Economic advancement of Indigenous Australians

Economic advancement of Indigenous Australians

Supporting entrepreneurism, financial literacy, and better educational attainment among Australia’s First People is a much better use of taxpayer funds than passive welfare, which most Indigenous leaders agree is poison to the dignity and self-esteem of their communities.

Economics Consultant to KPMG

KPMG Australia

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Indigenous Australia circle design

Craig Emerson, Economics Consultant, KPMG Australia and 
Prof Marcia Langton AM, Foundation Chair in Australian Indigenous Studies, Redmond Barry Distinguished Professor, University of Melbourne

The infamous gap between Indigenous and non-Indigenous Australians is finally showing some signs of closing in key areas.

Indigenous infant mortality has more than halved in the last 16 years. The gap in life expectancy between Indigenous and non-Indigenous Australians remains at an appallingly large 10 years, but overall mortality rates have been declining swiftly over the past decade.

Employment

Yet when it comes to employment, progress has been nothing short of poor in recent times.

No progress has been reported against the target since 2008. Just 46 percent of working-age Aboriginal and Torres Strait Islander people are currently in work.

Recent softening of the labour market has adversely affected the employment prospects of all Australians by about one percent, but it has cut more deeply into Indigenous employment rates.

A common misconception is that most Aboriginal and Torres Strait Islander people live in remote areas of Australia. In truth, almost 80 percent live in major cities and regional centres. But unemployment is more acute among Indigenous Australians living in remote areas, where only 36 percent of those of working age are actually in work.

The steep decline in the statistics for Indigenous employment is partly attributable to the demise of the Community Development Employment Programs (CDEP) scheme. But the CEDP should be compensated by the new Indigenous affairs employment programs in the Department of the Prime Minister and Cabinet, which are showing early signs of success.

In the period 1 July 2014 to 31 January 2016, there have been 24,137 job commencements as a result of a range of tailored assistance grants and programs, such as those offered by the Vocational Training and Employment Centres (VTEC), the Community Development Program, and the Employment Parity Initiative, which involves partnerships with corporate Australia.

Education

The qualified success of these government programs should be acknowledged, but to attack the problem more broadly it is vital to absorb the most significant finding of the 2016 Closing the Gap report: “There is a strong link between education and employment – at high levels of education there is virtually no employment gap between Indigenous and non-Indigenous Australians.”

It is a point worth repeating: for Indigenous Australians who attain a high level of education, the employment gap vanishes.

While progress is on track to meet a target of halving the gap for Year 12 attainment by 2020, the gap itself remains large – 85 percent of non-Indigenous students stay on to Year 12 while only 59 percent of Indigenous students do so.

Getting to and through university is an even bigger challenge. But there is encouraging progress: over the past decade there has been a 70 percent increase in the number of Aboriginal and Torres Strait Islander students enrolled in university courses.

Under the needs-based school funding reforms recommended by an inquiry chaired by David Gonski, two of the five indicators of disadvantage are Indigeneity and school remoteness.

Extra school funding does not automatically lead to improved education outcomes, but it is difficult to see how education attainment levels for Indigenous students can be improved in the absence of a substantial funding boost by federal and state governments.

School-based apprenticeship schemes can also be effective in contributing towards training qualifications while enabling students to stay on and complete high school.

Indigenous business

The Commonwealth’s Indigenous Procurement Policy has ignited a new wave of Indigenous entrepreneurialism, increasing the Government’s expenditure on goods and services provided by Indigenous businesses from $6 million to $156 million in less than a year.

The momentum in government policy innovation in employment and business investment must be continued. Inevitably, the policy prescriptions for improving the employment rates of Indigenous Australians in major cities will differ from those for Indigenous people in remote communities, where employment prospects are limited by distance and lack of infrastructure.

Yet these constraints are not unbreakable. They have not, for example, stopped the Arnhem Land Progress Aboriginal Corporation (ALPA) – a not-for-profit organisation with 25 shops in remote communities – from topping the annual table produced by the Office of the Registrar of Indigenous Corporations.

