Establishment
1.1
The Senate Select Committee on the effectiveness of the Australian Government's Northern Australia agenda (the committee) was established on 4 July 2019, pursuant to the agreement of the Senate, to inquire and report by the last sitting day of March 2021 on the effectiveness of the objectives, design, and implementation of the Australian Government's Northern Australia agenda, with particular reference to:
(a)
facilitation of public and private investment in infrastructure and economic development;
(b)
economic and social benefit arising from that investment for Northern Australians, in particular First Nations people;
(c)
funding models and policy measures that capture the full value of existing and emerging industries;
(d)
measures taken to develop an appropriately skilled workforce;
(e)
emerging national and international trends and their impact on the Northern Australia agenda; and
Conduct of the inquiry
1.2
In accordance with usual practice, the committee advertised the inquiry on its website, and wrote to relevant individuals and organisations inviting submissions. The date for receipt of submissions was 20 September 2019. The committee received 99 submissions, which are listed at Appendix 1.
1.3
The committee held a number of public hearings in:
Townsville on 9 October 2019;
Mount Isa on 10 October 2019;
Darwin on 6 November 2019;
Nhulunbuy on 7 November 2019; and
1.4
As a result of the COVID-19 travel restrictions, the committee held six public hearings between May and November 2020 via teleconference.
1.5
The committee also undertook site visits, as detailed below.
On 10 October 2019, following the public hearing in Mount Isa, the committee met with representatives of Glencore, and toured Glencore's mining operations in Mount Isa.
On 7 November 2019, following the public hearing in Nhulunbuy, the committee met with representatives of the Dhimurru Aboriginal Corporation. The committee were the recipients of a Welcome to Country Ceremony on Nhulun conducted by Mr Witiyana Marika, a Rirratjingu leader. The committee also spent time with Indigenous Rangers employed by the Dhimurru Aboriginal Corporation.
On 7 November 2019, the committee also visited the Buku-Larrnggay Mulka Art Centre, an Indigenous community controlled art centre located in Yirrkala. The committee met with Mr Will Stubbs, Co-ordinator, and were provided a tour of the centre.
1.6
The list of witnesses who participated in public hearings is at Appendix 2.
Acknowledgment
1.8
The committee would like to thank the organisations and individuals who provided evidence to the committee.
Interim report structure and focus
1.9
As the COVID-19 pandemic significantly curtailed the work of the committee, particularly its ability to travel across Northern Australia to receive evidence from witnesses, the committee resolved to extend the reporting date to the last sitting day of March 2021.
1.10
The committee however, decided that there is benefit in providing this interim report which details the evidence it has received in relation to the work of the Office of Northern Australia (ONA) and the Northern Australian Infrastructure Facility (NAIF).
1.11
The report focuses on the ONA and the NAIF due to the critical importance these organisations have in the Our North Our Future: White Paper on Developing Northern Australia (the White Paper).
1.12
The White Paper is the cornerstone document in the Australian Government's Northern Australia agenda, providing strategic and policy direction over a 20 year implementation schedule. The White Paper involves 51 measures and government investment of over $6 billion.
1.13
The ONA has responsibility for leading the Australian Government's Northern Australia agenda, working across all levels of government to implement measures under the White Paper.
1.14
A key measure in the White Paper is the establishment of the NAIF. The NAIF was established in 2016 to offer up to $5 billion in financing on concessional terms to encourage and complement private sector investment in infrastructure that benefits Northern Australia and broader public.
1.15
The NAIF's original expiration date was scheduled to be June 2021, however on 17 July 2020 it was announced that NAIF would be extended for a further five years to 30 June 2026, subject to the passage of legislation.
1.16
The ONA and NAIF will be of critical importance in generating economic development to ensure Northern Australia has a strong role in Australia's post COVID-19 economic recovery.
1.17
The report is structured as follows:
Chapter 1 provides an introduction to the report and outlines the development and evolution of the policy framework known as the Northern Australia agenda. It also provides an overview of the establishment and work of the ONA and the NAIF;
Chapter 2 explores the evidence received in relation to issues which have affected the work of the NAIF; and
Chapter 3 contains a committee view and recommendations.
