House debates

Thursday, 27 March 2014

Ministerial Statements

Australian National Audit Office: Norfolk Island Financial Statements

11:13 am

Photo of Jamie BriggsJamie Briggs (Mayo, Liberal Party, Assistant Minister for Infrastructure and Regional Development) Share this | | Hansard source

by leave—Today I table the Australian National Audit Office's (ANAO's) audit of the financial statements of the Norfolk Island Administration.

The results of the audit are troubling and clearly show the scale of the challenges facing the Norfolk Island government. Like any remote community, maintaining infrastructure and generating job opportunities has its challenges. However, these challenges on Norfolk Island are exemplified by a unique set of governance arrangements laid out in the Norfolk Island Act 1979.

Norfolk Island is Australia's only self-governing external territory and the only place in Australia where residents do not participate in the Australian taxation system and do not receive social security benefits. In fact, there is almost a complete absence of social services and a basic safety net which could protect the most vulnerable.

Over the last four decades there has been a plethora of reviews and reports looking at these arrangements, including a royal commission conducted in 1976, 12 separate parliamentary inquiries, and the commissioning of more than 20 reports from experts in various fields including outgoing reports from former administrators. All of these reviews, reports and audits have been unanimous in recommending significant changes and reforms.

In spite of this, as the ANAO findings I table today show, there has been very little progress in addressing the fundamental issues facing Norfolk Island. In fact the situation has deteriorated and the challenges are increasingly more difficult.

The ANAO has now forecast unfunded budget deficits for the Norfolk Island government in future years of between $7.4 million and $7.8 million.

The ANAO has also found there is a lack of proper financial controls and poor financial management practices in the Norfolk Island administration, and has concluded that without further Commonwealth support, the administration is not a 'going concern'. These issues identified by the ANAO are longstanding, and I am not the first minister to stand in this chamber and talk about the problems facing Norfolk Island, but these problems are becoming more critical as deficits increase and essential infrastructure on the island further deteriorates.

I recently visited Norfolk Island, where I was able to spend some time with the Norfolk Island government, the legislative assembly and community leaders. I would like to take this opportunity to thank the Administrator of Norfolk Island, Neil Pope, for his generous hospitality during my visit. I would like to thank him for his work over the last two years as the Administrator. Unfortunately—I say that very genuinely—he has decided not to stay on as the Administrator and will return home to Victoria at the end of June. He will be a huge loss to the island, and I wish him and his wife, Jen, all the best for the future.

The visit was an opportunity to hear first hand about the significant and ongoing challenges the island faces. I was also able to see the island's infrastructure. Simply, it is dated, run down and fragile. There has been no significant infrastructure investment since the 1970s and the Norfolk Island government has not had the capacity to maintain much of what was built then either. The island's hospital is outdated. The roads are deteriorating. Broadband services are poor. And the island's electricity network is extremely fragile and at risk of collapse.

Electricity costs on the island are very high, but the money raised through utility charges is not invested in the network but rather used to cross-subsidise other activities of the Norfolk Island government. Previous attempts by the Norfolk Island government to reduce reliance on imported diesel by promoting solar have achieved a high take-up of solar panels. But the surplus electricity now produced places the ageing network at risk of overload, exacerbating existing technical problems, and increasing the risk of system failure.

While many communities across Australia have infrastructure needs, the inability of Norfolk Island to access funding programs such as Roads to Recovery, equalisation payments, and local government financial assistance grants have made the infrastructure backlog much more severe than for comparable remote communities across Australia.

If something is not done, the Norfolk Island community will be increasingly at the mercy of events, with the chance that a future crisis or even simple neglect could push essential infrastructure past breaking point. This could have very severe consequences for the Norfolk Island community, leading to the point where the welfare of residents and even the ongoing viability of the Norfolk Island economy are placed at risk. It is clear that the problems facing Norfolk Island are getting worse, the financial position of the island is deteriorating, and the population continues to decline.

The lack of progress is disappointing, but it also shows the difficulty of achieving real improvements in this area and the challenges of maintaining a sustainable model of self-government for a remote population of less than 2,000 people. As disappointing as it is that long-term reforms have not taken place, I acknowledge that previous Australian governments have taken a number of steps to help the Norfolk Island government and community, including:

      The Australian government has also been working with the Norfolk Island government to introduce public sector and immigration reforms as well as land valuations ahead of the introduction of municipal rates on the island. However, progress on even these modest reforms has been slow and the Norfolk Island government seems to lack the capability to address many of the key sustainability issues facing the island.

