2010-11 budget papers · the fiscal outlook in the 2010-11 budget includes: • operating surpluses...

2010-11 Budget Papers

No. 1 Speech The Treasurer’s speech to the Legislative Assembly describes the Northern Territory Government’s Budget strategy and key features of the 2010-11 Budget, together with the Bill presented to Parliament outlining appropriations for 2010-11.

No. 2 Fiscal and Economic Outlook Meets the requirements of the Fiscal Integrity and Transparency Act. Includes a discussion of the Government's fiscal strategy, the fiscal and economic outlook for 2010-11 and the forward estimates period, and an overview of expenditure and revenue initiatives in the Budget. It also discusses current and topical issues in intergovernmental relations from the Territory’s perspective and outlines financial arrangements with the Commonwealth for Specific Purpose Payments and National Partnership Agreements. The financial data provided meets the Territory’s obligations under the Uniform Presentation Framework as agreed between governments.

No. 3 The Budget Detailed information about agency budgets, grouped by Ministerial portfolio. Includes agency budget highlights, appropriation amounts, output statements and accrual financial statements (Operating Statement, Balance Sheet and Cash Flow Statement) for all agencies within the Northern Territory budget sector. A detailed summary of revenue information is also provided.

No. 4 The Infrastructure Program Presents a summary of the Government’s Infrastructure Program for all budget sector agencies, as well as descriptions of 2010-11 capital projects for each agency. Expected committal dates for major projects in 2010-11 are also provided.

Related Papers Budget Overview

Key features of the 2010-11 Budget.

Northern Territory Economy A detailed assessment of the Territory economy, including recent performance and growth prospects, employment, population, trade, and Australian and international conditions. Includes chapters on the performance and outlook for major Territory industries. An overview is also provided as a separate, self-contained document.

Regional Highlights Government’s initiatives, programs and expenditures in the 2010-11 Budget detailed by region.

Any of the above papers can be obtained from: Northern Territory Government Printing Office, Retail Sales, Railway Street, Parap NT 0820 or GPO Box 1046, Darwin NT 0801 Telephone (08) 8999 4031, Facsimile (08) 8999 4001, or Northern Territory Budget website at www.budget.nt.gov.au

The cover photographs are reproduced with the kind permission of Department of Health and Families; Department of Construction and Infrastructure; Department of Natural Resources, Environment, The Arts and Sport; and Steve Strike.

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Fiscal and Economic Outlook 2010-11

Budget Paper No. 2

1

Table of Contents

In this book, the term ‘state’ or ‘states’ includes the Australian Capital Territory and the Northern Territory, unless the context indicates otherwise.

Under Treasurer’s Certification 3

1 Overview 5

2 Fiscal Strategy 11

3 Fiscal Position and Outlook 21

4 Budget Initiatives 43

5 Intergovernmental Financial Issues 59

6 Territory Taxes and Royalties 69

7 The Territory Economy 87

8 Uniform Presentation Framework 95

Appendix: Classification of Entities in the Northern Territory Public Sector 115

Glossary 117

3

Under Treasurer’s Certification

In accordance with the provisions of the Fiscal Integrity and Transparency Act, I certify that the financial projections included in the May 2010 Budget documentation were based on Government decisions that I was aware of or that were made available to me by the Treasurer before 28 April 2010. The projections are presented in accordance with the Uniform Presentation Framework.

Jennifer Prince

Under Treasurer

30 April 2010

Overview 5

Fiscal and Economic Outlook

Overview

This Budget Paper presents whole of government financial information and related issues and consolidates information from other budget papers. It also meets the requirements of the Fiscal Integrity and Transparency Act (FITA) and complies with the Uniform Presentation Framework, as agreed by all Australian jurisdictions.

Following the effect on international and Australian economies of the global financial crisis last year, the Territory’s fiscal outlook, like that of all other Australian jurisdictions, was substantially revised in the 2009-10 Budget. Although at the time of formulating the 2010-11 Budget the national economy is moving into a recovery phase, the Territory’s fiscal position continues to be affected by low revenue growth, including own-source revenue which continues to be restrained by economic conditions, and GST revenue which has been significantly affected by the Commonwealth Grants Commission’s (CGC) Report on GST Revenue Sharing Relativities – 2010 Review.

The Territory’s fiscal strategy remains unchanged from that adopted in the 2009-10 Budget. The objective of the strategy in the short term is to invest significantly in infrastructure in order to stimulate the Territory economy and protect jobs and, in part, to compensate for lower private sector investment, while capping the growth in operational spending. The Territory will incur operating surpluses but also cash deficits as a result of higher infrastructure investment over the forward estimates period. Once revenue streams and economic growth normalise, the medium-term strategy is to return the budget to a cash surplus position.

The current outlook means achievement of fiscal strategy targets will remain a challenge and will require ongoing expenditure restraint. To this end, the Territory Government has recently announced a number of budget improvement measures including a public sector staffing cap and reprioritisation of 2 per cent of agencies’ output appropriation to fund demand growth and new and expanded initiatives.

The fiscal outlook in the 2010-11 Budget includes:

operating surpluses maintained for all forward years; •

substantial infrastructure investment in 2010-11 of $1817 million, and remaining •higher than long-term trends in all forward years;

cash outcome and the accrual fiscal balance to be in deficit over the budget cycle •but improving over the forward estimates period to 2013-14;

net debt in the general government sector to increase as a result of significant •infrastructure investment over the forward years, but to remain below 2001-02 levels; and

a decrease in the general government sector net financial liabilities when •compared to the 2009-10 Budget as a result of the effect of an increase in the long-term bond rate used to value the Territory’s superannuation liability.

Chapter 1

Fiscal Position and Outlook

6 Overview

2010-11 Budget

Tables 1.1 and 1.2 present the Territory’s key aggregates at the time of the 2009-10 Budget, the 2009-10 Mid-Year Report and the 2010-11 Budget.

2009-10 2010-11 2011-12 2012-13 2013-14

Estimate Budget Forward Estimates

$M $M $M $M $M

Operating Balance

2009-10 Budget 214 115 121 78 na

2009-10 Mid-Year Report 236 132 134 69 na

2010-11 Budget 371 441 98 56 57

Variation from 2009-10 Budget 157 326 - 23 - 22 na

Fiscal Balance

2009-10 Budget - 248 - 218 - 119 - 44 na

2009-10 Mid-Year Report - 298 - 222 - 127 - 53 na

2010-11 Budget - 186 - 310 - 211 - 115 - 81

Variation from 2009-10 Budget 62 - 92 - 92 - 71 na

Cash Outcome

2009-10 Budget - 196 - 174 - 92 - 24 na


2010-11 Budget - 137 - 268 - 173 - 90 - 61


For consistency, the 2009-10 original budget data presented in this budget paper has been restated to include NT Home Ownership in the general government sector, as outlined in the 2009-10 Mid-Year Report. The effect on budget outcomes is not material. Source: Northern Territory Treasury

Changes in estimated budget outcomes over the Budget and forward estimates period between the 2009-10 Budget and the 2010-11 Budget have been influenced by four key factors:

significantly increased capital grants from the Commonwealth have resulted in •improvements in the operating balance but not the cash outcome which includes the capital expenditure associated with the grant. The net improvement in the operating balance is $438 million over the four years from 2009-10 to 2012-13 while the cash outcome shows a worsening of $182 million over the same period. The divergence in these budget aggregates is largely explained by the substantial increase in capital spending (purchase of non financial assets) of $752 million over the four-year period funded from Territory and Commonwealth sources;

increased GST revenue from 2009-10 due to improvements in the national •economy, offset by lower 2010 GST relativities resulting in minimal net growth in GST in 2010-11;

new and expanded spending initiatives; and•

timing of expenditure between years.•

For 2009-10, the improvement in all measures is predominantly due to the net transfer of expenditure from 2009-10 across the forward years and additional GST revenue, due to higher than expected growth in national collections, offset by the transfer in of expenditure from 2008-09. For 2010-11, the increase in the operating surplus is due to additional Commonwealth funds, the majority being for capital purposes. The Territory has also increased its contribution to capital spending by

Table 1.1: Estimated Outcomes – General Government Sector

Overview 7


$50 million, increasing the cash and fiscal balance deficit. The significant increase in Territory and Commonwealth funded infrastructure spending compared with that estimated in May 2009 is particularly evident in 2009-10 and 2010-11.

Although the operating balance remains in surplus over the forward years, lower GST and own-source revenues mean that the operating surplus is not at sufficient levels to meet the total infrastructure investment. Accordingly, this, together with an increased investment in capital spending, means that both the cash and fiscal balance deficits are higher over the forward estimates than estimated at the time of the May 2009 Budget.

2009-10 2010-11 2011-12 2012-13 2013-14


Net Debt ($M)

2009-10 Budget 1 193 1 349 1 422 1 426 na

2009-10 Mid-Year Report 1 036 1 185 1 251 1 248 na

2010-11 Budget 901 1 256 1 442 1 567 1 680

Variation from 2009-10 Budget - 292 - 93 20 141 na

Net Debt to Revenue (%)

2009-10 Budget 28 32 32 33 na


2010-11 Budget 20 26 32 36 37


Net Financial Liabilities ($M)

2009-10 Budget 4 666 4 890 5 016 5 066 na


2010-11 Budget 3 851 4 264 4 507 4 676 4 828

Variation from 2009-10 Budget - 815 - 626 - 509 - 390 na

Net Financial Liabilities to Revenue (%)

2009-10 Budget 110 115 115 116 na


2010-11 Budget 84 89 102 106 108


Source: Northern Territory Treasury

As shown in Table 1.2, net debt for 2009-10 and 2010-11 for the general government sector has improved since the May 2009 Budget due to the general government cash surplus achieved in 2008-09. Net debt is expected to increase over the forward years as a consequence of the cash deficits predicted over the budget cycle, together with increased borrowings. These include provisions for a series of debt for equity swaps with the Power and Water Corporation (PWC), over the forward estimates period, reasessed annually to maintain PWC’s fiscal sustainability while essential capital expenditure is brought forward and expanded under a new generation strategy. However, even with this increase, when measured as a ratio to revenue, net debt is significantly lower than 2001-02 levels.

Net financial liabilities has improved since the May 2009 Budget due to a decrease in the valuation of the Territory’s superannuation liability, partially offset by the flow-on effect of the increase in net debt over the forward years. The most

Table 1.2: Balance Sheet – General Government Sector

8 Overview

2010-11 Budget

significant influence on the superannuation liability is the valuation method. Accounting standards require the use of the 10-year bond rate to calculate the present value of the liability. The atypical conditions in capital markets that prevailed at the time of the 2009-10 Budget meant that a bond rate of 4 per cent was used in valuing the superannuation liability, resulting in an increased estimate of liability. The 10 year bond rate used in developing the 2010-11 Budget is 5.7 per cent, in line with current market conditions and the long-term average rate. This increased bond rate has resulted in a reduction of around $550 million in the valuation of the liability for all years since May 2009.

Further detail on the Budget and forward estimate projections are included in Chapters 2 and 3 of this Budget Paper.

The Territory economy is forecast to grow by 3.6 per cent in 2010-11, reflecting the benefits of a strengthening international trade surplus and further growth in public sector investment. The Territory’s trade surplus is forecast to increase due to strong growth in alumina, manganese and iron ore production as the global economic recovery strengthens over the year and LNG production returns to full capacity following scheduled maintenance shutdowns in 2009-10.

Resident employment is estimated to increase by 2.5 per cent in 2010-11, supported by increased residential construction activity and record levels of public investment related to:

the Strategic Indigenous Housing and Infrastructure Program;•

land servicing and essential services infrastructure (as part of Working Future);•

roads in urban and remote areas;•

headworks for the Palmerston East subdivision and the Arid Zone Research •Institute (AZRI) land development in Alice Springs; and

stage two of the Tiger Brennan Drive extension.•

The Territory’s population growth rate is forecast to moderate to 2.1 per cent in 2010 and 2 per cent in 2011 as the result of lower net interstate migration due to the relocation of the 7th Royal Australian Regiment (7RAR) and the completion of a number of major projects. Nevertheless, population growth is expected to be supported by increased levels of residential construction activity, strong public sector investment and jobs creation flowing from a record Territory Government capital works program.

Darwin’s CPI is forecast to increase by 3.1 per cent in 2010 and by 3.4 per cent in 2011, driven by increased commodity prices, particularly crude oil, and a turnaround in private sector wages growth. Housing is expected to continue to be the largest contributor to growth in Darwin’s CPI in 2010 and 2011. Ongoing tightness in Darwin’s housing market is expected to lead to continued increases in rents and housing prices, although growth should moderate as the result of increased residential land release and moderating population growth.

Total consumption expenditure is forecast to increase by 1.9 per cent in 2010-11 reflecting a recovery in household consumption, supported by public consumption. Although dampened by a rising interest rate environment, household consumption is forecast to increase by 1.8 per cent, supported by strengthening residential construction activity, population, wages and employment growth. Public

Economic Outlook

Overview 9


consumption expenditure is forecast to moderate to 2 per cent due to lower public sector employment growth, the relocation of the 7RAR and the completion of Commonwealth stimulus measures.

2005-06Actual

2006-07Actual

2007-08Actual

2008-09Actual

2009-10Estimate

2010-11Forecast

% % % % % %

Real GSP 6.7 6.7 3.9 2.6 0.4 3.6

Resident Employment 3.2 5.1 5.9 4.2 3.3 2.5

Population1 2.3 1.9 2.4 2.4 2.2 2.1

Darwin CPI2 2.6 4.4 3.4 4.0 2.8 3.1

1 As at December, annual percentage change. 2 As at December, year-on-year percentage change.

Table 1.3: Key Economic Indicators

Fiscal Strategy 11


Fiscal Strategy

The Territory’s fiscal strategy is an essential element of budget planning as it outlines the Government’s short-term and medium-term fiscal objectives in the context of the prevailing economic conditions and provides the basis against which policy decisions can be assessed. The strategy is based on the principles of sound financial management, thereby ensuring the ongoing economic prosperity and welfare of Territorians. It is for these reasons that the Fiscal Integrity and Transparency Act (FITA) requires a fiscal strategy to be prepared at the time of every budget.

The Territory’s fiscal strategy was substantially revised in the May 2009 Budget against the backdrop of the global financial crisis (GFC) which resulted in falling revenues, increased demand for services and Government commitments to increase investment in both infrastructure and service delivery programs to support jobs and maintain growth in the Territory.

The strategy, which remains unchanged in the 2010-11 Budget, outlines both short-term and medium-term targets. The objective of the fiscal strategy is the development of a robust and thriving Northern Territory that is capable of achieving ongoing significant operating surpluses irrespective of economic conditions. This will be achieved by maintaining the fiscal discipline that has been evident in the Territory budget in recent years and has resulted in seven consecutive cash surpluses. When revenues return to usual growth patterns, the operating surplus will provide the capacity to invest in infrastructure without the requirement for additional borrowings. In the short term, however, the constrained revenue growth, including the effects of the Territory’s reduced share of GST following the Commonwealth Grant Commission’s Report on GST Revenue Sharing Relativities – 2010 Review, combined with increased infrastructure spending to support Territory jobs, will result in cash deficits over the forward estimates period. Over the medium term, once revenue and expenditure return to more usual levels, the overarching objective of returning the budget to a cash surplus as well as an operating surplus will prevail and provide the capacity to reduce Territory debt.

The FITA requires the Treasurer to deliver a fiscal strategy statement at the time of each Budget which specifies the Government’s medium-term fiscal objectives and key financial targets. Under the FITA, the fiscal strategy statement must be based on principles of sound fiscal management to:

formulate and apply spending and taxation policies having regard to the effect of •these policies on employment, economic prosperity and the development of the Territory economy;

formulate and apply spending and taxing policies so as to give rise to a reasonable •degree of stability and predictability;

ensure that funding for current services is provided by the current generation; and•

prudently manage financial risks faced by the Territory (having regard to economic •circumstances), including the maintenance of Territory debt at prudent levels.

These financial management principles underpin the Territory’s fiscal strategy.

Chapter 2

Fiscal Principles

12 Fiscal Strategy

2010-11 Budget

The Government’s fiscal strategy consists of the following four components:

sustainable service provision;•

infrastructure for economic and community development;•

competitive tax environment; and•

prudent management of debt and liabilities.•

A discussion of each of these follows.

Target: Expenditure growth not to exceed revenue growth, excluding tied Commonwealth fundingThe Northern Territory Government is committed to maintaining services and investment in infrastructure to maintain jobs and economic growth. However, these policy objectives are to be achieved within a sound fiscal environment.

The Government’s overarching target is sustainable service delivery which requires that growth in operating expenses is less than growth in operating revenue, excluding Commonwealth tied funding, in order to achieve operating surpluses that can be used to fund capital investment.

This target was adopted in the May 2009 Budget when concern about the GFC was at its peak and all governments established new strategies to minimise the negative flow-on effects. The responses of the Territory Government meant that the Territory budget moved into a deficit position at the time of the 2009-10 Budget with a return to surplus not expected for five years.

While the strategy has been maintained in the 2010-11 Budget, the reduction in the Territory’s share of the national GST pool as a result of the Report on GST Revenue Sharing Relativities – 2010 Review has meant a further fall in Territory revenue and requiring the target of a return to surplus being extended by two to three years. It is also important to recognise that the growth in national GST collections has improved since May 2009, GST revenue has still not returned to pre-GFC levels and is not estimated to do so until the end of the budgetary cycle. Further details are provided in Chapter 5 of this Budget Paper.

Over the 2010-11 Budget and forward estimates period, while an operating surplus will be maintained, the budget will continue to record cash deficits, albeit declining over the period. In order to maintain its commitment to the strategy of sustainable service provision and the limiting of growth in expenditure, the Territory Government has initiated the following budget improvement measures:

implementation of a staffing cap for two years (staff reductions are not required •but the cap ensures staffing levels remain in line with budget capacity);

an increase in the efficiency divided from 1 per cent to 2 per cent in 2010-11 and •3 per cent in 2011-12;

2 per cent of agencies’ output appropriation redirected from 2010-11 from •discretionary costs including consultancy, advertising and travel to provide for demand growth and new initiatives; and

limiting capacity set aside in forward years for ongoing new initiatives to •$30 million per annum.

Sustainable Service Provision

Fiscal Strategy 13


Accordingly, in order to achieve fiscal targets, if the aggregate cost of new policy proposals exceeds the $30 million set aside in each of the forward estimate years, the additional cost will need to be met through a reprioritisation of existing expenditure or additional revenue. This does not include the usual $40 million that has been set aside in Treasurer’s Advance for one-off unforeseen events that may occur in future years.

When the economy and revenue and expenditure levels return to more normal conditions, maintenance of this fiscal prudence will enable a return to a strong operating result and a cash surplus, as evidenced by seven consecutive cash surpluses up to 2008-09. This will provide the capacity to meet both capital spending requirements and the retirement of additional debt accumulated during the economic downturn.

Tables 2.1 and 2.2 below compares the net operating balance and cash position for the general government sector since the 2009-10 Budget and Mid-Year Report.

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

2009-10 Budget 214 115 121 78 na


2010-11 Budget 371 441 98 56 57



The operating balance in the general government sector has improved significantly in 2009-10 and 2010-11 predominantly due to the higher Commonwealth revenue that is increasingly being allocated to capital payments rather than operating expenses.

For 2009-10 the major components of the improvement are additional GST revenue of $153 million, as a result of a higher national GST pool, additional capital grants revenue from the Commonwealth of $68 million being applied to capital spending, offset by $60 million in higher expenses which is the net effect of $110 million transferred from 2008-09 and $50 million transferred from 2009-10 to future years.

For 2010-11 the improvement largely represents a significant increase in Commonwealth revenue, consisting of 74 per cent, or $357 million, of capital grants revenue being applied to capital spending and additional GST revenue of $63 million, offset by reduced own-source revenues and increased expenditure. The increased expenditure includes new initiatives as well as a transfer of expenditure from 2009-10.

For 2011-12 and forward years the operating balance is set to remain in surplus, albeit at lower levels, reflective of lower capital grants from the Commonwealth and reduced revenue growth.

Table 2.1: Net Operating Balance – General

Government Sector

14 Fiscal Strategy

2010-11 Budget

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

2009-10 Budget - 196 -174 - 92 - 24 na


2010-11 Budget - 137 - 268 - 173 - 90 - 61



For 2009-10, the cash deficit is estimated to be $137 million, an improvement of $59 million since the May 2009 Budget. The $98 million difference between the cash outcome and the operating result is due to $68 million of Commonwealth capital grants funding applied to capital spending and $30 million in net additional capital expenditure, associated with Commonwealth funding of $40 million received in 2008-09 offset by $10 million transferred to future years.

For 2010-11 the cash deficit of $268 million is an increase of $94 million since May 2009. The difference in the variation between the operating result and cash outcome of $420 million largely reflects $357 million of additional Commonwealth capital grants revenue being used for infrastructure and the Territory’s $50 million increased commitment towards capital spending.

The cash deficits in 2011-12 and outer years have also increased, reflecting the ongoing commitment of $50 million additional capital funding and lower revenue growth rates than experienced in the last decade.

Notwithstanding the improved growth in national GST collections since May 2009, GST revenue has not returned to pre-GFC levels and is not estimated to do so until the end of the current budgetary cycle. This, combined with the reduction in the Territory’s share of the national GST pool following the Report on GST Revenue Sharing Relativities – 2010 Review, means that a return to surplus is now not expected until beyond the current budgetary cycle. Despite this, the cash deficits over the forward years are trending to an improvement by 2013-14.

Target: Maintain infrastructure investment at appropriate levels Capital investment plays a central role in the Government’s budget strategy and is essential for the delivery of the Territory’s social and economic policy objectives.

The roll out of the Nation Building and Jobs Plan stimulus package by the Commonwealth, and the Strategic Indigenous Housing and Infrastructure Program (SIHIP) and other capital commitments in the Remote Indigenous Housing (RIH) National Partnership agreement, continues to be a major influence on infrastructure funding. This significant investment in infrastructure, together with ongoing increased Territory funding of $50 million from 2010-11, will assist in maintaining the economy and protecting jobs, as well as improving the standard and quantity of government assets necessary to improve service delivery.

The Territory Government’s fiscal strategy commits to spending at least twice the level of depreciation expenses on capital infrastructure, on average, over the current economic cycle to improve facilities that support service delivery and business growth. Once private sector investment returns to more usual levels the countercyclical need for increased government investment in infrastructure will no longer be required.

Table 2.2: Cash Outcome – General Government Sector

Infrastructure for Economic

and Community Development

Fiscal Strategy 15


In more usual times most jurisdictions strive to maintain their capital investment levels around the equivalent of their depreciation expenses in order to keep the stock of public sector assets at appropriate levels. In the Territory, capital needs are greater and the provision of adequate levels of infrastructure is an ongoing challenge, due both to the Territory’s remoteness and its stage of development relative to other jurisdictions. Accordingly, once the economy reverts to more normal conditions, the Territory’s strategy in relation to infrastructure spending will be general government spending at least equivalent to depreciation charges, over the budget cycle. This will ensure that the Territory’s infrastructure is being maintained at appropriate levels to support medium-term economic growth while trending towards the objective of a general government fiscal balance.

Table 2.3 presents the estimates for capital investment for 2009-10 to 2013-14 compared with the May 2009 Budget. The Government’s capital investment comprises purchases of non financial assets (including construction and capital items) and capital grants to non government organisations. It excludes repairs and maintenance.

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

2009-10 Budget

Purchases of Non Financial Assets 735 600 509 394 na

Capital Grants 157 157 117 54 na

Total 892 757 626 448 na

2010-11 Budget

Purchases of Non Financial Assets 859 1049 602 480 438

Capital Grants 185 177 85 51 44

Total 1 043 1 226 687 531 481

Variation to 2009-10 Budget

Purchases of Non Financial Assets 124 449 93 86 na

Capital Grants 28 20 - 32 - 3 na

Total 151 469 61 83 na


Table 2.3: Capital Investment – General

Government Sector

16 Fiscal Strategy

2010-11 Budget

2009-10 2010-11 2011-12 2012-13 2013-14


2009-10 Budget

Total Capital Investment ($M) 892 757 626 448 na

Depreciation ($M) 196 199 202 204 na

Capital Investment to Depreciation Ratio

4.6 3.8 3.1 2.2 na

2010-11 Budget

Total Capital Investment ($M) 1 043 1 226 687 531 481

Depreciation ($M) 201 204 207 210 213


5.2 6.0 3.3 2.5 2.3

Variation to 2009-10 Budget

Total Capital Investment ($M) 151 469 61 83 na

Depreciation ($M) 5 5 5 6 na


0.6 2.2 0.2 0.3 na


As shown in Tables 2.3 and 2.4, there will be a significant increase in all years in infrastructure investment that substantially exceeds the fiscal strategy target of spending twice depreciation levels over the current economic cycle.

The increase in levels of capital investment since the May 2009 Budget is mainly a result of increased infrastructure investment by the Territory and Commonwealth governments in housing, hospitals, schools and roads.

Chart 2.1 illustrates the Northern Territory’s capital investment per capita since 2001-02 and highlights the Territory’s increasing levels of investment and that this is significantly higher than the average of the states. The peak in 2010-11 and high levels through to 2011-12 demonstrate the Territory Government’s commitment, assisted by Commonwealth funding, to increase infrastructure spending to maintain jobs and growth in the Territory.

Further information on capital works projects is included in Budget Paper No. 4.

Table 2.4: Capital Investment to Depreciation

Ratio – General Government Sector

Chart 2.1: Territory Capital Investment per capita –

General Government Sector

1

2

3

4

5

6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$(000)

ActualEstimate

Northern TerritoryYear ended June

ActualEstimate

State average

Fiscal Strategy 17


The fiscal balance provides a more complete measure of the Territory’s overall financial position (that is, whether it is a net lender or a borrower of funds) and includes the effects of all operating costs and the change in net physical assets. A fiscal balance deficit is expected for a developing jurisdiction such as the Territory.

Similar to the cash outcome, the fiscal balance remains in deficit over the budget cycle but improves to a projected deficit of $81 million in 2013-14, as shown in Table 2.5.

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

2009-10 Budget - 248 - 218 - 119 - 44 na


2010-11 Budget - 186 - 310 - 211 - 115 - 81



Target: Ensure Territory taxes and charges are competitive with the average of the states and territoriesThe Government is committed to maintaining taxation at levels that are competitive with the average of other jurisdictions and to encourage increased levels of business activity in the Northern Territory.

From 1 July 2009, the Territory adopted payroll tax legislation that is identical, as far as possible, with New South Wales, Victoria, the Australian Capital Territory, South Australia and Tasmania. This simplified payroll tax, reduced red tape for businesses that have employees in more than one jurisdiction, and provided cost savings to businesses.

Comparisons of relative tax competitiveness are complex due to inherent differences in respective economies and in taxation regimes. Chapter 6 describes the representative taxpayer model and compares the main Territory taxes using this model. Another measure of the competitiveness of the Territory’s tax system is taxation effort as assessed by the Commonwealth Grants Commission.

The Commission’s analysis of ‘tax capacity and effort’ assesses the extent to which a particular jurisdiction’s capacity to raise revenue is above or below average and whether tax rates applied are above or below the states average. Table 2.6 details the Territory’s revenue-raising capacity and effort expressed as a percentage of the Australian average in 2008-09, the latest year assessed by the Commission.

Capacity1 Effort2

% %

Total Taxation 86 91

Total Own-Source Revenue 99 119

1 Northern Territory’s capacity to raise revenue compared with the Australian average. 2 Northern Territory’s revenue effort compared with the Australian average, given the capacity available. Note: Australian Average = 100 per cent. Source: Commonwealth Grants Commission 2010 Update

Table 2.6 shows that the Territory’s capacity to raise revenue is below the Australian average. That is, if the Territory adopted the average rates of tax to its tax base, the revenue the Territory could raise would be less than the national average on a per capita basis.

Table 2.5: Fiscal Balance – General

Government Sector

Competitive Tax Environment

Table 2.6: Northern Territory Revenue‑Raising Capacity

and Effort 2008‑09

18 Fiscal Strategy

2010-11 Budget

The Territory is assessed as having lower than average effort for taxation (payroll tax, land revenue, stamp duty on conveyances, insurance taxation and motor taxes), reflective of the Territory’s fiscal strategy of ensuring taxes are competitive with the average of the jurisdictions. The lower than average taxation effort is mainly a result of the Territory not imposing a land tax and having lower than average motor taxes such as motor vehicle registration fees.

In relation to total own-source revenue, the main reason that the Territory was assessed with a high effort in 2008-09 was in respect of mining revenues. In 2008-09, Territory miners experienced high profitability and therefore the Territory’s profit-based collections were much higher compared to the average of ad valorem rates of the other states. This is discussed in more detail in Chapter 6. The Commission’s estimate of the Territory’s mining revenue effort in previous years was that it was below average, reinforcing that any comparison of profit-based schemes against ad valorem schemes need to be undertaken over the life of a mine or other significant period, rather than in any one year.

When volatility associated with mineral royalties is taken into account, levels of effort are in line with previous years and the Australian average.

Target: Reduce debt to pre-GFC levels once the economy reboundsThis element of the fiscal strategy aims to ensure that debt is prudently managed, taking into consideration service delivery needs and capital investment in infrastructure to promote social wellbeing and economic growth.

Over the current economic cycle, the Territory’s debt position is projected to worsen in line with estimated cash deficits coupled with increased investment in infrastructure to support Territory jobs and the economy.

Once the economy recovers, the sustainable service provision target of limiting expenditure growth will provide the capacity to reduce debt over time, to pre-GFC levels. The target is to reduce debt by 5 per cent of the increase per annum.

The measures of net debt and net financial liabilities for the general government sector provide the means of assessing the Territory’s performance against this element of the fiscal strategy.

