Bills Digest no. 113 2015–16
PDF version [732KB]
WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
29 April 2016
of the Bills
Structure of the Bills
Policy position of non-government parties/independents
Position of major interest groups
Statement of Compatibility with Human Rights
Key issues and provisions
Date introduced: 17
House: House of
Innovation and Science
Northern Australia Infrastructure Facility Bill commences on 1 July 2016.
The formal provisions of the Northern Australia
Infrastructure Facility (Consequential Amendments) Bill 2016 commence on Royal
Assent. Schedule 1 of this Bill commences immediately after the Northern
Australia Infrastructure Facility Bill commences.
Links: The links to the Bills, their
Explanatory Memoranda and second reading speeches can be found on the homepages
for the Northern
Australia Infrastructure Facility Bill 2016 and the Northern
Australia Infrastructure Facility (Consequential Amendments) Bill 2016, or
through the Australian
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
The purpose of the Northern Australia Infrastructure
Facility Bill 2016 (the Facility Bill) is to establish the Northern Australia
Infrastructure Facility (the Facility). The Facility will be an entity under
the Public Governance, Performance and Accountability Act 2013. The Facility will provide financial assistance to the states and territories for
the construction of economic infrastructure in Northern Australia.
The Northern Australia Infrastructure Facility (Consequential
Amendments) Bill 2016 (the Amending Bill) amends the Export Finance and
Insurance Corporation Act 1991. It will allow the Export Finance and Insurance Corporation (EFIC) to deliver
administrative services on behalf of the Facility and the states and territories
and to charge fees for those services.
of the Bills
The Facility Bill has one Schedule, with seven Parts.
1 deals with preliminary matters
2 deals with the establishment and functions of the Facility
3 deals with the Investment Mandate
4 deals with consideration given by the Minister
5 deals with the Board of the Facility
6 deals with administration and
7 deals with miscellaneous matters.
The Amending Bill has a single schedule which makes
amendments to the Export Finance and Insurance Corporation Act 1991.
In the lead up to the 2013 election, the Coalition
committed to produce a White Paper on the development of Northern Australia
within 12 months of the election. Prior to the release of the White Paper a number of studies were undertaken by
the Government, as well as through the Parliament, into Northern Australia, such
as the Northern Australia Infrastructure Audit, the Parliamentary Joint
Select Committee on Northern Australia Inquiry into the Development of
Northern Australia and the Green Paper on Developing Northern Australia. These studies aimed at promoting the development of Northern Australia as well
as understanding the associated challenges.
The state of infrastructure in Northern Australia was a
recurring issue in all the resulting reports. The Northern Australia
Infrastructure Audit, conducted by Infrastructure Australia, found for example:
maintenance backlogs are a feature of the northern road system
limited population and often small industry sizes of Northern Australia can
make it difficult to capture the economies of scale that allow commercially
viable infrastructure services at competitive prices and
per cent of premises in Northern Australia received the lowest broadband
quality rating in 2013.
Similarly the Parliamentary Joint Select Committee on
Northern Australia Inquiry into the Development of Northern Australia found that there is an absence of economic infrastructure, particularly water,
power and transport, in Northern Australia which impedes opportunities for
economic development and liveability.
The Facility was officially announced as part of the White
Paper on Developing Northern Australia in the 2015–16 Budget (although at
the time the White Paper had not yet been released). The initial announcement contained few details around the functions or goals of
the Facility other than ‘increasing private sector investment in infrastructure
in Northern Australia.’
Some commentators were surprised by the inclusion of the
Facility in the 2015–16 Budget, as there had been little forewarning. Others considered it a distraction from Australia’s real infrastructure needs. The Facility was, however, received more favourably by some, with Professor Andrew
Campbell of Charles Darwin University (Director of the Research School for the
Environment and Livelihoods) stating that it could play a useful role in
supporting the smart development of Northern Australia if it:
the evidence in the Infrastructure Australia audit
‘soft’ and ‘green’ infrastructure
transparent cost-benefit analysis on a whole-of-life and risk-assessed basis
projects using an independent, expert body at arm’s length from government and
incentives and assistance measures to properly reflect the distribution of
public and private benefits over time.
