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					              2008-09
         Budget




Northern Territory Economy
                2008-09
           Budget




Northern Territory Economy
                                         Beijing

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                                                                                                                                           Hobart
Contents
           Overview                                                           1
           Chapter 1       Structure of the Economy                           5
           Chapter 2       Economic Growth                                   11
           Chapter 3       Population                                        21
           Chapter 4       Labour Markets                                    39
           Chapter 5       Prices and Wages                                  53
           Chapter 6       External Economic Environment                     65
           Chapter 7       International Trade                               69
           Chapter 8       Mining and Energy                                 79
           Chapter 9       Manufacturing                                     89
           Chapter 10      Construction                                      93
           Chapter 11      Residential Property Markets                     103
           Chapter 12      Tourism                                          113
           Chapter 13      Retail and Wholesale Trade                       121
           Chapter 14      The Public Sector                                129
           Chapter 15      Defence                                          135
           Chapter 16      Transport and Communication Infrastructure       145
           Chapter 17      Rural Industries and Fisheries                   155
           Abbreviations                                                    165
           Glossary                                                         167
           Charts                                                           169
           Maps                                                             170
           Tables                                                           171




                                                                        Contents   iii
                      Overview
                      The small size of the Northern Territory economy means that large, typically
                      resource-based, projects can have a substantial impact on investment and
                      production, resulting in volatile growth patterns. The structure of the economy reflects
                      significant natural resources, the Territory’s importance in national defence and the
                      relatively large tourism and public sectors. The significance of the mining and tourism
                      industries makes the Territory economy particularly reliant on exports and susceptible
                      to developments in key export markets and the world economy generally.

                      The Economy in 2007-08
                      In 2007-08 Territory state final demand (SFD) is estimated to increase by 2.1 per cent
                      driven by very strong levels of total consumption expenditure which more than offset
                      the significant decline in total investment expenditure associated with the completion
                      of mega projects. Household consumption expenditure is estimated to grow by 6.4
                      per cent in 2007-08, supported by strong employment and population growth and
                      high levels of consumer confidence. Business investment is estimated to decline by
                      9.2 per cent in 2007-08 reflecting significant declines in engineering construction
                      activity associated with major projects. In addition, the level of dwellings investment
                      is estimated to decline by 3.3 per cent in 2007-08, as housing affordability and
                      interest rates dampen activity. The level of public consumption expenditure reflects
                      the significance of spending on both Closing the Gap and the Northern Territory
                      Emergency Response in 2007-08. Public investment in 2007-08 is being supported
                      by the ongoing delivery of the Middle year’s schooling program as well as continued
                      development of the Desert Knowledge Precinct in Alice Springs.

Gross State Product   Following an increase of 5.6 per cent in 2006-07, Territory gross state product (GSP)
                      is estimated to increase by 2.8 per cent in 2007-08. The more modest growth rate
                      compared to 2006-07 is due to lower net exports and lower investment. The negative
                      contribution of net exports to growth in 2007-08 reflects the impact of scheduled
                      maintenance shut-downs at the Wickham Point liquefied natural gas (LNG) plant
                      and associated gas fields, as well as the temporary closure of the Corallina oilfield
                      and the permanent closure of the Elang Kakatua oilfield. In addition, total private
                      investment expenditure is estimated to decline by 8.5 per cent in 2007-08, reflecting
                      the completion of major works on the Alcan G3 expansion, and despite increases in
                      machinery and equipment expenditure by many mine operators.

         Population   Population growth is estimated at 2.2 per cent in 2007, up from the reported growth
                      rate of 2.0 per cent in 2006. Construction of the Darwin Waterfront is currently
                      providing good employment opportunities and the associated construction of hotels,
                      residential apartments and retail complexes will continue for several years. In
                      addition the new suburbs of Lyons and Muirhead are well under way. Construction of
                      the Blacktip gas project will provide good employment opportunities during 2008-09.

      Labour Force    The Territory labour market continued its strong performance in 2007-08, with
                      estimated resident employment growth of 4.8 per cent and an estimated average
                      unemployment rate of 4.5 per cent (up from 3.8 per cent in 2006-07) as strong
                      employment conditions prevail, encouraging greater numbers of job seekers into the
                      labour market. Related indicators, such as the Sensis Business Index, the ANZ job
                      advertisements series and the skilled vacancy survey, point to strong employment
                      growth and a shortage of skilled labour.




                                                                                                 Overview        1
    2008-09 Budget


                         Prices   Darwin’s Consumer Price Index (CPI) is estimated to increase by 3.1 per cent in
                                  2008, a moderation from the 3.4 per cent increase reported for 2007. The 2007 result
                                  was the highest of the capital cities, and compares with the 2.3 per cent increase
                                  recorded nationally. The relatively high Darwin CPI figure for 2007 was driven by the
                                  significant increase in Darwin house prices, as well as increases in fuel costs and
                                  financial and insurance services (reflecting the impact of both higher interest rates
                                  and insurance premiums). The expected moderation in Darwin house prices over
                                  2008 will offset some of the expected fuel and freight cost increases such that the
                                  Darwin inflation rate is estimated to moderate.

                        Wages     Solid wages growth in 2007, both in the Territory and nationally, reflects tight labour
                                  market conditions and skilled labour shortages prevalent throughout the year. In
                                  the year to December 2007, the Territory Wage Price Index (WPI) increased by
                                  3.9 per cent, compared to 4.1 per cent nationally. This reflects a consolidation of
                                  wages growth in the Territory, with growth in 2007 equal to the reported growth
                                  in 2006. Private sector wages in the Territory increased by 4.8 per cent in 2007
                                  compared to 2.7 per cent for the public sector. The lower wages growth reported for
                                  the public sector mainly reflects the timing of negotiations for enterprise bargaining
                                  agreements across the public sector.

                                  Outlook for 2008-09 and Beyond
         Gross State Product      Economic growth is forecast to strengthen to 6.6 per cent in 2008-09, as the
                                  contribution from exports increases substantially, with full recovery from the
                                  temporary closures of both Wickham Point and the Corallina oilfield, as well as
                                  significantly higher oil production from the Puffin field. In addition, with the completion
                                  of the conversion to open cut operations at McArthur River, the production of
                                  lead-zinc will increase significantly, as will the output of alumina from Alcan, and iron
                                  ore from the Frances Creek mine.

         State Final Demand       Territory SFD is forecast to decrease by 0.4 per cent in 2008-09, due to the continued
                                  significant decline in total investment expenditure as major projects are completed.
                                  In addition, growth of both household and public sector consumption expenditure are
                                  forecast to moderate in 2008-09. The more modest contribution of total consumption
                                  expenditure in 2008-09 is not sufficient to offset the decline in total investment
                                  expenditure, resulting in the forecast decrease in SFD.

                     Population   Population growth is forecast to moderate to 1.9 per cent in 2008, with net interstate
                                  migration returning to longer run averages due to the completion of some major
                                  employment generating projects.

                 Employment       Resident employment growth of 2.5 per cent is forecast for 2008-09, underpinned by
                                  residential construction and work on resource projects and continued migration and
                                  tourism growth. The more modest growth rate forecast for 2008-09 is in line with the
                                  forecast moderation in SFD growth over the same period.
                                  Despite strong labour demand associated with high levels of construction activity
                                  and strong economic conditions, growth in employment may be partially constrained
                                  by limited availability of skilled labour. The ability of Territory employers to attract
                                  and retain suitable skilled workers will continue to be a critical factor in determining
                                  employment growth in the Territory.

           Prices and Wages       Inflation in the Territory is expected to continue to moderate in 2009, remaining
                                  within the Reserve Bank of Australia’s (RBA) target band of 2 to 3 per cent.
                                  Darwin CPI growth of 2.8 per cent is forecast for 2009. The continued softening of
                                  inflationary pressures in 2009 is attributed to higher interest rates, house price growth
                                  moderating further and lower crude oil prices relative to 2008. This softening in the


2     Overview
                                  Darwin CPI is expected to be partially offset by continued skilled labour shortages
                                  and the prevailing tightness of the labour market, as well as the possible depreciation
                                  in the Australian dollar (in line with the strengthening of the United States (US) dollar
                                  in 2009) which could lead to inflationary pressure in the economy, particularly in the
                                  manufacturing and tourism sectors.
                                  Wages growth in the Territory is expected to strengthen in 2008 as outcomes of the
                                  finalised enterprise bargaining agreements flow through to stronger public sector
                                  wages growth. In addition ongoing skilled labour shortages and a tight labour market
                                  are expected to flow through to growth in the Territory’s WPI averaging around
                                  4.0 per cent over the year.

                                                                 2003-04    2004-05   2005-06   2006-07 2007-08e 2008-09f
Summary of Territory Economic                                       %          %        %         %        %        %
                     Indicators
                                  Real GSP                         2.0         5.5      5.5       5.6      2.8           6.6
                                  Resident Employment              -2.9        -1.3     3.0       5.3      4.8           2.5
                                  Population1                      0.7         1.6      2.3       2.0      2.2           1.9
                                  Darwin CPI    2
                                                                   2.1         1.6      2.6       4.4      3.4   3
                                                                                                                         3.1

                                  e: estimate; f: forecast
                                  1 As at December, annual percentage change
                                  2 As at December, year on year percentage change
                                  3 Actual Darwin CPI 2007


                                  Future Potential
                                  The economic base of the Territory is expected to expand significantly over the next
                                  decade.
                                  •	 There is potential for construction of Train Two of the Wickham Point LNG plant to
                                     begin construction in the next one to two years with exports around four years later.
                                  •	 Following ratification of the International Unitisation Agreement and the Certain
                                     Maritime Arrangements in the Timor Sea Treaty in January 2007, Woodside
                                     announced that it would proceed to explore development options for the Greater
                                     Sunrise liquids and gas field in the Timor Sea. Greater Sunrise has an estimated
                                     6 trillion cubic feet of natural gas.
                                  •	 An area at Middle Arm has been identified as a potential site for a major gas-based
                                     industrial estate and associated port facilities. Possible gas manufacturing projects
                                     include further production of LNG, or gas-based products such as methanol,
                                     ethane, ammonia/urea fertilisers and various petrochemicals.
                                  •	 In February 2008, the Territory Government signed a project facilitation agreement
                                     with Japanese oil and gas company Inpex to evaluate the possibility of constructing
                                     an LNG plant at the Middle Arm Peninsula, near Darwin.
                                  •	 Nexus Energy is proposing to undertake a US$1 billion development at the Crux
                                     liquids and gas field located 700 kilometres northwest of Darwin. The development
                                     will entail the mooring of a floating, production storage and offloading vessel at
                                     the field and the construction of a number of wells and interconnecting pipelines.
                                     Condensate and LPG will be extracted with natural gas re-injected into the well.
                                     A final investment decision is expected in 2008, with the potential for first liquids
                                     production from 2010.
                                  •	 Compass Resources is currently undertaking a feasibility study of its proposed
                                     $750 million Browns Sulphide project near Batchelor. A number of production
                                     scenarios are currently being examined, with the potential for production to
                                     commence in 2010 or 2011.


                                                                                                                     Overview   3
    2008-09 Budget


                     •	 Arafura Resources is currently in the process of assessing the feasibility
                        of developing the Nolans rare earths-phosphate-uranium deposit located
                        approximately 135 kilometres north of Alice Springs. If the study proves to be
                        successful and government approval is forthcoming, the company is proposing to
                        freight the ore to Darwin by train where it will be processed at a $300 million plant.
                     •	 As the Territory continues to develop as a service and manufacturing hub for the
                        northern Australian mining and energy sectors, further opportunities are likely to be
                        created for the Territory construction industry.
                     •	 Production of oil from the Montara project, from the Montara, Skua, Swift/Swallow
                        oil fields in the Timor Sea, is due in 2009.
                     •	 Construction will continue at the Darwin Waterfront, with the addition of residential
                        apartments, retail outlets and a hotel.
                     •	 Over the next four years the Australian and Territory Government have committed
                        to a jointly funded major program for Indigenous housing in Territory communities.
                        The strategic Indigenous Housing and Infrastructure Program (SIHIP) has an
                        anticipated total value of $647 million, with $547 million provided by the Australian
                        Government and $100 million by the Territory Government.
                     •	 The construction of a $33 million backpacker resort in Alice Springs commencing in
                        2008-09.




4     Overview
                Chapter 1             Structure of the Economy
                  Key Points           » The Northern Territory economy is markedly different to other Australian
                                         jurisdictions. It has an abundance of natural resources, a large public sector and
                                         a significant defence presence.
                                       » The Territory economy is highly influenced by global economic conditions due to
                                         its relatively small size and commodity-focused base.
                                       » The importance of mining and mining-related production will grow as production
                                         reaches full capacity following the completion of major infrastructure projects.
                                       » The manufacturing base has significantly increased with the Alcan G3 refinery
                                         expansion, completed in 2007.
                                       » A relatively large mineral and energy industry means that the Territory economy
                                         is capable of high growth as resources are developed.

                                      Territory gross state product (GSP), at about $13.4 billion, accounts for about
                                      1.3 per cent of national gross domestic product (GDP). Key activities in the Territory
                                      economy include mining, defence, alumina production, liquefied natural gas (LNG)
                                      production and government services.
                                      Notable differences between the Territory and the national economy include a
                                      greater contribution from mining, construction, and government administration and
                                      defence, and a comparatively small contribution from manufacturing, finance and
                                      insurance, and property and business services (Chart 1.1). The contribution of the
                                      manufacturing industry to Territory GSP will increase significantly in coming years as
                                      the LNG produced at Wickham Point is exported to Japan, and the completed Alcan
                                      G3 refinery expansion increases alumina production levels from 1.7 million tonnes
                                      per annum in 2006-07 to 3.5 million tonnes by 2008-09. International exports of
                                      goods and services from the Territory are an important source of demand, averaging
                                      around 40 per cent of Territory GSP for most of the past decade compared to
                                      21 per cent nationally.

  Chart 1.1: Industry Proportion of   %
                                      25
GSP and GDP, 2002-03 to 2006-07
                                      20
                (five year average)
                                      15

                                      10

                                       5

                                       0
                                                                                                                                                       Transport and
                                                                                              Construction




                                                                                                                                                      communication




                                                                                                                                                                                                           Health and education
                                                         Mining


                                                                  Manufacturing
                                           Agriculture




                                                                                                                  Retail and
                                                                                                             wholesale trade




                                                                                                                                                                       Finance and
                                                                                                                                                                          insurance
                                                                                                                                    and restaurants




                                                                                                                                                                                            Property and
                                                                                                                                                                                       business services
                                                                                  Utilities




                                                                                                                               Accommodation, cafes




                                                                                                                                                                                                                                           Cultural and
                                                                                                                                                                                                                                  recreational services




                                                                                                                                                                                                                                                                           Ownership of dwellings
                                                                                                                                                                                                                                                           Personal and
                                                                                                                                                                                                                                                          other services
                                                                                                                                                                                            Government
                                                                                                                                                                                          administration
                                                                                                                                                                                            and defence




                                                                                                             Northern Territory                                                       Australia
                                      Source: ABS Cat. No. 5220.0




                                                                                                                                                                                          Structure of the Economy                                                                                  5
    2008-09 Budget


                                 Industry Structure
                                 In terms of contribution to GSP, mining is the most significant Northern Territory
                                 industry, accounting for 24.5 per cent of GSP in 2006-07, more than three times
                                 the national figure of 7.0 per cent (Table 1.1). The Territory’s figure is significantly
                                 influenced by activity associated with a few major resource projects, namely the
                                 Laminaria-Corallina oilfield in the Timor Sea, production from which is attributed to
                                 the Territory, and liquid petroleum gas production (condensate) from Bayu-Undan.
                                 A relatively high proportion of Territory GSP is attributed to government administration
                                 and defence services. This reflects the diseconomies of scale associated with
                                 providing public services to a small and dispersed population combined with the high
                                 needs of the Territory’s relatively large Indigenous population. The defence presence
                                 in the Territory is also relatively large compared to other jurisdictions.
                                 Other notable differences between the Territory economy and the national economy
                                 are the greater proportion of tourism-related production (accommodation, cafes
                                 and restaurants, and cultural and recreational services) in the Territory and the
                                 higher proportion of construction production compared to most other jurisdictions.
                                 Construction is currently a key contributor to the GSP of the three resource-rich
                                 jurisdictions of Western Australia, Queensland and the Territory, as the mining boom
                                 fuels construction. In the Territory in 2006-07, engineering construction comprised
                                 69 per cent of total construction, while residential building comprised 17 per cent and
                                 non-residential comprised 14 per cent.
                                 The contribution of the manufacturing industry is significantly lower in the Territory
                                 than in most other jurisdictions, but has increased as production from the completed
                                 Wickham Point LNG plant reached full capacity in 2006-07 and the completed
                                 Alcan G3 expansion increases alumina production. Production of both LNG and
                                 alumina is attributed to the manufacturing industry.
                                 The proportion of the Territory’s economic production attributed to service industries
                                 (all industries excluding agriculture, forestry and fishing, mining and manufacturing)
                                 is the second lowest in Australia at 53 per cent. The proportion of the national
                                 economy’s output attributed to service industries is 65 per cent. However, in
                                 employment terms, the Territory has a high proportion of people employed in the
                                 service industries, representing 91 per cent of employment compared to 85 per cent
                                 nationally. Part of the percentage increase in service industry employment
                                 is attributable to the decrease in the number of workers in capital intensive
                                 industries, such as mining and communication. This would have the effect of
                                 increasing labour-intensive industries’ percentage share of total employment, which
                                 predominantly consist of service-related industries.




6     Structure of the Economy
Table 1.1: Industry Proportions of                                                                                   NSW                Vic                    Qld                 SA                 WA                   Tas                         NT                      ACT Aust
         GSP and GDP, 2006-07        Agriculture, forestry and fishing                                                1.3                2.3                       2.8                3.4                   2.1               5.4                           2.2                       0.1               2.1
                                     Mining                                                                           2.3                2.0                      7.9                 3.9             28.6                    2.7                    24.5                             0.0               7.0
                                     Manufacturing                                                                   10.0               12.5                      9.3             13.2                     7.3             13.8                             5.4                       1.6              10.2
                                     Electricity, gas and water                                                       1.9                2.4                      1.9                 2.8                  2.4                4.6                           1.2                       2.2               2.2
                                     Construction                                                                     6.2                6.1                      8.5                 6.2                  7.3                5.3                           7.3                       7.0               6.7
                                     Wholesale trade                                                                  4.9                5.5                      4.6                 4.0                  3.5                3.5                           2.0                       1.8               4.6
                                     Retail trade                                                                     5.5                5.5                      7.0                 5.9                  4.7                6.7                           4.1                       4.5               5.7
                                     Accommodation, cafes and                                                         2.3                1.6                      2.7                 2.2                  1.2                2.4                           2.5                       1.9               2.1
                                       restaurants
                                     Transport and storage                                                            4.2                4.5                      5.6                 4.3                  5.1                4.8                           4.1                       1.9               4.6
                                     Communication services                                                           2.6                3.2                      2.3                 2.3                  1.9                2.2                           2.0                       2.4               2.5
                                     Finance and insurance                                                           10.2                8.0                      5.2                 6.2                  3.5                5.7                           2.2                       3.4               7.3
                                     Property and business services 14.3                                                                13.1                      9.3                 9.4                  9.1                5.8                           7.2                      12.5              11.8
                                     Government administration and                                                    3.7                2.6                      4.3                 3.5                  2.4                5.6                           7.8                      28.7               4.0
                                      defence
                                     Education                                                                        4.1                4.6                      4.3                 4.8                  2.8                5.1                           4.0                       5.3               4.2
                                     Health and community services                                                    5.7                6.0                      5.7                 7.2                  4.7                8.6                           5.3                       5.6               5.8
                                     Cultural and recreational                                                        1.6                1.6                      1.2                 1.5                  1.0                1.6                           1.5                       2.7               1.5
                                       services
                                     Personal and other services                                                      1.8                1.7                      2.1                 2.2                  1.6                2.2                           2.1                       2.6               1.8
                                     Ownership of dwellings                                                           8.7                7.7                      7.9                 8.3                  5.7                6.9                           9.5                       8.3               7.8
                                     Taxes less subsidies                                                             8.8                9.2                      7.5                 8.9                  5.2                7.2                           5.1                       7.5               8.1
                                     Total                                                                      100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
                                     Source: ABS Cat. No. 5220.0

                                     Employment by Industry
                                     Chart 1.2 compares GSP and employment by industry in the Territory. The
                                     mining industry is a relatively small employer, despite its contribution to GSP. The
                                     government administration and defence industry is the largest employer in the
                                     Territory, comprising 24.5 per cent of total Territory employment, followed by the
                                     health and education industry at 18.4 per cent. The retail and wholesale trade
                                     industry is also a relatively large employer in the Territory.
 Chart 1.2: Territory Employment     %
                                     25
  and GSP Proportions, 2006-07
                                     20

                                     15

                                     10

                                      5

                                      0
                                                                                                                                                                                                                     Government
                                                                                                                                                                                and insurance




                                                                                                                                                                                                                    administration
                                                                                                                                                                                                                     and defence
                                                                                                                                                                                      Finance
                                                                                          Utilities




                                                                                                                                                                Transport and
                                                                                                                                             and restaurants
                                                                                                                                        Accommodation, cafes



                                                                                                                                                               communication
                                                                                                                           Retail and
                                                                                                                      wholesale trade




                                                                                                                                                                                                                                                                                       Personal and
                                                                                                                                                                                                                                                                                      other services
                                                  Agriculture,
                                          forestry and fishing




                                                                                                      Construction




                                                                                                                                                                                                                                                                      Cultural and
                                                                                                                                                                                                                                                             recreational services
                                                                                                                                                                                                     Property and
                                                                                                                                                                                                business services




                                                                                                                                                                                                                                     Health and education
                                                                 Mining


                                                                          Manufacturing




                                                                                                                        GSP                                               Employment

                                     Source: ABS Cat. No. 5220.0, Census 2006

                                     Since the 1996 Census, the number of people employed in both the mining and
                                     communication industries, as reported in the 2006 Census, has fallen more than
                                     40 per cent. These decreases may be attributed to the changing technologies in
                                     the industries, whereby these industries have become more capital intensive. The


                                                                                                                                                                                                  Structure of the Economy                                                                                    7
    2008-09 Budget


                                          number of people employed in government administration and defence and the
                                          education industry has increased significantly since the 1996 Census, at 35 per cent
                                          and 20 per cent respectively. The increase in government administration and defence
                                          employment may be the result of the relocation of significant numbers of defence
                                          personnel to the Territory in the mid to late 1990s, and the increased provision of
                                          services by the government industry.

                                          Export Propensity
                                          In 2006-07, international trade exports of goods and services accounted for
                                          35 per cent of Territory GSP, an increase on the previous two years and higher
                                          than the national figure of 20 per cent, mainly due to LNG production at Wickham
                                          Point and alumina production from the Alcan G3 refinery expansion. Over the past
                                          five years, the composition of Territory exports has changed, with mineral fuel and ore
                                          exports increasing substantially, while exports of livestock have remained relatively
                                          stable (Chart 1.3). LNG exports have contributed significantly to the increase in
                                          mineral fuel exports, accounting for about 65 per cent of the total over the past year,
                                          while a number of mining projects have contributed to the increased mineral ore
                                          exports, namely the completed Alcan G3 expansion boosting alumina exports.
    Chart 1.3: Composition of Territory   $B
                 Merchandise Exports      2.5


                                          2.0


                                          1.5


                                          1.0


                                          0.5


                                          0.0
                                                      2004                2005         2006          2007             2008e
                                                                                 Year ended June
                                                               Livestock1           Mineral fuels2           Mineral ores

                                          e: estimate
                                          1 Predominantly live cattle exports
                                          2 Predominantly LNG exports
                                          Source: ABS Cat. No. 5368.0

                                          The significance of international exports to the Territory economy means that it is
                                          somewhat more exposed to conditions in world markets than other jurisdictions.
                                          Territory merchandise exports are primarily minerals, energy and agricultural
                                          commodities, which are prone to significant price fluctuations. Global supply and
                                          demand conditions, and the impact of exchange rate movements on competitiveness,
                                          are key factors affecting production and income. In the short to medium term,
                                          continued strength in global demand, especially from the rapidly growing economy of
                                          China, is expected to lead to increased demand for Territory minerals.

                                          Expenditure Patterns
                                          Overall, the balance between consumption and investment expenditure in the
                                          Territory and nationally is quite similar, with consumption expenditure accounting for
                                          about three-quarters of the Territory’s state final demand (SFD).




8     Structure of the Economy
          Consumption          General government consumption in the Territory accounts for a significantly
                               higher share of total consumption expenditure compared to the national figure,
                               while household consumption is lower (Chart 1.4). This reflects the relatively large
                               presence of government administration and defence in the Territory compared to
                               other jurisdictions.

    Capital Formation          Private capital formation in the Territory accounted for 25.4 per cent of final demand,
                               a marginally higher share compared to the national figure of 21.8 per cent. This
                               reflects the work on major projects over the five years to 2006-07 in the Territory,
                               contributing a large proportion to Territory SFD. However, the contribution of private
                               capital formation in the Territory may decline in coming years with the completion of
                               the LNG plant at Wickham Point and the Alcan G3 refinery expansion at Gove. Public
                               capital formation is similar in the Territory and nationally.
    Chart 1.4: Proportion of   %
   SFD, 2002-03 to 2006-07     60

         (five year average)
                               50

                               40

                               30

                               20

                               10

                                 0
                                         Household           General government     Private capital     Public capital
                                        consumption             consumption           formation          formation

                                                               Northern Territory          Australia

                               Source: ABS Cat. No. 5220.0

          Household            Patterns of household consumption are somewhat different in the Territory compared
Consumption Patterns           to nationally (Chart 1.5). Territory consumers spend relatively more (as a proportion
                               of consumption expenditure) on rent and other dwelling services, food, and culture
                               and recreation than Australian consumers in general.
                               In relation to rent and other dwelling services, this reflects the significant increase in
                               Territory house prices and rent in 2006-07, when the Darwin Consumer Price Index
                               (CPI) reported the highest increases on record for house purchases and the highest
                               increase in rents in 19 years. This increase in house purchase costs in Darwin was
                               more than double the increase at the national level, while the increase in Darwin
                               rents exceeded the national increase by 32 per cent.
                               Food prices in the Territory are higher due to freight costs for most goods, combined
                               with weaker competitive pressures relating to the small market size. Culture and
                               recreation consumption is relatively higher in the Territory due to tourist consumption
                               expenditure, which is a key component of the Territory economy.




                                                                                           Structure of the Economy         9
     2008-09 Budget


           Chart 1.5: Household Final    %
                                         25
     Consumption Expenditure, 2006-07
                                         20

                                         15

                                         10

                                          5

                                          0




                                                                                                                                                                                                                                       Hotels, cafes and
                                                                                                                                                                                                                                             restaurants
                                                                               Clothing and
                                                                                   footwear
                                                  Food



                                                                 and tobacco




                                                                                                                                                                                                                                                           goods and services
                                                         Alcoholic beverages




                                                                                                                                                                                                                           Education
                                                                                                                                                                                                                            services




                                                                                                                                                                                                                                                               Miscellaneous
                                                                                                                    and other fuel
                                                                                                                   Electricity, gas


                                                                                                                                      Furnishings and other




                                                                                                                                                                         Transport
                                                                                                                                      household equipment

                                                                                                                                                              Health




                                                                                                                                                                                       Communications
                                                                                                 Rent and other
                                                                                               dwelling services




                                                                                                                                                                                                             Culture and
                                                                                                                                                                                                              recreation
                                                                                                                                                                Northern Territory                                          Australia
                                         Source: ABS Cat. No. 5220.0

                                         Lower proportional expenditure on clothing is presumably due to the warmer climate
                                         in Darwin, while lower transport expenditure may reflect shorter commuting distances
                                         for urban-dwelling Territorians. Lower expenditure on electricity, gas and other
                                         fuels reflects subsidies provided by the Northern Territory Government and a larger
                                         household size, combined with relatively high average household incomes. Lower
                                         private consumption of health and education services in the Territory reflects the
                                         relatively low provision of private sector services relative to other jurisdictions.

                                         Business Investment
                                         Private industry business investment in the Territory has increased steadily from
                                         12 per cent of SFD in 1995-96 to 20 per cent in 2006-07. Private investment in the
                                         Territory is extremely volatile, as the timing of investment for major resource projects
                                         such as the Alcan G3 refinery expansion continued to have an impact on business
                                         investment in 2006-07. Non-dwelling construction is the main driver of total business
                                         investment in the Territory and is primarily made up of new engineering construction.
                                         In 2006-07, the machinery and equipment component of business investment
                                         reported strong growth, while all other components reported decreases (Chart 1.6).
                                         Business investment is expected to remain at high levels in the medium term as a
                                         number of large-scale mining and gas-related projects proceed. Defence and social
                                         infrastructure projects are expected to boost public industry investment in coming
                                         years, as will ongoing work on major projects such as the Darwin Waterfront.
        Chart 1.6: Business Investment    $M
                 Components, 2006-07     3500
                                                                                                                                                                                     Total business investment
                                         3000

                                         2500
                                                                                                                                                                                           Non-dwelling construction
                                         2000

                                         1500

                                         1000
                                                                                                                                                                                               Machinery and equipment
                                          500
                                                                                                                                                                       Intangible fixed assets
                                                                                                                                                                                                                                             Livestock
                                              0
                                                   97                  98                     99                   00                   01     02     03                                                04                 05          06                        07
                                                                                                                                        Year ended June
                                         Source: ABS Cat. No. 5206.0




10     Structure of the Economy
          Chapter 2              Economic Growth
            Key Points            » Economic growth in the Northern Territory tends to be volatile from year to year.
                                    The small size of the economy means large, typically resource-based projects
                                    can have a substantial impact on investment and income streams.
                                  » During the three years to 2006-07 Territory GSP grew by an average annual
                                    rate of 5.5 per cent. Growth was driven by strong consumption and a substantial
                                    increase in investment associated with major resource projects, followed by
                                    solid growth in exports and the commencement of LNG production.
                                  » Economic growth is estimated to ease to 2.8 per cent in 2007-08 as business
                                    investment declines in line with the completion of the Alcan expansion, while
                                    scheduled maintenance at Wickham Point, temporary closure of the Corallina
                                    oil field and the permanent closure of the Elang Kakatua oil field contribute to
                                    a moderate decrease in exports. These are offset by very strong consumption
                                    expenditure, particularly among Territory households.
                                  » Economic growth is forecast to strengthen to 6.6 per cent in 2008-09, driven
                                    by a substantial recovery in export volumes and supported by consumption
                                    expenditure.

Table 2.1: Territory Economic               GSP
                Growth Profile   Period     Growth % Comment
                                 2004-05      5.5       Onshore recovery broadens. Strengthening in construction, mining and
                                                        tourism. Business investment falls, but greater level of local value-adding.
                                 2005-06      5.5       Construction for major projects continues, and liquefied natural gas
                                                        (LNG) production commences. Strengthening in mining and energy
                                                        sectors. Population growth supports solid residential construction activity.
                                                        Darwin Waterfront project proceeds.
                                 2006-07      5.6       Ongoing strong economic growth, despite declining construction activity
                                                        associated with the completion of the Alcan alumina refinery expansion,
                                                        led by a full year of LNG exports and increasing mineral exports,
                                                        especially for alumina.
                                 2007-08e 2.8           Investment returning to expected levels with completion of mega
                                                        projects. Population and employment growth supported by high levels of
                                                        construction and mining activity. Exports decline sightly reflecting lower
                                                        energy production levels offshore.
                                 2008-09f     6.6       Strong growth driven by net exports as mining and manufacturing
                                                        volumes pick up, due to increased alumina production and increased
                                                        offshore oil and gas production. Activity will be partially offset by declining
                                                        growth in private consumption, and a decrease in private investment, as
                                                        engineering construction and machinery and equipment investment come
                                                        off recent highs.

                                 e: estimate; f: forecast
                                 Source: Northern Territory Treasury, ABS Cat. No. 5220.0




                                                                                                            Economic Growth               11
     2008-09 Budget


     Table 2.2: Territory State Final Demand (SFD) and Gross State Product (GSP)
                                        98-99      99-00     00-01      01-02      02-03     03-04      04-05     05-06       06-07    07-08e   08-09f
                                                                                              $M1
     Private consumption                3 959      4 219      4 366     4 650      4 863     5 173      5 418      5 728       5 918    6 297    6 500
     Public consumption                 3 202      3 446      3 483     3 498      3 586     3 752      3 871      3 955       4 139    4 361    4 561
     Total consumption                  7 164      7 668      7 851     8 148      8 449     8 924      9 289      9 684      10 057   10 658   11 061
     Private investment
       Dwellings                          791        592       354        366        403       387        495       567         573      554      537
       Business investment              2 424      1 450      1 426     2 204      2 378     2 609      2 621      3 065       2 955    2 682    2 191
     Total private investment2          3 270      2 085      1 844     2 684      2 900     3 150      3 263      3 789       3 681    3 370    2 855
     Public investment                    274        400        583       693        464       471        591       603         546      561      613
     Total investment                   3 491      2 490      2 460     3 406      3 370     3 622      3 861      4 392       4 227    3 930    3 469
     State Final Demand3               10 686     11 552    10 304     11 552     11 820    12 550     13 150    14 076       14 285   14 588   14 530
     Total exports                      3 727      5 276      6 681     5 312      4 661     3 689      3 517      3 425       4 628    4 576    5 291
     Total imports                        878      2 090       964      1 033      1 248     1 314      2 538      3 184       3 236    3 225    3 373
     Net exports                        2 849      3 186      5 717     4 279      3 413     2 375        979       241        1 392    1 351    1 918
     Balancing item                     -3 493    -2 690     -4 736    -4 420     -3 801     -3 337    -2 038     -1 624      -2 232   -2 158   -1 758
     Gross State Product (A)            9 650     10 355    10 930     11 118     11 184    11 408     12 032    12 693       13 405   13 782   14 690
                                                                                     Percentage change
     Private consumption                   5.4        6.6       3.5        6.5       4.6        6.4       4.7           5.7      3.3      6.4      3.2
     Public consumption                    5.6        7.6       1.1        0.4       2.5        4.6       3.2           2.2      4.7      5.4      4.6
     Total consumption                     5.5        7.0       2.4        3.8       3.7        5.6       4.1           4.3      3.9      6.0      3.8
     Private investment
       Dwellings                          43.6      -25.2     -40.2        3.4      10.1       -4.0      27.9       14.5         1.1     -3.3     -3.1
       Business investment                88.3      -40.2      -1.7      54.6        7.9        9.7       0.5       16.9        -3.6     -9.2    -18.3
     Total private investment             71.5      -36.2     -11.6      45.6        8.0        8.6       3.6       16.1        -2.9     -8.5    -15.3
     Public investment                   -35.1      46.0       45.8      18.9      -33.0        1.5      25.5           2.0     -9.5      2.7      9.4
     Total investment                     49.4     -28.7       -1.2      38.5        -1.1       7.5       6.6       13.8        -3.8     -7.0    -11.8
     State Final Demand                   17.0       8.1      -10.8      12.1        2.3        6.2       4.8           7.0      1.5      2.1     -0.4
     Total exports                         1.1      41.6       26.6      -20.5     -12.3      -20.9       -4.7      -2.6        35.1     -1.1     15.6
     Total imports                       -24.4     138.0      -53.9        7.2      20.8        5.3      93.2       25.5         1.6     -0.4      4.6
     Net exports                          12.9      11.8       79.4      -25.2     -20.2      -30.4     -58.8      -75.4       477.6     -2.9     41.9
     Balancing item                       66.1     -23.0       76.1       -6.7     -14.0      -12.2     -38.9      -20.3        37.4     -3.3    -18.5
     Gross State Product (A)               6.2       7.3        5.6        1.7       0.6        2.0       5.5           5.5      5.6      2.8      6.6
                                                                   Percentage point contribution to Gross State Product
     Private consumption                   2.2        2.7       1.4        2.6       1.9        2.8       2.1           2.6      1.5      2.8      1.5
     Public consumption                    1.9        2.5       0.4        0.1       0.8        1.5       1.0           0.7      1.4      1.7      1.5
     Total consumption                     4.1        5.2       1.8        2.7       2.7        4.2       3.2           3.3      2.9      4.5      2.9
     Private investment
       Dwellings                           2.6       -2.1      -2.3        0.1       0.3       -0.1       0.9           0.6      0.0     -0.1     -0.1
       Business investment                12.5      -10.1      -0.2        7.1       1.6        2.1       0.1           3.7     -0.9     -2.0     -3.6
     Total private investment             15.0      -12.3      -2.3        7.7       1.9        2.2       1.0           4.4     -0.9     -2.3     -3.7
     Public investment                    -1.6        1.3       1.8        1.0       -2.1       0.1       1.1           0.1     -0.4      0.1      0.4
     Total investment                     12.7      -10.4      -0.3        8.7       -0.3       2.3       2.1           4.4     -1.3     -2.2     -3.4
     State Final Demand                   17.1        9.0     -12.1       11.4       2.4        6.5       5.3           7.7      1.6      2.3     -0.4
     Total exports                         0.5      16.1       13.6      -12.5       -5.9      -8.7       -1.5      -0.8         9.5     -0.4      5.2
     Total imports                        -3.1      12.6      -10.9        0.6       1.9        0.6      10.7           5.4      0.4     -0.1      1.1
     Net exports                           3.6       3.5       24.4      -13.2       -7.8      -9.3     -12.2       -6.1         9.1     -0.3      4.1
     Balancing item                      -15.3       8.3      -19.8        2.9       5.6        4.1      11.4           3.4     -4.8      0.6      2.9
     Gross State Product (A)               6.2       7.3        5.6        1.7       0.6        2.0       5.5           5.5      5.6      2.8      6.6

     e: estimate; f: forecast; A: average
     1 2005-06 base year
     2 Total private investment is equal to business investment plus dwelling investment and ownership transfer costs
     3 Chain volume measures (real) are not additive. As such, the components do not add to the total measure
     Source: Northern Territory Treasury, ABS Cat. Nos 5206.0, 5220.0

12      Economic Growth
                            Measurement of Economic Growth
                            At the national level, an economy’s size is measured by gross domestic product
                            (GDP). Australia’s states and territories have an equivalent concept in gross state
                            product (GSP). Both measure the production undertaken in an economy in a
                            particular year. The value of production can be estimated using different approaches.

     Innovations in 2007    In November 2007, the ABS introduced a third method for calculating GSP based
                            on production by industry measures. GSP (Production) estimates gross value
                            added by industry by jurisdiction. This measurement provides an estimate of the
                            value of production for an economy, and complements the existing measures of
                            GSP, being expenditure and income, which are explained below. The publication of
                            GSP (Production) in November 2007 led to an additional change in the way GSP is
                            reported. The headline measure of GSP is now GSP (Average), the average of the
                            three different GSP measures.

        The Expenditure     The ‘expenditure approach’ for calculating GDP and GSP is the sum of all final
              Approach      expenditures by residents (Table 2.2). It includes consumption expenditure by
                            households and government on final goods and services, gross fixed capital
                            expenditure (investment) by the private and public sectors, changes in inventories
                            (that is, output produced in the year but not yet sold) and net exports.

   The Income Approach      The ‘income approach’ sums income accruing to the factors of production (primarily
                            labour and capital) in an industry. This provides a measure of the total factor income
                            earned in each industry, in each year, in current prices. The income measure of
                            GDP and GSP also includes net taxes on production and net taxes on imports. The
                            income approach provides an alternate way of measuring economic activity in the
                            economy, with a focus on the industry or supply side dimension, in order to provide a
                            complement to the expenditure or demand side measure.

The Production Approach     The production approach for calculating GDP and GSP is the sum of gross value
                            added (value of final output minus value of intermediate use) by industry. To this total
                            is added taxes less subsidies on products, to derive an estimate of GSP(P).
                            While in theory the three approaches of estimating GSP should provide the same
                            outcome, in practice they do not. This is due to methodological differences. As such,
                            statistical adjustments are required to make them all equal (GSPLA).

        Volatility of GSP   All jurisdictions report on the GSP measure of economic growth. Nonetheless,
                            the GSP measure is experimental and volatile, with the series open to significant
                            revisions. For example, the Australian Bureau of Statistics (ABS) initially reported
                            economic growth of 7.5 per cent for the Territory in 2005-06. This growth rate was
                            subsequently revised down to 5.5 per cent. The size of any revisions to ABS-reported
                            GSP can be exacerbated in the Territory due to the dominance of a few industries
                            and the small size of the economy.

    State Final Demand      A component of GSP, calculated using the ‘expenditure approach’, is state final
                            demand (SFD). SFD is a measure of the demand for goods and services in an
                            economy. SFD data is released quarterly, in contrast to GSP, which is released once
                            a year and as such is a more readily available measure of economic activity. SFD
                            includes expenditure for both consumption and investment purposes. As shown in
                            Table 2.2, the investment component of SFD can be volatile, particularly with the
                            influence of large projects on the Territory’s relatively small economy. Consumption
                            is a more stable element of economic activity and is influenced by population,
                            employment and income growth as well as interest rates and consumer confidence.
                            Public consumption includes defence-related consumption expenditure.




                                                                                             Economic Growth           13
     2008-09 Budget


                 Onshore and      Complicating the interpretation of Territory GSP is the impact of offshore economic
              Offshore Activity   activity. This is of economic significance to the Territory due to the location of many
                                  oil and gas fields offshore. In addition, a substantial proportion of Territory offshore oil
                                  and gas reserves are located within the Joint Petroleum Development Area (JPDA).
                                  The resources in this area are shared between Timor Leste and Australia, with half of
                                  the value of production from the JPDA allocated to the Territory.
                                  In total, offshore oil and gas account for around one fifth of the Territory’s GSP.
                                  This means that, in effect, there can be dual economies reported in GSP data. For
                                  example, SFD growth was relatively weak in 2006-07, with much of the growth in
                                  consumption expenditure offset by declining levels of investment. Nevertheless, GSP
                                  increased by 5.6 per cent due largely to increased exports. This was driven by a
                                  doubling of LNG production (compared to 2005-06) as well as significant increases in
                                  the volume of manganese production.

                Major Projects    In a small jurisdiction such as the Territory, it is possible for major projects to have
                                  a substantial impact on SFD, particularly via business investment, and on GSP via
                                  income earned by factors of production, as well as the value of final production.
                                  However, if the acquired machinery and equipment is assembled overseas, the
                                  investment expenditure attributed to the Territory can have a limited impact on the
                                  local economy, despite a large impact on SFD. A recent example is the importation
                                  of the pre-assembled modules (PAMs) for the Alcan G3 refinery expansion at Gove.
                                  In the same way, the income accruing to factors of production employed on major
                                  projects will be reported in GSP but may not flow on fully to the local economy
                                  through private consumption expenditure and dwellings investment, as many of the
                                  employees who work on these projects, as well as the owners of these projects,
                                  are not permanent residents of the Territory or, in the case of owners, residents of
                                  Australia.

                                  Economic Performance
                      2006-07     The Territory economy continued to experience very strong growth in 2006-07, with
                                  reported GSP growth of 5.6 per cent, the second highest of the jurisdictions. Growth
                                  in the Territory economy in 2006-07 was export led, with relatively moderate growth in
                                  state final demand. SFD increased by 1.5 per cent in 2006-07, reflecting moderating
                                  onshore economic activity, with the 3.9 per cent increase in total consumption
                                  partially offset by the 3.8 per cent decline in total investment. The level of household
                                  consumption expenditure held up in 2006-07, reflecting both strong employment and
                                  population growth (5.3 per cent and 2.0 per cent respectively), and strong consumer
                                  sentiment. This was supported by very strong growth in both retail sales and
                                  motor vehicle sales in 2006-07. The level of investment in new dwellings, including
                                  expenditure for alterations and additions of existing dwellings, increased modestly
                                  in 2006-07, from a very high base. This was the only positive contributing factor on
                                  the investment side, with both business investment and public sector investment
                                  reporting declines in 2006-07. Business investment decreased by 3.6 per cent,
                                  primarily reflecting decreased levels of investment expenditure on major projects.
                                  Territory output in 2006-07 was supported by the production of liquids (condensate
                                  and liquid petroleum gas) from the Bayu-Undan fields, as well as a full year of
                                  exports of LNG from Wickham Point, and a ramp up in production of manganese
                                  from both the Bootu Creek and the GEMCO mines. In addition, despite continuing
                                  work on the refinery expansion at Gove, production levels of alumina increased in
                                  2006-07 and production of iron ore commenced from the Frances Creek mine, with
                                  first exports reported early in 2007-08.




14     Economic Growth
        2007-08   The Northern Territory economy is estimated to grow by a further 2.8 per cent
                  in 2007-08, driven by a significant 6.0 per cent increase in total consumption
                  expenditure, with the largest contribution from Territory households. The confidence
                  of Territory households is supported by jobs growth estimated at 4.8 per cent in
                  2007-08, solid gains in property values in recent years, population growth and
                  positive net interstate migration. Despite these positive influences, Treasury has
                  factored in the recent interest rate rises leading to a moderation in the growth of
                  consumer spending in the second half of 2007-08 and into 2008-09.
                  The levels of both public consumption and investment expenditure are estimated
                  to increase in 2007-08 supported by expenditure on Closing the Gap, the Northern
                  Territory Emergency Response, Indigenous housing and defence. Additional public
                  spending on salaries and accommodation for Emergency Response employees has
                  contributed to public consumption expenditure in 2007-08.
                  Total private investment is estimated to decrease by 8.5 per cent in 2007-08, led
                  by large decreases in non-dwelling construction and despite solid increases in
                  machinery and equipment expenditure. The decrease in expenditure on non-dwelling
                  construction reflects the completion of the Alcan expansion, while the increase in
                  purchases of machinery and equipment reflects expenditure by Gemco (Groote
                  Eylandt), Xstrata (McArthur River), Compass Resources (Browns Oxide) and
                  Australian Pipeline Trust (Bonaparte Gas project).
                  The contribution of net exports (exports minus imports) is a modest negative in
                  2007-08, and despite declining levels of imports, reflects relatively stable overall
                  production volumes for Territory commodity exports. While the volumes of some
                  Territory commodities including manganese, magnetite and alumina have increased
                  substantially in 2007-08, there have been offsetting declines in the production
                  of other commodities. For example, a scheduled maintenance shut-down at the
                  Wickham Point LNG plant and associated gas fields in the Bayu-Undan field resulted
                  in decreased LNG production in 2007-08 relative to 2006-07. In addition, a temporary
                  shut-down of the Corallina oil field in late 2007 has led to a substantial reduction in
                  oil production. Finally, the permanent closure of the Elang Kakatua oil field in July
                  2007 has also contributed to a decrease in oil production. These declines are partially
                  offset by the commencement of oil production from the Puffin field, which began at
                  relatively low levels in October 2007, but will increase substantially in 2008-09.

Onshore Economy   In 2007-08 SFD is estimated to increase by 2.1 per cent, with positive contributions
                  from private and public consumption expenditure, and public investment.




                                                                                  Economic Growth           15
     2008-09 Budget


     Table 2.3: Northern Territory Economic Indicators
     Economic Indicators1                                  2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Latest available4
     Real retail turnover (real)                              -0.8        4.1      1.7      4.9    5.1    2.4    7.9   Dec 07    7.7
     New motor vehicle sales                                  -4.2       -0.3      3.3      8.4   10.7    0.0    4.1   Feb 08    8.2
     Tourist accommodation takings                             1.5       -1.0     -0.1      2.8   13.6    3.4   14.8   Dec 07   11.4
     Number of dwellings approved                            -28.4     -13.8       0.0    23.4    18.4   -1.8    7.4   Feb 08 -10.7
     Number of dwellings commenced                           -34.0        0.1     -4.1      6.0   29.1    1.3   -0.2   Dec 07   20.9
     Employment                                                1.5        4.6      1.1     -2.9   -1.3    3.0    5.3   Mar 08    5.0
     Unemployment rate (year average)                          5.6        6.7      5.5      5.2    5.7    5.5    3.8   Mar 08    4.7
     Darwin Consumer Price Index                               5.4        2.2      2.3      1.4    2.2    3.4    4.4   Dec 07    3.4
     AWOTE2                                                    3.7        2.3      5.0      6.5    7.0    3.9    0.7   Dec 07    1.8
     Wage Cost Index                                           2.8        3.1      3.0      3.3    3.7    4.4    3.9   Dec 07    3.9
     Population as at June (levels – thousands)               198        199      200      202    206    211    215    Sep 07   217
     Population (annual % change)                              1.1        0.8      0.3      1.0    2.1    2.0    2.0   Sep 07    2.2
     Net interstate migration (levels – number)   3
                                                            -1 592    -1 956    -2 725   -1 445   653    -658   228    Sep 07   381

     Financial Indicators
     Interest rates
      90 Day Bank Bill (as at 30 June)                        5.02      5.11     4.67     5.50    5.66   5.92   6.43   Apr 07   7.88
      10 Year Government Bond Yield                           6.04      5.99     5.01     5.87    5.11   5.79   6.26   Apr 07   6.07
        (as at 30 June)
     Exchange rates
       US$ per A$ (year average)                              0.52      0.52     0.58     0.71    0.75   0.75   0.79   Apr 07   0.87
       US$ per A$ (as at 30 June)                             0.51      0.56     0.67     0.69    0.76   0.74   0.85   Apr 07   0.93
     Special drawing rights per A$ (as at 30 June)            0.41      0.43     0.48     0.47    0.52   0.51   0.56   Apr 07   0.57
     Trade-weighted index of A$ (as at 30 June)               49.7      52.3     59.4     59.1    64.5   62.2   68.9   Apr 07   70.0

     1 Year on year percentage change unless indicated otherwise
     2 Average Weekly Ordinary Full-Time Earnings
     3 Year to date
     4 The 12 months to the latest available date
     Source: Northern Territory Treasury, Reserve Bank of Australia, ABS data



                        Consumption             Total consumption expenditure provides an indication of household and government
                                                demand and is a key element of economic growth. Consumption also tends to reflect
                                                household and business confidence. Consumption typically accounts for around
                                                three-quarters of final expenditure in the Territory, with household consumption at
                                                around 60 per cent of total consumption (compared to about 75 per cent nationally).
                                                Given the distortionary effect of large, often offshore resource projects on broad
                                                economic indicators, consumption expenditure is often used as a more stable
                                                indicator of the state of the Territory onshore economy. In 2007-08, total consumption
                                                expenditure by households and government is estimated to increase by 6.0 per cent,
                                                driven by growth in household expenditure.
                                                Since 1990-91, government consumption has declined as a proportion of total
                                                consumption, from about 45 per cent to 41 per cent in 2007-08. This reflects the
                                                growing significance of private sector (household) consumption expenditure in the
                                                Territory (Chart 2.1).



16      Economic Growth
Chart 2.1: Territory Consumption    $B
       (real moving annual total)   12
                                    11
                                    10                                                                     Total
                                     9
                                     8
                                     7
                                     6                                                               Household
                                     5
                                                                                                          Government
                                     4
                                     3
                                     2
                                     1
                                     0
                                         91   92   93   94   95   96    97   98 99 00 01 02     03   04    05   06 07 08e 09f
                                                                              Year ended June

                                    e: estimate; f: forecast
                                    Source: Northern Territory Treasury, ABS Cat. No. 5206.0
                 Investment         Investment is the other component of SFD and includes investment for dwellings,
                                    business investment and public expenditure for economic and social infrastructure.
                                    Investment is typically more volatile than consumption, reflecting the impact of
                                    capital-intensive resource projects on the relatively small Territory economy.
                                    Continuing to retreat from the historic high levels reported in 2005-06, Territory
                                    investment is estimated to decrease by 7.0 per cent in 2007-08, following declines
                                    of 3.8 per cent in 2006-07. The decrease in total investment in 2007-08 is being
                                    driven by declining levels of business investment in the Territory, which continue
                                    to be heavily influenced by major infrastructure works and resource projects. The
                                    LNG plant at Wickham Point was completed in December 2005, and major works
                                    for the Alcan G3 refinery expansion at Gove were completed in June 2007. During
                                    2007-08 relatively minor levels of construction work continue at Alcan during the
                                    commissioning phase. While both non-dwelling construction expenditure and
                                    machinery and equipment expenditure continue at modest levels in 2007-08, the
                                    positive contributions of smaller projects is more than offset by the very substantial
                                    reduction in expenditure associcated with the completion of the Alcan upgrade.
                                    Other projects ongoing in 2007-08 and contributing positively to business investment
                                    include the Bonaparte gas project, the GEMCO expansion, the McArthur River mine
                                    conversion, the Weddell power station and the Browns Oxide plant, as well as the
                                    Darwin Waterfront.
                                    The level of dwelling investment is estimated to decline by 3.3 per cent in 2007-08
                                    and has been impacted by both recent interest rate increases and diminished
                                    housing affordability. Growth in non-residential building activity is estimated to
                                    increase in 2007-08, supported by investment expenditure associated with the
                                    Darwin Waterfront, continued work on the Mantra Pandanas serviced apartments, the
                                    Medina and Vibe hotels, and preliminary works on stage 2 of Chinatown.
                                    Public sector non-residential building activity in 2007-08 will include the ongoing
                                    delivery of the middle year’s schooling program and the continued development of
                                    the Desert Knowledge Precinct in Alice Springs.




                                                                                                          Economic Growth       17
     2008-09 Budget

       Chart 2.2: Territory Dwelling and   $B
                   Business Investment     3.5
             (real moving annual total)
                                           3.0

                                           2.5                                  Business investment1

                                           2.0

                                           1.5

                                           1.0

                                           0.5
                                                                            Dwellings investment
                                           0.0
                                                 91   92   93   94 95     96   97   98 99 00 01 02             03   04   05   06 07 08e 09f
                                                                                     Year ended June

                                           e: estimate; f: forecast
                                           1 Private investment less dwelling investment and ownership transfer costs
                                           Source: Northern Territory Treasury, ABS Cat. No. 5206.0

                                           Economic Outlook
                                           Following modest growth in 2007-08, GSP is forecast to increase by a more
                                           substantial 6.6 per cent in 2008-09, predominantly driven by a recovery in export
                                           volumes, and supported by solid total consumption expenditure. Significant growth
                                           in export volumes more than offsets a forecast increase in import volumes (mainly
                                           oil and feedstock gas), and completely offsets the impact of the weakening onshore
                                           economy, particularly the significant decline in business investment. In 2008-09,
                                           oil production will be the main driver of increased production as the Corallina field
                                           resumes and a full year of production from the Puffin field contribute to growth.
                                           Additionally, increased liquids production from the Joint Petroleum Development Area
                                           (JPDA) including condensate, oil and liquid petroleum gas, will increase relative to
                                           2007-08, following recovery from the scheduled maintenance shutdown. Following
                                           completion of the conversion to open cut operations, production of lead-zinc at the
                                           McArthur River mine, will increase significantly in 2008-09, as will production of
                                           alumina from Alcan. Both will contribute to higher export volumes in 2008-09 relative
                                           to 2007-08.

                     Consumption           Private consumption growth is forecast to moderate in 2008-09 as the combination
                                           of higher interest rates, weak growth in property prices, and credit constraints impact
                                           on consumer spending and confidence. The combined impact of these influences on
                                           household spending reduces the forecast contribution of this expenditure component
                                           to both SFD and GSP in 2008-09. Nevertheless, continued strong growth in public
                                           consumption expenditure due to Closing the Gap, as well as the Emergency
                                           Response, means that in 2008-09, public consumption contributes relatively more to
                                           total consumption spending than households.

