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State of the states: Northern Territory

Australians see the NT as a place of red sand, Uluru and Aborigines but this is an incomplete picture. Image from

STATE OF THE STATES: a snapshot of the key issues affecting each state and territory in the lead up to Saturday’s election.

The Northern Territory is, in effect, a self-governing territory of the Commonwealth. It can have its legislation overruled by the Commonwealth parliament or regulations dictated by a Commonwealth minister. Around 80% to 85% of the NT government’s revenue derives from the Commonwealth, mostly as a general purpose grant (the GST disbursement) but also from federal specific purpose grants.

So the NT’s dependence on Canberra is at the core of its political economy and its medium-term future. This is the sleeper issue of the current election campaign which neither of the major parties wants to address publicly.

Introducing the Northern Territory

Australians see the NT as a place of rednecks, red sand, Uluru and Aborigines. This is an incomplete picture. The NT is a modern – if curious – economy. The major city, Darwin, even looks like a Parramatta transported to the northern coast of Australia. But urban similarities aside, the NT has a deep dependence upon the Commonwealth.

The NT has a singular demography. Aborigines constitute about 30% of its population. It also has a huge population churn of about 15% annually (among the whitefellas), as young people arrive for work or career reasons and older people leave for work or retirement.

Darwin looks like a Parramatta transported to the northern coast. Wikimedia commons

The NT has a greater proportion of its workforce in the public sector than in any other jurisdiction – even more than in the ACT. This indicates the extreme dependence of the NT on the public sector and its expenditure. Government is the central economic entity and the Commonwealth the ultimate funder.

The economy – a boom and bust state

The Northern Territory economy would grow relatively slowly – hampered by perpetual skilled labour shortages, high costs and long supply chains – except that it periodically booms.

In the past, when it “busts”, unwise government subsidisation of uneconomic projects has followed – like when the previous Labor NT government built a high-cost convention centre. Because of such persistent profligacy in the past, the NT has a serious public debt issue. This weakens governmental capacity because the NT raises such a small proportion of its own revenue. It is beholden to the counter-cyclical GST revenues and Commonwealth policy program expenditures and directions.

With the government broke, activity from the resources sector will have to provide any future booms. Currently Darwin is booming, as a giant A$35 billion LNG plant is being built. The rest of the Territory is in recession. Yet Darwin’s citizens are not happy; the cost of living is high and rents are comparable to Sydney.

So Territorians cannot decide whether to be optimistic or pessimistic about the state of the Territory. They don’t appreciate their current boom and they will hate the next recession in 18 months.

Snapshot of the Northern Territory

Political issues

The driving forces of NT politics – developmentalism and dependence – have been amply displayed via the issue of gas supplies for the Gove alumina operation.

The owners of Gove have previously thrice rejected the option to pipe gas directly to the facility. Yet six months ago the operation (now owned by Rio Tinto following its hubristic takeover of ALCAN) demanded the NT supply natural gas or the refinery would have to close down.

The then-Chief Minister Terry Mills capitulated and foolishly offered ten years of gas from the Power and Water Corporation supply contract, provided the Commonwealth built a (A$500 million) pipeline from existing facilities to Nhulunbuy. This offer was despite the fact that Rio was then trying to sell its aluminium division and so the NT was merely subsidising the sale price.

Negotiations with the Commonwealth commenced. Then Adam Giles supplanted Mills and subsequently offered Pacific Aluminium half the gas of the original deal. This half-better developmentalist policy still depended on a Commonwealth-funded or indemnified pipeline.

The election intervened and both major parties have been opaque on the future for any pipeline.

‘Urban bias’ as a hidden political issue

In the past, I have criticised successive governments for directing expenditure from general purpose funding from the Commonwealth – which was “earned” to ameliorate Aboriginal disadvantage – towards expenditure exclusively in the Greater Darwin area.

After becoming concerned about this inequity, from 2009 the Commonwealth increasingly tied its specific purpose funding. Tied grants meant the Commonwealth was forcing the NT government to make a contribution from its general purpose monies. But the problem of addressing inequity within the NT remains serious.

As the federal election campaign began, the Chief Minister wrote a letter to me (and presumably lots of other electors) explaining why the NT government had not signed up to the Commonwealth’s Gonski school funding proposals. At the heart of his government’s objections to the Gonski model was a (justified) fear of a loss of NT control over its education system.

But he also gave another curious reason and I quote from the letter:

The Gonski formula diverts money away from urban students in Darwin, the rural area, Palmerston, Alice Springs and Katherine and redistributes it to remote schools. I have already instructed the Education Department to begin an Indigenous education review but we don’t think the Gonski Formula is fair to all Territory students.

The problem of addressing inequity within the NT remains serious. Rusty Stewart

In other words, he tacitly acknowledged that NT schools funding currently favoured urban schools over remote (Aboriginal) schools.

The NT public education system funds about 155 schools. There are 85 schools with an over-90% Aboriginal enrolment and a further ten with an over-80% Aboriginal enrolment. Of this 95-strong cohort, only three Aboriginal schools were over-funded under the Gonski equalisation model. That is, less than 3% of Aboriginal schools are over-funded.

Yet of the 65 non-Aboriginal schools in the NT, some of which may have minority Aboriginal enrolments, 41 (or 63%) are over-funded by margins at least a factor of three greater than the over-funded Aboriginal schools. This is patently unconscionable and will attract national attention.

So, the Northern Territory must await with trepidation the new federal government. Whichever party secures office, NT developmentalism must falter and dependence wreak its price.

This is the second article in our State of the states series. Stay tuned for the other instalments in the lead-up to Saturday’s election.

Part one: Tasmania

Part three: Western Australia

Part four: Victoria

Part five: South Australia

Part six: Australian Capital Territory

Part seven: Queensland

Part eight: New South Wales

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