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Northern Australia Agenda Select Committee

DALE, Dr Allan, Chair, Developing Northern Australia Conference; Chief Scientist, Cooperative Research Centre for Developing Northern Australia; and Professor of Tropical Regional Development, James Cook University

PENRITH, Mr Anthony, Founder, Gamarard; and Managing Director, Kowanyama BioFutures Enterprise Pty Ltd

PETERS, Mr Stewart, Adviser, Gamarard

Evidence from Mr Penrith and Mr Peters was taken via teleconference—

Committee met at 08:49

CHAIR ( Senator Watt ): I declare open this hearing of the Senate Select Committee on the effectiveness of the Australian Government’s Northern Australia agenda. I begin by acknowledging the Mbabaram people, the traditional custodians of the land on which we are meeting today and pay our respects to the elders past, present and emerging. On behalf of the committee I welcome everybody to today's hearing.

This is a public hearing, and a Hansard transcript of the proceedings is being made. The hearing is also being broadcast via the Australian Parliament House website. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It's unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It's also a contempt to give false or misleading evidence to a committee. The committee generally prefers evidence to be given in public, but, under the Senate's resolutions, witnesses have the right to request to be heard in private session. If a witness subject to

answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground on which it is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may, of course, also be made at any other time.

I welcome our first witnesses. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to each of you. I now invite each of you to make a short opening statement, and at the conclusion of your remarks I'll invite members of the committee to ask some questions. Do you want to lead us off, Dr Dale?

Dr Dale : Thanks very much to the committee for the opportunity to speak this morning. On my background in relation to the conversation today I'd draw on a couple of key roles. One is as chair of the Developing Northern Australia Conference and the other is as the chief scientist for CRC North Australia. And the role I play in research around a whole lot of issues—social, economic and environmental—across northern Australia. A lot of the stuff I'm drawing on really draws on the State of the north report recently released by the CRC North Australia, and I'd direct the committee to that for a bit of further material. I've provided a couple of pages as background, as well.

Generally, the main point I'd like to stress is that a lot of the focus for the committee to date has been around the role of the NAIF particularly and, if you like, the concessional finance arrangements associated with the development of the northern Australia agenda. From a lot of the work that we're finding now through the CRC North Australia and other areas, we're of the view that finance is not necessarily the major constraint. In addition to NAIF there is a range. We've probably never had it better in terms of concessional investment and private sector investment. We know there is very significant investment interest in northern Australia from international investors, as well as from domestic investors and people in the northern Australia landscape, such as landholders and businesses—small, medium and large businesses—in the northern Australia landscape. So we know the investment interest is there and the finance interest is there. A lot of the evidence with the work we've been doing through the CRC is suggesting that we actually are lacking a very clear pipeline, if you like, of investable development opportunity to progress to finance and finance investment arrangements. So we think it's great to see the changes in the NAIF—they're moving in the right direction. There are great opportunities in terms of finance, but we're basically of the view that northern Australia is quite a contested landscape. It's not impossible to resolve those contests in the landscape but it does take the difficult work, I suppose, of the hard yakka of strategic land-use planning, infrastructure planning and support to get investors to the point where they're prepared to invest, take the risks and get to a pipeline of investments, at the end of the day.

The paper I've given teases that out in a bit of detail. One of the first parts of that that we're really focused on is how might we go, particularly, in relation to agriculture, because agriculture remains a very significant development opportunity—both agriculture and aquaculture—across northern Australia. We've just done about 18 months worth of quite detailed work with the Western Australian, Northern Territory and Queensland governments around some of these issues. Generally, we're finding there are about three or four big issues that need to be worked on, over the next period of time, in particular. We've got to have a much clearer focus of where we want to prioritise our agricultural development effort. North Australia's got a great contribution to make, relative to the 2030 targets, that NFF has set nationally for the growth of agriculture, but we are going to have to focus trilaterally between the federal government, state governments, territory governments and local governments to progress those agenda with industry.

We've got some significant problems about getting the strategic land-use planning that's required to resolve major issues associated with water allocation, vegetation management, infrastructure, workforce services and communications, those issues that are fundamentally required to be in place before we can see significant agriculture developmental progress. I said at the conference, a couple of weeks ago, this is not particularly sexy work but it is crucial work that needs to be done if we are going to see investment confidence raised. That interfaces with the development approval process, and here I draw attention to the role of the Environment Protection and Biodiversity Conservation Act review. If we get the foundations of that review right and get good quality devolution of those responsibilities to the states and the Territory, with good support from the Commonwealth, we can see, I think, both better environmental outcomes in the landscape and, more importantly, greater economic incentives to get jobs done. That really requires building partnerships at the project level, at the place based level, and back up at the state level, going forward.

The rest of my paper talks around a number of other key initiatives we think are really crucial to help build this pipeline of investment. We see the national water infrastructure facility that's been in place to support the first range of water infrastructure feasibility studies as having been quite successful, out of the first range, but there's a lot more work needed to prioritise where that effort goes. We think the formation of the National Water Grid Authority will be a good step in that direction. But even when infrastructure is put into place, like Rookwood Weir or Big Rocks and other developments that are happening, there's a huge amount of planning and support work that's needed for those communities to get the best value out of that water and to make it work effectively as well.

We think it's quite crucial, and not dissimilar to that, that there's something along the lines of a supply chain development fund that supports the building of collaboration around these agendas and takes us to the feasibility for critical supply chain infrastructure, not dissimilar to the Water Infrastructure Development Fund. We think this leads to tying back in to opportunities presented through the Regional Comprehensive Economic Partnership agreement: what is our strategic trade relationship and how do we start to build those foundations to ensure that we've got the demand that we need to see these go forward effectively?

They're some of the core things we think are quite crucial in the bigger context of agriculture, but in the context of bigger regional development we think it's time to also refocus our efforts at the larger townships across northern Australia, from Karratha, Broome, Kununurra and Darwin, and right down the east coast of Queensland, from Cairns, Townsville, Rockhampton and Mackay. That's going to take, I think, something not dissimilar to the regional deals approach, one that's much more based on strong partnership between local government, state governments, the Territory government and the Commonwealth, really clear land-use planning—again, that is the key to driving investment—and, behind that, the long-term infrastructure investments that are required, and tying that up to population and migration strategies as well.

