Proactive disengagement: where to next for the ALC and Groote Eylandt?

 

I conjure you by that which you profess—

Howe’er you come to know it—answer me.

Though you untie the winds and let them fight…

… Even till destruction sicken,

answer me to what I ask you.

Macbeth Act four, Scene one.

 

Three weeks ago, on 16 October, the NIAA and NACC visited Groote and according to media reports met with the Anindilyakwa Land Council (ALC). Following the visit, the ALC board decided to dismiss their longstanding CEO, Mark Hewitt (link here). This follows an ABC news article on 10 July (link here) which quoted a spokesman for the NACC as confirming that it had received a referral from the NIAA and was assessing the referral. It appears (but is not certain) that the NIAA referral followed the May Senate Estimates hearings where Senator David Pocock questioned the ALC CEO about his dual roles as ALC CEO and as a Director of Winchelsea Mining, and summed up by commenting that Mr Hewitt’s dual roles were a "pretty egregious conflict of interest". According to the 10 July ABC news article, the Estimates Committee was advised that some $16m in royalty [equivalents] were directed to supporting the proposed Winchelsea mine.

Following the CEO’s dismissal, there appears to have been a conspiracy of silence from all involved. The ALC website has expunged all mention of Mr Hewitt but provides no explanation for the Board’s decision. The NACC continues its policy of complete silence until the results of its investigations are published. Minister Malarndirri McCarthy appears to have issued no media statement apart from her comments to the ABC (link here):

"I received a letter from the ALC chair informing me that at its meeting on October 16, the ALC board resolved to terminate the employment of the ALC CEO," Senator McCarthy said in a statement.

"Without the trust of the Anindilyakwa people and other key stakeholders, the ALC cannot properly achieve its mission of serving and advocating for the interests of the Anindilyakwa people."

All we can take from this is that the ALC Board lost trust in the CEO, but on what basis? The question is important because it goes to the nature of the issues that were of concern to the NACC and perhaps NIAA, and thus to the steps that need to be taken to remedy those issues.

Ever since the ANAO report into the ALC was published on 31 May 2023, the Government, Indigenous Australians Ministers Burney and subsequently McCarthy, and the NIAA have sought to downplay the issues which the ANAO report raised (for example by always focusing on the recommendations of the ANAO report rather than the myriad critical findings embedded throughout the report). They have also sought to slow down any proactive engagement, and thus avoid taking action to ensure the ALC was fulfilling its statutory obligations. In doing so, the Government has allowed the ALC, heavily influenced by its former CEO, to continue to pursue policies which are demonstrably at odds with normal standards of accountability, and which inevitably disadvantage the land council’s constituency, the traditional owners of the Groote archipelago.

To facilitate this proactive disengagement, the Government has adopted a strategy of intentional non-transparency. When interrogated, it invariably resorted to obfuscation, opacity and has hidden behind justifications which do not stack up under close scrutiny.

By deliberately not saying anything except when it has no choice, it has sought to minimise media attention by starving the issue of oxygen notwithstanding the fact that every time an ALC rock is turned over, a scorpion emerges. It has deliberately ignored the multiple concerns raised by numerous individuals including the 235 signatories to the Parliamentary petition tabled in February 2024, the issues raised in the SMH by Nick McKenzie and in the Saturday Paper by Ben Abbatangelo & Rachel Hoffman, and by me in two detailed letters to the ministers. This strategy has only worked because the Opposition has similarly adopted a studied position of policy insouciance. The Opposition Shadow Minister, Senator Jacinta Price has simultaneously argued for greater accountability of the land councils, unsuccessfully moving to establish a parliamentary inquiry into land council accountability, but failing to pursue in any substantive way the egregious issues that have emerged at the ALC (link here).

To date, the Minister appears to be continuing with her strategy of proactive disengagement. Meanwhile, while the NACC is focussed on determining whether there has been corrupt conduct by any individuals (inevitably a highly legalistic and thus narrowly focussed exercise), the potential for significant and ongoing financial losses and/or financial harm to the traditional owners on Groote remains unaddressed. These are two separate issues, and while they might overlap, it is unacceptable in my view for the Minister and NIAA to use the NACC investigation as the reason for doing nothing to mitigate the likely financial harms arising from the convoluted lattice-work of conflicts of interest that the ANAO uncovered in May 2023. Where is the public interest in waiting?  

Of course, the Government might argue that it set up the ‘independent review’ undertaken by BellChambersBarrett. This was sheer diversion to cover up inactivity. Ministers and the NIAA persisted in claiming the review was ‘independent’ notwithstanding that its recommendations were negotiated with and approved by the ALC (and implicitly its CEO Mr Hewitt who is now implicitly not trusted by the ALC and presumably the NIAA), notwithstanding that’s its drafts were commented upon and thus influenced by the NIAA Integrity Unit (and by implication the Minister), and importantly, notwithstanding that its terms of reference were limited to the implementation of the narrowly framed ANAO recommendations, and did not canvass broader or more recent issues. And of course, the ANAO report was itself limited by the ANAO’s remit to the operations of the ALC per se, whereas the complex flows of royalty distribution finance extend beyond the ALC to at least 12 corporations established under the CATSI Act, and over which the ALC exerted considerable influence if not actual control, thereby bypassing the intent of the Land rights Act to place individual distributions and investment decisions outside the purview of the land councils. The CATSI legislation itself falls under the Minister’s responsibilities.

Taking the commentary above as context, I propose to make some high-level observations on likely future developments and the necessary next steps in relation to the ALC.

The first set of observations relate to the case for undertaking a truly independent and transparent forensic audit of the ALC’s distribution of royalties and royalty equivalents. The ALC has leveraged these processes to allocate substantial (but as yet unquantified) financial resources to (a) retail outlets which do not appear to be independent of the ALC and its staff, and which may be shifting significant amounts of money to private individuals; (b) to request the Anindilyakwa Mining Trust (AMT) to transfer $41m to ARAC, a CATSI corporation which appears to have been effectively controlled by the ALC, but whose financial statements do not record the receipt of the payment which the AMT made; and (c) to effectively subsidising the infrastructure and other associated investments necessary to establish the Winchelsea mine which was / is effectively controlled by private investors and the former Chair and former CEO of the ALC (it is not clear if the Directors Winchelsea Mining have changed since the death of the former Chair and the dismissal of the ALC CEO; if they haven’t, then this in itself is a problem). The import of this subsidisation is in effect to grant funds to the interests which control Winchelsea Mining; yet analysis of the ALC’s own submission to the EIS suggests that the proposed mine will not be commercially viable (link here).

Even were these alleged financial misallocations to be found to involve corrupt conduct by the NACC, it would not fix the problem. What is required is a forensic audit to understand where the funds have been allocated and on what basis as the precursor to taking action to methodically unwind the arrangements that have been established to facilitate the misallocations. A forensic audit is thus the essential first step towards both addressing the conflict of interest and other problematic issues that have been allowed to develop within the ALC and to understanding whether it will be possible to recoup any misallocated funds. Moreover, delays will inevitably lead to an increase in the quantum of funds at risk of misallocation.

Perhaps more importantly, a forensic audit is an essential step in redesigning the ALC’s strategic financial strategy for the medium-term future given that the South32 mine is scheduled to close sometime in the early 2030s, with the almost immediate cessation of what is a significant financial flow to the Groote community. The sheer magnitude of these flows — which emanate from Commonwealth appropriations — to what is a relatively small population, which as has been previously pointed out (link here and link here) is paradoxically suffering from extraordinary levels of disadvantage, suggests that the Commonwealth itself has a responsibility to put in place a transition strategy of some kind. Again, the first step in doing so would be to understand just where the royalty and royalty equivalent financial flows have been allocated. It should not need to be said, but I will repeat it: the mere undertaking of a forensic audit is essentially a core regulatory oversight task, and it will not inevitably and adversely impact any ongoing investigations. Indeed, the reverse is more likely to be the case: it is likely to assist the investigation of potential legislative and accountability breaches, and it is possible that new lines of investigation in relation to corruption or criminal behaviours will emerge.

