Agenda Item 9.2

REPORT Report No.84/17f TO: FINANCE COMMITTEE - 15 MAY 2017 SUBJECT: GST CUT BY FEDERAL GOVERNMENT TO GOVERNMENT AUTHOR: DIRECTOR FINANCE - DINESH PILLAY

EXECUTIVE SUMMARY

The Northern Territory Government (NTG) has been advised of Federal Government Goods & Services Tax (GST) cuts amounting to $2 billion over a 4 year period going forward. Council requested to know the impact this will have on the Town Council funding i.e. grant funding.

RECOMMENDATION

That it be a recommendation to Council:

That this report be noted.

REPORT

1. BACKGROUND

Council asked for a report due to concerns around the likelihood of Council’s NTG funding being cut amidst talks of the Federal Government cutting the GST contribution to the NTG.

2. DISCUSSION

in recent media reports, the NTG has advised that the Federal Government intends cutting the GST contribution to the NTG by up to $2 billion dollars over the next 4 years. Chief Minister Michael Gunner and Treasurer have stressed in these media reports how a possible cut of this size may cause significant budgeting issues for the NTG and further cause a delay in their planned return to surplus by 2019/20.

In a media report dated 24th March 2017 (attached), Ms Manison stated “Conditions that we have inherited have created the perfect storm - a combination of slowing population growth, a reduction in the GST relativity from 5.4 per cent to 4.7 per cent and a smaller GST pool combining to smash our share of the GST. "In an urgently called meeting with Federal Treasurer today, I delivered a blunt assessment of the devastating effect this GST shortfall will have on the Territory budget. "He has taken those concerns on board and has agreed to continue working together. "But the Gunner Labor Government has promised to put jobs first and we will deliver on that promise. This Budget will create and support jobs for Territorians and deliver on our election commitments. "We will continue to invest heavily in infrastructure, support jobs, encourage private investment and deliver crucial core services to Territorians.’’ Report No. 84/17f -12

Following on from there, a media report dated 29th March 2017 (attached) Federal Treasurer Scott Morrison denied the $2 billion GST cut to the NTG saying “/ don't know where they got it from [the $2 billion figure]. They didn't get it from us," Mr Morrison told ABC Radio Darwin.”

From the report, Mr Morrison said it was “just not true” that amount would be taken from the NT economy. Mr Morrison acknowledged that $269 million had been cut from the NT's share of the GST, thanks to a change in the GST relativity.

Since these initial reports, no recent media updates have been able to shed any further clarity on the possible GST cuts and their possible impact on the funding for the Alice Springs Town Council.

On Friday 5th May 2017, the Chamber of Commerce held the NT Budget Briefing Luncheon in Alice Springs. The NTG Treasurer made mention of aspects of the NTG’s 17/18 budget and also included some discussion on the possible $2 billion GST cut over the next 4 years. After the NTG Treasurer’s address and during the public question session, Council’s Director Finance posed the question to the NTG Treasurer as to what impact is foreseen to Council’s grant funding, with specific reference to the Alice Springs Public Library Operational Grant funding which is received on an annual basis, as an example. The NTG Treasurer answered that the NT Government will continue to show the Federal Government their displeasure in regards to the GST cuts and that ongoing discussions will continue to be held to get the best outcome for the NT economy. There was no clear feedback given as to the impact on funding to Councils.

It is clear from the information at hand, the available media reports, the feedback from the Minister based on the direct question posed to her, etc. that no conclusive information is available to Council at this stage in regard to what impact the possible GST cuts will have on Council’s grant funding going forward.

Attached is also a list of funding that has been received from the NTG in the current and previous financial year, some of which are received on an annual basis whilst others have been received on an application process basis.

3. POLICY IMPACTS

Nil

4. FINANCIAL IMPACTS

The NTG may decide to cut funding to Council going forward based on the possible GST cut or there may be not much impact on Council’s funding going forward. There is no confirmation from the NTG at this stage.

5. SOCIAL IMPACTS

Council may have to look at project and operational funding, which will have an impact on the community should there be a grant funding cut. Report No. 84/17f -13

6. ENVIRONMENTAL IMPACTS

Nil

7. PUBLIC RELATIONS

Should Council at a future date be made aware of possible NTG grant funding cuts, this will need to be disclosed to the community of Alice Springs together with the impact this will have on possible projects and operational funding.

8. ATTACHMENTS

1. Media report dated 24th March 2017 2. Media report dated 29th March 2017 3. List of funding that has been received from the NTG in the current financial year. NT hit with $2 billion GST cut: treasurer | news.com.au — ’s #1 news site Page 1 of 1

NT hit with $2 billion GST cut: treasurer

O MARCH 24, 2017 5:56PM

Lucy Hughes Jones Australian Associated Press

The Northern Territory government's election promise to balance the books by 2019-20 is looking less and less likely after it was hit with a "two billion-dollar revenue cut".

The Commonwealth Grants Commission released its annual GST distribution figures on Friday as the nation's treasurers met in Canberra,

NT Treasurer Nicole Manison said with 50 per cent of the Territory's revenue coming from the GST, the consequences for the May 2 budget will be devastating.

"This is a massive blow for our budget and unprecedented in the Territory's history," Ms Manison said.

"Over the next four years, around $2 billion dollars in revenue will be cut."

She said the cuts are roughly equivalent to 5000 teachers or nurses per year.

"Conditions we have inherited have created the perfect storm - a combination of slowing population growth, a reduction in the GST relativity from 5.4 per cent to 4.7 per cent, and a smaller GST pool combining to smash our share of the GST," she said.

In an urgently called meeting with federal Treasurer Scott Morrison, Ms Manison said she delivered a blunt assessment of the changes.

