On Track CLP

This is a guest post by Darwin based lawyer Matt Punch

The NT’s minority Country Liberal Party government spent much of the last year extolling the economic strength of the Northern Territory economy under their watch.

This included a noxious taxpayer funded government advertisement campaign called ‘On Track’ which told Territorians that the CLP government was successfully growing the Territory.

The ‘On Track’ campaign featured regular glossy ads in the NT News, local television advertising and a flash new website. The campaign reportedly ended up chewing through $428,000 of taxpayers money.[1]

In contrast, for some time, the dominant topic of conversation in and around Darwin has been the downturn being felt across much of the Territory economy.

For anybody who works in the private sector or has a small business, this has been the BBQ-stopper conversation for at least 6 months now.

The latest Commsec ‘State of States’ report still ranks the Territory third amongst the eight state/territory economies. We have higher than average wage growth and economic growth, and lower than average unemployment.[2]

However, these headline statistics don’t give the full story. The wages and economic growth figures come with a big asterisk – the $40 billion Inpex LNG project in Darwin harbour.

The Inpex mega-project is currently in the thick of peak construction. Wages and economic growth in our small economy are effectively propped up by this huge once-in-a-lifetime statistical outlier.

So it’s only when you look beyond the headline economic numbers – and you’re not in the well-paid and secure public service – that you begin to understand why people in Darwin are saying that the place feels like it’s in a big slump.

The previously mentioned Commsec report shows measurements from the back-half of last year where dwelling starts were already going backwards and Territory housing finance continued to be the weakest in the nation.

The Northern Territory  Treasury department’s latest update is also very sobering on this front.[3] In 2015, there was a 32.9% decrease in housing finance commitments for first home buyers. This was matched by dwelling sales in the Territory (houses and units) decreasing by 31.9% in the year to December 2015.

These figures paint a bleak picture – the Darwin real estate market has collapsed. In fact, real estate sales figures look eerily similar to the Global Financial Crisis (GFC) period:

Territory overall dwelling sales, moving annual total, 2005-06 to 2015-16

punchy graph

Source: NT Treasury, Territory Economic Review (February 2016), page 8

This picture matches what Darwin locals are telling each other. Real estate agents are saying that they’ve never seen vacancy rates this high. Properties aren’t selling because the market has no buyers, especially not first-home buyers.

Just about everybody I know who is renting is re-negotiating their rent down. Those landlords who can find tenants are sometimes renting for half what they were getting only 2-3 years ago.

Of course, the decline in the real estate market creates a drop-off in the construction/building industries – industries which are already distressed following the huge downturn in the Territory’s resources industries.

Though the news surrounding Australia’s mining downturn is widely known, fewer acknowledge the Territory’s historical dependence on mining and the disproportionate impact the mining downturn has had on our economy.

Between 2005/06 and 2011/12, mining was the largest industry contributor to NT Gross State Product (GSP) before being eclipsed, like everything else, by the construction of the Inpex LNG plant.

In the past few years, the Territory has lost hundreds of direct and indirect jobs when three iron ore mines and one manganese mine closed. Just before that, the Territory lost 1000 jobs in one hit when the Gove refinery was mothballed.

The resources sector is still shedding jobs. The mines which survived the international commodity price collapse have cut back. Most recently, gas companies have been winding back exploration programs with the collapse in world oil prices.[4]

Worse still, the economic down-turn in the resources industries has caused an exodus from the Territory. NT Treasury reports that in FY 2014-15, net interstate migration detracted 3038 persons from the Territory’s population. Somewhere around 1-2% of the Territory population packed up and left, most likely because of a lack of work. Today, empty apartments dot the Darwin CBD skyline.

All of the above explains the current climate of low economic confidence. NT Treasury, for example, notes that the Sensis Business Index December 2015 shows that “the net balance business confidence level is 22 percentage points lower than around the same time last year”.[5]

The Manpower Employment Outlook Survey for the second quarter of 2016 is even more pessimistic for the Territory, stating: “Job seekers can expect the weakest hiring climate since the region was first measured in the survey in Quarter 2 2004”.[6]

In recent weeks, Chief Minister Adam Giles has for the first time acknowledged problems in the economy. The downturn in the mining, real estate and building/construction sectors, and the stagnant population numbers, have shown up in budget forecasts. He said:

Government royalties have hit the floor with the resources industry, stamp duties are going through the floor themselves, and our GST receipts are going through the floor…[7]

Channelling the ghost of Kevin Rudd, last week Giles even announced a ‘stimulus’ package involving upgrades and repairs of school buildings with a view that the work should be completed by struggling “small businesses and independent subcontractors”.[8]

The school repairs ‘stimulus’, along with a new chunk of money for sports/tourism/community projects, is a belated acknowledgement by the CLP government that the Territory economy is not really ‘On-Track’ after all.

Indeed, you can’t even find the ‘On-Track’ ad-campaign website anymore (https://ontrack.nt.gov.au/).

Apparently, the CLP government took it down a month ago.

[1] See http://www.abc.net.au/news/2016-02-11/nt-government-ice-ads-inaccurate-and-misleading-says-a-g/7159560
[2] See https://www.commsec.com.au/stateofstates
[3] See http://www.treasury.nt.gov.au/Economy/TerritoryEconomicReviews/Pages/TerritoryEconomicReview.aspx
[4] See http://www.ntnews.com.au/business/nt-gas-exploration-being-decimated/news-story/55d0e122909aa04c8acd50c154bec87c
[5] See http://www.treasury.nt.gov.au/Economy/TerritoryEconomicReviews/Pages/TerritoryEconomicReview.aspx
[6] See http://www.manpower.com.au/research/manpower-employment-outlook-survey.aspx
[7] See http://www.abc.net.au/news/2016-02-26/northern-territory-in-a-budgetary-hole-warns-adam-giles/7202648
[8] See http://www.alicespringsnews.com.au/2016/03/06/fast-100m-stimulus-where-its-needed-most-giles/