Some thoughts on the implications of the coming Federal Budget for Indigenous Australians

Budgets used to be important for Indigenous Australians. Governments would hold back major funding announcements for the year ahead, and there was a much closer link between announced policy and budget decisions than we see today.

Now, governments make funding announcements through the year, and processes such as MYEFO facilitate parliamentary approvals of appropriations between annual budgets. Importantly, the forward estimates process is used by governments both to disguise the ongoing impact of past budget decisions, and to hide the cessation of programs. The majority of budget decisions involve allocations over multiple years and the gap between the decision to allocate resources and the program cessation can seem like an eternity, often with different ministers responsible, different portfolios arrangements oversighting the programs and different national political priorities in play.

In addition, the shift in the modus operandi of governments, particularly in the delivery of services away from direct government provision and towards outsourcing and commissioning of deliverables by third parties further diffuses the links between decisions and outcomes. All these processes mean that it has become virtually impossible even for engaged and interested citizens to discern and identify the link between the decisions announced in any one year in the budget and the impact of those decisions on the ground.

Nevertheless, governments continue to see the need to target key interests and garner political kudos in return for funding and policy favours of various kinds, but this occurs largely in the shadows. Individual groups know and are advised of the funding they receive, but overall summaries and metrics on program and sub-program funding levels and distributions are nowhere to be found. One-off media releases are issued to herald particular funding initiatives, social media used to celebrate the accessibility and generosity of ministers and governments, while key internal metrics for public servants managing programs relate to the preferences of ministers, the location of particular organisations and in particular the electorates in which the funded organisations operate.

Of course, the annual budget process continues to be important, particularly in terms of setting and managing the macro-parameters for the economy and for national financial management: public expenditure, tax (including tax expenditures) and revenue, and public sector borrowings. And also for controlling the operations of portfolios and the departments which dominate each portfolio.

However, for Indigenous citizens, the annual budget is not what it used to be. Indigenous specific programs are progressively becoming less significant in Indigenous citizens’ lives than mainstream programs and policy settings. Indigenous citizens are over-represented within the most disadvantaged segments of the Australian population, and thus are over-represented as clients within the mainstream programs which are directed towards disadvantaged citizens. To take one example, the gap between expenditures on aged and other pension payments and unemployed benefits (Newstart) has widened over the past twenty years (link here). Indigenous citizens under-represented amongst pensioners (due to their shorter lifespans) and over-represented within the unemployed.

 

In remote Australia (where 20 percent of the Indigenous population reside, but less than 2 percent of non-Indigenous Australians), disadvantage is deeper. The Community Development Program replaces Newstart in remote Australia, and 80 percent of its clients are Indigenous. It has higher participation requirements, involves staggering levels of breaches, and is largely income managed in the NT and selected other locations (link here). Hypothetically, any budget decisions to change the rate of Newstart (and thus CDP) benefits beyond current automatic indexing would not necessarily change the actual impact of the program on most Indigenous citizens as the program design features are not level with other Australian citizens. 

Or to take another example, the Commonwealth provides huge subsidies to homeowners and its largest budget program for disadvantaged housing is Commonwealth Rent Assistance (CRA) (link here), but in remote Australia Indigenous people have extremely limited access to home ownership and there is virtually no private rental market which means that Indigenous people are reliant on social housing (which is funded by the Commonwealth and the states jointly). The Federal Government is in the process of exiting its support for remote Indigenous housing leaving the most disadvantaged Australians bereft of federal financial support even though the Commonwealth is the dominant national funder of disadvantaged housing through CRA.

The introductory comments above are a long winded way of saying that budget decisions are by their nature incremental and operate at the margin to influence, for good or bad, more fundamental underlying structures. Indigenous citizens across the nation continue to face structural disadvantages which will not be remedied merely by a single set of budget allocations, but which will require more fundamental reform. Over time, sustained investments in strengthening Indigenous capability, education, health, housing and community development will all make a positive difference.

Unfortunately, our political system operates on the basis of governments allocating substantial resources to their primary constituencies (think corporate tax cuts link here) and allocating lesser amounts designed to give the appearance of policy action and initiative to excessive forestall criticism while progressively constraining expenditures directed to interests which are not part of the government’s core constituencies.

I have little doubt that the forthcoming budget will accord with these longstanding practices.

To finish up, I propose to do two things. First, set out a list (not necessarily comprehensive or complete) of potential but in practice unlikely budget initiatives which would make a substantive, as opposed to rhetorical, contribution to addressing Indigenous disadvantage and to beginning the process of removing structural disadvantage. And second, to make some intuitive guesses about the likely Indigenous related budget decisions and in particular the type of initiatives the Government will actually fund in the budget.

Potential Budget Initiatives to address Indigenous disadvantage:

Here are ten potential and sorely needed budget decisions which would start the process of removing Indigenous structural disadvantage:

·         A series of multi-year allocations directed specifically at the Closing the Gap targets. The absence of any direct linkage between the COAG endorsed Closing the Gap targets and funding via well designed programs is a major flaw in the Closing the Gap system (link here). A major program or programs directed to closing the gap targets would encompass health and preventative health, education including early childhood education, and employment. In remote Australia, given the almost complete absence of employment opportunities, consideration would need to be given to funding a major direct employment program, redolent of the ‘New Deal’ programs of the 1930s in the US.

·         A multi-year program directed at prevention and treatment of sexually transmitted infections across remote Australia (link here).

·         A policy change with related funding to implement the Productivity Commission’s recent recommendation to expand access to Commonwealth Rent Assistance to all social housing tenants along with a shift to market based rents (link here).

·         A decision to renew the current National Partnership on Remote Housing which expires in March this year and has involved an average allocation of $540m per annum for the last ten years (link here).

·         A decision to establish and fund a major program with the states to address the over-representation of Indigenous citizens in prisons, with a particular focus on youth incarceration (link here).

·         A decision to invest say $200m per annum for ten years in expanding the Indigenous Land Account (shortly to be renamed the Aboriginal and Torres Strait Island Land and Sea Future fund) (link here).

·         A decision to increase the base rate of Newstart, and to address the discriminatory treatment of Community Development Program recipients in remote Australia vis a vis Newstart recipients elsewhere in Australia.

·         A policy and resourcing decision to direct Infrastructure Australia to give greater attention to Indigenous specific infrastructure needs across Australia and to ensure that the current Northern Australia Infrastructure Facility is refocussed to remove the current blind spot in addressing Indigenous related infrastructure shortfalls across northern Australia (link here).