The second observation relates to the potential consequences of the current royalty distribution arrangements on Groote unravelling. There is more at stake here than an issue of whether an individual or group of individuals associated with the ALC have engaged in criminal activities or corrupt conduct. Notwithstanding the rhetorical hype that is often promulgated, the population on Groote are among the most disadvantaged citizens in Australia (link here). The reasons are complex and are not merely a matter of access to income. What is clear however is that the complexity and artificiality of the current financial arrangements on Groote are such as to exacerbate the risks of seriously negative social and cultural impacts from an erratic and haphazard unwinding of the current royalty distribution arrangements. The possibility of violence cannot be discounted. The implementation of any reform process will need to be managed. This is a task that will inevitably require external support. As a coda to this observation, I should emphasise that the risks of an unmanaged unwinding of current financial arrangements are higher if the Commonwealth chooses to remain inactive and disengaged. In my view, the Commonwealth now has no choice but to engage with the complexity its lack of regulatory oversight has unleashed (see below).

The third set of observations relates to the responsibilities of the Minister (and her predecessors) and NIAA to oversight the operations of statutory corporations in her portfolio. The scale and breadth of apparent maladministration; the quantum of the funds that may have been misallocated; the complexity of the financial arrangements involved; the convergence of public investment and private commercial interests, the sensitivity of the social, environmental and economic issues involved, and the extraordinary way in which much of this has developed and taken place in plain view indicates that there has been an extraordinary and substantial regulatory failure by the Commonwealth over a period going back to shortly after the former CEO Mr Hewitt was recruited. To provide just one example, the advice he gave to a previous Estimates Committee Hearing that he had a conversation with former Minister Scullion where he advised him of his dual roles on the ALC and Winchelsea Mining and assured him that there were arrangements in place to manage the conflict is (if true) an extraordinary revelation. Mr Hewitt claimed the subsequent Minister, Mr Wyatt, was also advised of the arrangement. These conversations in themselves appear to be significant watersheds in the development of the current royalty administration crisis, and yet appear to have elicited not one iota of concern within the Ministers’ Offices, nor NIAA (assuming of course that they knew of it; if they didn’t, what did NIAA do when they did become aware of the conflicted roles?).

Fourth, and finally, I make the observation that the current policy of proactive disengagement has meant that there is absolutely no information in the public domain regarding the current state of management of a key statutory corporation within the Minister’s portfolio. There are numerous legitimate questions that remain unasked and thus unanswered. To take some at random: what is the status of Ms Liu, Mr Hewitt’s spouse and a former employee of the ALC, who is /was actively engaged in the Royalty Shoppa scheme, in the ALC Royalty Management Unit (and thus a range of associated CATSI corporations), and in Winchelsea Mining? What is the status of the Chair of the ALC Audit Committee? How is it that the Audit Committee failed comprehensively over many years to identify and recommend the necessary changes to prevent the crisis that has emerged? For that matter, where was the NAIA Audit and Risk Committee in this whole process? Does the minister see these lapses as a problem and if so does she intend to do anything about it?  What is the current status of the proposal for a mine on Winchelsea Island?  Who are the Indigenous members of the Winchelsea Board following the dismissal of Mr Hewitt and death of the former Chair? Why did AAAC, the corporation which owns 70 percent of Winchelsea shares not have a single Director on the Winchelsea Mining Board? Has that been remedied recently?

More fundamentally, why has the current Government pursued a deliberate policy of proactive disengagement in relation to the operations of the ALC? How can the public and the traditional owners of Groote be reassured that the Government itself is not complicit in some way in what has transpired here?

The ALC and its associated recipient CATSI corporations are in a state of crisis. A crisis that no one wants to acknowledge, let alone seeks to fix. An apt metaphor would be a commercial corporation operating while insolvent. The risk is that it will seek to trade its way out of its financial crisis, and in the process, go bankrupt with even greater losses. The solution is for the shareholders to appoint insolvency specialists who can make an independent assessment and address the underlying issues.

In the present case, it is the Minister to whom this responsibility falls. To date, she has given absolutely no indication that she is cognisant of the risks or prepared to take the necessary action. She should immediately take action to appoint a highly experienced independent administrator to the ALC with the authority to oversee an independent forensic audit and to develop a pathway out of the current crisis. This process will require full transparency to minimise the risks of societal conflict on Groote, to ensure that those responsibility for getting the ALC into its current morass are held accountable, and importantly to maximise the chances that those who will be found to have suffered financial losses or disadvantage are recompensed. This responsibility goes beyond one individual and the possibility at some point in the future of a limited finding of corruption or misfeasance in public office.  And it goes beyond the ALC and its employees.

 

5 November 2024

 

Recent research focussed on West Kimberley geo-history, history and culture

 

We know what we are, but know not what we may be

Hamlet Act four, Scene five.

 

A major challenge for policymakers (and ex-policymaker analysts such as myself) is to (i) comprehend the reality of contemporary Indigenous cultural life and cultural priorities, and (ii) to then find ways to incorporate those values into the design and implementation of current policy frameworks and policy priorities. The reality that delivering on these challenges is important to First Nations citizens is reflected in the fact that they invariably argue to be involved in policy development, formulation and implementation through mechanisms such as arguing for co-design and or for the use by governments of community-controlled organisations to deliver services on the ground. The rationale for policymakers to take the inclusion of cultural perspectives in policy formulation seriously is that doing so is likely to make policy implementation more effective.

Nevertheless, despite the attempts made to date by mainstream policymakers to meet First Nations’ aspirations, with the most obvious example being the priority reforms identified in the National Agreement on Closing the Gap, progress has been slow and partial. Moreover, there is no accepted consensus amongst mainstream policymakers that these are more than optional elements in the design of policy. Amongst political conservatives, there exists serious ideological opposition to embedding acknowledgment of culture and cultural priorities within policy frameworks. This opposition is based on the political dividends that can be harvested from taking advantage of populist ignorance or even overt opposition to anything that differs from the nation’s Anglo-Saxon cultural precepts. The risk for First Nations interests then is that even apparent progress can be subject to ongoing pushback (link here) and unless successfully countered or resisted, to eventual roll-back.

Of course, one of the difficulties in protecting culture and in translating it into policy frameworks (and policy institutions) is to acknowledge that culture is dynamic, not static, and nor is it homogenous; observations that can be validly made about both mainstream and First Nations’ cultures. And to add to the complexity, there are increasing indications that both First Nations cultures and to a lesser extent mainstream cultures are manifesting characteristics that might be described as inter-cultural (link here). Thus, to the extent that we undertake any cultural analysis, it ought to take these possibilities into account. So, for example, Melinda Hinkson & Benjamin Smith in their 2005 Oceania article Introduction: Conceptual Moves Towards an Intercultural Analysis (link here) conclude with the following statement:

It is in such observation of the interaction between representations and the lived circumstances of Aboriginal people that the question of what is at stake in the development of an intercultural analysis comes most starkly to the fore. The notion that Aboriginal people might simply make a choice between two worlds, or simply move between them, selecting the best both have to offer, fails to comprehend the processes through which representations, cultural identities and lifeworlds are produced and reproduced. An intercultural analysis matters because it is arguably the only frame through which our conceptualisations of culture might be made to articulate with its lived expressions.

I am not suggesting that the notion of intercultural lifeworlds and analyses are in any way a solution to the challenges facing policymakers to incorporate Indigenous aspirations into their policy design and implementation activities. Nor are they a panacea for Indigenous interests whose aspirations for cultural acknowledgement remain unmet. Indeed, it arguably adds to the complexity of the challenges facing both sides of these issues.