      The Australian government has also made funds available to construct a waste management facility as well as to extend the Cascade Jetty on the island. Extending the Cascade Jetty will be a significant investment that will reduce the freight costs and increase revenue opportunities for Norfolk Island, as additional tourists will be able to visit. As important as these initiatives are, they will take time to pay dividends, and there is still important work that the Norfolk Island government can and must do to help tackle some of the issues facing the island.

      Members will be aware that the Australian government has an election commitment, made by the member for Stirling, prior to the election, to integrate Norfolk Island with the mainland taxation and social security systems. As a point of principle, the Australian government believes that Australians should be treated the same, no matter where they live. That is why the Australian government remains determined to implement our election commitment, as made by the member for Stirling. But let me make this clear: we will not be introducing Australian welfare benefits without the obligations of the Australian taxation system.

      The Prime Minister has asked me to develop a discussion paper on possible reform options, including governance reform and plans to extend mainland taxation and social security systems. In the coming weeks, I will be talking to my ministerial colleagues and the wider community about the best way to take this forward. To help frame our policy direction, I have written to all residents on the island seeking their views on how best to deliver essential services and the best governance model for the future of the island. I must say that I have been impressed with the level of responses I have received to date. I can say that the correspondence reflects a strong mood for reform. I would like to take this opportunity to thank all of those who have already written to me. The feedback is very important and will assist in forming government policy going forward.

      I am pleased that, while I was on Norfolk Island, the Norfolk Island government indicated its commitment to reform as well. This shared commitment will be important, as there is no doubt that this reform process will be complex and challenging for the Norfolk Island community, particularly in the adjustment to mainland taxation and social security systems. Businesses and individuals on Norfolk Island will need to adopt new record-keeping practices, comply with various legislative and regulatory requirements and disclose personal information such as income and assets to a government, for the very first time. As challenging as these reforms will be, they are important for the future of the Norfolk Island community.

      While the costs of addressing the problems facing Norfolk Island may seem significant; the costs of not acting are even greater.

      If a single parent on Norfolk Island needs family tax benefit payments to make ends meet, or if a person with a disability needs to receive the disability support pension, or if an elderly person needs to buy medicines that are unaffordable without the PBS, they must currently leave their support networks and community and move to the mainland, often at great personal expense.

      Australian citizens living on Norfolk Island are not eligible for Medicare, and Australians visiting Norfolk Island cannot use their Medicare card if they need to access medical services. In fact, Australians on Norfolk Island have to pay much more for public health services than on the mainland and the health fund operated by the Norfolk Island government is based on a flat levy, which hits low-income earners especially hard. For instance, a recent report on child and family services on Norfolk Island found that a family of four needs to spend almost $4,000 each year before the island's health insurance scheme starts to assist them and even then the scheme does not cover the full costs of some treatment. The Norfolk Island government recently announced an increase of more than 50 per cent to its health levy, which will drive up these expenses even further.

      While the Commonwealth is assisting the hospital to gain accreditation against the Australian Council of Healthcare Standards, several recent reviews have highlighted a fundamental disconnect between the services currently being delivered and the needs of the community. Issues with broadband access have also limited the opportunities to consult with mainland specialists in the event of an emergency. Extending the social security system will support Australians on Norfolk Island and allow them to continue to live and reside in their community throughout major life events.

      While integration with the mainland taxation and social security systems will assist and support the most vulnerable in the Norfolk Island community, it will not, of itself, guarantee the sustainability of Norfolk Island and its government, or fix all the service delivery issues on the island. The fact is that no other remote community of less than 2,000 people has to deliver complex national-level services including customs, immigration and quarantine. Therefore, as part of the reform work, the government will also be considering looking at changes to the governance arrangements for Norfolk Island.

      I appreciate the fact that many Norfolk Islanders have a strong connection to their history and their culture, as do many Australians, but the reality is that they are Australians and they will be treated as such. While I am fully aware that the problems outlined here are not new, and many promises to introduce reforms have been made in the past, I would like to assure Norfolk Island residents that this government intends to put Norfolk Island on a more sustainable footing.

      Despite the challenges, I am optimistic about the future of this special part of Australia. I have seen firsthand its natural beauty and experienced the warmth and hospitality of its people. It is etched in Australian settlement history and remains integral to our country. If we can take the time to get the policy settings right, then I think the island will have a bright and prosperous future.

      I present the following document: The Australian National Audit Office independent report of Norfolk Island's financial statements 2012-13—Ministerial Statement, 27 March 2014. I ask leave of the House to move a motion to enable the member for Lingiari to speak for 13 minutes.

      Leave granted.

      I move:

      That so much of the standing and sessional orders be suspended as would prevent Mr Snowdon speaking in reply to the ministerial statement for a period not exceeding 13 minutes.

      Question agreed to.

