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Joint Select Committee on Northern Australia
20/05/2014
Development of northern Australia

BARNES, Mr Gary, Chief Executive Office, Department of the Chief Minister, Northern Territory

CAREW, Mr Peter, General Manager, Northern Australia Development Office,

GILES, The Hon. Adam, Chief Minister, Northern Territory Government

HIGGINS, Mr Gary, Deputy Speaker and Chairman of Committees, Northern Territory Legislative Assembly

[09:27]

CHAIR: I welcome our next witnesses, from the Northern Territory government. The hearings are a formal proceedings of the parliament. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of the parliament. The evidence given here today is recorded by Hansard and, as such, attracts parliamentary privilege. I invite you to make a short opening statement, and then we will follow with some questions.

Mr Giles : Unlocking the economic potential of the north of Australia is going to take a lot of commitment and a lot of courage. Northern Territory has abundant natural resources, Australia's closest deep-water port to Asia, room to grow, and road and rail links to the rest of Australia. We occupy a strategic position supporting Australia's defence needs. We have enough unconventional gas to power the country for almost two centuries. We are Australia's biggest exporter of live cattle. The development of the Territory will open a gateway for the rest of Australia into Asia. It will create wealth and jobs and reduce reliance on welfare.

The potential of the Territory is quite enormous but the reality is that we are around 150 years behind the rest of the country in vital infrastructure. The rail link from Darwin to Adelaide was completed just a short 10 years ago. It was a visionary collaboration of the federal and Northern Territory governments that finished the rail line in 2004, but it was 146 years in the making to get it to conclusion. We cannot wait that long to fully develop the north. We need more vision and far fewer excuses. It has to be treated as a nation-building program. For starters, we need more roads. Large areas of the Territory were opened up by the cattle industry around 50 years ago so that cattle could be transported to market. It was visionary, nation-building work by Territory pioneers that was used to open up vast areas of the bush and create an industry that the rest of the country now takes for granted, but they are little more than tracks today. Road development is an enabler of economic growth. Improving access improves productivity and unlocks the economic potential of the Northern Territory. It improves access for remote Territorians and a community service obligation, and is a key enabler of access to employment—and with economic development come new jobs for our Indigenous population right across the Territory.

I know members of this committee have been invited to visit some of our remote communities while you are here so you can get a firsthand understanding of the scale of the challenges which we face in the Northern Territory. We are 17 per cent of Australia's land mass but only one per cent of the population, and that makes distance a problem that very few people in eastern Australia can fully understand.

We believe improvements to the Roper, Stuart and Barkly highways are critical to increased investment in onshore oil and gas discovery. The Stuart Highway is a two-lane artery that services the Territory's heavy haulage and a significant tourist trade. In the future, it will service the emerging onshore oil and gas industry and it needs a substantial increase in four-lane sections, overtaking lanes, bypass roads and upgrades to major intersections. Opening up the Tanami highway would facilitate the development of the Canning Basin. The southern Georgina region would benefit from upgrades to the Plenty and Sandover highways. We believe roads are critical to the development of the north and we have made detailed submissions, in the order of $2 billion, to the Australian government for road and bridge upgrades through Infrastructure Australia.

We need a gas pipeline. While much of Australia is debating the impact of the gas industry, in the Territory we welcome the development of new gas fields. We have over 200 trillion cubic feet of gas reserves that could be used to relieve the south-eastern gas supply crisis by extending the gas line from Alice Springs to Moomba. That would make our vast reserves of onshore gas a viable proposition for gas companies, and development would follow the creation of new business opportunities throughout the Northern Territory. We also want to support the release of precompetitive data that supports exploration. It is another reason that we need roads.

One of the key pieces of infrastructure we must expand is our port. The existing port is 786 metres long, with an available depth of around 12 metres. It is estimated that the cost of an additional berth for bulk loading is $350 million. An additional hardstand area and refrigerated containers are estimated to cost another $15 million. This will provide an additional 2.3 hectares of lay-down area and provide for up to 200 reefer points. A new container crane is estimated to cost $12 million. We have not fully costed a second port yet, but the Victorian government allocated $100 million for a scoping work for its second port in Melbourne. Expanded port facilities are essential to support the growing needs of the oil, gas and mining industries and crucial freight movements throughout Asia.

We also need federal government assistance to map the Territory's land and water resources. There has been a great deal of discussion about a northern food bowl, and we need to plan for future agricultural development and growth in regional centres. Water is the key to opening up the Territory to development, and we have to plan for it thoroughly.

