Far North Queensland Regional Organisation of Councils

Our Ref: #6177508

6 September 2019

Committee Secretariat Select Committee on the Effectiveness of the Australian Government’s Northern Australia Agenda Via: online portal.

Dear Sir/Madam

Select Committee on the Effectiveness of the Australian Government’s Northern Australia Agenda

The Far North Queensland Regional Organisation of Councils (FNQROC) was established in the 1980’s and represents 13 member councils from Hinchinbrook, north to Cook and west to Carpentaria in far north Queensland. The FNQROC region is the largest and fastest growing region in Northern Australia. It extends over 320,000 square kilometres with a population of approximately 276,000 and a gross regional product (GRP) of $15.15 billion. Further details can be found on our website at www.fnqroc.qld.gov.au.

Thank you for the opportunity to provide comments on the effectiveness of the objectives, design, implementation and evaluation of the Australian Government’s Northern Australia agenda.

The agenda is about unlocking the region’s full economic potential as a gateway to global markets, a source of rich resources and a home to pristine environments. There is a 20-year plan for investment and support to grow the north through 6 key pillars: 1. A trade and investment gateway 2. A more diversified northern economy 3. Indigenous entrepreneurship and businesses 4. World-class infrastructure 5. Water infrastructure investment, and 6. Research and innovation.

The terms of reference for the select committee is to inquire into and report on the effectiveness of the objectives, design, implementation and evaluation of the Australian Governments Northern Australia Agenda with particular reference to: a. Facilitation of public and private investment in infrastructure and economic development;

www.fnqroc.qld.gov.au b. Economic and social benefits arising from that investment for Northern Australians, in particular First Nations people; c. Funding models and policy measures that capture the full value of existing and emerging industries; d. Measures taken to develop an appropriately skilled workforce; e. Emerging national and international trends and their impact on the Northern Australia agenda; and f. Any related matters.

In developing our submission, we identified a difficulty in responding under the terms of reference headings. Much of what we are submitting crosses a number of terms being reviewed. To minimise the risk of repeating ourselves, losing the point or story, our submission will address items where local government has had a touch point under headings related to the Northern Australia Agenda: • Partnerships • Roads, • water, • telecommunications, • social infrastructure, • NAIF, • Research and Development, and • City Deals

Upfront, it is recognised that the Northern Australia agenda is 3.5years into a 20-year plan and it is hoped that some of our commentary can be utilised to improve or change initiatives into the future.

Government Partnerships to enable the Northern Australia Agenda Some of the biggest challenges of northern Australia still remain unanswered. This includes (but not limited to) regional population growth strategies, infrastructure such as roads, dams, telecommunication and land tenure.

It is recommended that all levels of government starting working diligently to alleviate the big challenges associated with opening northern Australia.

The Northern Australia agenda relies on all levels of government and related industries/businesses for it to be a success. Therein lies the first issue, while anecdotal, it appears that realising opportunities (in Far North Queensland) is hampered by issues between State and Federal governments. This hampering comes through a number of forms: • Bureaucratic processes within State and Federal Governments; • A perceived unwillingness to acknowledge infrastructure issues;

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• A perceived unwillingness to commit to what is evidently needed by undertaking numerous studies to allow for protracted decision making; • Development of business studies designed to fail.

Examples of all of these can be found further in our submission.

It is also noted within the 2018 Implementation report that the Office of Northern Australia does not have any local government or regional organisation of councils (ROC’s) as ‘key partners’.

It is recommended that local governments and or ROC’s be actively engaged in the process to deliver the Northern Agenda.

Infrastructure Australia Infrastructure Australia is the nation’s independent infrastructure advisor to advise governments, industry and the community on the investments and reforms needed to deliver better infrastructure for all Australians. Infrastructure Australia maintain the Infrastructure Priority List to ensure that public funds are directed towards projects that will deliver the best outcomes for our growing communities. Through the Infrastructure Priority List, Infrastructure Australia provides all levels of government with a prioritised list of infrastructure challenges and opportunities for the short, medium and longer term.

Currently Infrastructure Australia apply a threshold value of $30 million per annum in measuring material net benefit when assessing submissions to the Infrastructure Priority List.

It is recommended that this threshold be reviewed and lowered for projects in Northern Australia given the significant challenges faced in Northern Australia including sparse populations, industry size, costs of doing business (insurance, energy) and service challenges.

