Northern Australia development: a stocktake of land tenure issues

Cobbold GorgeThe Commonwealth government recently released its White Paper on Developing Northern Australia (‘White Paper’). The White Paper identifies land tenure as a key component of development in the north. It identifies challenges associated with land tenure, and proposes some tentative solutions, although in the main the action plan for land promotes undertaking pilot schemes rather than concrete plans.

This post outlines the land tenure ‘challenges’ identified in the White Paper, the opportunities that might arise and some of the potential impacts. In particular, I am interested in how the language around land tenure might advance or affect social and environmental objectives in northern Australia.

Challenges

The White Paper is clear that the key to northern development is secure and tradeable interests in land. The barrier to achieving this is that land tenure across the north is fragmented and complex, making it difficult for investors to commit to the region. There are a number of aspects of tenure that support this perception.

Multiple tenures: In addition to three state/territory land tenure jurisdictions and Commonwealth oversight of native title, there is enormous variety of tenures across the north. Unlike metropolitan areas, which tend to be largely freehold title, in more remote locations there is far more diversity in the way in which land is held. In the broadest sense, there are three main categories of interest:

  1. Pastoral lease
  2. Indigenous freehold
  3. Native title

Conditions apply: Each of these interests has its own special conditions – so not every pastoral lease is alike; and every native title determination consists of its own particular rights and interests. Therefore where an interest in land exists, there are information costs associated with ascertaining the rights it involves.

The terms and conditions of each type of tenure constrain the types of activities that can be carried out on the land. Usually also, the terms and conditions limit in at least some respect, the extent to which land can be mortgaged or sold. Some land cannot be mortgaged, and some land needs government permission before it can be transferred. These restraints are quite different across tenures, and across jurisdictions. There is no single ‘property market’ in the way this might be understood in the city.

Not permanent title: Pastoral leases are not permanent like freehold title. They run for only, say, 40 years before they are surrendered to the State. These kinds of tenure are considered to be less ‘secure’ than freehold as there is not as much time within which to recoup the costs of investment.

Together these factors provide context for the White Paper’s contention that secure and tradeable title is at the heart of northern development.

Opportunities

The White Paper wants to make land tenure less complex, and more secure. To do this, it proposes a number of strategies.

Anthill, NTCut down the length of time for a native title determination: The White Paper makes a bold goal of settling all native title determinations by 2025. This is a welcome development, in light of the extraordinarily slow process of claims to date. It will require political will, cooperation between the State parties and Commonwealth, and reforms to the native title system itself.

The White Paper coincided with an ALRC review into the Native Title Act which recommended changes to native title that would streamline claims. The White Paper aligns with this goal, planning on consultation and pilot projects with willing communities, that model effective development.

Additionally, the White Paper has committed funding to build capacity in native title representative bodies.  If effectively rolled out, it should empower these organisations to better administer their interests in land.

Freeholding leases: The White Paper suggests that leases ‘roll over’ or automatically convert to freehold, thus improving the ‘security’ of the tenure (through a lengthier term). If these tenures became freehold, the land could be sold without restriction. It is often assumed also that banks would be more likely to lend against the freehold title – because in a mortgage default, the bank can sell the land to the highest bidder.

Removing ‘unnecessary’ conditions on leasehold: It is common for a lease to require the pastoralist to make improvements – or to spend a certain amount each year on infrastructure. Usually this takes the form of fencing, or bores, or dams, or vegetation clearing, or roads.

The original purpose of leasehold title was to open up western and northern frontiers through infrastructure development undertaken by the pastoralist. Historically, with a lack of planning regulation and a desire to improve economic infrastructure for primary industries, the pastoral lease was an important policy tool. It is therefore  interesting to see the White Paper urging a reduction in the constraints on use for the very same purpose of promoting investment – and thereby growth.

The goal of ‘simplifying’ tenure is a clear indication of a shift towards a more pure market mechanism to promote development. The market model is usually predicated on a lack of government intervention and individualistic, secure and enforceable property interests. Freeing up conditions of land use is neither good nor bad of itself. The efficacy of the terms of land use will depend on the policy goals they serve.

For example, pastoral leases in Western Australia must presently be used for pastoral purposes. The owner is not permitted to earn income other than through pastoral activities. For the owners of the pastoral lease over Wooleen Station, these terms have constrained their ability to promote environmental objectives. The owners successfully trialed a system of improving degraded land by removing all stock. To earn an income on the de-stocked land, they wished to carry out an eco-tourism business. This would however be in breach of the lease, and would cause them to lose their tenure. Consequently they have had to partly re-stock the land, even though this destroys the environmental gains they have made.

Indigenous freehold and home ownership: Across northern Australia there are different forms of statutory title that can only be held by Aboriginal or Torres Strait Islander people. These tenures, unlike so-called ‘regular’ freehold, do not extinguish native title. As with pastoral leases, there are varying constraints on the way in which the land can be used, notably on how it can be transferred and to whom.

The White Paper looks to rationalise these types of tenure, and to free them up to ‘support investment’. For example, the White Paper commends the recent Queensland amendments that permit communities to turn their Indigenous freehold into ‘regular’ freehold. This process is consensual, but it does extinguish native title. Changing to freehold is intended to make this land fully tradeable. While it appears to promote the aspirations of Australians to own their own home, it will have consequences, notably that land may move out of Indigenous ownership altogether.

It is heartening to note that the White Paper says that:

Critically, pilots will be supported by willing communities, not undermine Indigenous land rights more broadly, and offer economic (and possibly other) gains to communities. (p19)

It is unclear however just how pilots, such as the Queensland example, will offer ‘economic gains’.

