Handy - Dandy: Native title and compensation for extinguishment

A man may see how this world goes with no eyes. Look with thine ears: see how yond justice rails upon yon simple thief. Hark, in thine ear: change places; and, handy-dandy, which is the justice, which is the thief?       King Lear Act 4, Scene 6

I recently wrote a short piece for The Guardian on native title compensation, and in particular the recent Federal Court decision in Griffiths v Northern Territory of Australia, and in particular exploring the policy implications. Link is here. Space was an issue so the argument was quite truncated.

Issues I would have liked to explore further included the nature of the intangible costs which Justice Mansfield recognised and the more fundamental narrative of the recognition and acknowledgment of native title since the High Court’s Mabo decision.

Mabo was a compromise. The Court held that native title was sui generis, part of the common law, but that it was vulnerable to extinguishment through inconsistent decisions of government. However, it also found that decisions of government which extinguished native title since the passage of the Racial Discrimination Act in 1975 and which did not do so in a non-discriminatory manner (that is by providing compensation) were invalid. This led to calls for existing titles in non-Indigenous hands to be retrospectively validated if they were at risk. Subsequently, one of the components of the Native Title Act was to provide for the validation of such titles.

One of the issues I dealt with in the Guardian piece, albeit briefly, is the capacity of the legal system and the courts to drive political and policy change in circumstances where parliaments and elected representatives find it too difficult. Political scientist Colin Tatz argued in the late 1970s that the law and the courts presented more opportunities for reform and recognition of Indigenous rights than the political system. He was certainly proved right in relation to native title.

While the courts work hard to appear to remain behind the veil of ‘judicial’ neutrality, their social function as interpreters of law in a rapidly changing society means that they inevitably make new law to deal with new circumstances. Arguably the High Court decision in Mabo can be seen as a judicial response to the failure of the nation’s political elites to recognise the existence and legitimacy of pre-existing Indigenous land ownership.

This failure was starkly visible in the failure of the Hawke Government’s proposals for National Land Rights largely at the instigation of the Western Australian Labor Government led by Brian Burke, and even more so in the failure of the most states to establish comprehensive land rights regimes with the broad applicability evident in the NT Aboriginal Land Rights Act enacted by the Fraser Government in 1976.

My argument in The Guardian was that in effect, the Federal Court has been continuing in this vein, step by small step, filling in the interstices within the Native Title Act’s complex structure and framework. However, while these incremental steps have been largely positive, there is no guaranteed that particular steps will be, nor that the trend will continue to be expansive as opposed to restrictive. The legal system generally, and particular judges, develop decisions and lines of argument which are themselves shaped by community sentiment and support, and the wider political debate. Even where the legal system makes the running, the shape and form of the debate in the wider political and public domain continues to be hugely significant.

Perhaps the most innovative and far reaching aspect of the Griffith decision by Justice Mansfield relates to the nature of the intangible costs which were imposed on the native title holders whose ownership was extinguished by the actions of the NT Government in 1994. Compensation for the intangible costs of a compulsory acquisition is a recognised element in Australian (and British) common law. It is often referred to as ‘solatium’. In many statutes which recognise it, it is capped. Mansfield in assessing it referred to it as the non-economic impacts of the acquisition, in other words, the impacts on Aboriginal culture, on connection to country, on sacred sites and so forth. This is an appealing distinction to draw, and is intuitively justifiable.

However, many anthropologists would emphasise the hybrid nature of culture and economy, and indeed, Mansfield in his recent decision in  Rrumburriya Borroloola Claim Group v Northern Territory of Australia, a native title case based on land near Borroloola, found that native title rights could include a range of economic and commercial components or elements. It follows that the intangible impacts of extinguishment will not be quarantined to non-economic, religious or cultural matters, but will inevitably impact on economic rights. It may be argued that any such economic rights are incorporated into the value of the title linked to comparative freehold values, and there is some merit in this. However the economic activities that non-Indigenous land owners undertake on land are limited in comparison to the range of potential economic activities which are incorporated into native title.

Nevertheless, policy is made and implemented in most areas of public policy on the basis of limited information, and with a focus on simplification aimed at establishing general rules or approaches which can then be adopted without having to re-prosecute de novo every new circumstance. I suggest that Mansfield’s approach, while perhaps conceptually conservative, will form the basis of the approach to intangible costs into the intermediate term future.

Turning to the narrative which underpins the discussion of native title in the public domain, it has to date been dominated by the process of native title holders lodging ‘claims’, or more accurately, seeking formal determination of their native title. Once formally determined, native title is acknowledged by the legal system to have always existed.

The Griffiths case opens a new chapter in this narrative. It will shift the focus of public discussion and debate more squarely toward the ongoing and continuing extinguishment of native title (dispossession) since 1975.

The fact that the Native Title Act validated potentially invalid acts of extinguishment between 1975 and 1993, and these provisions were later extended even further by the Wik amendments to the Native Title Act, was a cause of deep-seated angst amongst Aboriginal and Torres Strait Islander peoples. The legislated validation provisions included complementary provisions requiring the payment of just terms compensation in accordance with the constitution. However, the mechanisms were primarily designed to provide immediate certainty and security for non-Indigenous land owner’s property rights. They were successful in this aim.

However, the validation provisions also created a situation where many native title holders whose property rights had been extinguished since 1975 would miss out on compensation. The reason is that seeking and achieving a formal determination of native title is a long, slow and expensive process; there is a backlog of applications, and understandably, there has been a focus on seeking and obtaining determinations over native title which has not been extinguished. Seeking determinations over titles which have been extinguished, and for which the only recompense is just terms compensation, understandably is a lesser priority.

But from the perspective of those native title holders alive when the extinguishment occurred, and who presumably felt most keenly the adverse consequences of that legally authorised and retrospectively validated change of ownership status, most individuals in those situations will not outlive the wait time for ‘just terms ‘ compensation.

This raises a fundamental issue of justice and fairness. What seems clear is that for many individuals whose native title has been extinguished since 1975, the mere inclusion of a provision alongside the validations requiring the provision of ‘just terms’ compensation in the future in the event a successful application for determination is made is not in reality the provision of ‘just terms’.