·         A decision direct the Grants Commission to reconsider its current methodology for addressing Indigenous disadvantage in its overall formula for distribution of GST revenues to the states (link here).

·         A decision to commit to complete transparency of public sector funding decisions directed to addressing Indigenous disadvantage in an accessible and continuously updated public web-site.

Likely Budget Focus for Indigenous Citizens

My intuition tells me that the forthcoming Budget will fall well short of the benchmarks laid out above.

It seems clear that the Federal Government has made a decision not to renew the Remote Housing National Partnership Agreement, and instead has decided to replace it with a series of lesser ad hoc and short term payments to some states. We are probably looking at a net reduction against previous expenditure levels of at least around $300m per annum from this decision alone.

There will likely be an investment to address the epidemic of STIs in remote Australia given the political heat recently generated, but it will likely be in the region of only $50m to $100m over four years.

There will likely be a swathe of business related budget initiatives, emanating from the release of the Indigenous Business Sector Strategy (link here) in February this year, and which included a $27m Indigenous Entrepreneurs Capital Scheme funded at $27m over four years. There may also be extra funds for Indigenous business (or jobs) hubs, and possibly for IBA directed to increasing their Indigenous business support in northern Australia. The forthcoming meeting of the Ministerial Forum for Northern Development may mean that the Government is focussed more than usual on northern Australia as a site for budget related initiatives, potentially with a focus on water infrastructure and support for native title landowner groups (known as PBCs) to engage in business.

Finally, the Government may feel obliged to make some modest contribution to addressing the recommendations of the Royal Commission into Youth Detention in the NT (link here) which was established at the initiative of the Prime Minister.

All in all, I would be surprised if the Government allocated funding much in excess of $200m over four years towards addressing Indigenous disadvantage in this year’s budget. But I would be happy to be proved wrong.

Conclusion

What is absent from this analysis is a detailed examination of the actions of key Indigenous advocacy groups such as NACCHO, the National Congress of Australia’s First Peoples, and the National Native Title Council, to name a few. Any advocacy they undertake is not necessarily in the public domain. My strong sense however is that their efforts pale in comparison to the efforts of larger mainstream advocacy outfits such as the BCA, the Minerals Council and the National Farmers Federation. The area of policy advocacy, particularly in mainstream areas relevant to Indigenous concerns, is in my view an area where Indigenous interests need to do much more if they are to successfully resist the sorts of arbitrary decisions which appear to have occurred in relation to remote housing, in an environment where government tax revenues have been rising faster than expected (link here).

In the world of realpolitik, budget policy making at its core is not an exercise in discerning the national interest, or even discerning substantive need. It is fundamentally an exercise governments undertake as part of their ceaseless odyssey to maintain a politically dominant coalition of support within the community. Such a process will always involve winners and losers, and any objective assessment would have to conclude that Indigenous interests are still ‘bogged to the axels’ on the losing side of the ledger. The forthcoming federal budget will reflect this reality for Indigenous interests.

The devil in the detail: the Government’s proposed Indigenous Land Fund legislation

The spirit that I have seen
 May be the devil: and the devil hath power
 To assume a pleasing shape.

Hamlet Act 2, scene 2

On 12 February this year, as part of the Close the Gap statement to Parliament, the Prime Minister announced (link here) a series of changes to legislation relating to the Indigenous Land Corporation and the Aboriginal and Torres Strait Islander Land Account which provides the Indigenous Land Corporation’s annual funding. Prime Minister Turnbull stated:

A new Aboriginal and Torres Strait Islander Land and Sea Future Fund represents a significant reform in the land rights journey of our country, as the $2 billion land acquisition fund set up following the Mabo (No 2) decision has been plagued with poor returns, meaning lost opportunities for the Indigenous Estate. Our reform will see the fund transferred to the Future Fund, delivering a $1.5 billion benefit over 20 years.

These additional funds will also mean that the Indigenous Land Corporation (ILC), the Commonwealth agency that acquires land on behalf of Aboriginal and Torres Strait Islander Australians can now have its remit expanded to include sea country.

The Government has now introduced three Bills into the Parliament to implement the changes previously announced. Minister Scullion announced the introduction with a media release (link here) where he announced further details of the proposed changes: a name change for the Indigenous Land Corporation to the “indigenous Land and Sea Corporation’, accompanied by an extension of its statutory remit to allow it to acquire and provide management assistance to Indigenous owners of sea and freshwater country, including offshore. The second Bill establishes a new Land and Sea Future Fund to replace the Land Account which will be managed by the Future Fund Board of Guardians. Minister Scullion emphasised:

Proposed reforms have been co-designed with communities following significant consultations with Aboriginal and Torres Strait Islander Australians across the country.

A third Bill (link here) deals with consequential amendments and is largely technical.

A summary of the consultation process and final recommendations, which was led by the Indigenous Land Corporation, has been published on the ILC website (link here). This is good practice and the ILC and Government are to be commended for laying this out so clearly.

The latest meeting communique (dated 25-26 October 2017) of the Prime Ministers Advisory Council on Indigenous Affairs (link here) notes the conclusion of the consultations, but does not appear to have offered any substantive advice on the proposals. Their communique states:

Indigenous Land Corporation: welcomed the consultations on possible reforms to the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) regarding water related activities and the financial sustainability of the Land Account have concluded and the findings and recommendations are now being considered by Government (sic).

In relation to the outcomes of the consultations with respect to the financial sustainability of the Land Account, the ILC consultation report notes, inter alia:

During discussions on the potential for [Future Fund] management, the issue of Indigenous control and oversight of the investment framework was raised across the sessions. This was seen as an important aspect of managing the Land Account into the future, and needing to be included in any legislative changes. ILC representatives were able to discuss the Expert Panel’s recommendations on a proposed strengthening of the current Consultative Forum on the Investment Policy of the Land Account to a Land Account Investment Committee comprised of Indigenous representation and investment expertise.

In what appears to be an addendum to the Report, a section headed ‘Current ILC  Board position in relation to governance of Land Account investments’ states:

The consultation process revealed some complexity in regard to the proposed management and governance arrangements of the Land Account. Feedback from the Department of Finance and The Treasury is that the proposed Land Account Investment Committee is incompatible with the structure and operations of the Future Fund Management Agency, if the FFMA were to be responsible for the Land Account.

