More Dams for the Northern Food-bowls: Achievable Policies or Pre-Election Hype?
Preamble to the Discussion of Australia’s Northern Development
The 2013 federal election was another historic highpoint in federal LNP in place in Northern Australia. Northern Australia was almost wall to wall LNP territory between Brisbane and Perth. The exceptions were, of course, Lingiari (Northern Territory) and Bob Katter’s own electorate of Kennedy in North Queensland.
There were similar outcomes from other landslides to the federal LNP in 1975 and 1996. Historically, Northern Australia seems to reinforce the trends in national political landslides during the post-Whitlam period after The Dismissal in 1975.
As the next election approaches, the federal LNP still controls six of the ten federal electorates in Northern Australia. There is an element of volatility since the 2016 elections. Labor gained the Darwin-based seat of Solomon as well as the Townsville-based seat of Herbert. Future Labor candidates should be quite competitive in Leichhardt, Dawson, Capricornia and Flynn.
In the North Western Electorate of Durack in WA, Labor indigenous candidate Carol Martin achieved a strong swing in 2016 in a remote LNP which is much closer to Jakarta than to Canberra itself.
With such a strong LNP mandate from Northern Australia in 2013, the Abbott Government proceeded with a White Paper on Developing Northern Australia. This was published in June 2015 and is available for perusal online.
The CSIRO has already prepared the North Australia Water Resources Assessment. This was released on 11 August 2018. Northern Australia Water Resource Assessment offers a comprehensive assessment of the potential of water resources in the Mitchell, Darwin and Fitzroy Catchments (https://www.csiro.au/en/Research/Major-initiatives/Northern-Australia/Current-work/NAWRA).
The lack of sustainable investment funding for Northern Development is the major barrier to the broad goals of water conservation, regional development and economic diversification across Northern Australia.
Confronting these investment problems is a bipartisan challenge. Care has been taken to involve indigenous communities in rural and regional development. This contrasts with the occupation strategies of earlier generations.
Journalist Stan Grant laments the events at Mapoon to justify the expansion of bauxite production near Weipa (Quarterly Essay 64, 2016: The Australian Dream: Blood History and Becoming):
By 1963, the year of my birth, the dispossession was continuing. Police came at gunpoint under cover of darkness to Mapoon, an Aboriginal community in Queensland, and they ordered people from their homes and they burned those homes to the ground and they gave land to a bauxite company. And today those people remember that as the ‘Night of the Burning.’
Decades later, Indigenous Gulf of Carpentaria leader Murrandoo Yanner has steered favourable negotiations with New Century Resources to retrieve zinc from vast tailing sites under a progressive Gulf Communities Agreement. Recovery of zinc is part of a rehabilitation scheme for the now exhausted Century Zinc Mine. This extraordinary rehabilitation is occurring inland from Burketown near the indigenous community of Doomadgee and the Lawn Hill (Boodjamulla) National Park.
At another highpoint in the federal LNP’s electoral influence after the 1958 election, the Menzies Government commenced planning work on the Ord River Scheme in the current federal electorate of Durack. This Northern frontier electorate was part of the vast Kalgoorlie. It was Labor heartland in most elections between 1903 and 1975.
When Lake Argyle was opened in 1972, the financial costs of the scheme were becoming apparent and these burdens did not diminish (Shane Wright, Economics Editor, The West Australian 28 July 2017):
The Ord River irrigation scheme has been a $2 billion waste, with each new job costing almost $6 million to create, a report to be released today reveals.
In research that backs criticisms from WA’s Auditor-General, the Left-leaning Australia Institute found just 61 jobs had been generated by the most recent, $334 million investment in the sprawling irrigation area in the State’s north.
Irrigation, backed by government investment, started in the Ord region in the 1960s. Total spending now exceeds $2 billion.
Even after the latest expansion of the Ord scheme, the Australia Institute found that there were just 260 agricultural jobs in the region of which 60 were not related to irrigation.
Despite the market ideology credentials of successive post-war LNP governments, the Menzies Government looked to the Snowy Mountains Scheme as a government-sponsored water conservation model for application in Northern Australia.
The more modest expenditure of the Queensland Government’s Mareeba-Dimbulah Water Supply Scheme (MDWSS) produced better outcomes in the 1950s. MDWSS was well integrated with other regional development ventures that were quite close to Cairns. The policy mix offered hydro-electricity production, extensions of transport infrastructure as well as the processing and orderly marketing of farm output.
Tourists now flock to local museums to view the icons from the Develop the North eras of previous generations when state and federal governments of both persuasions took similar initiatives.