2009-10 2010-11 2011-12 2012-13 2013-14


Net Debt ($M)

2009-10 Budget 1 193 1 349 1 422 1 426 na


2010-11 Budget 901 1 256 1 442 1 567 1 680


Net Debt to Revenue (%)

2009-10 Budget 28 32 32 33 na


2010-11 Budget 20 26 32 36 37



As Table 2.7 highlights, net debt for the general government sector is expected to rise over the budget and forward estimates period. This is as a result of the lower than historic revenue growth and higher investment in infrastructure resulting in cash

Prudent Management

of Debt and Liabilities

Table 2.7: Net Debt – General Government Sector

Fiscal Strategy 19


deficits predicted for all years. In addition, the Government has made provisions for a series of debt for equity swaps for the Power and Water Corporation (PWC) over the budget and forward estimates period, reassessed annually. The swaps will assist with funding the increased infrastructure investment as part of the PWC’s new generation strategy to improve system capacity and reliability while maintaining the PWC’s fiscal sustainability.

Table 2.7 shows that in absolute terms net debt is estimated to rise from $901 million in 2009-10 to around $1.68 billion in 2013-14. When measured as a ratio to revenue, it is expected to rise from 20 per cent in 2009-10 to 37 per cent by 2013-14. This however is still below the 61 per cent recorded in 2001-02, a result of the seven consecutive cash surpluses delivered up to 2008-09.

Net financial liabilities is a broader measure than net debt in that it encompasses all liabilities including unfunded employee entitlements, largely superannuation, a major liability for the Territory and most jurisdictions. The Territory cannot influence the level of its future superannuation liabilities. The schemes to which the liabilities relate are closed and any variation to the liability is a result of factors outside the Territory’s control such as longevity or long-term bond rates. The Territory will make no policy decisions that will increase its overall superannuation liabilities.

2009-10 2010-11 2011-12 2012-13 2013-14


Net Financial Liabilities ($M)

2009-10 Budget 4 666 4 890 5 016 5 066 na


2010-11 Budget 3 851 4 264 4 507 4 676 4 828



2009-10 Budget 110 115 115 116 na


2010-11 Budget 84 89 102 106 108



Table 2.8 highlights that the level of net financial liabilities both in absolute terms and as a percentage of revenue is set to increase over the budget cycle for the general government sector, although a lower rate than predicted in May 2009. The increase over the forward estimates is a direct result of projected cash deficits, largely attributable to lower revenue growth rates, increased capital investment and increasing superannuation liabilities.

The Commonwealth 10-year bond rate used in calculating the superannuation liability is 5.7 per cent, consistent with current market conditions and the Territory’s long-term average rate, compared to 4 per cent at the time of the May 2009 Budget. This has resulted in a lower liability and largely accounts for the improvement since May 2009. Changes in the bond rate are for valuation purposes and do not affect the funding of future benefit payments. Rather it is a requirement of accounting standards to value long-term employee benefits in this manner and has been a matter of disagreement between treasuries and standard setters for some time.

Table 2.8: Net Financial Liabilities – General Government Sector

20 Fiscal Strategy

2010-11 Budget

The Territory’s 2010-11 fiscal strategy is consistent with the 2009-10 strategy and incorporates both a short-term and medium-term focus based on supporting the economy during the prevailing economic conditions and restoring the budget to surplus and reducing debt once revenue growth and the economy recover.

The operating balance continues to remain in surplus over the budget cycle, largely as a greater proportion of revenue is applied to capital investment with deficit cash and fiscal balances still predicted in all years, although trending to an improvement by 2013-14.

The Territory Government is maintaining its commitment to significant investment in infrastructure while private sector investment recovers. This increased infrastructure investment exceeds the target of spending at least twice depreciation expense over the economic cycle.

The commitment to maintain taxation at competitive levels to encourage increased levels of business activity continues.

The measures of net debt and net financial liabilities will increase over the budget cycle until economic conditions return to pre-GFC levels.

The Government has initiated a number of budget improvement measures including funding demand growth and new initiatives, in part through a reprioritisation of discretionary funding and limiting growth in employee numbers. There is minimal capacity in the forward years beyond the funds allocated for new and expanded initiatives and represents a significant challenge to the achievement of fiscal strategy targets.

Conclusion

Fiscal Position and Outlook 21


Fiscal Position and Outlook

The fiscal outlook for the Territory continues to be affected by the effects of the global financial crisis (GFC) which resulted in lower revenues and high levels of infrastructure investment. The 2010-11 Budget has also been adversely affected by the Commonwealth Grants Commission (CGC) Report on GST Revenue Sharing Relativities – 2010 Review. The 2010-11 Budget has, as a result, been developed in an environment of lower revenue capacity and higher expenditure to meet the ongoing requirement for expansion in service delivery and infrastructure.

This chapter presents the updated financial projections for 2009-10 through to 2013-14, and an explanation of changes since the May 2009 Budget. It also includes the identification of possible risks to the Territory’s Budget and Forward Estimates and the Territory’s contingent liabilities, as required by the Fiscal Integrity and Transparency Act (FITA).

The main focus is on the general government sector although commentary is provided on changes in other sectors since the 2009-10 Budget.

The key fiscal aggregates for general government are presented in Table 3.1.

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

Operating Statement

Revenue 4 571 4 784 4 438 4 413 4 488

Expenses 4 200 4 343 4 341 4 358 4 431

Net Operating Balance 371 441 98 56 57

Net Acquisition of Non Financial Assets 557 751 309 171 139

Fiscal Balance - 186 - 310 - 211 -115 - 81

Cashflow Statement

Operating Receipts 4 565 4 771 4 430 4 403 4 484

Operating Payments 3 929 4 068 4 069 4 093 4 175

Net Capital Payments 758 955 516 381 351

Superannuation earnings re-invested 14 17 18 19 20

Cash Surplus (+) / Deficit (-) - 137 - 268 - 173 - 90 - 61

Balance Sheet

Assets 11 248 11 942 12 349 12 658 13 016

Liabilities 5 271 5 402 5 572 5 677 5 840

Net Worth 5 977 6 540 6 777 6 981 7 176

Net Debt 901 1 256 1 442 1 567 1 680

Net Debt to Revenue (%) 20 26 32 36 37

Net Financial Liabilities 3 851 4 264 4 507 4 676 4 828

Net Financial Liabilities to Revenue (%) 84 89 102 106 108


The downturn in the global economy that affected the Territory’s fiscal position at the time of the 2009-10 Budget continues to influence the Territory’s fiscal outlook. While the national economy is moving into a recovery phase the extent of the downturn means that, although revenue growth is projected, it is from a low

Chapter 3

General GovernmentTable 3.1: Key Fiscal

Aggregates – General Government Sector

22 Fiscal Position and Outlook

2010-11 Budget

base. This is particularly the case for GST revenue where, not withstanding recent growth, GST revenue has not returned to pre-GFC levels and is not estimated to do so until the end of the budgetary cycle. The Territory’s GST revenue has also been significantly affected by the Report on GST Revenue Sharing Relativities – 2010 Review, which resulted in a reduction in the Territory’s relativity from 5.25073 to 5.07383 and the Territory’s share of GST revenue from 5.4 per cent in 2009-10 to 5.2 per cent for 2010-11.

This reduction in the Territory’s share of the national GST pool has resulted in a reduction in the Territory’s future fiscal capacity and has extended the fiscal strategy target of returning the Budget to surplus by 2-3 years.

As shown in Table 3.1, the net operating balance is in significant surplus in all years. The greater proportion of additional Commonwealth tied revenue being allocated for capital purposes, particularly in 2009-10 and 2010-11, is evident and largely accounts for the higher operating surpluses in those years. The fiscal balance, which adjusts the operating balance by the net investment in capital spending, is in deficit throughout, although expected to improve by 2013-14 with the anticipated continued recovery in the national economy and in line with the Territory’s fiscal strategy. This projected outcome reflects the Territory’s intention to support the economy and protect Territory jobs by investing significantly in infrastructure, offsetting lower private sector investment. The 2010-11 Budget includes substantial investment in infrastructure of $1.8 billion, a significant increase from previous years and much higher than historical levels. The fiscal balance deficits also reflect lower growth in own-source revenue and the effect of the Territory’s reduced share of GST revenue.

The fiscal outlook emphasises the importance of minimising recurrent expenditure growth to below that of revenue growth. Accordingly, the Government has implemented a number of budget improvement measures to manage current and future expenditure growth. During 2009-10, agencies were required to identify savings of 2 per cent of their expected 2010-11 output appropriation from discretionary areas, including consultancies, advertising and travel expenditure. These savings were retained by agencies to offset new initiatives, demand growth and emerging cost pressures. The reprioritisation amounts and the related new initiatives for each agency are presented in Chapter 4 of this Budget Paper. Further measures introduced include the implementation of a staffing cap for two years to ensure employee costs remain within budgetary capacity and an increase in the efficiency dividend applied to agencies. Increased funding has been provided as part of the 2010-11 Budget to boost the key service delivery areas of health, education and public safety to allow sufficient capacity in the forward estimates to maintain services at appropriate levels.

Consistent with the fiscal balance, the cash targets will be in deficit in all years, but trending to improvement from 2010-11 to 2013-14. The Territory’s aim to ensure that general government operating expenses are less than revenue, excluding Commonwealth tied funding, will ensure that cash deficits are minimised as far as possible while the economy is in a recovery period. When revenue growth returns to usual levels, this strategy will provide the capacity to fund capital spending and retire debt incurred as a result of the GFC.



Although the cash outcome and the accrual fiscal balance encompass both operational and capital spending, the difference between the two measures relates to non cash items and accrual timing differences between years. The most significant component relates to the Territory’s superannuation liability with the operating statement reflecting the movement in the liability whereas the cash flow statement includes actual benefit payments made. As the overall liability is still rising, the accrual expense will be higher than the cash payments and affecting the fiscal balance. However, once the liability peaks, the situation will reverse. The Territory’s liability is expected to peak in around 2015-16. Table 3.1 shows that the difference between the fiscal balance and the cash position is narrowing each year. After 2015-16, when cash payments begin to exceed the accrued expense, the fiscal balance will improve relative to the cash outcome.

Net debt is expected to increase across all forward years but at a lower level than projected in May 2009. This is due to the combination of the flow-on effect of the cash surplus achieved in 2008-09 coupled with an increase in the net market value of medium and long term investments, offset by an increase in both the cash deficit and borrowings in 2010-11 and all forward years.

Net financial liabilities are also expected to rise over the budget cycle due to the flow-on effect of the increase in net debt and increases in the valuation of the Territory’s superannuation liability, albeit at a lower level than in May 2009.

Table 3.2 sets out the material variations in both the fiscal balance and cash estimates for 2009-10 and 2010-11 since the May 2009 Budget.

For both 2009-10 and 2010-11, there have been significant movements in both revenue/receipts and expense/payments, particularly in relation to tied revenue received from the Commonwealth.

Changes Since May 2009


2010-11 Budget

2009-10 2010-11Accrual Cash Accrual Cash

$M $M $M $M

2009-10 BUDGET - 247.5 - 196.5 - 218.4 - 173.9REVENUE/RECEIPTSRevenue/Receipts - PolicyStamp Duty - 0.9 - 0.9 - 5.4 - 5.4Bookmakers Tax - 2.5 - 2.5 - 12.0 - 12.0Mining Royalties rate increase 9.2 9.2Total Revenue/Receipts - Policy - 3.4 - 3.4 - 8.2 - 8.2

Revenue/Receipts - Non PolicyTaxation 8.1 2.9 - 6.0 - 6.8GST Revenue 153.2 153.2 63.3 63.3Commonwealth Revenue 186.6 186.6 483.8 483.8Interest Income - 5.7 - 5.7 - 10.6 - 10.6Mining Royalties - 13.4 - 13.4 - 13.8 - 13.8Income Tax Equivalents and Dividends - 2.3 0.6 5.4 - 0.5Agency Own-Source Revenue 22.3 30.9 9.1 13.7

Other - 1.7 - 2.2Total Revenue/Receipts - Non Policy 348.8 353.4 531.2 526.9

TOTAL REVENUE/RECEIPTS 345.4 350.0 523.0 518.7

OPERATING EXPENSES/PAYMENTSExpenses/Payments - PolicyNew Initiatives 15.9 15.9 106.7 106.7Saving Measures - 43.0 - 43.0Total Expenses/Payments - Policy 15.9 15.9 63.7 63.7

Expenses/Payments - Non PolicyTransfers between years and to capital 71.8 78.8 31.0 31.0New/expanded Commonwealth funded programs 107.3 107.3 106.1 106.1Employee entitlements - 7.5Depreciation 3.5 0.5Other - 2.2 - 1.9 - 4.1 - 3.0Total Expenses/Payments - Non Policy 172.9 184.2 133.5 134.1

TOTAL OPERATING EXPENSES/PAYMENTS 188.8 200.1 197.2 197.8Net Capital PaymentsNew/expanded Commonwealth funded programs 68.1 68.1 356.7 356.7Transfers between years and from operational 27.6 27.6 11.2 11.2Additional Capital Works Cash 50.0 50.0Depreciation - 3.5 - 0.5Other 3.1 4.4 - 0.3 4.4Total Net Capital Payments 95.3 100.1 417.1 422.3

TOTAL EXPENSES/PAYMENTS 284.1 300.2 614.3 620.1

Future infrastructure and superannuation contributions / earnings

- 9.6 - 7.3

TOTAL VARIATION 61.3 59.4 - 91.3 - 94.1

2010-11 BUDGET - 186.2 - 137.1 - 309.7 - 268.0


Table 3.2: Variations to the Fiscal Balance and

Cash Outcome since May 2009



General government operating revenue (accrual) has increased from the May 2009 Budget by $345.4 million in 2009-10 and $523 million in 2010-11 with receipts (cash) increasing by $350 million in 2009-10 and $518.7 million in 2010-11. The difference between the cash and accrual movements is largely due to the timing of tax equivalents and dividends received from government businesses and agency own source revenue.

The main revenue policy related variations since the May 2009 Budget are:

downward revision of Territory stamp duty revenue of $0.9 million in 2009-10 and •$5.4 million in 2010-11, due to an increase in the first home owner concession from the first $385 000 to the first $540 000, an increase in the principal place of residence rebate from $2500 to $3500 and the introduction of a seniors, pensioners and carers concession of $8500;

downward revision of Territory bookmakers’ tax of $2.5 million in 2009-10 and •$12 million in 2010-11, due to the Government’s bookmaker’s tax reform, effective from 1 January 2010; and

upward revision of mining royalties of $9.2 million in 2010-11, due to the increase •in the mining royalty rate from 18 per cent to 20 per cent from 1 July 2010.

The main non-policy related variations to revenue since the May 2009 Budget are:

upward revision of Territory taxation revenue of $8.1 million in 2009-10, largely due •to the assessment of a number of large commercial conveyance transactions and increasing residential property prices. Tax receipts, however, are lower because of the time period between when the assessment is made and the tax payments are due. Taxation revenue has been revised downwards in 2010-11 by $6 million in revenue and $6.8 million in receipts, due mainly to the estimated reduction in community gaming machine tax attributable to indoor smoking bans. Further details on the Territory’s taxes are outlined in Chapter 6 of this Budget Paper;

an increase in GST revenue of $153.2 million in 2009-10, due to increased •estimates of the national GST pool growth. The $63.3 million increase in 2010-11 is the flow on effect of the growth in the pool in 2009-10, offset by the effect of the reduction in relativities following the Report of GST Revenue Sharing Relativities – 2010 Review. In absolute terms, GST revenue is expected to increase marginally between 2009-10 and 2010-11 due to the payment of Budget Balancing Assistance (BBA) in 2009-10 in respect of the 2008-09 year when GST revenue fell below the guaranteed minimum amount. Further detailed explanations on the collection of GST revenue can be found in Chapter 5 of this Budget Paper;

increased tied funding from the Commonwealth in the form of specific purpose •payments (SPPs) and National Partnership (NP) agreements of $186.6 million in 2009-10 and $483.8 million in 2010-11, largely related to housing, health, education and roads as shown in Table 3.3;


2010-11 Budget

2009-10 Estimate

2010-11 Budget

$M $M

Housing 0.5 279.9

Health 37.3 49.7

Education 87.6 54.8

National Network Roads 13.1 60.5

Public Order and Safety 22.8 25.5

Other 25.3 13.4

Total Increase 186.6 483.8


decreased interest income of $5.7 million in 2009-10 and $10.6 million in 2010-11 •due to the projected declining cash balances;

decreased mining royalty revenue of $13.4 million in 2009-10 and $13.8 million in •2010-11. This reflects collections received year to date in 2009-10 and for 2010-11 it is in line with mining companies’ estimates of reduced levels of profitability compared with previous years; and

increases in own-source revenue across most agencies, largely linked to •increased expenditure commitments.

General government expenses (accrual) have increased by $188.8 million in 2009-10 and $197.2 million in 2010-11, with payments (cash) increasing by $200.1 million in 2009-10 and $197.8 million in 2010-11. The variance between the cash and accrual movements are predominantly due to superannuation costs and depreciation.

The main expenditure-related policy variations include:

funding for new and expanded initiatives of $15.9 million in 2009-10 and •$106.7 million in 2010-11, predominantly related to key service delivery areas of government including:

a range of health-related initiatives including funding for the radiation oncology –unit, new nurse hours per patient methodology and child protection services;

operational funding for the Rosebery schools and new and expanded initiatives –to support schools and Indigenous education across the Territory;

funding for increased prisoner numbers and juvenile detainees, Barkly work –camp and crime victims assistance funding;

additional Police Beats, emergency services in Territory Growth Towns, police –housing allowance and additional resources for the Fire and Rescue Services; and

other new and expanded initiatives in the areas of recreation, community –support and the environment, including funding for the NT Climate Change Policy and the Safe Water Strategy.

the increases in 2010-11 are funded in part by saving measures of $43 million, •equivalent to 2 per cent of output appropriation, identified across agencies from 2010-11 and an additional 1 per cent efficiency dividend applied in 2010-11.

Further information on the policy initiatives included in the Budget is provided in Chapter 4 of this Budget Paper.

Table 3.3: Growth in Commonwealth Funding

(excluding GST)



The key non-policy variations are:

net transfers of payments between years and to capital of $78.8 million •for 2009-10 and $31.0 million for 2010-11, largely related to the delivery of Commonwealth-funded programs, including where the funds were received in prior years; and

additional payments of $107.3 million in 2009-10 and $106.1 million in 2010-11 as a •result of increases in Commonwealth SPP and NP funding.

There have also been some variations to net capital spending. The key variations are:

additional capital works cash from Territory sources of $50 million for capital works •projects in 2010-11 in line with capital works program requirements;

transfer of capital payments between years and from operational of $27.6 million •in 2009-10 and $11.2 million in 2010-11, largely related to the timing and scope of delivery of Commonwealth-funded programs; and

increased funding from the Commonwealth of $68.1 million in 2009-10 and •$356.7 million in 2010-11 mainly related to road infrastructure, Strategic Indigenous Housing and Infrastructure Program (SIHIP) and education as part of the Nation Building and Jobs Plan Stimulus package.

Further information on the Territory’s Infrastructure Program can be found in Budget Paper No. 4.

Basis of Forward EstimatesIn accordance with the FITA, five years of estimates are maintained and used by Government, both as a planning and an operational tool. This provides the framework within which agencies plan and also provides the basis for the Government’s fiscal strategy.

Agency forward estimates vary in line with the application of parameters (inflators and deflators) to the budget year on a no policy change basis. New policy decisions and funding decisions linked to demand or cost growth also add to each agency’s budget and forward estimates. The main parameters used to adjust estimates are:

wages – inflator;•

Consumer Price Index (CPI) – inflator; and•

efficiency dividend – deflator.•

The wage inflator applied for employee costs in 2010-11 and over the forward estimates period is 3 per cent, with a CPI factor of 2.8 per cent applied to operational costs for 2010-11, being CPI growth in calendar year 2009 compared with calendar year 2008. An estimate of 2.5 per cent is used for CPI over the forward estimates period.

An efficiency dividend is applied to operational and employee costs premised on agencies improving processes and delivering services more efficiently, as is the case with private sector enterprises. For key service delivery agencies with fixed staffing costs (police, health, education and correctional services), one-quarter of the dividend is applied. An efficiency dividend of 2 per cent has been applied in 2010-11, 3 per cent in 2011-12 and 1 per cent for 2012-13 and 2013-14.

2010-11 Budget and 2011-12 to

2013-14 Forward Estimates


2010-11 Budget

A composite factor based on 75 per cent of the wages factor and 25 per cent of the CPI factor is applied to grants. Efficiency dividends are not applied to grants and some contractual obligations.

Operating Revenue and Receipts

Table 3.4 presents operating revenue and receipts for 2010-11 and forward estimate years.

2010-11 2011-12 2012-13 2013-14

Budget Forward Estimates

$M $M $M $M

Revenue

Taxation revenue 399 411 407 422

GST revenue 2 480 2 684 2 878 3 078

Current grants 831 747 613 509

Capital grants 633 151 63 27

Sales of goods and services 167 165 165 166

Interest income 55 54 55 57

Dividend and income tax equivalent income 28 30 36 34

Mining royalties income 147 157 162 162

Other 44 39 34 34

Total Revenue 4 784 4 438 4 413 4 488

Year on Year Percentage Increase (%) 5 - 7 - 1 2

Receipts

Taxes received 398 411 406 421

Receipts from sales of goods and services 171 169 170 171

GST Receipts 2 480 2 684 2 878 3 078

Grants and subsidies received 1 464 897 676 536

Interest receipts 55 54 55 57

Dividends and income tax equivalents 20 28 30 36

Mining royalties income 147 157 162 162

Other receipts 36 31 25 25

Sales of non financial assets 94 86 99 86

Total Receipts 4 865 4 517 4 502 4 571

Year on Year Percentage Increase (%) 4 - 7 0 2


Total operating revenue and receipts are projected to decrease at an average of 2 per cent per annum over the forward estimates period. The decrease is associated with a reduction in tied Commonwealth funding by an average of 22 per cent per annum over the forward estimates. When considered on a year by year basis the most significant reduction is in 2011-12. This indicates the significant level of tied funds in 2010-11 (and 2009-10), the majority of which relate to remote Indigenous housing and essential services and the final element of the Nation Building and Jobs Plan stimulus package. In addition, a number of agreements are for fixed periods and although many are expected to continue they have not been incorporated into projections beyond the life of the current agreement. The decrease in tied funds is offset by GST revenue growth over the forward estimates period projected to

Operating and Cash Flow Statement

Forward EstimatesTable 3.4: Operating Revenue

and Receipts – General Government Sector



grow at an average of 8 per cent, albeit from a lower base in 2010-11 following the Territory’s reduced share of the national pool emanating from the CGC’s 2010 Review and the residual effect of the GFC on GST revenue. The improved growth in national GST collections since May 2009 has not returned the GST to pre-GFC levels and is not estimated to do so until the end of the current budgetary cycle. The Territory’s own-source revenue is increasing at around 1.4 per cent per annum. Overall, growth in Territory untied revenue over the period is 6.3 per cent per annum.

Taxation revenue is the most significant component of the Territory’s own-source revenue and is expected to grow by an average of 1.94 per cent over the forward estimates period. This growth is lower than previous years and is reflective of current economic conditions and Government commitments to reduce payroll tax, bookmaker turnover tax and stamp duty. Further information on the Territory Government’s tax reform initiatives can be found in Chapters 4 and 6 of this Budget Paper.

The majority of the Territory’s revenue is from the Commonwealth in the form of GST revenue and tied funding in the form of SPPs and NPs. There has been an increase in national GST collections during 2009-10 in line with a recovery in the national economy which has resulted in an increase to the pool available to the Territory. The Territory has forecast national GST collections to grow by 7.3 per cent per annum in 2010-11 and returning to the long term trend in later years based on Commonwealth Treasury estimates. The Territory’s growth from 2010-11 in GST reflects the expected growth in the pool, higher than the national average growth in population and the impact of the move to a per capita distribution of new SPPs. Whilst growth rates are expected to improve in line with the economy over the forward years this is lower than previous estimates as outlined above. Further information on GST can be found in Chapter 5 of this Budget Paper.

The growth in GST revenue is offset by a decline in SPPs and NPs. The decline in tied Commonwealth funding over the forward estimates is traditionally around 4-5 per cent per annum as many of these agreements are for fixed periods and are not included in the forward estimates beyond the life of the agreement. However the decline over the forward estimates in the Budget is significantly higher at around 22 per cent per annum, mainly attributed to the significant increase in capital funding in earlier years. The increase is largely associated with the Strategic Indigenous Housing and Infrastructure Program (SIHIP) and other components of the Remote Indigenous Housing (RIH) National Partnership, and the Nation Building and Jobs Plan stimulus package. Both of these programs peak in earlier years.

During each budget year there are significant changes in Commonwealth funding estimates as certain agreements are finalised. These adjustments tend not to affect the fiscal outcome as increases in revenue are generally matched by a corresponding increase in expenditure. However, timing differences in the receipt of tied revenue and associated expenditure introduce a degree of volatility affecting budgeted and actual outcomes, as mentioned previously in this chapter. Further commentary on SPPs is discussed in Chapter 5 of this Budget Paper.

Other own-source revenue includes sales of goods and services, interest, revenue from government trading entities and mining royalties. Both sales of goods and services and interest remain at fairly stable levels over the forward estimates.


2010-11 Budget

Revenue from government trading enterprises is expected to increase by 8.1 per cent over the forward estimates, due largely to the expected tax equivalents being received from the Power and Water Corporation (PWC) by 2012-13 as it moves to a more financially sustainable position.

The balance of own-source revenue is mainly collected from mining royalties, which are expected to grow by 1.2 per cent per annum over the forward estimates to $162 million. This reflects a drop in estimates of profitability provided by mining companies, offset by the rate increase of 2 per cent being introduced in July 2010. Mining royalties are extremely volatile and difficult to estimate. Further analysis of the effect of changing exchange rates, commodity prices and mining production on mining royalties is provided in the Statement of Risks section in this Chapter.

The Cash Flow Statement also includes capital receipts. These are largely sales of vehicles and land and have increased from previous years due to the release of industrial land by the Land Development Corporation. In 2012-13 higher receipts are expected in line with the Territory’s share of sale proceeds, as agreed at financial close, for the next stage of the residential component of the Darwin Waterfront.

Operating Expenses and Payments Table 3.5 shows general government sector operating expenses and payments for 2010-11 and forward estimate years.

2010-11 2011-12 2012-13 2013-14

Budget Forward Estimates

$M $M $M $M

Expenses

Employee expenses 1 582 1 624 1 662 1 703

Superannuation expenses 272 275 275 274

Depreciation and amortisation 204 207 210 213

Other operating expenses 1 145 1 157 1 180 1 251

Interest expenses 142 157 163 167

Current grants 714 720 697 658

Capital grants 177 85 51 44

Subsidies and personal benefit payments 106 116 119 122

Total Expenses 4 343 4 341 4 358 4 431

Year on Year Percentage Increase (%) 3 0 0 2

Payments

Payments for employees 1 786 1 839 1 887 1 938

Payments for goods and services 1 141 1 152 1 175 1 246

Grants and subsidies paid 998 921 868 824

Interest paid 142 157 163 167

Purchases of non financial assets 1 049 602 480 438

Total Payments 5 117 4 672 4 573 4 612

Year on Year Percentage Increase (%) 7 - 9 - 2 1


Operating expenses and total payments are expected to grow at an average of less than 1 per cent over the forward estimate years. This is significantly lower than historical levels, largely due to record levels of infrastructure spending in both

Table 3.5: Operating Expenses and Payments –




2009-10 and 2010-11 related to the large increase in Commonwealth revenues in those years and the fiscal strategy target of limiting operational expenditure growth, excluding tied Commonwealth funding, to below revenue growth.

Overall growth in Territory-funded expenditure, including GST but excluding tied Commonwealth funding, is 3.4 per cent per annum, which is less than the associated revenue growth of 6.3 per cent mentioned earlier in this Chapter and in line with the Territory’s fiscal strategy. In addition, as can be seen from the table, the investment in infrastructure, representing both purchases of non-financial assets and capital grants, is greater than twice the level of depreciation, with an average ratio of 3.8 over the budget estimates, meeting fiscal strategy requirements.

The expenditure forward estimates are based on a reduction in Territory own-source revenue growth over the forward estimate period from 2 per cent to 1.4 per cent, an additional $50 million ongoing contribution for infrastructure and the setting aside of $30 million per annum to support new and expanded initiatives in the forward estimates and the usual $40 million set aside in Treasurer’s Advance. There is no additional contingency in the forward estimates over and above these amounts. As a result new policy proposals in excess of the $30 million per annum set aside will need to be met through a reprioritisation of existing expenditure, additional revenue or additional efficiency gains in order for fiscal targets to be achieved.

Over the forward estimates period, employee expenses including superannuation expenses and benefit payments are estimated to increase, on average, by around 2.8 per cent per annum. This reflects wages growth in agencies offset by the efficiency dividend. Agencies will be required to manage their forward estimates to ensure that efficiency dividends are achieved.

Underlying growth in other operating expenses continues to grow marginally due to the CPI inflator included in agency budgets, offset by the efficiency dividend.

There is a decline in estimated current and capital grants, or grants and subsidies paid, due to high levels of tied funding from the Commonwealth in the early years. The decline in Commonwealth tied funding over the forward years is partially offset by the application of parameters to Territory-funded grants.

The Cash Flow Statement also includes capital payments. This element of the Cash Flow Statement is expected to remain higher than the average over the past decade across the forward estimates, although below the extremely high level in 2010-11 of $1.049 billion. This is due to the Government’s priority to increase infrastructure spending, including the provision of an additional $50 million ongoing to support the expanded capital works program, and additional tied capital grants from the Commonwealth.


