STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Northern Australia Infrastructure Facility Amendment (Extension and Other Measures) Bill 2021 (the Bill)
The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The purpose of the Bill is to amend the Northern Australia Infrastructure Facility Act 2016 (the Act) to:
· extend the investment window of the Northern Australia Infrastructure Facility (Facility) by five years to 30 June 2026;
· strengthen the Facility’s governance; and
· enhance the scope, speed and flexibility for the Facility to provide financial assistance to support the development of Northern Australia economic infrastructure.
Human rights implications
The Bill engages the following rights:
· right to privacy and reputation; and
· elimination of all forms of racial discrimination
Right to privacy and reputation
Article 17 of the ICCPR prohibits arbitrary or unlawful interference with an individual’s privacy, family, home or correspondence, and protects a person’s honour and reputation from unlawful attacks. This right may be subject to permissible limitations where those limitations are provided by law and are non-arbitrary. In order for limitations not to be arbitrary, they must be aimed at a legitimate objective and be reasonable, necessary and proportionate to that objective.
Schedule 1 to the Bill
Schedule 1 to the Bill includes the addition of subsection 42(2), which requires an annual report be prepared by the Board. A summary of financial assistance provided by any subsidiary of the Facility is to be included in the annual report. The summary of financial assistance includes the amounts of financial assistance and kinds of Northern Australia economic infrastructure concerned; the forms of financial assistance provided, and their important features; and the risks and returns to the Commonwealth. It also requires a summary of any adjustments or concessions made during the period by each subsidiary of the Facility in relation to Northern Australia economic infrastructure projects that have not progressed as planned.
These requirements represent only an extension of obligations already existing on the Facility to any subsidiaries it may establish, to ensure transparency of those subsidiaries. This transparency is critical to ensure the provision of financial support is in accordance with the intended purpose of the appropriated funds and that subsidiaries are conducting activities in accordance with the policy objectives of Government.
The information requested is therefore aimed at a legitimate objective, is reasonable, necessary and proportionate to ensuring that Government funds are being used for their intended purpose and with an appropriate return on investment.
Elimination of all forms of racial discrimination
Article 1 of the CERD defines the term “racial discrimination” and exclusions to this definition. It allows for special measures to be taken for the sole purpose of securing adequate advancement of certain racial or ethnic groups or individuals necessary to ensure equal enjoyment of human rights for such groups or individuals until such time that the objectives for which they were taken have been achieved.
Article 2 of the CERD condemns racial discrimination and undertakes to pursue policies that eliminate racial discriminations in all its forms. Article 2 similarly recognises that, where circumstances so warrant, including social, economic, cultural and other considerations, acceptable measures may be taken to ensure the adequate development and protection of certain racial groups or individuals belonging to them the full and equal enjoyment of human rights and fundamental freedoms until such time that the measures achieve their objectives.
Article 5 of the CERD requires parties to undertake to prohibit and eliminate racial discrimination and to guarantee the right of everyone to equality in the enjoyment of six rights, including civil rights, notably the right to own property alone as well as in association with others; and economic, social and cultural rights, including the right to work, to free choice of employment, to just and favourable conditions of work, to protection against unemployment, to equal pay for equal work, and to just and favourable remuneration, are engaged by this Bill.
Schedule 1 to the Bill
Schedule 1 to the Bill amends section 15(4) to include economic development for Indigenous communities to the list of relevant experience and expertise sought for a Board member. Board members are required to demonstrate one or more of the relevant areas listed.
The addition of this area of expertise recognises the importance of development for Indigenous communities to achieve full and equal enjoyment of all human rights and fundamental freedoms. This is a legitimate purpose under the CERD as it purports to advance the fulfilment and enjoyment of rights to equality, does not result in maintenance of separate rights for different racial groups and will not be continued after the objectives for which they were taken have been achieved.
This amendment is therefore compatible with human rights.
Conclusion
The Bill is compatible with human rights because, to the extent that it may engage or limit human rights, those limitations are reasonable, necessary and proportionate.
