeadiscriminatorychangeinlaw.

Formoreinformationoncontingentliabilities,refertoChapter9ofthisBudgetPaper.

27

Fiscal StrategyThischapteroutlinestheTerritoryGovernment’sfiscalstrategy,includingmedium-termfiscalobjectivesandfinancialtargets.Thefiscalstrategyprovidesasoundfiscalmanagementframeworktoensuresustainableserviceprovision,continuedinvestmentininfrastructureandacompetitivetaxenvironmentthatsupportseconomicgrowth.

The2007-08FiscalStrategyremainsunchangedfromthatsetoutinthe2006-07Budgetandaimstoensuresubstantialserviceprovisionparticularlyintheareasofhealth,education,communitysafetyandinvestmentininfrastructure.TheimportanceofastrongfinancialpositionisparamountforajurisdictionsuchastheTerritorywithalimitedrevenuebasebuthighexpenditurerequirements.

AsdiscussedinChapter2,thecontributiontowardstheTerritory’ssuperannuationliabilityfor2006-07resultsinanunderlyingcashoutcome,operatingresultandfiscalbalance.TheTerritorywilladopttheseunderlyingtargetsfrom2006-07asitsprimaryBudgetmeasures.

TheGovernment’smedium-termfiscalobjectivesandprojectedachievementsagainsttargetsare:

• Sustainable Service Provision

Target:Generalgovernmentnetoperatingbalanceby2012-13.

Assessment:Operatingsurpluspredictedforallyears.

• Infrastructure for Economic and Community Development

Target:Maintaintotalpublicsectorinfrastructureinvestmentatappropriatelevelsandachieveageneralgovernmentnetlendingbalanceby2012-13.

Assessment:Increasedcapitalinvestmentin2007-08of$629millionandcontinuinghighinvestmentoverforwardyears.

Assessment:Fiscalbalancecontinuesonatrendtosurpluswithasmallnetborrowingof$10millionby2010-11.

•Competitive Tax Environment

Target:EnsureTerritorytaxesandchargesarecompetitivewiththeaverageofthestates.

Assessment:Taxationrevenuepercapitaof$1765in2007-08,secondlowest,afterTasmania,andsignificantlylowerthantheaverageofthestatesat$2341.

• Prudent Management of Liabilities

Target:Netdebtplusemployeeliabilitiesasaproportionoftotalrevenuetofall.

Assessment:Netdebtplusemployeeliabilitiestorevenueratiocontinuestofallovertheforwardestimatesto110percentby2010-11.

Chapter 3Chapter 3OverviewOverview

28 Fiscal Strategy

2007-08 budget

TheFiscal Integrity and Transparency Act (FITA)requirestheTreasurertodeliverafiscalstrategystatementatthetimeofeachBudgetwhichspecifiestheGovernment’smedium-termfiscalobjectivesandkeyfiscalindicators.UndertheFITA,thefiscalstrategystatementmustbebasedonprinciplesofsoundfiscalmanagementto:

• formulateandapplyspendingandtaxationpolicieshavingregardtotheeffectofthesepoliciesonemployment,economicprosperityandthedevelopmentoftheTerritoryeconomy;

• formulateandapplyspendingandtaxingpoliciessoastogiverisetoareasonabledegreeofstabilityandpredictability;

• ensurethatfundingforcurrentservicesisprovidedbythecurrentgeneration;and

• prudentlymanagefinancialrisksfacedbytheTerritory(havingregardtoeconomiccircumstances),includingthemaintenanceofTerritorydebtatprudentlevels.

ThesefinancialmanagementprinciplesunderpintheTerritory’sfiscalstrategy.

SustainableServiceProvision–Target:GeneralGovernmentNetOperatingBalanceby2012-13

Theexpectedcashoutcomefor2006-07hasimprovedduetocontinuedgrowthineconomicactivityresultinginincreasedminingroyaltiesandstampdutyonconveyances,alongwiththeeffectoftimingofcapitalpaymentsfortheDarwinWaterfrontDevelopment.Thesefactorshaveresultedinanimprovementof$105millionin2006-07.Thishasenabledacontributionof$60milliontobemadetowardstheTerritory’ssuperannuationliabilityandresultsinanunderlyingdeficitof$11million.Allotheryears’cashtargetsremainunchanged,withareturntobalancestillexpectedin2008‑09andasurplusof$34millionprojectedfor2010‑11.

Table3.1comparesthecashtargetssetinthe2006‑07Budget,withtherevised2007‑08Budgettargets.

2006-07 2007-08 2008-09 2009-10 2010-11


2006CashTargets($M) -56 -40 0 17 na

2007CashTargets($M) -11 -40 0 17 34


Thenetoperatingbalancefor2006-07andforwardyears,asshowninTable3.2,representsanincreaseinallyearsontheestimatesinthe2006‑07Budget.Thisisduetohighergoodsandservicestax(GST)revenue,togetherwithanupwardrevisiontoown-sourcerevenueasaresultofincreasedeconomicactivity,particularlyforminingroyaltiesandstampdutyonconveyancing.Theseincreaseshavebeenpartiallyoffsetbytheinitiativesintroducedaspartofthe2007‑08Budget,togetherwithanincreaseinunfundedsuperannuationexpensesfollowingarecentactuarialreassessment.

FiscalPrinciplesFiscalPrinciples

Table 3.1: General Government Cash Outcome

Table 3.1: General Government Cash Outcome

2�

Asaproportionoftotalrevenue,Table3.2showsthatthenetoperatingbalanceisestimatedtobebetterin2006‑07and2007-08withimprovementofrevenue,coupledwithongoingspendingrestraint.By2010-11theprojected$38millionsurplusmeansthattheratioimprovesto1.04percent.

2006-07 2007-08 2008-09 2009-10 2010-11


2006NetOperatingBalance($M) 17 -18 -15 4 na

2007NetOperatingBalance($M) 31 29 8 15 38

2007NetOperatingBalanceasaProportionofTotalRevenue(%)

0.96 0.85 0.23 0.43 1.04


Table3.3showstheratiooftheTerritory’snetoperatingbalancetorevenuecomparedwiththeaverageofthestates.

2005-06 2006-07 2007-08

Actual Estimate Budget

% % %

NewSouthWales 2.4 -1.1 0.8

Victoria 2.6 1.1 1.1

Queensland 2.6 1.1 1.1

SouthAustralia 1.8 0.1 0.9

WesternAustralia 14.0 10.1 8.3

Tasmania 3.4 -3.1 -2.2

AustralianCapitalTerritory -6.5 -4.0 -4.4

State Average �.7 �.� �.�

Northern Territory 0.7 �.0 0.�

Source:NorthernTerritoryTreasuryandstatebudget,mid-yearandoutcomereports.

Theprojectedcashpositionandoperatingbalancecontinuetoindicatethattheaccrualtargetofanoperatingbalanceby2012-13remainsrealistic.

InfrastructureforEconomicandCommunityDevelopment–Target:MaintainInfrastructureInvestmentatAppropriateLevelsandAchieveFiscalBalanceby2012-13

CapitalinvestmentisalargecomponentoftheGovernment’sbudgetstrategytomeetboththeTerritory’ssocialandeconomicrequirements.

TheprovisionofadequatelevelsofinfrastructureisanongoingchallengefortheTerritoryduetobothitsremotenessanditsstageofdevelopment,relativetotheotherstates.

Netlending(fiscalbalance)providesameasureoftheTerritory’sinvestmentbalance(thatis,asalenderoraborrower).Netlendingincludestheeffectofbothcapitalandoperatingtransactionsafterexcludingtheeffectofdepreciation.

Table 3.2 General Government Net Operating Balance

Table 3.2 General Government Net Operating Balance

Table 3.3: State and Territory Net Operating Balance as

a Proportion of Revenue – General Government

Table 3.3: State and Territory Net Operating Balance as

a Proportion of Revenue – General Government

�0 Fiscal Strategy

2007-08 budget

Consistentwiththenetoperatingbalancerevisedestimates,thefiscalbalanceshowsimprovementsincethe2006-07Budgetinallyearsandistrendingtowardsabalancedposition.

Whencomparingagainstotherjurisdictions,Table3.4showstheTerritory’snetlendingtorevenueisprojectedtobemarginallybetterthantheaverageofthestatesin2007‑08.

2005-06 2006-07 2007-08

Actual Estimate Budget

% % %

NewSouthWales -1.1 -5.3 -3.2

Victoria -1.2 -2.7 -2.6

Queensland 8.2 -6.5 -6.5

SouthAustralia 0.7 -1.8 -2.6

WesternAustralia 11.4 4.4 1.7

Tasmania 2.3 -3.0 -1.3

AustralianCapitalTerritory -6.7 -10.5 -6.4

State Average 2.� - �.� - �.2

Northern Territory - �.7 - 2.2 - 2.�

Source:NorthernTerritoryTreasuryandstatebudget,mid-yearandoutcomereports.

Thefiscalbalancedeficitsindicatethatcapitalspendinginallyearsisgreaterthanthedepreciationexpense,whichisconsistentwithadevelopingeconomysuchastheTerritory.TheeffectoftheTerritory’ssubstantialcapitalinvestmentassociatedwiththeDarwinWaterfrontDevelopmentin2006-07and2007-08remainsevidentinTable3.5.Asaproportionoftotalrevenue,netlendingisestimatedtobe-2.9percentin2007-08improvingto-0.3percentby2010-11.Aswiththenetoperatingbalance,thetrendofimprovementovertheforwardestimateswouldindicatethattheTerritory’saimofabalancedpositionby2012-13willbeachieved.

2006-07 2007-08 2008-09 2009-10 2010-11

Estimate Budget ForwardEstimate

NetLending(+)/Borrowing(-)($M) -71 -96 -41 -32 -10

AsaProportionofTotalRevenue(%) -2.2 -2.9 -1.2 -0.9 -0.3


WhenconsideringcapitalinvestmentintheTerritory,itismoreappropriatetolookatthenonfinancialpublicsector.ItbetterreflectsthecompletepictureofGovernmentspendingoninfrastructureprojects,andincludesthePowerandWaterCorporationwhichwillbeinvestingapproximately$600millionover2007-08andforwardyearsintheessentialservicesofelectricity,sewerageandwater.

Table 3.4: State and Territory Net Lending (+)/ Borrowing (-)

as a Proportion of Revenue – General Government

Table 3.4: State and Territory Net Lending (+)/ Borrowing (-)

as a Proportion of Revenue – General Government

Table 3.5: General Government Net Lending (+)/

Borrowing (-)

Table 3.5: General Government Net Lending (+)/

Borrowing (-)

��

Table3.6presentstheestimatesforinfrastructureinvestmentfor2006-07to2010-11.Thegovernment’scapitalinvestment,includingtheDarwinWaterfrontDevelopment,comprisespurchasesofnonfinancialassets(includingconstructionandcapitalitems),assetsacquiredunderfinancelease(toincludetheConventionCentre)andcapitalgrantstonon-governmentorganisations.Itexcludesrepairsandmaintenance.

2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M

PurchasesofNonFinancialAssets

419 506 426 390 405

AssetsAcquiredUnderFinanceLease

48 34 1 1 1

CapitalGrants 83 89 115 105 103

Total �4� �2� �42 4�� 0�


Thehighinvestmentin2006-07and2007-08remainsattributabletotheDarwinWaterfrontDevelopment.Inallotheryears,capitalexpenditureisstillsignificantlyhigherthanhistoriclevelsduetoongoinginfrastructurerequirementsintheTerritoryandtheinvestmentofapproximately$600millionbythePowerandWaterCorporation.FurtherinformationoncapitalworksprojectsisincludedinBudget Paper No. 4.

CompetitiveTaxEnvironment–Target:EnsureTerritoryTaxesandChargesareCompetitivewiththeAverageoftheStatesTheGovernmentiscommittedtomaintainingacompetitivetaxenvironmenttoencourageincreasedlevelsofbusinessactivityintheNorthernTerritory.

Aspartofthe2007-08Budget,theGovernmenthasannouncedfurtherrevenuemeasurestobuildoneconomicandemploymentgrowthandhasconfirmedtheremovalofcertaintaxesunderthenationaltaxreformagreement.

Inthe2005-06Budget,theGovernmentcommittedtotheabolitionofanumberofstampdutiesaspartofthenationaltaxreform.Mostofthesestampdutieshavealreadybeenabolished,withstampdutyonhiringarrangementstobeabolishedfrom1July2007.

TheGovernment’sremainingcommitmenttonationaltaxreformistheabolitionofstampdutyonbusinesspropertyconveyances(excludingland)from1July2009.

AmoredetailedanalysisoftheserevenueinitiativesisprovidedinChapter4ofthisBudgetPaper.

InordertoassessthecompetitivenessoftheTerritory’staxsystem,thefollowingmeasuresareutilised:

• taxationrevenuepercapita;and

• taxationeffortasassessedbytheCommonwealthGrantsCommission(theCommission).

Taxationrevenuepercapitaisasimplesummarymeasurethataffordscomparabilitywithotherjurisdictions.

Table 3.6: Capital Investment – Non Financial Public SectorTable 3.6: Capital Investment – Non Financial Public Sector


2007-08 budget

Table3.7showsthattheTerritory’staxcollectionspercapitafor2007-08areestimatedat$1765,comparedwith$2341fortheaverageoftheotherstates.ThisalsohighlightsthattheTerritoryin2007-08isexpectedtocollectthesecondlowestpercapitataxrevenues,afterTasmania.

TheTerritory’s2005-06actualof$1810reflectedlargeone-offstampdutytransactionsinthatyear.The2006-07and2007-08estimatescontinuetoshowanincreaseineconomicactivity,howeveratalowerbase.

2005-06 2006-07 2007-08

$percapita $percapita $percapita

NewSouthWales 2326 2442 2541

Victoria 2130 2183 2220

Queensland 1817 2028 2172

WesternAustralia 2520 2671 2655

SouthAustralia 1912 2016 2058

Tasmania 1436 1483 1571

AustralianCapitalTerritory 2373 2510 2672

State Average 2 �4� 2 2�4 2 �4�

Northern Territory � 8�0 � 724 � 7��

Source:Stateandterritoryoutcomereports,stateandterritorybudgetpapers;ABSCat.No.3101.0.

Althoughtaxationpercapitaisausefulcomparativemeasure,itislimitedinthatitdoesnotmakeanyallowancesfordifferencesinstates’capacitiestoraiserevenue.

AmoresophisticatedmeasureoftaxcompetitivenessistheCommission’sanalysisof‘taxeffort’,whichadjustsfortheextenttowhichaparticularstate’scapacitytoraiserevenueisaboveorbelowaverage.Table3.8detailstheTerritory’srevenue-raisingcapacityandeffortexpressedasapercentageoftheAustralianaveragein2005-06,thelatestyearassessedbytheCommission.

Capacity1 Effort2

% %

TotalTaxation 82 111

TotalOwn-SourceRevenue 94 99

TotalTaxationplusRoyaltiesandPublicSafetyUserCharges 92 101

1 NorthernTerritory’scapacitytoraiserevenuecomparedtotheAustralianaverage.2 NorthernTerritory’srevenueeffortcomparedwiththeAustralianaverage,giventhecapacityavailable.Source:CommonwealthGrantsCommission2007Update.

TheCommission’sassessmentshowsthattheTerritory’stotaltaxeffortin2005-06wasabovetheAustralianaverage.Thisisduetoanumberoflargeone-offstampdutytransactionsinthatyear.Arguablyabettercomparativemeasurefor2005-06istaxationcombinedwithminingroyaltiesandpublicsafetyusercharges.

Table 3.7: Taxation Revenue Per Capita – General

Government

Table 3.7: Taxation Revenue Per Capita – General

Government

Table 3.8: Northern Territory Revenue-Raising Capacity

and Effort 2005-06 Australian Average

= 100 per cent

Table 3.8: Northern Territory Revenue-Raising Capacity

and Effort 2005-06 Australian Average

= 100 per cent

��

Onthisbasis,theTerritory’staxeffort(101percent)remainsslightlyabovetheAustralianaverageandthethirdlowest,afterTasmaniaandQueensland.This,togetherwiththepercapitameasure,demonstratesthattheTerritorycontinuestoprovideacompetitivetaxenvironmentforTerritorians.

FurtherinterjurisdictionalcomparisonsofindividualtaxrevenuemeasuresandamoredetailedsynopsisofthemethodologyusedbytheCommissionareprovidedinChapter8ofthisBudgetPaper.

PrudentManagementofLiabilities–Target:NetDebtandEmployeeLiabilitiesasaProportionofTotalRevenuetoFallThiselementofthefiscalstrategyaimstoensurethatdebtisprudentlymanaged,takingintoconsiderationservicedeliveryneedsandinvestmentininfrastructurerequiredtopromotesocialwellbeingandeconomicgrowth.ThemeasuresofnetdebtandnetdebtplusemployeeliabilitiesprovidethemeansofassessingtheTerritory’sperformanceagainstthistarget.

Netdebtforthenonfinancialpublicsectorisprojectedtoincreaseuntil2009-10,inlinewiththecontributionstotheDarwinWaterfrontDevelopment,beforedecliningto$1742millionin2010-11,belowthe2001-02levelof$1753million.Thisimprovementhasbeenachievedevenwithrecordlevelsofcapitalinvestmentininfrastructureinallyears.

Whencomparedtothestates,theTerritory’snetdebtforthenonfinancialpublicsectorremainshigherduetothegreaterrequirementforinfrastructureinvestment.ThisishighlightedbyChart3.1,whichshowstheTerritory’snetdebtasaproportionofrevenueagainstthestatesforthe2005-06outcomes.

Source:Stateandterritoryoutcomereports.

Chart 3.1: State and Territory Net Debt to Revenue

– Non Financial Public Sector 2005-06 Outcomes

Chart 3.1: State and Territory Net Debt to Revenue

– Non Financial Public Sector 2005-06 Outcomes

ACT QLD

NTTasWANSWSAVic

-80

-60

-40

-20

0

20

40

60

80

%

ACT QLD

NTTasWANSWSAVic

-80

-60

-40

-20

0

20

40

60

80

%


2007-08 budget

Chart3.2alsocomparesthelevelofTerritorydebtwiththeaverageofthestatesfor2001-02throughto2006-07andshowstheTerritoryisbeginningtoimprove,relativetothestates.

Source:StateandTerritoryoutcomereports,stateandterritorybudgetpapers.

Netdebtplusemployeeliabilitiesisabroadermeasurethannetdebtinthatitencompassesunfundedemployeeliabilities,consistinglargelyofunfundedsuperannuationwhichisamajorliabilityfortheTerritoryandmoststates.

Thelevelofnetdebtplusemployeeliabilitiesasapercentageofrevenueforthenonfinancialpublicsectorisexpectedtofall.Thisisasadirectresultofsuccessivecashsurplusesthroughto2005-06andtheimprovingprojectedoutcomesovertheforwardestimateperiod.Theimprovingtrendisdespitetheupdatedsuperannuationactuarialassessmentsandschemerevaluationsin2006,whichhaveresultedinincreasesintheCommonwealthSuperannuationSchemeliabilitiesfor2006-07.

Table3.9showstheeffectoftheGovernment’scontinuingcommitmenttoprudentlymanagedebtandemployeeliabilitieswhilemaintainingserviceprovision.Thishighlightsthatthelevelofnetdebtplusemployeeliabilitiesasapercentageofrevenuewillcontinuetodropfromthe2006-07estimateof116percentto110percentin2010-11.Thisrepresentsasignificantreductiononthe134percentrecordedin2001-02.

2006-07 2007-08 2008-09 2009-10 2010-11


NetDebt($M) 1578 1693 1748 1749 1742

NetDebttoRevenue(%) 44 45 45 44 42

NetDebtplusEmployeeLiabilities($M)

4196 4382 4481 4537 4578

NetDebtplusEmployeeLiabilitiestoRevenue(%)

116 116 115 114 110


FurtherinformationonbudgetaggregatesandfinancialprojectionsthatunderpintheTerritory’sfiscalstrategyareincludedinChapter2ofthisBudgetPaper.

Chart 3.2: Historical State and Territory Net Debt to Revenue – Non Financial Public Sector

Chart 3.2: Historical State and Territory Net Debt to Revenue – Non Financial Public Sector

0

10

20

30

40

50

60

70

80

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

%

NT State Average

0

10

20

30

40

50

60

70

80

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

%

NT State Average

Table 3.9: Northern Territory Net Debt and Employee

Liabilities – Non Financial Public Sector

Table 3.9: Northern Territory Net Debt and Employee

Liabilities – Non Financial Public Sector

��

Budget InitiativesThischaptersummarisestheGovernment’snewandexpandedinitiativesforexpenditureandrevenueincludedinthe2007-08Budget,alongwiththenewmajorworksonthe2007-08CapitalWorksProgram.Theinitiativesalsoincludeitemsthatwereannouncedinthe2006-07Budget,butdonotcommenceuntil2007-08orfutureyears.

Initiativesinthischapteraregroupedundertheagencythathasbeenfundedtodeliverthem.Initiatives,includingoperatingandcapitalpayments,areeitherone-offorongoinginnature,andthedetailsprovidedreflectthenatureofeachone.

TheCapitalWorksProgramtableslistmajorworksprojectsandgrantsandthetotalcostofeach.Theamountsreflectthetotalprojectcosts,notthecashallocationinthe2007-08Budget.

Formoredetailsaboutinitiativesandcapitalprojects,includingcapitalworksprojectscontinuingfrom2006-07,seeBudget Paper No. 3andBudget Paper No. 4.

Adetaileddiscussionofrevenueinitiatives,includingrevenuepolicychangesaswellaschangesinprocedures,isalsopresentedinthelastsectionofthischapter.

Tables4.1,4.2and4.3providedetailsofinitiativesacrossallagencies.


ExpenditureInitiatives

ExpenditureInitiatives

Table4.1:SummaryofRecurrentInitiatives 2006-07 2007-08 2008-09 2009-10 2010-11


$M $M $M $M $M

Auditor-General’sOffice 0.2 0.2 0.2 0.2 0.2

Ombudsman’sOffice 0.1 0.1 0.1 0.1

DepartmentoftheChiefMinister 0.7 0.5 0.3 0.3 0.1

DepartmentoftheLegislativeAssembly 0.3 0.3

NorthernTerritoryTreasury 0.6 9.3 16.0 27.8 28.6

DepartmentofJustice 0.8 1.6 1.7 1.7 1.7

DepartmentofEmployment,EducationandTraining 1.1 4.8 2.8 1.7 1.1

DepartmentofHealthandCommunityServices 6.2 9.2 15.3 18.5 21.6

NorthernTerritoryPolice,FireandEmergencyServices 0.9 5.5 3.2 2.4 2.4

DepartmentofBusiness,EconomicandRegionalDevelopment

0.7 0.5 0.5 0.5

DepartmentofPlanningandInfrastructure 14.1 20.0 16.2 15.3 15.3

DepartmentofNaturalResources,EnvironmentandtheArts

1.0 1.2 2.0 1.8 1.9

DepartmentofLocalGovernment,HousingandSport 2.1 6.8 5.9 0.1 0.1

DepartmentofCorporateandInformationServices 0.3 1.4 0.9 0.5 0.2

DepartmentofPrimaryIndustry,FisheriesandMines 3.8 3.2 3.2 3.2

Total Initiatives 28.� ��.4 �8.� 74.� 77.0

�� Budget Initiatives

2007-08 budget

Table4.2:RecurrentInitiativesbyAgency 2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

Auditor-General’sOfficeOutcomeofstrategicreviewofNorthernTerritoryAuditor-General’sOffice

200 200 200 200 200

Total 200 200 200 200 200

Ombudsman’sOfficeEnhancedcapacityfortheOmbudsman’sOffice 60 60 60 60

Total �0 �0 �0 �0

DepartmentoftheChiefMinisterContinuationoftheethniccommunitiesfacilitiesprogram 250 250 250

SupportfortheNorthernTerritoryShowCouncilInc. 220

Roadsafetycampaign 583

ContinuationofsupportfortheWorldSolarCarChallenge 75 75 75 75 75

Total ��8 �4� �2� �2� 7�

DepartmentoftheLegislativeAssemblyContinuationoftheStatehoodSteeringCommitee’sactivities

250 250

Total 2�0 2�0

NorthernTerritoryTreasuryAbolishstampdutyonhiringarrangements 5360 5790 6250 6750

Abolishstampdutyonbusinesspropertyconveyances,excludingland

11342 11636

Increasethefirsthomeownerstampdutyconcessionfrom$225000to$350000

640 3900 3900 3900 3900

FurtherpayrolltaxreductionstomaintaintheTerritory’spayrolltaxcompetitiveness

6300 6300 6300

Total �40 � 2�0 �� 0 27 7�2 28 �8�

DepartmentofJusticeExpandresourcesinsupportoftheCriminal Property Forfeiture Act

671 782 782 782

PrimaryhealthcareservicesinTerritorycorrectionalcentres

800 950 950 950 950

Total 800 � �2� � 7�2 � 7�2 � 7�2

(continued)

�7

2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

DepartmentofEmployment,EducationandTrainingJobsPlan3:BuildingtheNorthernTerritoryWorkforce 1615 2610 1675 1000

Furniture,fitoutandequipmenttosupportmiddleyearsschooling

952 3008

GranttotheNorthernTerritoryWorkingWomen’sCentre 133 133 133

TroopcarriersforWadeye,WudapuliandNgamarriyangaschools

34 68 68 68 68

Total � �� 4 824 2 8�� 74� � 0�8

DepartmentofHealthandCommunityServicesAliceSpringsHospital–additional24beds(50%additionalfunding;50%tobemetfromexistinggrowthfunding)

1125 2250 2250 2250

CapitalgrantforupgradeworksatBanyanHouse 4000

ExpansionoftheCommunityMidwiferyProgramtotheAliceSpringsregion

280 280 280

FundingfordisabilityservicesintheNorthernTerritory 2305 3735 5204 6549

Capacitytomeetincreaseddemandforrenaldialysis,andprimaryhealthcareservicestomanagechronicandearlykidneydisease

1450 2450 4150 5850

Roadsafetyinitiatives 100

RoyalDarwinHospital–additional24beds(50%additionalfunding;50%tobemetfromexistinggrowthfunding)

562 1125 2250 2250 2250

StJohnAmbulance 554 1151 1369 1369 1369

SupportedAccommodationAssistanceProgram(SAAP)AgreementNo.5

413 1496 1597 1699 1699

Additionalresourcesforchildhealthcare 500 500 500

DevelopmentanddeliveryofnewtreatmentplacesforpeoplesubjecttoanOrderfromtheAlcoholCourt

560 560 640 640 640

FundingforaudiologistandspeechpathologistinCentralAustralia

200 200 200

Total � �8� � 2�2 �� 27� �8 �42 2� �87

(continued)

�8 Budget Initiatives

2007-08 budget

2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

NorthernTerritoryPolice,FireandEmergencyServicesRoadsafetyinitiatives 736 1318 1458 1458 1458

ExpandresourcesinsupportoftheCriminal Property Forfeiture Act

579 491 491 491

ImplementationoftheMinimumNationwidePersonProfileProject

150 3095 750

ReplacementofmajorfireappliancesfortheNorthernTerritoryFireService

500 500 500 500

RegulationofpaintballintheNorthernTerritory 47

Total �� 4�2 � �� 2 44� 2 44�

DepartmentofBusiness,EconomicandRegionalDevelopmentDefencecommunitiesliaison 99 101 101 101

IncreasedcapacityfortheNorthernTerritoryResearchandInnovationFund

350 350 350 350

EstablishmentofaneducationaltrustinTennantCreek 250

Total �� 4�� 4�� 4��

DepartmentofPlanningandInfrastructureGranttoKatherineTownCouncilforBicentennialRoadfunding

200

UpgradeBorroloolasewerageservices 5000

AdditionalbusservicesbetweenRobertsonBarracksandPalmerston

100 100 100 100

AdditionalassetsinsupportofIndigenousEssentialServices

3390

ImplementationofthenewDarwinbusschedule 145 250 250 250 250

AdditionalcapacitytorepairandmaintainTerritoryRoads 7500 7500 10000 10000

Roadsafetyinitiatives 1645 2950 1510 1060 1060

Provisionofadditionalschoolbusesforseniorandmiddleschools

1145 3340 4390 4390 4390

Additionalschoolbusesandhostservicesforspecialneedschildren

460 460 460 460

Implementationofstrategicstaffingandstaffdevelopmentinitiatives

2000 2000 2000 2000

ContinuationofundergroundingpowerlinesinRapidCreek 6000 -3000 -3000

Total �4 �� 0 �� 2�0 �� 2�0 �� 2�0

(continued)

��

2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

DepartmentofNaturalResources,EnvironmentandtheArtsContinuationofCabombaeradicationprogram 253 253

CoolCommunitiesprogramtoimprovehouseholdenergyefficiencyandreducegreenhousegasemissions

50 100 100 100 100

‘DoubleTrouble’televisionseries 243

EstablishmentandoperationoftheEnvironmentProtectionAgency

248 876 876 876

SupportforfilmingtheBazmarkfilmproduction‘Australia’attheStokesHillWharf

200

CanetoadmanagementbyFrogwatch 150

IndigenousRangerprogramandassistancetoDhimurru 225 100 200 300 400

ImproveNorthernTerritoryfloodforecastingcapability 444 444 444 444

SupportforthePublicArtPrecinctatDarwinInternationalAirport

105

AliceSprings/TennantCreekinitiativetosupportrebateofupto$50forwatersavingdevicespurchasedbyresidents

50 100 100 100 100

Total � 02� � 24� � �7� � 820 � �20

DepartmentofLocalGovernment,HousingandSportAdditionalfundingforAustralianFootballLeaguepre-seasonmatchesinDarwinandAliceSprings

420 420 420

GrantforCentralAustraliandragracingstrip 250

GranttotheDarwinCityCounciltoimprovepublicamenitiesinNightcliff

100

Gunbalunyaparkimprovementandplaygroundequipment 120

LocalGovernmentReformmanagementcostsandone-offestablishmentcostsfornewshirecouncils

215 5805 5230

Grantsprovidedtolocalgovernmenttoextendandrepairspecificlocalgovernment-managedroadsacrosstheTerritory

710

AdditionalfundingforNationalRugbyLeaguegamesinDarwinandAliceSprings

91 87 101

GranttotheDarwinCityCouncilfortheprovisionofanewskateparkfacilityinNightcliff

250

GrantstoAlpurrurulam,ArlparraandYuendumulocalcouncilsforshadetoovalsandrecreationareas

270

EquipmentgrantforsportsfacilitiesinElliott 100

Fundingforpersonneltoprovidesupporttoassociationswithoutliquor/gaminglicences

66 67 67 67

Supportforstagingapre-seasonA-LeaguefootballmatchatthenewDarwinFootballStadium

45 33

Total 2 �2� � 7�� 8 �7 �7

(continued)

40 Budget Initiatives

2007-08 budget

2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

DepartmentofCorporateandInformationServicesChinatownofficetowerpropertymanagementcosts 300 300

NorthernTerritoryPublicSectortraineeshipscheme 325

Fundingforanadditional100traineesunderJobsPlan3 600 700 300

Payrollworkvaluereview 200 200 200 200

Total �00 � 42� �00 �00 200

DepartmentofPrimaryIndustry,FisheriesandMinesFundingforfouryearstomaintainandupgradegeosciencedataandpromoteexplorationactivities

3000 3000 3000 3000

FinancialandtrainingsupporttoIndigenouscommunitiesfortheMarineRangerprogram

179 179 179 179

DevelopmentofablueprintrehabilitationstrategyfortheMountToddMinesite

630

Total � 80� � �7� � �7� � �7�

4�

Table4.3:2007-08NewCapitalWorks

$M

DepartmentofLegislativeAssemblyParliamentHouse–upgradecabling 3.8

DepartmentofEmployment,EducationandTraining1

BorroloolaCommunityEducationCentre 5.0

Cyclonesheltersupgrade–Nightcliff,JingiliandHumptyDoo 1.5

DesertPeople’sCentre–block2 1.7

DesertPeople’sCentre–block7 6.4

KatherineHighSchool–stage2–middleyearsschooling 0.6

MillnerPrimarySchool–upgradeassemblyarea 1.0

RossParkPrimarySchool–stage1–upgradeclassroomfacilities 1.0

WanguriPrimarySchoolupgrade 1.0

DepartmentofHealthandCommunityServicesAliceSpringsHospital–EmergencyDepartmentupgrade 6.0

AliceSpringsHospital–essentialworks 3.0

AliceSpringsHospital–renalfacilities 1.9

RoyalDarwinHospital–autoclave 1.5

TennantCreekHospitalfiresafetyupgrade–stage2 1.0

Wadeyehealthclinic 3.1

NorthernTerritoryPolice,FireandEmergencyServicesCasuarinaPoliceStation 4.8

1AustralianGovernmentfundingmayalsobeprovidedfortheseprojects.

(continued)


2007-08 budget

$M

DepartmentofPlanningandInfrastructureAllcorridors–pavementstrengtheningandwidening 5.0

Bellamacksubdivision 7.0

Blackspotprogram 0.7

DarwinMiddleSchoolroadworks 2.5

DarwinWaterfrontDevelopment–stage5 5.0

EastArmboatrampredevelopment 2.8

MaryvaleRoadupgrade–stage2 0.3

MyillyPointredevelopment 6.0

OutbackWay–stage2 1.7

PortKeatsRoadupgrade–stage2 10.0

RoadstoRecoveryprogram 6.0

Ruralarterials–strengtheningandwidening 0.8

SandoverHighwayupgrade 0.5

TanamiRoadupgrade 2.0

TigerBrennanDrive–stage1–BerrimahRoadduplication 10.0

Urbanarterials–strengthening 0.8

Urbanroadslandscaping 1.0

VictoriaHighway–stage3 18.0

Warruwiairstripupgrade 1.2

2007-08 Major Capital Grants

IndigenousEssentialServices 14.3

DarwinPortCorporationDredgingCharlesPointPatches/EastArmlandreclamation 0.8

FortHillWharfdredging 1.0

PortSecurityPlan 0.7

DepartmentofNaturalResources,EnvironmentandtheArts

MaryRiverWetlandsdesalination 0.5

NitmilukNationalPark–ablutionfacility 0.5

DepartmentofLocalGovernment,HousingandSport

HiddenValleyracewayupgrade–stage3 0.5

Marraraoutdoornetballcentre 4.8

(continued)

4�

$M

TerritoryHousingPublichousing–constructhousingincentresotherthanDarwin

andPalmerston1.0

Publichousing–Kurringalredevelopment 1.9

Publichousing–redevelopunitcomplexesinurbanareas 2.0

Publichousing–tailoredupgradesinurbancentres 2.0

Governmentemployeehousing–constructadditionalhousinginremotelocalities

5.0

Governmentemployeehousing–landservicinginremotelocalities 1.0

Governmentemployeehousing–replaceexistinghousinginremotelocalities

2.0

Governmentemployeehousing–upgradehousinginremotelocalities 3.0

Governmentemployeehousing–upgradepolicehousinginremotelocations

4.0

Indigenoushousing–headworks 5.0

2007-08 Major Capital Grants

Indigenoushousing 55.6

DepartmentofPrimaryIndustry,FisheriesandMinesImprovedrecreationalfishinginfrastructure 0.5

Anumberofkeyrevenuemeasuresareincludedinthe2007-08Budget.