In 1993, the Parliament at least acknowledged the injustice of past dispossession, and made this tangible through the establishment of the Aboriginal Land Fund. While more than tokenism, it is far from an adequate recompense.

One test of this is to imagine yourself behind a hypothetical Rawlsian ‘veil of ignorance’; unsure whether the title to your home would be secured and validated, or extinguished and possibly and belatedly compensated. Would you agree to the arrangements put in place in the Native Title Act? I know that I wouldn’t.

The unfairness and injustice of the validation provisions in the Native title Act are an ongoing reminder to Indigenous Australians that dispossession is ongoing, and that the playing field is not level. It is a key part of what drives the aspiration and demand for substantive constitutional recognition and a treaty.

Public policy makers would be wise to find ways to advance these discussions and negotiations. An obvious way would be to put real bureaucratic and political focus and commitment into settling native title claims outside the litigation mindset which shapes so much native title policy at the moment.

History tells us that where the political system is gridlocked, the courts will eventually step in. To my mind however, leaving these issues unaddressed would be a monumental national failure, and runs the risk that generations of young and yet to be born Indigenous Australians will question the moral basis of the Australian nation state. Such an outcome would not bode well for our nation's future.

The NT Pre Election Fiscal Outlook (PEFO)

The NT Treasury released the PEFO last week. I don’t propose to attempt to summarise it, but further to a number of recent posts on NT budget matters, I will merely make a couple of brief observations and comments.

As one would expect from a document of this nature, the tone is subdued and neutral, and merely hints at value judgments on decisions which have been taken, or need to be taken by the incoming Government.

While I intend to focus largely on a couple of matters of particular relevance to Indigenous policy, it is worth noting that the state of the NT budget is of broader relevance to NT Indigenous citizens given that the comprise around 30 percent of the NT population.

Thus the commentary on the recent downgrade of the NT Treasury Corporation’s debt by Moodys from Aa1 with a negative outlook to Aa2 with a stable outlook will potentially add $14m to the Territory’s annual interest burden on its debt. The stated reason for the downgrade include ‘weakening revenue projections, larger deficits, the expectation that demand pressures would make the low expense demand projections difficult to achieve, and the continuing poor performance of the Power and Water Corporations financial performance’. This is far from a positive endorsement of the NTG’s financial management credentials.

The issues I wish to focus on are the policy changes since the May budget. The document lists $47m in new decisions.

One of these decisions was to allocate $7m are for the establishment of various task forces ‘to support the work that will be required as a result of the establishment of the Royal Commission into the Child Protection and Youth Detention systems in the Northern Territory announced by the Prime Minister on 26 July 2016’. Elsewhere the PEFO notes that the NT will budget to pay 50 percent of the costs of the Royal Commission. It follows that this allocation of $7m must be to fund the preparation of the NT Government’s submission to the Royal Commission, and presumably to fund the early implementation of better practice procedures in the relevant sectors. It can thus be seen as a measure of the investment which should have been made to deliver effective and appropriate services but was not.

A second decision worth noting is an investment of $30m in remote services. At page 12 of the PEFO, Treasury explain that the NT had received an upfront payment form the Commonwealth of $154m to fund around $20m per annum of municipal and essential services (MES) in remote communities over the eight years to 2022-23. The PEFO notes:

While the up-front payment improved the 2015-16 fiscal balances [by $154m], these funds were in lieu of around $20 million in annual revenue through to 2022-23 that remain budgeted to be spent in all forward years. Accordingly, the decision to re-invest an additional portion of the up-front proceeds of the MES funding into one-off projects, as well as maintaining the $20m ongoing recurrent expenditure, is a cost to the budget and contributes to the worsening of the 2016-17 fiscal balance.

The PEFO also lists a breakdown of the $30m in one-off projects on page 16. Most of the capital items are clearly legitimate needs and the existence of the needs being addressed cannot be questioned. However $10.7m relates to the creation of 137 full time equivalents for Aboriginal employees delivering services across the Territory. These are recurrent costs and implicitly lock in around $11m per annum in required expenditure if the jobs are to be maintained going forward. What this $30m allocation also tells us is that the real ongoing cost of remote essential services provision is closer to $50m per annum than then $20m which has been historically allocated by the Commonwealth and the NT. Because much of it relates to capital investment, most of it won’t be picked up in the Grants Commission needs assessments, and therefore won’t be reflected in the NT’s GST allocations.

What is crystal clear is that the decision to allocate an extra $30m was primarily influenced by the forthcoming election. Given the decades long history of politically motivated largesse towards non-Indigenous interests in the Territory, it is hard to begrudge Indigenous interests their share of politically motivated largesse. We might also conclude that this expedient allocation is a reflection of the increasing capacity of Indigenous voting patterns to influence politics and policy. Nevertheless, while good policy is usually good politics, the reverse does not hold.

The allocation of funds for job creation is worthwhile, but responsible budget management would have included the cost into the forward estimates rather than allocating zero. Similarly, the allocation of $1.4m for upgrades to outstation housing (‘more than 50 houses on 12 outstations’) raises expectations that the Government will take responsibility for all outstation housing, a matter which raises significant policy issues given that the actual owners are in most cases Aboriginal Land Trusts who have legal responsibilities for the upkeep of these assets.

Finally, throughout the PEFO, there are multiple references and instances of delays to capital projects leading to financial carryovers form one year to the next. While these are stated in neutral factual terms, they suggest a much deeper and extensive problem related to policy implementation capacity and/or a deliberate strategy to slow down spending so as to inflate current fiscal balances and push deficits into future years. Either outcome is poor policy.

The remedy must be a combination of greater transparency, which will need to be driven through parliamentary committee hearings and hopefully a focus by oversight bodies such as the Auditor General; and a stronger oversight role form the Commonwealth given its strong fiscal involvement in the Territory (it funds 70 percent of NT budget expenditures) and in many cases the fact that the delays related to tied programs. Unfortunately, these mechanisms have not worked particularly well to date, and a combination of independent analysis and astute use of the media will also be necessary to achieve better outcomes for Indigenous interests.