ALPA is a sign of the growing success of Indigenous enterprises, even in remote areas, in the public-private sector. It provides retail, employment and community services, trades and mechanical work, job-placement services, social club management, accommodation and hospitality. It is also a large provider of the Commonwealth’s work-for-the-dole program. The Corporation provides these services across the Northern Territory, Cape York and the Torres Strait, with income of $89 million last year, up from $60 million the previous year. It has 933 employees, 83 percent of them Indigenous.

As reported in the eighth annual analysis by the Office of the Registrar of Indigenous Corporations (ORIC), the combined income of the top 500 Aboriginal and Torres Strait Islander corporations had jumped 250 percent from 2004-05 levels.

ORIC reported the average income per corporation last year was $3.76 million and total assets under management by the top 500 were up 5.7 percent from the previous year, to $2.22 billion. The report found health and community services providers constituted the largest sector, making up 197 of the top 500 corporations. There were 2,688 registered corporations in total, with 165 of the top 500 in the Northern Territory.

The top 500 Aboriginal and Torres Strait Islander corporations employed more than 11,000 Indigenous people in 2014-15. Most of these are not-for-profit organisations operating outside urban Australia, with more than 40 percent of their total income self-generated. Over the past decade the average annual growth rate in total income for these corporations was a strong 9.4 percent.

So Indigenous business development is not only possible, it’s happening, including in the most remote parts of Australia. The success of the largely government funded Indigenous corporation sector is just a part of the story. The instances of success above do not include the Indigenous-owned or part-owned businesses in the private sector. Their numbers are difficult to determine but we do know from the reports of Supply Nation and the First Australians Chamber of Commerce and Industry, as well as businesses procuring their services that they are growing exponentially.

The success of Indigenous business is a core driver of Indigenous employment.

As Prime Minister Malcolm Turnbull has pointed out, the research shows Indigenous businesses are 100 times more likely to hire Indigenous Australians than non-Indigenous businesses.

While many Indigenous businesses are enjoying success, just as in the non-Indigenous community, other business start-ups have failed.

The signs of success in the latest reports from governments indicate that building on these successes and accelerating progress will require a willingness to take risks not only on the part of Indigenous people, but also by governments.

Failure rates among small business start-ups are high in the best of times in the best of circumstances. They will be higher in riskier ventures in remote Australia.

Impact investing

A relatively new investment approach, impact investing, offers significant promise. Impact investing involves coupling desirable and measurable social outcomes with a financial return.

In many cases the financial return might not be the most competitive, but sufficient to invoke entrepreneurship and the profit motive, while keeping the investor fund’s capital base intact for further investments.

Acting alone, however, private financiers might not have the appetite for the perceived riskiness of Indigenous small businesses. In addition, they may not have the in-house capability to assess Indigenous business proposals.

That is why governments should contribute seed funding to impact investment funds for Indigenous enterprise, and deploy private project assessors. This would engender confidence and limit downside risks. Of course, all the usual governance systems and accountabilities, including audited financial statements, would need to apply.

It must also be noted that none of this will stop the fact that some business ventures will fail, just as they do in the non-Indigenous community.

Other measures

There are other positive discrimination measures that can help close the economic and social gaps between Aboriginal and Torres Strait islander and non-Indigenous Australians.

We know, for example, that government subsidies in employment and training to businesses that lead directly to employment are working, especially with a 26-week period before payment to the corporation.

Setting targets to reach employment parity has also been shown to work. The Commonwealth public service has a new Indigenous employment target that will be reported next year and all state and territory governments should follow suit with both employment and procurement targets for their Indigenous populations.

The federal government should build on the success of its new Indigenous Procurement Policy by insisting that state and territory governments reach Indigenous employment and procurement parity targets in all projects funded by federal infrastructure grants. Only an integrated national effort will bring about the urgently required changes that would give the overwhelmingly young Indigenous population a better future.

Supporting entrepreneurism, financial literacy, and better educational attainment among Australia’s First People is a much better use of taxpayer funds than passive welfare, which most Indigenous leaders agree is poison to the dignity and self-esteem of their communities.

The task ahead is to build on the successes and learn from the failures so that Indigenous Australians have the same opportunity as non-Indigenous Australians of fulfilment through the dignity of work, and the satisfaction of reward for entrepreneurial effort.

Igniting the Indigenous economy

This report presents a collaboration of ideas focused on the economic development of Indigenous Australia.

 
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