IncreaseintheFirstHomeOwnerStampDutyConcessionFirsthomebuyerspurchasingahomefrom1May2007willbenefitfromthefirsthomeownerstampdutyconcessionincreasingfromthestampdutypayableonthefirst$225000ofahome’svaluetothefirst$350000.Thiswillnearlydoublethevalueoftheconcessionfromamaximumof$8015toamaximumof$15312,providingstampdutysavingsof$3.9milliontofirsthomebuyersin2007-08.

ThiswillbethefourthincreaseinthevalueoftheconcessionsinceAugust2002,priortowhichtheconcessionequatedtothestampdutypayableonthefirst$80000ofahome’svalue(amaximumconcessionof$2096).

TaxReformAspartofnationaltaxreform,theAustralianGovernment,statesandterritoriessignedtheIntergovernmentalAgreementontheReformofCommonwealthStateFinancialRelations(theIntergovernmentalAgreement).PartoftheIntergovernmentalAgreementsecuredtheabolitionofsomestateandterritorytaxesandareviewoftheneedtoretainalistofother‘business’taxes.

InaccordancewiththeIntergovernmentalAgreement,theTerritoryabolishedtourismmarketingdutyfrom1July2000,stampdutyonbothquotedmarketablesecuritiesandfinancialinstitutionsdutyfrom1July2001,anddebitstaxfrom1July2005.

RevenueInitiativesRevenueInitiatives


2007-08 budget

Further,aspartofitscommitmenttonationaltaxreform,theGovernmenthasagreedtoabolishthetaxesthatweresubjecttoreviewundertheIntergovernmentalAgreement.

Todate,ithasabolishedelectronicdebittransactionduty(from1July2005),andstampdutypayableonthegrantandrenewalofleasesandfranchisesandstampdutyonunquotedmarketablesecurities(from1July2006).

From1July2007,stampdutyonhiringarrangementswillbeabolished.Thisisastampdutyleviedonrentpaidforthehireofgoods,suchasspecialistorheavyequipmentormotorvehicles,andonhirepurchaseagreements,includingtheoptiontopurchasegoodsbyinstalments.Thisisexpectedtocost$5.4millionin2007-08.

Stampdutyleviedonnon-residentialconveyanceswillbeabolishedfrom1July2009.Thisincludesconveyancesofgoodwill,statutorylicencesandrightstousebusinessnamesandpatents,butdoesnotincludeconveyancesofrealproperty.Thisisexpectedtoreducestampdutycollectionsby$11.3millionin2009-10.

Equity,EfficiencyandAdministrativeEnhancementsTheGovernmenthasapprovedapackageofchangesthatenhancesimplicity,efficiencyandequityoftheTerritory’sstampdutyandfirsthomeownergrantschemes.

Ameasurethatwillapplyfrom1May2007willpreventthestampdutycorporatereconstructionexemptionsapplyingwhereapurposeofundertakingthereconstructionistofrustratetherecoveryofstampduty,taxorroyaltythatispayabletotheTerritory.

Thefollowingmeasurestocommencefrom1July2007,will:

• abolishstampdutyonthegrantofaleasefornilornominalconsideration;

• exemptalltypesofguaranteesfromnominalstampdutyof$20;

• ensurethatanythingthatisphysicallyfixedtolandisregardedas‘land’forthepurposesoftheland-holderprovisions;

• clarifythatstampdutyisimposedonthefullvalueandbestuseoftheland,whichincludeshavingregardtoinformationthatenhancesthevalueoftheland;

• ensuretheconsistentstampdutytreatmentofmininginformationirrespectiveofwhetherthemineissubjecttotheMining Act;

• ensurethatapersonwhohaspreviouslyownedahomeinterstateunderalong-termleasecannotqualifyforthefirsthomeownerstampdutyconcessionforasubsequenthomepurchase;

• clarifythatconsiderationneedstoactuallyhavebeenpaidforthepurchaseofahomepriortoanapplicantreceivingthefirsthomeownergrant;

• clarifythatanyoverpaymentofafirsthomeownergrantcanberecovered;and

• provideforotherminorchangesthatclarifytheoperationofthestampdutyandfirsthomeownergrantlegislation.

4�

Implications of Demographic Change for the TerritoryPopulationplaysasubstantialroleininfluencingthemediumandlong-termfiscalandeconomicoutlookfortheTerritory.

PopulationprojectionsareusedtoexplorethelikelyextentoffuturepopulationchangesandageingintheTerritory,andthepossibleeffectonvariousareasoftheeconomy,governmentservicesandotherareasofsocialdemand.AnalysisofhowtheTerritory’spopulationhaschangedinthelast30yearshasbeenusedtoassistthedevelopmentofpopulationprojections.

Populationageingreferstotheincreasingproportionsofolderpeopleandthecorrespondingdecreasingproportionsofyoungpeopleinapopulation.Ageingisoccurringbecauseoflong-termdeclinesinbirthratesandimprovementsinlifeexpectancy.Thepopulationsofalmostallcountriesintheworldarecurrentlyundergoingorsoontocommencerapidageingatascaleprobablynotpreviouslyexperiencedinhumanhistory.

Aspopulationsage,therearelikelytobeavarietyofeconomicimplicationsandfiscalpressures.Theseincludeareductionintheworkingagepopulationandlowerlabourforceparticipationastheworkingpopulationprogressivelyages;increasedhealthandagedcarecostsassociatedwithlongevity;reducededucationcostsbecausethereareproportionallyfeweryoungpeopleinthepopulation;andthehighercostofsupportingtheagedpopulationplacedonfewerwageearners.

TheTerritory,withitsuniquepopulationcompositionanddriversofgrowth,isexpectedtoagedifferentlytotherestofAustraliaanditsageingislikelytohavedifferentconsequencesthaninotherstatesandterritories.

ThereareanumberofuncertaintiesandmeasurementissuesthatcomplicatetheuseandanalysisofpopulationstatisticsparticularlyfortheTerritory.TheseareoutlinedinAppendixA.

Overthe30yearsfrom1971to2001,theTerritory’spopulationhasincreasedby130percent.WhiletheTerritory’sIndigenouspopulationhasdoubledfrom29000to56900people,thenon-Indigenouspopulationincreasedby150percentfrom56700to140900overthesameperiod.TheincreaseintheTerritory’snon-Indigenouspopulationisdueinparttonetinterstatemigrationthathasoccurredoverthisperiod.

BecauseofdifferentcharacteristicsoftheIndigenousandnon-IndigenouspopulationintheTerritory,changesinpopulationandpopulationprojectionsfortheTerritoryneedtoencompassseparateanalysesfortheIndigenousandnon-Indigenouspopulationgroups.Chart5.1ashowsthesizeandagedistributionsoftheTerritory’spopulationat10-yearlyintervalsfrom1971to2001,andChart5.1bshowsthechangesthathaveoccurredduringthethreedecadesfrom1971to2001.

Chapter 5Chapter 5

IntroductionIntroduction

AgeingintheTerritory

1971-2001

AgeingintheTerritory

1971-2001

4� Implications of Demographic Change for the Territory

2007-08 budget

ChangesintheTerritory’sIndigenouspopulationarealmostentirelyduetonaturalincrease(birthsanddeaths).Indigenouswomenhavehighbirthratesbutthesehavedeclinedoverrecentdecades.AsaconsequencetheIndigenouspopulationhasgainedrelativelyfewchildrenaged0-9duringeachofthethreedecades(Charts5.1b-1to5.1b-3).Theagecompositionoftheadultpopulationhasalsobeeninfluencedbyageing.Inthe1970stheIndigenouspopulationgrewbythegreatestnumbersintheagerange5-29years(Chart5.1b-1).Inthenextdecade,numbersincreasedmostamongthe15-39yearolds(Chart5.1b-2),but,bythe1990s,thelargestincreasesintheIndigenouspopulationwereoccurringinthe25-49yearagerange(Chart5.1b-3).

ChangesintheTerritory’snon-IndigenouspopulationarequitedifferentandmorecomplexthantheIndigenouspopulation.Thisisprimarilybecauseoftheveryimportantrolethatinterstatemigrationof20-29yearoldshasplayedinthegrowthoftheTerritory’snon-Indigenouspopulationoverthelast30years.Charts5.1b-1to5.1b-3showthatthedominantfeatureintheagedistributionfornon-IndigenousTerritorianshasbeentheageingofthecohortaged30-34yearoldsin1971-81(Chart5.1b-1).Thiswasanexceptionallylargecohort,withmanypeoplecomingtotheTerritoryduringtherebuildingofDarwinfollowingCycloneTracyandthentheexpansionofgovernmentservicesfollowingSelfGovernment.Charts5.1b-2and5.1b-3showtheageingofthisgroupfrom1971to2001.ItisprobablethatthiscohortwillcontinuetoprogressthroughtheTerritory’spopulationagegroupsinfuturedecades.

AlthoughtheTerritory’spopulationhasmorethandoubledoverthelast30years,thisincreasehasbeenfarfromuniformacrossallagegroups.Thesmallestpercentageincreasesinthenon-Indigenouspopulationwereinthenumberofinfants(aged0-4years)andyoungadults(20-29years).Forboththesegroups,thepopulationincreasedbyabout50percentoverthe30yearperiod.Thiscompareswithincreasesof400-600percentinthepopulationof50-60yearoldsoverthesameperiod.

FortheTerritory’sIndigenouspopulation,thepercentageincreaseininfantswasevensmallerthanthenon-Indigenouspopulation,atjust25percentover1971-2001.TheincreaseformostotherIndigenousadultagegroupswasupwardsof200percent.TherelativeincreasesintheTerritory’solderagegroupshasbeenextraordinarybyanystandards.TherelativelysmallincreasesinnumbersofyoungpeopleandlargeincreasesintheolderagegroupsindicatethatsignificantageinghasoccurredinboththeIndigenousandnon-IndigenousTerritorypopulationsoverthepast30years.

PopulationprojectionshaverecentlybeendevelopedbytheNorthernTerritoryGovernment(NTG)andCharlesDarwinUniversity(CDU)usinga‘componentsofgrowth’populationprojectionmodelthatsimultaneouslyprojectsboththeTerritory’sIndigenousandnon-Indigenouspopulationsfromthe2001AustralianBureauofStatistics(ABS)populationestimates.Theprojectionsarecurrentlyunpublishedandareundergoingaprocessofconsultation,reviewandpossiblerefinementbeforebeingendorsedforwholeofgovernmentuse.SeeAppendixBformoreinformation.

ProjectionsoftheTerritory’s

Population

ProjectionsoftheTerritory’s

Population

47

Chart 5.1: Changes to the Indigenous and Non-Indigenous Populations of the Territory from 1971 to 2001

Indigenous Non-Indigenous

1a-4 2001

14000 10000 6000 2000 0 2000 6000 10000 14000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+

Age Group

1a-3 1991

14000 10000 6000 2000 0 2000 6000 10000 14000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+


Age Group

14000 10000 6000 2000 0 2000 6000 10000 14000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+


1a-2 1981Age Group

14000 10000 6000 2000 0 2000 6000 10000 14000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+


Age Group1a-1 1971

Note:Between1991and2001therewasanetdecreaseinthenon-Indigenouspopulationaged20-24years(-1157)andanetdecreaseofnon-Indigenouspersonsaged25-29years(-136).During1991-2001thechangeintheIndigenouspopulationaged20-24yearswas603persons.

Source:CondonJR,BarnesT,CunninghamJ,SmithL.2004.DemographicCharacteristicsandTrendsoftheNorthernTerritoryIndigenousPopulation,1996to2001.CooperativeResearchCentreforAboriginalHealth,Darwin.


1b-3 Change 1991 to 2001

6000 5000 4000 3000 2000 1000 0 1000 2000 3000 4000 5000 6000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+

Age Group


1b-2 Change 1981 to 1991

6000 5000 4000 3000 2000 1000 0 1000 2000 3000 4000 5000 6000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+

Age Group


1b-1 Change 1971 to 1981

6000 5000 4000 3000 2000 1000 0 1000 2000 3000 4000 5000 6000

0~4 5~9 10~1415~1920~2425~2930~3435~3940~4445~4950~5455~5960~6465~6970~7475~7980~8485+ Age Group

(b)NetChangeinPopulationAgeDistributionBetweenDecades(a)PopulationAgeDistribution,NorthernTerritory1971-2001

48 Implications of Demographic Change for the Territory

2007-08 budget

Themodel’sparameterassumptionsforthegrowthcomponentsoffertility,mortalityandmigrationhavebeenbasedonthemostlikelyfuturetrends,basedonpastexperiences.Ofthesegrowthcomponents,interstatemigrationisthemostvolatileanddifficulttopredict.TheTerritory’sannualgrossinterstatemigrationisproportionatelygreaterthanforotherjurisdictions.Examinationofthesepasttrendsinmigrationshowthatnon-IndigenousnetmigrationtotheTerritoryhasconsistentlybeenrelativelylargeandpositiveforpeopleintheir20s,butsmallandnegativeornearzeroforallotheragegroups(Chart5.2).Ontheotherhand,netmigrationofIndigenouspeopletoandfromtheTerritoryhasbeeneffectivelyzeroatallages(Chart5.3).Theseimportantphenomenaarekeyelementsofthepopulationprojectionmodel.

Source:ABSCensus1971-2001.

Source:ABSCensus1971-2001.

Chart 5.2: Non-Indigenous Net Interstate Migration to

the Territory By Age Group, 1971-2001

Chart 5.2: Non-Indigenous Net Interstate Migration to


-2000

-1000

0

1000

2000

3000

4000

5-9

10-1

4

15-1

9

20

-24

25-2

9

30

-34

35

-39

40

-44

45

-49

50

-54

55

-59

60

-64

65

-69

70+

Age group (years)

number 1971-761976-811981-861986-911991-961996-01

-2000

-1000

0

1000

2000

3000

4000

5-9

10-1

4

15-1

9

20

-24

25-2

9

30

-34

35

-39

40

-44

45

-49

50

-54

55

-59

60

-64

65

-69

70+

Age group (years)

number 1971-761976-811981-861986-911991-961996-01

Chart 5.3: Indigenous Net Interstate Migration to


Chart 5.3: Indigenous Net Interstate Migration to


-1000

-500

0

500

1000

1500

2000

5-9

10-1

4

15-1

9

20

-24

25-2

9

30

-34

35

-39

40

-44

45

-49

50

-54

55

-59

60

-64

65

-69

70+

Age group (years)

number 1971-76

1976-81

1981-86

1986-91

1991-96

1996-01

-1000

-500

0

500

1000

1500

2000

5-9

10-1

4

15-1

9

20

-24

25-2

9

30

-34

35

-39

40

-44

45

-49

50

-54

55

-59

60

-64

65

-69

70+

Age group (years)

number 1971-76

1976-81

1981-86

1986-91

1991-96

1996-01

4�

Table5.1andChart5.4setoutestimatedchangesinTerritoryandAustralianpopulationsbetween1996and2027.Overtheperiod1996-2007,themedianageoftheAustralianandTerritorypopulationsincreasedby3yearsand2.6yearsrespectively.Theseincreasesareconsideredverylargebyanyhistoricalstandards.TheTerritory’snon-Indigenouspopulationshowedanevenlargerincreaseof4.2yearsoverthisperiod.TheIndigenousincreasewasslightlylessat2.3years(Chart5.4).

1996 2007 2017 2027

Australia 34.0 37.0 38.7 40.2

NorthernTerritory 27.8 30.4 31.3 32.3

NTIndigenous 20.6 22.9 25.0 26.6

NTNon-Indigenous 29.5 33.7 33.9 34.6

Source:ABSCat.Nos.3238.0,3201.0;NorthernTerritoryGovernment-CharlesDarwinUniversity(NTG-CDU)populationprojections.

15

20

25

30

35

40

45

Australia Northern Territory NT Indigenous NT Non-Indigenous

1996 2007 2017 2027

Years

Source:ABSCat.Nos.3238.0,3201.0;NTG-CDUpopulationprojections.

Largeincreasesinthemedianageareexpectedinthedecadebeyond2007,at1.7yearsforAustraliaand2.1yearsfortheTerritory’sIndigenouspopulationsbutonly0.2yearsfortheTerritory’snon-Indigenouspopulation.Thisincreaseissmallerthanforthepreviousdecade.

Between2017and2027,themedianageofthenon-Indigenouspopulationisprojectedtoriseonlymoderately,by0.7years,whiletheAustralianpopulation’smedianagerisesby1.5years.TheselowerthanexpectedincreasesfortheTerritorynon-Indigenouspopulationsuggeststhatmuchoftherapidageinginthenon-IndigenousTerritorypopulationmayhavealreadyoccurred.

Theproportionofthepopulationaged65yearsorovertellsaslightlydifferentstory,indicatinglessdramatic,butstillsubstantialchanges(Table5.2andChart5.5).SmallerfutureincreasesareexpectedintheTerritorythantheAustralianpopulation.However,startingfromaverysmallbase,theproportionoftheTerritorypopulationover65isprojectedtobe70percenthigherin2027thanin2007.Themostnoticeabledifferenceintheproportionagedover65yearsoccursintheTerritory’snon-Indigenouspopulation,withanequallylargeincreaseintheproportionofthepopulationaged65yearsandoverinboth1996-2007and2007-2017.

FutureAgeingintheTerritory

FutureAgeingintheTerritory

Table 5.1: Median Age, Northern Territory and

Australia 1996 to 2027

Table 5.1: Median Age, Northern Territory and

Australia 1996 to 2027

Chart 5.4: Median Age, Northern Territory and

Australia, 1996 to 2007

Chart 5.4: Median Age, Northern Territory and

Australia, 1996 to 2007

�0 Implications of Demographic Change for the Territory

2007-08 budget

1996 2007 2017 2027

% % % %

Australia 12.0 13.4 16.7 19.9

NorthernTerritory 3.2 4.6 6.3 7.9

NTIndigenous 2.8 3.1 3.8 5.3

NTNon-Indigenous 3.4 5.3 7.4 9.0

Source:ABSCatNos.3238.0,3201.0andNTG-CDUpopulationprojections.

0

5

10

15

20

25

Australia Northern Territory NT Indigenous NT Non-Indigenous

1996 2007 2017 2027

%

Source:ABSCat.Nos.3238.0,3201.0;NTG-CDUpopulationprojections.

Thetwosummarymeasuresofageing(medianageandproportionaged65yearsandover)appeartoindicateslightlycontradictoryexpectationsforageingfortheTerritory’snon-Indigenouspopulation.Thisreflectsthehighlynon-standardcompositionandgrowthdynamicsofthissectionoftheTerritory’spopulation.Forthisreason,itisnecessarytoconsiderchangesoverthewholeagerangeratherthanrelyingsolelyonsummarymeasureswhenconsideringthefullmagnitudeofageinganditseffectswithintheTerritory.

Charts5.6and5.7andTable5.3showtheexpectedpopulationincreasesineachagegroupforthetotalTerritoryandAustralianpopulationsfrom2007to2027andfortheTerritory’sIndigenousandnon-Indigenouspopulation.

Chart5.6showsthatineveryagegroup,theincreaseintheTerritorypopulationisexpectedtobehigherthanintheAustralianpopulation.TheAustralianpopulationisprojectedtoincreasebymorethan75percentforages70yearsandabovecomparedwithabouta150percentincreasefortheTerritorypopulation.

Chart5.7showsthemajorgrowthisexpectedtooccurinagesbeyond50yearsforIndigenousTerritoriansandbeyond65fornon-IndigenousTerritorians,withthenumbersintheseagegroupsprojectedtoincreasebyatleast100percent.

Table 5.2: Proportion of the Population Aged 65 and Over,

1996 to 2027

Table 5.2: Proportion of the Population Aged 65 and Over,

1996 to 2027

Chart 5.5: Proportion of the Population Aged 65 and Over,

1996 to 2027

Chart 5.5: Proportion of the Population Aged 65 and Over,

1996 to 2027

��

Source:NorthernTerritoryTreasury,calculatedfromNTG-CDUpopulationprojections.

Chart5.7alsoshowsmuchsmallerpopulationincreasesareexpectedinboththeIndigenousandnon-IndigenoussectorsoftheTerritory’spopulationbelowtheageof40years(between15to30percentfrom2007to2027).Thenon-Indigenouspopulationshowsslightlygreaterincreasesinagesupto14yearsthantheIndigenouspopulation,aresultnotimmediatelyexpectedgivenhigherIndigenousbirthrates.Thisislargelyduetotheexpectednetgainsofpeopleintheir20sand30sprojectedtooccurthroughmigration,whocomewithchildrenorparentchildrenaftertheirarrival.Thegrowthratesintheseyoungeragegroupsalsopartlyexplaintheslowerriseinmedianageforthenon-Indigenouspopulationafter2007,asseeninTable5.1.


0

50

100

150

200

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

Age group (years)

%

NT Total Australia Total

0

50

100

150

200

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

Age group (years)

%

NT Total Australia Total

Chart 5.6: Projected Percentage Increases for Each

Age Group in the Territory and

Australian Populations, 2007 to 2027


Age Group in the Territory and

Australian Populations, 2007 to 2027


Age Group in the Indigenous and Non-Indigenous

Populations, 2007 to 2027


Age Group in the Indigenous and Non-Indigenous

Populations, 2007 to 2027

0

50

100

150

200

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

Age group (years)

%

NT Indigenous NT Non-Indigenous

0

50

100

150

200

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

Age group (years)

%

NT Indigenous NT Non-Indigenous


2007-08 budget

NorthernTerritory

AgeGroup Indigenous

Non-

Indigenous Total Australia

0-4 16.2 36.0 27.7 11.3

5-9 18.2 29.5 24.8 9.7

10-14 12.1 21.1 17.3 4.8

15-19 16.3 15.3 15.7 4.4

20-24 23.9 21.6 22.4 8.4

25-29 25.7 34.6 31.9 17.2

30-34 32.2 35.8 34.8 19.6

35-39 26.4 25.9 26.1 11.8

40-44 44.8 23.6 28.5 11.1

45-49 52.1 15.3 22.9 3.3

50-54 85.2 21.9 33.3 10.4

55-59 115.6 30.0 44.9 19.0

60-64 146.6 51.0 67.3 35.4

65-69 134.6 87.7 97.4 70.0

70-74 148.8 137.1 139.5 83.7

75-79 140.5 149.6 147.9 83.8

80-84 76.9 174.9 155.0 73.1

85+ 77.8 192.8 168.0 90.3


Asdiscussed,theTerritory’sIndigenousandnon-Indigenouspopulations,andtheAustralianpopulationwillexperiencevastlydifferentdemographicchangeandageingoverthenext20years.TheNTG-CDUpopulationprojectionshavebeenusedtodemonstratethepossibleeffectofthisdemographicchangeonworkforcegrowth,anddemandforsocialservicesinkeyareasfrom2007to2027.Althoughcostofserviceshasnotbeenexamined,thelikelyincreaseindemandforaservicebasedonpopulationgrowthisoneoftheinputstocost.Anyconclusionsdrawnmustbeconsideredtentative,inpartbecauseoftheconsiderableuncertaintyaboutthepopulationprojections,andinpartbecauseoftheverysimpleformoftheindicatorsused.

Theareasexploredarethesizeofthelabourforce,demandforhealthandagedcareservices,schooleducation,housingandcorrectiveservices.Theindicatorsassumethatdemographicchange(age,sex,Indigenousstatus)istheonlydriverofdemandorcapacity.

Table 5.3: Population Increase, Northern Territory and

Australia (%),2007-2027

Table 5.3: Population Increase, Northern Territory and

Australia (%),2007-2027

ImpactsofDemographic

Change

ImpactsofDemographic

Change

��

Assumptionsunderlyingthesummaryindicatorsinclude:

• Labourforce–theprojectednumberofpeopleaged15yearsandoverin2007and2027,weightedbyage,sexandIndigenous-specificparticipationratesfromthe2001Census.Thisassumesthatparticipationratesfrom2007to2027remainconstantat2001Censuslevels.

• Healthservices–thenumberofhospitalseparations(includingthoseforrenaldialysisasaproxyforthelevelofchronicdiseaseinthepopulation),asthemaindriverofhealthcosts,hasbeenusedastheindicatorforhealthservicesdemand.AgeandIndigenous-specifichospitalisationratesfrom2003-04(Australia)and2002-06(theTerritory)havebeenusedtoweighttheprojectedpopulationsin2007and2027,toestimatethelevelofdemandforhealthservices.

• Agedcare–thenumberofnon-Indigenouspeopleaged70yearsandoverin2007and2027isusedasanindicatorofthedemandforagedcareservicesforthenon-Indigenouspopulation.FortheIndigenouspopulation,thenumberofpeopleaged50yearsandoverhasbeenused,becauseIndigenouspeoplerequireagedcareservicesatyoungeragesbecauseofpoorerhealth.TheseindicatorsareusedbytheAustralianGovernmentforagedcareplanning.Useoftheseindicatorsintheprojectionanalysisassumesthattheseagegroupswillremainreasonableindicatorsforthedemandforagedcarefrom2007to2027.

• Schooleducation–thenumberofchildrenaged5-18yearsintheprojectedpopulationsfor2007and2027hasbeenusedasanindicatorforthedemandforschooleducationservices.Thisassumesfullparticipationinschooleducationofall5-18yearolds.

• Housingdemand–housingdemand(publicandprivate)isdrivenbythenumberofhouseholdsinsociety.Thisinturnislargelydrivenbythenumberofadultsinthepopulation.Thenumberofadults(aged18yearsandover)inthe2007and2027populationshasbeenusedasanindicatorforhousingdemand.Thisindicatorincludesallhousing(notjustpublichousing),sohasimplicationswiderthangovernmentexpenditure.

• Correctiveservices–thenumberofprisonersinprisonsisthemaindriverofcorrectiveservicescosts.Thisindicatorprojectsthedemandforfuturecorrectiveservicesbyusingage,sexandIndigenous-specificimprisonmentrates(2006PrisonerCensus)toweighttheprojectedpopulationsin2007and2027.Thisassumesthatimprisonmentratesremainattheirconstantlevelsbetween2007and2027.

Thechangesintheindicatorsdescribedabovebetween2007and2027areshowninTable5.4anddisplayedinChart5.8.TheeffectsontheAustralian,totalNorthernTerritory,andTerritoryIndigenousandnon-Indigenouspopulationsareshownseparately.Thepercentageincreasesintheprojectedtotalpopulationsarealsoshownforcomparisonpurposes.


2007-08 budget

Itcanbeseenthatbetween2007and2027,theincreaseinallindicatorsisgreaterfortheTerritorythanforAustralia.ThisisexpectedbecauseofthegreaterprojectedgrowthinthetotalpopulationoftheTerritory(32.8percentcomparedwith21.2percentforAustralia).Likewise,forallindicators,thedifferencebetweentheincreaseinTerritoryandnationalindicatorsisgreaterthanthedifferencebetweentheincreaseinTerritoryandAustralianpopulation,indicatingthattheTerritorymaygenerallyundergogreaterrelativegrowthindemandforsocialservicesthanAustraliaasawhole.

Notsurprisingly,giventheproportionalincreasesinpopulationshowninTable5.2,thelargestrelativeincreaseforservicesinAustraliaandtheTerritoryisprojectedtooccurintheagedcaresector.Between2007and2027,theindicatorfordemandforagedcareincreasesby129percentintheTerritory,comparedto83percentinAustralia.

Theindicatorforhealthservices,basedoncurrenthospitalisationrates(includingrenaldialysis)showsamoremodest,butstillverylarge,increase,considerablylargerthantheincreaseinthetotalpopulation.TheindicatorfortheTerritory’snon-IndigenouspopulationissubstantiallylargerthanfortheIndigenouspopulation,whichinturn,islargerthanforAustralia.

Slightysmallerbutstillsubstantialprojectedincreasesareindicatedintheincreaseindemandforhousing.TheTerritoryincreasesaresubstantiallyabovethoseprojectedforAustralia.Housingdemand,asindicatedbythenumberofadults(18+)inthepopulation,isprojectedtoincreaseby37percentbetween2007and2027intheTerritory,comparedtoonly25percentinAustralia.IntheTerritory,thisincreaseisduetotherelativelyhighprojectedgrowthrateoftheIndigenousadultpopulation.Ifthisindicatorisanappropriateproxyforhousingdemand,thisprojectedincreasehassignificantpublicpolicyimplications,particularlygiventhecurrenthousingshortageinIndigenouscommunities.

Moremodestincreases,thoughsubstantiallylargerintheTerritorythanAustralia,areprojectedforschooleducationservicesinlinewiththesmallerincreasesinthegrowthofthepopulationofchildren.Schooleducationneedsareprojectedtoincreasebyalmost20percentintheTerritoryasaresultofdemographicchange,comparedto6percentnationally.

��

NorthernTerritory

Indigenous

Non-

Indigenous Total Australia

Total population growth 34.0 32.2 32.8 21.2

Economic capacity

Labourforce 43.6 33.0 35.8 20.0

Social service area

Health 61.1 48.2 57.0 37.6

Agedcare 114.6 153.4 129.4 82.8

Schooleducation 15.5 22.5 19.5 6.2

Housing 46.5 34.0 37.2 25.4

Corrections 35.0 23.1 32.9 15.1

Source:NTG-CDUpopulationprojections2007-2027;ABS,2006,PrisonersinAustralia,ABSCat.No.4517.0;ABS2001Census;DepartmentofHealthandCommunityServiceshospitalseparationsdata.


Table5.4alsoindicatestheprojectedincreaseinthedemandforcorrectionalservices(numberofprisoners)basedonthegrowthandchangingage,sexandIndigenousprofileofthepopulationalone.Assumingconstantimprisonmentratesforthesegroups,theresultindicatesthattheprisonpopulationanddemandforcorrectionalservicesisexpectedtoincreaseby33percentintheTerritorycomparedtoanincreaseof15percentinAustralia.Aswithotherareasofsocialservices,itisunrealistictoassume,astheseindicatorsdo,thattherewillbenonon-demographicchangesoverthenext20yearswhichmightinfluencecost.However,thesimpleindicatordoesservethepurposeofdemonstratingthat,ondemographicgroundsalone,thedemandforcorrectionalservicesintheTerritoryoverthenext20yearsmayincreaseattwicetherateoftherestofAustralia.

Table 5.4: Projected Growth in Territory Population,

and Increase in Selected Indicators (%), 2007-2027

Table 5.4: Projected Growth in Territory Population,


Chart 5.8: Projected Growth in Territory Population,


Chart 5.8: Projected Growth in Territory Population,


0

20

40

60

80

100

120

140

160%

NT Indigenous NT Non-Indigenous NT Australia

Population LabourForce

Health Aged Care Education Housing Corrections0

20

40

60

80

100

120

140

160%

NT Indigenous NT Non-Indigenous NT Australia

Population LabourForce

Health Aged Care Education Housing Corrections

�� Implications of Demographic Change for the Territory

2007-08 budget

Thenumberofpeopleparticipatingintheeconomythroughemployment,asoneoftheinputstoproductioncapacity,hasbeenusedinthismodelasanindicatorforpotentialcapacityoftheeconomytogrow.Basedon2001labourforceparticipationrates,thelabourforcewasprojectedto2007and2027.TheresultsinTable5.4andChart5.8showthatthenumberofpeopleparticipatinginemploymentisprojectedtogrowby36percentintheTerritoryoverthisperiod,comparedto20percentinAustralia.AmongtheIndigenousTerritorypopulation,theprojectedincreaseis44percentcomparedwith33percentfornon-IndigenousTerritorians.WhethertheprojectedgreaterincreaseamongstIndigenousTerritoriansconvertsintocorrespondinglygreaterincreasesinemployedIndigenouspeoplethancurrentlyoccurswilldependinpartontheextenttowhicheducationandskillstrainingoutcomesareimprovedoverthenexttwodecades.

Theindicatorsexploredintheprevioussectionshouldnotbeinterpretedasthelikelyfuturecostincreasesinthesesocialareas.Theyareconstructedtoshowthepossibleimplicationsofdirectdemographicchangeonincreasesindemand.Theydonottakeintoaccountindirectchangeslikelytooccurinassociationwithdemographicchangesuchaschangesintheprevalenceofchronicdisease,changesinthequalityandnatureofhealthcareandhousing,andchangesinfuturecoststructuresofprovidingsocialservices.

Theaboveanalysisindicatesthatdespiteitsyoungerpopulation,theTerritorymayexperiencegreatergrowthinpercapitademandforsocialservicesassociatedwithageingthanAustraliaasawhole.Thisperhapsunexpectedresultcanbeattributed,inpart,totheuniquedemographicdriversoftheTerritory’spopulation,namelyhighpopulation‘churn’amongtheyoungworkingnon-Indigenouspopulationandtheiroffspring,andhighnaturalincreaseamongtheIndigenouspopulation,andinparttotherapidlyincreasingproportionofolderpeopleintheTerritory’spopulationrelativetoAustralia.

Asnoted,makingpopulationprojectionsfortheTerritoryisparticularlydifficult.Thischapterattemptstoprojectincreasesindemanddueonlytodemographicchangewhile,inreality,thedriversofincreasingdemandandcostsaregenerallymuchmorecomplex.UnmetdemandandinadequateservicelevelsarelikelytoleadtogreaterrequirementsforservicesinthefuturethanthoseindicatedinTable5.4andChart5.8.

TheindicatorsdonotprovideabasistodistinguishcostpressuresbetweenAustraliangovernment,jurisdictionalgovernmentandnon-governmentcosts.TheProductivityCommission(PC)inits2005ResearchReportontheEconomicImplicationsofanAgeingAustraliaexploredsomeofthepossiblefutureconsequencesforstateandterritorygovernmentsofageinginthepopulationofthedifferentAustralianjurisdictions.

TheAustralianTreasuryhasrecentlyreleaseditssecondIntergenerationalReport(IGR)whichprovidesanupdateoflong-termdemographic,economicandspendingprojectionsandtheimplicationsforthesustainabilityoffiscalpolicyfortheAustralianGovernment.

AnalysesexploringtheimplicationsofageingbyallGovernmentswillcontributetobetterlong-termplanningand,insodoing,toimprovedfutureoutcomesforAustralia.

ImplicationsfortheTerritory

ImplicationsfortheTerritory

�7

Appendix A: Measurement of Australian

Official Population StatisticsTheAustralianBureauofStatistics(ABS)isthenationalagencyresponsiblefordevelopingestimatesofthepopulationforuseinarangeofofficialpurposes.ABSestimatesarerequiredtobeusedindetermininghowtheannualGSTrevenuesshouldbedistributedbetweenstatesandterritories.ThedistributionofGSTforanyfinancialyeardependsonthesizeofthepopulationasat31Decemberofthepreviousyear.

Populationsizeiscalculatedbyusinga‘componentsofgrowth’methodology.Thisisadeceptivelysimpleequationthatadjustsabasepopulationfornaturalincreaseandnetmigrationtoarriveatanewpopulationatalaterdate.Difficultieslieinuncertaintyaroundtheaccuracyofthebasepopulation,andinthemeasurementofthegrowthcomponentsofbirths,deathsandmigration.

ThebasepopulationistheCensusyearEstimatedResidentPopulation(ERP).ERPsarerebasedeveryfiveyearsonpopulationcountsderivedfromanewCensus,themostrecentofwhichwasconductedinAugust2006.AccurateERPdependsonaccurateresultsfromtheCensus,andthePostEnumerationSurvey(PES)–asurveydesignedtoallowundercountingintheCensustobeestimated.

TheTerritory’suniquegeographyanddemographymakeobtainingaccurateresultsfromthesedatacollectionsaparticularlychallengingtask.Inaddition,thePEShasbeenextendedtoremoteareasforthefirsttimein2006.ItisuncertainwhattheexactimpactofthiswillbeontheTerritorypopulationestimates,howeveritislikelytobemuchgreaterthaninotherjurisdictions.