The bottom line is that the Territory is facing substantial fiscal headwinds. In such an environment, the historical record has been that Indigenous needs have been the easiest services to cut, with the implicit expectation that the Commonwealth will step in to fund any particularly egregious shortfalls. This assumption increasingly looks suspect.

Given these systemic realities, there is a strong case for Indigenous interests in the NT to work to establish and fund independent oversight and advocacy mechanisms to monitor the financial performance of the NT Government if they are to avert the risk that they will be asked to shoulder an unequal burden in the inevitable budget repair task ahead.

The likely election of a new Government creates an opportunity for Indigenous interests to demand a new approach to transparency and accountability for the delivery of government services in the NT.

Substance Abuse in Remote Australia

“Smooth runs the water where the brook is deep”. Henry VI, Part 2

Earlier this week the Federal Indigenous Affairs Minister, Senator Nigel Scullion, released a report commissioned by the Department of Health four years ago into issues related to petrol sniffing in remote communities and regions. The Minister’s media release emphasises the significant reductions in the incidence of petrol sniffing in remote Australia over the eight years since Low Aromatic Fuel (LAF) began to be rolled out in remote Australia. NACCHO’s response was similarly positive.

The report itself, authored by Professor Peter d’Abbs and Gillian Shaw of the Menzies Research School in Darwin and Bowchung Consulting in Canberra respectively, is a text book study in how detailed and robust research and analysis can shine an analytical light onto what are very opaque and confusing real world trends. At around 40 pages, plus appendices, replete with clear tables and analysis, the report is a reasonably easy read and repays closer attention than I give it here.

Apart from the detailed findings, the report provides substantive support and confirmation for an extremely positive narrative, namely, that government policy can make a difference if backed up with persistence, policy leadership, and dare I say multi-party support. But smooth waters run deep.

The Australian Government began to focus on the issue in the mid-1980s when the Senate produced a report on Volatile Substance Abuse. In 2005, BP began to produce OPAL fuel, Commonwealth introduced its Petrol Sniffing Prevention Program (PSPP), and the then NT Government introduced NT legislation on substance abuse. Over the subsequent years, there was a focus on persuading fuel retailers to voluntarily shift to low aromatic fuel in remote regions. Baseline research on the extent of the problem in remote communities was commissioned. The latest report is merely the latest in that line of commissioned policy research.

In 2013, the Parliament enacted the Low Aromatic Fuel Act 2013 to promote the take up of LAF and to control the sale of non-LAF in prescribed areas.

The Bill was initiated by Greens Senator Rachel Siewert, and like much legislation, was the subject of a complex and quite tortured gestation, with more than a few twists and turns along the way. The Bills Digest prepared by the Parliamentary Library (Low Aromatic Fuel Bill 2012, Bills Digest 68:2012-13) provides an excellent summary of the policy lead up to the Bill, the Bill’s structure and framework, and outlines the positions of the various parties and stakeholders.

A Senate Committee report outlined broad multi-party support for addressing the issue, but recommended against the Greens Bill. To give a flavour of the complicated politics underlying the Bill’s development and passage, Senator Scullion’s speech on the second reading in November 2012 laments and criticises a change of tack by Labor away from bipartisan Labor/Coalition opposition to the Bill (on the rationale that uniform national legislation by the states and territories was required) and to a position supporting the Greens’ Bill. Senator Scullion suggested that there must have been some ‘deal’ between Labor and the Greens relating to some other issue, and perhaps he was right. The link above to the page on Parliamentary website dealing with the Bill takes you to an informative webpage with links to the various stages of the Bill’s progress through the Parliament, including the Second Reading debate.

Having initially opposed the legislation, Minister Scullion has become a convert, utilising his Ministerial powers to ban the supply of Regular Unleaded Petrol (RULP) in areas around Tennant Creek, Katherine and Palm Island in Queensland.

The Australian Government operates a web site dedicated to low aromatic fuel policy and information. The link is here.

The Australian Health Ministers’ Advisory Council  Aboriginal and Torres Strait Islander Health Performance Framework 2014 Report provides a comprehensive snapshot of the broad array of health issues facing Indigenous Australians. At pages 114-5, it outlines the issues and some key literature on substance abuse including petrol sniffing.

The release of the most recent report, and the short background outlined above provides an opportunity to provide some commentary on the policy issues involved.

The thirty year process of policy development provides further demonstration, if any is needed, of just how hard it is to drive policy change in the Indigenous policy domain. And this in an area where virtually everyone accepts that there has been a major problem. While the numbers of sniffers documented in the report are comparatively low, when a thirty year view is taken, the numbers of lives irretrievably affected, and the consequential life opportunities foregone, amounts to a terrible cost for thousands of Indigenous citizens.

A second and related observation is to note the substantial inertia evident in the policy stances of the major parties, evident in their initial support for state based uniform national legislation, an outcome which might easily have taken a further thirty years to achieve had the Greens Bill not been enacted.

Third, having said that, both major parties were very supportive in funding the Petrol Sniffing Prevention Strategy, presumably because this did not risk antagonising the states and territories, who have primary responsibility for regulating the sale of fuel and similar substances in their jurisdictions.

The clear success of the PSPP over the past decade is certainly an achievement worth celebrating. It has not come without considerable cost to taxpayers in the form of subsidies to oil companies to underpin the production and distribution of LAF, but no serious stakeholders appear to question that the outcomes justify the costs.

As an aside, there is not much transparency in the Government’s published information in relation to these costs. I haven’t searched the Budget Papers, but there is no real information on the PMC website on LAF about the financial arrangements between the Government and the oil companies.

The enactment of the Low Aromatic Fuel Act is a further achievement worth celebrating as it provides a mechanism for the Commonwealth to step in and take action when persuasion and voluntary measures don’t work. It backs up and reinforces the Commonwealth’s influence in shaping productive policy outcomes in this area. The legislation is demonstrable evidence of the value of the potential of minor parties to influence policy if they set their minds to it.

