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An uneven playing field in the Territory
Issue 105 - 18 May 2006
ISSUE 105, May 18, 2006: Underfunding is one thing, but what happens when cash ear-marked to alleviate disadvantage ends up in the pockets of the wealthy? SEAN BOWDEN* explores the way funds find their way to and from Northern Territory government coffers.
The Northern Territory is home to some of the richest postcodes in Australia. In Darwin, residents have access to first class infrastructure and services, with modern schools, hospitals and public amenities such as sporting stadiums, libraries, parks, pools and community centres.
Recent ABS statistics confirm Darwin’s residents have little difficulty taking advantage of their lifestyle options as they have some of the highest levels of disposable income in Australia. In the Northern Territory’s mining towns - Nhulunbuy, Jabiru and Groote Eylandt - residents compete for the title of having Australia’s highest disposable incomes.
For those who live in these parts of the NT, life is good. But elsewhere, the story is not so rosy.
In the Northern Territory’s sixth and seventh largest towns - Wadeye and Maningrida - and just about everywhere else outside the main urban centres, the situation is third world.
In Wadeye, about 2,500 people live in 148 habitable houses. In Maningrida about 2,500 people live in 157 houses.
Education services are minimal, doctors almost impossible to find, children and old people suffer most and life expectancy is at deplorable lows. Basic infrastructure is old and run down.
The situation is duplicated in just about every other non-urban town or community in regional NT: Papunya, Yuendumu, Willowra, Ali Curung, Beswick, Barunga, Ngukurr, Oenpelli... and the list goes on.
The situation that has developed reveals a great distinction between rich and poor; between the “haves” and “have nots”.
And the gap widens each year.
If we are to begin to challenge this inequity we must confront why it is that such a divide has developed. Why is it that such wealth can exist alongside such poverty?
Is it intentional? If so, who has made the decisions that have caused such a dire situation? And what can be done to balance the scales?
The best answers are found, as is often the case, in the numbers. And what the numbers reveal is a fiscal situation where the levers are pulled firmly in favour of the urban regions of the NT.
Discretionary decision-making by successive NT governments - Labor and Liberal - has warped expenditure priorities so that an abnormal situation has now become normal.
In fact the political, social and economic structures are so deep that it may be impossible for any NT government to address them alone.
The starting point in understanding the NT’s financial situation is to understand the way in which financial assistance is provided to the NT by the Commonwealth.
In a 2003 paper by Alan Morris titled Powerhouse or Mendicant? Is the Territory an engine of growth or a drag on federation, we get a good look at the bottom line.
Morris is the Chairman of the Commonwealth Grants Commission and a former Secretary of the NT Chief Minister’s department, so he’s seen both sides of the coin.
His paper points out that the NT receives grant funding at a multiplier of almost five-and-a-half times per person when compared with Victoria or New South Wales.
So whereas Victoria receives $1,138 per person in grant funds from the Commonwealth, the NT receives $7,239.
The general formula that governs these numbers is known as “horizontal fiscal equalisation”.
Morris explains: “The higher than average funding levels essentially reflect the very much greater costs faced by the Territory government in delivering services to the people of the Territory”.
So, when it comes to dividing up almost $40 billion annually in GST revenues, the NT advises Canberra of its difficulties with remote area service provision and how this is compounded by disadvantage, and the Commonwealth numbers men take account of these facts and weight the NT five-and-a-half times more favourably per capita than other states.
The grant funds, which form about 80 percent of the NT’s income, is then transferred, untied, to the NT Treasury. The NT government then decides how that money is spent.
In past years, this is often where the discussion stops. It is accepted that the NT labours under the burden of distance and disadvantage and that the money that comes from Canberra (or from “donor” states such as NSW and Victoria) is properly applied.
However, the way the NT government is spending its money has started to raise the ire of the so-called “donor” states. And indications are that the Commonwealth is also starting to pay careful attention.
In a nutshell, the allegation is being made that the NT government is not spending the money it receives for remote area disadvantage on addressing remote area disadvantage. Rather, there is a growing body of opinion and evidence that the NT government is redirecting money from where it is meant to go (ie. the regions) to where its own priority spending areas lie (ie. urban areas, the Northern Suburbs of Darwin).
For those outside the Territory who may not be aware, the Northern Suburbs of Darwin comprise eight seats in the Legislative Assembly. You can’t win government in the NT without winning the Northern Suburbs.
When the residents of the Northern Suburbs scream, the NT government acts - to not do so would be to risk handing government to the opposition.
A look at a recent Commonwealth Grants Commission (CGC) working paper that pits the spending of each state and territory against each other, highlights the problem and reveals the deep structural inequities that have developed in the NT.
For example, the CGC working paper records that in the area of ‘Service to Indigenous Communities’, the NT government should have spent $161.1 million in 2004-05. But it only spent just over half that - $95.3 million. Every year the regions ‘lose” about $70 million. And every year their needs get greater.
The CGC report also highlights the inequity in social services.
In 2004-05 the NT government was assessed as needing to spend $59.9 million in the area of ‘Homeless and General Welfare’ programs, which includes drug and alcohol rehabilitation and women’s shelters.
The NT government spent just $1.3 million.
A look at the other side of the ledger begins to explain these deficits.