We are well aware that the federal government is unlikely to meet all our needs. We are also pursuing private investors from all over the world to make some of these opportunities become a reality. Some of the infrastructure can be created through joint government and private partnerships, but we need roads and the resourcing mapping done first. If the federal government is fair dinkum about developing northern Australia, then it must accept the fact that it will take money, time and courage. But the results will be well worth it. There will be an immediate financial benefit from reduced welfare; the Territory can begin piping gas from the north to the needy households of the south-east; and the long-term benefit of opening up a vast area of Australia and turning it into a highly productive resource will benefit the entire country.

I am happy to take some questions, Chair.

CHAIR: Thank you very much, indeed.

Mrs GRIGGS: Chief Minister, given the limited pool of the Northern Territory's own source revenue, can you detail the priority infrastructure projects that your government like the Commonwealth to fund, please?

Mr Giles : The main requirements are roads and bridges. We put in a submission for around $577 million in the last round of submissions to the federal government. We were looking for a partnership with a 20 per cent contribution from the Northern Territory and 80 per cent from the federal government. The majority of that was knocked back by the federal government. I understand the tight fiscal conditions that Tony Abbott and the coalition have in the repair of the former, Labor government's debt and deficit. But, if we truly want to open up the north, we have to get investment in those roads, and that was knocked back. I did mention a few roads there. I think the Tanami highway was endorsed and approved by Infrastructure Australia—

CHAIR: That was brought up in Western Australia too as a very high priority.

Mrs GRIGGS: Yes.

Mr Giles : The Tanami highway did go through IA and the infrastructure counsel. I understand it sat on the desk of former transport minister Anthony Albanese. It was considered under the new framework, particularly basing its analysis around community service obligations but also the benefits to the mining industry, particularly the Newmont mine out there at the Granites. But that was not approved. I understand that of the roughly half a billion dollars that was available for some of that remote infrastructure, there was a road approved in South Australia and I am not sure if there were any other roads approved and that may have found itself by the way of a savings initiative, but when the Territory missed out on that—but getting back to your question, Mrs Griggs: the Tanami Road, the Roper Highway, Carpentaria, Sandover and Plenty are main arterial roads that can open up the country, which can start seeing the development of pastoral agricultural and horticultural opportunities but then also moving towards mining and hydrocarbons.

CHAIR: Does Outback Way fit into that criteria?

Mr Giles : The Outback Way does fit into that. The Outback Way would take probably around $520 million for dual-lane seal to fully equip it. In the last federal election there was a commitment of $33 million—11-11-11—by the Deputy Prime Minister for that. We have just had agreement with the Deputy Prime Minister to get matched funding for $7.5 million a year for the next three years just for the Territory side of the border and we will put that towards the Plenty, going out towards Harts Range. It is a start, it is a generational road that needs to be built but it is a road that will open up the country.

When you look at some of these roads and opening up the interior of the geographical landscape of Australia, it is something that is truly nation building and it has to occur. I put it back to the building economic revolution that we all had when we built basketball courts and stadiums for everybody but we did not build the infrastructure to get productivity gains for the country, and these roads are the roads that will open the country up.

CHAIR: On the infrastructure side, what about the connection between Tennant Creek and Mount Isa? I know there is a different gauge that needs to be addressed for a new rail network. Does government see that as a priority?

Mr Giles : We have done a bit of analysis on the Iron Boomerang from Port Hedland across to Townsville. Of that we have put the priority basis or focus on Tennant Creek to Mount Isa. We have started looking at easements and what the requirements might be.

CHAIR: What about the gas pipeline?

Mr Giles : I will get to the gas pipeline. But, in terms of rail, we are looking at what might go through the easement in terms of other infrastructure—whether it is pipeline, telecommunications or electricity—but we have to make sure that we get the economic modelling to support the sustainability of that rail. I know the feds are not so much in the environment of 'build it and they will come' but I think that is where our rail would sit itself. So we are looking at what developments are out there. The phosphate opportunities are out there, and iron ore there may be, which could utilise rail to get a good cost-benefit analysis done to make that an economic piece of infrastructure rather than a social piece of infrastructure.

