The Northern Territory underspent about $500m in GST payments meant for disadvantaged Indigenous communities in 2015-16, the Yothu Yindi Foundation has told the Productivity Commission’s GST review.

It accused governments of running policies that prevented Indigenous people in the NT from contributing to the economy and participating in the wealth of the nation.

“The full potential of the Territory will never be realised until Aboriginal people living in remote and regional parts of the Territory are able to assume a rightful place in its economic and social life,” the foundation’s chief executive, Denise Bowden, said.

The Productivity Commission is due to deliver its final report in May on its review of the horizontal fiscal equalisation system, which underpins how GST revenue is distributed to the states and territories.

In its submission, Yothu Yindi analysed billions of dollars in GST revenue apportioned to the NT through the Commonwealth Grants Commission (CGC), and found that about half a billion dollars assessed for Indigenous services in 2015-16 was spent elsewhere by the NT government.

The analysis, by former NT council of social services president Barry Hansen, found that 68% of $3.4bn in CGC assessments were intended to benefit Indigenous people, but the Northern Territory government spent just 53% of it, according to its own Indigenous expenditure review.

The Arnhem Land-based organisation called for “fundamental reform” of the way GST revenue is allocated to the NT and spent by its government.

The NT receives by far the largest GST proportion relative to its receipts, primarily because of high levels of disadvantage and its large population of Indigenous people. More than 70% of the NT’s Indigenous population live in remote or very remote areas.

The Yothu Yindi foundation said several factors compounded the NT’s disadvantage, including its relative youth as a jurisdiction and its declining share of the national Indigenous population, with interstate increases not explained by natural growth.

This meant funds were drawn away from the “desperate need” in the NT, it said, calling for the CGC to refine its methodology for determining Indigenous disadvantage.

“Illiterate welfare dependent families living in humpies in Papunya clearly should rate higher than a double income, university educated family living in their own home in Parramatta,” it said.

“A simple loading for the Indigenous factor based on ABS census data is grossly inadequate.”

Hansen, who came to his conclusions by conducting a three-stage reverse engineering process, has previously presented his investigation into Indigenous spending in the NT at the annual Garma festival.

In 2016, he described “significant” underspending during the 1990s and 2000s, particularly in areas relating to social justice and welfare.

He identified a shortfall of $108m in spending on services to Indigenous communities, and $128m on roads in 2006-07.

A pattern of underspending continued through to at least 2014-15, he said.

According to his analysis, that year the NT government underspent on Indigenous housing, roads, welfare and services to community by $334m, while overspending on services to industry and other areas by $375m.

He called for NT governments to publish budgeted revenue and expenditure compared with CGC assessments in the interest of transparency.

The Yothu Yindi Foundation’s submission also queried whether a disproportionate increase in public service jobs was considered Indigenous spending and was further drawing funds away from remote communities. It took aim at NT government spending on Darwin roads as an example of “geographic injustice”.

“We compare that to the state of the central Arnhem Highway (so-called) which is a dirt road from north-east Arnhem land to the Stuart Highway at Mataranka 100 km south of Katherine.”



The NT government said in its submission that the system, as it stood, was fair and any move to redistribute – as other states were lobbying for – would widen the gap on Indigenous disadvantage and would be “a national shame”.

It said recent changes to GST distribution took about $2bn from the NT economy and had “a very real and deep impact on the Territory’s budget”.