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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; ParliamentNT




Tabled By Delia Lawrie


Made available by the Legislative Assembly of the Northern Territory under Standing Order 240. Where copyright subsists with a third party it remains with the original owner and permission may be required to reuse the material.




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2008-09 Budget 22 Fiscal Position and Outlook $295 million. This is unlikely to occur, as all three components would need to vary by 1 per cent per annum and in the same direction; however it demonstrates the inherent volatility in the estimates. A more detailed discussion of GST revenue is presented in Chapter 5 of this Budget Paper. Specific purpose payment (SPP) agreements have historically posed risks to state budgets in several ways. However the reforms to Commonwealth-State financial relations by the Council of Australian Governments (COAG) are likely to reduce the risks in relation to the major SPPs in areas such as health, education, vocational education and training, housing and disability services. However, inadequate indexation will remain a key risk under the new arrangements. Risks to the Territory may still exist in relation to National Partnership Payments (NPPs) due to issues surrounding co-investment costs, input controls, inadequate indexation and raised community expectation following the expiration of agreements due to the provision of seed funding. The risks related to SPPs and NPPs cannot be quantified. The amount of revenue received from Territory taxes and royalties is dependent upon the performance of the Territory economy and other external factors. Forecasting such revenue involves judgements and assumptions being made about the performance of the various economic factors and indicators that impact directly on Territory taxes and royalties, such as growth in wages, employment, prices and exchange rates. It is difficult to accurately predict revenue collections into the future, particularly for the later years of the forward estimates. The most difficult source of revenue to forecast is conveyance stamp duty, as it is linked to activity in the property market, which can be volatile. The Northern Territory property market has experienced unusually high activity since 2003-04 and this has been a major contributor to increased stamp duty collections. Although there is evidence that the growth in activity levels in the residential property market has eased, the extent and timing of any drop in activity is difficult to predict and could have a significant impact on conveyance stamp duty collections. Forecasting mineral royalty revenue is also difficult be cause it is influenced by a number of factors, but predominantly mineral price, production levels and exchange rate conditions. For example, strong growth in mineral prices since 2004-05 has been the main contributor to increased mineral royalty collections. The mineral royalty forecast is based on the assumption that current market conditions will be maintained into the future. In this regard, market changes in mineral prices or exchange rates will have a material impact on the forecast. For example an Australian dollar to US dollar exchange rate change of 1 Australian cent will impact on annual royalty collections by approximately $1.6 million, at current exchange rates and assuming there are no changes in other market and production conditions. In total, a variation of 1 per cent to the parameters used to forecast Territory taxes and royalties would affect revenue by about $4.9 million for 2008-09. Other Commonwealth Grants and Subsidies Own-Source Revenue