2010-11 Budget

Table 3.6 provides a summary of assets, liabilities and balance sheet measures for the general government sector.

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Outcome Estimate Budget Forward Estimates

$M $M $M $M $M $M

Total Assets 9 845 11 248 11 942 12 349 12 658 13 016

Financial Assets 2 691 3 512 3 440 3 521 3 637 3 840

Non Financial Assets 7 154 7 736 8 503 8 828 9 022 9 176

Total Liabilities 5 094 5 271 5 402 5 572 5 677 5 840

Net Worth 4 751 5 977 6 540 6 777 6 981 7 176

Net Debt 837 901 1 256 1 442 1 567 1 680

Net Debt to Revenue (%) 20 20 26 32 36 37

Net Financial Liabilities 3 750 3 851 4 264 4 507 4 676 4 828


90 84 89 102 106 108


Net WorthSince the 2009-10 Budget, projected net worth for the general government sector has increased in all forward years largely due to the flow-on effect of the improved balance sheet position, including the upward revision of the Territory’s assets (road and bridge assets) and a higher bond rate used in valuing the superannuation liability, as reported in the 2008-09 Treasurer’s Annual Financial Report.

Since the introduction of accrual accounting in 2002-03, the Territory’s net worth has risen in successive years to $4751 million in 2008-09 and is projected to reach $7176 million by 2013-14. This is largely the result of continued improvement in the valuation of the Territory’s asset base as assessed by the Australian Valuation Office and the significant investment in infrastructure, together with seven successive cash surpluses in the general government sector. In addition, a change in accounting policy for the valuation of the PWC’s asset base to a depreciated replacement cost basis in accordance with AASB 1049 in 2009-10, accounts for the increase in investments in other public sector entities included in financial assets. Future valuation improvements on the Territory’s asset base have not been included in the forward estimates.

Net DebtThe Territory is a developing economy compared with other states and territories and as a result, its current level of debt is relatively high compared with other jurisdictions.

Table 3.7 shows that in absolute terms net debt at the general government sector is estimated to rise from $0.9 billion in 2009-10 to $1.7 billion in 2013-14. When measured as a ratio to revenue it is expected to rise from 20 per cent in 2009-10 to 37 per cent by 2013-14. However this is significantly lower than the 61 per cent recorded in 2001-02, a result of the seven consecutive cash surpluses delivered up to 2008-09.

Net debt projections in 2009-10 and 2010-11 have improved since the 2009-10 Budget. This is largely due to the flow-on effect of the cash surplus achieved in 2008-09. Net debt projections over the forward estimates from 2011-12 to 2013-14 have increased since May 2009, due to projected cash deficits and an increase in

Balance Sheet

Table 3.6: Balance Sheet – General Government Sector



borrowings due to a proposed series of debt for equity swaps for the PWC over the foward estimates period, reassessed annually, being the Territory Government’s contribution towards the $1.7 billion investment in infrastructure by the PWC over the budgetary cycle. As a result of a new electricity generation strategy, the PWC has increased capital expenditure by bringing forward essential infrastructure investment to ensure the continued reliability and security of services through asset refurbishment and renewal, in order to accommodate the Territory’s growth, including increasing land release programs and associated infrastructure upgrades in the Darwin area.

As outlined in the 2009-10 Mid-Year Report, financial investments held by the Territory Government comprise a range of instruments including short-term securities, fixed interest securities, fixed rate notes and equities. These financial assets are structured in separate portfolios to ensure that they meet the purpose for which the investments have been designated. The majority of assets are held in short-dated low-risk investments to match the relatively short dated nature of their requirements. The performance returns on these investments to 31 March 2010 are 3.12 per cent, slightly ahead of benchmark returns.

In the case of the Conditions of Service Reserve (COSR) these investments are managed by three external fund managers and relate to funds that have been set aside to fund the Territory Government’s long-term employee liabilities in future years and infrastructure. Accordingly, these investments have a weighting to long term growth assets in order to match the long-term nature of the liability.

Over the past five years to 30 June 2009, these funds have averaged annual returns of 5.25 per cent, 2.16 per cent in excess of benchmark but slightly below the long-term target rate of return of 6 per cent. In line with recent increases in economic and financial market conditions, the unrealised loss experienced in 2008-09 has been reversed, with the value of the COSR now at $415 million to 31 March 2010, an increase of $70 million from 2008-09. The value of the COSR is forecast to remain at these levels for 2009-10 and expected to grow steadily over the forward estimates.

Net Financial LiabilitiesNet financial liabilities is a broader measure than net debt in that it encompasses all liabilities including unfunded employee entitlements, largely superannuation. Table 3.7 shows that the level of net financial liabilities as a percentage of revenue is predicted to rise over the budget cycle as per the 2009-10 Budget. This is a direct result of the projected increase in net debt, together with an increase in the Territory’s superannuation liability over the forward estimates. Net financial liabilities however, have declined from the estimates predicted during the 2009-10 Budget as the valuation of the Territory’s superannuation liability has reduced from the use of a higher 10 year bond rate, from 4 per cent at the time of the 2009-10 Budget to 5.7 per cent for the 2010-11 Budget as discussed in Chapter 2 of this Budget Paper.

Although increasing, as a ratio to revenue the projected 108 per cent in 2013-14 is still below the 133 per cent recorded in 2001-02.

Operating and Cash Flow Forward EstimatesThe non financial public sector comprises both the general government sector and the public non financial corporation sectors (PNFC) of government. The PNFC sector comprises trading entities that are primarily engaged in the production of

Non Financial Public sector


2010-11 Budget

goods and services at prices that aim to recover costs and fund capital acquisitions through either borrowings or retained profits. In the case of the Territory, this sector includes the PWC and its subsidiaries as well as Darwin Port Corporation and Darwin Bus Service.

While this sector is commercial in nature it also receives contributions from general government in the form of community service obligations. This allows Government to achieve community or social objectives that would otherwise not be undertaken on a purely commercial basis.

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

Operating Balance

2009-10 Budget 221 119 174 128 na

2010-11 Budget 347 416 81 31 23


Fiscal Balance

2009-10 Budget - 462 - 443 - 247 - 190 na

2010-11 Budget - 507 - 666 - 418 - 266 - 166


Cash Outcome

2009-10 Budget - 424 - 402 - 224 - 170 na

2010-11 Budget - 494 - 631 - 390 - 241 - 156



As shown in Table 3.7, the operating statement is in surplus in all years while the fiscal balance and cash outcomes are in deficit positions.

This represents both the flow-on effect of the general government outcomes together with the following specific items related to the PNFC sector:

lower estimates of operating profitability since May 2009 of trading entities over •the budget cycle, predominantly related to the PWC; and

significant investments in infrastructure, including $1.7 billion by the PWC and the •expansion of Port facilities. Both of these are largely funded by borrowings and affect the cash and fiscal balance outcomes.

Balance Sheet Table 3.8 provides a summary of assets, liabilities and balance sheet measures for the non financial public sector.

Table 3.7: Estimated Outcomes – Non Financial

Public Sector



2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Outcome Estimate Budget Forward Estimates

$M $M $M $M $M $M

Total Assets 10 452 12 180 13 151 13 711 14 107 14 471

Financial Assets 1 608 1 718 1 509 1 473 1 461 1 530

Non Financial Assets 8 844 10 462 11 641 12 239 12 645 12 942

Total Liabilities 5 702 6 203 6 611 6 935 7 125 7 296

Net Worth 4 751 5 977 6 540 6 777 6 981 7 176

Net Debt 1 330 1 751 2 356 2 719 2 931 3 056

Net Debt to Revenue (%) 29 34 42 54 59 60

Net Financial Liabilities 4 291 4 716 5 374 5 784 6 041 6 198


93 92 96 115 121 121


Non financial public sector net debt comprises both the net debt of the general government and PNFC sectors and is often referred to as state or territory debt. State debt encompasses the full call on capital markets of both the general government sector that is supported by taxes and the often significant capital projects of trading entities that are largely funded through commercial borrowings.

The Territory’s relative stage of economic development compared with other states and territories results in its debt levels remaining high.

Table 3.8 shows that in absolute terms net debt at the non financial public sector is also predicted to rise over the budget cycle as a flow on of the increase in general government debt together with additional borrowings by PWC for essential infrastructure investment. When measured as a ratio to revenue, net debt is expected to rise from 34 per cent in 2009-10 to 60 per cent by 2013-14.

Net financial liabilities is a broader measure than net debt and Table 3.8 shows that the level of net financial liabilities as a percentage of revenue for the non financial public sector is predicted to rise over the budget cycle. This is a direct result of the projected increase in net debt together with an increase in the valuation of the Territory’s superannuation liability, albeit lower than projected in May 2009, due to the use of a higher bond rate in valuing the liability.

Although increasing, as a ratio to revenue the projected 121 per cent for the non financial public sector in 2013-14 is still below the 131 per cent recorded in 2001-02.

Total public sector comprises all sectors of government including general government, public non financial corporations and the public financial corporations sector. In the Territory, public financial corporations are entities that perform central banking functions and include both the Northern Territory Treasury Corporation and the Territory Insurance Office.

As required by the Uniform Presentation Framework, financial data for the public financial corporation and total public sectors is only required for the final estimate year, being 2009-10, as shown in Chapter 8 of this Budget Paper. For 2009-10 the total public sector outcomes largely mirror those of the non financial public sector.

Table 3.8: Balance Sheet – Non Financial Public Sector

Total Public Sector


2010-11 Budget

The Fiscal Integrity and Transparency Act requires that the Fiscal Outlook Report (Budget) must contain “a statement of risks, quantified as far as practical, that could materially affect the updated financial projections, including any contingent liabilities and any Government negotiations that have yet to be finalised”.

This statement outlines the potential effect of risks to the Budget due to changes in revenue and expense estimates and the likelihood of contingent liabilities becoming actual liabilities.

RevenueThe largest risk to the Territory’s forward estimates is variations in GST revenue. As GST revenue historically accounts for up to two-thirds of the Territory’s total revenue, changes in estimates have a significant effect on the Government’s funding capacity and budget outcome.

The estimation of GST revenue in any year is difficult, due to the volatility in the variables that determine the distribution of GST among the states. The risk to the key component variables of GST is discussed below.

National GST collections – the estimates for GST collections for 2009-10 to 2013-14 are based on best estimates using the Commonwealth’s most recent published advice and subsequent economic releases. Although there was a significant decrease in national GST collections predicted at the time of the 2009-10 Budget (around $6 billion), recent revisions advised by the Commonwealth Treasurer have reduced the estimated reduction to $3.2 billion. Growth rates have also been revised upwards, however national GST collections are not expected to return to pre-GFC levels until later in the budget cycle.

The extent and speed of the economic recovery in Australia has been greater than that previously anticipated and growth should continue. Accordingly there may be some upside risk to the projections in outer years.

An indication of the effect of a 1 per cent variation from these forecasts is estimated at ±$25 million in 2010-11 and ±$27 million in 2011-12. If a variation of this size occurred in each of the Budget and forward estimate years, the cumulative impact would be ±$110 million by 2013-14.

Territory’s share of national population – the Territory’s population estimates to 2013-14 reflect the expected performance of the Territory’s economy based on confirmed projects. There is material upside risk should the INPEX or other major projects not currently factored into assumptions proceed in the short term. The effect of a 1 per cent variation in the Territory’s population estimates is estimated at ±$24 million in 2010-11 and ±$25 million in 2011-12. The cumulative impact of a 1 per cent variation over each of the Budget and forward estimate years would be ±$104 million by 2013-14.

Territory’s per capita relativity as assessed by the Commonwealth Grants Commission (the Commission) – the Commission’s 2010 Review has brought greater certainty to the per capita relativity forecasts compared to recent years as the new methodology has been adopted. The move to a three-year rather than a five-year base period will increase volatility but is considered to be largely positive for the Territory. Future relativities will, however, continue to be informed by changes in state circumstances and any directions from the Commonwealth that are included in the Commission’s terms of reference. The Territory’s per capita

Statement of Risks

Goods and Services Tax Revenue



relativity for 2010-11 is 5.07383. The Territory has forecast future relativities based on the impact of changes to financial relations arising from the implementation of the Intergovernmental Agreement on Federal Financial Relations. These impacts arise during the transitional phase of changing the current distribution methodology of Specific Purpose Payments (SPPs) to a per capita distribution. While the direct share of SPPs received by the Territory is expected to decline, all other things being equal, this should be compensated through an increase in the Territory’s share of GST revenue.

The approximate effect of a 1 per cent variation in relativity estimates is ±$25 million in 2011-12 and ±$27 million in 2012-13, with a cumulative impact over the forward estimates to 2013-14 of ±$80 million. The changes to each of these variables can be either positive or negative and, if taken together, by 2013-14 could result in variations as high as $296 million. The faster than anticipated national economic recovery and its impact on national GST collections illustrates the significance of such risks and clearly demonstrates the inherent volatility in the estimates.

A more detailed discussion of GST revenue is presented in Chapter 5 of this Budget Paper.

The 2008 Intergovernmental Agreement on Federal Financial Relations has changed the nature of certain payments from the Commonwealth to the states and territories. SPPs in the areas of health, education, skills and workforce, disability and housing are now broader payments covering the full breadth of each functional area and are outcomes focused. Base funding was increased and sector-specific indexation formulae developed. SPP arrangements are now ongoing rather than requiring renegotiation every four years. The removal of input controls, including matching and maintenance of effort requirements, have provided a greater level of certainty to the Territory budget moving forward. However, the adequacy of indexation in terms of capturing increasing costs remains a key risk under the new arrangements.

National Partnership agreements still contain many of the risks to states that existed under the previous financial arrangements. These risks include co-investment, input controls, application of national costs and potential withdrawal of seed funding.

The risks related to SPPs and NPs cannot be quantified.

The Commonwealth’s National Health and Hospitals Network reform involves significant changes to the current state and territory health care arrangements. The risks associated with implementation of the reform agenda cannot currently be quantified, but could arise from a number of elements of the reform package, including the requirement to dedicate a portion of untied GST funding, the Commonwealth funding of 60 per cent of the efficient price of hospital services, the shift from government hospital management to management by Local Hospital Networks, and the changes to primary health care funding and policy responsibilities.

The amount of revenue received from Territory taxes and royalties is dependent on the performance of the Territory economy and other external factors. Forecasting such revenue involves judgments and assumptions being made about the performance of the various economic factors and indicators that impact directly on Territory taxes and royalties, such as growth in wages, employment, average hours worked, prices, market activity and exchange rates.

Other Commonwealth Grants and Subsidies

Commonwealth Health Reform Agenda

Own-source Revenue


2010-11 Budget

It is difficult to accurately predict revenue collections into the future, particularly for the later years of the forward estimates. The most difficult source of revenue to forecast in the 2010-11 Budget is mining royalty revenue. Forecasting mining royalty revenue is difficult because it is influenced by a number of factors, but predominantly mineral price, production levels and exchange rate conditions.

Mining revenue forecasts rely on advice from mining companies of their expected estimated liability for the financial year. Unpredicted market changes in mineral prices, production or exchange rates will have a material impact on this forecast. For example, an Australian dollar to US dollar exchange fluctuation of +1 Australian cent will impact on 2010-11 forecast royalty collections by approximately -2.2 per cent, assuming there are no changes in market and production conditions.

Forecasting conveyance stamp duty is also difficult because it is linked to activity in the property market. Although there is some evidence that the strong growth in residential property market activity experienced in 2010-11 is easing, the extent and timing of any reduction in growth is difficult to predict and could have a significant impact on conveyance duty collections. In addition, the Territory has a relatively small conveyance duty base which includes valuable commercial properties including pastoral properties and mining projects. These factors introduce significant variability in collections as a result of the impact of the duty collected from large commercial transactions.

In total, a variation of ±1 per cent to the parameters used to forecast Territory taxes and royalties would affect revenue by about $5.6 million for 2010-11.

The Review of Australia’s Future Tax System and the Commonwealth’s response to it was released on 2 May 2010. Given the terms of reference for the Review include state and territory taxes and royalties, there may be potential risks to the Territory’s revenue. The review covers a number of wide ranging reforms that are currently being analysed and accordingly, these risks are not quantifiable at this time.

ExpensesThe forward estimates for expenses are based on known policy decisions, with adjustments for parameters.

The parameter for wages growth in all forward years is 3 per cent which has remained unchanged, with revised CPI of 2.8 per cent for 2010-11 and 2.5 per cent for all forward years. The efficiency dividend is 2 per cent in 2010-11, 3 per cent for 2011-12 and 1 per cent in the forward years.

The most significant risk to these estimates on the expense side is increasing budget pressure due to increased cost and demand influences.

A further risk is in relation to any future enterprise bargaining agreements. The outcome of future enterprise bargaining agreements over and above amounts currently factored into the forward estimates will increase budgetary pressures.

As outlined earlier in this chapter, minimal capacity exists in the forward estimates to respond to budget pressures, over the capacity already factored into forward estimates.



A contingent liability is a liability that the Government may be called on to meet at some future date if a specified event should occur. Contingent liabilities of the Territory may arise out of a range of circumstances, the most common of which are indemnities and guarantees contained in agreements executed by the Territory. Contingent liabilities may also arise as a result of undertakings made by the Territory or as a result of legislation containing a guarantee or indemnity.

Contingent liabilities have the potential to materially affect the Budget due to the likelihood of an actual liability arising. As such, where possible, the potential outcome of an actual liability should be quantified. Details of estimated amounts of material contingent liabilities as at 30 June 2009 resulting from guarantees or indemnities granted by the Territory, as published in the 2008-09 Treasurer’s Annual Financial Report (TAFR), are presented in Table 3.9.

Estimated Quantifiable

Contingent Liability as at 30 June 2009

$M NPV1

Amadeus Basin to Darwin gas pipeline 52

Pine Crek/McArthur River electricity purchase agreements 65

Public Trustee common funds 35

1 Future values discounted at a nominal 5.6 per cent discount rate. Source: Northern Territory Treasury

Material contingent liabilities of the Territory are defined as guarantees and indemnities with potential exposure greater than $5 million and are disclosed in annual financial statements of the Territory in accordance with Australian Accounting Standards requirements. Quantifiable and unquantifiable material contingent liabilities of the Territory are outlined below.

Quantifiable Contingent LiabilitiesThese contingent liabilities result from arrangements for the purchase and transportation of gas, and the purchase and sale of electricity by and for the PWC. Material contingent liabilities relating to these arrangements are reported below.

The PWC has been a government owned corporation (GOC) since 1 July 2002. Under the Government Owned Corporations Act, a GOC is not within the shield of the Crown and the obligations of a GOC are not guaranteed by the Territory except where the Treasurer specifically agrees to this. The following Territory commitments were given prior to the PWC (formerly the Power and Water Authority) becoming a GOC and will remain in place until the relevant contractual arrangements cease.

The Territory has indemnified the financiers of the Amadeus Basin to Darwin Gas Pipeline Lease in relation to the residual value of the pipeline to be paid by the PWC on expiry or termination of the pipeline lease agreement.

The PWC has entered into agreements for the provision of gas and wholesale supply of electricity for the Pine Creek region and the McArthur River Mine. The agreement for the supply of gas contains three indemnities relating to the PWC supplying non-conforming gas.

Although the PWC’s contingent liability is unquantifiable, a major portion of the value of the contingent liability is the cost of overhauling turbine machinery, owned by the electricity producers, damaged by the provision of non-conforming gas. The

Contingent Liabilities

Table 3.9: Material Quantifiable Contingent

Liabilities

Electricity, Gas and Water Supply

Amadeus Basin to Darwin Gas Pipeline

Electricity and Gas Supply to Pine Creek and

McArthur River


2010-11 Budget

Territory’s maximum exposure is equivalent to the net present value of lease and operating charges under the purchase agreements.

Under the PWC’s current operating practices, the contingent events relating to each of the above indemnities are within the PWC’s control and are expected to be avoidable.

Statutory Contingent LiabilitiesUnder section 97 of the Public Trustee Act, the Treasurer indemnifies the Common Funds against any deficiencies in money available to meet claims on it. The Common Funds are a repository for all moneys received by the Public Trustee on behalf of estates, trusts or persons, and earns interest. Money to the credit of the Common Funds is invested according to the directions issued by an Investment Board.

Although a material statutory contingent liability exists, the prospect of this contingent liability being called upon is considered negligible.

Unquantifiable Contingent LiabilitiesUnquantifiable contingent liabilities exist which could pose a risk to the Government’s financial projections.

The Territory has contingent liabilities in this category that relate to indemnities and guarantees that have been provided in support of the Adelaide to Darwin railway project.

The AustralAsia Railway Corporation (AARC) and the Northern Territory and South Australian governments have entered into a concession arrangement for the Adelaide to Darwin railway on a build, own, operate and transfer-back basis.

Unquantifiable contingent liabilities of the Territory in relation to the Adelaide to Darwin railway project relate to the following:

joint guarantee of the obligations of the AARC;•

indemnities granted in relation to title over the railway corridor (title is secure but •the indemnity continues);

agreement to compensate in the case of early termination of the project (where a •termination event is caused by the Territory); and

indemnities in favour of the Commonwealth for its financial contribution.•

The Darwin Port Corporation has leased facilities at the Darwin Port to Asia Pacific Transport Pty Ltd, interfacing the port and the railway. There are contingent liabilities which arise out of the performance of the facilities.

AARC and the governments have comprehensive risk management procedures in place for all events that would give rise to liabilities.

The Northern Territory Government has entered into agreements for the relocation of fuel terminals from near the Darwin central business district to the East Arm industrial estate. The agreements provide for certain unquantifiable contingent liabilities to be provided to the developer of the new fuel terminal and an oil company. Government has put in place comprehensive risk management processes to address potential exposure.

Public Trustee Act

Transport



The Territory has granted a series of health-related indemnities for various purposes including indemnities to specialist medical practitioners employed or undertaking work in public hospitals and indemnities provided to medical professionals requested to give expert advice on inquiries before the Medical Board. Indemnities have also previously been granted to midwives.

Although the risks associated with health indemnities are potentially high, the beneficiaries of the indemnities are highly trained and qualified professionals. The indemnities generally cannot be called upon where there is wilful or gross misconduct on the part of the beneficiary.

Where the Territory has invited the participation of private sector persons and Government officers on boards of government owned or funded companies or corporations, the Territory may grant an indemnity to board members, which covers them for any losses that may result from good faith actions if an indemnity is not already contained in legislation establishing the board. This indemnity is generally consistent with the cover available through directors’ and officers’ insurance, and the policy of issuing an indemnity rather than purchasing commercial insurance is in line with the Government’s policy of self insurance.

The resulting contingent liabilities are considered low risk as board members are professionals selected on the basis of their expertise and knowledge. Further, the indemnities are restricted to good faith actions only.

Indemnities are granted to the Commonwealth and other entities involved in funding or sponsoring activities and programs initiated or undertaken by the Territory. Under the indemnities, the Government generally accepts liability for damage or losses occurring as a result of the activities or programs and acknowledges that, while the Commonwealth or another party has contributed financially or provided in-kind support, the Territory is ultimately liable for the consequences of the activity or program.

Although the resulting contingent liability may not always be low risk, depending on the activity undertaken, the Territory’s financial exposure is no greater than would have been the case without funding or sponsorship assistance.

The Government has indemnified private sector insurers providing workers’ compensation insurance in the Territory. The indemnity covers insurers for losses which may arise as a result of acts of terrorism. It is considered unlikely that the indemnity will be called, notwithstanding that the consequence in terms of financial exposure, should the indemnity be called, is potentially significant.

The Territory Government generally self insures its insurable risk. The size of the Government budget, coupled with the spread of risk, the small size and high degree of centralisation of Government activities, have been considerations in determining that self insurance is appropriate. Government’s primary exposure is to natural disaster risks that are outside Government control, for example, cyclones. In previous years, where catastrophic natural disasters result in major loss, the Commonwealth provided assistance, even beyond the terms of the Natural Disaster Relief and Recovery Arrangements.

Health and Community Services

Government Administration


2010-11 Budget

The Territory’s financial management framework is underpinned by centralised banking arrangements. The sole provider of banking-related services has been granted indemnities under the whole of government banking contract. These indemnities are considered not to involve significant risk.

Agreements for leases or licences of property, plant or equipment generally contain standard indemnity provisions covering the lessor or licensor for any losses suffered as a result of the lease or licence arrangement. These indemnities are considered not to involve significant risk.

Like negotiations not yet finalised, the outcome of legal proceedings brought by and against the Government also have the potential to affect actual Budget outcomes in current and future years.

Finance

Property and Business Services

Legal Proceedings

Budget Initiatives 43


Budget Initiatives

This chapter summarises the Government’s new and expanded initiatives for expenditure and revenue included in the 2010-11 Budget, along with significant new works on the 2010-11 Capital Works Program.

Table 4.1 provides an aggregate summary of expenditure initiatives across all agencies, with Table 4.2 outlining new expenditure initiatives and initiatives announced in previous Budgets that commence or increase in 2010-11. Table 4.2 also presents the amounts identified by agencies available for reprioritisation that have been redirected towards the new and expanded expenditure initiatives set out in Table 4.2.

The Capital Works Program tables list major works projects and capital grants. The amounts reflect the total project costs, not the cash allocation in the 2010-11 Budget. Table 4.3 provides an aggregate summary by agency, with Table 4.4 setting out the details by agency.

For more details about initiatives and capital projects, including capital works projects continuing from 2009-10, see Budget Paper No. 3 and Budget Paper No. 4. Budget Paper No. 3 also provides information on Commonwealth funded projects not included in this chapter.

Table 4.5 presents the summary of taxes and royalty measures, followed by a detailed discussion of these measures and other revenue increases, including revenue policy changes.

Table 4.1: Summary of Expenditure Initiatives

2009-10 2010-11 2011-12 2012-13 2013-14


$M $M $M $M $M

Auditor-General’s Office 0.14 0.14 0.14 0.14

Northern Territory Electoral Commission 0.22 0.22 0.22 0.22

Department of the Chief Minister 4.20 4.54 4.57 3.72 3.37

Department of the Legislative Assembly 0.30 1.20 0.60 0.60 0.60

Northern Territory Police, Fire and Emergency Services 8.43 12.92 16.09 18.95 18.39

Department of Justice 5.40 23.60 28.14 28.32 28.98

Department of Education and Training 5.85 32.12 35.19 35.77 35.27

Department of Housing, Local Government and Regional Services

5.61 9.44 8.03 8.85 7.61

Department of Health and Families 41.91 56.43 67.68 67.68 67.88

Department of Business and Employment 15.54 8.26 5.05 5.05 4.67

Tourism NT 0.25 0.25 0.25 0.25

Department of Natural Resources, Environment, The Arts and Sport

3.62 4.27 3.62 2.90 0.75

Department of Lands and Planning 0.93 14.25 13.41 10.95 10.65

Department of Construction and Infrastructure 1.16 1.16

Total Initiatives 93.20 168.80 182.99 183.40 178.53

Chapter 4

Overview

44 Budget Initiatives

2010-11 Budget

Table 4.2: Initiatives by Agency

2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Auditor-General’s OfficeAdditional funding to support increased audit activity 200 200 200 200

Savings identified for reprioritisation1 - 60 - 60 - 60 - 60

Total 140 140 140 140

Northern Territory Electoral CommissionFunding to support increased operational expenses 250 250 250 250


Total 220 220 220 220

Department of the Chief MinisterContinuation of the Ethnic Communities Facilities Development

Program 250 250 250 250

Support for Council of Australian Governments activities 220 800 800 800 800

Implementation of the Territory 2030 Strategic Plan 650 650 650 650 650

Territory contribution towards the Alice Springs Transformation Plan 310 820 820

Support for the operation of the Darwin Waterfront Precinct 1 500 2 000 2 000 2 000 2 000

Additional resources to implement the Northern Territory Climate Change Strategy

361 722 722 722 472

Support for the V8 Supercars including the Race and Rock concert and extension of the sanction agreement

350 93 127 100

Costs associated with Blue Mud Bay negotiations 427

Support to stage round 2 of the Australian Superbike Championship in Darwin

378


Total 4 196 4 535 4 569 3 722 3 372

Department of the Legislative AssemblyIncreased funding for building management costs 189 189 189 189

Additional funding to support the Statehood Steering Committee 600

Funding to support the Council of Territory Cooperation 300 600 600 600 600


Total 300 1 200 600 600 600

1 Savings from discretionary costs including consultancy, advertising and travel.

(continued)



2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Northern Territory Police, Fire and Emergency ServicesWorking Future – Establishment of Emergency Services Units in

Territory Growth Towns1 000 1 000 1 000 1 000

Additional funding for Community Fire Safety Specialists2 1 495 1 363 1 363 1 363

Increased funding for firefighters 620 620 620 620

Funding to support an additional firefighter in Jabiru 200 200 200 200 200

Increased funding for the police housing allowance 1 056 2 000 2 000 2 000 2 000

First Response Patrol and public reporting hotline to address antisocial behaviour

973 973 973 973

Additional resources to operate the Alice Springs Youth Hub 400 400 400 400

Increased funding to maintain and support key information and communications technology systems

1 400 1 400 1 400 1 400

Police Beat offices in shopping precincts and a Bagot Police Post 4 792 6 014 7 374 7 374 7 374

Additional resources for the Northern Territory Fire and Rescue Service 2 378 3 493 5 442 8 302 7 742

Savings identified for reprioritisation1 - 4 680 - 4 680 - 4 680 - 4 680

Total 8 426 12 915 16 092 18 952 18 392

Northern Territory TreasuryEnhanced graduate employment programs 200 200 200 200

Additional support for expanded Utilities Commission and electricity reform

300 300 300 300

Increased demographic research program 100 100 100 100


Total 0 0 0 0

Department of JusticeOperational funding for the new Barkly prisoner work camp 2 545 3 087 3 087 3 087

Funding to modernise the Integrated Justice Information System 2 700 2 700 2 700 2 700

Additional funding to manage juvenile detainees 1 000 2 000 2 000 2 000 2 000

Increased funding for the Crime Victims Services Unit and payments to assist victims of crime3

1 500 2 560 2 560 2 560 2 560

Support to implement reforms under the National Partnership Agreement to Deliver a Seamless National Economy

700 200

Funding to support Thoroughbred Racing NT 3 590 3 949 4 329 4 987

Additional funding to manage increased prisoner numbers 7 500 11 300 11 300 11 300

Additional funding for initiatives to address antisocial behaviour 965 965 965 965

Additional remote area corrections officers 1 000 1 300 1 300 1 300 1 300

Increased funding for rehabilitation programs for sex offenders 900 1 150 1 150 1 150 1 150

Continued support for the Indigenous Family Violence Community Based Program

1 000 1 300 1 640 1 640 1 640


Total 5 400 23 596 28 137 28 317 28 975


2 Amount includes capacity from additional fees to be collected by the Central Holding Authority.

3 Amount includes capacity from additional agency revenue of $1.06 million from 2010-11 received through increased victims levy revenue.