Development of the Northern Australia agenda
1.18
Over the past decade a number of inquiries have been conducted into the development and management of Northern Australia. These inquiries led to the development of a number of reports including the White Paper.
1.19
The White Paper was developed as a result of work undertaken by the Department of the Prime Minister and Cabinet, the Joint Select Committee on Northern Australia, and Infrastructure Australia.
1.20
In June 2014, the Department of the Prime Minister and Cabinet released the Green Paper on Developing Northern Australia. It proposed six broad policy directions for Northern Australia, namely:
business, trade and investment;
education, research and innovation; and
1.21
In September 2014, the Joint Select Committee on Northern Australia, released its report Pivot North: Inquiry into the Development of Northern Australia (Pivot North). Pivot North included 42 recommendations relating to opportunities for, and impediments to, developing Northern Australia.
1.22
In January 2015, Infrastructure Australia released the Northern Australia Audit – Infrastructure for a Developing North report. This report assessed critical gaps in economic infrastructure (transport, water, and communication) in Northern Australia. The key audit findings of this report included that:
backlogs in maintaining existing assets must be a priority to fund and resolve;
cost-benefit analysis is essential to evaluating and prioritising investment decisions; and
communities and the private sector need to drive decisions to ensure infrastructure meets the needs of users.
1.23
Subsequently in 2015, and complementary to the findings of Pivot North, the Australian Government released the White Paper. The White Paper also utilised the Northern Australia Audit – Infrastructure for a Developing North report as a primary evidence base.
The White Paper
1.24
The White Paper is a 20-year national agenda intended to achieve sustained economic growth in Northern Australia. It is intended to:
assist major project investors through providing concessional finance for infrastructure;
build an evidence base for expanded agricultural production;
upgrade key corridors to better connect industry and producers to markets, providing more reliable transport links for freight and tourism;
create and share pre-competitive data and information to help investors and governments reduce risk; and
make informed decisions about large scale developments.
1.25
The White Paper includes a framework for the delivery of six policy directions, as summarised below.
Creating simpler land arrangements to support investment, with the goal to achieve more opportunities for Indigenous Australians from their land, and clear and efficient land arrangements.
Developing the north's water resources through greater access to water, and efficient water allocation and use through water plans and tradeable water access entitlements.
Establishing a business, trade and investment gateway which grows the economy through diverse industries, and deepens business links into the region.
Developing infrastructure to support growth, and making better use of infrastructure in the north.
Creating a Northern workforce for growth, with more Australians working and allowing businesses to address unmet labour demand.
Developing and ensuring good governance for Northern Australia with strengthened decision making, and more Commonwealth public service employees based in Northern Australia.
1.26
The White Paper 'outlines a vision of a strong north where Northern Australia's great potential is unlocked, with benefits flowing to all Australians. It is a 20-year implementation schedule that involves 51 measures, backed by government investment of over $6 billion'.
Implementation of the White Paper
1.27
Within the Department of Industry, Science, Energy and Resources (formerly the Department of Industry, Innovation and Science), the ONA has responsibility for leading the Australian Government's Northern Australia agenda, working across all levels of government to implement measures under the White Paper.
1.28
The ONA provides coordination and leadership to achieve strategic outcomes, minimising duplication, and broadening objectives to achieve maximum development potential. The implementation of initiatives occurs across all levels of government as well as in conjunction with industry, and the economic development, research and academic sectors.
1.29
Over the five years since the release of the White Paper, the ONA has provided regular progress reports on the implementation of measures detailed in the White Paper.
1.30
In August 2020, the ONA reported that—in collaboration with 14 departments and agencies from the Australian Government and northern jurisdictions through the Queensland, Northern Territory and Western Australian governments—it had delivered 45 of the 51 measures and it was moving towards the implementation of the remaining six measures.
Refreshing the White Paper
1.31
In March 2020, the Government also announced the establishment of the Advisory Group on Northern Australia, to help develop a new five-year plan for Northern Australia development.
