Chapter 1Background

Referral and conduct of the inquiry

1.1On 30 March 2023, the Senate referred the provisions of the Northern Australia Infrastructure Facility Amendment (Miscellaneous Measures) Bill 2023 (the bill) to the Rural and Regional Affairs and Transport Legislation Committee (the committee) for inquiry and report by 4 May 2023.[1]

1.2The committee called for submissions by advertising the inquiry on its website and writing to a number of relevant stakeholders to invite them to make a submission.

1.3Submissions closed on 13 April 2023. However, the committee received some late submissions. In total, five submissions were received and published on the committee's website. The committee did not conduct any public hearings for the inquiry. A list of submitters is at Appendix 1.

1.4The committee thanks all stakeholders who contributed to the inquiry.

Structure of the report

1.5This report has two chapters. This first chapter covers the referral and conduct of the inquiry, background to the Northern Australia Infrastructure Facility (NAIF), and summarises the functions and provisions of the bill.

1.6Chapter 2 outlines support for the three substantive amendments contained in the bill and key issues raised by stakeholders.

1.7The chapter ends with the committee's view and recommendation.

Background

1.8The NAIF was established on 1July2016 by the Northern Australia Infrastructure Facility Act 2016 (the Act). The NAIF is a corporate Commonwealth entity which provides financial assistance to the states and territories and other entities 'for the development of Northern Australia economic infrastructure'. It is overseen by the NAIF Board and guided by the Northern Australian Infrastructure Facility Investment Mandate Direction 2021 (the Investment mandate).[2]

1.9The Investment mandate sets out ministerial directions on:

the types of projects eligible for NAIF financial assistance (including new infrastructure or activities to grow the capacity of existing infrastructure);

arrangements to support smaller projects through funding project proponents directly;

what economic benefit may be considered a public benefit;

types of concessions the NAIF can offer in its concessional loans products;

the use of alternate financing mechanisms, including higher-risk instruments such as derivatives and equity investments; and

the Government's expectations in regard to risk.[3]

1.10The NAIF's operations are also governed by other Commonwealth legislation, including the Public Governance, Performance and Accountability Act 2013 (PGPAAct). The Department of Infrastructure, Transport, Regional Development, Communications and the Arts has primary portfolio responsibility for the NAIF.[4]

1.11NAIF financing is usually provided in the form of loans. The NAIF is able to offer longer loans and/or lower interest rates than commercial lenders, along with different fee structures, deferral of payments and other loan concessions. Itis also empowered to provide finance through Alternative Financing Mechanisms, including equity investments. However, these must be justified and explained. They must also be assessed for risk and any impacts on 'the Facility's appropriation'.[5]

1.12In addition to loans, the NAIF provides direct funding 'through grants of financial assistance' to state and territory governments. In making such payments, the NAIF is required to obtain Commonwealth Government advice, and all decisions relating to direct funding must be communicated to the Minister for Northern Australia within five days.[6]

Performance of the NAIF

1.13As at April 2023, the NAIF has committed $4 billion to projects—of which $2.6billion has been provided in financing for contractually 'closed deals'.[7] The projects supported have an 'estimated total capital value of more than $15billion', and are forecast to deliver approximately $29.7 billion in economic benefit, and support around 16000 jobs (during construction and operations).[8] Information about projects that are being supported through the NAIF is available on the NAIF's website.[9]

1.14In its most recent annual report (2021–22), the NAIF provided a geographic breakdown of its investments (Figure 1).

Source: Northern Australia Infrastructure Facility, 2021–2022 Annual report, p. 6.

1.15The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (the department) submitted that NAIF investments to date have been in the following sectors:

minerals and resources—53percent of the total number of funded projects;

energy—19 per cent;

transport infrastructure—14 per cent;

social infrastructure—11 per cent;

agriculture and water—2 per cent; and

others—the remaining 1 per cent.[10]

1.16In addition to its existing investments, the NAIF is considering an 'ambitious pipeline of potential investment' across Northern Australia. Potential investment in 76 future projects is outlined in Figure 1.2.[11]

Source: Northern Australia Infrastructure Facility, 2021-2022 Annual report, p. 25.

Functions and provisions of the bill

1.17The bill seeks to amend the Act to:

(a)Increase the NAIF's appropriation from $5 billion to $7 billion, as announced by the Government in the October 2022–23 Budget.[12]

(b)Amend the definition of 'Northern Australia' to include Christmas Island and the Cocos (Keeling) Islands (known as the 'Indian Ocean Territories').[13]

(c)Clarify that the objectives of the Act include 'the provision of financial assistance for the development of Northern Australia economic infrastructure for the benefit of Indigenous persons'.[14]

1.18The last of these amendments would necessitate a consequential amendment to the Object of the Act to clarify that the main object remains to 'establish the Northern Australia Infrastructure Facility to provide financial assistance to the States and Territories and other entities for the development of Northern Australia economic infrastructure'.[15] A number of other minor consequential amendments would be made to wording in the Act to embed the three substantive changes listed above.[16]

1.19According to the Minister for Resources and Minister for Northern Australia, Ms Madeline King MP, the increased investment and proposed amendments to the Act demonstrate the Government's 'commitment to developing the north'. Ms King noted that the NAIF has already 'committed over $4 billion to projects, generating substantial public benefit'. Extending the definition of Northern Australia to include the Indian Ocean Territories would allow the facility to fund projects that provide 'a basis for economic growth or stimulate population growth' in those regions.[17]

1.20Further, clarifying that an objective of the Act is to fund projects that 'benefit Indigenous persons' would remove current ambiguity, and empower the NAIF to provide financial assistance for the development of economic infrastructure in Northern Australia that seeks to advance Indigenous outcomes.[18]

Footnotes

[1]Senate Journals No. 45, Thursday, 30 March 2023, p. 1291.

[2]Department of Finance, Northern Australia Infrastructure Facility, 29 March 2023 (accessed 5April2023).

[3]Department of Finance, Northern Australia Infrastructure Facility, 29 March 2023.

[4]Northern Australia Infrastructure Facility (NAIF), Corporate reports (accessed 5 April 2023).

[5]Section 11(2), Northern Australia Infrastructure Facility Investment Mandate Direction 2021 (Investment mandate).

[6]Investment mandate, section 12(1).

[7]NAIF, Investing for impact across the north(accessed 5 April 2023).

[8]Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA), Submission 5, p. 2.

[9]NAIF, Investing for impact across the north.

[10]DITRDCA, Submission 5, p. 3.

[11]NAIF, 2021–2022 Annual report, p. 25.

[12]Item 7–Section 41 (Appropriation of Consolidated Revenue Fund). Explanatory Memorandum (EM), [p. 6]. See also Investing for impact in the Northern Territory, October 2022 (accessed 5April2023).

[13]Item 4–Section 5 (after paragraph (d) of the definition of Northern Australia). EM, [p. 6].

[14]Item 2–New subsection 3(1A) and Item 6 – Paragraph 7(1A)(b). EM, [p. 2].

[15]Item 1–Subsection 3(1).

[16]EM, [pp. 5–6].

[17]Ms Madeline King MP, Minister for Resources and Minister for Northern Australia, 'Second reading speech', Houseof Representatives Hansard, 22 March 2023, p. 10.

[18]Ms King, 'Second reading speech', Houseof Representatives Hansard, 22 March 2023, p. 10.