                        Investment         Total investment is forecast to decline by 11.8 per cent in 2008-09, subtracting
                                           3.4 percentage points from growth. This decrease completely reflects lower private
                                           sector business investment, as public investment is forecast to strengthen. Private
                                           investment is forecast to decline by 15.3 per cent. The two mega-projects, the Alcan
                                           G3 refinery expansion and the Wickham Point LNG plant, raised private investment
                                           in the Territory to unprecedented levels in 2005-06 and, with their completion,
                                           private investment levels (particularly non-dwelling construction and machinery and
                                           equipment) are returning towards more long-run trends. Dwellings investment is
                                           forecast to decrease by a further 3.1 per cent in 2008-09, following a similar decline
                                           in 2007-08, and reflecting the higher interest rate environment and affordability



18     Economic Growth
                                     issues around house and land prices. The forecast increase in public investment
                                     expenditure of 9.4 per cent in 2008-09, reflects expenditure by the Power and
                                     Water Corporation, as well as defence expenditure on both the Darwin and Tindal
                                     RAAF bases, and redevelopment of housing at Robertson Barracks. In addition, the
                                     increase in public investment in 2008-09 captures expenditure on Indigenous and
                                     government employee housing, as well as expenditure for the Tiger Brennan Drive
                                     extension and the construction of a conveyor system at the Port of Darwin.
                                     Territory SFD is forecast to decrease by 0.4 per cent in 2008-09, due to the
                                     significant decline in total investment expenditure. Although total consumption is
                                     forecast to increase by 3.8 per cent in 2008-09, making a positive contribution to
                                     growth, total investment is forecast to decrease by 11.8 per cent, more than offsetting
                                     the increase in consumption.

              Major Projects         With major works at the Alcan G3 refinery expansion at Gove drawing to a close in
                                     late 2006-07, and no multi-billion dollar project to replace it, engineering construction
                                     activity in the Territory declines in both 2007-08 and 2008-09. Ongoing projects
                                     will support engineering activity in the Territory. These include the US$700 million
                                     Montara, Skua and Swift oilfield development in the Timor Sea and the $750 million
                                     development of the Blacktip gas field in the Joseph Bonaparte Gulf (of which about
                                     50 per cent will be attributed to the Territory). The $160 million GEMCO manganese
                                     processing expansion at Groote Eylandt will also ensure that engineering activity
                                     in the Territory remains at levels above historical averages in 2008-09. In addition,
                                     there are other projects such as the construction of the $71 million Molyhil tungsten
                                     and molybdenum plant near Alice Springs (with first production due in 2010), the
                                     $100 million retail development in the Darwin airport precinct, and ongoing works on
                                     the $100 million One30 Esplanade high rise apartment development.
  Chart 2.3: Territory State Final   %
Demand and Gross State Product       20
              (real year-on-year
            percentage change)       15


                                     10                                                          SFD


                                      5

                                                                                                         GSP
                                      0


                                      -5
                                           93   94   95    96    97    98    99 00 01 02            03   04   05   06   07   08e 09f
                                                                               Year ended June

                                     e: estimate; f: forecast
                                     Source: Northern Territory Treasury, ABS Cat. Nos 5206.0, 5220.0




                                                                                                               Economic Growth         19
     2008-09 Budget




20     Economic Growth
Chapter 3    Population
Key Points    » The Northern Territory is generally sparsely settled, but more than half the
                population reside in the Greater Darwin area.
              » The population is relatively young but ageing rapidly.
              » A far higher proportion of the Territory’s population is Indigenous (32 per cent)
                compared with other jurisdictions.
              » Natural increase (births minus deaths) is by far the largest component of
                Territory population growth and its contribution to growth is about double that
                experienced in other jurisdictions.
              » Net interstate migration is the most variable component of population growth
                and historically takes the form of an annual net population loss. Recent net
                migration has been positive, although quarterly patterns fluctuate considerably
                making the future hard to predict.
              » The Territory has enjoyed population growth of 2 per cent for the past three
                financial years and continues to have the third highest population growth rate
                after Western Australia and Queensland.
              » Population growth of 2.2 per cent is forecast for the year to December 2007,
                moderating to 1.9 per cent for the year to December 2008.

             The Territory’s population is characterised by its relatively young and very mobile
             nature, its large proportion of Indigenous people, and its high fertility rates. The
             population is highly urbanised, as in other parts of Australia, but a quarter of the
             population, mainly Indigenous people, live in remote communities and outstations
             spread over a vast area. Service provision is consequently both challenging and
             costly to deliver. The Territory experiences particularly high and volatile interstate
             migration among its non-Indigenous population, which strongly influences population
             growth and usually results in an annual net loss of interstate migrants. High natural
             increase, driven by high fertility rates in the Indigenous population, underpins
             continuing growth.
             Population is both a source of labour supply and a source of demand for goods
             and services and as such, population growth may either drive or be partially
             driven by economic growth. Interstate migration, for example, often responds
             to economic growth. However, significant economic growth can still occur in the
             absence of increases in the population because capital-intensive major projects,
             such as the mining projects common to the Territory, do not demand high levels
             of labour, although they contribute significantly to the economy. In addition, there
             is an increasing reliance on fly-in fly-out workers as a source of labour for major
             projects in the Territory and these workers are not necessarily counted in the resident
             population.
             The accurate estimation of population is of critical importance to the Territory as
             population estimates produced by the Australian Bureau of Statistics (ABS) are used
             by the Commonwealth Grants Commission (CGC) to distribute goods and services
             tax (GST) revenues, a substantial proportion of Territory total revenue. Northern
             Territory Treasury has concerns about the ability of the enumeration methods used
             by the ABS to accurately estimate the Territory’s very mobile population. Estimates
             of the resident population based on the 2006 Census included large adjustments for
             undercounting in the Census (see Appendix 1). The undercount rate in the Territory


                                                                                       Population      21
     2008-09 Budget


                                         was much larger than in other jurisdictions (Table A3.1 in Appendix 1). The Northern
                                         Territory Government and the ABS have worked in partnership to improve the
                                         accuracy of population estimates through collaborative projects such as those which
                                         aim to improve enumeration methods in the Census.

      Population Measurement             Population figures can be measured in a variety of ways. The concept of population
                    Concepts             used in this chapter is estimated resident population (ERP), which is the official
                                         population figure as measured by the ABS. It includes all people who usually
                                         live in a place. To measure ERP, the ABS needs information about the number
                                         of usual residents as well as information about the numbers of births and deaths
                                         and interstate and overseas migrants. ERP does not include fly-in fly-out workers,
                                         temporary visitors or holidaymakers.
                                         There are a number of other population concepts that can be of interest, for example,
                                         population counts from the ABS Census of Population and Housing. These can be
                                         based on place of enumeration (where people are actually counted on Census night)
                                         or place of usual residence (the place where people have lived, or intend to reside,
                                         for at least six months). Service providers and planners may be interested in another
                                         measurement concept, that of the service population. However service populations
                                         are not easily defined and measured, as they may include tourists and other visitors
                                         and may differ according to a service’s catchment area.

            Recent Population            Population growth in the Territory is more volatile than Australian population growth
                      Growth             (Chart 3.1). Significant fluctuations in the Territory’s population growth rate are largely
                                         due to variations in interstate migration. Historically, the Territory’s population grew
                                         strongly during the post-Cyclone Tracy reconstruction of the 1980s and the defence
                                         presence build up during the mid 1990s. Population growth slowed from 1999 to
                                         2003, resulting from a lagged effect of the slowing Territory onshore economy,
                                         where the Territory experienced larger net interstate migration losses. Since 2004,
                                         population growth in the Territory has consistently been above national growth. Based
                                         on ABS estimated ERP, Territory annual population growth increased to 2.0 per cent
                                         in 2006, following revised growth of 2.3 per cent in 2005, and 1.6 per cent in 2004
                                         (Table 3.1). In 2006-07, Territory estimated population growth was 2.0 per cent,
                                         the third consecutive year where the Territory population growth rate exceeded the
                                         national growth rate. Population growth in the Territory is forecast to be 2.2 per cent
                                         to December 2007 and is expected to ease slightly to 1.9 per cent in 2008 and
                                         1.8 per cent in 2009, but remain above national growth during this period.
                                         %
                     Chart 3.1: Annual
                    Population Growth     6


                                          5

                                          4

                                          3
                                                                                                    Northern Territory

                                          2

                                          1     Australia

                                          0
                                           83     85        87    89     91      93    95    97   99          01     03   05   07   09f
                                                                                 Year ended December
                                         f: forecast
                                         Source: Northern Territory Treasury, ABS Cat. No. 3101.0




22     Population
 Table 3.1: Annual Population                                  Northern Territory                                Australia
                                 To December       Population '000       Annual % Change        Population '000         Annual % Change
                                 1998                      191.3                   1.6                18 814.3                 1.1
                                 1999                      194.3                   1.6                19 038.3                 1.2
                                 2000                      196.3                   1.0                19 272.6                 1.2
                                 2001                      198.4                   1.1                19 535.1                 1.4
                                 2002                      199.4                   0.5                19 773.3                 1.2
                                 2003                      200.7                   0.7                20 015.8                 1.2
                                 2004                      203.9                   1.6                20 257.1                 1.2
                                 2005                      208.5                   2.3                20 548.4                 1.4
                                 2006                      212.6                   2.0                20 852.4                 1.5
                                 2007                      217.2                   2.2                21 163.0                 1.5
                                 2008e                     221.4                   1.9                21 454.0                 1.4
                                 2009f                     225.4                   1.8                21 741.0                 1.3
                                 e: estimate f: forecast
                                 Source: Northern Territory Treasury, ABS Cat. No. 3101.0

Interstate Comparison            Over the past ten years, the Territory had the third highest population growth of the
                                 jurisdictions (1.4 per cent) behind that of Queensland and Western Australia, and
                                 above the national average of 1.3 per cent (Chart 3.2). The Territory has maintained
                                 this position over 2006-07 and growth has strengthened considerably to more than
                                 2 per cent while Western Australia has overtaken Queensland as the fastest growing
                                 jurisdiction. The national growth rate strengthened to 1.5 per cent in 2006-07.
                                 The five-year period from 2002-07 saw comparatively more modest growth than in
                                 the past year in most jurisdictions. The Territory experienced a subdued onshore
                                 economy around 2000 which moderated the strong growth experienced in more
                                 recent years and curtailed the average growth rate for this period to 1.5 per cent. This
                                 was still above the national average of 1.4 per cent.
Chart 3.2: State and Territory   %
                                 2.5
  Population Growth Rates,
                to June 2007
                                 2.0


                                  1.5


                                  1.0


                                 0.5


                                  0.0
                                         NSW         Vic           Qld        SA         WA         Tas     NT           ACT         Aust
                                                                   10 Years               5 Years                2007

                                 Source: ABS Cat. No. 3101.0

      Regional Growth            Regional populations and population growth trends are important for informing
                                 government, business and service deliverers of future infrastructure and service
                                 needs including schools, roads, public housing and policing across the Territory.
                                 Between 1996 and 2006, there was a 1.6 per cent increase in the proportion of the
                                 population living in the Darwin region, with the largest change occurring in Palmerston
                                 (Table 3.2). The proportion of the population living in the five main regional towns
                                 (Jabiru, Katherine, Nhulunbuy, Tennant Creek and Alice Springs) decreased from


                                                                                                                          Population        23
     2008-09 Budget


                                           23.9 per cent in 1996 to 21 per cent in 2006. Alice Springs was the only centre to
                                           experience a decrease in population between 2001 and 2006, with most of the
                                           other regional centres simply making up some of the population losses they had
                                           experienced in the previous intercensal period. Nhulunbuy experienced strong growth
                                           between 2001 and 2006 because of the Alcan alumina refinery expansion project.
                                           The proportion of the population that lived in the rest of the Territory, outside Greater
                                           Darwin and the five towns, increased between 1996 and 2006.

         Table 3.2: Territory Population                                 1996                  2001                    2006
             Estimates by Main Centre                          Population % of Total   Population % of Total   Population % of Total
                           as at 30 June
                                           Darwin                68 889         37.9     68 710       34.7       71 933       34.1
                                           Palmerston            13 343          7.3     22 559       11.4       25 889       12.3
                                           Litchfield            13 597          7.5     15 573        7.9       16 546          7.9
                                           Darwin Region         95 829         52.7    106 842       54.0      114 368       54.3

                                           Jabiru                 1 457          0.8      1 181        0.6        1 247          0.6
                                           Katherine              9 443          5.2      8 956        4.5        9 023          4.3
                                           Nhulunbuy              3 759          2.1      3 800        1.9        4 433          2.1
                                           Tennant Creek          3 694          2.0      3 002        1.5        3 332          1.6
                                           Alice Springs         25 040         13.8     26 520       13.4       26 194       12.4
                                           Rest of Territory     42 621         23.4     47 467       24.0       52 077       24.7
                                           Total NT             181 843                 197 768                 210 674
                                           Source: ABS Cat. No. 3218.0


                                           Population Characteristics
               Small Population,           The Territory is sparsely populated, with a density of 0.16 persons per square
                Large Land Area            kilometre, lower than any other jurisdiction and well below the national density of
                                           2.68 people per square kilometre.

               Highly Urbanised            Despite the low overall population density, more than three-quarters of the Territory’s
                                           population live in the six main town centres. At the 2006 Census, the Greater
                                           Darwin region accounted for 54 per cent of the Territory’s population. Alice Springs
                                           accounted for 12 per cent, while the other regional town centres (Katherine,
                                           Nhulunbuy, Tennant Creek and Jabiru) together accounted for about 9 per cent
                                           (Table 3.2). This pattern of settlement, particularly for non-Indigenous people, is
                                           related to employment opportunities such as in government administration, defence
                                           and construction in Darwin, hospitality and other service industries around Alice
                                           Springs. The influence of mining and service industries in these and other Territory
                                           towns is likely to increase in the future. The proportion of the population living in
                                           remote areas of the Territory (outside Darwin and the five regional towns) has also
                                           grown over recent years, largely driven by the high Indigenous fertility rate.

               Young Population            The Territory’s population is the most youthful of any jurisdiction in Australia
                                           (Table 3.3 and Chart 3.3). It consistently has the largest proportion under 15 years
                                           of age and the smallest proportion aged 65 and over of any state or territory.
                                           For example, the proportion of the Territory’s population under the age of 15 is
                                           24 per cent, compared to 19 per cent nationally, reflecting the younger age profile
                                           of Indigenous Territorians and higher birth rate. The Territory also has a small
                                           proportion of people aged 65 years and over, at 5 per cent, compared to 13 per cent
                                           in Australia, due to lower life expectancy of Indigenous Territorians and out-migration
                                           of non-Indigenous Territorians at middle and older ages. The Territory has a
                                           higher proportion (71 per cent) of its population in the typical working age group of
                                           15-64 years, compared to the Australian population (68 per cent).


24     Population
                               As at 30 June 2007, the median age of Territorians was estimated by the ABS to be
                               31.1 years. This is the youngest of any jurisdiction and almost six years below the
                               national median age of 36.8 years. However, over the past ten years, the Territory’s
                               median age has increased much faster than that of the national population. See the
                               section on Population Ageing below for more information.

 Table 3.3: Comparative Age                         NSW      Vic      Qld      WA         SA     Tas     NT      ACT     Aust
               Distribution1   Population (000) 6 889.1 5 205.2 4 182.1 2 105.8 1 584.5          493.3   215.0   339.9 21 017.2
                               Age Distribution (%)
                               0 – 14 years           19.6   18.9     20.2     19.8       18.2    19.6    24.0    18.6     19.4
                               15 – 64 years          66.7   67.7     67.5     68.3       66.6    65.6    71.1    71.7     67.5
                               65 years and older     13.7   13.4     12.3      11.9      15.2    14.8     4.9     9.7     13.1
                               Median Age             37.0   36.9     36.2     36.4       38.9    39.1    31.1    34.6     36.8

                               1 Based on estimated resident population at 30 June 2007
                               Source: ABS Cat. No. 3201.0

Indigenous Population          The Indigenous population constitutes 31.6 per cent of the Territory’s total population,
                               a far larger proportion than any other jurisdiction, according to ABS experimental
                               estimates of the Indigenous population for 30 June 2006. The Territory Indigenous
                               population is much younger than the non-Indigenous population, with a median age
                               of 22.6 at June 2006 compared with 34.7 years for the non-Indigenous population.
                               Chart 3.4 shows the very different age distributions of the Territory’s Indigenous
                               and non-Indigenous populations. The non-Indigenous population has an unusual
                               age distribution caused by the high proportion of people in the young to middle
                               ages, reflecting large numbers of interstate migrants in these age groups. Smaller
                               proportions in older age groups reflect the tendency of older non-Indigenous people
                               to leave the Territory on retirement. The shape is also influenced by an exceptionally
                               large cohort of young adults who came into the Territory 30 years ago following
                               Cyclone Tracy and the expansion of services following Self Government. As this
                               cohort ages, it affects the age distribution. The Indigenous population has a standard
                               age profile of a developing nation, with high proportions of children reflecting high
                               fertility rates. High mortality rates rather than migration cause the sharp tapering off
                               of the pyramid from middle age.
                               The ABS Indigenous experimental estimates are based on the 2006 Census usual
                               residence counts and take into account instances in which Indigenous status is
                               not stated, the extent to which the ABS estimates that Indigenous people are
                               undercounted, and differences in Indigenous identification between the Census
                               and the presumed more accurate post-enumeration survey. At 30 June 2006,
                               the Indigenous population in the Territory was estimated to be 66 582 persons,
                               accounting for 13 per cent of the national Indigenous population of 517 174, which
                               was 2.5 per cent of Australia’s total population. Between 1996 and 2006, based on
                               ABS experimental estimates, the Territory’s Indigenous population has seen average
                               annual growth of 2.5 per cent compared to 1.0 per cent for the non-Indigenous
                               population. These trend figures should be used with caution, as the methods used
                               to adjust Census population counts for undercounting and not stated Indigenous
                               status differ across Census years and this could introduce bias to the estimates of
                               growth. Chart 3.4 shows projections for the Territory Indigenous and non-Indigenous
                               populations for 30 June 2007. Northern Territory Government and Charles Darwin
                               University draft population projections (see below) show the Indigenous population
                               was projected to grow to 67 586 by June 2007.




                                                                                                                 Population       25
     2008-09 Budget


         Chart 3.3: Age Distribution of   Age group
                                           (years)
               Population, June 2007
                                            80-84
                                            70-74
                                            60-64
                                            50-54
                                            40-44
                                            30-34
                                            20-24
                                            10-14
                                              0-4
                                                    10        8         6        4         2         0       2        4          6        8        10
                                                                                           % of population
                                                                  Northern Territory                                 Australia

                                          Source: ABS Cat. No. 3201.0

         Chart 3.4: Age Distribution of   Age group
                                           (years)
                  Territory Population,
                                            80-84
                            June 2007
                                            70-74
                                            60-64
                                            50-54
                                            40-44
                                            30-34
                                            20-24
                                            10-14
                                             0-4
                                                    14   12        10     8     6      4        2     0     2    4        6      8   10       12   14
                                                                                               % of population
                                                                   Indigenous                                    Non-Indigenous

                                          Source: NTG-CDU draft population projections 2008

                Household Size            From 1996 to 2006, the average number of persons per household decreased from
                                          3.1 in 1996 to 2.9 in 2006, a decrease of 6.5 per cent over 1996. Although this
                                          seems a small decrease, the potential impact on housing demand is substantial.
                                          The ongoing decline in the average size of Territory households reflects an ageing
                                          population and an increasing proportion of single person households, consistent
                                          with national trends. Despite the decline, household size in the Territory remains the
                                          largest of all jurisdictions, greater than the national size of 2.6 persons per household,
                                          partly reflecting high rates of overcrowding among Indigenous households as well as
                                          larger and younger families, particularly in remote communities.

         Male to Female Ratio             The Territory has significantly more males than females, with an estimated 108 males
                                          (52 per cent) for every 100 females (48 per cent) as at 30 June 2007. This is the
                                          highest sex ratio of all jurisdictions, much higher than the national ratio of 99 males
                                          for every 100 females. The Territory’s sex ratio becomes more extreme in older age
                                          groups until 75 years and over, progressing from 107 males for every 100 females
                                          in 0-19 year olds, to 124 males to 100 females in 55-74 year olds (Chart 3.5). The
                                          corresponding national figures are 105 males for every 100 females aged 0-19 years
                                          and 98 males for every 100 females aged 55-74 years. The Territory differences lie in
                                          the age structure of non-Indigenous males and females, as can be seen in Chart 3.5.
                                          High death rates among Indigenous males affect the Indigenous sex ratio from an
                                          early age.




26     Population
  Chart 3.5: Number of Males per   150
100 Females, as at 30 June 20071   140

                                   130

                                   120

                                    110

                                   100

                                     90

                                     80

                                     70

                                     60
                                              0-19               20-34        35-54           55-74            75+             Total
                                                     Australia           NT         NT Indigenous             NT Non-Indigenous
                                   1 A ratio of 100 means that there are equal numbers of males and females in a population.
                                   Source: ABS Cat. No. 3201.0; NTG-CDU draft population projections 2008

            Overseas Born          2006 Census results show that 23 per cent of the Territory usual resident population
                                   was born overseas, with many from non-English speaking backgrounds. This is
                                   similar to the proportion of overseas born recorded in both the 1996 and 2001
                                   Censuses (21 per cent and 22 per cent respectively), and is similar to the total
                                   Australian proportion. In the Territory, of those born overseas, the main countries
                                   of birth were the United Kingdom (18 per cent), New Zealand (8 per cent),
                                   the Philippines (4 per cent), the United States (3 per cent) and Greece and
                                   Germany (2 per cent each). The proportion of ‘not stated’ responses to the birthplace
                                   question for the overseas born in the 2006 Census has more than doubled since
                                   1996. Unfortunately, this obscures any patterns of change that may have occurred for
                                   countries of origin of overseas-born Territorians over the period.

        Population Ageing          Population ageing is a trend being experienced in nations around the world. In the
                                   absence of significant policy change, the implications of population ageing are lower
                                   labour force participation, potentially reduced labour productivity and increased
                                   government expenditure on services such as health and aged care.
                                   Both Australia’s and the Northern Territory’s populations are ageing rapidly.
                                   Table 3.4 sets out estimated changes in median ages in the Territory and Australian
                                   populations between 1996 and 2016. Projections to 2016 are from the Northern
                                   Territory Government-Charles Darwin University (NTG-CDU) population projections
                                   model. The model uses the ABS 2006 ERPs as the base population and projects the
                                   Territory and Australian Indigenous and non-Indigenous populations by single year
                                   of age and sex to 2036. Assumptions for future change in the growth components
                                   of natural increase and migration were set in consultation with Northern Territory
                                   Government agencies, while Charles Darwin University provided the technical
                                   expertise. The projections are currently in draft form.
                                   Table 3.4 shows that over the period 1996-2006, the median age of the Australian
                                   and Territory populations increased by 2.6 years and 3.1 years respectively, very
                                   large increases by any historical standards. The Territory’s non-Indigenous population
                                   showed an even larger increase of 5.2 years over this period. The Indigenous
                                   increase was somewhat less at 2.0 years.




                                                                                                                          Population   27
     2008-09 Budget


       Table 3.4: Median Age, Northern                                               1996            2006            2011    2016
                 Territory and Australia,
                                            Australia                                 34.0           36.6            37.7    38.4
                           1996 to 2016
                                            Northern Territory                        27.8           30.9            31.3    31.9
                                            NT Non-Indigenous                         29.5           34.7            34.9    35.0
                                            NT Indigenous                             20.6           22.6            23.8    25.0
                                            Source: ABS Cat. Nos 3238.0, 3201.0; NTG-CDU draft population projections 2008

                                            Large increases in the median age are expected in the decade beyond 2006, at
                                            1.8 years for Australia and 2.4 years for the Territory’s Indigenous populations
                                            but only 0.3 year for the Territory’s non-Indigenous population. The transition to a
                                            much slower rate of increase in median age in the non-Indigenous population is a
                                            consequence of the unusual age profile of this population (see Chart 3.4) and is
                                            evidence of the substantial ageing that occurred in the decade up to 2006.
                                            The projected proportions of the population aged 65 years and over tells a slightly
                                            different story but still with substantial changes over the decade from 2006
                                            (Table 3.5). The proportion of the population 65 and over is projected to increase by
                                            2.9 percentage points for both the Australian and Territory populations. The impact
                                            on the Territory’s aged population, however, is greater than for Australia’s aged
                                            population because the Territory had a much smaller proportion of its population aged
                                            65 and over than Australia in 2006. This age group is projected to increase in size by
                                            63 per cent compared with a 22 per cent increase in the Australian population. The
                                            most noticeable difference in the proportion aged 65 and over occurs in the Territory’s
                                            non-Indigenous population with a 3.9 percentage point increase, representing a
                                            68 per cent increase in size over the decade.
                                                                                     1996            2006            2011    2016
            Table 3.5: Proportion of the                                              %               %               %       %
          Population Aged 65 and Over       Australia                                12.0            13.0            14.1    15.9
                                            Northern Territory                         3.2            4.6             6.0     7.5
                                            NT Non-Indigenous                          3.4            5.4             7.2     9.1
                                            NT Indigenous                              2.8            2.9             3.4     4.0
                                            Source: ABS Cat. Nos 3238.0, 3201.0; NTG-CDU draft population projections 2008

                                            The two summary measures of ageing appear to indicate contradictory expectations
                                            for ageing for the Territory’s non-Indigenous population, that is, a small change in
                                            median age over the next decade but a large change in the proportion aged 65
                                            and over. However, the results are not incompatible and arise as a consequence
                                            of the distinctive age composition of the Territory’s non-Indigenous population.
                                            The increasing proportion of those aged 65 and over is a result of the ageing of
                                            the large cohort of post-Cyclone Tracy migrants to the Territory who, over the next
                                            decade, will significantly add to the 65 and over age group of the population. This
                                            is counterbalanced by the large cohorts of younger people entering the population,
                                            the consequence of continued high birth rates, natural increase and net migration of
                                            young adults (Chart 3.6). This results in little to no change in the overall median age
                                            of the non-Indigenous population.

                                            Components of Population Growth
                                            Population growth is the result of changes in natural increase, which is the excess
                                            of births over deaths, and in migration. Migration can take the form of net overseas
                                            migration and, for the states and territories, net interstate migration. The components
                                            of Territory population growth and total population growth are shown in Chart 3.6.




28     Population
    Chart 3.6: Territory Population     number (000)
                                        8
           Growth by Component
                                        6
                                                                                                      Total growth

                                        4
                                                                      Natural increase

                                        2
                                                                             Net overseas migration
                                        0


                                       -2                                          Net interstate migration


                                       -4
                                            82    84       86        88       90      92       94       96       98     00          02          04     06
                                                                                        Year ended June
                                      Source: ABS Cat. No. 3101.0

           Natural Increase           Natural increase makes a strong and relatively stable contribution to total Territory
                                      population growth. There are, on average, about 3700 births and 950 deaths each
                                      year in the Territory (Table 3.6). Over the past five years, the percentage contribution
                                      of natural increase to the total annual Territory growth rate has fluctuated between
                                      1.3 and 1.5 percentage points. This is about double the percentage contribution in
                                      other jurisdictions and is much higher than the Australian average of 0.6 percentage
                                      points per annum. Natural increase in the Territory’s Indigenous population accounts
                                      for about 40 per cent of the total contribution of natural increase to Territory
                                      population growth. Although remaining high, Indigenous fertility rates in the Territory
                                      have decreased in recent years and this is the main reason for the small decrease
                                      in the contribution of natural increase to total Territory growth from almost 1.5 to
                                      1.3 percentage points over the past five years.

Table 3.6: Population Components                                      2001          2002       2003          2004       2005             2006        2007
                                                                                                             (000)
                     as at 30 June
                                      Northern Territory                  197.77     199.44     200.11        202.16     206.49           210.67      214.98
                                       Natural Increase                     2.85       2.84         2.94        2.75         2.56           2.76        2.75
                                       Births                               3.70       3.76         3.82        3.62         3.52           3.72        3.73
                                       Deaths                               0.90       0.89         0.87        0.87         0.96           0.96        0.97
                                       Net Overseas Migration               0.88       0.66         0.33        0.65         1.00           1.89        1.32
                                       Net Interstate Migration            -1.59       -1.96        -2.73       -1.45        0.65          -0.66        0.23


                                      New South Wales                 6 575.22     6 629.83    6 674.37      6 710.49   6 758.27     6 817.18        6 889.07
                                      Victoria                        4 804.73     4 863.55    4 924.47      4 983.06   5 050.52     5 128.31        5 205.22
                                      Queensland                      3 628.95     3 714.94    3 809.56      3 901.81   3 996.56     4 091.55        4 182.06
                                      South Australia                 1 511.73     1 521.12    1 531.26      1 540.40   1 552.52     1 568.20        1 584.51
                                      Western Australia               1 901.16     1 925.64    1 952.37      1 982.01   2 016.40     2 059.05        2 105.78
                                      Tasmania                            471.80     472.80     477.68        482.80     486.38           489.92      493.34
                                      Australian Capital Territory        319.32     322.70     325.72        327.56     330.25           334.23      339.87

                                      Australia                      19 413.24 19 652.56 19 898.07 20 132.76 20 399.84 20 701.49 21 017.22

                                      Note: Growth components do not equal population change due to intercensal discrepancy.
                                      Source: ABS Cat. No. 3101.0




                                                                                                                                          Population            29
     2008-09 Budget


                       Births   The Territory’s total fertility rate (TFR – children per woman during lifetime) in
                                2006 was 2.2 babies per woman, the highest of any state or territory. Over the
                                past 20 years, the Territory’s TFR has remained around this level while Australia
                                has experienced a small decline in the TFR over the same period from 20 years
                                ago to 1.7 in 2003, before an increase over the past three years to 1.8. The
                                Commonwealth’s ‘baby bonus’ policy may be partly responsible for achieving this
                                increase, although currently there is no direct evidence to suggest this. This policy
                                is aimed at reversing Australia’s falling fertility rate which is below replacement level
                                (the level of fertility at which a cohort of women are just replacing themselves with
                                daughters – in Australia a TFR of about 2 is required).
                                The Territory’s high TFR is influenced by the age distribution of non-Indigenous
                                women which favours the child-bearing ages. Based on recent ABS data, some
                                57 per cent of non-Indigenous Territory women are aged 15 to 49 years compared
                                with 49 per cent of Australian women. High fertility rates among Territory Indigenous
                                women who had a TFR of 2.4 in 2006 also strongly influenced the overall TFR.
                                There were 1459 births registered to Indigenous women in 2006, representing
                                40 per cent of total births (3696) in the Territory, which was higher proportionally
                                than the representation of Indigenous people in the Territory’s population (31.6 per
                                cent). Nationally, Indigenous births made up nearly 5 per cent of all births. Indigenous
                                women tend to be younger when they give birth, with a median age of 23.7 years
                                compared with 28.1 years for all Territory mothers. Age-specific fertility rates are
                                higher among younger women, particularly Indigenous women, in the Territory than
                                they are elsewhere. The age-specific fertility rate for 15 to 19 year old Indigenous
                                women in the Territory in 2006 was more than four and a half times that of all non-
                                Indigenous Territory women and more than seven times higher than that of Australian
                                15 to 19 year old women.
                                Half the Territory’s births in 2006 were to women living outside the Greater Darwin
                                area. The TFR for Greater Darwin was 2.1 compared with 2.3 for the rest of the
                                Territory. This reflects the high proportion of Indigenous people living in regional
                                and remote areas of the Territory. However, the TFR for the rest of the Territory has
                                decreased from 2.5 births per woman since 2005 while the TFR for Greater Darwin
                                has remained relatively constant since that time.

                      Deaths    In 2006, 932 deaths were registered in the Territory. The Territory has a lower crude
                                (unadjusted) death rate than other states and territories because of its younger
                                age structure. In 2006, the Territory’s crude death rate was 4.4 per 1000 population
                                compared with 6.5 for Australia. The median age at death in the Territory was
                                60.0 years compared with 80.3 years for Australia.
                                The crude death rate conceals important aspects of mortality in the Territory
                                such as the high death rate of Indigenous people. Once adjusted by the ABS for
                                differences in the age structure of the Territory and Australia, the Territory’s death
                                rate rises to 8.7 per 1000 compared with 6.0 for Australia. Over a 15 year period the
                                age-standardised death rate has dropped from 12.7 per 1000 to 8.7, however the
                                Territory’s rate remains the highest of all the jurisdictions.
                                Although about one in three Territorians is Indigenous, deaths registered as
                                Indigenous accounted for nearly half of all deaths in 2006. This partly reflects the
                                tendency of older non-Indigenous Territorians to leave the Territory on retirement,
                                however high mortality rates at young ages among Indigenous people explain most
                                of this over-representation in the death statistics.
                                Mortality rates are higher for Indigenous Territorians compared with all Australians
                                at every stage of life (Chart 3.7). Data for 2001-04 combined shows that death rates


30     Population
                                   are 3.5 times higher for Indigenous children aged 0-4 and up to 11 times higher
                                   for Indigenous people aged 30-35. Cardiovascular disease was the leading cause
                                   of death for Indigenous Territorians in this period while cancer and cardiovascular
                                   disease were the leading causes of death for non-Indigenous Territorians.
Chart 3.7: Ratio of Age-Specific   Ratio
      Death Rates, 2001-20041      12
                                   11
                                   10
                                    9
                                    8
                                    7
                                    6
                                    5
                                    4
                                    3
                                    2
                                    1
                                    0
                                        0-4          10-14       20-24        30-34        40-44        50-54      60-64       70-74 75+
                                                    NT Indig male/Aust male                      NT Indig female/Aust female
                                                    NT non-Indig male/Aust male                  NT non-Indig female/Aust female
                                   1 A ratio of 1.0 means that age-specific rates for both populations are equal
                                   Source: Department of Health and Community Services

         Life Expectancy           The higher death rates of Indigenous people and at earlier ages results in lower
                                   life expectancy. For 2001-04, estimated life expectancy at birth (the number of
                                   years a baby born in the period could expect to live if no changes in future death
                                   rates occur) in the Territory was 59.7 years for Indigenous males and 79.0 years
                                   for non-Indigenous males compared with 79.5 years for all Australian males. The
                                   corresponding figures for females are 68.2 years for Territory Indigenous females,
                                   85.5 years for Territory non-Indigenous females and 85.1 years for all Australian
                                   females. Over the last 20 years, both Indigenous and non-Indigenous life expectancy
                                   has increased, hence the gap between Indigenous and non-Indigenous life
                                   expectancy remains at about 19 years for males and 17 years for females.

    Overseas Migration             Historically, net overseas migration to the Territory has provided a relatively stable
                                   contribution of about 0.4 percentage points (750 persons per year on average) to
                                   annual population growth in the Territory, lower than the national average. Over the
                                   last two financial years, net overseas migration has risen, to about 1900 persons in
                                   2005-06 and 1300 persons in 2006-07, most likely due to increased labour demand
                                   resulting from the resources boom and skills shortages being experienced worldwide,
                                   and the construction boom occurring in the Territory. Despite this increase, the
                                   Territory’s share of total Australian net overseas migration remains small, equivalent
                                   to its share of the Australian population (1 per cent).
                                   The ABS recently developed a new methodology for estimating net overseas
                                   migration and preliminary results based on the new method were first incorporated in
                                   the September quarter 2006 figures. Using the new method, people who reside
                                   in or out of Australia for 12 months within a 16 month period are classed as
                                   permanent additions to or subtractions from the resident population. This is designed
                                   to ensure that groups such as overseas students, who spend most of their time in
                                   Australia but may return to their home country for university holidays, are included
                                   in the resident population. It is difficult to say at this stage whether the new method
                                   is having an effect on the Territory’s population growth estimate. As noted above,
                                   increases in net overseas migration have been experienced recently, however net
                                   overseas migration remains a volatile series in the population accounts, and it is too
                                   early to draw conclusions.



                                                                                                                           Population      31
     2008-09 Budget


                                  There are two sources of overseas migration information: ABS and the
                                  Commonwealth Department of Immigration and Citizenship (DIAC). Unfortunately, it
                                  is not currently possible to compare the statistics from these two agencies in order
                                  to have a more complete understanding of immigration to the Territory. For example,
                                  DIAC presents statistics by visa category type (for example, family, humanitarian,
                                  skill) and status (permanent, temporary), whereas length of stay in Australia
                                  (12 months of residence within a 16 month period) rather than visa status is the
                                  criterion by which the ABS measures permanent additions to the resident population.
                                  The statistics presented below can therefore only indicate that there appears to be
                                  an increase in the numbers of immigrants to the Territory, however it is not possible
                                  to say how many of these are additions to the Territory’s resident population.
                                  Emigration, which is not explored here, presents its own set of complexities.
                                  Recent times have seen an increase in the numbers of skilled migrants to the
                                  Territory, as a result of new Commonwealth programs and policies as well as the
                                  need for the Territory to meet employment demand within Australia’s skills shortage
                                  climate. Between 2004-05 and 2006-07, the number of skilled migrants arriving on
                                  permanent visas doubled from 154 to 308 (DIAC statistics). The Territory registered
                                  142 humanitarian arrivals in 2006-07, up 149 per cent from the 57 humanitarian
                                  settlers received five years ago. Arrivals to the Territory for all permanent visa
                                  categories totalled 843 during 2006-07.
                                  Category 457 visa holders are a group of employer-sponsored skilled temporary
                                  entrants. There were 1353 Category 457 visa holders in the Territory at
                                  30 June 2007; up 55 per cent from 871 the previous year. The major citizenship
                                  countries of the 457 visa holders are the Philippines 348 (26 per cent), India 140
                                  (10 per cent), the United Kingdom 127 (9 per cent), China 75 (6 per cent), Zimbabwe
                                  72 (5 per cent), South Africa 67 (5 per cent) and Papua New Guinea 51 (4 per cent).
                                  Primary grants (excludes accompanying family members) to Category 457
                                  visa holders have risen from 690 in 2005-06 to 880 in 2006-07, an increase of
                                  28 per cent. The Territory’s share of these visa holders (1.9 per cent) exceeds its
                                  share of the Australian population (1 per cent).
                                  The major sponsoring industries of the new Category 457 visa holders are Health
                                  and community services 210 (24 per cent), accommodation, cafes and restaurants
                                  140 (16 per cent), and construction 110 (13 per cent). Future years may see the
                                  growth rate in this visa category moderate, as the Commonwealth is currently
                                  revising and tightening policy around eligibility for this visa category, particularly
                                  around English language and occupational skills competencies.

           Interstate Migration   Interstate migration remains the ‘wildcard’ of Territory population growth. The Territory
                                  experiences very large annual interstate inflows and outflows of up to 18 000
                                  people in each direction. The net figure is therefore the difference between two very
                                  large numbers and tends to be exceptionally volatile. Net interstate migration, as
                                  measured by the ABS, has fluctuated from negative 3100 per annum to positive 1700
                                  per annum over the last 20 years, however in recent years it has more commonly
                                  taken the form of a loss to the Territory’s population. Periods of positive net gains
                                  occurred in the mid 1990s during the defence force build up and in 2005 there was
                                  a period of small positive gain with the influence of major employment-creating
                                  projects such as the Wickham Point liquefied natural gas (LNG) plant and the Alcan
                                  G3 refinery expansion (Chart 3.8). Gains have also been recorded in the two most
                                  recent quarters, June and September 2007. Over the past five years, net interstate
                                  migration has subtracted on average 0.4 percentage points from annual growth, an
                                  average net loss of around 800 people each year. Note that the ABS has revised


32     Population
                                  these figures upwards based on the 2006 Census, showing that the Territory’s
                                  net losses were not as large as reported by the preliminary ABS figures for the
                                  intercensal period 2001-06.
Chart 3.8: Territory Interstate   (000)
             Migration Flows      20

                                                          Outflow



                                  16

                                                                        Inflow



                                  12




                                    8
                                        83   85      87     89     91      93    95    97    99     01     03      05   07
                                                                         Year ended June
                                  Source: ABS Cat. No. 3101.0

                                  Recent research is providing evidence-based insights into who migrates to the
                                  Territory and why, as well as who stays. The research forms part of a comprehensive
                                  program of demographic research being conducted in partnership between the
                                  Territory Government, CDU and the ABS. The research includes the Territory Mobility
                                  Survey (TMS), a telephone survey of 1500 Territory residents about their migration
                                  histories, and the Australia Post Relocation Survey (APS), a mail-out survey to which
                                  2000 Australian households that had moved house responded. The results of the
                                  APS point overwhelmingly to work-related reasons as being the primary motivator for
                                  people to move from one jurisdiction to another. However, family and social networks
                                  featured strongly for people leaving the Territory and for those who move across
                                  other state or territory borders, while this was much less significant for movers into
                                  the Territory. For a small number of dissatisfied Territory ex-residents, climate and
                                  cost of living were the main reasons for leaving while improved law and order would
                                  be the main incentive to encourage them to return to the Territory. According to the
                                  APS, only 17 per cent of movers to the Territory intended to stay permanently or long
                                  term although the TMS reported a higher figure of one quarter of respondents who
                                  intended to stay permanently. Both surveys showed that the vast majority of current
                                  and former Territory residents are satisfied with life in the Territory, however it seems
                                  that for many, this is not enough to keep them here long term and many plan to leave
                                  within five years of arrival. In fact, the median length of stay of movers out in the APS
                                  survey was about five years.
                                  Although movement to and from the Territory occurs at all ages, most Territory
                                  interstate migrants are young adults. Territory interstate in-migrants in 2005-06 had
                                  a median age of 26 years, while the median age of out-migrants was 27 years.
                                  Tasmania had the oldest median age for in-migrants of 31 years while the median age
                                  of out-migrants was 28 for all jurisdictions other than the Territory. Chart 3.9 shows a
                                  typical age profile of interstate migrants for the Territory, with a net gain of people in
                                  their 20s. In all other age groups, the Territory experiences a net loss of people.




                                                                                                                Population     33
     2008-09 Budget


       Chart 3.9: Age Profile of Territory   6000
      Arrivals and Departures (five year
           average 2001-02 to 2005-06)       5000

                                             4000

                                             3000

                                             2000

                                             1000

                                                 0
                                                       0-9        10-19    20-29      30-39        40-49      50-59     60-69   70 and over
                                                                                      Age (years)
                                                                           Arrivals                        Departures
                                             Source: ABS Cat. No. 3412.0

                                             Interstate mobility is more significant in the Territory than in other jurisdictions. Based
                                             on Census questions about where people lived five years before the Census date,
                                             about 20 per cent of Territory residents in 2006 were not living in the Territory five
                                             years earlier. Although the Australian Capital Territory had a similar rate to the Terri-
                                             tory (19 per cent), the figure ranged from 7 to 12 per cent for the states.
                                             Over the five years to June 2007, about 8 per cent of the population left the Territory
                                             each year for interstate destinations while nationally, less than 2 per cent of the
                                             population moved interstate (ERP data). More of the Territory population exchange
                                             is with Queensland than other states. In the five years to June 2006, 32 per cent of
                                             the combined population flows were with Queensland, while the other large states
                                             accounted for most of the remainder (Chart 3.10).

         Chart 3.10: Territory Interstate    6000
        Migration Flows by Jurisdiction,
                    2002-03 to 2006-07       5000
                      (annual average)
                                             4000


                                             3000


                                             2000


                                             1000


                                                 0
                                                       NSW           Vic        Qld           SA            WA          Tas        ACT
                                                                                Inflows                Ouflows

                                             Source: ABS Cat. No. 3101.0

                                             People come to the Territory from all parts of Australia and, in terms of absolute
                                             net gains, Census data show that over 2001 to 2006 the Territory received most
                                             interstate migrants from Melbourne and Sydney. However, relative to the populations
                                             of those cities, the strengths of the inflows of people were quite small. When placed
                                             in the context of the population size of the region of origin, the largest relative inflows
                                             of people are from the Territory’s neighbouring regions of the Kimberley, Pilbara,
                                             north west Queensland, and northern South Australia.




34     Population
Population Outlook
Major employment creating projects are the key drivers of change in population
growth in the Territory. The completion of the Wickham Point LNG plant and the Alcan
G3 refinery expansion project suggest that, in the medium term unless other major
projects are confirmed soon, the strong population growth experienced in the Territory
over the past three years may start to moderate. The past three financial years have
seen population growth of 2.0 per cent. Northern Territory Treasury forecasts growth
of 2.2 per cent for the year to December 2007 moderating to 1.9 per cent for the
year to December 2008. Construction of the Darwin Waterfront is currently providing
good employment opportunities and the associated construction of hotels, residential
apartments and retail complexes will continue for several years. Residential
construction remains strong and should continue to be so in the mid term, with
large residential construction projects such as Pandanas and Evolution apartment
complexes, as well as construction in the new suburbs of Lyons and Muirhead,
under way. Construction of the Blacktip pipeline will provide good employment
opportunities during 2008-09. Job vacancies in the Territory are at high levels and
increasing. All these are good signs for continued population growth. However,
engineering construction indicators show a decrease in activity in this sector over the
past two years although the level of activity is still relatively high in historical terms.
Some other economic indicators such as building approvals and housing finance
commitments also suggest a slowing down of activity in some sectors.
Based on current knowledge, the most significant future project for the Territory
would be Train 2 of the LNG plant, possibly commencing in mid 2009. If employment
prospects for this project are the same as or better than for Train 1, this should
provide a further sustained boost to population growth. However increasing use of
fly-in fly-out labour and construction methods which use pre-assembled modules
(requiring less labour on site) could see fewer new additions to the Territory’s resident
population than expected. There is no confirmation of this project at this stage.
Another large gas plant has also been mooted for the Territory but negotiations are at
an early stage.
Net overseas migration should remain strong in the mid term as the skills shortage
endures, as long as the Commonwealth continues to facilitate access to regional
skilled migration visas. However, the skills shortage also means demand for workers
is strong in other parts of Australia such as Western Australia and Queensland,
and the Territory has to remain competitive to attract and keep both interstate and
overseas workers. There is a distinct possibility that the Territory will be unable to
remain fully competitive with other parts of Australia for skilled workers in the coming
years. This could result in a gradual increase in net emigration from the Territory. It
is equally important that current residents continue to find the Territory sufficiently
attractive to stay.
Beyond 2008, the uncertainty surrounding future major employment creating projects
makes forecasting difficult. Treasury forecasts population growth to average around
1.7 per cent for the last years of the decade.




                                                                            Population        35
     2008-09 Budget


                                        Appendix 1: 2006 Census Results and Re-Based
                                        Estimated Resident Population for 30 June 2006
                                        Estimated Resident Populations (ERPs) are re-based every five years on population
                                        counts derived from a new Census, the most recent of which was conducted in
                                        August 2006.
                                        The Territory’s ERP at 30 June 2006 was 210 674, an increase of 1.9 per cent over
                                        the equivalent figure based on the 2001 Census of 206 688. The gap of 3986 people
                                        is known as intercensal error and is a result of inaccurate or incomplete intercensal
                                        information for the growth components of natural increase and migration, as well as
                                        errors in either of the base years of 2001 and 2006. The ABS attributed proportionally
                                        more of the intercensal error to the Territory than to other jurisdictions. It is likely the
                                        ABS will revise the intercensal error based on new information for the intercensal
                                        growth components when revised ERPs are published later in 2008.
                                        Accurate ERP depends on accurate results from the Census, and the Post
                                        Enumeration Survey (PES) – a survey designed to allow undercounting in the
                                        Census to be estimated. However, the Territory’s unique geography and demography
                                        make obtaining accurate results from these data collections a particularly challenging
                                        task. ABS has advised that the 2006 Census was more difficult to conduct than
                                        previous Censuses, particularly in northern Australia. The number of non-contact
                                        dwellings and hence the proportion of ‘not stated’ responses on most Census
                                        questions increased between 2001 and 2006 with the highest proportion of ‘not
                                        stated’ responses occurring in the Northern Territory.
                                        The PES was extended to remote areas for the first time in 2006. This resulted in
                                        a better estimate of Census undercount, however the levels of undercounting are
                                        considerably higher, for all jurisdictions, than those in 2001.
                                        Chart A3.1 shows that undercount rates have been increasing across Australia over
                                        the past four Censuses. The Territory has the highest undercount rate of all the
                                        jurisdictions in every Census year. The Territory’s undercount rate nearly doubled
                                        in 2006 (7.6 per cent) compared with 2001 (4 per cent). This is partly a result of
                                        the extended scope of the collection to include remote areas as well as improved
                                        methodology in 2006 for estimating the undercount, which means the 2001 and 2006
                                        estimates are not completely comparable. This suggests that undercount has been
                                        underestimated in previous Censuses.
        Chart A3.1: Undercount Rates,   %
                       Four Censuses    8

                                        7

                                        6

                                        5

                                        4

                                        3

                                        2

                                        1

                                        0
                                              NSW        Vic          Qld          SA      WA      Tas      NT     ACT     Australia
                                                                            1991        1996    2001     2006

                                        Source: ABS Cat. No. 2940.0




36     Population
   Indigenous Undercount             ABS published a breakdown of the Indigenous undercount below the national level
                                     for the first time after the 2006 Census (Table A3.1). The Indigenous undercount
                                     rate cannot be directly compared with the total Territory undercount rate shown
                                     above because of the different ways the rates are calculated. The Indigenous
                                     undercount rate includes adjustments for non-response to the Census Indigenous
                                     status question. The high Indigenous undercount rate for the Territory (19.2 per cent)
                                     is of concern and means that Indigenous Census count data need to be used with
                                     great caution, if at all in some cases. In addition, comparability with 2001 Indigenous
                                     Census data is compromised and uncertainty remains about the growth rate of
                                     the Indigenous population, which consequently affects the size and growth of the
                                     non-Indigenous population.
                                     Although the ABS did not publish a non-Indigenous undercount, Treasury has
                                     estimated this at 19 675 people or 13.6 per cent of ERP at 30 June 2006.

       Table A3.1: Indigenous Net                                  PES estimate1
Undercount by State/Territory 2006
                                                                                                    Usual
                                                                                    Relative      Residence                    Net
                                                                      Standard      Standard       Census           Net     Undercount
                                                        Persons        Error2        Error3         Count        Undercount   Rate
                                                           no.           no.            %             no.             no.             %
                                     NSW/ACT            151 048          9 146            6.1       142 382           8 666               5.7
                                     Vic/SA/Tas           73 380         4 337            5.9        72 467             913               1.2
                                     Qld                145 843          6 087            4.2       127 580          18 263            12.5
                                     WA                   77 304         5 605            7.3        58 710          18 594            24.1
                                     NT                   66 402         2 341            3.5        53 661          12 741            19.2

                                     Australia          513 977         13 309            2.6       454 799          59 178            11.5
                                     1 Estimate from the ABS PES of the Indigenous population who should have been counted in the 2006
                                       Census
                                     2 Means that the true value for the PES estimate could be said, with 95% confidence, to lie between plus
                                       or minus two standard errors of the estimate, for example, for the Territory, between 61 720 and 71 084
                                     3 The standard error expressed as a proportion of the PES estimate
                                     Source: ABS Cat. No. 4705.0

                                     In combination, the factors presented above mean that there is greater known
                                     uncertainty than in the past about Census population counts and estimates derived
                                     from them and these factors impact more on the Territory than on other jurisdictions.




                                                                                                                              Population         37
     2008-09 Budget




38     Population
Chapter 4    Labour Markets
Key Points    » The Northern Territory labour market continues to remain strong in 2007-08 as
                buoyant onshore economic conditions prevail.
              » Labour market statistics and related indicators point to solid employment growth
                and a shortage of skilled labour in 2007-08.
              » Following an increase of 5.3 per cent in 2006-07, as reported by the ABS,
                resident employment is estimated to increase by 4.8 per cent in 2007-08.
              » Resident employment growth of 2.5 per cent is forecast for 2008-09, in line with
                a general easing of growth in state final demand in the Territory.
              » ABS-reported employment data does not include defence personnel or fly-in
                fly-out (FIFO) workers and as such it should be considered only generally
                indicative of the actual level of employment in the Territory. Even more
                importantly, ABS employment data for the Territory is subject to very high levels
                of volatility and must be interpreted and considered in conjunction with a range
                of other economic indicators.


             Territory Labour Market Performance
             Labour is a critical input in the production of goods and services. The demand
             for labour is derived from the demand for goods and services, the cost of labour
             relative to capital, and the level of output produced per unit of labour (productivity).
             Accordingly, employment growth and economic growth are highly interdependent.
             Employment in the Territory is very much service-oriented. Service industry jobs
             account for almost 90 per cent of employment in the Territory, compared to just
             over 80 per cent nationally. The largest employers are retail trade, government
             administration, health, education and property and business services. The Territory
             also has a relatively young, mobile workforce, which is reflected in the Territory’s
             large interstate migration flows.
             There are a number of data quality issues associated with Territory labour market
             estimates that make its analysis difficult without using a range of economic indicators.
             These issues are explored in detail below, under ‘Data Reliability’.
             The Australian Bureau of Statistics (ABS) Labour Force Survey (LFS) is the most
             widely reported source of labour market data, producing monthly estimates of the
             employment, unemployment and labour force participation status of the civilian
             population aged 13 or over. Using ABS LFS figures, Northern Territory Treasury
             estimates that in 2007-08 Territory employment growth was 4.8 per cent, the
             unemployment rate averaged 4.5 per cent in the year and the participation rate
             increased by more than 2 percentage points to over 72 per cent (Table 4.1).




                                                                                   Labour Markets       39
     2008-09 Budget


      Table 4.1: Territory ABS-Reported                    Civilians 15                        Participation     Employed       Unemployment
                 Labour Force Statistics                 years and Over       Labour Force         Rate           Persons           Rate
                        (annual average)      Year                  %                %                                   %
                                           ended June      000    Change       000 Change             %        000     Change        %
                                               1988       109.9                71.7                             64.7                9.8
                                               1989       111.9      1.8       80.9    12.8           72.2      75.6   16.8         6.5
                                               1990       114.7      2.5       83.2      2.8          72.5      77.7    2.8         6.5
                                               1991       116.8      1.9       83.0     -0.1          71.1      76.4    -1.7        8.0
                                               1992       118.2      1.1       86.2      3.8          73.0      78.8    3.1         8.6

                                               1993       119.0      0.7       83.1     -3.6          69.9      76.4    -3.0        8.1
                                               1994       119.9      0.8       80.8     -2.8          67.4      75.0    -1.8        7.1
                                               1995       123.5      2.9       89.1    10.4           72.2      82.6   10.1         7.3
                                               1996       128.3      3.9       90.6      1.7          70.6      84.3    2.1         7.0
                                               1997       131.4      2.5       92.1      1.6          70.1      87.0    3.2         5.6

                                               1998       134.4      2.2       94.5      2.6          70.3      89.8    3.3         4.9
                                               1999       137.3      2.2       98.5      4.3          71.7      94.5    5.3         4.0
                                               2000       139.9      1.9       96.6     -1.9          69.0      92.3    -2.3        4.4
                                               2001       141.5      1.1       99.3      2.8          70.2      93.7    1.5         5.6
                                               2002       142.5      0.7     105.0       5.7          73.7      98.0    4.6         6.7

                                               2003       143.0      0.3     104.7      -0.2          73.3      99.0    1.1         5.5
                                               2004       143.3      0.2     101.5      -3.1          70.8      96.2    -2.9        5.2
                                               2005       145.1      1.2     100.7      -0.8          69.4      95.0    -1.3        5.7
                                               2006       148.6      2.4     103.5       2.8          69.7      97.9    3.0         5.5
                                               2007       152.5      2.6     107.1       3.4          70.2     103.0    5.3         3.8
                                               2008e      156.3      2.5     113.1       5.6          72.4     108.0    4.8         4.5
                                           Compound Annual Growth %
                                           1987-88 to 2007-08e       1.8                 2.3                            2.6
                                           2002-03 to 2007-08e       1.8                 1.5                            1.7
                                           e: estimate
                                           Source: Northern Territory Treasury, ABS Cat. No. 6202.0

                                           In original terms, ABS-reported resident employment grew by 5.3 per cent in
                                           2006-07, in line with a broadly based expansion of economic activity in the Territory. It
                                           continued to expand in 2007-08 with growth estimated at 4.8 per cent. In trend terms,
                                           the number of employed persons in the Territory in March 2008 increased by almost
                                           3000 to 108 816 from June 2007 (Chart 4.1).