1.32
The Advisory Group was established to provide expert advice to the Minister for Resources, Water and Northern Australia and the Ministerial Forum on Northern Development.
1.33
Ms Sam Reinhardt, Head of Division, Northern Australia and Major Projects Division, Department of Industry, Science, Energy and Resources (DISER) told the committee that the advisory group was established to inform the 'refresh' of the Northern Australia agenda.
1.34
Ms Reinhardt noted that refreshed agenda was 'never really meant to be a new Northern Australia white paper' rather it was 'really about what is the next five years of development that needs to be engaged with in order to drive that agenda'.
The NAIF
1.35
As noted above, the establishment of the NAIF is one of the 51 measures outlined in the White Paper. The below sections provide an overview of the establishment of the NAIF, the work it has undertaken to date, and the statutory review currently underway.
Establishment
1.36
The NAIF is a Corporate Commonwealth entity established in 2016 under the Northern Australia Infrastructure Facility Act 2016 (the NAIF Act) as part of the Australian Government's agenda for Northern Australia.
1.37
The White Paper envisaged the NAIF 'as a means to overcome the unique cost and services challenges faced by infrastructure projects in Northern Australia'.
1.38
The NAIF was established under the NAIF Act as a financial entity to support projects across Northern Australia. It has a special appropriation of $5 billion to finance the construction of infrastructure that provides a basis for economic growth, and which stimulates population growth in Northern Australia.
1.39
It commenced operations on 1 July 2016 with the legislated objective to provide grants of financial assistance for the construction of Northern Australia economic infrastructure. The NAIF Act's Explanatory Memorandum establishes that these grants are intended to be provided as concessional finance in the form of loans, guarantees and other financial mechanisms. The NAIF does not provide its loans directly; instead all funding is provided via the Northern Territory, Queensland and Western Australian government.
Governance and decision making
1.40
The NAIF's responsible minister is the Minister for Resources, Water and Northern Australia. The Minister appoints the NAIF's independent Board, and has given the NAIF direction through the NAIF Investment Mandate Direction 2018 (investment mandate) and the Statement of Expectations.
1.41
The NAIF's Board is solely responsible for making all investment decisions, that is, decisions to offer or not to offer financial assistance, by way of a loan to infrastructure projects that provide a basis for economic and population growth in Northern Australia.
1.42
Alternative financing mechanisms may be considered by the NAIF Board where it may be more appropriate for a specific project, or where it is necessary to encourage private sector participation in financing a project. In these cases, the NAIF must seek agreement from the responsible Minister who in turn will seek agreement from the Treasurer and Minister for Finance, and consult with the relevant jurisdiction.
NAIF financing
1.43
The NAIF is able to provide up to 100 per cent debt finance for a project, subject to satisfying the five mandatory criteria established in the investment mandate. These criteria require a project to:
involve the construction or enhancement of infrastructure;
be located in, or have significant benefit for, Northern Australia;
be able to repay or refinance the NAIF's debt; and
have an Indigenous engagement strategy.
1.44
In providing 100 per cent of debt funding for an eligible project, the NAIF must ensure that that there is appropriate risk-sharing and that the Australian Government is not a majority risk taker for a project. Where possible, the NAIF seeks to 'crowd in' other debt and equity financiers to support a project.
1.45
In providing financing to support the development of a project, the NAIF utilises a range of financing tools including longer loan tenor, deferral of interest and principal repayments, security and/or cash flow subordination and concessional pricing. The selection and use of such tools occurs on a project-by-project basis and the NAIF is able to accept a higher risk than commercial lenders, particularly where the risks associated with the project arise as a result of the unique operating environment of Northern Australia.
1.46
For the purpose of the NAIF Act and the investment mandate, Northern Australia includes all of the Northern Territory, and those parts of Queensland and Western Australia above or directly below and intersecting with the Tropic of Capricorn. It also includes the regional centres of Gladstone, the Gladstone Hinterland, Carnarvon and Exmouth, as well as the Local Government Areas of Meekathara and Wiluna in Western Australia. In additional, territorial seas up to twelve nautical miles offshore adjacent to these areas are also included in this definition.
