Two Indigenous corporations are among the Federal Government’s biggest borrowers, with an economic update this week showing they have a combined financial exposure of more than $1 billion
The Indigenous Land Corporation’s fully owned subsidiary Voyages Indigenous Tourism Australia Pty Ltd and Indigenous Business Australia were among a list of about 15 government entities with loans topping $200 million.
The Turnbull Government’s Mid Year Economic and Fiscal Outlook revealed Voyages Indigenous Tourism Australia, which manages several tourism properties for the ILC, is expected to have an outstanding loan in June 2018 of $308 million.
The debt is owed on the award-winning Ayers Rock Resort, which ILC purchased for $292 million in 2011.
The resort at Uluru offers accommodation from camping spots to five-star hotel rooms.
Twenty-two Indigenous trainees and 12 leaders have just graduated from a training academy at the resort (see our story at nit.com.au)
“The ILC purchased Ayers Rock Resort for $292 million in May 2011 and immediately sold it to its wholly owned subsidiary Voyages Indigenous Tourism Australia Pty Ltd, creating an intercompany loan that is partly funded by borrowings,” the MYEFO report said.
“The interest rate is set at the 90-day bank bill swap reference rate plus five percent, and it is reset monthly.”
The ILC said Tuesday it entered into a number of external finance arrangements, including a loan with ANZ and vendor finance with GPT in order to buy the property.
The loan to GPT has since been replaced with a loan from the Commonwealth Government.
“The external debt on the ARR purchase is currently $177 million,” it said.
“This is comprised of an ANZ loan of $115 million and a Commonwealth Loan of $62 million. In 2021 the ANZ loan will be reduced to $100 million. In 2023 the Commonwealth loan will be paid off in full.”
ILC said in the past year it had begun investigating options to speed up payment of the loans.
“The priority of the ILC and Voyages is the payment of the external loans, which is considered a realistic business achievement given the ILC’s review of operations and improvements to business efficiencies, the performance of ARR, and the economic factors governing tourism growth in Australia,” it said.
“The intercompany loan is a matter between the ILC and its subsidiary and will be addressed once the external loans are fully paid.”
The ILC also owns the Home Valley Station in the East Kimberley and co-owns the Mossman Gorge Visitors Centre, which is a gateway to the World Heritage-listed Daintree Rainforest.
It said it acquired ARR when the property had lost its standing as a must-visit destination and in six years had restored its occupancy from low 50 percents to record occupancy of 87 percent in the 2016-17 financial year.
A $6 million budgeted loss for the 2018 financial year was hoped to be turned into a profit.
Indigenous Business Australia
Meanwhile, Indigenous Business Australia is expected to have outstanding loans of $736 million on its books by the end of the 2017-18 financial year for Indigenous home ownership and business development, with the Indigenous home and business owners as borrowers.
IBA was contacted for comment.
The Department of Education and Training topped the list of government corporations with the biggest loans, with $43.3 billion expected to be outstanding on student loans at June 30.
It was followed by NBN Co, which has been granted a $19.6 billion government loan from July 1 to June 30 2021 for the roll-out of the NBN network.
The MYEFO showed the federal deficit had improved by $5.8 billion, but is still going to hit more than $23 billion.
The Federal Government announced it would introduce new savings measures in higher education and migrant welfare.
It said it would save $1.3 billion over four years from 2017-18 by broadening the criteria for waiting periods for newly arrived migrants before they can access welfare benefits.
From July 1, the current two-year waiting period for a range of benefits from paid parental leave to carers’ allowance will be increased from two to three years.
In education, there will be a freeze on Commonwealth Grant Scheme funding from January 1 and a combined limit for all tuition fee assistance under HELP and VET student loans.