After further consideration, the ILC Board’s preferred option is to see the Land Account invested by the FFMA to achieve the desired rates of return on investment while managing risk. It is advocating that the current Land Account Consultative Forum (established by s193G, ATSI Act) be retained in an enhanced form as the conduit for information to the ILC Board on investments of the Land Account. At present the Forum receives six-monthly reports; these would double in frequency as the FFMA provides quarterly updates, giving the Forum more current information. The Forum would maintain a ‘watching brief’ on investments made by the FFMA.

The Proposed Legislative Changes

So what do the Government’s Bills actually do?

The first Bill (link here), dealing with the name and remit of the Indigenous Land Corporation is largely uncontroversial, apart from the fact that the name change will involve numerous changes to documentation, and runs the risk of raising expectations which will not be fulfilled. The same substantive effect could have been achieved with a simple change to the definition of ‘land’ in the ILC’s establishing legislation to include ‘seas and freshwater country’. These substantive changes are uncontroversial and have merit, so I do not propose to spend time analysing this Bill.

The second Bill, the ‘Future Fund Bill’ (link here), is designed to establish a new Fund to provide annual funding to the ILC managed by the Future Fund, and thus accessing a much broader range of financial assets than previously available. The broadening of the potential investment pool for the Land Fund is a desirable change, and the use of the Future Fund to manage those investments is also positive insofar as it utilises a source of investment advice and management of undoubted expertise, and one which operates within the public sector and thus in accordance with established governance principles.

That said, there are serious criticisms to be directed at the approach adopted by the Government to achieve these aims, and in particular, in relation to the governance framework which surrounds the Land Fund. In my view, not only is there devil in the detail, but the issues are so fundamental that they raise questions regarding the desirability of enacting the Bill in its current form.

I don’t propose to address the third Bill (link here) which deals with consequential amendments.

The first major issue with the Future Fund Bill is that it fails to formally acknowledge the underlying purpose of the land fund. While some of the background documentation available (the ILC consultation summary and the ILC media release of 13 February 2018 – link here) do acknowledge this history, it is important that the formal legislative provisions do so. The Second Reading speech delivered by Minister Wyatt missed the opportunity to lay out this background, merely noting that:

The existing Aboriginal and Torres Strait Islander Land Account was established to provide ongoing funding to the Indigenous Land Corporation to assist Indigenous Australians to acquire and manage assets.

While this formulation mirrors the objects of the Fund in the current 2005 legislation, in fact, a persuasive argument might be made for the reverse, namely that the ILC was established to implement and operationalise the objectives of the Land Fund, objectives which over the past 25 years have been progressively erased from the statutory record.

Indeed, the Land Account was canvassed in the Native Title Act, and the Preamble to that Act still includes the following text:

It is also important to recognise that many Aboriginal peoples and Torres Strait Islanders, because they have been dispossessed of their traditional lands, will be unable to assert native title rights and interests and that a special fund needs to be established to assist them to acquire land.

The original ILC was established as a separate Part of the ATSIC legislation which also had a Preamble to contextualise the aims and objectives of establishing the Commission and its ancillary institutions. With the reconstitution of the legislation following ATSIC’s demise, and now the proposed establishment of the Land and Sea Fund in separate legislation, those contextual provisions have disappeared entirely. This is not merely a symbolic matter, but means that any future judicial consideration of the operation of the Fund will be done without the benefit of any contextual framing which can be taken into account by the courts. This needs to be rectified.

The second major issue is that the Bill is replete with provisions which make absolutely clear that the Fund is to be treated as merely another special account under the PGPA Act (link here) and thus within the Government’s standard financial architecture. Thus for example, the Bill provides a range of mechanisms for consultation and provision of advice and information between Ministers, and between the Future Fund and the Minister for Finance, but there is no requirement for information to be provided to the ILC Board, and indeed the current statutory Consultative Forum on the Investment Policy of the Land Account (refer s193G of the Aboriginal and Torres Strait Islander Act 2005) which provided Indigenous interests with a guaranteed mechanism for monitoring the operations of the Fund disappears. In the Explanatory Memorandum (link here), which is admirably clear and useful, the Government makes clear that it considers the Fund to be a creature of the Government’s financial architecture. In the introductory section on ‘Context’, it states:  

The Bill gives effect to the Government’s decision to establish a dedicated financial asset fund – the ATSILSFF – to support the making of annual and discretionary additional payments to the ILC….

…The Government wishes to invest in financial assets with the aim of achieving investment returns to support the ILC financially. (emphasis added).

Or in the section on clause 13, which establishes a mechanism for the crediting of extra amounts to the Fund, the Memorandum notes that the provision is ‘a tool for the Government to manage its financial arrangements’. In other words, it is all about administrative convenience.

This may seem like quibbling, and I suspect it is the product of historical ignorance rather than malevolent intention, but it creates a context in which the Fund which was established with a clear intent of going some small way to addressing the dispossession of Indigenous peoples from their lands is itself being progressively removed from their influence and / or control, thus reinforcing the original physical dispossession with institutional dispossession. The bureaucratic consequence is that anything to do with the Fund is seen as ‘government’ in nature, and design issues (both now and importantly into the future) will be determined on the basis of administrative convenience.

It is important to note that this trend towards separating the Fund from its formal origins is a continuation of a process which first emerged in the 2005 amendments which coincided with the legislative amendments necessitated by the abolition of ATSIC. In particular, in 2005, the Land Fund was renamed the Land Account, reinforcing its status as a special account within the government financial system rather than a ‘fund’ directed to Indigenous purposes. The reversion to the terminology of Land Fund in the current Bill is welcome, but is offset entirely by the substantive provisions which reinforce the Fund’s legal status as a government special account, and with an overarching preoccupation of making the Fund work in total alignment with the prerogatives of government financial priorities and systems rather than Indigenous priorities or concerns.

The third set of concerns relate to the design of the proposed arrangements, and the potential risks which emanate from the design features chosen. The issues involved are technically complex, and I propose to simplify in many respects.

The current relationship between the Land Account (ie the Fund) and the ILC can be summarised as follows. The Land Account, which is managed by the Department of Prime Minister and Cabinet, has a current balance of around $2bn. It is invested primarily in bank term deposits because the constituting legislation from its inception (and now the PGPA Act) provided that the Fund must only invest in bank deposits or government bonds. The ILC Board has consistently over the past ten or so years sought to have these investment parameters broadened.