The risk, as with all such Commonwealth legislation, is that it provides an incentive for the states and territories to step away from the hard decisions which they ought to be taking. Every instance of Commonwealth action under the legislation is arguably evidence of policy failure by the state or territory concerned.

The legislation is not perfect, and provides a number of mechanisms which potentially allow a Minister to create exclusions from the mandated policy within a region. Moreover, there appears to be limited parliamentary oversight of the exercise of any such exclusions. Like any policy framework, the devil is in the detail, and there is a need for ongoing vigilance to ensure that the headline policy is in fact being implemented on the ground. While one would hope that relevant Indigenous advocacy groups (such as NACCHO and the National Congress) build and maintain the capacity to monitor the operation of the legislation, it is a fact of life that the policy analysis capacity of the community sector in Indigenous affairs is quite thin. There is nothing in the LAF policy framework which guarantees sustained bureaucratic and ministerial focus, nor is there a guarantee of positive outcomes on an ongoing basis.

My major critique of the policy framework relates to the risks of adopting a too narrow or segmented frame of analysis. The D’Abbs/Shaw report in fact hints at this. If one takes the situation on the ground, community by community, or region by region, as the frame of analysis, and looks at substance abuse more broadly, it becomes apparent that the gains in reducing petrol sniffing may be offset in large measure by increasing abuse of alternative substances, in particular, alcohol, cannabis, and other harmful substances.

D’Abbs and Shaw comment directly on this issue (page 48):

While declines in petrol sniffing associated with LAF have been accompanied by high levels of alcohol and cannabis use in some communities, we found no evidence of a simple causal relationship between declining petrol sniffing and increasing alcohol and/or cannabis use. In many communities, the growth of cannabis use pre-dates the introduction of LAF and, in any case, use of these and other drugs is driven by a complex mix of supply and demand factors, rather than by any single cause. Both alcohol and cannabis are widely seen as now posing more serious problems than petrol sniffing.

So while there is no evidence of a ‘’substitution effect, there is an ‘offset ‘ problem, namely the gains made in reducing sniffing are potentially outweighed by the social and health costs of other substance abuse. The authors also comment on the serious challenges arising from the patchy and inconsistent provision of youth sport and recreation services in remote communities which potentially act as a counter-weight to the emergence and continuation of harmful substance abuse behaviours.

These observations are not arguments against the policy approach adopted on LAF, but rather implicitly raise the question can governments, and in particular the Commonwealth Government, do more to address the broader substance abuse issues destroying lives in remote communities. Indeed, does the success to date in addressing petrol sniffing provide us with lessons or pathways for successfully addressing other equally destructive substance abuse epidemics in remote Australia?

Options might include expanding the scope of the Low Aromatic Fuel Act to give the Commonwealth Minister powers to intervene in particular regions in relation to alcohol misuse (the federal minister already has significant powers in the NT), and even perhaps to address issues relating to illegal access to cannabis (bearing in mind that cannabis is technically illegal whereas fuel and alcohol are legally available substances).

Perhaps more usefully, there might be scope for the Commonwealth to take a sustained interest in the financing, and implementation of sport and recreation programs remote communities. My own experience tells me that this is an area best characterised as a ‘mish mash’ of projects, programs, activities, without any overarching coherence, without quality standards applicable to program delivery, and with extremely variable outcomes. My intuition tells me that there is scope for substantial improvements in outcomes just from improving the overall quality of these sorts of programs across the board in remote Australia.

Of course, a broader lesson which we might draw from this research is that addressing narrow slices of a problematic policy domain, while worthwhile in itself, can never be a substitute for a more comprehensive, coherent policy approach with legitimacy in the eyes of Indigenous stakeholders and citizens, and which will inevitably need to be place or regionally based to at least some extent. This is the glaring gap in remote Indigenous policy frameworks at present, one that governments of all persuasions have struggled with since the demise of ATSIC.

In releasing the most recent LAF Report, the Minister understandably and correctly pointed to the substantial policy successes achieved to date in reducing petrol sniffing incidence in remote regions. Smooth waters. However, his reticence in highlighting the report’s comments on the ongoing challenges in relation to substance abuse more generally, and in the shortfall in preventive youth services in communities (where the population under age 25 is usually in the majority) is less commendable. Many of these challenges can be traced back to shortfalls in state and territory policy action on substance abuse and Indigenous disadvantage more generally, matters which ought to be front and centre of the Minister’s policy agenda.

Finally there is an issue about transparency which needs to be mentioned. The taxpayer funded report was dated February 2016, and has taken six months to be released. Given the serious issues involved in addressing substance abuse, it is time that all sides of politics committed to releasing such reports expeditiously upon receipt. Six months is five months too long.

Belated thoughts on the NT Budget

With the NT election upon us in two weeks, and as a follow on to my previous post on Revisiting the Failed State in Northern Australia, I thought I would have a quick look at the NT Budget.

 I was overseas in May when it was brought down, and didn’t have the opportunity to have a close look at it. I am not proposing to undertake a detailed assessment, but rather to highlight some of the more salient implications for Indigenous policy at both NT and Commonwealth levels.

 I noted n my previous post that fiscal equalisation is a nationally sensitive issue, and periodically returns to the policy agenda. I had not anticipated however the Turnbull Government’s recent announcement of an olive branch to Western Australia of a floor in the distribution carve up which by definition means less funds for all the other states and territories. The progressive shift of state and territory governments towards Labor Governments appears to have facilitated this with only two Conservative jurisdictions which need to be assuaged if one assumes the CLP will lose the NT election.

 The short term political benefits of assisting the Barnett Government as it faces a challenging election, and of sandbagging the Federal Government’s reputation ahead of the next federal election, are obvious. Prime Minister Turnbull’s decision, if implemented, will exacerbate the progressive diminishment of what has been a longstanding, largely successful and innovative Australian policy institution, namely the Grants Commission.