Minister for Resources, Water and Northern Australia, the Honourable Keith Pitt MP
NORTHERN AUSTRALIA INFRASTRUCTURE FACILITY AMENDMENT (EXTENSION AND OTHER MEASURES) BILL 2021
1. Specifies the short title of the Act as the Northern Australia Infrastructure Facility Amendment (Extension and Other Measures) Act 2021.
2. The table in this clause sets out the commencement date for when the Bill’s provisions commence.
3. All sections of the Bill will commence the day after the Bill receives Royal Assent.
4. This clause gives effect to the provisions in the Schedules to the Bill.
Item 1: Subsection 3(1) (Objects of this Act)
5. This item updates the objects of the Act to include the establishment of the Facility and the provision of financial assistance to other entities. Previously the Facility could only provide financial assistance to the States and Territories.
6. This item replaces the term “construction” with “development”. Previously grants of financial assistance could only be provided in relation to the “construction” of Northern Australia economic infrastructure. The intention of this change is to permit the Facility to provide financial assistance not only for the construction of economic infrastructure, but also for additional elements of economic infrastructure development.
Item 2: Paragraph 3(2)(a) (Definition of Northern Australia economic infrastructure)
7. This item amends the definition of Northern Australia economic infrastructure by replacing “and” with “or”. This is to broaden the definition to include projects that meet either criterion of providing a basis for economic growth in Northern Australia, or stimulating population growth in Northern Australia.
Item 3: Subsection 3(2) (note) (Objects of this Act)
8. This item amends the note to reflect the amendment to paragraph 3(2)(a) and has the effect of expanding the definition of Northern Australia economic infrastructure.
Item 4: Section 4 (Simplified outline of this Act)
9. Item 4 replaces the simplified outline. The purpose of the simplified outline is to provide a high level overview of the Act.
Item 5: Section 5 (Definitions)
10. This item inserts new definitions for appointed member, the Finance Minister, financial assistance, and Minister for Northern Australia.
11. The definition of appointed member is inserted to distinguish between members appointed to the Board under section 15 of the Act and the Secretary of the Department.
12. Financial assistance is defined in relation to the function conferred on the Facility by item 11 of the Bill (new subsection 7(1A)) to include loans, letters of credit, purchase of bonds, guarantees and equity investments. This expands on the types of financial assistance that may be offered by the Facility.
13. Finance Minister and the Minister for Northern Australia are defined to distinguish between the Ministers’ powers and functions under the Act.
Item 6: Section 5 (after paragraph (e) of the definition of Northern Australia) (Definitions)
14. This item adds the Local Government Area of Ngaanyatarraku to the definition of an area within Northern Australia.
15. This means the Facility may be able to provide financial assistance to projects in the Local Government Area of Ngaanyatarraku.
Item 7: Section 5 (Definitions)
16. This item defines responsible Ministers, the Secretary and subsidiary.
17. Defining the responsible Ministers as the Minister for Northern Australia and the Finance Minister means that any reference to responsible Ministers is a reference to both Ministers.
18. The Secretary is defined as the Secretary of the Department, meaning the Department administered by the Minister administering the Act.
19. The definition of a subsidiary is the definition in the Public Governance, Performance and Accountability Act 2013.
Item 8: At the end of Part 1 (References to the Minister)
20. This item clarifies that a reference to the Minister in the singular is a reference to the Minister for Northern Australia.
Item 9: Before subsection 7(1) (addition of heading – Financial Assistance to the States and Territories)
21. This item inserts a new heading of Financial Assistance to the States and Territories.
Item 10: Paragraph 7(1)(a) (Functions of the Facility)
22. As per the originating Bill, this item empowers the Facility to provide grants of financial assistance to the States under section 96 and the Territories under section 122 of the Constitution, which extends to financial assistance such as loans. This is distinct from financial assistance provided directly by the Facility to other entities under other Constitutional provisions in item 11 (new subsection 7(1A)).
23. The intention is to maintain the originating Bill’s meaning of grants of financial assistance in the context of grants to the States and the Territories.
24. This item also replaces the term “construction” with “development”. Previously grants of financial assistance could only be provided in relation to the “construction” of Northern Australia economic infrastructure.