Growthcomponentsareeithertakendirectlyfromofficialfigures(eg.birthsanddeathregistrations)orareestimatedindirectlyfromotherdata(eg.Medicareaddressmovementsforinterstatemigration,andpassengerdeparturecardreconciliationsforoverseasmigrations).ThequalityofbirthsanddeathsregistrationdataintheTerritoryishigh,andbetterthaninmostotherjurisdictionsparticularlyintheareaofIndigenousidentification,howevertheestimationofmigrationremainsanareaofconcernfortheTerritory.

TheABScalculatesinterstatemigrationflowsusingMedicarechangesofaddressrecordsprovidedbyMedicareAustralia.TheABSmakesadjustmentstotherawrecordsfortimelagsbetweenapersonmovinginterstateandupdatingtheirMedicarerecord,andforotherfactorssuchasfailuretoupdateMedicarerecordsbycertainsegmentsofthepopulation.TheTerritoryGovernmentisuncertainabouttheabilityofMedicaredatatoaccuratelycaptureinterstatemovements,andabouttheaccuracyoftheadjustmentsABSmakestothisdatatocompensateforitsshortcomings.


2007-08 budget

TheABSisdevelopingnewmethodsofestimatingnetoverseasmigrationandthefirstresultswillbeincorporatedintothe30June2006ERPtobereleasedon5June2007.Atthisstage,itisunclearwhatimpacttheadjustmentswillhaveontheTerritoryERP.Underthenewmethods,migrantsmustresideinAustraliaorelsewhere(forthosewholeftAustralia)foratleast12monthsovera16monthperiodtobeincludedinorexcludedfromtheresidentpopulation.Previously,apersonhadtoremainin/stayoutofAustraliaforacontinuous12monthperiodbeforeachangeinresidencywasrecognisedbyABS.OneconsequenceofthechangeisthatitwilltakelongerfortheABStoproducerevisedestimatesofERP.

AnaddedcomplicationtopopulationmeasurementisthattheABSproducesanumberofdifferentERPfiguresatdifferenttimes–preliminary,revisedandfinal–asthequalityoftheinputdataimproves.ThefiguresusedindeterminingGSTrevenuedistributionarethepreliminaryfigures,releasedon31Decembereachyear.Thesefigurescanberevisedsignificantlyinthefollowingmonths.Thiscreatesuncertaintynotjustaboutthesizeofthepopulationbutalsoitsgrowthfromoneperiodtoanother.

TheABSpreliminaryERPfor31December2006willbeusedbytheAustralianTreasurertodeterminethedistributionofGSTrevenuesbetweenjurisdictionsfor2007-08.ABSwillreleasethesepreliminaryestimateson5June2007.Thereisgreateruncertaintywithforecastingthis2006estimatethanusualbecauseoftheabove-mentionedissuesoftherebasingofpopulationestimatesonthe2006Census,thenewmethodologyforthePES,andtheintroductionofthenewapproachfornetoverseasmigration.Thesedevelopmentshavethepotentialtointroducesubstantialcorrections,eitherpositiveornegative,tocurrentTerritoryestimates.

EstimatedResidentPopulationat

31December2006

EstimatedResidentPopulationat

31December2006

��

Appendix B: NTG-CDU Population

Projections ModelTheNorthernTerritoryGovernment(NTG)andtheCharlesDarwinUniversity(CDU)havedevelopedapopulationprojectionsmodelthatseparatelyprojectstheTerritoryIndigenousandnon-Indigenouspopulationsbysingleyearofageandsexto2050-51fortheTerritoryasawhole.Theprojectionsarecurrentlyunpublishedandareundergoingareviewandconsultationprocessbeforebeingrecommendedforwholeofgovernmentuse.

TheNTG-CDUprojectionmodeliscreatedasa‘componentsofgrowth’model.Thismethodologyisthebasisofmostpopulationprojectionmodelsatthecountryorstateandterritorylevel.ABSalsousesthisapproachinitsownpopulationprojectionmodel.However,becausetheIndigenousandnon-Indigenouspopulationsareprojectedseparately,theNTG-CDUmodelhasadistinctadvantageovertheABSmodelsforexploringpossiblefuturegrowthscenariosoftheTerritory’sIndigenousandnon-Indigenouspopulations.

ThemodelconsidersAustraliatobedividedintotwogeographies,theNorthernTerritoryandtherestofAustraliaandassumestwoco-existingpopulations,theIndigenousandnon-Indigenouspopulations.Age-sexspecificmigrationbetweenthetwogeographicregionsisallowed,asisage-sexspecificmigrationintoandoutofAustraliathrougheitheroftheregions.Fertility(includingpaternalfertilitytoallowforvaryingmixedmarriageratesandassociateddifferencesinIndigenousidentificationamongoff-spring)andmortalityareflexiblycateredforandevendirectmigrationbetweenthetwopopulationsisallowed(simulatingchangesinaperson’sIndigenousstatus).

ThemodelcurrentlyhasasetofparameterassumptionsbasedoncarefulexaminationbyCDUandTerritoryGovernmentstakeholdersofcurrentand,whatisbelievedtobe,themostlikelyfuturetrends.Differentassumptionsaroundparametersrepresentingfertility,mortalityandmigrationmaybereadilyenteredintothemodeltoexplorealternativescenarios.

ThereissomeuncertaintyaroundfuturetrendsinIndigenousfertilityasthemostrecentdatahavesuggestedanincreaseinthetotalfertilityrate(TFR)afteralongperiodofdecline.However,dramaticfluctuationsarenotexpected.Theassumptionsarebasedonacontinuingtrendforfertilitytoremainstrongbut,inthelongrun,somedeclineisanticipated.Smallimprovementsinlifeexpectancy,andthereforemortality,arepredicted.BothnetinterstateandoverseasmigrationareassumedtobenegligiblefortheTerritoryIndigenouspopulation.Althoughthisisareasonableassumptiontomakebasedonpastevidence,itwillbeimportanttoanalysethe2006Censusresultstoseeiftherehavebeenanychanges.

IndigenousPopulation

Assumptions(BaseScenario)

IndigenousPopulation



2007-08 budget

Territorynon-IndigenousfertilityandlifeexpectancyarebothexpectedtobesimilartothatofthetotalAustralianpopulation.Bothnetinterstateandoverseasmigrationhavebeenbasedonthelongrunaverageofpasttrends(-500and+660perannumrespectively).Howevernetinterstatemigrationisextremelyvolatileandoverthepast20yearsannualnetinterstatemigrationhasrangedfrom-3400to+1700.Thechosenparameters,althoughbasedonpastevidence,arenotnecessarilygoodpredictorsofthefuture.Theageandsexdistributionofinterstatemigrantsisanimportantfactorindeterminingthefuturegrowththroughnaturalincreaseofthepopulation.AgeandsexdistributionsofTerritory‘in’and‘out’migrantshavebeenassumedtofollowtheverystablepatternsofrecentyearswhichhavebeenobservedinCensusdata.

Althoughnottheprimaryconcernofthemodel,itrequires‘restofAustralia’populationcomponentgrowthassumptionstobemade.TheseareassumedtocloselyfollowtheABSmediumprojectionsseriesforthetotalAustraliannon-IndigenouspopulationandtheABSexperimentalprojectionsforthetotalAustralianIndigenouspopulation.

Modelresultsarepresentedherefor2007and2027.By2027,theTerritorytotal,Indigenousandnon-Indigenouspopulationswouldincreaseinsizebyone-thirdover2007levels,whiletheAustralianpopulationwouldincreaseby21percent(Table5.5).Table5.6presentstheprojectedpopulationsbyagegroupfor2007and2027usedinthisstudy.

population %

2007 2027 Change Change

Australia(million) 20.8 25.2 4.4 21.2

NorthernTerritory 209150 277660 68510 32.8

NTIndigenous 63500 85100 21600 34.0

NTNon-Indigenous 145650 192580 46930 32.2

Source:NTG-CDUpopulationprojections2007-2027.

Non-IndigenousPopulation


Non-IndigenousPopulation


RestofAustralia(BaseScenario)RestofAustralia(BaseScenario)

Table 5.5: Base Scenario Total Population Projections,

2007 and 2027

Table 5.5: Base Scenario Total Population Projections,

2007 and 2027

��

Table 5.6: Population Age Distribution 2007 and 2027

2007 2027

NorthernTerritory Australia NorthernTerritory Australia

AgeGroup Indigenous

Non-

Indigenous Total Indigenous

Non-

Indigenous Total

0-4 7580 10612 18193 1289662 8807 14432 23238 1434882

5-9 7103 9921 17024 1319112 8394 12849 21243 1447222

10-14 7007 9422 16428 1389648 7855 11409 19264 1455809

15-19 6511 9192 15703 1453600 7570 10602 18172 1517546

20-24 6017 11830 17847 1488868 7458 14387 21845 1614122

25-29 5498 12538 18035 1423465 6909 16881 23790 1668329

30-34 5052 12733 17784 1427380 6676 17293 23970 1707360

35-39 4779 13198 17977 1527792 6042 16621 22664 1708777

40-44 3740 12441 16181 1494533 5417 15373 20790 1660168

45-49 3135 12023 15158 1506081 4769 13863 18632 1555927

50-54 2268 10344 12611 1361098 4201 12608 16809 1502432

55-59 1749 8324 10074 1273062 3771 10826 14597 1514469

60-64 1106 5374 6480 1054947 2728 8116 10844 1428815

65-69 861 3333 4194 810656 2019 6258 8276 1378230

70-74 481 1872 2353 646852 1197 4439 5636 1188061

75-79 293 1282 1575 551907 703 3200 3904 1014477

80-84 179 703 882 415570 317 1932 2249 719529

85+ 140 510 650 372646 249 1493 1742 709220

Note:TheseprojectionsarenotformallyendorsedbytheNorthernTerritoryGovernment.Source:NTG-CDUpopulationprojections2007-2027.


2007-08 budget

��

Indigenous Expenditure ReviewInrecentyears,theNorthernTerritoryGovernmenthasbeensubjectedtointensescrutinyregardingIndigenousdisadvantageanditsownIndigenous-relatedexpenditure.

Around80percentoftheTerritory’srevenueissourcedfromtheAustralianGovernment,withasignificantproportionofthisprovidedtotheTerritoryasaresultofdisadvantageassociatedwithitslargeIndigenouspopulation.DoubtshavebeenraisedinvariousforumsastowhethertheTerritoryisjustifiedinclaimingtheleveloffundingreceivedbecauseofitsIndigenouspopulationandwhethersufficientfundshavebeendirectedtowardsimprovingoutcomesforIndigenousTerritorians.SomecommentatorshavecriticisedtheTerritoryforsupposedlyusingthesefundstosupportprogramsandinfrastructureprimarilyaccessedbythenon-Indigenouspopulation,particularlyinDarwin.IthasbeenallegedthatthisisperpetuatingandexacerbatingIndigenousdisadvantage.

PriortotheIndigenous Expenditure Review (theReview),therehadnotbeenanyrobust,wholeofgovernmentanalysisoftheTerritory’sexpenditureandrevenuerelatedtotheIndigenouspopulation.TheTerritory’sChiefExecutiveTaskforceonIndigenousAffairsdirectedtheNorthernTerritoryTreasurytoprepareareportanalysingtheTerritoryGovernment’sexpenditureandrevenueattributabletotheIndigenouspopulation.TheReviewwascompletedinSeptember2006andwasbasedon2004-05budgetdata.

TheReviewwasrefereedbyProfessorKennethWiltshire,JDStoryProfessorofPublicAdministrationattheUniversityofQueenslandBusinessSchoolandformermemberoftheCommonwealthGrantsCommission,andMrSaulEslake,ChiefEconomistANZ.NorthernTerritoryTreasuryalsohelddiscussionswithCommonwealthGrantsCommissionstaffconcerningtheCommission’sassessments.

MethodologyandResultsThebroadmethodologicalbasisoftheReviewinvolvedmeasuringrevenuefromallsources,receivedasaresultoftheTerritory’sIndigenouspopulation,andcomparingthistotheexpensesrelatedtothispopulationgroup.TheobjectivewastodeterminewhetheranappropriateamountofrevenuewasbeingspentforIndigenous-relatedpurposes.

ExpenditureIndigenouspeoplearemajorusersofmainstreamTerritoryGovernmentservices.ItiswidelyacceptedthatIndigenouspeoplehavepooreroutcomesacrossvirtuallyallmeasurescomparedwiththenon-Indigenouspopulation.Indigenousdisadvantageismultidimensionalandcomplex.Thelong-terminterplayofsocial,culturalandeconomicfactorsmeansthatdisadvantageisentrenchedinthelivesofmanyIndigenouspeople.HighlevelsofIndigenousdisadvantageresultinagreaterrelianceongovernmentservices,thecostofwhichisincreasedbyremotenessandlackofeconomiesofscale.Forexample,whilearound29percentofthepopulationisIndigenous,morethan60percentofhospitalseparationsareIndigenous.Around40percentofschoolchildrenareIndigenous.Thisnecessarilymeans

Chapter 6Chapter 6

TheReviewTheReview

�4 Indigenous Expenditure Review

2007-08 budget

thatmanymainstreamservicesareIndigenous-focused,whichisuniqueamongAustralianstates.Becauseofthis,attemptingtoseparateIndigenous-specificprogramfundingfromotherprogramfundingisnotappropriateorrelevantfortheTerritory.AttemptingtoconstructanestimateofIndigenous-relatedspendingbasedsolelyontheidentificationofIndigenous-specificprogramswouldresultinasignificantunderestimationofrelevantexpenditure.

ThemethodologicalapproachadoptedbytheReviewtoestimateIndigenous-relatedexpenditurereflectedthisconsiderationandtookintoaccountbothdirectandindirectuseandcostratesofallgovernmentservices.Agencieswerecategorisedinthreedistinctgroups:serviceagenciesthatprovideservicesdirectlytotheTerritorypublic(suchastheDepartmentofHealthandCommunityServices);supportagenciesthatprovideservicesdirectlytoothergovernmentagencies(suchastheDepartmentofCorporateandInformationServicesandNTFleet);andcentralagenciesthatprovidegeneral,wholeofgovernmentservicestoallagencies(suchastheDepartmentoftheChiefMinisterandNorthernTerritoryTreasury).

ServiceagenciesestimatedIndigenous-relatedexpenditurebyexamining:spendingonIndigenous-specificprograms;Indigenoususeratesforotherprograms;andfunctionsandcostdifferentialsbetweenprovisionofservicestotheIndigenousandnon-Indigenouspopulations.Whereserviceagenciesprovidedaservicethatgeneratesbroadereconomicandsocialbenefitsarisingfromgovernmentinvestment(forexample,tourismpromotionandindustrydevelopment)butthathaslimiteddirectbeneficiaries,considerationwasgiventotheindirectbenefitsaccruedtothewholepopulation.Theseindirectbenefitsmayincludeavailabilityofemployment,accesstothegoodsandservicesofproduction,andtheadvantagesgainedfromtaxationrevenueraisedfromtherelevantindustry.ExpenditurebytheseagencieswasgenerallyattributedtotheIndigenouspopulationonanequalpercapitabasisusingtheIndigenouspopulationproportionof28.8percent.

TheestimationofIndigenous-relatedexpenditureforsupportagencieswasbasedonthepremisethattheseagenciesexistonlytoprovideservicestootheragencies.Thus,supportagencies’expenditurewastreatedasthoughitwasacorporatecostforserviceagencies.Theestimatesforsupportagencies’sharesofIndigenous-relatedspendingwerethereforebasedontheaverageIndigenous-relatedexpenditureforallserviceagencies.Wheredatawasavailable,thesupportagencies’expenditurewasapportionedtoeachserviceagencyandweightedaccordingly.

Similartosupportagencies,theestimatesforcentralagencieswerebasedontheaverageexpenditurerelatedtotheIndigenouspopulationofallserviceagencies,becausecentralagenciespredominantlyprovidefunctionsthatsupportserviceagencies.Exceptionsweremadeforprogramsthatareadirectservicetothegeneralpopulation,suchasthosethatwereprovidedunderTreasury’soutputgroupin2004-05,‘Gambling,LiquorandOtherRegulation’.Thefunctionsofcentralandsupportagenciesdirectlycomplementtheactivitiesofserviceagencies.

DataonusageratesandrelativecostsofgovernmentserviceprovisionrelatedtotheIndigenouspopulationwascollatedfromavailableexternalsources.DatasourcesincludedtheAustralianBureauofStatistics,theAustralianInstituteof

��

HealthandWelfare,theAustralianInstituteofCriminologyandinternalNorthernTerritoryGovernmentagencies.

TheassumptionwasmadethatallTerritoryGovernmentprogramsareexpendedatnationalaveragelevelsofefficiency.Judgementswerenotmadeonhoweffectiveorappropriatetheprogramswere,asthiswasoutsidethescopeoftheReview.

TheReviewestimatedthat49.7percentoftheTerritory’stotalexpenditurecanbedirectlyorindirectlyattributedtotheIndigenouspopulation.Ifsupportandcentralagencieswereremovedfromtheanalysis,theshareoftheTerritory’stotalexpenditurerelatedtotheIndigenouspopulationincreasedto50.9percent.TheserviceagencyestimatereflectstheproportionofexpenditurerelatedtoservicesdirectlyaccessiblebyIndigenousTerritorians,ratherthantheindirecteffectofexpenditurerelatedtoadministrativeandcorporatefunctions.Serviceagenciesspentanestimated50.9percentonIndigenous-relatedpurposes,supportagenciesspent46.5percentandcentralagenciesspent45.6percent.

AgencyTypeShareofTotalExpenditure

Indigenous-relatedExpenditureShare

% %

Serviceagency 77.3 50.9

Supportagency 5.5 46.5

Centralagency 17.2 45.6

All agencies 100.0 49.7


RevenueTheTerritory’srevenuewasanalysedtodeterminewhatproportionwasIndigenousrelated.Likeotherstates,theTerritoryhasthreemainrevenuesources:own-sourcerevenue(statetaxes,interestandsalesofgoodsandservices),specificpurposepayments(SPPs)andgoodsandservicestaxrevenue(GST).GSTandSPPsareprovidedbytheAustralianGovernment.

TheTerritory’smainsourceofrevenueisGST,whichaccountsforabouttwo-thirdsoftotalrevenue.Thisshareismuchhigherthaninotherstatesduelargelytothehigherneedfor,andcostsof,servicedeliveryandlowerrelativecapacitytoraiseown-sourcerevenue.TheTerritory’srelativityforthedistributionofGSTrevenueisthehighestofallstatesandreflectsdifferencesinsocio-demographiccomposition,Indigenousinfluences,wagelevels,scale,dispersion,economicdevelopmentandthephysicalenvironment.Charts6.1and6.2showtheextentoftheredistributiontotheTerritoryandthefactorscontributingtotheTerritory’sGSTrelativity.

TiedfundingsuchasSPPsandotherAustralianGovernmentgrantscomprisesanother15percentoftheTerritory’stotalrevenue.Theremaining20percentoftheTerritoryGovernment’sincomeisfromown-sourcerevenue.

Table 6.1: Estimate of Northern Territory Government

Expenditure Related to the Indigenous Population

2004-05

Table 6.1: Estimate of Northern Territory Government

Expenditure Related to the Indigenous Population

2004-05

�� Indigenous Expenditure Review

2007-08 budget

Source:CommonwealthGrantsCommission(2004),ReportonStateRevenueSharingRelativities:2004Review.

Source:CommonwealthGrantsCommission(2004),ReportonStateRevenueSharingRelativities:2004Review.

CalculationoftheTerritory’sIndigenous-relatedrevenuewasbasedonthefollowing:

• theCommonwealthGrantsCommission’sestimatesoftheredistributiveeffectofIndigenousinfluences,nativetitle,landrightsandotherrelevantdisabilitiesindeterminingGSTrelativities;

• SPPrevenuetargetedatIndigenous-specificpurposes;

• theindirectimpactonGSTrevenueofIndigenousSPPfunding;

• estimatesoftheproportionofown-sourcetaxesattributabletotheIndigenouspopulation;and

• anequalpercapita(EPC)shareofremainingrevenue.

Table6.2showstheIndigenous-relatedshareofeachtypeofrevenue.Overall,theReviewestimatesthat43.2percentoftheTerritory’stotalrevenuewasrelatedtotheIndigenouspopulation.

Chart 6.1: GST Revenue Distribution, Difference from

Equal per Capita, 2004-05

Chart 6.1: GST Revenue Distribution, Difference from

Equal per Capita, 2004-05

NSW

Vic

ACT

WA

Qld

Tas

SA

NT

-2000 -1500 -1000 -500 0 500 1000 1500 2000

$M

NSW

Vic

ACT

WA

Qld

Tas

SA

NT

-2000 -1500 -1000 -500 0 500 1000 1500 2000

$M

Chart 6.2: Major Influences Causing GST Redistribution to

and from the Northern Territory

Chart 6.2: Major Influences Causing GST Redistribution to

and from the Northern Territory

Other factors

Input costs

Scale of service provision

Population dispersion

Indigenous influences

-100 0 100 200 300 400 500 600 700

$M

Other factors

Input costs

Scale of service provision



-100 0 100 200 300 400 500 600 700

$M

�7

SourceofRevenueShareofTotal

Revenue RevenueIndigenous-

RelatedShareIndigenous-

RelatedShare

% $M $M %

GST 64.1 1739.6 916.1 52.7

Tiedgrants(includingSPPs) 15.1 411.3 148.4 36.1

Own-sourcerevenue 20.8 565.3 108.0 19.1

Total 100.0 2 716.2 1 172.5 43.2


TheReviewestimatedthatin2004-05,49.7percentoftheTerritory’sexpenditureand43.2percentoftotalrevenuewasIndigenousrelated.Thiscomparestoapopulationshareof28.8percent.Thisresultshowsthat,in2004-05,theTerritoryspentmoremoneythanitreceivedforIndigenous-relatedpurposesby6.5percentagepoints,or$175million.

Indigenous-relatedexpenditurewas73percenthigherthanwouldbethecaseifitwasspentonanequalpercapitabasis.SpendingpercapitarelatedtoIndigenouspersonswas2.44timeshigherthanfornon-Indigenouspersons.

Despitethehighlevelofexpenditureandrecentimprovementsinlifeexpectancy,educationalattainmentandinfantmortalityrates,outcomesforIndigenousTerritoriansacrossawiderangeofindicatorsremainpoorrelativetothoseofnon-IndigenousTerritorians.

PopulationprojectionsfortheTerritory,developedincollaborationwithCharlesDarwinUniversity,predictthatby2027theIndigenouspopulationwillhaveincreasedby34percentcomparedtogrowthinAustraliaof21.2percent(seeChapter5Demographic Change and Its Implications for the Territory’s Future).

Chapter5demonstratedthat,basedondemographicchangealone,theimpactonservicesfortheTerritory’sIndigenouspopulationwillbesignificantlyhigherthaninAustraliaasawhole.Thisanalysisdoesnottakeintoaccountsuchfactorsasthehighlevelofunmethousingneed,pooreducationattainmentorrisingprevalenceofchronicdisease,allofwhichhavesignificantimplicationsforthefuturecostsofdeliveringservicesintheTerritory.

TheProductivityCommission,inits2005reportEconomicImplicationsofanAgeingAustralia,demonstratedthattheTerritory’sbudgetwouldsuffermorethanmostjurisdictionsbecauseofexpectedgrowingcostsassociatedwithservicestoitsIndigenouspopulation.

ItisclearthatcurrentlevelsoffundingareinsufficienttoclosethegapinoutcomesbetweentheIndigenousandnon-Indigenouspopulationgroupsintheforeseeablefuture.ThereisaneedformorefundingandintensiveinterventionifIndigenousdisadvantageistobeeliminatedwithinageneration.

Thisintensiveinterventionwillneedtofocusoneachofthemainserviceareasofhousing,employment,educationandtraining,lawandorderandhealth.Interventioninonlyasubsetoftheseareasmaynotbesufficienttoprovidethemuch-neededcircuitbreakertoimprovingoutcomesandreducingwelfaredependencyforIndigenouspersonsintheTerritory.

Table 6.2: Estimation of Northern Territory Revenue

Related to the Indigenous Population,

2004-05

Table 6.2: Estimation of Northern Territory Revenue

Related to the Indigenous Population,

2004-05

ConclusionandImplicationsfor

Governments

ConclusionandImplicationsfor

Governments

�8 Indigenous Expenditure Review

2007-08 budget

Therefore,maintainingthestatusquooffundingwillnotapparentlyreducelevelsofdisadvantage.DeliveryofnewfundingstreamstotheTerritory,inadditiontothosedeliveredthroughhorizontalfiscalequalisationandtheinterrelatedSPPs,isrequiredsothatsocialwellbeingoftheIndigenouspopulationcanbeimproved,alongwitheconomicparticipationandproductivity,andsothatallAustralianscanbenefitfromimprovedeconomicactivityandsocialcohesion.

��

Australian Government GrantsAustralianGovernmentgrantsrepresenttheTerritory’sprincipalsourceofbudgetfunding.Thisfundingincludes:

• generalpurposegrants,whichincludeGSTrevenuepaymentsand,fortheTerritory,grantsinlieuofuraniumroyalties.Thesepaymentsareuntiedandcanbeusedbythestatesforanypurpose;and

• othergrants,themajorityofwhichareclassifiedbytheAustralianGovernmentasspecificpurposepayments(SPPs).Thesepaymentsareassignedtospecificpurposesandrepresenttiedfunding.

GSTrevenuerepresentsthemostsignificantcomponentofAustralianGovernmentfundingandiscalculatedfromitsunderlyingparameterswhichincludenationalGSTcollections,populationandpercapitastate-revenuesharingrelativities.TheCommonwealthGrantsCommission(hereinaftercalledtheCommission)determinesrelativitieseachyearinitsannualupdateorattheendofitsmethodologyreviewperiod(approximatelyeveryfiveyears).GSTestimatesandprojectionsandtheCommission’s2007UpdateandMinisterialCouncilreportarediscussedinthefirsthalfofthischapter.

GrantsfromtheAustralianGovernmentareanessentialsourceofrevenueforallstates.Thegrantsareessentialas,underAustralia’sfederalsystem,thestateshavesignificantservicedeliveryresponsibilitiesbutlimitedcapacitytoraiseown-sourcerevenue.Conversely,theAustralianGovernment’srevenueraisingcapacityconsiderablyexceedsitslimitedservicedeliveryresponsibilities.Thedisparitybetweenthetwotiersofgovernmentintermsofrevenueraisingcapacityandservicedeliveryresponsibilitiesisdefinedasverticalfiscalimbalance(VFI).TheextentofVFIinAustraliahasincreasedsince2000-01followingtheintroductionofthegoodsandservicestax(GST)andtheassociatedtaxreforms,includingtheabolitionofarangeofstatetaxes.Issuesinpublicfinancearediscussedinthesecondhalfofthischapter.

TheTerritoryexpectstoreceive$1975.9millioninGST-relatedrevenuein2006-07,a6.8percentincreasefromthe$1850.2millionreceivedin2005-06.For2007-08,anincreaseof7.5percentto$2123.4millionisexpected.

TheTerritory’sGSTrevenuegrantisdeterminedprincipallyby:

• thelevelofnationalGSTcollectionsraisedannually;

• theTerritory’sshareofthenationalpopulation;and

• theTerritory’spercapitarevenue-sharingrelativityasdeterminedbytheCommission.

AccurateforecastingoftheparametersthatdetermineGSTrevenuecanmitigatetheriskofsignificantrevenuevariationsintheTerritorybudget.However,theinherentdifficultiesinestimatingthesizeoftheGSTpool,theTerritory’spopulationandCommissionrelativitiesovertheforwardestimatesperiodmakethisprocessdifficult.

UnexpectedchangesinGSTrevenueparametershaveapotentialtoposerisks(bothupsideanddownside)fortheTerritory’sfinancialperformance.Sincethe

Chapter 7Chapter 7

OverviewOverview

GSTRevenueGSTRevenue

70 Australian Government Grants

2007-08 budget

introductionoftheGST,therehavebeenanumberofexampleswheresuchriskshavematerialised(forexample,rebasingoftheTerritory’spopulationin2002-03followingthe2001Census,andincreasesintheTerritory’srelativityinthe2006and2007Updates,primarilyduetochangedfinancialcircumstancesinotherstates).

TheAustralianGovernmentprovidesstateswithestimatesofGSTcollectionsinitsannualbudgetandinitsMid-YearEconomicandFiscalOutlook(MYEFO).FollowingtheintroductionoftheGSTin2000,collectionswerevolatileanddifficulttopredict.Althoughmorestableatpresent,GSTrevenuewillvaryinlinewithchangesineconomicgrowthandconsumption.TheAustralianTreasuryremainsthemostinformedsourceofGSTestimates,givenitsaccesstothelatestkeystatisticalandcollectionsdata.PrivateandothergovernmentorganisationssuchasAccessEconomicsandQueenslandTreasuryalsoprovideestimatesofnationalGSTcollections.SuchestimatesprovidestateswithearlyintelligenceoflikelyvariationsfromAustralianGovernmentestimates.GSTrevenuepaymentstothestatesarefinalisedinJuneeachyearfollowingdeterminationofestimatesfornationalGSTcollectionsbytheAustralianTaxationCommissioner,estimatedresidentpopulations(asat31December)bytheAustralianStatisticianandrelativitiesbytheAustralianTreasurer.Thesedeterminationsarefinal,withtheexceptionofnationalGSTcollections,wherefutureGSTcollectionsareadjustedforoutcomesfromprioryears.

TheTerritoryhasadoptedAustralianGovernmentestimatesfornationalGSTcollectionsandpopulationsinitsGSTrevenueestimatesforthe2007-08Budgetandforwardestimatesperiod.NeithertheAustralianGovernmentnortheCommissionprovidesestimatesoffuturerelativities(2008-09onwards)andtherefore,consideringthepotentialforupsideordownsidemovement,theTerritoryhasadoptedthe2007Updaterelativitiesforthisperiod.ItshouldbenotedthatnationalGSTcollectionsarebasedonestimatesfromtheAustralianGovernment’sMYEFOwhichwerepublishedinDecember2006andthattheTerritory’spopulationmaybesignificantlyrevisedfollowingthe2006Censusoutcome.Thefirsttrancheofresultsfromthe2006CensuswillalsoimpactonCommissionrelativities.

Table7.1showsthebudgetandforwardprojectionsfortheTerritory’sGSTrevenueandthesensitivityofGSTrevenuetovariationsinkeyparameters.ThistabledemonstratesthatachangeinanyoneGSTparameter(inanyparticularyear)canhaveasignificantimpactontheTerritory’sGSTrevenue.Theseimpactsmultiplywhenmorethanoneparametervariesorwhenatrendemergesinforwardyears.Althoughaonepercentagepointchangehasasimilareffectoneachinfluence,therelativityisthemostvolatileandpresentsthegreatestfuturerisk,asdiscussedlaterinthischapter.

7�

2006-07 2007-08 2008-09 2009-10 2010-11

Budget Estimates ($M) � �7�.� 2 �2�.4 2 24�.� 2 ��4.2 2 4�7.�

NationalGSTRevenue($B) 39.3 41.9 44.4 46.6 49.0

Growth% 5.8 6.4 6.0 5.0 5.0

Population 208330 211303 214325 217380 220479

Growth% 1.5 1.4 1.4 1.4 1.4

ShareofNationalPopulation% 1.004 1.005 1.006 1.008 1.009

Relativity 4.32755 4.36824 4.36824 4.36824 4.36824

Sensitivity to a one percentage point variation in growth in key parameters

NationalGSTRevenue

Oneyearonlyvariation($M) 18.4 19.5 20.5 21.6

Ongoingvariation($M) 18.4 38.8 61.0 85.1

Population

Oneyearonlyvariation($M) 21.3 22.4 23.5 24.6

Ongoingvariation($M) 21.3 44.7 69.8 97.1

Relativity

Oneyearonlyvariation($M) 22.4 23.5 24.6

Ongoingvariation($M) 22.4 46.8 73.1

Source:NorthernTerritoryTreasury,AustralianGovernmentMid-Year Economic and Fiscal Outlook 2006-07.

ThemajorityofotherAustralianGovernmentagencygrantsareclassifiedasspecificpurposepayments(SPPs),whichareusuallytiedtosomespecificprogramorfunctionagainstwhichtheymustbeacquitted.SPPsareamajormechanismbywhichtheverticalfiscalimbalancebetweentheAustralianandstatelevelsofgovernmentiscorrected.

In2007-08,TerritoryGovernmentagencieswillreceiveabout$487millioninotherAustralianGovernmentgrants.

SPPsareusuallygovernedbyformalagreementsbetweentheAustralianGovernmentandthestateswhichsetoutconditionssuchas:

• theprogramsandfunctionsforwhichthefundsmaybeused;

• thecontributionofstatediscretionaryfunds;

• restrictionsonhowfundedprogramsmaybedelivered;

• performanceandreportingrequirements;and

• punitivesanctionsforthebreachofconditionsintheagreements.

Thestatescontinuetoseekimprovementsinthestructureoftheseagreements.

Table 7.1: Northern Territory GST Revenue Projections

Table 7.1: Northern Territory GST Revenue Projections

OtherAustralianGovernment

Grants

OtherAustralianGovernment

Grants


2007-08 budget

CommonwealthGrantsCommissionTheroleoftheCommissionistoadvisetheAustralianGovernmentonrelativitiesforuseinthedistributionofGSTrevenueamongthestates.TheIntergovernmentalAgreementontheReformofCommonwealth-StateFinancialRelationsrequirestheserecommendationstobebasedontheprincipleofhorizontalfiscalequalisation,whichisdefinedas:

A distribution of the pool of funds made available by the Australian Government for transfer to the states as untied financial assistance such that, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency, each would have the capacity to provide services at the same level. (Commission2007UpdateReport)

Everyfiveyears,theCommissionundertakesamajorreviewofthemethoditusestodeterminepercapitarelativities.Thisprocessisnecessarytoensurethatrelativitiescontinuetoreflectthecontemporarypublicadministration,serviceprovisionandrevenue-raisingenvironmentofstategovernments.ThelastreviewwascompletedinFebruary2004.The2004reviewmethodologywillbeusedasthebasisfordeterminingGSTdistributionamongthestatesto2009-10.Relativitiesintheinterveningyearsareupdatedusingthelatestavailablefinancial,economicanddemographicdata.

2007Update–StateRevenueSharingRelativitiesInFebruary2007,theCommissionreleaseditsReportonStateRevenueSharingRelativities–2007Update.The2007UpdatereportdetailstheCommission’srecommendationforthedistributionoftheGSTpoolin2007-08.

TheCommission’srecommendationsareexpressedinpercapitarelativitiesforeachstate.States’relativitiesreflectthefinancialeffectoneachjurisdictionofthe:

• unavoidableinfluencesontheuseorcostsofprovidingservices(expenditureneeds);

• unavoidableinfluencesonrevenue-raisingcapacities(revenueneeds);and

• itspercapitalevelofSPPsinrelationtothenationalaverage(SPPneeds).

Needsmaybepositiveornegative.BecausetheCommissionassessesneedswithinadefinedlevelofavailablefunds,anecessaryconsequenceisthatapositiveneedofonejurisdictionmeansatleastoneotherjurisdictionwillbeassessedashavingnegativeexpenditureneeds.Stateswithpositiveneedshaverelativitiesabove1.ThesestatesrequiremorethananequalpercapitashareoftheGSTpooltodelivertheAustralianbenchmarklevelofservices.Conversely,stateswithnegativeneedshaverelativitiesofbelow1andrequirelessthananequalpercapitashareofthepooltoprovideservicesatAustralianaveragelevels.

