Chapter 2Key issues
Introduction
2.1As outlined in Chapter 1, the bill seeks to amend the Northern Australia Infrastructure Facility Act 2016 (the Act) to:
(a)Increase the appropriation for the Northern Australia Infrastructure Facility (NAIF) from $5 billion to $7 billion.
(b)Amend the definition of 'Northern Australia' to include Christmas Island and the Cocos (Keeling) Islands (known as the 'Indian Ocean Territories').
(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'.
2.2The committee received submissions from a number of organisations and groups with a direct interest in the bill. All submitters were in favour of the bill's proposed amendments to the Act. Along with expressing their support, some submitters also made suggestions around application process and requirements for NAIF funding.
2.3This chapter outlines stakeholder views on the bill, discussing evidence on the likely benefits for affected communities and stakeholders. It then looks at a key issue raised by submitters—the requirement for an Indigenous engagement strategy as part of any application to the NAIF. While this issue falls outside the scope of the bill itself, it is relevant to the successful implementation of the bill's intent.
2.4The chapter finishes with the committee's views and recommendation.
Support for the bill
2.5All stakeholders who submitted to the inquiry supported the bill.
Increased appropriation
2.6The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (the department) described the NAIF as 'a key financing mechanism for … sustainable and resilient economic development in Northern Australia'. The NAIF is aligned with the Government's plan to transition to a net zero economy, contributing 'investment in enabling infrastructure, critical minerals development, employment and skills'.
2.7The NAIF submitted that its current 'pipeline' of projects brings it very close to the limit of its initial $5 billion appropriation. The increase to $7 billion will allow the NAIF to continue to support projects to deliver 'sustainable jobs and benefits for communities across northern Australia'. Similarly, the department said the additional $2 billion 'will enhance the NAIF's capacity' to support businesses and communities in northern Australia, and allow it to continue until its 'investment window' closes on 30 June 2026.
Inclusion of the Indian Ocean Territories
2.8Business sector submitters, including the Christmas Island Business Association Inc. (CIBA) and phosphate miner, PRL Group, argued that giving the Indian Ocean Territories access to the NAIF is 'critically important' for the future of these territories. These groups have long argued for inclusion in the NAIF, with CIBA submitting:
Because of the strategic importance of the IOT Territories to the Commonwealth … it is essential to maintain viable communities in the IOT and sustainable economies which can support them. On Christmas Island mining is finite and unlikely to continue beyond mid 2030. While PRL has made good progress in diversifying its business more effort and support is needed in order to realistically transition from a narrowly-based economy to one which is diversified and more sustainable. A major constraint to development in the IOT is access to finance therefore inclusion of the IOT into Northern Australia and access to the NAIF becomes critically important.
2.9PRL Group—which contributes half of Christmas Island's Gross Regional Product (GRP) and approximately half of its jobs—argued the Indian Ocean Territories are 'geographically and politically a part of Northern Australia', and face 'similar issues of remoteness and isolation that impact the development of other parts of Northern Australia'. PRL Group is working to diversify business and economic opportunities on the Island, but needs support 'to realistically transition from a narrowly-based economy to one which is diversified and more sustainable'.
2.10CIBA highlighted a number of challenges facing the Indian Ocean Territories, including 'accessibility challenges, limited tourist facilities, and elevated travel costs', which impact the growth of the tourism sector. Additional challenges include unreliable and costly freight and air travel, inadequate 'public infrastructure', food security and housing supply issues, and limited 'access to land for economic development'.
2.11The Indian Ocean Territories Regional Development Organisation (IOT RDO), which is part of the Regional Development Australia network, funded by the Commonwealth, submitted that it 'is working to facilitate sustainable development in the region, and to build strong and confident local economies'. However, a lack of access to finance has been a 'major constraint' to development in the territories, and access to the NAIF will improve this situation.
2.12The NAIF submitted that the inclusion of the Indian Ocean Territories in its remit will provide 'a new opportunity' for the NAIF to 'help support economic and population growth of the territorial areas'. The department similarly said:
The economies of the Indian Ocean Territories exist in unique circumstances, and there are potential benefits from investment in sustainable diversification. The NAIF can assist proponents in the Indian Ocean Territories to realise this potential by providing concessional loans and other financing support to eligible projects.