40     Labour Markets
  Chart 4.1: ABS-Reported Trend     number (M)                                                                      number (000)
           Resident Employment      11.0                                                                                     110


                                   10.5                                                                                        105

                                                                                         Australia (LHS)
                                   10.0                                                                                        100


                                     9.5                                                                                       95
                                                                                         Northern Territory (RHS)

                                     9.0                                                                                       90


                                     8.5                                                                                       85
                                             98        99     00      01    02     03     04      05       06       07        08
                                                                             Year ended June
                                   Source: ABS Cat. No. 6202.0

                                   The average unemployment rate rose from 3.8 per cent in 2006-07 to an estimated
                                   4.5 per cent in 2007-08 (Chart 4.2). The increase in the unemployment rate is
                                   attributed to a volatile data series, potentially understating the unemployment rate in
                                   2006-07, as well as solid growth in the labour force.
Chart 4.2: ABS-Reported Resident   %
             Unemployment Rate
                                    8
                                                       Australia

                                    6



                                    4
                                                       Northern Territory


                                    2



                                    0
                                        98        99        00       01     02     03      04      05       06           07     08
                                                                            Year ended June
                                   Source: ABS Cat. No. 6202.0


                                   Labour Demand
         Economic Growth           Employment is generally pro-cyclical, increasing during periods of strengthening
                                   economic activity and contracting during periods of low growth. After experiencing
                                   solid economic growth in 2005-06, supported by high levels of business investment,
                                   the Territory economy remained strong in 2006-07. Economic growth of 5.5 per cent
                                   in 2005-06 (the highest of the jurisdictions) and 5.6 per cent in 2006-07 has coincided
                                   with the highest level of resident employment (107 000) recorded for the Territory.
                                   These strong economic growth rates have also coincided with the Territory reporting
                                   a participation rate of 72 per cent, the second highest in Australia behind the
                                   Australian Capital Territory (ACT).
                                   The Territory continues to experience strong economic growth in 2007-08, although
                                   the shifting of the economy from an investment phase to an exporting phase was
                                   more noticeable. State final demand (SFD) was estimated to increase by 2.1 per cent
                                   in 2007-08, while gross state product (GSP), essentially equal to SFD plus interstate
                                   and international trade, was estimated to increase by 2.8 per cent. The significant
                                   difference between SFD and GSP represents the Territory’s strengthening export
                                   economy. Construction activity remained steady in the Territory in 2007-08, with


                                                                                                           Labour Markets            41
     2008-09 Budget


                                          work continuing on the over $1 billion Darwin Waterfront and numerous residential
                                          construction projects supporting economic and employment growth (Chart 4.3).
      Chart 4.3: Territory Economic and    %
                                           15
     Employment Growth (year-on-year)
                                                                                                         State final demand
                                           10


                                            5


                                            0
                                                                                                         Employment
                                                            Gross state product
                                           -5


                                          -10
                                                00       01          02           03          04          05          06     07   08e
                                                                                       Year ended June

                                          e: estimate
                                          Source: Northern Territory Treasury, ABS Cat. Nos 5206.0, 6202.0

                                          In the Territory in recent years there have been noticeable discrepancies between
                                          the growth rates of SFD and resident employment. The discrepancies are largely due
                                          to widely changing investment levels on major projects which, in a relatively small
                                          economy such as the Territory, can have a significant impact on economic growth
                                          figures.
                                          An example of this is the importation of pre-assembled modules (PAMs) for the Alcan
                                          G3 refinery expansion from 2005 to mid 2007. Although the refinery expansion has
                                          had a significant impact on the Territory businesses involved, the overwhelming
                                          majority of work done constructing PAMs occurred elsewhere. When the PAMs
                                          were transported to Gove and connected to the existing refinery, the investment
                                          component was attributed to Territory SFD. This boosts SFD growth while at the
                                          same time having little impact on Territory resident employment or other aspects of
                                          the onshore economy (Chart 4.3).

        Employment Indicators             The Sensis Business Index for Small and Medium Enterprises (SMEs) reported
                                          relatively strong net employment and the ANZ Job Advertisement Series displayed
                                          strong year-on-year growth of 7.9 per cent in 2006-07. In addition, Territory
                                          newspaper job advertisements hit record levels in 2006-07, and remained well above
                                          the long-term trend. These are all indicators of the demand for labour in the Territory.
                                          The Territory’s labour market continues to strengthen in 2007-08, against a
                                          backdrop of strong economic growth, with resident employment growth estimated
                                          at 4.8 per cent in year-on-year terms. Latest data indicate a further increase in job
                                          advertisements in 2007-08, with growth of 13.6 per cent in the year to March 2008.
                                          In addition, the Sensis Business Index reports that a net balance of 24 per cent
                                          of SMEs expected to increase the size of their workforce in the three months to
                                          May 2008.
                                          In the February 2008 Sensis Business Index, 32 per cent of SMEs reported that
                                          finding quality staff was their prime concern, compared to 15 per cent nationally.
                                          According to Sensis, the issue of staff recruitment for SMEs has risen substantially in
                                          recent years. Since late 2004, the percentage of SMEs reporting staff recruitment as
                                          their primary concern has ranged between 25 and 30 per cent, compared to around
                                          10 per cent in the early part of the decade. Despite their concerns, recruitment is
                                          expected to increase, with the index reporting that 24 per cent of SMEs expect to


42     Labour Markets
                   increase staff in the next quarter, compared with 16 per cent nationally.
                   The recent strong growth in employment and skilled labour shortages are also
                   highlighted by the Department of Education, Employment and Workplace Relations
                   (DEEWR) skilled vacancy survey, which reports that Northern Territory skilled
                   vacancies were up 22.1 per cent in the year to March 2008, while the ANZ job
                   advertisements increased by 13.6 per cent over the same period.
                   Job vacancies are increasing, while the number of unemployed people in the Territory
                   is decreasing. This means that the labour market is tight and the pool of available
                   labour from which employers must select is small.

Skills Shortages   Skills shortages are a key indicator of the demand for labour and are widely reported
                   across the country. The Northern Territory continues to experience a high demand
                   for labour across a range of occupations, industries and skill levels. With an ongoing
                   resources boom in Queensland and Western Australia, and low unemployment
                   nationally, skills and labour shortages in the Northern Territory are expected to
                   continue, particularly in regional areas.
                   Skills shortages can occur for a number of reasons, including strong employment
                   and economic growth, changing skills needs, changing technology, the geographical
                   location of labour, and demographic factors such as the ageing of the population
                   and associated retirement rates. The Territory has traditionally experienced difficulty
                   in attracting and retaining skilled labour, with recruitment difficulties even greater in
                   regional areas. Lack of suitable skilled labour can have a significant impact on the
                   economy, constraining the rate of economic growth and putting upward pressure on
                   wages as employers try to attract workers.
                   In recent years, strong growth in the Territory economy and labour demand
                   associated with major projects have exacerbated skills shortages across a broad
                   range of trade and professional occupations, along with a shortage of labour for
                   semi-skilled and unskilled work. In particular, acute shortages have been reported
                   by the Department of Employment, Education and Training (DEET) in most trade
                   occupations, and professional occupations such as engineering, medical practitioners
                   and nursing, education and child care.
                   During a recent review of the Northern Territory Occupation Shortage List, DEET
                   received responses from industry reporting over 50 new occupations in shortage
                   or experiencing recruitment difficulty. These were largely for professional and
                   associate professional occupations, including librarians and child protection workers.
                   In addition a large number of trade occupations continue to remain on the list. The
                   DEET Workforce NT Report 2006 reports that, of the ten trade occupations forecast
                   to require the highest numbers of additional employees, eight are currently in skills
                   shortage or experiencing recruitment difficulty. National shortages exist for most of
                   these occupations, which are likely to impact on recruitment activities as Territory
                   employers compete with other jurisdictions.

 Wages growth      Strong wages growth is an indicator of demand for labour. The Labour Price Index
                   (LPI) is an index that measures changes over time in the price of labour unaffected
                   by changes in the quality or quantity of worked performed. Changes in wages and
                   salaries resulting from changes in the composition of the labour market are excluded
                   from LPI movements.
                   The LPI grew by 3.9 per cent in the Territory in 2005-06 and in 2006-07, after
                   reporting a series high of 4.5 per cent in 2004-05. Nationally, the LPI reported
                   average growth of 4.1 per cent from 2004-05 to 2006-07. More information on this



                                                                                        Labour Markets         43
     2008-09 Budget


                                  topic can be found in the Prices and Wages chapter.
                                  An available, skilled and plentiful labour supply is crucial to the productivity and
                                  economic performance of the economy. There are many factors which both influence
                                  and determine the Territory’s labour supply. These will be discussed in the following
                                  section.

                                  Labour Supply
                                  The Territory’s labour market profile differs significantly from that of the rest of
                                  Australia, largely as a result of remoteness, transience and seasonality of labour
                                  demand and a relatively large Indigenous population. Government strategies to
                                  increase employment and the participation rate, and to address skills shortages,
                                  play an important role in the Territory. With a relatively young and mobile population,
                                  overseas and interstate migration are important sources of labour supply.

        Population Growth and     Population growth and employment growth are highly interdependent, and both
                     Migration    interstate and overseas migration are valuable sources of skilled labour for the
                                  Territory. Population growth has recovered from the 2003 low point, and there is a
                                  reported annual growth of 2.2 per cent to the September quarter 2007. A major driver
                                  of the increase is the recovery in interstate migration during 2005, recording the first
                                  positive net migration figures this decade. In the year to the September quarter 2007,
                                  net interstate migration reported an inflow of 381 people after reporting an outflow of
                                  421 persons in the year to the September quarter 2006.
                                  Overseas migration is typically a net contributor to the Territory’s population growth,
                                  adding an average of 880 people per year to the Territory’s population since 1997.
                                  Net overseas migration has risen to about 1900 persons in the year to the September
                                  quarter 2006 and 1400 persons in the year to the September quarter 2007, well
                                  above long-term trend levels. For a more detailed discussion on net overseas
                                  migration see the Population chapter.
                                  Category 457 visa holders are a group of employer-sponsored skilled entrants
                                  granted visas for up to four years, provided that there are no suitably skilled
                                  Australian workers available. There were 1353 Category 457 visa holders in the
                                  Territory at 30 June 2007, up 55 per cent from 871 in 2005-06. Primary grants
                                  (excludes accompanying family members) to Category 457 visa holders have
                                  risen from 690 in 2005-06 to 880 in 2006-07, an increase of 28 per cent. The
                                  major sponsoring industries of these new Category 457 visa holders are health
                                  and community services 210 (24 per cent), accommodation, cafes and restaurants
                                  140 (16 per cent) and construction 110 (13 per cent).

             Participation Rate   The participation rate is a crucial determinant of labour supply. The demographic
                                  changes occurring both nationally and in the Territory mean that policies aimed at
                                  sustaining Australia’s workforce participation rate will become increasingly important.
                                  As the Australian population ages and growth in the working age population is
                                  exceeded by growth in the older segments of the population, lower labour force
                                  participation will place increased pressure on health and aged-care services, and
                                  may negatively impact on productivity.
                                  In the Territory, labour force participation is a particularly challenging issue. Although
                                  the Territory has the highest participation rate of the jurisdictions, this is largely a
                                  product of the population’s age profile, with a higher proportion of people in the
                                  20 to 40 year age bracket. However, the Productivity Commission, in a report to the
                                  Council of Australian Governments in 2007, stated that in age-standardised terms,
                                  the Territory’s labour force participation is the lowest of the jurisdictions, reflecting



44     Labour Markets
                           to a large extent the lower rates of labour force participation in remote Indigenous
                           communities.

           Remoteness      About 25 per cent (or 52 000) of the Territory’s resident population live outside
                           major regional centres and are therefore considered to live in a ‘remote’ area. Of
                           this total, 42 000 (81 per cent) people are Indigenous, and 10 000 (19 per cent) are
                           non-Indigenous. The lack of training and employment resources available locally,
                           and distance from major employment markets, mean employment opportunities may
                           be limited in many of these areas. Developing local economies and creating links
                           between residents of remote areas and existing employment markets is a major
                           challenge. It also means that a significant proportion of the Territory’s potential labour
                           supply is distant from major employment opportunities.

            Seasonality    Consistent with other jurisdictions, a proportion of the Territory’s economic activity
                           and demand for labour is seasonal, in particular, activity and employment in
                           the tourism and agricultural industries. However, these seasonal effects can be
                           exacerbated in the Territory due to the relatively small size of the resident population
                           and pool of available labour. These two industries have historically supplemented
                           their workforce using backpackers and other non-resident labour to fill vacancies.
                           However, maintaining a reliable labour supply can be difficult in these circumstances
                           and is a major challenge for many Territory horticultural producers (such as mangoes
                           and forestry), retail outlets and tourism operators.

      Young and Mobile     Compared to the rest of Australia, the Territory attracts a disproportionately large
             Workforce     number of young, mobile workers who often view their stay as short to medium term.
                           Employment created from a large number of construction, mining and infrastructure
                           projects in the Territory contributes to the trend whereby non-Territory skilled workers
                           are engaged for the life of the project before returning to their resident jurisdiction.
                           These trends are reflected in large interstate migration flows, whereby about
                           8 per cent of the Territory’s population relocates interstate each year, around four
                           times the level of other jurisdictions (apart from the ACT). This leads to a high rate
                           of employee turnover which imposes significant recruitment and training costs on
                           employers. It also results in a loss of expertise and skill shortages, which can be
                           accentuated by large projects requiring specialised labour.

Ageing of the Population   In 2005, the Productivity Commission released a publication that analysed the
                           economic implications of an ageing population in Australia over the next few
                           decades. The report found that the proportion of working-age persons (people aged
                           15-64 years) in Australia is expected to decline against the number of people aged
                           65 and over in Australia as the ‘baby boomer’ generation reaches retirement age.
                           In other words, there are currently 5.2 persons in the potential workforce for every
                           person aged over 65; by 2044-45 it is expected that only 2.4 persons will be in the
                           potential workforce for every person aged over 65.
                           The report indicates that the Territory, however, is unique amongst the jurisdictions
                           whereby an increase in the proportion of both Indigenous and non-Indigenous
                           working-age persons is projected between 2004 and 2024. DEET reports that this
                           expectation goes against the national trend and will have important implications for
                           expanding the Territory labour force, provided adequate education and training, and
                           opportunities to participate in the labour force and economic development are made
                           available to all Territorians.




                                                                                                Labour Markets          45
     2008-09 Budget


                                Government Strategies
                                A number of major initiatives are currently under way aimed at reducing skill
                                shortages in key industries in the Territory. The Territory Government’s policy, Jobs
                                Plan – Building the Northern Territory Workforce, aims to create a highly skilled and
                                flexible workforce, address skills shortages, and maximise employment opportunities
                                for all Territorians. Jobs Plan is an initiative covering a range of strategies including
                                the expansion of pre-vocational training for apprentices and trainees, provision of
                                financial incentives for employers to take on apprentices and increasing the number
                                and range of school-based apprenticeships.
                                In the 2005-06 Budget, as part of the Jobs Plan strategy, the Territory Government
                                committed to a training program intended to see 10 000 apprentice and trainee
                                commencements over four years. The commitment is to be achieved using the
                                strategies outlined above, with employer incentives offered to businesses in skills
                                shortage areas and small businesses with ten employees or less. In 2007, almost
                                2800 Territorians commenced an apprenticeship or traineeship, bringing the total
                                number of trainee and apprentice commencements to over 8000 in the last three
                                years. Among all trainee and apprentice commencements since 2005, more than a
                                third were apprentices in traditional trades, almost 40 per cent were women and just
                                over a quarter were Indigenous
                                In early 2005, to address the immediate skilled labour shortages, the Territory
                                Government introduced a Territory Skilled Worker campaign that featured a national,
                                as well as New Zealand, advertising component designed to attract skilled workers
                                and their families to the Territory. As a possible indicator of the success of this
                                campaign, the Department of Immigration and Citizenship reports that between
                                2004-05 and 2006-07 the number of skilled migrants arriving in the Territory with
                                permanent visas doubled from 154 to 308.

              Welfare to Work   On 1 July 2006, the Commonwealth introduced Welfare to Work, a series of
                                measures aimed at increasing the Australian labour force participation rate. The
                                legislation specifically addresses the employment requirements associated with
                                the receipt of income support. The Welfare to Work measures seek to increase
                                the participation rate and employment of mature-aged Australians, parents with
                                school-aged children, people with a disability and the long-term unemployed
                                through measures such as increased services to assist people find paid work, while
                                maintaining a strong welfare safety net.
                                Recent studies indicate that the number of unemployed persons who have
                                transitioned into work over the last decade in Australia has increased significantly.
                                Interestingly, the number of disability support pension recipients is estimated to have
                                increased by a similar figure over the same period.
                                There is ongoing discussion regarding changes to Welfare to Work in order to reflect
                                current commonwealth attitudes and policies. Comprehensive information indicative
                                of the former and potential impacts of Welfare to Work in the Territory is not currently
                                available, although a long-term increase in the participation rate in the Territory is
                                expected.

          Apprenticeships and   Apprenticeship and traineeship commencements are a leading indicator of future
                 Traineeships   labour supply. Apprenticeship and traineeship completions in the Territory have
                                increased from 2002 to 2007. Apprenticeship numbers in skills shortage trades also
                                increased over this period.




46     Labour Markets
 Chart 4.4: Apprenticeship and    number
 Traineeship Commencements        3500
                and in Training    3000

                                   2500

                                   2000

                                   1500

                                   1000

                                    500

                                       0
                                             2001         2002   2003         2004     2005         2006           2007
                                                                      Year ended December
                                                        Commencements                       In training

                                  Source: Department of Employment, Education and Training

                                  In 2007 in the Territory, apprentices and trainees undertaking training increased by
                                  9.0 per cent to 3262 and apprenticeship and traineeship commencements increased
                                  by 6.2 per cent to 2790 (Chart 4.4).

Indigenous Employment             Indigenous Territorians are a largely under-utilised labour resource. Increasing the
                                  labour supply of Indigenous Territorians is a key government priority. In June 2007
                                  ABS released the latest experimental estimates of the labour force characteristics
                                  of Indigenous Australians, based on information collected in the LFS. The estimates
                                  indicate substantial differences in unemployment rates and participation rates
                                  between Indigenous and non-Indigenous Territorians. In 2006, the unemployment
                                  rate for Indigenous Territorians was reported as 15.7 per cent, compared to
                                  4.6 per cent for the Territory as a whole. The Indigenous participation rate for the
                                  same period was 44.8 per cent, compared to the total Territory participation rate of
                                  70.1 per cent. However, after reporting a decrease in Indigenous employment from
                                  18 300 in 2002 to 12 800 in 2005, contributing both to an increase in estimated
                                  unemployment and a decline in the Indigenous participation rate, Indigenous
                                  employment was estimated to increase to 15 300 in 2006.
                                  ABS cautions that these estimates are subject to significant non-sampling and
                                  sampling error and, as such, are substantially less reliable than the labour force
                                  estimates for the Territory as a whole. High standard errors associated with the
                                  data indicate that the large confidence intervals significantly limit the value of the
                                  estimates, particularly in relation to analysing changes in Indigenous employment
                                  over time.

    Northern Territory            The Commonwealth Department of Families, Housing, Community Services and
 Emergency Response               Indigenous Affairs (FaHCSIA) is the lead coordinating agency in the Commonwealth’s
      and Community               Northern Territory Emergency Response (NTER). A FaHCSIA media release stated
        Development               that the NTER provides opportunities to review the way Indigenous and mainstream
  Employment Projects             employment services and programs are delivered and how they can be improved,
                                  with an emphasis on increasing the economic independence of Indigenous
                                  Australians.
                                  Part of the NTER has included reform of the Community Development Employment
                                  Projects (CDEP) program, intended to transition CDEP participants in the Territory
                                  into real jobs, enhance training opportunities and engage mainstream employment
                                  services to assist people into work. The reforms have targeted stimulating
                                  employment and economic development in Indigenous communities as a stepping




                                                                                                       Labour Markets      47
     2008-09 Budget


                                  stone to economic independence by reducing welfare dependency, enabling
                                  quarantining of income support payments and requiring school attendance.
                                  FaHCSIA reported that the Local Government Association of the Northern Territory
                                  recently conducted an audit of job opportunities in 52 Territory communities. The
                                  audit identified 2955 real jobs, with only 44 per cent of these jobs held by Indigenous
                                  people. Vacant positions were identified within most communities, particularly for
                                  Aboriginal health workers, Aboriginal community police officers, groundsmen,
                                  cleaners and childcare workers. There were also professional positions available
                                  for teachers, nurses and tradespeople (electricians, mechanics, carpenters and
                                  builders). Across the Northern Territory, there were opportunities recognised in a
                                  range of industries including construction, mining, pastoral, retail, hospitality and
                                  tourism.
                                  Of the 50 CDEP contracts in the Territory, 16 have transitioned to new arrangements,
                                  including real jobs, transition activities, employment services and income support,
                                  accounting for some 2400 of the approximate by 8000 CDEP participants. The
                                  remaining 34 contracts will continue until their expiry on 30 June 2008. The
                                  Commonwealth is currently considering reforms to the CDEP program and will
                                  provide advice on contractual arrangements after 30 June 2008.
                                  Up to 1670 CDEP positions supporting Commonwealth service delivery are expected
                                  to be converted into real jobs by 30 June 2008, with over 600 of these jobs created
                                  and filled by participants as at April 2008. The Commonwealth is working closely with
                                  the Territory Government to assist many CDEP participants to move into municipal
                                  services jobs. People are also being supported to take up work in other locations with
                                  stronger job opportunities through mobility assistance.

                                  Composition of Territory Employment
                                  The Territory’s labour market has quite a different composition to the Australian
                                  labour market, reflecting its unique industry structure.

                 Government       Based on 2006 Census data, employment in government administration in the
                Administration    Territory accounted for about 13.1 per cent of total employment compared to
                                  only 4.7 per cent nationally. The high share of employment attributed to public
                                  administration in the Territory reflects the diseconomies of providing public services
                                  to a small and widely dispersed population. Compared to the 2001 Census,
                                  employment in government administration increased as a proportion of total
                                  employment by 1.3 percentage points in the Territory and by 1.0 percentage point
                                  nationally (Table 4.2).

                        Defence   Since the 1990s, the Commonwealth has continued to relocate substantial defence
                                  resources to the Territory. This resulted in the number of defence personnel, including
                                  civilians, stationed in the Territory increasing from about 2300 in 1990 to around 5400
                                  in 2006. The proportion of Territory residents employed in defence was 6.2 per cent
                                  in 2006, an increase of 1.7 percentage points from 1996 and well above the national
                                  level of 0.7 per cent (Table 4.2). Although employment growth in defence has been
                                  significant in the Territory, it is important to note that defence personnel are not
                                  captured in LFS figures.




48     Labour Markets
Table 4.2: Employment by Industry                                                 Australia                       Northern Territory
                                                                      Proportion of total employment Proportion of total employment
                                                                                    (%)                            (%)
                                                                         1996       2001       2006          1996        2001       2006
                                    Agriculture, forestry and              4.2        4.0         3.1           2.9        2.7          2.4
                                     fishing
                                    Mining                                 1.1        0.9         1.2           3.5        2.2          2.0
                                    Manufacturing                         12.6       12.2        11.0           4.4        4.2          4.9
                                    Services (including defence)          78.6       80.6       82.1          85.5        88.1       87.5
                                        Electricity, gas and water         0.8        0.7         0.8           0.6        0.9          0.4
                                          supply
                                        Construction                       6.3        6.7         7.7           7.4        6.2          7.0
                                        Wholesale trade                    5.8        5.3         4.8           3.7        3.5          2.8
                                        Retail trade                      13.6       14.6       14.3           11.0       12.4         11.5
                                        Accommodation, cafes               4.7        4.9         4.8           6.1        6.1          5.4
                                         and restaurants
                                        Transport and storage              4.3        4.3         4.4           4.9        5.2          4.8
                                        Communication services             2.0        1.8         1.5           1.5        1.1          0.9
                                        Finance and insurance              3.9        3.8         3.8           2.0        1.6          1.6
                                        Property and business              9.8       11.1       10.7            7.6        8.4          8.3
                                          services
                                        Government                         4.2        3.7         4.7         10.6        11.8       13.1
                                         administration
                                        Defence                            0.7        0.8         0.7           4.5        5.9         6.2
                                        Education                          7.1        7.2         7.4           7.4        8.1         8.5
                                        Health and community               9.5        9.7       10.7          11.0         8.8       10.1
                                         services
                                        Cultural and recreational          2.3        2.4         2.2           3.0        3.0         2.7
                                         services
                                        Personal and other                 3.6        3.6         3.6           4.0        4.9         4.2
                                         services
                                    Non-classifiable economic              1.4        0.6         1.2           1.1        0.9         1.2
                                     units
                                    Not stated                             2.0        1.7         1.4           2.7        1.8         2.0
                                    Total                               100.0      100.0       100.0         100.0      100.0       100.0
                                    Note: Due to the very high standard errors associated with the ABS estimates of Territory employment by
                                    industry derived from the LFS, the above Census data is considered to be a more reliable measure.
                                    Source: ABS 2006 Census of Population and Housing

              Manufacturing         Historically, the manufacturing sector has employed a relatively large proportion
                                    of the national workforce in a diverse range of industries. In the Territory, however,
                                    remoteness from major markets and a small population base has resulted in
                                    a relatively small manufacturing sector and a much lower proportion of people
                                    employed compared to the national proportion (less than half the national figure)
                                    (Table 4.2).

                        Mining      Reflecting the Territory’s abundant mineral and energy resources, the proportion of
                                    people employed in the mining industry is almost twice as high as it is nationally,
                                    at 2.0 per cent, although much lower than in 1996 when mining accounted for
                                    3.5 per cent of Territory employment. Given record commodity prices and exploration
                                    expenditure in the Territory in the past three years, further growth in mining activity
                                    and employment is expected in the future.




                                                                                                                      Labour Markets          49
     2008-09 Budget


        Full-time and Part-time   The recent strong growth in ABS-reported employment has been driven by growth
                   Employment     in full-time positions, which increased by an average of 3.0 per cent in 2005 and
                                  2006 and by 7.0 per cent in the year to March 2008. Full-time employment growth
                                  was partially offset by declining part-time employment, down by an average of
                                  5.8 per cent in 2005 and 2006 and a further decline of 0.5 per cent in the year
                                  to March 2008. This has resulted in an increase in full-time employment as a
                                  percentage of total employment, up from an average 78.5 per cent in 2005 and 2006
                                  to 79.8 per cent in the year to March 2008.
                                  The increasing proportion of full-time employment in the Territory varies from the
                                  national employment trends, where the proportion of full-time employment nationally
                                  has been declining over the past 20 years, and now stands at 71.7 per cent. The
                                  growth in full-time employment in the Territory may reflect the high level of business
                                  confidence and a willingness and need to convert part-time jobs to full-time jobs.

                                  Data Reliability
                                  The strong growth in economic activity in the Territory, as reported by the ABS,
                                  for the four years to 2006-07 has not been consistently reflected in ABS-reported
                                  resident employment levels or the resident unemployment rate over the same period.
                                  It remains Treasury’s view that data quality issues associated with the ABS LFS,
                                  including survey sample size and the high degree of volatility in survey estimates, are
                                  the cause of the inconsistency and continue to be a concern.

          Issues with the ABS     A number of characteristics of the design and methodology of the ABS LFS limit
         Labour Force Survey      its accuracy for the Territory. The scope of the ABS LFS, combined with issues of
                                  volatility and reliability of the resident employment series, can sometimes create a
                                  contradictory picture of the state of the Territory economy when resident employment
                                  is analysed in conjunction with other economic activity data.
                                  The disparity between the LFS employment estimate and other economic indicators,
                                  in particular SFD, is due to a number of data quality issues including:
                                  •	 the very large standard errors for Territory labour force estimates;
                                  •	 the scope of the LFS being limited to the ‘usually resident’ population, while SFD
                                     captures all economic activity of workers in the Territory, regardless of whether the
                                     workforce is resident in the Territory; and
                                  •	 the potential for SFD to include large items that do not have a direct impact on
                                     employment numbers in the Territory.

             Scope of the LFS     The ABS LFS reports on those parts of the currently economically active population
                                  defined as employed, unemployed or not in the labour force. It does not measure
                                  the total number of people working or the total number of jobs in the Territory, as is
                                  sometimes presumed. The scope of the LFS is limited to the civilian, usually resident,
                                  population of the Territory aged 15 years and over, and does not include:
                                  •	 fly-in fly-out (FIFO) personnel who are usually resident in other jurisdictions;
                                  •	 full-time Australian defence personnel;
                                  •	 personnel usually resident overseas and temporarily residing in Australia; and
                                  •	 diplomatic personnel of overseas governments and non-Australian defence
                                     personnel (and their dependants) stationed in Australia.
                                  Nationally, these excluded groups have a negligible impact on the number of jobs
                                  in the economy, as they make up a relatively small percentage of the Australian
                                  population. However in the Territory, due to its relatively small and transient



50     Labour Markets
                                population, these groups can account for a significant proportion of employed
                                persons. The exclusion of these groups from the scope of the ABS LFS leads to a
                                significant differential between resident employment and the number of Territory jobs.

Large Sampling Error            The LFS is a sample survey and does not directly measure the whole population. The
                                size of a sample can significantly affect the integrity of the survey results as indicative
                                of the total population. Although there have been improvements in ABS sample sizes
                                in the Territory and a high sampling fraction (the proportion of the population in the
                                sample) compared to other jurisdictions, the sample is still relatively small due to
                                the Territory’s relatively small population. This results in volatile estimates with very
                                large standard errors. Standard errors are even greater for estimates of the Territory
                                unemployment rate.
                                Volatility in the estimates is increased by the:
                                •	 heterogeneous nature of the Territory’s population;
                                •	 constraints imposed on sampling design as a consequence of many dispersed
                                   remote communities; and
                                •	 transient nature of the population.
                                In addition, and consistent with the method used for other jurisdictions, the ABS
                                adjusts the survey results to ensure that the resulting estimates conform to
                                the characteristics of the total population. While this is essential for generating
                                representative results, in the Territory it can sometimes exaggerate the effect of
                                outliers in the sample.
Table 4.3: ABS LFS Redesign             Year            1976       1981       1986       1991      1996       2001      2006
           Sampling Fractions   Sampling fraction     1 in 100   1 in 100 1 in 115     1 in 75    1 in 85    1 in 86   1 in 54
                                Source: ABS Labour Force Survey Sample Design, ABS Cat. No. 6269.0, November 2007

                                With large improvements in sampling fractions (Table 4.3), more recently as a result
                                of changes instituted to the survey in 2006, recent survey data may now provide
                                a more consistent picture of labour force statistics. However, due to budget cuts
                                imposed on the ABS from 2008-09, these improvements will be partially offset by a
                                reduced sample size and consequently increased standard errors.

                                Outlook
                                Understanding the Territory labour market requires analysis of several economic
                                indicators and related data sources. Nonetheless, forecasting is based on LFS data
                                and the reader should be aware of volatility and accuracy issues.
                                Resident employment growth of 2.5 per cent is forecast for 2008-09, underpinned
                                by residential construction and work on major projects and continued migration and
                                tourism growth.
                                A number of larger projects, such as the Darwin Waterfront and construction of
                                the Blacktip pipeline, may have a significant impact on employment demand in the
                                medium term.
                                The ability of Territory employers to attract and retain suitable skilled workers will
                                continue to be a critical factor in determining employment growth in the Territory, as
                                will the effectiveness of Territory Government training initiatives aimed at alleviating
                                skills shortages.
                                In the longer term, increasing Indigenous employment and labour force participation
                                represents a significant challenge, and will be an important factor in maintaining and
                                improving the Territory’s long-term participation rate and employment growth.



                                                                                                            Labour Markets       51
     2008-09 Budget




52     Labour Markets
Chapter 5    Prices and Wages
Key Points    » Darwin’s CPI increased 2.9 per cent in annual terms in 2007, and 3.4 per cent in
                year-on-year terms.
              » Strong wages growth over the two years to 2007, in the Territory and nationally,
                reflects a tight labour market with skilled labour shortages especially in
                construction, mining and health.
              » In 2007, the WPI increased by 3.9 per cent compared to 4.2 per cent nationally.
              » Ongoing shortages of skilled labour are expected to flow through to growth in
                the Territory’s WPI in 2008-09.
              » Growth in Territory Government wages is expected to be consistent with wages
                policy balancing the need to attract and retain staff within budget constraints.
              » Some inflationary pressures are expected in the Territory in 2008, largely
                reflecting continued growth in rents, fuel costs and food prices.
              » Six interest rate rises in the 18 months to March 2008 increased the Australian
                cash rate to 7.25 per cent, the highest rate since 1994, with possible further
                rises in 2008.

             Prices and wages determine purchasing power. Any increase in prices relative
             to wages may affect purchasing power and influence the standard of living. The
             Consumer Price Index (CPI) is one indicator by which the standard of living can be
             assessed.

             Consumer Price Index
             In annual terms, Darwin’s CPI increased by 2.9 per cent in 2007 compared to a
             3.0 per cent increase nationally. In more stable year-on-year terms, the Darwin CPI
             increased by 3.4 per cent in 2007, down from 4.4 per cent in 2006. Higher fuel,
             housing and rent prices over 2007 were the primary drivers of inflation. Darwin, Perth
             and Brisbane have consistently reported amongst the highest annual inflation rates
             of the capital cities over the past three years. This reflects the stronger economic and
             population growth rates in the Territory, Western Australia and Queensland compared
             to those experienced nationally. This has been largely driven by the global boom in
             the demand for resource commodities, which has flowed through to high levels of
             investment expenditure in the mining, construction and property sectors.




                                                                              Prices and Wages          53
     2008-09 Budget


      Chart 5.1: Consumer Price Index    %
                                         7

                                         6

                                         5                                                                 Darwin (year on year)
                                         4
                                                                             8 Capitals (year on year)
                                         3

                                         2

                                         1

                                         0

                                         -1
                                              99        00       01       02       03      04    05                06     07        08e         09f
                                                                                 Year ended December
                                                                         Darwin (quarterly)          8 Capitals (quarterly)

                                         e: estimate; f: forecast
                                         Source: Northern Territory Treasury, ABS Cat. No. 6401.0

       Table 5.1: Consumer Price Index                        Consumer Price Index            Annual % Change           Year on Year % Change
                                          As at December
                                              Quarter           Darwin     8 Capitals      Darwin        8 Capitals      Darwin     8 Capitals
                                                1997             120.8         120.0          -0.7          -0.2           0.2            0.3
                                                1998             122.7         121.9          1.6            1.6           0.7            0.9
                                                1999             123.6         124.1          0.7            1.8           0.7            1.5
                                                2000             130.6         131.3          5.7            5.8           3.9            4.5
                                                2001             133.5         135.4          2.2            3.1           3.6            4.4
                                                2002             136.2         139.5          2.0            3.0           2.2            3.0
                                                2003             138.5         142.8          1.7            2.4           2.1            2.8
                                                2004             141.1         146.5          1.9            2.6           1.6            2.3
                                                2005             145.4         150.6          3.0            2.8           2.6            2.7
                                                2006             152.6         155.5          5.0            3.3           4.4            3.5
                                                2007             157.1         160.1          2.9            3.0           3.4            2.3
                                                2008e            161.8         164.6          3.0            2.8           3.1            3.3
                                                2009f            166.0         169.5          2.6            2.9              2.8         2.8
                                         Compound Annual Growth %
                                         1997 to 2007              2.7           2.9
                                         2002 to 2007              2.9           2.8

                                         Source: Northern Territory Treasury, ABS Cat. No. 6401.0

                     Components          The largest contributing factor to Darwin’s annual consumer inflation rate in 2007
                                         was rising housing costs. The Australian Bureau of Statistics (ABS) House Price
                                         Index reported established house price growth of 13 per cent in Darwin in 2007.
                                         House purchases, repairs and maintenance, rent, utilities and property rates and
                                         charges contributed 1.3 percentage points to the 2.9 per cent annual inflation rate.
                                         Around 50 per cent of this increase was attributable to the house purchase category,
                                         reflecting the robust increase in Darwin median house prices through the year.
                                         Around 33 per cent was attributable to rising rents, fuelled by strong population
                                         growth and low residential vacancy rates. Increased prices for the transportation
                                         category of the CPI were the second largest component of the annual Darwin
                                         inflation rate, contributing 0.62 percentage points. This reflects the increased prices
                                         for crude oil and automotive fuels. The financial and insurance services category was
                                         the third largest contributor to annual inflation in Darwin, contributing 0.38 percentage
                                         points. Increased interest rates accounted for the majority of the upward movement in
                                         this category.

54     Prices and Wages
                                     Recreation made a small negative contribution to CPI growth in the Territory in 2007,
                                     subtracting 0.22 percentage points. This decrease was due mainly to lower prices for
                                     holiday travel and accommodation bookings in the Territory.
Chart 5.2: Annual Percentage Point                    Food
 Contribution to Change in Darwin     Tobacco and alcohol
            and National CPI, 2007   Clothing and footwear
                                                   Housing
                                       Household contents
                                                     Health
                                            Transportation
                                           Communication
                                                Recreation
                                                 Education
                                         Financial services
                                                             -0.2   0.0    0.2     0.4     0.6      0.8      1.0    1.2    1.4
                                                                             Percentage point contribution
                                                                      Darwin                                  8 Capitals

                                     Source: ABS Cat. No. 6401.0

        CPI 2008 and 2009            Darwin’s annual CPI growth is expected to increase by 3.0 per cent in 2008
                                     compared with 2.9 per cent in 2007. In more stable year-on-year terms, CPI growth
                                     in the Territory is forecast to moderate to 3.1 per cent in 2008 and to further moderate
                                     to 2.8 per cent in 2009. Higher prices for crude oil are expected to continue in
                                     2008 due to international demand, flowing through to higher petrol and food prices
                                     with increased transportation costs. Although contributing to CPI growth, these
                                     components are expected to be offset by more substantial decreases in the housing
                                     market. In addition, the strong value of the Australian dollar will continue to exert
                                     downward pressure on the prices of imported goods and import competing goods.
                                     House purchases, which contributed the highest percentage to the inflation rate
                                     in 2006 and 2007, are expected to moderate in 2008, with affordability restricting
                                     many people from entering the housing market. Interest rate rises by the Reserve
                                     Bank of Australia (RBA) and major banks are set to impact on household budgets,
                                     reducing the amount of money available for discretionary expenditure. The impact
                                     of contractionary monetary policy will be felt in both 2008 and 2009, dampening
                                     consumer demand and price pressures.

  Underlying Inflation and           Despite two interest rate increases in 2007 (0.25 percentage points in both August
           Interest Rates            and November 2007), Australian household confidence levels remained buoyant.
                                     This was reflected in retail sales data in the Territory and nationally, suggesting
                                     households quickly adjusted spending patterns to accommodate the interest rate
                                     rises. A tight labour market nationally and ongoing skilled labour shortages were
                                     the primary drivers of this resilience as individuals, feeling secure in their jobs, were
                                     more willing to continue spending. A strong Australian dollar and Commonwealth
                                     tax cuts in the middle of 2007 were also additional factors. This ongoing confidence,
                                     coupled with a period of sustained strong growth in fuel prices, flowed through to a
                                     strengthening in Australia’s underlying inflation rate (the CPI less volatile items) over
                                     the year.
                                     Although there are a number of ways to derive a measure for underlying inflation,
                                     the RBA has two preferred measures, the trimmed mean and weighted median. The
                                     trimmed mean measure ranks all the price changes in the CPI from the largest rise to
                                     the largest fall, then trims off the upper and lower 15 per cent, leaving only the middle




                                                                                                        Prices and Wages         55
     2008-09 Budget


                                        70 per cent of price changes. The weighted median measure ranks all price changes,
                                        then takes as the inflation rate the price increase of the median or 50th percentile.
                                        In annual terms, the trimmed mean and weighted median (the RBA does not specify
                                        a preference for either method as the benchmark for underlying inflation) increased
                                        strongly to around 3.0 per cent by the first quarter of 2007, and was a significant
                                        factor behind the decision to raise interest rates by a total of 0.5 percentage points
                                        over the year. Growth in both CPI measures remained high in the December quarter
                                        2007, prompting the RBA to increase the cash rate 0.25 percentage points in
                                        February 2008 and a further 0.25 percentage points in March 2008. This primarily
                                        reflects tight labour markets and ongoing skilled labour shortages across Australia.
                                        Constraints on growth are not likely to moderate significantly over 2008 and may flow
                                        through to increased inflationary pressure on wages nationally. This has the potential
                                        to see growth in underlying inflation above 3 per cent, placing pressure on the RBA to
                                        further increase rates in the second half of 2008.
          Chart 5.3: RBA, Underlying    %
                                        3.5                                  Trimmed mean
                Measures of Inflation
                     (annual change)
                                         3.0


                                        2.5         Weighted median

                                                                                Average of two measures
                                         2.0


                                         1.5


                                         1.0
                                               97      98      99       00   01     02      03      04      05      06      07
                                                                              Year ended June

                                        Source: Reserve Bank of Australia


                                        Cost of Living Study
                                        The 1995 Report of the Committee on Darwin compared, amongst other factors, the
                                        cost of living for wage and salary earners in Darwin, Perth and Sydney. The study
                                        concluded that the cost of living in Darwin was 5.5 per cent higher than in Perth and
                                        2.7 per cent higher than in Sydney, with higher costs for food, hospitality and motor
                                        vehicles and lower costs for clothing and footwear.
                                        Using ABS CPI data, Northern Territory Treasury has updated the results to
                                        December 2007. This update suggests that the gap between Darwin and Perth has
                                        narrowed to 0.5 per cent, and that Darwin’s cost of living is around 1.5 per cent lower
                                        than Sydney’s. Prices growth in Sydney and Perth relative to Darwin is higher for all
                                        categories of the CPI except for housing, clothing and footwear, tobacco and alcohol.

                                        Fuel Prices
                        Crude Oil       Crude oil prices rose steadily in 2007 from $US59 a barrel in January 2007 to a
                                        record high of around US$96 a barrel in December 2007 (as measured by the
                                        Tapis benchmark). Over 2007, the main drivers of the increases in oil prices have
                                        been strong global economic growth, particularly in China, moderate supply growth
                                        by non-Organisation of the Petroleum Exporting Countries (OPEC), tightness in
                                        global refining inventories and worldwide refining bottlenecks. In addition, ongoing
                                        geopolitical tensions in the Middle East have put pressure on crude oil supplies in
                                        recent months. The strong value of the Australian dollar against the US dollar has
                                        mitigated some of the effects of rising oil prices.

56     Prices and Wages
                                    The outlook for 2008 is for crude oil to continue trading at high price levels. In
                                    March 2008, the price of New York crude struck a new record high of $US110 a
                                    barrel. Another major factor supporting high prices was the dispute between oil-rich
                                    Venezuela and US energy giant ExxonMobil, the world’s biggest oil company.
                                    ExxonMobil has taken court orders in New York, London and the Netherlands,
                                    freezing $US12 billion worth of assets in those jurisdictions from Venezuela’s
                                    state-owned oil producer PDVSA.
                                    The legal battle relates to ExxonMobil’s bid to secure compensation after Venezuela’s
                                    government nationalised key oilfields in the Orinoco basin, including two ExxonMobil
                                    operations. World oil traders also hold concerns over possible further unrest in
                                    Nigeria, Africa’s biggest crude oil producer.

        Retail Fuel Prices          Retail fuel prices in Darwin and regional centres across the Territory are consistently
                                    higher than in locations elsewhere in Australia and are a direct consequence of the
                                    small size and remoteness of the market. These factors lead to Territory distributors
                                    and retail outlets having higher operational cost structures and lower fuel turnover
                                    than their interstate counterparts. This in turn limits their ability to achieve significant
                                    economies of scale that can be passed on to consumers in the form of lower
                                    prices. Higher prices also reflect the absence of widespread competition both at the
                                    distributor and retail level (especially outside Darwin, although Katherine is a notable
                                    exception at the retail level) and the lack of a large-scale oil refinery. The lack of
                                    a refinery and lower volume turnover also results in considerable price ‘stickiness’
                                    whereby fuel prices do not decrease as quickly as falls in crude oil prices, and vice
                                    versa.
Chart 5.4: Unleaded Retail Petrol   Australian cents per litre                                                   Australian cents per litre
            and Crude Oil Prices    80                                                                                                160

                                    70                                                                                                 140
                                                                                 Darwin unleaded
                                    60                                            petrol (RHS)                                         120

                                    50                                                                                                 100

                                    40                                                                                                  80

                                    30                                                                                                  60
                                                                                              Eight capitals weighted average
                                    20                          Crude oil                         unleaded petrol (RHS)                 40
                                                                 (LHS)
                                    10                                                                                                  20

                                      0                                                                                                0
                                          98     99        00       01       02      03     04            05       06       07        08
                                                                              Year ended June

                                    Source: Australian Automobile Association, Reserve Bank of Australia, Energy Information Administration

                                    In 2007, average unleaded petrol prices increased significantly across the Territory,
                                    reaching record highs in December 2007 (Table 5.2). This was consistent with the
                                    movement in prices observed nationally, which rose steadily through the year as the
                                    price of crude oil increased.
                                    The Australian Automobile Association (AAA) reports that in 2007, within the Territory,
                                    Tennant Creek consistently had the highest fuel prices of the regional centres,
                                    reflecting its distance from refineries and low volume turnover (the AAA does not
                                    report data for Nhulunbuy). Katherine had the lowest automotive fuel prices in the
                                    Territory, reflecting the highly competitive nature of retail outlets in the town.




                                                                                                                 Prices and Wages             57
     2008-09 Budget


      Table 5.2: Unleaded Retail Petrol                                                                                             Annual %
                  and Crude Oil Prices    Retail petrol price (cpl)                             December 06 December 07              Change
                                          Darwin                                                     125.0            147.4              17.9
                                          Alice Springs                                              125.7            152.5              21.3
                                          Katherine                                                  125.2            142.5              13.8
                                          Tennant Creek                                              129.7            157.9              21.7
                                          8 Capitals weighted average                                116.5            137.6              18.1
                                          Tapis Crude price (US$ per barrel)                          65.5             96.0              46.6
                                          Tapis Crude price (A$ per barrel)                           83.3            108.5              30.3

                                          Source: Australian Automobile Association, Energy Information Administration, Reserve Bank of Australia

     Fuel Taxes and Subsidies             The Territory Government does not directly collect any taxes or excises on fuel sold
                                          in the Territory, although it does indirectly receive a proportion of the goods and
                                          services tax (GST) revenue levied on fuel sales by the Commonwealth. Following
                                          the introduction of the GST in 2000, the Commonwealth introduced the Fuel Sales
                                          Grant Scheme (FSGS) rebate to compensate motorists for the impact of the GST on
                                          regional fuel prices. The FSGS rebate was replaced by a Fuel Tax Credits System
                                          in July 2006, which was designed to lower compliance costs and simplify the fuel
                                          taxation system. In addition to the Fuel Tax Credit System, the Territory Government
                                          continues to provide a retail fuel rebate to Territory motorists of 1.1 cents per litre.

                                          Exchange Rates
                                          Changes in the exchange rate affect the prices of imported and, to a lesser extent,
                                          domestically produced consumer goods and services.
                                          On a trade weighted basis, the Australian dollar increased by 5.8 per cent in 2007.
                                          This largely reflected the strong performance of the Australian dollar against the US
                                          dollar and the Japanese yen, while weakening against the euro. The appreciation
                                          against the US dollar reflected the increasing divergence of Australian and US
                                          interest rates over the second half of 2007 as US economic growth forecasts were
                                          revised downwards. Strong demand for Australian corporate debt by Japanese
                                          investors was a primary driver of the appreciation of the Australian dollar against the
                                          yen. The Australian dollar was also supported by strong global demand for resource
                                          commodities, in particular from China, which flowed through to significant increases
                                          in export prices and Australia’s terms of trade.
                                          Should US economic growth continue to soften in 2008, the outlook for the Australian
                                          dollar is to further appreciate against the US dollar.

           Chart 5.5: Exchange Rates      US$ per A$                                                                                          TWI
                                          Euros per A$                                                                                  Yen per A$
           (3 month moving average)
                                          1.0                                                                                                 110

                                          0.9                                                                                                   100
                                                                                                                      Yen (RHS)
                                                                                                                                                90
                                          0.8
                                                                                                                                US$ (LHS)       80
                                          0.7
                                                                                                                          TWI (RHS)             70
                                          0.6
                                                                                                                               Euro (LHS) 60
                                          0.5                                                                                                   50

                                          0.4                                                                                                 40
                                                98      99       00        01       02     03      04           05       06        07        08
                                                                                     Year ended June
                                          TWI: trade weighted index
                                          Source: Reserve Bank of Australia


58     Prices and Wages
                                     Grocery Prices
                                     Since 2000, Northern Territory Treasury has conducted regular surveys of grocery
                                     prices in most major Territory centres, plus Cairns and Mount Isa for comparative
                                     purposes. The latest Grocery Price Survey was conducted in December 2007
                                     (Table 5.3).

  Table 5.3: Grocery Price Survey,                            December 06       June 07         December 07       Annual %
December 2006 to December 2007                                    $                $                 $             change
                                     Darwin                       172.68        172.30             175.67            1.7
                                     Alice Springs                166.31        163.83             167.80            0.9
                                     Katherine                    171.20        173.98             177.04            3.4
                                     Yulara                       204.50        204.03             209.49            2.4
                                     Nhulunbuy                    206.48        202.61             215.52            4.4
                                     Cairns                       164.05        162.86             169.88            3.6
                                     Mount Isa                    166.77        166.66             174.59            4.7
                                     Source: Northern Territory Treasury

                                     Grocery prices in the Territory, as measured by the survey, reported annual price
                                     movement in the cost of the basket of groceries in 2007, with the smallest annual
                                     increase of 0.9 per cent reported for Alice Springs, and the largest increase of
                                     4.4 per cent reported for Nhulunbuy. The positive annual growth across all centres
                                     largely reflected the 18.7 per cent increase in fuel prices observed across the
                                     Territory in 2007 and its impact on packaging and freight costs, especially for regional
                                     centres.
                                     Prices growth for December 2007 are in line with the general principle that people
                                     purchasing an average basket of goods at supermarkets in towns more remote from
                                     major supply centres and larger population centres face higher prices than those
                                     living closer to major centres. This reflects higher freight costs, which have been
                                     affected by significantly higher fuel prices, as well as the smaller market size and
                                     reduced competition in these centres.
                                     Prices for fruit and vegetables and meat and seafood, which together typically make
                                     up around one-third of the cost of the basket, are highly volatile, reflecting variations
                                     in seasonal and other factors affecting supply. As such, variations in prices in these
                                     categories can have a substantial impact on the overall cost of the basket in any one
                                     survey.

   Household Expenditure             Conducted every five years, the ABS Household Expenditure Survey (HES) is a
                 Survey              comprehensive survey reporting differences in incomes and expenditure patterns in
                                     households residing in private dwellings across Australia’s capital cities. The latest
                                     HES data relates to the 2003-04 financial year. This will remain a useful source of
                                     data until 2010 when the 2008-09 HES is released.




                                                                                                       Prices and Wages          59
     2008-09 Budget


           Table 5.4: Average Weekly                                        1998-99                           2003-04
         Expenditure by Category and                            Darwin    8 Capitals Difference    Darwin    8 Capitals   Difference
                   Household Income                               $           $           %          $           $             %
                                       Goods and Services
                                       Current housing costs    149.63      107.40       39.3      187.76     160.39          17.1
                                        (selected dwellings)
                                       Domestic fuel and         22.43       18.57       20.8       29.41       23.96         22.7
                                        power
                                       Food and non-            157.57      134.58       17.1      172.12     160.37            7.3
                                         alcoholic beverages
                                       Alcoholic beverages       35.52       20.63       72.2       38.99       23.58         65.4
                                       Tobacco products          17.16       10.04       70.9       14.43       10.99         31.3
                                       Clothing and footwear     26.66       35.67      -25.3       34.58       38.30          -9.7
                                       Household furnishings     54.09       44.45       21.7       56.06       53.59           4.6
                                        and equipment
                                       Household services        55.65       43.48       28.0       64.38       56.73         13.5
                                        and operation
                                       Medical care and          31.41       35.03      -10.3       42.50       49.88         -14.8
                                        health expenses
                                       Transport                141.63      123.33       14.8      149.58     142.40            5.0
                                       Recreation               121.00       95.88       26.2      188.96     121.55          55.5
                                       Personal care             15.26       15.14        0.8       18.82       18.62           1.1
                                       Miscellaneous goods       78.38       62.98       24.5       87.37       87.01           0.4
                                         and services
                                       Total goods and        906.40        747.18       21.3     1 084.95    947.37          14.5
                                         services expenditure
                                       Mean gross        1 196.07           957.17       25.0     1 415.00   1 210.00         16.9
                                        household income
                                       Source: ABS Cat. Nos 65350, 65350.055.001

                                       In 2003-04, the Darwin average weekly household income of $1415 remained above
                                       the eight capital cities average of $1210, but the differential declined significantly
                                       from 25 per cent in 1998-99 to 17 per cent in 2003-04. The decline reflects strong
                                       economic conditions in the Territory during the 1998-99 reference period, which was
                                       followed by a period of relative weakness. The 2003-04 reference period captures the
                                       beginning of a recovery phase.
                                       The differential between average weekly household expenditure in Darwin and the
                                       eight capital cities average declined from 21 per cent in 1998-99 to 15 per cent
                                       in 2003-04, mirroring the decline in the average income differential. A significant
                                       factor in the decline was weaker growth in Darwin housing costs in 2003-04, which
                                       increased by 25 per cent compared to 49 per cent for the eight capital cities. This
                                       reflected strong growth in the property market and residential construction nationally,
                                       which was not observed in the Territory during this time. Consistent over both survey
                                       periods, the additional weekly earnings in Darwin relative to the eight capital cities
                                       were mainly allocated to additional expenditure rather than savings.




60     Prices and Wages
                                   Wages
                                   Strong economic activity in the Territory, combined with tight labour market conditions
                                   and ongoing skilled labour shortages, flowed through to wages growth in 2007.

     Table 5.5: Wage Price Index                                 2002    2003   2004      2005       2006        2007
(year on year to December 2007,                                   %       %      %         %          %           %
             percentage change)    Northern Territory
                                     Public                        3.2    3.7     3.3       4.8         4.4          2.7
                                     Private                       3.1    2.6     3.4       4.1         3.5          4.8
                                     Total                         3.1    3.1     3.3       4.5         3.9          3.9
                                   Australia
                                     Public                        3.3    4.4     4.1       4.6         4.3          4.2
                                     Private                       3.3    3.3     3.4       3.9         3.9          4.1
                                     Total                         3.2    3.6     3.6       4.1         4.0          4.1
                                   Source: ABS Cat. No. 6345.0

                                   Despite a tight labour market and employer groups reporting ongoing skilled
                                   labour shortages, growth in the Territory’s Wage Price Index (WPI) for 2007 was
                                   3.9 per cent, unchanged from 2006.
                                   Wages growth was most notable in the private sector, with growth in the WPI
                                   increasing by 4.8 per cent in the year compared to 3.5 per cent in 2006. This may
                                   reflect ongoing inflationary pressures on wages in the Territory, especially in the
                                   construction and mining industries. There has been increased use of category
                                   457 visa holders by employers in the Territory and nationally to alleviate skilled labour
                                   shortages. Sufficient data has yet to be made publicly available by the Department
                                   of Education, Employment and Workplace Relations to fully assess the impact of
                                   imported labour on wages growth in the Territory and nationally.
                                   Growth in the Territory’s public sector WPI moderated in 2007, increasing
                                   2.7 per cent, compared to 4.4 per cent in 2006. This primarily reflects the timing of
                                   enterprise bargaining agreements (EBAs), most notably the Northern Territory Public
                                   Sector 2004-2007 Certified Agreement, covering about 9500 Northern Territory
                                   public servants, which expired in the September quarter 2007. A number of newly
                                   negotiated EBAs, once finalised, will flow through to the Territory’s public sector WPI.

         Average Weekly            After several years of growth exceeding that reported nationally, growth in average
     Full-Time Adult Total         weekly full-time adult total earnings (AWE) moderated significantly in the Territory in
                Earnings           2007, increasing by 1.6 per cent to $1112, below the national level of $1159, and fifth
                                   highest of the jurisdictions.
                                   This may reflect in part the completion of the Alcan refinery expansion at Gove.
                                   AWE may also have been influenced by the Australian Fair Pay Commission
                                   (AFPC) wages setting timetable, where there is a six month delay for employees on
                                   minimum awards. This suggests there may be an upward spike in growth in AWE
                                   in the first quarter of 2008. There is insufficient data to assess the effect on AWE
                                   by the increased use of category 457 visa holders by employers in the Territory and
                                   nationally to alleviate skilled labour shortages.
                                   AWE data should be viewed with caution as, unlike the WPI, which is designed to
                                   measure changes in the cost of employing a constant quantity and quality of labour,
                                   the AWE measure of wages is heavily influenced by compositional changes in the
                                   survey sample.