Item 11: After subsection 7(1) (Functions of the Facility)
25. This item expands the functions of the Facility to include the provision of financial assistance to entities other than the States and Territories. The exercise of this function is only with respect to the matters set out at paragraphs 7(1A)(a)-(j). In particular, the Facility is prohibited from providing financial assistance in the form of equity investments to entities which are corporations to which paragraph 51(xx) of the Constitution applies. Financial assistance is to be provided on the terms and conditions as determined by the Facility.
26. This item also inserts a new provision which gives the Facility the power to provide financial assistance in the form of equity investments directly and indirectly. That is, through direct investments, investments through partnerships, trusts and joint ventures, through subsidiaries, or any combination thereof. It also prevents the Facility from providing financial assistance other than equity through subsidiaries. Expanding the mechanisms by which the Facility can deliver financial assistance provides it the flexibility to apply the most appropriate delivery mechanism on a project-by-project basis.
27. This item inserts a new provision which provides for the Facility to make use of derivatives as a risk management tool and to indirectly achieve exposure to financial assets other than derivatives. The Facility may also use derivatives to reduce the transaction cost of achieving required exposures, and in the ordinary course of providing financial assistance in the form of guarantees. However, the Facility may not use derivatives for speculative purposes or for leverage.
Item 12: After Section 7 (new section 7A Terms and conditions for provision of financial assistance to corporations
28. If the Facility decides to provide financial assistance to a corporation to which paragraph 51(xx) of the Constitution applies, the terms and conditions must be set out in a written agreement between the Facility and the corporation. This is to ensure compliance with the strict threshold required to provide financial assistance under paragraph 51 (xx), and precludes the making of equity investments under this constitutional power.
Item 13: Subsection 8(1) (Time limit for making decisions to provide financial assistance)
29. This item extends the timeframe in which the Facility can make decisions to provide financial assistance by five years to 30 June 2026.
Item 14: Subsection 8(1) (Time limit for making decisions to provide financial assistance)
30. Item 14 substitutes the term “construction” with “development” for consistency with item 1 of Schedule 1 of the Bill.
Item 15: Paragraphs 8(2)(a) and (b) (Time limit for making decisions to provide financial assistance)
31. This item substitutes 30 June 2021 to 30 June 2026, consistent with item 13.
Item 16: Subsection 9(1) (Investment Mandate)
32. This item substitutes “the Minister” with “The responsible Ministers” to reflect that the Finance Minister and the Minister for Northern Australia are both responsible for directing the Facility about the performance of its functions through the Investment Mandate.
Item 17: Subsection 9(1)
33. This item provides that directions are made to the Board of the Facility, rather than the Facility. This reflects the status of the Board as the accountable authority and its oversight over the performance of the Facility’s functions.
Item 18: Subsection 9(3) (Investment Mandate)
34. This item requires the Board to take all reasonable steps to ensure the Facility and its subsidiaries comply with the Investment Mandate. This reflects that the Board has responsibility for the performance of the Facility and its subsidiaries, and their compliance with the Investment Mandate.
Item 19: Paragraph 9(4) (a) (Investment Mandate)
35. This items substitutes the term “construction” with “development” consistent with the item 1 of Schedule 1 of the Bill.
Item 20: After Paragraph 10(d) (Matters covered by the Investment Mandate)
36. This item adds equity investments as a matter about which the Investment Mandate may include a direction.
Item 21: Paragraph 10(g) (Matters covered by the Investment Mandate)
37. This item replaces the term “Minister thinks” with “responsible Ministers think” to reflect that the Ministers together may include any matters they think appropriate in the Investment Mandate.
Item 22: Paragraph 11(1)(a) (Consideration by the Minister)
38. This item allows the Facility to provide financial assistance before the end of the Minister’s consideration period if the Minister notifies the Facility that they do not intend to issue a rejection notice.
Item 23: After subsection 11(3) (Consideration by the Minister)
39. This item allows the Minister to notify the Facility, at any time within the Minister’s consideration period, of their intent to not exercise the power under subsection 11(4) in relation to financial assistance.
Item 24: Subsection 11(4) (Consideration by the Minister)
40. If the Minister does not notify the Facility under subsection 11(3A), the Minister may at any time during the consideration period notify the Facility that the financial assistance should not be provided.