Originally, investment returns from the Fund were prioritised first to sustaining the Fund, and above a certain threshold were passed on to the ILC, however this led to difficult to manage variations in annual revenue for the ILC. In 2010, the arrangements were amended to provide for the Fund to provide the ILC with a guaranteed amount of $45m (indexed to the CPI) with any surplus returns to go to the ILC. While this effectively resolved the issue of revenue variability of the ILC, it also meant that the Fund would never grow in real terms (as surplus returns went to the ILC) and if in any years returns were negative, then the Fund’s capital would be progressively diminished. This issue needs to be fixed.

The proposed design structure in the Future Fund Bill continues the $45m indexed provision, but adds a provision for an annual discretionary payment to be made by Ministers. The Bill requires the Finance Minister and Treasurer (the ‘responsible ministers’) to issue an investment mandate to the Future Fund so as to provide a ‘mechanism for articulating’ the Government’s expectations and for providing ‘strategic guidance’ (refer para. 95 of the EM). This approach is consistent with the approach adopted with other funds invested by the Future Fund Board, but again provides no input for Indigenous interests. The Bill also requires the Future Fund Board to utilise an investment manager, an approach which is already being utilised by PMC albeit under much narrower investment parameters.

The shift to Future Fund management under wider investment options increases the likelihood that the basic payment to the ILC will be available, and the Bill provides that in deciding whether to make an additional annual payment the Finance and Indigenous Affairs ministers must seek formal advice from the Future Fund Board and have regard to the impact of any payment on the sustainability of the Land and Sea Future Fund. The crucial variable will be the annual returns obtained by the Future Fund from its investments, but it seems clear that over the medium to longer term, the likelihood will be that investment returns will exceed the current bank deposit arrangements.

The Bill establishes a much more complex design architecture of the Fund than at present, which has the unfortunate result of making the operations of the Fund even more opaque to Indigenous interests. Instead of simple payments from the PMC managed Land Account to the ILC, the Bill establishes a series of special accounts. The Future Fund Board owns and manages the Fund’s assets. It transfers funds from its asset/investment fund to the Aboriginal and Torres Strait Islander Land and Sea Future Fund Special Account as required. This account, which the Explanatory Memorandum makes clear is owned by the Government (refer para. 95) is used to pay any internal expenses of operating the fund, but also to transfer funds to ILC Funding Special Account which is controlled by PMC and which in turn is used to make annual payments to the ILC and any discretionary additional payments.

What this complexity disguises is that the proposed legislation not only broadens the investment parameters available in managing the fund, but it also significantly increases the control of ministers in controlling the flow of resources to the ILC. Two implications are worth drawing out.

First, over time, the gap between the guaranteed amount available for the ILC and the potential discretionary funding available which would not threaten the sustainability of the Land and Sea Fund will grow larger. This will likely have the effect of making the annual discretionary payment a routine event, to the point that the financial independence (as opposed to its statutory independence) of the ILC which was a deliberate feature of its original design, will disappear.

The second implication relates to the structural tensions which will inevitably exist between the short term interests of the ILC Board and Ministers and the longer term interests of the wider and more diffuse Indigenous interests who would wish to see a Land Fund exist in perpetuity. While the architects of the current Land Fund/ILC arrangements were aiming at a perpetual fund, the current proposals set up a structure which could allow Ministers to progressively reduce the capital base of the Fund through the use of additional payments to the ILC.

While the Bills do include checks and balances to constrain such behaviour, there is no statutory impediment to a Minister (perhaps in conjunction with an ILC Board which after all he or she appoints) allocating significant sums to the ILC for projects within its statutory remit. And in response to those who might scoff and argue that such behaviour in our system would be unthinkable, I merely point to the actions of a previous ILC Board which purchased (with apparent political support from a government in waiting) a major asset it could not afford (link here), and which has necessitated (without any comprehensive review of the circumstances) a subsequent government bail out to finance the acquisition (link here). Had the proposed Bill been in effect in 2013, the outstanding acquisition liabilities might have been funded by the simple expedient of drawing down the necessary funds from the Land Fund, and justifying the course of action on the basis that it creates Indigenous employment.

The Future Fund Bill includes a number of other minor matters worth commenting on briefly.

Clause 55 provides for a review of the Act to be commissioned by the responsible ministers (ie the Treasure and the Finance Minister) before the tenth anniversary of the Acts commencement. This appears to be a rather cursory nod towards good governance, and provides no assurance of Indigenous involvement in the process nor any assurance that the review will be made public and/or acted upon. The fact that the responsible ministers do not include the Indigenous affairs minister reinforces the technocratic blindness towards potential Indigenous concerns which suffuses this Bill.

The Statement of Compatibility with Human Rights prepared by the Department (appended to the Explanatory Memorandum) is in my view flawed insofar as it merely asserts that because the Bill ‘will enhance the Commonwealth’s ability to make payments to the ILC, and as a consequence will enhance the ILC’s ability to pursue its statutory purposes…the Bill indirectly engages the right to self-determination, rights to equality, and non-discrimination…’.  In my view, the more fundamental issue is whether the Bill will enhance the capacity of the Commonwealth to sustainably address (in an admittedly limited fashion) issues of ongoing dispossession. For the reasons outlined above, the answer to this question is far from straightforward.

Potential Improvements to the Bill

The following suggestions are not meant to be comprehensive, but emerge from the analysis of the Bill outlined above.

The Bill ought to be revised to incorporate an appropriate Preamble and potentially other substantive provisions to reinstitute the primacy of the objective of addressing dispossession which has been progressively stripped out of the legislation.

The Bill ought to be revised to substantially strengthen Indigenous engagement at all levels. This should extend to considering placing the Bill within the current legislation dealing with the ILC and Land Account; giving the Minister for Indigenous Affairs a stronger oversight role; and establishing an independent policy oversight advisory committee which monitors the operations of both the Land Fund and the ILC with a mandate to focus on issues which may place the long term sustainability of both institutions at risk. Such a body would provide statutory acknowledgment that both institutions are part of a single policy initiative to acknowledge and partially address the ongoing impacts of dispossession of Australia’s First Peoples.

The Bill ought to be expanded to include a provision which makes clear that whatever the internal administrative requirements, the Fund is established and operated by the Commonwealth on the basis of a fiduciary obligation to sustain the Land and Sea Fund in perpetuity and thus maximise the impact of the Fund (and ILC) operations in addressing the impact of dispossession on the nation’s First Peoples.

