November 29, 2017
Contact: Northern Territory Opposition

Speech to Productivity Commission

Wednesday 29 November 2017 in Darwin

Commissioners, often in life people use big words to confuse, or obscure the true intent of what is being proposed.

What we are talking about today with the Horizontal Fiscal Equalisation Inquiry (HFE Inquiry) is about levels of service and the simple question are all Australians equal?

Should it make a difference if you are born in Brisbane or Bachelor, Pine Creek or Perth, Wollongong or Wadeye?

Should you get better opportunities for health, and education just because of where you were born or live?

The NT Opposition says that location shouldn’t matter when it comes to health, education and opportunity.

Clearly and simply there should be no change to the way the Goods and Services Tax (GST) revenue is redistributed back to States and Territories.

Any change to the way GST revenue is distributed will be the end of the Northern Territory as we know it.

Commissioners, I hope you enjoy your time in Darwin the capital of the Northern Territory, the capital of Northern Australia and the gateway to Asia.

The NT Opposition asked for you to be here, and I thank you for being here this week to allow Territorians their say on Horizontal Fiscal Equalisation.

Let me now outline why the NT is such a special and unique place.

We know from the ABS Census 2016 that there at least 58,248 Aboriginal and Torres Strait Islander People in the Northern Territory. This is 9% of the total Aboriginal and Torres Strait Islander people in the nation.

Importantly, Census 2016 states that 25.5% of the Northern Territory population identify as being of Aboriginal and Torres Strait Islander descent.

However, the percentage of Aboriginal and Torres Strait Islanders in the Northern Territory is higher given the significant undercount of Aboriginal peoples.

The Northern Territory Government coordinates essential services to 72 remote Indigenous communities. There are about 500 homelands in the Northern Territory, with a total of 2400 homes.

Around 10,000 people live on homelands, while others have a small family group.

This presents its own challenges none less than the provision of food and water. The cost of fuel, freight and refrigeration all add up, and by the time food reaches a remote community it is far more expensive and far less fresh than it would be in urban regions.

It is no surprise that some Aboriginal people in homelands turn to cheaper, poor-quality foods lacking nutritional value. This causes significant poor health outcomes in the long term.

It is very important to note that the cost to access communities is significant. The cost of providing access is also a very heavy burden on the NT Government.

The Commission should be aware of the seasonality considerations regarding providing services to communities.

There are communities in the Northern Territory where the NT Government is unable to provide services continuously for 52 weeks of the year. So the figure that we attribute to the cost of proving services is not a true reflection of the need. In fact, it could be argued that the average cost of provision of services should be increased, indeed, even doubled to be a true reflection of costs and need.

In short, the NT Government can’t get to many of these remote communities to provide services due to the weather, distance or lack of reliable road or air transport infrastructure. This should be taken on board by the Productivity Commission and reflected in the next Commonwealth Grants Commission Update Report.

Research conducted by the Menzies School of Health Research found that 80% of the health gap between Indigenous and non-Indigenous Australians is due to chronic disease.

In remote areas, 90% of Indigenous children have some form of ear infection, 1 in 3 Indigenous people living in remote communities run out of food and have no money to buy more.

Aboriginal people have HEP B infection rates three times higher than non-Indigenous Australians.

At present, there is a 10 year gap in the average life expectancy between Indigenous and non-Indigenous Australians.

Let me speak to you about a few Aboriginal communities in my electorate of Daly.

Wadeye is located approximately 420 km south west of Darwin. It is accessed along the Daly River Road which is not sealed from the Daly River crossing and can only be accessed during the Dry Season (May to October).

It is worth noting that the town of Wadeye is 200km from Daly River. Along that Port Keats road from Daly River to Wadeye there are many communities and outstations. Many of those communities are tens of kilometers off the main dirt road.

One of the most telling indicators from 2016 is that the median total weekly family income for Wadeye was $584 versus $2,105 for the rest of the Northern Territory.

Remoteness and the vastness of the Territory makes everything much more difficult and expensive.

The point I would like to make about remoteness is in relation to how it limits the availability of services.