We think there are crucial parts of that that need to play out. We think there's a very strong need for a much stronger place based approach to both energy security and affordability as well as communications and telecommunications. We think a layer of that, particularly for regional and remote communities, like Jack's and others—there's a crucial reality to get those agendas in place.

There are other components to what I'm dealing with in the paper, in the context of workforce and workforce development issues, and biosecurity, and a strong reminder that traditional owners have rights and interests across, at least, 93 per cent of this landscape. I draw to the committee's attention the work of the Indigenous reference group. There has been fantastic policy work done by the IRG over the last couple of years, but we now need to progress into implementation of that as a mainstream part of the northern Australia development agenda as well.

Finally, to keep this agenda strong, the governance arrangements associated with the profile and progression of this agenda need to stay strong as well. Up till now, we've had the northern Australia ministerial forum, the strategic partnership and the northern Australia senior officers network group. I think the basic architecture of driving this forward is there; I feel that that can be used much more effectively to drive the agenda. In the current re-split of the national cabinet arrangements, while there's a short-term future for the ministerial forum we think it really needs to be a long-term agenda and a really cohesive, forward agenda which brings that cooperation between the states, the territories and the Commonwealth to the fore. It would be great to see a strong relationship between that process and the national cabinet process. More importantly, we need to reinvigorate the state and territory cooperation with the Commonwealth.

Hopefully I got most of my statement out in my five minutes! There's a paper of three or four pages which I hope gives you a good sense of it. The big issues like insurance need to stay on the table as well, but that's such an obvious one that I haven't put it in the paper. But hopefully that gives a good background on where we're coming from on this agenda. Thanks for the opportunity.

CHAIR: Thanks very much, Dr Dale. We will come back with some questions soon. Mr Penrith or Mr Peters, would you like to give us an opening statement as well?

Mr Penrith : Firstly, before I start, I want to acknowledge the traditional owners of the lands on which we all meet and pay my respects to elders past and present, and those who may be listening. I also want to thank the committee for the invitation to present here today. I know that a lot of submissions have been put in, and to be one of those submitters is certainly a privilege and an honour.

As an Aboriginal organisation, we want to talk to the committee mainly about our journey and trying to develop an irrigated agricultural project in the north. Just on some practical things: I've heard what Dr Dale has said, and much of that is true. On many of the things we've encountered in trying to get a business case for our proposal: I think the really big gap there has been that there is no money around for business cases. We've been everywhere and we've been unable to get it. Particularly for an Aboriginal enterprise, with closing the gap and the priority of that, it just seems to be non-existent.

For us, our journey started about 5½ years ago. We commenced looking at this region and the resources that are there before the white paper on developing the north was launched. I was at that launch. We presented a proposal to the government then. It has been five years of hard yakka, without any government resources, trying to get something up and going.

I will provide an update since we put in our submission. We have created Kowanyama BioFutures Enterprise. It is now a company, and that's the development vehicle we hope to take forward. We have a board that includes Rowena McNally, John McLean, Kaye Basford, myself and Beverley Compton. We have set aside two board seats for traditional owners, as we believe that this project will be a lighthouse for how traditional owners can benefit out of development in the north. As you might know, we've had a number of mining booms that are all on Aboriginal land across the north and our communities just haven't progressed in that time.

I have provided to the committee a draft initial advice statement that we've given to the Queensland Coordinator-General. We believe that that will trigger an application from the Queensland government to the National Water Infrastructure Development Fund, so hopefully we can finally get our business case funded. I will just pass you over to Stewart, just to give a bit of a background on what the project is for the committee.

Mr Peters : The project is a $3 billion integrated water, farm and bioprocessing project located between Kowanyama and Pormpuraaw on the Gulf. We divert around 800,000 megalitres of water off river, so we take some water—about half of it—from the Coleman River and that goes south. We also take some overland flows of water that would normally run into the Alice and Mitchell rivers. So we are not actually damming any rivers, just diversion, like a channel off the river into a water storage. That water storage will hold around two million megalitres of water, which will give us 100 per cent reliability with respect to the water supply, which is absolutely critical for large investments; it has got to be 100 per cent reliable.

We then take that water to a farm of about 65,000 hectares. That farm is designed to have subsurface trickle irrigation, so it is a very efficient farming system. We also put levies around that area. It is in a floodplain so we use conventional floodplain technologies which are widely used in Queensland and in inland Australia to protect the farm. In doing so, we also avoid sediment loss. There is no sediment loss runoff from the farm; we capture all that on-farm and we re-use that water. So it is very reliable, using technology and lessons that have come from other farming districts—the Burdekin and other areas of Australia.

Co-located in the middle of that farm is a processing precinct and, because we have water in the tropics, we grow sugarcane, which we are very good at doing, as anybody up north would know; we are world leaders in that regard. We take that sugarcane and convert it to a number of products, raw sugar being one of those. Again, we have a London metals exchange type market, so there is always a buyer of last resort, so it is quite bankable. We also have this biomass that produces very low-cost electricity—all renewable. We take that to produce our own fertiliser like nitrogen. We bring in potassium chloride and convert that to potassium sulphate. We need a lot of chlorine to clean and maintain a long life subsurface trickle system in the farm. We also bring in phosphate rock, which we know is available in that region or at least in the north-west there. We take that phosphate rock, and that provides the phosphoric acid, which is also needed by the trickle system to keep it clean and operational, and provides fertiliser. It also provides lime, which we use in the sugar mills. We also take some of the lower quality sugar, which we convert to ethanol. About half the weight of the material that goes into making ethanol becomes pure carbon dioxide. That carbon dioxide we combine with hydrogen, which we are able to produce from the excess electricity that is available on-site from the biomass. It is as stranded location, so we have to do something with all the biomass and all the electricity. We can't just put in a wire and sell it somewhere, so we convert that to liquid fuels, which we can sell. We do use that liquid fuel, dimethyl ether, to power the tractors and everything.