The Northern Australia Infrastructure Audit (2015) highlights that there are significant infrastructure challenges to meet the projected Northern Australia population and economic growth. A number of those challenges are highlighted within this submission. It is recommended that an update to this audit be undertaken to inform the development of an associated Northern Australian Infrastructure Development Plan and Priority List. This Plan and Priority List should be the key reference point for State and Federal governments to guide infrastructure decision making in Northern Australia.

Roads Roads are critically important to economic development and the health and safety of all that use them. The Australian Road Assessment Program (AusRAP) mapping shows the combined risk rating for our major road networks is mostly assessed as medium-high and high.1

1 http://racqi.maps.arcgis.com/apps/View/index.html?appid=2ab9f268294948f688b5c339993351fa

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announcement to approval and delivery is excessive and is a result of goal posts continuing to change.

For the local government projects we have a log of communications which show: • State prioritisation process – 2 weeks (12/04/2016 – 27/04/2016) • Original application process – 5 weeks (29/04/2016 – 07/06/2016) • Announcements – 16 October 2016 • Project Prioritisation Report process commences Feb 2017 – 1 year (09/02/2017 – 31/01/2018) • PPR’s approved for Richmond Croydon Rd and Ootann Road – 3 months (20/04/2018) • PPR approved for Burke Developmental Road (in part) August 2019– 2.5years

Key points • These are excessively long time frames from announcement to delivery; • Local governments getting urgent calls for information then long lag times before the next action required by either State or Federal governments; • PPR requirements changing between submission and approval resulting in them being sent back for amendment.

There is something wrong with this process, particularly for the relatively small funding amounts involved.

Northern Australia Roads Program ($600mil in 2016) Focused on the movement of people and freight. Only the Kennedy Developmental Road received funding from this program: $2.7mil – Kennedy Developmental Road (Mt Garnet – Lynd) $40mil – Kennedy Developmental Road (The Lynd – Hughenden aka Hann Highway)

It is understood and gratefully appreciated that the Hann Highway was an election promise.

It is our understanding that the State Government nominated and submitted the roads for this funding round, local government was not involved in the process at all.

Roads of Strategic Importance (ROSI) ($4.5Bil in 2019 of which $1.7Bil is for northern Australia) The intent of this funding program (3 years after the last program) is for key freight roads to efficiently connect agricultural and mining regions to ports, airports and other transport hubs.

Our region has two corridors: • Cooktown to Weipa – Mulligan Highway and Peninsula Developmental Road. $190mil has been allocated from this funding to continue efforts from previous programs which included Roads on National Importance (RONI) and the Cape

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York Package. It is very much appreciated that the Federal Government is continuing to invest in this corridor to ensure it is completed in full. This is a prime example of long term commitment and investment.

• Cairns to Northern Territory Border. This corridor has been allocated $50mil for the local government road portion in Carpentaria and Burke Shires which is very much appreciated. The only issue for these two small councils is contributing 20%.

Again, this corridor apparently was decided by the State and is not the preferred link for this region. The start and end is perfect but the route via Burke Developmental Road does not compare to the current and potential economic opportunities on the Gulf Developmental Road. The Gulf Developmental Road is also the main feeder from Cairns to Gulf communities. The Gulf Developmental road supports significant agricultural, grazing, solar and hydro power generation.

As identified in the IA Audit 2015, the Burdekin, Flinders, Gilbert River systems is identified as a future key growth region for irrigated agriculture and renewable energy. Infrastructure requirements include dam, pipelines, channels, electricity (renewable energy opportunities, rail and roads all likely within the next 20 years. Dry cropping in the Gilbert has exceeded that of the Ord, it would have been expected that the Gulf Developmental Road would have connected Cairns to Northern Territory Border.

The addition of the Gulf Developmental Road in ROSI is strongly recommended.

This corridor also includes Kuranda Range Road which has now proven to be a significant inhibitor to economic development west of Cairns. A recent development referral to the State government was declined due to the development having a potential traffic impact (above 5%) on Kuranda Range. This decision effectively prohibits any development west of Cairns with a transport impact. The solution to this issue is in the area of $1billion over 10 years – currently there are no programs to support this type of critical investment.