                                                                                                    Prices and Wages           61
     2008-09 Budget

            Chart 5.6: Average Weekly       %
         Full-Time Adult Total Earnings    9.0
                 (year-on-year change)                                                     LNG plant
                                           8.0                                       construction completed
                                           7.0
                                                                        LNG plant
                                           6.0                   construction commenced
                                           5.0

                                           4.0                                                   Australia

                                           3.0

                                          2.0                                                    Alcan G3 expansion
                                                                    Northern Territory               completed
                                           1.0

                                           0.0
                                                 98         99      00      01       02      03     04          05         06   07       08
                                                                                       Year ended June
                                          Source: ABS Cat. No. 6302.0

           Regional Wage and              In March 2008, the ABS published Territory regional wage and salary earner statistics
      Salary Statistics 2004-05           for 2004-05. Compiled from the Australian Taxation Office’s Individual Income Tax
                                          Return Database, the statistics provide regional estimates of the number of wage and
                                          salary earners and their characteristics, including age, sex, occupation and income.
                                          It is important to note that this data set relates to persons aged 15 years and over
                                          who have submitted an individual income tax return and for whom wage and salary
                                          income was the main source of income for the financial year. This is in contrast to
                                          ABS data sets reporting on wages that generally focus on the employment status
                                          of a person at a particular point in time, or surveying businesses about employee
                                          numbers and payroll. Consequently, this data set is not comparable with other ABS
                                          measures of wages such as Average Weekly Earnings or the Wage Price Index.

           Table 5.6: Wage and Salary     Statistical Subdivision                                        Average Income Median Income1
           Earners Aged 15 and Over,      Name                           Number           Income ($)           ($)           ($)
                             2004-05      Darwin City                     33 735         1 552 099 064           46 009              41 622
                                          Palmerston-East Arm              11 548         507 044 122            43 908              42 148
                                          Litchfield Shire                  7 233         323 543 064            44 732              41 236
                                          Finniss                             506          19 360 778            38 262              35 336
                                          Bathurst-Melville                   290           9 579 364            33 032              28 340
                                          Alligator                         1 474          63 789 394            43 276              38 312
                                          Jabiru (T)2                         490          24 948 168            50 915              46 297
                                          Daly                                462          15 543 423            33 644              28 932
                                          East Arnhem                       3 426         175 286 893            51 164              45 081
                                          Groote Eylandt     2
                                                                              338          20 782 153            61 486              53 552
                                          Nhulunbuy     2
                                                                            1 230          64 809 162            52 690              48 336
                                          Lower Top End                     4 579         187 826 163            41 019              38 821
                                          Barkly                            1 337          51 889 830             38 811             36 060
                                          Central NT                      13 705          554 099 519            40 430              36 912
                                          Unknown NT                          227           8 516 107            37 516              35 553
                                          1 Median not calculated for areas with fewer than 100 wage and salary earners
                                          2 Statistical Local Area
                                          Source: Australian Taxation Office Individual Income Tax Return Data

                                          The data highlight the impacts of the mining industry on incomes in the Territory,
                                          and in regional areas in particular, with Groote Eylandt (GEMCO manganese mining
                                          operations), Nhulunbuy (Alcan bauxite and alumina operations) and Jabiru (ERA
                                          uranium mining operations) reporting the highest average wage and salary incomes



62     Prices and Wages
at $61 486, $52 690 and $50 915 respectively. The next two locations reporting
higher incomes were The Gardens and Fannie Bay in Darwin.

Outlook
The Territory economy has potential to maintain its growth momentum in 2008-09,
with continued strong demand for export commodities and buoyant private
consumption being the key drivers. However risks for growth include uncertainty in
world commodity and financial markets, a continued downturn in the US economy,
and higher crude oil and petroleum prices flowing through to higher prices for
domestic goods and services, particularly food.
Continued pressure in the rental market, ongoing skilled labour shortages, and higher
prices for petrol and food are likely to maintain inflationary pressures in 2008. This
poses the possibility of further interest rate rises by the RBA in 2008 and suggests
there may be pressure on wages growth in the Territory to compensate for increased
cost of living. Despite inflationary forces in 2008, year-on-year growth in the Darwin
CPI is forecast to moderate to 3.1 per cent, driven by a decreasing contribution of
housing.
Ongoing skilled labour shortages and tightness of the labour market should continue
to see wages growth in the private sector above long-term trend levels. Tight Territory
Government budgetary conditions are likely to influence EBAs and flow through to
wage constraint in the Northern Territory public sector.




                                                                Prices and Wages          63
     2008-09 Budget




64     Prices and Wages
Chapter 6    External Economic Environment
Key Points    » Global economic conditions are expected to be less stable and less predictable
                in 2008.
              » The outlook for the Australian economy remains favourable, primarily reflecting
                strong Chinese demand for commodities.
              » Risks to the generally positive outlook include the possibility of a greater than
                expected slowdown in the United States economy.


             Northern Territory Economy
             Demand for Territory goods both internationally and from other Australian states and
             territories is very important for the Territory economy. Overseas demand constitutes
             almost 25.3 per cent of Territory final demand, while interstate demand has averaged
             12.3 per cent annually since 2002.
             Exports to Asian markets are one of the key links through which global economic
             conditions affect the Territory economy. The main products exported from the Territory
             to Asian markets include crude oil, liquefied natural gas (LNG), mineral ores, live
             cattle and tourism-related services. The major destination markets for mineral ores
             are the United States (US), China and Japan. Under contractual arrangements, all
             LNG is exported to Japan. Live cattle are exported mainly to the Philippines and
             Indonesia. Oil is exported primarily to Singapore, China, the US and South Korea.
             Services provided to international tourists, mainly from Europe, Japan and North
             America, also form an important export component of the Territory economy.
             Table 6.1 provides a summary of the economic outlook for the major destinations of
             Territory exports.

             Global Economy
             After four years of robust gross domestic product (GDP) and trade growth, conditions
             in global financial markets have turned from favourable to less stable and less
             predictable. Global GDP growth eased to 3.6 per cent in 2007 from 3.9 per cent
             in 2006 and growth, particularly for high income countries, is forecast to moderate
             further in 2008. The deterioration in financial market sentiment has been associated
             with a weakening in the outlook for global economic growth, with some economic
             analysts forecasting a US recession. The US housing sector remains weak, with the
             fall-out from the sub-prime mortgage crisis likely to remain a dampening factor in the
             short to medium term. Growth in the Eurozone, defined as European Union member
             states that have adopted the Euro currency, and Japan is also slowing. The extent to
             which the weakness in the major industrial economies will affect the developing world
             is still unclear.
             At the global level, the slowing demand for imports by the US has been offset in part
             by a strengthening of import demand across developing countries, driven by robust
             domestic demand from large emerging market economies such as China and India.
             Conditions in China, India and the smaller east Asian economies remain strong.
             In China, GDP grew by 11 per cent in 2007. While Chinese export growth has
             moderated, domestic spending is expanding rapidly. In the rest of east Asia,
             production and export growth generally strengthened through most of 2007. Growth
             in developing countries should offer a cushion from recessionary conditions in the




                                                              External Economic Environment           65
     2008-09 Budget


                                 key Organisation for Economic Co-operation and Development (OECD) economies
                                 over the 2008 period.
                                 Overall, changes in recent economic indicators such as stock market volatility, a
                                 weakening US dollar, uncertainty in the financial sector and rising oil prices, appear
                                 to support the view that global growth is slowing. This is due to significant weakness
                                 in the major industrial economies despite relatively strong growth in the developing
                                 world. Despite weaker global conditions, inflation remains a source of concern for
                                 many countries, including Australia.

                                 Australian Economy
                                 In 2007, the Australian economy continued to operate close to full capacity,
                                 experiencing labour shortages and capacity constraints. In the year to September
                                 2007, GDP increased 3.4 per cent, a solid increase but below the 10-year average
                                 GDP growth rate of 3.6 per cent.

          Disparate Economic     The Australian states and territories reported disparate economic growth in 2006-07
                      Growth     as measured by gross state product (GSP). Strong growth was reported for Western
                                 Australia, the Northern Territory, Queensland and the Australian Capital Territory,
                                 moderate growth in Victoria and Tasmania and weak growth in New South Wales and
                                 South Australia.
                                 At the national level, both the private and public sectors made significant
                                 contributions to GDP with domestic demand expanding 5.25 per cent. Strong growth
                                 in consumer demand has been driven by rising employment and real wages, as
                                 well as cuts in income tax. Business investment spending also grew at a fast pace,
                                 reflecting investment in plant, equipment and infrastructure.

          Productive Capacity    With demand continuing to grow strongly after a long period of expansion, domestic
                                 factors such as a shortage of skilled labour indicate that the economy is operating at
                                 close to full capacity. Business surveys, including the Sensis Business Index, have
                                 been reporting both high rates of capacity utilisation and high levels of concern about
                                 labour scarcity. Unemployment remains around a 30-year low, with the job vacancy
                                 rate increasing by 13.5 per cent from November 2006 to November 2007.
                                 High levels of business investment under way should assist in alleviating bottlenecks
                                 and over time add to the economy’s productive capacity.

      Agriculture and Cropping   The majority of winter cropping areas in southern Western Australia, South Australia,
                                 Victoria, New South Wales and central Queensland had an excellent start to the
                                 2007-08 season. However, dry conditions over the remainder of the growing period
                                 meant that winter crop production was significantly lower than expectations. Although
                                 production of major winter grains in 2007-08 was significantly higher than 2006-07,
                                 production remained well below average.

       Free Trade Agreements     Bilateral free trade agreements are expanding market opportunities for Australian
                                 exporters and facilitating greater investment in Australia, which has free trade
                                 agreements with New Zealand, Singapore, Thailand and the US.

                                 Outlook
              Global Economy     Global growth is expected to slow further in 2008, as the effective cost of capital
                                 remains elevated for financial institutions, firms, households and governments. This
                                 is primarily associated with the US sub-prime mortgage crisis, the effects of which
                                 have been felt in Australia with the major banks increasing interest rates independent
                                 of the Reserve Bank of Australia (RBA). As well, the RBA increased the cash rate
                                 from 6.75 to 7.25 per cent in March 2008. Despite these challenges, an upturn in
                                 global growth is projected in 2009 underpinned by continued demand for commodity


66     External Economic Environment
            resources to fuel China’s domestic demand, a US Government $171 billion plan to
            stimulate the US economy, and a bottoming out of the US housing downturn.
            From a global perspective, China and India have increased the supply of unskilled
            labour into the industrial sectors of these two previously less developed economies.
            This substantial increase in supply of low-skilled labour reduces the price of
            labour-intensive industrial outputs relative to other inputs, notably raw materials. India
            and China should continue to benefit from their large workforces, at least until the
            additional labour is absorbed or real wages for their workers improve.
            Inflation poses a risk to the global economy in 2008, in particular wage pressure due
            to labour shortages and capacity constraints in the developed economies. Instability
            in some oil-producing nations, particularly Venezuela, could mean supply shortages
            resulting in increased oil prices.
            Consensus Economics has forecast global growth in 2008 to ease to 3.2 per cent
            and the US economy is expected to slow. The world economy, however, is becoming
            more resilient and less vulnerable to a greater than expected slowdown in the US
            economy as a larger number of countries are contributing greater proportions to
            global growth. Economic growth in 2008 is expected to be strong in China, India and
            many South East Asian countries.

Australia   Australia’s international trade is dominated by the export of minerals and the import
            of manufactured goods. As such, Australia’s terms of trade (that is, the ratio of export
            prices to import prices) will be significantly impacted by global prices of resource
            commodities relative to those of traded industrial goods.
            Despite the slowing in the world economy, Australia’s terms of trade are forecast
            to rise in the near term. This outlook is largely driven by expected large increases
            in coal and iron ore contract prices in mid-2008, reflecting ongoing strength in
            commodity demand from Asian countries, particularly China. The effect of these
            increases is forecast to be partially offset by declines in base metals and rural export
            prices from their recent high levels. Together, these developments suggest that the
            terms of trade will reach new highs in mid-2008, before declining somewhat due to
            the slowing in global growth and as demand and supply respond to the current high
            commodity price levels.
            The Chinese and Indian economies are going to be increasingly important buyers
            of raw materials. China’s demand for iron ore has increased from 11 per cent
            to 37 per cent of the total global supply of iron ore in less than a decade. China
            already demands a significant proportion of world commodities, with the potential
            for increases, as does India. This has significant implications for Australia’s
            commodity-rich economy.
            Australia’s agricultural commodity sector has been under increasing pressure from
            drought in a rapidly evolving world economy. Challenges include uncertainty about
            irrigation water, climate change and high oil prices, as well as the availability and cost
            of labour. However, heavy rains across many drought-affected areas in late 2007 and
            early 2008 have improved prospects for the rural sector.
            Consensus Economics forecasts Australian GDP growth of 3.4 per cent in 2008
            led by the resource-rich states of Western Australia, Queensland and the Northern
            Territory. It also forecasts Australian inflation to be 3.1 per cent in 2008, above the
            upper end of the RBA’s target band of 2.0 to 3.0 per cent. This indicates future
            interest rate rises are possible in 2008.




                                                              External Economic Environment              67
     2008-09 Budget

     Table 6.1: Growth (annual percentage change)
                                        GDP Growth (%)
                         2005      2006      2007      2008e      2009f                                       Comment
     North East Asia
       China              10.2      11.1      11.4       10.2       9.6   Continued focus on development needs in rural areas to address widening
                                                                          inequality with more funds disbursed to regions for welfare. Pressure to revalue
                                                                          the currency as a way to lower the country’s growing trade surplus.

       Korea               4.0       5.0       4.9        4.9       5.1   Inflationary pressures to remain subdued in 2008. This will partly reflect the
                                                                          continued appreciation of the won against the US dollar and the impact of
                                                                          further economic restructuring.
       Japan               1.9       2.4       2.0        1.3       1.8   Government economic policy to prioritise growth over fiscal reform with general
                                                                          elections in 2008 and commitments for increased public works spending in the
                                                                          countryside.

       Taiwan              4.0       4.9       5.7        4.3       4.6   Real GDP growth forecast of around 4 per cent in 2008 driven by domestic
                                                                          demand as unemployment continues downward trend. The government
                                                                          will seek to limit Taiwan’s economic reliance on China yet benefit from the
                                                                          mainland’s strong growth.
       Hong Kong           7.3       6.8       6.3        4.8       5.1   Hong Kong, as a globally important trade centre port, will benefit from
                                                                          China’s rising levels of international trade by forging closer economic ties and
                                                                          partnership with mainland China in terms of people and resources.
     South East Asia
       Philippines         4.9       5.4       6.3        5.8      5.8.   Improvement in government’s finances is expected to lead to a decline in total
                                                                          government debt which should in turn lead to greater economic stability and
                                                                          modest acceleration in investment growth.
       Indonesia           5.6       5.2       6.3        6.2       6.0   Greatly reduced public debt has given the government more freedom in fiscal
                                                                          policy decisions. The central bank is likely to remain prudent, with a firm focus
                                                                          on keeping inflation low. Foreign investment inflows are expected to continue in
                                                                          2008.
       Malaysia            5.2       5.9       6.3        5.6       5.8   A major challenge for Malaysia will be coping with competition from China.
                                                                          However China presents opportunity as well as threat and Malaysia’s exports to
                                                                          China are likely to grow rapidly over the next five years.
       Thailand            4.5       5.1       4.8        4.6       4.9   Following a military coup in 2006, a democratically elected government has
                                                                          been returned in early 2008. Domestic demand has been weakened by
                                                                          uncertainty but positive external trade has propped up the overall economy.
       Singapore           6.4       7.9       7.7        5.2       5.9   Fiscal policy will be used to improve the country’s appeal as a destination for
                                                                          foreign direct investment. A similar motive will drive its pursuit of free trade
                                                                          agreements with its main trading partners.
     North America
       United States       3.2       2.9       2.2        1.4       2.3   After substantial slowing in 2007, GDP is forecast to weaken further with growth
                                                                          expected to fall to 1.4 per cent in 2008. The main concern is that consumer
                                                                          spending will be impacted more seriously than factored into forecasts. A partial
                                                                          reversal is expected in 2009 with real GDP growth of 2.3 per cent.
       Canada              2.9       2.8       2.7        1.5       2.3   Government budget surplus will deteriorate in 2008 and 2009 as a result of tax
                                                                          cuts introduced in October 2007 and a weakening economy. The Canadian
                                                                          dollar will remain strong against the US dollar due to a weakening US economy.
                                                                          Canada’s medium-term economic fundamentals remain strong.
     Eurozone              1.5       2.9       2.6        1.5       1.8   The European Central Bank has faced mounting political pressure to prioritise
                                                                          growth prospects over inflation targeting. Oil and food prices have shown little
                                                                          sign of decelerating and the central bank has raised the possibility of rate hikes.
     Russia                5.5       6.5       7.0        6.8       6.3   Capacity constraints, the slow pace of institutional change and the impact of
                                                                          an appreciating rouble will lead to a decelerating pace of economic expansion.
                                                                          Nevertheless GDP growth will continue to be boosted by high oil export prices.
     India                 8.4       8.4       7.8        8.1       8.4   India’s economic boom will continue albeit at a slightly slower pace. The
                                                                          government is committed to increase spending on health, education and rural
                                                                          welfare projects in a bid to improve living standards outside urban areas.
     Australia             2.8       2.8       3.9        3.3       3.2   Continued strength of domestic demand, a tight labour market and capacity
                                                                          constraints mean that inflationary pressures are likely to remain strong in
                                                                          2008-09.
     New Zealand           2.1       1.7       3.1        2.0       2.5   The government has backed up its goal of making the country carbon-neutral
                                                                          with a firm plan to meet its greenhouse emission targets. Market opportunities
                                                                          are limited by geographical location, small population and a tight labour market.
     e: estimate; f: forecast
     n.a: not available
     Source: Consensus Economics Consensus Forecasts March 2008 (India: financial year reported) (Russia, Philippines: International Monetary Fund)


68      External Economic Environment
Chapter 7    International Trade
Key Points    » In 2007-08, the Territory’s international trade surplus (that is, exports of goods
                and services less imports of goods and services) increased to an estimated
                $1.7 billion, up from the $1.5 billion surplus in 2006-07.
              » The Territory’s international merchandise trade balance (goods only) increased
                to an estimated $1.4 billion in 2007-08, up from $1.2 billion in 2006-07.
              » Mineral ores, mineral fuels and cattle dominate international exports in the
                Territory. In 2007-08, the value of merchandise exports increased by 6 per cent
                to an estimated $4.3 billion, largely due to increased global commodity demand
                and prices.
              » The major Territory imports are refined fuels, and machinery and equipment
                (mostly industrial equipment for mining and construction activities). In 2007-08,
                imports increased by an estimated 2 per cent to $2.9 billion, and are forecast to
                grow a further 13 per cent to $3.3 billion in 2008-09. The increase in 2007-08
                is primarily due to rising prices of imported mineral fuels and gas feedstock
                for the LNG plant at Wickham Point. Partly offsetting the increase in the value
                of mineral fuels imports is weakened demand for machinery and transport
                equipment imports (particularly for major oil and gas projects), and a reduction
                in national aircraft imports via Darwin.
              » The value of mineral fuel imports is forecast to increase by about 26 per cent in
                2008-09, due to continued importation of feedstock gas for the Wickham Point
                LNG plant and higher fuel prices.
              » Territory service exports are forecast to increase 1 per cent in 2007-08 and
                a further 1 per cent in 2008-09, driven by greater demand for travel services.
                Territory service imports are forecast to increase 5 per cent in 2007-08
                and increase a further 5 per cent in 2008-09, due to a higher demand for
                transportation services and travel services.
              » Strong growth in merchandise exports is forecast for 2008-09, supported by a
                third full year of LNG production, manganese from the new Bootu Creek mine
                and alumina from Alcan’s Gove refinery.

             International trade is an integral part of the Territory economy. In 2007-08, the
             Territory’s international trade surplus increased to an estimated $1.7 billion, with
             international merchandise trade (goods only) accounting for $1.4 billion of the
             surplus, a substantial improvement from the $236 million deficit recorded in 2005-06.
             The Territory’s positive trade balance is primarily due to the strong demand for,
             and increased prices of, mineral and energy commodities (such as alumina and
             manganese), together with weakened demand for manufacturing imports following
             the completion of the Alcan G3 expansion. Exports in the Territory are dominated by
             mineral and energy commodities and, to a lesser extent, the agricultural sector.
             The Territory’s reliance on the mining and energy sector, which is often characterised
             by projects with long lead times, price fluctuations and exchange rate movements,
             can substantially impact on the Territory’s trade performance. For example, the
             commencement of a full year of liquefied natural gas (LNG) production in 2006 has
             led to an increase in the Territory’s level of exports of almost 50 per cent (Chart 7.1).
             The volatility in exports was also evident in 1999 and 2000 when production at the
             Laminaria-Corallina oilfields began, leading to a 105 per cent increase in Territory



                                                                              International Trade        69
     2008-09 Budget


                                            exports. Although the volume of LNG production will remain at current levels for
                                            the next five to ten years, the value of production will fluctuate with price changes,
                                            impacting on the Territory’s international trade performance.
                                            Caution is also required when interpreting international trade statistics for the
                                            Territory. Although the importation of some high value capital goods, such as the
                                            Northern Endeavour platform in 1999 and 20 passenger aircraft for Jetstar between
                                            2004 and 2006, had a significant impact on Territory imports, there was minimal
                                            impact on the onshore economy. In addition, the majority of gold production in the
                                            Territory is exported through Perth, and is not considered a Territory international
                                            trade export, rather it is regarded as an interstate export.
       Chart 7.1: Territory International   $B
                    Merchandise Trade       6
                  (moving annual total)
                                            5
                                                                                                                               Exports
                                            4
                                                                                                                                  Imports
                                            3

                                            2
                                                                                                                        Trade balance
                                            1

                                            0

                                            -1
                                                 97    98       99      00       01      02     03    04           05     06      07        08e   09f
                                                                                          Year ended June

                                            e: estimate; f: forecast
                                            Source: Northern Territory Treasury, Australian Bureau of Statistics


                                            Merchandise Trade Balance
                                            Historically, the Territory is a net exporter, largely due to its abundance of mineral and
                                            energy resources. In 2007-08, the Territory’s merchandise trade balance is estimated
                                            to be a $1.4 billion surplus (merchandise exports exceeding merchandise imports),
                                            reflecting the high level of commodity exports from the Territory. The Territory’s major
                                            merchandise trading partners include North East and South East Asia (mainly China
                                            and Singapore). North America (mainly Canada) is another important trade region.
                                            Territory exports, as a ratio of gross state product (GSP), were 29.3 per cent in
                                            2006-07 (Table: 7.1), compared to the national ratio of 15.8 per cent, reflecting the
                                            Territory’s relatively high volume of exports of commodities and LNG. This ratio
                                            reflects a jurisdiction’s relative international trade exposure. Western Australia has
                                            the highest ratio of exports to GSP at 43.0 per cent, reflecting the high volume of
                                            commodities exports. Queensland’s relatively high ratio of exports to GSP also
                                            reflects its trade exposure as a result of its commodity exports.




70     International Trade
                                                                                                                                  Ratio of Trade
                                                                      Merchandise     Merchandise     Merchandise                  Balance to
        Table 7.1: International                                      Exports ($M)    Imports ($M) Trade Balance ($M)              GSP/GDP
   Merchandise Trade, 2006-07       New South Wales                       30 557            71 798              -41 241              -12.8
                                    Victoria                              20 816            51 600              -30 784              -12.7
                                    Queensland                            36 569            27 263               9 306                 5.0
                                    South Australia                        8 076             6 577               1 499                 2.3
                                    Western Australia                     54 910            21 437              33 473                26.2
                                    Tasmania                               3 078               592               2 486                12.9
                                    Northern Territory                     3 934             2 879               1 055                 7.9
                                    Australian Capital Territory                 8             310                - 302                -1.4
                                    Australia                            157 949          182 457               -24 508                -2.5

                                    Source: ABS Cat. No. 5220.0


                                    Merchandise Exports
                                    Mineral and energy exports comprise a large proportion of the Territory’s international
                                    merchandise exports. Multi-billion dollar onshore mining and offshore oil and gas
                                    extraction projects have a significant impact on the Territory’s economy and trade
                                    performance. Other important merchandise exports include live cattle, manufactured
                                    goods, and chemicals and related products.
                                    Merchandise exports have been volatile in recent years, reflecting the combined
                                    impact of falling oil production from the Laminaria-Corallina oilfields, fluctuations in
                                    crude oil prices, increased production of LNG at Wickham Point and movements in
                                    the Australian dollar. In 2007-08, the value of Territory merchandise exports increased
                                    by 6 per cent to an estimated $4.3 billion, primarily due to the increase in mineral ore
                                    exports and despite the significant appreciation of the Australian dollar.
Chart 7.2: Territory Merchandise    $B
                                     6
        Exports by Major Group
            (moving annual total)
                                     5

                                                                                                                          Total
                                     4        Mineral fuels1

                                     3


                                     2
                                                                                                Mineral ores
                                     1

                                                                   Livestock
                                     0
                                         97      98      99      00      01       02     03    04          05       06      07        08e     09f
                                                                                   Year ended June

                                    e: estimate; f: forecast
                                    1 Mineral fuels includes LNG exports
                                    Source: Northern Territory Treasury, Australian Bureau of Statistics

              Mineral Fuels         In 2007-08, the value of mineral fuel exports is estimated to decrease by 7 per cent to
                                    $1.7 billion, to which LNG exports contribute $1.4 billion. The decrease in mineral fuel
                                    exports in 2007-08 is attributable to LNG production at Wickham Point decreasing
                                    significantly in late 2007 as general maintenance works were carried out. The
                                    significant increase in mineral fuel exports in 2006-07 is due to the commencement
                                    of LNG exports from the Wickham Point plant. The peak in merchandise exports in
                                    mid 2001 (Chart 7.2) was due to oil production from the Laminaria-Corallina oilfields,
                                    a weak Australian dollar and increasing oil prices. Despite the strong Australian


                                                                                                                   International Trade              71
     2008-09 Budget


                                   dollar, mineral fuel exports are expected to remain stable at $1.7 billion in 2008-09 as
                                   full production of LNG continues at Wickham Point, offsetting the declining production
                                   of oil at the Laminaria-Corallina fields in the Timor Sea.

                    Mineral Ore    The dominant mineral ore exports in the Territory include alumina, manganese,
                                   lead-zinc concentrate and uranium. The value of mineral ore exports increased by
                                   26 per cent to an estimated $2.2 billion in 2007-08, reflecting an increase in demand
                                   for, and prices of, such resources.
                                   Following Xstrata’s decision to cease underground mining operations at its
                                   McArthur River lead-zinc mine in September 2005, a proposal to expand the mine
                                   to allow open cut operations was approved by the Territory Government in late
                                   2006. McArthur River mine continued its mining operations from its test pit during
                                   the conversion process, with capacity set to increase from 1.8 million tonnes to
                                   2.5 million tonnes in 2008.

                       Livestock   Territory livestock exports, more than 90 per cent of which are live cattle, are
                                   influenced by the economic conditions in the major importing countries such as
                                   Indonesia, as well as other factors including drought and the value of the Australian
                                   dollar relative to the currencies of Asian trading partners. In 2007-08, the value
                                   of livestock exports from the Territory increased by 6 per cent to an estimated
                                   $184 million. This increase is largely due to the combined effects of higher cattle
                                   prices and growth in live cattle export demand by South East Asian countries such as
                                   Brunei, Indonesia, Malaysia and the Philippines. Although the drought has affected
                                   cattle properties in Central Australia, the export of livestock from the Territory is
                                   expected to increase a further 6 per cent in 2008-09. In March 2008, the Territory’s
                                   cattlemen’s and livestock exporters associations announced that they were meeting
                                   with the Vietnamese Government and potential buyers of cattle, possibly adding a
                                   new cattle export market in the next two years.

           Key Export Markets      In the five years to 2006-07, about 70 per cent of Territory merchandise exports went
                                   to Asia (Chart 7.3). Of all mineral ore exports from the Territory, 36 per cent were
                                   sent to North East Asia, with the other major destinations including North America,
                                   Japan and Europe. The Territory exports 63 per cent of its mineral fuel to South
                                   East Asia, with the other major destinations including Japan and North East Asia.
                                   Nearly 95 per cent of all livestock exports were to South East Asia in the five years to
                                   2006-07.




72     International Trade
Chart 7.3: Territory Merchandise
                                     Other countries1
   Exports, 2002-03 to 2006-07
              (five year average)   North East Asia2

                                        North America

                                               Japan

                                          Middle East

                                              Europe

                                    South East Asia

                                                        0        100         200       300       400       500         600         700    800
                                                                                                 $M
                                                               Mineral fuels3          Mineral ores        Livestock4         Other5

                                    1 Includes the United Kingdom, Africa, South America, New Zealand, Ireland and Central America
                                    2 Excludes Japan
                                    3 Includes LNG exports
                                    4 Predominantly live cattle exports
                                    5 Primarily alumina and may also include beverages and tobacco, manufactured goods,
                                      machinery and equipment and miscellaneous manufactured articles
                                    Source: Australian Bureau of Statistics



                                    Merchandise Imports
                                    In 2007-08, the value of imports is estimated to increase by 2 per cent to $2.9 billion,
                                    primarily driven by the increased value of mineral fuel imports, including feedstock
                                    gas for the Wickham Point LNG plant, despite the strong value of the Australian
                                    dollar. This increase is partly offset by a decline in the value of machinery and
                                    equipment imports as major construction projects near completion. This contrasts
                                    with the previous three years (2004-05 to 2006-07), when machinery and transport
                                    equipment imports were particularly high due to the importation of equipment for
                                    major construction projects and the import of aircraft for Jetstar. The Territory’s major
                                    international merchandise imports are mineral fuels and machinery and transport
                                    equipment (Chart 7.4).
Chart 7.4: Territory Merchandise    $B
  Imports (moving annual total)     4

                                                                                Machinery and                              Total
                                                                             transport equipment
                                    3



                                    2                                        Mineral fuels

                                                                         Manufacturing
                                                                     Other1
                                    1



                                    0
                                        97     98       99      00      01         02     03    04        05      06         07     08e   09f
                                                                                    Year ended June

                                    e: estimate; f: forecast
                                    1 Primarily consists of chemicals and related products, and other unclassified items
                                    Source: Northern Territory Treasury, Australian Bureau of Statistics




                                                                                                                  International Trade           73
     2008-09 Budget


                  Mineral Fuels   Gas production at the Wickham Point LNG plant has had a significant impact on
                                  the Territory’s international trade balance. Feedstock gas for manufacture into LNG
                                  is piped from the Bayu-Undan fields in the Joint Petroleum Development Area
                                  (JPDA). The JPDA is jointly managed by Australia and Timor-Leste and as such
                                  is classified as a country for international trade purposes. Half of all feedstock gas
                                  from Bayu-Undan is reported as a Territory import, while the other half piped to the
                                  Territory is classified as mineral fuel produced in the Territory.
                                  In 2007-08, the value of fuel imports increased by 40 per cent to a historic high of
                                  $1.8 billion, a result of the increasing demand for fuel by mining and construction
                                  companies. This increase in demand is despite rising oil prices that have been
                                  partially offset by the appreciation of the Australian dollar. The solid increase in
                                  international fuel imports since 1999 partially reflects a shift in the source of supply,
                                  with less being sourced from Australian refineries and more being sourced from
                                  Singapore. In 2007-08, the international price of crude oil reached record levels
                                  above $US110 a barrel largely due to supply constraints and strong global demand.

      Machinery and Transport     The value of machinery and transport equipment imports decreased from
                   Equipment      $777 million in 2006-07 to an estimated $442 million in 2007-08, representing about
                                  15 per cent of Territory merchandise imports. In 2005-06, the peak in machinery and
                                  transport equipment was primarily due to Darwin being the first Australian port of call
                                  for Jetstar’s fleet of 20 Airbus A320s, contributing more than $900 million to Territory
                                  merchandise imports. Machinery and transport equipment imports have now returned
                                  to levels reported in 2003-04, following the completion of Jetstar’s fleet purchases in
                                  late 2006 and slowing demand for industrial machinery and transport equipment by
                                  mining and construction companies.

                 Manufacturing    The Territory has a small manufacturing base, with the majority of manufactured
                                  products imported from interstate and overseas. Manufacturing imports includes
                                  items such as military equipment and building materials. In the five years to 2007-08,
                                  manufactured imports accounted for 14 per cent of international merchandise
                                  imports. In 2007-08, the value of manufactured imports decreased by 32 per cent to
                                  an estimated $315 million. This significant decrease is due to the one-off import of
                                  re-conditioned US M1A1 Abrams tanks and a variety of military support vehicles in
                                  March 2007, resulting in an unusually high manufacturing figure in 2006-07.

            Other Merchandise     Other merchandise imports include food and live animals, beverages and tobacco,
                      Imports     crude materials, animal and vegetable oil, chemicals and related products, and
                                  unclassified commodities. In 2007-08, other merchandise imports increased by
                                  12 per cent to an estimated $375 million. The majority of this increase in other
                                  merchandise imports is attributed to rises in chemicals and related products,
                                  increasing 7 per cent in 2007-08 and accounting for about 83 per cent of total other
                                  merchandise imports.

           Key Import Markets     In the five years to 2006-07, 60 per cent of Territory merchandise imports came from
                                  South East Asia or Europe. South East Asia supplied more than 95 per cent of the
                                  Territory’s fuel requirements. In the five years to 2006-07, Europe was the Territory’s
                                  second largest import source, largely due to the one-off impact of Airbus A320 aircraft
                                  imports from France (Chart 7.5).




74     International Trade
Chart 7.5: Territory Merchandise
                                     Other countries1
   Imports, 2002-03 to 2006-07
              (five year average)    North East Asia2

                                      North America

                                               Japan

                                         Middle East

                                              Europe

                                    South East Asia

                                                        0           100          200          300          400           500          600
                                                                                             $M
                                                            Mineral fuels      Transport         Manufacturing          Other3

                                    1 Includes the United Kingdom, Africa, South America, New Zealand, Ireland and Central America
                                    2 Excludes Japan
                                    3 Includes beverages and tobacco, food and live animals, crude materials, chemicals and related
                                      products, animal and vegetable oils and unclassified commodities
                                    Source: Australian Bureau of Statistics


                                    Service Exports
                                    The Territory’s level of per capita service exports was the highest of all jurisdictions
                                    in 2006-07. This was due to the relatively large contribution of the tourism industry in
                                    the Territory as well as the Territory’s status as a ‘rest and recreation’ destination for
                                    foreign defence personnel.
                                    In August 2006, the Australian Bureau of Statistics (ABS) made revisions to the
                                    calculation of international trade in services exports, which has led to a significant
                                    change in the value of services exports for all jurisdictions. For example, in 2004-05,
                                    the value of Territory travel services exports was reported as $138 million. As a
                                    result of the ABS revisions, in 2006-07 Territory travel services exports were valued
                                    at $360 million. Previously, travel services exports were apportioned to jurisdictions
                                    based on the main state of stay, an indicator more likely to favour larger states.
                                    However, the revised methodology utilises the number of stop-over nights, a better
                                    indicator of travel services exports. The following service export figures were
                                    calculated using the new ABS methodology.

           Travel Services          Travel services exports include the expenditure by overseas tourists, business
                                    travellers and students, on services such as meals, accommodation, entertainment,
                                    and sightseeing tours. In 2006-07, travel services were valued at $360 million,
                                    accounting for more than half of the total Territory services exports. Since 2000-01,
                                    the value of Territory travel service exports has declined by almost 30 per cent
                                    (Chart 7.6), largely due to a series of international terrorist attacks affecting worldwide
                                    tourism. In 2007-08, the value of travel services exports is expected to increase
                                    by about 1 per cent as overseas consumers take advantage of low-cost carriers
                                    providing services to Australia.

  Government Services               Expenditure by foreign government personnel on services such as meals,
                                    accommodation, entertainment and sightseeing tours is included as government
                                    services exports. The majority of government services exports in the Territory
                                    are delivered to visiting defence personnel, particularly from the United States. In
                                    2006-07, the value of government services exports was $275 million, representing
                                    38 per cent of total Territory services exports. The value of government services
                                    exports is expected to decline in 2007-08, as a result of fewer defence missions
                                    planned for the Top End region. The decline in the number of major naval ships



                                                                                                               International Trade          75
     2008-09 Budget


                                          visiting the Port of Darwin is due to a number of factors including operational
                                          demands and ability to guarantee berthage.
          Chart 7.6: Territory Services    $M
                                          1000
                                Exports
                                           900
                                           800
                                                                                                     Total
                                           700
                                           600
                                           500
                                           400                                                Travel services
                                           300
                                           200                                             Government services

                                           100
                                                                                                                      Other1
                                                0
                                                     00       01        02        03      04      05             06      07     08e   09f
                                                                                    Year ended June

                                          e: estimate; f: forecast
                                          1 Includes transportation and communication services
                                          Source: ABS Cat. No. 5368.0.55.003


                                          Service Imports
                                          Territory services imports are dominated by Territory-based demand for travel
                                          services (consumed by Territorians travelling overseas) and transportation services
                                          (shipment and freight services provided by foreign operators), each representing
                                          close to half of all services imports in 2006-07. The total value of services imports
                                          in 2006-07 was $356 million, up from $295 million in 2005-06. In 2007-08, the value
                                          of services imports in the Territory is estimated to increase by about 5 per cent as
                                          demand for transportation services and travel services continues to strengthen.
          Chart 7.7: Territory Services    $M
                                Imports   450

                                          400
                                                                                                                      Total
                                          350

                                          300

                                          250
                                          200                                                                 Travel services
                                          150

                                          100
                                                                                            Transportation services
                                           50                                                                Other1
                                             0
                                                    00       01        02        03        04      05           06      07      08e   09f
                                                                                      Year ended June

                                          e: estimate; f: forecast
                                          1 Includes communication services and confidential items
                                          Source: ABS Cat. Nos 5368.0.55.003




76     International Trade
                       Outlook
                       The Territory’s trade surplus is forecast to be $2.4 billion in 2008-09. The
                       merchandise trade surplus is estimated to increase to $2.1 billion, up from the
                       $1.4 billion trade surplus in 2007-08, and a substantial turnaround from the
                       $236 million deficit in 2005-06. The Territory’s balance of trade is forecast to remain
                       in surplus for 2008-09 as a result of factors such as weakening demand for major
                       imports (such as machinery and transport), and strong growth in the value of LNG
                       and mineral ore exports.

Merchandise Exports    The current value of merchandise exports is estimated to increase by 6 per cent to
                       $4.3 billion in 2007-08 and forecast to increase to $5.4 billion in 2008-09. The growth
                       in merchandise exports is associated with the increase in value of LNG production,
                       manganese from the Bootu Creek mine and increased production from Alcan’s Gove
                       refinery. The value of mineral fuels exports is forecast at $1.7 billion in 2008-09 as
                       the value of LNG production is sustained, offsetting the decline of oil production from
                       Laminaria-Corallina. Commodity prices, particularly in the mining and energy sectors,
                       are expected to continue to increase as Chinese economic growth continues its solid
                       performance, increasing demand and value of Territory commodities exports, despite
                       a forecast slowdown of global growth led by the downturn in US economic conditions.
                       In the next 12 months, the following major resource developments may increase
                       Territory exports:
                       •	 alumina production at Alcan refinery plant to reach full capacity of 3.5 million
                          tonnes by 2008-09;
                       •	 production of manganese at the Bootu Creek mine to reach 3.95 million tonnes in
                          2007-08, increasing to 4.25 million tonnes in 2008-09;
                       •	 iron ore production at the Frances Creek mine near Pine Creek is expected to
                          increase production from about 530 000 tonnes in 2007-08 to 1.5 million tonnes in
                          2008-09; and
                       •	 production of manganese at the GEMCO mine to ramp up in 2009 following the
                          $167 million mine expansion.

Merchandise Imports    The current value of Territory international merchandise imports is forecast to
                       increase to $3.3 billion in 2008-09, following an increase of 2 per cent to $2.9 billion
                       in 2007-08. The increases in merchandise imports are primarily due to increasing
                       demand for fuel by mining and construction companies and rising oil prices, partially
                       offset by the appreciation of the Australian dollar.

   Trade in Services   The trade services balance is estimated to decrease by 3 per cent to a surplus
                       $349 million in 2007-08 and further moderate to $338 million in 2008-09. Trade
                       services exports are estimated to increase by 1 per cent in 2007-08 with a further
                       1 per cent increase in 2008-09. This increase largely reflects greater demand for
                       travel services (in particular personal travel services) as consumers access low-cost
                       airlines such as Tiger Airways and Jetstar. The value of trade services imports is
                       expected to increase by about 5 per cent to an estimated $374 million in 2007-08 and
                       further increase to $392 million by 2008-09. The increase in trade service imports
                       will be driven by higher demand for transportation services and travel services as
                       cheaper airfares strengthen demand.




                                                                                         International Trade      77
     2008-09 Budget




78     International Trade
              Chapter 8             Mining and Energy
                Key Points           » In terms of output, mining is the largest industry in the Territory, accounting for
                                       26 per cent of GSP in 2006-07, compared to 7 per cent nationally.
                                     » Mining output is volatile as production is dominated by a small number of large
                                       projects. Global supply and demand conditions and the impact of exchange rate
                                       movements on competitiveness are key factors affecting production levels and
                                       price.
                                     » The value of Territory mining output has grown substantially in recent years,
                                       driven by increased gas and condensate production from Bayu-Undan, as well
                                       as increases in mineral commodities such as manganese and lead-zinc.
                                     » Further increases are expected in the next few years, driven by increased
                                       production and strong growth in prices of several key commodities.
                                     » Mineral and energy production is estimated to increase by 7.7 per cent to
                                       $5.6 billion in 2007-08. Higher growth of 34.3 per cent is forecast for 2008-09.
                                     » In the medium term, high levels of exploration expenditure are expected
                                       to continue, supported by ongoing strong commodity prices and Territory
                                       Government initiatives.


                                    Mining
                                    In terms of output, mining is the most significant industry in the Territory, accounting
                                    for 26 per cent of gross state product (GSP) in 2006-07, compared to 7 per cent
                                    nationally (Table 8.1). However, its high contribution to GSP is not reflected in its
                                    share of Territory employment. According to the 2006 Census, resident employment
                                    in the mining industry was 1700 or 2.0 per cent of total resident employment. An
                                    additional 5000 employees are associated with the Territory mining and energy
                                    industry as fly-in fly-out (FIFO) workers, manufacturing workers at Alcan’s Gove
                                    alumina plant and the Wickham Point liquefied natural gas (LNG) plant, and
                                    construction workers on mining and energy projects.

Table 8.1: Mining as a Percentage                                                    %
                  of GSP, 2006-07
                                    New South Wales                                 2.4
                                    Victoria                                        2.0
                                    Queensland                                      7.7
                                    South Australia                                 4.1
                                    Western Australia                              27.7
                                    Tasmania                                        4.5
                                    Northern Territory                             25.7
                                    Australian Capital Territory                    0.0
                                    Australia1                                      7.1

                                    1 Mining as a percentage of GDP
                                    Source: ABS Cat. No. 5220.0

                                    Mining is a source of Territory Government revenue through royalties for most
                                    onshore mining operations. Royalty revenues have grown significantly, increasing
                                    by 126 per cent in the three years to 2007-08 to an estimated annual amount of
                                    $88.4 million. The Commonwealth also pays a grant to the Territory Government in



                                                                                                     Mining and Energy         79
     2008-09 Budget


                                           lieu of uranium royalties, estimated at $4.0 million in 2007-08. In addition, royalties
                                           based on the production of offshore gas and oil comes under the Commonwealth’s
                                           tax jurisdiction.
                                           A number of mining commodities are utilised as feedstock for significant value-adding
                                           operations in the Territory, most notably alumina production at the Alcan refinery,
                                           which uses bauxite feedstock, and LNG manufacturing at Wickham Point, using
                                           gas feedstock from Bayu-Undan. The value of production of these commodities
                                           is classified as manufacturing by the Australian Bureau of Statistics (ABS), and is
                                           therefore not included in the total output of the mining industry. For more details on
                                           these products, see Chapter 9, Manufacturing.
                                           In 2007-08, the value of mining and energy production is estimated to increase by
                                           7.7 per cent to $5.6 billion. The increase is largely being driven by growth in the
                                           value of production of liquid petroleum gas and condensate from the Joint Petroleum
                                           Development Area, as well as increased output of a number of mineral commodities,
                                           including manganese, magnetite, gold and bauxite (Chart 8.1).
         Chart 8.1: Value of Mining and    $B
                                           8
     Energy Production and Processing
                       (nominal dollars)    7

                                            6

                                            5

                                            4                                                             Total
                                                                                                                           Energy
                                            3

                                            2

                                            1
                                                                                              Minerals
                                            0
                                                99     00        01       02        03      04      05            06     07        08e       09f
                                                                                      Year ended June

                                           e: estimate; f: forecast
                                           Source: Northern Territory Treasury; Department of Business, Economic and Regional Development;
                                           Department of Primary Industry, Fisheries and Mines


                                           Minerals
                                           Manganese production at Groote Eylandt, lead-zinc production at McArthur River
                                           and gold production from The Granites mine in the Tanami region account for an
                                           estimated 68 per cent of the total value of mineral production in 2007-08. These three
                                           mines are expected to continue to dominate production in the medium term.
                                           Bauxite production at Gove also contributes significantly to total mineral production,
                                           and is used as feedstock for alumina manufacturing at the Alcan refinery (see
                                           Chapter 9, Manufacturing).
                                           The McArthur River mine is in the process of being converted from an underground
                                           to an open cut operation. Processing of zinc-lead concentrate has continued during
                                           the conversion phase using ore mined from the test pit and the initial stages of the
                                           open pit.
                                           Manganese production from the Bootu Creek mine commenced in June 2006. This
                                           has led to manganese contributing a growing share of the total value of mineral
                                           production in recent years. Global demand for manganese, which is used in the
                                           production of steel, has been driven by strong growth in the demand for steel from
                                           China.



80     Mining and Energy
Map 1: Onshore Mineral and Energy Resources

        TIWI ISLANDS
   MINERAL SANDS PROJECT
             Zircon/Rutile                Melville
                                          Island

                Bathurst
                 Island

                                                                                                                                               NHULUNBUY
                             DARWIN
                                                                                       Jabiru
                                                                                                   RANGER/JABILUKA
                                                                                                                 Uranium                               GOVE
        BATCHELOR                                               FRANCES CREEK
                                                                          Iron Ore                                                               Bauxite/Alumina
          Magnesite
BROWNS OXIDE                                                              UNION REEFS
                                                                                 Gold
PROJECT                                     Pine Creek
Copper/Cobalt/Nickel
                                                                      KATHERINE
                                                                                                                                    GROOTE EYLANDT
                                                                                                                                            Manganese
                                                                                          Mataranka


                                                                                           NORTHERN CEMENT
                             Timber Creek
                                                                                                                Lime                                     McARTHUR
                                                                             Railway

                                                                                                                                                           RIVER
                                                                                                                              Borroloola                 Lead/Zinc/Silver
                                                                                                      Gas Pip
                                                                                                                 eline

                                                            Top
                                                           Springs                               Dunmarra                                                          REDBANK
                                                                                                                                                                      Copper


                                                                                                    Elliott                                MERLIN
                                    Kalkarindji                                                                                            Diamonds


                                                           BOOTU CREEK                                    Renner Springs
                                                                    Manganese


                                                                                                                   Barkly

                                                                                                                  TENNANT                   H ighwa
                                                                                                                   CREEK                           y
                                          THE GRANITES                                                                                                  Avon
                                                    Gold                                                                                               Downs
                                                                                                                       PEKO PROJECT
                                                                                                                            Gold/Magnetite/Cobalt


                                                                                  Barrow Creek

                                                                                        Ti Tree
                                                                                                                       HARTS RANGE
                                                                                                Highway




                                                                                                                         Garnet Sands
                                            Yuendumu


                                                                           ne
                                                                       eli                                        Harts Range
                              MEREENIE                              Pip
                             Gas and Oil Field             G   as

                                                                                                            ALICE SPRINGS
                                                                                                  art
                                                                                                Stu




                                                      PALM VALLEY
                                                           Gas Field
                                                 Yulara
                                                                                                           ay
                                                                                                      Railw




                                                                                                                              0         100        200
                                                                                                                                        Km




                                                                                                                                                   Mining and Energy           81
     2008-09 Budget


                                         Other important mineral operations in the Territory include:
                                         •	 the Union Reefs plant and surrounding gold mines located near Pine Creek;
                                         •	 the Frances Creek iron ore mine, near Pine Creek;
                                         •	 the Browns polymetallic deposit of lead, cobalt, copper, nickel and silver in the
                                            Batchelor area;
                                         •	 the Peko Tailings project near Tennant Creek, producing magnetite, gold, copper
                                            and cobalt; and
                                         •	 the Merlin diamond field southeast of Borroloola.
                                         Uranium mining is reported under the ‘Energy’ section below.

               2007-08 Mineral           The nominal value of Territory mineral production is estimated to increase by
                    Production           14.9 per cent to $2.5 billion in 2007-08 (Chart 8.2).
                                         The value of gold production in 2007-08 is estimated to increase by 21.7 per cent
                                         to $482 million. Declining production at The Granites mine in the Tanami region has
                                         been more than offset by increased production at the Union Reefs plant near Pine
                                         Creek. The plant is operated by GBS Gold, and produces gold using feedstock ore
                                         from a number of underground and open pit mines in the Pine Creek and Katherine
                                         areas.
                                         The value of bauxite production is estimated to increase by 52.1 per cent to
                                         $254 million in 2007-08. With the Alcan Gove refinery expansion completed,
                                         production of bauxite is expected to ramp up over 2007-08 to the new plant’s higher
                                         production capacity of 3.8 million tonnes of alumina per annum.
                                         The value of lead-zinc production at McArthur River is estimated to decrease by
                                         19.8 per cent in 2007-08 to $454 million, as increased production volumes are
                                         offset by declining prices. Following a decrease in production in 2005-06, due to the
                                         cessation of underground mining, production levels have been gradually increasing
                                         as work progresses on the conversion of the mine to an open cut operation.
                                         The value of manganese production is estimated to increase by 10.5 per cent to
                                         $1.1 billion in 2007-08, driven by increased production at both the GEMCO mine at
                                         Groote Eylandt and the Bootu Creek mine.
           Chart 8.2: Value of Mineral   $B
                                         2.0
           Production and Processing
                     (nominal dollars)   1.8
                                         1.6
                                         1.4
                                         1.2
                                                                                                                   Manganese
                                         1.0
                                         0.8
                                         0.6                                                                          Lead-zinc

                                         0.4                             Gold
                                         0.2                                                                       Bauxite
                                                                                                                             Other
                                           0
                                               99     00        01       02       03      04      05          06       07       08e        09f
                                                                                  Year ended June

                                         e: estimate; f: forecast
                                         Source: Northern Territory Treasury; Department of Business, Economic and Regional Development;
                                         Department of Primary Industry, Fisheries and Mines




82     Mining and Energy
             Exploration        Mineral exploration in the Territory decreased in 2006-07, the latest year for which
                                data on exploration is available, but still remains at historically high levels. Exploration
                                continues to be supported by high commodity prices and strong global demand,
                                particularly from China. In the Territory, private mineral exploration expenditure
                                (not including exploration for uranium) decreased by 7.6 per cent to $62 million in
                                2006-07. However, the latest data indicates that exploration expenditure increased
                                substantially in the first half of 2007-08, resulting in an increase of 13.7 per cent to
                                $70 million in the year to December 2007 (Chart 8.3).
                                Increased exploration expenditure has been influenced by the Territory Government’s
                                initiative, Bringing Forward Discovery, launched in 2007 and building on the previous
                                initiative, Building the Territory’s Resource Base. The initiative aims to expand
                                publicly available geoscience data, and to promote opportunities for exploration and
                                mining investment in the Territory.
Chart 8.3: Northern Territory   $M
         Mineral Exploration    100

       (moving annual total)
                                 80


                                 60
                                                                                Total

                                 40
                                                                    Gold
                                                 Other minerals
                                 20


                                  0
                                      97    98       99       00   01        02     03    04     05      06      07      08
                                                                        Year ended June

                                Source: ABS Cat. No. 8412.0


                                Energy
                                The significant energy resources in the Territory are oil, uranium, natural gas,
                                LPG and condensate (a light hydrocarbon liquid used to manufacture petrol and
                                petrochemicals, and often found mixed with deposits of natural gas). The Territory’s
                                major energy resources and operations include:
                                •	 Ranger uranium mine, and undeveloped uranium resources Jabiluka and
                                   Koongarra in west Arnhem Land;
                                •	 onshore gas and oil operations in the Amadeus Basin at Palm Valley and Mereenie;
                                •	 offshore oil operations at Laminaria-Corallina, Jabiru and Challis/Cassini, and
                                   Puffin in the Timor Sea; and
                                •	 undeveloped offshore gas and condensate deposits, including Greater Sunrise,
                                   Evans Shoal, Petrel/Tern and Crux/Argus in the Timor Sea.
                                In addition, 50 per cent of the value of oil and gas production from the Joint
                                Petroleum Development Area (JPDA) is also attributed to the Territory. Currently,
                                the only producing field in the JPDA is Bayu-Undan (gas, LPG and condensate),
                                following the end of production from Elang/Kakatua (oil) in mid 2007.

      2007-08 Energy            The nominal value of energy production is estimated to increase by 2.4 per cent to
          Production            $3.1 billion in 2007-08, driven largely by the higher value of liquids production from
                                the JPDA, as strong increases in oil and gas prices more than offset decreased
                                production.


                                                                                                  Mining and Energy            83
     2008-09 Budget


                                          The value of oil production (excluding JPDA) is estimated to decrease by
                                          10.0 per cent to $689 million, driven by lower production at Laminaria-Corallina.
                                          The natural decline in production of the mature field has been exacerbated by the
                                          temporary shut down of the Corallina well in September 2007, as repair work is
                                          conducted. Full production from Corallina is anticipated to resume in September
                                          quarter 2008.
                                          The decline in production from Laminaria-Corallina has been partially offset by the
                                          commencement of production from the Puffin field in October 2007. Located in the
                                          Ashmore and Cartier Islands Adjacent Area, the field was initially forecast to produce
                                          30 000 barrels of oil day (higher than current output from Laminaria-Corallina),
                                          however technical difficulties have so far limited production to less than one-third of
                                          this amount.
                                          The value of uranium ore output from the Ranger mine is estimated to increase by
                                          10.9 per cent to $303 million, as production recovers from the impact of heavy rains
                                          experienced in the March quarter 2007, which had prevented access to higher grade
                                          ores. An increase in the realised sales price of uranium from the Ranger mine is also
                                          expected to contribute to the growth in the value of production in 2007-08.
                                          The value of offshore gas production from the Bayu-Undan field is estimated to
                                          decrease by 10.2 per cent to $154 million in 2007-08. Lower output was caused
                                          by a planned maintenance shutdown of the offshore facility during September and
                                          October 2007.
                                          LPG and condensate production from the JPDA is also forecast to decrease due to
                                          the maintenance shutdown at Bayu-Undan, although strong price growth will result in
                                          the value of production increasing by an estimated 7.6 per cent.

