This was a favourite song of mine back in my yoof. I used to sing it frequently, mostly to irritate friends who thought I should take things much more seriously. I think we should all start singing it again now, but for a different reason. The future really is bright for the Northern Territory, despite hyperbolic doomsaying in the mainstream media in the wake of announcements about anticipated cuts in federal GST funding.
According to respected independent economist Saul Eslake, it is likely that the Territory’s GST funding will be cut by around $1.2 billion over the next three years or so. That will mean a cut of a little over 6% in the Territory’s overall budget of $6.5 billion per year. That is certainly significant but entirely manageable. Moreover, new Chief Minister Michael Gunner IS managing it, quite skilfully as far as I can tell. His decision to promote former Under-Treasurer Jody Ryan to the position of CEO of the Department of Chief Minister seems to be paying off.
Last week’s gloomy announcement about GST funding cuts is mostly just a PR exercise in managing public expectations, although it might have been a little more prudent to avoid fuelling up the Northern Territory News to portray the situation as if the sky was falling and it was all PM Turnbull and Federal Treasurer Scott Morrison’s fault. The sky isn’t falling and the funding cuts aren’t their fault. Even after the cuts the Territory’s share of GST funding will be vastly higher than that of any other state or territory, some 4.7 times more than our per capita share of GST. Moreover, that is still more than the long-term average Territory share of GST funding. When you strip away the BS, what is happening at the moment is that the Territory’s GST share is moving back towards the (still very generous) long-term funding average after a few years of short-term stimulus driven by the huge Inpex project.
As I said, Chief Minister Gunner seems to be managing the situation very skilfully. He is keeping public service cuts to a prudent minimum, will probably announce restrained increases in taxes and charges in the May budget, and has already indicated that his government will maintain promised public infrastructure funding and will accept that this means remaining in budget deficit for a longer period than planned. All of that is simply competent macroeconomic management to weather the storm of a hopefully brief economic downturn. At least that is true as long as the infrastructure spending goes towards projects which when finished will enhance the Territory’s income position by more than the cost of servicing the debt needed to build the projects. That is an aspect that I intend revisiting in a subsequent article.
In the meantime, it’s worth noting that the Territory is just coming out of a great wet season and we’re looking forward to what is expected to be an early and cooler than normal dry season. That is good news for mango growers and agriculture in general, for aquaculture, and for our cattle industry. With any sort of luck we will also have a good tourist season.
It’s also worth keeping in mind that the federal government will soon start spending a couple of billion dollars over the next few years (and much more in the longer term) on upgrading Top End defence facilities, to accommodate things like the new F35 stealth aircraft and American troop training rotations. We can also confidently expect to get our fair share of Northern Australia Infrastructure Facility funding to be announced in the near future.
Even more importantly, prospects for the gas industry are looking very good. Federal and interstate politicians have finally realised that gas-fuelled peaking power generation facilities are a key part of transition to a sustainable renewable energy future for Australia. Moreover, because existing gas reserves have already been flogged off to the Chinese and Japanese, there is an immediate demand for the Territory’s abundant unsold reserves (both conventional and onshore unconventional gas). Jemena now has traditional owner approval to build its gas pipeline across to Queensland, and will hopefully soon renegotiate a deal with a construction contractor.
Meanwhile, Independent Senator Nick Xenophon has just agreed to back part of the Coalition government’s corporate tax cut plan in return for promises by Malcolm Turnbull to seriously consider funding a gas pipeline from the Northern Territory to South Australia. Of course, whether all of that helps very much will depend on whether the Gunner government decides to lift the current fracking moratorium and on what terms. There isn’t any real doubt that the Inquiry chaired by Justice Rachel Pepper will find that fracking for shale gas is safe and appropriate as long as it is tightly regulated and supervised. After all, that is what every other inquiry has always found. Of course the local anti-fracking chorus will never accept this irrespective of the actual evidence.
Nevertheless, it seems likely that the Gunner government will at least allow fracking in the highly prospective Beetaloo Basin:
Some sources are putting potential recoverable gas volumes at 30 trillion cubic feet, enough for decades of east coast gas use, plus shoring up exports from Gladstone and Darwin. …
The hope is that in the Beetaloo – and the adjacent McArthur Basin – Australia has found its own vast and highly productive shale play that will rank alongside the finest in the US and eventually deliver similar transformative results.
To call this exciting is a huge understatement. In contrast to the offshore gas involved in the Inpex project, the Territory government will gain the full royalties from the onshore Beetaloo and McArthur basins. Moreover, as long as some of it is reserved for local use (not just flogged off to Japan and China) there is also massive potential for development of a wide range of spin-off industries including plastics. This is exactly what Territory-born Trump adviser and Dow Chemical CEO Andrew Liveris has been advocating for years. Hopefully Mr Gunner and his team are already thinking and planning along those lines. There are obvious challenges associated with petrochemical industries, but also enormous opportunities to develop the North. This is the Territory’s Jed Clampett moment.
Meanwhile, the Gunner government also has an opportunity to capitalise fully on the Territory’s tourism potential, which remains enormous if airline connections can be boosted. That will require the government to stimulate investment in new tourism accommodation and attractions to refresh the current fairly tired offerings and return us to the halcyon boom days of NT tourism of the 1980s that followed the Crocodile Dundee movies and Paul Hogan’s famous “shrimp on the barbie” TV commercials. Success will need the sort of agility and innovation that Malcolm Turnbull only talks about. But all this is a subject for another article, in case the future begins to look so bright that it damages readers’ eyesight.