$287million has also been allocated from ROSI for Cairns (Cairns Western Arterial Road and Captain Cook Highway) which is very much welcomed.

The Infrastructure Australia Audit 2015 (IA Audit 2015) identified that more than half of the north Queensland network exceeds the theoretical design life and an increasing proportion (currently one third) of network seals are older than the target optimum. Queensland note its pavement rehabilitation and programmed maintenance requirement in north Queensland is $700m over the next five years, $318mil represents a backlog.

Routine and Programmed maintenance as well as Rehabilitation has increased since 2015/16 $27,007,851 to 2016/17 $37,185,314 to 2017/18 $52,221,184 however Councils are stewards for a significant portion of the State network and their Routine and Maintenance Performance Contract (RMPC) amounts have effectively not increased since 2006. Many councils in this region have a significant backlog of work on state roads still to be funded in 2019.

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There is a need for: • Focussed attention by the State and Federal governments on our roads, • There is a need for long term consist funding of priorities/corridors to enable forward planning, and • There is a need to consider the value of commodities being transported by road rather than just traffic volumes in prioritising funding.

Water

Nullinga Dam On the 2nd August 2019 the State government announced that the Queensland Government will pursue other water supply options’ in light of the business case findings which did not support Nullinga Dam.

This is a perfect example of a business case being developed with an end result in mind; to not commit. There are a number of concerns with the business case: 1. It adopted a 30-year appraisal period from construction completion. This resulted in only 25 years’ worth of agricultural benefits being included in the analysis. The assumption that Nulling Dam would not deliver any agricultural benefit beyond 25 years of operation is clearly inappropriate. 2. No urban benefit – the business case assumes no urban benefit. The business case concludes that any additional urban water supply would not be required for Cairns until 2063, this is 3 years after the end of the 30-year appraisal period. 3. Methodology for price determination – the business case concluded that water allocation price operators would be prepared to pay to be between $2,000 and $3,000 per mega litre (ML) based on what users and potential users indicated they would be ‘willing to pay’ in questionnaires and consultation. This is despite permanent water prices in the Mareeba Dimbulah Water Supply Scheme (MDWSS) averaged $3,500 per ML with some trades reaching $4,000 per ML 4. Value of agricultural benefit determined using willingness to pay rather than productive use methodology – The business case estimates the agricultural benefit using a willingness to pay (WTP) methodology which results in a substantial understatement of the agricultural benefit. A more appropriate methodology to adopt would be that of product use by determining the economic value and employment (both direct and indirect) of agricultural production facilitated by the additional water supply.

The business case also does not place a value on the potential flow on capital investment Nullinga would activate in terms of agricultural processing and value adding. Businesses such as MSF Sugar and others would be expected to make multi-million-dollar investment decisions should Nullinga proceed. 5. No community resilience benefit – Nullinga would contribute significantly to the region’s economic and social resilience to changing climatic conditions including natural disasters such as drought. Tinaroo Dam in early 2018 was at

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record low levels (36.1% of capacity) with restrictions placed on agricultural and recreational water use. Nullinga provides significant risk mitigation in this regard. 6. Adoption of a Full Cost Recovery approach – the business case is premised on a ‘full cost recovery’ model i.e. the Queensland and Federal governments not putting any direct investment into the project with project costs to be fully recovered from upfront and ongoing payments from users/operators.

Investment in critical long term projects such as Nullinga is part of the core role of State and Federal governments, the direct investment approach is adopted for other items of economic enabling infrastructure such as roads where governments invest significant sums of money without recovery from users. Governments benefit indirectly from enabling infrastructure through the additional economic benefits they generate which ultimately results in additional tax revenue, increased employment and the benefits improved economic prosperity and liveability contribute to sustainable and thriving regional communities.

We note the Queensland Federal governments are jointly contributing $352 million towards the Rookwood Weir project. This business case for that project concluded that funding for the project was critical as without it water prices (on a full recovery basis) were likely to be unattractive to users, particularly agricultural users. We also note the Queensland Government previously made significant capital investment in the Gold Coast Desalination plant. Table 42 below identifies the community service obligation paid by the Queensland Government to Sunwater. 7. Project capital cost – the projects capital cost increased substantially from the $323 million in the Preliminary Business Case to between $506 million and $774 million in the detailed business case.