So for the first time ever really in any farming district, we are becoming carbon neutral, if not sequestering carbon dioxide. This is the way forward for agriculture around the world—to be a carbon sink, as well as produce a multiplicity of products. With all the water and all the energy, we have about 2,000 hectares of fish ponds, which is the first use. From there, the water goes back to the farm and is used to irrigate. Of course, we still have a lot of biomass left over. We're able to convert that into stockfeed, so we fatten cattle and process those and supply the market in the US.

CHAIR: Mr Peters, can I just interrupt you there. Thank you for the overview. I do make sure that we leave plenty of time for questions, because the three senators have all got long lists of questions. Could I just ask you to wrap up shortly so that we can move on to questions.

Mr Peters : I think that really sort of covers it. It's an integrated operation so it has to be large to meet the lack of infrastructure. It provides around 3,000 jobs at peak during construction, 1,500 ongoing. So it's a project that can deliver a lot to those remote and disadvantaged communities. Thank you.

CHAIR: Thank you very much for that. I might just kick off with some questions and then go round the committee if that's okay. Dr Dale, can I just pick up on a couple of things that you said at the outset. This idea of needing more of a strategic plan and land use planning for the northern Australia agenda—am I right in thinking that your view would be that, while there certainly have been some achievements through the agenda to date, if it's really going to succeed, it needs a clearer sense of direction around the types of industries that can prosper and the actions that are needed, whether they be about resolving tenure issues, investments in infrastructure, skills? Is that the kind of thing that you mean by having a clearer plan?

Dr Dale : Yes. I think that starts with a bigger, stronger vision of what we think that looks like across northern Australia. There's that whole-of northern-Australian vision about what that looks like—how we maybe get better integration between our industries, particularly between the resources sector, agriculture, energy and other key sectors. That sets the scene there for where our development opportunity really sits and where we need to put in the significant effort to do the second layer, if you like, of very significant strategic land-use planning.

I think it's important to understand that the northern Australia landscape generally is very different from southern Australia, where, let's say, we've got a key council that's got the resources and capability and all of the responsibility to say, 'Resolve those public policy issues about where development can happen, how it gets done and how the infrastructure follows.' Northern Australia isn't quite like that. The capacity of councils to drive significant land-use planning is not particularly strong. There's a great desire to do it but not a strong capability and resources behind those councils to do that work. As a result, most of the decision-making is fragmented between multiple bits of legislation. So it might be the Vegetation Management Act, it might be the Water Act, it might be the Land Act, it might be issues associated with native title and regional ILUAs that need to be done. If you think of all of those bits being done separately and in silos, with nobody responsible for actually bringing them all together into one integrated package, then if there's an investment interest wanting to come to the table they've actually got to work their way through an incredible set of silos, often in three layers of government, and the level of contestation around all that is quite strong. The north has fantastic environmental values which need to be looked after, we have strong traditional owner interests that obviously need to be progressed and supported and we have strong economic need. Unless there's something that can pull those together into an agreement, or a clear way forward, then it's almost impossible for the major investors to really come behind it and progress. So we've got to start with a high-level vision; we've got to really then drop into where that opportunity is; then we really need trilateral level agreements, I suppose, about how we take that forward; and then, finally, we've got to integrate that through much more coordinated development approval processes.

In the work we've been doing lately, we've seen some good examples of how that can work—for example, under the state development act in Queensland, under coordinated projects—but we've also seen cases where the Department of Agriculture and Fisheries, DAF, in Queensland has actually concierged or case-managed developers through major processes like that and achieved much greater coordination. So it's about the vision as well as the way we go about supporting the development approval and progression.

Senator ROBERTS: I'll just jump in there—and I want to compliment you on your five-minute introduction and also that response there. What are the costs of not doing what you're saying? Basically, people are going to be stifled in northern Australia; is that right?

Dr Dale : I use an iceberg analogy. There are the people in northern Australia above the water who are struggling along with lack of clarity, but they're making some progress in getting things done. Below the water are all the people who don't come because that work has not been done. It doesn't cost a huge amount of money; it's just that it's not seen to be action oriented.

Senator ROBERTS: What I'm getting at is that you've made a fabulous summary and you've painted a very good picture—a sad picture, if you like. The cost of not doing this is huge. We must do it.

Dr Dale : Yes, and that's why I used the iceberg analogy. The people who don't come are the people below the water, and that's the vast majority of investment opportunity. So it's lost opportunity that is the real cost.

Senator ROBERTS: And the people who are there now will be the ones who suffer most.

Dr Dale : These are the guys struggling, and they're making it through, but then there's a huge amount of investment that just doesn't come, and that's really the cost I'm articulating.

CHAIR: You got cut short at the end of your previous answer, but I'm aware that in Queensland, for instance, there is a Coordinator-General whose role, as I understand it, is to chaperone a project through at least the various state approval processes.

Dr Dale : Yes.

CHAIR: Is there something deficient with that process, or do you think the issue is more that it's not always just a matter of state regulation; it's that idea that it's got to cross all three and projects can bounce between all three levels of government?

Dr Dale : The Coordinator-General is proponent led still, so it still takes a proponent to come to the table and say, 'We want to go through a coordinated, integrated project approval.' But, even before we get to that, there's a much higher level of policy consensus that's needed to say, 'Well, where would we potentially see significant development activity occur and how would we really pull over those big issues that need to be resolved at that scale?' That then sets the scene for major proponents to come to the table. So, if you like, even in that system the State Development and Public Works Organisation Act, which establishes the role of the Coordinator-General, is a good piece of legislation, but it relies still on a proposal and a proponent wanting to run through the process. So there's a lot of upfront strategic work that doesn't sit in place, even before we get to the use of the state development act to progress these agendas.

CHAIR: Thanks for that. You mentioned that you thought there would be some benefit in having a supply chain development fund. Can you just elaborate a bit on that? What would that do? How would it work? What would be the benefit?

Dr Dale : This is based on what we have seen working quite well. In fact, Anthony mentioned this issue of feasibility money as one of the issues he's interested in. What we've seen work well with the National Water Infrastructure Development Fund and the northern Australian component of that is that there's been quite a lot of money spent on water based analysis. In the last 10 years, we've seen the FAGARA studies in the gulf and we've seen the NAWRA work that's done by CSIRO around water opportunity. That's the first stage of investment in analysis to get the data on the table that's needed to know what we've got available. The National Water Infrastructure Development Fund then provided money for feasibility to start to bring the parties together, and that gets us to the point where capital can flow.