Mr SNOWDON: Thanks, Chief Minister. I would just make a passing comment about debt and deficit. The current Treasurer has doubled the size of the deficit since they came into government, so let's put all that into some sort of context. We should avoid having a political discussion here; if we do it will just distract us from what we should be doing. I want to ask a couple of questions, one of which goes to roads. Yesterday we had evidence that said that the cost doing roads in the Northern Territory is three or four times greater than doing roads in Western Australia and Queensland, per kilometre. We were told that in the shires abutting the Northern Territory border and Queensland and Western Australia bituminised roads can be done at $250,000 a kilometres, and we were told that in the Northern Territory the cost is in excess of $1.2 million.

Mr Giles : Per kilometre.

Mr SNOWDON: Yes. We do not know the reason for that, but clearly there is an issue so maybe you could take that on notice and come back to us. We will show you the evidence we got and you can respond to it but—

Mr Giles : I can answer that now, if you like. I would not say it is $1.2 million; I would say around $800,000—an approximate figure—being the former minister for transport and infrastructure. One of the key challenges around building roads is not just the cost of delivery of services across the board; it is also about the cost of gravel in the Northern Territory. Some of our costs of purchasing the gravel and delivering it on site is high compared with the rest of the nation, in Western Australia and Queensland. There is also the tyranny of distance in the transportation of water and some of the other costs associated with building roads such as that.

Mr SNOWDON: I was impressed by your submission. I think it raises some very significant and very important issues. One is the issue of standardisation of regulation across borders, including how water might be used and assessed and allocated, but also the issues to do with environmental regimes—the sorts of things that are impediments to people working across a border. They are issues that were raised with us. I would be interested in your comments about whether or not you can see some possibility of standardising those important regulatory areas that confront people who want to work across borders.

Mr Giles : Just on water? Or across the board?

Mr SNOWDON: No, across the board. There is obviously already a very proactive and productive tri-state arrangement in the south-east corner of the Northern Territory around policing and a range of other matters, so that is one opportunity, I think. But in your submission you talk about the need for research to address the factors that constrain farming, beef, horticulture, and aquaculture, which I obviously agree with. These include markets, supply chain, and land and water planning issues. If there is such an issue, how are you basing your planning at the moment? If there is a requirement to do more science and get a better understanding of what is there, how can you actually now be allocating water on the basis that you currently do?

Mr Giles : Well, let's get to the point in the first part, about the regulation. I was particularly talking about mining and hydrocarbons and so forth. We are just about to sign an agreement with South Australia to standardise our regulatory environment to be aligned with that of South Australia. We have been working towards that for a long period of time, and we are about to sign an agreement with those guys. We are also working with South Australia about how we can get some modelling done and working in partnership about the idea of a gas pipeline from Alice Springs to Moomba. And we are working with South Australia in a range of other areas, including cross-border promotion around tourism opportunities. So, that is advancing in a wide scope of opportunities.

With regard to science and research, you may be aware that we have research farms across the Northern Territory that look at opportunities around horticultural and agricultural development, and that continues to go. But we need a greater level of injection to be able to expand that further. It is interesting when you look at the growing middle class and how that is operating throughout Asia and the increased demand for improved protein and beef products. The top half of the Northern Territory runs a model of Brahman beef, as opposed to the bottom half of the Territory. Brahman beef has generally been seen as going towards a lower socioeconomic market throughout Asia. Soon the Brahman beef market will have to start changing its environment, in my opinion, to be able to meet a changing dynamic in terms of the market. So, a lot of our research needs to go towards that, and we have only a limited amount of resources to put towards research in that regard.

In terms of water, we are currently doing some analysis about how we make sure that we have a sustainable water supply for the Top End, particularly the greater Darwin area. Our modelling shows that in the future we will be constrained by available water sources through storage capacity, and we need to be able to meet some of the changes in demand for that. And that is something we are looking at at the moment—how we can increase our storage capacity. We have recently had—in the last five years—an increase in our storage capacity in the greater Darwin area, but that will have to grow into the future.

CHAIR: On water, are you factoring in any opportunities you may be able to capture on stage 3 of the Ord?

Mr Giles : Yes, but with our mind to 4, 5 and 6. My understanding is that the responsibility for Ord stage 3 has been handed from the Prime Minister to the Deputy Prime Minister, and we are working with Warren Truss on that. We have been in negotiation with the traditional owners on both sides of the border—the native title holders—looking to identify which areas are native title and where the sacred sites are and trying to facilitate our way through that. We know there are significant opportunities around Ord stage 3 and that it needs to link up with Ord 2. Ord 3 is on our side of the border, but the service centre will be on the Western Australian side of the border. And we are trying to facilitate a financial outcome out of some of the native title and sacred site matters—protecting sacred sites but facilitating our way through that to make sure that we get employment and economic opportunities for native title holders and that we can build a bigger and better Ord stage 3, fully utilising the Victoria Highway and Darwin Port to get product to market.