Item 25: At the end of subsection 13(2) (Establishment of the Board)
41. This item provides that the Secretary of the Department is a member of the Board.
Item 26: Subsection 13(3) (Establishment of the Board)
42. This item increases the number of Board members from five to six to reflect the addition of the Secretary of the Department to the Board.
Item 27: Subsection 15(1) (Appointment of members)
43. In recognition that the Secretary of the Department will be a permanent member of the Board, this item excludes the Secretary from being appointed to the Board by the Minister.
Item 28: Subsection 15(3) (Appointment of Members)
44. This item reflects that the term limit applies only to appointed members, and not to the membership of the Secretary of the Department.
Item 29: At the end of subsection 15(4) (Appointment of Members)
45. This item adds economic development for Indigenous communities to the list of fields of expertise and experience sought for the Board. It recognises the value of this area of expertise to the exercise of the Facility’s functions.
46. A Board member does not require experience and expertise in economic development for indigenous communities to be eligible for appointment if they have experience and expertise in one or more of the other fields listed.
Item 30: Section 17 (heading)
47. This item deletes members from the heading in recognition that there is now a distinction between appointed members and the Secretary of the Department.
Item 31: Subsections 17(1) and (2) (Remuneration)
48. This item restricts remuneration for the performance of Board duties to appointed members only.
Item 32: Subsection 18(1) (Leave of absence)
49. This item allows the Minister to grant a leave of absence to the Chair only if the Chair is appointed by the Minister. The Minister cannot grant a leave of absence to the Secretary of the Department.
Item 33: Subsection 18(2) (Leave of absence)
50. This item limits the Chair to granting a leave of absence to appointed members of the Board only. The Chair cannot grant a leave of absence to the Secretary of the Department.
Item 34: Section 19 (Other terms and conditions)
51. This item reflects that only appointed members of the Board, not the Secretary of the Department, hold office on terms and conditions in relation to matters not covered by the Act that are determined by the Minister.
Item 35: Section 20 (heading) (Resignation)
52. This item amends the heading to remove reference to members as this section does not apply to the Secretary of the Department.
Item 36: Subsection 20(1) (Resignation)
53. This item reflects that only an appointed member may resign their appointment by giving the Minister a written resignation.
Item 37: Subsection 21(1) (Termination of appointment)
54. This item reflects that the section applies only to appointed members of the Board, not the Secretary of the Department.
Item 38: At the end of subsection 21(1) (Termination of appointment)
55. This item allows the Minister to ensure that the collective expertise and experience of appointed members are sufficient to enable the Board perform its functions effectively and in line with the Investment Mandate and expectations of Government. Changes to the functions or Investment Mandate of the Facility may result in a requirement for different expertise and experience.
Item 39: Subsections 21(2) and (3) (Termination of appointment)
56. This item reflects that subsections 21(2) and (3) apply only to appointed members and not to the Secretary of the Department.
Item 40: Subsection 21(3) (note) (Termination of appointment)
57. This item reflects that appointed members may be terminated under section 30 of the Public Governance, Performance and Accountability Act 2013.
Item 41: Subsection 22(3) (note) (Board meetings)
58. This item amends the number of Board members who must write to the Chair to convene a meeting from four to five to reflect the increased number of Board members due to the addition of the Secretary of the Department.
Item 42: After section 22 (new Section 22A Secretary may nominate alternate to attend Board meetings)
59. This item empowers the Secretary of the Department to nominate a specified person to attend Board meetings at which the Secretary is not present.
Item 43: Paragraphs 24(a) and (b) (Quorum at Board meetings)
60. The number of appointed members that forms a quorum has been increased by one member to reflect the addition of the Secretary of the Department.
Item 44: Before section 40 (new Section 39A Matters relating to subsidiaries)
61. This item places conditions on the Facility’s use of the power to incorporate or otherwise form subsidiaries. The Facility cannot incorporate or otherwise form a subsidiary in a place other than Australia.
62. This item provides that in making equity investments, subsidiaries of the Facility must take all reasonable steps to comply with the Investment Mandate. This is to ensure that financial assistance provided by a subsidiary achieves the outcomes for which the Facility was formed, and is undertaken in accordance with the Investment Mandate.
