As a former Treasury official and long-time critic of industry assistance, I’m sympathetic to the Federal Opposition’s criticism of the expected $900 million soft loan from the Northern Australia Infrastructure Facility (NAIF) to Adani for the rail line to its Carmichael mine. Adani has not helped its case by admitting at one stage that it didn’t really need the loan (see this Brisbane Times report), undermining the rationale for the government providing the loan. I suspect the concessional loan would effectively provide Adani with a subsidy of at least $10 million per annum and possibly much more depending on the generosity of its terms.
If I were still in Treasury I would have argued against the Commonwealth setting up the NAIF in the first place, asking what is the market failure the facility is trying to address? Certainly the rationale for NAIF is not in sound economics, and former Treasurer Wayne Swan has raised important questions about its governance, as reported in the AFR.
That said, as a Queenslander and one hailing from Townsville, recognising our State and especially NQ will benefit in a major way from the mega mine (see my post from December last year), particularly through additional employment and the huge revenues from royalties, some hundreds of millions of dollars per annum, I can tolerate the loan, although I would prefer Adani found the money elsewhere.
With our inefficient environmental laws that have allowed protracted “law fare” by environmental groups against the mine, and the risk of policy changes in the future that would jeopardise the project’s viability, a loan from NAIF may be an important signal of commitment to the project from Australian governments, an excellent point made by John McCarthy in his Courier-Mail column this morning.