Consideration might also be given to adopting a much simpler approach where the current legislative provisions stipulating narrow investment options are broadened, and allowing the Department of Prime Minister and Cabinet to decide whether to make an arrangement with the Future Fund or continue to utilise a contracted investment manager.

Finally, if we are to take the Prime Minister’s claims seriously that these amendments represent a ‘significant reform in the land rights journey of our country’, shouldn’t we expect to see increased funds allocated by government to accelerate the accretion of the Fund’s capital base? The original Keating Land Fund legislation was based on the statutory appropriation over ten years of $140m per annum, which built the fund to $1.4bn. Investment returns over twenty years have taken it to $2bn today. A persuasive case can be made that the funds allocated were paltry compared to the value of the land that was taken without compensation form Indigenous peoples (let alone the economic, social and cultural losses that also were involved). A further contribution of say $200m per annum over ten years would go some way to acknowledging that fact, and to rectifying the notional losses to the Fund arising from the fact that government has, for the past decade, not been prepared to treat the Land Account in the same way that it treats the superannuation funds of its public servants (to make appoint first made by Noel Pearson). Such a provision would serve to give a modicum of credibility to the Prime Minister’s claims of ‘significant reform’; its absence merely serves to confirm the government is more concerned with rhetoric than substance in this area as in so many others.

Some policy ruminations

It strikes me that the appearance of these Bills says much more about the current state of Indigenous public policy than is covered in the proposed legislation (important as that is).

The Government has stretched beyond breaking point its rhetoric on consultation and co-design, with a close comparison of the consultation outcomes and the final Bill making clear that there is a huge gap between what Indigenous interests said they wanted and what is proposed. Moreover, the Government conveniently fails to mention earlier calls of the previous Dawn Casey led ILC Board for these reforms (among others); matters which were taken up by the Greens in a Bill introduced in the Senate, but which failed to find major party support. The gap between rhetoric on consultation and reality is not a one-off occurrence in the Indigenous policy domain.

The way in which the Prime Ministers Advisory Council appears to have ‘ticked and flicked’ this agenda item raises important issues around what Indigenous interests might expect, and in fact are getting from this peak appointed Indigenous advisory body. The way in which the ILC Board’s position on its proposed investment consultative committee was first overturned, and then ignored, also says something about the respect accorded by the Government to its own appointed statutory officeholders.

The intricate technical complexity of the legislative process, and the ways in which the bureaucracy can slowly over time shift the way key Indigenous demands and principles are interpreted or even applied are under-appreciated dynamic in the Indigenous policy domain. Proposed changes to Indigenous legislation will always benefit from the inclusion of historical perspective within the policy process. Governments increasingly assume that policy development is a-historical and the only context which is important is the current political objectives of the Government. This is ultimately short-sighted and counterproductive to the national interest, and both governments to actively support the retention of staff with deep background knowledge and requires Indigenous interests to step up and strengthen their advocacy capabilities as a counter-weight to the bureaucracy’s structural short-comings.

All legislation is invariably complex. Because it is a primary mechanism for effecting institutional change, its impacts are long lasting. The process of legislative degradation – for that is what it has been – over the past twenty five years in relation to the Land Fund has gone on under the radar. It seems technical, it is not necessarily controversial, the consequences of legislative change can take decades to emerge and have a tangible impact. The Land Fund was provided for in the Native Title Act and yet was progressively transformed from a social justice initiative into one of a myriad ‘special accounts’ within the byzantine Commonwealth financial architecture.

That this occurred, and could well continue to occur, is perhaps one of the strongest reasons for establishing the Indigenous Voice proposed in the Uluru Statement from the Heart.

The devil in legislation is in the detail. But without strong Indigenous oversight of this and other crucial Indigenous institutions, the detail can be used to hide the devil at work.  

Declaration of Interest:

Michael Dillon is a former public servant and currently a Visiting Fellow at the ANU Centre for Aboriginal Economic Policy Research. He worked on the Keating Land Fund legislation in 1995, and is a former Chief Executive Officer of the ILC.

The Productivity Commission’s Human Services Reform agenda in remote communities

The Productivity Commission recently released its report ‘introducing Competition and Informed User Choice into Human services: Reforms to Human Services (link here). The Final Report was presented to the Treasurer in October 2017, and was published on 26 March 2018.

The report includes two areas of particular relevance to Indigenous policy. The first relates to social housing, where the Commission recommends, inter alia, extending Commonwealth  Rent Assistance to social housing tenants, a move which if implemented would go a long way to eliminating the structural inequities between remote social housing and the treatment of non-remote housing assistance to low income citizens.

This post focusses on the second issue on the provision of human services in remote Indigenous communities, dealt with in chapter nine of the report. In December 2016 I commented briefly on an earlier study paper released by the Commission as part of its review (link here). The study paper appears to have been more adventurous and incisive than the Final report.

In the Final Report, the Commission argues at page 265, inter alia, that

·         Despite goodwill and significant resources, current approaches to commissioning human services in remote Indigenous communities are not delivering the benefits of contestability and are exacerbating its potential weaknesses.

·         Policy instability has created uncertainty and confusion for communities and service providers, and has undermined the effectiveness of service provision.

In relation to an earlier disposition to recommend more vigorous use of place based approaches:

·         there is merit to place-based approaches, but that a large-scale systematic rollout of place-based approaches across remote Indigenous communities is not feasible.

·         Government and community capacity for place-based reforms does not exist everywhere and would take time and effort to build. Expanding too far, too fast is a significant risk.

Moreover,

·         Governments should shift the balance away from centralised decision making in government toward greater regional capacity and authority to improve responsiveness to local needs.

These are all sensible and considered judgments which deserve serious consideration, but which governments, based on their record over the past few decades, are unlikely to address enthusiastically.

Nevertheless, the Commission’s chapter on remote communities deserves to be read by anyone interested in remote policymaking, not least because it represents the ‘standard view’ on what is the appropriate policy approach to addressing indigenous disadvantage, and improving Indigenous engagement. Moreover, the specific recommendations on human service are well argued and deserve serious consideration. The Commission recommends that contract lengths for commissioned service delivery be set at ten years by default, that governments publish a rolling schedule of upcoming tenders, that tenders include a focus on skill transfer and capacity building, that provider attributes (for example culturally appropriate service provision) be taken into account, that outcome measures and establishing evaluation and feedback systems be implemented, and that agencies adopt less centralised decision making systems which involve greater local engagement.

