Friday, 1 January 2016

Recent Budget Developments for Indigenous Specific Funding

The Government released the Mid Year Economic and Fiscal Outlook (MYEFO) on 15 December 2015. It is worth quoting the introductory overview in full:

The Government is focused on building a stronger economy to drive further gains in employment and prosperity. The 2015‑16 Mid‑Year Economic and Fiscal Outlook (MYEFO) shows the Government's fiscal position is forecast to maintain an improving trajectory over the forward estimates period, despite changes in economic parameters detracting from the fiscal outlook since the 2015‑16 Budget.

The Australian economy continues to perform well, transitioning from strong resource investment‑led growth to broader‑based drivers of economic activity. Employment growth has strengthened as the economy transitions to more labour intensive sectors. While business investment intentions currently remain subdued, conditions conducive to stronger business investment are in place.

Building on Australia's economic growth record requires sound government finances, continued investment in Australia's productive capacity and policy settings that support the innovation and drive of Australian workers and businesses. This underscores the importance of the Government's integrated national plan for economic growth and jobs.

The MYEFO outlines the key policy/budget decisions taken since the budget in May 2015. Accordingly, it is worth reprising briefly the key indigenous related budget decisions over the past two financial years.

2014 Budget: Indigenous Specific Decisions.

The most significant decision for Indigenous interests in the 2014 Budget was the decision to rationalise and reduce funding for Indigenous grant programs:

The Government will achieve net savings of $534.4 million over five years through efficiencies resulting from the rationalisation of Indigenous programmes, grants and activities administered by the Prime Minister and Cabinet and Health portfolios.

Over 150 Indigenous programmes and activities which recently transferred to the Department of the Prime Minister and Cabinet will be consolidated into a new Indigenous Advancement Strategy which is comprised of five programmes focusing on Jobs, Land and the Economy; Children and Schooling; Safety and Wellbeing; Culture and Capability; and Remote Australia Strategies. This rationalisation will eliminate waste and duplication. Funding provided to the Torres Strait Regional Authority will also be reduced to achieve similar efficiencies in its administration of grants. A new Remote Community Advancement Network will be established in the Department of the Prime Minister and Cabinet (2014 Budget Paper Number 2).

The five year period began in 2013-14, and average well over $100m per annum for the four subsequent years. The other major funding reduction was the cut of $15m over three years to the National Congress of Australia’s First Peoples, reversing a decision taken by the Labor Government in its 2013 Budget to allocate a further $15m over three years to supplement the $29m previously allocated. The future viability of the National Congress must now be in grave doubt.

On the positive side of the ledger, the Government allocated $13.4m over four years to the Clontarf Foundation; $2.5m to the NT Police for community liaison officers; $10.6m over four years to support up to 250 existing renewable energy systems in remote Indigenous communities in WA, Qld, and the NT; $54.1m over four years to construct police stations in up to seven remote Indigenous communities in Qld, WA, and SA; $18.1m (from within existing appropriations) for school attendance strategy in the NT, WA, Qld, SA, and NSW; $3.8m to the AFP to continue the NT Child Abuse Task Force for one year;  $6.8m over one year for schools with significant numbers of remote indigenous boarders; and $25.9 over one year for Indigenous teenage sexual and reproductive health programs.

Thus total reductions of $550m over four years in Indigenous specific funding were offset by new appropriations of $117m.

In addition, the Government allocated $101.1m for the continuation of income management programs in existing locations where funding was due to expire, and in addition added Ceduna to the list of income management locations. These are not indigenous specific programs, although a large proportion of welfare recipients subject to income management are Indigenous.

2014 MYEFO Indigenous specific decisions

There were three Indigenous related measures in the 2014 MYEFO. The Department of Finance was provided with $31.5m from the budget contingency reserve to fund the remediation of contaminated land subject to the Kenbi Land Claim across the harbour from Darwin.

