Territory Economy
The following section provides an overview
of the Territory economy, including the overall
performance of the economy in 2011‑12 and the
outlook for 2012‑13.
While the local economy has little direct impact on
the Corporation’s performance, the overall health
of the Territory economy and level of economic
activity does influence the underlying funding
requirements of government and the assessment
of the Territory’s credit rating. Updates of key
economic indicators are published regularly
and can be downloaded at www.nt.gov.au/ntt/
economics.
Structure of the Economy
The Territory accounts for 19 per cent of Australia’s
total land mass and just over 1 per cent of
Australia’s total population, with approximately
one‑third of the Territory’s population being
Indigenous. The Territory has an economy
dominated by mining and energy production. The
Territory is also characterised by a large public
sector and a significant Australian Defence Force
presence.
The small size of the Territory economy means that
large, typically resource‑based projects can have
a substantial impact on investment and production,
resulting in volatile growth patterns. Additionally,
the significance of the mining and tourism
industries makes the Territory economy particularly
reliant on exports and as a result it is susceptible
to developments in key export markets and the
world economy generally.
Gross State Product
The Territory’s gross state product (GSP) is
estimated to have increased by 2.4 per cent to
$16.7 billion in 2011‑12. Growth is expected to
have been underpinned by large increases in
private sector investment, which has more than
offset declining levels of public investment and
consumption, and a narrowing trade surplus.
Investment expenditure in the Territory is estimated
to have increased by 14.9 per cent to $4.4 billion
in 2011‑12. This is primarily due to strong growth
in private sector machinery and equipment
expenditure and engineering activity related to the
development of a number of major projects such
as the Montara and Kitan oil fields in the Timor
Sea, a scheduled maintenance shutdown of the
Darwin liquefied natural gas (LNG) plant and the
commencement of INPEX’s $34 billion Ichthys
project. Growth in investment is also expected
to be driven by strong growth in residential
construction activity due to the commencement
of several major projects such as the Darwin
correctional facility, the marine supply base and
the INPEX workers’ village, and is expected to be
supported by higher levels of mineral and energy
exploration expenditure.
Public sector investment is estimated to have
declined by 24.3 per cent in 2011‑12, as the
Territory Government’s capital works program
steps down from record counter‑cyclical highs and
the Commonwealth stimulus measures end.
Total consumption expenditure in the Territory is
estimated to have decreased by 0.3 per cent to
$13.8 billion in real terms, detracting 0.3 per cent
from economic growth. Household consumption,
which accounts for around 60 per cent of total
consumption, is expected to have maintained
similar levels to 2010‑11, constrained by the
increased propensity to save and debt aversion
among households continuing into 2011‑12, as well
as moderating employment and modest population
growth in 2011‑12. Public sector consumption
expenditure is estimated to have decreased
by 0.7 per cent, with declining state and local
government consumption expenditure more than
offsetting 1.0 per cent growth in Commonwealth
expenditure.
The Territory’s economic growth rate is forecast
to strengthen to 3.9 per cent in 2012‑13, due
to strong growth in private sector investment and
modest growth in household consumption. Private
sector investment is expected to be driven by
major projects including the INPEX workers’
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accommodation village and LNG plant, marine
supply base and correctional facility, as well as
increased residential housing activity as a result
of land releases in Palmerston. However, the
Territory’s trade surplus is forecast to narrow by
about 40 per cent reflecting increased imports of
key machinery and equipment and pre‑assembled
modules for the construction of INPEX’s LNG plant
at Blaydin Point.
External Economic Environment
Overseas exports constitute over 35 per cent of
Territory GSP. Major Territory exports include LNG,
crude oil, mineral ores, and tourism‑related services.
The International Monetary Fund (IMF) forecasts
global economic growth to fall to 3.5 per cent
before strengthening to 3.9 per cent in 2013,
reflecting stronger growth in many emerging
and developing countries, despite the continued
uncertainty over the economic and financial
situation in Europe.
