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At the heart of the NT government’s perpetual shambles is a crisis of fiscal racism that for decades has squandered federal money. By Mike Seccombe.

How the Northern Territory failed

Northern Territory Chief Minister Adam Giles speaking in Darwin.
Credit: AAP / Neda Vanovac

The current Northern Territory government has been in a semi-constant state of chaos since the time it was elected four years ago, beset by scandals, sackings, allegations of corruption, defections, un-defections and all manner of leaking and internecine nastiness.

Take one incident. On February 2 last year, the territory’s primary industries minister, a former policeman named Willem Westra van Holthe, called a media conference at 1am to announce a party-room coup.

He claimed to have supplanted the party leader and chief minister Adam Giles, nine votes to five. Others disputed the numbers and some said they were unaware there had even been a meeting to vote on the leadership.

Such a move was not unprecedented. In March 2013, just seven months after the Country Liberal Party government was elected, Giles came into the top job through a similar coup, staged while the chief minister, Terry Mills, was on a trade mission to Japan.

Now it seemed it had happened again. The next morning, Westra van Holthe announced his deputy would be John Elferink. The swearing in was to take place the next day.

But it was called off at the last minute, because Giles refused to quit. He called a media conference at which he announced: “I am still the chief minister.”

Then he went into a long meeting of the party room, which eventually reconfirmed him as leader, but also installed Westra van Holthe as his deputy.

Giles subsequently apologised to Territorians for the brief disruption to government, and assured them all “wounds have been healed” in the administration. This, despite the fact that before going into the party-room meeting he had impugned Westra van Holthe’s “capacity, capability, tenacity [and] professionalism”.

The truth is, Giles’s words amounted to an accurate description not just of his new deputy, but to his entire government. And since then the CLP has stumbled on from crisis to crisis, the most recent and nationally prominent being the appalling treatment of children in Darwin’s Don Dale Youth Detention Centre.

GST revenues amassed

The Giles administration governs almost one-fifth of the landmass of Australia and it aspires to statehood. Its ministers sit at the table with those of states, and the Commonwealth, at intergovernmental meetings. Yet it behaves like the most fractious of town councils.

Which, in effect, is what it is.

“The territory has a population about the size of Geelong,” says Michael Dillon, a bureaucratic veteran with experience in both the federal and NT governments, now a visiting fellow at the Centre for Aboriginal Economic Policy Research at the Australian National University.

“I mean no disrespect to Geelong. There might be some exceptional people in Geelong, but the reality is they’d struggle if they faced problems like those facing the Northern Territory – if 30 per cent of the people were Indigenous and not literate and spoke another language and had all the various other disadvantages they experience.”

In the Northern Territory, says Dillon, “not only do they have the least capability of any jurisdiction in the country, but they’ve got the most difficult problems”.

They are fortunate in the territory, though, because the rest of Australia is very generous to them. Less than 30 per cent of the money the territory spends comes from “own source” revenue. The other 70 per cent comes from the federal government.

Of that money, by far the largest amount – about 50 per cent of the territory’s budget – comes in the form of GST revenue. Every year the Commonwealth Grants Commission (CGC) hands the NT government between five and six times the amount it would get if the GST money were divided evenly per capita.

The grants commission apportions funds on the basis of a complex formula of assessed need. The aim is to provide for equal service delivery to everyone in Australia. The Northern Territory gets extra because of it small revenue base, its remoteness, the sparseness of its population and particularly because of its large, scattered, generally impoverished Indigenous population.

There is, however, no legal obligation on the state and territory governments to spend the GST funds distributed to them in accordance with the grants commission’s assessments. And the territory government doesn’t. It overspends in Darwin, where most of the white population lives, and underspends in the more remote parts of the territory, where 80 per cent of the Indigenous population lives.

Underspending on social services

Determining exactly how much it underspends is hard, because the government does not publish figures directly comparing its expenditure with the assessments of need.

But Barry Hansen, a Darwin accountant and former president of the NT Council of Social Service, does. He has been doing so for about a decade, and at this week’s Garma Festival in the Northern Territory he presented his most recent findings, for the 2015-16 financial year.