Table7.2comparesthechangesinrelativitiesbetweenthe2006and2007Updates.Inthe2007Update,theCommissionhasrecommendedanincreaseinrelativitiesforNewSouthWales,Victoria,SouthAustralia,theAustralianCapitalTerritoryandtheNorthernTerritory.Theremainingjurisdictionsexperiencedadecreaseinrelativities.

DeterminationofStateRevenue

SharingRelativities

DeterminationofStateRevenue

SharingRelativities

7�

TheoutcomefortheTerritorywasanincreaseinitsrelativityfrom4.32755to4.36824,whichtranslatestoanincreaseof$19.7millionintheTerritory’sshareofGSTrevenueonano-changebasis(thatisbasedonthe2006-07GSTpoolandnochangeinpopulation).Inpercapitaterms,thelargestpositiveimpactswereintheNorthernTerritory($94.45)andSouthAustralia($44.60),whilethegreatestnegativeimpactswereinWesternAustralia(-$131.66)andQueensland(-$40.74).

Theannualchangeinrelativitiesreflectsthechangesintheeconomicandsocialcircumstancesofthestates,whichimpactonstates’own-sourcerevenueraisingcapacityorthecostsofprovidingthestandardlevelofgovernmentservices.Inthe2007Update,thevariationinstates’revenueraisingcapacitiesaccountsformostofthechangeinrelativities.Changesintherelativecostsofprovidingservicesbetweenstatesgenerallyhadasmallerimpactonrelativities.

Table7.3showsthemaincontributorstothechangesinstaterelativitiesbetweenthe2006and2007Update.

ThedeclineinrelativitiesforWesternAustraliaandQueenslandwasdrivenbythecontinuedstrengthofthepropertymarketandcommoditiesprices.Conversely,therelativeslowdowninthepropertymarketinNewSouthWalesincreaseditsrelativitycloserto1.Theoutcomesfromthe2007UpdatereflecttheeffectivenessofAustralia’ssystemofequalisation.

Table 7.2: Impact of the 2007 Update

NSW Vic Qld WA SA Tas ACT NT

Relativity

2006Update 0.87332 0.89559 1.02387 1.00480 1.18862 1.54931 1.14575 4.32755

GrantShare(%) 28.9 22.1 20.2 10.0 8.9 3.7 1.8 4.4

Relativity

2007Update 0.89079 0.90096 1.00607 0.94747 1.20791 1.54465 1.16293 4.36824

GrantShare(%) 29.5 22.2 19.8 9.4 9.1 3.7 1.9 4.4

Effect of 2007 Relativity

Impact ($M) 277.0 �4.0 -��.4 -27�.� ��.� -�.� ��.� ��.7

Impact ($ per capita) 40.�� 2.�� -40.74 -��.�� 44.�0 -�0.4� ��.74 �4.4�

Source:CommonwealthGrantsCommissionReportonStateRevenueSharingRelativities–2007Update.

Table 7.2: Impact of the 2007 Update


Relativity

2006Update 0.87332 0.89559 1.02387 1.00480 1.18862 1.54931 1.14575 4.32755

GrantShare(%) 28.9 22.1 20.2 10.0 8.9 3.7 1.8 4.4

Relativity

2007Update 0.89079 0.90096 1.00607 0.94747 1.20791 1.54465 1.16293 4.36824

GrantShare(%) 29.5 22.2 19.8 9.4 9.1 3.7 1.9 4.4

Effect of 2007 Relativity

Impact ($M) 277.0 �4.0 -��.4 -27�.� ��.� -�.� ��.� ��.7

Impact ($ per capita) 40.�� 2.�� -40.74 -��.�� 44.�0 -�0.4� ��.74 �4.4�


Table 7.3: Main Influences on Changes in State Allocations from the Pool, 2007 Update ($M)

NSW Vic Qld WA SA Tas ACT NT Aust

Stampdutyonconveyances 201.9 0.8 -60.4 -161.1 16.5 5.1 3.2 -6.0 227.5

Abolitionofsomestatetaxes 101.9 14.9 -62.2 -26.3 -17.0 -13.7 7.2 -4.8 123.9

Wagesinputcosts -107.7 1.4 67.2 4.8 45.4 1.1 -2.1 -10.0 119.8

Miningrevenue 24.2 48.0 -82.2 -10.1 13.8 1.8 3.0 1.4 92.3

Populationcharacteristics 39.4 -21.5 -9.3 -34.1 -9.9 -0.5 0.0 35.9 75.2

Allotherchanges 17.3 20.5 -19.5 -44.8 20.5 1.0 1.9 3.1 64.3

TOTAL 277.0 �4.0 - ��.4 - 27�.� ��.� - �.� ��.� ��.7 NA


Table 7.3: Main Influences on Changes in State Allocations from the Pool, 2007 Update ($M)


Stampdutyonconveyances 201.9 0.8 -60.4 -161.1 16.5 5.1 3.2 -6.0 227.5

Abolitionofsomestatetaxes 101.9 14.9 -62.2 -26.3 -17.0 -13.7 7.2 -4.8 123.9

Wagesinputcosts -107.7 1.4 67.2 4.8 45.4 1.1 -2.1 -10.0 119.8

Miningrevenue 24.2 48.0 -82.2 -10.1 13.8 1.8 3.0 1.4 92.3

Populationcharacteristics 39.4 -21.5 -9.3 -34.1 -9.9 -0.5 0.0 35.9 75.2

Allotherchanges 17.3 20.5 -19.5 -44.8 20.5 1.0 1.9 3.1 64.3

TOTAL 277.0 �4.0 - ��.4 - 27�.� ��.� - �.� ��.� ��.7 NA



2007-08 budget

FortheTerritory,theincreaseinitsrelativeshareofGSTrevenuein2007-08wasmainlyduetotheincreaseintheimportanceofexpensesonservicestoIndigenouscommunities.ThiswaspartlyoffsetbyrevisionstotheABS’SurveyofEducationandTraining,whichshowedslowerwagesgrowthintheTerritorycomparedwithnationalwagesgrowth,andtheCommission’sdecisiontodiscounttheimpactofvisitornumbersonthecostsofprovidingnationalparksandwildlifeservices.

Table7.4comparestherelativerevenue,expenditureandSPPneedsofeachjurisdiction.TheTerritory’sneedsareprimarilydrivenbyitsexpenditurerequirementsand,toalesserextent,itsbelow-averagecapacitytoraiserevenue.ThisispartlyoffsetbytheTerritory’srelativelyhighshareofthetotalSPPfunding.

TheTerritory’shighexpenditurerequirementsareduetotheveryhighcostsofprovidingvirtuallyallgovernmentservices.ThemaincausesoftheaboveaveragecostsofserviceprovisionintheTerritoryare:

• therelativelylargeproportionoftheIndigenouspopulationresidingintheTerritory,whichincreasestheunitcostsanduseofservices;

• thesmallandhighlydispersedpopulationoveralargeandremotelandmass;

• thelargediseconomiesofscale;and

• theisolationfromthecapitalcitiesontheeasternseaboard.

Chart7.1showsthemainfactorsthatcontributetothedifferencebetweentheTerritory’sequalisedandequalpercapitashareofGSTrevenue.IndigenousinfluencesaccountfornearlyhalfthetotalredistributionofGSTrevenuetotheTerritory.

Table 7.4: Causes of the Redistribution from Equal Per Capita, 2007 Update ($ Per Capita)


Revenueraisingcapacity -167.31 193.02 -28.20 -555.53 529.03 842.77 377.15 306.38 116.39

Expenditurerequirements -91.39 -445.83 32.45 441.08 -20.41 476.02 3.19 7975.10 141.88

SPPs 6.82 24.38 8.94 -7.49 -30.72 -65.92 -5.91 -530.55 10.04

Totalneeds–differencefromEPC1

-251.92 -228.51 13.33 -121.50 477.74 1252.52 374.24 7749.22 0.00

Source:CommonwealthGrantsCommissionReportonStateRevenueSharingRelativities–2007Updatesupportingvolume.1ThisisthedifferencebetweenanequalpercapitadistributionofGSTrevenueandtheCommission’sassessment.

Table 7.4: Causes of the Redistribution from Equal Per Capita, 2007 Update ($ Per Capita)


Revenueraisingcapacity -167.31 193.02 -28.20 -555.53 529.03 842.77 377.15 306.38 116.39

Expenditurerequirements -91.39 -445.83 32.45 441.08 -20.41 476.02 3.19 7975.10 141.88

SPPs 6.82 24.38 8.94 -7.49 -30.72 -65.92 -5.91 -530.55 10.04

Totalneeds–differencefromEPC1

-251.92 -228.51 13.33 -121.50 477.74 1252.52 374.24 7749.22 0.00

Source:CommonwealthGrantsCommissionReportonStateRevenueSharingRelativities–2007Updatesupportingvolume.1ThisisthedifferencebetweenanequalpercapitadistributionofGSTrevenueandtheCommission’sassessment.

7�

Source:CommonwealthGrantsCommissionupdatereports.

TheCommission’srecommendationsofthe2007-08relativitieswillresultinabout6.5percentofthetotalGSTandhealthcaregrantspoolbeingredistributedbetweenstates.Theremainingproportionofthetotalpooliseffectivelydistributedonanequalpercapitabasis.Chart7.2showstheproportionofthetotalpoolthatisredistributedbetweenthestates.Overthelongterm,theamountofequalisationpaymentsasaproportionofthepoolhasbeendeclining.

Source:CommonwealthGrantsCommission2007Update.

Chart 7.1: Expenditure Contribution to the Northern Territory GST Revenue ($M)

Chart 7.1: Expenditure Contribution to the Northern Territory GST Revenue ($M)

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Chart 7.2: Redistribution of the Pool Over Time (%)

Chart 7.2: Redistribution of the Pool Over Time (%)

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7� Australian Government Grants

2007-08 budget

2010ReviewofStateRevenueSharingRelativities–ProgressReporttoMinisterialCouncilforCommonwealth-StateFinancialRelations2007The2010ReviewTermsofReferenceinstructedtheCommissiontoreporttothe2007MinisterialCouncilontheprogresstowardssimplifyingthemethodologyusedtodetermineGSTgrantallocationby:

• aggregatingexistingassessmentcategories,componentsandfactors,inwholeorinpart;

• eliminatingcategoryassessmentsfoundunreliablebecauseofunsatisfactorydataormethodology;

• applyingamaterialitythresholdtocurrentandfutureassessments;and

• reviewingthescopefortheuseofmoregeneralindicatorsofrevenuecapacityandexpenditureneed.

TheCommissionhasadopteda‘cleanslate’,‘topdown’approachtodeterminetheappropriatecategorystructureforthe2010Review.Underthisapproach,theCommissionhasstartedwithbroadexpenseandrevenuecategoriesandwillonlydisaggregatewhere:

• therearedistinctdifferencesbetweenthedriversofstateexpenseswithintherangeofactivities;

• materialitythresholdsaremet;

• thedisaggregatedcategorycanbemeasuredreliably;and

• equalisationoutcomesareimproved.

TheCommissionhasdevelopedapreliminarycategorystructureforthe2010Reviewwith12expenditure(previously39expenditureand8usercharges)and7revenue(previously13)categories.TheCommissioniscurrentlyexaminingappropriatebroadindicatorsforeachcategorythatarepolicyneutralandwhichcaptureknowndifferencesbetweenstatesinthecostsofprovidingservices.

In2006,theCommission,inconsultationwiththestates,commencedareviewoftheprinciplesandarchitectureofhorizontalfiscalequalisationthatwillapplyinthe2010Review.TheCommissionhasreportedthemainissuesraisedbystatesasincluding:

• theobjectiveofequalisation–moststatessupportedthecurrentfiscalequalisationapproachwhichprovidestateswiththecapacitytoprovidethesamelevelofservices.However,thereisaminoritystateviewthattheCommission’smethodologyshouldachievepartialequalisationratherthanfullequalisation;

• scopeofequalisation–thecurrentapplicationofequalisationiscomprehensiveasitincludesallgeneralgovernmentrevenuesandservices.Onestatehasproposedthatthescopeofequalisationshouldbelimitedto‘core’servicessuchaseducation,health,andlawandorder;

• newequalisationpillars–theCommission’sassessmentisbasedonthreefundamentaltenets:capacityequalisation,equalisingtointernalstandardsandpolicyneutrality.Somestateshavearguedforadditionalpillarsrelatedtosimplicityandefficiency;and

77

• contemporaneity–theannualrelativitiesarebasedontheaverageofindividualrelativitiesoverfiveyearswithatwoyearlag.ThisapproachwasadoptedbytheAustralianGovernmentafterconsultationwiththestatestosmoothrelativitieshavingregardtofluctuationsintheeconomicandbudgetcyclesofstates.Asaresult,therelativitythatappliesinagivenyearmaynotreflectthecurrentcircumstancesofthestates.Onealternativemodelproposedistoreturntoaveragingtheannualrelativitiesoverthreeyearsratherthanfive.

TheCommissionwillreleaseadiscussionpaperonitsviewsontheprinciplesandarchitectureofequalisationinMay2007.

Concurrently,theCommissionisexaminingthequalityandfitnessforpurposeofthedatausedinitsassessments,includingaprogramforreviewingthereliabilityofthemaindatasetsandimplementingaprotocolforimprovingthequalityofstatedata.In2006,theCommissionreviewedanumberofstatedatasetsincludingstampdutyonconveyances,courtappearances,isolation,nationalparks,roads,nativetitle,landrightsandservicestoIndigenouscommunities.

TheCommission’s2007dataworkplanwillfocusonthereliabilityofGovernmentFinanceStatisticsGovernmentPurposeClassifications,socio-demographiccomposition,locationandfurtherworkonthequalityofstateroadsdata.

IntergovernmentalAgreementTheAustralianGovernmenthascollectedrevenueonbehalfofthestatessincethe1940s,whenstates’incometaxingpowersweretransferredtotheAustralianGovernment.UntiltheinceptionoftheIntergovernmentalAgreementontheReformofCommonwealth-StateFinancialRelations(theIntergovernmentalAgreement)in1999,theAustralianGovernmenthadcompletediscretionovertheamountofitstaxationrevenuethatwasprovidedtostatesandthemannerinwhichtherevenuewasprovided(thatis,tiedoruntied).

Fromthe1940stothe1990s,theshareofAustralianGovernmentrevenuegrantedtothestatesgraduallydecreased,particularlytheamountofuntiedrevenue.Bythelate1990sthefiscalarrangementsbetweenthetwotiersofgovernmentwerebothinefficientandunsustainable.StategovernmentcostswereescalatingfasterthanrevenuefromtheAustralianGovernmentandtheimportanceofstateown-sourcerevenuewasincreasingasstatessoughttofundthegrowingdemandfor,andcostsof,providinggovernmentservices.

Toaddresstheseissues,theIntergovernmentalAgreementwassignedbytheAustralianGovernmentandthestatesinJune1999.TheagreementdefinestheprinciplesandinstitutionalarrangementsunderwhichtheAustralianGovernmentcollectsGSTrevenueonbehalfofthestates.Sinceitsinception,theIntergovernmentalAgreementhasformedthebasisoffederal-statefiscalrelations.TheIntergovernmentalAgreement:

• guaranteesstatesaccesstoasourceofuntiedrevenuewhich,overtime,shouldbetteralignwiththegrowthinthecostofprovidingstateservices;

• allowsforthestagedabolitionorreviewofaspecifiedlistofstatetaxes;and

• simplifiesfinancialrelationsbetweentheAustralianGovernmentandthestates.

AkeyfeatureoftheIntergovernmentalAgreementisaguaranteethatnostatewillbefinanciallydisadvantagedbythetaxreformsimplementedaspartoftheIntergovernmentalAgreement.Accordingly,theAustralianGovernmentcommittedtoprovidingbudgetbalancingassistance(BBA)tooffsetanyshortfall.Followinga




2007-08 budget

decisionbythemajorityofstatestoabolishanumberoftaxeswhichweresubjecttoreviewundertheIntergovernmentalAgreement,theAustralianGovernmenthasconditionallyagreedtoextendtheBBAarrangementsto30June2009.

States,inaggregate,areexpectedtoreceive$2billionmoreinGSTrevenuein2006-07thantheywouldhaveifpreviousarrangementshadremainedinplace.ThisisprimarilybecausetheGSTprovidesstateswithaccesstoabroadly-basedconsumptiontaxwhichreflectseconomicperformanceratherthanthepreviousfinancialassistancegrants,whichwereescalatedbypopulationgrowthandinflation.

Thecomparison,however,isartificialastheongoingstrengthoftheAustralianeconomyandsubsequentincreasesinnationaltaxationrevenuemeanthatchangestothepreviousmethodsofrevenuedistributionwereinevitable.Inaddition,GSTrevenuegrowthhasbeeninsufficienttoalterthecontinuingdeclineinthestates’shareofnationaltaxrevenue.

Chart7.3illustratestheongoinglong-termtrenddeclineinstates’shareofnationaltaxationrevenue,includingstatetaxationrevenue.Thestates’shareoftaxationrevenuehasfallenfrom46.9percentin1983-84to35.0percentin2006-07.AlthoughtherewasaminorcorrectionsubsequenttotheintroductionoftheGSTin2000,thestates’shareoftaxationrevenuehasdeclinedineachsubsequentyearofthenewfinancialarrangements.Currentforwardestimatesshowafurtherdeclineto34.9percentofnationalrevenuein2008-09.Stateestimatesincludeprovisionofspecificpurposepaymentstothestates.

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Reflectingstrongeconomicconditions,stateown-sourcerevenue,GSTandAustralianGovernmentown-purposerevenuehaveallgrownmuchmorestronglythanprojectedwhentheGSTwasintroduced.However,basedon2006-07estimates,AustralianGovernmentown-purposerevenuewillhavegrownbyalmost$70billionsincethefirstyearoftheGST(seeChart7.4)comparedto$13billionforeachofGSTandstateown-taxrevenue.TheAustralianGovernment’sprojectedcashsurplusof$11.8billionin2006-07isalmostsixtimesthe$2billionexcessofGSTrevenueoverpreviousfinancialarrangements,andaround30percentofstates’totalGSTrevenuein2006-07.

Chart 7.3: State and Territory Share of National Taxation

Revenue

Chart 7.3: State and Territory Share of National Taxation

Revenue

7�

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Australian GovernmentOwn-Purpose Revenue

State Own-Source Revenue


In2001,The State and Territory Shares of National Tax Revenues reportbyHeadsofTreasuriestotheTreasurers’Conferenceestimatedthatacombinedrealgrowthofaround3.4percentinstateown-sourcerevenueandspecificpurposepaymentswouldberequiredtopreventstates’shareofnationaltaxationrevenuefromdiminishingfurther.However,thestrongerthanexpectedgrowthinAustralianGovernmenttaxationrevenue,coupledwiththeabolitionofanumberofadditionalstatebusinesstaxesandalackofanyoffsettingincreasesinAustralianGovernmentgrants,hasmeantthatverticalfiscalimbalancehasincreasedsincetheintroductionoftheGST.Around$2.7billioninadditionalAustralianGovernmentgrantswouldberequiredin2007-08torestorethestates’shareofnationaltaxationrevenuetoits2000-01level,whichatthetimewasatanhistoricallylowlevel.

Chart7.5showstheincreaseinAustralianGovernmentgrantsthatwouldbenecessary(intheabsenceofneworincreasedstatetaxes)torestorethestates’shareofnationaltaxationrevenuetoitspre-GSTaverage(theaveragestates’shareofnationaltaxationrevenuefrom1983-84to1999-00(41.3percent)).


Chart 7.4: Growth in Australian Government Revenue

Chart 7.4: Growth in Australian Government Revenue

70

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110

120

130

140

150

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

State Taxation Revenue (includes GST, States’ Own-Source Revenue and Australian Government grants)

Additional Australian Government grants required to restore pre-GST average share

$B

70

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140

150

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

State Taxation Revenue (includes GST, States’ Own-Source Revenue and Australian Government grants)

Additional Australian Government grants required to restore pre-GST average share

$BChart 7.5: Restoring States’ Share of Pre-GST National

Taxation Revenue

Chart 7.5: Restoring States’ Share of Pre-GST National

Taxation Revenue


2007-08 budget

TheIntergovernmentalAgreementprovidesforameetingofallAustraliantreasurerstooverseeitsoperation.ThisisknownastheTreasurers’Conferenceanditseighthmeetingwasheldon30March2007.ThemeetingdiscussedtheCommonwealthGrantsCommission2007UpdateandreporttotheMinisterialCouncilandtheIntergovernmentalAgreementcommitmentbystatestoreviewtheneedforretentionofarangeofstatetaxes.

Lastyear,thestatescollectivelyagreedtoabolishallbutoneofarangeoftaxeslistedforreviewundertheIntergovernmentalAgreement.Statesopposedtheabolitionoftaxonthepropertycomponentofnon-residentialstampdutyduetoinequitywithresidentialhomebuyersanditsimportancetostaterevenue.

Thisyear,theAustralianTreasureragainrequestedthatstatesprovideadateforabolitionofthistax.ThestatesreiteratedoppositiontoitsabolitionandnotedthattheyhadextendedtaxconcessionsoutsidethoseareasinitiallyproposedundertheIntergovernmentalAgreementincludinginitiativesinrelationtopayrolltax,stampdutyforfirsthomebuyersandlandtax.

GeneralIssueswithSPPsAlthoughSPPsareameansofreducingverticalfiscalimbalancebetweenthestates,theyalsoprovidetheAustralianGovernmentwiththeabilitytoexertapolicyinfluenceoverareasofserviceprovisionwhicharehistoricallyorconstitutionallyastateresponsibility.SPPsareincreasinglyregardedbytheAustralianGovernmentasameansofaligningthedeliveryofstateserviceswithitsownpolicyobjectives.

SPPsareanacceptedfeatureofAustralianintergovernmentalfinancialrelations,andareanimportantsourceofrevenueforthestates.Nonetheless,therearenumerousproblemswiththecurrentimplementationofSPParrangements,including:

• inefficiency–SPPscarryalargeadministrativeburdenandinvolveduplicationoffunctionsatthenationalandstatelevelsofgovernment;

• distortionofservices–theinputcontrolsandperformancerequirementsinSPPsoftendonotpromoteoptimaloutcomes,andstifleinnovationinservicedelivery;and

• reducedbudgetflexibility–inputcontrolsinSPPagreementseffectivelycontrollargeamountsofstatediscretionaryrevenue,substantiallyreducingstatebudgetflexibility.

NationalReformAgendaOn10February2006,theCouncilofAustralianGovernments(COAG)agreedtoanewnationalreformframeworktomaintainnationaleconomicperformanceandlivingstandardsintothefuture.ThenewframeworkisknownastheNationalReformAgenda(NRA)andcomprisesthreebroadstreamsinhumancapital,competitionandbestpracticeregulation.TheNRAreformsaretobeimplementedthroughagreedintergovernmentalactionplanswhichwilldetailagreedreformactions,progressmeasuresandoutcomes.

UndertheNRA,theAustralianGovernmentistoconsiderfinancialassistancetothestatesonacase-by-casebasis,withreferencetothedistributionofcostsandbenefitsbetweenlevelsofgovernment.ThequantumandtimingoffinancialassistanceisexpectedtobedeterminedaspartoftheimplementationofNRAintergovernmentalplansduring2007.

8�

Anewstatutoryauthority,theCOAGReformCouncil(CRC),hasbeenestablishedtomonitorandassessreformprogressagainstintergovernmentalplansandreportannuallytoCOAG.TheAustralianGovernmentwilldetermineeligibilityforfinancialassistancebasedonCRCreports.Atthisstage,norevenuefromthissourcehasbeenfactoredintotheBudgetfor2007-08.

InFebruary2007,theProductivityCommissionreleasedareportmodellingthepotentialbenefitsoftheNRA.Themodellingestimatedthefollowingimpactsforthenationaleconomy:

• thecompetitionandregulationreformstreamsaimtoimprovetheefficiencyoftransport,energyandinfrastructuremarketsandgovernmentregulation,andcouldincreasenationaleconomicoutputby2percent(around$17billionin2005-06dollars);

• achievinga5percentproductivityimprovementinhealthservicesdeliverycouldequatetoresourcesavings(oradditionalresourcesforhealthexpenditure)ofaround$3billion,withassociatedincreasesingovernmentrevenuesofaround0.4percentofGDP($4billionaftertenyears);and

• humancapitalreformsarebasedonimprovinglabourforceparticipationandproductivitygiventheageingofthepopulation.Reformstoimprovelabourforceproductivitycouldincreasenationaleconomicoutputbyaround6percentafter25yearswhileinitiativestoincreaselabourforceparticipationcouldincreasenationaloutputbyaround3percentoverthesameperiod.

ThemodellingtodatehasnotexplicitlyestimatedthecostsofimplementingspecificNRAreforms.FiscalbenefitsareexpectedtofavourtheAustralianGovernment(approximately60percent)comparedtostates(40percent).


2007-08 budget

8�

Territory Own-Source RevenueNorthernTerritoryown‑sourcerevenuecomprisestaxes,fees,charges,miscellaneouspropertyincome,interestreceivedandprofitorlossondisposalofassets.FulldetailsofrevenuecollectedfromTerritorysourcesaresetoutinBudget Paper No. 3.

Akeyrevenuemeasureinthe2007-08Budgetistheincreaseinthefirsthomeownerconcessiononstampduty.From1May2007,thestampdutyconcessionisincreasedfromthefirst$225000ofahome’svaluetothefirst$350000(amaximumconcessionof$15312).

The2007-08Budgetalsoabolishesstampdutyonhiringarrangementsfrom1July2007,atanestimatedcostof$5.3millionin2007-08,alongwithtwootherminorduties.

Followingremovalofthistax,theGovernment’sonlyremainingnationaltaxreformcommitmentistheabolitionofstampdutyonbusinesspropertyconveyances(excludingland)from1July2009.Thisisestimatedtocost$11.3millionfrom2009-10.

TheGovernmenthasalsocommittedtofurtherreducepayrolltaxduringitscurrentterm,atanestimatedannualcostof$6.3millionayear.

Additionally,on29March2007,stateandterritoryTreasurersannouncedthatanationaloverhaulofpayrolltaxarrangementshadbeenagreed.Thestatesandterritorieswilladoptcommonprovisionsanddefinitions,commencingnolaterthan1July2008,forthetimingoflodgments,motorvehicleallowances,accommodationallowances,arangeoffringebenefits,payrolltaximposedonworkperformedoutsideajurisdiction,employeeshareacquisitionschemes,superannuationcontributionsfornon-workingdirectorsandthegroupingofbusinesses.

Althoughprovisionsanddefinitionsaretobeharmonised,statesandterritorieswillcontinuetodetermineratesandthresholdsapplicableintheirjurisdictions.

TheBudgetalsoincludesarangeofefficiencyandequitytaxationmeasureswhichareexplainedaspartoftheBudgetinitiativesinChapter4.

ThischapterprovidesanexplanationoftheTerritory’sown-sourcerevenueregime,howitcompareswiththeotherjurisdictions,andtheTerritory’sresponsetonationaltaxreform.

ItalsoincludesastatementoftheTerritory’sforecasttaxexpendituresasaresultofconcessionsandexemptionsfor2007‑08throughto2010-11asrequiredbytheFiscal Integrity and Transparency Act.

Theabilityofthestatestogeneraterevenuefromtheirownsourcesisaresultofthesizeofeachjurisdiction’srevenuebaseandthetaxratesthegovernmentapplies.

TheCommonwealthGrantsCommission(theCommission)assesseseachjurisdiction’srevenuecapacityandrevenueeffortwhencalculatinggoodsandservicestax(GST)shares.Revenuecapacityisthepercapitarevenueastatecouldraisebyapplyingnationalaverageratestoitsownrevenuebase,whereasrevenueeffortiswhetherstatetaxesareappliedatlevelsaboveorbelowthenationalaveragelevel.


AssessmentsofRevenueEffort

andCapacity

AssessmentsofRevenueEffort

andCapacity

84 Territory Own-Source Revenue

2007-08 budget

Averagerevenuecapacityandeffortareassumedtobe100percent.Ifastatehasanaboveaveragerevenueeffortorcapacityitwillscoremorethan100percent,whilebelowaveragecapacityoreffortislessthan100percent.

ThemostrecentdatausedbytheCommissiontoassessrevenuecapacityandeffortis2005-06data.

Table8.1comparesrevenuecapacityinalljurisdictionsandshowsthattheTerritory’scapacityisjustbelowaverageandhigherthanfourotherjurisdictions.


99.75 90.45 107.54 137.48 78.03 68.13 82.63 94.47

Source:CommonwealthGrantsCommission2007UpdateReport.

Table8.2providesacomparisonoftheCommission’sassessmentofown‑sourcerevenue-raisingeffortin2005-06andincludestaxation,miningrevenueandcontributionsbytradingenterprises,includinggovernmentownedcorporations.

TheassessmentinTable8.2showsthattheNorthernTerritoryhasthethirdlowestown-sourcerevenue-raisingeffortofallthestates.Thisislowerthan2004-05figuresduelargelytoareductioninrevenuecontributedbytradingenterprises.


102.40 98.79 88.70 109.30 106.39 101.28 115.27 98.91

Source:CommonwealthGrantsCommission2007UpdateReport

Totaltaxationeffortremovesminingrevenueandcontributionsbytradingenterprises,suchasdividendsandtaxequivalentpayments.

Table8.3providesacomparisonoftheCommission’sassessmentoftotaltaxationeffortin2005-06.ItshowsthattheTerritoryhasthesecondhighestrevenue-raisingeffortfortotaltaxation.


102.82 101.94 85.18 104.50 114.03 96.91 105.87 111.06

Source:CommonwealthGrantsCommission2007UpdateReport.

Therearevarioustaxes,userchargesandroyaltiesassessedbytheCommissionwheretheTerritory’srateoftaxvariesfromtheAustralianaveragerate,orwheretheTerritorydoesnotimposetaxatall,suchaslandtax,mortgagestampdutyandfire/emergencyserviceslevies.Arguably,abettercomparativemeasureacrossjurisdictionsofthetaximpostonbusinessandthecommunityistaxationcombinedwithminingroyaltiesandpublicsafetyusercharges,includingemergencyservicelevies.Onthisbasis,theTerritory’seffortisassessedbytheCommissionasthethirdlowestofallthestates,behindQueenslandandTasmania,assetoutinTable8.4.

Table 8.1: Revenue Capacity by Jurisdiction –

Total Own-Source Revenue

Table 8.1: Revenue Capacity by Jurisdiction –


Table 8.2: 2005-06 Revenue Effort by Jurisdiction –





Total Taxation


Total Taxation

8�


% % % % % % % %

Payrolltax 107 97 86 102 98 105 129 129

Conveyanceduty 96 117 75 115 129 99 111 116

Landtax 101 101 63 110 218 285 110

Gamblingtaxes 99 128 98 33 120 79 55 124

Vehicleregistrationfees1 132 71 108 83 82 78 133 56

Totaltaxation2 103 102 85 105 114 97 106 111

Publicsafetycharges 92 98 109 115 101 183 46 14

Mineralandpetroleumroyalties

86 81 99 110 84 88 64

Total effort� �02 �02 88 �0� ��2 �� 04 �0�

1 Vehicleregistrationfeesexcludeheavyvehicles.2 Thetotaltaxationfigureisnotatotalofalltaxesappearinginthistable.3 Thetabledoesnotlistallrevenuestreamsand,assuch,thisfigureisnotatotalforthetable.Source:CommonwealthGrantsCommission2007UpdateReport.

TheTerritoryGovernmentraisedthepayrolltaxexemptionthresholdfrom$800000to$1millionfrom1July2005,atacosttorevenueof$3.4million.Notwithstandingthischange,theTerritory’spayrolltaxeffortisestimatedtobesignificantlyhigherthanthenationalaverage.TheincreasedeffortforpayrolltaxreflectsareductionintheTerritory’sassessedcapacityresultingfromarevisionoftheAustralianBureauofStatisticsdatausedbytheCommission.

TheTerritory’sassessedeffortforgamblingtaxesincreasedsignificantly,from111percentin2004-05to124percentin2005-06,reflectingtheincreaseingamblingtaxesreceivedin2005-06.ThiswaspredominantlyaresultofthecessationoftheCommunityGamingRebatefortheSKYCITYCasino.

TheTerritory’sconveyancedutyeffortishigherthanthenationalaverage,butisoffsetbytheTerritorynotimposingalandtaxormortgageduty.

Chart8.1showstheTerritory’smajorown-sourcerevenuesin2007-08accordingtotheclassificationusedintheUniformPresentationFramework,adoptedfortheTerritory’sreportingrequirements.

Note:Excludespayrolltaxcollectedfromgeneralgovernmententities.Source:NorthernTerritoryTreasury.

Table 8.4: 2005-06 Tax Effort of Significant Revenue

Streams

Table 8.4: 2005-06 Tax Effort of Significant Revenue

Streams

AnalysisofTerritoryRevenue

AnalysisofTerritoryRevenue

Taxes on Employers$137.3M

Taxes onGambling $68.2M

Motor VehiclesTaxes $40.7M

Taxes onInsurance $23.3M

Taxes onProperty $97.1M

Mining Royalties$72.2M

Taxes on Employers$137.3M

Taxes onGambling $68.2M

Motor VehiclesTaxes $40.7M

Taxes onInsurance $23.3M

Taxes onProperty $97.1M

Mining Royalties$72.2M

Chart 8.1: 2007-08 Main Own-Source

Revenue Categories

8� Territory Own-Source Revenue

2007-08 budget

Theprojectedrevenuefor2007-08frommainown-sourcerevenuetotals$438.8million.AsindicatedinChart8.1,taxesonemployers(payrolltax)comprise$137.3million,or31.3percent,andtaxesonproperty(stampdutiesonfinancialandcapitaltransactions)areestimatedat$97.1million,or22.1percentin2007-08.

PayrollTaxPayrolltaxispayableatarateof6.2percentontheamountbywhichwagespaidbyemployersexceedthegeneralexemptionthresholdof$1.25million.

Inallstatesandterritories,thethresholdisreducedifanemployerpayswagesinmorethanonestateorterritory.Forexample,ifanemployer:

• payswagesintheNorthernTerritoryandelsewhereinAustralia,thethresholdisreducedtoreflectthelevelofwagespaidoutsidetheTerritory.Therefore,ifanemployerpays50percentofitswagesintheTerritoryand50percentinterstate,thegeneralexemptionthresholdisreducedby50percentto$625000;or

• onlyemploysforpartofafinancialyear,thethresholdisreducedtoreflecttheperiodthattheemployerpaidwagesduringtheyear.Therefore,ifanemployeronlypayswagesforsixmonthsoftheyear,thegeneralexemptionthresholdisreducedto$625000.

Revenuefrompayrolltaxisforecasttobe$137.3millionin2007‑08andcontinuestobetheTerritory’ssinglemostsignificantown‑sourcetaxrevenue.

ThepayrolltaxrateintheNorthernTerritoryhasreducedfrom6.5percentin2001to6.2percent.TheGovernmenthasannouncedthatitintendsfurtherreducingpayrolltaxduringitscurrenttermingovernment.

Table8.5showsthattheNorthernTerritory’spayrolltaxexemptionthresholdistheequalhighestinAustraliaandthatitspayrolltaxrateiscurrentlythesecondhighest.