Failure to adequately plan and provide for the long term urban water security needs of Cairns also has the potential to adversely impact the regions tourism industry. With annual visitor numbers to the Tropical North Queensland Region now exceeding 2.8 million people per annum, failure to adequately plan and provide this service has the potential to constrain this sector which is also of State and National significance.

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Source: Northern Australia Infrastructure Audit Report 2015

With the world population expected to reach 9.7 billion by 2050 (up by 2 billion from today) and with income growth in developing countries leading to dietary changes, global food demand is expected to increase anywhere between 59% and 98% by 2050.

Our region is best placed to meet this increasing global food demand, by virtue of our regions competitive advantages including: • Established and growing agriculture industry; • Physical proximity and connectivity to the Asia-Pacific and beyond; • Significant water resources; • Large tracts of underdeveloped arable land; and • Established and well connected airport and seaports

Increased Australian Government and private sector infrastructure investment is vital to support the growth of the Cairns region. To unlock the developmental potential of the Cairns region and Northern Australia the commonly used cost benefit formulas applied by Queensland and Australian Government to proposed infrastructure projects, such as Nullinga Dam, are often at odds with the development approach needed for longer term nation building.

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This approach needs to change if Government wants to play a positive role in developing Northern Australia into the future. It is recommended that capital investment appraisal methodologies incorporate longer appraisal periods as well as acknowledge and incorporate the strategic benefits to Northern Australia and the nation.

NAIF There is obviously a need for a program like NAIF as it has been utilised by a number of private investment opportunities. It could also be argued industry hasn’t, isn’t or didn’t take advantage of NAIF, reasons for this include: • A long lead time is required for projects (significant enough for NAIF) to get to a stage (initially) required to commence a NAIF application. • Protracted State governmental approval times for projects significant enough to warrant NAIF. This is due to a number of reasons not limited to; vegetation management act, water and energy security, and transport capacity. Certain infrastructure such as roads and water infrastructure are key economic enablers particularly in Northern Australia, where the harnessing of significant water resources for agricultural development and population growth and the investment in roads which connect agricultural production to key ports and markets will help support economic development. In the vast majority of circumstances, this infrastructure is not privately operated and the cost is unable to be fully recovered from users meaning funding project capital costs through loan funding is not appropriate.

To support further investment in this type of infrastructure it is recommended that an element of grant funding be facilitated via NAIF to support investment in economic enabling infrastructure where full direct cost recovery from users is not a viable alternative.

This would complement existing funding sources including ROSI and the National Water Infrastructure Development Fund (NWIDF). It is also noted that investment decisions through NAIF, ROSI and NWIDF generally require an evidence base including strategic assessments and preliminary/detailed business cases. The cost of this initial planning work is significant and for large scale projects can run into the millions of dollars. The cost of this work can be an inhibitor in itself in seeing potential projects progressed, particularly where stakeholders (such as local councils) may not have the financial capacity to fund such work.

Specific grant funding programs should be made available to support strategic analysis and business case development. This would be particularly relevant where such infrastructure addresses a problem/gap which has been identified in the Northern Australia Infrastructure Audit and/or where the problem is listed on Infrastructure Australia’s Infrastructure Priority List.

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Telecommunication infrastructure

The IA Audit 2015 identified that mobile broadband services lag behind those in southern Australia. Only 21% of NA premises had good mobile availability compared to 91% in southern Australia.

Some five years later, little has changed, the Infrastructure Australia Audit 2019 (IA Audit 2019) identifies that telecommunications infrastructure is becoming more integral to everyday life as the digital economy and reliance on mobile technology grow. Substantial investment is occurring to upgrade our telecommunications networks – NBN and 5G – providing new opportunities. Digital literacy and network reliability differ across the country, with rural and remote areas often left behind.

Our own mobile communication audit of major roads and tourist routes identified that nearly 70% is in a blackspot, this compares to 1% in urban areas. A copy of the report and spatial data can be found here, the spatial data set is also available on request.

It is acknowledged that blackspot funding is available to service providers however the provision of services outside urban areas in northern Australia is not a favourable business decision without additional funding or policy pushes. The Federal government has a key role in this area and it would be encouraging to see a strategic mobile communication implementation plan for Northern Australia to support economic development, workplace health and safety and community wellbeing (connectedness).