The Commonwealth allocated $46.3m for ongoing funding of municipal services while it negotiated with the states and territory and $120.9m for payment to the states and territory to reimburse them for taking on the funding responsibility for municipal services funding in remote communities. While this is clearly a state and territory responsibility, the Commonwealth has funded it for many years. This is likely to be an ongoing source of contention between the Commonwealth and the states as it seems likely that the states will have little incentive to maintain current funding levels going forward, and there appears to be no mechanism to ensure that they maintain and indeed given demographic change, increase funding for municipal services in remote communities.

The third and largest decision was the reform of the still new Remote Jobs and Communities Program. The measure description is set out below:

The Government will provide an additional $94.9 million, and redirect existing funding of $1.5 billion over four years from 2014‑15, to reform the Remote Jobs and Communities Programme (RJCP) to implement work for the dole in remote communities. The additional investment will contribute toward the provision of meaningful work‑like experience for job seekers, such as house painting and maintenance of community facilities, to aid transition into employment.

All adults aged between 18 and 49 living in remote Australia, not in work or study, with a capacity to work and in receipt of income support will be required to participate in work for the dole activities for up to 25 hours per week, throughout the year.

The Government is also reforming outcome payments for employment service providers to facilitate the creation of a demand driven remote employment service that rewards employment outcomes, and reduces incentives to refer job seekers to training not linked to a job.

This delivers on the Government's election commitment. Further information can be found in the press release of 6 December 2014 issued by the Minister for Indigenous Affairs

The Government made no mention at the time of the source of the extra $95m. It transpired that the funding was sourced from reductions to the allocations for remote Indigenous housing. This was finally announced in the 2015 Budget (see below).

2015 Budget: Indigenous Specific Decisions.

The key Indigenous related decisions in the 2015 Budget were the announcement of the cessation or amendment of a number of key Indigenous related National Partnership Agreements with the states and Northern Territory.

The National Partnership on Remote Indigenous Housing was ‘reformed’:

The Government will replace the existing National Partnership Agreement on Remote Indigenous Housing with a new Remote Indigenous Housing Strategy over three years from 2015—16 totalling $1.1 billion.

Funding will be provided to the New South Wales, Western Australian, South Australian, Queensland and Northern Territory governments to build new houses and refurbish existing houses in remote Indigenous communities. Funding will also be provided to build employment—related accommodation in urban and regional areas for Indigenous Australians who relocate from remote communities for work or training.

Funding will also focus on achieving agreed outcomes, including increased Indigenous home ownership and employment, and improved property and tenancy management.

Funding of $95 million associated with the existing National Partnership Agreement has been redirected to the Reform of the Remote Jobs and Communities Programme measure announced in the Mid‑Year Economic and Fiscal Outlook 2014—15.

A new National Partnership Agreement on Northern Territory Remote Aboriginal Investment was established at a net additional cost of $61.3m. The measure description is set out below:

The Government will redirect funding of $988.2 million over eight years to establish a new National Partnership Agreement (NPA) on Northern Territory Remote Aboriginal Investment. The new NPA will replace the existing NPA on Stronger Futures in the Northern Territory, at a net additional cost of $61.3 million over four years from 2015‑16. The new NPA will prioritise schooling, community safety and employment.

The new NPA includes funding of $154.8 million in 2015‑16 for the Northern Territory Government to take on full responsibility for delivering municipal and essential services in remote Indigenous communities.

Commonwealth administered funding of $1.4 billion, currently part of the NPA on Stronger Futures in the Northern Territory, will not be included in the new NPA. This funding will continue outside of the NPA framework and be administered by the departments of the Prime Minister and Cabinet, Social Services and Health to provide services and support for Indigenous Australians.

Other sundry budget measures included the cessation of the National Partnership Agreement on Remote Indigenous Public Internet Access (a holdover from the NT Emergency Response) and the inclusion of $6.7m in the Indigenous Advancement Strategy; the allocation of an extra $15m for payment to South Australia in return for their agreement to fund Municipal Services in the APY Lands; and continued funding of $10m over five years to extend ABSTUDY assistance to remote Indigenous boarders.

