Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
We know that Northern Territory taxpayers could be footing a
billion dollar bill is what's being reported for the controversial
shiplift project in Darwin. Now, as we know, the facility
is intended to support the marine industry, the maintenance of
the marine industry, and it is going to be operated
by Purling Giant Pass Payey. But concerns continue to be
(00:22):
raised about the time that it's taking to complete this project,
as well as the ongoing cost blowouts. Now, independent economist
Saul Slake spoke to the ABC a little earlier this
week and said the blowout is among the worst in
recent memory, warning that it could leave the Northern Territory
with the stranded asset and mounting debt. Now Saul joins
(00:45):
me on the line right now. Good morning to you, Good.
Speaker 2 (00:48):
Morning Pai, Thank you for having me on your program.
Speaker 1 (00:51):
Thank you so much for joining us. Now, sold this shiplift,
it was supposed to cost about one hundred million dollars
in the early days when it was first announced. I mean,
now we're talking the potential of a billion dollars. How
does something like that even happen?
Speaker 2 (01:06):
Well, some of it is explained by the fact that
infrastructure projects across Australia and all over the world have
been subject to delays and cost blowouts. The Status Bureau
estimates that the average cost of infrastructure projects around Australia
(01:26):
since this one was first announced ten years ago has
escalated by around forty percent. That's ten percentage points more
than the Consumer Price Index, for example, over its own period.
That wouldn't explain the blowout in the cost of this
particular project, but it explains some of it. Some of
it may be the result of the fact that the
(01:47):
original estimate of one hundred million that was made in
twenty fifteen was an underestimate, and if there were to
be a public inquiry into this project, is at least
one former territory MLA is, then that might shed some
light on whether that was an underestimate. It may well
be that the complexity of the project was initially underestimated,
(02:11):
and there may be other factors involved as well. I mean,
my understanding is that when it was first announced there
was some kind of agreement with the federal government to
put in up to three hundred million dollars for this,
so that's the original estimate was closer to four hundred
million than one hundred At this stage we don't know.
But although there have been projects around Australia where the
(02:32):
total cost has increased by more in terms of billions
of dollars, and the most obvious one that people might
remember hearing of recently is Snowy two point not which
was originally estimated to cost about two billion, and the
most recent estimate, according to the Federal Government I think
just last week, was twelve billion. That's an increase of
ten billion dollars, which is of course a hell of
(02:54):
a lot of money, but it's a sixfold increase compared
with If it's true that the cost of the Darwin
Shiplift project has risen from one hundred million to over
one billion, which is speculation I've seen, then that's a
tenfold increase, which would make it proportionately one of the
biggest in Australia in living.
Speaker 1 (03:13):
Memory and sol you know, the concern I suppose that's
been raised right from the get go as well, since
this project was announced, is you know, making sure that
we've actually got you know, I don't know whether client's
the right word or what the right word is that
are going to use it, so that you know, we
actually see some return for that investment, which is, you know,
(03:34):
it's it's difficult when then we've got a private operator
who's going to be operating it, But you would hope
that the impact to the rest of the economy and
other businesses around the Northern Territory, you'd hope that it's
going to be worth the spend.
Speaker 2 (03:48):
Well. Indeed, then if I were a territory taxpayer and
this amount of mine and fellow territorian's money was being
put into a project for which all the returns were
going to a private operator rather than at least some
of them being returned to the government, I'd be asked
wanting to ask a lot of questions as well, and
to be getting some meaningful answers to this. I mean,
(04:11):
it may be that you wouldn't get the same return
on it that a commercial investor would get, because, for example,
there could be applications of a project like this for
the military. You know, it might be helpful for the
Navy to be able to repair naval vessels, or for
Border Force to be able to repair vessels or maintain
vessels that it uses, rather than having them sent way
(04:34):
down south, which would cost more and involve delays. Rather
than having that work done in the Northern Territory. You
wouldn't necessarily expect that to pass the same cost benefit
tests as a private investor would make for a commercial project.
But the thought that there would be a zero return
to taxpayers for the amount of money that they're being
put expected to put into this project does, I think
(04:57):
raise some questions that deserve serious answers opinion.
Speaker 1 (05:00):
And you know, you've looked at a lot of different
projects in the ways in which you know different governments
are spending money over the years. Is it normal for
the public to pay this much while a private operator benefits.
Speaker 2 (05:13):
It's unusual. I can't say it's never happened, but it's unusual,
and it's becoming far too commonplace for the details of
projects like this to be wrapped in a commercial in
confidence blanket. I mean, sometimes there may be a justification
for that, if there's a competitive process, for example, and
you don't want one competitor to be advantaged over another,
(05:37):
or where you don't want the government's negotiating position with
potential commercial bidders to be compromised by having their bargaining
position exposed to the public before any decision is made.