Iconic Images: Aussie Towns, Mareeba and Historical Australian Towns
The Annual Reports of the now defunct Tobacco Leaf Marketing Board are archived at the state library but far-right parties in North Queensland are still keen to promote Back to the Future Agendas (North Queensland Register 7 August 2018). Preferences from this political nostalgia are likely to favour to favour the federal LNP in North Australian regional electorates.
If the electorate is as hooked on economic issues as the current Ipsos Poll suggests, alternatives are needed to the federal LNP’s aberrant oscillation between the extremes of market ideology and implementation of the mega-projects which have just been listed by the CSIRO’s water assessments for Northern Australia.
Having just ditched billions in long-term taxation concessions, it is time to question the funding options which are available to fund the LNP’s Northern Development agendas after the 2018 budget. Time will tell if Prime Minister Morrison wishes to persist with reduced corporate taxes for medium and large corporations.
Despite all the political energies invested in claims about fiscal responsibility since 2013, the Australian Government’s debt to GDP ratio has deteriorated despite cost-cutting and revenue ditching measures by Former Treasurer, Scott Morrison in the 2018 Budget.
An assessment of the consequences of the 2018 budget from the PolicyMod Unit of the ANU criticizes the irresponsibility of revenue losses from changes to personal income taxes in the 2018 budget (The Conversation 1 June 2018):
Using our model of the Australian tax and welfare system, PolicyMod, we projected the incomes of each person in the 20,000 families in the underlying model survey data (the Australian Bureau of Statistics’ Survey of Income and Housing 2015-16).
We did this for each year until 2028-29, using the federal budget’s wage assumptions. We then used this to forecast the outcome of the proposed tax cuts and compared it with the effects of maintaining current tax rates.
Our results are remarkably similar to the forecasts of Treasurer Scott Morrison. He has projected a total tax cut between 2018-19 and 2028-29 of A$143 billion, whereas our model puts this figure at A$140 billion.
In the mean-time, the comparative tax policies of successive governments are available for scrutiny (ABC News 12 July 2016). These graphics need to be updated to consider the effects of the 2018 budget.
Time for Alternative Investment Strategies?
In this recent budgetary context, the capacity of the federal government to deliver grants for major water conservation and associated regional development programmes for Northern Australia is strong on rhetorical appeal but weak on the capacity to deliver.
Just completing the Pinnacles Dam on the Palmer River Catchment would cost $755 million according to the best estimates from the CSIRO. Such projects are beyond the resources of the North Australia Investment Fund (NAIF). However, NAIF can be opened to more private sector investment.
Australia’s over-commitment to the US Global Military Alliance has been a complicating factor in the availability of investment funding for Northern Australia. The Trump Administration has counselled Australia against over-participation in China’s Belt and Road Initiatives (BRIs).
Mainstream reporting cheers on the recent US-sponsored Trilateral Investment Partnership (TIP) between US, Japan and Australia which was discussed with our defence and foreign ministers at the Indo-Pacific Business Forum of the US Chamber of Commerce in Washington just before the recent leadership spill in Canberra Participants in the Trilateral Investment Partnership decided to make a financial commitment to offer alternatives to China’s Belt and Road Initiatives (BRIs) (US Chamber of Commerce 30 July 2018):
WASHINGTON – Today at the Indo-Pacific Business Forum, hosted by the U.S. Chamber of Commerce, leaders from the U.S.’s Overseas Private Investment Corporation, the Japan Bank for International Cooperation (JBIC), and the Australian government announced a trilateral partnership to invest in infrastructure projects in the Indo-Pacific region that build infrastructure, address key development challenges, increase connectivity, and promote economic growth.
OPIC President and CEO Ray W. Washburne, JBIC Governor Tadashi Maeda, and Australian Embassy Chargé d’affaires Katrina Cooper issued the following joint statement on the trilateral partnership:
“The United States, Japan, and Australia have formed a trilateral partnership to mobilise investment in projects that drive economic growth, create opportunities, and foster a free, open, inclusive and prosperous Indo-Pacific. We share the belief that good investments stem from transparency, open competition, sustainability, adhering to robust global standards, employing the local workforce, and avoiding unsustainable debt burdens.”
“We will uphold these principles as we mobilise investment in infrastructure, such as energy, transportation, tourism, and technology that will help stabilize economies, enhance connectivity, and provide lasting benefits throughout the region. To deepen this trilateral partnership, we are currently developing a framework for cooperation. OPIC is also placing a representative in the U.S. Embassy in Tokyo, Japan.”