Screening process
1.47
The NAIF uses a staged screening process before any project is approved for a loan. This process involves two review stages: strategic assessment and due diligence.
1.48
Following initial enquiry and provision of high-level project information, the NAIF conducts a preliminary assessment to see if a project can demonstrate the potential to meet the NAIF eligibility criteria.
1.49
If the project is assessed as having this potential, a Strategic Assessment paper is submitted to the NAIF Chief Executive Officer (CEO) for approval seeking the commitment of NAIF resources to further investigate the project. The NAIF Board notes each Strategic Assessment paper, following CEO endorsement.
1.50
The project then moves to the due diligence stage, a more detailed stage of assessment to determine whether the project satisfies the requirements of the NAIF Act and the investment mandate.
1.51
The due diligence process can include developing appropriate NAIF loan terms and conditions, project and credit risk analysis, and environmental and social assessments. A decision to undertake the due diligence process does not constitute an investment decision or an offer of finance. It also does not indicate whether the NAIF eligibility criteria will be met nor is it an endorsement of any specific terms or conditions.
1.52
Following the completion of the due diligence stage, project proponents are required to submit a formal investment proposal to the NAIF, which the NAIF executive rely on to prepare a request for financial assistance for consideration by the NAIF Board, who decide whether or not to offer finance.
1.53
The NAIF Board must be satisfied that the requirements of the NAIF Act and the investment mandate are met. Like loans from commercial entities, an investment decision to offer finance will be subject to negotiation and execution of finance documents and may be subject to specific conditions. The financial close of the loan agreement will be subject to conditions.
1.54
The NAIF does not proceed with making an investment decision if at any time the relevant State or Territory government provides written notification that financial assistance should not be provided to the project.
1.55
The responsible Australian Government Minister is also required to consider the project, and can reject a proposal if it is determined that financial assistance should not be provided on the following grounds: inconsistency with the objectives and policies of the Australian Government; adverse implications for Australia's national or domestic security; or an adverse impact on Australia's international reputation or foreign relations.
1.56
Once a final investment decision is made by the NAIF Board, information about the transaction, as required by the NAIF investment mandate, is published on the NAIF website within 30 business days.
Reviews
1.57
The NAIF has been subject to a number of reviews which have scrutinised the operation and/or the performance of the NAIF.
1.58
In December 2017, Mr Anthony F Shepherd AO undertook an expert review of the NAIF. The aim was to recommend ways to accelerate project development and to ensure the NAIF is best able to meet its legislated objective. This review was established by the responsible Minister and, with the support of the then Department of Industry, Innovation and Science. The review made 15 recommendations and in 2018, the investment mandate was amended as a result of these recommendations.
1.59
On 14 June 2017, the Senate referred an Inquiry into the Governance and Operation of NAIF to the Senate Economics Reference Committee. The Senate Committee tabled its report on 6 July 2018, making twelve recommendations in relation to the transparency of reporting, the location of staff in Northern Australia, and providing more support to the tourism and Indigenous sectors. The Government Response was tabled in October 2019.
1.60
In its response the Australian Government supported four of the Senate Economics Reference Committee's recommendations, noted three recommendations and rejected five recommendations. The twelve recommendations and the Australian Government’s response are outlined below.
Recommendation 1: The committee recommends that the Northern Australia Infrastructure Facility Act 2016 be amended to require two responsible Ministers (the Minister for Resources and Northern Australia and the Minister for Finance) to provide oversight of the Northern Australia Infrastructure Facility. The Government did not accept this recommendation.
Recommendation 2: The committee recommends that the Northern Australia Infrastructure Facility should establish a Memorandum of Understanding with the Clean Energy Finance Corporation to allow information and processes to be shared on projects that have applied to both agencies, ensuring work is not duplicated. The Government supported this recommendation.