However, Professor Campbell also drew attention to potential
downsides of the proposal, in particular the ‘risk of unco‑ordinated
effort and ill-conceived public investment for short-term political reasons
with dubious long‑term public benefits—potentially exceeded by long-term
costs…’. He concluded by reserving the right to consider the matter further, saying ‘how
infrastructure funding is invested, on what projects and via what governance
and delivery mechanisms, is rightly open to policy, academic and public
More information on the operation of the Facility was made
available in October 2015, when Josh Frydenberg, Minister for Resources, Energy
and Northern Australia, stated:
We’re looking for infrastructure that services multiple
users, predictable cashflows, long economic life, may have a high development
cost relative to its operating costs, and there’s also significant barriers to
It’s got to be able to expand the economic capacity of
northern Australia, and its ability to support a greater population base over
Links to coal mining proposals
Following the 2015–16 Budget questions were raised by the
Greens, as well as some commentators, as to whether the Adani Carmichael project
and other coal projects would be eligible to apply for loans from the Facility for
the construction of mining related infrastructure. The Abbott Government did not rule out the possibility of Galilee Basin coal
infrastructure projects (where the Carmichael proposed mine is located)
qualifying for Facility loans.
After the 2015 change in Prime Minister, the new Minister
for Resources, Energy and Northern Australia, Josh Frydenberg initially continued
to leave open the possibility of the Facility providing finance to mining
projects in the Galilee Basin, noting that the Carmichael project is ‘a very
important project, which will see significant investment in Australia and
provide electricity to millions of people in the developing world.’
Minister Frydenberg later changed his stance, stating that
Adani was ‘a commercial operation and it needs to stand on its own two feet …
this wouldn’t be a priority project for us.’
During the October 2015 Supplementary Budget Estimates it
emerged that representatives from Treasury had met with Adani in late September
2015. Treasury officials stressed, however, that the meeting was one of over 100
meetings with ‘potential project proponents’ and that no commitments were made
during the meeting.
Commencing in November 2015 and leading up to the tabling
of the Bills in Parliament, a significant amount of consultation occurred
around key aspects of the Facility, including its functions, goals and enabling
Australia Infrastructure Facility Consultation Paper, released 9 November 2015
draft legislation, released 28 January 2016 and
Draft Investment Mandate, released 17 March 2016.
The public was invited to provide submissions and feedback
relating to the above documents. This feedback was to be reflected in the
drafting of the final material (including the Bills).
The Facility will provide traditional ‘concessional loans’
(loans at concessional rates, below market rates) for the construction of
Northern Australia economic infrastructure. These concessional loans will,
according to the draft Investment Mandate, be the default form of financial
assistance provided by the Facility. The Facility Bill specifies that the Investment Mandate may direct the Facility
to provide financial assistance for purposes other than to provide or support
loans. In other words the Investment Mandate may direct the Facility to consider
alternative funding mechanisms, such as bonds or providing guarantees.
Neither Bill specifies a minimum loan amount that the
Facility may lend. Minister Frydenberg, however, stated on 9 November 2015 that
minimum Facility loans should be $50 million and that financing of eligible
projects must not exceed 50 per cent of the total project debt, meaning that
projects must have a value of at least $100 million. These parameters are reflected in the draft Investment Mandate, which proposes
$50 million as the minimum amount of financing as a non-mandatory eligibility criterion
and would require, as a mandatory criterion, that the finance provided by the
Facility would not exceed 50 per cent of the total project debt. The draft Investment Mandate also stipulates that the Facility must consult
Infrastructure Australia when it is deciding whether to provide a project with financial
assistance of more than $100 million.
Joint Select Committee on Northern
The Bill was referred to the Joint Select Committee on
Northern Australia for inquiry and report by 22 April 2016. The Committee
tabled its Advisory Report on the Northern Australia Infrastructure Facility Bill
2016 on 14 April 2016. Details of this, and earlier, inquiries can be found at the Joint
Select Committee on Northern Australia homepage.
The Advisory Report on the Northern Australia Infrastructure Facility Bill
2016, which was
largely devoted to explaining the Bill, recommended that the Facility Bill be
passed by the Parliament. The Joint Committee received only four submissions when conducting the inquiry,
two of which were government departments (the Department of Industry,
Innovation and Science and the Department of Agriculture and Water Resources)
and two were from business (Seafarms Group Ltd and Suncorp Group Ltd). Both businesses were supportive of the Facility, although Suncorp believed that
disaster mitigation projects should be eligible for funding.
