25 March, 2021
I rise today to speak on the Northern Australia Infrastructure Facility Amendment (Extension and Other Measures) Bill 2021. For those who don't know, in shorthand, the Northern Australia Infrastructure Facility is called the NAIF. It was established under statute in 2016. It is a government agency with $5 billion to invest to provide the basis for economic and population growth in northern Australia. The NAIF was established with the intent to fill financing gaps in northern Australia by being more risk tolerant to uniquely northern Australian characteristics like remoteness, distance and climate. As of September last year, the NAIF has made approximately $2.7 billion worth of loans and has $2.3 billion left in funding.
What this bill does is not entirely what is being portrayed in this place. This bill will extend the life of the NAIF for a further five years, which is fine, but it will make substantial changes to the NAIF's operations. The explanatory memorandum states that these changes will strengthen the NAIF's governance and enhance the scope, speed and flexibility to provide financial assistance to support the development of northern Australian economic infrastructure. While the NAIF is an essential vehicle to support northern Australia, I do not agree that the changes will result in these outcomes. On the contrary, the changes will weaken independence and result in the potential funding of stranded assets with public money. The government claims that the reforms contained in this bill arise from the recent statutory review of the NAIF released in December last year. This review was not independent. It was conducted by the Department of Industry, Science, Energy and Resources. This is basically the fox conducting a review of the safety of the hen house. These reviews must be conducted at arm's length from the government. The result is that this push is flawed from the very outset.
How can the public be assured that taxpayer money is being spent appropriately? This is really the funding of fossil fuel projects. Minister Pitt has made clear in his public comments that he would like to 'cut out state administration of the loans', which he said was 'partly to blame for delayed rollout of funding on projects'. But it is not as simple as cutting them out due to delays; they want to cut them out to push fossil fuel projects. In the past, state and territory veto has provided an important check on government expenditure. For example, when the NAIF proposed to make a $1 billion taxpayer funded loan to Adani Carmichael mine's rail line, the state government threatened to veto any loan and said they would veto any other proposals linked to Adani. So it is very clear here what the government want to do with these changes. The minister has said that this bill will enable the Commonwealth to bypass the state on certain projects, including interstate rail and gas projects.
In the government's Beetaloo Strategic Basin Plan, released in January, it also states:
The government has also announced changes to the NAIF … They can also support Beetaloo infrastructure developments.
It is very clear what is intended to be done here. The plan goes further and says the government would like to be:
facilitating Northern Australia Infrastructure Facility (NAIF) discussions to ensure that stakeholders do not miss out on Beetaloo gas development opportunities.
The Beetaloo Basin is a methane bomb. It is irresponsible in the extreme for the government to attempt to open it up. This is the same basin that the government's own department said would risk Australia failing to meet its Paris commitments. One conservative report projected that the basin will release some 117 million tonnes of greenhouse gases per annum, equivalent to one-fifth of Australia's annual emissions. We must reject any move to allow further funding to fossil fuel projects, especially in the Beetaloo Basin.
The NAIF should focus, instead, on clean technology and on the types of projects that are being raised by members in this place. Northern Australia can be a renewable energy superpower. Think of the Sun Cable and the Asian Renewable Energy Hub. Projects of this magnitude are possible with the right support. I know many renewable project developers in Warringah, particularly at the Manly Solar Beach Hub, who would support such a move and would no doubt be interested in developing clean energy projects in northern Australia with such support.
Item 11 in the amendment bill expands the functions of the NAIF to allow for the provision of financial assistance in the form of equity investments, meaning that the government could take a stake in the business and it's not a loan which is repayable. This increases the risk appetite of the NAIF as well as the Commonwealth's potential liability should the investment not work out. This is of particular concern when analysed in the context of the NAIF making investments in fossil fuel infrastructure that the market does not want to support.
Item 11 also allows for the acquisition of derivatives. The government states derivatives must only be used for, amongst other factors, achieving indirect exposure to financial assets and achieving transactional efficiency. That sounds a lot like financial jargon, but this language really gives NAIF a licence to do anything. It, in essence, gives NAIF management free rein to play around in derivatives. Even worse, there is no requirement to make a financial return. We are talking here about free rein to go for loss-making projects. It could mean the government buying gas contracts to guarantee the supply price and volume at a later date. It could mean supporting pipelines and it could mean funding Shine Energy's Collinsville coal-fired power plant—and I note the energy minister sitting there at the dispatch box.
However, problems arise if the gas or power plant are not needed due to factors, of course, like increasing penetration of renewable generation. The government would be left holding the problem and would still have to pay. And they may well do just that, as fossil-fuel-production extraction and its supporting infrastructure have huge carbon risk and are likely to be stranded assets in the very near future. The gas industry has had a shocking 2020, shedding huge amounts in shareholder value and writing down assets across the board. In particular, Santos, which is aiming to develop the Beetaloo, has written down over $8 billion worth in assets since 2014. So it's no surprise that industry has their hands out for government assistance. Of course they know that none of the projects they're proposing will get up without the government kick along.
I do not believe the taxpayer should foot the bill for bad fossil fuel investments. The NAIF should not be a slush fund for the minister's projects. There's a serious lack of independence proposed; the changes are likely to impact the independence of the NAIF board from the government. Currently, the NAIF board makes all investment decisions. Section 14 of the NAIF Act reads:
(1) The functions of the Board are:
(a) to decide, within the scope of the Investment Mandate, the strategies and policies to be followed by the Facility; …
Item 25 of this amendment bill provides that the secretary of the department will now be a member of the board. As the secretary reports to the minister for energy and the government, this change could open up the board to ministerial influence and could erode confidence in NAIF's investments. This is just a cynical attempt to consolidate influence on the already-weak governance of the NAIF.
This bill makes serious changes to the NAIF's governance that will facilitate payments to fossil fuel projects: let's be very clear about what this does. The bill will also make changes that will reduce the independence of the NAIF board. I do not support these changes. We cannot waste taxpayer money on fossil fuels and we cannot allow an agency to be so co-opted. At a time when our national debt is at record levels we must not allow the government to waste public funds on bad fossil fuel projects. We need the NAIF to be independent and focused on the future of infrastructure and development in northern Australia, and we need a future focus on technologies which are clean energy technologies.