Australia’s COVID-19 budget ‘shock’ to wipe $500m from NT coffers, Grattan Institute estimates

THE historic blow to Australia’s budget bottom line will wipe an estimated $500m from the NT’s books in GST alone.

THE historic blow to Australia’s budget bottom line will wipe an estimated $500m from the NT’s books in GST alone.

The prediction by Grattan Institute economists comes as Chief Minister Michael Gunner warned that the Territory government’s economic and fiscal budget outlook to be released next week will look “grim”.

Mr Gunner conceded the “plummeting” GST base would be the most significant hit to the NT’s budget.

Federal Treasurer Josh Frydenberg, laying bare the economic destruction of the coronavirus pandemic on Thursday, revealed the budget deficit hit almost $86bn in the 2019/20 financial year, the biggest blow to the bottom line since World War II.

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The national deficit is expected to rise to more than $184bn this financial year.

It’s expected national net debt hit $488bn at the end of June and it is estimated that will grow beyond $677bn – or nearly 36 per cent of gross domestic product – this financial year.

The federal government’s fiscal update did not provide a breakdown of how each state and territory would be impacted, though it noted ­income from tax fell $31.7bn in 2019/20 and is expected to fall $63.9bn this financial year.

This in turn led to a $5.2bn reduction in the national GST pool in 2019/20 – worth $65.4bn as at the mid-year economic update – and $7.6bn in 2020/21.

The Northern Territory is the jurisdiction most dependent on the GST, with the $2.7 billion entitlement allocated by the commonwealth for 2019/20 making up 42 per cent of the Territory’s revenue.

Grattan Institute chief executive Danielle Wood said, based on the hit to the nation’s GST takings, the NT would have lost an estimated $205m from its 2019/20 GST allocation.

This would rise to about $300m in 2020/21, assuming how the Northern Territory’s GST slice is calculated does not change.

Northern Territory Treasurer Nicole Manison yesterday estimated “hundreds of millions” would be wiped from the Territory’s GST share.

“It’s ugly across the board but not unexpected,” Ms Wood said.

“Clearly the NT is particularly dependent on GST revenue, that will hurt the budget more, but the NT is in a better state because of the health situation compared to other parts of Australia.

“The hit to economic activity, housing construction, hit to business investment will be bigger (in COVID-19 infected states like Victoria).”

Unemployment nationally is expected to rise to 9.25 per cent by December, with Mr Frydenberg saying the jobless rate would be “at elevated levels” into early next year.

The commonwealth’s fiscal outlook also revealed it would be covering the costs borne by the NT government, alongside South Australia, Western Australia and Queensland, to put in place COVID-19 related travel restrictions to remote communities.

The dollar figure has not been released as negotiations are ongoing, though it was revealed the money would come out of the $5.2bn Indigenous Advancement Strategy.

The purpose of the IAS was to fund children’s education, assisting adults to get jobs, growing the Indigenous business sector and “delivering safer and healthier communities” according to a 2019 government statement.

Mr Gunner said the biggest impact for the Territory would come from the “plummeting” GST base.

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“But our budget is also impacted by our own COVID-19 expenditure decisions (and) I stand by every single decision, every single dollar,” the Chief Minister said.

“The federal budget looks grim today, ours will look grim next week.

“But the alternative is unimaginable, it would be apocalyptic, health and economic carnage that would last a generation.”