Senate Standing Committee for the
Scrutiny of Bills
At the time of writing the Senate Standing Committee for the
Scrutiny of Bills had not yet considered the Bills.
Senate Standing Committee for the
Selection of Bills
At its meeting of 17 March 2016, the Senate Standing Committee
for Selection of Bills determined that the Bills would not be referred to
committee for inquiry and report.
position of non-government parties/independents
Bob Katter has raised issues with the Facility,
particularly around the Facility’s $50 million loan requirement.
The Greens have stated that the draft criteria contained
in the Northern Australia Infrastructure Facility Consultation Paper fail to
rule out the possibility of the facility ‘becoming a slush fund for big mining
Gary Gray, the Labor Shadow Minister for Northern
Australia, has supported the Government’s focus on Northern Australia, but has
outlined concern over the possible lack of rigour in the assessment process.
major interest groups
The Australian Financial Review reports that state
governments and the private sector ‘cautiously’ welcomed the Facility, although
the Australia Agricultural Company has urged that loans are directed towards
existing businesses to ‘avoid building white elephants in remote areas’. Others are less concerned about who gets the funding, with Darlene Irvine of
the Far North Queensland Regional Organisation of Councils reported as saying
‘[the Facility is] awesome. It provides an opportunity that the banking
industry does not allow in terms of allowing private enterprise to bring
Gina Rinehart is reported to have pushed ‘strongly’ for
the Facility and Andrew ‘Twiggy’ Forrest has also reportedly praised the Facility.
The Facility Bill will provide ‘up to’ $5 billion in
financial assistance to the states and the Northern Territory. The actual cost
of the Facility is estimated to be $39.7 million over five years commencing
2016–17. Over the same period it is estimated that $40.2 million will be recovered
through fee revenue. The cost of the Facility is far less than the $5 billion,
as the only expenses that the Commonwealth will incur is the differential
between the regular and concessional loan interest rates and the expenses
associated with operation of the Facility. The Facility Bill also appropriates
$5 billion from the Consolidated Revenue Fund.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bills’ compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bills are compatible.
Parliamentary Joint Committee on
At the time of
writing, the Parliamentary Joint Committee on Human Rights had not yet
considered the Bills.
It is intended that the Facility will provide concessional
loans or alternative funding mechanisms through the states and the Northern
Territory to the private sector for the construction of economic infrastructure
that would otherwise not be built, or would not be built for some time. The Bill frames the powers broadly, making no reference to the private sector
but simply stating that the Facility’s role is ‘to grant financial assistance
to states and territories for the construction of Northern Australia economic
infrastructure’ (paragraph 7(1)(a)).
Definition of Northern Australia
The Facility will only be permitted to invest in projects
that are within an area designated by the definition of ‘Northern Australia’ in clause 5. This definition encompasses the entire Northern Territory,
together with parts of Western Australia and Queensland. This area is shown in Figure
1, below. The definition refers to the Australian Bureau of Statistics
(ABS) concept of ‘Statistical Area level 2 (SA2)’. SA2s are a component of the Australian Statistical Geography Standard (ASGS)
developed by the ABS for the collection and dissemination of geographic
statistics. SA2s cover the whole of Australia without gaps or overlaps. They generally have
a population range of around 3,000 to 25,000. Wherever possible SA2s are based on officially gazetted state and territory
suburbs and localities. In urban areas SA2s largely conform to whole suburbs
and combinations of whole suburbs, while in rural areas they define functional
zones of social and economic links. They also take into account geography.
Figure 1: Main map
Source: Facility Bill, clause 5
Figure 1: Main map, above, shows the definition of
‘Northern Australia’ provided in the Facility Bill does not divide Australia
neatly. Some areas of Northern Australia, such as the SA2 of Meekatharra (in
Western Australia – see Figure 2: Inset 1 below) contain a very small amount of
area north of the Tropic of Capricorn, yet are defined as Northern Australia. This is also true to a lesser extent for the Queensland SA2s of Far Central
West and Bouldercombe (Figure 3: Inset 2). The SA2 of Emerald on the other hand, despite being wholly surrounded by
‘Northern Australia’, is not defined as ‘Northern Australia’ and is not,
therefore, eligible for Facility loans.
Figure 2: Inset 1
Source: Facility Bill, clause 5.
Figure 3: Inset 2
Source: Facility Bill, clause 5.