We think the equivalent potentially works for supply chains, so CRCNA has been investing quite a lot in supply chain analytical work. We've now seen some really good supply chain collaborative studies and analytical pieces of work in Townsville; in Cairns, around the airport and airport opportunity; in Mackay-Whitsunday; in Rockhampton; increasingly in Darwin; and in the north-west of Western Australia. So the analytical work has been done.

In supply chain development, though, they really rely on collaboration between many parties, from landholders and producers to the transport industry to local governments to investors in infrastructure that need to follow these through. So we think the work that next needs to follow is getting those real supply chain collaborations in place. Nobody takes responsibility, because everybody's responsible. It's one of those things that just don't happen because nobody actually has responsibility for making them happen, but we think there is a need to stimulate those collaborations. Then the next step is really the feasibility around the major supply chain infrastructure that's needed, whether it's cold storage facilities or significant processing facilities. The potential to take this from raw product to processed, value-added product is really important as well, so we're starting to get that depth in the economy from the work that we're trying to do. Then we get to finance, and we think there's plenty of finance out there, whether it's in the grants context, in the NAIF, in the Regional Investment Corporation or in the CEFC, and there are the private sector finance opportunities as well.

So the missing bits are those two bits in the middle for us: the supply chain collaboration components and the work that needs to be done to really get the feasibility in place for critical supply chain infrastructure.

CHAIR: Thanks for that. I have plenty of questions for each of our witnesses, but I might give Senator McDonald a go and see how we go for time.

Senator McDONALD: Thank you, Chair. I am going to start with Gamarard, and I will come back to you, Dr Dale. Anthony, I noticed in your submission that you're calling for a new regulatory approval framework. We've just heard more evidence about the issue for proponents getting state government, federal government and local government approval in North Queensland, particularly on the cape. Do you want to expand on the framework? Could you elaborate on that?

Mr Penrith : The major issue for us is because we're an irrigated agricultural proponent. In the Mining Act, if you find a tenement of resources, whether it's gold or any other thing, you can actually get a mining licence quite quickly; there's a mechanism in the Mining Act for you to do that. Because we're looking for a water allocation, we've found that there is no mechanism for us in the Water Act. So we have to go back and look at all those things, just in the water aspect, and then you've got land clearing and environmental issues and others. I think it's good that we're now looking at it becoming a coordinated process through the Coordinator-General. But, when we're looking across northern Australia, we need a one-stop shop as a proponent to go to and say, 'These are all the things we can help you manage through the system.' It's very complex.

In the last probably five years, I've found that, because the synergies aren't there at the federal and state level, not even including local government, things don't really happen. It's just so hard. A new development framework for the north would assist proponents such as us—and I can understand others doing all these market sector things. When you want to develop something, you need a guide to do that. I guess it's been very hard, trying to manage our way through all those systems. If one agency doesn't like you as opposed to another agency, there's no real mechanism to work through that, I guess.

Senator McDONALD: You're talking about your project, which is a very significant sized project. We've talked about a coordinated approach. What about if you were a smaller proponent? If you actually already owned the land or had a joint venture or a partnership agreement, that would fall outside that coordinated approach. Is what you're talking about with the regulatory framework being more approvals driven a cultural issue, in that the departments at a state and federal level are not designed to approve projects; they're designed to stop projects?

Mr Penrith : I'm not sure whether that's the case. When you look at the mining industry and the mining sector, that's a very mature sector, and everyone knows the development process that everyone needs to go through. If you're a grazier or a small horticulturalist who wants to do something on your land, if you've managed to get someone who's interested, it's still very hit and miss. There's no clear framework for you to say: 'I want to develop my land in this way. How about you help me?' Whether you're a large proponent such as us or you're just a normal grazier sitting out there in the gulf and you want to do something on your land, or over in WA, how do you steer yourself through everything?

The amount of regulatory paperwork there, even if you're a smaller proponent and a small family operation, is still a concern in trying to have a profitable business and stay on the land. I think that's one of the things that has led to a lot of our young ones moving south and moving to bigger centres. We haven't been able to make it easier for those who actually want to do something, because they're stifled by an unknown.

Senator McDONALD: It's an expensive unknown to go through that process too.

Mr Penrith : Yes.

Senator McDONALD: What interest have you had in terms of private sector investment? Have any barriers to investment been raised with you by potential investors?

Mr Penrith : Stewart, I might ask you to talk on that.

Mr Peters : We talk to investors that want to invest in agriculture. But they recognise that there is no regulatory link between a water allocation and environmental approval. So an investor can spend $20 million and go through all the environmental processes—get full environmental approval from the Coordinator-General and everyone else, the federal government, EPBC and so on—and still not get an allocation of water. It's just another resource; you can buy and sell water in some places. But, for some reason, you cannot get a link. No investor is going to take a binary risk where they can spend $20 million and get nothing. It just doesn't work that way; it's too risky. There's a market failure, and to overcome that we're seeing governments put money into some business cases to try and get beyond that regulatory failure. But without a process in place to provide a conditional approval for water allocation subject to environment approval, it becomes very difficult for the private sector to participate in the early stage.

Senator McDONALD: That is a terrific point because this is exactly the blockage that we now have with Big Rocks Weir and the Richmond irrigation scheme. It will no doubt be the same with Hell's Gate and Hughenden. That point you made about a water allocation subject to an environmental approval is a point well made. It's a much more adversarial approach that both departments—the environment and Coordinator-General—and NRM all stake out their own turf pretty firmly; you can have an approval under one, but it doesn't mean that there'll be an approval under the other. Thank you very much for that.

Professor Dale, what do you think is the single biggest inhibitor of development in north Australia? You've made a terrific presentation and raised a number of issues, but is there a silver bullet or is there a lot of hard work to do?