      11:26 am

      Photo of Warren SnowdonWarren Snowdon (Lingiari, Australian Labor Party, Shadow Parliamentary Secretary for External Territories) Share this | | Hansard source

      I commend the Assistant Minister for Infrastructure and Regional Development for his statement on the governance and finances of Norfolk Island and to say that we agree with the direction in which the government is heading. My friend the member for Canberra is sitting alongside me because she is evidence of the support that exists across the chamber for the changes the minister has indicated. Norfolk Island is a very important place in our national story and will always be emblematic of our nation's history. But this is an opportunity, as the minister has rightly pointed out, for us to determine a new future, a new pathway, for that community.

      The report from the Australian National Audit Office is salutary reading. We need to be very concerned about what it has indicated to us. Paragraph 1.3 of this report says that the administration of Norfolk Island has forecast significant negative cash flows from operations to total $7.4 million in 2014-15, $7.4 million in 2015-16 and $7.8 million in 2016-17. It says:

      The Commonwealth of Australia's funding commitments to the Administration—

      of Norfolk Island—

      ends at 30 June 2014 and as at the date of signing these financial statements, no further financial assistance to the Administration has been negotiated.

      The report indicates that 'these conditions give rise to a material uncertainty that may cast significant doubt' upon the administration's ability to continue as a going concern, and 'in the event that the administration of Norfolk Island does not obtain additional funding from the Commonwealth of Australia and/or reduce expenditure in line with available revenue' the administration may not be able to continue its operations as a going concern.

      That is the nub of the problem. The issues of governance and finances have been vexed issues for over four decades, as the minister rightly pointed out. I have had the great fortune of visiting Norfolk Island on a number of occasions, in the early 1990s in particular, in an endeavour to advance some of the changes which we are talking about this morning.

      The minister mentioned that in many remote communities—and Norfolk Island is remote—maintaining infrastructure and general job opportunities has its challenges. The population, although now 2,000, is declining, which is an issue of significant concern. As an example, in the year August 2011 to September 2012, about 25 per cent of the male population aged between 25 and 50 had left the island and the overall population dropped by 9.4 per cent. The minister referred to the issues dealing with social services and the requirement for a basic safety net which could protect the vulnerable. Last year, there were reports of people getting by on charity parcels and shooting wild chickens—that is not what Australia should be about

      As he rightly pointed out, there have been 12 parliamentary inquires on this issue and more than 20 reports have been commissioned from experts in various fields. On 2 March 2011 the Norfolk Island Road Map was agreed upon between Simon Crean, the then Minister for Regional Australia, Regional Development and Local Government, and the Hon. David Buffett, Chief Minister of the Norfolk Island government.

      The Joint Standing Committee on the National Capital and External Territories tabled its Report of the visit to Norfolk Island 29-30 April 2013, and on 5 June 2013 noted:

      Since the passage of the Territories Law Reform Act 2010, four funding agreements have been made between the Australian and Norfolk Island Governments. These agreements have seen the Commonwealth grant specified funds for specified purposes to the Norfolk Island Government in order to allow the Norfolk Island Government to continue to provide essential services to the community. $3.829m was granted in December 2010, $5.629m in April 2011, $2.9m in September 2011 and $4.5 million in December 2012. In each case, the funding was tied to stipulated conditions for the reform of governance or finances under the Territories Law Reform Act 2010 or the Norfolk Island Road Map.

      Those of us in this place who have had any experience of Norfolk Island know of the need for change. You very rightly pointed out, Minister:

      It is clear that the problems facing Norfolk Island are getting worse, the financial position of the island is deteriorating, and the population continues to decline.

      You further said in your speech,

      Members will be aware that the Australian government has an election commitment … to integrate Norfolk Island with the mainland taxation and social security systems.

      We absolutely concur, and we are determined to assist you in that process. You have rightly pointed out that the Australian government will not be introducing welfare benefits without the obligation of the Australian taxation system, and we concur with your position. We also concur with your observation that Australians should be treated the same, no matter where they live.

      We support the development of a discussion paper, but I think those of us on this side of the chamber with experience of Norfolk Island, which we have had over many years, would say to you: let us expedite this process. We are very supportive of your communications with the Norfolk Island community and interaction with the community residents, because clearly they have got to be partners in this process. I am sure the member for Canberra and I can attest to the strong feeling of support for change. No longer can we be stuck in the ideas of Queen Victoria. They are no longer relevant, despite what the Prime Minister might think from time to time.

      It is very important that we actually address the needs of the community on Norfolk Island. Your observations and the examples that you provided about those people who are missing out are salutary reminders of what we need to do in this place as parliamentarians to make sure all Australians are treated fairly and equally. Can I again say to the minister that we on this side of the House want to work with you in a bipartisan way to get the best possible outcome for the people of Norfolk Island.

      Debate adjourned.