But after decisions have been made, I don't see why
things should be commercial in confidence. In the same way,
sometimes there might be legitimate security reasons for some decision
(06:00):
to be kept under wraps, but I don't see how
that applies in this particular instance, And especially given that
the territory now has a new government which wasn't responsible
for any of these decisions when they were made between
twenty fifteen, and by the time this government come to
op you kind of wonder what are they afraid of?
What are they trying to conceal? If indeed they are
(06:21):
intending to conceal, maybe they'll respond positively to the calls
that have been made from some quarters for there to
be a full and open public inquiry into this whole project.
And hopefully, even if nothing can be done about commitments
that may have been entered into by previous governments, lessons
will nonetheless be learned so that this doesn't happen again. Yeah,
(06:41):
I mean, do you.
Speaker 1 (06:42):
Think from your experience with the Northern territories already, you know,
we're already dealing with rising debt levels. Could this project,
I mean, it's obviously going to make things worse, but
are we taking on too much risk here.
Speaker 2 (06:54):
Well, I think the Northern Territory is in a pretty
precarious financial position to say, and I want to be
very clear about this, that the territory is in any
danger of going bankrupt or is going to need some
kind of federal bailout. We're not talking that kind of
extremist language. But the Northern Territory's financial position is up
there with Victorias and Tasmania's as the worst in the nation.
(07:17):
The Northern Territory has a relatively small population and a
much more volatile economy than Victoria or even Tasmania, so
it shouldn't be carrying as much debt as larger states
are more capable of doing. And yet he is. And
that's something that you would think the Territory government would
(07:37):
be worried about. I was a little surprised in their
first budget that the new government took decisions, as their
budget papers disclosed, that actually made the fiscal position in
the Northern Territory worse rather than better. They say that
was because they needed to pay for the commitments they
had made, particularly in the law and order space, during
(07:58):
the election campaign. But they hadn't funded those commitments by
raising additional revenue. The decisions they made in the lead
up to the territory's most recent budget actually made the
deficits worse in the next three or four years. And
if they have to tip more money into this project
in order to make it happen, then that's just going
to compound that risk.
Speaker 1 (08:17):
Yeah, so I know they'll be listeners hearing you and
I speak this morning, and they might be thinking to themselves,
will is it too late to pull out? Or are
we at riskier of this being a wise elephant?
Speaker 2 (08:27):
Well potentially yes, as I say, I can imagine that
there are reasons why you might want this project to
go ahead, both to assist the fishing industry and other
industries that rely on putting boats out into the waters
around Northern Australia and the Northern Territory, and there might
also be some military naval security type reasons for wanting
(08:50):
to proceed with it. But nonetheless, it's a financial decision
that's going to cost someone, and it looks like at
the moment, the Northern Territory government and Northern Territory Tax
a very substantial amount of money for a population that's
less than two hundred thousand and as I said before,
I think, you know, Northern Territorians are entitled to ask
(09:10):
some serious questions of the government and get some sensible,
credible and complete answers as to whether it is possible
and if so, whether it makes sense to extricate it
from this project, or if it isn't possible because of
contracts that have been signed and you know what some
people describe as sovereign risk of governments defaulting on decisions
(09:33):
that have been made or promises that have been made
by previous governments. If you can't get out of that,
then doing the best possible financial deal and being fully
transparent about it, I think of the least that can
be expected.
Speaker 1 (09:45):
So, just in closing, I mean, what lessons do you
think should be learned from this, especially for a small
jurisdiction like the Northern Territory.
Speaker 2 (09:54):
Well, I think the key lesson is that sunlight is
the best disinfected. Commitments like this shouldn't be entered into
before there's been a thorough arms length investigation of the
costs and benefits. And you know, sometimes they can be
difficult to quantify, especially if there is a sort of
security dimension to it. But these things need to be
(10:17):
considered seriously, fully openly, and transparently before decisions like this
are made.
Speaker 1 (10:25):
Interesting you say that, I mean it makes absolute sense
to me, and it was something that I was asking
questions about, you know, of both former governments, saying have
we sort of got contracts locked in with defense or
with the navy? You know, are we sure that we
are going to have the industry to be able to
support this amount of money being spent and then we
know that cost is blown out. I know that there's
(10:47):
lots of Northern Territory businesses who, you know, once this
is up and running, are hoping that they will see
the benefit of that, and I hope they do as well.
But Jee, it's a heck of a lot of money.
Speaker 2 (10:58):
Yeah. And the thing is is, Katie, if governments won't
or can't answer these questions reasonable questions, then people are
entitled to spell something furry with a tail running up
and down the corridor. So I like that.
Speaker 1 (11:14):
Thank you so much for your time this morning. I
really appreciate you having a chat to us about this.
Speaker 2 (11:20):
That's been a pleasure. Can you think thank you?