According to the grants commission formula of assessed need, Hansen says, 68 per cent of the $3.4 billion in GST revenue given to the territory should have been spent in areas of Aboriginal disadvantage, basically on services in remote areas. Instead, the territory allocated 53 per cent. The difference amounted to $500 million.

“Darwin gets the cream and a fair whack of the milk and the bush gets what’s left over,” Hansen says. “It’s basically pork-barrelling.”

And it has long been thus. “During the 1990s and 2000s,” Hansen told the Garma crowd, “the NT government significantly underspent in respect of the CGC assessments in particular areas relating to social justice and welfare.”

He referred to findings from previous years – 2006-07, 2009-10 – and the pattern was similar. And that was before the election of the current hapless government. It occurred under the previous Labor government. Indeed, it goes all the way back to when the territory gained self-government in 1974.

Hansen concluded his presentation:  “I could bore you with more rafts of figures, but the short answer is ‘Business as usual. No change here folks’.

“To be genuinely transparent I believe the NT government should publish budgeted revenue and expenditure as compared to CGC assessments in their annual budget papers.”

Fond hope. As he and other experts spoken to for this story note, the tendency of the territory in recent years, in the face of greater scrutiny, has been to become less transparent.

Decades of neglect

“The territory is a very insular place,” says Michael Dillon. “There are structural impediments to it becoming an effective jurisdiction.”

He harks back to the reformist efforts of former chief minister Clare Martin after she led Labor to a surprise win in 2001, following 27 years of CLP government.

“Clare brought in a couple of external heads of department. I was one,” he says. “The existing networks just closed ranks.”

Long before Giles’s brutally incompetent CLP government, and long before Four Corners’ report on the institutional racism of the correctional system it administers, there was a kind of fiscal racism working in the territory. Malcolm Turnbull’s royal commission will only examine one consequence of it.

And just as government ignored the warnings about what was happening in its juvenile corrections system, it has ignored warnings about the inevitable consequences of its neglect of its most disadvantaged citizens.

Take for example the work of John Taylor, now emeritus professor at the ANU’s Centre for Aboriginal Economic Policy Research, undertaken a decade ago at the behest of the Council of Australian Governments in the remote area centred on the community of Wadeye.

“My work was to establish a baseline set of indicators,” he says. “We looked at all government dollars going to various aspects of programs like health education, justice, housing et cetera, and asked the question how it compared per capita with expenditure on these things for the average Territorian. Because it was a COAG trial, government departments were forced to open their books.”

The findings were eye-opening. The number that gained the most attention in the media and elsewhere was the amount spent on education. For every education dollar spent on the average child in the territory, only 47 cents was spent on the average child at Wadeye.

It led to a five-year battle before the Human Rights Commission, at the end of which the federal government contributed $7.7 million as partial compensation for 30 years of underfunding.

As to the degree to which things might have improved since then, Taylor cannot be sure.

“I suspect the work we did was unique,” he says. “Since then, government seems to have clamped down on public information. We really need a much more open process, because when you do lift the lid, you can test the adequacy of what’s going on.”

Taylor’s work shone light on broader issues, as well. “It came up with a balance sheet,” he says, “that basically said they were spending much more on negative things like locking people up and welfare, and much less on positive things like education and housing a jobs. There’s a structural imbalance in spending.”

Jon Altman, a research professor at the Alfred Deakin Institute for Citizenship and Globalisation at Deakin University, agrees. “They put money into locking people up rather than investing in their health, education and development that might keep them out of the criminal justice system,” he says. “And this has escalated over time.”

Law and order spend outsized

Crime rates are high in the territory, and particularly among Indigenous people. Break-ins and attempted break-ins occur at more than twice the national average, motor vehicle theft is almost four times as high, assaults more than twice as high. More resources need to be devoted to the justice system, and the Commonwealth Grants Commission factors this into its calculations.

But one might ask who benefits from this expenditure.

“To a substantial extent it’s white folks,” Altman says. “The approximately $100,000 per inmate for those in detention, for example, is paid to white folks.”

It might be different if the justice system worked to rehabilitate those in its custody. But as The Age’s economics editor Peter Martin pointedly observed this week, jailers in the Northern Territory are particularly unproductive. “There’s one for each nine prisoners, compared to one for each 16 elsewhere. Yet for the most part they simply keep their prisoners locked in cells, for an average for 17 hours each day, compared to 10 hours in the rest of the country. And they are far less concerned about improving prisoner’s lives. Only 14 per cent of territory prisoners attend training courses, compared to 32 per cent in the rest of the nation.”