So what’s missing from the Commission’s analysis? I would point to three key issues.

First, the Commission appears to have dropped all references to greater transparency in program delivery from its analysis and recommendations. The Commission’s focus on policy instability and churn (which is largely driven by ministers and political factors) is absolutely correct, but it appears to have failed to make the link between greater transparency and reduced incentives on governments to countenance policy churn. Similarly, a focus on program and policy evaluation will be facilitated and indeed strengthened by a greater focus on transparency in relation to government policymaking. The Commission’s earlier study paper, mentioned above, was quite explicit in calling for greater transparency, so the decision to drop any mention of the value of greater transparency is difficult to understand.

Second, the Commission’s revised and more modulated support for place based approaches would be significantly strengthened if governments were to simultaneously establish an overarching policy framework so that while the scope for regional and place based differences was maintained, there was also a greater degree of certainty around expectations on both sides of the ledger: from providers, and form communities. Such an overarching policy framework would assist governments to articulate exactly what they are trying to achieve, deliver greater stability in coordination and cooperation between jurisdictions, and assist in managing community expectations. Furthermore, while Indigenous communities are diverse and heterogeneous, there is a risk that without an overarching policy framework to underpin place based approaches, communities who are outside the ambit of the place-based arrangements will be neglected and services will be under-supplied.

Third, and perhaps my most fundamental critique of this chapter of the report, the Commission’s approach ignores the reality, and indeed the centrality, of politics both within Indigenous domains, and within the public sector. This is clearly a deliberate decision of the Commission to make the report appear ‘policy focussed’ and to maximise the likelihood that its recommendations will be accepted, if not by this government, then by the next. However it has the effect of making the analysis extremely artificial and anodyne and somehow lifeless.  I am not advocating that the Commission takes sides in political debates, but to effectively ignore the existence of politics both as a driver of policy problems and challenges, and as a driver of potential solutions, seems somewhat otherworldly. The reality is that politics are ubiquitous in relation to these issues, and to blithely recommend policy ‘reforms’ as if politics don’t exist appears short-sighted at best, and potentially destructive at worst. One of the reasons that governments are so averse to transparency on any kind is that it increases the likelihood that blatantly political tactics will be seen for what they are.

Thus at present, we have a Federal Government with a substantial policy and program footprint in remote Australia, but without an overarching remote policy framework, and with both of the two largest Commonwealth programs in remote Australia, the Community Development Program and the Remote Housing Strategy subject to deep-seated uncertainty. In place of any policy framework, the Commonwealth appears to have decided that addressing remote challenges is just too hard, and instead, that it is easier to adopt a political strategy of blaming the states and territory for any issues which have emerged, ignoring the Commonwealth’s overarching stewardship responsibilities in Indigenous affairs and the fact that as the major funder in remote Australia, the Commonwealth has a responsibility to work with jurisdictions to develop coordinated and coherent policy frameworks.

Notwithstanding my criticisms of the Commission’s approach, there is much in the Commission’s report worth considering and pursuing. The report is an excellent example of open and transparent processes delivering better outcomes, and as a result, there is a clear ‘audit trail’ of the development of the Commissions thinking in relation to the conceptually challenging issues involved such as place based program delivery.

If this report goes un-noticed and un-addressed, remote Indigenous communities will be worse off. Unfortunately, because the Commonwealth does not have a comprehensive remote policy framework in place, it seems unlikely that we will see a serious and sophisticated response to these findings and recommendations. Nor does the present Minister see that he has a responsibility to respond formally to reviews and inquiries such as this; he has been quite open in stating that he does not intend to respond to the recommendations of the review into remote housing which he commissioned and which was delivered to him in 2017. Hopefully the Opposition and the Greens will take up the issue of a formal response to this Inquiry Report and ensure that the Government at least responds to the Commission’s recommendations and findings in a timely manner.

The Prime Minister announced over a year ago that the Productivity Commission would be supplemented with an Indigenous Commissioner. Legislation is currently before the Parliament. The omens will not look particularly positive in terms of the capacity for such an appointment to make a real difference to policy outcomes if the Government is not serious about dealing with the recommendations of worthwhile inquiries such as this.

Remote Indigenous infrastructure priorities

Infrastructure Australia (IA) has recently released its most recent Infrastructure Priority List (link here). I have posted on the topic of remote infrastructure previously (link here and here), and my comments and assessment have not changed substantially.

Infrastructure Australia is an advisory body which assesses proposals from state and territory governments, local government, private sector interests, and in theory the Commonwealth to compile a list of priority infrastructure projects across Australia.

The Board of IA is drawn predominantly from the business sector, and in particular from individuals with a backgrounds in communications, transport, gas infrastructure, and the like. While this is unsurprising, it is fair to say that there does seem to be a dearth of ‘community sector’ representation, which in my view is problematic.

My major concern with the model of policy development adopted by IA and its Board is that it is too focussed on a narrow conception of infrastructure, one which prioritises economic benefits over social benefits, and single larger projects over aggregations of smaller projects.

The definition of infrastructure may seem largely uncontroversial, however it is clear that housing per se is not deemed to be infrastructure for the purposes of policy assessment. While this may be justified in urban and regional Australia, in remote Australia, virtually all housing is social housing, and privately owned housing is virtually non-existent. The reasons for this are complex, and include historical dispossession, capital deficiencies within remote communities, high costs, land tenure challenges, and the absence of appropriate planning regimes. But whatever the reasons, it is clear that Governments must take some responsibility for the shortfalls.

It follows that there are good policy reasons for including remote housing as a core component of our economic and social infrastructure in remote Australia. In my view, IA and its Board (and by implication governments at all levels) have a serious blind spot in relation to this issue. For example, the IA 2015 Northern Australia Audit (link here) explicitly focusses on the needs of towns of 3000 or more, and notes that this excludes the needs of remote indigenous communities (refer page 43) and thus fails to include remote housing infrastructure needs in its assessment.

One implication of this narrow geographic and functional approach to defining infrastructure is that it ignores the massive undersupply of housing infrastructure in remote Australia, which I recently estimated would require an investment of $9bn to address (link here). In turn, this means that there is a concomitant underestimation of the true levels of related infrastructure needs in remote communities such as water, sewerage, power and even roads.