Dr Dale : Unfortunately, there are no silver bullets. But we do know the jobs that need to be done. There are a series of jobs. I think we've tried to articulate a fair few of those. If I really have to put my attention to where—and let's take agriculture as just one example of key investment—at the end of the day, the focus is on where we want to see agricultural development happen, No. 1. We start to prioritise a little bit between the layers of government. There's a bit of a stronger sense between the Commonwealth, the states and the Territory about where they can see agricultural development effort. Then it's that strategic land use planning and integrated water planning that's really required. Anthony's case brings that out as a clear example where, if we're clear about where we think the development's going to occur, we start to then bring all of those silos together into one integrated vision of what that looks like. That fundamentally integrates the vegetation, the water and the regional ILUAs that need to be in place, and starts to give us the opportunity to play into integrated infrastructure provision and support and workforce development service capacity as well. Without those foundations in place, the risk is, as the example has been talked about here, just too great for people to work through this incredible level of complexity.

So I'll give an example of where that works well: a place like Mareeba Dimbulah irrigation area, by virtue of a lot of history, does actually have a lot of those things in place, because of a lot of background work that's been done in the past. So we're seeing three to four per cent continuous growth in agriculture in that region and have done for probably 15 years now. If anyone has gone to Mareeba lately, they'll be caught in a traffic jam going into town. To me, Mareeba is a good practical example of a place where we've got a lot of those things sorted out. It could be done better, but it certainly has given confidence for the agricultural sector.

I want to stress how important the small to medium part of the sector is within agriculture and other sectors in northern Australia. It's not all about the large investors. The vast majority of work is done at farm scale or corporate farm scale, and those guys struggle if the water is not well allocated and if the frameworks for investment of infrastructure, resolution of native title tenure and the vegetation related issues are not clear, then they'll potentially struggle to get through that.

I'll also stress this is a major issue for traditional owners right across northern Australia. As people have got their rights and interests resolved through native title and other processes, people now are aspirational about how they mobilise those rights. Exactly the same dilemmas face traditional owners as well. This is a north Australia wide agenda. It faces traditional owners; it faces the traditional pastoral and farming community; and it faces those external investors, who could come but probably won't because it's just a bit too hard.

Senator McDONALD: The previous mayor of Tablelands, Tom Gilmore, said to me that he doubted that the Tinaroo dam would be approved now, particularly under feasibilities looking at a 30-year approval. We know that Tinaroo was producing about half a billion dollars worth of agricultural produce currently. You talked about it growing at three per cent a year?

Dr Dale : Yes, three to four per cent.

Senator McDONALD: In a nutshell, people in the north look at projects like Tinaroo, but in this current regulatory environment we can't approve projects that we know have benefited us so much; we seem to have lost our way in understanding the difference between process, regulation and outcomes. Is that something you can talk about?

Dr Dale : Yes. You mentioned culture before. I think that sort of issue of culture of how we go about facilitating development is an important part of this conversation. Being someone who's been in government—historically I've spent time in government as much as out of government—I think there was a period about 20 to 30 years ago where a lot of the regulatory foundations needed to be set, but we possibly at that point lost the business of how we facilitate development. So in Queensland the Water Resources Commission came to a close, we went back to lots of bits of isolated regulation and we said to the private sector, 'You work your way through all that'. So I do think across the layers of government that culture of how might we facilitate as well as achieve our environmental and regulatory standards has been a bit lost. I think the issue of the cooperation between the feds, the states, the territory and local is really crucial. If we line those three up, we're all on the same ticket about moving forward. In the modern world, for larger development schemes, we actually need that level of cooperation for the finance, for the legislative and regulatory responsibilities and for the cooperation on infrastructure and those sorts of issues. If we can nail that issue of the collaboration and focus on where we put our effort, if we put our focus back on how we facilitate that while still achieving our environmental and regulatory standards and meeting our social obligations then it is possible that it will change that culture. There will be a cultural change required to achieve that, I think.

Senator McDONALD: The CSIRO has done a great deal of work on water potential in the north. Do you know if that identification of good reliability has been worked into state and territory governments? So if we think of the Mitchell and some of the others, has that been worked into—

Dr Dale : Not to the extent that I would like to see. I think that is important work and it's a contribution to the bigger story, but it hasn't yet sort of brought us to a really serious conversation between three layers of government and industry about, 'What do we do with that in terms of prioritising where we put our effort?'

I know coming out of that work the CSIRO guys might have a quite clear view of where efforts should be focused, but that's not a socialised conversation between the Commonwealth, the state and the industry about going forward. We've got to take that next step now and say: 'Well, what does that all mean? Where are we going to put our effort? How are we going to rely on our resources going forward?'

Senator McDONALD: Thank you.

Senator ROBERTS: Dr Dale, perhaps I can put some structure around my questions. I've got eight keys to human progress, if you like. I've thought about what's driven the remarkable achievements in the last 170 years of human civilisation. Perhaps you can grade each of them as they apply to northern Australia. I'm being serious. The first one that's essential for success is freedom. Are people free in northern Australia? And I don't just mean free as in not locked up, not run by a feudal baron; I mean free to be creative and free to express that through business, through investment, through collaborative relationships. Are people really free?

Dr Dale : I'm a northern Australian and I feel quite free. I think at the end of the day, yes. There are a lot of issues to be resolved, and, at the end of the day, it will take us coming together to work those issues out and having some structure around them, but the freedom to do that is there. We need to put effort into making that a reality.

Senator ROBERTS: In the mid-19th century, the Whigs came to power and they were in power for about 40 years. They were true libertarians, and they took 18,000 pieces of legislation, got rid of 14,000 and left 4,000, which had been in place since King Henry VIII I think. Little England in those 40 years became Great Britain. America didn't have stifling regulations; people were free to use their initiative. Is that the case in northern Australia?

Dr Dale : There's a contest always between rights and responsibilities. While we need to focus on making sure we have the rights to do what we need to do in life, we've also got responsibilities to make sure we're managing the impact of that on other people. That's the thing that focuses us to need to come together and actually reach an agreement about these agendas to take things forward. We possibly lost our way a bit on how we bring those conversations together about where we all agree we need to move forward and focus on the collaboration to do that, but I think the rights we have are definitely there to do that. But there's a lot more work to be done to pull that off.

Senator ROBERTS: The second key I've got is rule of law. That's essential for protecting people so that they can look after their investments and their achievements. Rule of law: has it gone too far? We've now got so many laws.