Senator PERIS: Thank you, Chief Minister. That was a great opening statement, where you highlighted how important the injection of finances is in developing the north. Page 39 of the Commonwealth budget book, which is titled Building Australia's infrastructure, outlines that the Northern Territory government would get less than half of one per cent of the Commonwealth infrastructure budget over the next seven years. Considering that we get only $½ billion out of the $126 billion—which is less than our share per capita—how do you think this would develop the Northern Territory?

Mr Giles : Thank you for your question.

Senator SIEWERT: It's a Dorothy Dixer!

Senator PERIS: Well, I am here to develop the north as well. But this is also of grave concern considering that we actually get less than the ACT, when there is so much attention on developing the north.

CHAIR: It is the purpose of this inquiry to find out what we need to do in addition; this is what we are here for.

Mr SNOWDON: But you make a very good point, Nova.

Mrs GRIGGS: And then you get projects and then you seek funding for the projects once they have been identified.

Mr SNOWDON: No, she is making a point about the level of funding coming from—

Mr Giles : Well, I do not want to get involved in any politics on your side of the table. I do not want to talk about how the deficit has increased through forecast estimates, forward planning. But I will get to your point, Senator: it is disappointing; let's be honest. We put an application in for more roads funding. It was knocked back by the former Labor government and knocked back by this government. And if we are going to develop Northern Australia we need to build roads and bridges; it is fundamental. The communities such as Ngukurr—and I will talk in rough terms, but people around this table would know—get cut off from the rest of the Northern Territory for months and months each year. We have to helicopter food in. Wadeye, the fourth or fifth biggest town in the Northern Territory, gets cut off for five months of the year. If you have a look throughout that region out to Wadeye, in Gary's electorate, it is cut off for so long—Elizabeth Downs Station out past Tipperary. So much of the Northern Territory could be part of the food bowl, but we cannot get access to that until we seal the Port Keats Road and do a lot of work there. We have $20 million going at the moment—a joint partnership between us and the federal government. But until we fix things such as Saddle Rail and some of the area just across the road from the Daly River bridge, you are not going to be able to open that country up; you are not going to be able to get the CSO, the community service obligation, to get connectivity between those communities, to get full access 12 months of the year. Plus you cannot open up to get the road trains down there, whether it is for cattle or for whatever sort of production it might be.

So, to your question about infrastructure: you need to do it. Our challenge is not to be a mendicant state. We are moving away from that. We are starting to punch above our weight, doing things differently. Whether we need to look at infrastructure bonds or a range of other ways to get money in, such as toll roads—and I am not suggesting toll roads, for the purpose of the media—we are looking at ways that we can get some of our roads to become more economic. In the Territory we have 30,000 kilometres of road network, or whatever the exact number is. There are five kilometres that are economic. The Berrimah Road from Tiger Brennan Drive to the port is the only economic road in the Northern Territory. But the federal government wants to fund roads based on economics. The HVCI, for example, wants to fund all roads through its registration component on economics. We do not have economic roads here, apart from five kilometres, out of our many thousands of networks.

So, you need to get money into infrastructure, and part of that is working part and parcel with the federal government. If they will not do it, we will find ways to do it. I am disappointed with the funding stream that comes through in the federal budget; I will make no bones about it. But we are looking at what we can do. At the moment we have engaged a company called Flagstaff Partners, in Melbourne, to look at how we can get a financial partner to come into our port to expand the quay line, expand the hardstand, improve the container rate coming through the port. So, we are looking at how we can do that, because that meets the needs of a growing Northern Australia. I think I gave you a bit of a political hit there, but we did get a lack of investment in infrastructure. And if we are going to grow the north we need the money.

Mr Barnes : Just to back up what the chief minister has been talking about, the productivity commissioner released a report into infrastructure that was furnished to the Australian government and was the topic of some conversation heading into COAG. The formula for cost-benefit analysis that has been used is a south-east-centric formula. Basically the productivity commissioner used in his report, as an illustration, the fact that it was a terrible decision economically to build a railway from Adelaide to Darwin. And we do need to have the competing dialogue between opening up the north and looking at emerging economies and a future-proofing of the country versus immediate cost-benefit analysis. That I think will become a very important debate going forward. Transport ministers are meeting in Alice Springs on Thursday and one of the topics for discussion will be a more reasonable approach to funding the Northern Territory. Even if we move to a population share basis, we would be heaps better off than we have been in the past under many governments.

