The Northern Territory Government’s latest snapshot of the economy shows there has been a small improvement to economic growth and the budget deficit, but significant challenges lie ahead.
The mid-year economic report tabled in Parliament on Tuesday revealed headline economic growth for 2016/17 strengthened to 4 per cent — an improvement on the 1 per cent which was forecast in the May budget.
The boost was primarily the result of continued private investment in the Ichthys liquefied natural gas (LNG) project, which has pumped $4 billion a year into the Territory’s economy since 2012.
But with the project nearing completion, economic growth is forecast to shrink to 1.1 per cent this financial year and 0.5 per cent the next.
These figures include the exports from the Icthys project as it enters production.
State Final Demand set to plummet
State Final Demand (SFD), a measure of the domestic economy which strips out the effects of net exports, is forecast to plummet from 8.2 per cent in 2016/17 to -8.6 per cent in 2018/19.
The report said investment of other projects, such as construction of the Northern Gas Pipeline and defence infrastructure projects, was expected to help offset some of the declines and support economic growth in outer years.
The mid-year update also showed a modest improvement of $245 million to the Northern Territory’s budget deficit, which was attributed to improvements in the value of financial investments.
The saving has lowered the Government’s projected debt level to $5.3 billion in 2020/21, down from the $5.6 billion predicted back in the May budget.
Meanwhile, Treasury figures said the debt to revenue ratio was predicted rise from 50 per cent now to 84 per cent by 2021.
Economist sceptical of Territory’s deficit figures
Economist Professor Rolf Gerritsen from Charles Darwin University said the Territory would face tough economic times when the Icthys project winds down next year, but was sceptical of the Treasury figures.
“I’m not convinced that we will be $5 billion in debt in three or four years’ time,” he said.
“That is built on assumptions that are conservative on the revenue side and realistic on the expenditure side.
“My guess is that the Treasury is being deliberately conservative so that when conditions change and improve slowly the government can say it was us [that did it].”
Construction projects, defence contracts may ease downturn
Professor Gerritsen said he expected a number of proposed construction projects and defence contracts would help prevent a severe economic downturn.
He said the forecasts also did not allow for the significant investment the fracking may bring to the Territory.
Construction of the Northern Gas Pipeline is one project expected to support economic growth. (Supplied: Jemena, file photo)
Treasurer Nicole Manison said the Treasury had been conservative in its estimates and the Territory was facing challenging economic conditions.
“We have seen an improvement in the deficit so far, that it has improved by about $245 million at this financial year but there’s more work to be done to ensure that we’re supporting local jobs are growing the economy,” she said.
“It’s vital that we invest in jobs right across the Northern Territory and that’s why we’ve got a record infrastructure budget and also that we must keep the pressure on the Federal Government when it comes to the GST.”
GST cut estimate inflated, independent says
Former NT treasurer and independent MLA Robyn Lambley said the NT Government’s spending is out of control.
“You learn a lot about fiscal management and prudence and I think this government came in with a spending agenda and not really thinking about the consequences,” she said.
In questioning the cut to GST revenue in the Territory, Ms Lambley said the $2 billion cut estimated by the NT Government was an inflated figure and that GST revenue over the last six months had actually increased.
“I think it’s a convenient narrative and I think this report saying it what is says it’s just like a one or two sentences towards the end of it, really confirms that they’re exaggerating it for their own benefit,” she said.
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