Tuesday, 19 December 2017

MYEFO and Indigenous Funding

The Treasurer and Finance Minister released the Mid-Year Economic and Fiscal Outlook yesterday (media release here; link to MYEFO here).  The headline message was an improvement in the expected deficit for this financial year, and a transition to a surplus by 2020-21.

In terms of Indigenous funding, MYEFO had very little to say. It reported on minor modifications to a loan from the Indigenous Land Corporation to one of its subsidiaries, Voyages Indigenous Tourism Pty Ltd, with a current outstanding balance totalling $308m (refer pages 256 and 261 of MYEFO). This loan is itself partly funded by borrowings, from both the private sector and the Commonwealth Government. The Federal Government allocated up to $65m in the 2016 budget (link here and media article here) to assist the ILC in refinancing its borrowings arising from the acquisition of the Ayers Rock Resort.

Here is not the place to trawl over past history in detail, but the bottom line is that the purchase of the ARR in 2010/2011 was contentious and highly problematic (link here) and while the acquisition has undoubtedly been beneficial for those Indigenous people who have obtained employment at the resort, it has severely constrained the ability of the ILC to undertake its statutory functions relating to land management and land acquisition for large numbers of communities across Australia in subsequent years. The acquisition which appears to have the support of Minister Scullion is one of the most expensive job creation programs ever undertaken by the Indigenous affairs portfolio in the Northern Territory.

The Minister recently announced the reappointment for 4 years as a Director of Indigenous Business Australia of the former Chair of the ILC, Ms Shirley Macpherson, who oversaw the decision to purchase the Ayers Rock Resort (link here).

The second and potentially more significant issue relates to remote housing. The first point to note is that contrary to the Minister’s advice to Senate Estimates a year or so ago, but consistent with his dodging and weaving on the matter in the most recent Estimates Hearings (link here), the MYEFO makes no provision for the renewal of the National Partnership on Remote Housing (formerly known as NPARIH). This National Partnership, which provided $5.5bn over ten years to states with significant remote housing requirements, expires in June 2018.

The failure to allocate renewal funding injects a high level of uncertainty into the remote social housing system, and will inevitably lead to a hiatus in construction of new dwellings across the interregnum. This is despite the issue of providing long term funding certainty being one of the key messages of the Remote Housing Review commissioned by the Minister and made public in October this year. My two earlier posts on these issues (link here and here) provide the background on these issues.

One new piece of information to emerge from MYEFO is the advice that the Commonwealth holds over 1800 housing leases in 43 Northern Territory communities which will expire over the forward estimates period (refer pp 243 and 252 of MYEFO). The Department’s latest Annual Report notes that it was not aware of any contingent liabilities at 30 June 2017, so this matter has only recently come to the Department’s attention. These leases have been subleased to the NT Government, and MYEFO notes that if the subleases are not renewed, then the Commonwealth will be responsible for the delivery of property and tenancy management going forward. The Department claims that the cost of the contingent liability is unquantifiable.

This new information is relevant for two reasons. First of all, it provides the NT Government with a greater degree of leverage than other states in any negotiations related to the renewal of the National Partnership. This will go some way to offset the policy leverage the NT gave up when the new Labor Government unilaterally committed a billion dollars for remote housing (link here).

Secondly however, these lease agreements create a direct line of responsibility for the delivery of adequate property and tenancy management to the Federal Minister. Even where the Commonwealth has contracted a third party to deliver these services, the Commonwealth has a clear political and legal responsibility (and presumably legal redress available) where the third party fails to deliver the property and tenancy services. As it happens, there have been widespread reports over the past year of the failure of Territory Housing to deliver these services in many remote locations (here is a link to the most recent fiasco), so the question must be asked: what has Minister Scullion done to ensure that the NT is meeting its landlord obligations under the subleases?

The shortcomings in the delivery of remote social housing programs are well known and serious. They play into the extreme levels of disadvantage confronting the vast majority of remote indigenous citizens. Minister Scullion campaigned hard on remote housing issues from Opposition. He was responsible for cutting $95m from the remote housing program allocations for property and tenancy management in 2015. It is therefore impossible to believe that he is not aware of the issues facing the remote housing sector. Whether he has the capability or intrinsic motivation to ensure something substantive is done about it will become clear over the coming six months.

The lead up to the next budget will be crucial for the remote housing sector. The focus evident in MYEFO in bringing the deficit under control will give the Government every incentive to find ways to fudge the issue. Unfortunately, housing is central to so much else, from early childhood health, school attendance, maternal health, job readiness, and more. A failure to invest in remote housing assets and infrastructure is a short cut to widespread and deeper social problems in the future.

Declaration: I am a former CEO of Northern Territory Housing (2002-6), an adviser to then Minister for Indigenous Affairs Jenny Macklin (2008-2011) and a former CEO of the Indigenous Land Corporation (2013-15).