Economist tips Northern Territory to seek federal bailout

The NT’s extraordinary debt, and its limited ability to raise revenue, will likely prompt discussions on a commonwealth bailout, according to economist Saul Eslake.

Economist Saul Eslake.

The Northern Territory’s extraordinary debt, and its limited ability to raise revenue, will likely prompt discussions on a commonwealth bailout, according to economist Saul Eslake.

The new Country Liberal Party government – led by Lia ­Finocchiaro – has inherited $10.82bn in net debt that is projected to climb to $12.26bn in the 2027-28 financial year, according to a pre-election fiscal outlook signed off on August 2 by the NT’s then chief minister Eva Lawler.

Debt was already on the rise in the NT when Labor won government there in August 2016. However, it continued to climb and at a rapid rate, from $2.71bn in the 2016-17 financial year to $10.82bn last month.

Mr Eslake said the NT’s finances were as parlous as Victoria, where net debt is predicted to rise to $177.8bn in 2026-27.

“I wouldn’t be surprised if the NT at some point asks for a bailout from the feds,” he said.

“The commonwealth would not give that money without some conditions.”

The NT already receives relatively much more than other jurisdictions in GST grants, in recognition of the fact its population of about 233,000 is widely dispersed and that about a third are Indigenous with health problems and other disadvantages.

In the GST carve up last year, the NT received $5.07 for every dollar contributed. The funds are untied, which has fuelled criticism that the NT has not spent well to reduce disadvantage.

Mr Eslake said it would be “quite reasonable” for the commonwealth to negotiate strict terms of any bailout, including by insisting that the NT does more to raise its own revenue “such as having the NT cut some spending and introduce land tax.”

“There is obviously valuable private land in Darwin and the commonwealth might well be justified in saying ‘if you are going to get this help you need to help yourself as well by having land tax like every other state does’,” he said. “They could also raise a bit more revenue from mineral royalties.”

Former NT chief minister Eva Lawler said at a Sky News Australia debate during the NT election campaign that royalties from the Beetaloo Basin would help repair the NT’s finances. Current projections vary but an analysis by ACIL Allen has found the likely maximum royalties from that gas project are $140m per year. That is not enough to cover the NT’s current annual deficit.

In the same debate, broadcast last month, Ms Finocchiaro said her government would grow the NT economy rather than impose more taxes.

“I don’t think it’s time for austerity measures now,” she said.