Recommendation 3: The committee recommends that subsection 17(2) of the Northern Australia Infrastructure Facility Investment Mandate Direction 2018 be amended to include a requirement that within 30 days of an Investment Decision, the Northern Australia Infrastructure Facility publish detailed Indigenous Engagement Strategies from applicants when an investment decision is taken, including detailed Indigenous procurement and employment plans demonstrating a commitment to Indigenous Communities on its website. The Government supported in-principle this recommendation.
Recommendation 4: The committee recommends that the Northern Australia Infrastructure Facility Act 2016 be amended to require at least one Board member of Aboriginal or Torres Strait Islander heritage and expand the eligibility criteria for Board appointments to include skills or expertise representative of the Northern Australian economy, like experience in Indigenous development, the sciences and the tourism industry.. The Government supported in-principle this recommendation.
Recommendation 5: The committee recommends that subsection 17(2) of the Northern Australia Infrastructure Facility Investment Mandate Direction 2018 be amended to include a requirement that within 30 days of an Investment Decision, the Northern Australia Infrastructure Facility publish information on its website regarding any conflicts of interest that were disclosed by Northern Australia Infrastructure Facility board members in relation to the relevant project and how they were managed. The Government did not accept this recommendation.
Recommendation 6: The Committee recommends that subsection 17(2) of the Northern Australia Infrastructure Facility Investment Mandate Direction 2018 be amended to include a requirement that within 30 days of an Investment Decision, the Northern Australia Infrastructure Facility publish the following information on its website: - A statement addressing how the project proponent has met the mandatory criteria set out in Schedule 1 of the Investment Mandate; - Information about the loan conditions between the Northern Australia Infrastructure Facility and the project proponent. i.e. expected repayment rates, rate of return and length of investment; and - What approvals need to be completed before a project can commence (e.g. environmental and Native Title approvals). The Government did not accept this recommendation.
Recommendation 7: The committee recommends that the Northern Australia Infrastructure Facility prioritise projects that have high local content, procurement and employment plans, to deliver a higher benefit to the regions. The Government noted this recommendation.
Recommendation 8: The committee recommends that a portion of the Northern Australia Infrastructure Facility's total funds should be allocated to directly supporting Northern Australia's vital tourism industry. The Government did not accept this recommendation.
Recommendation 9: The committee recommends that the Office of the Australian Information Commissioner undertake a review of the Northern Australia Infrastructure Facility's transparency and freedom of information procedures, with a view to removing the veil of secrecy the Northern Australia Infrastructure Facility operates behind. The Government did not accept this recommendation.
Recommendation 10: The committee recommends that the government work closely with industry and consumer groups to develop and implement a more transparent transaction pipeline to assist building momentum in projects that the Northern Australia Infrastructure Facility is evaluating. The Government noted this recommendation.
Recommendation 11: The committee recommends moving more staff to Northern Australia and basing at least one full-time staff member in Darwin to assist with stakeholder management and investment pipeline development in the Northern Territory and northwest Western Australia. The Government supported in-principle this recommendation.
Recommendation 12: The committee recommends expanding the Northern Australia Infrastructure Facility annual report to include more details on the Northern Australia Infrastructure Facility's board and senior staff remuneration in line with executive remuneration reporting undertaken by agencies such as the Export Finance and Insurance Corporation. This would include details such as gross payments, reportable fringe benefits, reportable employer superannuation and bonuses. The Northern Australia Infrastructure Facility should also report more details relating to procurement and other operating costs generally. The Government noted this recommendation.
1.61
The Australian National Audit Office (ANAO) conducted a Performance Audit into the Governance and Integrity of the NAIF. The report was tabled on 10 April 2019 and concluded that the NAIF has an appropriate governance framework, including systems of risk management and internal control. It also concluded that the NAIF has an appropriate integrity policy framework and that its management of conflicts of interest were effective.
1.62
The Performance Audit recommended areas for improvement including publishing more information and better recording of aspects of its decision-making and relating to measuring and reporting on certain performance targets. The ANAO made six recommendations. The NAIF agreed with all of the ANAO's recommendations (five in full and one in principle).