(continued)


2010-11 Budget

2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of Education and TrainingWorking Future Initiatives

Additional funding for new education and training programs in Territory Growth Towns

619 5 263 6 425 6 425 6 425

Establish a 3-9pm after-school Indigenous language and culture initiative in very remote community schools

3 100 3 100 3 100 3 100

Additional teachers to increase education opportunities for children in remote communities

2 400 3 600 4 800 4 800 4 800

Continued roll out of new mobile preschools for children in remote communities

2 000 2 500 3 000 3 000 3 000

Child protection unit to provide specialist support to schools including ten student counsellors for remote communities

700 900 1 030 1 030 1 030

Other Initiatives

Alice Springs Youth Action Plan – Stage 2 952 1 203 1 203 1 203

Increased use of Family Responsibility Agreements 1 100 1 100 1 100 1 100

Initiatives to address antisocial behaviour involving Palmerston youth 50 100 100 100

Additional funding for electricity, furniture, cleaning and fit-out of new education infrastructure

2 500 2 500 2 500 2 500

Increased funding to repair and maintain education infrastructure 5 000 5 000 5 000 5 000

Continuation of employer incentives under the Jobs NT 2010-12 initiative

500 1 300 500

Operational funding for Rosebery Primary and Middle schools 13 121 11 990 13 371 13 371

Funding to expand the Positive Learning Centre in Palmerston 807 807 807 807

Establish Centres for Excellence and the Institute of School Leadership, Learning and Development

800 900 900 900

Additional resources for the Teachers Registration Board2 130 130 130 130 130


Total 5 849 32 123 35 185 35 766 35 266


2 Amount includes capacity from fees to be collected by the Central Holding Authority.

(continued)



2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of Housing, Local Government and Regional ServicesWorking Future – Additional resources to address high priority small

scale projects in Territory Growth Towns1 500 2 000 2 500 3 000

Funding to support the Fred’s Pass Sport and Recreation Management Board Inc.

450 450 425

Additional resources to establish and operate managed accommodation facilities

1 103 930 930 930

Improve water quality at Yuelamu, Kintore and Ali Curung under the Strategy for Safe Water

424 435 445 457

Additional funding for repairs and maintenance for public and government employee housing

1 000 1 000 1 000 1 000 1 000

Additional resources for shelter accommodation projects for homeless people in the Territory

1 113

Operational funding for the transitional accommodation facility in Berrimah

1 220 1 220 1 220 1 220

Funding for improved coordination of service delivery in remote Indigenous communities

1 000 2 000 2 000 2 000 2 000

Additional resources to implement the Northern Territory Climate Change Strategy to trial renewable and low emission energy

2 000 2 000

Territory Government contribution to fund a tenancy sustainability scheme and ongoing management costs under the A Place to Call Home Program

498 747 996 1 329


Total 5 611 9 444 8 031 8 849 7 607

Office of the Commissioner for Public EmploymentFunding for the implementation of the Indigenous Employment and

Career Development Strategy 100 100 100 100


Total 0 0 0 0


(continued)


2010-11 Budget

2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of Health and FamiliesAdditional funding for child protection resources 3 037 3 037 3 037 3 037

Additional funding for services for children in care 626 6 000 6 000 6 000 6 000

Operational funding for the Alan Walker Cancer Care Centre 3 067 7 256 7 256 7 256 7 256

Additional pathology staff at Royal Darwin Hospital 620 620 620 620

Upgrade Royal Darwin Hospital’s emergency power generation capability

2 618 2 618 2 618 2 618

Establish a mental health triage and response protocol 930 930 930 930

Funding for a new nurse staffing ratio implemented across the Territory hospital network resulting in an additional 95 nurses

9 500 9 500 9 500 9 500 9 500

Additional funding to support acute care services 4 189 756 756 756 3 374

Additional funding to support the reform of Adult Guardianship in the Northern Territory

200 200 200 200

Increased resources for environmental health 583 583 583 583

Funding to establish the Growing Our Own Health Workforce school-apprenticeship program

500 500 500 500


250

Additional resources to establish and operate managed accommodation facilities

591 485 485 485

Additional funding to repair and maintain health infrastructure 2 000 2 000 2 000 2 000

Alice Springs Youth Action Plan – Stage 2 102 2 115 2 115 2 115 2 115

Family Support Centre expansion of services into Palmerston 100 200 200 200

Additional funding for crisis accommodation and support for children in care to address antisocial behaviour amongst Palmerston youth

300 1 000 1 000 1 200

Additional resources to enhance secure care services for young people and adults with complex care needs

3 260 5 519 11 428 11 428 11 428

Expansion of the Child Abuse Taskforce 2 000 2 300 2 500 2 500 2 500

Additional care and case management for children in care 2 000 2 500 3 500 3 500 3 500

Residential care unit for children in care 1 500 1 850 1 850 1 850 1 850

Therapeutic services for children in care 600 800 800 800 800

Additional child protection workers for children in care 1 500 1 800 2 000 2 000 2 000

Further funding to increase the capacity of Aboriginal child protection and care services

1 800 3 300 3 300 3 300 3 300

Continued expansion of Sexual Assault Referral Centre services in Darwin, Alice Springs, Tennant Creek and Katherine

1 200 1 500 1 900 1 900 1 900

Targeting chronic disease 1 300 2 500 5 000 5 000 5 000

Continued development of integrated community family violence and support services in remote communities

1 500 2 000 2 600 2 600 2 600

Supporting Indigenous employment by replacing Community Development Employment Project jobs with real jobs in the Northern Territory Public Sector

1 000 1 250 1 250 1 250 1 250

Capacity to meet increased demand for renal dialysis and services to manage chronic and early kidney disease

4 150 5 850 5 850 5 850 5 850


Total 41 912 56 425 67 678 67 678 67 878


(continued)



2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of ResourcesAdditional funding to expand mining regulation 685 685 685 685


Total 0 0 0 0

Department of Business and EmploymentFunding to support the Jobs NT 2010-12 initiative 2 750 2 950 2 950 2 950

Rental increases for leased commercial properties 4 058 3 097 3 097 3 097 3 097

Continuation of the Northern Territory Research and Innovation Fund 373 373 373


1 410

ecoBiz NT 677 702

Transition costs for new information communication and technology service contracts

10 800 1 300


Total 15 535 8 258 5 046 5 046 4 673

Tourism NTFunding to support and promote new airline services to the Territory 250 1 000 1 000 1 000 750


Total 250 250 250 250 0

Aboriginal Areas Protection AuthorityAdditional funding for ongoing operational expenses 60 60 60 60


Total 0 0 0 0


(continued)


2010-11 Budget

2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of Natural Resources, Environment, The Arts and SportExpand capacity of the Environment Protection Authority 500 500 500 500

Funding to bring the ACT Brumbies Super 14 Rugby team to the Territory for pre-season trial games

300 300 300

Funding to bring Australian Football League matches to the Territory 1 624 1 526 1 324 1 468 1 324

Grant funding to the Fred’s Pass Sport and Recreation Management Board Inc. to upgrade and construct new sporting and other infrastructure at Fred’s Pass Reserve

980 810 500

Resources to implement and administer a Container Deposit Scheme 181 625 490 315 315

Funding to bring National Rugby League games to the Territory for pre-season trial games

285 320 285

Additional funding for crocodile management and public awareness campaigns

290 265 265 265 265

Additional resources to manage the impact of feral camels in Central Australia

300 1 000 1 000 1 000

Establish an adaptation program for Mary River wetlands as part of the Northern Territory Climate Change Strategy

200 200 200 200

Management of the North Australian Fire Information website as part of the Northern Territory Climate Change Strategy

100 200 100

Support for the Strategic Weed Management Program 640 450 450 450 450


Total 3 620 4 266 3 624 2 898 754


(continued)



2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Department of Lands and Planning Working Future Initiatives

Funding for reporting officers to improve safety at remote airstrips 500 1 000 1 000 1 000 1 000

Additional resources to conduct land surveys of existing lots and infrastructure in Territory Growth Towns

1 728 1 608 296

Additional resources to trial remote passenger transport services 1 950 1 150

Other Initiatives

Funding to progress the new town of Weddell project 1 950 950 950 950

Expand bus services in the Alice Springs area 650 650 650 650

Continue the provision of statutory valuation services 433 202 202 202

Additional resources to deliver the Northern Territory road program 500 500 500 500

Additional resources to enhance Motor Vehicle Registry services 200 200 200 200

School bus services for Rosebery schools 978 1 956 1 956 1 956

Additional funding for repairs and maintenance on Territory roads 3 000 3 000 3 000 3 000


300

Improved bus services operating between Darwin, Casuarina Palmerston and the rural area

3 200 3 200 3 200 3 200

Funding to undertake the Energy Smart Schools and Government Energy Efficiency programs

429 220


Total 929 14 246 13 410 10 948 10 652

Department of Construction and InfrastructureAdditional funding to meet ongoing operational expenses 337 1 194 1 194 1 194

Funding to implement a building certification package in remote areas 1 155 1 155

Savings identified for reprioritisation1 - 337 - 1 194 - 1 194 - 1 194

Total 1 155 1 155 0 0 0



2010-11 Budget

$M

Northern Territory Police, Fire and Emergency Services 25.5

Department of Education and Training 34.8

Department of Housing, Local Government and Regional Services 673.1

Department of Health and Families 31.6

Department of Resources 1.0

Department of Natural Resources, Environment, The Arts and Sport 6.2

Department of Lands and Planning 160.6

Land Development Corporation 18.0

Darwin Port Corporation 2.2

$M

Northern Territory Police, Fire and Emergency ServicesTennant Creek Police Station – upgrade 3.7

Working Future

Arlparra Police Station and associated infrastructure 9.4

Upgrade existing and construct new cyclone shelters 2.0

Imanpa Police Station and associated infrastructure 9.4

2010-11 Major Capital Grants

Working future – cyclone shelter upgrades 1.0

Department of Education and TrainingAcacia School – infrastructure upgrade 2.8

Centralian Middle School at Gillen and Youth Hub at Anzac Hill 6.4

Casuarina Senior College – upgrade 5.0

Henbury School – infrastructure upgrade 1.0

Nemarluk School – infrastructure upgrade 3.0

Sanderson Middle School – refurbish classrooms 1.0

Working Future

Additional office space for student counsellors 0.4

Child and family centres 8.1

Elliott School – upgrade 0.5

Ntaria School (Hermannsburg) – upgrade 1.3

Homeland learning centre upgrades at various schools 2.0

Maningrida School – refurbish classrooms and teacher preparation areas 1.3

Yirrkala School – replace current demountable block with four new classrooms

2.0

(continued)

Table 4.3: Summary of 2010‑11 New Capital Works

Table 4.4: 2010‑11 Capital Works by Agency



$M

Department of Housing, Local Government and Regional ServicesGovernment Employee Housing

Gove District Hospital – construct 6 two-bedroom units 3.8

Working Future

Construct additional housing for government employees in remote locations 6.3

Land servicing in remote locations 1.0

Replace existing government employee housing in remote locations 2.0

Construct teacher housing in remote locations 7.8

Upgrade government employee housing in remote locations 6.0

Public Housing

A Place to Call Home – construct 4 two-bedroom units 1.3

Larapinta Seniors Village 5.6

Redevelop unit complexes across all regions 4.0

Nation Building and Jobs Plan social housing 31.8

Indigenous Housing

Working Future

Land servicing and essential services infrastructure 236.5

Strategic Indigenous Housing and Infrastructure Program 255.4

2010-11 Major Capital Grants – Indigenous Essential Services

Working Future

Ali Curung – remove elevated fluoride and nitrate levels from water 2.7

Alpurrurulam – renewable energy 2.0

Kintore – remove elevated nitrate levels from water 2.0

Yuelamu – secure a long-term potable water source 1.9

2010-11 Major Capital Grants – Other

Working Future

Municipal and Essential Services 4.1

Strategic Indigenous Housing and Infrastructure Program 98.9

Department of Health and FamiliesKatherine District Hospital renal facilities 2.8

Royal Darwin Hospital – patient accommodation 18.6

Secure care facilities in Alice Springs 5.9

Secure care facilities in Darwin 3.5

Working Future – Borroloola Health Clinic upgrade 0.8

Department of ResourcesRecreational fishing infrastructure 1.0

(continued)


2010-11 Budget

$M

Department of Natural Resources, Environment, The Arts and SportHidden Valley Raceway Motor Sports Complex – upgrade 1.3

Howard Springs Nature Park – improved facilities 1.8

Litchfield National Park – construction of the Wangi Visitor Centre facility 2.1

Installation of a stinger net in the Darwin region 1.0

Department of Lands and PlanningArnhem Highway – upgrade 2.0

AZRI development – headworks for new residential subdivision 10.0

Beef Roads – selective upgrade on Douglas Daly area roads 2.0

Blackspot Program 1.0

Capital Cities Projects 2.0

Fog Bay Road – upgrade and seal further sections 2.5

Greening Heart of Darwin 2.0

Katherine Main Street Initiative 0.4

Litchfield Road, stage 3 – upgrade and seal 6 kilometres 3.0

Local Tourist Roads – upgrade of Woolianna and Marrakai Station roads 1.0

National Network flood immunity improvements 8.0

National Network Infrastructure Road Safety Initiatives 5.0

National Network strengthening and widening 14.0

Off-road Cycle Path – Palmerston to Howard Springs link route 3.0

Palmerston East – headworks 20.0

Roads to Recovery Program 4.6

Rural arterials – pavement strengthening and widening 2.0

Stuart Highway – construction of new high level bridge at Cullen River 6.0

Stuart Highway – Darwin to Katherine overtaking opportunities 5.0

Tennant Creek Main Street Initiative 0.4

Urban arterials – strengthen deficient pavement sections on Bagot Road 1.0

Urban arterials – traffic management improvements to major urban arterial roads

3.0

Urban arterial roads landscaping 1.0

Vanderlin Drive Duplication – Patterson Street to Mueller Road 3.0

Working Future

Canteen Creek airstrip upgrade and seal 2.5

Community, Beef and Mining Roads:

Central Arnhem Road – stream crossing upgrades 14.0

Port Keats Road – stage 1 upgrade 10.0

Integrated Regional Transport Strategy – barge ramps 2.0

Jasper Creek Bridge – Buchanan Highway 1.2

Sandover Highway – upgrade and seal 2.0

Tanami Road – upgrade and seal 2.0

Umbakumba Road – upgrade and seal 20.0

Utopia airstrip upgrade 2.5

Yarralin airstrip upgrade and seal 2.5

(continued)



$M

Land Development CorporationCasey Road Development – provision of 6 blocks of industrial land 3.0

Defence Support Hub stage 2 – development of further industrial lots 3.0

Development of a large block of waterfront land for leasing to developers 2.5

Services to East Arm Marine Services Precinct sewer 5.0

Hidden Valley to East Arm Marine Services Precinct haul road link 4.5

Darwin Port CorporationEast Arm Wharf – ship loader modification 1.0

East Arm Wharf – water supply upgrade 0.5

Pontoon for pilot and cruise vessels 0.7

A number of key revenue measures are included in the 2010-11 Budget. A summary of the taxes and royalty measures administered by Northern Territory Treasury is provided at Table 4.5, with a full description of each initiative and other policy variations. Other revenue measures are described later in this section.

Table 4.5: Summary of Taxes and Royalty Measures

2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Abolition of stamp duty on business property conveyances excluding land

- 10 327 - 10 585

Increase first home owner stamp duty concession to $540 000 - 450 - 2 700 - 2 767 - 2 837 - 2 907

Increase principal place of residence rebate to $3500 - 200 - 1 500 - 1 537 - 1 576 - 1 615

New senior, pensioner and carer stamp duty concession of $8500 - 250 - 1 200 - 1 230 - 1 261 - 1 292

Increase in mineral royalty rate to 20% 9 176 14 839 14 839 14 839

Total - 900 3 776 9 305 - 1 162 - 1 560

Home Ownership IncentivesA key priority in the Territory 2030 Strategic Plan is to achieve a balanced housing market across all market segments. One of the Government’s targets is for the Territory to be one of Australia’s most affordable housing markets.

From 4 May 2010, home buyers purchasing a principal place of residence will pay less stamp duty. This increased assistance is at a total estimated cost to the Budget of $5.4 million per year. Further detail on these actions by the Government to improve affordability and increase home ownership among all Territorians is provided below.

For first home buyers, the first home owner concession has been increased from the first $385 000 of a home’s value to the first $540 000. Subject to eligibility requirements, this means that first home buyers will pay no stamp duty on the first $540 000 of their home’s value. This is an increase of over $11 000 in the maximum concession to $26 730.

This increase ensures that stamp duty will not be an impediment for most home buyers in the Territory looking to purchase their first home.

Revenue Initiatives

First Home Owner Stamp Duty Concession


2010-11 Budget

In 2009, the Government introduced a stamp duty exemption for the lease of residential premises in a retirement village. Also, senior citizens, pensioners and carers have been entitled to the same principal place of residence rebate that is provided to other home buyers who are not first home buyers.

Recognising that on retiring many people do not move to retirement villages, from 4 May 2010, a much higher stamp duty concession of up to $8500 has been introduced. This new concession will be available to non-first home buyers aged at least 60 years or buyers who hold a Northern Territory Pensioner and Carer Concession Card.

This means that these home buyers will pay no stamp duty on about the first $263 190 of their home’s value. This reduces a barrier to the purchase of a home and facilitates a retiree selling an existing home that does not suit their needs to move into a home that is more suitable. This concession may also encourage interstate retirees to consider the Territory as a place to retire.

Other eligibility criteria for the new senior, pensioner and carer concession will be similar to the other stamp duty home incentives schemes. For example, the concession is subject to a value limit of $385 000 for vacant land and $750 000 for a home.

For other home buyers, the principal place of residence rebate has increased by 40 per cent from $2500 to a maximum of $3500. This means that these home buyers will pay no stamp duty on about the first $143 330 of their home’s value (previously $111 850).

From 4 May 2010, the first home owner grant and the stamp duty home owner incentive schemes have been extended to home owners who acquire land or homes pursuant to a long-term lease granted under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). This measure is aimed at promoting home ownership among Indigenous Territorians and partially addresses the disparity in home ownership rates between Indigenous and non-Indigenous Territorians.

Also, from 4 May 2010, there is an increase the period in which an owner builder, or a person who has entered into a contract to have a home built, is required to have a home built from three years to five years after obtaining title to the land. Also there will not be a construction time limit for an off-the-plan contract, but a requirement to occupy the home as a principal place of residence for at least six months within 12 months of the person taking possession of the home.

The Government will also introduce a stamp duty exemption for the transfer of property to a Special Disability Trust where no consideration has been given. Special Disability Trusts were introduced by the Commonwealth to assist relatives of disabled persons to engage in succession planning for the benefit of the disabled person by providing concessional means testing and tax treatment to assets held in such trusts. The exemption seeks to encourage the use of these trusts from 1 July 2010.

New Senior, Pensioner and Carer Stamp Duty

Concession

Stamp Duty Principal Place of Residence

Rebate Increase

Other Housing Affordability Initiatives



Mineral Royalty Rate IncreaseFrom 1 July 2010, the Territory’s mineral royalty rate will increase from 18 per cent to 20 per cent of the net value of a mine’s production that is over $50 000. As is explained in more detail in Chapter 6, unlike other states, the Territory imposes royalty on the profitability of a mine. The profits-based royalty regime is founded on the premise that the Territory is the owner of the minerals that are extracted and the higher rate aims to increase the contribution of the mining industry to the long-term welfare of the Territory and the community.

The increased royalty rate will only affect a small number of mines as the majority of mining projects in the Territory are in the early stages of production and are not yet obliged to pay any royalty. The new rate is expected to increase revenue by about $9.2 million in 2010-11 and $14.8 million in 2011-12.

Equity, Efficiency and Administrative EnhancementsThe Government has approved a package of changes that enhance the simplicity, efficiency and equity of the Territory’s stamp duty and general taxation regime.

The following measures, to commence from 1 July 2010, will:

clarify that a memorandum can be created for the reassessment of stamp duty •where it is impractical or impossible for the original instrument to be lodged, or where the dutiable value of a motor vehicle is not correct when the vehicle is transferred;

broaden the concept of the family trust for the purposes of the substituted •purchaser provisions by allowing a family trust to have a family company as a beneficiary. The substituted purchaser provisions were introduced in 2009 and allow a purchaser to nominate a related person prior to settlement to receive the property being purchased without double stamp duty consequences unless a sub-sale of the property has occurred;

allow stamp duty to be assessed on the value of land granted by the Territory, that •is a Crown leasehold or Crown freehold estate, where monetary consideration is payable but the exact amount is unascertainable at the time of the grant;

ensure that payments by a taxpayer can be allocated in the order of interest, •penalty tax and primary tax; and

clarify that, despite their repeal, the former • Pay-roll Tax Act and Stamp Duty Act and the Act previously titled the Taxation (Administration) Act continue to be taxation laws for the purposes of the current taxation administration legislation.

Also, in order to maintain the integrity of the Territory’s stamp duty legislation, the Government has approved measures that:

clarify, with effect from 4 May 2010, that consideration given for the grant of a •lease includes consideration given for an option to require the grant of a lease;

from 4 May 2010, condition an exclusion, for an acquisition of an interest in a •landholding corporation that is made as part of a financing arrangement, to ensure that such acquisitions are made for genuine financing purposes; and

clarify, from 1 July 2010, the time when an interest in a landholding corporation •is acquired to ensure that the timing of an acquisition cannot be deferred to avoid stamp duty.


2010-11 Budget

Other Revenue Measures From 1 July 2010, the victims levy for infringement notices will increase from $10.00 to $20.00. Additional revenue raised will offset increasing costs associated with the Crime Victims Services Unit and payments to victims of crime.

The Government has approved the application of fees and charges for Northern Territory Fire and Rescue Service attending false alarms, and for fire safety inspections and reports on building plans. Additional revenue raised will offset the provision of additional Community Fire Safety Specialists.

Victims Levy

Northern Territory Fire Alarm System

Transmission

Intergovernmental Financial Issues 59


Intergovernmental Financial Issues

Intergovernmental financial relations have changed substantially in the last two years. The reasons are the ongoing implementation of the Council of Australian Governments (COAG) reform agenda, the effect of the global financial crisis (GFC) on the finances of all Australian governments including the consequential flow on to both revenues and expenses through economic stimulus payments, the outcome of the Commonwealth Grants Commission’s 2010 Review of Relativities and more recently the Commonwealth’s health reform proposals. Further changes are expected as a result of the Henry Tax Review which was released on 2 May 2010.

The Intergovernmental Agreement on Federal Financial Relations (IGA) was signed in late 2008 and reformed the arrangements for Commonwealth Specific Purpose Payments (SPPs) to the states and territories, established National Agreements (NAs) in six key areas of government services and introduced a new form of agreement called National Partnerships (NPs) with more than 50 NPs now having been established. States also provide services on behalf of the Commonwealth with funding provided through agreements known as Commonwealth Own Purpose Expenses (COPEs). Partial commencement of the new arrangements occurred in the second part of 2008-09 with full implementation in 2009-10.

Specification of performance targets are a requirement of NAs and NPs. Assessments of performance are required to be undertaken on an annual basis, with the baseline performance reports for NAs being prepared by the COAG Reform Council (CRC) during 2009-10. COAG has also requested that the Productivity Commission produce a National Indigenous Expenditure Review by mid-2010. Fiscal stimulus measures designed to offset the effects of the GFC by supporting economic growth and jobs are part of the NPs included in 2009-10 and 2010-11. The NAs, NPs and associated Implementation Plans will be reviewed during 2010 for consistency with the requirements set out in the IGA and under the auspices of the Ministerial Council for Federal Financial Relations.

The GFC and the associated slowdown in the national economy resulted in significant falls in GST collections during 2008-09 and the estimates for 2009-10. The improvement in the Australian economy that has been increasingly evident this financial year has caused GST estimates to be revised upwards, with higher revenue now expected in 2009-10 and increases in growth rates for 2010-11 and the forward estimates period. However GST revenue is not expected to return to pre-GFC levels until 2012-13.

In February 2010, the Commonwealth Grants Commission released its Report on GST Revenue Sharing Relativities – 2010 Review. The 2010 review is the first major review of relativities since 2004 and included a requirement for greater simplicity in the assessment methodology used to determine relativities. The Commission substantially revised its assessment methods for the 2010 review including a reduction in assessment categories from 60 to 21, recognising fewer influences on the cost and use of services, greater reliance on nationally based and independently derived data sources, a reduction in the assessment period from five years to three years and the inclusion of an assessment of capital requirements.

The outcome of the 2010 review is a decline in the Territory’s 2009 relativity of 5.25073 to 5.07383, which reduces the Territory’s share of GST revenue from

Chapter 5

Overview

60 Intergovernmental Financial Issues

2010-11 Budget

5.4 per cent in 2009-10 to 5.2 per cent in 2010-11 and will result in a significant reduction in the Territory’s fiscal capacity.

Following receipt of an expert review report and considerable consultation, the Commonwealth released the initial National Health and Hospitals Plan in March 2010, with an additional package released in April 2010. At its meeting of 19 and 20 April 2010, COAG, with the exception of Western Australia, agreed to implement a range of national health reforms including the establishment of a National Health and Hospitals Network. This represents substantial changes to responsibility for and financing of Australian health services, with the Commonwealth taking responsibility for 60 per cent of public hospital funding and 100 per cent of primary health care funding. This is to be achieved through the dedication of around one-third of the national GST Pool, the establishment of independent Local Health Networks that will receive funding from a pool of Commonwealth and state contributions, and the introduction of activity-based funding (ABF) with a transition to national efficient costs adjusted for factors such as hospital size and patient characteristics. The new arrangements also include additional funding for improved waiting times for emergency departments and elective surgery, sub-acute facilities in hospitals, and mental health and aged care services.

Discussions are expected to continue over the next few months, with a final work plan for the implementation of the reforms due to be agreed by COAG by 30 June 2010.

Australia’s federal system is characterised by a high level of vertical fiscal imbalance, whereby states are responsible for delivering the major government services such as health, education and law and order but do not have sufficient own-source revenue raising capacity to fully support these services. The reverse is true for the Commonwealth, where expenditure requirements for its own services are less than the revenue it collects. Consequently, the Commonwealth provides transfer payments to all states and territories to enable them to meet their expenditure requirements. There are two types of Commonwealth grants to the states:

General purpose payments, which are predominantly GST revenue payments. •These are untied payments that can be used by the states for any purpose; and

Tied grants that include SPPs and NPs provided for a specific function or program, •for either current or capital purposes, and that are required to be acquitted against agreed key performance indicators.

The Territory has a higher reliance on funding from the Commonwealth than the states as a consequence of its small revenue base, the high fixed costs associated with delivering the same range of general government services as provided in other jurisdictions and its very different population demographic composition, namely its highly dispersed and large Indigenous population. On average, about 80 per cent of the Territory’s total revenue has been from Commonwealth grants, compared with about 50 per cent for the other states. However, in recent years the Commonwealth’s contribution to all jurisdictions including the Territory has increased, due mainly to the effect of higher NPs including fiscal stimulus payments. In the Territory, the increase is also due to Indigenous related payments including

Federal Financial Relations



for Closing the Gap initiatives and Indigenous housing. Estimated Commonwealth funding to the Territory is set out in Table 5.1.

2009-10 2010-11

$M % total revenue

$M % total revenue

Total Commonwealth Revenue 3 726 82 3 944 82

Goods and Services Tax (GST) 2 378 52 2 480 52

Budget Balancing Assistance (BBA) 95 2

Specific Purpose Payments (SPP) 274 8 274 8

National Partnerships (NP) 662 14 961 20

Other Commonwealth Revenue 317 5 229 3

Own-Source Revenue 845 18 840 18

Total Revenue 4 571 100 4 784 100

Note: Budget Balancing Assistance was paid in 2009-19 in recognition that the Territory’s 2008-09 GST revenue did not meet its guaranteed minimum amount. Source: Northern Territory Treasury

GST RevenueGST represents the largest fiscal transfer from the Commonwealth to the states. The faster than expected recovery in the national economy has resulted in upward revisions of GST collections during 2009-10 and over the forward estimates period. At the time of the 2009 Budget, Commonwealth estimates of the GST revenue payable to states for 2009-10 was $41 330 million; however, this was increased to $42 300 million in the Mid-Year Economic and Fiscal Outlook (MYEFO). The Commonwealth Treasurer advised during the April 2010 COAG meeting that the estimates had again been revised upwards. Collections in 2009-10 are now expected to be $44 450 million as per Table 5.2, with increased annual growth over the forward estimates period as shown in Table 5.3.