Rather my point in making these comments was less ambitious but still important. I wanted to contextualise two significant research outputs I cam across this morning related to the West Kimberley which gave me cause for some optimism and which I felt deserve the (limited) wider dissemination that I can offer through this blog post.

The first was a doctoral thesis (link here) written by Arjati Schipf and titled Closing the Culture Gaps: Policies and Codesign in Remote Western Australia. A Long-Time Story of a Community-Based Kimberley Aboriginal Organisation. This thesis provides a theoretically based account of the role and inner workings of the Kimberley Aboriginal Law and Cultural Centre (KALACC), a remote community-based Aboriginal Community Controlled Organisation located in Fitzroy Crossing, Western Australia.

The second was an innovative digitally based educational resource project (link here) titled (somewhat misleadingly) Barlili: Devonian reef of the Kimberley – Geoheritage. The project has developed a dedicated website (link here) with the more informative title Living Water: River, Land and Sea Country of the West Kimberley. The Living Water website includes a selection of test and visual resources addressing the cultural importance of country and the Martuwarra /Fitzroy River catchment to the regions Aboriginal population.

I have spent the morning scanning through both these research outputs, and while neither is perfect, they are both major achievements in making the case for the ongoing relevance and importance of living cultures and their continuing links with the land, its macro and micro environments, and importantly in the case of the Living Water website, of the importance of history, both deep history and post colonisation history. Importantly, in different ways, both make the case persuasively that mainstream policymakers have much more to do in relation to incorporating culture into policy design, development and implementation.

Both these research outputs are worth a look from anyone interested in the importance of culture and the challenges of meshing it with national policy frameworks. I especially recommend the short two- and three-minute videos included on the Living Waters website of elders and younger community leaders talking about aspects of history, country and culture. They overflow with insights that mere textual descriptions can never achieve.

What is left unresolved by both these research outputs is how policymakers might move forward in incorporating First Nations cultural aspirations into policy while mitigating the very real and arguably inevitable risks of pushback and rollback. Even were policymakers to successfully incorporate West Kimberley perspectives into local policies, that still leaves vexed issues around how to mesh national policy frameworks with local aspirations and priorities across eight jurisdictions and perhaps some 60 to 100 regional areas.  These issues should be an important research agenda for the future: they will require deep understandings of the cultures, and core priorities, of both First Nations communities and policymakers.

 

27 October 2024

 

An Institutional approach to analysing Indigenous policy (Part Two)

                                                 O, what men dare do! What men may do!

What men daily do, not knowing what they do!

Much Ado About Nothing, Act four, scene one

 

I ended part one of this post (link here) with the question: What then are the strategies available to Indigenous interests to increase the likelihood of gaining seats at the table when key decisions are being taken on institutional design and development?

There are it seems two levels of action and engagement that are required for Indigenous interest to obtain a guaranteed and long-term seat at the institutional development table. Both are essential, but on their own, (i.e. without the other) they will invariably fall short.

The first is to develop a conceptually coherent and viable long term policy agenda. At least three recent attempts have been made to do this: Ngunggai Warren Mundine has laid out one policy agenda in his recent CIS report titled Where to Now: the road ahead for Indigenous Policy (link here). This road map is summarised as follows:

Market economy and democracy, the rule of supply and demand as well as the rule of law are the blueprint for economic prosperity and have been proven successful in communities all over the world, regardless of their race, culture or religion. It can work for remote Indigenous communities too.

This paper proposes a roadmap to closing the gap through real economic solutions under four pillars: Economic Participation; Education; Safe communities; Accountability.

A second has been overseen by Professor Peter Yu at the ANU in the recent Murru Waaruu Outcomes Report (link here). The approach proposed is summarised in the report as follows (emphasis added):

The paradigm shift envisaged by the Seminar Series proposals is intended to change the current transactional relationship that First Nations peoples have with governments and industry to one of genuine partnership involving an equity stake in economic projects. …   developing and implementing economic self-determination policy is a long-term approach and is complementary to the National Agreement on Closing the Gap.

Ultimately, this Outcomes Report argues that an economic self-determination agenda is about providing First Nations communities and enterprises with opportunities to engage in the Australian economy and to share in wealth creation opportunities on their own terms. On this basis, as discussed throughout the Seminar Series, the approach should be framed by the human rights of Indigenous peoples as articulated in UNDRIP. A coordinated approach is required to reform policy and institutional arrangements to support First Nations economic development in relation to land and Sea Country, freshwater, intellectual property, and access to finance. [The report includes an Appendix with 24 specific institutional reforms, albeit vaguely specified].

A third is the implicit policy agenda in the 2020 refresh of the Closing the Gap Strategy, ostensibly codesigned between the Commonwealth, the states and territories and the nascent Coalition of Indigenous Peaks. I say ‘ostensibly’, because the codesign negotiation was undertaken by two parties, government interests and Indigenous interests, operating within a significant and consequential power and capability imbalance. The high-level summary of the Closing the Gap policy agenda might best be summarised by pointing to the Four Priority Reforms agreed by all parties to the National Agreement in the outcomes sought (clause 17) and in the specific commitments to these outcomes spelt out in chapter six of the Agreement (link here):

17. The outcomes of this Agreement are:

 a. Shared decision-making: Aboriginal and Torres Strait Islander people are empowered to share decision-making authority with governments to accelerate policy and place-based progress on Closing the Gap through formal partnership arrangements.

b. Building the community-controlled sector: There is a strong and sustainable Aboriginal and Torres Strait Islander community-controlled sector delivering high quality services to meet the needs of Aboriginal and Torres Strait Islander people across the country.

c. Improving mainstream institutions: Governments, their organisations and their institutions are accountable for Closing the Gap and are culturally safe and responsive to the needs of Aboriginal and Torres Strait Islander people, including through the services they fund.

 d. Aboriginal and Torres Strait Islander-led data: Aboriginal and Torres Strait Islander people have access to, and the capability to use, locally-relevant data and information to set and monitor the implementation of efforts to close the gap, their priorities and drive their own development.

e. The socio-economic outcomes (listed at Table A).

Significantly, none of these three policy agendas has been subjected to a rigorous and independent analysis or critique focussed on the substantive feasibility and likely effectiveness of the proposed measures in delivering more inclusive and positive benefits to First Nations communities and citizens. The fact that there has not been so far such a constructive critique reflects (in my subjective view) a deep-seated and widespread societal shift away from rigorous analysis and its replacement by reliance on rhetoric and assertion as the primary means of justifying social and political action. Each of the proposed policy agendas is constituted by an amalgam of largely unspecified initiatives located within a mostly open-ended conceptual framework. The result is the articulation of agendas built around a series of largely implicit assumptions regarding the presumed efficacy and effectiveness of the actions proposed.

The Nyunggai Mundine/CIS proposals argue for policies that drive greater market-based approaches to land tenure and a stronger focus on education and employment. While these proposals implicitly rely on institutional change, they are largely about removing those institutional provisions which acknowledge or deal with Indigenous citizens’ rights and interests and replacing them with mainstream rights. They do not involve a significant increase in government financial outlays. The Murru Waaruu proposals advocated by Peter Yu are an amalgam of a focus on economic development rather than welfare or basic services facilitated through the provision of more inclusive institutional reforms based on the greater acknowledgment of human rights instruments such as UNDRIP. 