2.13An additional benefit for the Indian Ocean Territories is that this may flow through to other programs and policies. According to CIBA, the NAIF definition 'has been used by other Australia Government agencies … for public policy purposes', meaning the territories have been excluded from other programs.
Clarification of support for Indigenous development
2.14There was broad support for clarifying a focus on Aboriginal and Torres Strait Islander economic development in the Act. The department suggested this amendment 'is largely administrative, and aligns the section with modern drafting practice'. In addition, the clarification will ensure that NAIF financing can support projects that align with the government's commitment 'to advance Indigenous outcomes and the whole-of-government agenda to Close the Gap'.
2.15The NAIF maintained that it is already 'a leader in the northern Australia space regarding Indigenous engagement'. Having developed formal arrangements with key Indigenous groups, including the National Indigenous Australians Agency, Indigenous Land and Sea, and Indigenous Business Australia, the NAIF is able to 'ensure collaboration and the support of indigenous projects and businesses across the north'.
Indigenous engagement strategy
2.16The NAIF's Investment Guidelines stipulate that all applications for support from the fund must be accompanied by an Indigenous engagement strategy, which demonstrates 'objectives for Indigenous participation, procurement and employment in the region of the project'. This requirement is outlined in the NAIF's Investment Mandate, which is a legislative instrument.
2.17PRL Group said this requirement is 'critically important on the mainland', but may be inappropriate in the Indian Ocean Territories. Historically, these territories were never inhabited by Indigenous Australians prior to settlement in the 1890s (Christmas Island) and 1820s (Cocos Keeling Islands). Most of the population are of Cocos Malay, Chinese, Indonesian or European descent.
2.18The committee notes that some Cocos Malay residents of the islands consider themselves indigenous to those islands on account of their 'long historical tradition' in the territory and continued cultural practices. However, there has been no formal classification.
2.19PRLGroup and CIBA were both concerned that the requirement for an Indigenous engagement strategy for NAIF projects 'would be of little benefit to the local populations and businesses in the [Indian Ocean Territories] or the Indigenous communities on the mainland'. Further, this requirement may be 'an impediment to local companies being eligible for finance through NAIF'.
2.20PRL Group and CIBA recommended that Indian Ocean Territories instead be required to produce 'a local participation, procurement and employment strategy', which would be more likely to benefit their regional economies.
2.21The committee notes that, while the NAIF's Investment Guidelines simply stipulate the requirement for an Indigenous engagement strategy, the Investment Mandate includes a qualifying clause:
The Project Proponent must provide a strategy which sets out objectives for Indigenous participation, procurement and employment that reflect the Indigenous population in the region of the proposed Project.
Committee view
2.22Changes to the Northern Australia Infrastructure Facility Act 2016 outlined in this bill are critical to ensuring the NAIF can continue to support economic development in Northern Australia.
2.23The committee supports the inclusion of the Indian Ocean Territories in the definition of Northern Australia. This is a logical change, as the Territories are aligned both geographically and politically with Northern Australia, and are facing similar challenges. Investment in the economic infrastructure these islands need will help to diversify their economies and boost future prosperity.
2.24The committee understands that Christmas Island and the Cocos (Keeling) Islands do not have a history of Aboriginal or Torres Strait Islander habitation or substantial contemporary Indigenous populations. As such, the requirement for an 'Indigenous engagement strategy' could be nuanced or adapted for these territories.
2.25The committee believes that while the qualifier in the current Investment Mandate—that an Indigenous engagement strategy should 'reflect the Indigenous population in the region of the proposed Project'—provides sufficient flexibility to accommodate the Indian Ocean Territories, the text of its Investment Guidelines should be reviewed to ensure this qualifier is captured, and to provide clarity for proponents from these territories.
2.26The committee recommends that the Senate passes the bill.
Senator Glenn Sterle
Chair