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Standing Committee on Infrastructure, Transport and Cities
02/05/2018
Australian government's role in the development of cities

FINOCCHIARO, Mr Angelo Henry, Program Leader Economic Development, Cairns Regional Council

MASASSO, Mr Nicholas Charles, Executive Project Officer, Cairns Regional Council

Evidence was taken via teleconference—

CHAIR: I now welcome representatives of the Centre for Urban and Regional Studies to give evidence today. Although the committee does not require you to give evidence under oath, I advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to make a brief opening statement before we proceed to discussion.

Mr Masasso : Firstly, we want to thank the committee for the opportunity to present today and for the opportunity to provide a written submission on the terms of reference. In terms of regional development, Cairns obviously has a key interest in ongoing regional development in Australia. As a major city within the region and within northern Australia, we've made a number of recommendations in our submission, and we're pleased to see that a number have actually been embodied in recent announcements from the federal government, particularly around the Northern Australia Infrastructure Facility. We're certainly keen to engage with all levels of government regarding regional development policies, in particular those that impact northern Australia and Northern Queensland.

Ms BIRD: Thank you for your submission and the obvious real consideration you've given to the terms of reference. As you indicated, since the submission was put in the government has announced changes to the Northern Australia Infrastructure Facility. For the record, could you outline the frustrations that you were experiencing, with direct examples, where you think the announced changes may assist and if there are any other changes you would still suggest pursuing?

Mr Masasso : Our main point was around the flow of line funding to enable projects to proceed. We believe that the initial guidelines or eligibility criteria were too tight, and our recommendation was to reduce the $50 million project value threshold. We actually requested an increase in the maximum NAIF investment from 50 per cent to 75 per cent, and I see the announcement has taken that to 100 per cent. We also requested a broadening of the definition of 'economic infrastructure'. We're satisfied that all three of those have been met, and, in the instance of the percentage of debt, it actually exceeded our requests and should contribute to the flow of funds. We are also pleased to see the pipeline of projects within NAIF, both in the due diligence stage and in the pipeline phase. I think these changes will help support the flow of funds and get these projects ultimately moving.

Ms BIRD: Could you give us some examples of projects you'd be looking at?

Mr Masasso : We don't have any particular projects within NAIF itself, and we don't have any awareness of what projects are within the pipeline either. I understand they're confidential. I think five of the ones in due diligence are in Northern Queensland, but we're not privy to the details.

Ms BIRD: Understood. From your perspective, you talk about some of the challenges around private sector investment in the region. We talk to other councils that are probably similar to yours—a little bit subject to the peaks and troughs of industry such as mining. Can you give me a picture of how that affects your council area?

Mr Masasso : We have a fairly diverse economic base. Tourism is obviously still a significant part of our economy, and that has cyclical impacts which can be caused by items beyond our direct control, such as foreign exchange rates, in terms of international conditions, and that can include things like physical safety and physical security considerations as well. Our aim through council is to continue to support the broadening of our economy. In recent years, areas that have developed in that regard include international education. We have two recognised universities operating within the region. That supports our tourism sector as well. Arts and culture is continuing to be an emerging area of our economy, and that supports tourism as well. What we're aiming to do is balance the unique natural assets that we have in Cairns—the gateway to the Great Barrier Reef and the wet tropics rainforest—with economic development. They are linked. In some ways, we're in the fortunate position that effective management of those particular natural assets also supports and underpins key parts of our economy. We appreciate that underpinning the quality of life of our community, the economy and access to jobs is of key importance. Having conditions where people will invest in the region, and a policy that supports and encourages that, is obviously welcomed.

Ms BIRD: What's the population situation in your council area? Is it growing or stagnant? What are the drivers?

Mr Masasso : It is growing. It's currently just over 160,000 in our local government area. There was growth in the last year of just over one per cent. We do see an increase in population forecasts going forward. We have seen significant reductions in our regional unemployment rate. Our unemployment rate is now sitting at just above six per cent. Four years ago it was over nine per cent.

Ms BIRD: Sorry, where is most of the growth in your employment coming from?