Information infrastructure: It is one thing to know that you have rights over a parcel of land – but information about those rights needs to be readily available. Further, any dealing with land, regardless of the tenure, also needs a survey plan. Frequently Aboriginal owners of Indigenous freehold have been unable to deal with their land because it is not surveyed or on a register.

The White Paper will provide land surveys, recognising that they are the ‘building blocks for secure tenure’. (p6) This is part of the two year plan to develop ‘simpler land arrangements to support investment’ (p126) though the cadastral surveys will be undertaken in ‘targeted communities to support property rights’. Promoting this information infrastructure is however an important benefit for land holders.

Overall, there are a number of positive ideas about tenures across the north. Developing titling infrastructure through surveys, registration of interests and rationalising the native title process should result in greater security for interest holders. Further, there is explicit mention throughout the White Paper of the importance of Aboriginal and Torres Strait Islander connection with land, and for an inclusive and consultative process. There are, however, also many likely impacts from these recommendations.

Impacts

Overall, the White Paper probably oversimplifies the tenure arguments and their connection to economic development. Additionally, as Jon Altman and Francis Markham observe in their parliamentary submission preceding the White Paper, there is ‘a tendency to interchange the words “development” and “growth”.’ While growth tends to focus on statistical economic indicators like GDP, the former is ‘more contested’. Importantly, it can indicate ‘improvements in wellbeing, living standards and opportunities’ but there is a downside of ‘commodification, industrialisation, modernisation and globalisation’. (p3)

Seasonal creekThis ambiguity is reflected in the White Paper itself. Thus there is an emphasis on consultation with and inclusion of Indigenous Australians in the north, and recognition of the importance of native title, but discussion about land tenures that frequently appears to override such aims. For example, the assumption in the White Paper seems to be that the more tenure is like a ‘regular’ freehold title, the more economic development can occur. This is the case both in terms of land use, and in leveraging capital off land tenure to support development. However neither of these tells the complete story.

No land tenure is free from constraints on its use. The most free of all tenures is constrained by planning and environment regulations, amongst others. Environmental and planning regulation is particularly important in light of the fragile ecosystems of northern Australia, a fact recognised in the White Paper. Therefore, as Altman and Markham observe, it is vital that any development plan in the region embed the guiding principles of ecological sustainability and the precautionary principle. (Recommendations 3 & 4) These are absent in the White Paper.

Existing tenures could well be updated to recognise the environmental conditions, and to provide for them – as is argued in the case of Wooleen Station. But this would be opening up a higher use of the land, rather than allowing open slather for any kind of development. The real likelihood of environmental degradation demands a cautious response to evidence-based land use planning as a concomitant to tenure. Preserving environmental integrity is central to the wellbeing of people in the north, as well as to the landscape itself.

‘Freeing up’ land tenure is also believed by many as the key to leveraging capital. Many have suggested that individual home ownership is the first step to this. Once people have title to their home, theoretically they can borrow money to support business development. In the same way, the White Paper assumes that a freely tradeable title will encourage banks to lend on the title – permitting an influx of capital to support infrastructure and business development.

However for banks to lend, the asset must be capable of being realised on mortgage default. For the asset to be realised, what is required is not just freehold or tradeable tenure, but a market. If there is no market, the asset has little value and will not support an injection of capital. The smaller the market, the less the likelihood that the asset can be realised, and the lower its value. This is a real issue for remote northern Australia.

There may be some connection between freehold tenures and bankability as there are no constraints on the identity of the buyer. But for the remote north, the connection is tenuous at best because of the lack of viable market (except perhaps for pockets of land suitable for particular uses). Changing tenures – freeing them up – is no magic bullet. Furthermore, for Aboriginal and Torres Strait Islander land holders, it comes with the downside of losing rights to land altogther.

Despite government support for some ‘targeted communities’, the White Paper largely promotes privatisation of the costs of surveys and other information infrastructure processes. They are likely to be borne not by government, but by those who seek to hold the resulting title. This infrastructure, essential to any regularisation of title, may therefore be out of reach to many who live in remote communities, because of the cost.

It is estimated that nearly 76 per cent of northern Australia is under Aboriginal interests of some kind. To ‘free up’ tenures is likely to mean extinguishing these interests. Certainly the Queensland model, praised in the White Paper, involves freeholding Aboriginal titles at the expense of native title – albeit following a process of consultation.

Altman and Markham observe that the minimum standard for protection of Indigenous land owners is ‘free prior informed consent’. This exists in some northern tenures already, but is largely absent from others. Despite not being mentioned in the White Paper, this is one way to secure Indigenous property interests. Instead the equation I see implied in the white paper, is a zero sum game. The call seems to be that we need to give up communal title, Indigenous interests, in favour of a market-based development/growth model.

Conclusion

Historically it is through effective government policy, argely occurred at the cost of Indigenous Australians, that land in northern Australia has supported economic development. The need for government support is likely to remain for at least the medium term, despite the optimism of the White Paper.

While the complexity of tenures and constraints on leasehold interests or Aboriginal titles might be seen as a fetter on the operation of the open market, in fact they already represent a land system designed to promote social, economic, and environmental objectives. Complexity is not bad of itself – only where it arises from unnecessary requirements.

Importantly, there is no necessary link between lifting constraints on land tenure, and economic development in the north. By contrast, tenures already provide an important social, economic and environmental foundation that could be enhanced rather than overturned. The White Paper is a useful focus for policy development affecting northern Australia. It will serve an important role in leveraging benefits for the people and the environment of the north. But to do so involves thinking critically about the assumptions made in the White Paper and clearly articulating the role of land tenures in development.

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2 thoughts on “Northern Australia development: a stocktake of land tenure issues

  1. Pingback: Freehold tenure: it’s no panacea for the north | katgallow

  2. Pingback: Mining proposal sets new benchmark of Indigenous exclusion | katgallow

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