The implicit Closing the Gap policy agenda reflected in the National Agreements four Priority Reforms is process oriented, and essentially reflects the widespread First Nations’ aspiration for much greater involvement in both policy development and service delivery. It assumes (in my view incorrectly) that Governments are serious about policy reforms directed to shifting the dial on closing the gap. As the Productivity Commission pointed out in its July 2024 Annual Data Compilation Report (link here; page 2), the four priority reforms are underpinned by 17 socio-economic outcomes, and the 23 closing the gap targets are underpinned by 164 indicators. According to the PC report: ‘The targets are specific and measurable goals, while the supporting indicators provide context and information on the drivers of the outcomes.’ At its core then, the Closing the Gap policy agenda involves four priority reforms, 17 socio-economic outcomes, 23 targets and 164 indicators which 9 jurisdictions are each responsible for measuring and progressing. This matrix (which governments have designed and committed to progress) thus comprises 1872 cells. The complexity built into this policy agenda is both staggering and impossible to explain as anything but a deliberate attempt to make the underlying process both incomprehensible and impossible to criticize.

The Productivity Commission review of the Closing the Gap process published in February 2024 was in my view seriously flawed. It was too focussed on pushing Indigenous aspirations over substantive analysis, and in many respects lacking in independence given the Productivity Commission’s role in developing the data dashboard. To be clear, there is nothing inherently wrong with advocacy for Indigenous aspirations, but this is not the Productivity Commission’s role. It ended up preaching to the small church of First Nations communities and citizens (around five percent of the nation’s population) whereas what is desperately needed is coherent and conceptually persuasive analysis aimed at persuading the mainstream population and interests to support the reforms necessary to transform exclusionary institutions into inclusive institutions.

Notwithstanding the flawed analytic underpinnings of each of the three models outlined above, it seems to me that there is likely to be much of use and relevance in each of the three policy agendas. The task however is to identify the institutional reforms and associated policy initiatives that will have outsized positive impacts and alongside, to develop a persuasive and conceptually coherent narrative to persuade mainstream interests that it is in their interests to expand the inclusive scope of Australia’s political settlement. Moreover, the task of developing a long-term institutional reform policy agenda is inherently dynamic and the optimal policies for advancing Indigenous socio-economic and cultural wellbeing will inevitably develop and change over time.

My own approach to developing a high-level Indigenous institutional reform agenda and associated policy framework would be simpler and more strategic than any of the three policy models outlined above. It would include the following elements:

It would focus explicitly on advocating for institutional reforms which have medium to long term consequences. Examples include ten-year funding agreements for all priority sectors; financial adjustments to the tax system to compensate taxpayers who do not take advantage of tax expenditures (such as negative gearing).

It would advocate for explicit focus on ensuring all mainstream policies and programs that have an outsize impact on First Nations citizens should have needs-based access criteria. Examples include financial literacy programs,

It would advocate for a comprehensive remote policy framework which spans both mainstream and Indigenous specific policies and programs. Key components include the impacts of climate change on communities, addressing housing and essential services (water, sewerage, power, kerbed streets) deficits, improved digital access and food security, real reform to the Community Development Program to shift all participants to funded employment in community service roles including environment, health and disability service roles.

It would advocate for evidence-based approaches and maximum transparency in the provision of services to First Nations across mainstream and Indigenous specific policy sectors. Examples include rigorous macro-level evaluation of comparative take up and access by mainstream and First Nations citizens to key policy frameworks and programs, and rigorous evaluations of policies to counter the rise of populist ideological approaches.

It would advocate for the creation of stand-alone agencies to deliver core services in contexts where there is market failure which inhibits private sector delivery. Examples include the overall delivery of the reformed CDP in remote Australia, and the remote operations of the NDIS.

Importantly my approach differs from the strategies outlined above in that it avoids listing particular sectors in recognition of the fact that notwithstanding the Government silos that exist, there are strong synergies and inter-relationships across all key sectors. The interconnections between housing, health, education, and employment are complex and operate in multiple directions. Identifying one sector as a priority that will on its own address deep disadvantage is a chimera.

Of course, not all institutional reforms require financial investments. It is important that governments acknowledge that the present is a product and function of our nation’s history, and there can be no effective policy frameworks developed by governments that do not acknowledge that history.

Perhaps the most important difference between the policy strategies listed above and my approach is that it shifts from assuming that government will respond to the mere existence of a need and acknowledges the (unjust) reality that Indigenous interests must robustly and effectively advocate for the reforms they seek (probably over sustained periods).

It follows that the second level of action and engagement is for Indigenous interests to develop an independent, broadly representative, policy capable and well led advocacy organisation (or complementary set of organisations). None of the three policy agendas in the public domain have to my mind fully managed this.

The Mundine policy agenda in effect rests on the advocacy capabilities of the Centre for Independent Studies, other conservative advocacy entities (such as the Business Council and the Minerals Council) and a small coterie of likeminded Indigenous intellectuals. It has strong political support from the Liberal and National Parties.

Professor Peter Yu has established a new entity, the First Nations Economic Empowerment Alliance to advance the Indigenous economic empowerment agenda laid out in the Murru Waaruu Outcomes Report (link here and link here). The membership of the Alliance and its governance arrangements are as yet unclear, and it does not appear to have a presence on the web. Its funding is opaque.

The key advocacy mechanism driving Indigenous aspirations within the Closing the Gap policy agenda is the Coalition of Indigenous Peaks led by Pat Turner. The Coalition of Peaks includes some 80 peak bodies representing Indigenous organisations across virtually all social sectors. The depth of experience and representativeness of these peaks varies, with the mainstay being the longstanding and well organised National Aboriginal Community Controlled Health Organisation (NACCHO) representing some 145 Indigenous health organisations across all states and territories. Yet the Coalition of Peaks appears to be funded almost entirely by governments and given its role under the National Agreement it has limited staff in its secretariat.

The challenges facing both the First Nations Economic Empowerment Alliance and the Coalition of Indigenous Peaks are multiple: how to build and sustain policy capability; how to build and sustain widespread Indigenous support for the agenda being pursued; how to engage with governments while remaining financially and politically independent, and how to outlive the charismatic and capable leaders who brought them into existence. These challenges will inevitably need to address the inevitable ebbs and flows of organisational life. They must be prepared to operate in an environment of ongoing internal conflicts as new leadership aspirants vie for influence and power as well as potential external threat as governments (and oppositions) seek to influence and co-opt, with both the carrot and the stick. These pressures will be applied not just to the organisation, but (from time to time) will be directed towards individual leaders. Moreover, effective advocacy must manage and deal with the inevitable transitions and dynamic inconsistencies that mainstream electoral politics throws up, and which makes navigating these mazes high risk. 

The most obvious strategy for Indigenous interests is to build on institutional infrastructure established by the National Agreement on Closing the Gap by investing as much human, intellectual and financial capital as they can muster into building the long-term independence and sustainability of the Coalition of Indigenous Peaks. This entity has several obvious advantages: it has an established base across multiple sectors; it is a party to the National Agreement which while deeply flawed provides significant legitimacy with mainstream Australia; its senior leadership have deep experienced within government and are astute.

There is no reason why the First Nations Economic Empowerment Alliance should not seek to strengthen its footprint in the Indigenous public policy domain, however its focus and remit, directed to economic development is in my view too narrow for it to stand alone. That said, there are clear advantages in having more than one national advocacy body for Indigenous interests, just as there are several peak interest group entities representing mainstream interests.

The challenge for both the Coalition of Peaks and the Economic Empowerment Alliance is to step up to the next level. For the Empowerment Alliance, it is still in a nascent phase and lacks a track record. However, its existing members (to the extent that this is known) appear to be highly experienced and capable. For the Coalition of Indigenous Peaks, there seems to me to be a real possibility that a change of government at the Commonwealth level would bring a major reshaping (again) or even the abolition of the Closing the Gap process. If that were to occur, it would be a tragedy for the Coalition of Peaks to go the way of the National Aboriginal Consultative Committee and National Aboriginal Conference of the 1970s/80s, of ATSIC in the early 2000s, and of the National Congress of First Peoples a mere decade ago.