"He has taken those concerns on board and has agreed to continue working together," she said.

The NT economy is already facing considerable challenges as the multibillion-dollar Inpex LNG project winds down.

"We will continue to invest heavily in infrastructure, support jobs, encourage private investment and deliver crucial core services to Territorians," Ms Manison said.

ESTIMATED GST REDUCTIONS OVER THE NEXT FOUR YEARS:

* 2017/18 - $385 million

* 2018/19 - $434 million

* 2019/20 - $533 million

* 2020/21 - $570 million

http://www.news.com.au/national/breaking-news/nt-hit-with-2-billion-gst-cut-treasurer... 7/05/2017 Scott Morrison denies GST allocation means NT losing $2b over next four years - AB... Page 1 of 2

608 NEWS Scott Morrison denies GST allocation means NT losing $2b over next four years

By Xavier La Canna Updated Wed 29 Mar 2017, 6:38am

Federal Treasurer Scott Morrison has denied $2 billion will be ripped from the Northern Territory's economy as a result of the recently announced carve-up of GST revenue.

The Commonwealth Grants Commission (CGC) recently revealed how the GST revenue would be divided up for 2017/18, and the NT complained loudly after its share was reduced.

The NT Government released information showing it would hit the NT's bottom line by about $2 billion during the next four years.

But on Tuesday Mr Morrison questioned that figure. PHOTO: Scott Morrison (right) says he does not know where Michael Gunner's $2b figure came from. "I don't know where they got it from [the $2 billion figure]. They didn't get it (ABC News)

from us," Mr Morrison told ABC Radio Darwin. related STORY: NT Government abandons commitment to return to surplus by 2019-20 He said it was "just not true" that amount would be taken from the NT economy. related STORY: Job attrition, program cuts flagged in wake of NTs $2 billion GST revenue hit

MAP: NT ©

Northern Territory GST receipts

.. updated ssr fcrmit ——•mic-i; Mid-Yen Report »is

PHOTO: This NT says forecast GST receipts will cost it about $2 billion over four years. (Supplied: NT Government)

Mr Morrison acknowledged that $269 million had been cut from the NT's share of the GST, thanks to a change in the GST relativity.

"It is a significant reduction, I am not saying it is not but it is $269 million, it is not $2 billion," he said.

GST relativity equates roughly to the amount of GST a state receives for each dollar of GST it collects.

http://www.abc.net.au/news/2017-03-28/nt-not-losing-2b-in-gst-funds-scott-morrison-s... 7/05/2017 Scott Morrison denies GST allocation means NT losing $2b over next four years - AB... Page 2 of 2

Difficult to compare NT to other jurisdictions

Historically the NT has the highest relativity of any jurisdiction.

This is because the CGC considers that the high proportion of Indigenous people means there is greater demand for, and

cost in, service delivery, according to a parliamentary paper. <

It said the NT's circumstances made it difficult to compare its relativity with other jurisdictions.

Mr Morrison said the GST revenues were reviewed every year, and the NT had not complained in previous years when other states had their relativity reduced.

"The Commonwealth Grants Commission, through an independent process, has looked at the relativities for how the GST is distributed, and that is the figure they have arrived at," he said.

NT Chief Minister Michael Gunner yesterday said the Government was being forced to push back its planned return to surplus in 2019/20 as a result of the change in projected GST funding.

He said his Government could not absorb the funding reduction through cuts alone, and indicated it would have to borrow money to pay for its election promises.

"If we took $2 billion over four years out of our budget, you are shutting up shop and going home," Mr Gunner said.

NT Treasurer Nicole Manison later said the Federal Government was looking at different figures.

"We're going from the latest figures that we have at hand from our mid-year report. So I'm absolutely adamant this is a $2 billion cut," Ms Manison said.

Topics: tax, federal—state-issues, govemment-and-politics, states-and-territories, nt

First posted Tue 28 Mar2017, 1:34pm

http://www.abc.net.au/news/2017-03-28/nt-not-losing-2b-in-gst-funds-scott-morrison-s... 7/05/2017 Received (GST Grants Received 2016-2017 Exclusive)

Subtotal Northern Territory Government Grants (project specific)

Department of Transport Reqional Economic Infrastructure Fund Albrecht Oval Carpark Upgrade $ 966.651

Road Safety Community Grants Program - June Department of Transport 2016 Smiley Face against speeding $ 10,000

Dept of Housing and Community Natural Disaster Relief and Recovery Development Arrangements (NDRRA) Central Australia Hail Storm June 2016 $ 347,561

Department of Tourism and Culture Facility and Capita! Equipment Proqram (FacE) Storage Shed Ross Park $ 97,330

Dept of Chief Minister Office of Youth Affairs - Youth Week 2017 Youth Week Movie Marathon $ 3,000

Dept of Housing and Community Special Purpose Grant (SPG) Round 1 2016- Priority 1 - Alice Springs 50 Plus Community Development 2017 Centre Upgrade $ 90,072

Department of the Chief Minister Operational Fundinq After Hours Youth Service $ 349,000

Dept of Chief Minister Office of Senior Territorians - Seniors Month 2016 Still Got Talent - 6th Edition $ 2,000

Department of Tourism and Culture Capital Grant Retractable Tiered Seating - Netball $ 200,000 Department of Local Government Community Services Operational Fundinq Town Camp Waste Collection $ 281,971

Subtotal $ 2,347,585 Northern Territory Government Grants (ongoing)

Department of Arts and Museums (NT) Operational Fundinq Operational fundinq for ASTC Library. $ 595,262

NT Pensioner & Carer Concession Scheme Operational Fundinq Annual Pensioner Concessions $ 215,712

Subtotal $ 810,974

Total Grants Received $ 3,158,559