Senator SIEWERT: I would like to ask about health and health infrastructure. One of the issues I have been working on for a long time is dialysis. There is $10 million sitting in the federal coffers—sitting up here—for a specific dialysis project. It has been sitting there for three years. How do we resolve some of these really important health issues, particularly, between the Commonwealth and the Territory—the tri-state area? We know there are huge health issues, but we are not making as much progress as we should be making because there are blocks in getting this infrastructure on the ground. How do you plan to address those issues?

Mr Giles : I would argue that we are making health progress. I think that in the Northern Territory the one stand-out has been health. More success has been achieved in health than in anything else across successive Territory and federal governments. I think that is one area where there have been advances. In terms of dialysis, we raise the important question of how we make sure we get dialysis facilities for everybody. We all would like to see dialysis facilities for everybody. It partly comes down to an issue of federation—about who is responsible for what. Who is responsible for health and education and Indigenous affairs and who funds what are issues that are in the broader public discussion at the moment.

I am not making a political point here, but I will give you an example. In Canberra there are 5,200 health bureaucrats. In the Northern Territory there are 5,900. In Canberra they look after one hospital in Tasmania. In the Northern Territory they look after 63 hospitals and health centres. We spread our money as far and wide as we can. We simply cannot afford to spread that out to more and more dialysis facilities.

I will give you an example in policing. In the most recent federal budget there was an announcement for, I think, six new police stations in the Northern Territory. There is a policy to try to get a permanent police facility in every community with 300 people or more. We have around 66 police stations in the Northern Territory right now. Based on our population, if we consider ourselves to be the size of Cairns, we have 66 police station but I think Cairns has two. We are not being asked to take on another six. All people support more law and order and policing for communities. That is not the question. The question is that we might get funding to build another six, but how do we fund the ongoing operation of them when we are still so heavily reliant on GST money from the Commonwealth government and our own-sourced revenue is not high enough because we are trying to develop our economy and come out of that mendicant state. One of the challenges concerns how you increase your service delivery aspect. The feds—and this is a Commonwealth versus Territory issue and it is not just aligned to the coalition—are very keen to provide the capital, which we are very appreciative of, but the ongoing operation of some of the delivery of services is just astronomical in the delivery.

Senator SIEWERT: Unless these issues are resolved, aren't they going to be ongoing issues? I would probably take a slightly different view to some of my colleagues across the table on the subject of developing the north. It depends how you look at it. You can have some sustainable development. I totally acknowledge that. How are we going to deal with the increasing population if we cannot resolve these delivery of services issues? You are going to have a hugely increased population and more problems. I do acknowledge that the NT has made some significant progress on some of the indicators, but there is still a long way to go in terms of closing the gap, particularly. How are we going to solve those issues? Surely we cannot have a massive expansion of the agenda until we actually know how we are going to deliver services to this hugely increased population?

Mr Giles : I think it is just a matter of time. The greater the level of population the greater the level of economies of scale and the greater the level of own-sourced revenue, which means we can re-invest in some of those services, to be honest. But to keep it at the same population base means it is always going to be a challenge.

Senator SIEWERT: An example in Perth, Western Australia, is that we have a growing gap between those who are actually engaged in industries such as mining and those who are not. So we have a much more divided community, when you already have significant gaps between those engaged in the more high-paying industries and those who are not. Are you worried that that is the scenario that is going to play out here?

Mr Giles : The short answer is no.

Senator SIEWERT: We already know there is a homelessness problem. We have already talked about the increasing cost of housing in the City of Darwin, and this is also a major issue in Perth. How do you intend to deal with some of those issues?

Mr Giles : I am not real sure about the context of this in delivering for Northern Australia. But in terms of the cost of housing the annual basis for the increasing cost of housing—its valuations—was running a 11 per cent per annum over 10 years. We have brought that back to six per cent. So we have started to reduce the cost of living in terms of housing. To go from 11 per cent growth per annum to six per cent is a complete downward trend and is significantly starting to reduce the cost of living and of services. As we increase our economies of scale across a range of different areas you will continue to see a reduction in the cost of delivery of services—for example, the price of petrol. The greater demand we have for petrol and increased competition will start to drive down the price of petrol, so you will not have the price disparity of 30 cents a litre that we currently see now between some of our eastern states. A lot of that change takes time, but the trajectory we are on will deliver the change.