To be successful into the medium-term future, both the Coalition of Peaks and the Economic Empowerment Alliance will need to devise strategies to become financially independent of government and establish the transparent, coherent and robust governance structures that address the inevitable criticisms, from both within and beyond the Indigenous domain, that will question their legitimacy. Given the importance of recruiting the very best talent available, there is a case for broadening membership of each entity to allow individuals to participate in their governance. There is also a strong argument in favour of establishing two or three semi-autonomous divisions or entities under the Coalition of Peaks focussed on sub-sets of the institutional reform policy space: one option would be to establish a remote Institutions division/entity along with a social and an economic division/entity. Another would be to establish some geographical units to oversight developments in particular jurisdictions. These entities could have their own Boards, staff and resources. The rationale for such units is the need to build and sustain policy expertise and capability: it is just too ambitious to think that one set of staff can cover developments across the whole of government in nine jurisdictions.

Australia’s extant political settlement is determined by a dominant coalition of commercial, social and political interests. Those interests share an uneasy equilibrium which is built upon an array or assemblage of institutions that operate to distribute societal benefits to those included in the equilibrium. Indigenous Australians are over-represented amongst those citizens who are comprehensively excluded by the operation of multiple institutions, particularly in remote Australia. To reform those power structures, Indigenous interests’ only realistic option is to strengthen their capacity to advocate on policy and to progressively shift the shape of the institutional framework thought strategic alliances with other interest groups.

To achieve such an outcome, Indigenous interests need to develop a robust institutional reform agenda that aligns with the political and policy demands of the present and the near future. They must develop the independent organisational heft to engage robustly with existing interests across the breadth of Australian society, seeking out allies and contesting the agendas of opposing interests. Governments respond to the sustained advocacy of organised interests, especially when that advocacy is backed up by the threat of political consequences.

Conclusion

As I argued at length in Part one of this post, the Indigenous policy domain has been characterised by Institutional stasis over the last thirty years. To the extent that there has been institutional change, it has been to degrade and walk back previous institutional reform. There is no shortage of Indigenous political activism, but my point is that it will only ever be effective if it is informed by a conceptually sound Institutional reform agenda with a medium to long term horizon. This must be complemented by the organisational capability and heft to prosecute detailed policy arguments against those who either oppose or merely ignore the legitimate aspirations of Indigenous interests to be part of an inclusive society. If institutions matter, then addressing structural and system exclusion and disadvantage requires institutional reform. That is the mountain that First Nations leaders will have to climb to achieve their legitimate aspirations

 

23 October 2024

 

An Institutional approach to analysing Indigenous policy (Part One)

I like not fair terms, and a villain’s mind

Merchant of Venice, Act one, Scene three

 

Last week the Nobel prize in economics was awarded to three economists, Daron Acemoglu, Simon Johnson and James A. Robinson “for studies of how institutions are formed and affect prosperity” (link here). There have been several prominent economists write short overviews of the prize winners’ work (link here and link here). The economic historian Adam Tooze wrote a thought provoking critique (link here) which questions the prize winners’ interpretation of the modern history of China’s rise, but implicitly endorsed the underlying importance of institutions. The overview I found most useful was by Alice Evans (link here).

Evans succinctly summarises the considerable academic output of AJR (as the prize winners are often referred to) in a very accessible way. She emphasises the importance of institutions (defined as ‘the rules of the game’) in shaping policy outcomes, the role of inclusive institutions in driving sustained social and economic equity, and the more recent research of AJR in exploring the complementary roles of expectations and prestige in shaping the ideological frameworks within which institutions operate and which thus shape societal outcomes. I recommend interested readers have a look at her Substack post as she explains these issues in very accessible terms.

The bottom line is that ARG have made an enormous contribution to explaining the importance of institutions in shaping and determining policy outcomes, and point to the underlying roles of elites, dominant coalitions of interest groups, and ideology in the creation and protection of institutions that allocate benefits to those dominant interests, in maintaining institutional stability over time, and by implication in weakening institutions which either no longer serve their interests or which allocate societal resources in ways they dislike. A core element in ARG’s analyses is to argue that inclusive institutions (ie institutions that allocate societal resources more broadly) lead to stronger economic and social development; whereas non-inclusive institutions lead to weaker outcomes and ultimately to state failure.

How then might we describe the institutional frameworks which shape the Indigenous policy domain in Australia? The summary below is more a thumbnail sketch than an attempt at absolute accuracy and comprehensiveness.

The first point to note is that mainstream institutions are the predominant influence over Indigenous policy outcomes: the Constitution, the Parliament, the dominance of the Executive Government over the Parliament, the Commonwealth’s extraordinary reach across mainstream policy sectors such as education, health, employment, social security, the disability support policy, taxation, the economy, and so on. The Commonwealth retains very strong institutional influence over Territories both direct and latent (notwithstanding legislation providing for self-government), and its mainstream legislation outlawing racial discrimination has had an outsized influence over Indigenous policy. Mainstream state and territory institutions focussed on essential services and mainstream land laws, housing regulation, social housing provision and criminal justice are also extremely influential in shaping Indigenous life opportunities across urban, regional and remote contexts. While these are generally considered inclusive institutions, the reality is that in many cases, particular institutions, or the synergies between institutions lead to exclusionary outcomes for particular segments of society. Indigenous interests are strongly represented amongst those disadvantaged segments as the Productivity Commission Closing the Gap dashboard demonstrates very clearly.

The second point is that Indigenous specific institutions are in a state of prolonged stasis: there has been virtually no new Indigenous specific institutional initiatives for almost three decades. A high-level list of Indigenous specific institutional initiatives over the past half century would include the following policy measures and reforms.

The Whitlam and Fraser Government enacted land rights legislation in the NT in 1976. States such as NSW, SA, Queensland and Victoria enacted much more limited land rights regimes during the seventies and eighties. The Fraser Government enacted the Aboriginal Councils and Associations Act in 1976 (updated in 2006 as the CATSI Act) and the Aboriginal Development Commission in 1980. The Hawke Government enacted ATSIC in 1989 (incorporating the ADC) and established alongside a more commercial entity now known as Indigenous Business Australia. The Native Title Act was enacted in 1993 by the Keating Government after the High Court forced the Commonwealth’s hand when it handed down its decision in Mabo No.2. In 1995, the Keating Government legislated the Indigenous Land Corporation and an associated Land Fund acknowledging the reality that native title did not benefit all Indigenous people. In 2007, the Howard Government (with ALP support) initiated the Northern Territory National Emergency Response, involving the deployment of unarmed ADF personnel and a suite of largely time limited legislative measures to ensure Commonwealth freedom of action in undertaking various mainstream and Indigenous specific measures. This legislation included provisions over-riding the operation of the Racial Discrimination Act.

Most recently, in 2023, the Albanese Government took a referendum on constitutional reform built around the proposal for a Voice to Parliament to the Australian people, and following the loss of bipartisanship, it was comprehensively defeated. Had the referendum been successful, it would have made a significant contribution to the recognition of First Nations people at an institutional level. However, the contribution of the Voice to driving better policy outcomes was never guaranteed, as it depended on subsequent legislation to scope out the detailed design and mechanics of is operations. There is no guarantee that this subsequent legislation would have been effective (much like expectation that the National Anti-Corruption Commission appears to have been substantially weakened by the compromises made during the design and passage of its establishing legislation (link here).

