Australia: The north's time has come: Why business should be looking at Northern Australia for new opportunities

Developing Northern Australia has been an on-again-off-again dream for years. While the north's potential is obvious, there's never been a large enough market – particularly for food – to make the investment needed worthwhile.

That's changed. With world population expected to hit 8 billion by 2025, the international market for what the north can produce is expanding rapidly. So much so, it's now big enough to justify the investment.

The Federal Government's new white paper, Our North, Our Future, confirms what many in the north already know - now is the time to focus on developing northern Australia.

The White Paper recognises the region's potential, which encompasses all of the Northern Territory and those parts of Western Australia and Queensland above the Tropic of Capricorn.

While the paper canvasses several industry opportunities (industry pillars), it is food and agribusiness that really plays to Australia's strengths, and has the most potential for rapid growth.

AGRIBUSINESS AND FOOD PRODUCTION IS THE STAND OUT OPPORTUNITY

Food security concerns at home in Asia and the Middle East will drive demand for the north's food output. The impact of water scarcity in the Middle East is such that locally-produced crops like wheat will increasingly be phased out. The region will ultimately become a large importer of wheat and other crop foods.

For example, Saudi Arabia, with its population of 31 million, is now actively looking at Australia as a country that could help resolve its food security issues, including the supply of fodder for the country's significant dairy herd.

While, in the past, Saudi Arabia has looked to Europe, United States and South America as its source for fodder, Australia is increasingly being considered. Northern Australia's proximity to the Gulf region gives it a distinct competitive advantage.

Some Australian companies are already making significant plans for Northern Australia. Earlier this year, the Northern Territory Government and Federal Government awarded Major Project Status to a $1.5 billion prawn facility planned by the Seafarms Group Limited.

The project is forecast to create 1,600 direct jobs, and eventually produce more than 100,000 tonnes of prawns a year, to take advantage of growing international demand for seafood. Most of the product is aimed at Asian markets.

INVESTMENT IS CENTRAL TO THE NORTHERN DEVELOPMENT DREAM

The region needs investment to realise its potential. The Northern Australia Infrastructure Facility announced by the Government will help finance vital infrastructure that wouldn't have been funded otherwise. When the infrastructure is in place, it will cut companies' costs in getting things to market.

The Federal Government has released a consultation paper, which expects to see the NIAF in place from 1 July 2016, and operated by the Commonwealth Department of Industry, Innovation and Science. A number of mandatory loan eligibility criteria have been identified, including:

  • Construction or enhancement of economic infrastructure.
  • Public benefit (eg multiple users).
  • Unlikely to proceed (at all or without significant delay) without NAIF assistance.
  • Located in, or of significant benefit for, Northern Australia.
  • NAIF finance will not exceed 50% of the total project debt.
  • The loan will be able to be repaid.

Preference will be given to projects that have been identified as a priority by the Federal Government, have State or Territory endorsement, and require loans above $50 million.

NORTHERN AUSTRALIA ROADS PROGRAMME

Following on from the White Paper, the Federal Government has issued a discussion paper seeking to gauge the degree of private sector interest in the $600 million Northern Australia roads programme. The paper invites the private sector to put forward delivery proposals with expressions of interest to close on 29 January 2016.

The paper is looking for proposals from investors or construction companies, or from major road users in industries in the north, such as agriculture, resources and tourism.

THE NORTHERN TERRITORY INFRASTRUCTURE DEVELOPMENT FUND - A HOME GROWN INITIATIVE OF THE NT GOVERNMENT

Alongside the NAIF, the Northern Territory Government has launched its own infrastructure fund. The fund will primarily be used on territory based infrastructure assets to provide community and economic projects, with the aim of helping overcome the boom and bust cycle which is a feature of much of Northern Australia.

TIME TO TAKE ADVANTAGE OF THE OPPORTUNITIES

With both the Federal, and northern Australia state and territory governments focussed on the north, now is a good time for producers and investors to be looking at the opportunities available, and exploring whether or not whether the NAIF, the proposed NT infrastructure fund or the Northern Australia Roads Programme could be a source of capital for significant infrastructure and agribusiness projects.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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