Social infrastructure As identified in the IA Audit 2019 – the quality of infrastructure services is high for most Australians in urban areas, however population growth is impacting some services. The needs of people and businesses in low density areas, emerging industries and lower socio-economic groups are not being met.

IA audit 2019 also identifies that the quality of infrastructure services for people living in remote communities does not meet the standards Australians expect.

We still continue to see significant investment and focus in and around our capital cities. This is required to ensure the liveability of those living there however this improved liveability is further compounding the desire of people to live and work in these area’s as they have the social infrastructure to make ‘life happier’. If Northern Australia centres had similar social infrastructure it would further attract people out of these city areas to the regions.

Again, this is another area where the State and Federal governments need to show some leadership and commit to programs and social infrastructure to support our regions. This foresight will support population growth in our regions, lessening the burden on our capital cities and surrounds.

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Research and Development While a substantial portion of this submission is critical, credit needs to be given where due. In trying to elicit evidence for this submission we found a number of initiatives were unknown but very much welcomed. Perhaps some of the policy changes and R&D (particularly in our backyard) could be better promoted so we can be active supporters and potentially identify opportunities to leverage.

Some interesting research and development projects include (but are not limited to): • Mapping new opportunities for Australian farmers; • Unlocking the value of satellites to help farmers get the most from their land and plan for the future. 3 businesses given $50,000 of seed funding to develop pilot projects that will leverage Geoscience Australia’s Digital Earth Australia technology; • Broad acre cropping to be tested in FNQ – oilseed trails could lead to a North Queensland Industry delivering up to 50,000 tonnes of seed per year and worth up to $50 million; • Testing the performance of five spice crops (Rockhampton, Biloela, Burdekin, Tully, Katherine); • Agricultural supply chain studies.

City Deals The Cairns region is the largest region in Northern Australia (population circa 286,000) and is a strategic gateway to the Pacific, Asia and beyond. With a resident population of 165,000 people and an average 30,000 additional visitors staying in the city on any given night, Cairns is one of the largest and most dynamic regional cities in Australia. Unique liveability and solid economic fundamentals have seen Cairns experience significant population growth (2.3% per annum in the 15 years to 2016) – well in excess of the national growth rate. Significant private investment and renewed business confidence has also seen the Cairns region unemployment rate reduce significantly in recent years. The region’s unemployment rate currently sits at 4.4% (SA4, July 19).

In June 2018, the Joint Standing Committee on Northern Australia released its report ‘Northern Horizons – Unleashing Our Tourism Potential’. A key recommendation from that report was the establishment of a City Deal for Cairns. A City Deal for Cairns would also support the Federal Government’s agenda for the development of Northern Australia and would also contribute to the implementation of a variety of Federal and Queensland Government strategies and policies.

Northern Australia’s other largest regions, Darwin and Townsville, have already secured a City Deal. Cairns Regional Council is calling on the Federal and Queensland Governments to join Council in signing a Statement of Intent (SoI) for the establishment of a 10-year City Deal for Cairns.

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Closing comments The Far North Queensland Regional Organisation of Councils region is the largest and fastest growing region in Northern Australia. Infrastructure Australia noted in their IA Audit 2015: • that the north Queensland population was almost 75% of the Northern Australia population and it is projected to drive population growth in the north; • that critical infrastructure was transport, energy, water and communication sectors; • Airport, road and communications infrastructure underpin visitor growth, to meet a scenario target of two million international tourist stopovers annually in Northern Australia.

This advice continues today. Growth and diversification of our region is dependent on a number of initiatives and investments; each one relying on and supporting the other to achieve the desired outcome.

‘One off’ infrastructure investments or policy changes won’t enable growth in Northern Australia or Far North Queensland as the largest and fastest growing region, there needs to be an understanding and commitment by Federal and State Governments to planned investment in infrastructure, continued policy and legislative reviews to untie hurdles and continuing research and development.

Without this commitment, private investment will stagnate, populations will continue to move to our capital cities and surrounds and the nation won’t realise the financial opportunities available in far north Queensland.

Thank you again for the opportunity to provide comments on the northern Australia agenda, should you have any further queries regarding this submission, please do not hesitate to contact myself or Darlene Irvine, FNQROC Executive Officer .

Yours sincerely

Cr Tom Gilmore Chair

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