Mr CHRISTENSEN: I have three questions. One of them concerns the cost benefit formula you have criticised in your submission, but that question has already been answered by you and Mr Barnes. I am just wondering, though, that if there is some sort of new formula or new measure the Territory government believes should go forward, if it comes out at the meeting coming up between the transport ministers, could you forward that to the committee, because I think that would greatly help our deliberations?

Mr Giles : The analysis that was done about Tanami Road was I think a really good one. I think the formula IA used to measure community service obligation as opposed to economic opportunities, particularly around the mining sector, was quite good. That was done by GHD.

Mr CHRISTENSEN: We will have to pick that up at some stage and have a look at it. Moving to two other points in your submission. First, you have identified human capital and labour shortages as being a significant issue in the further development of the Territory. You have put a couple of policy ideas forward here, one of which we already have in existence, which is incentives for people to relocate. You have also talked about welfare reform assisting in the Indigenous space. Given that both of those policies are in place, what is the Territory looking for in addition to the current policy regime addressing those labour shortage issues?

Mr Giles : On the second point, over the last six or seven years I think welfare reform has not been implemented, but it is good to see it coming back now. I think that is really important. In regard to moving people or incentives for people from the southern states to move to Northern Australia, particularly if they are unemployed, I fundamentally do not think that policy works. As a former employee and manager in the employment and workplace relations department I do not think it worked then. As Chief Minister, now, I still do not think it works. I think there is a fundamental position amongst people down south that they do not want to move to the north. But I think we have a real opportunity for people north of Northern Australia to be able to move to Northern Australia—so, for people from Asia to come here. I think that is an important population dynamic to look at it. We are different up here from the rest of the nation in terms of our cultural dynamics and our heritage on how we have been brought up—Timorese, Indonesians and so forth—and the growing dynamics here. I think that is where we should be looking.

For a number of years the previous Northern Territory government, under Paul Henderson as Chief Minister, sought to get a regional migration agreement done for some 200 people. That was never signed off, after much lobbying by the former federal government. We are now in a position where we are negotiating with the Prime Minister to get a regional migration agreement done for around 2,500 people over a multiyear period to be able to encourage people to come to the Northern Territory to fill some of our jobs. In the context of that we have an unemployment rate of about 1.3 per cent in the greater Darwin area in the Top End, which means it is a challenge for us to get employees, which produces wage inflation and so forth. It is not just an issue for us in skilled employment—it is skilled, semi-skilled, low-skilled and unskilled. So we need to be able to track people across a broad range of areas to be able to fill some of those jobs to help us grow. If we cannot solve some of those problems, you are going to see a continued escalation in the cost of delivery of services and wage inflation, which is quite difficult for north Australia. The quicker we can sign an agreement to get a greater level of population migration here to fill some of those jobs, the better we will all be. That is going to continue to be a problem for a long period of time. As we grow and develop as a capital city in north Australia, that will start to attract people from down south. But at the moment you cannot do that—to answer part of your question—so overseas migration is important.

Mr CHRISTENSEN: So you believe it is almost a chicken-and-egg scenario: the growth has to happen here, first, before you are going to attract people from southern Australia up to northern Australia. The growth has to happen with the extra services before you really see some shift in attitude.

Mr Giles : That is one thing, but there needs to be a psychological shift in a lot of people who see the Northern Territory as being further away than the moon. A lot of people from Sydney and Melbourne think Darwin is further away than the US, for example.

CHAIR: And that is why you need tax incentives.

Mr Giles : There is all that sort of stuff as well. We put in place those incentives for employees to come up here. We also need to look at what incentives we can put in place for corporate relocation. Strategic economic zones, personal tax, corporate tax opportunities, depreciative tax and allowances can encourage the corporate sector to come up here, which will then bring people with them at the same time.

Mr CHRISTENSEN: What do you think of the special economic zone? The Territory is probably the low-hanging fruit here, because the Commonwealth can just come in and impose things without the constitutional problems. What would that look like, if we did something like that?