The Government also allocated a further $146.7m over three years to extend income management in current locations for a further two years to 30 June 2017. As noted above, these are not indigenous specific programs, but do engage a significant proportion of indigenous welfare recipients.

2015 MYEFO Indigenous Specific Decisions

There were three Indigenous related measures included in MYEFO.

The Government has increased investment in its remote employment reforms:

The Government will provide $25.9 million to provide increased incentives for job seekers to work and to strengthen the mutual obligation framework in Community Development Programme (CDP) regions.

From 1 July 2016, a new Remote Income Support Payment (RISP) will replace Newstart, Youth Allowance (other), and certain Parenting Payment Single, Disability Support Pension and Special Benefit payments, including supplements and allowances, for job seekers in the selected regions. The RISP will be administered weekly by local CDP providers, enabling more immediate application of financial penalties for job seekers who do not comply with mutual obligation activities. Further, to encourage job seekers to take up employment, the income free area of the RISP will be increased to the equivalent of the minimum wage.

A Community Investment Fund will also be established to reinvest non‑compliance penalties in economic and community development activities in remote communities.

The cost of this measure will be offset from the Indigenous Advancement Strategy over the forward estimates.

Further information can be found in the press release of 2 December 2015 issued by the Minister for Indigenous Affairs.

The expenditure falls in the first two years (2015-16 and 2016-17) and savings of $22m are harvested in the following two years.

The Government announced further investment totaling $80m in its school attendance strategy:

The Government will invest $80.0 million from the Indigenous Advancement Strategy over three years from 1 January 2016 to continue the Remote School Attendance Strategy. The Strategy seeks to improve attendance rates in targeted remote communities across the Northern Territory, Western Australia, South Australia, Queensland and New South Wales by supporting families and communities to ensure that children attend school.

This measure extends the 2014‑15 Budget measure titled Remote School Attendance Strategy — extension.

The cost of this measure will be met from within the existing resources of the Department of the Prime Minister and Cabinet.

Further information can be found in the press release of 25 September 2015 issued by the Minister for Indigenous Affairs.

In addition, MYEFO announced a cut of $17.8m to Indigenous grant programs in 2018-19 derived form an ‘indexation freeze’ and announced further expenditure on the Department of Human Services remote services programs in 2019-20 (outside the normal four year budget estimates timeframe).

Overall, the Government has used MYEFO to reinforce its stated priorities in the employment and school attendance areas, increasing expenditure in these priority areas by over $100m over four years. However, this is entirely funded from within existing ongoing appropriations for indigenous specific funding, and future funding reductions of some $17.8m for existing Indigenous programs are locked in.


I don’t propose to attempt more than the provision of some high level observations in relation to the Government’s budget decisions over the past two years. A full assessment would require additional commentary on the size and allocation of the existing Indigenous specific budget. These are reported within departmental appropriations and are not easily identified. In a previous era, Governments would provide an Indigenous budget summary each year but this has been discontinued.

The measures reported above are just the changes to the underlying appropriations and forward estimates, and thus do not provide a complete picture of Indigenous specific budget outlays. Having said that, the delineation of Indigenous specific budget measures is not entirely cut and dried, for a range of methodological and dare I say philosophical reasons. For example, one might wish to distinguish funds provided to Indigenous groups and funds provided for Indigenous groups, or to distinguish positive and negative expenditures in relation to Indigenous citizens, and give greater weight to funding designed to assist Indigenous citizens directly rather than funding designed to regulate behaviour.

Nevertheless, the decisions reported above allow a number of high level observations to be made.

First, in contrast to the previous Government, the Abbott / Turnbull Government has not quarantined Indigenous interests from budget cuts. Moreover, it is clear that already substantial Indigenous specific financial reductions for the forward estimates are locked in. While it is not absolutely clear from the budget papers, there appears to be a net reduction across the forward estimates over the past two budget cycles of at least $217m.