The most recent Priority List includes three priority projects in remote Australia, the upgrade of the Tanami road in the NT, improved roads access to remote communities in WA (both of which will benefit miners and other remote interests as much as Indigenous interests), and the provision of enabling infrastructure in three remote locations in the NT (Wadeye, Tiwi, and Jabiru). The summary for this latter project describes it as:

A portfolio of upgrades to road infrastructure, as well as a range of essential services and community infrastructure upgrades to support economic and social development in three remote regions of the Northern Territory.

One salient point to note is that the ten year National Partnership on Remote Indigenous Housing which ends in June this year invested substantial funding in upgrading the ‘enabling infrastructure’ in both Wadeye and the Tiwi Islands so as to facilitate the construction of significant subdivisions of housing ion both locations. In other words, Governments have been quite happy to use remote housing programs to construct infrastructure, but are unable to see that aggregations of housing should be seen as infrastructure.

While inclusion of remote social housing on the IA priority list will of itself not add to the supply of remote housing, it will raise the profile of an issue which the current Federal Government is intent on setting aside. It is time IA and its Board adopted a broader and more far-sighted approach to assessing the infrastructure needs of remote Australia.

For Governments, the policy challenge is not merely to allocate the necessary funding to ensure that remote infrastructure needs are met, and not degraded (which will be the inevitable outcome of the current Commonwealth disinvestment policy in remote housing in particular), but to also devise and progress appropriate policy reform particularly in relation to land use, planning and land administration regulation. This work needs to be led by the Commonwealth, and will necessarily involve the states and territories. In recent years, this challenge has proved to be too hard for governments, and the use of ‘smoke and mirrors’ as a substitute for real policy development too tempting. And there are no signs of change on the horizon.

One of the reasons Indigenous policy reform appears to be so difficult is that we appear to lack the political leadership at all levels to drive necessary reform. Remote infrastructure is a salient case in point.

How else to cut it: ruminations on remote housing and Senate Estimates March 2018

O, what may man within him hide,
Though angel on the outward side!

Measure For Measure, Act 3, scene 2

Last week the Finance and Public Administration Estimates Committee of the Senate convened for a day to address cross-portfolio Indigenous issues. The link to the transcript is here.  

I don’t propose to attempt to comprehensively summarise the hearing, rather I focus on a select number of policy issues of particular relevance to remote Australia.

In particular, I wish to focus on the issue of remote housing which has been the subject of previous attention in this blog (link here).

The discussion in Estimates was limited and partial, insofar as the bulk of discussion involved Senator Ketter from Queensland and he was focussed almost entirely on the implications of the Commonwealth’s approach for his own state.

Some basic facts.

The current National Partnership was initiated in 2008 and was for a period of ten years. It was innovative insofar as it took funding certainty beyond the normal four year forward estimate period. There was no discussion or understanding at the time that funding would cease at its expiry, merely that arrangements would need to be renegotiated.

Second, it involved $5.5bn in funding to the states over the ten years, all contributed by the Commonwealth. This was subsequently reduced to $5.4bn after the current Government cut $95m in 2015. In other words, the Commonwealth is currently contributing around $540m per annum on average to remote housing.

Third the current Minister initiated a review in late 2016 presumably as a precursor to renegotiating the current arrangements. The review which was finalised in early 2017 and made public in October 2017 makes a number of recommendations. The review was, in my view, seriously deficient in many key respects; see my previous post on this issue here. Most notably in the context of the current debate (see pages 51/52 of the Estimates transcript), there is no comprehensive information included on expenditure on the remote housing program year by year and state by state. Nor is there detailed information which justifies the Minister’s current allegations about states not allocating Commonwealth funding to housing purposes. In the absence of any serious reporting from his Department on these issues, my assessment is that they have virtually no basis nor justification.

Fourth, over the course of the ten years, arrangements were negotiated with NSW, Victoria and Tasmania for funding under the program to cease. This was essentially in acknowledgment that their ‘remote regions’ were minimal and outstanding housing needs had been largely met. It was not (contra Minister Scullion’s assertions at page 51) merely that they ‘had taken on their own responsibilities’. Moreover, the exit of those jurisdictions was the result of joint and methodical negotiation, not a ‘take it or leave it’ ultimatum from the Commonwealth as appears to be the approach adopted by Minister Scullion with Qld, SA and WA.

And fifth, the Minister appears to have allocated insufficient time for negotiation of new arrangements and has failed to put basic information on the table outlining the Commonwealth’s parameters and policy directions. Indeed, as previously argued (link here), it seems as if the Minister deliberately delayed negotiations so as to avoid having to include future funding in the Commonwealth’s budget estimates released in the December 2017 MYEFO.

The Minister’s arguments (insofar as they can be ascertained) appear to be as follows:

First, the Minister has alleged that the states (but not the NT) have mis-allocated current remote housing funding. As he stated in Estimates (at page 51):

Not only am I a minister but also I am a champion for Aboriginal and Torres Strait Islander people. When they put to me that in the state you're talking about someone has taken from them $600 million that should have gone to them, yes, I'm going to stand up. I'm not walking away from negotiations. I'm also not walking away from the bloody truth. And if you tell me the only money you're not giving out is to Aboriginal and Torres Strait Islander people, it's a bloody racist policy, mate. I don't care how else you want to cut it. So, no, I'm not walking away from this. We will negotiate on proper terms, but they will also be held to account for their actions.

As noted above, the Minister’s own review did not suggest that Queensland had shifted $600m, and his figure appears to have been conjured out of this air. Bluster might make effective politics, but it is extremely poor public policy. Unfortunately Senator Ketter failed to pursue this particular issue with the result that the Minister appears to have bludgeoned his way through.

Second, the Minister is basing his argument for not committing continued Commonwealth funding on the proposition that the states and territories have responsibility for social housing, and that the current National Partnership was a one-off arrangement or surge designed to remove the deficit in housing provision in remote regions.

The response to this rather complex argument is itself complex. The Commonwealth has historically been and continues to be the major player in funding social housing, and provides the bulk of social housing funding nationally – around $1.5bn pa - through the National Affordable Housing Agreement. In addition, the Commonwealth allocates some $4.5bn pa to low income individuals via the Commonwealth Rent Assistance program. Unfortunately, the absence of a private sector rental market in most remote communities means very little of this funding reaches Indigenous communities. So it is disingenuous if not dishonest to argue that the states have primary responsibility for funding social housing. And it is also disingenuous if not dishonest for the Commonwealth to do nothing to fix the ‘misallocation’ of Rent Assistance away from remote communities.