63. Subsidiaries are restricted to the acquisition of derivatives for specific purposes outlined in subsection 7(1C) to ensure derivatives are only acquired in accordance with the objectives of the Facility.
Item 45: Section 41 (Appropriation of Consolidated Revenue Fund)
64. These amendments broaden the purposes for which the appropriation may be used, to include the provision of financial assistance to other entities and the development, not just construction, of Northern Australia economic infrastructure, consistent with item 1 of Schedule 1 of this Bill.
Item 46: Section 42 (Annual report)
65. This item is an administrative change to allow for the insertion of a subsection.
Item 47: Subparagraph 42(d)(ii) (Annual report)
66. This item requires the annual report to include a summary of the forms of financial assistance provided during the relevant period and their important features. This item reflects the expansion to the forms of financial assistance the Facility may offer.
Item 48: At the end of section 42 (Annual report)
67. This item requires the annual report prepared by the Board to contain the information required in paragraphs 42(1)(d) and 42(1)(e) in relation to financial assistance provided in the form of equity investments by each subsidiary of the Facility. The intention is to ensure transparency in relation to the actions of subsidiaries.
Item 49: After section 42 (new section 42A Delegation by Board)
68. This item empowers the Board to delegate any of its functions or powers under the Act to the CEO and requires the CEO to comply with any directions of the Board.
69. The intention of this item is to provide the Board with flexibility to streamline and expedite processes where the Board deems this appropriate.
Item 50: Subsection 43(1) (Review of operation of Act)
70. This item provides that a further review will be required as soon as possible after 30 June 2024. The review will examine whether the time limit in which the Facility may make decisions to provide financial assistance should be extended. The review will also consider the appropriate governance arrangements for the Facility after 30 June 2026.
Item 51: Paragraph 43(2)(a) (Review of operation of Act)
71. This is an administrative amendment to reflect that subsection 8(1) has been amended to limit the time for making decisions to provide financial assistance to 30 June 2026 and that the review of operation of the Act must consider if this time limit should be extended.
72.
Appendix 1: Regulatory Impact Statements
REGULATION IMPACT STATEMENT
Name of department/agency: Department of Industry, Science, Energy and Resources
OBPR Reference number: 26337
Name of proposal: Extension of the Northern Australia Infrastructure Facility (NAIF)
Summary of the proposed policy and any options considered: This proposed policy allows the NAIF to continue making decisions to finance infrastructure projects in northern Australia for five years beyond 30 June 2021. Consultation with stakeholders during the Statutory Review of the NAIF strongly supported the extension of the NAIF, which will support it to allocate its full $5bn in finance. The alternative option of allowing the NAIF’s investment window to expire in June 2021 would reduce regulatory costs but would also prevent infrastructure projects in northern Australia from proceeding.
What are the regulatory impacts associated with this proposal? The NAIF loan assessment process is broadly aligned with those of a commercial bank or other private sector financier. The NAIF has two major requirements which project proponents must meet in excess of a private sector financier:
· Public Benefit – the Board must be satisfied that the project will produce benefits to the broader economy and community beyond those able to be captured by the project proponent; and
· Indigenous Engagement Strategy (IES) – the project proponent must provide a strategy which sets out objectives for Indigenous participation, procurement and employment that reflect the Indigenous population in the region of the proposed project.
What are the regulatory costs/savings associated with this proposal?
Regulatory costs for this proposal are estimated at $0.16m annually. This is based on the NAIF supporting up to ten projects per annum, and the costs associated with meeting the NAIF’s requirements in excess of private sector financiers. An analysis of regulations applicable to the NAIF was unable to identify regulatory offsets, however the NAIF is in the process of a Statutory Review, the recommendations of which may identify further regulatory changes. Additionally, the Department of Industry, Science, Energy and Resources is seeking to pursue net reductions in compliance costs across the broader portfolio.
| Average annual regulatory costs (from business as usual) |
| Change in costs
($ million) | Business | Community Organisations | Individuals | Total change in costs |
| Total, by sector | $0.16 | $0 | $0 | $0.16 |
Regulation Impact Statement (RIS) summary
Name of department/agency: Department of Industry, Science, Energy and Resources; Northern Australia Infrastructure Facility.