NSW Vic Qld WA SA Tas ACT NT Average

Threshold($M) 0.6 0.55 1.01 0.75 0.50 1.01 1.25 1.25 0.86

Rate(%) 6.00 5.05 4.75 5.50 5.50 6.10 6.85 6.20 5.74

1 Queensland’sthresholddiminishessothatnoexemptionisprovidedforemployerswithwagesover$4million.

Source:Statelegislationandinformationavailableasat20April2007.

However,whiletheNorthernTerritory’spayrolltaxrateappearshigh,thisdoesnotpresentanaccuratecomparisonwithotherpayrolltaxregimesastheeffectofthethresholdexemptionneedstobetakenintoaccount.Theimpactoftheapplicationofeachstateandterritory’spayrolltaxrateandexemptionthresholdisillustratedinTable8.6.

Wages NSW Vic Qld WA SA Tas ACT NT

$M % % % % % % % %

2 4.2 3.7 3.2 3.4 4.1 3.0 2.6 2.3

4 5.1 4.3 4.8 4.5 4.8 4.6 4.7 4.3

6 5.4 4.6 4.8 4.8 5.0 5.1 5.4 4.9

10 5.6 4.8 4.8 5.1 5.2 5.5 6.0 5.4

20 5.8 4.9 4.8 5.3 5.4 5.8 6.4 5.8

Source:NorthernTerritoryTreasuryandavailableinformationasat20April2007.

Table 8.5: State and Territory Payroll Tax Rates and Exemption Thresholds

Table 8.5: State and Territory Payroll Tax Rates and Exemption Thresholds

Table 8.6: Effective State and Territory Payroll Tax Rates at

Various Wage Levels.

Table 8.6: Effective State and Territory Payroll Tax Rates at

Various Wage Levels.

87

Table8.6showsthat:

• theTerritory’spayrolltaxregimeismorefavourablethanallotherjurisdictionsforsmalltomediumbusinesseswithwagesupto$4million;and

• thepayrolltaxburdenforlargerbusinessesintheTerritoryismorefavourablethan,orcomparablewith,NewSouthWales,SouthAustralia,TasmaniaandtheAustralianCapitalTerritory.

StampDutyTotalrevenuefromtheTerritory’sstampdutiesisforecasttobe$140.2millionin2007-08.Themaincomponentsareconveyance,insuranceandmotorvehicletransferofregistrationduties,asshowninChart8.2.

e:estimateSource:NorthernTerritoryTreasury.

Stampdutyrevenuein2006-07isprojectedtobe$144.6million.Thisishigherthantheestimateof$127.4millionoriginallyforecastinthe2006-07Budget.Althoughresidentialpropertysalesremainedstrongduring2006-07andpropertypricescontinuedtoincrease,theincreasewasmainlyattributabletohigherstampdutycollectionsfromnon-residentialconveyances,resultingfromagreaterthanexpectednumberoflargertransactions.

ConveyanceDutyTheTerritory’sconveyancedutyisderivedfromconveyancesofdutiablepropertyintheTerritory.Suchpropertymainlycomprisesrealestateandtransfersofbusinesses.

TheCommissionassessedtheTerritory’srevenue-raisingeffortinthiscategoryasthethirdhighestofthestatesandabovethenationalaverage.However,thereareaspectsoftheTerritory’sconveyancestampdutyregimeonwhichthedutyloadiscomparativelylessthanotherjurisdictions.Inthemain,thisincludestheTerritory’shomepurchasestampdutyconcessions.

Apracticalcomparisonoftheeffectofstateandterritoryconveyancestampdutyisobtainedbycomparingtheconveyancestampdutypayableonthepurchaseofamedian-pricedhomeineachcapitalcity.Chart8.3setsoutthemedianhousepricesfortheDecember2006quarterforAustraliancapitalcities.ThesepricesareusedasthebasisforthestampdutycomparisonsinCharts8.4and8.5.

Chart 8.2: Stamp Duty Collections

Chart 8.2: Stamp Duty Collections

0

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OtherInsurance Motor Vehicle RegistrationConveyance

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88 Territory Own-Source Revenue

2007-08 budget

Note:Currentasat20April2007.Source:RealEstateInstituteofAustralia.

ThemedianhousepriceinDarwinincreasedsignificantlyduring2006,atahigherratethanallothercapitalcitiesexceptPerth.Despitethisincrease,Chart8.3showsthatthemedianhousepriceinDarwinisbelowtheaveragemedianhousepriceofallcapitalcities.

Inresponsetorisinghouseprices,theGovernmenthasprovidedsignificantincentivestopromotehomeownershipintheTerritory,includingthefirsthomeownerstampdutyconcessionandtheprincipalplaceofresidencestampdutyrebate.Inaddition,theHomeNorthscheme,theTerritory’ssharedequityscheme,hasbeensignificantlyremodelledtomakeiteasierforlowandmiddleincomeearnerstoownahome.

ThebenefitoftheTerritory’sprincipalplaceofresidencerebateof$2500isshown

inChart8.4.TherebatereducestheTerritory’sconveyancedutyonaprincipal

placeofresidenceinDarwintoanamountthatissimilartothenationalaverage

andthefourthlowestofthejurisdictions.AlthoughnotreflectedinChart8.4,

Territoryhomebuyersalsobenefitfrompayingnostampdutyonanymortgage

securityor,forinvestors,annuallandtax.

Note:MedianpricesasatDecember2006Source:RealEstateInstituteofAustralia,statelegislationandinformationavailableasat20April2007.

Chart 8.3: Median House Prices for Australian Capital Cities for the

December 2006 Quarter

Chart 8.3: Median House Prices for Australian Capital Cities for the

December 2006 Quarter

0

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State Average ($381 513)

NSW Vic Qld WA SA Tas ACT NT0

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Chart 8.4: Conveyance Duty Payable on Purchase of a

Median-Priced Principal Place of Residence, from 1 May 2007


Median-Priced Principal Place of Residence, from 1 May 2007

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8�

The2007-08Budgetincreasesthefirsthomeownerstampdutyconcessiontothefirst$350000ofahome’svalue(astampdutyconcessionofupto$15312),andwasinresponsetostrongincreasesinhomepricesintheNorthernTerritoryinthepast12months.IncreasingthefirsthomeownerconcessionisoneavenueavailabletoGovernmenttoassistinimprovinghousingaffordabilityforfirsthomebuyers.

Chart8.5providesaninterjurisdictionalcomparisonofthestampdutyleviedfor

afirsthomeowneronthepurchaseofamedian-pricedhouseinacapitalcity.

ThestampdutypayableintheTerritorybyafirsthomeowneronamedian-priced

houseinDarwinissignificantlybelowthenationalaverageandisthesecond

lowestinAustralia,behindonlyQueensland.Territoryfirsthomebuyersnow

receivestampdutyreliefonthefirst$350000oftheirpurchase.

Note:VictoriahasaFirstHomeBonusforfirsthomebuyerswhoareeligibleforthe$7000FirstHomeOwnerGrant.Thebonusis$5000forthepurchaseorbuildingofanewhome,orotherwiseis$3000,andceaseson1July2009.Thebonusisonlyavailablewheretheconsiderationpaidunderthecontractisnomorethan$500000.

Source:RealEstateInstituteofAustralia,statelegislationandinformationavailableasat20April2007.

TheeffectoftheincreasestothefirsthomeownerconcessioncanbeseeninCharts8.6and8.7,whichshowthatthemedianpriceofahouseorunitpurchasedbyfirsthomebuyersinDarwinisconsiderablylessthanthatpurchasedbyotherhouseandunitbuyers.Forexample,themedianpricepaidbyfirsthomebuyersforahouseandunitinDarwin,totheendofDecember2006,is$340000and$260000respectively.Thiscomparestoamedianhouseandunitpricepaidbyotherbuyersof$370000and$300000respectivelyfortheDecember2006quarterrelativetothevalueofthehomebeingpurchased.

Thesechartsshowthat,althoughhouseandunitpriceshaveincreasedsince2001,theamountofstampdutypaidbyfirsthomebuyershasdecreased.

FirsthomebuyerspurchasingahouseorunitatthemedianpricepaidbyfirsthomebuyersinDarwinwillpaynostampdutyonthatpurchasebecauseofthehigherfirsthomeownerconcessionfrom1May2007.


Median-Priced First Home, from 1 May 2007


Median-Priced First Home, from 1 May 2007

0

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�0 Territory Own-Source Revenue

2007-08 budget



InsuranceDutyInsurancedutyisimposedongeneralandlifeinsurancepolicies,withgeneralinsurancecomprisingthemajorityoftherevenuecollectedfromthisstampduty.Revenuefrominsurancedutyisforecasttobe$23.3millionin2007-08.

AsshowninChart8.8,thetotaltaxloadondomesticinsuranceinNewSouthWalesandVictoriaissignificantlyabovethenationalaveragewhenfireservicesleviesaretakenintoaccount,withtheTerritorybeingoneofthelower-taxingjurisdictions.Thesestatescollecttheirfireserviceslevyasarateappliedtoinsurancepremiums.

Ratherthanutilisingthedomesticinsurancebase,Tasmania,Queensland,SouthAustralia,WesternAustraliaandtheAustralianCapitalTerritoryeachimposetheiremergencyorfireservicesleviesonpropertyownersthroughlocalcouncils.Tasmaniaalsoraisesthelevyoncertaintypesofnon-domesticinsurance,whileQueenslandhasanambulancelevyongeneralpublicelectricityaccounts.

TheTerritorydoesnotimposeanyemergencyorfireservicesleviesonthegeneralpublic,althoughinlinewiththestatesitdoeslevychargesforcommercialfirealarmmonitoring.

0

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0

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$000 $Chart 8.6: Median-Priced House Purchased by a

First Home Buyer and the Conveyance Duty Payable on

that Purchase

Chart 8.6: Median-Priced House Purchased by a


that Purchase

Chart 8.7: Median-Priced Unit Purchased by a


that Purchase

Chart 8.7: Median-Priced Unit Purchased by a


that Purchase

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��


MotorVehicleRegistrationDutyStampdutyisleviedonthetransferandinitialregistrationofmotorvehicles.Generally,thedutyisleviedonthepurchasepriceofthevehicle.Revenuefromthissourcein2007-08isforecasttobe$19.8million.

TheTerritoryrateofdutyisslightlybelowthenationalaverageforanewvehiclevaluedat$34500(Chart8.9).Unlikemostjurisdictions,theTerritorydoesnotimposeahigherrateofdutyonluxurycars.


MotorVehicleRegistrationVehicleregistrationfeesandtaxesvarysignificantlyacrossthejurisdictions.At$524.70,theTerritoryhasthethirdlowestannualregistrationandthirdpartyinsurancefeesinAustraliaforamedium-sizedpassengervehicle(seeChart8.10).

TheTerritory’sregistrationfee,excludingthirdpartyinsuranceof$90,isthelowestinAustraliaandwellbelowthenationalaverageof$194.82.HighercompulsorythirdpartypremiumsintheNorthernTerritory($426.30)reflectinherentlyhighercostsduetothesmallsizeoftheTerritoryandrelativelyhighroadaccidentcasualties.

Chart 8.8: Total State and Territory Taxes on Domestic Insurance

Chart 8.8: Total State and Territory Taxes on Domestic Insurance

0

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%


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State Average (including fire services levy) (14.7%)

State Average (9.4%)

0

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Stamp Duty Fire Service Levy

State Average (including fire services levy) (14.7%)

State Average (9.4%)

Chart 8.9: Motor Vehicle Registration Duty on a

New Vehicle Valued at $34 500

Chart 8.9: Motor Vehicle Registration Duty on a

New Vehicle Valued at $34 500

0

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$

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2007-08 budget

Note:Pricesareforcapitalcities,however,priceschargedinDarwinapplyacrosstheTerritory.Basedona4cylinderToyotaCamryCSISedan.Source:NorthernTerritoryTreasury.

LandRevenueThiscategoryincludestaxesontheownershipofland,wherethetaxesarebasedontheassessedunimprovedvalueoftheland.Italsoincludesanymetropolitanlandplanninganddevelopmentleviesthatareincludedinthelandtaxbaseofsomestates.

Landtaxisgenerallyleviedoncommerciallandandinvestmentresidentialproperty,althoughageneralexclusionisprovidedforlandusedforprimaryproduction.

TheTerritorydoesnotimposealandtax,however,inits2007assessment,theCommissionhasassessedalandtaxcapacityofapproximately$20.9million,beinganapproximationofthelandtaxthattheTerritorywouldreceivebasedonanaverageoftheotherstates’landtaxregimes.

GamblingTaxationGamblingtaxesconstituteasignificantproportionofstateandterritoryrevenues.RevenuefromtheTerritory’sgamblingtaxesisforecasttobe$68.2millionin2007-08.

TheTerritoryraisesgamblingrevenuesfromtaxesleviedonthevalueofbetsplacedwithbookmakers,taxesleviedonthevalueofinvestmentsinlotteries,taxesleviedontheturnoverofgamingmachinesinclubsandhotelsandtaxesleviedonplayerlossesatcasinos.Similartaxesareraisedinallotherjurisdictions.

Table8.7providesabreakdownoftherevenuethattheTerritory’sgamblingtaxesareexpectedtoraisein2007-08.

Chart 8.10: Annual Registration Fees and Charges for a

Medium-Sized Passenger Vehicle (March 2007)

Chart 8.10: Annual Registration Fees and Charges for a

Medium-Sized Passenger Vehicle (March 2007)

0

100

200

300

400

500

600

700

800

900


$

Administration Fee Third Party Insurance Registration Fees

0

100

200

300

400

500

600

700

800

900


$

Administration Fee Third Party Insurance Registration Fees

��

Tax $000

WageringTaxes 6756

InternetGaming 311

Casino 10758

Bookmakers–RacingandSportsBetting 10084

CommunityGamingMachines 25143

Lotteries 13197

CommunityBenefitLevy 1955

Total �8 204Source:NorthernTerritoryTreasury.

FinancialTaxesFrom1July2001,financialtaxeshavegenerallycompriseddebitstaxandstampdutyonleases,mortgages,hiringarrangementsandelectronicdebits.

TheNorthernTerritorydoesnotchargestampdutyonmortgagesandhasalreadyabolishedalltheothertaxesinthiscategory,otherthanstampdutyonhiringarrangements,whichisbeingabolishedfrom1July2007.

Accordingly,only$0.5millionisexpectedtoberaisedfromthiscategoryoftaxesin2007-08,whichrelatessolelytostampdutyonhiringarrangements.Notwithstandingthatthistaxwillbeabolishedfrom1July2007,therewillbesomeresidualcollectionofdutyinJuly2007,arisingfromreturnsrelatingtoJune2007.

MiningandPetroleumRevenueMiningrevenueisobtainedfromroyaltiesorrentequivalentsleviedontherecoveryofmineralcommoditiesfromaminingtenementintheNorthernTerritory.Similarly,petroleumrevenueaccruesfromroyaltiesimposedontheproductionofpetroleumintheTerritory.Mineralandpetroleumroyaltiesarenotataxbutachargeforresourceusage,payabletotheGovernmentastheownerofthesiteorthemineralorpetroleumrightsoverthesite.

Miningandpetroleumrevenueisforecasttobe$72.2millionin2007-08.

TheTerritory’sminingroyaltyrevenuesarebasedonbothprofits-basedandad valoremregimes,whereasad valoremregimespredominateinotherjurisdictions.TheTerritory’spetroleumroyaltyrevenuesarebasedonanad valoremregime,afterallowingpostwellheadcostsuptothepointofsale.

TheTerritory’sprofits-basedregimeusesthenetvalueofamine’sproductiontocalculateroyalty.Incontrast,ad valoremregimescalculateroyaltybasedonamine’sgrossproductionvalue.Otherroyaltyschemescalculateroyaltyonthetonnageofmineralsextracted.TheNorthernTerritory’sprofits-basedregimeislesslikelytoimpactoninvestmentdecisionsasitisalignedtothereturnsderivedfromaminingventure.Thismeansthat:

• bothpricesandminingcostsaretakenintoaccountinroyaltycalculations.Ifproductioncostsriseorfall,royaltymaydeclineorincreaseaccordingly;

• royaltywillgenerallybepayableinyearswhentheabilitytopayisthegreatest;and

• minesoperatinginisolatedlocationsorwithhighcostsofextractionmaypaylessroyaltythanminesingoodlocationsorwithsimpleoperations.Thisiscontrastedwithanad valorem royaltyschemeasittendstoincreasetheroyaltyshareofreturnsforlessprofitableminesandreducetheroyaltyshareofreturnformoreprofitablemines.

Table 8.7: Estimated Revenue from Gambling Taxes in

2007-08

Table 8.7: Estimated Revenue from Gambling Taxes in

2007-08


2007-08 budget

MineralroyaltiesarecollectedintheNorthernTerritoryfromminingandquarryingforgold,silver,bauxite,manganese,sand,gravel,laterite,vermiculiteandlime.RoyaltiesarenotcollectedinrespectofuraniumminingintheTerritory,astheAustralianGovernmentretainsownershipofuraniumintheNorthernTerritory.AgrantinlieuofuraniumroyaltyispaidbytheAustralianGovernmenttotheNorthernTerritory.

Nationaltaxreformbeganon1July2000.Keytothenewarrangementswasthereplacementofwholesalesalestaxwithabroad-basedGST,agreedremovalofcertain‘business’taxesandthereviewofothertaxes.Althoughtheoriginaltaxreformpackageprovidedsufficientcapacitytoremoveanumberofstatetaxes,theremovaloffoodfromtheGSTbasemeantthatthefinaltaxreformpackagehadreducedcapacityforremovalofadditionaltaxes.

TerritoryTaxesAlreadyAbolishedInaccordancewiththeIntergovernmentalAgreement,theTerritoryabolishedtourismmarketingdutyfrom1July2000,stampdutyonquotedmarketablesecuritiesandfinancialinstitutionsdutyfrom1July2001,anddebitstaxfrom1July2005.

FollowingtheTreasurers’ConferenceinMarch2005,theTerritoryjoinedwithfiveotherjurisdictionsinproposingafiveyeartimetablefortheabolitionofothertaxes,beginningfrom1July2005.Otherjurisdictionshavesincesubmittedtimetables.Inaccordancewiththatcommitment,theTerritoryabolished:

• electronicdebittransactiondutyfrom1July2005;

• stampdutyonthetransferofnon-quotedmarketablesecuritiesfrom1July2006;and

• stampdutyontherentpaidforthegrantandrenewalofnon-residentialleasesandfranchisearrangementsfrom1July2006.

DetailsoftheabolitionschedulefortheTerritory’sremainingbusinesstaxesspecifiedintheIntergovernmentalAgreementaresetoutbelow.

StampDutyonHiringArrangementsStampdutyleviedontherentpaidinrespectofthehireofgoods,includingconsumerandproducergoodsandinstalmentpurchasearrangements,istobeabolishedfrom1July2007.

StampDutyonNon-ResidentialConveyances,OtherThanLandStampdutyleviedonthevalueofconveyancesofnon-residentialpropertyconveyances,otherthanland,istobeabolishedfrom1July2009.

Taxconcessionsareoftenprovidedtobenefitaspecifiedactivityorclassoftaxpayer.Theyareexpendituresinthesensethattheirimpactonthebudgetissimilartodirectoutlays,andtheycanbeusedtoachievesimilargoalstospendingprograms.

Taxexpenditurescanbeprovidedinavarietyofwaysincludingbywayofexemption,deduction,rebateorreducedtaxrate.

NationalTaxReform

NationalTaxReform

TaxExpendituresTaxExpenditures

��

ThetaxexpenditurestatementdetailsrevenueestimatedtobeforgonebytheGovernmentorfinancialbenefitsobtainedbytaxpayersasaresultoftaxexemptionsorconcessionsprovidedbytheGovernment.IdentifyingthisexpenditureassistsinprovidingamoreaccuratepictureofwhattheGovernmentcontributesbywayoftaxationconcessiontoassistvariousgroupsorindustries.

ThetaxexpendituresidentifiedinthisstatementrelatetothemoreimportantandmaterialconcessionsapplicableintheNorthernTerritory.InaccordancewiththeFiscal Integrity and Transparency Act,thetaxexpenditurestatementprovidesforecastinformationfor2007-08andthefollowingthreefinancialyears.

MethodologyTaxexpenditureshavebeenestimatedbyapplyingthebenchmarkrateoftaxationtotheforecastvolumeofactivitiesorassetsexemptedbyaparticularconcession.Onlythosefutureeventsthatarecertainorhighlylikelytoimpactonassumedtaxbasesortaxrateshavebeentakenintoconsiderationinestimatingfuturetaxexpenditures.Otherwise,theexistingtaxationarrangementshavebeenassumedtoapplyforfutureyears.

Measuringtaxexpendituresrequirestheidentificationof:

• abenchmarktaxbase;

• concessionarytaxedcomponentsofthebenchmarktaxbase,suchasaspecificactivityorclassoftaxpayer;and

• abenchmarktaxratetoapplytotheconcessionarytaxedcomponentsofthetaxbase.

Theestablishmentofataxbenchmarkprovidesabasisagainstwhicheachtaxconcessioncanbeevaluated.Theaimofthebenchmarkistodeterminewhichconcessionsaretaxexpendituresasopposedtostructuralelementsofthetax.

Bydefinition,taxexpendituresarethosetaxconcessionsnotincludedaspartofthetaxbenchmark.

PayrollTax

2007-08 2008-09 2009-10 2010-11

Taxexpenditure($M) 105.6 111.2 117.2 123.6

Thebenchmarktaxbaseforpayrolltaxisassumedtobeallwages,salariesandsupplementspaidintheNorthernTerritory,asdefinedinthePay-roll Tax Act.Thebenchmarktaxrateisassumedtobethepayrolltaxratethatwillapplyin2007-08,being6.2percent.

Taxexpenditureinrelationtomanypayrolltaxconcessionsisdifficulttoestimate,asdataisnotgenerallycollectedinrelationtoemployersthatdonothaveapayrolltaxliability.Accordingly,theestimatedtaxexpenditurereportedabovehasbeenderivedbyusinghighlevelAustralianTaxationOfficedataaboutwagespaidbyemployersintheTerritoryandcomparingthistowagesinformationreportedbyemployersregisteredforpayrolltaxintheTerritory.ThedifferencebetweenthesetwosetsofdataprovidesareasonableestimateofwagesthatarenotsubjecttopayrolltaxintheTerritorybecauseofpayrolltaxconcessionsprovidedinthelegislation.

�� Territory Own-Source Revenue

2007-08 budget

Theestimatedtaxexpenditurereportedabovemainlycomprisesthefollowingexemptions.

Thefirst$1.25millionofanemployer’swagesareexemptfrompayrolltaxintheTerritory.Accordingly,employerswithwageslessthanthisamountintherelevantyearsarenotrequiredtopaytax,andemployerswithwagesthatexceedthisamountonlypaytaxontheexcess.

Atthepayrolltaxrateof6.2percent,the$1.25millionexemptionreducesanemployer’sannualpayrolltaxliabilitybyupto$77500.

Anexemptionappliesforwagesthatarepaidorpayableto:

• apprenticeswithinthemeaningoftheNorthern Territory Employment and Training Authority Act;

• employeesreceivingwagesfundedundertheCommunityDevelopmentEmploymentProjectsprogram;or

• graduatesofapprovedtertiaryinstitutionsemployedundertraineearrangementsapprovedbytheCommissionerofTaxes.

Thisexemptionreplacedarebateschemethatappliedpriorto1July1999.

Payrolltaxdoesnotapplytowagespaidorpayablebythefollowingorganisations,totheextentthatthosewagesarepaidforanemployee’sservicesthatrelatedirectlytothepurposeforwhichtheorganisationwasestablished:

• privatenon-tertiaryschoolsorcolleges;

• localgoverningbodies;or

• religiousinstitutions,publicbenevolentinstitutionsorpublichospitals.

StampDutyonConveyances2007-08 2008-09 2009-10 2010-11


Thebenchmarktaxbaseisassumedtobesalesofalldutiableproperty,includingchattelsthatarepartofatransactionthatconveysotherdutiableproperty.Thebenchmarktaxscaleisassumedtobethestampdutyscalethatwillapplyin2007-08.

Theestimatedtaxexpenditurereportedabovecomprisestheitemsbelow.

Anexemptionfortransfersofpropertybetweencommonly-ownedcorporationswasintroducedfrom10October2002.Theexemptionistoallowcorporategroupstoreorganisetheownershipofassetsintomoreefficientstructures.

Theestimatedvalueoftheconcessionisbasedontheactualamountofstampdutyforgoneasaresultofapprovedcorporatereconstructionexemptionsandhowthisrelatestooverallconveyancestampdutycollections.

Astampdutyconcessionisavailableforthepurchaseofaperson’sfirsthomeintheNorthernTerritory.

Theconcessionhasbeenincreasedonanumberofoccasionssince2002andfrom1May2007,theconcessionincreasestoincludethestampdutypayableonthefirst$350000ofahome’svalue(thatis,upto$15312instampduty).

Small Business Exemption

Small Business Exemption

Apprentices, Graduates and Others

Apprentices, Graduates and Others

Private Educational Institutions and Local

Governments

Private Educational Institutions and Local

Governments

Corporate Reconstructions

Exemption

Corporate Reconstructions

Exemption

First Home Owner Concession

First Home Owner Concession

�7

Theestimatedtaxexpenditureforthisconcessionisbasedonactualhistoricaldatacollectedinrelationtotheconcessionandhowthisrelatestooverallconveyancestampdutycollections.

From20August2002,astampdutyrebateofupto$1500ofthedutypayableonthepurchaseofaperson’sprincipalplaceofresidenceintheNorthernTerritorywasintroduced.

Therebateamountwasincreasedtoupto$2500from20June2005,theequivalenttoarebateofthestampdutyonaboutthefirst$92500ofahome’svalue.Thisconcessionisnotavailabletofirsthomebuyers.

Theestimatedtaxexpenditureforthisconcessionisbasedonactualhistoricaldatacollectedforthisrebateandhowitrelatestooverallconveyancestampdutycollections.

SeveralotherconveyancestampdutyexemptionsareprovidedthattogetherresultinsignificantrevenuebeingforgonebytheTerritory,thelargestofthesebeingexemptionsfor:

• thetransferofacompany’sproperty,onitswindingup,toashareholderofthecompanyentitledtothepropertyonadistributioninkind;

• instrumentsmadepursuanttoacourtorderthataltertheinterestsofthepartiestoamarriage.ThisexemptionisprovidedundertheAustralianFamily Law Act;

• theconveyanceofpropertybetweenpartnersofadefactorelationshiponthebreakdownoftherelationship;and

• propertytransferredtopublicbenevolentinstitutions,religiousinstitutions,publichospitalsandpubliceducationinstitutionsforapurposeotherthanthecarryingonofacommercialactivityconductedbyoronbehalfoftheentity.

Theestimatedtaxexpenditurefortheseconcessionsisbasedonactualhistoricaldatacollectedinrelationtothevariousexemptionsthathavebeengrantedandhowtheserelatetooverallconveyancestampdutycollections.

StampDutyonGeneralInsurancePolicies2007-08 2008-09 2009-10 2010-11


Thebenchmarktaxbaseisassumedtobeallclassesofgeneralinsurancepolicies.Thisdoesnotincludelifeinsurancepolicies,whicharetreateddifferentlyforstampdutypurposes.Thebenchmarktaxrateisassumedtobethestampdutyratethatwillapplyin2007-08,being10percentofthepremium.

Theestimatedtaxexpenditurereportedabovecomprisesthefollowingitems.

Anexemptionisprovidedforworkerscompensationinsurancetohelpreducelabouroncosts.ThisitemoftaxexpenditurehasbeenestimatedusingtotalworkhealthinsurancepolicypremiumspaidduringpastyearsandhowthesecomparetototalpayrolldatapaidbyemployersintheNorthernTerritory.

Anexemptionisprovidedforprivatehealthinsurancetohelpreducethecostofsuchinsurance.TheestimatedtaxexpenditureforthisexemptionisbasedonprivatehealthinsurancepremiumdataobtainedfromthePrivateHealthInsuranceAdministrationCouncil.

Principal Place of Residence RebatePrincipal Place of Residence Rebate

Other Conveyance Stamp Duty Exemptions

Other Conveyance Stamp Duty Exemptions

Workers Compensation Insurance Exemption

Workers Compensation Insurance Exemption

Private Health Insurance Exemption

Private Health Insurance Exemption


2007-08 budget

MotorVehicleRegistrationFees2007-08 2008-09 2009-10 2010-11


TheholderofaPensionerVehicleConcessionCardisabletoreceiveaflat$104concessionfrommotorvehicleregistrationfees.Thisistheestimatedtaxexpenditurereportedabove.

Actualhistoricalmotorvehicleregistrationfeedatahasbeenusedtoestimatethisitemoftaxexpenditure.

MineralRoyalties2007-08 2008-09 2009-10 2010-11


ThebenchmarktaxbaseisassumedtobeallprofitableminingoperationsintheNorthernTerritory.Thebenchmarktaxrateisassumedtobetherateofroyaltythatwillapplyin2007-08,being18percent.

Theestimatedtaxexpenditurereportedabovecomprisesthefollowingitems.

RoyaltypayersareabletoreducetheamountofroyaltythattheypayintheTerritoryforeligibleexplorationexpenditure(EEE)incurredfortheirminingoperationsintheTerritory.Inaddition,theyhavebeenabletoutiliseexplorationexpenditureincurredbyothers,throughacquiringexplorationexpenditurecertificates(EECs),toalsoreducetheamountofroyaltythattheyarerequiredtopay.However,theamountbywhichroyaltymaybereducedthroughtheuseofEEEislimitedtoamaximumof25percentoftheamountthatwouldotherwisebepayable.

Moreover,EECshavenotbeenissuedsince1July2003,sothenumberandvalueofEECsavailabletoreduceroyaltyhasbeendiminishingsincethen.ItisexpectedthattheremainingstockofEECswillbeexhaustedduring2007-08,restrictingroyaltypayerstoclaimsforEEEexpendedontheirownminingtenements.

Theestimatedcostofthisconcessionisbasedonprojectedfuturemineralroyaltycollections,assumingthatroyaltypayerswillseektomaximisetheirroyaltydeductionbyusingEEE.

TheTerritoryhassubstantiallythesamerevenue-raisingpowersasthestates.However,constitutionalandotherarrangementslimittherevenue-raisingbasethatisavailabletoallstatesandterritories.

ThereforewhiletheTerritory,likethestates,haslimiteddiscretionontherangeoftaxesthatcanbeapplied,ithasdiscretionovertheratesofthesetaxes.

Includedinthe2007-08Budgetmeasuresisanincreasetothefirsthomeownerstampdutyconcessioneffectivefrom1May2007.Thismeasureeasestheimpactofthestampdutyleviedonthepurchaseofafirsthomewithanoutcomethattheaveragefirsthomebuyerwillnotpaystampduty.

Nationaltaxreformhasgiventhestatesandterritoriesaccesstoamorerobustandgrowingrevenuebasebutithasalsofurtherreducedtherangeoftaxesdirectlyavailabletothestatesandterritories.Thishasmeantstatesandterritoriesarepayinggreaterattentiontotheefficiencyandcomparabilityoftheirremainingtaxes.

Eligible Exploration Expenditure

Eligible Exploration Expenditure

ConclusionConclusion

��

Commercial IssuesCommercialpoliciesadoptedbytheTerritoryaffectthewayinwhichNorthernTerritoryGovernmentbusinessesoperateandthewayinwhichtheTerritoryGovernmentdealswiththeprivatesector.AspectsthatarerelevanttotheTerritoryBudgetare:

• governmentbusinessdivision(GBD)andgovernmentownedcorporation(GOC)frameworkswhichrecognisethatbusinessactivitiesofGovernmentmustoperateonacommercialbasisincontrasttogeneralgovernmentagencies,wheretherearenon-commercialobjectives;

• Territory Partnerships,whichoutlinestheframeworkfordealingsbetweentheTerritoryGovernmentandtheprivatesectorinrelationtopublicprivatepartnerships;and

• therisksfacedbytheTerritory,inparticularcontingentliabilitiesarisingfromguaranteesandindemnitiesthattheTerritoryhasissuedwhendealingwiththeprivatesectorandothergovernments.

Governmenthasestablishedlegislativeandadministrativeframeworksgoverningtheoperationofgovernmentownedbusinesses.Theintentofsuchframeworksistoprovidegreaterincentivestomanagecosts,increaseefficiencyandimprovethequalityofthegoodsandservicesdelivered.Managementofgovernment-ownedbusinessesisaccordingtobestcommercialpracticesinrecognitionthat:

• theiroperationsaresimilartothoseofprivatesectorbusinesses;and/or

• theyoperateinacommercialenvironmentorincompetitionwithprivatesectorbusinesses.

AgovernmentbusinessconsideredsuitabletooperatecommerciallycanbedeclaredbytheTreasurerasaGBDor,bystatute,canbegiventhestatusofaGOC.Unlikegeneralgovernmentagencies,thesebusinessesdonotreceivedirectoutputappropriationfortheircommercialactivities.Instead,theiroperatingrevenueisgeneratedfromsalesofgoodsandservicestootherTerritoryGovernmentagencies,theprivatesectororboth.

GBDsaresubjecttothefinancialmanagementframeworkcontainedinthe Financial Management Act,withthechiefexecutiveofficerofaGBDaccountabletotheresponsibleMinisterforfinancialperformance.

GOCsaresubjecttotheGovernment Owned Corporations Act, whichseekstoreplicateasfaraspossibletheshareholdermodelofcorporategovernance.Thisstructureessentiallycreatesan‘arm’slength’relationshipbetweentheGOC,whichhasanindependentBoardresponsibleforitsmanagement,andtheGovernmentasownerorshareholder.

TheTerritoryInsuranceOffice(TIO),anothergovernmentbusiness,operatescommerciallyunderitsownlegislativeframework(Territory Insurance Office Act andRegulations).ItalsohasanindependentBoardthatisaccountableforitsperformance.TheTIOissubjecttoaprudentialregulatoryregime,similartothatapplyingtocompetitorsininsuranceandfinancialservices,butadministeredbyNorthernTerritoryTreasury.TheMotor Vehicle Accident (Compensation) Act(MACA)establishesaseparatestatutoryfundadministeredbyTIO.


CommercialFrameworksCommercialFrameworks

�00 Commercial Issues

2007-08 budget

Inresponsetotheoutcomesofascopingstudyfinalisedin2006,theTIOhasbeenretainedunderGovernmentownership,witharangeofreformsundertakentoimproveriskmanagementandfinancialperformance.TheseincludetheadoptionofprudentialsupervisionstandardsconsistentwiththoseappliedbytheAustralianPrudentialRegulationAuthority,separateaccountingandreportingofTIO’sbusinesslines,strengthenedcapitalmanagementandStatementofCorporateIntentprocesses.

Government-ownedbusinessactivitiesthatcompetewiththeprivatesectorarerequiredtocomplywithcompetitiveneutralityprincipleswhichseektoensurethatresourceallocationbetweenthepublicandprivatesectorsisdeterminedbyrelativeefficiency,ratherthanadvantagesaccruingasaresultofGovernmentownership.

Competitiveneutralitycomplaintsmayarisewhenagovernment-ownedbusinessactivityisincompetitionwithprivatesectorbusinesses.NorthernTerritoryTreasuryisresponsibleformanagingsuchcomplaints.Ifacomplaintisupheld,theGovernmentdecidesonacasebycasebasistheappropriateactiontorectifyanynetcompetitiveadvantagethegovernment-ownedbusinessactivitymayhave.