Martin was informed by statistics from the 2016 Productivity Commission report on government services, which allows comparisons of various jurisdictions.

It shows, for example, that the NT spends $1150 per person on police. The national average is $430. The territory has 700 police for every 100,000 residents. The national average is 267. It spends $647 on corrective services, versus $156. Yet it also has by far the highest recidivism rates in the country.

The territory spends more than the national average on state schools, but not much more – about $23,500 per kid, compared with $16,177 for Australia as a whole. That figure was inflated by operating costs. The amount spent on actual teachers was only marginally above the national average.

Retention rates are dramatically lower, however. Non-attendance rates dramatically higher. As the NAPLAN scores released this week show, students in the NT performed the worst in Australia in all areas: reading, writing, numeracy, spelling and grammar, and punctuation.

Only 53 per cent of year 9 students met the national minimum standards for writing, compared with 83 per cent nationwide.

On health, the Productivity Commission tells us, total recurrent expenditure was $7926 per capita in 2013-14 for the territory, compared with $6248 nationally. Again, operational costs for remote communities inflate the figures.

The data is a litany of disadvantage, starting before birth, extending through preschool – services are grossly lacking – through the whole education and health systems. It goes to preventable diseases, birth complications, rates of mental illness, suicide rates, overcrowded housing and lack of employment.

“Tsunami” of problems

Five years ago, Olga Havnen, as the territory’s Coordinator-General for Remote Services, prepared a comprehensive report, going to all of this disadvantage. The incoming CLP government determined to dispense with her services before it was done, but she released it anyway.

She foresees a growing “tsunami” of problems.

“Aboriginal people make up 30 per cent of the population of the territory and 80 per cent of those live outside the major urban centres. We have about 650 discrete Aboriginal communities,” she says.

“And that population has doubled over 20 years. They have high fertility rates. A substantial proportion is under 25. And it’s going to keep growing. There are real challenges in how you are going to deliver services.

“What that means is if you don’t want this burden of ill health and disease and poverty and the next bloody scandal, then for Christ’s sake develop a 10-year plan for addressing those needs.”

She’s not talking just about the NT government, either. They simply cannot deliver what is required, even if they had a mind to do so.

“You almost need something like a Marshall Plan here, but I don’t see any political will to do it.”

Indeed, in some ways the attitude of the current federal government is making matters worse. For example, the onerous requirements it has attached to its work-for-the dole Community Development Program have been counterproductive. The punitive, paternalistic, red-tape bound system is actually discouraging work.

“The rate of Aboriginal men not in the labour force has remained constant at about 60 per cent,” Havnen says. “If you’re not in the labour force, you’re not even registered with Centrelink and you have no money at all. I think what’s going on there is that the system has become so difficult for people that they have just give up.”

She recalls the comment of one Aboriginal man: “The government keeps squeezing blackfellas because they hope one day a whitefella will pop out.”

The current federal Aboriginal affairs minister, Nigel Scullion, defends the system. Fred Chaney, a former federal Liberal minister for Aboriginal affairs, who still works full-time on various Aboriginal causes, does not. The Community Development Program, he tells me, “is leading to a vast breaching of Aboriginal people, with consequent hardship of a serious kind. In my view it’s a disgrace.”

To an audience at the Garma Festival, Chaney said: “So many of the recent actions of government ... have taken decision-making out of Aboriginal hands and actually, in the name of getting people to be more responsible, have removed all sense of responsibility and possibility of responsibility. It’s ridiculous.”

Chaney is as steeped as anyone in the statistical evidence of the Aboriginal tragedy in the Northern Territory. But really, he says, you don’t need the statistical analysis to understand the fiscal racism.

“You just have to look at the place. You’ve got a superb modern city in Darwin, and a slum just about everywhere else.”

This article was first published in the print edition of The Saturday Paper on Aug 6, 2016 as "How the Northern Territory failed". Subscribe here.

Mike Seccombe
is The Saturday Paper's national correspondent.

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