The Northern Territory Government has delivered a grim budget forecast, incurring a $1.2 billion deficit for 2018-19, with net debt expected to blow out to $7.5 billion by the end of the forward estimates — an additional $2 billion more than previously predicted.

Key points: GST cuts will leave the NT $317 million out of pocket in 2018-19

GST cuts will leave the NT $317 million out of pocket in 2018-19 Employers will receive a two-year payroll tax rebate for replacing FIFO workers with locals

Employers will receive a two-year payroll tax rebate for replacing FIFO workers with locals Territory population expected to increase only marginally despite new budget strategy

The NT will incur interest repayments of $1.65 billion over the four-year estimates period — equating to $1.38 million per day in the final forecast year.

An $8.09 billion budget has been set aside for 2018-19, including $6.86 billion in expenditure and $1.23 billion in capital works during the same period.

However, lower GST revenue, weakening economic conditions and increased demand for government services has seen the Territory's fiscal outlook substantially deteriorate since last year.

"These are difficult numbers to work with, but that is just how deeply the GST drops over the last two years have hit the budget bottom line," NT Treasurer Nicole Manison said.

"[But] to balance the budget tomorrow, we'd have to close schools and hospitals across the Territory, and sack thousands of teachers, nurses and doctors."

Forecast GST cuts are predicted to leave the Territory $317 million out of pocket in 2018-19, with an estimated total loss of $800 million since the 2016 Pre-Election Fiscal Outlook (PEFO).

In response to the further decline in the Territory's GST revenue share, $234 million in cuts will be made across the budget cycle — including a reduction in the public sector wages policy from 2.5 per cent to 2 per cent, and the loss of 250 public sector job over four years — bringing cumulative savings to $828 million since the 2016 PEFO.

But the net debt to revenue ratio is still expected to more than double between 2017-18 (51 per cent) and 2020-21 (106 per cent), reaching 119 per cent by 2021-22.

In essence, within three years, the NT will have borrowed more than it makes per year.

Interstate workers get the axe in bid to boost population

Despite the grim forecast, this year's budget is not all doom and gloom, with a key focus on growing the Territory's population and economy.

The NT Government will introduce a two-year payroll tax rebate for businesses that employ a new staff member, or replace an existing employee who is not a resident (such as fly-in-fly-out workers) with someone who becomes or is a resident of the Territory.

The NT Government wants to increase the number of permanent residents in places like Darwin. ( Supplied: HC Blechynden )

Royalty deductions will also be put in place for the cost of buying, renting or building accommodation for employees who live in the Territory, and for the cost of building infrastructure that provides economic or social benefits to Territory communities near to or affected by a mine's operations.

Royalty reductions for FIFO-related travel and ancillary costs for employees who do not live in the Territory will be axed.

An additional $7.9 million will be invested over four years for the Territory Government's Population Strategy, aimed at attracting and retaining women, middle and late career workers, international skilled migrants and students, and seasonal and short-term workers.

However, despite this, the Territory's population is expected to increase only marginally over the forward estimates, from a 0.7 per cent decrease in 2018 to a 1.1 per cent increase in 2021.

Mining royalties in the spotlight

The Territory's own source revenue will decrease by $150 million for the 2018-19 period, due to lower mining royalties and a reduction in payroll tax collections, largely related to the expected timing of construction completion of the Ichthys LNG project.

However, in 2018-19 it is expected the Territory will receive $335.7 million in mining and petroleum revenue — $110.6 million higher than forecast in the 2017-18 budget — based on collections to date.

It follows the Government's decision to lift a moratorium on the fracking industry, but potential royalties from the sector have not been included in budget forecasts.

In response, the NT Government will invest $26 million over a four-year period to provide incentives for exploration programs; develop geoscience information to de-risk exploration investment and highlight potential new areas; promote the Territory's resource potential; and develop a digital database of exploration drill holes and geochemical assay results.

The funding will also be used to assess resource potential and increase exploration in the Tennant Creek region, to support the development of Tennant Creek as a mining hub.

"We want to see mining companies succeed," Ms Manison said.

"We want to see them maximising jobs for Territorians and minimising their FIFO workforce from interstate."

A minimum royalty scheme will be introduced for all mines in the Northern Territory. ( ABC News: Jane Bardon )

A minimum royalty scheme will be introduced for all mines in the Northern Territory.

The royalty will be based on the gross value of mineral production at a rate of 1 per cent in July 2019, increasing to 2.5 per cent over the first three years of production for each royalty payer.

The NT Government will also remove the stamp duty exemption on the transfer of petroleum and pipeline interests.

"This hybrid scheme gets the balance right — keeping costs down for new miners, while also providing Territorians with a fair return on their resources," Ms Manison said.

"These have been considered and difficult decisions, but they are fair and manageable and will contribute to economic sustainability."