Once the notion takes hold that Governments can unilaterally shift the fiscal equalisation goalposts, the utility of having an independent umpire is lost, and the precedent of unilateral over-rides can justify future politicisation of the process in ways which no-one can currently predict. Quite apart from the more general policy arguments for transparent process in the fiscal equalisation process, my fear is that greater politicisation will mean that small jurisdictions such as the NT, and in particular its Indigenous citizens, will end up with even less capacity to influence equitable outcomes.

The NT’s 2016-17 Budget was brought down on 24 May 2016 by NT Treasurer David Tollner. Here is a link to the NT Budget website.

The macro statistics on the budget (rounded for clarity) essentially extracted for the Budget Overview document are as follows:

Total expenditure is $5.7bn. Of this, the NTG allocates $3.8bn in recurrent, $0.4bn in various staffing commitments; $0.5bn in capital investments, and the Commonwealth $ 0.98bn (let’s say $1bn) in recurrent/capital support, or 17% of the total budget. The NTG allocations are funded from GST allocations, around 50% of the budget and own revenue, close to 30%. In other words, the Commonwealth Government is funding almost 70% (or two thirds) of the NTG budget.

The second issue worth considering is the NTG’s debt levels. The Budget Papers refer to NTG debt levels as being $2.7bn and projected to increase to $3.1bn over the next three years. This relates however to what is termed the Non-Financial Public Sector, and does not include debt carried by the NT Treasury Corporation on behalf of $1.5bn to Government owned Corporations and Government Business Divisions. See link here. The total NTG debt is thus around $4.2bn. Total interest repayments each year are around $250m. While the NTG’s rhetoric emphasises the contrast between the former NT Labor Government’s alleged debt blowout and the current Government, a key issue not seriously addressed in the budget has been the desirability of pursuing an aggressive debt reduction strategy utilising the proceeds of the sale of the NTG port of Darwin, and the previous sale of the Government owned Territory Insurance Office. The prospects of further reductions in GST revenues merely serve to reinforce the advantages of using the proceeds of asset sales to do this.

It is worth having a quick look at the Treasurer’s budget speech and the actual Appropriation Bill to flesh out some of the language and issues I am referring to. The link is here.

Some selected extracts:

This Budget sets a clear choice of continuing to grow a prosperous, robust and diversified economy, over Labor’s plan, which again, racks up the debt and attacks the very heartland of our Territory. This Budget protects our way of life and focuses on growing the private sector, utilising the strengths of our workforce to adapt to new industries and gets on with the task of providing the best education, health and safety for our community….

….However, recent reductions in revenue are estimated at more than $1 billion over the budget cycle. This is made up of a reduced GST share totalling $750 million, and lower estimates of stamp duty and mining royalties. These reductions will delay the achievement of ongoing surpluses in the short term. It would be irresponsible for us to continue to target a budget surplus in 2017-18 at the expense of protecting jobs and maintaining investment in critical areas of the economy….

…Last year the Territory economy grew by an impressive 10.5 per cent, the highest rate of growth since 1998-99. …The Territory Government will be contributing to investment in 2016-17 with a near record $1.7 billion infrastructure spend….

…The Port of Darwin lease generated proceeds of $506 million. Budget 2016 re-invests $431 million of the proceeds into a range of projects designed to stimulate investment and diversify the Territory economy, with the remaining $75 million used to pay off Labor’s debt burden…

…A major part of the Government’s diversification plan has been the implementation of the Northern Territory Infrastructure Development Fund. As the House is aware, the Government seeded this innovative fund with $200 million from TIO sale proceeds. Budget 2016 strategically invests a further $100 million from the Port lease into the Fund. This investment takes the total Territory contribution to $300 million. This government investment will be the cornerstone in targeting an additional $1.2 billion from external investors. This $1.5 billion investment fund should generate more than $4.5 billion in private sector infrastructure investment….

Budget 2016 demonstrates the Government’s commitment to Indigenous Territorians with a direct investment of $1.2 billion. Creating employment opportunities for indigenous Territorians is critical to building individual self-esteem and confidence. It is also critical in building future economic prosperity in our remote communities. Key highlights in Budget 2016 to foster this goal include:

• $400 000 for crocodile farming business enterprises in East Arnhem; ….

• $1 million to support air services between Darwin, Katherine, Tennant Creek and Alice Springs;

• $2 million to support Indigenous business;

• $5.5 million to continue the expansion of telecommunication services and provide internet access; and

• $5.25 million over two years for bakeries in remote communities. This particular initiative is a result of the strong relationship we have with the Federal Indigenous Affairs Minister, Senator Nigel Scullion.

The provision of housing and essential services in the bush is paramount. The Giles Government recognises this and $1 million is being provided to establish a Northern Territory Remote Housing Development Authority. This Authority will give local people more say on the provision of housing and essential services in their communities. It will empower communities to focus on better local engagement, management and delivery strategies.

Budget 2016 also delivers crucial investment in housing and essential services in remote areas with:

• $211 million, again through the efforts of Senator Scullion, to construct new, and upgrade existing, housing;

• $30.3 million for housing and essential services in Arlparra, Elliott and Kalkarindji; and

• $36.2 million over two years to upgrade power, water and sewerage services.

This Budget provides for Indigenous people living in homelands with $21.3 million for the Homelands Program to provide housing and maintenance services and $5.35 million to continue the Homelands Extra Allowance program.

Commentary

I have quoted the speech at some length to give a sense of the key Indigenous initiatives highlighted.

The decision to surrender on the task of budget reform is in direct contraction to the Commonwealth’s budget policy focus, but is clearly driven by politics rather than ideology. It does create a sharp distinction between Commonwealth budget policy and that of the NTG.

I find the comments in Treasurer Tollner’s speech on the close relationship of the NTG with Minister Scullion somewhat curious. The Commonwealth assistance for establishing bakeries in remote communities (criticised by Nick Cater in a recent op ed in the Australian, although Cater’s target was unnamed bureaucrats rather than Minister Scullion who appears to deserve the credit) seems slightly odd given the range of policy challenges facing residents of remote communities, and does not appear to have been announced or highlighted by Minister Scullion on his ministerial website. See Chief Minister Giles’ 13 May 2016 media release which makes clear the focus is on job creation, but doesn’t address the nutrition concerns in remote communities which Minister Scullion pursued in the most recent Senate Estimates hearings, and which don’t square with the investment in bakeries.

