A new research report has raised significant questions around the capabilities and independence of the Federal Government’s flagship infrastructure fund, that has already earmarked $1 billion in concessional loans for coal mining infrastructure.
In a discussion paper published by progressive think tank The Australia Institute, questions are raised about the Northern Australia Infrastructure Facility (NAIF), a $5 billion fund established by the Turnbull Government to provide concessional loans to infrastructure projects in Northern Australia.
The life of the NAIF dates to 2012, when the Liberal-National Coalition released a ‘Developing Northern Australia’ policy while in opposition. The NAIF was subsequently included in the 2015-16 budget and legislated in 2016.
The aim of the NAIF is to provide concessional loans to underwrite the completion of major infrastructure projects, including “airports, communications, energy, ports, rail and water.”
According to the TAI discussion paper titled “Don’t be so NAIF”, while the NAIF is actively providing “conditional approval” for projects to receive loans, the organisation has yet to establish crucial guiding policies. These include a lack of established due diligence requirements for projects, and has not yet prepared a Risk Appetite Statement, to guide the fund in choosing suitable investments.
The situation has potentially undermined the independence with which the NAIF is claimed to operate, as much of what is known about the projects being considered by the NAIF Board has come via the responsible minister, Senator Matthew Canavan.
While little is known about the types of projects that the NAIF may support through the provision of loans, one major project has been earmarked for targeted support from the NAIF, the construction of a rail line linking a Queensland coal mine to export hubs.
The proposal consists of a request for the Northern Australia Infrastructure Facility to provide $1 billion in concessional loans towards the construction of a 310 kilometre rail corridor between Adani’s Carmichael Mine and export terminals on Queensland’s coast.
In its report, The Australia Institute argues that there is a questionable basis for financial support to be provided to the Adani project and questions how such a project could receive such a significant investment of public funds with such a limited application process.
The report cites comments from Resources and Northern Australia Minister Matthew Canavan, as well as those from Adani spokesperson, that suggest loans from NAIF would not be critical to the project being completed.
As such, the project would not meet one of the core investment criterions that dictate how funds from the NAIF could be invested. The NAIF investment criterions state to receive a concessional loan, the NAIF must be satisfied that “The project is unlikely to proceed, or only at a much later date, without NAIF financial assistance”.
“Both Adani and the Minister have suggested the loan is ‘not critical’. That means it would not be eligible for NAIF funding. On the other hand, concerns about commercial viability bear on loan repayment, and there are serious unanswered questions about claimed public benefits.” TAI researcher and report author, Tom Swann said.
“Our polling shows people would prefer these funds spent on renewable energy, the NBN, infrastructure in our congested cities — virtually everything else, other than infrastructure for coal companies.”
“The government needs to explain why billions of dollars for coal trains for foreign miners is a greater priority than building critical infrastructure in populated areas,” Mr Swann said.
In launching the NAIF in 2016 and announcing the inaugural board, Minister Canavan stressed that he had confidence in the board’s ability to administer the fund. The minister also recalled the story of the creation of a Captain Cook statue in Cairns, which due to an administrative bungle, was built about three times larger than intended.
“I think we have in the NAIF a fit for purpose nimble team that is going to do great things for Northern Australia. Still, like the Captain Cook statue we hope that the $5 billion we are investing here does grow into something more, something impressive, something you can’t miss.”