          Chart 8.4: Value of Territory   $B
                   Energy Production      3.5

                     (nominal dollars)
                                          3.0

                                          2.5                                                                          Total

                                          2.0

                                          1.5                                                                                  Gas1
                                                                                                       Oil
                                          1.0

                                          0.5                                               Uranium

                                          0.0
                                                93   94   95     96    97    98   99 00 01        02         03   04    05     06     07e   08f
                                                                                  Year ended June

                                          e: estimate; f: forecast
                                          1 Includes gas, condensate and liquid petroleum gas
                                          Source: Northern Territory Treasury; Department of Business, Economic and Regional Development;
                                          Department of Primary Industry, Fisheries and Mines

                      Exploration         Sustained high oil and gas prices globally have led to a resurgence in exploration
                                          activity in the Territory in recent years. Following a tripling of oil and gas exploration
                                          expenditure in 2004-05, expenditure tripled again in 2005-06, to a total of
                                          $299 million. Oil and gas exploration expenditure has since declined, falling by
                                          6.6 per cent to $280 million in 2006-07, however this remains significantly higher than
                                          the long-term average.
                                          Like mineral exploration, increased oil and gas exploration has been supported
                                          by the Territory’s Bringing Forward Discovery initiative through the provision of
                                          geoscience data to explorers. The initiative has contributed to a major increase in the

84     Mining and Energy
Map 2: Timor Sea Oil and Gas               number of onshore exploration permits.




                                                    Dili                 JOINT PETROLEUM
     INDONESIA                                  TIMOR-LESTE             DEVELOPMENT AREA
                         Oecusse                                                                           Abadi

                                                                                     Greater Sunrise
                                                                                                                         Lynedoch
                                                                                                                     Barossa
                                                            Kuda Tasi      Kelp                              Evans Shoal         N.T.
                         Kupang                    Buller                                                               Caldita
                                               Buffalo      Jahal
                                                                   Elang/Kakatua
                                   Laminaria-Corallina                            Chuditch
                                                                      Hingkip
                                                   Bluff     Krill     Bayu-Undan                       TIMOR SEA
  ASHMORE AND CARTIER
 ISLANDS ADJACENT AREA
                                            Oliver
                               Tenacious      Audacious
                         Brontosaurus
                              Maple         Jabiru
                              Swan           Challis
                                                               W.A.                                                           Darwin
                          Puffin
                       Padthaway          Talbot
                                       Montara       Prometheus                     Petrel
                            Tahbilk      and Bilyara
                                Crux                                              Tern

          Ichthys                   Cornea                                         Blacktip
                                                                                                                             NORTHERN
          Brewster                                                                                                           TERRITORY

                                                                                              Barnett

                     INDIAN OCEAN
                                                                 WESTERN
                                                                AUSTRALIA


                                                                                                                   0       100          200

                                                                                                                           Km

     LEGEND
              Producing gas field                                    Producing oil field                                   Gas pipeline

              Discovered undeveloped gas field                       Discovered undeveloped oil field


                                           Uranium exploration, previously concentrated in west Arnhem Land and dominated
                                           by a few companies, expanded significantly in recent years, driven by strong
                                           increases in uranium prices since 2001. By June 2006, more than 40 companies
                                           were active in almost every geological province in the Territory.

                                           Outlook
                                           Growth in the total value of mineral and energy production is expected to increase by
                                           34.3 per cent in 2008-09, resulting in a total value of production of $7.5 billion.
                                           The outlook for minerals and energy is determined by global supply and demand,
                                           with world economic growth and the exchange rate being major influences on
                                           demand. Despite a forecast slowdown in global economic growth, driven in part by
                                           the downturn in the US economy, sustained growth in China and other developing
                                           countries is expected to support ongoing strong demand for energy and mineral
                                           commodities. Although global production has been increasing, output has struggled
                                           to keep up with commodity demand due to the long lead time in developing major
                                           mining projects, as well as rising construction and operating costs. The international
                                           competitiveness of Australian commodity producers may also be enhanced by a
                                           forecast moderate depreciation of the Australian dollar in 2008-09.



                                                                                                                       Mining and Energy      85
     2008-09 Budget


                      Minerals    The value of mineral production in the Territory (excluding manufacturing) is forecast
                                  to increase by 54.3 per cent to $3.9 billion in 2008-09. The increase is due largely
                                  to a forecast increase in the value of manganese production, as well as increases in
                                  gold and lead-zinc.
                                  The rise in the value of manganese production will be driven by further growth in
                                  output from Groote Eylandt. GEMCO is in the process of expanding the capacity
                                  of the mine’s processing plant, with commissioning expected to be completed by
                                  the end of 2008. The resulting increase in output, combined with significant growth
                                  in manganese prices, is forecast to lead to an 83.9 per cent increase in the value
                                  of manganese production in 2008-09, contributing 36.4 percentage points to total
                                  growth in Territory mineral production.
                                  The value of gold production is forecast to increase by 41.2 per cent to $681 million
                                  in 2008-09. The increase will be driven by the continued expansion of GBS Gold’s
                                  Union Reefs project, incorporating ore feedstock from a number of mines in the
                                  region. The increased output is anticipated to add 8 percentage points to total growth
                                  in Territory mineral production in 2008-09.
                                  The value of Territory base metal production, comprising mainly lead-zinc
                                  concentrate, as well as copper concentrate and zircon, is forecast to rise in 2008-09
                                  to $615 million. Increased production of lead-zinc from McArthur River Mine, resulting
                                  from an expansion of the mine’s processing capacity, will more than offset a forecast
                                  decline in lead-zinc prices.
                                  Production of iron ore at Frances Creek will continue to ramp up in 2008-09,
                                  increasing to a total of $102 million, contributing 2.6 percentage points to total growth
                                  in Territory mineral production.

                       Energy     The value of energy production is forecast to increase by 18.1 per cent to $3.7 billion
                                  in 2008-09, driven by increased offshore oil and gas production and higher oil prices.

                            Oil   The value of oil production will increase by 44.3 per cent in 2008-09, as full
                                  production from Corallina recommences in late 2008, supported by a full year
                                  of production from Puffin. The normal ongoing decline in output from Laminaria-
                                  Corallina will resume after 2008-09, however offshore oil volumes may be boosted
                                  in the medium term if efforts to address the production difficulties at Puffin are
                                  successful. In addition, a number of other marginal oil discoveries in the Timor Sea
                                  await further appraisal
                                  and/or development, including Audacious, Barnett, Montara, Oliver, Talbot and
                                  Tenacious.
                                  The Australian Bureau of Agricultural and Resource Economics (ABARE) has
                                  forecast a moderate decline in oil prices in 2009, although this may be partially
                                  offset by any depreciation of the Australian dollar. In addition, limited spare global
                                  production capacity means that potential supply disruptions, such as those
                                  associated with geopolitical uncertainty, may result in significant ongoing oil price
                                  volatility.

                           Gas    Production from Bayu-Undan is forecast to return to normal levels following the
                                  planned maintenance shutdown in September and October 2007. The value of
                                  gas production is forecast to increase by 11.4 per cent to $172 million in 2008-09,
                                  while the value of LPG and condensate production will increase by 13.0 per cent to
                                  $2.1 billion.
                                  In the medium term, the Territory’s significant offshore gas reserves could lead to a
                                  major development phase for gas production and gas-based manufacturing. If efforts
                                  to bring more Timor Sea gas onshore are successful, it could be used as feedstock


86     Mining and Energy
              for new manufacturing industries (see the Manufacturing chapter for more detail).
              Middle Arm in Darwin Harbour has been identified as a potential site for a major
              gas-based industrial estate and associated port facilities.
              Woodside remains committed to the development of the Greater Sunrise gas field,
              however the timing and nature of the development remain uncertain. In particular,
              Woodside has yet to decide on whether to locate the LNG processing facility in
              Darwin, Timor-Leste or on a floating vessel in the Timor Sea. Woodside has stated,
              however, that a final investment decision will be made in 2009, with the first shipment
              of LNG as early as 2013.
              The Northern Territory’s Power and Water Corporation has signed an agreement with
              Eni Australia for the purchase of gas from the Blacktip field, a Western Australian
              administered deposit 100 kilometres west of Wadeye in the Bonaparte Basin. The
              agreement secures the supply of gas from Blacktip to meet the Territory’s long-term
              gas requirements. Construction of the pipeline is expected to begin in the 2008 dry
              season, with first delivery of gas scheduled for the March quarter 2009.

  Uranium     Following significant growth in uranium spot prices since 2000-01, ABARE is
              forecasting a moderate decline over the next few years. Despite this, average
              Australian contract prices are forecast to increase in 2008-09. Larger Australian
              producers, including Ranger, sell the majority of their production under long-term
              contracts, which results in sales prices being only partially influenced by the spot
              market. In recent years, contract prices have been significantly below the spot price,
              as many were negotiated when the uranium market was much weaker.
              In the Territory, uranium production is forecast to return to normal levels in 2008-09,
              following strong production in 2007-08 as output recovered from the impact on the
              Ranger operating pit of heavy rains during the previous wet season. The value of
              production is forecast to fall by 5.8 per cent in 2007-08, with the decline in production
              partially offset by higher prices.
              Energy Resources Australia (ERA) is planning to expand the current operating
              pit at its Ranger mine, which has the potential to extend the life of the pit to 2012,
              with most production occurring during 2011. The expansion is possible due to the
              continuing high price of uranium, which makes it viable to mine and process lower
              quality ore.
              ERA’s Jabiluka mine remains on a stand-by care and environmental maintenance
              status, and the operator has given an undertaking to the traditional owners that
              mining will not begin without their consent. Reserves at Jabiluka are estimated to be
              sufficient to maintain production for nearly three decades.

Exploration   Minerals exploration expenditure in the Territory has recovered significantly in the
              past three years, following a period of gradual decline over the seven years to
              2003-04, while petroleum exploration has risen to record levels. In the medium to
              long term, the level of exploration is expected to remain at high levels, consistent with
              Australian trends and supported by Territory Government initiatives.




                                                                               Mining and Energy          87
     2008-09 Budget




88     Mining and Energy
              Chapter 9              Manufacturing
                Key Points            » The manufacturing industry in the Territory is small in comparison to other states
                                        and is dominated by a small number of large companies.
                                      » In 2006-07, manufacturing activity accounted for 5.4 per cent of GSP
                                        ($719 million) and 3.5 per cent of total employment.
                                      » Manufacturing production will continue to grow in 2007-08 with alumina and
                                        LNG production dominating Territory manufacturing.
                                      » In the short to medium term, growth prospects include the helium plant at
                                        Wickham Point, metals processing from the Browns Oxide mine at Batchelor
                                        and possible increased LNG production from the Sunrise gas field in the Timor
                                        Sea.
                                      » In the long term, prospects include Timor Sea energy production and a possible
                                        two-train, 8 million tonne per annum LNG development bringing gas onshore to
                                        Darwin from the Ichthys gas field in Western Australia.

                                     The manufacturing industry in the Territory is small compared to other jurisdictions,
                                     accounting for 5.4 per cent of gross state product (GSP) in 2006-07 compared to
                                     10 per cent nationally. Despite the relatively small size of the manufacturing industry
                                     in the Territory, it has grown in recent years, with large manufacturing projects moving
                                     towards full production. In 2006-07, the value of production from the Territory’s
                                     manufacturing industry expanded by 2.3 per cent. About 4600 people are employed
                                     in the industry, accounting for 3.5 per cent of total employment in the Territory. The
                                     manufacturing base in the Territory is also narrow, reflecting the small local market
                                     and distance from other major markets. With the exception of export-focused alumina
                                     and liquefied natural gas (LNG) production, the majority of Territory manufacturing is
                                     for local consumption and includes the manufacture of products for Territory mining
                                     companies, printed material and food manufacturing.

                                     Composition
                                     Chart 9.1 shows the proportions of value added, employment and sales turnover
                                     attributable to each sector of the manufacturing industry for the Territory. Value added
                                     is defined as the value of gross output at basic prices less the value of inputs used in
                                     manufacturing these goods.
Chart 9.1: Territory Manufacturing
                                                  Other manufacturing
                   Sector Selected
                                                      Machinery and
               Indicators, 2005-06           equipment manufacturing

                                          Metal product manufacturing
                                                  Non-metallic mineral
                                                product manufacturing
                                        Petroleum, coal, chemical and
                                     associated product manufacturing
                                                    Printing, publishing
                                                   and recorded media
                                                       Wood and paper
                                                product manufacturing
                                             Textile, clothing, footwear
                                            and leather manufacturing
                                                   Food, beverage and
                                               tobacco manufacturing
                                                                           0        5       10      15       20       25   30      35
                                                                                                 % of manufacturing
                                                                               Employment           Sales turnover         Value added

                                     Source: Northern Territory Treasury, ABS Cat. No. 8221.0




                                                                                                                       Manufacturing     89
     2008-09 Budget


               Metal Products   Manufacturing in the Territory has been dominated by metal products manufacturing
                                (primarily manufacturing bauxite to alumina), which typically accounts for about
                                30 per cent of total manufacturing value added, compared to about 19 per cent
                                nationally, and about 29 per cent of total Territory manufacturing sales turnover
                                in 2005-06 (Chart 9.1). Although it is much less labour intensive than most other
                                manufacturing sectors, it accounts for about 16 per cent of Territory manufacturing
                                employment due to its large size.
                                Production delays caused by engineering issues for the Alcan G3 refinery expansion
                                hampered the expected ramp-up in production in 2006-07. Production of 1.7 million
                                tonnes of alumina in 2006-07 represents a 2.7 per cent decrease on 2005-06
                                production. The value of production in 2006-07 is estimated to be $483 million,
                                $22 million lower than 2005-06.
                                The Alcan expansion is expected to increase production to 3 million tonnes of
                                alumina in 2007-08, increasing to 3.5 million tonnes in 2008-09.
                                The conversion of bauxite to alumina at Gove has accounted for the vast majority
                                of metal manufacturing in the Territory in 2007-08. The construction of cobalt, nickel
                                and copper manufacturing plants in recent times has seen other metal manufacturing
                                making up nearly 10 per cent of the estimated value of metal manufacturing
                                production.
                                The metal production sectors of the manufacturing industry also include sheet metal
                                fabrication and the production of materials used in the construction industry. The
                                relatively high value for metal products manufacturing value added has been boosted
                                by commodity price increases over the past three years, with the outlook for 2008-09
                                remaining positive.

         Fuels and Chemicals    Fuels and chemicals manufacturing in the Territory has been growing and, with the
                                completion of the Darwin LNG plant in 2005-06, accounts for about 26 per cent of
                                total manufacturing value added, compared to 14 per cent nationally. This sector also
                                accounts for 15 per cent of Territory manufacturing employment. The importance of
                                this sector has been growing over the past few years as the Territory’s gas-based
                                processing infrastructure continues to develop due to increasing demand from China
                                and increased exploration investment.
                                Production of LNG at Wickham Point began in February 2006, and has added
                                significantly to the value of Territory manufacturing, producing an estimated
                                1.7 million tonnes of LNG in 2005-06. The plant is expected to produce 3.3 million
                                tonnes per annum from 2006-07 onwards for export to Japan, and directly employ
                                80 to 100 permanent staff.
                                The renewable fuels facility at the Darwin Business Park at East Arm exported its first
                                shipment in early August 2007, shipping 8.8 million litres of bio-diesel to the United
                                States. Problems with both price and availability of feedstock arose in 2007-08. In
                                addition, deficiencies in the plant design combined with the feedstock problems to
                                halt bio-diesel production. The Darwin plant has continued to refine crude glycerine to
                                recover fixed costs. Its future is uncertain at this time.

     Machinery and Equipment    Machinery and equipment manufacturing accounts for about 9 per cent of
                                manufacturing value added in the Northern Territory, compared to 20 per cent
                                nationally. This sector is relatively labour intensive, accounting for about 16 per cent
                                of Territory manufacturing employment.
                                Machine and equipment manufacturing in the Territory is focused on servicing the
                                mining and defence sectors, in particular, producing tools and equipment for the



90     Manufacturing
maintenance and development of the large defence and mining machinery used
throughout the Territory.
The maintenance requirements of the large, and still increasing, defence presence
has the potential to significantly impact on and increase the contribution of machinery
and equipment manufacturing in the Territory.

Outlook
Alumina production is forecast to reach production limits in 2008-09, with the
expansion of Alcan’s G3 refinery increasing production capacity from 3 million to
3.5 million tonnes per annum. Prior to the expansion of the Alcan facility, bauxite
was both exported as a commodity and processed into alumina (for export). With the
completion of the expansion to the refinery, Alcan now processes all the extracted
bauxite into alumina, no longer exporting bauxite as a raw commodity.
BOC Limited will begin construction of a helium plant at Wickham Point in 2008-09.
The plant, which will be the first in the southern hemisphere, will use feed-gas
from the LNG plant and is estimated to produce 750 tonnes of helium per annum.
Helium has many industrial uses including pressurizing and purging, welding cover
gas, controlling atmospheres, leak detection and breathing mixtures. The helium is
destined to supply both domestic and South East Asian markets.
In the medium to long term, the possibility of bringing more Timor Sea gas
onshore offers significant manufacturing opportunities. The agreement between
the Timor-Leste Government and the Commonwealth Government regarding the
proportion of the Greater Sunrise field outside the Joint Petroleum Development Area
(JPDA) concluded in February 2007, and has opened the door for the development of
the Sunrise field.
Woodside Petroleum owns a 33.4 per cent share in the Sunrise field and announced
in February 2008 that it was accelerating development of the Sunrise project, with
a possible start date in late 2009. Production would then follow with the first LNG
shipment estimated in 2013. The final investment decision as to how to develop the
gas is expected to be made in 2008. Currently, three options are being considered.
These include a tie-in to the existing production facilities at the Bayu-Undan project,
a floating LNG plant (probably unlikely due to current limits in technology) and taking
the gas onshore to Timor-Leste. The Timor-Leste Government is advocating for the
gas to come onshore to Timor-Leste via a 180 kilometre pipeline. This, however,
poses serious engineering challenges due to the 3300 metre sub-sea trench
the pipeline would have to traverse. In addition, political instability adds another
complication to this option, making Darwin the most likely destination for the LNG
processing facility.
Other possible gas manufacturing projects include further production of LNG,
or gas-based products such as methanol, ethane, ammonia/urea fertilisers and
various petrochemicals. Timor Sea gas also has the potential to provide a cheap
and efficient energy source for the manufacture of alumina, magnesium and other
ore concentrates, and for the production of electricity that could advance local
value-adding opportunities.
The construction of a $450 million condensate processing facility at East Arm is
another possible project in the medium term. The facility would source condensate
from the Timor Sea and North West Shelf for the production of petroleum, diesel,
liquid petroleum gas (LPG) and jet fuel.




                                                                     Manufacturing        91
     2008-09 Budget


                       Further increases in manufacturing production will occur in 2008-09 with the
                       processing and refining of copper, cobalt and nickel at the Browns Oxide mine in
                       Batchelor, which is expected to start production in the second quarter of 2008.
                       In addition, construction of a gold and copper processing plant at the Peko Tailings
                       mine east of Tennant Creek is estimated to begin in the third quarter of 2008, with a
                       cobalt plant scheduled to begin construction in the fourth quarter of 2008.
                       In the long term, there is the possibility of Inpex’s two-train, 8 million tonne per annum
                       LNG pipeline and processing development from the Ichthys gas field in Western
                       Australia’s Browse basin. On 28 February 2008, the Territory Government signed
                       an agreement with Inpex giving the Japanese company permission to assess the
                       viability of processing gas, sourced from Western Australia, in Darwin. Inpex is
                       continuing to work closely with the Territory Government to facilitate production
                       options and plant design at the prospective site at Middle Arm Peninsula. Further
                       discussions regarding this option were held in Tokyo in March 2008 between the
                       Territory Government and Inpex officials.




92     Manufacturing
Chapter 10     Construction
  Key Points    » The construction industry accounted for about 8.3 per cent of GSP on average
                  over the five years to 2006-07, and employed about 7.9 per cent of the
                  workforce.
                » Projects such as the Alcan G3 refinery expansion at Gove have a huge impact
                  on the value of construction work done in the Territory. They are significant both
                  on a Territory and a national scale and can lead to substantial volatility in the
                  value of construction work done.
                » In 2006-07, total construction activity decreased by 12.6 per cent to $2.2 billion,
                  supported by major resource-based engineering projects such as the $3 billion
                  Alcan G3 refinery expansion.
                » Declining construction growth in 2007-08 comes as investment for the Alcan
                  expansion, the main driver of engineering work done, is completed.
                » Northern Territory construction activity will continue to contract in 2008-09.
                  However, new mining and engineering based projects will ensure that total
                  construction activity will remain at levels above the historical average over
                  2008-09.

               Construction comprises residential building, non-residential building and engineering
               construction. The construction industry plays an important role in the Northern
               Territory economy, accounting for about 8.3 per cent of gross state product (GSP) on
               average over the five years to 2006-07 and about 7.9 per cent of total employment.
               Construction activity in the Territory can be highly volatile, reflecting the impact large
               resource and infrastructure related projects can have on a relatively small economy.
               This has been particularly evident over the last decade.
               At the beginning of this decade, construction activity slowed markedly in the Territory
               as economic and population growth weakened following the completion of the major
               defence force relocation to the Top End (Chart 10.1). This slowdown continued
               until mid 2001 when construction for the $1.3 billion Alice Springs to Darwin railway
               commenced, and was further boosted in 2002 by the start of development of
               stage 1 of the $2.7 billion Bayu-Undan liquids and gas field project in the Timor
               Sea. Construction activity reached record levels in 2005-06 during the construction
               phases of the $2 billion Darwin Liquefied Natural Gas (LNG) plant (and associated
               subsea pipeline) at Wickham Point and the $3.1 billion Alcan G3 alumina refinery
               expansion at Gove. Since peaking in 2005-06, total construction activity has been
               declining in the Territory, reflecting the completion of construction for the LNG plant
               in December 2005 and the Alcan refinery expansion in December 2007. As a result,
               total construction activity in the Territory decreased by 12.6 per cent to $2.2 billion in
               2006-07.
               Without any new multi-billion dollar projects, total construction activity is expected to
               continue its decline over the remainder of 2007-08.




                                                                                         Construction       93
     2008-09 Budget


      Chart 10.1: Territory Construction   $B
                             Work Done     3.0


                                           2.5                                                               Total

                                           2.0


                                           1.5
                                                                                                         Engineering

                                           1.0


                                           0.5                                                                       Residential

                                                                                                                   Non-residential
                                           0.0
                                                 92   93   94   95   96    97    98   99 00 01 02       03    04     05   06   07    08e 09f
                                                                                      Year ended June

                                           e: estimate; f: forecast
                                           Source: ABS Cat. No. 8752.0, Northern Territory Treasury

                                           Although major projects such as the Alcan expansion create a significant number of
                                           jobs in the Territory, this is not necessarily reflected in resident employment figures
                                           reported by the Australian Bureau of Statistics (ABS). The primary reason is that
                                           the very large scale of these projects, combined with a limited pool of skilled local
                                           workers, results in a strong reliance on fly-in fly-out (FIFO) employees who are not
                                           attributed to Northern Territory resident employment levels by the ABS labour force
                                           survey. This means the official employment contribution of the construction industry
                                           in the Territory underestimates the actual employment contribution.
                                           Similarly, such major projects can have a huge impact on the value of construction
                                           work done and cause substantial volatility in reported activity. However, the impact of
                                           these projects on underlying economic activity may be less substantial due to their
                                           location, often in remote areas or offshore, use of FIFO workers and the importation
                                           of equipment and construction materials from outside the Territory.

                                           Residential Construction
                                           Residential construction includes the building of new houses and other residential
                                           buildings (townhouses, units), residential conversions (converting non-residential
                                           buildings into residential buildings), and alterations and additions to existing
                                           residential buildings. Residential construction activity occurs in both the private and
                                           public sectors. In 2006-07, residential construction accounted for about 16.8 per cent
                                           of total construction.
                                           Demographic, social and economic factors have strong influences on the demand for
                                           residential dwellings and, in turn, on residential construction. Residential construction
                                           is closely linked to population growth and the underlying strength of the economy,
                                           while other key factors affecting the demand for housing include:
                                           •	 the rate of new household formation;
                                           •	 the distribution of income and wealth;
                                           •	 the availability and cost of land and housing;
                                           •	 the price of new dwellings relative to existing dwellings;
                                           •	 government housing policies; and
                                           •	 availability and cost of finance.
                                           In the short term, interest rates and business and consumer confidence are also
                                           major influences on the building cycle.


94     Construction
                                    In 2006-07, total residential building work done, in real terms, remained near its
                                    highest level in almost a decade, down just 0.2 per cent to $372.7 million from
                                    one year earlier (Chart 10.2). Construction work done for new houses increased
                                    by 7.5 per cent to $171.8 million, while other residential work done decreased
                                    by 7.6 per cent to $137 million. Alterations and additions, which were at the
                                    highest levels in over 30 years in 2006-07, declined by 2.8 per cent in the year to
                                    $64.6 million.
                                    Strong population growth, declining vacancy rates, relatively high rental yields and
                                    various government housing initiatives such as the HomeNorth scheme have been
                                    significant drivers of residential construction activity over the past few years. These
                                    factors are expected to continue to contribute to increasing residential construction
                                    activity in the Territory in 2007-08.
                                    Territory residential construction activity is estimated to increase by 2.2 per cent in
                                    2007-08. Private residential building activity is expected to increase modestly, as
                                    growth in other dwellings (units, townhouses and apartments) construction more
                                    than offsets weakness in activity for houses, alterations and additions. The weakness
                                    in private sector house construction reflects the impacts that rising interest rates,
                                    declining home loan affordability and rising land and construction prices have had on
                                    demand.
                                    Public sector construction activity is estimated to strengthen in 2007-08, primarily
                                    reflecting construction work done at the Lyons estate in Darwin and Territory
                                    Government employee and Indigenous housing projects throughout the Territory.
Chart 10.2: Territory Residential   $M
                                    500
            Building Work Done
                                    450
                                    400                                                                              Total

                                    350
                                    300
                                    250
                                    200                                                                           Houses
                                    150
                                    100                                                                 Other residential
                                     50
                                       0                                                         Alterations and additions
                                           92   93   94   95   96    97   98    99 00 01 02      03   04   05   06    07 08e 09f
                                                                               Year ended June

                                    e: estimate; f: forecast
                                    Source: ABS Cat. No. 8752.0, Northern Territory Treasury


                                    Non-Residential Building
                                    Non-residential building includes hotels, shopping centres, factories, offices, schools,
                                    hospitals and cinemas. The level of private sector investment in non-residential
                                    building is determined by several factors, including the adequacy of existing capital
                                    stock, interest rates, anticipated future demand and general business confidence.
                                    Public sector expenditure on non-residential building is targeted to meet medium to
                                    long-term needs and provide social and economic infrastructure such as schools,
                                    hospitals and roads.
                                    In 2006-07, non-residential construction activity, in real terms, increased by 7.4 per cent
                                    to $306.4 million. Large declines in public sector non-residential construction activity
                                    were more than offset by a large increase in private sector activity.



                                                                                                                 Construction      95
     2008-09 Budget


          Private Sector Non-    In real terms, private sector non-residential construction increased by 43.7 per cent
      Residential Construction   to $208.9 million in 2006-07, supported by projects such as the Darwin Convention
                                 Centre (DCC) and the Mantra Pandanas development. Despite the anticipated
                                 completion of these two projects in the latter half of 2007-08, private sector
                                 non-residential construction activity is expected to remain at high levels during the
                                 year supported by work done for the:
                                 •	 $100 million Vibe and Medina hotels at the Darwin Waterfront;
                                 •	 $35 million Tiwi Gardens retirement village redevelopment;
                                 •	 $30 million Crocosaurus Cove development;
                                 •	 $30 million SkyCity Darwin Casino redevelopment;
                                 •	 $15 million Darwin Airport Inn; and
                                 •	 $12 million Pandanas office suites.
                                 Activity will be further supported by a number of new warehouse developments
                                 particularly around Darwin, with one of the largest being the $20 million Metcash
                                 Trading Warehouse at the Darwin Business Park.

           Public Sector Non-    Declining public sector non-residential construction activity in 2006-07 was driven
      Residential Construction   by the conclusion of major works relating to the 1st Aviation Regiment relocation
                                 to Robertson Barracks and the Bradshaw Field Training Area in mid-2006.
                                 Nevertheless, public sector construction activity in 2006-07 was supported by
                                 Territory Government investment including expenditure associated with:
                                 •	 the Darwin Waterfront (excluding the DCC which, although funded through a public
                                    private patnership, is categorised as a private sector project by the ABS);
                                 •	 Middle Years high school developments in Darwin and Palmerston;
                                 •	 a new secondary schooling facility at Wadeye;
                                 •	 upgrades to the Alice Springs Hospital;
                                 •	 the Darwin football stadium; and
                                 •	 the Mararra fire station.
                                 In 2007-08, public sector non-residential construction activity is estimated to have
                                 increased due to increased work by the Territory Government.
                                 Major Territory Government non-residential construction activity in the year related to:
                                 •	 ongoing facilitation and delivery of the Middle Years schooling infrastructure
                                    program;
                                 •	 continued development of the Desert Knowledge Precinct including the Desert
                                    People’s Centre in Alice Springs; and
                                 •	 commencement of construction for the Casuarina and Galwin‘ku police stations.
                                 Total growth in non-residential building activity is estimated to moderate to
                                 1.2 per cent in 2007-08 before declining by 4.8 per cent in 2008-09 (Chart 10.3).




96     Construction
     Chart 10.3: Territory Non-   $M
                                  400
Residential Building Work Done
          (moving annual total)   350                                                                              Total

                                  300

                                  250                                                                         Private

                                  200

                                  150

                                  100
                                                                                                              Public
                                   50

                                     0
                                         92   93   94   95   96    97   98    99 00 01 02      03   04   05   06     07    08e 09f
                                                                             Year ended June

                                  e: estimate f: forecast
                                  Source: ABS Cat. No. 8752.0, Northern Territory Treasury


                                  Engineering Construction
                                  Historically, engineering construction activity in the Territory, as for Australia, has
                                  been dominated by public sector activity related to infrastructure developments.
                                  Since the start of construction for the Adelaide to Darwin railway in mid-2001,
                                  engineering construction activity in the Territory has been primarily driven by large
                                  private sector resource projects. This trend continued into 2006-07, although at lower
                                  levels than in previous years.
                                  In 2006-07, engineering construction work done in the Territory, in real terms,
                                  decreased by 18.2 per cent to $1.5 billion. This primarily reflects the majority of work
                                  related to the Alcan refinery expansion having been completed by mid-2007. Other
                                  major engineering projects undertaken in the year included work for the:
                                  •	 $100 million Puffin oilfield development project by Australian Energy Developments
                                     (AED) in the Timor Sea;
                                  •	 $110 million conversion of operations at the McArthur River mine; and
                                  •	 $750 million Blacktip project by Eni Australia.
                                  The Blacktip project involves the construction of an onshore gas treatment plant near
                                  Wadeye with two connecting pipelines, one to the Blacktip gas field in the Joseph
                                  Bonaparte Gulf (situated in Western Australian waters), and the other to the existing
                                  Amadeus Basin to Darwin pipeline. Commissioning and start up are scheduled for
                                  the last quarter of 2008, with the first gas to be delivered to the Power and Water
                                  Corporation early in 2009.
                                  Based on current projects, growth in engineering activity will decline by an estimated
                                  47.6 per cent in 2007-08, although remaining at relatively high levels. Major
                                  engineering projects under way in the year include:
                                  •	 ongoing work for the Blacktip project;
                                  •	 the $US700 million Montara, Skua and Swift oilfields projects in the Timor Sea;
                                  •	 the $140 million Browns Oxides project at Batchelor;
                                  •	 commencement of construction of the $167 million GEMCO manganese
                                     processing expansion at Groote Eylandt;
                                  •	 community infrastructure for the Darwin Waterfront project including construction of
                                     the wave pool, roads and parking;


                                                                                                               Construction          97
     2008-09 Budget


                                           •	 upgrading of the Victoria Highway to improve flood immunity, including bridges at
                                              Big Horse and Little Horse creeks;
                                           •	 continued development of the Red Centre Way; and
                                           •	 commencement of work for the $126.6 million Weddell power station by the Power
                                              and Water Corporation.

                Power and Water            In early 2007, the Territory’s Power and Water Corporation announced that it would
                    Corporation            invest $592 million on capital upgrades over the next five years, with another
                                           $222 million directed to its repairs and maintenance program. The largest project
                                           over this period will be the construction of the $126.6 million Weddell power station
                                           (servicing the Darwin-Katherine network) which commenced construction in
                                           2007. The first generator came on line in late January 2008 with a second due for
                                           completion in 2008. A third generator will be constructed within the next five years.
                                           In Alice Springs, construction is expected to start on a $41.7 million power station
                                           (including transmission lines) at Brewer Estate in April 2008, with completion by
                                           October 2008.

      Montara, Skua and Swift              Coogee Resources is currently developing the $US700 million Montara project
               oilfield projects           located around 650 kilometres west of Darwin in the Timor Sea. The project involves
                                           converting an existing oil tanker into a floating production, storage and offloading
                                           (FPSO) vessel that will be moored at the Montara oilfield with tie-backs to the Skua
                                           and Swift/Swallow fields via flowlines. First production for Montara is expected in
                                           the third quarter of 2008. As Coogee Resources is leasing the FPSO, its impact on
                                           Territory engineering construction activity will be allocated by the ABS over the life
                                           of the project, not when it is first moored to the oilfield. As such there is no spike in
                                           activity expected over 2007-08 and 2008-09. Consequently, this project and other
                                           similar ones (for example the AED Puffin project) operating in the Timor Sea will have
                                           less impact on activity in the short term than is suggested by its capital expenditure
                                           program.
       Chart 10.4: Territory Engineering    $B
                                            2.5
                              Work Done
                                                                                                                       Total
                                            2.0


                                            1.5                                                                    Private


                                            1.0


                                            0.5
                                                                                                                  Public

                                              0
                                                  92   93   94   95   96    97   98    99 00 01 02      03   04   05    06     07   08e 09f
                                                                                      Year ended June

                                           e: estimate f: forecast
                                           Source: ABS Cat. No. 8762.0, Northern Territory Treasury


                                           Construction Outlook
                                           Given the uncertainty surrounding many of the factors influencing the decision to
                                           proceed with construction activity, timing can be unpredictable. These factors include
                                           the investment climate, access to capital, the outlook for global economic growth,
                                           commodity prices, the value of the Australian dollar and perceptions about the
                                           Territory’s comparative advantages. In recent years, acute skilled labour shortages
                                           in the construction sector have also been a primary driver behind project timelines


98     Construction
                           being significantly extended, making this one of the primary risks to the accuracy of
                           construction forecasts.
                           In real terms, Territory construction activity is forecast to decrease by 13 per cent to
                           $1.3 billion in 2008-09. The value of residential construction is forecast to decrease
                           by 0.8 per cent to $378 million, non-residential construction to fall by 4.8 per cent
                           to $295 million and engineering construction to decrease by 21.1 per cent to
                           $635 million.

Residential Construction   In real terms, residential construction work done is forecast to decrease by
                           0.8 per cent to $378 million in 2008-09. Ongoing construction activity related to
                           a number of high rise apartment developments in the Darwin central business
                           district and increased public sector expenditure on housing, supported by the
                           Commonwealth’s Northern Territory Emergency Response and the Territory
                           Government ‘Closing the Gap’ initiatives are expected to largely offset declining
                           levels of private sector house construction and alterations and additions activity.
                           Major residential developments under construction in 2008-09 include:
                           •	 the joint venture development of the Darwin suburb of Lyons ($280 million).
                           •	 the One30 Esplanade high rise apartment development ($100 million);
                           •	 the residential component (Wharf One apartments) of the Darwin Waterfront
                              ($60 million);

   Defence Single LEAP     Housing developments are proposed at both the Robertson and Larrakeyah
        Phase 2 Project    barracks, which will increase the supply of accommodation. This project, called
                           Single Living and Environment Accommodation Precinct (LEAP) phase 2, has plans
                           to construct 686 individual units at Robertson Barracks and 232 units at Larrakeyah
                           Barracks. This project has the potential for a public private partnership that will
                           boost local construction. Construction at the Larrakeyah Barracks is proposed to
                           commence in mid-2009 (with completion by mid-2011), while construction for the
                           Robertson Barracks units is proposed to commence in mid-2010 (with completion
                           by 2012).
                           Population and employment growth, although forecast to moderate in 2008-09, will
                           also continue to support overall residential construction activity in the Territory.

        Non-Residential    After three years of relatively high levels of activity, Territory non-residential building
          Construction     work is forecast to decrease by 4.8 per cent to $295 million in 2008-09. This primarily
                           reflects the completion of the DCC and Mantra Pandanas serviced apartments in
                           early 2008. Nevertheless, the decline in non-residential construction is expected to
                           be partly offset by activity associated with projects such as the:
                           •	 $150 million Chinatown development (Stage 2);
                           •	 $100 million Northern Territory Airports retail development near the Darwin airport;
                              and
                           •	 $33 million Gilligan’s backpacker resort in Alice Springs;

Engineering Construction   In real terms, Territory engineering construction activity is forecast to fall by
                           21.1 per cent to $635 million in 2008-09, as the Alcan G3 project draws to a
                           close. Nevertheless, ongoing development of projects such as the $750 million
                           development of the Blacktip gas field in the Joseph Bonaparte Gulf, and the
                           commencement of the $167 million GEMCO manganese processing expansion at
                           Groote Eylandt, will ensure that engineering activity in the Territory remains at levels
                           above the historical average in 2008-09.



                                                                                                    Construction         99
      2008-09 Budget


        Major Defence Projects     A number of major Defence projects are currently in development that will impact
                                   significantly on public sector construction activity (engineering and non-residential) in
                                   the Territory from 2008-09 and beyond.

           RAAF Base Darwin        This project, expected to commence in late 2008 and be completed by late 2010, will
       Redevelopment Stage 2       upgrade existing facilities including fuel farms, workshops, fitness centre and airfield
                                   lighting, and construct a new logistics headquarters.

            Robertson Barracks     The Robertson Barracks Redevelopment will provide new and upgraded facilities
               Redevelopment       for training, emergency response, working accommodation and equipment support.
                                   The Land 907 facilities project will provide parking and working accommodation
                                   for heavy tank transport vehicles and other tank support services. The Hardened
                                   and Networked Army project will provide additional live-in accommodation, working
                                   accommodation and other support facilities.

           RAAF Base Tindal        This project plans to expand and upgrade existing and construct new working
       Redevelopment Stage 5       accommodation and augment electrical and water supply infrastructure.

             RAAF Base Tindal      This project will provide facilities and infrastructure at RAAF Tindal to support the
        Airborne Early Warning     introduction of the new airborne early warning and control aircraft. The scope of work
          and Control Facilities   includes new taxiways, operational facilities and working accommodation.

                                   Long Term Outlook
                                   Despite an expected slowdown in global economic growth in 2008, the Territory
                                   construction sector is expected to continue to benefit from the ongoing boom in
                                   demand for resource commodities especially from China and India. Highlighting this,
                                   a number of world-scale resource projects are currently being planned throughout the
                                   Territory for potential development over the coming years.

      Wickham Point LNG Plant      ConocoPhillips and its joint venture partners are currently in the process of shoring
           Expansion – Train 2     up additional gas resources so as to expand production capacity at the Wickham
                                   Point LNG plant. The construction of an additional production train (Train 2) would
                                   increase capacity from the current 3.4 million tonnes per annum to around 10 million
                                   tonnes per annum. In addition to the Caldita and Barossa fields, ConocoPhillips is
                                   exploring the possibility of sourcing gas from the Greater Sunrise liquids and gas
                                   field.

                Greater Sunrise    Following ratification of the International Unitisation Agreement and the Certain
                                   Maritime Arrangements in the Timor Sea Treaty in January 2007, Woodside
                                   announced that it would proceed to explore development options for the Greater
                                   Sunrise liquids and gas field in the Timor Sea. Greater Sunrise has an estimated
                                   6 trillion cubic feet of natural gas.
                                   The company is aiming to make a final investment decision for the project sometime
                                   in 2009, with the production of first gas and condensate from 2013.
                                   Woodside is currently looking at three options to develop the field including:
                                   •	 linking with the existing Bayu-Undan project in the Timor Sea and the
                                      Darwin-based LNG plant;
                                   •	 a floating LNG facility; or
                                   •	 an offshore development linked to a newly constructed LNG plant in Timor-Leste.
                                   Private sector analysts estimate that the capital expenditure required to develop the
                                   Greater Sunrise field could be in excess of $6 billion.
                                   As at April 2008, Woodside and the other joint venture partners (Shell, ConocoPhillips
                                   and Osaka Gas) had yet to announce a decision on their preferred development


100     Construction
                           option for Greater Sunrise. Furthermore, development is contingent on the project
                           receiving legal, regulatory and fiscal certainty from both the Timor-Leste Government
                           and the Commonwealth.

    Inpex LNG Plant at     In February 2008, the Territory Government signed a project facilitation agreement
  Middle Arm Peninsula     with Japanese oil and gas company Inpex to evaluate the possibility of constructing
                           an LNG plant at the Middle Arm Peninsula, near Darwin. If successful, gas would
                           be sourced from Inpex’s Ichthys field and transported 850 kilometres via a subsea
                           pipeline to an 8 million tonne per annum LNG plant.
                           In April 2008, the company undertook a range of technical and engineering studies
                           to fully assess the Darwin option and compare it to its current preferred option of
                           processing the gas on the Maret Islands off the Kimberley coast in Western Australia.

          Dow Pacific      In mid 2007, Dow Pacific announced that it would investigate the possibility of
        Chemical Plant     building a $3 billion chemical plant in the Territory. If the project proceeds, it is
                           estimated that 4000 construction workers will be required during the construction
                           phase, with an additional 500 during the operational phase. The plans are contingent
                           on sufficient gas resources being secured.

    Crux Liquids Project   Nexus Energy is proposing to undertake a US$1 billion development at the Crux
                           liquids and gas field located 700 kilometres north-west of Darwin. The development
                           will entail mooring a floating, production storage and offloading facility (classified
                           as engineering construction activity by the ABS) at the field and the construction
                           of a number of wells and interconnecting pipelines. Condensate and LPG will be
                           extracted, with natural gas re-injected back into the well. A final investment decision
                           is expected in 2008 with the potential of liquids production from 2010.

Browns Sulphide Project    Compass Resources NL is currently undertaking a feasibility study of its proposed
                           $750 million Browns Sulphide project near Batchelor. A number of production
                           scenarios are currently being examined with the potential for production to
                           commence in 2010 or 2011.

 Nolan’s Rare Earth and    Arafura Resources is currently in the process of assessing the feasibility of
     Phosphate Project     developing the Nolans rare earths-phosphate-uranium deposit located approximately
                           135 kilometres north of Alice Springs. If the study proves successful and government
                           approval is forthcoming, the company is proposing to freight the ore by train to
                           Darwin where it will be processed at a $300 million plant.
                           As the Territory continues to develop as a service and manufacturing hub for the
                           northern Australian mining and energy sectors, further opportunities are likely to be
                           created for the Territory construction industry.




                                                                                                   Construction      101
      2008-09 Budget




102     Construction
Chapter 11    Residential Property Markets
 Key Points    » Residential property, as defined in this chapter, is a key factor influencing
                 residential construction activity and includes the sale and availability of
                 residential land, movements in residential property markets and government
                 public housing initiatives.
               » Residential property markets in the Territory have performed strongly over the
                 past five years.
               » Land sales in the Territory, driven by strong population and economic growth,
                 peaked in 2007 and have been declining since. Nevertheless, a number of new
                 residential subdivisions are planned for release over the next few years that will
                 help to moderate prices growth for land and, in turn, help to alleviate pressures
                 on affordability.
               » Prices growth for houses and other dwellings moderated in most major centres
                 in 2007, reflecting the impact that rising interest rates and falling affordability
                 levels have had on demand.
               » Home loan affordability in the Territory declined to its lowest level on record in
                 2007. Nevertheless, the Territory continues to have the second highest level of
                 affordability of the jurisdictions.

              In this chapter, residential property consists of activities that are closely linked with
              residential construction.
              Residential property markets are subject to strong fluctuations in activity, real estate
              prices and sales volume. Activity in property markets is cyclical, fluctuating to reflect
              underlying demand that, in turn, depends on economic and demographic factors. The
              fluctuations in activity are also associated with financial capital flows into and out of
              investment in real estate.
              Residential property market activities include the sale and availability of residential
              land, movements in residential property market prices and sales numbers and
              government public housing initiatives.

              Land
              The completion of the defence build up and a general downturn in the onshore
              economy from 2000 to 2003 saw land sales in the Territory decline over the period.
              Land sales began a steady improvement in line with stronger housing demand in
              2004 before reaching peak levels in 2007, largely driven by strong property market
              activity and population growth. In 2007, land sales increased by 27.1 per cent in the
              Territory. Palmerston accounted for 67.8 per cent of all residential land sales, while
              the Strangways and Bagot town planning divisions in the Litchfield Shire accounted
              for 25.1 per cent of sales and Darwin accounted for 5.4 per cent of sales (Chart 11.1).




                                                                     Residential Property Markets         103
      2008-09 Budget


                   Chart 11.1: Territory   1200
               Residential Land Sales
          (number, moving annual total)    1000


                                            800
                                                                                      Total

                                            600
                                                                                  Palmerston

                                            400


                                            200                           Strangways and Bagot
                                                                                                                              Darwin
                                                    Alice Springs
                                               0
                                                   92   93   94     95   96      97    98 99 00 01 02     03   04   05   06   07   08
                                                                                        Year ended June

                                           Source: Australian Valuation Office

                              Darwin       Darwin’s newest suburb, Lyons, is a joint public-private sector development of
                                           approximately 690 residential lots on ex-defence land near Lee Point. Since the first
                                           stage release in November 2006, 117 residential lots have been made available by
                                           ballot to the general public. A Stage 7 release consisting of over 20 lots was expected
                                           to come onto the market in April 2008. If the current take up of lots continues, it is
                                           anticipated that the Lyons subdivision will be complete by the end of 2009, at which
                                           time Defence Housing Australia (DHA) expects to begin developing the new suburb
                                           of Muirhead.
                                           Muirhead is about 152 hectares of land located adjacent to Lyons. DHA plans to
                                           develop up to 500 blocks to house defence personnel and their families, with the rest
                                           to be sold to the private sector for residential housing.
                                           Development approval has been obtained for a 94 small lot subdivision in the
                                           Frances Bay area, as well as a 22 lot infill subdivision within the Parap area. These
                                           developments, combined with the continued construction of medium and high
                                           density dwellings, will continue to provide a wide array of housing options in the
                                           inner Darwin area.
                                           In 2007, the Territory Government announced that it would be releasing surplus
                                           land at Berrimah Farm for light industrial (20 hectares) and residential development
                                           (80 hectares). Around 700 residential dwelling lots are expected to be made
                                           available.

                        Palmerston         Strong population growth from 1995 to 1998, combined with the limited supply of
                                           land for housing development in Darwin, was the primary stimulus for the rapid
                                           growth of Palmerston. Palmerston’s ready supply of land has seen unprecedented
                                           take up of land in the suburbs of Rosebery, Farrar, Gunn (The Chase) and Durack
                                           (Fairway Waters). Demand has recovered rapidly from the low levels experienced
                                           in 2002-03, bolstered by owner-occupier and investment demand, and supported by
                                           increased home ownership incentives offered through the Territory Government’s
                                           HomeNorth Scheme.
                                           In response to the high demand, the Territory Government sought expressions of
                                           interest for the development of Bellamack in September 2007. Stage 2 of the process
                                           is currently under way and involves the submission of detailed proposals to the
                                           Government by developers. The approximate development area of Bellamack is
                                           90 hectares, with a potential yield of more than 700 lots. Around 15 per cent of the
                                           lots will be retained for first homebuyers and public housing. It is anticipated that the
                                           first lots will be released onto the market in mid-2009.


104     Residential Property Markets
                                  The next area for development in Palmerston is the eastern side of Mitchell Creek.
                                  Evaluation and land capability studies of the area are due to begin in 2008 in
                                  preparation for future release.

             Alice Springs        In Alice Springs, a shortage of residential land for development over the past
                                  decade was associated with native title restrictions on the release of Crown land. An
                                  Indigenous Land Use Agreement (ILUA) between the Northern Territory Government
                                  and the Lhere Artepe native title holders was finalised in April 2004. The agreement
                                  led to the release of 40 residential blocks in the subdivision of Stirling Heights.
                                  In November 2007, auction of the second stage release at Larapinta, comprising
                                  39 residential lots including six lots for first homebuyers, was sold to a local
                                  development company. Further stages of Larapinta will require additional ILUAs to be
                                  negotiated.
                                  An ILUA currently under negotiation with the Lhere Artepe native title holders has
                                  progressed with the potential for the release of up to 70 lots at Mt Johns Valley. Into
                                  the future, Mt Johns Valley is expected to provide about 600 residential lots.
                                  In the private sector, there remain about 25 urban lots available at the North Edge
                                  subdivision. Preliminary works have commenced on a 62 rural lot subdivision in
                                  Ragonesi Road, with the developer proposing 256 lots in six stages. Approval has
                                  also been obtained for a 94 rural lot subdivision on Stegar Road.

                                  Residential Housing
          Housing Prices          Movements in property markets continue to be the largest influence on the residential
                                  construction sector in the Territory. The residential building industry and property
                                  markets are subject to strong fluctuations in activity, real estate prices and sales
                                  volumes.
                                  The Territory did not participate in the national housing price boom that occurred
                                  over the period between 1998 and 2002. However, since mid-2002, Territory housing
                                  prices have experienced strong growth in line with strengthening population and
                                  economic growth rates.
                                  In the December quarter 2007, the Real Estate Institute of Australia reported that
                                  the median price for a unit in Darwin, at $309 000, was the third lowest of the capital
                                  cities while the median house price, at $412 500 was the fourth lowest.
Chart 11.2: Capital City Median   $000
        House and Unit Prices,    600

       December quarter 2007
                                   500

                                   400


                                   300


                                   200

                                   100


                                      0
                                           Hobart      Adelaide Brisbane       Darwin   Canberra  Perth   Melbourne Sydney
                                                                                Units      Houses

                                  Source: Real Estate Institute of Australia




                                                                                           Residential Property Markets      105
      2008-09 Budget


         Territory House Prices          The Real Estate Institute of the Northern Territory (REINT) reports that Palmerston
                                         had the largest increase in median house prices over the past five years (up
                                         by 103.2 per cent) followed by Darwin (up by 98.3 per cent), Katherine (up by
                                         86.5 per cent), Alice Springs (up by 72.4 per cent) and Tennant Creek (up by
                                         46.4 per cent).

       Table 11.1: Median House Prices                    Darwin            Palmerston             Katherine    Tennant Creek   Alice Springs
                                                 Median Annual Median Annual Median Annual Median Annual Median Annual
                                         December price change price change price change price change price change
                                         quarter  $000    %     $000    %     $000    %     $000    %     $000    %
                                         2002         208.0       9.5     187.0      10.5     144.0       3.8    70.0   -17.6   181.0    5.7
                                         2003         230.0      10.6     202.5       8.3     147.0       2.1    74.0    5.7    225.0   24.3
                                         2004         260.0      13.0     240.0      18.5     158.0       7.5    76.5    3.4    250.5   11.3
                                         2005         328.0      26.2     300.0      25.0     169.7       7.4    89.5   17.0    280.0   11.8
                                         2006         370.0      12.8     342.5      14.2     225.0      32.6   100.0   11.7    281.0    0.4
                                         2007         412.5      11.5     380.0      10.9     268.5      19.3   102.5    2.5    312.0   11.0
                                         Average annual          14.7                15.2                13.3            7.9            11.5
                                           growth rate (%)
                                         5 year growth           98.3              103.2                 86.5           46.4            72.4
                                           rate (%)

                                         Source: Real Estate Institute of the Northern Territory

                                         Strengthening economic and population growth, relatively low interest rates and
                                         increasing investor confidence were the primary drivers of house price growth in
                                         Darwin and Palmerston over this period. Strong growth in house prices in Katherine
                                         reflect a number of additional factors such as increased public sector activity
                                         (especially following the commencement of the Commonweath’s Northern Territory
                                         Emergency Response (NTER) in 2007) and limited releases of new residential land
                                         onto the market over recent years.
                                         Relatively low levels of land release and residential construction activity in Alice
                                         Springs, coupled with strengthening demand for housing, have been some of the
                                         primary drivers of growth in house prices in Alice Springs over the past five years.
                                         As with Katherine, the Emergency Response has also led to increased demand for
                                         housing in Alice Springs, which in turn has been reflected in the strong growth in
                                         house prices reported over 2007.
                                         Annual growth in median house prices strengthened in Alice Springs over 2007,
                                         however in other major centres price growth moderated. Despite slowing rates of
                                         growth, Katherine recorded the strongest growth in median house prices increasing
                                         by 19.3 per cent to $268 500 followed by Darwin (up 11.5 per cent to $412 500),
                                         Alice Springs (up by 11 per cent to $312 000), Palmerston (up by 10.9 per cent to
                                         $380 000) and Tennant Creek (up by 2.5 per cent to $102 000).

                 Territory Other         The ‘other dwellings’ market (townhouses, apartments and units) tends to be
                Dwellings Prices         significantly more volatile than the market for houses, with prices fluctuating with
                                         the release of major new developments, changes in investor sentiment and distinct
                                         cycles of under and over supply.
                                         REINT reports that Katherine experienced the strongest growth (up by 92 per cent)
                                         in median other dwelling prices in the five years to December 2007 followed by
                                         Palmerston (up by 90.8 per cent), Darwin (up by 85 per cent) and Alice Springs (up
                                         by 68.3 per cent).



106     Residential Property Markets
Table 11.2: Median Unit Prices                                 Darwin              Palmerston           Katherine               Alice Springs
                                                   Median Annual                 Median Annual       Median Annual         Median Annual
                                                    price change                  price change        price change          price change
                                  December quarter $000     %                     $000    %           $000    %             $000    %
                                  2002                    167.0         10.6     141.5      28.6     112.0        n.a.     129.0            7.5
                                  2003                    160.0         -4.2     125.0      -11.7    156.5        39.7     124.5         -3.5
                                  2004                    175.0          9.4     134.5       7.6      95.5    -39.0        179.5        44.2
                                  2005                    242.0         38.3     193.0      43.5     136.3        42.7     200.0        11.4
                                  2006                    300.0         24.0     245.0      26.9     170.0        24.8     212.5            6.3
                                  2007                    309.0          3.0     270.0      10.2     215.0        26.5     209.5         -1.4
                                  Average annual                        13.1                13.8                  13.9                  10.2
                                    growth rate (%)
                                  5-year growth rate (%)                85.0                90.8                  92.0                  62.4

                                  Source: Real Estate Institute of the Northern Territory

                                  Over 2007, Katherine recorded the strongest growth in the median price of other
                                  dwellings, increasing by 26.5 per cent to $215 000, followed by Palmerston (up
                                  10.2 per cent to $270 000) and Darwin (up by 3 per cent to $309 000). Alice Springs
                                  recorded a decline in other dwelling prices (down by 1.4 per cent to $209 500) over
                                  the year.

            Sales Volume          Sales numbers for both houses and other dwellings in the Territory continued to
                                  decline in 2007. The Australian Valuation Office reports that the number of house
                                  sales declined by around 5 per cent in 2007, following a decline of 4.4 per cent
                                  in 2006. Sales of other dwellings fell significantly more than houses during 2007,
                                  declining by 8.7 per cent, following an 11.2 per cent decline in 2006. The decline in
                                  sales numbers since 2005-06 reflects both the impact of strongly rising prices and six
                                  interest rate rises by the Reserve Bank of Australia over this period.
Chart 11.3: Territory House and   6000
Other Dwelling Sales (number)                                                                                      Total
                                  5000


                                  4000


                                  3000                                                                            Houses


                                  2000
                                                                                                             Other dwellings
                                  1000


                                      0
                                          92   93   94    95    96      97     98 99 00 01 02          03    04     05     06     07   08     09
                                                                                 Year ended June
                                  Source: Australian Valuation Office

          Vacancy Rates           Territory rental vacancy rates were at relatively high levels for several years until early
                                  2002, reflecting a general over supply of residential properties. Since then, vacancy
                                  rates have fallen to historically low levels that indicate demand has significantly
                                  outpaced supply. REINT reports the average residential vacancy rates in 2007 as:
                                  •	 Darwin – 1.4 per cent for houses and 1.3 per cent for units;
                                  •	 Palmerston – 1.7 per cent for houses and 1.6 per cent for units;




                                                                                                    Residential Property Markets                   107
      2008-09 Budget


                                          •	 Alice Springs – 2.8 per cent for houses and 2.6 per cent for units; and
                                          •	 Katherine – 1.8 per cent for houses and 2.0 per cent for units.