The $5.25m investments in bakeries, located within existing stores, and the $2m allocated to supporting Indigenous businesses (probably comprising the $7.35m mentioned in the Chief Minister’s bakeries press release) may create some immediate jobs. But in the absence of robust feasibility analyses and business cases, there are serious risks that once the funding runs out, the stores will either cross subsidise the bakeries from within, leading to yet higher prices, or the bakeries will close leaving the communities disenchanted with store management, and the capricious nature of government intervention in local economies.

The simplistic mantra ‘jobs good, welfare bad’; or ‘private sector good, public sector bad’, which seems to underpin much public policy in relation to indigenous development is a recipe for ongoing economic and social disaster in remote communities.

As for the $211m for remote housing claimed to have been provided ‘through the efforts of Senator Scullion’, these are funds negotiated under the NPARIH by the previous federal Labor Government. I have dealt with the policy issues surrounding the proposed Remote Housing Development Authority in a previous post. I merely add that while remote residents comprise 30 percent of the NT population, the NT Government is investing $322m for essential services upgrades in urban centres, and only $47m in remote communities; and in housing, is spending $211m in remote communities (tied Commonwealth funding under NPARIH) and some $140m over five years in urban social housing. Notwithstanding the rhetoric, the NTG preference for favouring the towns over the bush is still clearly in evidence.

At a more macro level, the claimed $1.2bn ‘direct investment’ in Indigenous citizens of the NT is nowhere laid out and impossible to reconcile. The largest investment listed in the Budget Overview document in the two pages on Aboriginal Affairs is the Commonwealth funded remote housing investment of $211m, and the other items listed appear to sum far short of $1.2bn.

The proposed NT Infrastructure Development Fund as described in the Budget Speech strikes me as a magic pudding. A Territory investment of $300m leverages (through an unspecified mechanism) $1.2bn in private sector funding, which brings the fund to $1.5bn which then  (through an unspecified mechanism) leverages ‘more than $4.5bn in private sector investment’. I must be missing something! Bottom line, if there is a strong case for private sector investment, government should not be investing. If there is not a case for private investment, then government needs to be very careful about investing, particularly if it is taking on the lion’s share of the risk, either commercial or social.

Poorly structured Private/Public Partnerships can end up leveraging the liabilities for government without sharing in the upside. In the meantime, the $300m contributed by the NTG might have gone to debt reduction, with a flow on to reduced debt repayment obligations and/or a reduction in the opportunity cost of needed social investments which have been foregone. Indigenous Territorians would be entitled to ask, what can they expect out of the sale of the Darwin Port and the Territory Insurance Office?

Conclusion

The Territory budget reflects the realities of the Northern Territory. It is a small jurisdiction with huge challenges. The political dynamics of small electorates, fluid population, polarised partisan political debate, significant Indigenous population, and substantial and longstanding levels of government debt all play into shaping a lowest common denominator budget. The likely change of government in two weeks is not going to change the political and budget realities of the NT.

Indigenous Territorians have been longstanding losers in NT budget politics, and it is still the case that the Commonwealth and not the NT is shouldering the majority of heavy lifting in relation to underpinning Indigenous citizenship entitlements. Not only is the Commonwealth providing around two thirds of the NT Budget, but it is through its substantial defence and socials services expenditures the major force underpinning the economic strength and stability of the NT.

In these circumstances, it is incumbent on the Commonwealth to keep the NT honest in terms of its Indigenous citizens. There is a structural problem, akin to a conflict of interest, in having a Northern Territory Senator as Minister for Indigenous Affairs given the significant Commonwealth financial and policy presence in the NT.

To take just one example, the moves underway to move away from National Partnership Agreements which locked in state and territory contributions to match Commonwealth investments will make it even more difficult for the Commonwealth to encourage the NT to stump up matching dollars for Commonwealth investments. On key investment decisions, the Commonwealth will either have to go it alone, or not invest at all. In either case, Indigenous citizens are the losers.

The Commonwealth should be taking a much tougher line with the NT over its budgetary treatment of its Indigenous citizens. Of course, as the Commonwealth itself pulls back across the budget, it is in no position to lecture the states and territories on budget matters.

Add to this the likely adverse consequences for the NT and its indigenous citizens , both short and longer term, of politicising the fiscal equalisation process which underpins the federation, and the budget fairness prospects for Indigenous citizens in the NT (and indeed in other states and territories) appear bleak indeed.

When Indigenous citizens, particularly that resident in remote Australia, are compared to mainstream Australians, they fare poorly. The reasons are structural and not merely the result of day to day politics. But day to day politics, as reflected in the 2016-17 NT Budget, provides further confirmation of the adverse consequences of those structural forces which have persisted for decades.

Revisiting the 'Failed State' in northern Australia

  

Oh, how wretched / is that poor man that hangs on princes’ favours!

Henry the Eighth, Act 3, Scene 2

In the last week, and following the revelations from within the juvenile justice system in the NT, there have been a number of media articles focussed on broader issues related to the effectiveness and implicitly the viability of the Northern Territory Government.

On 31 July 2016, in The Age and The Sydney Morning Herald, Peter Martin argued that the Northern Territory Government (NTG) is replete with inefficient services and overly generous public sector staffing conditions which stand in sharp contrast to the poverty and disadvantage of the Territory’s indigenous citizens. He points to the cause of this malaise and ‘featherbedding’ as being the poor incentives implicit within the fiscal equalisation process which provides the bulk of the NTG’s revenues, based on a formula which allocates substantial sums based on the levels of disadvantage, but without any requirement to spend those resources on remedying the disadvantage.