While there may be more Indigenous people in Southern States in absolute terms, for example in New South Wales and Victoria, Indigenous people in NSW, and Victoria are unlikely to be hundreds of kilometers from basic services.

In the NT, 80% of Indigenous people live in remote areas, this is approximately 40% for WA.

So the question for the people living at Wadeye is how do they get to services?

The town gets cut off during the Wet Season.

The only way to get in and out is to fly. To illustrate the difficulty – the cost of a flight on Murin Air in and out of Wadeye is $330 each way.

No hospital….think of what this means for an expectant mother or her partner.

This is just one town.

There are a number of commonalities between all Aboriginal towns and communities across the Northern Territory. They are geographically dispersed, isolated and subject to seasonal conditions, lack basic infrastructure and services. They have high comparative levels of socio-economic disadvantage.

We know that just over half of all remote communities in the NT don’t have a local health clinic.

The scale of the task in addressing the infrastructure deficit and closing the Indigenous disadvantage gap is immense.

Census data shows that Wadeye has one of the fastest population growth rates in the country.

In 2006 the population at Wadeye was 2,207 and in 2016 it was 2,858, an increase of 651 people or 29.5% growth over the decade.

The Northern Territory with a population of approximately 244,000 represents just 1% of the national population.

Despite our large area—over 1.3m square kilometres- we are sparsely populated.

The structure of the Northern Territory economy is markedly different to the national economy. The Territory is a relatively small open economy that is significantly influenced by major projects, with abundant natural resources, a large public sector and Defence presence.

The Territory economy has grown considerably over the past decade. Total gross state product (GSP) has grown from $16.9 billion in 2006‑07 to $23.6 billion in 2015‑16, with population increasing during this period by approximately 31 000 people to over 240 000.

All of this has been built on the bedrock of certainty provided by HFE and the attendant GST revenue streams.

The certainty provided by HFE has enabled NT Governments to look outwards to Asia, to put in place bold pro-business policy settings.

Looking north for trade we can grow our economy and population.

The unintended consequences of removing that certainty are unclear.

Commissioners, for 16 years I was a mango farmer at the Daly River Mango Farm. I saw firsthand a phenomenon I call ‘intentional ignorance’, this is the injustice of inaction, the injustice of indifference.

A head in the sand approach will not allow us to ‘Close the Gap’.

Changing the current system of GST funding is exactly opposite of what is required to achieving the ‘Closing the Gap’ initiatives. 

The United Nations has described Australia's lack of progress on ‘Closing the Gap’ as "woefully inadequate", saying the over-incarceration of Indigenous people is a major human rights concern.

Indigenous Australians don't live as long as other Australians. Their children are more likely to die as infants. And their health, education and employment outcomes are worse than non-Indigenous people.

Australia has promised to close this gap on health, education and employment.

Let me remind Commissioners of Prime Minister Malcolm Turnbull’s words in relation the 2017 ‘Closing the Gap’ Report

"It is clear that Closing the Gap is a national responsibility that belongs with every Australian.”

Changing the objective of HFE from full equalisation to reasonable equalisation or from funding to provide equal level of services to a reasonable level of services will not assist in any way the goals of the Federal Government and the Closing the Gap initiative.

In fact, I put it to Commissioners, what message does changing the goalposts send to regional Australians and Aboriginal Australians?

Either we are all Australian, all equal, or we are not.

Commissioners, in any business or economy, there will be good times and there surely will be bad.

There are swings and roundabouts.

It is inappropriate and frankly wrong to base irrevocable change of a good system (HFE) on the current economic conditions of one State (WA) just because at one point in time they mount a good political campaign.

To put it another way , as Saul Eslake does in his submission on the Draft Report, the alternative approaches canvassed in Chapter 8 are all different ways of determining who ‘loses’ so that Western Australia can ‘win’.

The observed effect of HFE in practice over its nearly two decades of operation in its current form has been to entrench pro-cyclical fiscal policy.

In simple terms, it puts fuel on a fire when an economy is growing and due to backward looking nature of the assessment makes slow economies slower.