Dr Dale : Again, I tend to think this is an issue of fragmentation. If I take the water agenda, over the last 20 years we've see the development of nationally agreed approaches to water allocation. Water allocation is hugely important because, if we didn't actually go through proper water allocation, there'd be irrigators competing for the same drop of water, so, even if you think of it as an environmental versus economic issue, it's actually fundamentally an economic issue, because, if we allocate all of the water to one person, somebody else is going to miss out. The progressive development of all those pieces of legislation has been important but so too is the issue of how we bring this together and keep it connected. We really need to focus our effort on where things can happen as opposed to where things can't happen—making the distinction between those two things.

Senator ROBERTS: The third one on my list is stable governance, constitutional governance, so that when the current leaders of the country fall over there will be stable continuity. Have we centralised too much now? My preference is to get the decision-making and the money allocation as close to the service is possible, which means councils, but councils seem to be withering and the federal government seems to be bloating.

Dr Dale : I do a lot of work in the governance system space—

Senator ROBERTS: Yes, that's why I asked you.

Dr Dale : My strongest principle that I very strongly adhere to is subsidiarity, and that basically means supporting people to make the decision at the appropriate scale. I do tend to think that the more we centralise, the more we potentially slow down the decision-making process, because everything needs to go up before it comes back down. The more you're able to empower the capacity at local scale, at regional scale to get the appropriate layers right, the smoother the system can work. I'm a very strong supporter of really lifting capability at the local scale and empowering people to get on and do things within national frameworks, within state-wide frameworks. I think we'd be strongly in agreement about the need to bring a level of capability at all scales to decision-making.

Senator ROBERTS: The fourth one is secure property rights. There seems to be a lot of problem with that in northern Australia. You mentioned land tenure, land use.

Dr Dale : If you look at all the international development literature, in terms of economic development, over the last 20 or 30 years almost the foundation piece of work that goes into place is the tenure system. We've been through a complex period of 20 or 30 years in resolving past injustices associated with native title. We're moving into a period that is, really, in the post-determination era, in which case the foundation rights and interests that people have are a lot clearer than they probably were 20 to 30 years ago. The processes we've potentially got, to resolve these issues, let's say in pastoral properties or in existing native title lands or in freehold, are a lot clearer than they were in the past.

I am a strong believer we need to put a lot more effort into tenure resolution support, the negotiation of tenure rights and interests in individual blocks of land, the codification of that in tenure documents. We're a little bit behind that now, I think, because we've gone down the 20 years of native title effort and we now need to put that support back behind traditional owners, pastoralists and others to codify and clarify those rights. So there's a lot of work to be done in the tenure space. It's why we need to get this wider regional stuff right, because that gives us a vison of where we want to go, and then we can focus our effort on the tenure resolution that's required, whether that's through ILUAs or agreements or property tenure upgrades or whatever the case may be.

Senator ROBERTS: The fifth one on my list is energy. What we've seen for 150 years, up until about the mid-1990s, is ever-decreasing prices of energy, in real terms, and now, in the last 20 years or so, that has been flipped and we've had an artificially induced dramatic increase of energy prices. As energy prices decrease, productivity increases, wealth increases and investment increases. So we've seen a reverse of human progress in the last 20 years. Is that really stifling us now; energy prices have gone up so much artificially?

Dr Dale : There are three energy issues I consistently talk about in northern Australia: security, affordability—and, yes, we do need to think seriously about transitioning and how we will achieve that, because we know where things are heading, in terms of CO2 emissions. The first two, security and affordability, are at the heart of that. Whatever we do, security and affordability need to be at the centre of the conversation. It's one of the reasons I'm recommending, in the paper, we take a much stronger place based approach to try to achieve security and affordability outcomes.

Senator ROBERTS: So place based—

Dr Dale : In Far North Queensland, this particular region—say, Cairns, the cape, Torres Strait, the gulf—

Senator ROBERTS: as opposed to a national policy.

Dr Dale : It's good to have the national policy frameworks, but how would you then achieve security and affordability in a place like Far North Queensland?

Senator ROBERTS: Regionally.

Dr Dale : Yes. Currently, we are dependent on the grid. The vast majority of our power comes from down south, so we have a security problem, to a certain extent, and we're subsidised under the arrangements for domestic users but not necessarily industrial. The industrial cost of power is incredibly high in north Queensland, so we have a significant affordability problem. It's 'How do we look in this region at the huge amount of opportunity we have and the jobs that need to be done within national policy frameworks to achieve security affordability and transition?' Then we start working through the investment that's required to achieve that.

It could be that a lot of the issues are associated with transmission or a lack of transmission. There might be totally different problems in different regions. In fact, in this region here, in places like the gulf or in Cape York, there are great opportunities, going forward, but it's often about the governance of energy, not necessarily the technology. In a place like Cairns, where we're on the fringe of the grid, it's a different story altogether. In places like Cooktown—where I say it's on the fringe of the fringe of the grid—there are other opportunities. So the solutions might look different, in different places, depending on their circumstances.

Senator ROBERTS: The next one is tax. The tax system in our country seems to be one of the most destructive systems, in my opinion, that we have. Tax drives behaviour, stifles behaviour, sometimes, if it's not properly designed. Here again we have a huge imbalance between the tax revenue, which is largely federal, and the tax usage, which should be local councils.

Dr Dale : Tax policy—that's a big area of policy.

Senator ROBERTS: Could we make it a free economic zone?

Dr Dale : I know there's been a lot of debate about special economic zones. I'm not particularly a supporter of special economic zones in the tax context, because it would require the rest of the nation to agree that that's something we would do. I think we really need to be again looking at getting the planning foundations right and then looking at the incentives we're prepared to have to draw investment into particular places. There are existing parts of the tax system which are quite beneficial in northern Australia, which we do need to look at maintaining and retaining, but I'm probably not that supportive of a radical taxation benefit for one place in Australia relative to others. I certainly think we can start to look at our strategic arrangements and look at the incentives we put in place to make that work. That has to be a national conversation. It's one of the reasons, on the governance side of this, I think it's very important that there is a strong link between the northern Australia ministerial forum and the national cabinet, because northern Australia has a very significant role in the national development debate. And it's why I think it's a national cabinet issue that needs to be kept on the table as a national issue, not just as a northern Australia minister's issue.