Martin argues, citing economist Neil Warren, that in fact, the NTG has an incentive to maintain Indigenous disadvantage, and thus maintain the flow of an inflated share of GST revenues. He recommends a review of the Grants Commission formula, and an inquiry into the NT itself. His concluding paragraph begins:

If it was a state, it’d be a failed state, propped up by diverting aid that was intended for its most disadvantaged citizens.

Mike Seccombe followed up with a piece in The Saturday Paper (6-12 August 2016) titled “How the Northern Territory Failed”. Seccombe recounts various instances of chaotic political management within the Government, but quickly moves to the financial underpinning of the Territory’s public sector. He notes that around 70 percent of the NTG’s revenue is from the Commonwealth, including around 50 percent from the GST. Like Martin, he hones in on the fact that the NT is not required to spend its GST revenues in accordance with the basis upon which it is determined. He cites longstanding and ongoing research by Darwin accountant Barry Hansen who calculates that around $500m provided to the NT each year on the basis of Indigenous disadvantage is not allocated to addressing Indigenous disadvantage.

Based on interviews with a number of academics and public policy players (myself included), Seccombe develops a narrative demonstrating that public sector expenditures are strongly skewed towards Darwin and the major towns, and away from the bush communities where the majority of the Indigenous population –comprising almost a quarter of the NT population – resides. This narrative underpins an argument that the NT’s public sector budget foundations are based on ‘a sort of fiscal racism’, the outcomes of which add up to neglect of remote communities in order to maintain the privileged lifestyle of the territory’s urban centres.

These commentaries are not new. In October 2009, Nicolas Rothwell, writing in the Australian, published a scathing analysis under the title ’The failed state’. The parallels with the more recent analyses are striking. Importantly, Rothwell’s analysis was directed at a Territory Labor Government.

Rothwell’s opening sentence sums up his argument: ‘The Northern Territory is a lost cause’. He goes on:

There is, though, a failed state in our midst. That state is not Aboriginal north Australia, where the social fabric is in shreds and tatters. No: it is the jurisdiction largely responsible for entrenching this degree of indigenous disadvantage: the modern-seeming, self-governing Northern Territory.

Rothwell too points to the federal subvention, the divide between black and white, the ‘façade’ of democratic institutions, and the complex social stratification at work. He argues that

the Territory  is best understood as an interlocking set of interest groups. It is heavily dependent on outside funding, the bureaucracy is shot through with politics, almost all medium-sized business relies on public sector contracts and the entire system is founded on the administration of an Aboriginal underclass.

Like Martin, Rothwell canvassed some of the potential ways forward. He noted the most straightforward change would be to tie the GST funding to the underlying formula and thus ensure an appropriate proportion is spent on addressing Indigenous disadvantage. More drastically, he notes the possibility of appointing a Commonwealth controlled Council of Administration. More intriguingly, he moots the possibility of splitting the Territory in two and exploring forms of Indigenous self-government in the bush.

I recommend interested readers read all these articles as I have not done their arguments justice. They are replete with facts and detailed instantiation which reinforce the argument that something is fundamentally wrong. See also my earlier post on fiscal equalisation.

It seems clear that the problems pervading the governance of the Northern Territory are structural and institutional in nature. It is also clear, clear as day, that the political will does not exist to drive radical change to the current system. The forthcoming election, and the likelihood that the present CLP Government will be wiped off the map, and that we have a new government writing on a new page, will be used to justify further inaction. It seems highly unlikely that the royal commission established by Prime Minster Turnbull has the remit, or the analytical firepower to propose, and persuade the Commonwealth to pursue, structural and systemic change to the current structures of governance in the Northern Territory.

Of course, one never knows when a crisis will emerge which will trigger fundamental change. For this reason, it is worth thinking through the key elements of the arguments made in the articles above, if only to begin to disentangle the complex threads which comprise the ‘failed state’ argument.

One fundamental and threshold issue is to delineate responsibility for state ‘failure’. In 2007, in our book Beyond Humbug, Neil Westbury and I argued that remote Australia might be characterised as a ‘failed state’ for many of the reasons outlined in the media articles discussed above. See also the 2012 monograph by Bruce Walker, Doug Porter and Ian Marsh Fixing the Hole in Australia’s Heartland published by Desert Knowledge Australia which also refers to the failed state of remote Australia, and places the blame squarely with the existing systems of governance established by governments.

Westbury and I were not directing this criticism at Indigenous communities ,though many readers appear to have misinterpreted our analysis as doing this perhaps because we also identified the existence then of serious dysfunction in many if not most remote communities. Rather than focussing on the administration of various governments, we argued that the outcomes within communities, where the footprint of government (police stations, post offices, kindergartens etc) was virtually non-existent, pointed to state failure. Our ‘failed state’ critique was directed at governments (plural). This line of argument did not and still does not sit well with much of the thinking on the left which sees the solutions to Indigenous disadvantage and lack of autonomy in less, not more, government. Yet, as John Keane points out in a recent essay in The Conversation titled “Whither anarchy”, institutions are crucial for liberty. The real issues revolve around the quality of those institutions.

In particular, we directed our critique at the Commonwealth Government, its system of fiscal equalisation, its inability or unwillingness to require state and territory governments to deliver services equitably to all their citizens (particularly their Indigenous citizens), and at the woeful levels of investment by the Commonwealth in remote Australia, underpinned by structural impediments to capital investment in remote Australia through poorly designed  local government funding systems , social housing shortfalls, and the like.

A key element of our argument was that Indigenous disadvantage is structural, and deeply embedded. Accordingly, solutions must also be structural. While the problems identified within the NTG are real and are serious, to the extent that the Commonwealth is structurally complicit in creating and maintaining Indigenous disadvantage, solutions which are directed solely to the NT will be bound to fail.

So for example, in relation to the legitimate issues with fiscal equalisation in the NT mentioned in all three articles discussed above, it is clear that the same problems also exist in South Australia, Western Australia, NSW and Queensland, but they are disguised by the scale of those jurisdictions. Fixing fiscal equalisation is a potentially fraught exercise; there is already a simmering conflict within the Federation over the distribution arrangements. Initiating change in an attempt to address NT issues, or Indigenous issues, will inevitably reopen a wider and bitter debate over distribution more generally. The allocations to remote Australia could suffer, and Indigenous interests may not benefit, or could even go backwards. Nevertheless, when change to the GST distribution system is next mooted, there ought to be action to address Indigenous disadvantage in remote regions.