The states do have primary responsibility for delivering and managing social housing, but the funding responsibility is shared and historically in remote it has been with the Commonwealth. The Minister’s aspiration for the states to pull more weight in remote housing is legitimate as far as it goes, but for the Minister to use this argument as a fig leaf to cover further Commonwealth funding cuts is extremely poor public policy.

As to the ‘one-off arrangement’ argument, the Commonwealth has a long history of funding remote housing at least back to 1972. There was never an expectation that the current remote housing program would cease, or could cease upon the expiry of the ten years. Moreover, as the Ministers own review makes clear, the gap in social housing provision between remote and non-remote regions has been substantially reduced, but is still significant and thus there is no policy rationale for ceasing the ‘funding surge’ at this point.

So what did we learn from the recent Estimates Committee hearing?

First, with only three pages out of some sixty pages dedicated to discussion of remote housing issues in the transcript, the Labor Opposition and Greens appear to place remote housing issues a long way down their Indigenous policy priority list. This does not bode well for remote communities.

Second, the Minister in his opening statement to the committee made a point of confirming that he is not walking away entirely from remote housing:

In terms of the remote housing strategy, I am pleased to once again confirm that, despite the many fictitious and irresponsible claims to the contrary made by various state Labor housing ministers, the Commonwealth is not walking away from remote housing. We are, however, still waiting for those Labor states to come to the table and to put a clear and unequivocal financial commitment on the table. So far, the only jurisdiction out of the remote housing strategy jurisdictions to put any funds on the table is the Northern Territory, and I commend them. I'm looking forward to hearing from Mr de Brenni, Mr Tinley and Minister Zoe Bettison in South Australia on what their commitment to remote Indigenous housing would be.

Third, the Minister confirmed that the Commonwealth would not be providing a formal response to the recommendations of the review of Remote Housing which he commissioned, arguing with a classic non-sequitur that it is ‘an independent review. It informs where we go’ (page 50). While not unprecedented, it is highly unusual for a Government not to respond to a formal review, and leaves the public at large and Indigenous interests in particular in the dark as to the Government’s policy intentions.

Fourth, the Minister gave no indication of the quantum of funding the Commonwealth would be providing nationally for remote housing. As I have previously speculated, if the NT is to get $110m pa from the Commonwealth, and the NT has around half the outstanding remote housing need nationally, this suggests that the best allocation will be around $220m pa from the Commonwealth. This would represent a cut in Commonwealth funding of around $300m pa. and if fully matched by states and territories, a net cut of $100m pa on current funding levels. As an aside, as I have previously noted (link here) the outstanding need over the next decade for housing in remote Australia is probably around $9bn pa or $900m pa. The Turnbull Government is laying the foundations for a serious deepening of the major slow motion social disaster already underway in remote Australia.

Fifth, the Minister did indicate that the Commonwealth would be prepared to match the NT up to a figure of $110m pa. for as long as there was an outstanding need or housing deficit, via a bilateral agreement with the NT (refer pages 52/53 of the transcript). He has however given no indication of the proposed length of the bilateral agreements he is proposing.

Sixth, there was a rather extraordinary interchange between Senators McCarthy and Dodson and Department of Health officials regarding the worsening epidemic (to use Senator Dodson’s term) of syphilis and congenital syphilis in northern Australia, and the limited role and commitment of the Commonwealth in addressing this epidemic. Minister Scullion applied some soothing balm to the injury and agreed to ‘take a larger personal interest in this matter and report back to the committee’. The discussion was extraordinary because it was focussed largely on responses rather than prevention, and totally disconnected from the demographic realities of remote communities, and the huge outstanding housing needs.

Seventh, this discussion was followed by an insightful exchange between Senator Ketter and officials including Dr Hobbs, the Commonwealth Deputy Chief Medical Officer, on the Commonwealth’s Rheumatic Fever Strategy:

Senator KETTER: What causes that in the first place?

Dr Hobbs: Streptococcal infection is very common in the community, either in Indigenous people or indeed in non-indigenous people. But it's more common in circumstances where there is overcrowding, poor access to hygiene infrastructure and intercurrent illness. The response then is of the immune system, and that may target the heart or other organs, but particularly the heart, and then lead to the development of an anatomical defect, usually on the valve of the heart, which then progresses to rheumatic heart disease over a period of time.

Senator KETTER: If there was investment in overcrowding and housing conditions, would you say that would lead to an improvement of outcomes here?

Dr Hobbs: Certainly. The overcrowding and the access to hygiene infrastructure are a very important part of prevention. There has also been a lot of work done internationally and in Australia in collaboration with colleagues in New Zealand on a vaccine, but that's been very, very difficult to develop to date.

Senator KETTER: Minister, you can see here that housing is very important in relation to this particular issue. The government is increasing funding for this national partnership agreement. What I'm concerned about is, on the one hand, we're seeing developments there, but when you have housing as a driver, you've got the government moving in two different directions. If we don't fund housing properly then we're not going to see improvements in the area of rheumatic fever.

Senator SCULLION: I can't disagree with you. As I've indicated, I'm trying to hold those states accountable to ensure that they continue to fund housing.

Notwithstanding the Minister’s double negative response – a second resort to soothing balm - he gave no hint or acknowledgment that it is the Commonwealth Government’s policies which will, on the evidence of the Commonwealth’s own Deputy Chief Medical Officer, have further deleterious impacts on the health of remote communities.

Conclusion

The recent Senate Estimates Hearings served to reinforce that the Commonwealth is actively pursuing a political agenda to pressure the four Labor run jurisdictions who are beneficiaries of the current remote national partnership agreement to contribute greater funding.

Greater state investment in remote housing provision is a legitimate aspiration for the Commonwealth to pursue through genuine and serious negotiation, but it is entirely hypocritical to adopt a political strategy which advocates greater state contributions merely so as to sow confusion and divert attention from the Commonwealth’s apparent intentions to cut funding further than they have already.

The Minister and indeed the Prime Minister would do well to reflect very carefully on Minister Scullion’s advice to the Estimates Committee:

I'm also not walking away from the bloody truth. And if you tell me the only money you're not giving out is to Aboriginal and Torres Strait Islander people, it's a bloody racist policy, mate. I don't care how else you want to cut it.