Senator ROBERTS: The seventh one—the chair is winding me up, so I won't get to the eighth—is strong families. What is the standing of the stability of various communities in northern Australia?

Dr Dale : I do a lot of work particularly in collective impact approaches to getting better outcomes for kids from zero to 12. This again is a significant issue right across northern Australia in terms of the social infrastructure for northern development. I'd very strongly draw on your question to say that we need to be thinking about the social development side of this equation as much as the economic side, because getting those foundations right means we've got good, strong, capable people moving into the workforce and we have strong communities supporting liveable environments that go forward. So the bigger issue of social development cannot be separated from the northern development agenda, and I think where you're heading with that question is the need for us to continue to support good outcomes for kids, particularly in the early years, and that really means putting support behind families being functional.

Senator ROBERTS: Thank you.

CHAIR: Senator, you can put your eighth on notice. I have a couple of questions, and Senator McDonald may have a couple more. Dr Dale, we've talked quite a lot about the future of agriculture in the north, which is obviously a really important topic. I'm also interested in any thoughts you have about how the northern Australia agenda could be changed in any way to support some of the emerging industries in the north, whether that be in the tropical sciences, medicine, services, architecture, town planning or even industries that exist that we don't necessarily recognise as industries, such as human services—obviously they employ a lot of people in northern Australia and don't always get the recognition that they deserve. So do you have any thoughts about how the agenda could be adapted to really get behind those industries as well?

Dr Dale : This is a really important issue, a foundational issue. The ag sector and resources sector are where our traditional business has been. I would love to see the northern development agenda recognise the opportunity of other major sectors that are moving forward. And they actually all complement each other. At the heart of that, innovation, research and capability is really crucial. And it's crucial to productivity in all sectors, from agriculture to resources to human services.

The role of the universities across the future of northern Australia is really quite crucial, both as being, if you like, the anchor institutions that can be out there supporting communities and industries with their innovation agendas and moving forward, and building, if you like, a tropical expertise capability that is incredibly able to be exported, not just within the university sector but within innovators and entrepreneurial companies throughout the north. That innovation ecosystem does need to be really strongly looked at. I think the role of the universities in supporting that is crucial. We have to remember that the human services sector is probably one of the fastest growing sectors and has been for many years now. There is very little support in the building of the strength of that sector across the north. It is crucial to liveability for other sectors, like the resources sector and agriculture.

The other one I'd like to bring to your attention is what you might call the environmental services sector. Northern Australia is rapidly becoming an environment of investment preference—an internationally recognised investment opportunity around what you might say are a whole range of ecosystem service markets. Again, that work requires very good strategic planning to see it through. We're at the heart of that potential opportunity because we have these incredible natural and cultural assets, and because we have traditional owners and pastoralists who manage the vast majority of that landscape and are willing and able to participate in those sorts of economies. So it's a new and growing sector which needs special attention to make sure it complements both the existing sectors but also grows opportunity and bidder diversity in the economy for landholders.

CHAIR: You mentioned in your opening statement how crucial developing the workforce of northern Australia is, whether we're talking about traditional or emerging industries. Any thoughts there?

Dr Dale : I'm doing a lot of work through the Communities in Transition program, in partnership with the state, through about six communities in regional Queensland. I knew this was the case, but one of the things I'm finding incredibly clear is the lack of support for workforce development within those communities moving forward. That starts with: how do we get behind business and business capability within those regions; how do we start to make sure that those businesses are building to strong sectors and the new or existing sectors we've talked about; and, behind that, how do we really get cohesive workforce development, population and migration strategies and workforce development strategies that sit behind that? Local governments are desperately keen to see that sort of support right across northern Australia, because there is really not a cohesive approach to that.

We've also done quite a lot of work across five major ag sectors—aquaculture, grains, the pastoral sector and others. All of them are calling for a much more strategic approach to workforce development. I tend to think that will rely on stronger long-term relationships with the universities and the vocational education sector, those particular sectors. Aquaculture has very strongly articulated some key investments it wants to see move forward, like the Tropical Aquaculture Accelerator, as a key to driving significant workforce deficiencies in that process. But we can't also separate this from population and migration strategies as well—so how do we use targeted migration support to back up and support our workforce requirements across the north?

CHAIR: Thanks for that. Feel free to supplement everything you've said today with anything further! My last question is for Gamarard. One of the earliest points you made was the need for funding for business cases, especially for Indigenous enterprises. This came up in the committee's interim report, specifically regarding the NAIF—but I know your comment goes beyond the NAIF. I was interested by what you said. I take it you've approached federal, state and local agencies, had a pretty thorough look and not found any funding sources available for business cases for your type of enterprise?

Mr Penrith : The only fund we've been able to get an indication that we can look at is the National Water Infrastructure Development Fund. That is a bilateral thing, so we need the state government to apply on our behalf. We haven't been able to attract anything in the way of grant funding, even on just the small stuff, to look at the business case and move forward. It's been a hard five years. I think it would be great to look at something within northern Australia that looks at Indigenous led development. We talk about it all the time, but where's it leading to? We've certainly approached those other organisations like IBA and ILC. They just don't have the capacity to look at something as big as what we're doing. We've approached the state government, the local government and the federal government. There's just nothing out there that looks at a business case for us. Unfortunately, like Stewart was saying, the private sector just won't invest in the early stage because they just can't see themselves getting their investment back.

CHAIR: Thank you for that. That certainly backs in what we've heard previously. Senator McDonald.

Senator McDONALD: Thanks very much, Chair. Dr Dale, goodness, you might have to stop talking because I keep getting more questions and it will make the chair very unhappy! You've raised some really terrific points. On the workforce development issue, last year in Townsville there was a conference. The data showed that less than two per cent of high school students in Townsville were completing STEM subjects. We know that, in the development of emerging industries and the way agriculture is going, there is a range of jobs, but there are more jobs requiring higher education and STEM subjects. Do you have a view? I heard what you said about a greater partnership between the university and TAFEs and other higher education institutions, but, if kids aren't getting STEM subjects at high school in northern Australia, how do we bridge the gap?