Statutory Review
1.63
DISER commenced a review of the NAIF Act in November 2019, as established by section 43 of the NAIF Act which requires a review be conducted as soon as possible after 1 July 2019. Section 43 of the NAIF Act requires the consideration of two mandatory matters:
whether the time limit of 30 June 2021 for making investment decisions should be extended; and
the appropriate governance arrangements for the NAIF after that date.
1.64
The Issues Paper released by DISER at the beginning of the review noted that previous reviews have scrutinised the operation and/or performance of the NAIF. However, the reviewed have not considered the operation of the NAIF Act itself.
1.65
The terms of reference for the statutory review identify eight issues for consideration, as detailed below:
The appropriateness of the NAIF's investment mandate and eligibility criteria.
Impediments to enhanced NAIF support for projects that are of a larger scale or are better aligned to the Northern Australia development agenda.
The NAIF as a mechanism to support the long-term development of Northern Australia, including coordination with state, territory and local governments and organisations.
Opportunities through the legislative framework to strengthen Indigenous outcomes, diversify the sectors receiving NAIF finance and build the skills necessary to develop finance-ready business plans in the north.
The suite of available investment mechanisms and associated required changes to the legislative framework, including the potential to provide equity.
The relationship between legislative requirements and public benefit outcomes from NAIF investment decisions.
The Ministerial consideration provisions and the adequacy of associated procedures, including how policy consistency, national security and international relations matters are considered through the investment pipeline.
Opportunities for the legislative framework to support better governance including the role of the NAIF Board and CEO.
1.66
Since the outbreak of COVID-19, the Review has also expanded to consider how the NAIF can contribute to the recovery of Northern Australia from the economic impacts of the pandemic.
1.67
The NAIF's original expiration date was scheduled to be June 2021, however on 17 July 2020 it was announced that NAIF would be extended for a further five years to 30 June 2026, subject to the passage of legislation. The Minister for Resources, Water and Northern Australia the Hon. Keith Pitt MP stated that:
This extension is the first step under the statutory review of the NAIF that aims to implement changes to enable a more flexible and faster approval process for proponents looking to access the facility.
1.68
Ms Sam Reinhardt, Head of Division, Northern Australia and Major Projects Division, DISER, explained that the extension of the NAIF:
…was announced early to provide certainty to investors and proponents in northern Australia, especially in light of the COVID-19 pandemic, and reflects the stakeholder feedback we've received supporting the continuation of the NAIF.
1.69
To extend the NAIF's investment window and to expand its lending remit and processes, 'the government will provide $36.9 million over four years from 2020-21 and further $25.2 million over the two years to 2025-26.
Investment mandate
1.70
As noted above, in April 2018, significant changes to the NAIF's investment mandate were announced. These changes came into effect on 2 May 2018 and included:
broadening the types of eligible assets the NAIF could invest in;
allowing the NAIF to lend up to 100 per cent of debt for eligible projects provided there is appropriate risk-sharing;
streaming the eligibility criteria including to ensure that the NAIF has the flexibility to support smaller projects;
requiring consultation with Infrastructure Australia for investment decisions over $100 million; and
requiring (though it is a non-mandatory prerequisite) that the NAIF Board, in making an investment decisions, must consider a preference for projects that address infrastructure needs identified through Commonwealth, State or Territory assessment processes, pipelines or priority lists.
Investment decisions
1.71
As at 23 October 2020, the NAIF had made 23 investment decisions where the projects are proceeding and one conditional approval, with:
10 in Queensland, totalling $1,021 million (approximately 42 per cent of total);
six in Western Australia, totalling $555 million (approximately 23 percent of total) ; and
eight in the Northern Territory, totalling $857 million (approximately 35 per cent of total), including one conditional approval.
1.72
Those investment decisions amount to $2.4 billion, supporting projects with an estimated total capital value of $4.5 billion, and are forecast to generate around $6.6 billion in economic benefit, and support 7,849 jobs. Across sectors, the NAIF's loan commitments are as follows:
$737 million to energy projects
$677.8 million to transport projects
$436.8 million to social infrastructure projects
$527 million to resource projects
$55.4 million to agriculture and water projects.