Mr Giles : I do not want to talk about exact components of an SEZ. I think there needs to be some financial analysis done around that. You might be talking about the wrong particular thing. Personal income tax, depreciation on business and the lower corporate tax are three things that could certainly help. The opportunities around some reform on the cost basis of doing trade over our port would be very important. Fixing up some of the customs issues would also help, in goods and services coming over the port. That also starts to make things like the railway line more viable, and it would assist in that process. There needs to have a greater amount of analysis done about the SEZ idea, about SEZs around the world, what are some of those cost components, what are some experiences around trade development zones that have occurred in Australia—and we have had one here in the Territory in the past—and how can we get the right financial investment coming through some of those incentives to be able to generate reform. We do not want to come up with an SEZ that fails. We want an SEZ that is going to immediately attract investment, particularly from overseas as well, and which can also bring about population change and drive that growth. It is not just about tax in SEZ; a lot of it is about the population migration as well.

Senator O'NEILL: Thank you for giving me the opportunity, being a New South Welsh woman coming to the moon.

Mr Giles : I was born in the Blue Mountains.

Senator O'NEILL: There you go. There is a redeeming quality, straight off. I have not been disappointed coming to the Northern Territory. I got a croc headline yesterday. I am just wondering if we are going to get a croc report tomorrow. The reality of infrastructure you have articulated very well, but one of the things that seems glaringly missing, to me, is a request for infrastructure of a digital nature. Internet access was raised yesterday in the Alice Springs hearings, as well as your positioning in relation to Asia in terms establishing a knowledge economy here. Your submission is very light on on that. One of the expectations people have as they move around is to be have high-quality Internet access guaranteed, not compromised access and certainly not high-cost access. I am just wondering why the knowledge economy and Internet capacity really is not key to your infrastructure given the nature of your young population. That is a vital way in which you would be able to balance out some of the highs and lows of the other more volatile industries that you are seeking to support with your submission so far.

Mr Giles : It is not in there because we are getting on with doing the job. When we came into government I held the portfolio of corporate information services, which covers IT. We tried very hard to get the federal government at the time, the former Labor government, to assist us in rolling out more IT across the Northern Territory. That was not forthcoming. So, we did a partnership with Telstra—individually, without the federal government—on connecting 16 communities with internet and broadband, communities such as Ampilatwatja in Utopia now have broadband and internet. Since just last Thursday Peppimenarti and Palumpa, in Gary's region, along the Port Keats Road, have mobile phone and data coverage for the first time, on a uniform tariff basis provided by Telstra in a partnership that we have done. I think it was $3 million for each party—a $6 million project, or around those figures—to connect 16 communities.

The reason it is not in there is that we are actually out there doing it. We also did not want to be political in our submission. When you look at the NBN, for example, you see that the contract between NBN Co and Telstra completely forgot about the Northern Territory. There are 34 communities in the Northern Territory that are connected by fibre optic cables. That was not part of the NBN-Telstra deal. With those 34 communities we have tried to make that, where there are fibre optics, every community along that pathway could have access to mobile phone and internet. That was not the case. We have sought to do that.

NBN Co and the former federal government were not appreciative or accepting of that idea. So we went out on our own and did that modelling. We also tried to change the NBN rollout and the digital TV rollout. That was unsuccessful, as well, with the former federal government. We are now in a position where every house in a remote community in the Northern Territory will get a satellite dish on its roof. A lot of houses in communities have a satellite dish on their roof for Foxtel or Austar. So we have a satellite dish for NBN, a satellite dish for TV, a satellite dish for Foxtel, the Star satellite system, which operates for the school education system, and then we have our own satellite system, which operates for the police network. So we have five satellite systems operating in each community, where 34 communities were connected by the fibre optic cable. It was a complete mess, and no matter how much we tried to argue with Senator Conroy, who was the telecommunications minister at the time, about fixing this process we could not make headway. So we just went on and did stuff ourselves. That is why it is not in there.

Senator O'NEILL: If your argument is that this is a great place for global business—you can come to the Northern Territory and you have fibre-to-the-premises access for everybody—I cannot understand why you are not selling that, if that is the reality.

Mr Giles : We do not have fibre-to-the-premises access; we have satellite.

Senator O'NEILL: That is in regional areas. What about here in the city?

Mr Giles : Not all areas of the city have fibre to the premises. Some are still satellite.

Senator O'NEILL: One of the things we have received in recent information for the NBN select committee is some of the particular challenges of satellite. Obviously the usage is increasing, and satellite is pretty full. With respect to HFC—which is what you are talking about in terms of the Foxtel lines—there is a submission by a gentleman called Kenneth Tsang that explains very clearly the contestation on those lines and how difficult it is to have high-quality shared distribution. Clearly, fibre to the home is a very different prospect from fibre to the node. These are things that I think connect communities, wherever you are. I come from a regional area just one hour out of Sydney. The reality is that without that connectivity, as the critical infrastructure for the future, everything else you do here in terms of hard infrastructure will be compromised.