The SA2 of Gladstone is included in the definition of
Northern Australia (subparagraph(e)(i) of the definition at clause 5—Figure
4: Inset 3 below). The Gladstone Hinterland SA2 is also included (subparagraph
(e)(ii) of the definition). Between these SA2s however, there are several SA2s
which are not included (Callemondah, West Gladstone, Clinton – New Auckland,
Kin Kora – Sun Valley, Telina – Tooloa and South Trees). However all of these
excluded areas contain significant portions of the Gladstone Urban Centre, as
well as being completely surrounded by the Gladstone Hinterland SA2, which is
included. Additionally the SA2s of Gracemere and Bouldercombe are included
because of the crossover of small portions (approximately three kilometres and
1.6 kilometres respectively) of their area north the Tropic of Capricorn (as
provided in paragraph (c) of the definition of Northern Australia at clause 5).
Figure 4: Inset 3
Source: Facility Map, clause 5.
This information about the exclusion of the majority of the
Gladstone Urban Centre was provided to the Department, which outlined that it
was based on the definition used in the Infrastructure Australia Northern
Australia Audit, which included Gladstone due to it being a key coal and
liquefied natural gas port. This does not make it clear why the Gladstone Hinterland SA 2 is included.
Functions of the Facility
Investment decisions will be made by the Board, and governed
by matters provided in the Investment Mandate. The directions given by the Minister by legislative instrument about the
performance of the Facility’s functions (subclause 9(1) and 9(2))
constitute the Investment Mandate. The Bill specifies that the Investment
Mandate must not direct the Facility to provide financial assistance for the
construction of particular infrastructure or in relation to a particular person
(subclause 9(4)). The Explanatory Memorandum specifies that this
provision will ensure that the Minister ‘cannot show preference to particular
individuals or entities and therefore must not issue an Investment Mandate to
the Facility that relates to a particular infrastructure project or individual’.
A note to subclause 9(1) draws attention to the fact
that the legislative instrument is not disallowable. Matters which may be
covered by the Investment Mandate (clause 10) include:
the Facility is to pursue in providing financial assistance
and policies to be followed for the effective performance of the Facility’s
characteristics for circumstances in which financial assistance is used to
provide or support loans
financial assistance for purposes other than to provide or support loans
and return in relation to providing financial assistance and
other matters the Minister thinks appropriate.
The Clean Energy Finance Corporation (CEFC), a similar
agency to the proposed Facility, also invests, and is governed by an Investment
Mandate. Matters covered in the different investment mandates differ significantly,
mainly due to the different objectives of the Facility Bill and Clean Energy
Finance Corporation Act 2012 (CEFC Act— the CEFC co-finances and
invests, directly and indirectly in clean energy projects and technologies). One difference of note, however, is that the CEFC Act requires that the
Board be consulted during the development of the investment mandate.
Another notable difference is that the Facility must not
provide financial assistance to any project until the end of the Minister’s
consideration period (paragraph 11(1)(a)), or if the Minister has
notified the Facility in writing that financial assistance should not be
provided (paragraph 11(1)(b)). No Ministerial consideration, approval or
veto exists under the CEFC Act. If the Facility proposes to
provide financial assistance it must notify the Minister (proposal
notification—subclause 11(2)), who has 21 days to consider the
proposal, unless the Minister provides written notice to extend the period (paragraph
11(3)(a)). This period must end not later than 60 days after the proposal
notice was given to the Minister (paragraph 11(3)(b)).
The Minister may, at any point in time during this period,
notify the Facility in writing that the assistance should not be provided (rejection
notice—subclause 11(4)). The Minister can only do this if they are
satisfied that providing financial assistance would:
inconsistent with the objectives and policies of the Commonwealth Government (paragraph 11(5)(a))
adverse implications for Australia’s national or domestic security (paragraph
an adverse impact on Australia’s international reputation or foreign relations
If the Minister decides that financial assistance should
not be provided they must provide, with the rejection notice, their reasons for
the rejection in writing (subclause 12(1)) and within 20 sitting days
after the rejection notice has been given the Minister must table the notice in
each House of the Parliament (subclause 12(2)).