However, the weakness inherent in the system rights itself in the long run.

To rewrite the objectives of HFE is to rewrite the principles of federation this is unfair and short sighted.

The Productivity Commission must consider how any change to the GST revenue distribution framework would impact on the delivery of the Defense White Paper, the White Paper on Developing North Australia or the bi-partisan commitment to ‘Closing the Gap’.

In the Northern Territory maintaining ‘equal’ (as opposed to ‘reasonable’) services in the NT will help attract more people. For the NT to grow and achieve sustainable population growth will require levels of service provision comparable to competing Australian jurisdictions.

It is important to note that the NT while having one of the largest social provision obligation challenges, has the smallest taxable base of any jurisdiction.

Over 50% of the Territory’s land mass and 80% of the coastal waters have been given over to traditional owners under the Aboriginal Land Rights Act.

The NT Opposition always puts the Territory first. This issue of changing the GST distribution is a major issue for the NT Opposition because GST revenue makes up over 50% of the NT’s annual income.

With the NT receiving $4.66 for every $1 raised, the NT has the most to lose from any changes to the current system of HFE.

To reiterate it is the Territory’s higher expenditure needs rather than the lack of its major revenue raising effort which drives the Territory’s high need for GST revenue.

The Northern Territory uses this GST to provide critical government services in the Territory, such as health, education, police, and roads. Vast distances push up the cost of service delivery.

The cost of attracting and retaining staff, and constructing and maintaining the necessary infrastructure in remote areas is far more expensive than in urban areas, which contribute to higher service delivery cost.

The Commonwealth Grants Commission, in its 2017 update report calculated that the Northern Territory is having an accessed expenditure of $19,072 per capita.

Commissioners, it is of the utmost importance that the Productivity Commission record that the NT Opposition, having consulted widely, rejects any move away from the current distributional model for HFE.

Prima facie, many of the partial equalisation distribution approaches would entrench disadvantage.

The NT Opposition believes that HFE is a requirement for the sustainability of self-government over the medium term.

HFE has served the Commonwealth, the States and Territories well for many decades and the case to change has yet to be demonstrated or proven.

Ensuring the long run viability and sustainability of the NT is very dependent on the ability of the jurisdiction to attract and maintain population numbers.

Given the geostrategic importance of Darwin, and the Northern Territory more generally, how would any such move from ‘full’ to ‘reasonable’ equalisation effect, if at all, the roll out of the Defence White Paper (2016).

In the context of a small developing jurisdiction with an annual income of approximately six to seven billion dollars such massive reductions in income would severely impact the ability of the NT to deliver essential government services and functions.

In conclusion, the NT Opposition rejects any move away from the current distributional model for HFE.

Indeed, any change to the current method of distributing GST would mean ‘the end of the Northern Territory as we know it’.

The NT Opposition note that while jurisdictions can go from being GST ‘winners’ to ‘losers’, these differences are equalised in the long run. There are also alternative approaches that may be considered to relieve inter State tensions.

Those seeking to move away from the current model have yet to demonstrate clear evidence of a more certain, efficient, effective, or equitable model.

Commissioners, the Draft Report into HFE fails to meet the standards expected of its Inquiry reports in two crucial and fundamental ways:

(a) It makes recommendations to fundamentally alter the objective of HFE without any supporting evidence; and

 (b) The recommendations are inconsistent with the objective of achieving higher living standards for all members of the Australian community.

Long term, less GST will have a snowball effect on our economy, decrease Territorians’ health and wellbeing, and ultimately cost Australia more down the track to address the long-term effects of systemic under-funding.

On behalf of ALL Territorians I thank you for the opportunity here today, and look forward to reading the final report when it is delivered to the Federal Treasurer in late January 2018.

This issue will impact the life of every Territorian and will influence the quality of life for generations of Territorians to come….

Whilst we are only one percent of Australia’s population we have the right to equal services that the 99% have.

I urge you… do not change the current funding methodology that is based on the premise of provision of an equal level of services to one based on a reasonable level of services…that would not be a reasonable outcome for Territorians.