Dr Dale : There's a huge amount of evidence, as you know, around graded support in the primary and secondary education system. The more we will have capable kids moving in. Coming from the university sector, there's certainly no argument from my point of view that we need to put more effort into that. Nick Klomp made an excellent speech—were you there for that, Murray—at the Developing Northern Australia Conference. He was particularly focused on the bigger issue of in situ capability. Both of my kids have nicked off to Brisbane for university. It's an incredible struggle we all have as northern Australians, in terms of keeping in situ capability here. A lot of that comes down to the competitiveness of the regional universities in the bigger national context and the huge amount of work we need to do to attract and retain. A very significant amount of evidence shows that, if we're able to do that, students are much more likely to stay in the region, progress and go forward. Quite a lot of attention needs to be put on the transition from school to university and vocational education, but we certainly need to think a lot more seriously about how we make sure the universities and the higher education system become the anchors of encouraging in situ workforce development, and that will mean them reaching deeply into the school system to see that flow through from schools into the workforce development space.

Senator McDONALD: On that point, I worry that we're building in structural inequality in the north, because there aren't the education facilities in the regional schools. I think of all the towns across the north where they don't even get to senior education; maybe it's only to grade 9. It forces the local policeman to move to the coast; it forces people away because, of course, they're always going to put their children's education higher than any other priority. I see that time and time again. The RDA has been trying to do some work with Glencore to build apprenticeships back into the school system so that kids can see a purpose. There's that and connectivity. Kids at Richmond State School weren't able to do their NAPLAN exam the year before last because the state had not provided connectivity fast enough for them to complete their exam.

Dr Dale : I might play on the connectivity issue a little bit because I think it is absolutely crucial. We've always known that connectivity in the bush has not been great. That's always been a known. That connectivity is now potentially increasing nationally and people have much higher expectations of connectivity than they may have had in the past. It's a double whammy for the bush. We're doing quite a lot of work. Particularly, there's some work we've done through ACCAN and others around the nature of connectivity—

Senator McDONALD: Could you spell out ACCAN?

Dr Dale : The Australian Communications Consumer Action Network. It was in relation to communications and getting a stronger sense of what connectivity really means within regions. But there's also digital capability—the servicing that's required to keep that functioning and people's ability to utilise and take advantage of those opportunities. We're trialling a place based approach through some of the flood recovery money in the Gulf region at the moment, and we've just done some really detailed work in a couple of the key shires there about teasing out security and affordability issues. There are a range of options, but none of those options work well all of the time. There are some incredible costs for people hedging their bets by taking on multiple communication technologies, none of which are working well all the time. There's a higher cost and there's lower reliability, and that is an incredible driver of both keeping families in towns and keeping the workforce and workforce capability. The communications issue, I think, is one that we really have to nail for the northern development agenda.

Senator McDONALD: Is decentralisation of government services another part of that puzzle? I reflect on towns that traditionally had a greater government investment in people like Main Roads staff and Queensland Rail staff, which gave a community a baseline population that allowed for greater service delivery into more decentralised parts of the state. Is that something that both state and federal government could be looking at as a way to progress a northern Australia agenda, by putting their money where their mouth is?

Dr Dale : It's another part of the puzzle. Queensland in particular is a very decentralised state, in population terms, so I think a much greater sense of decentralisation of government services is an important part of that puzzle. We've talked a fair bit about centralisation. I talk about 'regionalism' versus 'regionalisation'. You might regionalise by getting your services out there, but we also need to increase the decision-making capability of government agencies within regions. I think, over many years, we've seen a general decline in the capacity of, for example, state agencies in a place like Cairns to come together and make strong decisions collaboratively with the region. It's a bit of both: regionalism plus regionalisation. Those two things are part of the puzzle.

Senator McDONALD: That's a very good point. I had correspondence from a proponent just this week, saying that the department in Brisbane had said they could deal with the Townsville agency all they liked but they could never sign off on the project—it would have to be Brisbane. For North Queenslanders, that's frustrating.

Back to workforce capability and availability in the north: I notice that, on the Richmond irrigation scheme, they're proposing to use foreign funding for 60 houses to house the new people who have come to town. They're doing that because they can't get finance; they can't get banks to lend into Richmond. I know the mayor for Normanton is here, and I'm sure he will speak on something similar. Is this something that the CRC is coming up against—this risk-shading by banks with regard to lending into northern Australia, particularly for things like residential housing and smaller projects?

Dr Dale : I think it's a good one to bring us back to the conversation about the preparedness to invest without that really strong strategic, foundational land use planning and tenure resolution. These are key issues that encourage investment and security. Of course, insurance is flowing into that issue as well, and that's one of the reasons I do want to make sure we keep insurance on the table today. Having been through Larry and Yasi, I have personally seen the massive spike in insurance for landholders, as opposed to the impacts on the industry. The issue of confidence, generally, around these issues could flip either way, which is one of the reasons I'm so strongly passionate about us getting our act together, collectively, as to the strategic future. If we don't, I think there is a risk of a continuing lack of willingness in the context of finance and insurance related opportunities. We've got to work hard to try to keep ourselves from falling into that pit, because, if we do fall, we'll see finance failure and insurance failure and overall confidence will fail.

Senator McDONALD: I'd just like to get this on the record. For those of us who are living in northern Australia, we are paying at least 2½ times what is being paid in South-East Queensland or further south—and that's if you can get coverage at all. Many businesses are now not being offered insurance coverage at all, which means that their financiers are pulling their finance. This is a crisis—the insurance issue—isn't it. Would you agree with that?

Dr Dale : I would agree with that, because I live it.

Senator McDONALD: You really have to live some of these issues for it to be top of mind.

CHAIR: You won't get any disagreement from me.

Senator McDONALD: No. the Gold Coast is certainly not having some of those challenges, Chair.

CHAIR: You know a bit about Brisbane, too, Senator McDonald. I wholeheartedly agree: I'd like to see the government do something about the northern Australia insurance crisis. They would have my full support in doing so.

Senator McDONALD: The state government should be looking at the stamp duty removal that the ACCC recommended.

CHAIR: Sure. Everyone has a role to play. Thanks Dr Dale, Mr Penrith and Mr Peters. We appreciate your time today. You've given us lots to think about.

Dr Dale : Thank you very much, Chair.