Westbury and I proposed, in Beyond Humbug, the creation of a new ‘GST jurisdiction’ across the totality of remote Australia, which would protect the existing freedom of states and the NT to decide allocations within their jurisdictions, but would quarantine the expenditure of the sums allocated on the basis of indigenous need to the remote ‘GST jurisdiction’ within each state or Territory. A further issue which we didn’t deal with relates to the fact that remote Australia suffers, because the GST distribution formula is calculated on the basis of recurrent needs, not capital needs. Yet remote Australia, the last settled parts of the nation, suffers from enormous capital backlogs. These are just some of the structural issues which drive Indigenous disadvantage in remote Australia.

Other systemic issues, known but unaddressed, exist within the Commonwealth’s funding systems for local governments which allocate commonwealth assistance to local government nationally based largely on a per capita distribution, but then require the states and territories to allocate the per capita determined allocation through a local government grants commission formula based on assessed need. This ensures that the NT in particular receives and distributes to local governments a much smaller cake than it would receive if the Commonwealth resources were themselves allocated on a needs basis.

In relation to welfare and employment, Mike Seccombe deals briefly with the substantial and growing issues within the Commonwealth’s remote employment program, which imposes much more onerous requirements than the equivalent non-remote program. The introduction of a revised remote program, named the Community Development Program, has led to a massive increase in breaches of remote residents, and is contributing to a major legitimacy crisis for government in remote Australia. Minister Scullion has adopted a suite of ‘tough’ measures ostensibly justified as incentivising job seekers to find employment, but in reality causing Indigenous ‘job seekers’ (in the Orwellian language of the bureaucracy) to exit the system altogether, thus adding to the Indigenous ‘underclass’ that Rothwell identified as being an essential element of the ‘failed state’.

On a positive note, one of the less recognised elements and consequences of the NT Emergency Response, or Intervention as it was known, was a massive step up in Commonwealth investment (largely under the guiding hand of Labor’s Minister Jenny Macklin as she attempted to soften the impact of what has been a major policy disaster for remote Australia) into the NT and remote Australia, through a suite of National Partnership Agreements totalling in excess of $8bn over ten years. This funding kept at bay the worst consequences of the systemic failures of governance at Commonwealth and state levels. Unfortunately, the current Government has deliberately set about dismantling these National Partnership Agreements, simultaneously making the funds more vulnerable to annual budget cuts driven by the incessant drive for ‘budget repair’, and not coincidentally, laying the groundwork for less transparency when the arrangements come up for renewal in 2017 and 2018. [Disclosure: I worked as an adviser to Macklin from 2008 to 2011].

Conceptual Issues

The concept of a ‘failed state’ is not without its critics and a range of definitional and conceptual limitations. The Wikipedia article on failed states provides a good introduction to these issues. I don’t propose to attempt to assess the merits of the various points of view, adopting the pragmatic view (following Schneckener’s approach outlined in the Wikipedia article), which identifies three core requirements for state viability: a state monopoly on the use of violence; state legitimacy, and the rule of law.

On each of these criteria, there are serious doubts regarding the robust existence of these requirements in many remote communities. The patchy footprint of police services across remote Australia, and a lack of traction on family violence issues undermines the state’s monopoly on the use of violence. I have already referred to the legitimacy undermining elements of the rollout of the remote employment scheme; another example was the recent announcement by Minister Scullion and Chief Minister Giles that the Groote Eylandt community would contribute to the construction of police facilities in their communities, something no other Australian citizens are asked to fund, and a decision bound to undermine the legitimacy of government. Finally, the rule of law is fatally undermined by the excessive incarceration rates within Indigenous communities generally, and particularly in remote Australia, often for trivial offences. Clearly, the existence of state failure must be given serious credence, and in turn, deserves serious policy attention. It says much that it is largely the media and not government which is addressing the issue in the domain of public discourse and opinion.

Prognosis

The ‘crisis’ within the juvenile justice system in the NT is just one facet of a deeper problem within the Northern Territory. The crisis of governance in the Northern Territory is part of a deeper crisis across remote Australia. Its root causes can be traced to systemic and institutional arrangements which span state and Territory governments, but also reach into the Commonwealth domain.

The demographic dynamics at play within remote Australia, plus the likely reduction in real levels of funding from governments, for both new capital investment and ongoing maintenance of essential services and programs will ensure that the social dynamics of remote Australia will remain under intense pressure for the foreseeable future.

I see little prospect of the impetus for the fundamental structural changes required being generated from within governments, and indeed out federal structure mitigates against system wide change. Incremental policy change will emerge, sector by sector, jurisdiction by jurisdiction, as crises continue to occur.

In the absence of political will to address fundamental issues, governments will likely resort to simplistic policy nostrums, over the top rhetoric, obfuscation and non-transparency, and continued reliance on ‘an announcement a day to keep the electorate at bay’.

The current federal government is doing virtually nothing to keep the states up to the mark (juvenile justice in the NT being just the peak/pique of this iceberg). The federal government focus on school attendance (a state and territory responsibility), the rhetoric of economic development to the exclusion of all else, cuts to remote social housing, cuts to the Indigenous Advancement program, and the looming fiasco of the remote employment program all square with a tactic of talking big but doing little. More distressingly, the tactic entails in many cases dismantling the sensible funding and policy arrangements put in place by previous governments (of both Labor and Liberal/National persuasions) under the guise of implementing ‘reform’.

The low prospect of governments initiating fundamental change (or “princes’ favours”) is a depressingly pessimistic, but realistic assessment.

It is partially offset by the reality that Indigenous people and communities have shown themselves to be very resilient survivors, albeit at a terrible ongoing cost in reduced and compromised life opportunities. ‘How wretched’ indeed.