Despite weakness in many developed nations, the
strength of demand from Asian nations is expected
to result in the Australian economy outperforming
most other advanced economies in 2012 and
2013, with the IMF forecasting growth for Australia
at 3.0 per cent for 2012, increasing to 3.5 per cent.
The Territory is well positioned to capitalise on this
resource growth.
International Trade
International trade forms an integral part of the
Territory economy. The Territory’s trade surplus
is expected to have narrowed by 44.1 per cent
to 1.1 billion in 2011‑12. The decline reflects a
17.0 per cent decrease in goods exports, largely
reflecting the scheduled maintenance shutdown
of the Darwin LNG plant and the Bayu‑Undan
offshore processing facility in April 2012.
In 2012‑13, the Territory’s trade surplus is forecast
to narrow further by 40.9 per cent to $671 million,
reflecting an increase in imports of machinery,
equipment and parts related primarily to the
construction of the $34 billion Ichthys project. The
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increase in imports is expected to be partly offset
by an increase in oil exports as the Kitan and
Montara oilfields increase production.
Population
In line with slowing economic activity, moderating
jobs growth, lower net overseas migration and the
relocation of the 7th Royal Australian Regiment to
South Australia, the Territory’s population growth
rate slowed to 0.8 per cent in 2011. Nationally,
Australia’s population growth rate slowed
to 1.4 per cent in 2011.
The Territory’s population growth rate is forecast
to strengthen to 1.6 per cent in 2012 and to 2.2
per cent in 2013. Strengthening population
growth is largely being driven by the
commencement of construction of a number
of major projects, including INPEX’s LNG plant,
the $495 million Darwin correctional facility, the
$110 million marine supply base, redevelopment
of the Montara oilfield platform and maintenance
of both the ConocoPhillips Darwin LNG plant and
Bayu‑Undan oilfield and the associated increased
demand for construction labour.
Labour Force
Resident employment growth in the Territory
moderated to 0.5 per cent in 2011‑12 mainly
reflecting softer labour demand following the
completion of several major projects in 2011.
In 2012‑13, resident employment growth is forecast
to strengthen to 2.0 per cent as a result of stronger
economic activity associated with works on major
projects, including INPEX, the Darwin correctional
facility and the new marine supply base. In
addition, defence expenditure on developing
infrastructure on major bases in the Territory is
expected to support employment growth.
Prices
Inflation in Darwin was constrained in 2011 by
slowing growth in private consumption, investment
and population levels and a weakening labour
market, reflecting the impact of the completion of
a number of employment‑intensive major projects
on economic activity. In addition, lower import
prices, primarily due to a sustained high AUD, also
contained the Darwin inflation rate in 2011, which
remained steady at 2.8 per cent over the year.
Mining and Energy
Higher tobacco and alcohol, financial service,
transportation, and food and non‑alcoholic
beverage prices exerted upward pressure on
Darwin’s inflation rate, while lower prices for
household contents and service, and recreation
and culture partially offset growth.
In 2010‑11, the inflation‑adjusted value of mineral
and energy production in the Territory decreased
by 5.8 per cent to $5 billion, driven by lower
demand for resource commodities as global
economic growth slowed, as well as lower offshore
oil production following the decommissioning of
the Challis, Cassini and Jabiru oilfields and lower
production from the Laminaria‑Corralina oilfields
due to natural decline.
Growth in the inflation rate in Darwin is forecast to
slow to 2.1 per cent in 2012 reflecting moderate
growth in private consumption, subdued
employment and population growth, and a lack of
capacity constraints.
In 2013, inflation in Darwin is forecast to strengthen
to 3.2 per cent driven by stronger aggregate
demand. Increased private construction investment
and private housing investment is expected as
work on the Ichthys project, Darwin correctional
facility and marine supply base ramps up. In
addition, a recovery in household consumption is
expected, driven by stronger employment, wages
and population growth.
