Australia to unlock north's potential

A port in the northern Australian city of Darwin.
A port in the northern Australian city of Darwin. PHOTO: NORTHERN TERRITORY GOVERNMENT

$5b concessional loan scheme aims to boost investment in vast region right on Asia's doorstep

Australia is planning to subsidise a wave of investment in its vast northern region - an area that is on Asia's doorstep but whose potential has never been "unlocked". 

The federal government is close to finalising a A$5 billion (S$4.9 billion) concessional loan scheme to boost investment in the region, which has long been touted as ripe for development. The loans would go towards projects such as expanding Cairns airport, building an outback rail line and a new tourist precinct in Darwin.

The scheme comes amid concerns that the resources-rich region is set to struggle as the mining boom ends. Instead, the government hopes to boost sectors such as agriculture, energy and transport.

Minister for Northern Australia Josh Frydenberg has signalled that the loan scheme should be ready by mid-year to allow investors to apply from July. Investors will likely be required to secure at least half of their funds from the private sector. 

"The programme will supercharge investment in economic infrastructure in Australia's north," Mr Frydenberg told The Australian earlier this month, adding: "Developing the region is a bipartisan, long-term national endeavour that will produce big dividends for the country as a whole."

Northern Australia, which covers the Northern Territory and parts of Queensland and Western Australia above the Tropic of Capricorn, has a population of only 1.2 million, but accounts for about 40 per cent of the nation's land mass and about A$178 billion in annual economic output.

A government report last June laid out a 20-year development plan for the region, including building new roads and airports and improving water supplies. The report proposed making it easier for foreign workers to obtain visas and a greater focus on seeking business opportunities in Asia. 

"Australia's north… sits at the intersection of the two great regions of global economic and population growth - Asia and the Tropics," the report said. (The Tropics encompass everything between the Tropic of Cancer and the Tropic of Capricorn and includes 40 per cent of the world's population.)

"The north operates in similar time zones to (Asia's) most dynamic economies… The booming economies of South-east Asia and southern China are within three to five hours' flying time from Darwin."

Proposed projects that could receive government loans reportedly include a dam in north Queensland to supply water to farmers and sealing long dirt roads in Western Australia and Queensland.

Loan terms will vary on a case- by-case basis but may involve lower interest rates or longer repayment periods than those offered by commercial lenders.

The scheme has received a mixed response from analysts, with some saying the government should not "pick winners" or interfere with private-sector funding decisions.

Professor John Quiggin, an economist at the University of Queensland,  said the government should not single out Northern Australia for special treatment but should instead develop a national approach to infrastructure. "The idea that we have a 'Northern Australia problem' makes no sense," he told The Straits Times. 

But other analysts were more supportive, saying  the plan could create much-needed investment opportunities for investors in Australia and internationally.

Economist Richard Holden from the University of New South Wales said the loan guarantees would help to build confidence among private investors considering backing businesses in the region.

"Loan guarantees… (create) belief in belief by underwriting success," he wrote in The Australian on Jan 11. 

"And it's much cheaper than funding the whole thing with taxpayer money."

Ahead of the loan scheme, the government last November hosted potential investors from 20 countries, including Singapore, at a forum in Darwin. More than 100 potential projects were presented, including a new hotel in Darwin and a rail link between the remote towns of Tennant Creek and Mount Isa. 

The Office of Northern Australia, a government agency which assists in developing  the region, has begun operating in Darwin after being relocated from Canberra. 

Prof Quiggin noted that successive governments had proposed plans to focus on Northern development - a policy which was often seen as a vote-winner in local electorates. He said the region was diverse, with some places such as Cairns actually benefiting from the decline of the mining boom because this had led to a cheaper Australian dollar and boosted tourism.

"Unlocking the north is an easy cliche to reach for," he said. "It is a disparate region, with rural areas, regional centres and Aboriginal communities settlements. It does not make sense to treat the region as justifying separate treatment."

A version of this article appeared in the print edition of The Straits Times on January 27, 2016, with the headline 'Australia to unlock north's potential'. Print Edition | Subscribe