                                                                       Darwin             Palmerston          Katherine         Alice Springs
      Table 11.3: Overall Vacancy Rates   December quarter               %                    %                  %                    %
                                          2002                            6.8                   6.9                7.2                4.9
                                          2003                            7.2                   4.6                4.1                7.0
                                          2004                            4.1                   4.7                5.6                8.1
                                          2005                            4.4                   3.4                3.0                3.7
                                          2006                            4.6                   2.0                4.2                7.1
                                          2007                            2.1                   2.2                1.0                2.0
                                          Source: Real Estate Institute of the Northern Territory

                     Rental Prices        Historically low vacancy rates across the Territory and strong demand for rental
                                          properties led to significant growth in weekly rental prices in 2007. According to
                                          the REINT, the median rental price for a three-bedroom house in Darwin increased
                                          by 42.9 per cent (to $450 per week) over the year to the December quarter 2007.
                                          Palmerston recorded the next highest increase (up by 25 per cent to $400 per week)
                                          followed by Alice Springs (up by 10.9 per cent to $355 per week) and Katherine
                                          (up by 9.1 per cent to $300 per week). Rental growth for other dwellings followed a
                                          similar trend.

         Table 11.4: Median 3-bedroom                                     Darwin           Palmerston          Katherine         Alice Springs
           House Weekly Rental Prices                             Median Annual         Median Annual        Median Annual Median Annual
                                                                   Rent change           Rent change          Rent change Rent change
                                          December quarter            $          %          $          %       $          %       $          %
                                          2002                      230         -2.1      220         10.0    235        -6.0    260         4.0
                                          2003                      260         13.0      250         13.6    245         4.3    260         0.0
                                          2004                      270          3.8      260          4.0    250         2.0    270         3.8
                                          2005                      300         11.1      300         15.4    260        4.0     280         3.7
                                          2006                      315          5.0      320          6.7    275        5.8     320        14.3
                                          2007                      450         42.9      400         25.0    300        9.1     355        10.9
                                          Average annual                        14.4                  12.7               5.0                 6.4
                                          growth rate (%)
                                          Source: Real Estate Institute of the Northern Territory

                                          REINT reports that weekly rental prices for a two-bedroom unit in Darwin increased
                                          by 50 per cent to $360 per week over the year to the December quarter 2007.
                                          Palmerston recorded the next highest increase (up by 36 per cent to $340 per week),
                                          followed by Katherine (up by 12.5 per cent to $270 per week) and Alice Springs (up
                                          by 12 per cent to $280 per week).




108     Residential Property Markets
Table 11.5: Median 2-Bedroom Unit                                Darwin              Palmerston          Katherine      Alice Springs
             Weekly Rental Prices                    Median Annual                Median Annual       Median Annual    Median Annual
                                                      rent change                  rent change         rent change      rent change
                                    December quarter   $      %                     $      %            $      %         $      %
                                    2002                      180       -5.3        150       -3.2      185   -15.9     185       2.8
                                    2003                      180         0.0       160        6.7      185     0.0     190       2.7
                                    2004                      210       16.7        173        7.8      200     8.1     210     10.5
                                    2005                      220         4.8       200       15.9      190     -5.0    220       4.8
                                    2006                      240         9.1       250       25.0      240    26.3     250     13.6
                                    2007                      360       50.0        340       36.0      270    12.5     280     12.0
                                    Average annual                      14.9                  17.8              7.9               8.6
                                      growth rate (%)

                                    Source: Real Estate Institute of the Northern Territory

                                    The relative strength of growth in rental incomes compared to housing prices over
                                    2007 has seen a recovery in rental yields in most regions across the Territory.

                Rental Yields       The gross rental yield for a 3-bedroom house in Darwin gradually declined over the
                                    past five years, to a multi-year low of 4.1 per cent in the September quarter 2006.
                                    This reflects growth in median house prices outstripping the growth in median rental
                                    prices over this period. Since then, yields have steadily recovered to 5.7 per cent in
                                    the December quarter 2007, as rental prices have increased at a significantly faster
                                    rate than house prices.
                                    Rental yields for the other regions have followed a similar trend with the exception
                                    of Katherine, where they continue to decline. The decline in Katherine reflects the
                                    impact of the booming property market driven by factors previously highlighted.
                                    In the December quarter 2007, Alice Springs recorded the highest gross rental
                                    yield for a 2-bedroom unit in the Territory at 6.9 per cent, followed by Katherine and
                                    Palmerston (both at 6.5 per cent) and Darwin (6.1 per cent).
                                    The large increases in rents and property prices recorded in the Territory over
                                    the past few years have significantly outpaced the growth of wages and salaries.
                                    Consequently, both home loan and rental affordability have also declined significantly.

      Housing Affordability         After peaking in late 2001, home loan affordability (as reported by the Real Estate
                Measures            Institute of Australia [REIA] and Deposit Power) in the Territory has been in steady
                                    decline, reaching record low levels in the December quarter 2007 (Chart 11.4). In
                                    annual terms, home loan affordability in the December quarter 2007 declined (that
                                    is, worsened) by 7.9 per cent in the Territory, with approximately 23.3 per cent of
                                    average family income allocated to loan repayments. Nevertheless, the Territory
                                    continues to have the second most affordable housing of the jurisdictions, behind the
                                    Australian Capital Territory.




                                                                                                     Residential Property Markets       109
      2008-09 Budget


      Chart 11.4: Home Loan Affordability   Index number
                                              90

                                             80

                                             70

                                             60                                                                       Northern Territory
                                             50

                                             40
                                                                                                                      Australia
                                             30

                                             20

                                              10

                                               0
                                                   95     96    97      98      99     00    01    02       03   04      05       06   07    08
                                                                                      Year ended June

                                            Source: Real Estate Institute of Australia and Deposit Power

                                            The 4th Annual Demographia International Housing Affordability Survey: 2008
                                            reports that Darwin’s median house price is equivalent to 5.9 times median
                                            Darwin household income. The Demographia publication ranked Darwin’s housing
                                            affordability the 171st lowest of the cities in the survey (227 cities in Australia,
                                            Canada, Ireland, New Zealand, the United Kingdom and the United States).
                                            Nevertheless, of the 28 cities surveyed in Australia, Darwin ranks as the ninth most
                                            affordable.
                                            Strong increases in rents over the past few years have seen rental affordability
                                            also decline significantly in the Territory. According to REIA and Deposit Power,
                                            26.1 per cent of a family’s income was required to meet rent payments in Darwin in
                                            the December quarter 2007, compared with 18.7 per cent in the December quarter
                                            2006. This is the second highest proportion in the capital cities behind Tasmania and
                                            represents a significant turnaround in rental affordability over 2007. In the December
                                            quarter 2007, 23.3 per cent of a family’s income was required to meet average loan
                                            repayments for the purchase of a home compared to 26.1 per cent to meet rental
                                            payments. This indicates that it was cheaper to purchase a home in the Territory in
                                            the December quarter 2007 than to rent.
        Chart 11.5: Proportion of Income    %
                                            30
        Needed to Meet Rent Payments

                                            25


                                            20


                                            15


                                            10


                                              5


                                              0
                                                        ACT       Vic          WA         SA           NSW     Qld         NT          Tas
                                                                             Dec quarter 2006             Dec quarter 2007

                                            Source: Real Estate Institute of Australia and Deposit Power

                      Dwelling Size         The ABS publication Australian Social Trends 2001 (the most current year that data
                                            is available) reports that between 1993 and 2000 the size of both new public sector
                                            and private sector houses increased. Over this time period, the size of new private
                                            sector houses increased by 20.9 per cent to 220m2 in the Territory, while the size of


110      Residential Property Markets
                                      new public sector houses increased by 38.1 per cent to 163m2. At the national level,
                                      the size of new private sector houses increased 22.2 per cent 231m2 while the size
                                      of new public sector houses increased 31.5 per cent to 171m2. These figures indicate
                                      that while the level of house prices has increased substantially, the size of newer
                                      homes has increased relative to the size of existing dwellings, and this ‘quantity
                                      effect’ accounts for some of the price growth.
                                      The 2006 Census reported that in the Northern Territory, the proportion of dwellings
                                      with four or more bedrooms increased to 18.2 per cent, up 2.4 percentage points
                                      from the proportion reported in the 2001 Census (Table 11.6). Nationally the
                                      proportion of dwellings with four or more bedrooms in the 2006 Census was
                                      28.1 per cent, an increase of 2.9 per cent on the proportion reported in the 2001
                                      Census.

Table 11.6: Proportion of Dwellings   Year ended December                2001      2006
  with Four or More Bedrooms (%)      Northern Territory                 15.8      18.2
                                      Australia                          25.2      28.1
                                      Source: Census 2001, Census 2006


                                      Public Housing
                                      In the Territory, the main provider of housing assistance is Territory Housing, which
                                      manages the Territory Government’s Indigenous, public and government employee
                                      housing stock. DHA manages defence housing. These organisations provide partially
                                      or fully subsidised accommodation to eligible low-income earners, Indigenous
                                      Territorians, public sector employees and defence personnel.
                                      The number of households in public housing in the Territory is relatively high, with
                                      2006 Census data reporting that 8.3 per cent of dwellings were identified as public
                                      housing.

           Territory Housing          Territory Housing owns and manages more than 6850 dwellings throughout the
                                      Territory, consisting of public housing, government employee housing (GEH) and
                                      industry housing. Public housing is located in urban and town centres, while GEH
                                      and industry housing is predominantly in remote Indigenous communities.
                                      Public housing dwellings occupied by government employees in urban areas are
                                      currently being sold off, with the proceeds earmarked for upgrading police GEH
                                      in remote areas. As at January 2008, a total of 51 houses had been sold, raising
                                      $15 million towards the program. A further 16 houses and 14 units are earmarked for
                                      sale over the year.
                                      In 2006-07, Territory Housing invested a total of $42 million in the building and
                                      construction industry to support economic activity throughout the Territory through
                                      construction, repairs and maintenance of housing. Significant projects included the
                                      investment of $2.5 million in the construction of nine new government employee
                                      dwellings in remote localities and the completion of a $2 million renovation and
                                      upgrade of the Stuart Lodge complex in Alice Springs. In addition, $0.93 million in
                                      grants to community organisations were awarded to construct, purchase, upgrade
                                      and repair buildings under the Community Housing Program and the Crisis
                                      Accommodation Program.

                   HomeNorth          Territory Housing supports home ownership in the Territory through the HomeNorth
                                      Xtra Scheme. The scheme provides assistance to low and middle income households
                                      which are unable to obtain finance through private sector financial institutions.
                                      Since the inception of the scheme on 1 July 2005, Territory Housing has funded
                                      625 loans and shared equity purchases to the value of $120.5 million. In May 2007,


                                                                                          Residential Property Markets        111
      2008-09 Budget


                                       the scheme was reviewed and amended to better target low and middle income
                                       clients in larger household structures.

            Indigenous Housing         There are currently more than 6900 dwellings in Indigenous communities across the
                                       Territory.
                                       In 2005-06, a new Indigenous Housing and Infrastructure Agreement and Common
                                       Policy Framework were finalised and signed by respective Commonwealth and
                                       Northern Territory Government ministers. Under the Agreement, the Territory
                                       Government will deliver the housing and housing-related infrastructure components
                                       in accordance with a broad framework agreed with the Commonwealth.
                                       In late 2006, the Territory Government announced the investment of an extra
                                       $100 million in remote housing over the next five years, and that Territory Housing
                                       would assume responsibility for remote housing provision. This will include extending
                                       a public housing management framework to remote areas. Subsequently, the
                                       Commonwealth committed $140 million to strategic housing and infrastructure
                                       projects in several major communities and town camps. This was complemented in
                                       May 2007 by another Commonwealth announcement that a new Indigenous housing
                                       program would begin from 1 July 2008, to be known as the Australian Remote
                                       Indigenous Accommodation program (ARIA).
                                       During 2006-07, $25.2 million was invested in the construction of 64 new dwellings,
                                       while 66 dwellings were upgraded and renovated in remote areas.
                                       The Territory Government provides support to Indigenous community housing
                                       organisations (ICHOs) to increase their capacity to train and employ Indigenous
                                       people in all roles related to providing Indigenous housing, infrastructure and
                                       essential services. In 2006-07, $16.7 million of Territory funding was provided to 70 of
                                       the 73 ICHOs for Indigenous housing repairs and maintenance.
                                       In September 2007, the Territory Government and the Commonwealth signed a
                                       Memorandum of Understanding for a funding commitment of $793 million over four
                                       years. This included all existing commitments and $513 million in new funding, to be
                                       utilised for Indigenous housing and essential infrastructure.
                                       The program will deliver:
                                       •	 around 750 new houses including new subdivisions;
                                       •	 over 230 new houses to replace houses to be demolished;
                                       •	 over 2500 housing upgrades;
                                       •	 essential infrastructure to support new houses; and
                                       •	 improvements to living conditions in town camps.

              Defence Housing          DHA provides housing for defence personnel through its ownership of dwellings,
                                       development activity, and through the leasing of properties from the private sector.
                                       DHA-managed stock in the Territory increased from about 1250 dwellings in 1992 to
                                       2248 dwellings in June 2007.




112     Residential Property Markets
   Chapter 12        Tourism
      Key Points      » Tourism plays a significant role in the Northern Territory economy, creating
                        demand and generating employment in a range of different industries, including
                        hospitality, retail trade and transport.
                      » Since 2003-04, tourism’s contribution to the economy has been measured by a
                        new method, called a Tourism Satellite Account.
                      » In 2006-07, tourism gross value added was estimated by Northern Territory
                        Treasury to be $945 million. Tourism accounted for 7.8 per cent of Territory GSP.
                        Tourism consumption was $2.5 billion in 2006-07, which is 25 per cent of the
                        Territory’s total final consumption expenditure.
                      » Total visitor numbers and nights in the Territory, including international, domestic
                        overnight and domestic same day visitors, increased noticeably in 2006-07.
                        Total visitor expenditure increased by 19.1 per cent in 2006-07 supported by
                        continued growth in interstate and international expenditure.
                      » In 2007-08, a consolidation of tourism activity is expected in the Territory after
                        strong growth in 2006-07, with the long-term outlook broadly positive.


                     Introduction
                     Tourism plays a significant role in the Territory economy, contributing relatively more
                     to gross state product (GSP) than in any other jurisdiction. Unique flora, fauna and
                     geographical features, as well as Indigenous art and culture, are key attractions for
                     visitors. Cruise and defence force ship visits also make a significant contribution to
                     Territory tourism.
                     The growth in tourism over any period typically reflects prevailing economic
                     conditions both domestically and internationally. Factors such as exchange rates
                     and growth in disposable household income are key drivers. Tourism expenditure
                     is largely a discretionary component of consumer expenditure and, as such, both
                     income growth and consumer confidence can have a significant effect on tourism
                     activity. International tourism is particularly sensitive to geopolitical conditions and
                     health concerns, while the availability and cost of airfares and fuel prices can also
                     impact on tourism activity in the Territory. Visitor numbers are also influenced by
                     regular events in the Territory such as the Darwin Cup, Arafura Games, Masters
                     Games and defence exercises, as well as large one-off events in other jurisdictions
                     such as the Commonwealth Games, from which there is a flow-on of visitors to the
                     Territory.

                     Concepts and Definitions of Tourism
Concept of Tourism   Tourism is defined differently to other standard industries, such as manufacturing or
                     transport, as it is defined by the nature of the consumer (demand side), rather than
                     the process by which goods and services are produced (supply side). That is, tourism
                     activity and expenditure is defined by the status of the customer as a visitor, while
                     non-tourism activity and expenditure is defined by the status of the customer as a
                     resident.
                     Tourism is a component of many other standard industries, as tourists create
                     demand in a range of industries including accommodation, cafes, restaurants and
                     food outlets, cultural and recreational services, retail trade and transport. In some
                     standard industries, a high proportion of output is directly linked to tourism, while in
                     others, only a small proportion may be attributed to tourism.


                                                                                                    Tourism     113
      2008-09 Budget


                                   Tourism comprises the activities of visitors travelling to, and staying in, places
                                   outside their usual environment for not more than one consecutive year for leisure,
                                   business and other purposes. This identifies tourism as more than just leisure travel,
                                   also including travel for business, health, education, religious and other reasons.
                                   It includes most short-term domestic and international travel away from the normal
                                   place of residence.

          Definitions of Tourism   Standard Australian Bureau of Statistics (ABS) measures of production are not
                      Measures     available for tourism. As tourism output is included, in varying degrees, in all
                                   industries, the ABS uses a satellite account to extract the tourism contribution in all
                                   industries and then totals them to get a proxy measure of total tourism activity in the
                                   Australian economy.
                                   The ABS produces a Tourism Satellite Account (TSA) which calculates a measure of
                                   tourism activity using the national accounting framework. The ABS does not currently
                                   provide this at a state level. However, in collaboration with Tourism NT, the Northern
                                   Territory Tourism Satellite Account (NT TSA) has been developed by the Sustainable
                                   Tourism Cooperative Research Centre (STCRC). The STCRC has produced tourism
                                   satellite accounts for each jurisdiction. In October 2007, STCRC released a revised
                                   version of the NT TSA, providing estimates of the value of tourism activity in the
                                   Territory for 2003-04.
                                   The TSA and the NT TSA measure the direct economic contribution of tourism to the
                                   economy, that is, where a direct physical or economic relationship exists between the
                                   visitor and producer of the good or service. The direct economic contribution primarily
                                   measures the immediate effect of expenditure made by visitors. For example, a
                                   visitor may purchase a meal from a restaurant; the direct economic contribution to the
                                   economy of the purchase is measured by the transfer of funds from the visitor to the
                                   restaurant.
                                   The flow-on effects of expenditure made by visitors are known as the indirect
                                   economic contribution of tourism or indirect tourism demand. Indirect tourism demand
                                   accounts for other industries, not in direct contact with tourists, whose goods and
                                   services support the direct demand for tourism goods and services by the industries
                                   in direct contact with tourists. For example, where a visitor purchases a steak from a
                                   restaurant, indirect tourism demand is generated for the cattle farmer.
                                   To complement the estimates of the direct contribution of tourism in the TSA,
                                   Tourism Research Australia (TRA) has recently undertaken a detailed analysis of
                                   the indirect effects of tourism activity using economic modelling at the national level.
                                   The combined measures of the direct and indirect economic contribution of tourism
                                   provide a more complete account of tourism activity. Currently, the ABS and TRA do
                                   not publish a measure of indirect tourism demand for the Northern Territory, but this is
                                   an avenue of future research.
                                   Of the measures of tourism activity generated from the TSA and NT TSA, tourism
                                   gross value added (TGVA) and tourism consumption are discussed in this chapter.
                                   TGVA is a supply side measure, while tourism consumption is a demand side
                                   measure. The measures are defined as follows.
                                   •	 TGVA measures the value of tourism-related final goods and services produced in
                                      all industries, less the value of inputs used to produce these goods and services.
                                      TGVA effectively measures the value of tourism-produced goods and services at
                                      the final stage of production. In addition, TGVA excludes net taxes (taxes paid less
                                      subsidies received). TGVA provides a measure of tourism’s contribution to the
                                      economy from the industry or supply side.



114     Tourism
                                     •	 Tourism consumption measures actual and imputed expenditure by a visitor, or on
                                        behalf of a visitor, for and during their stay at the destination. Tourism consumption
                                        measures the total market value of the goods and services consumed by visitors,
                                        including the value added at each stage of the production process, not just the final
                                        stage of production.
                                     TGVA measures the value added only at the final stage of production. Tourism
                                     consumption measures the value added at each stage of production, therefore it is
                                     significantly larger than TGVA.

                                     Tourism Measures 2003-04 to 2006-07
                                     Northern Territory Treasury has used the 2003-04 NT TSA estimates of TGVA and
                                     tourism consumption as a benchmark for tourism activity and has moved them
                                     forward using both TRA expenditure data and ABS data as indicators, to estimate
                                     the contribution of tourism to the economy in 2006-07. Table 12.1 presents the three
                                     measures of tourism for the Territory.

Table 12.1: Tourism Measures for                            2003-04¹         2004-052             2005-062            2006-072
            the Northern Territory                                                   %                    %                   %
                                                               $M          $M      change       $M      change       $M     change
              2003-04 to 2006-07
                                     TGVA                       616         742      20.5        828      11.5       945     14.2
                                     Tourism Consumption      1 787       2 094      17.2      2 095       0.1     2 495     19.1

                                     1 Revised 2003-04 NT TSA October 2007. STCRC expects the 2005-06 NT TSA may be available in 2009
                                     2 Estimated by Northern Territory Treasury
                                     Source: Northern Territory Treasury, Tourism Research Australia, Tourism NT, Sustainable Tourism
                                     Cooperative Research Centre

                                     Since 2003-04, TGVA has reported solid growth in line with the broadly based
                                     expansion across the Territory economy. In 2006-07, TGVA was estimated at
                                     $945 million in the Territory, up 14.2 per cent from 2005-06.
                                     Between 2003-04 and 2004-05, tourism consumption is estimated to have grown
                                     by 17.2 per cent. This was consistent with growth in total visitor numbers, driven by
                                     strong increases in domestic overnight visitors. In 2005-06, tourism consumption
                                     growth stabilised in line with visitor numbers and nights. The Territory experienced
                                     19.1 per cent growth in tourism consumption in 2006-07, consistent with strong
                                     growth in total visitor activity in the Territory.

                                     NT TSA Estimates
                                     Using the TSA method, which is an internationally recognised methodology adopted
                                     by the ABS and STCRC, the values of TGVA and tourism consumption are calculated
                                     at industry level, with the collective industry totals being the overall measure of the
                                     contribution of tourism to the economy. Under international TSA standards, each
                                     industry is classified according to the proportion of its output that is consumed by
                                     visitors. There are three industry classifications in the TSA – tourism characteristic
                                     industries, tourism connected industries and all other industries.
                                     •	 Where at least 25 per cent of an industry’s output is consumed by visitors,
                                        an industry is known as a ‘tourism characteristic industry’. An example is the
                                        accommodation industry.
                                     •	 Where an industry’s output is consumed by visitors in volumes which are significant
                                        for the visitor and/or the producer, this industry is known as a ‘tourism connected
                                        industry’. An example is the retail trade industry.
                                     •	 Industries that do not produce tourism products, although some of their products
                                        may be consumed by visitors, are classified as all other industries.


                                                                                                                          Tourism       115
      2008-09 Budget


                  Tourism Gross         Using the STCRC 2003-04 figures as a base, Northern Territory Treasury
                    Value Added         estimates that in 2006-07, the first measure in Table 12.1, TGVA was $945 million
                                        in the Territory. Among tourism characteristic industries, air and water transport
                                        is the largest single contributor to tourism gross value added, contributing
                                        $197.2 million. (For more information on air and water transport, see the Transport
                                        and Communication Infrastructure chapter.) The accommodation and cafes,
                                        restaurants and food outlets industries are also major contributors to TGVA,
                                        contributing $120.3 million and $98.8 million respectively. Among the remaining
                                        tourism characteristic industries, travel agency and tour operator services contribute
                                        $72.9 million, taxi transport contributes $18.1 million and motor vehicle hiring
                                        contributes $25.3 million (see Chart 12.1).
            Chart 12.1: Tourism Gross                                Travel agency and tour operator services
                          Value Added                                                $72.9M
                                             All other industries $99.9M                          Taxi transport $18.1M



                                                                                                           Air and water transport
                                                                                                                   $197.2M

                                           Total tourism
                                        connected industries
                                             $312.4M

                                                                                                          Motor vehicle hiring
                                                                                                               $25.3M
                                                                                                     Accommodation
                                                                                                        $120.3M
                                                                   Cafes, restaurants and food outlets
                                                                                $98.8M

                                        Source: Northern Territory Treasury, Sustainable Tourism Cooperative Research Centre

                                        Total tourism connected industries, including manufacturing, other transport,
                                        clubs, pubs, taverns and bars, and retail trade, are estimated to have contributed
                                        $312.4 million to TGVA in 2006-07.
                                        The residual component of TGVA, all other industries, was valued at $99.9 million in
                                        2006-07 in the Territory (see Chart 12.1).

          Tourism Consumption           The third measure reported in Table 12.1 is tourism consumption. In 2006-07, tourism
                                        consumption was estimated by Treasury to equal $2494 million.
                                        Tourism consumption is derived from Tourism Research Australia (TRA) expenditure
                                        data and is adjusted by STCRC to include a number of additional components,
                                        including prepaid airfares and package tours purchased overseas, as well as imputed
                                        non-market services such as actual and imputed rent on holiday houses.
                                        In 2006-07, total visitor expenditure in the Territory was estimated by TRA to increase
                                        by $314 million to $1.96 billion, some 80 per cent of tourism consumption. Total visitor
                                        expenditure comprises international visitor expenditure, domestic overnight visitor
                                        expenditure and same day visitor expenditure. In 2006-07, international, domestic
                                        overnight and same day visitor expenditure increased by $40 million, $254 million
                                        and $20 million respectively in the Territory (Table 12.2).
                                        The Territory recorded the highest growth in total visitor expenditure of the
                                        jurisdictions in 2006-07, at 19.1 per cent. Nationally, total visitor expenditure rose by
                                        8.1 per cent (Table 12.2).




116     Tourism
  Table 12.2: Visitor Expenditure,                  International      Domestic Overnight              Same Day                      Total
              2005-06 to 2006-07                    $M     % change         $M     % change           $M         % change     $M       % change
                                     NSW           5 586     12.6         12 157         5.1         4 569          5.6     22 312           7.0
                                     Vic           2 981     19.5          7 967         0.5         3 226         11.6     14 174           6.4
                                     Qld           3 667       8.2        11 945         7.1         3 072         18.1     18 684           9.0
                                     SA             454      -11.3         2 711         5.0          931           4.0      4 096           2.7
                                     WA            1 543     18.2          4 530        13.8         1 296          6.8      7 369       13.4
                                     Tas            242      14.7          1 456        -2.1          435          12.4      2 133           2.3
                                     NT             423      10.4          1 419        21.8          119          20.2      1 961       19.1
                                     ACT            203      36.2           930         13.1          249          27.7      1 382       18.5
                                     Australia 15 098        12.7      43 122            6.0        13 897         10.2     72 117           8.1

                                     Source: Tourism Research Australia

                                     Tourism is worth more to Territory residents than in any other jurisdiction. Illustrating
                                     the importance of tourism to Territory residents, the Territory records the highest
                                     level of total visitor expenditure per head of resident population at $9122, compared
                                     to $3431 nationally (see Chart 12.2). The significant difference in the level of visitor
                                     expenditure per resident is largely due to the Territory’s relatively small resident
                                     population compared to other jurisdictions and the relatively high number of visitors.
 Chart 12.2: Tourism Expenditure           $
Per Head of Resident Population,     10 000
                        2006-07
                                      8 000


                                      6 000


                                      4 000


                                      2 000


                                               0
                                                   NSW      Vic       Qld          SA          WA          Tas       NT       ACT       Australia
                                     Source: Northern Territory Treasury, Tourism Research Australia, ABS Cat. No. 3101.0


                                     Tourism Visitors
     International Visitors          In 2006-07, international visitor expenditure in the Territory is estimated at
                                     $423 million, up from $360 million in 2005-06. The growth in international visitor
                                     expenditure is largely attributed to an increase in average nights spent in the Territory
                                     per international visitor. International visitors spent an average of nine nights in the
                                     Territory in 2006-07, an increase of 1.2 nights from 2005-06.
                                     As a share of total Territory visitor expenditure however, international visitor
                                     expenditure decreased marginally to 22 per cent in 2006-07 due to strong growth in
                                     domestic overnight and same day visitor expenditure.




                                                                                                                                      Tourism       117
      2008-09 Budget


           Chart 12.3: Territory Visitors   000
                                            3000

                                             2500     Total visitors

                                            2000

                                             1500
                                                      Domestic overnight visitors
                                             1000

                                                      Domestic day visitors
                                              500
                                                      International visitors
                                                 0
                                                     01            02            03          04         05           06              07
                                                                                      Year ended June

                                            Source: Tourism Research Australia

                     Domestic               The domestic overnight visitor category includes both interstate and intra-Territory
              Overnight Visitors            overnight visitors, with interstate visitors accounting for around two-thirds of total
                                            visitors.
                                            The domestic overnight market is typically the largest contributor to tourism visitor
                                            expenditure in the Territory. In 2006-07, domestic overnight expenditure increased by
                                            $254 million to $1419 million and comprised 72 per cent of total visitor expenditure in
                                            the Territory.
                                            The increase in domestic overnight visitor expenditure in 2006-07 is largely attributed
                                            to the strong growth in domestic overnight visitor numbers and interstate and
                                            intra-Territory visitor nights in the Territory, increasing by 8.0 per cent, 18.5 per cent
                                            and 15.4 per cent respectively (Chart 12.3). Holiday visitors formed the majority of
                                            interstate visitors to the Territory in 2006-07.
                                            The key factors affecting Territory domestic overnight tourism activity in 2006-07
                                            appear to be:
                                            •	 relatively high levels of consumer and business confidence;
                                            •	 increased competition and capacity of low-cost airline carriers;
                                            •	 continued growth in accommodation capacity; and
                                            •	 robust labour force conditions nationally.
                                            In addition, trends in the intra-Territory component of domestic overnight tourism
                                            activity may also be impacted by higher fuel prices in the Territory than in southern
                                            states and competition from other household goods and services.

             Same Day Visitors              Same day visitor expenditure largely represents intra-Territory visitors, although
                                            interstate same day visitors are a minor component.
                                            In 2006-07 in the Territory, same day visitor expenditure increased by 20.2 per cent to
                                            $119 million, despite same day visitor numbers declining by 2.3 per cent. Same day
                                            visitor expenditure made up 6.0 per cent of total visitor expenditure in the Territory.
                                            The solid increase in same day visitor expenditure and moderation in visitor numbers
                                            may be attributable in part to prices growth in tourism products in the Territory,
                                            meaning fewer people are spending more due to higher prices.
                                            For further insight into tourism activity indicators, see figures and comments in
                                            Table 12.3 at the end of the chapter.



118     Tourism
Tourism NT
Tourism NT is a Territory Government agency responsible for the development of
tourism in the Territory and advising the Minister on all matters relating to tourism.
Tourism NT markets and influences the development of the Northern Territory as a
competitive tourism destination. Its activities are focused on leisure (that is, holiday)
and meeting/conferences/incentive travel markets. These market segments can be
more readily influenced through marketing activities.

Outlook
The Northern Territory Tourism Forecasting Panel was established by Tourism NT in
April 2006 to provide tourism forecasts for the Territory using a combination of industry
intelligence and time series modelling provided by TRA forecasting analysis. The panel
consists of members from tourism-related government and business organisations,
and provides three-year forecasts for visitor numbers, nights and expenditure in the
Territory.
Results from the December 2007 panel meeting include the expectation of an overall
consolidation of tourism activity in the Territory in 2007-08 and 2008-09 after strong
growth in tourism indicators in 2006-07. Solid growth is forecast for 2009-10, with
total visitor numbers and expenditure expected to increase by 3.5 and 2.4 per cent
respectively. However recent interest rate rises in Australia, combined with a
strengthening of the Australian dollar, may dampen an otherwise buoyant domestic
and international tourism market.
The panel expects moderate growth in international visitor numbers, nights and
expenditure in the Territory in 2007-08, as the Australian dollar is expected to remain
strong and international attention turns to China for the 2008 Olympic Games.
Increases in airline seating capacity are expected in late 2008, which should relieve
peak period seat shortages and contribute to strong growth in Territory visitor
numbers in 2008-09 and 2009-10. Continued strong business links with Asia and the
completion of the Darwin Convention Centre and the new cruise ship terminal are
also expected to contribute to positive growth in international tourism activity and
expenditure in the Territory in 2008-09 and 2009-10.
Increased domestic airline seating capacity in 2008 is expected to contribute to some
positive growth in interstate tourism activity in the Territory in the medium term while
having a dampening effect on intra-Territory tourism activity at the same time. The
Central Australian region will be exposed to a new interstate market as Tiger Airways
continues flights on a Melbourne-Alice Springs route from March 2008.
In 2008-09, the panel expects a moderation in interstate visitor nights to have
a dampening effect on interstate expenditure as low-cost carriers provide the
opportunity for more visitors to have shorter stays in the Territory. Intra-Territory
tourism activity is expected to suffer in the short term, with visitor numbers and
nights expected to fall by 1.9 per cent and 7.9 per cent in 2008-09. After five years
of reporting negative growth in the Territory, intra-Territory expenditure is expected
to improve over the next two years before returning to its recent downward trend.
Intra-Territory expenditure is forecast to increase by 16.7 per cent in 2007-08, and by
2.7 per cent in 2008-09.




                                                                               Tourism      119
      2008-09 Budget


      Table 12.3: Tourism Indicators
                                                                                     Year on   5 yr Average
      Northern Territory                                2005-06       2006-07     Year % change Growth                             Comment
      Total Visitor Numbers (000)1                         2 303         2 359             2.4           0.6    In 2006-07, total visitors to the Territory
        Domestic day                                         923           902            -2.3           0.6    increased by 2.4%, attributed to solid growth
                                                                                                                in domestic overnight visitors.
        Domestic overnight                                 1 017         1 098             8.0           1.4
        International                                        363           359            -1.1           -1.5
      Visitor Nights (000)                                 9 225        10 782            16.9           1.6    Visitor nights experienced strong growth in
        Intrastate                                         1 063         1 227            15.4           -5.9   2006-07 after zero growth in 2005-06. An
                                                                                                                increase in interstate visitors was the key
        Interstate                                         5 322         6 309            18.5           4.4    contributor to growth.
        International                                      2 840         3 246            14.3           0.3
      Average Nights per visitor                              6.7           7.4           10.7           1.0    After negative growth in 2005-06, solid
        Intrastate                                            2.9           3.3           11.1           0.4    growth in average nights per visitor was
                                                                                                                reported for all visitors in the Territory
        Interstate                                            8.1           8.7            7.5           -2.7   in 2006-07, indicating that visitors are
        International                                         7.8           9.0           15.6           1.9    lengthening their stays.

      Total Expenditure ($M)2                              1 624         1 961            20.8           n.a.   After a weak performance in 2005-06,
        Domestic Overnight                                 1 165         1 419            21.8           n.a.   expenditure in the Territory reported strong
                                                                                                                growth in all categories, supported by an
        International                                        360           423            17.5           n.a.   increase in total visitor numbers and total
        Domestic Day                                          99           119            20.2           n.a.   visitor nights. In 2006-07 in the Territory,
      Average Expenditure per visitor                      1 177         1 346            14.4           n.a.   expenditure per visitor and expenditure per
                                                                                                                night recorded 14.4% and 3.3% growth
        Domestic                                           1 146         1 292            12.8           n.a.   respectively. This also reflects higher prices
        International                                        992         1 178            18.8           n.a.   for tourism products.
      Average Expenditure per night                          176           182             3.3           n.a.
        Domestic                                             182           188             3.2           n.a.
        International                                        127           130             2.8           n.a.
      International backpacker numbers (000)3                 92             94            2.6           -1.6   In 2006-07, backpacker numbers and nights
        Backpackers as a proportion of international        25%            26%            1ppt           n.a.   in the Territory continued to recover to
          visitors                                                                                              long-term levels. The increasing availability
                                                                                                                and attractive profile of backpacker
        Backpackers as a proportion of total visitors         7%            6%           -1ppt           n.a.   accommodation is expected to contribute to
      International backpacker nights (000)                  664           670             0.9           -1.9   growth in backpackers.

      Self-drive visitors entering NT (000)4                 241           212           -12.2           1.9    Total self-drive visitors entering the Territory
        Domestic                                             194           171           -11.9           3.8    and self-drive visitors within the Territory
                                                                                                                decreased in 2006-07, reflecting a fall in
        International                                         47             41          -13.8           -4.4   intra-Territory visitors, higher fuel prices and
      Self-drive visitors within NT (000)                    510           473            -7.2           -5.0   more affordable air travel.
        Domestic                                             439           397            -9.6           -5.5
        International                                         71             76            7.3           -2.2
      Cruise ship visits*                                     44             43           33.3          14.9    Cruise ship visits were up in 2006-07,
                                                                                                                while defence ship visits and visit days
      Defence ship visits*                                    59             47          -10.6           -6.6   reported negative growth, due to operational
      Defence ship days*                                     214           149           -19.2         -11.8    demands.

      Selected National Park Visitors (000)                1 234         1 260             2.1           -1.6   National park visitor numbers in the Territory
      Kakadu5                                                196           216            10.0           2.6    increased by 2.1% in 2006-07. Visitation
                                                                                                                to Kakadu and Litchfield national parks
      Uluru-Kata Tjuta6                                      354           338            -4.5           -2.6   experienced strong growth, while the other
      Nitmiluk                                               234           234            -0.1           -0.6   major parks reported a moderation in growth,
      Watarrka                                               219           214            -2.1           -5.1   reflecting increased visitor numbers to the
                                                                                                                Top End.
      Litchfield                                             231           258            11.8           -0.8

      *Calendar year data.
      n.a.: not available
      1 International and domestic tourism data are obtained from the TRA International Visitor Survey and National Visitor Survey and are calculated using
        different methodologies
      2 International expenditure includes package expenditure and domestic expenditure includes airfares and long distance traffic costs
      3 This data series shows the number of people who spent one or more nights in backpacker/hostel accommodation on their trip to the Territory
      4 These figures are subject to high volatility and should be interpreted with caution
      5 Kakadu National Park visitor numbers are generated using calibrated vehicle counters
      6 Uluru-Kata Tjuta National Park visitor numbers represent ticket sales and do not include children under 16 years of age who have free entry
      Source: Tourism Research Australia, Tourism NT, Darwin Port Corporation, Department of Business, Economic and Regional Development, Parks
      Australia, Department of Natural Resources, Environment and the Arts


120      Tourism
Chapter 13     Retail and Wholesale Trade
  Key Points    » Retail and wholesale trade accounted for 6.1 per cent of Northern Territory GSP
                  and 14.1 per cent of resident employment in 2006-07.
                » In 2007, real retail turnover grew by 7.7 per cent in the Territory despite the
                  uncertainty surrounding future increases in interest rates and petrol prices.
                » Territory real retail turnover is forecast to increase by 6.2 per cent in 2007-08
                  and moderate to 4.2 per cent in 2008-09.


               Retail trade is the trade in goods for resale to final consumers for personal or
               household consumption or in selected repair activities via stores and, increasingly,
               online. It also includes repairs to household equipment and motor vehicles.
               Wholesale trade is the resale of new or used goods to businesses and institutional
               users. Wholesalers buy large quantities of goods from producers, and resell
               them in smaller quantities. This structure allows for the efficient transfer of goods
               by wholesalers acting as intermediaries in the process of bringing goods from
               producers to the final customer. By way of example, Mintech is one Territory
               chemical wholesaler offering chemicals to offshore and onshore miners, such as the
               Bayu-Undan project.
               A significant proportion of the Territory’s economy is made up of the retail and
               wholesale trade industries. The combined contribution of these industries to gross
               state product (GSP) was 6.1 per cent in 2006-07, with retail trade the larger, and
               directly contributing 4.1 per cent to GSP. In comparison to other Australian states,
               the contribution to GSP by wholesale trade is relatively small in the Territory at
               2.0 per cent, compared to an average of 4.6 per cent nationally. The remoteness
               and small population of Territory centres tend to be unfavourable for many wholesale
               activities. Therefore, a significant amount of wholesale activity occurs interstate, with
               goods for retail in the Territory sourced directly from interstate wholesalers.
               Although retail trade is a significant contributor to the Territory’s GSP, the contribution
               to resident employment is considerably larger, accounting for 12.2 per cent of
               resident employment and reflecting the labour intensive nature of the industry. The
               combination of wholesale and retail trade accounts for 14.1 per cent of total resident
               employment.




                                                                       Retail and Wholesale Trade            121
      2008-09 Budget


                Table 13.1: Retail and                                      Employment 2007                     GSP/GDP 2006-07
                     Wholesale Trade
                                                                                           Wholesale                       Wholesale
                                                                     Retail Trade           Trade          Retail Trade     Trade
                                                                               No.                 No.
                                                                     %1        000        %1       000    %2      $M      %2      $M
                                         New South Wales           15.8      525.7       4.1      137.6   5.5   17 617    4.9   15 793
                                         Victoria                  15.1      386.1       5.2      132.9   5.5   13 428    5.5   13 306
                                         Queensland                16.5      346.6       3.7       77.2   7.0   13 087    4.6    8 571
                                         South Australia           15.9      120.3       4.6       35.1   5.9    3 881    4.0    2 604
                                         Northern Territory        12.2        13.1      1.9        2.0   4.1      551    2.0     265
                                         Western Australia         13.5      147.1       4.1       44.7   4.7    6 050    3.5    4 432
                                         Tasmania                  15.5        34.7      3.6        8.1   6.7    1 293    3.5     670
                                         Australian Capital          9.9       18.6      1.9        3.6   4.5      944    1.8     369
                                           Territory
                                         Australia                 15.4    1 592.1       4.3      441.1   5.7   56 851    4.6   46 010

                                         1 Percentage of the total national/state/territory employed.
                                         2 Percentage of total national/state/territory GSP/GDP.
                                         Source: ABS Cat. Nos 5220.0, 6291.0.55.003


                                         Consumption Profile
                                         The Australian Bureau of Statistics (ABS) conducts a Household Expenditure Survey
                                         (HES) every five years. The latest, for the 2003-04 period, reported that the average
                                         weekly household expenditure for Darwin was $1085, the highest of all the capital
                                         cities. In addition, the HES reported that for all households in the Territory, average
                                         weekly expenditure was $1044, considerably higher than the national average of
                                         $893. However, this figure should be treated with caution since the scope of the HES
                                         as defined by the ABS excludes very remote districts and Indigenous communities,
                                         which account for about 23 per cent of the Territory population. If the scope of the
                                         HES was expanded to include all areas of the Territory, average weekly earnings and
                                         expenditure would be lower because the excluded population is largely dependent on
                                         income support.
                                         The HES reports that consumers in Darwin spend more than the national average in
                                         most of the household expenditure categories. Higher prices for many items in the
                                         Territory are associated with higher freight costs and less competition, resulting in
                                         higher retail prices.
                                         Indexing the HES income and expenditure data using the change in the Consumer
                                         Price Index (CPI) over the three years from 2003-04 to 2006-07 increases Darwin
                                         average weekly household expenditure to $1249 in 2006-07. Darwin reports the
                                         highest weekly expenditure ahead of Canberra ($1205) in 2006-07. Retail turnover
                                         is a major component of household consumption expenditure, which in turn is a
                                         significant component of final demand and economic growth. The indexed 2006-07
                                         HES data reports that Darwin household expenditure increased at the fastest rate in
                                         the following categories (in descending order):
                                         •	 automotive fuel;
                                         •	 tobacco products;
                                         •	 health expenses; and
                                         •	 housing.



122     Retail and Wholesale Trade
                                  Drivers of Retail and Wholesale Trade
                                  The economic environment and population growth are the main drivers of retail and
                                  wholesale turnover.

                 Population       Population growth impacts positively on both retail and wholesale trade by
                                  supplying labour, increasing the number of consumers and generating a favourable
                                  environment for the establishment of new businesses. Since December 2004,
                                  Territory population growth has been above the national average, coinciding with
                                  strong economic growth. Through the year to September 2007, the Territory’s
                                  resident population increased by 4616 to 216 503. The major contributor to this
                                  increase was natural increase. Net interstate migration continues to challenge the
                                  Territory, with a small gain in 2006-07 after negative net interstate migration in
                                  calendar year 2006.

  Household Disposable            Household disposable income is a major driver of retail trade turnover. The 2006
      Income and Debt             Census reports that the Northern Territory has the second highest median household
                                  income of the states and territories, at $1192 per week. Latest data from the
                                  Australian Taxation Office reports that the average individual taxable income for the
                                  Territory, at $38 823 for 2004-05, was the third highest of the jurisdictions and above
                                  the national average. Both these measures support relatively stronger retail turnover
                                  in the Territory.
                                  At the national level, in the year to September 2007, the ABS reports real net
                                  disposable income growth of 4.8 per cent (in seasonally adjusted terms). Stable
                                  average weekly earnings growth, combined with personal income tax cuts, saw
                                  household income growth outpace consumption spending growth, improving the net
                                  household savings ratio to 3.2 per cent in the September quarter 2007, compared
                                  to -0.2 per cent in the September quarter 2006. The household savings ratio is
                                  calculated by deducting household final consumption expenditure from household
                                  disposable income. In addition, the growth in the value of both housing and financial
                                  assets has increased household net worth. This ‘wealth effect’ has been linked to
                                  increased consumer spending.
                                  Chart 13.1 shows the ratio of total household assets to income, financial assets to
                                  income, and total household debt to income.
                                   %
   Chart 13.1: Household Assets   900
and Debt – Percentage of Annual   800
              Household Income                                                             Total assets
                                   700

                                  600

                                  500

                                  400

                                  300                                                    Financial assets
                                  200
                                                                                               Debt
                                   100

                                     0
                                         1990    1992       1994      1996    1998     2000     2002      2004   2006   2008
                                                                             Calendar Years
                                  Source: Reserve Bank of Australia

                                  Total household assets, as a percentage of household disposable income, increased
                                  at an average annual rate of 4.4 per cent over the four years to September 2007.
                                  This mainly reflects growth in house prices (the primary asset of many households)
                                  and financial assets (such as superannuation). In September 2007, total household


                                                                                              Retail and Wholesale Trade       123
      2008-09 Budget


                                          assets were eight times annual household disposable income. The household debt
                                          to disposable income ratio has grown at a higher rate than the household assets
                                          to income ratio, surging by an average annual rate of 13.9 per cent in 2002-03
                                          (reflecting house price increases in many southern capital cities), before increasing
                                          by an average annual rate of 4.7 per cent in the two years to September 2007. This
                                          again reflects increases in house prices and increased average mortgage sizes.
                                          Household debt continued to grow in 2006-07 with housing debt increasing
                                          13 per cent (see Chart 13.2). With this increase in personal debt, consumers are
                                          more sensitive to interest rate increases than in the past. The recent increases in the
                                          official cash rate in November 2007 and February and March 2008 have combined to
                                          dampen growth in consumer spending in the second half of 2007-08.
      Chart 13.2: Household Debt Ratios   %
       – Debt as a Percentage of Assets   30
                                                                                                                       Housing
                                          25


                                          20
                                                                                                                           Total

                                          15


                                          10


                                           5


                                           0
                                            1990       1992       1994        1996    1998     2000   2002   2004   2006       2008
                                                                                     Calendar Years

                                          Source: Reserve Bank of Australia

                                          Chart 13.2 shows housing debt as a percentage of housing assets compared to
                                          the total asset to debt ratio for households. In September 2007, average Australian
                                          housing debt was 25.5 per cent of the value of housing assets. In comparison, in
                                          September 2007, total debt was 16.9 per cent of total assets. The significantly higher
                                          housing debt to asset ratio reflects the substantial increase in house prices and
                                          mortgages in recent years. Nevertheless, because only 34 per cent of Australian
                                          householders are buying their home, the total debt to asset ratio is somewhat lower.
                                          The widening gap between the housing debt ratio and the total debt ratio since
                                          1990 shows the increase in recent years of housing costs. For example, in 1990 the
                                          difference between the two ratios was 2.3 percentage points, whereas in 2007 this
                                          has widened to 8.6 percentage points.

                      Employment          The strong economic growth of 5.6 per cent reported for the Territory economy in
                                          2006-07 has continued into 2007-08, resulting in strong employment growth. In the
                                          year to February 2008, resident employment in the Territory grew by 5.1 per cent and
                                          the ABS reports average weekly earnings in November 2007 of $1116, an increase
                                          of $21 in the year. The robust employment environment and a Territory participation
                                          rate of 73.1 per cent, 7.8 percentage points higher than the national average, reflects
                                          the strength of the Territory economy during 2007-08. Consumer confidence in the
                                          Territory was high in late 2007, in contrast to some other Australian jurisdictions.

           Consumer Sentiment             Consumer confidence predominantly influences discretionary spending, particularly
                                          for more expensive items and non-essential goods, such as travel, which are often
                                          purchased on credit. Subdued consumer confidence may result in delayed purchases
                                          and the propensity for consumers to substitute lower priced items, while strong
                                          consumer confidence supports high levels of discretionary spending.



124     Retail and Wholesale Trade
                                  Sensis undertakes a nationwide quarterly survey designed to measure the
                                  confidence and behaviour of Australia’s consumer population. The survey is weighted
                                  to reflect age, gender and location based on the latest ABS population figures. The
                                  March quarter 2008 Sensis Consumer Report found that Territory consumers were
                                  the second most confident in the nation, with 56 per cent feeling confident about
                                  their financial prospects for the year ahead (Chart 13.3). The main reasons Territory
                                  consumers gave for feeling confident were ‘having a good or secure job’, followed by
                                  ‘everything is going well’. Those consumers who were worried about their financial
                                  prospects for the year ahead cited their main concern as rising interest rates. The
                                  prime concern for Territory consumers in the March quarter 2008 was rising petrol
                                  prices.
                                  Nationally, consumer confidence fell markedly in the March quarter 2008 to a net
                                  balance of 44 per cent. This represents the largest quarterly drop in confidence level
                                  since the start of the Sensis Consumer Report in May 2004. Interest rates were the
                                  main concern across all gender, age and socio-economic groups. Security in the job
                                  market was the main reason for confidence.
Chart 13.3: Consumer Sentiment,   %
             March Quarter 2008   70

                                  60

                                  50

                                  40

                                  30

                                  20

                                  10

                                   0
                                         ACT         NT         WA            Vic   Qld       SA       NSW        Tas

                                  Source: Sensis March 2008 Consumer Report

             Interest Rates       In February and March 2008, and in August and November 2007, the Reserve
                                  Bank of Australia (RBA) raised the official cash rate in response to rising growth in
                                  aggregate demand and inflation fuelled by housing costs and high petrol prices. In
                                  January and March 2008, independently of the RBA, some banks raised the interest
                                  rates they charge on their loan products, citing higher credit costs.
                                  The Lags of Monetary Policy report by the RBA found that there is generally a lag
                                  of up to 18 months between interest rate movements and changes in consumer
                                  behaviour. It appears consumer spending was largely unaffected by the three
                                  official interest rate increases in 2006, although there was a significant softening in
                                  commitments for housing finance for owner occupation. In 2007, retail turnover was
                                  strong nationally and even stronger in the Territory, with the year on year real retail
                                  growth rates around 8.0 per cent throughout the year. Retail spending has shown
                                  resilience despite the emergence of global uncertainty and rising interest rates. This
                                  may in part be attributable to strong employment growth and the positive consumer
                                  sentiment regarding the strength of the Territory economy in 2007. However,
                                  consumer confidence fell sharply in early 2008 and is expected to be further
                                  impacted by the latest increases in the cash rate, which has taken the banks’ average
                                  variable rate mortgage to around 9.3 per cent.




                                                                                          Retail and Wholesale Trade        125
      2008-09 Budget


                                     Retail Trade Turnover
                                     Moderate growth of 2.7 per cent in real retail turnover in 2005 was followed by growth
                                     of 5.8 per cent in 2006. High levels of consumer confidence, relatively low interest
                                     rates, wages growth, steady population growth and competitively priced imports,
                                     particularly from China, helped to boost growth in retail spending.
                                     In 2007, year on year retail turnover growth continued to strengthen, increasing
                                     8.0 per cent in March 2007 as consumers shrugged off uncertainty surrounding
                                     interest rates and fuel prices. The continuing strength of the local construction and
                                     mining industries and solid employment growth saw retail growth remain strong
                                     throughout the rest of the year, despite two further interest rate increases, to record
                                     7.7 per cent growth in 2007.

                                     Retail Turnover by Sector
                           Food      Expenditure on food is by far the largest category in retail sales and accounts for
                                     about 45 per cent of all retail sales in the Territory, noticeably higher than the national
                                     average of around 40 per cent. The higher than national average expenditure on food
                                     in the Territory is largely accounted for by freight costs and the less competitive retail
                                     market, both leading to higher prices.
                                     In 2007, expenditure on food in the Territory increased by 9.8 per cent to exceed
                                     $1.0 billion (see Chart 13.4). The growth in expenditure on food is predominantly
                                     accounted for by the increase in population and higher average food prices.
                                     The food category consists of supermarket and grocery items, fish and poultry, fruit
                                     and vegetables, liquor, bakery products and takeaway food.

        Hospitality and Services     Hospitality and services expenditure, which includes hotels, pubs, taverns, clubs,
                                     cafes and restaurants, video hire outlets, and hairdressing and beauty salons,
                                     decreased by 5.8 per cent to $371 million in 2007, following 6.1 per cent growth in
                                     2006. This is the second largest expenditure category in the Territory.
                                     Despite strong tourism numbers in 2007, this decrease comes as a result of a shift
                                     in discretionary spending between categories. It may be that expenditure in this
                                     retail category is the most responsive to changes in disposable income. Consumer
                                     spending may have shifted to other need areas, such as housing and transport,
                                     possibly due to the impact of rising interest rates and petrol prices on household
                                     budgets.

                          Other      This category includes retailing in department stores, jewellery, gardening,
                                     pharmaceuticals, cosmetics and flowers. In 2007, expenditure in other retailing
                                     increased to $371 million, an increase of 3.6 per cent over 2006.

              Household Goods        Household goods retailing recorded very strong growth in 2007 with total turnover
                                     reaching $349 million, an increase of 22.1 per cent compared to 2006. Household
                                     goods include furniture and floor coverings, domestic houseware, appliances and
                                     hardware. Demand for household goods is closely linked to dwellings investment.

       Clothing and Soft Goods       The category of clothing and soft goods comprises clothing and clothing accessories,
                                     footwear and textiles. During 2007, turnover increased by 12.4 per cent to
                                     $112 million.

            Recreational Goods       Recreational goods, the smallest category, includes sport and camping equipment,
                                     toys and games, marine equipment, newspapers, books and stationery, and
                                     photographic equipment, and increased by 11.8 per cent to $56 million in 2007.




126     Retail and Wholesale Trade
Chart 13.4: Territory Real Retail    $M
 Turnover (moving annual total)
                                    1000
                                                                   Food
                                     800


                                     600

                                                                                                Household goods
                                     400    Hospitality and services

                                                                               Other
                                     200                                                                           Recreational goods
                                                                                         Clothing and soft goods

                                       0
                                           92         94          96         98       00       02             04        06        08e
                                                                               Year ended June

                                    e: estimate
                                    Source: Northern Territory Treasury, ABS unpublished data

  Retail and Wholesale              Retail and wholesale floor space is expecting strong growth in 2008-09, with a
         Developments               $20 million wholesale grocery warehouse in Darwin Business Park at East Arm
                                    expected to be completed by November 2008. The completion of retail space at
                                    the Darwin Waterfront will progressively increase retail space through 2008-09.
                                    Smaller commercial and residential retail development projects in Darwin City due for
                                    completion in 2007-08 will add to these major projects.
                                    High levels of vacant retail space in the Darwin central business district are expected
                                    to be maintained in 2008-09 as increases in innercity population lag behind growth in
                                    retail floor space.
                                    Recent trends in retailing have seen an increasing shift from traditional store-front
                                    based retailing to online retailing. To match this shift, the ABS has adjusted its
                                    categories of retailing to include non-store retailing and retail commission-based
                                    buying and/or selling. The ABS reports for 2005-06 wages and salary were
                                    $1.2 million for non-store retailing and retail commission-based buying and selling,
                                    while sales of goods and services for this subdivision reached $22.3 million,
                                    making up less than 1.0 per cent of both total Territory sales, and compensation
                                    of employees. While currently at low levels sales in this category of retailing are
                                    expected to grow strongly in the future, both adding and subtracting from retail in the
                                    Territory as spending moves away from store-front retailing.

                                    Outlook
                                    Nationally, retail trade turnover is forecast to grow by 3.0 per cent in 2007-08
                                    compared to 4.0 per cent in 2006-07. Solid wages and employment growth are
                                    expected to be the main drivers in retail growth. Territory retail turnover in 2007-08 is
                                    expected to exceed the national average and is estimated to grow by 6.2 per cent.
                                    The strong growth in retail turnover in the Territory is consistent with forecast strength
                                    in the resource industry over 2007-08. The commodity boom, strong construction
                                    activity and employment and population growth are expected to maintain a stable
                                    level of consumer confidence that will maintain a healthy retail turnover through
                                    2007-08, despite the dampening effect of rising interest rates.
                                    In 2008-09, retail turnover is expected to weaken at both the national and Territory
                                    level as the economy feels the full effect of the contraction in monetary policy. The
                                    negative effect of the November 2007, and February and March 2008 interest rate
                                    rises will be felt across all states, decreasing discretionary spending and slowing
                                    retail trade.