Songa Venus drilling rig at the Ichthys Field
In terms of output, mining is the largest industry in
the Territory, accounting for 17.4 per cent of GSP
in 2010‑11, compared to 8.8 per cent nationally.
In 2011‑12, the inflation‑adjusted value of mining
and energy production is estimated to have
increased by 4.7 per cent to $5.2 billion, as the
Kitan oilfield increased production. Growth was
partly offset by lower LNG production following
the scheduled temporary dual‑shutdown of both
the Darwin LNG plant and the offshore facility at
Bayu‑Undan for maintenance in April and May 2012.
The inflation‑adjusted value of mineral and energy
production in the Territory is forecast to increase
Photograph provided by INPEX
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by 10.6 per cent to $5.7 billion in 2012‑13. Growth
will be primarily driven by increasing output in
the energy sector related to higher levels of oil
production reflecting the commencement of
production from the Kitan and Montara oilfields.
Construction
The construction industry accounted for
10.7 per cent of Territory GSP in 2010‑11 and in
terms of output was the second largest industry in
the Territory. The Territory’s construction industry
employed over 11 000 people in 2010‑11, or
10.1 per cent of the resident labour force.
In inflation‑adjusted terms, construction activity
in the Territory is expected to increase by
51.4 per cent to $2.7 billion in 2011‑12, primarily
driven by engineering construction associated with
the Montara and Kitan oilfield developments, the
maintenance shutdown of the Darwin LNG plant
and the commencement of work related to the
Ichthys project.
In 2012‑13, the value of construction activity in the
Territory is forecast to increase by 87.9 per cent
to $5.1 billion, largely driven by engineering
activity associated with the INPEX‑related works.
Residential construction activity is forecast to
increase by 9.5 per cent to $562 million. The level
of construction activity is expected to increase
as the Territory’s population grows as a result
of increased economic activity. In response
to strengthening population growth caused by
increased economic activity, residential
construction will be required in the new land
release areas of Palmerston and Muirhead.
Growth in unit developments in Darwin and
Palmerston is forecast in 2012‑13 with the likely
construction of a number of developments.
Non‑residential construction is forecast to increase
by 43.6 per cent to $971 million in 2012‑13. The
large increase in growth reflects construction of
Darwin’s new correctional facility and the INPEX
workers’ village. The combined value of both
projects over the next three years is $795 million.
Other projects such as the Charles Darwin Centre
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in the Smith Street Mall, SKYCITY Casino and
continued works at Darwin International Airport are
also expected to contribute to growth.
Tourism
In 2010‑11, international travel to the Territory
decreased due to adverse economic conditions
experienced across the UK, Europe and Japan.
This affected household disposable income levels
in many of the Territory’s key international tourist
markets.
In addition, the continued appreciation of the AUD
adversely impacted Territory tourism not only by
discouraging international visitors but also by
encouraging Australians to travel overseas, instead
of within Australia.
The continued strength of the AUD as well as
continued economic weakness among many of
the Territory’s key international source markets
have dampened tourist demand in the Territory in
2011‑12. These conditions are expected to remain
for the near future and continue to impact tourist
numbers to Australia and the Territory in 2012‑13.
However, partly offsetting this, the Ichthys gas field
development is expected to have a positive effect
on Territory tourism through increased visitation
associated with the project’s workforce.
Longer Term Economic Outlook
On 13 January 2012, INPEX made its final
investment decision, confirming that it would
construct a two‑train LNG processing plant (with
approval for up to six trains in total) at Blaydin Point
on Darwin Harbour. The $34 billion Ichthys project
includes approximately $13 billion expenditure
onshore in the Darwin region. This expenditure
includes construction of the processing facility
and laying of the associated 850 kilometre gas
transportation pipeline (of which around 250
kilometres will be in Darwin Harbour and
Territory‑administered waters). Also included is
the construction of a workers’ village at Howard
Springs, to house up to 3500 workers.
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