Statement on Norfolk Island
27 March 2014
Today I table the Australian National Audit Office's (ANAOs) 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 community.
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 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 they 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, the Hon Neil Pope, for his generous hospitality during my visit.
I would also like to thank him for his work over the last two years as the Administrator.
Unfortunately, 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, or earlier.
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, rather it is 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 programmes such as Roads to Recovery, equalisation payments, and local government Financial Assistance Grants, have made the infrastructure backlog much more severe than 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 2000 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 provision of emergency financial assistance to the Norfolk Island Government on an annual basis; and
- Ensuring certainty for the tourism industry by underwriting the airline service to the Island.
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 lacks 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 would be a significant investment that would 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 to integrate Norfolk Island with the mainland taxation and social security systems.
As a simple principle, the Australian Government believes Australians should be treated the same, no matter where they live.
This is why the Australian Government remains determined to implement our election commitment.
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 the 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.
I must say that I am impressed with the level of responses I have received to date.
I can say unambiguously that the correspondence reflects a strong mood for reform.
I would like to take this opportunity to thank all those who have already written to me.
This 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 has 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, all for the 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.
And the Norfolk Island Government recently announced an increase of more than 50 per cent to its health levy, which will drive up this expense 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 opportunity 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 the Norfolk Island Government, or fix all the service delivery issues on the Island.
The fact is that no other remote community of less than 2000 people has to deliver complex national level services including customs, immigration and quarantine.
Therefore, as part of the reform work, I will also be considering and 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 must 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 place of Australia.
I have seen first-hand 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.