Speaker 1 (11:21):
Thanks so much,
We know that Northern Territory taxpayers could be footing a
billion dollar bill is what's being reported for the controversial
shiplift project in Darwin. Now, as we know, the facility
is intended to support the marine industry, the maintenance of
the marine industry, and it is going to be operated
by Purling Giant Pass Payey. But concerns continue to be
(00:22):
raised about the time that it's taking to complete this project,
as well as the ongoing cost blowouts. Now, independent economist
Saul Slake spoke to the ABC a little earlier this
week and said the blowout is among the worst in
recent memory, warning that it could leave the Northern Territory
with the stranded asset and mounting debt. Now Saul joins
(00:45):
me on the line right now. Good morning to you, Good.
Speaker 2 (00:48):
Morning Pai, Thank you for having me on your program.
Speaker 1 (00:51):
Thank you so much for joining us. Now, sold this shiplift,
it was supposed to cost about one hundred million dollars
in the early days when it was first announced. I mean,
now we're talking the potential of a billion dollars. How
does something like that even happen?
Speaker 2 (01:06):
Well, some of it is explained by the fact that
infrastructure projects across Australia and all over the world have
been subject to delays and cost blowouts. The Status Bureau
estimates that the average cost of infrastructure projects around Australia
(01:26):
since this one was first announced ten years ago has
escalated by around forty percent. That's ten percentage points more
than the Consumer Price Index, for example, over its own period.
That wouldn't explain the blowout in the cost of this
particular project, but it explains some of it. Some of
it may be the result of the fact that the
(01:47):
original estimate of one hundred million that was made in
twenty fifteen was an underestimate, and if there were to
be a public inquiry into this project, is at least
one former territory MLA is, then that might shed some
light on whether that was an underestimate. It may well
be that the complexity of the project was initially underestimated,
(02:11):
and there may be other factors involved as well. I mean,
my understanding is that when it was first announced there
was some kind of agreement with the federal government to
put in up to three hundred million dollars for this,
so that's the original estimate was closer to four hundred
million than one hundred At this stage we don't know.
But although there have been projects around Australia where the
(02:32):
total cost has increased by more in terms of billions
of dollars, and the most obvious one that people might
remember hearing of recently is Snowy two point not which
was originally estimated to cost about two billion, and the
most recent estimate, according to the Federal Government I think
just last week, was twelve billion. That's an increase of
ten billion dollars, which is of course a hell of
(02:54):
a lot of money, but it's a sixfold increase compared
with If it's true that the cost of the Darwin
Shiplift project has risen from one hundred million to over
one billion, which is speculation I've seen, then that's a
tenfold increase, which would make it proportionately one of the
biggest in Australia in living.
Speaker 1 (03:13):
Memory and sol you know, the concern I suppose that's
been raised right from the get go as well, since
this project was announced, is you know, making sure that
we've actually got you know, I don't know whether client's
the right word or what the right word is that
are going to use it, so that you know, we
actually see some return for that investment, which is, you know,
(03:34):
it's it's difficult when then we've got a private operator
who's going to be operating it, But you would hope
that the impact to the rest of the economy and
other businesses around the Northern Territory, you'd hope that it's
going to be worth the spend.
Speaker 2 (03:48):
Well. Indeed, then if I were a territory taxpayer and
this amount of mine and fellow territorian's money was being
put into a project for which all the returns were
going to a private operator rather than at least some
of them being returned to the government, I'd be asked
wanting to ask a lot of questions as well, and
to be getting some meaningful answers to this. I mean,
(04:11):
it may be that you wouldn't get the same return
on it that a commercial investor would get, because, for example,
there could be applications of a project like this for
the military. You know, it might be helpful for the
Navy to be able to repair naval vessels, or for
Border Force to be able to repair vessels or maintain
vessels that it uses, rather than having them sent way
(04:34):
down south, which would cost more and involve delays. Rather
than having that work done in the Northern Territory. You
wouldn't necessarily expect that to pass the same cost benefit
tests as a private investor would make for a commercial project.
But the thought that there would be a zero return
to taxpayers for the amount of money that they're being
put expected to put into this project does, I think
(04:57):
raise some questions that deserve serious answers opinion.
Speaker 1 (05:00):
And you know, you've looked at a lot of different
projects in the ways in which you know different governments
are spending money over the years. Is it normal for
the public to pay this much while a private operator benefits.
Speaker 2 (05:13):
It's unusual. I can't say it's never happened, but it's unusual,
and it's becoming far too commonplace for the details of
projects like this to be wrapped in a commercial in
confidence blanket. I mean, sometimes there may be a justification
for that, if there's a competitive process, for example, and
you don't want one competitor to be advantaged over another,
(05:37):
or where you don't want the government's negotiating position with
potential commercial bidders to be compromised by having their bargaining
position exposed to the public before any decision is made.