Perhaps the highest profile non-legislated Indigenous specific institution is the Closing the Gap framework established by COAG in 2008 along with the National Indigenous Reform Agreement which provided around $16bn in associated funding over ten years (link here: pages 7/8)  and fundamentally revised and updated in 2020. These latter revisions saw the reframing of the Closing the Gap framework in a National Agreement signed by all Australian Governments and the newly established Coalition of Peaks. The new National Agreement was fundamentally flawed insofar as there was no overarching long-term funding package built into it, and it was deliberately designed by governments to ensure that political accountability was both deferred and widely shared, thus undercutting the likely impetus for substantive ongoing reform. As a result of the large number of ‘targets’, the devolution of responsibility to states and territories, the complexity of the measurement approaches adopted, and the absence of any direct alignment between targets and financial investments means that its accountability frameworks in relation to government performance are effectively non-existent.  The ‘codesign’ of the Agreement was in my view effectively a sham and has not worked for Indigenous interests. The establishment of the Coalition of Peaks was necessary to make this sleight of hand work, but the Coalition has not been funded adequately to engage with governments across the huge breadth covered by the Agreement and Closing the Gap framework. The refresh of Closing the Gap by the Morrison Government was institutional change, but not institutional reform; it was a means of shifting the goalposts with the result that Indigenous interests have, in my view, been thwarted at virtually every turn. My submissions to the Productivity Commission Review of Closing the Gap made this argument at some length but were effectively ignored (link here and link here).

The third point to note is that notwithstanding the 1967 referendum, the Commonwealth has for the last decade been actively shifting Indigenous policy responsibilities to the states and territories, in the process reducing the Commonwealth’s Indigenous policy footprint in regional and remote areas, and thus limiting its capacity to know and understand what is actually happening amongst the most disadvantaged segments of the Indigenous population. I won’t seek to spell out every instance, but the following examples are illustrative of the wider trend. IN 2018, the former LNP Government discontinued the National Partnership Agreement on Remote Indigenous Housing and its associated $5.5bn in funding (except in the NT) when the ten-year term expired arguing it was a state responsibility. More recently, following the Voice referendum defeat, the Albanese Government has left the treaty and truth telling processes its formerly promised to the states and territories (link here).

The combined effect of these three points is to build a very strong case for the proposition that there has been virtually no significant institutional policy reform directed to the Indigenous policy domain over the past thirty years. I use the word ‘reform’ to mean ‘positive change’, not just change. This is the institutional stasis referred to above. But this institutional stasis has been reinforced and amplified by a series of major institutional setbacks for Indigenous interests which have undoubtedly had a cumulative impact.

So over those same thirty years we have seen (even as increasing amounts of land have been recognised as native title) largely retrograde amendments to the Native Title Act including the so-called Wik amendments; the pre-emptive abolition of ATSIC in 2005; the retrograde imposition of punitive policies under the Northern Territory Intervention (which continue to resonate in First Nations’ narratives even after the actual policies imposed have run their course); the failure of the Closing the Gap framework to drive tangible improvements in Indigenous socio-economic status (for reasons I explored in two related Discussion Papers in 2021: link here and link here). Indeed, key socio-economic indicators have been worsening over time (I wont rehearse the data available in the Productivity Commission Closing the Gap Information Repository (link here).  To pick out two that I find incomprehensible, extraordinary national incarceration rates and the extremely concerning education outcomes in remote regions and the concomitant levels of social dysfunction particularly amongst school age youth point to a conjunction of multiple social, economic and cultural crises which adjectives such as ‘deep-seated disadvantage’ and ‘deep poverty’ do not do justice.

Perhaps the most significant institutional reform failures have been successive governments’ unpreparedness to take up opportunities that have one way or another been proposed. The Australian Law reform Commission delivered a major report on potential reforms to the Native Title legislative and policy framework in 2015 (link here); it sank without trace and without a Government response. In June this year, the Attorney General commissioned a new review of the Native Title Act Future Acts regime (the core of the legislation) (link here) to report by December 2025. My prediction is that it too will sink without trace. To take one native title example that particularly annoys me, through all these reviews, governments have known that the Prescribed Bodies Corporate that are required to be established under the Act to hold native title have no comprehensive operational funding framework and are beholden to siphoning fees off third parties (such as miners and developers) seeking access to native title lands to fund their operations. Yet governments prefer to undertake reviews rather than take decisions to adequately fund bodies established by legislation of the Parliament. Another lost opportunity is the failure of governments to respond to the Indigenous Evaluation Strategy review undertaken by the Productivity Commission in 2019/20 (link here). And of course, the failure of the referendum related to the proposed Indigenous Voice to Parliament is another lost opportunity to reform the institutional framework that shapes the Indigenous policy domain.

While it is possible to argue about the detail of each of the retrograde changes and lost institutional reform opportunities of the past thirty years, the absence of major reforms with the substantive financial and intellectual capital resources to make a difference (summarised by the cop out phrase ‘Indigenous affairs policy is intractable’) and the sheer accumulation of retrograde changes over the past thirty years provides irrefutable evidence that there are deep and powerful systemic or structural forces at work (link here).

The existing coalitions of interests that benefit from the institutional status quo (often referred to as ‘elites’) are not prepared to give up their shared benefits and allow new interests access to the ongoing implicit negotiation of institutional adjustments with their concomitant adjustment of shared benefits. Those with the power and influence to force their way to the negotiating table are included, and those without the power and influence are ignored and effectively excluded. The latter group includes the vast majority of Indigenous interests, particularly in regional and remote Australia. It is this dynamic that Alice Evans described when she wrote in the Substack linked above:

Contending coalitions are constantly vying for ideological and institutional dominance. In the past, they primarily sought conquest. But now it’s a battle for persuasion - in which prestige reigns supreme.

The problem for Indigenous interests is that they are not losing just one or two fights. They are losing comprehensively, and continuously. In the battle for institutional influence, Indigenous interests are either excluded by governments (who are the mediator between contending interest based coalitions) either by ignoring Indigenous aspirations, or by using delay, complex processes and ultimately window dressing to ensure that the status quo ante between the powerful interests is not upset. 

The challenge then for Indigenous interests is how to pull themselves up by their bootstraps and somehow gain a guaranteed and unquestioned seat at the table at least when key issues of concern are being discussed (or are sought to be ignored). The Indigenous Voice to Parliament as conceptualised by Noel Pearson and Megan Davis was an attempt to be granted, by constitutional right, a seat at the table in relation to the consideration of laws affecting Indigenous interests. That opportunity has been refused at best for the next decade or two, and at worst perhaps forever. But it is not the only opportunity on offer, and nor was it the only pathway forward.

What then are the strategies available to Indigenous interests to increase the likelihood of gaining seats at the table when key decisions are being taken on institutional design and development that impacts their interests and their lives? That is the topic I turn to in Part Two of this post.

21 October 2024

 

 

Church and State versus the perils of outsourcing

                                     Though no man be assur’d what grace to find

You stand in coldest expectation.

King Henry IV, Part II, Act five, Scene two

 

With Estimates due in November, I thought it might be useful to see how far we have come in Upper House scrutiny over the past century and a half. The following text is taken in its entirety from the Western Australian Parliamentary Hansard (link here).

WA Legislative Council Thursday, 4th July, 1878.

DUTY ON FURNITURE AND BAGGAGE OF HIS LORDSHIP BISHOP PARRY.

Sir T. COCKBURN-CAMPBELL — having elicited from the Colonial Secretary the fact that, on the occasion of the arrival in the Colony of Bishop Parry, his furniture and baggage were admitted, as had been done in the case of his predecessor, without payment of duty, and that His Lordship had since been called upon to pay duty on the same,-moved a resolution to the effect that in view of the exceptional circumstances under which the Bishop had been called upon twelve months after his arrival in the Colony-to pay the duty, the Council should respectfully suggest to the Government that the payment should not be enforced….

… No doubt the Bishop was prepared to pay the duty on his arrival in the Colony, but he was then led to believe that he had no duty to pay, but, twelve months afterwards, a sudden and totally unexpected call was made upon him for payment of the duty. This appeared to the hon. baronet to be such an irregular proceeding on the part of the Government officers concerned in the matter, that he thought the House would be quite justified in entering a protest against such irregularities….