Mr Masasso : There is a lot of construction work happening in Cairns at present. There's also public sector investment. In terms of our own council construction projects, we've had a number of major construction projects in recent years. Also, to some extent, there has been a rebound in the tourism economy in recent years, particularly following the reduction in the value of the Australian dollar. That has encouraged further international tourism. We have a significant pipeline of both public and private projects on the medium-term horizon. With low unemployment, we would see that contributing to further population growth in the next five-year horizon.

Ms BIRD: The other issue you've raised is, while there are Australian government programs such as the building better regions program, there are some challenges for local government in that they're competitive not only with local governments but with the non-government sector. I think you proposed that there should be an allocation of funding to each local government area. We just heard a similar proposition from Mackay. Can you describe for me how you might see that operating, and what you would like to see the Australian government doing? Is it a carve-out of some of the funding under the existing? Are you looking at a separate, specific type of program?

Mr Masasso : The way we see it is as a review of the funding arrangements. We see the council accessing funding from a number of different programs in a number of different departments, each with their own grant criteria—whether there's an opportunity to review those arrangements and perhaps come up with a system whereby there is a broader allocation of funds, and whether that's based on particular metrics around population, unemployment and particular industry sectors—and then having some flexibility in terms of the local government determining how that allocation of funds is then utilised.

Another option that we see, and was not mentioned specifically in our submission, is a tripartite-type funding arrangement like a city deal where there is broad agreement brokered, with the local council taking an active role in determining what the shared vision for a city and region is and what key projects, investment and policy underpin that. We would then have that tripartite arrangement where all levels of governments agree on those key priorities and investments and can negotiate the funding arrangements for it, so that it's done as a holistic process rather than an individual project process.

Ms BIRD: Where does your council sit with these city deals? Are you developing a proposal? What's happening with that?

Mr Masasso : We are doing some preliminary work on that. We're in the process of starting stakeholder engagement to develop a shared vision, which I understand is the key criterion to then progress a city deal.

Ms BIRD: Yes.

Mr Masasso : We've identified stakeholders and had preliminary discussions. We would be looking to coordinate stakeholder engagement to build that shared vision and then identify the key projects policy that underpins that shared vision and then utilise that as an opportunity to potentially broker a city deal. So it is certainly something that is within our line of sight.

Ms BIRD: Another area in your submission I want you to expand on is the potential for the federal government to be involved in creating better international connections to regional cities. You talk about the NAIF forum that was held in Cairns last year. Where do you see that work by federal government happening, other than in the example you've given—and we do have various federal departments that can work in that space: Austrade and Industry and so forth—and where do you think it might be better utilised, from your direct experience as a local government? How effectively do they work with you, and what could be improved in that space?

Mr Finocchiaro : The Northern Australia Investment Forum held in Cairns late last year was a great example of how the federal government can work in regions to showcase the investment potential within those regions. Subsequent to that event, we have been working with a number of the investors that visited and took part in the Northern Australia Investment Forum. The Cairns Regional Council continues its engagement with Austrade, particularly the trade commissioners based overseas. Those overseas offices where Cairns may have a direct air link or direct opportunities are perhaps where we could work more closely with Austrade to make sure that the people on the ground in those offices overseas have a better understanding and awareness of the investment potential not only in Cairns but across the whole region, covering off on agriculture and mining as well.

Ms BIRD: Obviously the forum was a successful initiative. Should I take it that that sort of thing hadn't happened previously? As to upscaling it across Australia—our committee's perspective—what do you think were the most significantly important parts of it that would need to be captured for future forums?

Mr Finocchiaro : The forum was obviously a result of the northern Australia initiative. We found that there were some really high-quality investors as part of that forum. It brought them into the city and, from conversations with a number of them, they hadn't been to Cairns before. So what the forum did was to showcase the growth that was occurring within the city. No matter what city this was in, across northern Australia, it would provide the opportunity for the investors to actually get on the ground and see what was happening and understand the opportunities. I think that sort of leverage should not be undervalued. Looking forward, I hope that that can continue and showcase areas across northern Australia.

Ms BIRD: So it really was that government-driven initiative but it pulled in quality investors to get knowledge and experience they didn't previously have?

Mr Finocchiaro : Correct. And that's vitally important for any investor.

