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Budget Paper No.2 Fiscal and Economic Outlook 2008-2009



Budget Paper No.2 Fiscal and Economic Outlook 2008-2009

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Tabled paper 1293


Tabled papers for 10th Assembly 2005 - 2008; Tabled Papers for 10th Assembly 2005 - 2008; Tabled papers; ParliamentNT; Tabled Papers




Tabled By Delia Lawrie


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21 Further analysis of net debt and net debt plus employee liabilities is provided in Chapter 3 of this Budget Paper. 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. Revenue The largest risk to the Territorys forward estimates is variations in GST revenue. As GST revenue accounts for almost two-thirds of the Territorys total revenue, changes in estimates have a significant effect on the Governments funding capacity and budget outcome. The estimation of GST revenue in any year is difficult, due to volatility in the variables that determine the distribution of GST among the states and particularly should adverse economic conditions arise. Each of the variables is provided below, with the risk to these components discussed. National GST revenue collections the estimates for GST revenue collections for 2008-09 to 2010-11 are based on the most recent published advice from the Commonwealth. Growth in collections of 7.2 per cent and 5.3 per cent is forecast in 2008-09 and 2009-10 respectively. The impact of a 1 per cent variation from these forecasts is estimated at $21 million in 2008-09 and $22 million in 2009-10. If a variation of this size occurred in both years, the impact would be $44 million, with the potential to rise to $100 million by 2011-12. Territorys share of national population population estimates to 2010-11 are based on Commonwealth projections. The effect of a 1 per cent variation in the Commonwealths population forecasts is estimated at $24 million in 2008-09 and $25 million in 2009-10. If a variation of this size were to occur in both years, the effect would be $50 million and could rise to $112 million by 2011-12. Territorys per capita relativity as assessed by the Commonwealth Grants Commission (the Commission) the Territorys per capita relativity for 2007-08 is 4.51835. Neither the Commonwealth nor the Commission provide estimates of future relativities, therefore, considering the potential for both upside and downside movement, the Territory has presumed the 2008 Update relativities will remain constant over the forward estimates. The Commission is undertaking a major review of State Revenue Sharing Relativities in 2010 and this represents a considerable risk to the Territory from 2010-11. The Commissions Terms of Reference require it to simplify the methodology which will make the likely outcome more uncertain than previous reviews. Considering this uncertainty, there is potential scope for significant downside or upside movement in the Territorys relativity. The approximate effect of a 1 per cent variation in relativity estimates is $25 million, with a cumulative effect to 2011-12 of $84 million. It is important to note that changes to these variables can be either positive or negative and, if taken together, by 2010-11 could result in variations as high as Statement of Risks GST Revenue