…. Mr. CROWTHER, though not intending to oppose the resolution, intimated that in the event of its being affirmed, he would bring forward a similar motion with respect to some articles belonging to the Bishop of New Norcia, who in like manner had been called upon to pay duty some time after the goods-certain vestments for his own use-had been landed. A minister of the Congregational body who not long ago arrived in the Colony all had also been called upon to pay duty on his baggage, and the same had occurred still more recently in the case of a Wesleyan minister. Personally, he did not care two straws whether the clergy were really entitled to the privilege of having their furniture and baggage admitted duty free; but if the concession was made with regard -to the clergy of one denomination it ought to be extended to the ministers of every other religious denomination. If such a privilege really did attach to the clerical office, all he could say was he was sorry he was not a dignitary of the church himself….

…. Mr. MARMION regretted very much that the attention of the House had been called to the matter at all, and thought they were entering upon very dangerous ground. In saying so, he had no intention whatever to oppose the resolution, but he did think it was a pity the subject had come before the House in any way, inasmuch as it would have a tendency to impress upon the minds of many persons 'outside that there exists in this country what had not existed for many years back-a State Church, and that there were privileges granted to the clergy of that church which were not granted to the clergy of other denominations….

….. The resolution was then put to the House and carried on the voices.

On the House resuming, Sir. T. COCKBURN-CAMPBELL said that in explanation, and in justice to Bishop Parry, he would like to say that the Bishop had never said a word to him about this matter, nor was His Lordship aware that he had intended to propose such a resolution.

….

Friday 12 July 1878

ESTIMATES: FURTHER CONSIDERED IN COMMITTEE….

…. Aborigines, Item £1,210 read:

MR. MONGER called attention to the practice adopted in distributing blankets to aborigines. These blankets were sent from Perth to York to the Resident Magistrates, who-no doubt with the best intention issued them to the settlers for distribution to the natives; but as a rule the blankets were given to their own native shepherds, who traded with the bush natives, obtaining opossum skins in barter for the blankets given away by the Government. He would suggest that the blankets should be issued by the Resident Magistrate at York to the police-constables stationed to the Eastward (and not to the settlers) for distribution among the natives.

THE COLONIAL SECRETARY (Hon. R. T. Goldsworthy) said if that were very glad at all times to learn the views of hon. members on such matters, and to give them every consideration, as he would with regard to the present suggestion.

MR. CAREY thought it would be a very good plan to leave the distribution of the blankets in the hands of the police, rather than in the hands of the settlers. He would also suggest that they be distributed in the early part of the year; at present, the natives did not receive them until the winter was half over.

The vote for "Aborigines" was then put and passed.

The 2024 NAIF review: the case for addressing systemic exclusion

 

For that’s an article within our law

As dangerous as the rest

Pericles Act one, Scene one.

 

The Government announced a review of the North Australia Infrastructure Facility on 19 August 2024 (link here). The Ministers media statement noted, inter alia:

The review is a requirement under the Act and will make recommendations to Government including on how to best continue to support investment that delivers economic and community benefits to northern Australia.

NAIF is a development financier that provides financial assistance to infrastructure projects in northern Australia to drive public benefit, economic and population growth, as well as materially improve the lives of First Nations people.

I have previously published a number of posts dealing with NAIF on this blog (link here; link here; link here; and link here). While not essential reading, for those interested in some of the dubious history of the NAIF’s involvement, and lack of involvement, in relation to Indigenous interests in northern Australia, they are worth a look. I should note that the NAIF legislation, and associated Investment Mandate have been amended since some of the posts were published.

Set out below is my submission to the current review. It does not include hyperlinks to key assertions, but most of the information and data I cite can be found on the NAIF website (link here).

 

Submission to the 2024 Northern Australia Infrastructure Facility Statutory Review

 

The following submission is predicated on my view that the NAIF has significant potential to contribute to the ongoing development of northern Australia. I wish to acknowledge that since the quite critical 2019 ANAO performance audit, NAIF appears to have strengthened its governance and systems considerably, and for this it should be commended.

I would note however that as with any public sector institution, the risks of progressive degradation of the requisite internal culture on governance and effectiveness issues always exists, and thus there is a strong public interest in ensuring that the appropriate checks and balances exist and are strengthened. I am a strong advocate of transparency in the public sector as a primary mechanism for ensuing that public benefit is always at the forefront of organisational priorities (including the informal priorities that inevitably exist in any complex organisation). Accordingly, I would encourage the review to proactively consider what opportunities exist for greater transparency in NAIF’s operations.

For example, it seems to me important that the legislative protections in favour of Board independence be maintained and perhaps strengthened. While it is also important that portfolio Ministers retain the right to veto Board decisions, this should be based on timely publication of their decision and the reasons.

Another example where greater transparency is required in my view relates to the publication of aggregate data on NAIF operations rather than (or in addition to) the current approach of publishing disaggregated information at the project level. For a specific example, while there is a degree of high-level public relations content relating to the required Indigenous engagement strategy for each project, I was unable to discern either on the NAIF website nor in key NAIF documents any summary assessment (let alone a rigorous evaluation) of the overall benefits arising from this requirement. NAIF could for example begin by reporting some core data metrics such as the levels of Indigenous employment derived from NAIFs project contributions.

Or to take another example, while the headline figure of $7bn in available finance is always front and centre, there is very little accessible data available on the annual net cost of NAIF to the Commonwealth and nor is there accessible data on the annual projected revenue returns to the Commonwealth as interest on loans is repaid. NIAF and its portfolio agency could do much better on these fronts than they have to date.

In this context, I would also suggest that the Review Panel should look behind NAIF’s (perhaps understandable) public relations gloss and focus on the direct impacts of NAIF financing in relation to jobs created (including Indigenous jobs) and seek to ascertain and understand the terms of that employment. Clearly a full-time five-year job is not the same as a three-month casual part-time job. But NAIF’s public relations unhelpfully conflates these data. Moreover, (perhaps understandably from a public relations perspective) NAIF invariably cites the projected public benefit of the whole project, and the numbers of jobs to be created by the whole project which are never wholly funded by NAIF loans or investments.

These statistical leaps of imagination implicitly assume that the projects funded by NAIF would never go ahead without NAIF funding. This is in my view not a realistic assumption. The overall effect of these statistical sleights of hand is to undermine the credibility of all NAIF’s data efforts. Yet a realistic assessment is important to understand the real impact and outcomes of the Commonwealth’s investment in NAIF. If the Review reaches the view that they haven’t the time or resources to undertake such an exercise, then I suggest that you consider recommending an independent impact evaluation of NAIFs operations given that we are approaching the ten-year anniversary of its existence.

In relation to the mandatory Indigenous Engagement Strategy which proponents are required to prepare, there are in my view significant limitations on the potential for this requirement to make a real difference to the social and economic status of Indigenous communities and people in northern Australia. Not only are the outcomes of marginal significance when put beside the overall quantum of investments in projects, but there is a serious risk that the very existence of this requirement is implicitly used by NAIF, and the indeed the Commonwealth, as a rationale for ignoring the significant systemic bias in NAIF’s legislative and operating framework against delivering benefits for northern Australian remote communities.

A case in point is the public relations spiel on NAIF’s projects page regarding the upgrade of Connellan Airport at Yulara. The website page lists the project as social infrastructure whereas the upgrades of the NT airports’ infrastructure and the Townsville airport infrastructure projects are all listed as ‘transport and logistics infrastructure’. The real benefit of the airport upgrade was to the NT tourism industry, not to Aboriginal interests. The Indigenous Engagement Strategy for Connellan relates in its entirely to the ongoing operation of Yulara by Voyages (and not to the NAIF loan), and most if not all of the ‘commitments’ listed relate to initiatives which were already in place and underway prior to the airport upgrade being initiated. I know this as I was employed by the ILC in the period before the airstrip loan was approved. What we don’t get in the project summary is any information on is how many Indigenous workers Downer Constructions (the contractor used in the airport upgrade) employed, and whether Downer utilised any Indigenous procurement in the upgrade. They may have, and I hope they did, but NAIF do not appear to be providing realistic information regarding the actual project that they funded. How can we trust the rest of NAIF’s data and performance metrics in relation to the Indigenous Engagement Strategy requirement? Has there been an independent evaluation of the Indigenous Engagement Strategy requirement? If not, perhaps the review should recommend one.

