Chamber of Commerce CEO: NT businesses ready to bounce back

THE sooner we can safely begin to reopen the Territory economy, the less the fast-accumulating damage will be, and the sooner the recovery process can begin, writes Chamber of Commerce NT CEO Greg Ireland.

The Chamber of Commerce NT suggests that Greater Darwin needs to be prioritised for reopening. Picture: Michael Franchi

AS we all know, COVID-19 and necessary response are inflicting severe and long-lasting impacts on the economy of the Northern Territory. Business and many Territory workers will take a long time to recover. So will government finances.

We can’t sugar coat the hurt: the Northern Territory lost 9500 jobs in three weeks following 14 March.

Over the same period, total wages paid to Territorians fell 17.6 per cent, which equates to $33 million less in people’s hands or available to spend each week. (Source: ABS)

Many businesses will not reopen and jobs will not restart. All businesses have been forced to implement restrictions that increase costs and reduce productivity. Many have put remaining employees on reduced pay.

It is not as if we can simply turn the tap back on when conditions improve. History shows that if people are out of work for long, they leave the Territory, depleting both skills and population.

Last year, 23,000 people left the Territory for interstate and overseas and only 19,000 arrived. That loss of people could quickly get much worse. The sooner we can safely begin to reopen the Territory economy, the less the fast-accumulating damage will be, and the sooner the recovery process can begin.

Chamber of Commerce NT CEO Greg Ireland. Picture: Helen Orr

The Northern Territory has been first to get our children back to school, but we have yet to hear about proposals for how and when businesses might reopen and regrow, and how unemployed and underemployed Territorians can get back to work.

The Territory has a very different economy to the rest of Australia. We need a reopening plan that is tailored to the conditions we experience here. Simply following other states will not suffice.

The Chamber of Commerce agrees with the Scott Morrison and Michael Gunner, who have emphasised that national and Territory economies and jobs are driven by business. It is therefore business that must be the focus of economic reopening. The Chamber suggests that keys to reopening the Territory economy are:

• Enabling businesses, particularly service businesses, to ramp-up their activities and ensure they implement appropriate risk protocols

• Restarting appropriately scaled community events and activities, and reopening facilities that are so important to the Territory lifestyle

• Supporting business to design and implement thorough risk management plans that protect staff and customers

• Enabling and stimulating consumption by households and the private sector

• Attracting and enabling private sector investment, from small to very large

• Targeting government investment in infrastructure to enable economic activity and help to fill construction order books

• Continuing to keep COVID-19 at bay and protecting the vulnerable.

The Territory has a very different economy to the rest of Australia and needs a reopening plan that is tailored to the conditions we experience here. Picture: Michael Franchi

Contributions to economy and jobs

The key sectors in terms of output value, or Gross State Product, are government and community services (23 per cent of GSP), service industries (19 per cent), mining and manufacturing (13 per cent), construction (11 per cent), retail and wholesale trade (5 per cent) and primary industries (3 per cent).

If we focus on the private sector only, then service industries are the major contributors to the economy (35 per cent), followed by mining and manufacturing (24 per cent) and construction 22 per cent.

With employment, the story changes somewhat.

About 134,000 Territorians are employed in around 200,000 jobs (some work more than one job), split as follows: government and community services (40 per cent of total employment), service industries (35 per cent of total employment/64 per cent of private sector employment), mining and manufacturing (5 per cent/9 per cent), construction (8 per cent/15 per cent), retail and wholesale trade (11 per cent) and primary industries (2 per cent). In addition, the Territory has one of the highest proportions of two-income households in the nation.

Job losses

All business sectors have shed jobs, but losses are spread unevenly across the economy. A Grattan Institute study and ABS data shows hardest hit are accommodation and food services (down 16 per cent or 2240 jobs in the three weeks from 14 March), professional, technical and administrative services (down 1660 jobs); mining (down 1430 jobs) and arts and recreation services (down 780 jobs). As well, lower-paid workers and the young have been more likely to lose their jobs.

According to the ABS, total wages paid to Territorians fell 17.6 per cent, or $33 million, in the three weeks from March 14. Picture: Che Chorley

Priorities for reopening business sectors

Getting NT service businesses back to full operation is clearly a priority, as are parts of retail and wholesale. The high number of jobs in services and retail businesses (nearly 60,000 Territorians work in them) underlines the need for these businesses to fire-up and attract customers.

The construction sector has been able to keep operating on current projects, but our construction businesses say that their forward order books are pretty sparse. They need to be filled in the short term by both private and government investment. The Territory Government’s overachieving stimulus measures will help, but the only sustainable answer to lifting construction sector activity is vigorous private sector investment.

Mining operations (except oil and gas exploration and development) have largely continued as before, with new safeguards in place, but with reduced workforces. Their main issue is with softening and uncertain market conditions (including gyrating oil markets), which if they remain for some time, could well delay new investment.

Stimulating consumption

Private consumption (mostly households) contributes a massive 42 per cent of Gross State Product; public sector consumption contributes 31 per cent, private investment 15 per cent, and public investment 6 per cent.

On an ironically positive note, this is one time it is good for the Territory to have a larger public sector than average! People who have remained in public sector jobs in the Territory on full pay are likely to have the income to support discretionary spending.

Government spending remains vital, particularly in depressed economic conditions. Public investment is going to be difficult to maintain, however, given the enormous current spending on stimulus measure and collapses in revenue.

Government spending that stimulates private sector spending and positively leverages it, will deliver the best value for taxpayers.

Government spending that stimulates private sector spending and positively leverages it will deliver the best value for taxpayers.

Economic activity nodes

Of the 134,000 Territorians who are employed, 69 per cent work in the Greater Darwin region and 31 per cent in the rest of the Territory. Greater Darwin (population 147,000) and Alice Springs (26,000) together account for 71 per cent of the Territory’s population and therefore generate the lion’s share of consumption. The major regional towns of Katherine, Tennant Creek and Nhulunbuy make up 7 per cent of the population.

In contrast, 25 per cent of Territorians live in remote and very remote locations. These are predominantly indigenous people who are vulnerable to the worst effects of COVID-19. Nhulunbuy is the East Arnhem hub for the largest concentration of indigenous people in the Territory.

The Chamber suggests that Greater Darwin and Alice Springs need to be prioritised for reopening, with Katherine, Tennant Creek and Nhulunbuy having tailored reopening strategies to ensure the biosecurity concerns remain the priority focus. There are also economic nodes in the bush, notably resources projects, and pastoral, farming and fish production industries. These nodes all contain high value industries, but with various degrees of risk relating to disease transmission that already are being managed.

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Keeping COVID-19 at bay

Some industries have lower risk of coronavirus transmission while others with a higher risk need to implement strict social distancing and hygiene measures. Industries like construction, agriculture and mining have lower risks, or risks that can be mitigated. Industries like hospitality and food have higher risks, but also help generate strong consumption.

Governments are putting in place fast response capabilities to respond to any COVID-19 outbreaks wherever they occur. The Chamber proposes that businesses that seek to reopen, or ramp-up trade, be supported by government to conduct thorough risk assessments and implement risk management plans. These will help businesses, particularly in accommodation and food, and in services and retail to progressively reopen while protecting staff and customers – and by extension, the greater Territory community.

Greg Ireland is the CEO of the Chamber of Commerce Northern Territory