CHAIR: Thank you for attending today. I'm looking at some of your recommendations—in particular, the suggestion of having 150 per cent tax deductibility for costs incurred by businesses relocating operations to designated regional areas. It's an interesting concept. Could you elaborate on that?

Mr Masasso : When we were putting those points together—there is an element of risk in any decision to locate a project or an office or an operation in a regional area or, to some extent, any area. That risk is going to enter into those decisions being made by businesses, whether they are looking to invest or whether they are looking to relocate. If there is some way that that risk can be offset—and these are potentially financial offsets through the taxation system—that can provide a positive in terms of that decision. So if a business was considering two areas to relocate—a regional area and another area—and they were comparable then the potential to gain a financial benefit through an accelerated tax deduction may help them de-risk that investment decision. So it is a way of supporting it through the taxation system.

We see similar things in the airline industry with new route development. With international route development, airlines are often looking for financial contributions—and Cairns Regional Council, along with other partners, has assisted in that for Cairns International Airport route development—to help them de-risk a decision to start visiting or to establish an operation in the area in terms of direct flights. It is a little bit similar in that it helps de-risk a decision and helps promote that process of establishing an operation in a regional area.

CHAIR: You made the comment that it 'de-risks' the decision. I would have thought it would also be a real incentive, an inducement, for a business to relocate if you are getting a higher level of tax deductibility.

Mr Masasso : Definitely. It provides that financial benefit.

CHAIR: On de-risking, it would appear that each component of this region—we are looking at Cairns at the moment—has a distinct culture, personality or activity. I would imagine Cairns is more focused on tourism. Would that be correct?

Mr Masasso : Certainly tourism is a large part of our economy. Over recent years, though, there has been further diversification of our economy. International education, defence aviation, marine, agriculture and tropical medicine have all become, or continue to be, an important part of the economy. Certainly tourism is still significant but, from council's perspective, diversification has been one of the most pleasing aspects of our economy. It helps us to have a more resilient economy as well.

CHAIR: That resilience and opportunity for growth would probably be better served by regional cooperation when, for instance, you group Cairns, Townsville and Mackay together to form a hub or, when combined, a real critical mass for a desirable destination if those three cities were connected by better transport connectivity or quite fast rail.

Mr Masasso : Any connectivity would be welcomed. Certainly we work quite closely with our neighbouring regions. We still have a bit of a tyranny of distance even between those centres. It is a four-hour drive between Cairns and Townsville, on a good day, and probably 12 hours to Mackay. Certainly any infrastructure or transport links that could improve that connectivity would be welcome.

CHAIR: On fast rail, a four-hour drive becomes more like a one-hour train trip, which would be a big improvement.

Mr Masasso : Yes, I certainly acknowledge that.

CHAIR: A theme that keeps coming back is the need to master plan our infrastructure and our land use a long way in advance. It seems that historically we have not been good at planning at all, certainly not long-term planning. So what might be being planned for the next 10, 20 or 30 years might have greater clarity if you knew where you were likely to be going 40, 50 or 60 years out. That seems to be a recurring theme.

Mr Masasso : We would certainly concur with that. Obviously, it is an area that requires close collaboration between all three levels of government. As well as the physical connectivity with transport links, digital connectivity is obviously important for regional Australia as well.

CHAIR: In essence this inquiry is to address the problems of cities in our major urban areas that have shouldered the greater burden of population growth—Sydney and Melbourne. Retrofitting infrastructure and the densification of those cities goes hand-in-hand with a strategic plan of decentralisation, where probably the greater potential lies in accommodating growth projecting forward 40 or 50 years or more. It seems that Sydney or Melbourne are bursting at the seems. Bob Carr famously said some time ago that Sydney was full—and if you get stuck in traffic you would believe it; it is overflowing. It would appear that regions like this have enormous potential for growth, especially when you consider the opportunities of tourism and the mining industry and innovation in this region and the proximity to our trading partners to the north.

Mr Masasso : Certainly. Our direct air connections into Asia provide a competitive advantage. Whilst people have traditionally lived where they work, with digital connectivity that is not necessarily going to be the case: you can live where you choose to, for quality of life purposes, and service a market that may be national and international. We strongly believe that Cairns has significant quality of life and lifestyle benefits across a range of quality of life factors, and that would make it attractive for people to move here to live. That is why we have seen sustained population growth in the region, and I think that will continue as you get better digital connectivity as well as physical connectivity.