I am not arguing against the requirement for NAIF projects to have developed an Indigenous Engagement Strategy, but I am deeply sceptical that as presently formulated and implemented, it is anything more than window dressing. By all means retain the requirement, and ensure that it is focussed and substantive, but it is more important (indeed essential) to fix the systemic bias built into NAIF’s legislative and operating framework.

The systemic bias I am referring to emanates from the legislated focus of the NAIF on economic infrastructure. Over time, the legislation and investment mandate have been broadened to include social infrastructure, but there is a problem. The majority of NAIF’s loan portfolio is driven by private sector project proponents seeking access to either concessional finance or a higher loan to equity ratio than the banks are prepared to support. While NAIF’s remit has been slowly broadened to allow NAIF to invest in or lend to social infrastructure projects, the reality is that it is state and territory governments which have responsibility for social infrastructure, and who thus must be the applicant for NAIF finance. Unlike commercial firms, these governments are oversighting hundreds of projects, and their most influential constituencies are dominated by mainstream interest groups. The result is that they have competing financial priorities which limit their interest in accessing NAIF to fund social infrastructure. The unfortunate reality is that the states and the NT have failed to even look for a NAIF contribution to addressing these infrastructure deficits. Just because those jurisdictions lack the imagination to seek policy solutions to these policy deficits is no reason for the Review, nor indeed for the Commonwealth, to follow suit.

After eight years of operation, NAIF’s website lists, on my count, nine social infrastructure projects totalling ‘up to’ approximately $606m and three of the six are relatively recent investments). Only two of the nine projects are in the NT, and none are in Western Australia. With committed loans currently totalling $4.7 bn, the proportion of approved NAIF funds allocated to social infrastructure is thirteen percent of that amount. Undoubtedly, some Indigenous citizens will benefit from these projects as they are overwhelmingly mainstream health and education related projects in Queensland which provide access to all citizens whether Indigenous or not. Yet only one of these projects is directed to Indigenous controlled or Indigenous specific projects and even that single project — the Connellan airport upgrade — is arguably not directed to benefitting Indigenous community members (see above). NAIF’s record in terms of allocating project funding towards benefitting Indigenous interests is extraordinary in its myopic narrow-mindedness, not least because infrastructure provision is such a crucial driver of poverty, inequality and arguably social dysfunction.

The most serious infrastructure deficit in northern Australia is undoubtedly in the social housing sector. These deficits are particularly serious in remote communities where the associated community infrastructure (water, power, sewerage) required to make housing viable is invariably degraded or non-existent. The most recent report of the Economic Inclusion Advisory Committee which advises the Government on budget priorities included a detailed report on remote housing (link here). Remote communities comprise some of the most socially and economically disadvantaged Australians, yet after eight years operation, NAIF, the major policy initiative directed at northern Australian infrastructure, has not made a dent in the outstanding housing and essential services needs of those communities.

I venture to say that the current pipeline of loan applications to NAIF is similarly bereft of any focus on these needs. It might be claimed by some that social housing is just that, a purely social priority. I disagree; basic housing (and education and healthcare) are core drivers of economic development and thus crucial to addressing deep-seated disadvantage. Without access to housing, education, and good health, economic development is a chimera. Further, investment in these social infrastructure priorities has substantial and ongoing commercial benefits. The Aboriginal residents of northern Australia are permanent residents, whereas many (perhaps even a majority) of non-Indigenous residents will not remain in residence beyond ten years. The economic development of the north will never succeed for as long as the Indigenous population is systemically excluded from access to core societal infrastructure.

One ostensibly persuasive argument against extending NAIFs operations into financing remote social housing and essential services infrastructure is that the level of need exceeds NAIFs potential capability to contribute by several orders of magnitude. My response to such a critique would be two-fold:

• first, a relatively modest NAIF contribution sustained over time would eventually have a significant impact; and
• second, there are potential ‘niche’ sectors which NAIF could focus on such as the ongoing shortage of adequate staff housing in remote communities, or aspects of the renewable energy transition. These types of niche investments have the potential to have outsized impact.

It would be a tragedy if the potential embedded within the NAIF model to drive positive and long-lasting change in remote Indigenous communities across northern Australia was overlooked based on a lack of imagination and innovation by policymakers.

One solution to this systemic exclusion of social infrastructure, particularly Indigenous social infrastructure, in relation to NAIF’s remit is to adopt an alternative and proactive investment approach. It would require NAIF (or some other government agency) to undertake a high-level needs analysis, and for NAIF to then set aside a proportion of its available capital for investment in that particular social infrastructure need. The Commonwealth in its latest Ministerial Statement of Expectations (which requested NAIF to set aside $500m for critical minerals projects) has established a precedent for identifying priority areas of focus within NAIF’s remit. The NAIF could then approach state and territory governments and negotiate (or even auction) access to the concessional loans directed to the determined social infrastructure needs. NAIF has demonstrated with its approval of the project Territory Infrastructure Loans (which allows the NTG to on-lend funds to smaller infrastructure projects) that it is possible to allocate funds for infrastructure projects that are primarily state and territory responsibilities.

If the solution proposed above is not attractive to NAIF, an alternative solution would be to amend the legislation to allow Indigenous Business Australia and perhaps the ILC (both Commonwealth statutory corporations) to access up to say $2bn in NAIF funds as an agent of NAIF (thus maintaining all of the NAIF project assessment criteria and administrative processes), with an additional requirement that any loans or investments must involve significant benefit to Indigenous communities in the north.

It is clear that the current outcomes do not need to persist. There is no insurmountable obstacle to the Commonwealth taking the action required to address the systemic exclusion of Indigenous interests from accessing the NAIF. Indigenous communities have the greatest social and economic infrastructure deficits, yet the Commonwealth has to date preferred to allocate concessional loans to commercial interests while allowing the Indigenous community infrastructure deficits to continue. It is not a matter of one priority over the other. There are sound economic social and political rationales for addressing both social infrastructure and other infrastructure priorities simultaneously. Not doing so would amount to maintain ongoing systemic and structural discrimination against the most disadvantaged members of the Australian community.  

While it may be feasible for the first approach I proposed to be implemented administratively, I strongly suggest that the Review Panel recommend legislative adjustments to the NAIF legislation to make clear that proactive investments in remote infrastructure needs are both necessary and desirable.

Finally, it is my view that the unless the systemic exclusion of Indigenous social exclusion within NAIF’s remit is addressed, then the case for extending NAIF’s investment sunset would not be made out.

In summary, I suggest the Review Panel make the following recommendations:

First and most importantly, ensure that going forward the Commonwealth and NAIF jointly eliminate the systemic exclusion of remote community infrastructure from the NAIF remit and importantly, from its operations. This would ensure the NAIF contributes to addressing the social housing and essential services infrastructure deficits across remote Australia.

Second, address the shortcomings evident in the way NAIF performance and data, and particularly the data related to the Indigenous Engagement Strategy requirement on proponents, is measured and reported upon. There appears to be strong grounds for an independent evaluation to undertaken.

Third, recommend an independent impact evaluation of NAIF’s operations over the eight years since its inception.

Fourth, recommend that NAIF (and the Commonwealth) take appropriate action to strengthen the independence of the NAIF Board and pay much greater attention to the transparency of NAIF operations not just in relation to internal government accountabilities, but in relation to the wider public.

Finally thank you for the opportunity to make a submission to the Review. I am happy for this submission to be made public.

 

M C Dillon

27 September 2024