But after decisions have been made, I don't see why
things should be commercial in confidence. In the same way,
sometimes there might be legitimate security reasons for some decision
(06:00):
to be kept under wraps, but I don't see how
that applies in this particular instance, And especially given that
the territory now has a new government which wasn't responsible
for any of these decisions when they were made between
twenty fifteen, and by the time this government come to
op you kind of wonder what are they afraid of?
What are they trying to conceal? If indeed they are
(06:21):
intending to conceal, maybe they'll respond positively to the calls
that have been made from some quarters for there to
be a full and open public inquiry into this whole project.
And hopefully, even if nothing can be done about commitments
that may have been entered into by previous governments, lessons
will nonetheless be learned so that this doesn't happen again. Yeah,
(06:41):
I mean, do you.
Speaker 1 (06:42):
Think from your experience with the Northern territories already, you know,
we're already dealing with rising debt levels. Could this project,
I mean, it's obviously going to make things worse, but
are we taking on too much risk here.
Speaker 2 (06:54):
Well, I think the Northern Territory is in a pretty
precarious financial position to say, and I want to be
very clear about this, that the territory is in any
danger of going bankrupt or is going to need some
kind of federal bailout. We're not talking that kind of
extremist language. But the Northern Territory's financial position is up
there with Victorias and Tasmania's as the worst in the nation.
(07:17):
The Northern Territory has a relatively small population and a
much more volatile economy than Victoria or even Tasmania, so
it shouldn't be carrying as much debt as larger states
are more capable of doing. And yet he is. And
that's something that you would think the Territory government would
(07:37):
be worried about. I was a little surprised in their
first budget that the new government took decisions, as their
budget papers disclosed, that actually made the fiscal position in
the Northern Territory worse rather than better. They say that
was because they needed to pay for the commitments they
had made, particularly in the law and order space, during
(07:58):
the election campaign. But they hadn't funded those commitments by
raising additional revenue. The decisions they made in the lead
up to the territory's most recent budget actually made the
deficits worse in the next three or four years. And
if they have to tip more money into this project
in order to make it happen, then that's just going
to compound that risk.
Speaker 1 (08:17):
Yeah, so I know they'll be listeners hearing you and
I speak this morning, and they might be thinking to themselves,
will is it too late to pull out? Or are
we at riskier of this being a wise elephant?
Speaker 2 (08:27):
Well potentially yes, as I say, I can imagine that
there are reasons why you might want this project to
go ahead, both to assist the fishing industry and other
industries that rely on putting boats out into the waters
around Northern Australia and the Northern Territory, and there might
also be some military naval security type reasons for wanting
(08:50):
to proceed with it. But nonetheless, it's a financial decision
that's going to cost someone, and it looks like at
the moment, the Northern Territory government and Northern Territory Tax
a very substantial amount of money for a population that's
less than two hundred thousand and as I said before,
I think, you know, Northern Territorians are entitled to ask
(09:10):
some serious questions of the government and get some sensible,
credible and complete answers as to whether it is possible
and if so, whether it makes sense to extricate it
from this project, or if it isn't possible because of
contracts that have been signed and you know what some
people describe as sovereign risk of governments defaulting on decisions
(09:33):
that have been made or promises that have been made
by previous governments. If you can't get out of that,
then doing the best possible financial deal and being fully
transparent about it, I think of the least that can
be expected.
Speaker 1 (09:45):
So, just in closing, I mean, what lessons do you
think should be learned from this, especially for a small
jurisdiction like the Northern Territory.
Speaker 2 (09:54):
Well, I think the key lesson is that sunlight is
the best disinfected. Commitments like this shouldn't be entered into
before there's been a thorough arms length investigation of the
costs and benefits. And you know, sometimes they can be
difficult to quantify, especially if there is a sort of
security dimension to it. But these things need to be
(10:17):
considered seriously, fully openly, and transparently before decisions like this
are made.
Speaker 1 (10:25):
Interesting you say that, I mean it makes absolute sense
to me, and it was something that I was asking
questions about, you know, of both former governments, saying have
we sort of got contracts locked in with defense or
with the navy? You know, are we sure that we
are going to have the industry to be able to
support this amount of money being spent and then we
know that cost is blown out. I know that there's
(10:47):
lots of Northern Territory businesses who, you know, once this
is up and running, are hoping that they will see
the benefit of that, and I hope they do as well.
But Jee, it's a heck of a lot of money.
Speaker 2 (10:58):
Yeah. And the thing is is, Katie, if governments won't
or can't answer these questions reasonable questions, then people are
entitled to spell something furry with a tail running up
and down the corridor. So I like that.
Speaker 1 (11:14):
Thank you so much for your time this morning. I
really appreciate you having a chat to us about this.
Speaker 2 (11:20):
That's been a pleasure. Can you think thank you?
Speaker 1 (11:21):
Thanks so much,
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