While the growth in national GST collections has improved the budget outlook in 2009-10 and future years, GST revenue has not returned to pre-GFC levels and is not estimated to do so until 2012-13. Table 5.2 with shows the changes in national and Territory GST revenue prior to, during and with Australia’s emergence from the GFC. While national GST revenue in 2009-10 is now estimated to be higher than at the time of the 2009 Budget, it remains more than $3 billion lower than estimated at the time of the 2008 Budget and prior to the GFC. While the increase in the GST pool during 2009-10 has resulted in an increase of $153 million to the Territory’s GST revenue, this is estimated to be $154 million lower than it would have been had the GFC not occurred. In 2011-12, the Territory’s GST is estimated to be around $100 million less than pre-GFC levels, with full recovery not anticipated until the end of 2012-13.

2009-10 2010-11 2011-12

National GST Revenue $M $M $M

2008-09 Budget 47 670 50 130 52 638

2009-10 Budget 41 330 43 810 46 438

2010-11 Budget 44 450 47 695 50 843

Difference in National GST Revenue between 2008 and 2010

- 3 220 - 2 435 - 1 795


Table 5.1: Commonwealth Funding to the

Northern Territory

Table 5.2: Comparisons of GST Revenue Estimates between 2008 and 2010


2010-11 Budget

The amount of GST that each state receives is dependent on national GST collections, each state’s share of the national population and the GST relativities as recommended by the Commonwealth Grants Commission. Table 5.3 shows the budget and forward projections of the Territory’s GST revenue and the associated key parameters.

2009-10 2010-11 2011-12 2012-13 2013-14

National GST Revenue1 ($M) 44 450 47 695 50 843 54 046 57 235

NT relativity2 5.25073 5.07383 5.14841 5.18072 5.21713

NT share of national population (%) 1.022 1.023 1.025 1.028 1.031

NT GST Revenue3 ($M) 2 378 2 480 2 683 2 878 3 078

1 Updated National GST Revenue estimate. 2 Takes into account the five year transition to an equal per capita allocation of SPPs. 3 Excludes $95.3 million BBA and residual 2008-09 GST ($0.9 million) received in 2009-10. Source: Northern Territory Treasury

Table 5.3 shows the Territory’s relativity, estimated share of national population growth and estimated GST revenue from 2009-10 to 2013-14. The decrease in the Territory’s relativity in 2010-11 compared to 2009-10 arises from the outcome of the Commonwealth Grants Commission’s 2010 Review, whereas changes in the Territory’s relativity from 2011-12 show the effect on the Territory’s relativity of the transition to per capita distribution of SPPs. Further details on both issues are covered later in this chapter.

Table 5.3 excludes the receipt of $96.2 million, predominantly $95.3 million in Budget Balancing Assistance paid to the Territory in 2009-10 in respect of the 2008-09 year when, due to the national economic downturn, GST revenue fell below the guaranteed minimum amount as set out in the IGA. If this payment is taken into account, total GST revenue in 2010-11 is only marginally more than that received in 2009-10.

The Territory’s share of national population is estimated to increase from 1.022 per cent in 2009-10 to 1.023 per cent in 2010-11, with further increases projected in the forward estimates.

The estimates in Table 5.3 are based on current information informed by Northern Territory and Commonwealth forecasts and are subject to change due to comparatively high levels of volatility of key parameters and the sensitivity of the Territory’s GST revenue share to changes in any or all of these parameters. The GST estimates present a significant risk to the Territory’s budget, with a detailed examination of these set out in Chapter 3 of this Budget Paper. The estimates do not include changes to the GST arrangements stemming from COAG’s agreement on National Health and Hospitals Reform, which are discussed later in this chapter.

Commonwealth Grants Commission and the 2010 ReviewThe Commonwealth Grants Commission is responsible for recommending to the Commonwealth the distribution of GST revenue between the states. As required under the IGA, the Commission’s recommendations are based on the principle of horizontal fiscal equalisation, which is defined as:

State governments should receive funding from the pool of goods and services tax such that, after allowing for material factors affecting revenues and expenditures, each would have the fiscal capacity to provide services and the associated

Table 5.3: Northern Territory GST Revenue Projections



infrastructure at the same standard, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency. (CGC 2010)

In February 2010, the Commission released its Report on GST Revenue Sharing Relativities – 2010 Review. The previous major review by the Commission was concluded in 2004 and following analysis by Heads of Treasuries for the then Ministerial Council of Commonwealth-State Financial Relations, the initial terms of reference for the 2010 Review were conveyed to the Commission in 2005. To address concerns about the complexity of the Commission’s assessments, the terms of reference directed the Commission to simplify its assessments and ensure that data used in its methodology are of sufficient quality and fit for purpose, while having regard to the principle of horizontal fiscal equalisation.

For the 2010 review, the Commission adopted a top-down approach which resulted in a reduction in the number of assessment categories (from 60 revenue and expense assessments to 21 revenue, expense and capital assessments) and significant changes to the method for each of the assessments. The Commission also adopted a three year average rather than the previous five year average so that relativities more closely reflect states’ circumstances in the year they are applied. Table 5.4 compares the 2009 relativities (based on the 2004 Review method) with the 2010 relativities.

NSW Vic Qld WA SA Tas ACT NT

2009 0.93186 0.91875 0.91556 0.78485 1.24724 1.62040 1.27051 5.25073

2010 0.95205 0.93995 0.91322 0.68298 1.28497 1.62091 1.15295 5.07383

Source: CGC 2010 Review

Major Changes in the 2010 ReviewThe major influences on GST allocation between the 2009 Update and the 2010 Review are illustrated in Table 5.5. The table shows that in terms of the overall effect on relativities, changes to the revenue and capital assessments were the main drivers of differences in GST allocations between the 2009 Update and 2010 Review. However, the effect of these influences differs markedly between jurisdictions. On a per capita basis, the Territory was the most disadvantaged by the changes in the 2010 Review, with $334.49 per capita or $76.9 million of GST revenue being redistributed away from the Territory. The 2010 Review also resulted in reduced GST shares for the Australian Capital Territory (-$225.61 per capita), Western Australia (-$195.99 per capita) and Queensland (-$4.81 per capita).

Table 5.4: Comparison of Relativities for the 2009

Update and 2010 Review


2010-11 Budget

Table 5.5: Main Influences of Changes in State Allocations from the GST Pool, 2010 Review compared to 2009 Update

NSW Vic Qld WA SA Tas ACT NT Total

Revenue categories ($pc) 164.29 57.12 - 143.88 - 370.51 44.03 - 71.52 5.69 - 186.42 70.71

Shortening of review period 76.13 45.95 - 68.88 - 242.77 31.09 13.27 28.67 - 23.53 39.11

Method changes and data revisions 33.08 - 22.87 2.37 - 0.10 - 25.41 - 126.24 - 16.84 - 45.08 11.19

Change in state circumstances 54.71 33.94 - 77.05 - 127.01 38.41 41.81 - 5.99 - 117.31 29.93

Expenditure categories ($pc) - 73.37 - 3.30 65.52 0.05 164.05 248.90 - 168.20 - 373.05 31.11

Shortening of review period 1.17 - 15.56 - 7.15 29.52 5.81 - 31.36 - 2.58 215.95 6.06

Method changes and data revisions - 63.64 51.93 66.35 - 70.92 145.13 263.46 - 118.60 - 1 292.18 43.08

Change in state circumstances - 10.91 - 39.41 6.36 41.18 13.25 16.79 - 47.13 697.95 14.06

Capital Assessments ($pc) - 64.87 - 53.05 144.16 152.14 - 118.88 - 163.50 - 147.36 417.03 49.07

Commonwealth payments ($pc) 13.20 39.83 - 70.61 22.33 - 16.77 - 13.04 84.26 - 192.05 17.80

Total $pc 39.25 40.60 - 4.81 - 195.99 72.43 0.84 - 225.61 - 334.49 168.69

Total $M 277.3 223.0 - 19.8 - 442.9 118.4 0.6 - 79.8 - 76.9 619.3

Figures do not add up due to rounding. Source: CGC 2010 Review

The changes to the revenue assessments in the 2010 Review resulted in $1.6 billion of GST revenue being redistributed away from Western Australia, Queensland, the Northern Territory and Tasmania to the other states. The shortening of the review period and the use of more recent data were the main contributors to the redistribution. The change was also driven by the mining revenue assessment, in particular the continued strength of the mining industry in Western Australia.

The negative impact of the revenue assessments for Western Australia, Queensland and the Territory was partially offset by the new capital assessment methodology. For the 2010 Review, the Commission adopted a capital assessment which uses a financial worth approach rather than the previous holding cost model. This new method redistributed $1.1 billion between states.

Changes to the expenditure assessment had the largest impact on the Territory. Specifically, method changes and data revisions resulted in $1 292.18 per capita being redistributed away from the Territory. This was partly offset by changes in state circumstances, in particular the increased costs of providing welfare and housing services to the Indigenous population.

The revised location assessment had the greatest impact on the Territory’s relativity, however it is difficult to quantify because location factors are assessed across a number of categories. It is estimated that the GST impact of the changes to the method for assessing location disabilities was about ten times higher for the Territory (about -$1400 per capita) compared with the next most affected jurisdiction, Western Australia (about -$140 per capita). The large impact on the Territory is likely to be due to the reduced sensitivity of the location assessment as national data sets do not adequately capture data from remote locations.



In addition, method changes to the roads assessment (where there is a greater emphasis on road use compared with road length than previously) and services to communities (where Indigenous community essential services are no longer separately assessed) contributed to the decline in the Territory’s GST relativity.

Commonwealth payments redistribute about $17.80 per capita between states. The Commonwealth payments assessment redistributes GST revenue away from the Territory because the Territory receives above average revenue payments from the Commonwealth. However, with the transition of the distribution of SPP payments to a population basis, the GST redistribution away from the Territory will decline. This should eventually result in no GST redistribution among the states as a result of Commonwealth SPPs.

The IGA was signed by COAG in December 2008. The IGA establishes the framework for federal financial relations and is aimed at improving the quality and effectiveness of government services by providing states with greater flexibility in service delivery and enhancing accountability for outcomes. The IGA also sets out the framework for the provision of GST funding to the states, specifically that GST payments will be provided to the states on an untied basis and will be distributed among the states in accordance with the principle of horizontal fiscal equalisation.

A key aim of the IGA reforms was to minimise the number of SPPs and to streamline administrative arrangements associated with these payments. In December 2008, COAG approved 15 NPs, however there are now over 50 NPs, reflecting both new initiatives and the transition of previous funding arrangements to the IGA. Further detail about specific NPs is included in Budget Paper 3.

States are concerned that the proliferation of NPs has seen the re-emergence of input controls and overly burdensome administrative arrangements. Consequently, at the COAG December 2009 meeting it was agreed that a review of NAs and NPs would be undertaken by the Ministerial Council for Federal Financial Relations (MCFFR). The review will examine the consistency of agreements with the design principles of the IGA, the clarity of roles and responsibilities, and the quality and quantity of performance measures. It will also consider options to enhance the efficiency and effectiveness of the federal financial relations framework. The Ministerial Council will report its findings to COAG by the end of 2010.

Performance FrameworkA key element of the IGA is its focus on accountability and the requirement to establish a national performance reporting system. This means that governments are required to report on achievements against agreed objectives or outcomes included in NAs and NPs. A performance reporting framework has been established for NAs, with high level performance indicators and collation of data through the Steering Committee for the Review of Government Service Provision, and reporting of performance by the COAG Reform Council.

The COAG Reform Council was established by COAG to assist in implementation of federal financial relations arrangements and publishes performance reports for NAs and NPs, together with a comparative analysis that inter alia highlights examples of good practice and identifies contextual differences between jurisdictions which are relevant to interpreting the data.

Intergovernmental Agreement on

Federal Financial Relations


2010-11 Budget

The first COAG Reform Council reports for the National Education Agreement and the National Agreement for Skills and Workforce Development, which establish baseline performance data, were submitted to COAG on 30 September 2009 with the remaining NAs (reviewing financial year performance) provided to COAG on 30 April 2010.

Specific Purpose Payments and National Partnership Funding Base funding and indexation arrangements for the SPPs are outlined in the IGA, with the share of SPP funding between states transitioning over five years to a population share basis. While the Territory’s share of SPP revenue will decrease over this transitional period it is anticipated that, all other things being equal, the reduction will be compensated by an increase in its share of GST revenue arising from the Commission’s assessment of GST relativities. The Territory’s SPP revenue is shown at table 5.6.

Table 5.6: Northern Territory SPPs

2009-10 2010-11 Sector specific indexation arrangements

$M $M

National Healthcare SPP 145.9 150.3 A health specific cost index1, growth in population estimates weighted for hospital utilisation, and a technology factor2

National Schools SPP 62.4 62.2 Growth in average government schools recurrent cost and growth in full time equivalent enrolments in government schools

National Skills and Workforce Development SPP

13.7 13.7 85 per cent Wage Cost Index13; and 15 per cent Wage Cost Index64

National Disability SPP 9.7 11.1 Rolling five year average of nominal GDP year-on-year growth

National Affordable Housing SPP 41.9 36.7 Wage Cost Index13

Total SPPs 273.6 274.0

1 The Australian Institute of Health and Welfare health price index. 2 Productivity Commission derived index of technology growth. 3 Comprises safety net wage adjustment weighted by 75 per cent and all groups CPI weighted by 25 per cent. 4 Comprises safety net wage adjustment weighted by 40 per cent and all groups CPI weighted by 60 per cent. Source: Northern Territory Treasury

Table 5.7 lists key NPs by functional area for the Territory and their associated funding. More detail on these NPs and funding associated with other NPs are covered in Budget Paper 3.

2009-10 Estimate

2010-11 Budget

National Partnership Funding $M $M

Education 225.1 162.4

Housing and Community Amenities 238.9 559.4

Transport and Communications 100.3 106.2

Health and Welfare 53.2 79.5

Public Order and Safety 31.4 48.1

Fuel and Energy 7.1 2.7

Other 5.8 2.8

TOTAL NATIONAL PARTNERSHIPS 661.8 961.1


Table 5.7: National Partnership Funding



National Indigenous Expenditure ReportIn December 2007, COAG agreed that the life expectancy gap between Indigenous and non-Indigenous Australians must be closed and that this can be achieved through linking economic development and improved education outcomes. A key initiative arising from this COAG commitment was the need to report transparently on expenditure on government services to the Indigenous population. The intention of the national reporting framework is to facilitate, over time, an understanding of the link between expenditure and outcomes for Indigenous people and to inform government policy making. This initiative should also lead to identification of data gaps and improvement in the quality of Indigenous reporting.

A steering committee reporting to Heads of Treasuries has been established to prepare the report to COAG. The steering committee is chaired by the Commonwealth Treasury and includes officials from state treasuries and various Commonwealth departments. The Productivity Commission provides the secretariat function for the steering committee. A final report is expected to be provided to COAG in July 2010.

The Territory is the most advanced jurisdiction in reporting government expenditure on Indigenous population having completed two Indigenous expenditure reviews relating to the 2004-05 and 2006-07 financial years. The broader methodology and principles used in the Northern Territory Indigenous Expenditure Report (NTIER) are consistent with the National Indigenous Expenditure Report (NIER), including comprehensive analysis of all general government expenditure, the attribution of both direct and indirect spending on Indigenous people and the use of publicly available data sources to determine service use measures. However, unlike the NTIER, the NIER does not consider government revenue attributable to the Indigenous population.

National Health and Hospital ReformOn 3 March 2010, the Commonwealth released its National Health and Hospital Network plan which outlined the Commonwealth’s reform agenda for public hospitals and state-provided primary health services in Australia. A further element of the reform package was released in April 2010 outlining additional proposals for aged care, elective surgery and emergency departments.

COAG met on 19 and 20 April 2010 and, with the exception of Western Australia, agreed to establish a National Health and Hospitals Network, the key features of which are:

the Commonwealth will become the majority funder of the Australian public •hospital system providing 60 per cent of the efficient price of hospital activity costs and for research, training and capital investment. States will fund 40 per cent of the efficient price and 100 per cent of other costs;

the Commonwealth will take over 100 per cent funding responsibility for primary •health care services; and


2010-11 Budget

the establishment of Local Hospital Networks (LHNs) to manage groups of public •hospitals. LHNs will be responsible for providing patient care and managing budgets, and will be held directly accountable for the performance of the hospitals in their network. LHNs are to be paid on an activity basis for hospital services by a joint intergovernmental funding authority based in each state. This authority will receive funding from both the Commonwealth and the relevant state government.

Additional Commonwealth funding is to be made available for aged care, elective surgery, emergency departments, health workforce and mental health. While the majority of this funding will flow to the states, some will also go to other health service providers.

With the exception of Western Australia, all states and territories have agreed that about one-third of the share of states’ aggregate GST revenue will be tied to health and hospitals to enable the Commonwealth to fund its additional responsibilities. The amount of GST to be tied will vary in each jurisdiction in line with contribution to total revenue of own-source revenue, patient revenue and GST revenue in each jurisdiction. The proportion of tied GST revenue for the Territory is expected to be around 14 per cent. The Commonwealth will also continue to provide the National Healthcare SPP and, from 2014-15, when the amount of GST dedicated to health will be fixed, will provide a guaranteed level of additional top-up funding to enable its 60 per cent contribution to be met.

The Territory’s per capita share of the additional Commonwealth funding announced for hospital and health services during the transitional period (2010-11 to 2013-14) is estimated at $55.7 million, and the additional growth funding, once the reforms are fully implemented (2014-15 to 2019-20), is estimated at $167 million. These amounts will be verified once the Commonwealth provides final funding estimates as part of its 2010-11 Budget.

The details of the implementation of the health reforms are to be agreed by COAG by 30 June 2010. The reforms will require a new or, at a minimum, amendments to the existing, IGA. The Ministerial Council for Federal Financial Relations and Heads of Treasuries will also progress the detail of the financial arrangements associated with the National Health and Hospital Network over the forthcoming months.

Territory Taxes and Royalties 69


Territory Taxes and Royalties

Territory own-source revenue predominantly comprises taxes and mining revenue but also includes fees and charges, miscellaneous property income, interest received and profit and loss on disposal of assets.

Nationally, own-source revenue represents around half of states’ total revenue, with the remaining revenue sourced from Commonwealth grants. Although the Territory is more reliant on Commonwealth grants than other jurisdictions, the Territory’s own-source revenue nonetheless forms an important component of total revenue. In addition to being a significant source of revenue for the states, own-source revenue provides states with fiscal autonomy and flexibility to tailor services to meet the needs of their constituents.

This chapter provides an explanation of the Territory’s own-source revenue categories of taxes and royalties, revenue collection forecasts and a comparison with other jurisdictions. It also includes a statement of the Territory’s forecast tax expenditures as a result of concessions and exemptions for 2010-11 through to 2013-14, as required by the Fiscal Integrity and Transparency Act.

Full details of revenue collected from the Territory’s own sources are set out in Budget Paper No 3.

The projected revenue for 2010-11 from taxes and royalties totals $555.2 million and the main contributors are expected to be mining royalties at $156.6 million or 28 per cent, taxes on employers (payroll tax) at $151.6 million or 27 per cent, and taxes on property (stamp duties on capital transactions) at $113.1 million or 20 per cent.

Chart 6.1 shows the Territory’s estimated main own-source revenues in 2010-11 according to the classification used in the Uniform Presentation Framework, adopted for the Territory’s reporting requirements.

Note: Excludes payroll tax from general government entities. Source: Northern Territory Treasury

The estimated revenue in 2009-10 from taxes and royalties totals $556.7 million, compared to the forecast total of $565.4 million. The reduction of $8.7 million is a net result of a reduction from the original forecast of mining royalties, taxes on employers, and taxes on gambling which are offset by an increase in the estimate of taxes on property. These revisions are set out in Table 6.1 below.

Chapter 6

Overview

Analysis of Territory Taxes and Royalties

Chart 6.1: Main Own‑Source Revenue Categories, 2010‑11

Taxes on property, $113.1M

Taxes on gambling, $57.0M

Taxes on insurance, $29.8M

Mining royalties, $156.6M

Motor vehicles taxes, $47.1M

Taxes on employers, $151.6M

70 Territory Taxes and Royalties

2010-11 Budget

2009-10 2009-10 2010-11

Budget Estimate Budget

$000 $000 $000

Mining royalties 160 466 147 029 156 630

Taxes on employers 157 389 146 641 151 566

Taxes on property 105 645 126 941 113 127

Taxes on provision of goods and services 97 905 90 094 86 817

Motor vehicle taxes 44 000 45 950 47 065

Total 565 405 556 655 555 205


Mining revenue is obtained from royalties or rent equivalents levied on the recovery of mineral commodities from mining tenements in the Territory. Similarly, petroleum revenue accrues from royalties imposed on the production of petroleum in the Territory. Mineral and petroleum royalties are a charge for resource usage, payable to the Government as the owner of the site or the mineral or petroleum rights over the site.

The Territory’s mining royalty revenues are largely based on a profits-based regime provided within its Mineral Royalty Act. The Territory’s profits-based regime uses the net value of a mine’s production to calculate royalty. This is the operating revenue derived from mining activities in excess of $50 000 after deducting allowable project costs, prior year carried forward losses, the cost of capital employed in the mine and the cost of capital and exploration expenditure on the mine site.

In the 2010-11 Budget, the Government has introduced legislation to increase the mineral royalty rate from 18 to 20 per cent from 1 July 2010. The 18 per cent rate has remained unchanged since the Mineral Royalty Act commenced in 1982 and the new rate gives an increased community return from state owned non-renewable resources. Similar royalty increases have recently been undertaken in New South Wales and Queensland in order to increase those states’ return from coal mining operations.

The rate increase is aimed at increasing the contribution of the mining industry to the long-term welfare of the Territory and the community, but only through a reasonable share in the profitability of the mine.

Mineral royalties are collected in the Territory from mining and quarrying for gold, silver, bauxite, manganese, lead, zinc, sand, gravel, laterite, vermiculite and lime. The Territory is unable to receive royalties in respect of uranium mined in the Territory as, unlike the other states, the Commonwealth retains the ownership of this uranium. Nonetheless, the Territory receives a grant in lieu of uranium royalty from the Commonwealth. The only uranium mine in the Territory is the Ranger Project, which has an ad valorem royalty scheme settled by the Commonwealth. The Territory receives grant payments reflecting the Territory’s royalty regime that applied at the time the Ranger arrangements were settled.

The Commonwealth recently passed legislation that imposes royalty on any new uranium mines in the Territory based on the Territory’s Mineral Royalty Act, with those royalties paid to the Territory as a grant in lieu of royalty. This will place the Territory in a fiscal position that is equivalent to the states in respect of the mining of uranium.

Table 6.1: Main Own‑Source Revenue Categories

Mining and Petroleum Revenue



Unlike the Territory’s profits-based scheme, the other states predominantly use output-based royalty schemes that impose a royalty rate on the value of production (ad valorem) or on the tonnage extracted.

When comparing royalty regimes, a profits-based regime will always have a higher rate than an ad valorem or volume-based regime. This is because ad valorem rates are based on revenue and profits-based royalties incorporate the deduction of relevant costs. The ad valorem rates in the other states generally range between 1.25 per cent and 7.5 per cent. These rates vary between states and for different mineral commodities, or for different grades of the same commodity.

The complex ad valorem rate structures used in these other states partly reflect the profitability of mining a particular mineral or in a particular location and partly reflects incentive-based policy. This acts as a proxy for determining a reasonable share of mining profits collected under the ad valorem approach. In comparison, the Territory’s scheme sets the royalty to be a defined share of mining profits irrespective of the method used for mining or the profitability of the mined mineral.

A key feature of the Territory’s scheme is that both prices and mining costs, including mine set-up costs carried forward to profitable years, are taken into account in royalty calculations. If commodity prices, production costs or the value of the Australian dollar rise or fall, royalty liabilities vary accordingly.

This variability produces stronger growth in royalty revenues in times of high mineral prices than under ad valorem royalties, which is the reason for the Territory’s significant royalty growth in recent times. The opposite result also follows in times of low mineral prices. Accordingly, any comparison of profit-based and ad valorem royalty schemes can only be reliably determined over a mine’s life or at least over a significant period of time. Table 6.2 below provides the value of mineral production and the mineral royalty collected by the Territory in each year over the period 2003-04 to 2008-09. The table also shows the ad valorem rate based on the value of mineral production and the royalty collection for each year and the average ad valorem royalty rate over the six year period.

Value of production

Royalty revenue

Equivalent ad valorem rate

$M $M %

2003-04 742.3 25.1 3.4

2004-05 957.2 29.3 3.1

2005-06 1 003.3 39.3 3.9

2006-07 1 974.7 65.0 3.3

2007-08 1 742.6 79.5 4.6

2008-09 1 978.2 202.9 10.3

Total 8 398.4 441.4 5.3

Note: Value of production and royalty revenue does not include minerals for which royalty is payable under arrangements outside the Mineral Royalty Act. Source: Northern Territory Treasury, ABS and Department of Resources

Table 6.2: Royalty Collected from Mining Production from

2003‑04 to 2008‑09


2010-11 Budget

As shown in Table 6.2, although the equivalent ad valorem rate was 10.3 per cent in 2008-09, the remaining years range between 3.1 per cent and 4.6 per cent. The variation in equivalent ad valorem rates reflects the differences in profitability for each year. The table shows that over the six-year period the Territory’s royalty regime has collected royalty at an average equivalent ad valorem rate of 5.3 per cent. This rate is about the mid-range of the states’ published ad valorem rates.

In 2009-10, it is expected that the Territory will receive $147 million in mining revenue, $13.4 million less than forecast in the 2009-10 Budget. This is a result of lower second half payments than was estimated. Payments were lower due to industry profitability declining as a result of the impact of the global financial crisis on resource demand and changes in the Australian dollar.

The forecast for 2010-11 is $156.6 million, an increase of $9.6 million from the 2009-10 estimate, largely reflecting the effect of the rate increase. As the first six monthly payment received in 2010-11 relates to the prior year, the rate increase has a reduced half-year effect on revenue. Mining revenue forecasts are reliant on advice from mining companies of their estimated liability for the financial year and their estimates of commodity price movements, production levels and the value of the Australian dollar.

The Territory’s taxation revenue for 2009-10 is expected to total $409.6 million. In 2010-11, taxation revenue is expected to decline by 2.7 per cent to $398.6 million, largely as a result of lower conveyance duty and gambling tax receipts.

The components of the Territory’s taxation revenue are payroll tax, stamp duty on conveyances, taxes on gambling, taxes on insurance and motor vehicle fees and taxes. Table 6.3 shows the estimate of the Territory’s taxation revenue for 2009-10 and forecast for 2010-11.

2009-10Estimate

2010-11Budget

$000 $000

Taxes on employers

Payroll tax1 146 641 151 566

Taxes on property

Conveyance duty 126 128 112 822

Other duty 813 305

Taxes on the provision of goods and services

Taxes on gambling 61 677 57 014

Taxes on insurance 28 417 29 803

Taxes on use of goods and performance of activities

Motor vehicle taxes 45 950 47 065

Total 409 626 398 575

1 Payroll tax from public financial corporations, public non-financial corporations and the private sector. Source: Northern Territory Treasury

Taxation Revenue

Table 6.3: Northern Territory Taxation Revenue



Payroll TaxPayroll tax is payable in the Territory when the total Australian wages of an employer (or group of employers) exceed the Territory’s general exemption threshold, currently $1.25 million. The threshold reduces proportionately if an employer pays wages in another state or territory.

Payroll tax is calculated at a rate of 5.9 per cent on taxable wages paid by an employer for services rendered by employees in the Territory. The Government has committed to reducing the payroll tax rate to 5.5 per cent in 2012.

In 2009-10, payroll tax revenue is expected to be $146.6 million, a decrease of $4.9 million from 2008-09, despite positive employment growth in the Territory.

The decrease is attributable to several large construction and mine expansion projects, which had been contributing substantial payroll tax revenue, reaching completion in 2008-09. Furthermore, employment growth in the Territory was offset by a decline in full-time hours worked during 2009-10.

In 2010-11, a number of factors will influence payroll tax collections. These include:

moderate employment growth and growth in average weekly earnings; and•

growth in full-time hours worked.•

Consequently, payroll tax revenue in 2010-11 is forecast to grow by 3 per cent to $151.6 million, rising to 3.5 per cent in 2011-12 and returning to the long-term growth rate of 5 per cent by 2012-13.

Stamp DutyThe Territory’s conveyance duty is derived from direct and indirect conveyances of dutiable property in the Territory. Such property comprises real estate and transfers of businesses.

Conveyance duty in the Territory is calculated by a formula that determines a rate applicable to the value of dutiable property conveyed. The minimum rate is 1.5 per cent and the maximum rate is 4.95 per cent, applying to a dutiable property with a dutiable value of $525 000 or more. This is different to the other states which levy stamp duty on a marginal rate scheme. A comparison of the Territory’s stamp duty regime with the other states is provided later in this chapter.

In 2009-10, the Territory is expected to collect $126.1 million in stamp duty on conveyances, compared with $105.3 million in 2008-09. The increase in conveyance duty collections is mainly due to a number of large commercial conveyance transactions and increases in residential prices over this period.

In 2010-11, conveyance duty is estimated to decline by $13.3 million to $112.8 million, due to the increase in stamp duty home owner incentive concessions and more usual numbers of large commercial property sales. In the 2010-11 Budget, the Government introduced a new senior, pensioner and carer stamp duty concession and increased the first home owner concession and principal place of residence rebate, at a cost of $5.4 million. Chapter 4 provides further information on these revenue measures.