In the area of ‘General Public Services’, which takes in expenditure on administration, the NT government is grossly overspending according to the CGC report - it should have spent $142.5 million in 2004-05, but actually spent $297.8 million.
In the area of ‘Debt Charges’, the CGC reveals the NT government is spending $108.4 million annually servicing debt. Other states have little or no debt.
These numbers start to unlock what it is that many, particularly the NT’s two big Land Councils, have argued for years. That is, the government underspends on areas such as regional infrastructure and services and overspends on public servants and urban infrastructure.
The ANU’s Dr John Taylor recently opened up the debate further by exploring the actual on-the-ground expenditure in the Thamarrurr region, which includes the town of Wadeye.
Dr Taylor’s figures are shocking and his conclusions are damning.
Taylor proves, based on the government’s own figures, that the NT government is chronically underspending in the Thamarrurr region on the fundamentals of education, health, and aged care.
In education - the most basic of all rights - an average child at Wadeye can expect to have spent on him or her 26 cents (or 47 cents depending on which government figures you believe) as against the full $1 spent on the average child in the NT.
These figures are even worse than they look because the ‘average’ number includes spending in Wadeye, Papunya, Maningrida and Ngukurr and all the other remote communities who experience similar circumstances.
If you only compared spending at Wadeye to spending on schools in large urban centres like Darwin and Alice Springs, the real number may be closer to five cents against $1.
On the ground in Wadeye, the results speak for themselves. There is a school that can only house about 300 children comfortably. There is no secondary school. But there are about 800 children of school age in the town. So, at best, 500 children every year do not have access to an education.
Despite receiving Commonwealth assistance based on census calculations the NT government funds schools according to attendance.
This situation begs the question, how do the other 500 “attend” school in the first place?
The confronting reality is that limiting access to an education for children in Wadeye suits the current system of expenditure, because it allows the money that would have otherwise been spent on these children’s education to be spent elsewhere.
That is of course until an uneducated child enters the juvenile justice or prison system. Then the NT government starts to overspend.
This is unsustainable, unproductive and, frankly, unforgivable.
The Australian Financial Review’s economics editor, Alan Mitchell wrote an opinion piece in July 2005, which looked at this issue from a political and economic perspective.
Noting that the Commonwealth cannot control Territory expenditure, Mitchell points out that it may now be in the interests of some states and the Territory government to allow certain disadvantage to continue as it not only ensures the continuation of the income stream, but actually increases income each year.
This is starting to look a lot like the exploitation of the most disadvantaged in our society. And, regrettably, the CGC working paper shows these trends have continued under an NT Labor government, which was elected in 2001.
Historically, the Australian Labor Party and, in particular, NT Labor, has concerned itself with addressing this type of structural inequity.
In fact, it is the hallmark of a social democratic party such as the ALP that it seeks to resolve situations of inequity, or under privilege, in its work towards making lives better.
In the famous Light on the Hill speech, the great Labor leader Ben Chifley spoke not to the employed but to the unemployed, not to the housed but to the homeless, not to the rich but to the poor.
He spoke of real battlers who were marginalised in society. He promised to represent them and make things better. NT Labor, as the responsible government, must be urged to apply Labor principles to the situation under discussion here.
The first step is to begin the process of repaginating the financial formulae. That is, the NT government must ensure that the right amount of money is spent in the right areas.
Indigenous community infrastructure is an obvious starting point. And addressing the expenditure shortfall in homelessness and drug and alcohol rehabilitation might be the best way to tackle the NT’s “itinerant” problem. Jailing people is a non-solution.
The ‘General Public Service’ over-expenditure identified in the CGC working paper must be tackled as a counterbalance to increased expenditure in areas such as health and education.
Transferring public servants and their offices out of Darwin and into the communities they serve would be a start.
The NT now faces an enormous backlog of under-funding and neglect to deal with that will not be solved by an incremental approach.
My suggestion is that the NT government establish a Regional Development Fund.
This fund should be allocated a minimum of $400 million. The NT government kick-started the Trans-Territory railway by taking the lead and it did not hesitate in putting up to $200 million into a conference centre and wave pool in Darwin.
The Chief Minister should request, in the firmest terms, a matching contribution from the federal government.
The Indigenous Land Corporation could also be asked to contribute to the economic development component of the fund.
The four NT land councils should be brought into the picture and asked to sit as executive members on the fund’s board.
Aboriginal land holdings are an essential ingredient of a future solution.
The priorities of the fund would need to be determined after careful consideration but they should not just deal with backlog need, but economic and regional development. The two go hand-in-hand.
Consider the potential of the Ord River Scheme; the potential of agriculture and forestry of the Daly River region; the resources and tourist potential of Arnhem Land; the mineral riches of the Territory; the fishing and aquaculture industries; and the pastoral enterprises that are the backbone of the regional areas at the minute.
We must build regional economies if we are to have regional communities.
Each region has numerous over-looked industries and opportunities that would be unlocked if the right infrastructure and support was provided.
The current situation was created by three decades of discretionary decision-making by Country Liberal Party politicians. The solutions must then lie with the current crop of NT Labor politicians and the party they represent.
* Sean Bowden is a Darwin-based lawyer.
• SEE ALSO: Record Growth
• SEE ALSO: Brough's ten cents worth
• SEE ALSO: Govt budget cause for national shame: ALP
 
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