Mr Giles : That is right. But when we talk about developing Australia's north, from a Territory point of view, are we talking about the whole of the Northern Territory. So there is one thing for people in Darwin. Parts of Alice Springs will have fibre, and lots of the other parts will have satellite. But outside those areas, and with the cost of the satellite network, it would be far better connecting people up to fibre optic cable and delivering much better services than the shemozzle of having different satellites for different programs run by the same minister in the same portfolio in Canberra. I just think it was crazy.

So in terms of connectivity we are getting on and doing the job and funding it ourselves, because we could not get any support from the former federal government. We are just rolling programs out and we are just about to start negotiations with Telstra about a new model of rolling our program out.

Senator PERIS: I have two questions, one on notice. Over at Pirlangimpi on Melville Island they have an amazing $50 million port, which they call Port Melville. What sort of consultation has taken place between the NT government and the community with regard to the port being used as an oil and gas supply hub?

Mr Giles : I cannot give you the exact answer. It is an agreement that has been undertaken between the traditional owners and the port owner. They have done the work. We have not been involved in facilitating that to occur. As I understand it, Ezion, who are the owners, have worked with the Tiwi Land Council to be able to bring that to fruition. We now need to ensure that we have a regulatory environment that can provide the safety aspects around utilisation of that port and what role our harbourmaster, pilots or some of our port officials play in the facilitation of that port. But that has been outside of the purview of us. We have been really happy that the Tiwi Land Council have used that model of self-determination to get out there and do it themselves. That is what we want all communities to do. We are pretty happy with that.

Senator PERIS: The Commonwealth budget has cut funding to local councils. What modelling, if any, do you have to access the impact of this?

Mr Giles : That will have to be a question for the federal government. If they cut FAGS grants, they should know what the modelling is.

Mr SNOWDON: I would like to make an observation. We have not had time to traverse a whole range of issues that we need to address, like Indigenous employment, education and a whole range of matters. There is one matter that I do want to place on record. What is your response to the continuing debate on horizontal fiscal equalisation and the push by some governments, principally the Premier of Western Australia, for per capita distribution of those grants?

Mr Giles : Thank you very much for your question, Warren. My response is that we will be making a submission to the federal white paper on tax reform.

Mr SNOWDON: Let me put it another way, then. Do you or do you not support the per capita redistribution? I do not. I make it very clear. I think that, if there has to be a review of these grants, they have to make sure that the principles of horizontal fiscal equalisation are maintained and not eroded. I am interested in whether you have a view which says you are moving towards supporting the idea that there might be per capita grants?

Mr Giles : We are supporters of HFE, the modelling of around 5.6 times equation. That is supported by the Northern Territory government. We will be making a more fulsome contribution to the white paper when it comes out.

CHAIR: We have a question on notice and then we will have to wind it up.

Mrs GRIGGS: The committee said earlier today that we are looking for projects to fund and will make recommendations for funding. On notice, I would like the Northern Territory government to submit all of its infrastructure priorities and road funding that it sees we should fund to ensure the development of northern Australia. Having three Territorians on this committee, there would be some support for that funding.

CHAIR: Just your top five.

Mrs GRIGGS: No, I would like an exclusive list.

CHAIR: Not exclusive for roads.

Mr SNOWDON: All out of Darwin, for that one.

Mrs GRIGGS: We have three and three.

CHAIR: Senator Peris, you could ask a question on notice or you could write through the secretariat.

Mr Giles : If you would like to send it to me, I will provide an answer.

CHAIR: Write through the secretariat.

Senator PERIS: Okay, I will do that.

Mr Giles : I will get back to you.

Senator PERIS: Thank you.

Senator O'NEILL: I will also have a couple of questions on education. I did not get to ask you some questions about that.

CHAIR: Thank you very much indeed for your time. We will get these questions to you in writing through the secretariat. We will be back up here again for a second round in Darwin—we do not have a date yet—because we have had such strong interest up here. I am sorry for the short amount of time, but we have so many people—

Mr Giles : I am sorry I was running late.

CHAIR: and we do have submissions that are available to us as well. Thank you very much for your time. That was very useful.

Mr Giles : Thank you.