It is expected that stamp duty revenue growth will return to longer term growth rates of 2.5 per cent from 2011-12. However, as part of the Intergovernmental Agreement on Federal Financial Relations, stamp duty on the non-land component of business

Conveyance Duty


2010-11 Budget

conveyances is scheduled for abolition from 1 July 2012, decreasing the 2012-13 forecast by $10.3 million.

Insurance duty is imposed on general and life insurance policies, with general insurance contributing to the majority of the revenue collected from this duty. Stamp duty on general insurance is calculated at a rate of 10 per cent of the premium paid on all general insurance products that relate to property or risk that may occur in the Territory. Where the policy also relates to a risk or property outside the Territory, the premium is apportioned accordingly. Stamp duty on life insurance is levied on life insurance policies relating to a person residing in the Territory and is calculated at a rate of 10 cents per $100 or part thereof of the sum insured.

Revenue from insurance duty is forecast to be $28.4 million in 2009-10. In 2010-11, insurance duty is forecast to grow by 4.9 per cent to $29.8 million, based on historical growth rates.

Motor vehicle taxes comprise motor vehicle registration fees and stamp duty on the transfer and initial registration of motor vehicles.

Generally, stamp duty is levied on the purchase price of the vehicle at a rate of $3 per $100 or part thereof. Revenue from this source in 2009-10 is estimated to be $20 million, consistent with that received in 2008-09. In 2010-11 it is expected to increase by 2 per cent to $20.4 million, supported by strengthening population and wages growth and increased consumer confidence. The long-term growth rate of 2.5 per cent has been applied to the forward estimates.

Motor vehicle registrations comprise heavy vehicle registrations and light vehicle registrations. Heavy vehicle registration fees are uniform across Australia and are set by the National Transport Commission. Light vehicle registration fees are determined by each state. In the Territory, the fee is calculated by reference to a differential rate scale based on the engine capacity of the vehicle. In 2009-10, the Territory is estimated to receive $26 million in motor vehicle registration fees, increasing to $26.7 million in 2010-11, reflecting expected adjustments to registration fees based on CPI as registration fees are expressed in revenue units.

Gambling TaxesGambling taxes constitute a significant proportion of state and territory revenues and in 2010-11 gambling tax revenue is forecast to be $57 million, or the fourth largest own-source revenue. The components of gambling taxes in the Territory are community gaming machine tax, lotteries tax, wagering tax, bookmaker turnover tax, casino/internet tax and community benefit levy.

In 2009-10, the Territory is estimated to received $61.7 million in gambling taxes, a decrease of $11 million from 2008-09. This is largely attributable to the half-year effect of the Government’s reform of bookmaker tax on corporate bookmakers from 1 January 2010 and a reduction in community gaming machine tax resulting from a decline in gambling that may be attributable to indoor smoking bans from 2 January 2010.

Stamp Duty on Insurance

Motor Vehicle Taxes



Table 6.4 shows the estimated revenue from each of the Territory’s gambling taxes.

Tax/Duty

2009-10 Estimate

2010-11 Budget

$000 $000

Wagering Taxes 6 130 6 283

Casino/Internet tax 12 040 12 642

Bookmakers – Racing and Sports Betting 6 825 2 058

Community Gaming Machines 19 316 19 316

Lotteries 14 957 14 306

Community Benefit Levy 2 409 2 409

Total 61 677 57 014


In 2010-11, bookmaker tax is expected to decline to $2.1 million, reflecting the full year effect of the Government’s bookmaker tax reform and some consolidation in the industry that has reduced the number of corporate bookmakers. Lotteries tax for 2010-11 is expected to be lower than 2009-10, as 2009-10 revenue includes one-off revenue from an unprecedented large jackpot lottery.

Community gaming machine tax is expected to remain constant in 2010-11, due to a decline in 2010 following introduction of indoor smoking bans, offset by moderate growth in 2011.

Wagering tax is imposed on both on-course and off-course totalisators at the rate of 40 per cent of the licensee’s commission. Tax of 20 per cent of the licensee’s commission is paid for races other than thoroughbred, harness and greyhound races and Australian sports. Tax at the rate of 10 per cent of the licensee’s commission is paid for international sports.

In 2009-10, wagering tax is expected to decline by $1.6 million to $6.1 million, as all other states now require gambling providers to pay product fees to the racing industry in order to publish and use racing information. These product fees are based on either wagering turnover in the relevant states or the profits from taking wagers in the relevant state. The Budget for 2010-11 increases to $6.3 million, based on the long-term growth rate of 2.5 per cent which flows through to the forward estimates.

The composition of state taxes is broadly similar between the states, however there are differences in the application. These differences primarily relate to rates, exemptions and thresholds. The ability of states to modify their rates and tax base promotes competition between states and allows them to structure their tax system to meet their different circumstances such as industry structure, house prices, population demographics and revenue needs.

There are various approaches to measuring tax competitiveness. Two common approaches are Commonwealth Grants Commission measures of taxation effort and capacity, and the representative taxpayer model.

Commonwealth Grants CommissionThe Commission assesses each state’s revenue-raising effort on an annual basis. Revenue effort is the ratio of the actual amount of revenue a state raises to the amount of tax revenue the Commission assessed could be raised if the state had applied the average tax rates to its tax base.

Table 6.4: Estimated Revenue from Gambling Taxes

Tax Comparison

Revenue Effort


2010-11 Budget

The average revenue effort is assumed to be 100 per cent. If a state has an above average revenue effort, it will score more than 100 per cent, while below average effort is less than 100 per cent.

Table 6.5 provides a comparison of the Commission’s assessment of own-source revenue-raising effort in 2008-09 (the latest year that an assessment is available) and includes taxation, mining revenue, contributions by trading enterprises and public safety user charges. The table shows that the Territory’s own-source revenue-raising effort is the second highest of the states behind the ACT and similar to South Australia. However in relation to taxation effort, the Territory’s effort is significantly below the national average and the second lowest of all the states.


% % % % % % % %

Total taxation1 106 99 87 101 116 93 111 91

Total own-source revenue

91 104 104 91 116 104 162 119

1 Payroll tax, land revenue, stamp duty on conveyances, insurance taxation and motor taxes. Source: Commonwealth Grants Commission 2010 Update

The main reasons for the Territory’s lower than average taxation effort is that it does not impose a land tax and imposes lower than average motor taxes. By contrast, one of the reasons that the Territory was assessed with a high effort for total own-source revenue in 2008-09 was that it was assessed with the highest effort of all jurisdictions for mining revenues. In 2008-09, Territory miners experienced high profitability as a result of increased production, record mineral prices and a favourable exchange rate for the Australian dollar.

The Commission’s assessment is based on an assessment of state/territory royalty collections on an average ad valorem basis. As indicated above, the Territory’s profit-based scheme provides highly variable comparisons in extreme profit or loss conditions. In the case of the Commission’s 2008-09 effort assessment, mining royalties show the impact of the extremely profitable conditions that occurred during that year.

Another significant reason for the high assessment of own-source revenue effort is that it includes other revenue such as gambling taxes, user charges and taxes scheduled for abolition under the IGA. These revenues are assessed on an equal per capita basis that may not reflect the Territory’s circumstances.

States are constrained from growing their own-source revenue to either replacing current taxes with a new growth tax or by expanding existing tax bases. This is evident as nationally, state own-source revenue comprises only about 50 per cent of total state revenue. However, the Territory’s own-source revenue comprises 18 per cent of total revenue.

The revenue limitations imposed on the states are the result of the Australian Constitution and changes to Commonwealth-state financial relations. For instance, states are unable to raise excise and customs duties and the Commonwealth has assumed the collection of income tax.

In addition, state taxation policy provides a balance between raising sufficient revenue to deliver government services, minimising the tax burden on the public, fostering business development and creating a tax environment that is competitive with other jurisdictions.

Table 6.5: 2008‑09 Revenue Effort by Jurisdiction

Revenue Capacity



Although all states face similar constraints in raising own-source revenue, the Territory’s capacity to raise revenue is further disadvantaged by its relatively small revenue base. This is illustrated in Table 6.6 which shows the Commission’s assessed revenue raising capacity for the major taxes and mining revenue. Revenue capacity is the ratio of the per capita amount a state could raise if it applied the national average to its tax base to the per capita average revenue raised. This measure removes differences in state policies.


% % % % % % % %

Payroll tax 107 101 89 120 80 73 104 81

Land tax 97 102 103 152 58 45 65 69

Conveyance duty 97 97 121 104 72 66 99 105

Insurance duty 110 97 94 98 99 76 91 81

Motor vehicle Duty 87 101 108 127 98 104 86 91

Mining Revenue 52 7 198 365 32 18 0 161

Source: Commonwealth Grants Commission 2010 Update

For each of the major state taxes other than conveyance duty, the Territory is assessed as having a low capacity to raise revenue. This reflected the Territory’s different circumstances such as:

the Territory’s industry structure, which is characterised by a large number of small •and medium businesses that are generally exempt from payroll tax as a result of the Territory’s $1.25 million payroll tax general exemption; and

a relatively small number of very high value commercial and residential properties, •although average land prices in the Territory are higher than the national average.

The Territory is compensated for its relatively small own-source revenue base by the Commission’s equalisation process through a higher share of GST revenue. The Territory’s low capacity to raise own-source revenue increases its reliance on funding from the Commonwealth.

Representative Taxpayer ModelComparisons can also be made of states’ tax schemes by comparing the amount of tax payable for a representative household or firm. This approach takes into account different circumstances of each state by applying each state’s tax rate to a representative/average standard.

Table 6.7 compares the payroll tax rates and thresholds for each jurisdiction. The table shows that the Territory’s payroll tax exemption threshold is the second highest in Australia and its payroll tax rate is the third highest.

NSW Vic Qld1 WA SA Tas ACT NT Average

Threshold ($M) 0.64 0.55 1.00 0.75 0.60 1.01 1.50 1.25 0.91

Rate (%) 5.65 4.95 4.75 5.50 4.95 6.10 6.85 5.90 5.58

1 Queensland’s threshold diminishes so that no exemption is provided for employers with wages over $5 million. Source: State legislation and information available at 15 April 2010

Since 2001, the Territory Government has provided significant payroll tax relief for Territory businesses by reducing the payroll tax rate from 6.5 per cent to 5.9 per cent and by increasing the exemption threshold from $0.6 million to $1.25 million. These changes have maintained the competitiveness of the Territory’s

Table 6.6: Assessed Revenue Raising Capacity, 2008‑09

Payroll Tax

Table 6.7: State and Territory Payroll Tax Rates and

Exemption Thresholds


2010-11 Budget

payroll tax regime with other jurisdictions, particularly for small to medium size businesses.

This is illustrated in Table 6.8, which provides the effective payroll tax rate at various wage levels for each jurisdiction after taking into consideration individual state thresholds and the payroll tax rates. For businesses with wages up to $5 million, the Territory has the most competitive payroll tax scheme as it has either the lowest or second lowest effective payroll tax rate. For larger businesses with wage costs over $5 million, the Territory has a more favourable effective payroll tax rate than the ACT, New South Wales and Tasmania and is comparable to that in Western Australia.

Wages NSW Vic Qld WA SA Tas ACT NT

$M % % % % % % % %

2 3.8 3.6 3.0 3.4 3.5 3.0 1.7 2.2

4 4.7 4.3 4.5 4.5 4.2 4.6 4.3 4.1

5 4.9 4.4 4.8 4.7 4.4 4.9 4.8 4.4

6 5.0 4.5 4.8 4.8 4.5 5.1 5.1 4.7

10 5.3 4.7 4.8 5.1 4.7 5.5 5.8 5.2

20 5.5 4.8 4.8 5.3 4.8 5.8 6.3 5.5

Source: State legislation and information available at 15 April 2010

From 1 July 2009, the Territory adopted legislation that is identical, as far as possible, with New South Wales, Victoria, South Australia and Tasmania. Queensland amended its legislation to achieve harmonised outcomes and the ACT adopted legislation that has common provisions and definitions in eight key areas. As a result of this harmonisation, employers receive about $3 million per year in total savings compared to the pre-harmonisation payroll tax legislation, largely as a result of new or expanded payroll tax exemptions such as exemptions for wages paid during maternity and paternity leave.

From 4 May 2010, Territory first home buyers pay no stamp duty on the first $540 000 of their purchase, a total saving of up to $26 730. In addition, a new concession has been introduced for seniors (persons aged 60 years or older) and Northern Territory Pensioner and Carer Concession card holders to receive a concession of $8500 on the purchase of a principal place of residence. This is equivalent to a stamp duty concession on the first $252 970 of the value of the residence.

For other home buyers, a rebate of $3500 is provided on the purchase of a principal place of residence, up from $2500, from 4 May 2010. This is equivalent to a stamp duty concession on the first $143 350 of the value of the residence. Further details on these home incentive schemes are provided in Chapter 4.

The median house price in each capital city is used to compare stamp duty payable in each state. Chart 6.2 shows that Darwin has the third highest median house price behind Sydney and Melbourne.

Table 6.8: Effective State and Territory Payroll Tax Rates at

Various Wage Levels

Payroll Tax Harmonisation

Stamp Duty on Conveyances



Note: Median house prices as at December 2009. Source: Real Estate Institute of Australia

Chart 6.3 provides an interjurisdictional comparison of the stamp duty levied on principal places of residence and first homes on the purchase of a median-priced house in a capital city. For first home buyers, no stamp duty is payable in the Territory, which is significantly below the national average and is the equal lowest with Queensland and Western Australia. However, as a result of the Territory having the third highest median house price, stamp duty on a median priced home is above the national average.

Note: Median house prices as at December 2009. Source: Real Estate Institute of Australia, state legislation and information available at 15 April 2010

As shown in Chart 6.4, the Territory is one of the lower taxing jurisdictions for domestic insurance. By comparison, the total tax load on domestic insurance in New South Wales and Victoria is significantly above the national average when fire services levies are taken into account.

Chart 6.2: Median House Prices

0

100

200

300

400

500

600


State average ($482 063)

$000

Chart 6.3: Stamp Duty Payable on Purchase of

Median Priced Home

0

5

10

15

20

25

30


Principal place of residence First home buyer

$(000)

Principal place of residence average: $17 727

First home buyer average: $10 559

Insurance Duty


2010-11 Budget


All states impose taxes on general insurance premiums at rates between 7.5 per cent and 11 per cent, with New South Wales, Queensland and Tasmania having special rates on particular classes of general insurance business. All states apart from Western Australia also impose taxes on life insurance policies at different rates. In addition, New South Wales and Victoria collect a portion of their fire services levies through a charge on insurers. Tasmania and the ACT raise the levy on certain types of insurance, but similar to Queensland, South Australia and Western Australia, the large proportion of the levy is from a charge on property owners through local councils. The Territory does not impose any emergency or fire services levies on the general public, although, like the states, it does charge for commercial fire alarm monitoring.

Chart 6.5 compares the stamp duty applicable for a new motor vehicle valued at $39 990. The chart shows that the stamp duty payable in the Territory is below the national average.


Motor vehicle registration fees comprise registration, compulsory third party and other fees and as such, vary significantly across the jurisdictions. Chart 6.6 compares the costs of registering a medium sized passenger vehicle in each jurisdiction. At $619, the Territory has the fourth lowest total registration costs. Excluding third party compulsory insurance and other fees, the Territory’s registration fee of $152 is the lowest in Australia.

Chart 6.4: Average State Tax Rate on Domestic Insurance Premiums

0

5

10

15

20

25

30

35

NSW Vic Qld WA SA Tas ACT NTStamp duty Fire service levy

%

State average including fire service levy 14.3%

State average 9.4%

Stamp Duty on Motor Vehicles

Chart 6.5: Stamp Duty Payable on Purchase of $39 990 Motor Vehicle

0

400

800

1 200

1 600

2 000


$

State average ($1 392)

Motor Vehicle Registration



Note: Based on 6-cylinder Holden Commodore. Source: State legislation and information available at 15 April 2010

The higher compulsory third party premiums in the Territory reflect the inherently higher costs due to the small size of the Territory and relatively high road accident casualties. Motor Accident Compensation scheme premiums will increase by 3.5 per cent from 1 July 2010 in accordance with the Independent Motor Accident Compensation Contributions Commissioner’s determination, which aims to ensure that likely compensation claims for the upcoming year can be met and that the scheme maintains a prudent solvency margin. Chart 6.6 incorporates this increase in compulsory third party insurance in the Territory.

This category includes taxes on the ownership of land, where the taxes are based on the assessed unimproved value of the land. It also includes any metropolitan land planning, development and fire and emergency services levies that are included in the land tax base of some states.

Land tax is an important source of income for states, generating about $5.75 billion in revenue in 2008-09. Land tax is levied on the total holding of unimproved land value of commercial land and investment residential property, although a general exclusion is provided for land used for primary production. Land tax rates are generally progressive and most jurisdictions have tax-free thresholds.

The Territory does not impose a land tax. However in its 2010 Update, the Commonwealth Grants Commission assessed that the Territory could raise about $40.8 million if it adopted the average state policies on land tax.

Tax ExpenditureTax concessions are often provided to benefit a specified activity or class of taxpayer. They are expenditures in the sense that their impact on the budget is similar to direct outlays, and they can be used to achieve similar goals to spending programs.

Tax expenditures can be provided in a variety of ways including by way of exemption, deduction, rebate or reduced tax rate.

The tax expenditure statement details revenue estimated to be forgone by the Government or financial benefits obtained by taxpayers as a result of tax exemptions or concessions provided by the Government. Identifying this expenditure assists in providing a more accurate picture of what the Government contributes by way of taxation concession to assist various groups or industries.

Chart 6.6: Annual Registration Fees and

Charges for a Medium Sized Passenger Vehicle

0

200

400

600

800

1 000

1 200

1 400

NSW Vic Old WA SA Tas ACT NT

Registration fees Third party insurance Administration fee

$

Average total registration costs $793.69

Average registration fees $351.66

Land Revenue


2010-11 Budget

The tax expenditures identified in this statement relate to the more important and material concessions application in the Territory. In accordance with the Fiscal Integrity and Transparency Act, the tax expenditure statement provides forecast information for 2010-11 and following three financial years.

Tax expenditures have been estimated by applying the benchmark rate of taxation to the forecast volume of activities or assets exempted by a particular concession. Only those future events that are certain or highly likely to impact on assumed tax bases or tax rates have been taken into consideration in estimating future tax expenditures. Otherwise, the existing taxation arrangements have been assumed to apply for future years.

Measuring tax expenditures requires the identification of:

a benchmark tax base;•

concessionary taxed components of the benchmark tax base, such as specific •activity or class of taxpayer; and

a benchmark tax rate to apply to the concessionary taxed components of the tax •base.

The establishment of a tax benchmark provides a basis against which each tax concession can be evaluated. The aim of the benchmark is to determine which concessions are tax expenditures rather than structural elements of the tax.

By definition, tax expenditures are those tax concessions not included as part of the tax benchmark.

The benchmark tax base for payroll tax is assumed to be all wages (as defined under the payroll tax legislation) paid in the Territory. The benchmark tax rate is 5.9 per cent.

2009-10 2010-11 2011-12 2012-13 2013-14

Tax expenditure ($M) 135.8 139.2 144.1 137.2 141.1

As data is not generally collected in relation to employers that do not have a payroll tax liability, tax expenditure in relation to many payroll tax concessions is difficult to estimate. Accordingly, the reported estimated tax expenditure has been derived by comparing Australian Taxation Office data about wages paid by employers in the Territory to data reported by employers registered for payroll tax in the Territory. The difference provides a reasonable estimate of wages that are not subject to Territory payroll tax because of payroll tax concessions.

The reported estimated tax expenditure in relation to payroll tax mainly comprises the following exemptions.

The first $1.25 million of wages paid by employers are exempt from payroll tax in the Territory. Employers with wages below this amount are not required to pay tax and those with payrolls exceeding this amount pay tax only on the excess, saving up to $73 750 per annum for each employer.

Non-profit organisations having a sole or dominant purpose, that is, charitable, benevolent, philanthropic or patriotic, are exempt from payroll tax to the extent that wages are paid for an employee’s services that relate directly to the purpose for which the organisation was established. In addition, employment agencies providing temporary staff to exempt organisations are able to claim payroll tax exemption for these wages.

Methodology

Payroll Tax

Table 6.9: Payroll Tax Expenditure

Small Business Exemption

Charities and Other Exempt Bodies



Businesses receive payroll tax exemptions for apprentices, graduates of approved tertiary institutions and employees receiving wages funded under the Community Development Employment Projects program.

From 1 July 2009, several new exemptions were introduced as part of national payroll tax harmonisation:

wages paid to employees participating in voluntary work for bushfires and •emergency relief; and

wages paid as maternity and adoption leave for a maximum of 14 weeks. •

The benchmark tax base is assumed to be sales of all dutiable property, including chattels that are part of a transaction that conveys other dutiable property. The benchmark tax scale is the stamp duty scale that applies in 2009-10.

2009-10 2010-11 2011-12 2012-13 2013-14


Tax expenditure estimates are based on a historical revenue base indexed by normal growth parameters.

Corporate groups formed by commonly owned corporations are able to reorganise the ownership of assets without incurring a stamp duty liability. The estimated tax expenditure is the actual stamp duty forgone for approved reconstruction exemptions.

Before 4 May 2010, first home buyers were eligible for a stamp duty concession on the first $385 000 of the value of the home, a saving of up to $15 515. From 4 May 2010, the concession was increased to the first $540 000 of the value of a home, a saving of up to $26 730. Tax expenditure is estimated by actual collections in relation to the concession, with an adjustment for the increased concession applying from 4 May 2010.

Before 4 May 2010, other home buyers were entitled to a rebate of $2500 when purchasing a principal place of residence. That rebate was increased to $3500 from 4 May 2010. Tax expenditure is estimated by actual collections in relation to the rebate, with an adjustment for the increased rebate applying from 4 May 2010.

On 4 May 2010, a new concession for seniors (aged 60 years and over) and Northern Territory Pensioner and Carers Concession Card holders was introduced, providing a concession of $8500 when purchasing a principal place of residence. Tax expenditure has been estimated based on the proportion of actual principal place of residence transactions attributable to eligible purchasers.

Several other conveyance stamp duty exemptions are provided that together result in significant revenue being forgone by the Territory, the largest of these being exemptions for:

property transferred to charitable organisations having a sole or dominant purpose •that is charitable, benevolent, philanthropic or patriotic;

the transfer of a company’s property, on its winding up, to a shareholder of the •company entitled to the property on a distribution in kind;

an exemption under the • Commonwealth Family Law Act for instruments made pursuant to a court order that alter the interests of the parties to a marriage or de facto partnership; and

Apprentices, Graduates and Others

Other Exemptions

Stamp Duty on Conveyances

Table 6.10: Stamp Duty on Conveyances Expenditure

Corporate Reconstructions

Exemption

First Home Owner Concession

Principal Place of Residence Rebate

Seniors, Pensioner and Cares Concession

Other Conveyance Duty Exemptions


2010-11 Budget

the conveyance of property between partners of a de facto relationship on the •breakdown of the relationship.

The estimated tax expenditure for these concessions is based on actual historical data collected in relation to the various exemptions that have been granted and how these relate to overall conveyance stamp duty collections.

The benchmark tax base is all classes of general insurance policies. This does not include life insurance policies, which are treated differently for stamp duty purposes. The benchmark tax rate is 10 per cent of the premium.

2009-10 2010-11 2011-12 2012-13 2013-14


The Territory provides stamp duty concessions on certain insurance products to reduce the costs of such insurance, namely workers compensation insurance and private health insurance. Tax expenditure has been estimated using total work health insurance policy premiums paid during past years compared to total payroll data of employers in the Territory and data on private health insurance premiums obtained from the Private Health Insurance Administration Council.

Motor vehicle registration concessions are available to holders of a Northern Territory Pensioner and Carer Concession Card or a Northern Territory Seniors Card to an annual value of up to $104 and $52 respectively. Table 6.12 shows the motor vehicle registration fees expenditure. Actual registration fee data has been used to estimate this item of tax expenditure.

2009-10 2010-11 2011-12 2012-13 2013-14


The benchmark tax base is assumed to be all profitable mining operations in the Territory and the benchmark tax rate is 18 per cent in 2009-10 and 20 per cent from 2010-11 onwards.

2009-10 2010-11 2011-12 2012-13 2013-14


Royalty payers are able to reduce the amount of royalty they pay in the Territory for eligible exploration expenditure (EEE) incurred for their mining operations in the Territory. In addition, they have been able to utilise exploration expenditure incurred by others, through acquiring exploration expenditure certificates (EECs), to also reduce the amount of royalty that they are required to pay. However, the amount by which royalty may be reduced through the use of EEE is limited to a maximum of 25 per cent of the amount that would otherwise be payable.

EECs have not been issued since 1 July 2003, so the number and value of EECs available to reduce royalty has been diminishing since then. It is believed that there is minimal stock of EECs available to royalty payers, so royalty payers will be increasingly restricted to EEE expended on their own mining tenements.

The estimated cost of this concession is based on projected future mineral royalty collections, assuming that royalty payers will seek to maximise their royalty deduction by using EEE.

Stamp Duty on General Insurance Policies

Table 6.11: Stamp Duty on General Insurance

Policies Expenditure

Motor Vehicle Registration Fees

Table 6.12: Motor Vehicle Registration Fees Expenditure

Mineral Royalties

Table 6.13: Mineral Royalties Expenditure



On 13 May 2008, the Commonwealth announced a comprehensive review of Australia’s tax and transfer system. The scope of the review encompasses all Commonwealth and state taxes, improvements in transfer payment system for individuals and working families, incentives for workforce participation and skill formation, tax expenditure and incentives for individuals to save for their future. The objective of the review is to create a tax and transfer system that will position Australia to deal with long-term social, economic, demographic and environmental challenges.

The review panel considered a wide range of issues related to the fairness and efficiency of state taxes, including composition, efficiency, harmonisation, simplification and natural resource charging.

A final report was provided to the Commonwealth Treasurer in December 2009, and the Commonwealth Treasurer released the report along with the Commonwealth’s response on 2 May 2010. The recommendations of the panel have implications for states’ tax base and long-term Commonwealth-state financial relations and are being analysed.

Review of Australia’s Tax

and Transfer System

The Territory Economy 87


The Territory Economy

The Northern Territory economy has achieved average annual growth of 3.7 per cent in the period from 2000-01 to 2008-09. This is the third highest growth rate of the jurisdictions, and higher than the national average rate of 3.2 per cent. Economic activity in the Territory is dominated by the extraction of minerals and energy, manufacturing of alumina and liquefied natural gas (LNG), retail, tourism and government services.

Since 2000-01, the Territory economy has experienced significant growth in private sector investment, particularly in the minerals and energy sector and associated residential and non-residential construction, which has driven above long-term average economic growth. Substantial public sector investment, such as the $1.3 billion Adelaide to Darwin railway, significantly increased spending on roads, schools, hospitals, essential services and police and justice facilities as well as the expansion of government services, has also supported the Territory’s economic growth.

The relatively small size of the Territory’s economy means that major projects have a significant impact on economic growth. Major projects, together with the large influence of exports, can cause volatile changes in investment, production and consumption levels. Goods exports are especially susceptible to economic conditions in Asian export markets and the world generally.

This chapter outlines estimated economic growth for the Territory for 2009-10 and outlook for 2010-11. The proposed INPEX LNG plant at Blaydin Point near Darwin has not been included in these forecasts. If the project proceeds, it will have a significant positive impact on the Territory economy. A more detailed analysis of the Territory economy is included in the 2010-11 Northern Territory Economy Budget-related paper.

Growth in the Territory’s gross state product (GSP) is estimated to have moderated to 0.4 per cent in 2009-10, due to significant declines in construction activity as several major projects reached completion. Increased public sector consumption and investment and a widening trade surplus are estimated to have slightly more than offset the decline in construction activity.

e: estimate; f: forecast Source: Northern Territory Treasury, ABS Cat. Nos 5206.0, 5220.0, base year 2007-08

Chapter 7

The Economy in 2009-10

Chart 7.1: Territory State Final Demand and

Gross State Product (real year‑on‑year

percentage)

-6

-4

-2

0

2

4

6

8

10

12

14

01 02 03 04 05 06 07 08 09 10e 11f

SFD

GSP

Year ended June

%

88 The Territory Economy

2010-11 Budget

State final demand (SFD) is estimated to have decreased by 5.2 per cent in 2009-10 as a result of declining private consumption and investment. Household consumption is estimated to have declined by 0.3 per cent as higher interest rates reduced disposable household income and dampened demand for recreational, leisure and luxury goods. Nevertheless, overall consumption expenditure in the Territory is estimated to have grown by 1.3 per cent as increased public sector consumption offset weaker household consumption. Public sector consumption is estimated to have increased by 3.5 per cent, supported by increased front-line health, education and police personnel.

Investment expenditure is estimated to have declined by 17.4 per cent due to the completion of several major private sector projects. An estimated decrease of 32.2 per cent in private investment was partly offset by an estimated 62.5 per cent increase in public investment. The increase in public investment was driven by substantial additional expenditure on the Territory’s road network, housing (particularly Indigenous housing, as part of the Strategic Indigenous Housing and Infrastructure Program), schools, land development (including head-works for the Bellamack subdivision) and improvements to the Power and Water Corporation’s utilities infrastructure. The increase also reflects the impact of the Commonwealth’s Nation Building and Jobs Plan, in particular increased schools related infrastructure and social housing.

e: estimate; f: forecast Source: Northern Territory Treasury, ABS Cat. Nos 5206.0, 5220.0, base year 2007-08

The Territory’s international trade surplus in goods and services is estimated to have increased by 28.5 per cent in 2009-10, as the global economy continued to recover from the global financial crisis (GFC). The international goods trade surplus is estimated to have increased by 38.1 per cent as exports increased by 6.6 per cent and imports decreased by 5.5 per cent. The increase in exports is largely the result of higher alumina, manganese and iron ore exports driven by strengthening demand in Asia. The decline in imports is the result of a decrease in production of feedstock gas from the Joint Development Petroleum Area (JDPA) and lower LNG production due to scheduled maintenance shutdowns.