GovernmentBusinessDivisionsTheTerritoryhasestablishedGBDsinordertoimproveoperatingefficiencyandtoreduceGovernmentandbusinesscosts,therebyfreeingupGovernmentresourcesforotherexpenditurepriorities.

CommercialpracticesthathavebeenimplementedforGBDsare:

• fullattributionofcosts(includingtaxequivalents);

• efficientpricing,basedoncosts;

• operatingunderchartersofoperationandestablishingauditcommittees;and

• identificationandbudgetfundingofcommunityserviceobligation(CSO)paymentstocompensateGBDsforundertakingnon-commercialactivitiesatthedirectionofGovernment.

ThecurrentemphasisofGBDreformistobuildoninitiativestodatebyencouragingagreatercommercialfocus,improvedmanagementpractices,additionalefficiencyandproductivitygains,ensuringvalueformoneyfromexpenditureonCSOsandmorerigorousperformancemonitoring.ChartersofoperationhavebeenreviewedtoensurethatoperationalandcommercialboundariesareappropriateinthelightofmarketdevelopmentsthathaveoccurredsinceGBDswereestablishedinthemid1990s.

GovernmentOwnedCorporationsTheGovernment Owned Corporations Actadoptstheshareholdermodelofcorporategovernance.TheobjectiveoftheActistoimposecapitalmarket-typedisciplinesongovernment-ownedbusinessesandtoreplicatethecorporategovernancestructuresofprivatecompaniesincorporatedundertheAustralianCorporations Act2001.AGOCisexpectedtooperateasefficientlyascomparablebusinessesandtomaximisesustainablereturnstotheTerritory.

KeyelementsoftheTerritoryGOCframeworkare:

• corporationsestablishedundertheirownlegislationbutgovernedbyanoverarchinglegislativeframeworkbasedontheCorporations Act 2001principles;

�0�

• anindependentcommercialboardofdirectorsthatisresponsiblefortheoperationofthebusinessandaccountabletotheshareholdingMinister(currentlytheTreasurer)forfinancialperformance;

• ashareholdingMinisterwhomonitorsthefinancialperformanceofthecorporation;

• aportfolioMinisterwhomonitorstheserviceperformanceofthecorporationandhasbroadindustrypolicyresponsibilities;and

• aStatementofCorporateIntent,whichisessentiallyaperformanceagreementbetweentheshareholdingMinisterandtheGOCBoard.

TheshareholdingMinisterarrangementundertheGOCframeworkissignificantlydifferenttothegovernancearrangementsforgeneralgovernmentagenciesandforGBDsundertheFinancial Management Act,underwhichthechiefexecutiveofficerofaGBDisdirectlyaccountabletoGovernmentfortheperformanceofthebusiness.GBDBoardsgenerallyhaveanadvisoryrole,withMinistersresponsibleforbusinessdecisions,whichmayormaynotbetakenontheadviceoftheBoard.

UndertheGOCframework,theBoardisthedecision-makingbodyandisaccountableforitsdecisions.TheBoardisaccountabletotheshareholdingMinisterforfinancialperformanceandtotheportfolioMinisterfortheservicequalityaspectsofaGOC’sbusiness.

GOCsarenotsubjecttotheFinancial Management Act,reflectingthepolicyintentofoperationalautonomy.

ThePowerandWaterCorporationbecametheTerritory’sfirstGOCon1July2002and,atthistime,remainstheTerritory’sonlyGOC.

ThePowerandWaterCorporationBoardisaccountablefortheperformanceoftheGOC.InmostofthePowerandWaterCorporation’sbusinesslines,thecorporationissubjecttoaregulatoryregimeadministeredbyanindependenteconomicregulator,theUtilitiesCommission.ThisregimeisapplicabletoanypartythatmayoperateintheseareasofbusinessintheTerritory.

TheTreasureristheshareholdingMinisterforthePowerandWaterCorporationandistheRegulatoryMinisterforthecorporation’scommercialbusinesslines.TheMinisterforEssentialServicesisthePowerandWaterCorporation’sportfolioMinister.

LikeGBDs,thePowerandWaterCorporationdoesnotreceivedirectbudgetappropriation.However,throughGovernmentagencies,itreceivesCSOpaymentsfornon-commercialservicesthatitprovidesatthedirectionofGovernment.

CommunityServiceObligationsACSOariseswhentheGovernmentrequiresaGBDorGOCtocarryoutactivitieswhichitwouldnotelecttodoonacommercialbasisorwouldonlydoatcommercialprices.CSOpaymentsallowtheGovernmenttoachieveidentifiablecommunityorsocialobjectiveswhichwouldnotbeachievediflefttocommercialconsiderations.

GovernmentCSOpolicyisaimedatclearlyidentifyingthenon-commercialfunctionsperformedbyGBDsandGOCs,makingthefunctionstransparentandtheirdeliveryaccountabletothecommunity.Toensurethatnon‑commercialfunctionsdonotadverselyimpactonthefinancialperformanceoftheGBDorGOC,thepolicyprovidescompensationfortheprovisionoftheCSO.


2007-08 budget

TheprovisionofbudgetfundingforCSOsoracceptanceofalowershareholderreturnhastwoimportantimplications:

• itenablesGBDsandGOCstomanagecommercialactivitieswithouthavingtocross-subsidisenon-commercialactivities,promotingthedevelopmentofacommercialculturewithinGBDsandGOCs;and

• itprovidesanopportunityforanannualreviewofCSO-fundedactivities.

CSOpaymentsareprovidedtotheGBDorGOCbythe‘purchasing’agency.TerritoryGovernmentCSO-relatedinitiatives,listedbypurchasingagencyfor2006-07and2007-08,arepresentedinTable9.1,withthefollowingdiscussiononCSOsprovidedbythepurchasingagencyoutliningthekeycomponents.

TreasuryallocatesCSOfundingtothePowerandWaterCorporationinaccordancewithGovernmentpolicyregardingtheprovisionof:

• electricitysupplytodomesticcustomersandsmallbusinessesandotherorganisationsacrosstheTerritoryatuniformtariffs;

• electricitysupplyservicestotranche4electricitycustomers(primarilymediumsizebusinessesandotherorganisations)atasubsidisedtariff;and

• waterandsewerageservicestoallcustomersatuniformtariffs.

CSOfundingtomaintaingazettedutilitytariffsisbudgetedtobe$52.7millionin2007-08.

TourismNTprovidesTerritoryDiscoveries,theTerritoryGovernment-ownedtourismproductwholesaler,withCSOpaymentstofundnetcostsincurredbytheNorthernTerritoryHolidayCentreinAliceSprings,specificshoulderseasoncampaignswhichassistinpromotingtheTerritoryasayear-rounddestination,andtheinclusionofsmalltourismoperatorsinitsreservationsystem($0.45millionin2007-08).

ThePowerandWaterCorporationalsoreceivesCSOpaymentsforsubsidisedelectricity,waterandseweragetariffsforpensionersundertheDepartmentofHealthandCommunityServices’PensionerConcessionScheme($4.3millionin2007‑08).

TheDarwinPortCorporation(DPC)receivesCSOfundingfromtheDepartmentofPlanningandInfrastructurefornon-commercialactivitiesrelatedtothedevelopment,operationandmaintenanceofwharffacilitiesthatsupportthecruiseshipandnavalpresenceintheNorthernTerritory,theDarwinfishingandtourismindustryandsomeinternationaltradethroughthePortofDarwin.

Itisestimatedthatatotalof$2.3millioninCSOswillbepaidtoDPCin2007-08.

TheDepartmentofNaturalResources,EnvironmentandtheArts(NRETA)providesCSOfundingforfournon-commercialfunctionscarriedoutbyTerritoryWildlifeParks.Thesefunctionsrelateto:

• maintainingtheparks’assetstoahighstandardtoassistthegrowthanddevelopmentoftheTerritory’stourismindustry;

• supportingtheTerritory’sbiodiversitythroughcaptivebreedingofendangered,rareandthreatenedspecies;

• enhancingtheeducationofschoolchildrenbyteachingthemthebenefitsofthenaturalenvironment;and

• managementofthebotanicgardensattheAliceSpringsDesertPark.

Northern Territory TreasuryNorthern Territory Treasury

Tourism NTTourism NT

Department of Health and Community Services

Department of Health and Community Services

Department of Planning and Infrastructure

Department of Planning and Infrastructure

Department of Natural Resources, Environment

and the Arts

Department of Natural Resources, Environment

and the Arts

�0�

Itisestimatedthatatotalof$7.9millioninCSOswillbepaidbyNRETAin2007-08.

TerritoryHousingreceivesCSOpaymentsfromtheDepartmentofLocalGovernment,HousingandSportfornon-commercialactivitiessuchas:

• rentalrebatesforlow-incomefamiliestoenablethemtoaccesssecure,safeandaffordableaccommodation;

• providingincentivesforpeoplewithmediumtolowincomestoincreasethelevelofhomeownershipwithintheNorthernTerritory;and

• reducingupfrontcostsforpublichousingtenantspurchasingtheirhomesthroughtheprovisionofastampdutyconcession.

Itisestimatedthatatotalof$15.5millioninCSOswillbepaidtoTerritoryHousingin2007-08.

ThefullrangeofCSOsfundedbytheTerritoryGovernmentisdetailedinTable9.1.

Department of Local Government, Housing

and Sport

Department of Local Government, Housing

and Sport


2007-08 budget

PURCHASING AGENCY/Provider/Description

2006-07

Estimate

2007-08

Budget

$000 $000

NORTHERN TERRITORY TREASURY �2 80� �2 ��2

Power and Water Corporation

Gazettedtariffs 52805 52662

TOURISM NT 448 448

Territory Discoveries

Tourismmarketing 448 448

DEPARTMENT OF HEALTH AND COMMUNITY SERVICES 4 08� 4 2�8

Power and Water Corporation

PensionerConcessionScheme 4083 4268

DEPARTMENT OF PLANNING AND INFRASTRUCTURE 4 �8� 2 �0�

Darwin Port Corporation

Smallcraftservices(marineindustrysupport) 280 280

CruiseandDefence(WharfPrecinct) 1546 1546

Tourismandrealestate(WharfPrecinct) 480 480

FortHillWharf–roll-on/roll-offfacility(repairsandmaintenance) 575

FishermansWharf–facility(repairsandmaintenance) 1100

DredgingFortHillWharf 1000

DEPARTMENT OF NATURAL RESOURCES, ENVIRONMENT AND THE ARTS

7 8�4 7 ��

Territory Wildlife Parks

TerritoryWildlifePark–tourism 3992 4033

TerritoryWildlifePark–threatenedspecies 475 475

TerritoryWildlifePark–education 222 222

AliceSpringsDesertPark–tourism 2107 2147

AliceSpringsDesertPark–threatenedspecies 118 118

AliceSpringsDesertPark–education 277 277

AliceSpringsDesertPark–botanicgardens 643 643

DEPARTMENT OF LOCAL GOVERNMENT, HOUSING AND SPORT

�� 40 �� 48�

Territory Housing

Rentsubsidies 13404 13404

Lowinteresthomeloans 884 926

Fringebenefitstaxonemployeeloans 57 48

Interestsubsidy 132 100

Stampdutydifferential 168 84

Policerentforgone 995 921

TOTAL 8� 7�� 8� 082

Table 9.1: Community Service Obligation Payments

Table 9.1: Community Service Obligation Payments

�0�

TaxEquivalentsRegimeGBDsandGOCsincurtaxliabilitiessimilartoprivatelyownedorganisations.ThismeasureensuresgreaterparitybetweenthecoststructureofGovernmentbusinessesandtheprivatesector,aidingintheachievementofcompetitiveneutrality.Forexample,thePowerandWaterCorporationandtheDarwinPortCorporationpaylocalgovernmentratesequivalentstotheCentralHoldingAuthority.

Totaltaxequivalentsareexpectedtobe$6.4millionhigherin2006-07than2007-08,dueprimarilytothePowerandWaterCorporation’soperatingresultsineachyear.

ItisestimatedthatthePowerandWaterCorporation’staxequivalentspayablewillbe$16.1millionin2006-07and$9.7millionin2007-08,reflectingareductioninPowerandWaterCorporation’s2007-08taxableincome.Thisreductionisduetooperationalperformanceandnotassociatedwithanassetwritedownforwaterandsewerageassets,asaresultoftheapplicationoftherecoverableamountstest(RAT),expectedfor2006-07.Althoughthewritedownhasaneffectonoverallprofitabilityandthusthelevelofdividendspaid,thefullamountisnotimmediatelytakenintoaccountinthetaxreportingandtaxequivalentsregimes.

2006-07Estimate

2007-08Budget

$000 $000

Income Tax Equivalents from GBDs

NorthernTerritoryTreasuryCorporation 6555 5903

DarwinBusService 115 83

ConstructionDivision 427 602

DataCentreServices 456 723

GovernmentPrintingOffice 107 110

NTFleet 2402 2497

Total Tax Equivalents from GBDs �0 0�2 � ��8

Income Tax Equivalents from GOCs

PowerandWaterCorporation 16146 9700

Other Income Tax Equivalents

TIO 4354 4569

Local Government Rates Equivalents from GBDs

DarwinPortCorporation 178 182

Local Government Rates Equivalents from GOCs

PowerandWaterCorporation 214 220

Total Tax Equivalents �0 ��4 24 �8�

Note:GBDsnotshownpaidnotaxequivalentsin2006-07andarenotexpectedtopayanyin2007-08.

Table 9.2: Tax EquivalentsTable 9.2: Tax Equivalents

�0� Commercial Issues

2007-08 budget

DividendPolicyIftheTreasurerissatisfiedthataGBDorGOChassufficientresources,hemaydeterminethattheGBDorGOCistopayadividendtotheGovernment.Generally,theTerritoryGovernment’sprimarybenchmarkisanordinarydividendof50percentofafter-taxprofit.However,adividendpayoutratioof50percentmaynotalwaysbeappropriate,particularlywhere:

• aGBD’sorGOC’sdebtlevelsareunsustainableinthemediumtolongterm;

• whereaGBDorGOChassignificantfuturecapitalexpenditureneeds;or

• GovernmentelectstoreceivealesseramountbecauseithasdecidedtoonlypartlyfundCSOs.

AnexampleistheNorthernTerritoryTreasuryCorporation,whichoperatesastheGovernment’scentralfinancingauthority.Thecorporationgeneratesitsrevenuefromthepositivemarginbetweenlendingandborrowingactivities.Asthecorporationdoesnotneedtoretainprofitstomeetcapitalcosts,itisappropriateforittopayadividendof100percentofafter-taxprofit.

TheBoardofaGOCistodeclaretheamountofadividendonthesharesofaGOC,buttheshareholdingMinistermaydirecttheBoardofaGOCtodeclareaspecificdividendlevelwhereitisappropriateandtherearesufficientresourcestopaytheamount.

DividendspayablebyGBDsandGOCsareprojectedat$29.4millionin2007-08,anincreaseof$10millionfrom2006-07.IncreaseddividendincomeisprimarilyduetotheforecastincreaseinPowerandWaterCorporationprofitabilityin2007-08.

In2006-07,PowerandWaterwillrecordanaccountingloss,duetoawritedownofwaterandsewerageassets,afterapplicationoftherecoverableamountstest(RAT).Thereforenodividendispayableinrespectofthe2006-07year.

ThePowerandWaterCorporationprojectsadividendpaymentof$11millionin2007‑08,whichis50percentofitsnetprofitaftertax.

2006-07Estimate

2007-08Budget

$000 $000

Dividends from GBDs

NorthernTerritoryTreasuryCorporation 15295 13775

DarwinBusService 134 96

ConstructionDivision 498 702

DataCentreServices 532 844

GovernmentPrintingOffice 124 129

NTFleet 2803 2913

Total Dividends from GBDs �� 8� �8 4��

Dividend from GOC

PowerandWaterCorporation 10959

Total Dividends to Government �� 8� 2� 4�8

Table 9.3: Dividends Payable to Government

Table 9.3: Dividends Payable to Government

�07

Publicprivatepartnerships(PPP)isatermusedtodescribeamethodofprocuringGovernmentinfrastructureandassociatedservices.PPPscreateopportunitieswiththeprivatesectorforincreasinginvestmentinsocialandeconomicinfrastructure,andtheTerritory’sPPPpolicyframework,Territory Partnerships,definestheprotocolforsuchcommercialdealingsbetweenthepublicandprivatesectors.

GenerallyprojectsconsideredforPPParrangementsarethosewithsignificantwholeoflifecosts(generallygreaterthan$50millionintoday’sdollars)andwhicharelongterminnature(20to30years).UsuallyaPPPprojectwillbeattractivetotheprivatesector,whereitpresentsaviablecommercialbusinessopportunity.Acommercialopportunityismorelikelytobecreatedwherethirdpartyrevenuesareavailable(suchasfromroadtollsonaroadway)orwhereeconomiesofscalecanbeachievedinconstructionandongoingmaintenance(suchaswithagroupofschools).

FromtheGovernment’sperspective,valueformoneywillbeachievedwherethereisprivatesectorexperienceandexpertiseindeliveryoftheprojectandthereisanenvironmentofcompetitivetensiontodeliverthebestoutcomeforGovernment.Toachievethis,aPPPrequiresarigorousandstructuredprojectdevelopmentandevaluationprocesswhichassistsinallocationofriskstothepartybestabletomanagethem.Withtheseelementspresent,thebiddingprocesswillhelpensurethatefficientandoptimalrisktransferoccursatrealisticcostandthatservicedeliveryandinnovationaremaximised.

TheTerritoryformallyreleaseditsTerritory PartnershipsframeworkinApril2004.InlinewithamovebyallgovernmentsinAustraliatowardsuniformpolicyinthisarea,thepolicyislargelybasedonthepoliciesofboththeVictorianandNewSouthWalesgovernments.TheTerritory Partnershipsframeworkispremisedon:

• theprimarydecision-makingcriteriaastowhethertopursueaPPPbeingvalueformoneyandwhethertheprojectisconsideredtobeinthepublicinterest;

• allpotentialPPPprojectsrequiredevelopmentofapublicsectorcostbenchmarkorcomparator;

• projectsofsufficientscale($50millionnetpresentvaluewholeoflifecostswouldgenerallybetheminimumsize)andduration;

• projectswithcapacityforoptimalriskallocationbetweenthepublicandprivatesectors;

• projectswhichallowscopeforinnovativesolutionsfromtheprivatesector;

• projectswhichprovideagenuinebusinessopportunityfortheprivatesector;and

• projectswhichfosteracompetitivebiddingenvironment.

InprogressingauniformAustralia-wideapproachtoPPPs,theTerritoryisrepresentedonaNationalMinisterialForumwhichfocusesonfosteringandpromotinganationalPPPmarket.

TheTerritory’sfirstprojectundertheTerritory PartnershipsframeworkistheDarwinConventionCentrecomponentoftheDarwinWaterfrontDevelopment.Thisprojectinvolvestheredevelopmentofsome25hectaresofwaterfrontlandinDarwinandtheconstructionandlong-termoperationoftheConventionCentre,aswellasresidentialandcommercialcomponents.

PublicPrivatePartnerships

PublicPrivatePartnerships


2007-08 budget

AcontingentliabilityisaliabilitythattheGovernmentmaybecalledontomeetatsomefuturedateifaspecifiedeventshouldoccur.ContingentliabilitiesoftheTerritorymayariseoutofarangeofcircumstances,themostcommonofwhichareindemnitiesandguaranteescontainedinagreementsexecutedbytheTerritory.ContingentliabilitiesmayalsoariseasaresultofundertakingsmadebytheTerritoryorasaresultoflegislationcontainingaguaranteeorindemnity.

Detailsofestimatedamountsofmaterialcontingentliabilitiesat30June2006resultingfromguaranteesorindemnitiesgrantedbytheTerritoryarepresentedinTable9.4.

EstimatedQuantifiable

ContingentLiabilityat

30June2006

$MNPV1

AmadeusBasintoDarwinGasPipeline 189

PineCreek/McArthurRiverElectricityPurchaseAgreements 88

PublicTrusteeCommonFund 33

1 Futurevaluesdiscountedatanominal7percentdiscountrate.

MaterialcontingentliabilitiesoftheTerritoryaredefinedasguaranteesandindemnitieswithpotentialexposuregreaterthan$5millionandaredisclosedinannualfinancialstatementsoftheTerritoryinaccordancewithAustralianAccountingStandardsrequirements.QuantifiableandunquantifiablematerialcontingentliabilitiesoftheTerritoryareoutlinedbelow.

Electricity,GasandWaterSupplyThesecontingentliabilitiesresultfromarrangementsforthepurchaseandtransportationofgas,andthepurchaseandsaleofelectricitybyandforthePowerandWaterCorporation.Materialcontingentliabilitiesrelatingtothesearrangementsarereportedbelow.

ThePowerandWaterCorporationhasbeenaGOCsince1July2002.UndertheGovernment Owned Corporations Act,aGOCisnotwithintheshieldoftheCrownandtheobligationsofaGOCarenotguaranteedbytheTerritoryexceptwheretheTreasurerspecificallyagreestothis.ThefollowingTerritorycommitmentsweregivenpriortothePowerandWaterCorporation(formerlythePowerandWaterAuthority)becomingaGOCandwillremaininplaceuntiltherelevantcontractualarrangementscease.

AmadeusBasintoDarwinGasPipelineTheTerritoryindemnifiedthecompanythatconstructedandoperatesthenaturalgaspipelinefromtheAmadeusBasintoDarwininsupportofobligationsofthePowerandWaterCorporationtothecompany.TheTerritoryalsosupportedthecorporation’sfinancingobligationstothepipelinecompanyanditsfinanciers.Shouldthisfacilitybeterminatedpriortotheendofthecontractterm,theTerritoryundertooktostandbehindand,ifnecessary,underwritetherefinancingoftheoutstandingfacilityamountincludingaleaseresidualduetobepaidattheendofthefacilityterm.TheleaseresidualattheendofthecontracttermisadirectcontingentliabilityoftheTerritory,unrelatedtoanyobligationofthePowerandWaterCorporation.

ContingentLiabilities

ContingentLiabilities

Table 9.4: Material Quantifiable Contingent Liabilities

Table 9.4: Material Quantifiable Contingent Liabilities

QuantifiableContingent

Liabilities

QuantifiableContingent

Liabilities

�0�

TheTerritoryguaranteedgasproducersinsupportoftheobligationsofasubsidiarycompanyofthePowerandWaterCorporationundergaspurchasecontractsandprovidedaletterinsupportofaloantothecorporation’ssubsidiarycompanyusedtomeetthecompany’sdevelopmentobligationsunderagaspurchaseagreement.

IntheeventthatthePowerandWaterCorporationexperienceasignificantdeclineinitssalesofelectricity,thereisariskthatthecorporationmayhavealesserrequirementfornaturalgastobedeliveredthroughtheAmadeusBasintoDarwingaspipeline.Incircumstanceswherethedeclineissevere,bothgaspurchasecontractsandthepipelinefinancingarrangementscouldpresentarisktothecorporationandtheTerritory,astherewouldbeongoingpaymentsmadedespitereducedneedforgastobedelivered.Thissituationisconsideredhighlyimprobable.

Ontheotherhand,thereisariskthatcontractedsuppliesofgaswillproveinadequatetomeetthefuelneedsforapublicelectricitysupply.Althoughmostinstalledcapacitythatgenerateselectricityforpublicsupplycanusealternativeliquidfuels,thereispresentlyaverysignificantpricedifferentialbetweengasandliquidfuelsatalllocationswheregascanbedeliveredthroughexistinginfrastructure.

ThePowerandWaterCorporationhasadvisedthatitexpectstobeabletomeetitsneedsandthoseofthepublicelectricitymarketforatleastthenextfiveyears.Withinthistimeframe,thecorporationisnegotiatingtocontractforadditionalgassuppliesfromBlacktip,oneofthegasfieldslocatedinwatersadjacenttotheTopEndoftheTerritory.Risksrelatedtogassupplyshortfallarenotassociatedwithguaranteesorindemnitiesincontracts,astheyrelatetosituationswhereexistingcontractscannotmeetthecorporation’sneeds.

ElectricityandGasSupplytoPineCreekandMcArthurRiverThePowerandWaterCorporationhasenteredintoagreementsfortheprovisionofgasandwholesalesupplyofelectricityforthesupplyofpowertothePineCreekregionandMcArthurRiverMine.TheagreementforthesupplyofgascontainsthreeindemnitiesrelatingtothePowerandWaterCorporationsupplyingnon-conforminggas.Thecorporation’scontingentliabilityisunquantifiable.However,amajorportionofthevalueofthecontingentliabilityisthecostofoverhaulingturbinemachineryownedbytheelectricityproducers,wheredamagehasbeencausedbytheprovisionofnon-conforminggas.Since5March2003,nogashasbeensuppliedtothepowerstations,significantlyreducing,butnotentirelyremoving,theriskexposure.

UnderthePowerandWaterCorporation’scurrentoperatingpractices,thecontingenteventsrelatingtoeachoftheaboveindemnitiesarewithinthecorporation’scontrolandareexpectedtobeeasilyavoidable.

Inrelationtotheelectricitypurchaseagreements,theTerritoryhasprovidedanindemnityagainstpossibleactionsoftheTerritoryinrelationtothestructureoroperationsofthePowerandWaterCorporation.TheTerritory’smaximumexposureisequivalenttothenetpresentvalueofleaseandoperatingchargesunderthepurchaseagreements.ThisriskiswithintheTerritory’scontrol.

��0 Commercial Issues

2007-08 budget

TransportTheTerritoryalsohascontingentliabilitiesinthiscategoryrelatedtoindemnitiesandguaranteesthathavebeenprovidedinsupportoftheAdelaidetoDarwinrailwayproject.

TheAustralAsiaRailwayCorporation(AARC)andtheNorthernTerritoryandSouthAustraliangovernmentshaveenteredintoaconcessionarrangementfortheAdelaidetoDarwinrailwayonabuild,own,operateandtransfer-backbasis.

QuantifiablecontingentliabilitiesoftheTerritoryidentifiedinpreviousyearsinrelationtotheprojectarosefromcommitmentstoprovideacappedamountof$25millionincontingentequity,ofwhich50percentwillbeprovidedbytheAustralianGovernment.TheequitywasfullycalledandpaidinJune2005.

UnquantifiablecontingentliabilitiesexistwhichcouldposearisktotheGovernment’sfinancialprojections.

TransportUnquantifiablecontingentliabilitiesoftheTerritoryinrelationtotheAdelaidetoDarwinrailwayprojectrelatetothefollowing:

• jointguaranteeoftheobligationsoftheAARC;

• indemnitiesgrantedinrelationtotitleovertherailwaycorridor(titleissecurebuttheindemnitycontinues);

• agreementtocompensateinthecaseofearlyterminationoftheproject(whereaterminationeventiscausedbytheTerritory);and

• indemnitiesinfavouroftheAustralianGovernmentforitsfinancialcontribution.

TheDarwinPortCorporationhasleasedfacilitiesattheDarwinPorttoAsiaPacificTransportPtyLtd,interfacingtheportandtherailway.Therearecontingentliabilitieswhichariseoutoftheperformanceofthefacilities.

Althoughthemajorityofcontingentliabilitiesarisingfromtheaboveguaranteesandindemnitiesareunquantifiable,AARCandthegovernmentshavecomprehensiveriskmanagementproceduresinplaceforalleventsthatwouldgiverisetoliabilities.

TheNorthernTerritoryGovernmenthasenteredintoagreementsfortherelocationoffuelterminalsfromneartheDarwincentralbusinessdistricttotheEastArmindustrialestate.Theagreementsprovideforcertainunquantifiablecontingentliabilitiestobeprovidedtothedeveloperofthenewfuelterminalandanoilcompany.Governmenthasputinplacecomprehensiveriskmanagementprocessestoaddresspotentialexposure.

HealthandCommunityServicesTheTerritoryhasgrantedaseriesofhealth-relatedindemnitiesforvariouspurposesincludingindemnitiestospecialistmedicalpractitionersemployedorundertakingworkinpublichospitalsandindemnitiesprovidedtomedicalprofessionalsrequestedtogiveexpertadviceoninquiriesbeforetheMedicalBoard.Indemnitieshavealsopreviouslybeengrantedtomidwives.

Althoughtherisksassociatedwithhealthindemnitiesarepotentiallyhigh,thebeneficiariesoftheindemnitiesarehighlytrainedandqualifiedprofessionals.Theindemnitiesgenerallycannotbecalleduponwherethereiswilfulorgrossmisconductonthepartofthebeneficiary.

UnquantifiableContingent

Liabilities

UnquantifiableContingent

Liabilities

��

GovernmentAdministrationWheretheTerritoryhasinvitedtheparticipationofprivatesectorpersonsandGovernmentofficersonboardsofgovernmentownedorfundedcompaniesorcorporations,theTerritorymaygrantanindemnitytoboardmembers,whichcoversthemforanylossesthatmayresultfromgoodfaithactionsifindemnityisnotalreadycontainedinlegislationestablishingtheboard.Thisindemnityisgenerallyconsistentwiththecoveravailablethroughdirectors’andofficers’insurance,andthepolicyofissuinganindemnityratherthanpurchasingcommercialinsuranceisinlinewiththeGovernment’spolicyofselfinsurance.

Theresultingcontingentliabilitiesareconsideredlowriskasboardmembersareprofessionalsselectedonthebasisoftheirexpertiseandknowledge.Further,theindemnitiesarerestrictedtogoodfaithactionsonly.

IndemnitiesaregrantedtotheAustralianGovernmentandotherentitiesinvolvedinfundingorsponsoringactivitiesandprogramsinitiatedorundertakenbytheTerritory.Undertheindemnities,theGovernmentgenerallyacceptsliabilityfordamageorlossesoccurringasaresultoftheactivitiesorprogramsandacknowledgesthat,althoughtheAustralianGovernmentoranotherpartyhascontributedfinanciallyorprovidedin-kindsupport,theTerritoryisultimatelyliablefortheconsequencesoftheactivityorprogram.

Althoughtheresultingcontingentliabilitymaynotalwaysbelowrisk,dependingontheactivityundertaken,theTerritory’sfinancialexposureisnogreaterthanwouldhavebeenthecasewithoutfundingorsponsorshipassistance.

TheGovernmenthasindemnifiedprivatesectorinsurersprovidingworkerscompensationinsuranceintheTerritory.Theindemnitycoversinsurersforlosseswhichmayariseasaresultofactsofterrorism.Itisconsideredunlikelythattheindemnitywillbecalled,notwithstandingthattheconsequenceintermsoffinancialexposure,ifcalledupon,ispotentiallysignificant.

TheTerritoryGovernmentgenerallyselfinsuresitsinsurablerisk.ThesizeoftheGovernmentbudget,coupledwiththespreadofrisk,thesmallsizeandhighdegreeofcentralisationofGovernmentactivities,havebeenconsiderationsindeterminingthatselfinsuranceisappropriate.Government’sprimaryexposureistonaturaldisasterrisksthatareoutsideGovernmentcontrol,suchas,cyclones.Inpreviousyears,wherecatastrophicnaturaldisastersresultinmajorloss,theAustralianGovernmenthasprovidedassistance,evenbeyondthetermsoftheNaturalDisasterReliefandRecoveryArrangements.

FinanceTheTerritory’sfinancialmanagementframeworkisunderpinnedbycentralisedbankingarrangements.Thesoleproviderofbanking-relatedserviceshasbeengrantedindemnitiesunderthewholeofgovernmentbankingcontract.Theseindemnitiesareconsiderednottoinvolvesignificantrisk.

PropertyandBusinessServicesAgreementsforleasesorlicencesofproperty,plantorequipmentgenerallycontainstandardindemnityprovisionscoveringthelessororlicensorforanylossessufferedasaresultoftheleaseorlicencearrangement.Theseindemnitiesareconsiderednottoinvolvesignificantrisk.

��2 Commercial Issues

2007-08 budget

Anumberofmaterialstatutorycontingentliabilitiesalsoexist,however,theprospectofthesecontingentliabilitiesbeingcalleduponisconsiderednegligible.

Public Trustee ActUndersection97ofthePublic Trustee Act,theTreasurerindemnifiestheCommonFundsagainstanydeficienciesinmoneyavailabletomeetclaimsonthem.TheCommonFundsprovidearepositoryforallmoneysreceivedbythePublicTrusteeonbehalfofestates,trustsorpersons,andtheyearninterest.MoneytothecreditoftheCommonFundsisinvestedaccordingtothedirectionsissuedbyanInvestmentBoard.

Negotiationsnotyetfinalisedhavethecapacitytoinfluencetheachievementofbudgetprojectionsandhavethepotentialtoaffectbothrevenuesandexpenses,aswellastheBalanceSheet.

However,asindicatedabove,theBudgetandforwardestimateshavebeendevelopedbasedonarangeoffactorsaboutwhichconsensusexistsatthetimetheBudgetisframed.

LegalProceedingsLikenegotiationsnotyetfinalised,theoutcomeoflegalproceedingsbroughtbyandagainsttheGovernmentalsohavethepotentialtoaffectactualBudgetoutcomesincurrentandfutureyears.TheBudgetandforwardestimateshavebeendevelopedbasedontheconsensusexistingatthetimetheBudgetisframed.

StatutoryContingent

Liabilities

StatutoryContingent

Liabilities

��

Economy OverviewThefollowingchaptergivesanoverviewoftheNorthernTerritoryeconomy.Itprovidesasummaryandforecastsofeconomicgrowth,followedbyanoverviewofthestructureoftheeconomy,theTerritorypopulation,labourmarket,pricesandwages,andvariousindustriesandsectorswithintheeconomy.

ThechapterislinkedtotheNorthern Territory Economy budget-relatedpaper (wheremoredetailscanbefound)anditsstructureisnotintendedtobeindicativeoftherelativeimportanceofthevariousindustriesorsectorswithintheeconomy.

EconomicgrowthintheNorthernTerritorytendstobevolatilefromyeartoyear.Thesmallsizeoftheeconomymeanslarge,typicallyresource-basedprojectscanhaveasubstantialimpactoninvestmentandincomestreams.

TheTerritoryeconomygrewby6percentin2004-05,withstronggrowthinconsumptionandinvestmentboostedbymajorprojects.

In2005-06,grossstateproduct(GSP)grewby7.5percentwithstrengtheningconsumption,andasubstantialincreaseinbusinessinvestmentassociatedwithmajorresourceprojects,alongwiththecommencementofliquefiednaturalgas(LNG)exports.

ThemajorinfluenceonestimatedGSPgrowthof7.2percentin2006-07isstrongexportactivity,alongwithasignificantdeclineinimports.PeakproductionofLNG,andattheBayu-Undanfields(gas,condensateandliquidpetroleumgas),withincreasedaluminaproductionfromAlcan,arethemajorcontributorstogrowth.

Economicgrowthisforecasttocontinuein2007-08withgrowthof3.7percent.BusinessinvestmentlevelswillreturntomoreusuallevelsastheAlcanexpansioniscompleted.Exportsareexpectedtostabiliseaspeakproductionisreached.

Chapter 10Chapter 10

EconomicGrowthEconomicGrowth

2002-03

%ch

2003-04

%ch

2004-05

%ch

2005-06

%ch

2006-07e

%ch

2007-08f

%ch

RealGSP 0.2 0.2 6.0 7.5 7.2 3.7


Population1 0.1 0.3 1.2 2.0 1.6 1.4

DarwinCPI2 2.2 2.1 1.6 2.6 4.4 3.0

e:estimate;f:forecast1 AsatDecember,annualpercentagechange(compareslatestquarterwiththesamequarterin


12months).Source:ABSCat.Nos6202.0,3101.0,6401.0,5220.0andNTTreasury.


