Developing northern Australia

Budget Review 2015–16 Index

Rob Dossor

The Treasurer in his Budget speech announced a $5 billion Northern Australia Infrastructure Facility to address northern Australia’s need for infrastructure.[1] This $5 billion forms part of the Government’s response to the yet to be released White Paper on Developing Northern Australia.[2] A number of other measures included in the 2015–16 Budget also form part of the Government’s White Paper, including:

  • positioning the north as a leader in tropical health
  • improving northern cattle supply chains
  • northern Australia infrastructure projects pipeline and
  • northern Australia insurance premium taskforce measures.

All together the measures forming part of the White Paper included in the 2015–16 Budget total approximately $916.3 million over four years.

Background to Northern Australia package

Prior to the 2013 Commonwealth election the Coalition committed to producing a White Paper on the development of Northern Australia, within 12 months of an election.[3] Preceding the White Paper was the Green Paper, as well as the Joint Select Committee on Northern Australia Inquiry into the Development of Northern Australia. Both the Green Paper and the Joint Committee Inquiry will inform the drafting of the White Paper.[4]

The Budget states that all the measures discussed in this article form part of the White Paper. The White Paper is not scheduled to be released until June 2015.[5] It is unusual to announce a range of measures from a White Paper that has not yet been released.

Infrastructure deficiencies were identified as major issues in Northern Australia in both the Green Paper on Developing Northern Australia and the Joint Committee Inquiry on Developing Northern Australia Final Report.[6] Infrastructure Australia’s Northern Australia Infrastructure Audit found, among other things, that:

  • road maintenance backlogs are a feature of the northern road system
  • the limited population and often small industry sizes of northern Australia can make it difficult to capture the infrastructure economies of scale that allow commercially viable infrastructure services at competitive prices and
  • 70 per cent of premises in northern Australia received the lowest broadband quality rating in 2013.[7]

Budget related measures

A number of measures are included in the Budget to address these issues. The largest of these is the Northern Australia Infrastructure Facility. This facility will provide concessional loans up to $5 billion with the objective of increasing private sector investment in infrastructure in Northern Australia. Little else is said about this measure, other than the cost to the Government will be less than $5 billion. The cost of the loan facility will also be less than what is shown in Budget Paper No. 2. This is because the only expense that the Commonwealth will incur is the differential between the regular and concessional interest rates.

The Minister for Finance could not rule out mining companies making use of these loans to fund the building of mine related infrastructure.[8]

Another measure will provide $101.3 million over four years to improve cattle supply chains in the north, with a particular focus on road infrastructure. CSIRO logistics modelling will be drawn on, as well as input from livestock transport and beef industry experts.

The other northern Australia infrastructure measure is the northern Australia infrastructure projects pipeline. This measure will provide $3.7 million over four years to develop a new infrastructure project priority list which will be informed by priorities identified by Infrastructure Australia Northern Australia Infrastructure Audit. This list will be developed by the Department of Infrastructure and Regional Development.

The northern Australia insurance taskforce measure will provides $2.1 million to establish a taskforce to assess ways to reduce home, contents and strata insurance premiums in northern Australia. This taskforce was first announced by Assistant Treasurer J Frydenberg on 30 March 2015.[9] The affordability and availability of insurance was another issue outlined in both the Green Paper and in the Joint Committee Final Report.[10] A similar measure was included in the 2014–15 Budget, which resulted in the establishment of an insurance comparison website for North Queensland.[11] The Government has not indicated what direction will be taken although the establishment of a mutual insurer for cyclone cover or providing support to a reinsurance pool are said to be possibilities.[12]

The Productivity Commission, in its Natural Disaster Funding Arrangements Inquiry Final Report, stated that ‘intervention in property insurance markets (either through direct provision of insurance or by providing pooling through reinsurance) is overwhelmingly ineffective.’[13]

The Budget also includes a measure which will provide $15.3 million over four years to invest in research into exotic disease threats to Australia and the region. This measure is further discussed in the Foreign Affairs Overview of the Budget Review.

Commentary

Commentary has centred on the headline measure, the northern Australia infrastructure facility. Andrew Campbell of Charles Darwin University states that the northern Australia infrastructure facility could play a very useful role in supporting the smart development of Northern Australia if it uses evidence, especially from the Infrastructure Australia audit, undertakes transparent cost-benefit analysis and appraises projects using an independent expert body at arm’s length from government.[14]

Laura Tingle of the Australian Financial Review considers the northern Australia infrastructure facility a ‘badly thought out initiative which may yet bite the Government.’[15] Tingle had earlier stated that the facility ‘will apparently give government guarantees or concessional rates to unspecified projects, with undefined priorities having been determined by undefined processes. It smacks of a very last-minute addition to the budget ...’[16] A Crikey editorial says that ‘Northern Australia ... [is] a costly distraction from our real infrastructure needs.’[17]



[1].          J Hockey (Treasurer), Budget speech 2015–16.

[2].          The budget figures have been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2015–16.

[3].          The Coalition, The Coalition’s 2030 Vision for Developing Northern Australia, June 2013, p. 4.

[4].          Australian Government, ‘Green Paper on Developing Northern Australia released for comment’, Department of Prime Minister and Cabinet website; Australia Government, ‘Interim Government Response to the Joint Select Committee on Northern Australia Inquiry into the Development of Northern Australia’, December 2014, p. 2.

[5].          T Abbott (Prime Minister), W Entsch, ‘Joint Press Conference, Cairns’, Media Release, 8 May 2015.

[6].          ‘Green Paper on Developing Northern Australia released for comment’, op. cit., p. 31; Joint Select Committee, Inquiry into Developing Northern Australia – Final Report, The Senate, Canberra, 4 September 2014, pp. 113–20

[7].          Infrastructure Australia, Northern Australia Audit: Infrastructure for a Developing North Report, January 2015, pp. 6–19.

[8].          J McCarthy, ‘Mega-mines can access $5 billion fund’, Courier Mail, 15 May 2015.

[9].          J Frydenberg (Assistance Treasurer), ‘Northern Australia Insurance Premiums Taskforce’, 30 March 2015.

[10].       ‘Green Paper on Developing Northern Australia released for comment’, op. cit.; Inquiry into Developing Northern Australia –Final Report, op. cit.

[11].       Australian Government, Budget measures: budget paper no. 2: 2014–15, p. 213; M Cormann (Minister for Finance and Acting Treasurer), ‘Initiatives to help address insurance affordability for Northern Queensland’, media release, 23 October 2014.

[12].       J Saulwick, ‘Northern Frontier: Top of nation to get $5b in loans’, Canberra Times, 13 May 2015; D Kitney, ‘Plan to boost north’s agriculture frontier’, The Australian, 13 May 2015.

[13].       Productivity Commission (PC), Natural Disaster Funding Arrangements, Inquiry Report, Vol. 1, 17 December 2014, p. 222.

[14].       A Campbell, ‘Budget harks back to old ideas for northern Australia’, The Conversation, 19 May 2015.

[15].       L Tingle, ‘Policy Deficit’, Australian Financial Review, 16 May 2015.

[16].       L Tingle, ‘Strategy’s success requires sticky tape and chutzpah’, Australian Finance Review, 15 May 2015.

[17].       Editorial, ‘Northern Australia a costly distraction’, Crikey, 20 May 2015.

 

All online articles accessed May 2015. 

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