“As we look to the future, this partnership represents our commitment to an Indo-Pacific region that is free, open and prosperous. By working together, we can attract more private capital to achieve greater results.”
At the U.S. Chamber event, the three aforementioned participants announced future plans for a formalized trilateral Memorandum of Understanding (MOU) and OPIC announced the placement of a staff member in the U.S. Embassy in Tokyo to better facilitate cooperation.
Japan has committed to advancing sustainable infrastructure in the Indo-Pacific, and OPIC is coordinating with Japanese partners on co-investment under two bilateral MOUs signed in November 2017 last year. OPIC signed a similar MOU with Australia in February 2018.
Canada’s national broadcaster (CNBC) is highly critical of the tokenism of the Trilateral Investment Fund in the economic diversification of countries across the Indo Pacific Basin (https://www.cnbc.com/2018/07/31/australia-japan-join-us-infrastructure-push-in-asia.html).
While most federal LNP seems to be afraid to offer constructive criticisms of Trump Administration trade and investment controls on the mix of overseas investment into Australia, the Reserve Bank of Australia (RBA) has been more proactive in defence of Australia’s economic stability (AFR 18 September 2018):
Australia’s economy is at risk of becoming collateral damage in the escalating US-China trade war, economists warned, after President Donald Trump confirmed China would be punished by tariffs on $US200 billion of US imports.
China is expected to swiftly retaliate against Mr Trump’s 10 per cent tariffs, leaving Australia’s export-dependent economy vulnerable to a slowdown in commerce between its two largest trading partners.
The Reserve Bank of Australia’s monetary policy minutes published on Tuesday, based on its September 4 meeting, said “significant tensions around global trade policy” represented a “material risk” to the global economic outlook.
Shiro Armstrong, an economist specialising in Asia at the Australian National University, said with Mr Trump also threatening to impose tariffs on Japanese cars, Australia’s top three export markets were on the brink of entering a risky international economic clash.
Ironically, Australia has been an active investment partner in the Beijing based Asian Infrastructure Investment Bank (AIIB) since the last months of the Abbott Government in 2015. Our total financial subscriptions and voting rights in the AIIB are comparable to those taken up by South Korea, the UK, Germany and France which all have approximately $US 3-5 billion in subscriptions.
The AIIB cuts across global ideological divides with almost seventy subscribers. Israel, Qatar, Saudi Arabia and Turkey are all participants although these states are sometimes at loggerheads in other forums. There is a similar place for both India and Pakistan in the AIIB. India’s financial involvement in the AIIB is substantially larger than that of Russia.
The University of Sydney with the co-operation of financial consultants KPMG has an ongoing avalanche of documents on this issue of Chinese investment (http://apo.org.au/node/175916). The flat-line in levels of Chinese investment in Australia has a multiplier effect on longer-term economic activity here and in the neighbouring countries of the Indo-Pacific Region.
Global capital flows have tightened since the GFC. However, US$6 trillion is still on the move each year (McKinsey Global Institute 2018). This is still 7.1 per cent of the entire global economy which is available to be tapped pragmatically by Australia for priority investment needs like the transformation of Northern Australia to improve regional global food security and to extend the infrastructure, energy transitions and telecommunications of the future.
Fluctuations in capital investment in Australia are extremely volatile in the wake of the mineral and property booms. Net capital flows into Australia in the July Quarter of 2018 are running at half the level of their peak in the September Quarter of 2015.
Although Chinese investment is dwarfed by investment from the US and even Britain, asset patterns from the latest DFAT data for 2014-15 show remarkable similarities. The (a) qualifier in the Chinese data is used to note the extent of confidentiality provisions. Australia offers no qualification against tax minimization practices by US multinational companies.
Detailed data is not so readily available on the exact component of these capital flows from China and Hong Kong as a Special Autonomous Region (SAR) of China for the current June Quarter of 2018. Back in 2017, only 5.56 per cent of capital flows to Australia originated in China and Hong Kong combined. The US (27.46 per cent) and Britain (14.74 per cent) topped the sources of capital flows (DFAT 13 June 2018).
There is no reason for Chinese investment to be subjected to special controls which are not justified by accountable security considerations. Given the poor coverage of electronic communication in Northern Australia, lower cost providers like Huawei can assist in overcoming the tyranny of distance through new BRI and other Asian investment initiatives.
Progressive investment options are needed to deliver Australia’s Northern Development agendas is just one test of national economic policy competence. The federal LNP’s rhetoric on Northern Development is appealing. Its delivery strategies are an exercise in Back to the Future Politics which are always cheered on by the far-right parties to deliver those preferences which just might protect key LNP members in North Australian seats.