Chart 7.2: Private and Public Investment Expenditure

(moving annual total)

0

1

2

3

4

5

6

7

01 02 03 04 05 06 07 08 09 10e 11f

Total investment

Private investment

Year ended June

Public investment

$B



e: estimate; f: forecast Source: Northern Territory Treasury, ABS Cat. No. 5368.0

PopulationPopulation is a key component of economic growth. Increasing population generally supports economic growth through increased demand for goods and services, which in turn supports employment growth and commercial and residential construction activity.

The Territory’s population is forecast to increase by 2.1 per cent in 2010, moderating slightly from a 2.2 per cent increase estimated for 2009. Annual population growth in the Territory in 2009 remained above the national rate of 2 per cent and is expected to remain above the national average in 2010.

As well as a high rate of natural increase, the high population growth is attributed to positive interstate and overseas migration. People were attracted to the Territory by plentiful employment opportunities and the Territory’s relatively strong economic performance throughout the GFC.

While remaining above national growth, the Territory’s population growth is expected to moderate in 2010. This moderation is mainly due to the completion of several major projects in 2009 and the relocation of the 7th Battalion Royal Australian Regiment (7RAR) to Adelaide in late 2010 and early 2011. This relocation is projected to result in a net loss of around 1000 persons including defence force personnel and dependants.

Source: ABS Cat. No. 3101.0

Chart 7.3: Territory International Merchandise

Trade (current prices, moving annual total)

-1

0

1

2

3

4

5

6

7

01 02 03 04 05 06 07 08 09 10e 11f

$B

Exports

Imports

Trade Balance

Year ended June

Chart 7.4: AnnualPopulation Growth

0

0.5

1.0

1.5

2.0

2.5

3.0

NSW Vic Qld SA WA Tas NT ACT Aust10 years 5 years 2008-09

%


2010-11 Budget

EmploymentEmployment growth in the Territory increased by an estimated 3.3 per cent in 2009-10, compared to 5.9 per cent in 2008-09, and remained above the long-term average growth rate of 2 per cent. Employment growth has been consistently strong since mid-2006.

e: estimate; f: forecast Source: ABS Cat. No. 6202.0, Access Economics

Construction activity is expected to continue to underpin strong, though moderating, employment growth in the Territory in 2009-10 mainly due to Commonwealth stimulus measures (infrastructure, school and health projects), a record Territory Government capital investment program and increasing residential construction.

Since April 2008, the Territory’s unemployment rate has been below the national unemployment rate, with an estimated unemployment rate in 2009-10 of 3.5 per cent compared to the national rate of 5.9 per cent.

PricesThe small market size and remoteness of the Territory means generally higher average prices than other capital cities. As measured by the consumer price index (CPI), the Darwin inflation rate is forecast to strengthen to 3.1 per cent in 2010. This is greater than the 2.8 per cent increase in prices in 2009 and reflects higher commodity prices and continuing pressure in Darwin’s housing market over 2010.

Since 2006, inflation in Darwin has generally tracked higher than the national rate. This is mainly due to Darwin’s housing prices and rents increasing at a faster rate than nationally. However, historically the rate of price inflation in Darwin has on average been less than the national rate.

Housing contributed about 57 per cent to the increase in Darwin’s CPI in 2009. The increase attributed to housing was somewhat offset by lower costs in the financial services sector. These lower costs reflect lower interest rates, which influence the price of services charged by financial institutions. In addition, a decrease in fuel prices partly offset growth in the Darwin CPI in 2009.

Chart 7.5: Territory and Australia (year‑on‑year

per cent change)

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0%

00 01 02 03 04 05 06 07 08 09 10e 11f

Northern Territory

Australia

Year ended June



f: forecast Source: Northern Territory Treasury, ABS Cat. No. 6401.0, Access Economics

WagesThe Territory Wage Price Index (WPI) is estimated to increase by 4.2 per cent in 2010, compared to 4 per cent in 2009. In 2010, private sector wages are estimated to increase by 3.5 per cent compared to 3.6 per cent in 2009, while public sector wages are estimated to increase by 4.5 per cent compared to 4.6 per cent in 2009.

Strengthening private sector wages growth in 2010 will be driven by increased demand for skilled workers in the construction and mining industries, as a result of strong growth in residential construction activity and an improved outlook for the mining industry. Strengthening public sector wages growth in 2010 reflects the outcomes of several enterprise bargaining agreements (EBA) over the past few years including Northern Territory police and teachers.

The International Monetary Fund expects that the recovery in the world economy will strengthen and broaden over 2010-11. This is expected to increase demand for Territory exports, particularly those mineral and energy resources used in producing consumer goods such as alumina.

The EconomyThe Territory’s GSP is forecast to increase by 3.6 per cent in 2010-11, reflecting the benefits of a widening international trade surplus and further growth in public sector investment. The Territory’s trade surplus is forecast to increase due to strong growth in alumina, manganese and LNG exports, slightly offset by higher feedstock gas imports from the JPDA and increased demand by Territorians for international travel.

In 2010-11, Territory SFD is forecast to increase by 0.3 per cent, with an increase in public sector consumption and investment, and a moderate recovery in household consumption offsetting further falls in private sector engineering activity and machinery and equipment investment.

Consumption expenditure is forecast to increase by 1.9 per cent in 2010-11, driven by a modest recovery in household consumption expenditure. Although dampened by a rising interest rate environment, increasing household consumption is expected to be supported by strengthening residential construction activity, population, wages and employment growth. Public consumption expenditure is forecast to moderate in 2010-11 due to lower public sector employment growth, the relocation of the 7RAR and the Commonwealth stimulus measures nearing completion.

Chart 7.6: ConsumerPrice Index

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

01 02 03 04 05 06 07 08 09 10f 11f

Darwin (quarterly) 8 Capital (quarterly)

%

Darwin (year-on-year)

8 Capitals (year-on-year)

Calendar year

Outlook for 2010-11 and

Beyond


2010-11 Budget

In the medium term, the rate of economic growth in the Territory will depend on the continued recovery of Australia’s major trading partners following the downturn in the global economy in 2009 and the rate of growth in global demand for mineral and energy resources.

PopulationThe Territory’s population growth rate is expected to moderate in 2010 and 2011, as the result of the completion of several major projects in 2009 and the relocation of the 7RAR to Adelaide in late 2010 and early 2011.

EmploymentWith public investment expected to remain at high levels throughout the year and housing construction forecast to strengthen, resident employment growth of 2.5 per cent is forecast for 2010-11.

The average unemployment rate is forecast at 3.7 per cent for 2010-11. This is lower than the Territory’s long-term average unemployment rate of 5 per cent.

The ability of Territory employers to attract and retain suitable skilled workers will continue to be a critical factor in determining employment growth in the Territory, as is the effectiveness of Territory Government training initiatives aimed at alleviating skills shortages.

Prices and WagesDarwin’s CPI is forecast to increase by 3.1 per cent in 2010 and by 3.4 per cent in 2011, driven by increased costs of housing, transportation and financial and insurance services. CPI growth will also be supported by increased private sector wages.

Housing is expected to continue to be the largest contributor to growth in Darwin’s CPI in 2010 and 2011. Ongoing tightness in Darwin’s housing market may lead to continued increases in rents and housing prices, although growth should slow as the result of increased residential land release and moderating population growth. This, however, is expected to be offset to some degree by higher interest rates during 2010-11.

Future PotentialThe following are key projects expected to contribute to the Territory economy over the next decade:

A final investment decision on INPEX’s proposed $US23 billion development of the •Ichthys gas field is expected in late 2010 or early 2011. If approved, construction of the largest energy project in the Territory’s history will commence soon afterwards. The first LNG train could be completed by 2015 with the second train completed about a year later. First LNG production is anticipated to commence in 2015. The onshore plant will produce 8.4 million tonnes per annum (MTPA) of LNG, 1.6 MTPA of liquid petroleum gas and 15 000 barrels per day of condensate.

ConocoPhillips and the joint venture partners are examining options for obtaining •sufficient gas reserves to expand the Darwin LNG plant at Wickham Point from the current 3.7 million tonnes a year to around 10 million tonnes a year.



Following ratification of the International Unitisation Agreement and the Certain •Maritime Arrangements in the Timor Sea Treaty in January 2007, there is increased interest in exploring and developing the potential of the Greater Sunrise petroleum liquids and natural gas field in the Timor Sea. Greater Sunrise has an estimated 6 trillion cubic feet of natural gas.

Phosphate Australia is considering building a $230 million slurry pipeline to •transport around three million tonnes of phosphate from its Highland Plains operation near Borroloola to a shipping port in the Territory or Queensland.

Construction of a rare earth processing plant at Nolan’s Bore north-west of •Alice Springs, is possibly commencing in late 2010, at an estimated total cost of $600 million.

Production at the HNC (Australia) Resources Pty Ltd Browns Oxide operation near •Batchelor is expected to recommence in late 2010, with up to $50 million capital expenditure on plant and equipment.

The availability of gas and the possible advent of emissions trading and carbon •pricing also mean the Territory has the potential to become the home of energy intensive industry.

As the Territory continues to develop as a service and manufacturing hub for the •northern Australian mining and energy sectors, further opportunities are likely to be created for the Territory construction industry.

In the Territory’s urban centres, forecast population growth will require •construction of more housing and associated utilities infrastructure. The Territory Government has commenced planning for the new satellite city of Weddell south of Palmerston, eventually to house up to 40 000 people.

The Territory Government’s Housing the Territory policy, with a 20-year land •release program, accelerated release of land and improved planning and approval processes.

The joint Commonwealth and Territory governments’ Strategic Indigenous Housing •and Infrastructure Program which will deliver 750 new houses, 230 rebuilds of existing homes and 2500 refurbishments across 73 remote Indigenous communities and town camps by 2013, at an estimated cost of $672 million.

Uniform Presentation Framework 95


Uniform Presentation Framework

Under the Uniform Presentation Framework (UPF), the Commonwealth, state and territory governments have agreed to publish information in a standard format in their budget papers. The UPF is based on accounting standard AASB 1049 Whole of Government and General Government Sector Financial Reporting that harmonises Government Finance Statistics and generally accepted accounting principles with the objective of improving the clarity and transparency of government financial statements.

The harmonised standard means that government financial reports are now presented on the same basis by all jurisdictions, resulting in greater transparency and consistency.

The Fiscal Integrity and Transparency Act requires that fiscal outlook reports be prepared in accordance with external reporting standards, including the Australian Accounting Standards or the UPF.

The tables in this chapter meet the Territory’s reporting obligations under both the Fiscal Integrity and Transparency Act and the UPF. They include, for each sector of government, an:

operating statement; •

balance sheet; and •

cash flow statement. •

Also included are supplementary tables for the general government sector presenting:

taxes; •

grant revenue and expenses; •

dividend and income tax equivalent income;•

expenses and purchases of non-financial assets by function; and •

a revised 2010-11 Loan Council Allocation.•

The financial statements for the general government, public non financial corporation and non financial public sectors include the revised 2009-10 Estimate, 2010-11 Budget and 2011-12 to 2013-14 Forward Estimates. The statements for the public financial corporation sector and total public sector present the 2009-10 Estimate only, with the remaining supplementary tables presenting both the 2009-10 Estimate and the 2010-11 Budget.

Chapter 8

96 Uniform Presentation Framework

2010-11 Budget

Table 8.1

General Government Sector Operating Statement 2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

REVENUE

Taxation revenue 409 626 398 575 411 342 406 479 421 800

Current grants 3 347 893 3 311 521 3 430 127 3 491 231 3 586 039

Capital grants 378 318 632 647 150 732 63 112 27 125

Sales of goods and services 171 133 167 436 165 211 165 376 165 976

Interest income 59 554 54 771 54 304 55 438 56 577

Dividend and income tax equivalent income 18 577 27 673 30 497 35 623 34 434

Other 185 942 191 327 196 018 195 974 196 174

TOTAL REVENUE 4 571 043 4 783 950 4 438 231 4 413 233 4 488 125

less EXPENSES

Employee expenses 1 542 358 1 581 572 1 624 441 1 661 916 1 702 575

Superannuation expenses

Superannuation interest cost 133 628 139 144 142 158 144 738 146 774

Other superannuation expenses 137 653 132 863 132 781 130 372 127 331

Depreciation and amortisation 201 147 204 031 207 075 209 968 212 771

Other operating expenses 1 051 530 1 145 249 1 156 509 1 179 624 1 250 872

Interest expenses 130 641 141 931 157 024 163 171 167 187

Other property expenses

Current grants 719 757 714 466 720 119 697 208 657 557

Capital grants 184 585 177 257 84 530 51 361 43 771

Subsidies and personal benefit payments 99 042 106 317 116 051 119 164 122 229

TOTAL EXPENSES 4 200 341 4 342 830 4 340 688 4 357 522 4 431 067

equals NET OPERATING BALANCE 370 702 441 120 97 543 55 711 57 058

plus Other economic flows – included in operating result

106 961 25 125 25 993 33 251 26 500

equals OPERATING RESULT 477 663 466 245 123 536 88 962 83 558

plus Other economic flows – other non-owner movements in equity

746 427 96 865 113 402 115 760 110 787

equals COMPREHENSIVE RESULT – Total change in net worth before transactions with owners as owners

1 224 090 563 110 236 938 204 722 194 345

NET OPERATING BALANCE 370 702 441 120 97 543 55 711 57 058

less Net acquisition of non financial assets

Purchases of non financial assets 858 861 1 048 895 602 351 479 945 437 649

Sales of non financial assets - 100 856 - 94 026 - 86 442 - 98 787 - 86 378

less Depreciation 201 147 204 031 207 075 209 968 212 771

plus Change in inventories

plus Other movements in non financial assets

equals Total net acquisition of non financial assets

556 858 750 838 308 834 171 190 138 500

equals FISCAL BALANCE - 186 156 - 309 718 - 211 291 - 115 479 - 81 442



Table 8.2

General Government Sector Balance Sheet2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

ASSETS

Financial assets

Cash and deposits 394 822 151 922 103 335 111 660 108 612

Advances paid 134 339 134 730 135 121 135 512 135 903

Investments, loans and placements 770 746 723 105 694 720 616 244 630 333

Receivables 120 637 128 819 132 219 137 921 137 183

Equity

Investments in other public sector entities 2 091 372 2 300 881 2 455 943 2 635 508 2 828 295

Investments – other 100 100 100 100 100

Other financial assets

Total financial assets 3 512 016 3 439 557 3 521 438 3 636 945 3 840 426

Non financial assets

Inventories 8 797 8 797 8 797 8 797 8 797

Property, plant and equipment 7 676 310 8 447 524 8 777 841 8 977 245 9 136 647

Investment property 45 834 39 915 34 558 29 201 23 844

Other non financial assets 5 034 6 322 6 310 6 298 6 286

Total non financial assets 7 735 975 8 502 558 8 827 506 9 021 541 9 175 574

TOTAL ASSETS 11 247 991 11 942 115 12 348 944 12 658 486 13 016 000

LIABILITIES

Deposits held 345 354 106 996 88 961 90 103 142 962

Advances received 245 491 218 707 211 129 203 226 194 982

Borrowing 1 610 051 1 939 661 2 075 475 2 137 061 2 216 462

Superannuation 2 441 131 2 494 000 2 539 267 2 574 984 2 599 690

Other employee benefits 475 028 484 806 495 006 504 434 514 286

Payables 95 926 96 025 96 008 96 008 96 006

Other liabilities 58 454 62 254 66 494 71 344 75 941

TOTAL LIABILITIES 5 271 435 5 402 449 5 572 340 5 677 160 5 840 329

NET ASSETS/(LIABILITIES) 5 976 556 6 539 666 6 776 604 6 981 326 7 175 671

Contributed Equity

Accumulated surplus/(deficit) 1 279 569 1 745 814 1 869 350 1 958 312 2 041 870

Reserves 4 696 987 4 793 852 4 907 254 5 023 014 5 133 801

NET WORTH 5 976 556 6 539 666 6 776 604 6 981 326 7 175 671

NET FINANCIAL WORTH1 - 1 759 419 - 1 962 892 - 2 050 902 - 2 040 215 - 1 999 903

NET FINANCIAL LIABILITIES2 3 850 791 4 263 773 4 506 845 4 675 723 4 828 198

NET DEBT3 900 989 1 255 607 1 442 389 1 566 974 1 679 558

1 Net financial worth equals total financial assets minus total liabilities.2 Net financial liabilities equals the sum of total liabilities less total financial assets excluding investments in other public sector entities.3 Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid and

investments, loans and placements.


2010-11 Budget

Table 8.3

General Government Sector Cash Flow Statement 2009-10 2010-11 2011-12 2012-13 2013-14 Estimate Budget Forward Estimates

$000 $000 $000 $000 $000Cash receipts from operating activitiesTaxes received 404 461 397 727 410 766 405 903 421 224Receipts from sales of goods and services 173 121 170 739 169 089 169 726 170 526Grants and subsidies received 3 730 969 3 944 168 3 580 859 3 554 343 3 613 164Interest receipts 59 554 54 771 54 304 55 438 56 577Dividends and income tax equivalents 17 394 20 339 27 673 30 497 35 748Other receipts 179 141 183 411 187 512 186 981 186 981Total operating receipts 4 564 640 4 771 155 4 430 203 4 402 888 4 484 220Cash payments for operating activitiesPayments for employees - 1 741 991 - 1 786 375 - 1 839 341 - 1 887 294 - 1 937 535Payment for goods and services - 1 053 522 - 1 141 459 - 1 152 269 - 1 174 774 - 1 246 275Grants and subsidies paid - 1 003 278 - 997 995 - 920 655 - 867 688 - 823 512Interest paid - 130 657 - 141 822 - 157 041 - 163 171 - 167 189Other payments Total operating payments - 3 929 448 - 4 067 651 - 4 069 306 - 4 092 927 - 4 174 511NET CASH FLOWS FROM OPERATING ACTIVITIES 635 192 703 504 360 897 309 961 309 709Cash flows from investments in non financial assetsSales of non financial assets 100 856 94 026 86 442 98 787 86 378Purchases of non financial assets - 858 861 - 1 048 895 - 602 351 - 479 945 - 437 649Net cash flows from investments in non financial

assets- 758 005 - 954 869 - 515 909 - 381 158 - 351 271

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS

- 122 813 - 251 365 - 155 012 - 71 197 - 41 562

Net cash flows from investments in financial assets for policy purposes1

- 5 391 - 113 035 - 42 051 - 64 196 - 82 391

Net cash flows from investments in financial assets for liquidity purposes

221 549 57 032 38 275 88 893 - 3 111

NET CASH FLOWS FROM INVESTING ACTIVITIES - 541 847 - 1 010 872 - 519 685 - 356 461 - 436 773Net cash flows from financing activitiesAdvances received (net) - 6 520 - 26 784 - 7 578 - 7 903 - 8 244Borrowing (net) - 3 619 329 610 135 814 61 586 79 401Deposits received (net) 152 115 - 238 358 - 18 035 1 142 52 859Other financing (net) NET CASH FLOWS FROM FINANCING ACTIVITIES 141 976 64 468 110 201 54 825 124 016NET INCREASE/DECREASE IN CASH HELD 235 321 - 242 900 - 48 587 8 325 - 3 048Net cash flows from operating activities 635 192 703 504 360 897 309 961 309 709Net cash flows from investments in non financial assets - 758 005 - 954 869 - 515 909 - 381 158 - 351 271CASH SURPLUS (+)/DEFICIT (-) - 122 813 - 251 365 - 155 012 - 71 197 - 41 562Additional Information to the Cash Flow StatementCASH SURPLUS (+)/DEFICIT (-) - 122 813 - 251 365 - 155 012 - 71 197 - 41 562Acquisitions under finance leases and similar

arrangements

ABS GFS SURPLUS (+)/DEFICIT (-) including finance leases and similar arrangements

- 122 813 - 251 365 - 155 012 - 71 197 - 41 562

Future infrastructure and superannuation contributions/earnings2

- 14 327 - 16 601 - 17 595 - 18 653 - 19 771

UNDERLYING SURPLUS (+)/DEFICIT (-) - 137 140 - 267 966 - 172 607 - 89 850 - 61 333

1 Includes equity acquisitions, disposals and privatisations (net).2 Contributions for future infrastructure and superannuation requirements.



Table 8.4

Public Non Financial Corporation Sector Operating Statement2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

REVENUE

Current grants 119 313 121 228 123 203 126 286 129 202

Capital grants 12 192 19 224 10 955 16 354 16 763


Interest income 2 315 1 241 1 231 1 239 1 252

Other 52 589 36 004 25 787 27 112 27 696

TOTAL REVENUE 701 951 971 831 743 235 779 289 809 185

less EXPENSES

Employee expenses 73 485 80 956 89 163 91 549 103 434

Superannuation expenses 11 293 12 415 12 415 12 415 12 415


Other operating expenses 468 935 698 202 403 644 420 773 431 879


Other property expenses 184 166 166 4 783 4 950

Current grants

Capital grants


TOTAL EXPENSES 725 413 997 158 759 599 803 831 842 717

equals NET OPERATING BALANCE - 23 462 - 25 327 - 16 364 - 24 542 - 33 532


- 1 545 - 1 823 - 1 435 - 1 504 - 1 579

equals OPERATING RESULT - 25 007 - 27 150 - 17 799 - 26 046 - 35 111


737 520 82 337 81 256 87 057 91 133


712 513 55 187 63 457 61 011 56 022

NET OPERATING BALANCE - 23 462 - 25 327 - 16 364 - 24 542 - 33 532


Purchases of non financial assets 407 641 428 255 312 223 261 107 193 204

Sales of non financial assets - 186 - 126 - 126 - 126 - 126


plus Change in inventories 128 15 414 11 210 6 690 9 176


9 347 18 500 8 713 8 930 9 154


297 662 330 409 190 595 125 445 50 799



2010-11 Budget

Table 8.5

Public Non Financial Corporation Sector Balance Sheet2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

ASSETS

Financial assets


Advances paid

Investments, loans and placements

Receivables 74 943 107 016 94 932 98 062 101 628

Equity 3 3 3 3 3


Total financial assets 168 278 149 183 136 505 143 765 152 748


Inventories 18 273 33 687 44 897 51 587 60 763


Investment property



TOTAL ASSETS 2 894 150 3 288 115 3 547 602 3 767 678 3 918 907

LIABILITIES

Deposits held 392 392 392 392 392

Advances received

Borrowing 943 430 1 142 203 1 317 437 1 409 077 1 427 354

Superannuation


Payables 57 568 83 739 61 589 58 917 50 939




Contributed Equity 362 172 474 816 516 476 580 281 662 281

Accumulated surplus/(deficit) 740 908 713 564 695 571 669 331 634 026

Reserves 757 870 840 401 921 851 1 009 102 1 100 429

TOTAL EQUITY 1 860 950 2 028 781 2 133 898 2 258 714 2 396 736

NET FINANCIAL WORTH1 - 864 922 - 1 110 151 - 1 277 199 - 1 365 199 - 1 369 423

NET DEBT2 850 490 1 100 431 1 276 259 1 363 769 1 376 629

1 Net financial worth equals total financial assets minus total liabilities.2 Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid and




Table 8.6

Public Non Financial Corporation Sector Cash Flow Statement2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

Cash receipts from operating activities

Receipts from sales of goods and services 496 428 762 076 594 416 605 401 630 851

Grants and subsidies received 131 333 140 452 134 158 142 640 145 965

Interest receipts 2 315 1 240 1 229 1 238 1 251

Other receipts 40 869 15 533 15 280 16 388 16 747

Total operating receipts 670 945 919 301 745 083 765 667 794 814

Cash payments for operating activities

Income tax equivalents paid - 186 - 185 - 166 - 100 - 4 913

Payments for employees - 89 610 - 99 325 - 107 477 - 109 568 - 120 172

Payment for goods and services - 478 928 - 680 753 - 430 735 - 422 467 - 441 522

Grants and subsidies paid - 5 348 - 5 787 - 26 483 - 27 458 - 29 591

Interest paid - 45 948 - 67 492 - 85 419 - 96 214 - 100 204

Other payments

Total operating payments - 620 020 - 853 542 - 650 280 - 655 807 - 696 402

NET CASH FLOWS FROM OPERATING ACTIVITIES 50 925 65 759 94 803 109 860 98 412

Cash flows from investments in non financial assets

Sales of non financial assets 186 126 126 126 126

Purchases of non financial assets - 407 641 - 428 255 - 312 223 - 261 107 - 193 204

Net cash flows from investments in non financial assets

- 407 455 - 428 129 - 312 097 - 260 981 - 193 078


- 356 530 - 362 370 - 217 294 - 151 121 - 94 666



NET CASH FLOWS FROM INVESTING ACTIVITIES - 407 455 - 428 129 - 312 097 - 260 981 - 193 078

Net cash flows from financing activities

Advances received (net)

Borrowing (net) 338 066 198 773 175 234 91 640 18 277

Deposits received (net)

Dividends paid - 311 - 215 - 194 - 194 - 194

Other financing (net) 112 644 41 660 63 805 82 000

NET CASH FLOWS FROM FINANCING ACTIVITIES 337 755 311 202 216 700 155 251 100 083

NET INCREASE/DECREASE IN CASH HELD - 18 775 - 51 168 - 594 4 130 5 417

Net cash flows from operating activities 50 925 65 759 94 803 109 860 98 412

Net cash flows from investments in non financial assets - 407 455 - 428 129 - 312 097 - 260 981 - 193 078

Dividends paid - 311 - 215 - 194 - 194 - 194

CASH SURPLUS (+)/DEFICIT (-) - 356 841 - 362 585 - 217 488 - 151 315 - 94 860

Additional Information to the Cash Flow Statement

CASH SURPLUS (+)/DEFICIT (-) - 356 841 - 362 585 - 217 488 - 151 315 - 94 860

Acquisitions under finance leases and similar arrangements


- 356 841 - 362 585 - 217 488 - 151 315 - 94 860

1 Includes equity acquisitions, disposals and privatisations (net).


2010-11 Budget

Table 8.7

Non Financial Public Sector Operating Statement2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

REVENUE

Taxation revenue 403 153 391 381 404 148 399 285 414 606

Current grants 3 347 807 3 311 521 3 430 127 3 491 231 3 586 039

Capital grants 378 318 632 647 150 732 63 112 27 125


Interest income 59 656 54 777 54 308 55 438 56 577

Dividend and income tax equivalent income 19 940 27 313 30 137 30 646 29 290

Other 233 093 224 120 218 579 219 845 220 629

TOTAL REVENUE 5 102 382 5 577 225 5 009 197 5 007 333 5 108 616

less EXPENSES

Employee expenses 1 615 843 1 662 528 1 713 604 1 753 465 1 806 009


Superannuation interest cost 133 628 139 144 142 158 144 738 146 774

Other superannuation expenses 145 319 142 117 142 020 139 596 136 555


Other operating expenses 1 487 682 1 810 103 1 526 805 1 567 255 1 649 609


Other property expenses

Current grants 667 749 664 060 668 395 644 130 603 090

Capital grants 172 393 158 033 73 575 35 007 27 008


TOTAL EXPENSES 4 755 356 5 161 626 4 928 212 4 976 358 5 085 284

equals NET OPERATING BALANCE 347 026 415 599 80 985 30 975 23 332


105 416 23 302 24 558 31 747 24 921

equals OPERATING RESULT 452 442 438 901 105 543 62 722 48 253


771 648 124 209 131 395 142 000 146 092


1 224 090 563 110 236 938 204 722 194 345

NET OPERATING BALANCE 347 026 415 599 80 985 30 975 23 332


Purchases of non financial assets 1 266 502 1 477 150 914 574 741 052 630 853

Sales of non financial assets - 101 042 - 94 152 - 86 568 - 98 913 - 86 504


plus Change in inventories 128 15 414 11 210 6 690 9 176


9 345 18 500 8 713 8 930 9 154


854 518 1 081 247 499 429 296 635 189 299




Table 8.8

Non Financial Public Sector Balance Sheet 2009-10 2010-11 2011-12 2012-13 2013-14


$000 $000 $000 $000 $000

ASSETS

Financial assets


Advances paid 134 339 134 730 135 121 135 512 135 903

Investments, loans and placements 770 746 723 105 694 720 616 244 630 333

Receivables 187 012 226 457 217 195 220 833 223 042

Equity

Investments in other public sector entities 230 422 272 100 322 045 376 794 431 559

Investments – other 103 103 103 103 103


Total financial assets 1 718 049 1 509 026 1 472 550 1 461 177 1 529 583


Inventories 27 070 42 484 53 694 60 384 69 560


Investment property 45 834 39 915 34 558 29 201 23 844



TOTAL ASSETS 12 179 896 13 150 516 13 711 153 14 106 631 14 471 316

LIABILITIES

Deposits held 253 019 65 833 47 814 44 826 92 268

Advances received 245 491 218 707 211 129 203 226 194 982

Borrowing 2 553 481 3 081 864 3 392 912 3 546 138 3 643 816

Superannuation 2 441 131 2 494 000 2 539 267 2 574 984 2 599 690


Payables 146 215 172 483 150 314 147 641 139 660




Contributed Equity

Accumulated surplus/(deficit) 2 020 477 2 459 378 2 564 921 2 627 643 2 675 896

Reserves 3 956 079 4 080 288 4 211 683 4 353 683 4 499 775

NET WORTH 5 976 556 6 539 666 6 776 604 6 981 326 7 175 671

NET FINANCIAL WORTH1 - 4 485 291 - 5 101 824 - 5 461 999 - 5 664 128 - 5 766 062

NET FINANCIAL LIABILITIES2 4 715 713 5 373 924 5 784 044 6 040 922 6 197 621

NET DEBT3 1 751 479 2 356 038 2 718 648 2 930 743 3 056 187

1 Net financial worth equals total financial assets minus total liabilities.2 Net financial liabilities equals the sum of total liabilities less total financial assets excluding investments in other public sector entities.3 Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid and