                                                                                                    Retail and Wholesale Trade          127
      2008-09 Budget


                                     Following strong growth in 2007-08, Territory retail turnover growth is expected
                                     to moderate in 2008-09 to 4.2 per cent, largely due to the interest rate rises and
                                     their effect on discretionary spending. The continuing strength of the Territory’s
                                     construction and commodity sector, with its close economic relationship to China, will
                                     prevent a contraction in retail trade turnover and will be supported by strong wages
                                     and employment growth. The outlook beyond 2008-09 is positive, with large projects
                                     expected to commence in the medium term.




128     Retail and Wholesale Trade
      Chapter 14              The Public Sector
          Key Points           » The public sector consists of Commonwealth, Territory and local government
                                 activity including defence. The public sector is a major contributor to the Territory
                                 economy, providing a wide rage of economic and social services. This chapter
                                 deals primarily with the public sector, excluding defence.
                               » In 2006-07, the non-defence public sector accounted for about 25.1 per cent of
                                 SFD, which is higher than most other jurisdictions. Defence contributes a further
                                 7.6 per cent, taking the total to 32.7 per cent.
                               » The non-defence public sector is the largest employer in the Territory,
                                 accounting for about 26 per cent of total employment in 2006-07.
                               » The size of the non-defence public sector relative to the size of the Territory
                                 economy has declined over the past two decades, reflecting the maturing and
                                 diversification of the Territory economy.

                              The public sector includes Commonwealth, Northern Territory and local government
                              activity. The focus of this chapter is the non-defence public sector in the Territory;
                              defence activity is discussed in more detail in Chapter 15.
                              Despite declining in relative size over the past two decades, the public sector in
                              the Territory remains a significantly larger component of the economy than in most
                              other jurisdictions, accounting for about 25.1 per cent of state final demand (SFD) in
                              2006-07. Nationally, the public sector accounted for just 20.0 per cent of domestic
                              final demand (DFD) (Chart 14.1). The Australian Capital Territory (ACT) has a larger
                              public sector than the Northern Territory, due to its large Australian Public Sector
                              (APS) presence.
  Chart 14.1: Public Sector   %
Expenditure as a Proportion   60
           of SFD, 2006-07
                              50

                              40


                              30


                              20

                              10


                                0
                                      Qld       WA          Vic   NSW      SA       Tas       NT       ACT      Aust
                                                                  Non-Defence       Defence

                              Source: ABS Cat. No. 5206.0


                              Expenditure
                              In 2007-08, public sector consumption and investment expenditure in the Territory
                              was an estimated $4.9 billion, a 2.9 per cent increase on 2006-07. In relative
                              terms, public sector expenditure is much higher in the Territory than in most
                              other jurisdictions. In 2006-07, public sector expenditure was $16 886 per capita,
                              compared to $9700 per capita nationally. The ACT had the highest public sector
                              expenditure per capita at $52 200 and South Australia the lowest at $8604. As a
                              proportion of SFD, Territory public sector expenditure is also the second highest



                                                                                                The Public Sector        129
      2008-09 Budget


                                          (25.1 per cent) behind the ACT (51.9 per cent). The relatively high level of public
                                          sector expenditure in the Territory reflects, among other factors, the relatively high
                                          cost of providing core government functions to a small, widely dispersed population,
                                          with a significant Indigenous component.
                                          Since 1991-92, public sector expenditure as a proportion of SFD has declined,
                                          reflecting both the ongoing development and diversification of the Territory
                                          economy (Chart 14.2). Over this period, SFD has increased by an annual average
                                          of 5.8 per cent, with the private sector contribution to SFD growing by 6.7 per cent
                                          compared to the public sector component growth of 3.4 per cent.
                                          Although the decline in public sector expenditure as a proportion of SFD has also
                                          occurred nationally, the rate of decline in the Territory has been much faster. The
                                          proportion of Territory SFD attributed to the public sector has declined from about
                                          35 per cent in 1991-92 to about 25 per cent ($3.6 billion) in 2006-07. Over the same
                                          period, the national proportion declined by just 3 percentage points, from about
                                          23 per cent to 20 per cent.
              Chart 14.2: Public Sector   %
        Expenditure (excluding defence)   40
                 as a Proportion of SFD
                                          35                  Northern Territory


                                          30


                                          25


                                          20
                                                                                               Australia


                                          15
                                               91        93           95           97        99        01   03        05         07
                                                                                     Year ended June
                                          Source: ABS Cat. No. 5206.0

      Consumption Expenditure             In 2006-07, public sector consumption expenditure, including wages and salaries,
                                          office supplies, consultancy services and consumption of fixed capital, accounted
                                          for 86.0 per cent of total public sector expenditure in the Territory, and around
                                          one-third (34.1 per cent) of total consumption (public and private). Territory and local
                                          governments accounted for 77 per cent of total public sector consumption, and the
                                          Commonwealth accounted for the remaining 23 per cent.
                                          In the 15 years to 2006-07, the level of public sector consumption expenditure has
                                          increased by about 65 per cent to $3.1 billion (Chart 14.3), but nevertheless has
                                          declined as a proportion of total consumption expenditure from about 41 per cent
                                          to 34 per cent. This reflects the growing significance of private sector (household)
                                          consumption expenditure in the Territory.




130     The Public Sector
Chart 14.3: Components of Public     $B
Sector Consumption Expenditure        4
              (excluding defence)
                                                                                                                                  Total
                                     3



                                     2                                                             Territory and local government


                                     1

                                                                                                                  Commonwealth

                                     0
                                          91         93        95        97         99        01           03           05            07
                                                                              Year ended June

                                     Source: ABS Cat. No. 5206.0

 Investment Expenditure              Public sector investment expenditure is volatile and can experience large fluctuations
                                     from year to year due to the small size of the Territory economy and the impact of
                                     funding for large one-off projects. Examples include works on the bulk liquids berth,
                                     railway access, land reclamation and wharf extensions of the East Arm Wharf bulk
                                     loading facility, and headworks, soil decontamination and provision of community
                                     infrastructure at the Darwin Waterfront. Other projects contributing to recent growth
                                     in public investment include works done on the Red Centre Way, Darwin industry
                                     fuel terminal oil pipelines, expansion works on Territory schools and a number of
                                     projects aimed at the delivery of Indigenous housing services across the Territory
                                     (Chart 14.4).
                                     In 2006-07, public sector investment accounted for 13.9 per cent of total public sector
                                     expenditure and 12.8 per cent of total investment. Territory and local governments
                                     accounted for 61 per cent of the public sector investment, public corporations such as
                                     the Power and Water Corporation accounted for 29 per cent, and the Commonwealth
                                     for the remaining 10 per cent.
Chart 14.4: Components of Public     $M
  Sector Investment Expenditure      800
             (moving annual total)

                                     600
                                                                                                                Total


                                     400

                                                                          Territory and local government
                                     200

                                                   Commonwealth

                                          0
                                              96    97    98        99   00      01      02     03      04       05          06      07
                                                                              Year ended June

                                     Source: ABS Cat. No. 5206.0


                                     Employment
                                     The public sector is the largest employer in the Territory, accounting for about
                                     26 per cent of total employment in 2006-07. The Territory Government accounts for
                                     74 per cent of public sector employment, the Commonwealth for 13 per cent and
                                     local government for the remaining 13 per cent.



                                                                                                             The Public Sector             131
      2008-09 Budget


                                        In the Territory since 1997-98, public sector employment is estimated to have
                                        increased at an annual average rate of 2.1 per cent (Table 14.1), more than total
                                        resident civilian employment (1.9 per cent) over the same period. Local government
                                        employment increased by an annual average rate of 2.9 per cent over the period,
                                        due in part to growth in the number of local governing bodies (largely community
                                        governments in remote areas), as well as growth in Community Development
                                        Employment Projects (CDEP), although not all CDEP programs were administered
                                        by local councils. Northern Territory Government employment increased at
                                        an annual average rate of 2.3 per cent, while Commonwealth employment
                                        experienced zero per cent annual average growth over the period. In late 2007, the
                                        Commonwealth placed a moratorium on the dismantling of CDEP that had begun in
                                        the Territory in mid-2007 and announced CDEP reforms including, where possible,
                                        converting some CDEP positions into public sector jobs. These changes, combined
                                        with local government reforms, are expected to have some impact on public sector
                                        employment in the Territory.
               Table 14.1: Wages and                                    Commonwealth Territory              Local
                       Salary Earners         Year ended June            Government Government            Government   Total
                                                    1998                     3 500          16 200          2 625      22 325

                                                    1999                     3 550          16 000          2 600      22 150

                                                    2000                     3 450          15 975          2 600      22 025

                                                    2001                     3 550          16 675          2 600      22 825

                                                    2002                     3 850          17 050          2 950      23 850

                                                    2003                     3 450          17 925          2 900      24 275

                                                    2004                     3 400          18 625          3 325      25 350

                                                    2005                     3 475          19 475          3 425      26 375

                                                    2006                     3 400          19 850          3 275      26 525

                                                    2007                     3 500          20 200          3 550      27 250

                                                    2008e                    3 500          20 400          3 500      27 400

                                        Compound Annual Growth
                                        1997-98 to 2007-08e                     0.0             2.3           2.9         2.1
                                        2002-03 to 2007-08e                     0.3             2.6           3.8         2.5

                                        e: estimate
                                        Source: Northern Territory Treasury, ABS Cat. No. 6248.0.55.001

                                        Employment data referenced in Table 14.1 is based on the Australian Bureau of
                                        Statistics Wage and Salary Earners (WSE) Public Sector data series, which reports
                                        on the number of paid public sector positions in the Northern Territory across a range
                                        of industries such as health, education and general government.
                                        In 2006, the proportion of Territory residents working in the public sector (31 per cent)
                                        was larger than the national proportion (16 per cent). The majority worked for the
                                        Territory Government (53 per cent) and about one-third worked for the Australian
                                        Government (32 per cent). More females than males worked for the Territory
                                        Government (62 per cent).
                                        The Office of the Commissioner for Public Employment (OCPE) provides a measure
                                        of Northern Territory public sector employment, based on the full-time equivalent
                                        positions in the general government sector. This measure includes employees under
                                        the Public Sector Employment and Management Act, uniformed police, employees



132     The Public Sector
                        of Tourism NT, employees of the Aboriginal Areas Protection Authority and ministerial
                        staff. The OCPE measure excludes Charles Darwin University, Centralian College,
                        Batchelor Institute of Indigenous Tertiary Education, Northern Territory Rural College,
                        Menzies School of Health Research, Territory Insurance Office and Legal Aid
                        Commission, which would be included in industry categories rather than in general
                        government. From 1983 to 2007, public sector employment increased by 14 per cent.
                        In calendar year 2007, the average number of full-time equivalent Northern Territory
                        Public Service employees was 16 051, a 1.5 per cent increase from the calendar
                        year 2006 average of 15 808. In 2007, the majority were permanent employees
                        (74 per cent) and temporary employees (22 per cent), with the remainder casual
                        employees.

Indigenous Employment   From June 2006 to December 2007, the number and proportion of self-identified
                        Indigenous employees in the general Northern Territory Government sector increased
                        from 1166 (7 per cent of total full-time equivalent positions) to 1339 (8 per cent),
                        an increase of 15 per cent. Increased Indigenous employment reflects initiatives
                        to promote Indigenous career development, as well as a possible increase in the
                        propensity for employees to self-identify as Indigenous.

                        Outlook
                        The public sector will continue to play an important role in the Territory economy
                        with modest growth in the public sector expenditure expected in 2007-08, reflecting
                        continued works on the Darwin Waterfront and the middle schools project. Public
                        sector employment growth is expected to moderate or possibly decrease slightly in
                        2007-08, although to remain at about one-third of total employment. This is largely
                        due to completion of major government initiatives to recruit more police, nurses and
                        teachers in 2006-07, although impacts on future employment growth from changes to
                        CDEP and local government reforms in the Territory remain uncertain.




                                                                                        The Public Sector         133
      2008-09 Budget




134     The Public Sector
Chapter 15     Defence
  Key Points    » The defence presence in the Territory has more than doubled since the early
                  1990s, with the number of defence personnel and their families increasing from
                  6223 in June 1992 to an estimated 13 165 in June 2008.
                » Of all the Australian permanent defence force personnel, 10 per cent are based
                  in the Territory. Recurrent defence expenditure by the Commonwealth in the
                  Territory totalled $1.08 billion in 2006-07.
                » Recently completed defence activities include the replacement of the
                  1st Brigade’s fleet of Leopard tanks with 59 re-conditioned United States M1A1
                  Abrams tanks, 41 of which are in the Territory.
                » The Territory’s economy will benefit from new and ongoing local supply and
                  support contracts.

               The Territory is an integral component of Australia’s security strategy by virtue of
               location. The strategic decisions outlined in the Defence White Paper 2000 have
               placed a greater emphasis on national security and increasing capabilities to respond
               to threats of terrorism, international emergencies and coastal surveillance. The
               Commonwealth will release a new Defence White Paper in 2008.
               The Australian Defence Force (ADF) is committing significant resources to increase
               its land, air and sea capabilities by gradually upgrading the current fleet of tanks,
               patrol boats, aircraft and helicopters Australia-wide. Major Territory defence sites
               are an important component of Australia’s northern borders protection and will
               greatly benefit from the increase in capabilities from the acquisition of the Abrams
               tanks, Tiger helicopters and the Armidale Class patrol boats. Defence will remain an
               important element of the Territory economy for the foreseeable future.

               Defence Force Activity
               The defence force presence in the Northern Territory is made up of the three primary
               services – Army, Navy and Air Force – along with other groups involved in support
               and coordination functions. Major defence sites in the Northern Territory include:
               •	 Larrakeyah Barracks in Darwin, which includes Headquarters Northern Command;
               •	 Robertson Barracks near Palmerston;
               •	 HMAS Coonawarra in Darwin;
               •	 RAAF Base Darwin;
               •	 RAAF Base Tindal near Katherine;
               •	 the Joint (United States and Australia) Defence Facility Pine Gap near Alice
                  Springs.
               Other defence sites include the Naval Fuel Installation (Stokes Hill), Joint Logistics
               Unit North (in Winnellie), Defence Establishment Berrimah, Bradshaw Field Training
               Area (near Timber Creek), Mount Bundy Field Training Area (near the Mary River),
               Delamere Bombing Range (near Katherine) and the Jindalee Operational Radar
               Network (JORN) facility near Alice Springs.




                                                                                          Defence       135
      2008-09 Budget


                          Army     The largest operational base in the Territory is Robertson Barracks, which is home
                                   to the Army’s 1st Brigade. The defence force build up during 1992-2001 primarily
                                   reflected the major relocation of the 1st Brigade to the Territory over this period.
                                   In March 2007, the 1st Brigade’s former fleet of Leopard tanks was replaced with
                                   41 re-conditioned United States M1A1 Abrams tanks (plus a variety of support
                                   vehicles). The Abrams tanks were ready for deployment in July 2007.
                                   The North West Mobile Force (NORFORCE) surveillance unit monitors the remote
                                   northern borders, more than 1900 kilometres of coastline, for poachers, illegal fishing
                                   and illegal immigration. When at full operational level, NORFORCE has more than
                                   600 personnel, mostly reservists. It is one of the largest employers of Indigenous
                                   Territorians, after the Northern Territory Government, with around 420 Indigenous
                                   part-time reservists.

                          Navy     Border protection is the primary focus of the Royal Australian Navy (RAN) operations
                                   in the Territory. Darwin home ported patrol boats play an integral role in the
                                   surveillance of Australia’s northern approaches and form part of Operation Resolute,
                                   which targets illegal fishing and smuggling in Australia’s northern waters.
                                   HMAS Coonawarra is home to the majority of the RAN’s Armidale Class patrol
                                   boats. Ten of these patrol boats are home ported in Darwin, of which two vessels
                                   operate out of Port Dampier in Western Australia at any one time, with crew and
                                   services provided from Darwin. These patrol boats have replaced the former fleet
                                   of ten Fremantle Class patrol boats that were decommissioned in early 2007. The
                                   new fleet will increase the RAN’s surveillance and response capabilities, such as
                                   the apprehension of illegal fishing vessels. Construction at the naval base to provide
                                   accommodation for the larger Armidale Class patrol boats began in early 2005 and
                                   is being completed in stages to allow for the continued operation of the naval base.
                                   Construction is scheduled for completion in mid-2008.

                       Air Force   The main operational and strategic Air Force base in the north of Australia is the
                                   Royal Australian Air Force (RAAF) Base Tindal, home to a Fighter Attack F/A18C
                                   fighter squadron. In addition, RAAF Base Darwin is home to No. 396 Combat Support
                                   Wing, which commands squadrons based in Darwin, Townsville and Butterworth
                                   (Malaysia), and is used as a base for surveillance aircraft. RAAF Base Darwin is
                                   the forward operating base for RAAF operations and exercises, and regularly hosts
                                   foreign aircraft during these exercises.
                                   In the Territory, the RAAF also operates the Delamere Bombing Range facility
                                   (south-west of Katherine) and one of Australia’s three JORN surveillance units (near
                                   Alice Springs).

                 Headquarters      Headquarters Northern Command (HQNORCOM), based at Larrakeyah Barracks,
            Northern Command       is the joint force headquarters responsible for the defence of northern Australia. Its
                                   jurisdiction includes the Territory, north Queensland and the northern half of Western
                                   Australia. HQNORCOM is engaged with the Joint Offshore Protection Command
                                   and is responsible for the implementation, coordination and management of offshore
                                   maritime security, including the protection of offshore oil and gas assets.

          Joint Defence Facility   The Joint Defence Facility at Pine Gap is a component of the United States’ global
                      Pine Gap     missile defence and early warning system. The facility is jointly administered by
                                   the Australian and United States defence departments. It employs an estimated
                                   900 personnel (of whom half are Australian) and, together with more than 3000
                                   dependants, this facility is responsible for about 12 per cent of the Alice Springs
                                   population.




136     Defence
                                    Defence Population
                                    The Territory has 10 per cent of all Australian permanent defence force personnel,
                                    a significant contribution to its population of 214 975 (as at 30 June 2007), which
                                    accounts for just 1 per cent of the total Australian population. More than 6 per cent of
                                    total defence expenditure occurs in the Territory (Table 15.1).

Table 15.1: Population, Permanent                                         Defence                 Defence       Total Australian
     Defence Force Members and                                           Personnel1              Expenditure      Population
                                                                             %                       %                 %
 Defence Expenditure Proportions,
                          2006-07   New South Wales                          31.9                     32.2            32.8
                                    Victoria                                 11.1                     15.6            24.8
                                    Queensland                               23.2                     22.4            19.9
                                    South Australia                           5.1                         6.2          7.5
                                    Western Australia                         7.3                         8.8         10.0
                                    Tasmania                                  0.3                         1.6          2.3
                                    Northern Territory                       10.2                         6.2          1.0
                                    Australian Capital Territory              9.5                         6.9          1.6
                                    Australia                              100.0                    100.0           100.0

                                    1 Excludes civilians, reserve forces and personnel serving overseas
                                    Source: Department of Defence, ABS Cat. No. 3101

                                    In 1992, the Territory’s population was boosted by the Army Presence in the North
                                    (APIN) program, which involved the relocation of about 2300 defence personnel
                                    to Darwin over the period 1992-2001 from Holsworthy in New South Wales and
                                    Puckapunyal in Victoria.
                                    Since the first major relocation in the early 1990s, the Territory’s total defence
                                    community (including personnel and their families) has increased from 6223 in
                                    June 1992 to an estimated 13 165 in June 2008. This represents about 6.0 per cent
                                    of the Territory’s population, up from 3.7 per cent in June 1992.
                                    In June 2008, 443 civilian defence personnel and 780 reservists will be based in the
                                    Territory. The most recent defence relocation to the Territory was the 1st Aviation
                                    Regiment from Queensland in 2006, which increased the total number of defence
                                    personnel and their families in the Territory by an estimated 300 people.
                                    The number of defence force personnel based in the Territory (including Department
                                    of Defence civilians, but excluding reservists) increased from 2569 in June 1992 to
                                    an estimated 5451 in June 2008. This comprises an estimated 3460 army personnel,
                                    540 navy personnel, 1008 air force personnel, totalling 5008 military personnel, plus
                                    443 defence civilians (Chart 15.1).




                                                                                                                      Defence      137
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          Chart 15.1: Defence Personnel      number (000)
       Stationed in the Northern Territory    6                                                               Total defence personnel

                                              5


                                              4
                                                                                                                         Army

                                              3

                                              2             Civilians
                                                                                                                                Air force
                                              1
                                                                              Navy

                                              0
                                                  92    93      94      95   96   97      98   99 00 01 02          03   04     05    06    07 08e 09f
                                                                                               Year ended June

                                             Source: Department of Defence, ABS Cat. No. 3101, unpublished ABS data

                                             The defence presence contributes to the Territory economy through consumption
                                             and investment expenditure as well as through the partners of defence personnel,
                                             often skilled, who enter the Territory’s labour force. Defence personnel do not,
                                             however, contribute to the official employment statistics published by the Australian
                                             Bureau of Statistics (ABS) which, for reasons of definition, focus on resident civilian
                                             employment. Because of this, ABS employment statistics under-record the number
                                             of jobs in the Territory by at least 5 per cent (refer to chapter 4, Labour Market). The
                                             2003 Defence Census found that around 56 per cent of defence partners who are not
                                             permanent defence force members worked full time, forming an important source of
                                             labour for the economy. Of all defence partners, 48 per cent had formal qualifications
                                             (bachelor degree or higher, certificate or diploma, trade or vocational qualification)
                                             and 22 per cent were undertaking some form of study. Outcomes from the Defence
                                             Census 2007 are expected to be released in mid-2008.

                                             Defence Recurrent Expenditure
                                             Defence recurrent expenditure (which includes weapons and platforms, salaries and
                                             other operational expenses) is an important contributor to the Territory economy. The
                                             ABS estimates that defence recurrent expenditure in the Territory was $1.08 billion
                                             in 2006-07, equivalent to 8.1 per cent of the Territory’s gross state product, up from
                                             $967 million in 2005-06 (Chart 15.2).
         Chart 15.2: Defence Recurrent        $M
        Consumption Expenditure in the       1000
                      Northern Territory
                                               800                                                           Total


                                               600

                                                                                                      Operational
                                               400
                                                                                                                              Salaries

                                               200


                                                  0
                                                       93     94        95   96      97    98   99    00    01      02    03         04     05   06   07
                                                                                             Year ended June
                                             Source: Northern Territory Treasury, Department of Defence, ABS unpublished data




138     Defence
   Defence Salaries   Salaries paid to defence personnel equalled $474 million in 2006-07, representing
                      about 44 per cent of total recurrent defence expenditure (Chart 15.2). The increase
                      in defence expenditure reflects a rise in salaries attributable to the deployment of
                      Territory defence personnel to Iraq. Defence salaries and defence personnel and
                      family purchases are an important contributor to consumer demand in the Territory.
                      Strengthening consumer demand in turn stimulates other areas in the economy such
                      as employment growth. The increase in salaries in part reflects a rise in the number
                      of defence personnel deployed on missions to Timor during 2004-05 and Iraq during
                      2006-07. The flow-on effect of defence salaries on private consumption expenditure
                      in the local economy has continued to be an important contributor to growth in the
                      Territory.

Defence Operational   In 2006-07, defence operational expenditure totalled $537 million and accounted
       Expenditure    for just over half of total defence recurrent expenditure in the Territory (Chart 15.2).
                      This expenditure category includes items such as weapons and platforms and other
                      defence (including ammunition, transport costs, catering and office supplies).

   Defence Industry   Defence contracts are also an important contributor to operational expenditure. The
                      value and number of defence contracts with Territory businesses has increased, as
                      well as greater levels of outsourcing of defence services. In 2006-07, the Department
                      of Defence estimates that the defence presence in the Northern Territory was
                      supported through local contracts with a total value just under $200 million. The
                      increased capacity of local businesses to meet specialised defence requirements has
                      contributed to the growth in defence operational expenditure in the Territory. Business
                      relationships between the ADF and local enterprises have provided opportunities for
                      new capacity and capability to be developed, broadening and enhancing the local
                      economy. Examples of contracts awarded locally in 2006-07 include:
                      •	 more than 100 local contractors involved in the supply and support services for
                         the new Armidale Class patrol boats, which includes the provision of medical and
                         security services; and
                      •	 the Bradshaw Field Training Area project saw 90 per cent of its $65 million worth
                         of contracts awarded to local businesses, including subcontracting projects to local
                         Indigenous communities in remote areas.

                      Defence Housing
                      Since 1992, residential construction booms in the Territory have been impacted by
                      defence demand for housing. The relocation of defence personnel and their families
                      to the Top End has resulted in a significant increase in the Territory’s population,
                      with an associated increase in demand for housing and other goods and services.
                      Defence Housing Australia (DHA) currently manages 2290 dwellings in the Territory,
                      with the majority located in Darwin and Palmerston (Chart 15.3). The stock of
                      defence housing grew strongly between 1992 and 1999, with average annual growth
                      in DHA dwelling stock of 9.4 per cent. The decline in total dwelling stock over the
                      two years to June 2005 is largely associated with a decline in new acquisitions and
                      a decline in the number of properties leased to DHA (which is generally for a term of
                      12 years) to more sustainable levels.




                                                                                                   Defence       139
      2008-09 Budget


          Chart 15.3: Defence Housing     number
         Australia (DHA) Dwelling Stock   3000

                                                                                                            Total
                                          2500

                                          2000                                                    Darwin and Palmerston


                                          1500

                                          1000

                                                                                                            Katherine
                                           500
                                                                                                           Alice Springs
                                              0
                                                  92   93   94   95   96    97   98     99 00 01 02            03   04     05   06   07   08e 09f
                                                                                      Year ended June

                                          e: estimate; f: forecast
                                          Source: Northern Territory Treasury, Defence Housing Australia

                                          The composition of defence housing varies to accommodate the different living
                                          arrangements of defence families. The number of off-base properties has increased
                                          nearly three-fold since the early 1990s. As at June 2007, the number of off-base
                                          properties in Darwin was 988, Katherine 185, Alice Springs 61 and Nhulunbuy 16.
                                          On-base property numbers included RAAF Base Darwin 408, Larrakeyah 131 and
                                          RAAF Base Tindal 193.

                                          Planned Housing Developments
                               Lyons      The creation of the new $280 million Darwin suburb of Lyons is well under way
                                          with DHA releasing the first houses for defence families in August 2007. The
                                          Lyons development is a joint venture between DHA and the Canberra Investment
                                          Corporation, which will provide 650 fully serviced residential land allotments. Of
                                          these, at least 300 blocks, positioned throughout the development, will be supplied to
                                          ADF members and their families. DHA has been taking delivery of 75 lots per year,
                                          since 2006, with an additional 75 lots made available to the public every year.

                          Muirhead        In late 2006, DHA purchased 152 hectares of land at Muirhead (adjacent to Lyons)
                                          at a total value of $18 million. DHA plans to commence the development of the new
                                          suburb in 2009-10 to coincide with the conclusion of the Lyons development in 2011.
                                          Muirhead has the potential to yield more than 700 allotments, a proportion of which
                                          will be made available for sale to the public. This residential construction by DHA will
                                          ensure that defence demand for new housing is met to replace older housing both on
                                          and off base.

           Larrakeyah Barracks            There is a proposed redevelopment of the Larrakeyah Barracks, involving major
                                          renovations to the older DHA stock. As a result of the renovations, the on-base
                                          housing stock is expected to decrease.

                               Tindal     Defence houses at RAAF Base Tindal in the Northern Territory continue to be
                                          upgraded as part of an $18 million major refurbishment program. This program
                                          includes upgrading amenities to provide additional living/family areas, master
                                          bedrooms, new kitchens and internal repainting.

                     Alice Springs        There are no planned defence housing developments for Alice Springs in the
                                          foreseeable future.




140     Defence
                                       Defence Capital Expenditure
                                       Two projects that the Department of Defence is undertaking are upgrading of the
                                       Bradshaw Field Training Area Infrastructure and the Darwin Naval Base Patrol Boat
                                       Facilities. These upgraded facilities will provide increased capabilities and support
                                       existing infrastructure.

Table 15.2: Approved Major Capital                                                                             Cumulative
                 Facilities Projects                                                     Total Estimated      Expenditure to       2007-08
                                                                                          Expenditure         30 June 2007         Estimate
                                                                                                   $M               $M               $M
                                       Bradshaw Field Training Area Infrastructure                 72.6            64.5              2.0
                                       Darwin Naval Base – Patrol Boat Facilities                  19.2              9.8             5.4

                                       Source: Department of Defence

  Bradshaw Field Training              This project provides engineering services and infrastructure to allow the use of
       Area Infrastructure             Bradshaw as a field training area for the 1st Brigade. Works include roads, training
                                       force maintenance area, base camp, range control and caretaker facilities. The
                                       residual works are scheduled for completion by 2008-09.

Darwin Naval Base Patrol               This project provides upgraded facilities at HMAS Coonawarra for the new Armidale
          Boat Facilities              Class patrol boats. Construction commenced in early 2005 and is being completed
                                       in stages to allow for the continued operation of the naval base and to support the
                                       staged introduction into service of the Armidale Class patrol boats. The revised
                                       expenditure estimate reflects actual achievement in 2006-07. The project is
                                       scheduled for completion in 2008-09.

        Table 15.3: Major Projects                                                                                             Expenditure
       under Consideration by the                                                                         Current Status          $M
      Commonwealth Government          RAAF Darwin Redevelopment Stage 2                                  In development          49.8
                       in 2007-08
                                       Robertson Barracks Redevelopment                                   In development          72.0
                                       RAAF Tindal Redevelopment Stage 5                                  In development          58.7
                                       RAAF Tindal Airborne Early Warning and Control Facilities          In development          64.2

                                       Source: Department of Defence

                                       The major projects outlined in Table 15.3 are subject to parliamentary clearance
                                       from the Commonwealth. As these major projects were initiated by the previous
                                       Commonwealth, there is an element of uncertainty around the timeframes currently in
                                       place.

           RAAF Darwin                 This project, if approved, will upgrade existing facilities including fuel farms and
  Redevelopment Stage 2                workshops and construct a new logistics headquarters, with the Commonwealth
                                       committing $49.8 million. At peak construction, it is expected that around
                                       50 construction industry jobs will be created, offering opportunities for skilled
                                       consultants, local sub-contractors and the construction industry in general during the
                                       construction period. Once approved, construction is expected to commence in early
                                       2009, with completion expected in 2011.

        Robertson Barracks             This project comprises three individual project elements: the Robertson Barracks
           Redevelopment               Redevelopment project, Land 907 facilities project and the Hardened and Networked
                                       Army facilities project, with the Commonwealth committing $72 million. The
                                       Robertson Barracks Redevelopment will provide new and upgraded facilities for
                                       training, emergency response, working accommodation and equipment support.
                                       The Land 907 facilities project will provide parking and working accommodation for
                                       heavy tank transport vehicles and other tank support services. The Hardened and


                                                                                                                                 Defence      141
      2008-09 Budget


                                  Networked Army project will provide additional working accommodation and other
                                  support facilities. If approved, construction is expected to commence in early 2009,
                                  with completion expected in 2010.

                RAAF Tindal       This project comprises a number of elements to expand and upgrade existing
       Redevelopment Stage 5      working accommodation, construct new working accommodation and to augment
                                  electrical and water supply infrastructure, with the Commonwealth committing
                                  $58.7 million. If approved, construction is expected to begin early 2009, with
                                  completion expected in late 2010.

          RAAF Tindal Airborne    This project, if approved, will provide facilities and infrastructure at RAAF Base Tindal
            Early Warning and     to support the introduction of the new Airborne Early Warning and Control aircraft,
             Control Facilities   with the Commonwealth committing $64.2 million. The scope of work includes new
                                  taxiways, operational facilities and working accommodation. If approved, construction
                                  is expected to begin in early 2009, with completion expected in late 2010.

                                  Defence Operations, Exercises and Deployments
            Operation Resolute    Defence force personnel based in the Territory are involved in the ongoing primary
                                  defence operation, Operation Resolute. This defence operation is conducted to
                                  protect Australia’s Exclusive Economic Zone from illegal fishing, smuggling and
                                  unauthorised arrivals.

          Operation Overwatch     Territory-based defence personnel play a significant role in Australia’s military
                                  involvement in Iraq as part of the Overwatch Battle Group (West), particularly in the
                                  areas of transport, security, air traffic control and medical support.

            Operation Outreach    Operation Outreach is the Australian Defence Force contribution to the
                                  Commonwealth’s Northern Territory Emergency Response (NTER). This contribution
                                  to the whole of government effort is primarily centred on provision of operational
                                  command elements and the delivery of logistical support services such as vehicular
                                  and airborne transport, communications, temporary accommodation, contracting
                                  support and general sustainment support. Defence’s contribution to the NTER is
                                  $19 million over 2007-08. Approximately 130 defence personnel are involved, with
                                  members from NORFORCE supported by detachments from Navy, Air Force and
                                  other units from around Australia.
                                  Direct funding from the Commonwealth in 2006-07 for these activities was
                                  $15.5 million, of which $8 million has been spent. Department of Defence estimates
                                  that 70 per cent of the expenditure would contribute to the Northern Territory
                                  economy.

             Army Aboriginal      The Army Aboriginal Community Assistance Program (AACAP) is an ongoing
         Community Assistance     commitment that reinforces the strong association between Army and the Indigenous
                     Program      people of Northern Australia. It is a joint initiative between the Department of
                                  Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and Army
                                  that aims to improve health and living standards in Aboriginal communities.
                                  Army provides soldiers and equipment to complete project management,
                                  construction, health care and training support to communities. The program has
                                  facilitated the provision of essential housing, infrastructure, health and training
                                  support provided to remote communities across Australia.
                                  AACAP mainly operates in the Northern Territory but some projects have been
                                  undertaken in Western Australia, South Australia and Queensland. AACAP projects
                                  have been allocated $20 million for the three-year period 2006-09.




142     Defence
      Defence Exercises    Defence exercises are regularly staged in the Territory and adjacent waters. These
                           provide a major boost to the economy through supply and support contracts and
                           increased visitor numbers. In 2007-08, the Territory hosted three major exercises:
                           •	 Exercise Albatross Ausindo 2007 was a combined Royal Australian Air Force and
                              Indonesian Air Force maritime surveillance exercise held off the coast of Darwin in
                              July 2007.
                           •	 Exercise Talisman Sabre 07, a biennial exercise conducted between 19 June
                              and 2 July 2007, was held primarily at Shoalwater Bay in Central Queensland.
                              Some defence activities were carried out at Bradshaw Field Training Area and at
                              Delamere Bombing Range.
                           •	 Exercise Arnhem Thunder was held for two weeks in August 2007 and involved
                              around 500 Air Force personnel and 25 aircraft.

                           Other Defence-Related Activities
                           The Territory also benefits in a direct way from visiting naval ships and in an indirect
                           way from the Territory Government’s involvement in defence-related support activities.

             Navy Ships    A large number of RAN and international navy ships visit the Territory when regular
                           exercises, rest and recreation, and naval or humanitarian missions occur. Examples
                           include relief operations in response to the 2004 Asian tsunami and 2005 East Timor
                           civil disturbance. These visits provide a significant economic contribution, particularly
                           the expenditure by sailors on shore leave and re-supply and service stopovers in
                           Darwin. Ships remain in port for an average of four days, with crew sizes between
                           100 and 1000. The Defence Support Division of the Territory Government estimates
                           that each Royal Australian Navy and United States Navy sailor spends about $228 a
                           day while in Port. In 2007, 47 major naval ships visited the Port of Darwin for a total
                           of 149 ship visit days, compared to 59 navy ships and 214 ship visit days in 2006.
                           The decline in the number of major naval ships visiting the Port of Darwin is due to a
                           number of factors including operational demands and ability to guarantee berthage.

Defence Support Division   The defence presence in the Territory provides significant opportunities for local
                           industry. In 2003, the Territory Government established the Defence Support
                           Division (DSD) to help facilitate the growth of Territory industry capability to capture
                           defence-related opportunities. The DSD has taken on the additional role of Defence
                           Community Liaison to help support defence organisations such as the Defence
                           Community Organisation, Defence Housing Authority and Defence Families
                           Association to assist defence personnel and their families posted to the Territory.

                           Defence Outlook
                           Darwin’s position at Australia’s northern approach will remain of strategic relevance
                           to Australia’s defence. The most recent relocation of the 1st Aviation Regiment
                           will increase already significant levels of defence investment and consumption
                           expenditure in the Territory. The replacement of patrol boats and tanks based in the
                           Territory, and the arrival of the Tiger helicopters, will provide opportunities for local
                           business to undertake maintenance and other defence-related support activities, as
                           well as attracting national and international businesses to the Territory.
                           The Territory’s total defence community (including personnel and their families) is
                           forecast to increase from an estimated 12 935 in June 2007 to 13 165 by June 2008.
                           The number of permanent defence force personnel is forecast to increase by 100
                           over 2007-08 to 5451 by June 2008. This increase is expected as a result of the
                           recruitment efforts made by the ADF to boost personnel numbers across Australia.




                                                                                                         Defence       143
      2008-09 Budget


                       The $280 million Lyons development project will boost the Territory economy over the
                       next five years with the construction of an estimated 650 houses.
                       The Northern Territory Government has allocated 54 hectares of land close to
                       Robertson Barracks for the development of an industry park to include a Defence
                       Support Hub. This will provide a location for the defence support industry to grow
                       and align its capability to deliver support to the armoured and non-armoured vehicles
                       based at the barracks. New long-term support contracts for the defence platforms
                       based in the Northern Territory are expected to create new jobs and contribute to the
                       economy.
                       In 2008-09, the Territory is to host two major defence exercises:
                       •	 Exercise Singaroo, to be held in July 2008, is a biennial naval and air exercise
                          between Australia and Singapore, conducted in the Arafura Sea off the Territory
                          coast; and
                       •	 Exercise Pitch Black 08, to be conducted in July/August 2008, a biennial exercise
                          involving the RAAF and air forces from France, Singapore, Thailand, the United
                          Kingdom and the United States. It is the RAAF’s largest exercise, involving about
                          1500 defence personnel.




144     Defence
Chapter 16     Transport and Communication
               Infrastructure
  Key Points    » With a small, widely dispersed Territory population and small local market
                  relative to major markets in southern Australia, good transport and
                  communication links are critical to ongoing development in the Territory.
                » Rail remains an important transport link providing regular passenger services
                  between Darwin and Adelaide. Volumes of freight continue to grow, with further
                  opportunity for regional development particularly in the movement of bulk
                  mineral ores.
                » The Territory’s road network continues to be improved with upgrade work to
                  infrastructure, bridges and flood mitigation.
                » Air transport provides Darwin with links to international, interstate and intrastate
                  destinations for passenger movement and freight transfer.
                » Access to information and communications technology to the large percentage
                  of Territorians living in remote areas remains a priority.

               The transport and storage industry includes all entities mainly engaged in providing
               passenger or freight transport by road, rail, water or air; terminal facilities for
               passengers or freight; services related to transport such as car parking, stevedoring,
               harbour services, navigation services, airport operation; booking, travel, freight
               forwarding, crating or customs agency services; and storage facilities. It also includes
               entities mainly engaged in operating pipelines for the transportation of oil or gas, on a
               contract or fee basis.
               The communications industry covers telecommunications, postal and courier
               services. Also discussed in this chapter are television, radio broadcasting and
               media services, which are counted by the Australian Bureau of Statistics (ABS)
               as part of the cultural and recreation industry. Newspaper publishing and other
               news dissemination, often thought to form part of the communications industry, are
               included by the ABS as part of the manufacturing industry.
               As the Territory economy continues to grow, so too does the need for transport
               and storage, and communication infrastructure. Transport and storage contributed
               4.1 per cent to the Territory’s gross state product (GSP) in 2006-07. The
               communications industry (as defined by ABS) contributed 2.0 per cent to the
               Territory’s GSP in 2006-07.




                                                  Transport and Communication Infrastructure               145
      2008-09 Budget


              Table 16.1: Transport and                                        Transport             Communication1    Total
       Communications Production as a                                             %                      %              %
       Proportion of GSP/GDP, 2006-07     New South Wales                         4.2                     2.6          6.8
                                          Victoria                                4.5                     3.2          7.7
                                          Queensland                              5.6                     2.3          7.9
                                          South Australia                         4.3                     2.3          6.6
                                          Western Australia                       5.1                     1.9          7.0
                                          Tasmania                                4.8                     2.2          7.0
                                          Northern Territory                      4.1                     2.0          6.1
                                          Australian Capital Territory            1.9                     2.4          4.3
                                          Australia                               4.6                     2.5          7.1

                                          1 As defined by ABS, being Telecommunications and Postal
                                          Source: ABS Cat. No. 5220.0


                                          Transport
                                          Remoteness, geographical size and dispersed population mean long distance
                                          transportation and storage become increasingly important as the Territory economy
                                          and population continue to grow.
                                          Growth in the mining sector, along with increased freight volumes and tourist
                                          numbers passing through the Territory, continues to develop and contribute to the
                                          Territory economy. Transport and storage activity accounted for around $554 million
                                          or 4.1 per cent of the Territory’s GSP in 2006-07, up from 3.7 per cent in 2005-06.
                                          This growth contributed 0.2 percentage points to the total GSP growth of the Territory
                                          economy
                                          Four main components of the Territory’s transport industry are road, rail, sea and
                                          air. Each sector facilitates the movement of people, goods and services to, from and
                                          around the Territory.

                               Road       The Territory is served by three national highways which provide links to Queensland
                                          (Barkly Highway), South Australia (Stuart Highway) and Western Australia (Victoria
                                          Highway). The national highway network is the backbone of the road network system
                                          across the Territory and provides the only sealed road links between the Territory and
                                          the rest of Australia.
                                          The Territory road network consists of more than 36 000 kilometres of road. About
                                          22 000 kilometres are managed by the Territory Government, including 12 per cent
                                          classified as national highways, 19 per cent classified as arterial roads and
                                          69 per cent classified as secondary or local roads. The remaining approximately
                                          14 000 kilometres of roads, primarily for distributing traffic within local areas, are
                                          administrated by local governments.
                                          In 2007-08, AusLink expenditure on roads in the Territory is estimated at $46 million.
                                          Along with maintenance and widening activities, this includes major works to
                                          overcome flooding problems on the Victoria and Stuart highways, including bridge
                                          works. Upgrading blackspot locations on roads servicing the pastoral, tourism and
                                          mining industries and improving access for remote communities are also being
                                          conducted.
                                          Improvements to the Victoria Highway include pavement strengthening and lifting at
                                          the Victoria River Floodplain through high level bridges at Victoria River, Joe Creek,
                                          Lost Creek and Sandy Creek and should result in reduced road closures caused by


146     Transport and Communication Infrastructure
       flooding. Improving of community and mining roads such as the Port Keats Road
       and Tanami Road remains a priority. In 2007-08, Northern Territory Government
       expenditure on roads will be approximately $77 million.
       In April 2008, it was announced that the Territory Government, in partnership with
       the Commonwealth, would allocate $110 million to extend Tiger Brennan Drive.
       When complete, the work will include a flyover and a 7 kilometre road extension to
       the Stuart Highway. The $6.5 million stage one extension of Tiger Brennan Drive is
       scheduled for completion by the end of 2008. Stage one will upgrade a section of
       Berrimah Road to dual lane to address congestion experienced during peak hours
       and reduce commuting time between Darwin, Palmerston and rural areas. Extending
       Tiger Brennan Drive is an important infrastructure project that will build on the
       economic opportunities of East Arm Port, providing better access for trucks and trains
       to deal with increased transport and freight volumes.

Rail   The Adelaide to Darwin railway was completed in January 2004. Freightlink, the
       railway operator, began rail transport operations with five freight services a week
       capturing 85 per cent of the competitive interstate freight market within three months
       of starting up. Freightlink continues to provide the primary linehaul service along
       Australia’s central freight corridor connecting Darwin with freight services in Adelaide
       and other states.
       The value of the railway to the development of the Northern Territory economy
       continues to be demonstrated by results, with a surge to record levels of both bulk
       and general freight in 2006-07. The railway continues to demonstrate its long-term
       potential to the economic development of both South Australia and the Northern
       Territory. The net tonnage carried increased 67 per cent from 668 081 tonnes in
       2005-06 to 1 112 885 tonnes in 2006-07.
       The railway has acted as a catalyst for the development of the resources sector
       throughout the Northern Territory and South Australia by offering an alternative
       cost-effective way to move large quantities of bulk ore and materials for shipment to
       overseas markets. Through its subsidiary, OM Manganese Ltd (OMM), OM Holdings
       Ltd (OMH) operates the Bootu Creek manganese mine, located 110 kilometres north
       of Tennant Creek. Bootu Creek manganese is mined exclusively for OMH Group’s
       wholly-owned Qinzhou smelter, in south-west China. OMM was the first mine to enter
       into a contract to haul manganese by rail from the Bootu Creek operation to the Port
       of Darwin and is expected to produce 550 000 tonnes of ore annually.
       Territory Resources Ltd’s Frances Creek mine near Pine Creek commenced
       operations in July 2007, with FreightLink carrying iron ore to the Port of Darwin bulk
       minerals discharge facility. The first shipment of 65 000 tonnes of iron ore was loaded
       on 28 September 2007 destined for China. Another mining company, Oxiana, has
       announced plans to transport copper concentrate by rail from its Prominent Hill mine,
       south-east of Coober Pedy, to the Port of Darwin, commencing in 2008.
       The table below shows there is potential for more mining operations in the Northern
       Territory and South Australia to use rail to move their product to the Port of Darwin.




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         Table 16.2: Potential for Rail to   Company               Project               Location               Product
             Support Mining Operations
                                             GBS Gold              Union Reefs           Pine Creek             Gold ore
                                             Territory Iron        Frances Creek         Pine Creek             Gold ore
                                             OM Holdings           Bootu Creek           Tennant Creek          Manganese
                                             Territory Iron        Warrego               Tennant Creek          Magnetite
                                             Peko Rehab            Peko Tailings         Tennant Creek          Magnetite
                                             Arafura Resources     Nolans Bore           Alice Springs          Rare earths
                                             Olympia Resources     Harts Range           Alice Springs          Garnet sands
                                             Altona Resources      Arkaringa             Arkaringa SA           Coal
                                             Goldstream            Cairn Hill            Coober Pedy SA         Magnetite/copper/gold
                                             Goldstream            Peculiar Knob         Coober Pedy SA         Iron ore
                                             BHP Billiton          Olympic Dam           Roxby Downs SA         Copper/uranium/gold

                                             Freightlink plans to invest around $8 million in 2007 and 2008 to provide additional
                                             track infrastructure along the corridor and in Darwin, with additional leased rolling
                                             stock (defined as engines and wagons) to support the expansion of the minerals
                                             business.
                                             Linking southern markets with international markets, the railway has proven its ability
                                             to move large quantities of bulk commodities between Darwin and Adelaide in less
                                             time than by sea. This capacity was increased in early 2006, with the introduction
                                             of wagons capable of carrying road fuel tankers and wagons with the ability to
                                             double-stack containers. The Adelaide to Darwin railway is making steady progress
                                             toward achieving its objective of converting users of road freight transport to rail
                                             freight transport, especially with Coles and Woolworths now major users of rail on
                                             this corridor.
                                             Expansion of Australian Defence Force (ADF) activities in the Northern Territory
                                             and South Australia has seen an increase in military equipment movement on this
                                             corridor. In early 2008, the ADF expects to have rolling stock available to carry heavy
                                             equipment, including Abrams tanks, to and from Darwin.
                                             Great Southern Rail operates the Ghan passenger train service between Adelaide
                                             and Darwin. The service consists of a twice weekly return trip from Adelaide
                                             to Darwin, with scheduled stops of several hours duration at Alice Springs and
                                             Katherine. About 63 000 passengers were carried in 2007. Expansion of the Ghan
                                             passenger train service is planned for 2008 to emulate the world’s most luxurious
                                             railway journeys in a bid to appeal to the high end of the tourism market. Platinum
                                             cabins will have all the modern comforts with 24-hour room service. The cabins will
                                             have a distinctly Australian character in timber finishes, colours and fabrics.

                                    Sea      The Port of Darwin is a naturally occurring deep water port located in the Top End of
                                             the Northern Territory. Geographically, it is Australia’s closest port to the Association
                                             of South East Asian Nations (ASEAN) markets, making it Australia’s northern
                                             gateway port. This strategic geographic location is fundamental to the high volume of
                                             trade flowing through the port in recent times and will play a significant role in growth
                                             into the future.




148     Transport and Communication Infrastructure
      The port facilities at East Arm are connected to the national rail network through the
      Adelaide to Darwin railway to allow seamless movement of goods, including bulk
      mineral and bulk liquid trades. Integration of port facilities with the railway supports
      the Territory Government’s vision of establishing Darwin as a regional transport and
      logistics centre and an integral part of the AustralAsia trade route.
      The original Port of Darwin concept was primarily geared towards a container focus.
      However, with the increased demand for energy and resources, particularly from
      China, there has been a significant shift toward creating a multipurpose facility,
      an example being the construction of a $24 million bulk minerals ship loader. The
      expanding gas and mineral industries rely heavily on the high quality, efficient and
      congestion free infrastructure that is now in place at the East Arm Port.
      Darwin Port is well equipped to handle container and general cargo, bulk mineral
      and bulk liquids including petroleum, live cattle, and offshore oil and gas rig services.
      The Darwin Port Corporation also operates facilities for non-trading vessels. These
      include cruise, naval, fishing and pearling vessels. The port plays a significant role as
      a supply, service and distribution base supporting research and exploration of the oil
      and gas reserves in the nearby Timor Sea.
      Total trade across the Port of Darwin’s wharf facilities for 2006-07 increased by
      384 000 tonnes or 35.6 per cent on 2005-06 total tonnage. The port is the location
      of the Darwin Liquefied Natural Gas (LNG) facility. LNG production in the region
      is responsible for 3.5 million tonnes of export trade annually. There were 52 LNG
      carrier calls completed during 2006-07 at the Port of Darwin’s LNG facility, making it
      Australia’s second major LNG hub.
      A growing number of mining projects are benefiting from the installation of a
      $24 million bulk materials export facility at East Arm Wharf. The first wagons of bulk
      iron ore from Territory Resources were delivered in June 2007. Territory Resources
      expects to export 750 000 tonnes of iron ore during 2007-08.
      OMM exported 383 245 metric tonnes of bulk manganese during the year and
      forecast its 2007-08 tonnage to increase to 650 000 tonnes per annum on the back of
      dry bulk exports, mainly from the Bootu Creek mine near Tennant Creek.
      The first shipments of bulk sulphuric acid were delivered during May 2007, the start
      of a new 171 000 tonne per annum trade. The sulphuric acid is imported by Orica
      and stored at the port in a purpose-built facility by Vopak. Sulphuric acid is used in a
      leaching process for the treatment of ore.
      Darwin has been nominated by Oxiana Limited as the preferred export port for
      copper concentrate from its Prominent Hill mine in South Australia. Securing the
      Oxiana business was an important milestone for the Port of Darwin and it is expected
      that around 240 000 tonnes will pass through the port each year. The Port of Darwin
      is also Australia’s number one port for live cattle exports.
      Petroleum products remain the dominant import cargo, accounting for 71 per cent
      of the port’s import tonnage. Petroleum product imports increased by 4.4 per cent in
      2006-07, in line with increased economic activity in the Territory.

Air   Air transport continues to be an important enabler of economic growth in the Northern
      Territory. Major airports capable of jet aircraft operations are Darwin, Alice Springs,
      Ayers Rock and Nhulunbuy. Darwin airport is an international gateway and capable
      of handling the largest aircraft currently in operation. Alice Springs airport receives
      international charter flights from Japan on a seasonal basis.




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                                          Airports are critical infrastructure and play a key role in generating economic growth.
                                          Airport Development Group (ADG) owns and operates three airports in the Northern
                                          Territory – Darwin International, Alice Springs and Tennant Creek airports, with more
                                          than 60 full-time staff. In total, the on-airport and off-airport businesses employed
                                          more than 1600 people in 2006-07.
                                          During 2006-07, ADG reported an increase in revenue of 32 per cent. The
                                          strong performance was driven by growth in revenue across all airports, a result
                                          substantially underpinned by 16 per cent growth in the Darwin domestic market,
                                          11 per cent growth in international traffic and a 3 per cent growth in the Alice Springs
                                          market. Growth was also supported by the opening of the Bagot Road commercial
                                          precinct. Construction of the Osgood Drive and Bagot Road intersection provides
                                          easy access to a Bunnings warehouse retail store.
                                          ADG funded $31 million of capital projects during 2006-07. Security upgrades and
                                          enhancements continued in line with Commonwealth regulations, including the
                                          introduction of LAGS (Liquids, Aerosols and Gels Screening) for all international
                                          passengers and the implementation of 100 per cent CBS (Checked Bags Screening)
                                          at Alice Springs airport, operational since August 2007. This project and its ancillary
                                          works at Alice Springs airport cost about $7 million and bring the total associated
                                          capital investment by ADG in aviation security alone to about $20 million.
                                          Total international passengers to Darwin for the six months to December 2007 were
                                          214 300, a 7 per cent increase over the same period in 2006. Scheduled international
                                          services are provided by Jetstar, Tiger Airways, Garuda and Air North and fly to
                                          Singapore, Bali, Dili and Kupang. Royal Brunei Airlines ceased international services
                                          to and from Darwin in January 2008.
                                          Total domestic passengers for 2007 were 724 700, a 6 per cent increase over 2006.
                                          Domestic services are operated to all Australian capital cities and some regional
                                          centres by Airnorth, Vincent Aviation, Skywest, Virgin Blue, Jetstar, Qantas and Tiger
                                          Airways. Tiger Airways Australia is a low cost airline which commenced services in
                                          the Australian domestic airline market in November 2007. Alice Springs received
                                          Tiger Australia flights from Melbourne from March 2008, a welcome boost for tourism
                                          in central Australia.
                                          Darwin airport has reported good growth in passenger numbers due mainly to
                                          increased flights by Jetstar and Tiger Airways as shown in Chart 16.1.

          Chart 16.1: Airline Passenger    passengers (000)
                      Numbers, Darwin     1800
                                          1600
                                                                                                       Total
                                          1400
                                          1200
                                          1000                                                         Domestic
                                           800
                                           600
                                           400                                                          International

                                           200
                                              0
                                              2002              2003            2004           2005                 2006    2007
                                                                               Year ended June

                                          Source: Airport Development Group (ADG), Annual Report, 2006-07




150     Transport and Communication Infrastructure
                     Scheduled services to remote communities have been in decline in recent times
                     as they are not commercially viable. Aboriginal Air Services, for example, ceased
                     operations in September 2006 for financial reasons.
                     Conversely, the charter segment of the industry has reported growth mainly from
                     increased mining activity and, to a lesser extent, the 2007 Commonwealth Northern
                     Territory Emergency Response. Most communities depend on charter aircraft for
                     carriage of passengers and freight.
                     The Territory Government ensures emergencies are catered for through aero-medical
                     evacuations and through the Northern Territory Police Airwing. The Government
                     maintains a strategic network of 72 regional airports and airstrips servicing all
                     major communities in the Territory, and currently spends around $3 million a year
                     maintaining and progressively upgrading these facilities.

         Pipelines   Pipelines are the fastest and safest method of transporting large volumes of natural
                     gas over long distances. In the Northern Territory, they provide a vital energy link for
                     power generation and industry.
                     The Bayu-Undan field, located in the Joint Petroleum Development Area (JPDA) in
                     the Timor Sea, approximately 500 kilometres north of Darwin and 250 kilometres
                     south of Timor-Leste, currently produces more than 100 000 barrels of liquids per
                     day. The gas product is sent through a 502 kilometre sub-sea pipeline to the Darwin
                     LNG plant where it is processed into LNG to be shipped by specially built transport
                     tankers to Japan for the Tokyo Electric and Tokyo Gas companies.
                     NT Gas Pty Limited, in its capacity as trustee of the Amadeus Gas Trust, operates
                     and manages over 2000 kilometres of high pressure natural gas pipeline and facilities
                     in the Northern Territory.
                     Envestra Limited, Australia’s largest distributor of natural gas, owns 8800 kilometres
                     of pipeline distribution networks in South Australia, Queensland and the Northern
                     Territory. Envestra operates the natural gas transmission pipeline that connects the
                     Palm Valley gas field to Alice Springs. The 200 millimetre diameter pipeline supplies
                     gas to the Northern Territory’s Power and Water Corporation for power generation in
                     Alice Springs.