Ms BIRD: I think you were successful in a round 1 grant under the Smart Cities program. Is that correct?

Mr Masasso : Yes, we were.

Ms BIRD: Can you describe what that is and what you are looking to achieve that.

Mr Masasso : I am not across the detail, but I understand that it was smart sensors for water run-off. I think it is around our environmental management and quality of water run-off, which impacts reef health. But I'm not fully across the details.

Ms BIRD: That's fine. There is such a wide variety of projects. So your project relates to using technology to monitor water run-off and so forth. That is obviously significant for where you are located in our country.

Mr Masasso : Yes, we definitely appreciated that grant. That is an exciting project.

Ms BIRD: One thing that is been raised with us is the capacity of regional cities to engage in innovation. Obviously, the use of technology is a significant part of that. We have had some evidence that there are some frustrations that when you try to do something a bit differently, when you try to apply some innovation, the long-term well-established regulations, controls and so forth can be quite prohibitive to that. Is your council looking at any particular innovative approaches? Do you think federal government could better support councils being innovative in water resources, energy, infrastructure and transport?

Mr Masasso : Certainly around environmental management—programs similar to smart sensors—and what that means for the reef. A smart decision is a decision that ultimately should improve the quality of life of the people in the community. The key to that is having access to the right data. That requires an investment in technology resources to make sure you are capturing the data properly, cleansing it, making sure you are not swamped with data and that it is correct. It is not necessarily always hard infrastructure but if there are programs that can support that data collection, and data management and data analytics, I think that will lead to better decision-making. Ultimately, I would see that data being a community resource as well. It could be opened up to the community to enable them to make their own decisions—whether that is a personal decision or a business decision. It affects all aspects of our operations. We have significant investment in water and other infrastructure. We are looking at ways we can make sure we've got the data around the condition of that infrastructure so that we are not replacing it purely on time cycles but have data around the condition of it so that where the opportunity arises we can sweat those assets to the maximum possible. So it is about getting the best bang for buck for money spent by all levels of government.

Ms BIRD: That is very useful. Throughout the inquiry we have had a number of data analysis organisations and so forth raising the opportunity that data can create for better planning. One issue that some of them have highlighted is the potential to drive a greater divide between big cities and smaller cities just because of the capacity and cost to be able to do that effectively. Can you give us some insights from your perspective on what you see as the challenges in doing that. Is it a cost challenge? Is it expertise? What is your view on those?

Mr Masasso : It is probably a bit of both. It is certainly a cost challenge in implementing the systems to capture and analyse that data. Information technology jobs around data analytics have tended to gravitate towards capital cities. But I would come back to the lifestyle benefits of Cairns. A number of IT professionals have recently relocated to Cairns and are operating their businesses from here; the business itself doesn't operate in Cairns, but they are living here.

Ms BIRD: What's your current broadband delivery like across Cairns?

Mr Finocch iaro : The NBN has been rolled out and I think that rollout has been completed. In terms of the connectivity, we do hear mixed reports. Generally the NBN is able to look at and address those issues. We don't have fibre to the premises; it's fibre to the node, as I understand it to be the case. Given our tropical conditions, I understand there have been issues with some of those in terms of the technology around—

Ms BIRD: Where the copper is still in the ground?

Mr Finocch iaro : Yes.

Ms BIRD: I'm from Wollongong, so it's not tropical, but it's high rainfall, and it's a similar challenge for us where copper is still on the ground, with what it does in the pits. So you're experiencing similar challenges?

Mr Finocch iaro : Yes.

Ms BIRD: There has been plenty of evidence—we tend to get caught up in talking about road and rail, but having communication connectivity is so important if you're trying to diversify your economy to get those workers into areas.

Mr Masasso : I couldn't agree more. That's the first question people from an information technology background ask: 'Can I have reliable access to broadband at appropriate speeds?'