2010-11 Budget

Table 8.9

Non Financial Public Sector Cash Flow Statement2009-10 2010-11 2011-12 2012-13 2013-14 Estimate Budget Forward Estimates

$000 $000 $000 $000 $000Cash receipts from operating activitiesTaxes received 398 253 391 381 404 148 399 285 414 606Receipts from sales of goods and services 643 165 906 711 737 401 749 229 775 479Grants and subsidies received 3 730 711 3 944 168 3 580 859 3 554 343 3 613 164Interest receipts 59 656 54 777 54 308 55 438 56 577Dividends and income tax equivalents 19 073 19 940 27 313 30 137 30 646Other receipts 217 835 198 894 202 742 203 319 203 678Total operating receipts 5 068 693 5 515 871 5 006 771 4 991 751 5 094 150Cash payments for operating activitiesPayments for employees - 1 825 447 - 1 879 354 - 1 940 200 - 1 990 178 - 2 051 094Payment for goods and services - 1 506 013 - 1 796 059 - 1 556 850 - 1 571 293 - 1 661 849Grants and subsidies paid - 877 035 - 863 330 - 812 980 - 752 506 - 707 138Interest paid - 174 392 - 208 080 - 241 235 - 258 147 - 266 142Other payments Total operating payments - 4 382 887 - 4 746 823 - 4 551 265 - 4 572 124 - 4 686 223NET CASH FLOWS FROM OPERATING ACTIVITIES 685 806 769 048 455 506 419 627 407 927Cash flows from investments in non financial assetsSales of non financial assets 101 042 94 152 86 568 98 913 86 504Purchases of non financial assets - 1 266 502 - 1 477 150 - 914 574 - 741 052 - 630 853Net cash flows from investments in non financial

assets- 1 165 460 - 1 382 998 - 828 006 - 642 139 - 544 349


- 479 654 - 613 950 - 372 500 - 222 512 - 136 422


- 5 391 - 391 - 391 - 391 - 391


221 549 57 032 38 275 88 893 - 3 111

NET CASH FLOWS FROM INVESTING ACTIVITIES - 949 302 - 1 326 357 - 790 122 - 553 637 - 547 851Net cash flows from financing activitiesAdvances received (net) - 6 520 - 26 784 - 7 578 - 7 903 - 8 244Borrowing (net) 334 447 528 383 311 048 153 226 97 678Deposits received (net) 168 343 - 187 186 - 18 019 - 2 988 47 442Other financing (net) NET CASH FLOWS FROM FINANCING ACTIVITIES 496 270 314 413 285 451 142 335 136 876NET INCREASE/DECREASE IN CASH HELD 232 774 - 242 896 - 49 165 8 325 - 3 048Net cash flows from operating activities 685 806 769 048 455 506 419 627 407 927Net cash flows from investments in non financial assets - 1 165 460 - 1 382 998 - 828 006 - 642 139 - 544 349CASH SURPLUS (+)/DEFICIT (-) - 479 654 - 613 950 - 372 500 - 222 512 - 136 422Additional Information to the Cash Flow StatementCASH SURPLUS (+)/DEFICIT (-) - 479 654 - 613 950 - 372 500 - 222 512 - 136 422Acquisitions under finance leases and similar

arrangements


- 479 654 - 613 950 - 372 500 - 222 512 - 136 422

Future infrastructure and superannuation contributions/earnings2

- 14 327 - 16 601 - 17 595 - 18 653 - 19 771

UNDERLYING SURPLUS (+)/DEFICIT (-) - 493 981 - 630 551 - 390 095 - 241 165 - 156 193




Table 8.10

Public Financial Corporation Sector Operating Statement2009-10

Estimate

$000

REVENUE

Current grants

Capital grants

Sales of goods and services 161 042

Interest income 222 058

Other 4 010

TOTAL REVENUE 387 110

less EXPENSES

Employee expenses 23 759

Superannuation expenses 1 829

Depreciation and amortisation

Other operating expenses 100 938

Interest expenses 192 265

Other property expenses 8 339

Current grants 3 424

Capital grants

Subsidies and personal benefit payments

TOTAL EXPENSES 330 554

equals NET OPERATING BALANCE 56 556


equals OPERATING RESULT 56 556

plus Other economic flows – other non-owner movements in equity - 23 877

equals COMPREHENSIVE RESULT – Total change in net worth before transactions with owners as owners 32 679

NET OPERATING BALANCE 56 556


Purchases of non financial assets 5 786

Sales of non financial assets

less Depreciation

plus Change in inventories


equals Total net acquisition of non financial assets 5 786

equals FISCAL BALANCE 50 770


2010-11 Budget

Table 8.11

Public Financial Corporation Sector Balance Sheet2009-10

Estimate

$000

ASSETS

Financial assets

Cash and deposits 232 346

Advances paid 264 804

Investments, loans and placements 3 559 814

Receivables 123 596

Equity


Total financial assets 4 180 560


Inventories

Property, plant and equipment 50 558

Investment property

Other non financial assets 4 728

Total non financial assets 55 286

TOTAL ASSETS 4 235 846

LIABILITIES

Deposits held 518 773

Advances received 268 524

Borrowing 2 653 827

Superannuation

Other employee benefits 4 592

Payables 64 008

Other liabilities 495 700

TOTAL LIABILITIES 4 005 424

NET ASSETS/(LIABILITIES) 230 422

Contributed Equity 58 054

Accumulated surplus/(deficit) 163 184

Other reserves 9 184

TOTAL EQUITY 230 422

NET FINANCIAL WORTH1 175 136

NET DEBT2 - 615 840





Table 8.12

Public Financial Corporation Sector Cash Flow Statement2009-10

Estimate

$000


Receipts from sales of goods and services 159 368

Grants and subsidies received

Interest receipts 220 879

Other receipts 10 034

Total operating receipts 390 281


Income tax equivalents paid - 5 722

Payments for employees - 26 643

Payment for goods and services - 79 220

Grants and subsidies paid - 3 424

Interest paid - 189 250

Other payments - 2 357

Total operating payments - 306 616

NET CASH FLOWS FROM OPERATING ACTIVITIES 83 665


Sales of non financial assets

Purchases of non financial assets - 5 786

Net cash flows from investments in non financial assets - 5 786

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS 77 879


Net cash flows from investments in financial assets for liquidity purposes - 555 617

NET CASH FLOWS FROM INVESTING ACTIVITIES - 561 403


Advances received (net) - 5 175

Borrowing (net) 474 637

Deposits received (net) 69 265

Dividends paid - 13 351

Other financing (net)

NET CASH FLOWS FROM FINANCING ACTIVITIES 525 376

NET INCREASE/DECREASE IN CASH HELD 47 638

Net cash flows from operating activities 83 665

Net cash flows from investments in non financial assets - 5 786

Distributions paid - 13 351

CASH SURPLUS (+)/DEFICIT (-) 64 528


CASH SURPLUS (+)/DEFICIT (-) 64 528


ABS GFS SURPLUS (+)/DEFICIT (-) including finance leases and similar arrangements 64 528

1 Includes equity acquisitions, disposals and privatisations (net).


2010-11 Budget

Table 8.13

Total Public Sector Operating Statement2009-10

Estimate

$000

REVENUE

Taxation revenue 402 098

Current grants 3 347 807

Capital grants 378 318

Sales of goods and services 817 625

Interest income 112 696

Dividend and income tax equivalent income

Other 234 613

TOTAL REVENUE 5 293 157

less EXPENSES

Employee expenses 1 639 602


Superannuation interest cost 133 628

Other superannuation expenses 147 115

Depreciation and amortisation 320 415

Other operating expenses 1 581 276

Interest expenses 198 575

Other property expenses 2 357

Current grants 671 173

Capital grants 172 393

Subsidies and personal benefit payments 36 999

TOTAL EXPENSES 4 903 533

equals NET OPERATING BALANCE 389 624

plus Other economic flows – included in operating result 105 416

equals OPERATING RESULT 495 040

plus Other economic flows – other non-owner movements in equity 729 050

equals COMPREHENSIVE RESULT – Total change in net worth before transaction with owners as owners 1 224 090

NET OPERATING BALANCE 389 624


Purchases of non financial assets 1 272 288

Sales of non financial assets - 101 042

less Depreciation 320 415

plus Change in inventories 128

plus Other movements in non financial assets 9 345

equals Total net acquisition of non financial assets 860 304

equals FISCAL BALANCE - 470 680



Table 8.14

Total Public Sector Balance Sheet 2009-10

Estimate

$000

ASSETS

Financial assets

Cash and deposits 414 334

Advances paid 130 666

Investments, loans and placements 1 905 086

Receivables 286 617

Equity

Investments in other public sector entities

Investments – other 103


Total financial assets 2 736 806


Inventories 27 070

Property, plant and equipment 10 432 106

Investment property 45 834

Other non financial assets 12 123

Total non financial assets 10 517 133

TOTAL ASSETS 13 253 939

LIABILITIES

Deposits held 553 994

Advances received 264 906

Borrowing 2 766 825

Superannuation 2 441 131

Other employee benefits 509 888

Payables 203 507

Other liabilities 537 132

TOTAL LIABILITIES 7 277 383

NET ASSETS/(LIABILITIES) 5 976 556

Contributed Equity

Accumulated surplus/(deficit) 2 183 661

Reserves 3 792 895

NET WORTH 5 976 556

NET FINANCIAL WORTH1 - 4 540 577

NET DEBT2 1 135 639




2010-11 Budget

Table 8.15

Total Public Sector Cash Flow Statement2009-10

Estimate

$000


Taxes received 397 198

Receipts from sales of goods and services 798 701

Grants and subsidies received 3 730 711

Interest receipts 112 496

Other receipts 225 412

Total operating receipts 5 264 518


Payments for employees - 1 851 035

Payment for goods and services - 1 578 944

Grants and subsidies paid - 880 459

Interest paid - 195 603

Other payments - 2 357

Total operating payments - 4 508 398

NET CASH FLOWS FROM OPERATING ACTIVITIES 756 120


Sales of non financial assets 101 042

Purchases of non financial assets - 1 272 288

Net cash flows from investments in non financial assets - 1 171 246

NET CASH FROM OPERATING ACTIVITIES AND INVESTMENTS IN NON FINANCIAL ASSETS - 415 126

Net cash flows from investments in financial assets for policy purposes1 - 5 391

Net cash flows from investments in financial assets for liquidity purposes - 6 590

NET CASH FLOWS FROM INVESTING ACTIVITIES - 1 183 227


Advances received (net) - 5 199

Borrowing (net) 473 810

Deposits received (net) 55 495

Other financing (net)

NET CASH FLOWS FROM FINANCING ACTIVITIES 524 106

NET INCREASE/DECREASE IN CASH HELD 96 999

Net cash flows from operating activities 756 120

Net cash flows from investments in non financial assets - 1 171 246

CASH SURPLUS (+)/DEFICIT (-) - 415 126


CASH SURPLUS (+)/DEFICIT (-) - 415 126


ABS GFS SURPLUS (+)/DEFICIT (-) including finance leases and similar arrangements - 415 126

Future infrastructure and superannuation contributions/earnings2 - 14 327

UNDERLYING SURPLUS (+)/DEFICIT (-) - 429 453




Table 8.16

General Government Sector Taxes2009-10 2010-11

Estimate Budget

$M $M

TAXES ON EMPLOYERS’ PAYROLL AND LABOUR FORCE 147 152

Payroll taxes 147 152

TAXES ON PROPERTY 127 113

Stamp duties on financial and capital transactions 127 113

TAXES ON THE PROVISION OF GOODS AND SERVICES 90 87

Taxes on gambling 62 57

Taxes on insurance 28 30

TAXES ON THE USE OF GOODS AND PERFORMANCE OF ACTIVITIES 46 47

Motor vehicle registration fees 46 47

TOTAL TAXES 410 399

Table 8.17

State and Territory General Government Sector Grant Revenue2009-10 2010-11

Estimate Budget

$M $M

Current grant revenue

Current grants from the Commonwealth (including for on-passing)

National partnership payments 308 331

Specific purpose payments 359 360

General purpose grants 2 681 2 620

Total current grant revenue 3 348 3 311

Capital grant revenue

Capital grants from the Commonwealth (including for on-passing)

National partnership payments 354 630

Specific purpose payments

General purpose grants 24 3

Total capital grant revenue 378 633

TOTAL GRANT REVENUE 3 726 3 944


2010-11 Budget

Table 8.18

State and Territory General Government Sector Grant Expense2009-10 2010-11

Estimate Budget

$M $M

Current grant expense including subsidies and personal benefit payments

Local Government 81 62

Private and Not-for-profit sector (including for on-passing) 531 559

Grants to other sectors of Government 53 51

Other 154 149

Total current grant expense including subsidies and personal benefit payments 819 821

Capital grant expense

Local Government 8 3

Private and Not-for-profit sector (including for on-passing) 95 137

Grants to other sectors of Government 76 21

Other 6 16

Total capital grant expense 185 177

TOTAL GRANT EXPENSE 1 003 998

Table 8.19

General Government Sector Dividend and Income Tax Equivalent Income2009-10 2010-11

Estimate Budget

$M $M

Dividend and income tax equivalent income from PNFC sector

Dividend and income tax equivalent income from PFC sector 19 28

TOTAL DIVIDEND AND INCOME TAX EQUIVALENT INCOME 19 28



Table 8.20

General Government Sector Expenses2009-10 2010-11

Estimate Budget

$M $M

General public services 107 114

Public order and safety 460 488

Education 899 903

Health 911 946

Social security and welfare 229 238

Housing and community amenities 516 518

Recreation and culture 163 162

Fuel and energy 139 132

Agriculture, forestry, fishing and hunting 62 56

Mining, manufacturing and construction 23 21

Transport and communications 219 224

Other economic affairs 181 233

Other purposes 291 308

TOTAL OPERATING EXPENSES 4 200 4 343

Table 8.21

General Government Sector Purchases of Non Financial Assets 2009-10 2010-11

Estimate Budget

$M $M

General public services 14 11

Public order and safety 68 52

Education 149 109

Health 48 72

Social security and welfare

Housing and community amenities 318 525

Recreation and culture 27 26

Fuel and energy

Agriculture, forestry, fishing and hunting 9 7

Mining, manufacturing and construction 34 32

Transport and communications 185 209

Other economic affairs

Other purposes 7 6

TOTAL PURCHASES OF NON FINANCIAL ASSETS 859 1 049


2010-11 Budget

Table 8.22

2010-11 Loan Council AllocationLoan Council Budget-time

Allocation Estimate

$M $M

General government sector cash deficit (+)/surplus (-) 157 251

Public non financial corporations sector cash deficit (+)/surplus (-) 227 363

Non financial public sector cash deficit (+)/surplus (-) 384 614


equals

ABS GFS cash deficit (+)/surplus (-) 384 614

less

Net cash flows from investments in financial assets for policy purposes

plus

Memorandum items

2010-11 LOAN COUNCIL NOMINATION 384 614

Tolerance limit (2% of non financial public sector cash receipts from operating activities) 98

Change in loan council allocation 230

Note: This table sets out the Territory’s 2010-11 Loan Council Allocation (LCA) Budget update of $614 million as compared to that nominated and endorsed with the Loan Council of $384 million. This movement is outside the tolerance limit of 2 per cent of non financial public sector operating cash receipts that applies between the LCA and Budget-time nomination. Nominations for 2010-11 were provided by all jurisdictions on the basis of policies commenced up to and included in their mid-year budget updates. The Budget-time estimate of $614 million reflects the prevailing economic conditions affecting the Territory and the significant investment in infrastructure across the Territory.

Appendix 115


Classification of Entities in the Northern Territory

Total Public SectorNon Financial Public Sector

General GovernmentAboriginal Areas Protection AuthorityAuditor-General’s OfficeAustralAsia Railway Corporation3

Batchelor Institute of Indigenous Tertiary Education3

Central Holding AuthorityConstruction Division1

Darwin Waterfront Corporation3

Data Centre Services1

Department of Business and EmploymentDepartment of Construction and InfrastructureDepartment of the Chief MinisterDepartment of Education and TrainingDepartment of Health and FamiliesDepartment of Housing, Local Government and Regional ServicesDepartment of JusticeDepartment of Lands and PlanningDepartment of the Legislative AssemblyDepartment of Natural Resources, Environment, The Arts and SportDepartment of ResourcesDesert Knowledge Australia3

Government Printing Office1

Land Development CorporationNominal Insurer’s Fund3

Northern Territory Electoral CommissionNorthern Territory Legal Aid Commission3

Northern Territory Major Events Company Pty Ltd3

Northern Territory Police, Fire and Emergency ServicesNorthern Territory TreasuryNT Build Statutory Corporation3

NT Fleet1

NT Home Ownership1

Office of the Commissioner for Public EmploymentOmbudsman’s OfficeTerritory Discoveries1

Territory Wildlife Parks1

Tourism NTPublic Non Financial CorporationsDarnor Pty Ltd3

Darwin Bus Service1

Darwin Port Corporation1

Gasgo Pty Ltd3

Indigenous Essential Services Pty Ltd3 Power and Water Corporation2,3

Public Financial CorporationsNorthern Territory Treasury Corporation1

Territory Insurance Office3

1 Government business divisions. 2 Government owned corporation. 3 Non budget sector entity.

Appendix:

Glossary 117


Glossary

Loans acquired for policy rather than liquidity management purposes. Included are long-term and short-term loans, non marketable debentures and long-term and short-term promissory agreements (bonds and bills) issued to public sector units for achieving government policy objectives.

A unit of government administration, or office or statutory corporation, nominated in an Administrative Arrangements Order for the purposes of the Financial Management Act and including, where the case requires, a part or division (by whatever name called) of an agency.

Statements of accounting standards which can be applied in the preparation and presentation of financial statements.

Transactions in which the ownership of an asset (other than cash and inventories) is transferred from one institutional unit to another, in which cash is transferred to enable the recipient to acquire another asset, or in which the funds realised by the disposal of another asset are transferred, for which no economic benefits of equal value are receivable or payable in return.

Reported in the cash flow statement that measures the net impact of cash flows during the period. It equals net cash flows from operating activities plus net cash flows from acquisition and disposal of non-financial assets, less distributions paid less value of assets acquired under finance leases and similar arrangements.

Net cash flows from operating plus net cash from acquisition and disposal of non-financial assets (less dividends paid for the PNFC and PFC sectors).

Payments by the Commonwealth for goods and services and associated transfer payments for the conduct of its general government activities.

The net result of all items of income and expense recognised for the period. It is the aggregate of operating result and other movements in equity, other than transactions with owners as owners.

A general indicator of the prices paid by household consumers for a specific basket of goods and services in one period, relative to the cost of the same basket in a base period.

A potential financial obligation arising out of a condition, situation, guarantee or indemnity, the ultimate effect of which will be confirmed only on the occurrence or non-occurrence of one or more uncertain future events.

Amounts payable or receivable for current purposes for which no economic benefits of equal value are receivable or payable in return.

Lease agreements that transfer substantially all the risks and benefits relating to ownership of an asset from the lessor (legal owner) to the lessee (party using the asset).

Advances/Advances Paid

Agency

Australian Accounting Standards

Capital Grants

Cash Surplus/Deficit

Commonwealth Own-purpose Expenses

Comprehensive Result

Consumer Price Index

Contingent Liability

Current Grants

Finance Lease

118 Glossary

2010-11 Budget

Any asset that is:

cash;•

an equity instrument of another entity;•

a contractual right:•

– to receive cash or another financial asset from another entity; or

– to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or

a contract that will or may be settled in the entity’s own equity instruments and is:•

– a non derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or

– a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.

For this purpose, the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments.

Fiscal balance, also referred to as net lending/borrowing, is an operating statement measure that differs from the net operating balance in that it includes spending on capital items but excludes depreciation. The fiscal balance measure more accurately reflects the cash requirements of a government in any given year. A net lending (or fiscal surplus) balance indicates that a government is saving more than enough to finance all its investment spending. A net borrowing (or fiscal deficit) position indicates that a government’s level of investment is greater than its level of savings.

Generally accepted accounting principles (GAAP) is a term used to describe broadly the body of principles that governs the accounting for financial transactions underlying the preparation of a set of financial statements.

Defined in Government Finance Statistics as an entity or group of entities which are mainly engaged in the production of goods and/or services outside the normal market mechanism. Goods and services are provided free of charge or at nominal charges well below costs of production.

On 1 July 2000, the Commonwealth introduced the goods and services tax (GST). Payments from the Commonwealth return the GST revenue to the states and territories, replacing the previous general purpose grants.

A Territory-controlled trading entity that follows commercial practices and is required to comply with competitive neutrality principles.

Refers to statistics that measure the financial transactions of governments and reflect the impact of those transactions on other sectors of the economy. Government Finance Statistics in Australia are developed by the Australian Bureau of Statistics in conjunction with all governments and are mainly based on international statistical standards, developed in consultation with member countries by the International Monetary Fund.

Financial Asset

Fiscal Balance

Generally Accepted Accounting Principles


Goods and Services Tax Revenue

Government Business Division (GBD)

Government Finance Statistics

Glossary 119


A government owned corporation (GOC) is an entity whose objectives are to operate at least as efficiently as any corporate business and maximise sustainable return to government. The Government Owned Corporations Act adopts the shareholder model of corporate governance and the Power and Water Corporation became the Territory’s first GOC on 1 July 2002.

Classifies outlays or expenditure transactions by the purpose served, for example, health, education.

Transactions in which one unit provides goods, services, assets (or extinguishes a liability) or labour to another unit without receiving approximately equal value in return. Grants can either be of a current or capital nature (see current grants and capital grants).

Grants can be paid as general purpose grants which refer to grants which are not subject to conditions regarding their use. Alternatively, they may be paid as specific purpose grants which are paid for a particular purpose and/or have conditions attached regarding their use.

All grants paid to one institutional sector (for example, a state general government) to be passed on to another institutional sector (for example, local government or a non-profit institution).

The total value of goods and services produced in Australia over the period for final consumption. Intermediate goods, or those used in the production of other goods, are excluded. Gross domestic product can be calculated by summing total output, total income or total expenditure.

Similar to gross domestic product, except that it measures the total value of goods and services produced in a jurisdiction. It is the sum of all income, namely wages, salaries and profits, plus indirect taxes less subsidies. It can also be calculated by measuring expenditure, where it is the sum of state final demand and international and interstate trade, changes in the level of stocks and a balancing item.

An undertaking to answer for the debt or obligations of another person or entity.

A written undertaking to compensate, protect or insure another person or entity against future financial loss, damage or liability.

The Australian Loan Council coordinates borrowing by Australian and state governments. Current arrangements seek to emphasise transparency of public sector finances, through financial market scrutiny of proposed borrowing to restrict borrowing to prudent levels.

The nomination to the Loan Council of the level of financing required.

Memorandum items are used to adjust the cash surplus/deficit to include in the Loan Council Allocation certain transactions that may have the characteristics of public sector borrowings but do not constitute formal borrowings.

An agreement defining the objectives, outputs and performance benchmarks related to the delivery of specified projects, to facilitate reforms or to reward those jurisdictions that deliver on national reforms or achieve service delivery improvements.

Government Owned Corporation

Government Purpose Classification

Grants

Grants for On-passing

Gross Domestic Product

Guarantee

Indemnity

Loan Council

Loan Council Allocation

Memorandum Items – Loan Council

National Partnership Agreement

120 Glossary

2010-11 Budget

Purchases (or acquisitions) of non-financial assets less sales (or disposals) of non-financial assets less depreciation plus changes in inventories and other movements in non-financial assets.

Purchases and sales (or net acquisitions) of non-financial assets generally include accrued expenses and payables for capital items. Purchases exclude non-produced assets and valuables which are included in other movements in non-financial assets.

Includes actuarial gains and losses on defined benefit superannuation plans.

Cash receipts from liquidation or repayment of investments in financial assets for liquidity management purposes less cash payments for such investments. Investment for liquidity management purposes means making funds available to others with no policy intent and with the aim of earning a commercial rate of return.

Cash receipts from the repayment and liquidation of investments in financial assets for policy purposes less cash payments for acquiring financial assets for policy purposes. Acquisition of financial assets for policy purposes is distinguished from investments in financial assets (liquidity management purposes) by the underlying government motivation for acquiring the assets. Acquisition of financial assets for policy purposes is motivated by government policies such as encouraging the development of certain industries or assisting citizens affected by natural disaster.

Net debt measures a government’s net stock of selected gross financial liabilities less financial assets.

Net debt equals sum of deposits held, advances received, government securities, loans and other borrowing less the sum of cash and deposits, advances paid and investments, loans and placements.

Total liabilities less financial assets, other than equity in PNFCs and PFCs. This measure is broader than net debt as it includes significant liabilities, other than borrowings (for example, accrued employee liabilities such as superannuation and long service leave entitlements). For the PNFC and PFC sectors, it is equal to negative net financial worth.

A measure of a government’s net holdings of financial assets. It is calculated from the Uniform Presentation Framework balance sheet as financial assets minus liabilities. Net financial worth is a broader measure than net debt, in that it incorporates provisions (such as superannuation, but excludes depreciation and doubtful debts) as well as holdings of equity. Net financial worth includes all classes of financial assets and liabilities.

The revenue from transactions minus expenses from transactions. It is a summary measure of the ongoing sustainability of operations and excludes gains and losses resulting from changes in price levels and other changes in the volume of assets. It is the component of the change in net worth that is due to transactions and can be attributed directly to government policies.

Provides a relatively comprehensive picture of a government’s overall financial position. It is calculated as total assets less total liabilities less shares and other contributed capital. It includes a government’s non financial assets such as land and other fixed assets, which may be sold and used to repay debt, as well as its financial assets and liabilities including debtors, creditors and superannuation liabilities. Net worth also shows asset acquisitions over time, giving an indication of the extent to which borrowings are used to finance asset purchases, rather than only current expenditure.

Net Acquisition/ (Disposal) of Non-Financial Assets from Transactions

Net Actuarial Gains

Net Cash Flows from Investments in Financial Assets (Liquidity Management purposes)

Net Cash Flows from Investments in Financial Assets (Policy Purposes)

Net Debt

Net Financial Liabilities

Net Financial Worth

Net Operating Balance

Net Worth

Glossary 121


Assets that are not financial assets, predominantly land and other fixed assets.

The sector formed through a consolidation of the general government and public non financial corporation subsectors.

Changes in the volume or value of an asset or liability that do not result from transactions (that is, revaluations and other changes in the volume of assets).

Includes all superannuation expenses from transactions except superannuation interest cost. It generally includes current service cost, which is the increase in entitlements associated with the employment services provided by employees in the current period. Superannuation actuarial gains/losses are excluded as they are considered other economic flows.

Includes short-term and long-term trade debt and accounts payable, grants and interest payable.

Government-controlled entities which perform central bank functions, and/or have the authority to incur liabilities and acquire financial assets in the market on their own account.

Public enterprises primarily engaged in the production of goods or services of a non financial nature, for sale in the market place, at prices which aim to recover most of the costs involved.

Includes short-term and long-term trade credit and accounts receivable, grants, taxes and interest receivable.

Revenue from the direct provision of goods and services and includes fees and charges for services rendered, sales of goods and services, fees from regulatory services and work done as an agent for private enterprises. It also includes rental income under operating leases and on produced assets such as buildings and entertainment, but excludes rental income from the use of non-produced assets such as land. User charges includes sale of goods and services revenue.

A Commonwealth financial contribution to support state delivery of services in a particular sector. Payments are made from the Commonwealth Treasury to state treasuries, and are appropriated to the relevant Northern Territory agency.

Final consumption expenditure plus gross fixed capital formation in each jurisdiction. It represents the total expenditure on consumption and investment in a jurisdiction.

The expense resulting from the increase in the liability due to the fact that, for all participants in the scheme, retirement (and death) is one year nearer, and so one fewer discount factors must be used to calculate the present value of the benefits for each future year. Interest cost is the increase during a period in the present value of a defined benefit obligation which arises because the benefits are one period closer to settlement, as per the relevant accounting standard. The cost is measured net of the actuarial return on plan assets of defined benefit schemes calculated using an actuarially determined long-term rate of return.

The mechanism to ensure that GBDs and GOCs incur tax liabilities similar to privately owned organisations. Thus, greater parity exists between the cost structures of government-controlled trading entities and the private sector, aiding in the achievement of competitive neutrality.

Non Financial Assets

Non Financial Public Sector

Other Economic Flows

Other Superannuation Expense

Payables

Public Financial Corporations (PFC)

Public Non Financial Corporations (PNFC)

Receivables

Sale of Goods and Services

Specific Purpose Payments

State Final Demand

Superannuation Interest Cost

Tax Equivalents Regime

122 Glossary

2010-11 Budget

An appropriation purpose of that name as specified in an Appropriation Act, which provides a pool of funds specifically set aside in each budget to meet operational contingencies that arise during the year.

A uniform reporting framework (UPF) agreed by the Australian Loan Council in 2000, which is a revision of the agreement reached at the 1991 Premiers’ Conference. The UPF was further updated and reissued in April 2008 to incorporate accounting standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. The UPF specifies that the Commonwealth, state and territory governments will present a minimum set of budget and financial outcome information on the Government Finance Statistics basis, according to an agreed format and specified Loan Council reporting arrangements.

Treasurer’s Advance

Uniform Presentation Framework

2010-11 budget papers · the fiscal outlook in the 2010-11 budget includes: • operating surpluses...

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