                     Communications
                     The communication sector is one of the smallest sectors of the Northern Territory
                     economy and accounts for about $273 million or 2 per cent of Territory GSP in
                     2006-07, and about 1 per cent of total Territory employment. Despite significant
                     investment and ongoing improvement, the gap between the Territory and other
                     jurisdictions in access and delivery of information and communication technology
                     (ICT) based services remains large, particularly in remote areas. Although television,
                     radio broadcasting and media services are included for discussion in this chapter,
                     their contribution to Territory GSP is not captured in the communication industry, as
                     they are part of the ABS’ cultural and recreation industry category.

Postal and Courier   Despite the increasing use of technology such as email, web mail and the internet,
         Services    postal mail remains a highly effective way for businesses to communicate with their
                     customers. The Territory is serviced by reliable, cost-effective postal and courier
                     services providing a complete range of competitive, customer-focused mail and
                     speciality services for all Territorians. Postal and courier services link with freight
                     forwarding companies including Australian Air Express and Star Track Express to
                     provide time critical air and linehaul parcel and mail delivery services.




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           Telecommunications      In 2005, the Commonwealth announced the Connect Australia program, a $1.1 billion
                                   package aimed at improving remote and regional telecommunications within
                                   Australia. The four components of the program were focused on the delivery of
                                   equitable broadband services, rolling out broadband networks to carry applications
                                   aimed at improving delivery of health, education and other essential services,
                                   extending terrestrial mobile phone coverage, and delivering vital communication
                                   services to remote Indigenous communities.
                                   Remote areas of the Territory have benefited from technology developments and
                                   improved access has reduced the isolation faced by many Territorians. Increased
                                   access to information technology has enabled the delivery of a wider range of
                                   mainstream services to remote areas, however low volume network traffic and lack of
                                   competition mean that the unit costs for electronic services remain high.
                                   In 2006, Telstra began rolling out the NextG mobile network to replace the ageing
                                   Code Division Multiple Access (CDMA) network. The planned January 2008 closure
                                   of the regional CDMA mobile network was deferred until April 2008, to address
                                   network coverage concerns and offer rural phone users more time to make the
                                   transition to the new service. Mobile phones are the product of choice for telephony
                                   in remote Indigenous communities. NextG provides broadband mobile connectivity to
                                   49 Territory locations, 41 of them in remote areas.
                                   In 2007, the scale and scope of the broadband delivery component of Connect
                                   Australia was extended when the Commonwealth announced the Australian
                                   Broadband Guarantee. This program aims to ensure all Australians are able to
                                   access broadband services regardless of where they live. Benefits to the large
                                   proportion of the Territory population living in remote areas will emerge over coming
                                   years.
                                   The Territory Government continues to liaise with the Commonwealth to ensure
                                   the specific needs of the Territory are addressed. These needs are broadband and
                                   mobile access in remote areas and a second fibre-optic cable from Adelaide to
                                   Darwin to improve wholesale telecommunications competition.

              Northern Territory   In June 2005, Telstra was awarded the contract to provide the Territory Government
                   Government      with telecommunications services for five years. Under the contract, bandwidth was
                                   increased, resulting in improved response times for services such as data transfer,
                                   intranet and internet services. Included in the contract were industry and community
                                   development initiatives estimated at $65 million.
                                   In August 2005, Telstra opened its National Indigenous Directorate in Darwin, which
                                   coordinates the delivery of telecommunications services to remote Indigenous
                                   communities nationally. Later in 2006, Telstra expanded its 100-staff call centre in
                                   Darwin to 150 staff and upgraded the facility to a national call centre.
                                   Under the Telstra contract two significant Department of Employment, Education and
                                   Training (DEET) programs continue to provide improved ICT service delivery and
                                   access in schools.
                                   •	 Learning and Technology in Schools (LATIS) delivers high volume bandwidth ICT
                                      services to 155 Territory schools.
                                   •	 The two-way radio system used by the School of the Air has been replaced by
                                      Interactive Distance Learning (IDL), using satellite technology to deliver interactive
                                      specialist tuition to 200 remote homesteads, schools and training centres in the
                                      Territory. The technology is used for secondary school tuition, but may in the future
                                      be applied to other training needs, including vocational education and training.



152     Transport and Communication Infrastructure
             The contract with Telstra is expected to deliver a cost saving to Government of about
             $4 million over four years.

Television   Darwin is served by the ABC, SBS, Channel Nine and Southern Cross Television
             (SCTV – formerly Channel 7) networks. Additionally, iTV64 broadcasts tourist
             oriented information in Darwin via the free-to-air and pay television networks. Other
             major centres receive a combination of Imparja, Central Queensland Satellite
             Television (Channel 10), the ABC and SBS. Austar pay television is available via
             cable and satellite in Darwin, and via satellite in Alice Springs and other parts of the
             Territory.
             Standard definition digital free to air television broadcasts are available in Darwin,
             Batchelor, Katherine and Alice Springs. SBS and ABC television transmit high
             definition digital broadcasts as well as standard definition channels, namely ABC
             National, ABC2 and SBS news services from around the world. Channel 9 and SCTV
             also transmit high definition broadcasts.
             The Australian Communications and Media Authority (ACMA) allocated a new
             commercial television broadcasting licence in May 2007, to provide a digital only
             service for Darwin. The licence was allocated to Darwin Digital Television Pty Ltd, a
             joint-venture company owned by the two existing commercial television broadcasting
             licensees in the Darwin television licence area, Regional Television Pty Ltd (Southern
             Cross Darwin) and Territory Television Pty Ltd (NTD Nine). The new service will join
             the four digital television services already operating in Darwin, improving the quantity
             and diversity of programming available to viewers. Due to licensing provisions, the
             channel’s service must officially launch before May 2008.

    Radio    Darwin, Alice Springs and other urban centres in the Territory are serviced by a
             number of radio stations, including the ABC, commercial and community-based
             stations. Operations such as the Top End Aboriginal Bush Broadcasting Association
             (TEABBA) and the Central Australian Aboriginal Media Association (CAAMA) link
             more than 30 Indigenous community radio stations using broadcasting equipment
             provided by the Commonwealth under the Remote Indigenous Broadcasting Services
             (RIBS) program.

             Outlook
Transport    The Territory transport industry continues to grow and shows no sign of slowing. With
             new road projects totalling almost $130 million and further investment in air, rail and
             sea infrastructure projects, the outlook is positive.
             Continued expansion of and upgrades to, the road network, including bridges, means
             that more of the Territory is open all year round. The ongoing goal of connecting
             regional communities with sealed roads means that the Territory is becoming more
             accessible to the transport industry.
             The outlook for domestic and international air services is positive, with Darwin
             emerging as a regional hub for low cost carriers. Tiger Airways Singapore flights
             connect with Tiger Australia domestic flights to Melbourne. Jetstar have announced
             similar hubbing through Darwin from April 2008 with a doubling of services to
             both Singapore and Melbourne from seven to fourteen per week. Jetstar is also
             considering basing a number of aircraft in Darwin for hubbing to a range of Asian
             destinations. Darwin is expected to gain from the competitive pressures between
             these two operators. In the short term Darwin may also benefit from the delays
             Boeing is having with the delivery of the new B787 aircraft. Jetstar plan to use these
             aircraft to mount direct flights to Asia and southern Europe from Australia’s east
             coast.


                                                Transport and Communication Infrastructure              153
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                                   Indonesia Air Asia announced in January 2008 that they intend to establish a hub in
                                   Bali with plans to connect to Perth and Darwin by October 2008. This would provide
                                   Darwin with a fourth connection to South East Asia.

               Communications      The Territory Government is continuing to explore communication technology
                                   solutions for improved access to information and technology to the large percentage
                                   of Territorians living in remote areas.




154     Transport and Communication Infrastructure
          Chapter 17               Rural Industries and Fisheries
               Key Points           » Rural industries and fisheries accounted for 2.2 per cent of Territory GSP in
                                      2006-07 and 2.4 per cent of resident employment.
                                    » The value of rural industries and fisheries production is estimated to be
                                      $532 million in 2007-08, an increase of 5 per cent from 2006-07.
                                    » The cattle industry is the largest contributor to rural industries and fisheries in
                                      the Territory making up approximately 38 per cent of total estimated production
                                      value in 2007-08.
                                    » The value of production is forecast to increase by 6.4 per cent to $566 million in
                                      2008-09.

                                   Rural industries in the Territory comprise cattle and other livestock (including buffalo,
                                   crocodiles, poultry, pigs and camels), horticulture (fruit, vegetables, nursery and cut
                                   flowers) and mixed farming (field crops, hay and seeds, and forestry). The fisheries
                                   industry comprises the harvest of wild catch and aquaculture.
                                   Rural industries and fisheries accounted for 2.2 per cent of Territory gross state
                                   product (GSP) in 2006-07 and 2.4 per cent of resident employment.
                                   In regional and remote areas, rural industries are vital to the local economy, providing
                                   direct employment for about 1329 people and making up approximately 18 per cent
                                   of rural employment. In addition, rural industries represent an important source of
                                   economic development for other rural-based industries, such as retail and wholesale
                                   trade, manufacturing and construction. The export revenue from rural production
                                   accounts for an important share of total Territory export revenue, with the total value
                                   measured at $174 million for 2006-07, or 4.3 per cent of total exports.
Chart 17.1: Rural Industries and   $M
 Fisheries, Value of Production                                                                        Cattle
                                   250
               (nominal dollars)

                                   200


                                   150
                                                                                         Fisheries

                                   100
                                                        Horticulture
                                    50
                                                                                                 Other

                                     0
                                         94   95   96    97    98      99   00 01     02 03          04    05   06   07   08e 09f
                                                                             Year ended June
                                   e: estimate; f: forecast
                                   Source: Department of Business, Economic and Regional Development


                                   Cattle
                                   The cattle industry remains the largest contributor to the rural industries sector
                                   making up 39 per cent of rural industries and fisheries estimated production value in
                                   2007-08. The flow-on effects from the cattle industry, particularly transport and retail
                                   trade, are major contributors to regional economies in the Territory.
                                   The value of Northern Territory cattle production for 2007-08 is estimated at
                                   $205 million, up 6.4 per cent from 2006-07.



                                                                                           Rural Industries and Fisheries           155
      2008-09 Budget


      Chart 17.2: Total Northern Territory   number (000)
                                             600
                       Cattle Movements
                                              500

                                              400

                                              300

                                              200

                                              100

                                                0
                                                    91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08e 09f
                                                                                 Year ended June
                                                       Live cattle exports                       Total
                                                       Live cattle movements interstate          Cattle slaughtered in NT abattoirs

                                             e: estimate; f: forecast
                                             Source: Department of Business, Economic and Regional Development

                                             In 2006-07, it is estimated that 380 506 cattle were turned off Territory pastoral
                                             properties, a decrease of 33 529 (8.1 per cent) for the year. This represents a
                                             decrease in value of cattle production of $10 million down to $193 million in 2006-07.
                                             Northern Territory cattle producers are highly influenced by economic conditions
                                             in interstate and international markets. In 2006-07, 57 per cent of Territory cattle
                                             turned off were exported, while the remaining 43 per cent were destined for interstate
                                             markets. The lack of a commercially operational abattoir in the Northern Territory
                                             meant that almost no cattle were slaughtered in the Territory in 2006-07, with all meat
                                             products slaughtered interstate or overseas.

                   Interstate Trade          The declining trend in interstate cattle movements through 2007 reflected drought
                                             conditions in southern states and has led to a 23 per cent decease in interstate cattle
                                             movements. Live cattle export numbers rebounded by 8.4 per cent in 2006-07 after a
                                             fall in the previous year. Despite this improvement in exports, total cattle movements
                                             fell by 8.1 per cent in 2006-07.
                                             The majority of cattle destined for interstate markets are feeder cattle for further
                                             growing before slaughter and sale in the domestic and international markets. The
                                             drought in southern states continued to affect interstate cattle movements in 2006-07
                                             as demand for feeder stock fell.
                                             Of the cattle sent interstate from the Territory in 2006-07, Queensland was the
                                             main destination, comprising 75 per cent of the total interstate movement. Western
                                             Australia took about 15 per cent, while 11 per cent went to other jurisdictions. In
                                             2006-07, the value of interstate trade for Territory cattle was $72 million.

                     Cattle Exports          Historically, about two-thirds of beef produced in Australia is exported, mainly to the
                                             United States (US) and Japan. In 2006-07, Australian beef exports benefited from
                                             the absence of US beef from North Asian markets, due to continued bans associated
                                             with the discovery of bovine spongiform encephalopathy (BSE) in the US in 2003.
                                             The ban on US beef increased beef and cattle prices in these markets, and boosted
                                             demand for Australian beef in Japan, Korea and Taiwan. Territory cattle represent
                                             an estimated 34 per cent of total Australian live cattle exports to all markets in
                                             2007-08. A total of 216 557 head of Territory cattle were exported to South East Asia
                                             in 2006-07, an 8.4 per cent increase over 2005-06 but still well below the highs of
                                             2001-02. Several factors have inhibited the expansion of the Territory’s live cattle
                                             export market. These include the high value of the Australian dollar, higher Australian
                                             cattle prices, and strong competition from lower priced meat in South East Asia and


156     Rural Industries and Fisheries
                                      South America, and from other Australian exporters. In 2006-07, total Territory live
                                      cattle exports were valued at $121 million, up $13 million from 2005-06.
Chart 17.3: Northern Territory Live   $M
                                      160
    Cattle Exports by Destination
                                      140

                                      120

                                      100

                                       80

                                       60

                                       40

                                       20

                                        0
                                            91   92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08e 09f
                                                                      Year ended June
                                                          Brunei       Indonesia      Africa      Philippines   Malaysia

                                      Source: Department of Business, Economic and Regional Development

                                      Indonesia was the largest market for Territory live cattle exports, accounting for about
                                      90 per cent of the total (Chart 17.3). Exports to Indonesia increased by 13.9 per cent
                                      to 193 982 head in 2006-07, while the value of exports increased by 18.0 per cent
                                      to almost $107 million. Malaysia imported 12 891 head of Territory cattle in 2006-07,
                                      an increase of 20 per cent compared to a 16 per cent fall in 2005-06. Increasing
                                      prices and a strong Australian dollar in 2006-07 have seen exports to the Philippines
                                      decreasing from levels achieved in 2003-04 by 51 per cent in 2006-07, with
                                      Queensland and international producers gaining a greater share of the market.
                                      Cheaper South American beef and Indian buffalo meat were the main sources of
                                      international competition for Territory exports.

        Farm Performance              The financial performance of beef producers in the Territory improved in 2006-07,
                                      largely due to better seasonal conditions and increased cattle numbers. Farm
                                      cash costs continued to increase as a result of spending on freight and fodder. The
                                      Australian Bureau of Agriculture and Resource Economics (ABARE) estimates that
                                      the average farm business profits of Territory producers increased by 47 per cent
                                      in 2006-07, at odds with other states where dry conditions continued to affect
                                      herd productivity. However, there were considerable variations in farm financial
                                      performance between the pastoral regions and between large and small cattle
                                      enterprises.

                                      Cattle Outlook
              Territory Cattle        The Territory cattle industry is dependent largely on the economic conditions
                                      facing interstate and international markets. In the short to medium term, increased
                                      competition in international markets will push prices downward. The ratification of a
                                      free trade agreement between Korea and the US, and weaker demand from Japan,
                                      are the primary causes of the estimated fall in the future export price of Territory beef.
                                      Lower export levels to Japan and Korea will be partially offset by growth in the US
                                      and South East Asian region. Higher grain prices and a strong Australian dollar will
                                      also detract from export growth in 2008-09.
                                      The outlook for 2008-09 is expected to see the continuing recovery of herd numbers,
                                      rebuilding low numbers after slaughtering due to the drought conditions in previous
                                      years. In 2008-09, interstate cattle movements are expected to increase slightly,
                                      growing stronger over the period to 2010-11. The interstate movement of Territory
                                      cattle generally reflects demand for meat both domestically and in Australia’s beef


                                                                                               Rural Industries and Fisheries      157
      2008-09 Budget


                                     export markets, in particular Japan, the US and South Korea. With the alleviation of
                                     Japanese concerns over BSE from markets outside Australia, Japanese domestic
                                     consumption of beef should return to 2000 levels. A lower Australian dollar should
                                     see a rise in Australian exports to 2012-13. Interstate demand is also largely affected
                                     by environmental factors such as drought.
                                     Australian live cattle exports are also forecast to increase by 3 per cent to
                                     700 000 head of cattle in 2008-09. The price is forecast to rise over the same period,
                                     partially offset by the strength of the Australian dollar. Territory live cattle exports
                                     to South East Asia are expected to increase slightly but will depend critically on
                                     exchange rate movements and price competition from cheaper substitutes (buffalo
                                     meat and lower quality beef imports) from the Asian subcontinent and locally supplied
                                     meats such as pork and chicken.

                  Future Market      Indonesia remains a growth area for Territory live cattle exports. Its large population
                  Developments       and economic development have seen trend levels of beef consumption increase in
                                     the past decade. Territory exporters are heavily reliant on the Indonesian market, so
                                     trade links are crucial to the health of Territory beef producers. One possible future
                                     development of the Indonesian market could see a meat manufacturing plant open in
                                     Indonesia, where Territory beef is processed for on-sale throughout Asia.
                                     In March 2008, the Northern Territory’s cattlemen’s and livestock exporters
                                     associations announced that they were meeting with the Vietnamese Government
                                     and potential buyers of cattle, possibly adding a new cattle export market in the
                                     next two years and decreasing the reliance of Territory producers on the Indonesian
                                     market.

                                     Other Livestock Industries
                                     In 2007-08, the production value of other livestock industries in the Territory is
                                     estimated to be $11 million, a 4 per cent increase from 2006-07, contributing
                                     2 per cent to the total value of Territory rural industries and fisheries. Other livestock
                                     includes the live export of buffaloes, horses, camels, deer, pigs and goats, while
                                     horses, camels and crocodiles are exported live interstate. Crocodile skins and flesh
                                     are produced for local and export markets.

                          Buffalo    Several issues were faced by Territory buffalo producers in 2007-08. These included
                                     the closure of the local Darwin abattoir, cheaper low quality competition from India,
                                     and the loss of Brunei as an export market. To overcome these difficulties, producers
                                     have been looking toward developing stocks of the Riverina (premium) buffalo which
                                     offer higher growth rates and a better product for consumption. Other opportunities
                                     also lie in dairy buffalos for cheese production. The market for dairy buffalo is in
                                     southern states and in New Zealand where buffaloes have already been exported for
                                     this purpose.
                                     The outlook for Territory production of other livestock in 2008-09 and over the
                                     medium term is for a slight increase. This will depend on the ability of the industry to
                                     meet the challenges of price and demand both internationally and domestically. The
                                     lack of a local abattoir has halted the supply of local meats to market and will see a
                                     reduction in competition and availability of locally produced meats.




158     Rural Industries and Fisheries
Map 5: Northern Territory Rural Industries and Fisheries


                          FORESTRY                                     AQUACULTURE
          AQUACULTURE                     Melville
          POTENTIAL                        Island                         BUFFALO                                                 AQUACULTURE
                                                                                                    COMMERCIAL AND
                    Bathurst                                                                         RECREATIONAL
                     Island                                                                             FISHING
                                                                                                                                    Nhulunbuy
         AQUACULTURE                   DARWIN                           Horticulture
                                                                         Potential
                                                                          Jabiru

                                                                      HORTICULTURE,
                                                                       CROCODILES                                                     PRAWN
                                                                                                                                     TRAWLING
                                 KATHERINE                   Pine Creek
                                 DALY BASIN
                                                                               HORTICULTURE,
   MIXED FARMING                                   KATHERINE                   MIXED FARMING
   AND FORESTRY                                                             Mataranka                                             COMMERCIAL AND
                                                                                                                                   RECREATIONAL
                                                                                                        Ngukurr                       FISHING
                ORD
            IRRIGATION         Timber Creek
               AREA                                 RANGELAND
                                                      CATTLE                                                      Borroloola


                                                             Top                   Dunmarra
                                                            Springs


                                                                                       Elliott
                                     Kalkarindji

                                                                                              Renner Springs
                                                                              y
                                                                              lwa




                                                                                                          RANGELAND CATTLE
                                                                                Rai




                                                                                                      Barkly

                                                                      TENNANT CREEK
                                                                                                                               Highwa
                                                                                                                                     y
                                                                                                                                          Avon
                                                                                                                                         Downs
                                                                                                                   Horticulture
                                                                                                                    Potential

                                                                       Barrow Creek

                                                                          Ti Tree
                                                                                   Highway




                                              Yuendumu



                                               HORTICULTURE                                          Harts Range


                                                                                                ALICE SPRINGS
                                              RANGELAND CATTLE
                                                                                 art
                                                                              Stu

                                                                                             w ay




                                                   Yulara
                                                                                        R ail




                                                                                                               0           100       200
                                                                                                                           km




                                                                                                                        Rural Industries and Fisheries   159
      2008-09 Budget


                                             Horticulture
                                             The Territory horticulture industry includes fruit, vegetables, nursery products and cut
                                             flowers. Horticulture statistics are collected on a calendar year basis, corresponding
                                             to the harvesting season.
                                             In 2007, the Territory horticulture industry is estimated to have contributed
                                             29 per cent to the total value of Territory rural industries and fisheries production. The
                                             value of horticultural production for 2006-07 is estimated to be around $145 million,
                                             an increase of 52 per cent from 2005-06. The main reason for the increase is a
                                             rise in mango production due to the biennial production cycle of mango trees, and
                                             substantial growth in the value of vegetables and melon production as shown in
                                             Chart 17.4.
           Chart 17.4: Value of Northern      $M
                                             180
        Territory Horticultural Production
                                             160
                                             140
                                             120
                                             100
                                              80
                                              60
                                              40
                                              20
                                               0
                                                   94     95   96      97   98   99    00 01 02 03           04   05   06   07e 08f   09f
                                                                                        Year ended June
                                                        Mangoes              Bananas          Other fruits        Nursery and cut flowers
                                                        Table grapes         Melons           Vegetables
                                             e: estimate; f: forecast
                                             Source: Department of Business, Economic and Regional Development

                                             The majority of Northern Territory horticultural production is destined for interstate
                                             markets. Historically, the main fruits produced in the Territory include mangoes,
                                             table grapes, bananas and rockmelons. In 2006-07, the value of fruit production is
                                             expected to rise by 95 per cent to $101 million, due largely to increased mango and
                                             melon production.

                            Mangoes          Mango production is the largest contributor to horticultural industry in the Territory. In
                                             2006-07, the estimated value of mango production in the Territory rose 74 per cent
                                             to $53.4 million. The mango industry continued to develop, with large companies
                                             consolidating their market position. A small number of large companies are now
                                             producing the majority of mangoes in the Territory.

                               Grapes        The production of table grapes has been declining in recent years, as a result of a
                                             high incidence of nematode infestation which depressed yields and forced some
                                             producers to re-plant crops and other producers to leave the market. Increased
                                             competition from Queensland growers also forced prices to fall in 2007, pricing
                                             Territory producers out of the market. Nevertheless, the estimated value of table
                                             grapes in 2006-07 was $9 million, up from $6 million in 2005-06. Established grape
                                             growers are implementing a five-year vine replacement program, with stock tolerant
                                             of nematode infestation.

                             Bananas         In 2007, banana production fell as production in the eastern states recovered in
                                             the aftermath of Cyclone Larry that decimated banana plantations in March 2006.
                                             Prices fell markedly as production throughout Australia recovered. Panama disease
                                             continues to plague the banana industry in the Territory, causing the closure of a
                                             number of plantations and reduced production of infected banana plants.



160     Rural Industries and Fisheries
     Melons     Production of rockmelons and other melons in the Territory has risen in recent years,
                with large areas planted in the Darwin and Katherine regions, including production
                from a number of traditionally mixed cropping farms. Territory producers continued
                to consolidate their melon farming practices in 2007, increasing the estimated value
                of production by 8 per cent in 2007 and continuing to exploit their advantage of
                supplying off-season melons to southern states during the winter months. Territory
                melons have been successfully exported to Singapore, Malaysia and Hong Kong in
                the past and, if production continues to increase, they will probably again be exported
                to overseas markets.
                Melon production value jumped in 2006-07 by 191 per cent to $25 million due to
                strong prices and increased production. The further use of contract melon growers in
                2008-09 is expected to further consolidate the melon industry in the Territory.

Exotic Fruits   The production of exotic fruits such as rambutan, jackfruit, dragon fruit, guavas,
                carambolas, Fiji apples/hog plums and star apples remained steady in 2007.

 Vegetables     Territory vegetable production in 2007 benefited from supply shortages in southern
                states caused by drought conditions. After remaining largely unchanged in 2006,
                large gains were made in 2007 and the estimated value of the vegetable industry in
                the Territory increased to $29 million in 2007-08.

    Forestry    Forestry plantations continue to be a growth area for Territory rural industries.
                Plantations on the Tiwi Islands continue to grow towards maturity with an expected
                initial harvest estimated in 2012. Infrastructure and labour shortages exist on
                location in the Tiwi Islands and are the major constraints on the expansion of the
                industry. African mahogany planting in the Douglas Daly region is another area
                being developed by agricultural investment companies in the Territory. Plantations
                will potentially exceed 40 000 hectares, with harvesting estimated to begin in 2028.
                These hardwoods are expected to be exported to Asia.
                High levels of forestry investment in the Douglas Daly region by hardwood plantation
                companies in 2007-08 are leading to a land use change in the region. This has
                historically been a cattle producing region, however the moratorium on land clearing
                in the region has restricted the supply of land with water licences. This finite supply
                and increased demand from the private sector is changing land values. Companies
                such as Great Southern are accumulating Douglas Daly land to plant tropical
                hardwoods for future harvest, an industry that has been booming in recent times.
                This boom comes on the back of dwindling supplies of global high value timbers,
                which have suffered from years of native deforestation and poor harvesting practices
                in the developing world. Global demand has been increasing steadily for decades
                and it is this market opportunity that agribusiness investors are looking to exploit in
                the Douglas Daly region.

                Horticultural Outlook
                In the short term, Territory horticultural production is expected to improve, driven
                mainly by an increase in mango and melon production. The consolidation of the
                industry will continue, with economic conditions pushing smaller producers out of
                the market in favour of larger, more professional producers. In the longer term,
                favourable climatic conditions, a relatively disease-free status, improved product
                quality, expanded marketing efforts and the relatively unrestricted access to domestic
                and international markets, will underpin future industry growth.




                                                                   Rural Industries and Fisheries         161
      2008-09 Budget


                        Mangoes      As the large number of juvenile mango trees matures in coming years, further
                                     increases in supply are expected, ensuring that mangoes remain the major
                                     horticultural output in the Territory for the foreseeable future. However, as mango
                                     production increases, a number of issues already emerging will intensify. These
                                     include labour supply, price pressures and the need to develop new markets, as well
                                     as logistics and supply chain issues and quality assurance and control factors. The
                                     freight train service to the Territory has eased transport bottlenecks, especially for
                                     Katherine producers, where large volumes of mangoes have been transported by rail.

                        Bananas      Banana plantations in the Territory continue to suffer from Panama disease and
                                     will do so until a disease resistant strain of banana can be found. Production levels
                                     continue to fall and if a resistant strain is not found, the continuing commercial
                                     viability of the industry is in question. Banana growers will continue to diversify
                                     into other crops such as rockmelons or watermelons, as a temporary and possibly
                                     permanent measure. After prices returned to long-term average levels in 2006-07,
                                     they are expected to remain stable as production levels in the Queensland banana
                                     industry continue to recover. A decision from the Commonwealth is expected in the
                                     third quarter of 2008 on whether to allow banana imports from the Philippines, which
                                     will have supply and price implications for the Australian banana industry. Previously,
                                     frozen bananas have been imported to Australia from Vietnam.

                          Grapes     The outlook for table grape growers is also uncertain as lower prices from interstate
                                     producers and production problems due to the nematode infestation threaten the
                                     industry. Although re planting is taking place, several producers have left the industry
                                     and volumes are set to fall in the short to medium term.

              Other Horticultural    Commercial growers of the newer exotic fruits, especially dragon fruit, are continuing
                 Developments        to search for viable markets in the short term, as they attempt to consolidate a market
                                     position for their products.
                                     The nursery and cut flower sectors also have good prospects for expansion,
                                     especially in the Top End, where climatic conditions provide distinct production
                                     advantages for a wide range of tropical varieties. In addition to current heliconia and
                                     orchid production for southern markets, inroads have been made into the Dubai
                                     market. Continuing research and development of additional nursery varieties should
                                     result in production levels increasing.
                                     The long-term future of hardwood plantations looks promising in the Territory. If
                                     Territory plantations can overcome the substantial issues of environmental impacts,
                                     labour shortages and infrastructure problems, output from the Tiwi Islands in 2012
                                     and Douglas Daly in 2028 looks promising.
                                     The Peanut Company of Australia’s peanut farm in Katherine is another promising
                                     horticulture industry in the Territory. A moratorium on water licences in the region
                                     is, however, constraining growth of the farm. If the water plan currently under
                                     development is finalised, production benefits could be seen in the long term.

                                     Mixed Farming
                                     Mixed farming includes hay and pasture seed production, cereal crops such as
                                     sorghum and maize, other crops such as peanuts, sesame and soybeans, and farm
                                     forestry. The value of field crop production in 2007-08 is estimated at $23 million,
                                     an increase of 22 per cent from 2006-07. Field crop production is dominated by hay
                                     and fodder grown in the Katherine, Douglas Daly and Darwin areas for the live cattle
                                     export industry.




162     Rural Industries and Fisheries
                                  Fishing
                                  The Territory fishing industry comprises commercial, recreational and traditional
                                  Indigenous sectors. The commercial sector includes harvesting wild catch fisheries
                                  and aquaculture as well as the processing, trade and retailing of seafood. Statistics
                                  on the value of some components of past fisheries production have been revised
                                  during 2007.
                                  In 2007-08, the value of Territory fisheries production, including the Commonwealth
                                  Northern Prawn Fishery (CNPF), is estimated to increase by 2.5 per cent to
                                  $143 million. The CNPF is Australia’s most valuable Commonwealth-managed fishery
                                  and lies off the coast of Northern Australia.Territory fisheries production represents
                                  27 per cent of the total value of rural industries and fisheries. This is the second
                                  consecutive year of growth in the value of fisheries production in the Territory. In
                                  the last five years, since the low levels recorded in 2002-03, the industry has grown
                                  by 37 per cent. Historically, the value of production of fisheries in the Territory has
                                  fluctuated widely due to environmental and demand conditions (Chart 17.5).
  Chart 17.5: Value of Northern   $M
   Territory Fishing Production   100
                                   90                                                             Crustaceans
                                    80
                                    70
                                    60
                                    50
                                                                                 Aquaculture
                                    40
                                    30
                                    20                       Fin fish
                                    10
                                                                                           Molluscs and echinoderms
                                     0
                                         94   95   96   97    98       99   00 01 02 03          04   05   06   07    08e 09f
                                                                              Year ended June
                                  e: estimate; f: forecast
                                  Source: Department of Business, Economic and Regional Development

Commercial Fishing and            Prawn and aquaculture production (primarily pearls and barramundi) are the major
          Aquaculture             components of fishing output. Combined, these two sectors historically account for
                                  around three-quarters of the value of Territory fisheries production. A sharp fall in the
                                  value of aquaculture production in 2000-01 was associated with a dramatic decline
                                  in international pearl prices and major producers delaying harvest. The value of
                                  aquaculture production has improved in recent years, although only to half the value
                                  of the 1990s.
                                  Effective management of fisheries and resource sharing between commercial and
                                  recreational fishers continues to be an integral component of the Territory’s long-term
                                  resource strategy. Over the past decade, important changes have occurred in
                                  fisheries adjacent to the Territory. The Northern Prawn Fishery has seen the greatest
                                  adjustment, with voluntary and compulsory reductions in licences and gear resulting
                                  in boat numbers falling from about 350 in the early 1980s to 95 boats in 2004. Boat
                                  numbers continue to fall as many fishermen are being priced out of the market by
                                  cheaper imports and higher fuel costs.
                                  Other adjustment measures have included a voluntary buyback of 9 of the 14 costal
                                  netting licences, gear restrictions, seasonal closures, river closures and minimum
                                  size limits. The closure of the McArthur River in 2002 and the Adelaide River in 2004
                                  to commercial barramundi fishing were major initiatives, leaving these areas to the
                                  recreational sector. The closure of Darwin Harbour and Shoal Bay from coastal net


                                                                                          Rural Industries and Fisheries        163
      2008-09 Budget


                                     fishing from February 2008 is the most recent measure to conserve Territory fisheries.
                                     The threat of illegal fishing within Territory waters has diminished in recent times
                                     with stringent monitoring of Australian waters by Australian customs and defence
                                     resources.
                                     A recent Commonwealth assessment of the Territory commercial fishing industry
                                     has resulted in several participants being given the highest level of accreditation,
                                     meaning the fisheries are healthy, well managed and ecologically sustainable.
                                     These industry participants include shark and mackerel, aquarium, demersal, finfish
                                     trawl, mud crab, Timor Reef and trepang fisheries. The shark and mackerel industry
                                     harvests 1292 tonnes of fish annually and injects an estimated $4.34 million into the
                                     Territory economy.
                                     Barriers to entry remain a major problem in the development of offshore commercial
                                     fisheries. Lack of infrastructure and transport costs are the main barriers, currently
                                     inhibiting the growth of commercial fisheries, as infrastructure and freight problems
                                     restrict the viability of some remote sustainable fisheries.

           Recreational Fishing      Recreational fishing is one of the most popular leisure activities in the Territory.
                                     In 2000-01, the Department of Primary Industry, Fisheries and Mines attributed
                                     approximately $35 million to spending on recreational fishing in the Territory.
                                     Recreational fishing is an important tourism activity, especially in the Top End, with
                                     up to 25 per cent of Territory tourism expenditure attributed to recreational fishing
                                     visitors. The closure of Darwin Harbour and Shoal Bay to inshore commercial coastal
                                     net fishing in February 2008 will see an improvement in fishing stock and recreational
                                     fishing. This will ensure the long-term protection and sustainability of the fishing
                                     industry, acting as a drawcard for Territory tourism in the future.

                                     Fishing Outlook
                                     The March 2007 Federal Court decision in the Blue Mud Bay case has created
                                     uncertainty for commercial and recreational fishers in the Northern Territory. The
                                     decision extends traditional Indigenous owners’ freehold title to the low-water mark
                                     on Aboriginal land, granting the right to exclude people from waters overlying that
                                     land. An appeal to the High Court was heard on 4 December 2007. Pending this
                                     decision, a temporary licensing scheme for recreational and commercial fishers has
                                     been established to maintain the status quo.
                                     Moderate growth in the gross value of production is forecast for 2007-08 and
                                     2008-09, driven mainly by growth in the aquaculture sector. Development in the
                                     industry is set to be constrained by the cost-price squeeze affecting fisheries
                                     producers, as a strong Australian dollar, rising interest rates, high labour costs,
                                     increasing fuel prices and cheaper imported fish all combine to lower profits by
                                     increasing input costs and lowering the base market price.
                                     Aquaculture is forecast to expand by 7 per cent in 2008-09 to an estimated
                                     $31 million. The positive outlook is influenced by a number of potential developments,
                                     including a major expansion in the farmed barramundi industry and an extension of
                                     the trepang hatchery currently in its pilot phase on Channel Island.
                                     In the medium term, several areas of growth could add to Territory fisheries
                                     production. The Tiwi Islands barramundi farm is currently attracting investors and
                                     could be one of the potential developments. Expansion in the remote fisheries is
                                     another possible commercial fishery opportunity that may open up in the medium
                                     term if limited infrastructure in remote areas is improved.




164     Rural Industries and Fisheries
Abbreviations
AAA         Australian Automobile Association
AACAP       Army Aboriginal Community Assistance Program
ABARE       Australian Bureau of Agriculture and Resource Economics
ABC         Australian Broadcasting Corporation
ABS         Australian Bureau of Statistics
ACMA        Australian Communications and Media Authority
ACT         Australian Capital Territory
ADF         Australian Defence Force
ADG         Airport Development Group
AED         Australian Energy Developments
AFPC        Australian Fair Pay Commission
APIN        Army Presence in the North
APS         Australian Public Service
ARIA        Australian Remote Indigenous Accommodation program
ASEAN       Association of South East Asian Nations
ATO	        Australian	Taxation	Office
AWE         average weekly earnings
A$          Australian dollar
B           billion
BIITE       Batchelor Institute of Indigenous Tertiary Education
BSE         bovine spongiform encephalopathy (mad cow disease)
CAAMA       Central Australian Aboriginal Media Association
Cat. No.    catalogue number
CBD         central business district
CBS         checked bags screening
CDEP        Community Development Employment Projects
CDMA        Code Division Multiple Access
CDU         Charles Darwin University
CGC         Commonwealth Grants Commission
CNPF        Commonwealth Northern Prawn Fishery
CPI         Consumer Price Index
cpl         cents per litre
DBERD       Department of Business, Economic and Regional Development
DCC         Darwin Convention Centre
DEET        Department of Employment, Education and Training
DEEWR       Department of Education, Employment and Workplace Relations
DFD         Domestic Final Demand
DHA         Defence Housing Australia
DIAC        Department of Immigration and Citizenship
DSD         Defence Support Division
e           estimate
EBA         enterprise bargaining agreement
ERA         Energy Resources Australia
ERP         estimated resident population
f           forecast
FaHCSIA     Department of Families, Housing, Community Services and Indigenous Affairs
FIFO	       fly-in	fly-out
FPSO	       floating	production,	storage	and	offloading	vessel
FSGS        Fuel Sales Grant Scheme
FTE	        full-time	equivalent
GDP         gross domestic product
GEMCO       Groote Eylandt Mining Company
GSP         gross state product
GST         goods and services tax
HES         household expenditure survey
HMAS        Her Majesty’s Australian Ship
HQNORCOM	   Headquarters	Northern	Command	



                                                                                         Abbreviations   165
      2008-09 Budget


      ICHO        Indigenous Community Housing Organisation
      ICT         information and communications technology
      IDL         interactive distance learning
      ILUA        Indigenous Land Use Agreement
      JORN        Jindalee Operational Radar Network
      JPDA        Joint Petroleum Development Area
      LAGS	       liquids,	aerosols	and	gels	screening
      LATIS       Learning and Technology in Schools
      LEAP        Living and Environment Accommodation Precinct
      LFS         Labour Force Survey
      LHS         left hand side
      LNG	        liquefied	natural	gas
      LPI         Labour Price Index
      LPG	        liquid	petroleum	gas	
      M           million
      NORFORCE    North West Mobile Force
      NT          Northern Territory
      NTER        Northern Territory Emergency Response
      NT TSA      Northern Territory Tourism Satellite Account
      OCPE	       Office	of	the	Commissioner	for	Public	Employment	
      OECD        Organisation for Economic Cooperation and Development
      OPEC        Organisation of Petroleum Exporting Countries
      PAMs	       pre-assembled	modules	
      PES         Post Enumeration Survey
      RAAF        Royal Australian Air Force
      RAN         Royal Australian Navy
      RBA         Reserve Bank of Australia
      REIA        Real Estate Institute of Australia
      REINT       Real Estate Institute of the Northern Territory
      RHS         right hand side
      RIBS        Remote Indigenous Broadcasting Services
      SBS         Special Broadcasting Service
      SCTV        Southern Cross Television
      SFD	        state	final	demand
      SME         small and medium enterprise
      STCRC       Sustainable Tourism Cooperative Research Centre
      TEABBA      Top End Aboriginal Bush Broadcasting Association
      TFR         total fertility rate
      TGVA        Tourism Gross Value Added
      TMS         Territory mobility survey
      TSA         Tourism Satellite Account
      TWI	        trade-weighted	index	
      UK          United Kingdom
      US, USA     United States of America
      USD, US$    United States dollar
      WPI         Wage Price Index
      WSE         wage and salary earners, public sector series




166     Abbreviations
Glossary
Broadband
An	‘always	on’	internet	connection	with	an	access	speed	equal	to,	or	greater	than	256	kilobits	per	second	(kbps).	
Broadband has the capacity to accommodate audio, video and data channels simultaneously.
Chain Volume Measure
Chain volume measures provide estimates of real change by factoring in changing price relativities from year to year.
Closing the Gap
The Northern Territory Government’s Indigenous Generational Plan, Closing the Gap – Overcoming Indigenous
Disadvantage,	was	launched	in	June	2007.
Confidence Interval
Confidence	intervals	represent	the	likelihood	that	a	value	lies	within	an	identified	range	of	estimates.	Confidence	
intervals are constructed using an estimate and its associated standard error.
Consumer Price Index
A	general	indicator	of	the	prices	paid	by	household	consumers	for	a	specific	basket	of	goods	and	services	in	one	
period relative to the cost of the same basket in a base period.
Constant Dollars
Used	to	remove	the	impact	of	price	changes	(inflation)	in	time	series	data.	In	the	base	year,	current	prices	equal	
constant	prices.	To	convert	current	dollar	values	to	constant	dollar	values,	it	is	necessary	to	deflate	or	inflate	by	the	
appropriate	inflation	index	number.
Current Dollars
A	measure	that	is	not	adjusted	for	inflation	or	changes	in	the	purchasing	power	of	money.	Current	dollars	specify	the	
value at a certain time and are not used to compare values over a series of time periods.
Dwelling Unit
A	self-contained	suite	of	rooms,	including	cooking	and	bathing	facilities,	intended	for	long-term	residential	use.
Employed
Persons	15	years	and	older	who	worked	for	one	hour	or	more	in	the	week	that	the	resident	employment	survey	was	
conducted.
Final Consumption Expenditure
The value of purchases of goods and services for consumption by households and government. Excludes purchases
of	fixed	assets,	intermediate	goods	or	additions	to	inventories.	Intermediate	goods	are	those	used	as	inputs	for	
making other goods.
Goods and Services Tax
On	July	2000,	the	Commonwealth	introduced	a	10	per	cent	tax	on	goods	and	services	(GST),	replacing	the	previous	
wholesale sales tax regime. Some items like basic food, health, education and exports are GST free.
Gross Domestic Product
The	total	value	of	goods	and	services	produced	in	Australia	over	the	period	for	final	consumption.	Intermediate	
goods, or those used in the production of other goods, are excluded. Gross domestic product can be calculated by
either summing total output, total income or total expenditure.
Gross Fixed Capital Formation
Additions to the stock of real capital by private and public sectors. Real capital represents assets, except land and
natural	resources,	which	are	capable	of	producing	income	(for	example,	new	and	second-hand	buildings,	plant	and	
equipment,	and	roads).
Gross State Product
Similar to gross domestic product, except that it measures the total value of goods and services produced in a
jurisdiction.	It	is	the	sum	of	all	income,	namely	wages,	salaries	and	profits,	plus	indirect	taxes	less	subsidies.	It	
can	also	be	calculated	by	measuring	expenditure,	where	it	is	the	sum	of	state	final	demand	and	international	and	
interstate trade, changes in the level of stocks, and a balancing item.
Labour Force
All	persons	15	years	and	over	who	are	available	for	work,	that	is,	employed	plus	unemployed	persons	actively	
seeking	work.	Excludes	defence	force	personnel	and	non-residents.
Miscellaneous Goods and Services
Includes items such as personal care, jewellery, watches and clocks, and health insurance (sourced from ABS
internal documents).


                                                                                                               Glossary      167
      2008-09 Budget


      Moving Annual Total
      A	method	used	to	smooth	data.	These	smoothing	methods	iron	out	the	short-term	fluctuations	in	the	data	by	
      averaging	observations	collected	over	a	12-month	period.
      Nominal Terms
      Where	data	is	not	adjusted	for	inflation	or	changes	in	the	purchasing	power	of	money.
      Original Terms
      Data in original terms is basic, raw data as collected in a survey or a census. It is not adjusted for seasonality, or
      smoothed to remove irregularities to form a trend series.
      Participation Rate
      The	proportion	of	the	population	over	15	years	of	age	who	are	working	or	looking	for	work.
      Private Business Investment
      Private	fixed	capital	formation	for	non-residential	buildings	and	structures,	machinery	and	equipment,	livestock,	
      intangible	fixed	assets	and	ownership	transfer	costs	before	depreciation.
      Relative Standard Error
      The relative standard error is the standard error expressed as a proportion of the estimate. This measure provides an
      immediate indication of the percentage error likely to have occurred due to sampling.
      Sample Error
      Sample error is the difference between estimate obtained from a particular sample and the value that would be
      obtained if the whole population was enumerated under the same procedures.
      Seasonally Adjusted Terms
      The seasonally adjusted series is a time series of estimates with the effects of normal seasonal variation removed,
      that	is,	those	fluctuations	that	exhibit	a	regular	pattern	at	a	particular	time	of	year.	Seasonally	adjusted	terms	allow	
      the	effects	of	other	non-seasonal	influences	on	the	series	to	be	more	clearly	recognised.
      Standard Error
      The standard error of an estimate is a measure of the variation in the estimate from all possible samples, and
      therefore is a measure of the precision with which an estimate from a particular sample approximates the average
      over all possible samples.
      State Accounts
      An Australian Bureau of Statistics framework and methodology for measuring economic growth (see gross domestic
      product,	gross	state	product	and	state	final	demand).
      State Final Demand
      Final	consumption	expenditure	plus	gross	fixed	capital	formation	in	each	jurisdiction.	It	represents	the	total	
      expenditure on consumption and investment in a jurisdiction.
      Terms of Trade
      The ratio of export prices to import prices. An improvement in the terms of trade occurs when export prices rise
      relative	to	import	prices.	It	has	a	significant	influence	on	the	value	of	a	country’s	currency.
      Trade-Weighted Index
      Index of weighted average exchange value of one currency against currencies of other countries. Australia’s TWI is
      an indicator of how the Australian dollar is performing compared to its major trading partners. The composition of the
      index	is	determined	by	Australia’s	two-way	trade	with	its	major	trading	partners,	and	accounts	for	at	least	90	per	cent	
      of aggregate trade.
      Trend Terms
      The trend series is used to analyse the underlying behaviour of a series over time. Trend terms are derived by
      smoothing the seasonally adjusted series so as to reduce the impact of any irregular components of that series.
      Unemployed
      Persons	15	years	and	older	who	were	not	employed	during	the	week	of	the	labour	force	survey	and	were	actively	
      looking for work in the last four weeks.
      Unemployment Rate
      The number of unemployed persons expressed as a percentage of the labour force.
      Visitor
      Tourism	Research	Australia	defines	a	visitor	as	someone	who	has	stayed	in	a	place	at	least	40	kilometres	from	their	
      usual	place	of	residence	for	at	least	one	night,	but	who	is	away	from	home	for	less	than	12	months.	An	international	
      visitor	is	defined	as	an	overseas	arrival	who	stayed	in	Australia	for	less	than	12	months.	




168     Glossary
Charts
Chart 1.1    Industry Proportion of GSP and GDP, 2002-03 to 2006-07 (five year average)                       5
Chart 1.2    Territory Employment and GSP Proportions, 2005-06                                                7
Chart 1.3    Composition of Territory Merchandise Exports                                                     8
Chart 1.4    Proportion of SFD, 2002-03 to 2006-07 (five year average)                                        9
Chart 1.5    Household Final Consumption Expenditure, 2006-07                                                10
Chart 1.6    Business Investment Components, 2006-07                                                         10
Chart 2.1    Territory Consumption (real, moving annual total)                                               17
Chart 2.2    Territory Dwelling and Business Investment (real, moving annual total)                          18
Chart 2.3    Territory State Final Demand and Gross State Product (real year-on-year percentage change)      19
Chart 3.1    Annual Population Growth                                                                        22
Chart 3.2    State and Territory Population Growth Rates, to June 2007                                       23
Chart 3.3    Age Distribution of Population, June 2007                                                       26
Chart 3.4    Age Distribution of Territory Population, June 2007                                             26
Chart 3.5    Number of Males per 100 Females, as at 30 June 2007                                             27
Chart 3.6    Territory Population Growth by Component                                                        29
Chart 3.7    Ratio of Age-Specific Death Rates, 2001-2004                                                    31
Chart 3.8    Territory Interstate Migration Flows                                                            33
Chart 3.9    Age Profile of Territory Arrivals and Departures (five year average 2001-02 to 2005-06)         34
Chart 3.10   Territory Interstate Migration Flows by Jurisdiction, 2002-03 to 2006-07 (annual average)       34
Chart A3.1   Undercount Rates, Four Censuses                                                                 36
Chart 4.1    ABS-Reported Trend Resident Employment                                                          41
Chart 4.2    ABS-Reported Resident Unemployment Rate                                                         41
Chart 4.3    Territory Economic and Employment Growth (year-on-year)                                         42
Chart 4.4    Apprenticeship and Traineeship Commencements and in Training                                    47
Chart 5.1    Consumer Price Index                                                                            54
Chart 5.2    Annual Percentage Point Contribution to Change in Darwin and National CPI, 2007                 55
Chart 5.3    RBA, Underlying Measures of Inflation (annual change)                                           56
Chart 5.4    Unleaded Retail Petrol and Crude Oil Prices                                                     57
Chart 5.5    Exchange Rates (3 month moving average)                                                         58
Chart 5.6    Average Weekly Full-Time Adult Total Earnings (year-on-year change)                             62
Chart 7.1    Territory International Merchandise Trade (moving annual total)                                 70
Chart 7.2    Territory Merchandise Exports by Major Group (moving annual total                               71
Chart 7.3    Territory Merchandise Exports, 2002-03 to 2006-07(five year average)                            73
Chart 7.4    Territory Merchandise Imports (moving annual total)                                             73
Chart 7.5    Territory Merchandise Imports, 2002-03 to 2006-07 (five year average)                           75
Chart 7.6    Territory Services Exports                                                                      76
Chart 7.7    Territory Services Imports                                                                      76
Chart 8.1    Value of Mining and Energy Production and Processing (nominal dollars)                          80
Chart 8.2    Value of Mineral Production and Processing (nominal dollars)                                    82
Chart 8.3    Northern Territory Mineral Exploration (moving annual total)                                    83
Chart 8.4    Value of Territory Energy Production (nominal dollars)                                          84


                                                                                                          Charts   169
      2008-09 Budget


      Chart 9.1    Territory Manufacturing Sector Selected Indicators, 2005-06                89
      Chart 10.1   Territory Construction Work Done                                           94
      Chart 10.2   Territory Residential Building Work Done                                   95
      Chart 10.3   Territory Non-Residential Building Work Done (moving annual total)         97
      Chart 10.4   Territory Engineering Work Done                                            98
      Chart 11.1   Territory Residential Land Sales (number, moving annual total)             104
      Chart 11.2   Capital City Median House and Unit Prices, December quarter 2007           105
      Chart 11.3   Territory House and Other Dwelling Sales (number)                          107
      Chart 11.4   Home Loan Affordability                                                    110
      Chart 11.5   Proportion of Income Needed to Meet Rent Payments                          110
      Chart 12.1   Tourism Gross Value Added                                                  116
      Chart 12.2   Tourism Expenditure Per Head of Resident Population, 2006-07               117
      Chart 12.3   Territory Visitors                                                         118
      Chart 13.1   Household Assets and Debt – Percentage of Annual Household Income          123
      Chart 13.2   Household Debt Ratios – Debt as a Percentage of Assets                     124
      Chart 13.3   Consumer Sentiment, March Quarter 2008                                     125
      Chart 13.4   Territory Real Retail Turnover (moving annual total)                       127
      Chart 14.1   Public Sector Expenditure as a Proportion of SFD, 2006-07                  129
      Chart 14.2   Public Sector Expenditure (excluding defence) as a Proportion of SFD       130
      Chart 14.3   Components of Public Sector Consumption Expenditure (excluding defence)    131
      Chart 14.4   Components of Public Sector Investment Expenditure (moving annual total)   131
      Chart 15.1   Defence Personnel Stationed in the Northern Territory                      138
      Chart 15.2   Defence Recurrent Consumption Expenditure in the Northern Territory        138
      Chart 15.3   Defence Housing Australia (DHA) Dwelling Stock                             140
      Chart 16.1   Airline Passenger Numbers, Darwin                                          150
      Chart 17.1   Rural Industries and Fisheries, Value of Production (nominal dollars)      155
      Chart 17.2   Total Northern Territory Cattle Movements                                  156
      Chart 17.3   Northern Territory Live Cattle Exports by Destination                      157
      Chart 17.4   Value of Northern Territory Horticultural Production                       160
      Chart 17.5   Value of Northern Territory Fishing Production                             163




      Maps
      Map 1        Onshore Mineral and Energy Resources                                       81
      Map 2        Timor Sea Oil and Gas                                                      85
      Map 3        Northern Territory Rural Industries and Fisheries                          159




170     Charts and Maps
Tables
             Summary of Territory Economic Indicators                                                       3
Table 1.1    Industry Proportions of GSP and GDP, 2006-07                                                   7
Table 2.1    Territory Economic Growth Profile                                                             11
Table 2.2    Territory State Final Demand (SFD) and Gross State Product (GSP)                              12
Table 2.3    Northern Territory Economic Indicators                                                        16
Table 3.1    Annual Population                                                                             23
Table 3.2    Territory Population Estimates by Main Centre as at 30 June                                   24
Table 3.3    Comparative Age Distribution                                                                  25
Table 3.4    Median Age, Northern Territory and Australia, 1996 to 2016                                    28
Table 3.5    Proportion of the Population Aged 65 and Over                                                 28
Table 3.6    Population Components as at 30 June                                                           29
Table A3.1   Indigenous Net Undercount by State/Territory 2006                                             37
Table 4.1    Territory ABS-Reported Labour Force Statistics (annual average)                               40
Table 4.2    Employment by Industry                                                                        49
Table 4.3    ABS LFS Redesign Sampling Fractions                                                           51
Table 5.1    Consumer Price Index                                                                          54
Table 5.2    Unleaded Retail Petrol and Crude Oil Prices                                                   58
Table 5.3    Grocery Price Survey, December 2006 to December 2007                                          59
Table 5.4    Average Weekly Expenditure by Category and Household Income                                   60
Table 5.5    Wage Price Index (year on year to December 2007, percentage change)                           61
Table 5.6    Wage and Salary Earners Aged 15 and Over, 2004-05                                             62
Table 6.1    Growth (annual percentage change)                                                             68
Table 7.1    International Merchandise Trade, 2006-07                                                      71
Table 8.1    Mining as a Percentage of GSP, 2006-07                                                        79
Table 11.1   Median House Prices                                                                          106
Table 11.2   Median Unit Prices                                                                           107
Table 11.3   Overall Vacancy Rates                                                                        108
Table 11.4   Median 3-bedroom House Weekly Rental Prices                                                  108
Table 11.5   Median 2-Bedroom Unit Weekly Rental Prices                                                   109
Table 11.6   Proportion of Dwellings with Four or More Bedrooms (%)                                       111
Table 12.1   Tourism Measures for the Northern Territory 2003-04 to 2006-07                               115
Table 12.2   Visitor Expenditure, 2005-06 to 2006-07                                                      117
Table 12.3   Tourism Indicators                                                                           120
Table 13.1   Retail and Wholesale Trade                                                                   122
Table 14.1   Wages and Salary Earners                                                                     132
Table 15.1   Population, Permanent Defence Force Members and Defence Expenditure Proportions, 2006-07     137
Table 15.2   Approved Major Capital Facilities Projects                                                   141
Table 15.3   Major Projects under Consideration by the Commonwealth Government in 2007-08                 141
Table 16.1   Transport and Communications Production as a Proportion of GSP/GDP, 2006-07                  146
Table 16.2   Potential for Rail to Support Mining Operation                                               148




                                                                                                        Tables   171

				
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