OBPR reference number: 42887
Name of proposal: Enhancing the Northern Australia Infrastructure Facility
Proposal
This proposed policy will reform the NAIF, responding to the Statutory Review of the NAIF (the Review) and streamlining eligibility criteria and governance arrangements for the NAIF.
The proposal contains options that would amend the legislative arrangements for NAIF financing, which are not expected to have any impact on regulatory costs for project proponents. The proposal also considers administrative reforms to the NAIF, which are recommended to be included regardless of the option chosen. These reforms would:
a) Adjust the NAIF’s public benefit criteria to focus less on multi-user infrastructure, and instead on economic development and job creation.
b) Change the geographic boundaries eligible for NAIF financing.
c) Appoint a Commonwealth representative to the NAIF Board, and adjust the criteria for appointing NAIF Board members.
Regulatory Impact
The current NAIF loan assessment process is broadly aligned with those of a commercial bank or other private sector financier. The NAIF has two major requirements in excess of a private sector financier – a requirement to develop an Indigenous Engagement Strategy (IES) and to demonstrate the project generates a public benefit over and above that which can be captured by the proponent.
Regardless of the option chosen, adjustments to the public benefit criteria are expected to result in a minor regulatory reduction for proponents seeking a low amount of NAIF financing (<$50m) where proponents can demonstrate public benefit through approaches other than a formal Cost Benefit Analysis. However, the changes proposed are expected to increase the pace of NAIF’s investment decisions from 10 per year to approximately 16 per year.
Main Costs
While reforms result in a reduction in regulatory costs for approximately 50 per cent of proponents seeking low amounts of NAIF financing, the increase in the number of proponents to 16 per year is expected to result in a slight increase in regulatory costs of $0.07m annually. An analysis of regulations applicable to the NAIF was unable to identify regulatory offsets, however the Department of Industry, Science, Energy and Resources is seeking to pursue net reductions in compliance costs across the broader portfolio.
| Average annual regulatory costs (from business as usual) |
| Change in costs ($ million) | Business | Community Organisations | Individuals | Total change in costs |
| Total, by sector | 0.07 | 0 | 0 | 0.07 |
Regulation Impact Statement (RIS) summary
Name of department/agency: Department of Industry, Science, Energy and Resources; Northern Australia Infrastructure Facility (NAIF)
OBPR reference number: 43076
Name of proposal: Establishing a northern Australian Equity Vehicle
Proposal
This proposed policy will expand investment tools available to the NAIF to invest in infrastructure projects in northern Australia by:
- Streamlining the use of debt tools such as guarantees and letters of credit; and
- Removing the prohibition on NAIF making equity investments, and allowing the NAIF to make equity investments where it does not have a controlling stake.
Regulatory Impact
NAIF processes are designed to be closely aligned with those of a commercial bank or other private sector financier. For its current offering of concessional loans, its requirements in excess of private sector processes are that proponents must demonstrate public benefit derived from their project, and they must provide an Indigenous Engagement Strategy (IES).
The streamlined and expanded debt tools will require project proponents to complete the same requirements as current loan applications. The streamlined process reduces duplication between Commonwealth agencies and processing times, but is not expected to have a significant impact on individual proponents. It is anticipated that this measure will not increase the number of NAIF proponents, but that proponents will switch from requesting loans to requesting other debt tools.
The process for proponents seeking an equity investment is expected to be similar to that of loans, and that in additional to financial due diligence scrutiny of the kind expected by the private sector they will also need to demonstrate public benefit and develop and indigenous engagement strategy.
Main Costs
These reforms are expected to result in two equity investment decisions from the NAIF each year. The costs of justifying public benefit and developing an IES for project equity proponents is expected to be in line with current investment decisions, totalling 157 hours per project at a labour cost of $100.96 per hour.
An analysis of regulations applicable to the NAIF was unable to identify regulatory offsets, however the Department of Industry, Science, Energy and Resources is seeking to pursue net reductions in compliance costs across the broader portfolio.
| Average annual regulatory costs (from business as usual) |
| Change in costs ($ million) | Business | Community Organisations | Individuals | Total change in costs |
| Total, by sector | 0.03 | 0 | 0 | 0.03 |