Ms BIRD: Yes. You were talking more broadly about expertise and capacity. Sometimes councils get very innovative and ahead of the game in this space because they happen to be lucky enough to have someone who really gets it. Some of the concerns and issues that have been raised by providers present an opportunity for federal government to do some capacity building with local government in that space. I'm interested in your view on that.

Mr Masasso : Yes, we would certainly welcome that. Again, we'd certainly be happy to learn from experiences of others. Oftentimes council is not at the very forefront of technological change. I think there's an expectation in the community that we are, to some extent, risk averse. Whilst not being at the very forefront, we want to be in that front wave, I guess, so that we can be taking the benefit of those advancements.

Ms BIRD: Thanks for that; I appreciate it.

CHAIR: In your submission you talk about the need for long-term planning and say that local governments are best placed to undertake the master planning. We had some concerns expressed by the James Cook University this morning in regard to Townsville and the need to not commit the sins of the past of having broadacre development and to look at densification around transport hubs, which is similar to evidence given in Hobart recently. Are there similar thoughts taking place when you talk about master planning for Cairns?

Mr Masasso : In terms of densification?

CHAIR: Yes. We are finding that inevitably we are committing the sins of the past in just having endless suburban sprawl, which then manifests as commuters try to come into the CBD areas of congestion and then there is the need to retrofit infrastructure, which is costly. It's better to have planned, in advance, reserve corridors and to have had the purpose of infrastructure being designed and planned and working hand-in-hand with land use. So when you're talking about your long-term planning for Cairns, are these issues being taken into consideration?

Mr Masasso : Yes, they definitely are. We're a fairly linear city in that we're bordered by the sea on one side and the Great Dividing Range on the other. That provides another challenge as well. Within our planning there are certain sectors of our city. To the south we have Edmonton town centre, which has a number of proposed developments included within our planning processes to try and encourage a decentralised town centre. The other thing that we have at the moment is a city centre master plan, looking at what the best uses for our city centre are. It's not just about continued development; it's about what the best uses are and what people want to see in that particular area.

I'm not a planner myself, but I understand our planning scheme does provide for densification of housing. But we are to some extent driven by the market, and we still find that people in Cairns expect—as I would expect they do in broader Australia as well—to own a block with a detached house. That in some ways does impact the market for the denser housing options, but hopefully that will change over time.

Ms BIRD: One of the consistent messages from regional cities, in terms of decentralisation, has been that the idea of every regional city saying, 'We want to grow; we want to diversify, so send government, whether it's departments or initiatives, our way,' will only really work successfully if it builds off a niche or particular expertise of that city. So, if there's something established, you develop that, because that will then have natural synergies to the private sector and so forth. Within that framework, how would you describe your council and its specific opportunity that we should be looking at?

Mr Finocch iaro : I completely agree with those comments. Each regional city, or each city for that matter, has a regional specialisation. For Cairns, obviously our tourism industry has afforded us opportunity, in terms of international connections, which, using those new connections, has then flowed through other sectors such as international education and opening up our agricultural industry to potential exports. So, it's about trying to build on those specialisations, rather than cities competing for the same industry or for the same dollar. Cairns, Townsville and Mackay, as you've previously suggested, should work together to say, 'Well, this is one area that we specialise in; let's all get behind that,' so we're being more efficient in how we allocate money and not diffusing or, I guess, devaluing one industry and one area that might have potential by spreading that into another city that's not as strong in that area.

Ms BIRD: Yes—so a bit more strategic about that approach?

Mr Finocch iaro : As I said, Cairns, Townsville, Mackay—we all have a specialisation, and working together to realise and grow each of them would go a long way towards efficiencies.

Ms BIRD: Do you think there's a useful role for the federal government, whether it's through the City Deals program or a national planning initiative, to actually work with regional cities on developing that up more fully?

Mr Finocch iaro : I think all three levels of government should come together in that area. I know that state governments obviously invest heavily in different sectors, so I think all three levels of government coming together to agree on those specialisations and how we allocate funding moving forward would be the way to go.

Ms BIRD: Great. Thanks for that.

CHAIR: Thank you for your attendance here today. If you've been asked to provide any further additional information, would you please forward it to the secretary by Friday, 11 May. You'll be sent a copy of the transcript of your evidence and will have an opportunity to request corrections to transcription errors. Thank you again for your attendance.