2002-03

%ch

2003-04

%ch

2004-05

%ch

2005-06

%ch

2006-07e

%ch

2007-08f

%ch

RealGSP 0.2 0.2 6.0 7.5 7.2 3.7


Population1 0.1 0.3 1.2 2.0 1.6 1.4

DarwinCPI2 2.2 2.1 1.6 2.6 4.4 3.0

e:estimate;f:forecast1 AsatDecember,annualpercentagechange(compareslatestquarterwiththesamequarterin


12months).Source:ABSCat.Nos6202.0,3101.0,6401.0,5220.0andNTTreasury.


��4 Economy Overview

2007-08 budget

TheNorthernTerritoryeconomyismarkedlydifferenttootherAustralianjurisdictions.Ithasanabundanceofnaturalresources,alargepublicsectorandasignificantdefencepresence.

TheTerritoryeconomyishighlyinfluencedbyglobaleconomicconditionsduetoitsrelativelysmallsizeandcommodity-focusedbase.

ArelativelylargemineralandenergysectormeansthattheTerritoryeconomyiscapableofhighgrowthasresourcesaredeveloped.Therecentandnearcompletionofanumberofmajorinfrastructureprojectswillresultinsignificantincreasesinminingandmining-relatedproductionoverthenextfewyears.

ThemanufacturingbasehasincreasedwiththeLNGplantatWickhamPointcommencingproductioninFebruary2006,andwillincreasefurtherwhentheAlcanG3expansioniscompletedinthefirsthalfof2007.

Theminingindustryisarelativelysmallemployer,despiteitscontributiontoGSP.ThehealthandeducationsectoristhelargestemployerintheTerritory,followedbygovernmentadministrationanddefence,andretailandwholesaletrade.

StructureoftheEconomy

StructureoftheEconomy

0

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Northern Territory Australia

%Chart 10.1: Industry Proportion of GSP and GDP,

2001-02 to 2005-06 (five year average)

Source:ABSCat.No.5220.0.

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Northern Territory Australia

%Chart 10.1: Industry Proportion of GSP and GDP,

2001-02 to 2005-06 (five year average)


Chart 10.2: Territory Employment and GSP

Proportions, 2001-02 to 2005-06 (five year average)

Chart 10.2: Territory Employment and GSP

Proportions, 2001-02 to 2005-06 (five year average)

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erv

ice

s

Gov

ern

me

nta

dm

inis

trat

ion

an

d d

efe

nce

H

ea

lth a

nd

ed

uca

tion

Cu

ltura

l an

dre

cre

atio

na

l se

rvic

es

Pe

rso

na

l an

dot

he

r se

rvic

es

O

wn

ers

hip

of d

we

llin

gs

GSP Employment

0

5

10

15

20

25%

Source:ABSCat.Nos.5220.0,6291.0.55.003.

��

TheNorthernTerritoryissparselysettled,witharelativelyyoungandhighlyurbanisedpopulation.AfarhigherproportionoftheTerritory’spopulationisIndigenous(29percent)thaninotherjurisdictions.

Naturalincrease(birthsminusdeaths)contributesmoretototalgrowthintheTerritorythaninotherjurisdictions,averaging1.4percentagepointscomparedto0.6percentagepointsnationally.ThisisinpartduetohighratesofIndigenousfertilityintheTerritory.

Interstatemigrationisthemostvariablecomponentofpopulationgrowth.Aftercontributingstronglytopopulationgrowthin2005,interstatemigrationreturnedtomoretypicalpatternsin2006-07.Growthin2006remainsstrongatanestimated1.6percent,afterstrongerthanexpectedgrowthof2percentin2005.

Populationgrowthof1.4percentperannumisforecastfor2007and2008.

AnaccurateestimateofpopulationisofcriticalimportancetotheTerritoryasAustralianBureauofStatisticspopulationestimatesareusedbytheAustralianGovernmenttoapportiongoodsandservicestax(GST)revenues,asubstantialportionofTerritorytotalrevenue.

PopulationPopulation

-1

0

1

2

3

4

5

6

7

82 84 86 88 90 92 94 96 98 00 02 04 06 08f

%

Northern Territory

Australia

Year ended June

Chart 10.3: Annual Population Growth

f:forecastSource:NorthernTerritoryTreasury,ABSCat.No.3101.0.

-1

0

1

2

3

4

5

6

7

82 84 86 88 90 92 94 96 98 00 02 04 06 08f

%

Northern Territory

Australia

Year ended June

Chart 10.3: Annual Population Growth

f:forecastSource:NorthernTerritoryTreasury,ABSCat.No.3101.0.

�� Economy Overview

2007-08 budget

TheTerritorylabourmarketcontinuestostrengthenin2006-07asbuoyantonshoreeconomicconditionsprevail.

Followinganincreaseof4.0percentin2005-06,asreportedbytheABS,residentemploymentisexpectedtoincreaseby4.4percentin2006-07.Theunemploymentratefellfrom6.3percentin2004-05to5.7percentin2005-06andanestimated3.5percentin2006-07.

Labourmarketstatisticsandrelatedindicatorspointtostrongemploymentgrowthandashortageofskilledlabourin2006-07,whichisexpectedtocontinueinto2007-08.

Residentemploymentgrowthof2.3percentisforecastfor2007-08,supportedbyongoingconstructionworkontheDarwinWaterfrontDevelopment,residentialconstructionandengineeringprojectssuchasthecondensateprocessingfacilityandtheBlacktipgaspipeline.

ABS-reportedemploymentdatadoesnotincludedefencepersonnelorfly-infly-outworkersandassuchdoesnotcapturealltypesofemploymentintheTerritory.Evenmoreimportantly,ABSemploymentdatafortheTerritoryissubjecttoveryhighlevelsofvolatilityandmustbeinterpretedandconsideredinconjunctionwitharangeofothereconomicindicators.

LabourMarketLabourMarket

-10

-5

0

5

10

15

00 01 02 03 04 05 06 07

%

Employment

Year ended June

Chart 10.4: Territory Employment Growth

(year on year)

Source:NorthernTerritoryTreasury,ABSCat.Nos.5206.0,6202.0.

-10

-5

0

5

10

15

00 01 02 03 04 05 06 07

%

Employment

Year ended June

Chart 10.4: Territory Employment Growth

(year on year)

Source:NorthernTerritoryTreasury,ABSCat.Nos.5206.0,6202.0.

��7

In2006,Darwin’sConsumerPriceIndex(CPI)increasedby4.4 per cent,comparedtoa3.5 per centincreasenationally.However,inflationintheTerritoryisexpectedtofallsignificantlyin2007,largelyreflectingmoderatinggrowthinhousingpricesandlowerfuelandbananaprices.

DarwinCPIgrowthof3.0 per centand2.5 per centisforecastfor2007and2008respectively.

In2006,theTerritory’sWagePriceIndexincreasedby3.9 per centcomparedto4.0 per centnationally.StrongwagesgrowthintheTerritoryandnationallyoverthepasttwoyearsreflectstheimpactonwagesgrowthofthetightlabourmarketandskilledlabourshortages,especiallyinconstruction,miningandhealth.

WagesgrowthintheTerritoryisexpectedtomoderatein2007astheAlcanG3refineryexpansioniscompletedandgrowthinpublicsectorwagesisconstrainedbytheTerritoryGovernment’spublicsectorwagespolicy.

PricesandWages

PricesandWages

-1

0

1

2

3

4

5

6

7

98 99 00 01 02 03 04 05 06 07e 08f

Darwin (quarterly) Eight capitals (quarterly)

Darwin (year on year)

Eight capitals (year on year)

%

Year ended December

Chart 10.5: Consumer Price Index

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSCat.No.6401.0.

-1

0

1

2

3

4

5

6

7

98 99 00 01 02 03 04 05 06 07e 08f

Darwin (quarterly) Eight capitals (quarterly)

Darwin (year on year)

Eight capitals (year on year)

%

Year ended December

Chart 10.5: Consumer Price Index

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSCat.No.6401.0.

��8 Economy Overview

2007-08 budget

DemandforTerritorygoodsbothinternationallyandfromotherAustralianstatesandterritoriesisveryimportantfortheTerritoryeconomy,collectivelyaccountingfor30percentoffinaldemand.

GlobalgrowthisforecastbyConsensusEconomicstoeaseslightlyto4.7percentin2007.

EconomicgrowthisexpectedtobestronginChina,IndiaandmanySouthEastAsiancountries.

RiskstothegenerallypositiveoutlookincludethepossibilityofinflationarypressuresleadingtofurtherincreasesininterestratesandagreaterthanexpectedslowdownintheUnitedStateseconomy.

ConsensusEconomicsforecastsAustralianGDPgrowthof2.9percentin2007.AustralianBureauofAgriculturalandResourceEconomics(ABARE)forecastsmineralandenergyexportstoincreaseby20percenttoabout$111billion,withbothvalueandvolumeincreasing.

NegotiationsareproceedingwithChina,Malaysia,Japan,ChileandSouthKoreaforfreetradeagreements.

ExternalEconomic

Environment

ExternalEconomic

Environment

GDPGrowth(%)

2004 2005 2006 2007e 2008f

North East Asia

China 10.1 10.2 10.5 9.6 9.4

SouthKorea 4.7 4.0 5.0 4.4 4.9

Japan 2.7 1.9 2.2 2.1 2.3

Taiwan 6.1 4.0 4.3 4.0 4.6

HongKong 8.6 7.3 6.5 5.1 5.0

South East Asia

Philippines 6.0 5.1 5.0 5.4 na

Indonesia 5.1 5.6 5.4 5.9 5.9

Malaysia 7.2 5.2 5.9 5.4 5.7

Thailand 6.3 4.5 4.6 4.8 5.0

Singapore 8.7 6.4 7.7 5.2 5.5

North America

UnitedStates 3.9 3.2 3.3 2.4 3.0

Canada 3.3 2.9 2.7 2.4 2.9

Eurozone 1.8 1.5 2.8 2.3 2.1

Russia 7.2 5.5 6.5 6.5 na

India 7.5 8.4 8.4 7.8 na

Australia 3.7 2.8 2.5 2.9 3.2

NewZealand 4.4 2.1 1.7 2.1 2.8

e:estimate;f:forecastna:notavailableSource:ConsensusEconomicsConsensusForecasts(India:financialyearreported);Russia,

Philippines:InternationalMonetaryFund.

Table 10.2: GDP Growth (annual percentage change)

GDPGrowth(%)

2004 2005 2006 2007e 2008f

North East Asia

China 10.1 10.2 10.5 9.6 9.4

SouthKorea 4.7 4.0 5.0 4.4 4.9

Japan 2.7 1.9 2.2 2.1 2.3

Taiwan 6.1 4.0 4.3 4.0 4.6

HongKong 8.6 7.3 6.5 5.1 5.0

South East Asia

Philippines 6.0 5.1 5.0 5.4 na

Indonesia 5.1 5.6 5.4 5.9 5.9

Malaysia 7.2 5.2 5.9 5.4 5.7

Thailand 6.3 4.5 4.6 4.8 5.0

Singapore 8.7 6.4 7.7 5.2 5.5

North America

UnitedStates 3.9 3.2 3.3 2.4 3.0

Canada 3.3 2.9 2.7 2.4 2.9

Eurozone 1.8 1.5 2.8 2.3 2.1

Russia 7.2 5.5 6.5 6.5 na

India 7.5 8.4 8.4 7.8 na

Australia 3.7 2.8 2.5 2.9 3.2

NewZealand 4.4 2.1 1.7 2.1 2.8

e:estimate;f:forecastna:notavailableSource:ConsensusEconomicsConsensusForecasts(India:financialyearreported);Russia,

Philippines:InternationalMonetaryFund.

Table 10.2: GDP Growth (annual percentage change)

��

In2006-07,theNorthernTerritory’sinternationaltradesurplus(thatis,exportsofgoodsandserviceslessimportsofgoodsandservices)isestimatedtoincreaseto$2.6billion,upfromthe$179millionsurplusin2005-06.

TheTerritory’sinternationalmerchandisetradebalance(exportofgoodsminusimportofgoods)increasedtoanestimated$2.1billionin2006-07,upfromthe$230milliondeficitin2005-06.

Mineralores,mineralfuelsandservicesrelatedtointernationalvisitors(touristsandforeigndefencepersonnel)dominateinternationalexportsintheTerritory.In2006-07,merchandiseexportsincreasedby71percenttoanestimated$4.5billion,largelyduetoincreasedglobalcommoditydemandandprices.

Merchandiseexportsareforecasttoincreasetoanestimated$4.7billionin2007-08,supportedbyasecondfullyearofLNGproduction,manganesefromBootuCreekmineandaluminafromAlcan’sGoverefinery.

ThemajorTerritoryimportsaremachineryandequipment(mostlyindustrialequipmentforminingandconstructionactivities)andrefinedfuels.In2006-07,importsdecreasedbyanestimated16percentto$2.4billion,andareforecasttodeclinebyafurther14percentto$2.1billionin2007-08.Thedeclineisprimarilyduetolowerdemandformachineryandtransportequipment(particularlyformajoroilandgasprojects),andareductioninnationalaircraftimportsviaDarwin.

Forecastincreasesinmerchandiseexportsanddecreasesinmerchandiseimportsin2007-08areexpectedtoresultinasubstantialincreaseinthemerchandisetradesurplusto$2.6billion.

InternationalTrade

InternationalTrade

-1

0

1

2

3

4

5

6

98 99 00 01 02 03 04 05 06 07e 08f

Exports

Imports

Trade balance

Year ended June

$BChart 10.6: Territory

International Merchandise Trade (moving annual total)

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSdataservice5432.0.65.001.

-1

0

1

2

3

4

5

6

98 99 00 01 02 03 04 05 06 07e 08f

Exports

Imports

Trade balance

Year ended June

$BChart 10.6: Territory

International Merchandise Trade (moving annual total)

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSdataservice5432.0.65.001.

�20 Economy Overview

2007-08 budget

Intermsofoutput,miningisthelargestindustryintheTerritory,accountingfor25percentofgrossstateproduct(GSP)in2005-06,comparedto7percentnationally.Itismuchlessimportantintermsofemployment,accountingfor1.9percentoftotalTerritoryresidentemploymentaccordingtoABSestimates.

Miningoutputisvolatileasproductionisdominatedbyasmallnumberoflargeprojects.Globalsupplyanddemandconditionsandtheimpactofexchangeratemovementsoncompetitivenessarekeyfactorsaffectingproductionlevelsandprices.

Inrecentyears,decliningoutputfromtheLaminaria-CorallinaoilfieldintheTimorSeahasbeenpartiallyoffsetbyincreasinggasandcondensateproductionfromBayu-Undan,aswellasLNGproductionattheWickhamPointplant.

Mineralproductionandprocessingisexpectedtosignificantlyincreaseinthenextfewyears,withgrowthdrivenlargelybyincreasedproductionofalumina,goldandmanganese.

Mineralandenergyproductionisestimatedtoincreaseby26.1percentto$6.3billionin2006-07.Moremoderategrowthof6.6percentisexpectedfor2007-08.

Inthemediumtolongterm,thelevelofexplorationisexpectedtocontinuetoincrease,supportedbystrongcommoditypricesandNorthernTerritoryGovernmentinitiatives.

MiningandEnergy

MiningandEnergy

0

1

2

3

4

5

6

7

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07e 08f

Total

Energy

Minerals

Gas and mineral processing1

$B

Year ended June

Chart 10.7: Value of Mining and Energy Production and

Processing (nominal dollars)

e:estimate;f:forecast1 IncludesaluminaandLNGmanufacturing.Source:NorthernTerritoryTreasury,DepartmentofBusiness,EconomicandRegionalDevelopment,

DepartmentofPrimaryIndustry,FisheriesandMines.

0

1

2

3

4

5

6

7

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07e 08f

Total

Energy

Minerals

Gas and mineral processing1

$B

Year ended June

Chart 10.7: Value of Mining and Energy Production and

Processing (nominal dollars)

e:estimate;f:forecast1 IncludesaluminaandLNGmanufacturing.Source:NorthernTerritoryTreasury,DepartmentofBusiness,EconomicandRegionalDevelopment,

DepartmentofPrimaryIndustry,FisheriesandMines.

�2�

TourismplaysasignificantroleintheTerritoryeconomy,creatingdemandandgeneratingemploymentinarangeofdifferentindustries,includinghospitality,retailtradeandtransport.

Since2003-04,tourism’scontributiontotheeconomyhasbeenmeasuredbyanewmethodwhichintroducesconceptssuchastourismgrossvalueaddedandtourismconsumptionconsistentwiththenationalaccountsframework.

In2005-06,tourismgrossvalueaddedwasestimatedat$715.6million,accountingfor7.2percentofTerritorygrossstateproduct.Tourismconsumptionwas$2billionintheTerritoryin2005-06,whichis22percentoftotalconsumptionintheTerritory.

Totalvisitornumbersdeclinedmoderatelyin2005-06,however,highervisitorexpenditureresultedinminimalchangetototalexpenditurelevelsin2005-06.

In2006-07,tourismintheTerritoryisexpectedtobebroadlypositive,withtheoutlookfor2007-08oneofsteadygrowth.

TourismTourism

0

500

1000

1500

2000

2500

3000

00 01 02 03 04 05 06

Year ended June

Total visitors

Domestic day visitors

International visitors

‘000

Domestic overnight visitors

Chart 10.8: Territory Visitors

Source:TourismResearchAustralia.

0

500

1000

1500

2000

2500

3000

00 01 02 03 04 05 06

Year ended June

Total visitors

Domestic day visitors

International visitors

‘000

Domestic overnight visitors

Chart 10.8: Territory Visitors

Source:TourismResearchAustralia.


2007-08 budget

TheTerritoryconstructionindustryaccountedforabout7percentofGSPonaverageoverthepastfiveyearsto2005-06,andemployedabout7.8percentoftheworkforce.

ProjectssuchastheAlcanG3refineryexpansionatGovehaveahugeimpactonthevalueofconstructionworkdoneintheTerritory.TheyaresignificantbothonaTerritoryandanationalscaleandcanleadtosubstantialvolatilityinthevalueofconstructionworkdone.

In2005-06,totalconstructionactivityincreasedby5.9percentto$2.4billion,supportedbymajorresource-basedengineeringprojectssuchastheLNGplantatWickhamPointandthe$3billionAlcanexpansion.

Decliningconstructiongrowthin2006-07comesasinvestmentforBayu-Undanstage2(LNGplantandassociatedsub-seapipeline)andtheAlcanrefineryexpansion,themaindriversofengineeringworkdone,arecompleted.

NorthernTerritoryconstructionactivitywillcontractsubstantiallyin2007-08.However,totalconstructionactivitywillremainatlevelsabovehistoricalaveragesover2007-08dueinparttonewminingandenergyprojects.ThiswillbesupplementedwithsignificantconstructionactivityassociatedwiththeDarwinWaterfrontDevelopmentandroads,housing,educationandhospitalprograms,andasizeabledefenceinfrastructureschedule.

Propertymarketshaveexperiencedstronggrowthinthepastfewyears,withmedianhousepricesincreasingby21.8percentin2006.ThestrengthinresidentialpropertypricesreflectstrongerpopulationgrowthintheTerritory,aswellastheflow-oneffectsfromhighcommoditypricesandtherelatedresourcesboom.

ConstructionandProperty

ConstructionandProperty

Total

0.0

0.5

1.0

1.5

2.0

2.5

3.0

95 96 97 98 99 00 01 02 03 04 05 06 07e 08

Residential

Non-residential

Year ended June

$B

f

Engineering

Chart 10.9: Territory Construction Work Done

(moving annual total)

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSCat.Nos.8752.0,8782.0.65.001.

Total

0.0

0.5

1.0

1.5

2.0

2.5

3.0

95 96 97 98 99 00 01 02 03 04 05 06 07e 08

Residential

Non-residential

Year ended June

$B

f

Engineering

Chart 10.9: Territory Construction Work Done

(moving annual total)

e:estimate;f:forecastSource:NorthernTerritoryTreasury,ABSCat.Nos.8752.0,8782.0.65.001.

�2�

Retailtradeandwholesaletradeaccountedfor6.1percentofNorthernTerritoryGSPand15.9percentofresidentemploymentin2005-06.

Territoryretailturnoverin2006-07isexpectedtoexceedthenationalaverageandisestimatedtogrowbyastrong7.5percent.Thecommodityboom,strongconstructionactivityandrecordlowunemploymentareexpectedtomaintainconsumerconfidenceathighlevelsanddriveconsumerspending,particularlydiscretionaryspending.

Territoryretailturnoverisexpectedtoremainatnearrecordlevelsin2007-08.However,retailturnovergrowthisexpectedtomoderateto2.0percentasgrowthcomesoffthehighlevelsrecordedsinceJune2006,andthelaggedimpactofthe2006interestraterisesbeginstotakeeffect.

IntheMarchquarter2007,Territoryconsumerswerethesecondmostconfidentinthenation,with61percentfeelingconfidentabouttheirfinancialprospectsfortheyearahead.

RetailandWholesaleTrade

RetailandWholesaleTrade

0

10

20

30

40

50

60

70

ACT NT SA NSW WA Vic Qld Tas

%Chart 10.10: Consumer Sentiment (Net Balance

Feeling Confident)

Source:SensisConsumerReportMarchQuarter2007.

0

10

20

30

40

50

60

70

ACT NT SA NSW WA Vic Qld Tas

%Chart 10.10: Consumer Sentiment (Net Balance

Feeling Confident)

Source:SensisConsumerReportMarchQuarter2007.


2007-08 budget

ThepublicsectorisamajorcontributortotheTerritoryeconomy,providingawiderangeofservices.ItconsistsofAustralian,Territoryandlocalgovernmentactivity,includingdefence.

In2005-06,thenon-defencepublicsectoraccountedforabout$3.3billion,or24.7percentofstatefinaldemand(SFD)–higherthanmostotherjurisdictions.ThissectoristhelargestemployerintheTerritory,accountingforabout27percentoftotalemploymentin2005-06(32percentwhendefenceisincluded).

Thesizeofthenon-defencepublicsectorrelativetothesizeoftheTerritoryeconomyhasdeclinedoverthepasttwodecades,reflectingthematurationanddiversificationoftheTerritoryeconomy.

Detailsofthedefencepublicsectorarepresentedinthenextsection.

ThePublicSectorThePublicSector

0

10

20

30

40

50

60

Qld WA Vic NSW SA Tas NT ACT Australia

Non-Defence Defence

%Chart 10.11: Public Sector Expenditure as a Proportion of

SFD, 2005-06


0

10

20

30

40

50

60

Qld WA Vic NSW SA Tas NT ACT Australia

Non-Defence Defence

%Chart 10.11: Public Sector Expenditure as a Proportion of

SFD, 2005-06


�2�

ThedefencepresenceintheTerritoryhasmorethandoubledsincetheearly1990s,withthenumberofdefencepersonnelandtheirfamiliesincreasingfrom6223inJune1992toanestimated12935inJune2007.

OfthetotalAustralianpermanentdefenceforcepersonnel,10percentarebasedintheTerritory.RecurrentdefenceexpenditurebytheAustralianGovernmentintheTerritorytotalled$954millionin2005-06.

Majordefence-relatedactivitiesunderwayintheTerritoryincludethe$170milliondevelopmentofthenewsuburbofLyonsatLeePointandtherecentacquisitionoflandadjacenttoLyons(Muirhead).Defenceactivitiesnearingcompletionincludetheconstructionofthe$82millionRobertsonBarracks1stAviationComplexandthe$65millionBradshawfieldtrainingareanearTimberCreek.Intotal,Defencewillspendaround$275millionin2007-08oninfrastructure.

TheTerritory’seconomywillbenefitfromlocalsupplyandsupportcontractsincludingthoseforthenewArmidaleClassPatrolBoats,theTigerhelicoptersandthereplacementoffieldvehiclesandtrailers.

DefenceDefence

Project

Estimated

TotalValueof

Projects

($million)

Estimated

Expenditure

in2007-08

($million)

RedevelopmentofRobertsonBarracks 82.0 76.6

UpgradeofRAAFDarwinredevelopmentstage2 36.0 36.0

RAAFBaseTindalredevelopmentstage5(includestheAirborneEarlyWarningandControlFacilities)

90.0 50.0

Bradshawfieldtrainingarea 65.0 4.7

Lyonssubdivisiondevelopment 170.0 70.0

DarwinNavalBaseextensions 19.2 13.9

DarwinandGoveforeignfishingvesselcrematoriums 6.6 6.6

MtBundytrainingareaurbanterrainfacilities 5.0 4.2

Maintenancecontracts(lessthan$5millionperproject) 13.4 13.4

Total 487.2 27�.4

Source:NorthernTerritoryTreasury,DepartmentofDefenceBudgetStatements2006-07.

Table 10.3: Proposed Defence Infrastructure Program

for 2007-08Project

Estimated

TotalValueof

Projects

($million)

Estimated

Expenditure

in2007-08

($million)

RedevelopmentofRobertsonBarracks 82.0 76.6

UpgradeofRAAFDarwinredevelopmentstage2 36.0 36.0

RAAFBaseTindalredevelopmentstage5(includestheAirborneEarlyWarningandControlFacilities)

90.0 50.0

Bradshawfieldtrainingarea 65.0 4.7

Lyonssubdivisiondevelopment 170.0 70.0

DarwinNavalBaseextensions 19.2 13.9

DarwinandGoveforeignfishingvesselcrematoriums 6.6 6.6

MtBundytrainingareaurbanterrainfacilities 5.0 4.2

Maintenancecontracts(lessthan$5millionperproject) 13.4 13.4

Total 487.2 27�.4

Source:NorthernTerritoryTreasury,DepartmentofDefenceBudgetStatements2006-07.

Table 10.3: Proposed Defence Infrastructure Program

for 2007-08

�2� Economy Overview

2007-08 budget

TheTerritoryhasasmallandnarrowlybasedmanufacturingsector,dominatedbyaluminaproductionatAlcan’sGoverefinery.

In2005-06,manufacturingaccountedfor6percentofGSP($685million)andabout3percentoftotalemployment.

Manufacturingproductionwillincreasesignificantlyin2007withincreasedaluminaproductionfromtheexpandedAlcanrefinery,andafullyearofproductionfromboththeWickhamPointLNGplantandthenewrenewablefuels(biodiesel)facility.

FurtherincreasesareexpectedoverthenexttwoyearswiththecompletionoftheheliumplantatWickhamPointin2008,andthecondensateprocessingfacilityatEastArminlate2009.

Inthemediumtolongterm,naturalgasfromtheTimorSeacouldbeusedasaninputforgas-relatedmanufacturingindustriessuchasmethanol,ethane,ammonia/ureafertilisersandvariousotherpetrochemicals,andasacheaperenergysourceformining-relatedvalueaddingproduction.

ManufacturingManufacturing

0 10 20 30 40 50 60 70

Food, beverage andtobacco manufacturing

Textile, clothing, footwearand leather manufacturing

Wood and paperproduct manufacturing

Printing, publishingand recorded media

Petroleum, coal, chemical andassociated product manufacturing

Non-metallic mineralproduct manufacturing

Metal product manufacturing

Machinery andequipment manufacturing

Other manufacturing

% of Manufacturing

EmploymentSales turnoverValue added

Chart 10.12: Comparison of Territory Manufacturing,

2004-05

Note:2004-05isthelatestyearthatdataisavailableforemployment,valueaddedandsalesturnoverinmanufacturingindustries.

Source:NorthernTerritoryTreasury,ABSCat.No.8221.0.

0 10 20 30 40 50 60 70

Food, beverage andtobacco manufacturing

Textile, clothing, footwearand leather manufacturing

Wood and paperproduct manufacturing

Printing, publishingand recorded media

Petroleum, coal, chemical andassociated product manufacturing

Non-metallic mineralproduct manufacturing

Metal product manufacturing

Machinery andequipment manufacturing

Other manufacturing

% of Manufacturing

EmploymentSales turnoverValue added

Chart 10.12: Comparison of Territory Manufacturing,

2004-05

Note:2004-05isthelatestyearthatdataisavailableforemployment,valueaddedandsalesturnoverinmanufacturingindustries.

Source:NorthernTerritoryTreasury,ABSCat.No.8221.0.

�27

In2005-06,thetransportandcommunicationsectoraccountedfor5.4percentofGSPandalmost7percentoftotalTerritoryemployment.

Transport-relatedactivityaccountedforabout$415millionor3.4percentofTerritoryGSPin2005-06andabout5percentoftotalTerritoryemployment.ActivitiesrelatedtoallmodesofthetransportindustryintheTerritoryshownosignofslowing.

TheraillinkisanincreasinglyimportantfactoringrowingexportactivitythroughthePortofDarwin,atwhichthescaleandscopeoffacilitiescontinuestoimprove.

2006sawthestartofannualshipmentsofLNGtoJapanfromtheConocoPhillipsLNGprocessingandshiploadingfacilitiesatWickhamPointwithinDarwinHarbour.

In2007,thenumberofvisitsbypassengercruiseshipsisexpectedtoincreaseandTigerAirwaysandQantasplantoincreasetheirpassengercapacityintoandoutoftheTerritory.

Thecommunicationsindustryincorporatingtelecommunications,televisionandradionetworksaccountedforabout$241millionor2percentofTerritoryGSPin2005-06andforaround1percentoftotalTerritoryemployment.

In2006,TelstralaunchedtheNextGmobilenetwork,makingbroadbandmobileconnectivityavailableto49Territorylocations,41ofwhichareinremoteareas.

During2006,anewTelstra150-staffnationalcallcentrebeganoperationsinDarwinandanexisting100-staffcallcentrewasexpanded.

TransportandCommunication

TransportandCommunication

0

200

400

600

800

1 000

97 98 99 00 01 02 03 04 05 06

Overseas in

Overseas out

Intrastate outInterstate out

Interstate in

Year ended June

tonnes (000)Chart 10.13: Trade Through Port of Darwin

Note:Thelargeincreasein‘Intrastateout’in2004-05wasarmourrockusedfortheconstructionoftheBayu-Undansub-seagaspipeline.

Source:DepartmentofPlanningandInfrastructure,DarwinPortCorporation2005-06AnnualReport.

0

200

400

600

800

1 000

97 98 99 00 01 02 03 04 05 06

Overseas in

Overseas out

Intrastate outInterstate out

Interstate in

Year ended June

tonnes (000)Chart 10.13: Trade Through Port of Darwin

Note:Thelargeincreasein‘Intrastateout’in2004-05wasarmourrockusedfortheconstructionoftheBayu-Undansub-seagaspipeline.

Source:DepartmentofPlanningandInfrastructure,DarwinPortCorporation2005-06AnnualReport.


2007-08 budget

Ruralindustriesandfisheriesaccountedfor2.3percentofTerritoryGSPin2005-06and3.1percentofresidentemployment.

TheTerritoryenjoyscertaincomparativeadvantagesduetoitscapacitytosupplymarketswitharangeofearlyseasonandoutofseasonproduce,andbenefitsbecauseofitsenvironmentallycleanimage.

Outputgrowthintheindustrytendstobevolatileduetovariableweatherconditions,whiletheexchangeratecanhaveasignificanteffectoninternationaldemand.IntheTerritory,averageannualoutputgrowthhasbeenlowerthanbroadereconomicgrowthoverthepast10years.

Thevalueofruralindustriesandfisheriesproductionisestimatedtobe$539millionin2006-07,anincreaseof12percentfrom2005-06largelyduetoincreasedvaluesofcattleandhorticultureproduction.

Thevalueofproductionisforecasttoincreaseby6.5percentto$574millionin2007-08followingfurtherexpectedincreasesincattleandhorticultureproductionvalues.

RuralIndustriesandFisheries

RuralIndustriesandFisheries

0

50

100

150

200

250

300

350

400

450

500

550

600

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07e 08f

Total

Cattle

Fisheries

Horticulture

Other

$M

Year ended June

Chart 10.14: Rural Industries and Fisheries Value of

Production (nominal dollars)

e:estimate;f:forecastNote:Horticulturedataisonlyavailableforcalendaryears.Source:DepartmentofBusiness,EconomicandRegionalDevelopment.

0

50

100

150

200

250

300

350

400

450

500

550

600

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07e 08f

Total

Cattle

Fisheries

Horticulture

Other

$M

Year ended June

Chart 10.14: Rural Industries and Fisheries Value of

Production (nominal dollars)

e:estimate;f:forecastNote:Horticulturedataisonlyavailableforcalendaryears.Source:DepartmentofBusiness,EconomicandRegionalDevelopment.

�2�

Uniform Presentation FrameworkUndertheUniformPresentationFramework(UPF),jurisdictionshaveagreedtopublishinformationinastandardformatintheirbudgetpapers.TheformatoftheUPFisbasedonthereportingstandardsoftheAustralianBureauofStatistics’GovernmentFinanceStatistics(GFS).TheUPFhasbeenadoptedbyallgovernmentstofacilitateabetterunderstandingofgovernments’budgetpapersandtoprovideabasisformeaningfulcomparisonsofeachgovernment’sfinancialresultsandprojections.

ThereportingrequirementsoftheFiscal Integrity and Transparency ActcomplementthosespecifiedintheUPFAgreement.TheActrequiresthatfiscaloutlookreportsbepreparedinaccordancewithexternalreportingstandardsthatincludetheGFS.

ThetablesinthischaptermeettheTerritory’sreportingobligationsunderboththeFiscal Integrity and Transparency ActandtheUPF.Theyincludeanoperatingstatement,balancesheetandcashflowstatementforeachsectorofgovernment.Alsoincludedaretablespresentinggeneralgovernmentsectortaxes,generalgovernmentsectorexpensesbyfunction,andtherevised2007‑08LoanCouncilAllocation.

AsoutlinedinChapter2ofthisBudgetpaper,TerritoryHousinghasbeenreclassifiedasabusinessdivisionwithinthegeneralgovernmentsectorratherthanthepublicnonfinancialcorporationsector.Theupdatedfinancialdatafor2006-07andfutureyearshavebeenpreparedonthisbasis.

Chapter2alsohighlightsthattheTerritorywill,for2006-07,makeanadditionalsuperannuationcontributiontowardsunfundedsuperannuationliabilities,resultinginanunderlyingBudgetoutcome.Accordingly,thefinancialstatementspresentedinthischapterhavebeenupdatedtoreflecttheadoptionoftheseunderlyingtargetsastheTerritory’sprimaryBudgetmeasures.

Thefinancialstatementsforthegeneralgovernment,publicnonfinancialcorporationandnonfinancialpublicsectorsincludetherevised2006‑07estimate,2007‑08Budgetand2008‑09to2010‑11forwardestimates.Thestatementsforthepublicfinancialcorporationsectorandtotalpublicsectorpresentthe2006‑07estimateonly,withtheremainingsupplementarytablespresentingboththe2006‑07estimateandthe2007‑08Budget.