1.73
As of 30 October 2020, a total of 15 project loan agreements worth a combined $1.1 billion have contractually closed between NAIF and the proponent, with total payments of $218.4 million (including capitalised interest) having been drawn down. This amounts to 4.36 per cent of total available funding released.
1.74
To date, the NAIF has made two investment decisions in relation to First Nations projects. The first investment decision, of $27.5 million, was made on 14 May 2018 in relation to Voyages Indigenous Tourism Australia Pty Ltd. The NAIF’s second investment decision, for $12.5 million, was made in relation to the Australian Aboriginal Mining Corporation for $12.5 million on 22 August 2019. This $40 million investment in First Nations projects represents less than 1 per cent of total available NAIF funding.
1.75
Construction is underway or complete on seven projects: three in Queensland, three in the Northern Territory, and one in Western Australia. As of 29 October 2020, no Queensland project north of Townsville has drawn down funds.
1.76
DISER submitted that it is important to note that the drawdown of funds occurs at the discretion of the borrower. As funds are for construction they are not drawn down in one tranche, but rather as required by the project's design and construction timetable.
Reforms arising from the Statutory Review
1.77
On 30 September 2020, the Australian Government announced further reforms to the NAIF to provide it with faster lending, expanded eligibility, increased risk appetite and strengthened governance. Assistant Minister for Northern Australia the Hon. Michelle Landry MP said 'these reforms come off the back of the NAIF statutory review that found that while the NAIF is seen to be an important vehicle of investment in the north, more can be done'.
1.78
A number of key changes are being made to the NAIF including:
Faster lending
1.79
The NAIF will have the option to lend directly to project proponents in certain circumstances, which will simplify the lending process and reduce administrative burden. Currently, all NAIF loans are made through the relevant state or territory jurisdiction. While the state and territory governments remain important stakeholders for the NAIF, the ability to lend directly empowers the NAIF to move projects to contractual close faster, so projects can get on with creating jobs and developing the north.
1.80
This change also permits the NAIF to establish on-lending partnerships with local financiers to improve access to NAIF finance for smaller project proponents. Those partners will have the expertise to work with smaller proponents to demonstrate their suitability for NAIF finance and will extend the NAIF's reach to those smaller projects that need added assistance in these economically challenging times.
Expanding eligibility
1.81
The NAIF was previously restricted to funding physical construction works only. The reforms will make NAIF finance available to additional elements of infrastructure construction, such as equipment purchases or leasing, training, and the expansion of existing business operations. The reforms will ensure NAIF can take a holistic approach to supporting economic growth and jobs.
1.82
The definition of public benefit applied when assessing projects will be expanded to include consideration of factors such as jobs, regional income, and opportunities for local suppliers, Indigenous businesses and communities. This will simplify the application of public benefit tests to projects applying for NAIF finance.
1.83
The definition of Northern Australia will be extended to include the Shire of Ngaanyatjarraku in Western Australia. The Shire's borders sit further north than those of some other local government areas already included in the definition, making the expansion a logical amendment.
Increased risk appetite
1.84
The NAIF was established to fill a market gap and address the specific risk characteristics of Northern Australia. The review has proposed changes to provide the NAIF the flexibility to support riskier projects with the potential to deliver significant public benefit, in light of the scale of the economic challenge post-COVID. The changes include removing the prohibition against the Commonwealth assuming the majority of risk in any project.
Strengthening governance
1.85
A number of changes will also be made to strengthen the governance of the NAIF as it evolves with these reforms. These will include the appointment of a Government representative to the NAIF Board; ensuring the board includes members with experience in Indigenous development; and allowing the Minister to take earlier decisions not to reject a NAIF investment decision review, nor introduced legislation to give effect to these proposed amendments.
1.86
To date, the government has not released the final report from the Review, nor introduced legislation to give effect to these proposed amendments.
1.87
It is important to note that where this committee report refers to the recommendations of the Statutory Review, the committee is referring to the announcements made in the expectation that these recommendations will be included in the Statutory Review when it is released.