Clause 15 provides that the Minister must appoint Board
members, on a part time basis, for a period not exceeding three years (although
they may be reappointed–section 33AA of the Acts Interpretation
Act 1901). The only requirement that the Minister must adhere to, is
that potential members have experience or expertise in one or more of the
equity or investment by way of lending or provision of credit
planning and financing
funding programs or bodies
accounting or auditing and
By contrast, the CEFC Act also allows Board members
to have expertise in government funding programs or bodies, and the environment
sector. Considering the importance of Northern Australia to Indigenous Australians
(indeed the term ‘indigenous’ is mentioned over 300 times in the White Paper)
it is surprising that the Board does not have an Indigenous representative. 
Another difference between the Board member requirements
in the CEFC Act and those proposed in the Facility Bill is that CEFC
Board members must have ‘substantial experience or expertise, and professional credibility
and significant standing’ in at least one of the relevant fields, whereas Facility Board members are only required to have ‘experience or
expertise’ in one of the fields (subclause 15(4)).
Clause 42 requires that an annual report be
prepared by the Board and given to the Minister. The report must include:
particulars of any changes to the Investment Mandate and their impact on the
operation of the Facility
summary of the proposal notices given by the Facility to the Minister
summary of the rejection notices given by the Minister and the Minister’s
reasons for giving the notices
of the financial assistance provided by the Facility, including:
amounts of financial assistance and kinds of economic infrastructure concerned
kinds of loan contracts used and their important features and
risks and returns to the Commonwealth.
summary of any adjustments or concessions made by the Facility in relation to
projects that have not progressed as planned.
In contrast, the CEFC Act requires that quarterly
reports, providing a general summary of each investment made in that quarter,
be published on the CEFC website.
Clause 43 specifies that the Minister must cause a
review of the Act as soon as possible, after it has been operating for three
years. This review must consider whether the time limit for providing new financial
assistance, which clause 8 specifies as 30 June 2021, should be extended
and the governance arrangements for the facility after that date (subclause
43(2)). The review report must be tabled in each House of Parliament within
15 sitting days after it is given to the Minister (subclause (43)(4)).
The remaining clauses in the Facility Bill relate to
administrative provisions around the establishment and running of the Facility.
Information on these provisions is available in the Explanatory Memorandum to
the Facility Bill.
The Amending Bill amends the Export Finance Insurance
Corporation Act 1991 so that:
the Facility in the performance of its functions and
incidental assistance to the states and territories (as agreed between EFIC and
the states and territories) in relation to arrangements and agreements for grants
of financial assistance for the construction of Northern Australia economic
become functions of the EFIC (item 2).
Section 9 of the Export Finance Insurance Corporation
Act provides that EFIC is not subject to direction by the Minister except
as expressly provided by that Act. Subsection 9(2) provides that the Minister
may direct EFIC in relation to the performance of its functions or the exercise
of its powers if the Minister is satisfied that this is desirable from a public
interest perspective. However, subsection 9(5) explains that subsection 9(2) is
not intended to authorise a Ministerial direction that purports to:
the Minister’s approval for the EFIC to enter into a particular contract, give
a particular guarantee or make a particular loan or
the Minister power to determine that EFIC is or is not to enter into a
particular contract, give a particular guarantee or make a particular loan.
Item 4 of the Amending Bill inserts subsection 9(6)
into the Export Finance Insurance Corporation Act, which provides that
subsection 9(5) does not apply for the EFIC in performance of its Facility
functions. In other words, item 4 allows the Minister to issue
directions to the EFIC in relation to its Facility functions which:
Ministerial approval for the EFIC to enter into particular contracts, give a
particular guarantee or make a particular loan or
the Minister power to determine that the EFIC is or is not to enter into a
particular contract, give a particular guarantee or make a particular loan.
Other than the requirement that an annual report be
prepared and that rejection notices be tabled, there are few measures in the
Facility Bill which promote transparency. For example, there is no requirement
that proposal notices be made public after they are provided to the Minister
nor any details around which proposals are approved (other than summaries in
the annual report). This can be contrasted with the CEFC, which must publish
online quarterly summaries of all investments made in that quarter. Similarly, while the Draft Investment Mandate stipulates that the Facility must
consult Infrastructure Australia where an investment decision is greater than
$100 million, there is no requirement that this consultation be made public,
nor that any assessment or assessment summary be made public by Infrastructure
Australia or the Facility.
There is also a lack of detail about how the Facility will
provide assistance. The Facility Bill states that it will grant financial
assistance to the state and territories, but not how this assistance will fund
infrastructure projects. This and the general lack of transparency may make the
Facility susceptible to abuse.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to email@example.com.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.