Chapter 11Chapter 11

��0 Uniform Presentation Framework

2007-08 budget

Table11.1

GeneralGovernmentSectorOperatingStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

NET OPERATING BALANCE

REVENUE

Taxationrevenue 358155 366562 379150 380919 398451

Currentgrantsandsubsidies 2400032 2529156 2652920 2718545 2831343

Capitalgrants 101784 123927 100759 88493 87593

Salesofgoodsandservices 135886 131019 130449 129473 130135

Interestincome 46489 38046 38412 39218 39293

Other 156106 150397 143638 152314 145426

TOTAL REVENUE � ��8 4�2 � �� 07 � 44� �28 � �08 ��2 � ��2 24�

EXPENSES

Grossoperatingexpenses 2227502 2347828 2450615 2528853 2621084

Depreciation 169340 171591 174537 177205 179816

Employeeexpenses 1292919 1333484 1376841 1407617 1436889

Otheroperatingexpenses 765243 842753 899237 944031 1004379

Nominalsuperannuationinterestexpense 122220 126675 129949 131949 134949

Otherinterestexpenses 138377 141785 141087 141229 142649

Otherpropertyexpenses

Currenttransfers 571556 591990 590734 579749 586291

Capitaltransfers 107955 105891 128922 116105 113871

TOTAL EXPENSES � ��7 ��0 � ��4 �� 44� �07 � 4�7 88� � ��8 844

GFSNETOPERATINGBALANCE 30842 24938 4021 11077 33397

Superannuationearnings(a) 3600 3816 4045 4288

UNDERLYING NET OPERATING BALANCE �0 842 28 ��8 7 8�7 �� 22 �7 �8�

NET LENDING/BORROWING (Fiscal balance)


less

Net acquisition of non financial assets

Purchasesofnonfinancialassets 288939 329854 289819 279278 282753

Salesofnonfinancialassets -74442 -65420 -67546 -55496 -55571

less Depreciation 169340 171591 174537 177205 179816

plus Changeininventories

plus Othermovementsinnonfinancialassets 56418 31587 720 720 720

Total net acquisition of non financial assets �0� �7� �24 4�0 48 4�� 47 2�7 48 08�

equals

GFSNETLENDING/BORROWING(Fiscalbalance) -70733 -99492 -44435 -36220 -14689


UNDERLYING NET LENDING/BORROWING (Fiscal balance)

- 70 7�� - �� 8�2 - 40 �� - �2 �7� - �0 40�

(a) Representsinvestmentearningsonfinancialassetsheldtomeetfuturedefinedbenefitsuperannuationliabilities.

��

Table11.2

GeneralGovernmentSectorBalanceSheet2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

ASSETS

Financial assets

Cashanddeposits 47129 76061 74634 75159 78434

Advancespaid 196644 197035 197426 197817 198208

Investments,loansandplacements 736655 678448 670576 701741 754251

Othernonequityassets 107179 114510 109296 108245 105910

Equity 1057713 1085953 1110291 1137609 1164566

Total financial assets 2 �4� �20 2 ��2 007 2 ��2 22� 2 220 �7� 2 �0� ��

Non financial assets

Landandfixedassets 5115568 5243821 5306186 5354372 5403347

Othernonfinancialassets

Total non financial assets � �� 8 � 24� 82� � �0� �8� � ��4 �72 � 40� �47

TOTAL ASSETS 7 2�0 888 7 �� 828 7 4�8 40� 7 �74 �4� 7 704 7��

LIABILITIES

Depositsheld 163884 148354 130531 138210 147311

Advancesreceived 323582 323529 323505 323044 322597

Borrowing 1717614 1725021 1713139 1699499 1690070

Superannuationliability 2225280 2288346 2322365 2367384 2403403

Otheremployeeentitlementsandprovisions 382213 385788 391311 398810 409599

Othernonequityliabilities 91163 91247 91226 91155 91153

TOTAL LIABILITIES 4 �0� 7�� 4 ��2 28� 4 �72 077 � 0�8 �02 � 0�4 ��

NET WORTH 2 ��7 ��2 2 4�� 4� 2 4�� 2 2 �� 84� 2 �40 �8�

NETFINANCIALWORTH(a) -2758416 -2810278 -2809854 -2797531 -2762764

NET DEBT (b) � 224 ��2 � 24� ��0 � 224 �� 8� 0�� 2� 08�

(a) Netfinancialworthequalstotalfinancialassetsminustotalliabilities.(b) Netdebtequalsthesumofdepositsheld,advancesreceivedandborrowing,minusthesumofcashanddeposits,advancespaidand

investments,loansandplacements.


2007-08 budget

Table11.3

GeneralGovernmentSectorCashFlowStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

Cash receipts from operating activities

Taxesreceived 357655 366562 379150 380919 398451

Receiptsfromsalesofgoodsandservices 136487 131387 131317 130462 131124

Grantsandsubsidiesreceived 2501707 2653083 2753679 2807038 2918936

Otherreceipts 210781 173385 178706 183579 177710

Total operating receipts � 20� ��0 � �24 4�7 � 442 8�2 � �0� ��8 � �2� 22�

Cash payments for operating activities

Paymentforgoodsandservices -2079621 -2228891 -2358842 -2423130 -2521120

Grantsandsubsidiespaid -677439 -695336 -719611 -695809 -700117

Interestpaid -138387 -141778 -141117 -141290 -142641

Otherpayments

Total operating payments - 2 8�� 447 - � 0�� 00� - � 2�� 70 - � 2�0 22� - � �� 878

NET CASH FLOWS FROM OPERATING ACTIVITIES

�� 8� 2�8 4�2 22� 282 24� 7�� 2�2 �4�

Net cash flows from investments in non financial assets

Salesofnonfinancialassets 74442 65420 67546 55496 55571

Purchasesofnonfinancialassets -288939 -329854 -289819 -279278 -282753


- 2�4 4�7 - 2�4 4�4 - 222 27� - 22� 782 - 227 �82

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS

�� 8� - � 022 � 00� �7 �87 ��

Netcashflowsfrominvestmentsinfinancialassetsforpolicypurposes(a)

24863 109 109 -391 -391

Netcashflowsfrominvestmentsinfinancialassetsforliquiditypurposes

-72642 77107 27905 -9929 -30000

NETCASHFLOWSFROMINVESTINGACTIVITIES -262276 -187218 -194259 -234102 -257573

Netcashflowsfromfinancingactivities

Advancesreceived(net) -329 -53 -24 -461 -447

Borrowing(net) -25554 -26680 -12602 -14360 -10149

Depositsreceived(net) -31897 -15530 -17823 7679 9101

Distributionspaid

Otherfinancing(net)

NETCASHFLOWSFROMFINANCINGACTIVITIES -57780 -42263 -30449 -7142 -1495

NETINCREASE/DECREASEINCASHHELD -8873 28932 -1427 525 3275


�� 8� - � 022 � 00� �7 �87 ��

Financeleasesandsimilararrangements -47841 -34087 -720 -720 -720

GFSSURPLUS(+)/DEFICIT(-) 48845 -40109 289 17267 34441

lessSuperannuationcontributions(b) -60000

UNDERLYING SURPLUS (+)/DEFICIT (-) - �� - 40 �0� 28� �7 2�7 �4 44�

(a) Includesequityacquisitions,disposalsandprivatisations(net).(b) Contributionstomeetfuturedefinedbenefitsuperannuationliabilities.

��

Table11.4

PublicNonFinancialCorporationSectorOperatingStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000


REVENUE


Capitalgrants 26516 14294 14217 11217 11217


Interestincome 2484 1312 1370 1381 1393

Other 37931 36119 31256 28908 29577

TOTAL REVENUE �8� 802 ��8 00� �2� ��4 �� 022 ��8 �0�

EXPENSES


Depreciation 70494 77749 81882 78387 78099




Otherpropertyexpenses 10478 20838 13735 8863 4562

Currenttransfers

Capitaltransfers

TOTAL EXPENSES ��7 042 ��0 �� 24 7�0 ��4 �04 ��4 28�


Superannuationearnings(a)

UNDERLYING NET OPERATING BALANCE �2 7�0 7 404 � 7�4 4 ��8 4 2�8



less





plus Changeininventories -1037 -1492 366 376 385


Total net acquisition of non financial assets 72 72� �07 �22 �2 8�� 40 28� �� 240

equals




- �� - �� 8 - �� 02 - �� 7�7 - 4� 022



2007-08 budget

Table11.5

PublicNonFinancialCorporationSectorBalanceSheet2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

ASSETS

Financial assets


Investments,loansandplacements


Equity

Total financial assets �24 28� �22 ��0 �27 �47 �40 7�� 2��




Total non financial assets � 2�� 777 � �7� �� 4�� 4� � 47� ��0 � �2� �70

TOTAL ASSETS � ��0 0�2 � 4�� 4� � �� 4�2 � ��7 �4� � �8� 20�

LIABILITIES

Depositsheld

Advancesreceived

Borrowing 396991 485742 564545 615437 678973

Superannuationliability



TOTAL LIABILITIES �00 2�8 ��8 �2� ��4 �80 7�� 778 0��

Sharesandothercontributedcapital 889764 897228 899112 903810 908148

NET WORTH


NET DEBT (b) �� 4�� 447 �0� �2� 4�7 ��2 �80 ��2 702



��

Table11.6

PublicNonFinancialCorporationSectorCashFlowStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000




Otherreceipts 17401 27123 24625 22089 22564

Total operating receipts �4� 28� �� 047 �� 4 �2� �2� �48 �87



Grantsandsubsidiespaid

Interestpaid -26617 -29959 -35534 -40085 -44139

Otherpayments

Total operating payments - 4�� 7 - �0� 284 - ��7 �27 - �4� ��0 - ��8 2��


�7 �� 7�� 78 827 82 �7� 7� 888





- �2� ��8 - �7� 2�� - �� 8� - ��0 0�� - �22 ��2


- �2 �02 - 82 4�8 - �7 ��8 - 27 �2� - 42 ��4





Advancesreceived(net)

Borrowing(net) 36823 88751 78802 50892 63537

Depositsreceived(net)

Distributionspaid -28583 -11548 -18354 -11340 -7358

Otherfinancing(net) 6126

NETCASHFLOWSFROMFINANCINGACTIVITIES

14366 77203 60448 39552 56179

NETINCREASE/DECREASEINCASHHELD -18236 -5295 2891 11629 13514


- �2 �02 - 82 4�8 - �7 ��8 - 27 �2� - 42 ��4

Distributionspaid -28583 -11548 -18354 -11340 -7358

Financeleasesandsimilararrangements

GFSSURPLUS(+)/DEFICIT(-) -61185 -94046 -75912 -39263 -50022

lessSuperannuationcontributions(b)

UNDERLYING SURPLUS (+)/DEFICIT (-) - �� 8� - �4 04� - 7� ��2 - �� 2�� - �0 022


�� Uniform Presentation Framework

2007-08 budget

Table11.7

NonFinancialPublicSectorOperatingStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000


REVENUE

Taxationrevenue 353537 361762 374078 375613 392917


Capitalgrants 105803 123927 100759 88493 87593


Interestincome 46522 38073 38440 39246 39322

Other 162275 154733 154882 165746 163486

TOTAL REVENUE � �0� �28 � 78� �0� � ��2 488 � �� 78 4 �44 2�0

EXPENSES


Depreciation 239834 249340 256419 255592 257915



Nominalsuperannuationinterestexpense 122220 126675 129949 131949 134949


Otherpropertyexpenses

Currenttransfers 473798 494926 492796 482076 490593

Capitaltransfers 82628 89097 114705 104888 102654

TOTAL EXPENSES � �2� 02� � 7�4 �� 0� 70� � �80 �8� 4 �0� �4�



UNDERLYING NET OPERATING BALANCE 8� �02 �� 42 � �0� �� 40 4� �0�



less





plus Changeininventories -1037 -1492 366 376 385


Total net acquisition of non financial assets �74 2�8 2�� 7�2 �� 22 87 �82 �0� �2�

equals




- �0 �� - �� 8�0 - �0� 72� - �7 �42 - �� 42�


��7

Table11.8

NonFinancialPublicSectorBalanceSheet2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000

ASSETS

Financial assets


Advancespaid 196644 197035 197426 197817 198208

Investments,loansandplacements 736655 678448 670576 701741 754251


Equity 167949 188725 211179 233799 256418

Total financial assets � �28 282 � �2� 842 � ��8 �0� � 40� �8� � 488 �7�




Total non financial assets � �8� �4� � �� 80 � 742 �� 8�0 �82 � �� 7

TOTAL ASSETS 7 70� �27 7 ��8 822 8 08� 2�4 8 2�2 �� 8 42� ��

LIABILITIES

Depositsheld 121689 111875 93004 93830 94955

Advancesreceived 323582 323529 323505 323044 322597

Borrowing 2114605 2210763 2277684 2314936 2369043

Superannuationliability 2225280 2288346 2322365 2367384 2403403



TOTAL LIABILITIES � ��2 47� � �0� 27� � �84 �02 � �7� 722 � 78� ��

NET WORTH 2 ��7 ��2 2 4�� 4� 2 4�� 2 2 �� 84� 2 �40 �8�


NET DEBT (b) � �78 �� 2 8�� 747 �� 748 7�� 74� 787




2007-08 budget

Table11.9

NonFinancialPublicSectorCashFlowStatement2006-07 2007-08 2008-09 2009-10 2010-11


$000 $000 $000 $000 $000


Taxesreceived 353037 361762 374078 375613 392917



Otherreceipts 189604 185119 183584 192914 191477

Total operating receipts � �70 0�� 7�� 4 � �0� 4�� 8� �� 4 ��2 008



Grantsandsubsidiespaid -556199 -583978 -607456 -586919 -593202

Interestpaid -162557 -170458 -175313 -180025 -185420

Otherpayments

Total operating payments - � ��0 �� - � 42� �07 - � ��7 ��4 - � �70 �87 - � 7�7 ��


�7� �� 40 �27 28� 7�� 2 �0� ��4 872





- �44 4�� - 440 �� - ��8 ��8 - �� 88� - �4� 7�4


�� 0� - �00 0�8 - 74 �0� - 2� 27� - �4 8�2


25700 109 109 -391 -391


-72642 77107 27905 -9929 -30000



Advancesreceived(net) -329 -52 -25 -462 -446

Borrowing(net) 11269 62070 66201 36533 53387

Depositsreceived(net) -8466 -9814 -18871 825 1126

Distributionspaid

Otherfinancing(net)

NETCASHFLOWSFROMFINANCINGACTIVITIES 2474 52204 47305 36896 54067

NETINCREASE/DECREASEINCASHHELD -8967 29353 416 5301 8813


�� 0� - �00 0�8 - 74 �0� - 2� 27� - �4 8�2

Distributionspaid

Financeleasesandsimilararrangements -47841 -34087 -720 -720 -720

GFSSURPLUS(+)/DEFICIT(-) -12340 -134155 -75623 -21995 -15582


UNDERLYING SURPLUS (+)/DEFICIT (-) - 72 �40 - ��4 �� - 7� �2� - 2� �� - �� 82


��

Table11.10

PublicFinancialCorporationSectorOperatingStatement2006-07

Estimate

$000


REVENUE

Currentgrantsandsubsidies

Capitalgrants

Salesofgoodsandservices 128933

Interestincome 218236

Other 14635

TOTAL REVENUE �� 804

EXPENSES

Grossoperatingexpenses 159987

Depreciation 1256

Employeeexpenses 17451

Otheroperatingexpenses 141280

Otherinterestexpenses 161769

Otherpropertyexpenses 28561

Currenttransfers 1286

Capitaltransfers

TOTAL EXPENSES �� 0�

GFSNETOPERATINGBALANCE 10201


UNDERLYING NET OPERATING BALANCE �0 20�



less


Purchasesofnonfinancialassets 3526

Salesofnonfinancialassets

less Depreciation 1256

plus Changeininventories

plus Othermovementsinnonfinancialassets

Total net acquisition of non financial assets 2 270

equals

GFSNETLENDING/BORROWING(Fiscalbalance) 7931


UNDERLYING NET LENDING/BORROWING (Fiscal balance) 7 ��


�40 Uniform Presentation Framework

2007-08 budget

Table11.11

PublicFinancialCorporationSectorBalanceSheet2006-07

Estimate

$000

ASSETS

Financial assets

Cashanddeposits 127784

Investments,loansandplacements 3279565

Othernonequityassets 80121

Equity 29000

Total financial assets � �� 470


Landandfixedassets 10845


Total non financial assets �0 84�

TOTAL ASSETS � �27 ��

LIABILITIES

Depositsheld 580698

Advancesreceived 296546

Borrowing 2014878

Superannuationliability

Otheremployeeentitlementsandprovisions 385891

Othernonequityliabilities 81416

TOTAL LIABILITIES � �� 42�

Sharesandothercontributedcapital 167886

NET WORTH

NETFINANCIALWORTH(a) 157041

NET DEBT (b) - �� 227



�4�

Table11.12

PublicFinancialCorporationSectorCashFlowStatement2006-07

Estimate

$000


Receiptsfromsalesofgoodsandservices 171111

Grantsandsubsidiesreceived

Otherreceipts 196667

Total operating receipts ��7 778


Paymentforgoodsandservices -169805

Interestpaid -165794

Otherpayments -3643

Total operating payments - �� 242

NET CASH FLOWS FROM OPERATING ACTIVITIES 28 ��


Salesofnonfinancialassets

Purchasesofnonfinancialassets -3526

Net cash flows from investments in non financial assets - � �2�

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS 2� 0�0


Netcashflowsfrominvestmentsinfinancialassetsforliquiditypurposes -131863

NETCASHFLOWSFROMINVESTINGACTIVITIES -135389


Advancesreceived(net) -4522

Borrowing(net) 16000

Depositsreceived(net) 74881

Distributionspaid -30464

Otherfinancing(net)

NETCASHFLOWSFROMFINANCINGACTIVITIES 55895

NETINCREASE/DECREASEINCASHHELD -50958

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS 2� 0�0

Distributionspaid -30464

Financeleasesandsimilararrangements

GFSSURPLUS(+)/DEFICIT(-) -5454

lessSuperannuationcontributions(b)

UNDERLYING SURPLUS (+)/DEFICIT (-) - � 4�4



2007-08 budget

Table11.13

TotalPublicSectorOperatingStatement2006-07

Estimate

$000


REVENUE

Taxationrevenue 352482

Currentgrantsandsubsidies 2403939

Capitalgrants 105803

Salesofgoodsandservices 658683

Interestincome 101753

Other 149350

TOTAL REVENUE � 772 0�0

EXPENSES

Grossoperatingexpenses 2834638

Depreciation 241090

Employeeexpenses 1354936

Otheroperatingexpenses 1238612

Nominalsuperannuationinterestexpense 122220

Otherinterestexpenses 161280

Otherpropertyexpenses 2357

Currenttransfers 475084

Capitaltransfers 82628

TOTAL EXPENSES � �78 207



UNDERLYING NET OPERATING BALANCE �� 80�



less


Purchasesofnonfinancialassets 422501

Salesofnonfinancialassets -74560

less Depreciation 241090

plus Changeininventories -1037

plus Othermovementsinnonfinancialassets 70754

Total net acquisition of non financial assets �7� ��8

equals

GFSNETLENDING/BORROWING(Fiscalbalance) -82765


UNDERLYING NET LENDING/BORROWING (Fiscal balance) - 82 7��


�4�

Table11.14

TotalPublicSectorBalanceSheet2006-07

Estimate

$000

ASSETS

Financial assets

Cashanddeposits 145519

Advancespaid 178611

Investments,loansandplacements 1669707

Othernonequityassets 219503

Equity 29063

Total financial assets 2 242 40�


Landandfixedassets 6392190


Total non financial assets � ��2 ��0

TOTAL ASSETS 8 ��4 ��

LIABILITIES

Depositsheld 657343

Advancesreceived 285270

Borrowing 2114108

Superannuationliability 2225280

Otheremployeeentitlementsandprovisions 780090

Othernonequityliabilities 215350

TOTAL LIABILITIES � 277 44�

NET WORTH 2 ��7 ��2

NETFINANCIALWORTH(a) -4035038

NET DEBT (b) � 0�2 884




2007-08 budget

Table11.15

TotalPublicSectorCashFlowStatement2006-07

Estimate

$000


Taxesreceived 351982

Receiptsfromsalesofgoodsandservices 684066

Grantsandsubsidiesreceived 2509633

Otherreceipts 191441

Total operating receipts � 7�7 �22


Paymentforgoodsandservices -2633983

Grantsandsubsidiespaid -557485

Interestpaid -165309

Otherpayments -2357

Total operating payments - � �� 4

NET CASH FLOWS FROM OPERATING ACTIVITIES �77 �88


Salesofnonfinancialassets 74560

Purchasesofnonfinancialassets -422501

Net cash flows from investments in non financial assets - �47 �4�

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS �0 047

Netcashflowsfrominvestmentsinfinancialassetsforpolicypurposes(a) 25700

Netcashflowsfrominvestmentsinfinancialassetsforliquiditypurposes -189228

NETCASHFLOWSFROMINVESTINGACTIVITIES -511469


Advancesreceived(net) -4851

Borrowing(net) 13246

Depositsreceived(net) 73598

Distributionspaid

Otherfinancing(net)

NETCASHFLOWFROMFINANCINGACTIVITIES 81993

NETINCREASE/DECREASEINCASHHELD -51488

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS �0 047

Distributionspaid

Financeleasesandsimilararrangements -47841

GFSSURPLUS(+)/DEFICIT(-) -17794


UNDERLYING SURPLUS (+)/DEFICIT (-) - 77 7�4


�4�

Table11.16

GeneralGovernmentSectorTaxes2006-07

Estimate

2007-08

Budget

$000 $000

TAXES ON EMPLOYERS’ PAYROLL AND LABOUR FORCE �28 7�� 7 280

Payrolltaxes 128751 137280

TAXES ON PROPERTY �02 8�� 7 0��

Stampdutiesonfinancialandcapitaltransactions 102899 97095

TAXES ON THE PROVISION OF GOODS AND SERVICES 8� �� 28

Taxesongambling 63938 68204

Taxesoninsurance 22427 23324

TAXES ON THE USE OF GOODS AND PERFORMANCE OF ACTIVITIES 40 �40 40 ��

Motorvehicleregistrationfees 40140 40659

TOTAL TAXES ��8 �� 2

�4� Uniform Presentation Framework

2007-08 budget

Table11.17

GeneralGovernmentSectorExpenses2006-07

Estimate

2007-08

Budget

$000 $000

Generalpublicservices 116326 120109

Publicorderandsafety 370592 387186

Education 657148 684304

Health 654410 700527

Socialsecurityandwelfare 180441 193662

Housingandcommunityamenities 311259 327861

Recreationandculture 131036 130076

Fuelandenergy 123175 125292

Agriculture,forestry,fishingandhunting 42393 44820

Mining,manufacturingandconstruction 25297 26729

Transportandcommunications 181350 188360

Othereconomicaffairs 104668 106554

Otherpurposes 269515 278689

TOTAL OPERATING EXPENSES � ��7 ��0 � ��4 ��

�47

Table11.18

2007-08LoanCouncilAllocationLoanCouncil

Allocation

Budget-time

Estimate

$M $M

2007-08 LOAN COUNCIL NOMINATION

Generalgovernmentsectorcashdeficit(+)/surplus(-) 40 40

Publicnonfinancialcorporationssectorcashdeficit(+)/surplus(-) 4 94

Nonfinancialpublicsectorcashdeficit(+)/surplus(-) 44 134

less

Netcashflowsfrominvestmentsinfinancialassetsforpolicypurposes

plus

Memorandumitems

2007-08 LOAN COUNCIL NOMINATION 44 ��4

Tolerancelimit(2%ofnonfinancialpublicsectorcashreceiptsfromoperatingactivities)

72

ChangeinLoanCouncilAllocation 90

Note:ThistablesetsouttheTerritory’s2007-08LoanCouncilAllocation(LCA)Budgetupdateof$134millioncomparedtothatnominatedandendorsedwiththeLoanCouncilof$44million.Thisexceedsthetolerancelimitof2%ofnonfinancialpublicsectoroperatingcashreceiptsthatappliesbetweentheLCAandBudgettimenomination.Theincreaseddeficitislargelyduetonetborrowingrequirementsasaresultofincreasedspendingoncapitalinfrastructureinthepublicnonfinancialcorporationsector.


2007-08 budget

�4�

GeneralGovernmentAboriginalAreasProtectionAuthorityAuditor-General’sOfficeAustralAsiaRailwayCorporation1

BatchelorInstituteofIndigenousTertiaryEducation1

CentralHoldingAuthorityConstructionDivision2

DataCentreServices2

DepartmentofBusiness,EconomicandRegionalDevelopmentDepartmentoftheChiefMinisterDepartmentofCorporateandInformationServicesDepartmentofEmployment,EducationandTrainingDepartmentofHealthandCommunityServicesDepartmentofJusticeDepartmentoftheLegislativeAssemblyDepartmentofLocalGovernment,HousingandSportDepartmentofNaturalResources,EnvironmentandtheArtsDepartmentofPlanningandInfrastructureDepartmentofPrimaryIndustry,FisheriesandMinesDesertKnowledgeAustralia1

GovernmentPrintingOffice2

LandDevelopmentCorporationNominalInsurer’sFund1

NorthernTerritoryElectoralCommissionNorthernTerritoryLegalAidCommission1

NorthernTerritoryMajorEventsCompanyPtyLtd1

NorthernTerritoryPolice,FireandEmergencyServicesNorthernTerritoryTreasuryNTBuild1

NTFleet2

OfficeoftheCommissionerforPublicEmploymentOmbudsman’sOfficeTerritoryDiscoveries2

TerritoryHousing2

TerritoryWildlifeParks2TourismNT

PublicNonFinancialCorporationsDarnorPtyLtd1

DarwinBusService2

DarwinPortCorporation2

GasgoPtyLtd1

IndigenousEssentialServicesPtyLtd1

PowerandWaterCorporation1,3

PublicFinancialCorporationsNorthernTerritoryTreasuryCorporation2

TerritoryInsuranceOffice1

1Non-budgetsectorentity2Governmentbusinessdivision3Governmentownedcorporation

Appendix: Classification of Entities in the Northern Territory Public SectorAppendix: Classification of Entities in the Northern Territory Public Sector

��0

2007-08 budget

��

GlossaryTheGovernmentFinanceStatisticscashsurplusordeficitisused.Itisreportedinthecashflowstatementandmeasuresthenetimpactofcashflowsduringtheperiod.

Acommunityserviceobligation(CSO)ariseswhentheGovernmentrequiresagovernmentbusinessdivisionorgovernmentownedcorporationtocarryoutactivitieswhichitwouldnotchoosetodoonacommercialbasisorwouldonlydosoathighercommercialprices.CSOsallowtheGovernmenttoachieveidentifiablecommunityorsocialobjectivesthatwouldnotbeachievediflefttocommercialconsiderations.

Ageneralindicatorofthepricespaidbyhouseholdconsumersforaspecificbasketofgoodsandservicesinoneperiodrelativetothecostofthesamebasketinabaseperiod.

Apotentialfinancialobligationarisingoutofacondition,situation,guaranteeorindemnity,theultimateeffectofwhichwillbeconfirmedonlyontheoccurrenceornon-occurrenceofoneormoreuncertainfutureevents.

Leaseagreementsthattransfersubstantiallyalltherisksandbenefitsrelatingtoownershipofanassetfromthelessor(legalowner)tothelessee(partyusingtheasset).

Anentityorgroupofentitiesmainlyengagedinprovidingservicesorproducinggoodsforthegeneralpublic,suchaseducation,healthandpolicingservices.Goodsandservicesareprovidedfreeofchargeoratnominalcharges.

On1July2000,theAustralianGovernmentintroducedthegoodsandservicestax(GST).PaymentsfromtheAustralianGovernmentreturntheGSTrevenuetothestatesandterritories,replacingthepreviousgeneralpurposegrants.

Governmentbusinessdivisions(GBDs)areTerritory-controlledtradingentitiesthatfollowcommercialpracticesandarerequiredtocomplywithcompetitiveneutralityprinciples.

Referstostatisticsthatmeasurethefinancialtransactionsofgovernmentsandreflecttheimpactofthosetransactionsonothersectorsoftheeconomy.GovernmentFinanceStatisticsinAustraliaaredevelopedbytheAustralianBureauofStatisticsinconjunctionwithallgovernmentsandaremainlybasedoninternationalstatisticalstandards,developedinconsultationwithmembercountriesbytheInternationalMonetaryFund.

Agovernmentownedcorporation(GOC)isanentitywhoseobjectivesaretooperateatleastasefficientlyasanycorporatebusinessandmaximisesustainablereturntogovernment.The Government Owned Corporations ActadoptstheshareholdermodelofcorporategovernanceandthePowerandWaterCorporationbecametheTerritory’sfirstGOCon1July2002.

Classifiesoutlaysorexpendituretransactionsbythepurposeserved,forexample,health,education.

Cash Surplus/DeficitCash Surplus/Deficit

Community Service ObligationCommunity Service Obligation

Consumer Price IndexConsumer Price Index

Contingent LiabilityContingent Liability

Finance LeaseFinance Lease

General Government AgencyGeneral Government Agency

Goods and Services Tax RevenueGoods and Services Tax Revenue

Government Business DivisionsGovernment Business Divisions

Government Finance StatisticsGovernment Finance Statistics

Government Owned CorporationGovernment Owned Corporation

Government Purpose ClassificationGovernment Purpose Classification

��2 Glossary

2007-08 budget

ThetotalvalueofgoodsandservicesproducedinAustraliaovertheperiodforfinalconsumption.Intermediategoods,orthoseusedintheproductionofothergoods,areexcluded.Grossdomesticproductcanbecalculatedbyeithersummingtotaloutput,totalincomeortotalexpenditure.

Similartogrossdomesticproduct,exceptthatitmeasuresthetotalvalueofgoodsandservicesproducedinajurisdiction.Itisthesumofallincome,namelywages,salariesandprofits,plusindirecttaxeslesssubsidies.Itcanalsobecalculatedbymeasuringexpenditure,whereitisthesumofstatefinaldemandandinternationalandinterstatetrade,changesinthelevelofstocks,andabalancingitem.

Anundertakingtoanswerforthedebtorobligationsofanotherpersonorentity.

Awrittenundertakingtocompensate,protectorinsureanotherpersonorentityagainstfuturefinancialloss,damageorliability.

Thetermusedtodescribetheinternationalaccountingstandards.Australianequivalentstothesenewstandardshavebeenadoptedforreportingperiodsonorafter1January2005.

TheAustralianLoanCouncilendorsesAustralianandstategovernmentborrowinglevels.Currentarrangementsseektoemphasisetransparencyofpublicsectorfinances,throughfinancialmarketscrutinyofproposedborrowingtorestrictborrowingtoprudentlevels.

ThenominationtotheLoanCounciloftheleveloffinancingrequired.

Netdebtmeasuresagovernment’snetstockofselectedgrossfinancialliabilitieslessfinancialassets.ItiscalculatedfromtheUniformPresentationFrameworkbalancesheetasthesumofdepositsheld,advancesreceivedandborrowing,minusthesumofcashanddeposits,advancespaidandinvestments,loansandplacements.

Netfinancialworthmeasuresagovernment’snetholdingsoffinancialassets.ItiscalculatedfromtheUniformPresentationFrameworkbalancesheetasfinancialassetsminusliabilities.Netfinancialworthisabroadermeasurethannetdebt,inthatitincorporatesprovisions(suchassuperannuation,butexcludesdepreciationanddoubtfuldebts)aswellasholdingsofequity.Netfinancialworthincludesallclassesoffinancialassetsandliabilities.

Netlending/borrowing,alsoreferredtoasthefiscalbalance,isanoperatingstatementmeasurethatdiffersfromthenetoperatingbalanceinthatitincludesspendingoncapitalitemsbutexcludesdepreciation.Thenetlending/borrowingmeasuremoreaccuratelyreflectsthecashrequirementsofagovernmentinanygivenyear.Anetlending(orfiscalsurplus)balanceindicatesthatagovernmentissavingmorethanenoughtofinanceallitsinvestmentspending.Anetborrowing(orfiscaldeficit)positionindicatesthatagovernment’slevelofinvestmentisgreaterthanitslevelofsavings.

ThenetoperatingbalanceiscalculatedfromtheUniformPresentationFrameworkoperatingstatementastheexcessofrevenueoverexpenditure.Thismeasure,whichexcludescapitalexpenditure,providesagoodmeasureofagovernment’spositionovertimeandanindicationofthesustainabilityoftheexistinglevelofgovernmentserviceprovision.

Gross Domestic ProductGross Domestic Product

Gross State ProductGross State Product

GuaranteeGuarantee

IndemnityIndemnity

International Financial Reporting StandardsInternational Financial Reporting Standards

Loan CouncilLoan Council

Loan Council AllocationLoan Council Allocation

Net DebtNet Debt

Net Financial WorthNet Financial Worth

Net Lending/BorrowingNet Lending/Borrowing

Net Operating BalanceNet Operating Balance

��

TheUniformPresentationFrameworknetworthmeasureprovidesarelativelycomprehensivepictureofagovernment’soverallfinancialposition.Itiscalculatedastotalassetslesstotalliabilitieslesssharesandothercontributedcapital.Itincludesagovernment’snonfinancialassets,suchaslandandotherfixedassets,whichmaybesoldandusedtorepaydebt,aswellasitsfinancialassetsandliabilities,includingdebtors,creditorsandsuperannuationliabilities.Networthalsoshowsassetacquisitionsovertime,givinganindicationoftheextenttowhichborrowingsareusedtofinanceassetpurchases,ratherthanonlycurrentexpenditure.

Thesectorformedthroughaconsolidationofthegeneralgovernmentandpublicnonfinancialcorporationsubsectors.

Government-controlledentities,whichperformcentralbankfunctions,and/orhavetheauthoritytoincurliabilitiesandacquirefinancialassetsinthemarketontheirownaccount.

Publicenterprisesprimarilyengagedintheproductionofgoodsorservicesofanonfinancialnature,forsaleinthemarketplace,atpriceswhichaimtorecovermostofthecostsinvolved.

Publicprivatepartnerships(PPPs)isatermusedtodescribeamethodofprocuringGovernmentinfrastructureandassociatedservices.PPPscreateopportunitieswiththeprivatesectorforincreasinginvestmentinsocialandeconomicinfrastructureandtheTerritory’sPPPpolicyframework,TerritoryPartnerships,definestheprotocolforsuchcommercialdealingsbetweenthepublicandprivatesectors.

Specificpurposepayments(SPPs)aretiedgrantsreceivedfromtheAustralianGovernment,whichareearmarkedforspecificpurposes.

Finalconsumptionexpenditureplusgrossfixedcapitalformationineachjurisdiction.Itrepresentsthetotalexpenditureonconsumptionandinvestmentinajurisdiction.

ThemechanismtoensurethatGBDsandGOCsincurtaxliabilitiessimilartoprivatelyownedorganisations.Thus,greaterparityexistsbetweenthecoststructuresofgovernment-controlledtradingentitiesandtheprivatesector,aidingintheachievementofcompetitiveneutrality.

AnAllocationofthatname,asspecifiedinanAppropriation Act,whichprovidesapooloffundsspecificallysetasideineachBudgettomeetoperationalcontingenciesthatariseduringtheyear.

AuniformreportingframeworkagreedbytheAustralianLoanCouncilin2000,whichisarevisionoftheagreementreachedatthe1991Premiers’Conference.ItspecifiesthattheAustralian,stateandterritorygovernmentswillpresentaminimumsetofbudgetandfinancialoutcomeinformationontheGovernmentFinanceStatisticsbasisaccordingtoanagreedformatandspecifiedLoanCouncilreportingarrangements.

Net WorthNet Worth

Non Financial Public SectorNon Financial Public Sector

Public Financial CorporationsPublic Financial Corporations

Public Non Financial CorporationsPublic Non Financial Corporations

Public Private PartnershipsPublic Private Partnerships

Specific Purpose PaymentsSpecific Purpose Payments

State Final DemandState Final Demand

Tax Equivalents RegimeTax Equivalents Regime

Treasurer’s AdvanceTreasurer’s Advance

Uniform Presentation FrameworkUniform Presentation Framework

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