The caveat here however is that the Government does not always identify the matching savings options allocated against new expenditures while it is well known that ministers are required by the budget rules administered by the Finance Department to offset all new expenditures with savings. In these circumstances, the extent of the budget cuts to Indigenous specific programs could be substantially larger.

Second, when the impact of internal reallocations is taken into account, it is clear that a much larger shift in budget priorities is underway. In short, this entails a shift away from remote housing programs (an area of continuing and dire need) and away from generic funding within the Indigenous Advancement Strategy and towards remote employment programs and school attendance. This will inevitably lead to further contraction of the Indigenous community sector going forward.

Third, it is clear that particularly in relation to remote communities, the Commonwealth continues to fund state and territory responsibilities to a significant level. The stand our examples include the funding for school attendance (what happened to the idea of truancy officers in state and territory education departments?), remote power generation, and policing. All of these are core state and territory responsibilities. Moreover, it has been prepared to compensate the states and Northern Territory generously for taking on the responsibility of municipal services, a function which the budget papers note is a state responsibility, but without publishing the terms of those agreements nor identifying mechanisms by which the states and Northern Territory will be held to account for the ongoing delivery of those services.

Fourth, while the rationalisation and cuts to the Indigenous Advancement Strategy funding has been the subject of much angst in the Indigenous community, and indeed is currently the subject of an ongoing Senate Committee inquiry, there has been very little focus on the structural implications of the budget decisions taken. In particular, it is not clear which areas are likely to be de-prioritised as the inexorable search for savings proceeds. While the Government is prepared to outline its narrative on jobs, school attendance and economic development, it is much less willing to identify where the cuts are falling, and to provide an explanation or rationale for the decisions it is taking.

Fifth, while it is clear that the Northern Territory faces substantial challenges, there remains a concern that the extremely generous decisions in relation to the NT across virtually all areas of Commonwealth indigenous funding is designed to assist the Northern Territory Government retain electoral support within Indigenous communities. The centralization of decision making on funding within the Office of the Minister for Indigenous Affairs, who happens to be a Senator for the NT, creates a clear impression of conflict of interest.

Sixth, funding the cessation of funding to the National Congress of Australia’s First Peoples is a retrograde step, given that the Congress was a largely indigenous initiative and there is no other national representative body of voice for Indigenous interests. While Governments of all political persuasions find organisations such as the National Congress uncomfortable, there is much to be said for having a body which speaks for the entire spectrum of indigenous interests. It may be that Congress will find a way to become independently viable, but it is already clear that it is struggling to provide the quality output and advocacy which characterised its early years.

Seventh, the Government’s decisions to centralize most Indigenous specific responsibilities within the Department of Prime Minister and Cabinet raises very real questions (if not doubts) around the ongoing commitment of mainstream agencies to ensure that their programs are tailored in ways which ensure they target the most disadvantaged and that Indigenous citizens who are undoubtedly well represented within that cohort are assisted to take advantage of the services available within mainstream programs.

Eighth, the cessation of two Indigenous specific National Partnership Agreements (the NPA on Remote Indigenous Housing, and the NPA on public internet use in the NT), and the removal of all Commonwealth expenditures from within a third, the former National Partnership Agreement on Stronger Futures in the NT will have two adverse consequences: it opens up the option of further unilateral reductions in funding into the future, and it increases the flexibility and control of the Minister for Indigenous Affairs in funding allocations (see the fourth point above).

Ninth and finally, perhaps the most important issue embedded within MYEFO and the Government’s budget decisions over the past two years relates to the overarching allocation of resources for Indigenous specific programs. The Productivity Commission recently reported to Government that the Close the Gap targets were largely not being met. In these circumstances, one must ask whether the Government’s decision to ensure funding for Indigenous programs are subjected to substantial and ongoing reductions, and to fund its priorities through reallocations from within existing program allocations, while other parts of the budget are quarantined or augmented, makes sense and is fair.

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