Commonwealth and State governments all direct significant amounts of funding towards Indigenous affairs, through both mainstream and Indigenous specific programmes and services.

Despite a long history of Indigenous policies, outcomes for Indigenous people are not improving to the extent they should be. As noted in the Department of Finance’s Strategic Review of Indigenous expenditure in 2010:

The history of Commonwealth policy for Indigenous Australians over the past 40 years is largely a story of good intentions, flawed policies, unrealistic assumptions, poor implementation, unintended consequences and dashed hopes.

The Commission considers there is significant scope to improve the effectiveness of Indigenous expenditure by consolidating programmes, redirecting funding to Indigenous education, reducing overlap with the States and improving accountability.

Estimated expenditure per capita for Indigenous Australians in 2010-11 was $44,128, more than double the amount for other Australians. This is driven by the greater intensity of service use by Indigenous people and the cost of providing services in remote locations. For example, government spending per person on housing services is around four times higher for Indigenous Australians.

In 2008, the Council of Australian Governments set six specific targets to ‘close the gap’ in outcomes between Indigenous and non-Indigenous Australians. This approach seeks to set a practical framework of outcomes and performance monitoring.

The Commission notes that three of the ‘closing the gap’ outcomes are moving in a positive direction (mortality rates for children, year 12 achievement and access to early childhood education), while the life expectancy, reading, writing and numeracy and employment outcomes are not on track to be met.

Most of the areas of greatest need (education, community safety) are largely the responsibility of the States, but the Commonwealth has stepped in to make a difference. This has led to multiple programmes from both levels of government.

In Roebourne in Western Australia, with a population of 1,150, there are around 67 local service providers and over 400 programmes funded by both Commonwealth and State governments. The small town of Toomelah, in New South Wales, with only 300 people has 70 service providers.

Table 8.2: Total estimated expenditure on Indigenous Australians, 2010-11

	Commonwealth ($ billion)	State & Territory ($ billion)	Total ($ billion)
Indigenous Specific	3.2	2.3	5.5
Mainstream	8.3	11.6	19.9
Total Expenditure	11.5	13.9	25.4

Source: Productivity Commission.

Table 8.2 highlights the split between jurisdictions with around 55 per cent of spending on Indigenous Australians made by State governments, and 45 per cent accounted for by the Commonwealth. A significant proportion of spending by the States (around one third) is indirectly funded by the Commonwealth through national partnership agreements and other specific purpose payments.

A fundamental question for the Commission is whether Indigenous affairs should continue to be a shared responsibility between the Commonwealth and the States. As outlined in Chapter Three, areas of shared responsibility have caused confusion and created many difficulties over time, including in terms of cost shifting.

There is currently a substantial degree of overlap and duplication between the Commonwealth and States in Indigenous affairs as well as excessively bureaucratic processes and administrative arrangements.

One option to address this would be to transfer responsibility for Indigenous specific services to the States (with associated funding transfers) to clarify responsibilities and improve accountability.

However, addressing the severe disadvantage faced by Indigenous Australians has rightly been identified as a national priority by successive Commonwealth Governments. The Commission supports this view and recommends that responsibility continue to be shared. However, accountability must be improved and other inefficiencies addressed if better outcomes are to be achieved.

At the Commonwealth level, layers of programmes have built up over the years, many of which are no longer relevant, while new programmes have been introduced. There have been few examples of programmes that have been rationalised or abolished.

There are now too many disparate and fragmented Commonwealth Indigenous programmes. There is too much duplication and a creeping overlap of responsibilities between the Commonwealth and the States. There is also a critical lack of robust evidence and evaluation about the effectiveness of Indigenous programmes at all levels of government. Finally, in some essential areas, such as primary health care and early childhood education, Indigenous Australians are under-utilising available mainstream services.

Within the Department of the Prime Minister and Cabinet there now are more than 150 Indigenous programmes and activities, with total funding of approximately $2.4 billion for 2013-14. The Commission supports the Department of the Prime Minister and Cabinet’s review of Indigenous programmes.

A consolidation into six or seven programmes with identified outcomes is needed to refocus the Commonwealth’s efforts on practical ways of breaking the cycle of disadvantage affecting many young Indigenous Australians.

As part of the process of consolidation, the Commission recommends that some existing funding be redirected to a new voucher programme for education and training for Indigenous children and young people. This programme would address inter-generational disadvantage by offering comprehensive, means-tested and needs-based vouchers to Indigenous Australians to access accredited providers of early childhood learning through to primary and tertiary education and training. This would include education fees as well as other costs such as travel and boarding.

Providing educational vouchers directly to families in need will empower Indigenous Australians to make meaningful choices about their children’s education. It will shift significant Commonwealth resources from programme administration directly to Indigenous families with children, providing greater access to quality education.

Over the longer term, these initiatives have the potential to increase cognitive development, language development, school readiness, employment and law and justice outcomes.

The scheme could be maintained as a fund, with any unclaimed assistance accumulating to be paid as vouchers in future years.

The Commission has undertaken a preliminary investigation and identified a number of programmes that could potentially be abolished to fund the new programme for Indigenous children and young people. While a detailed analysis should be undertaken by the Department of the Prime Minister and Cabinet, some preliminary views of the Commission are set out below.

The Commonwealth could pull back from areas of direct responsibility of the States. This would represent a significant pivot for the Commonwealth away from some areas in which it has been heavily involved, such as Indigenous housing, municipal and essential services and the National Partnership Agreement on Stronger Futures.

Funding for lower performing, or lower priority activities (such as carbon farming) could also cease. Funding from these categories of programme, as well as programmes related to early childhood, schooling, higher and vocational education could be reinvested into the new programme.

Funding for programmes that have demonstrated effectiveness should be retained. Programmes related to areas of Commonwealth responsibility such as native title and telecommunications should also be retained. Employment programmes should be retained and considered in the context of the outcomes of the review of Indigenous employment and training programmes, chaired by Mr Andrew Forrest, which is due to report in April 2014.

Similarly, there is potential to streamline and possibly rationalise the approximately 30 Indigenous bodies, advisory boards and committees currently in existence. Indigenous Business Australia and the Indigenous Land Council should be amalgamated.

Funding support for the National Congress of Australia’s First Peoples should be discontinued given that it duplicates existing Indigenous representative advisory bodies. Further detail regarding the rationalisation of bodies is included in Chapter Nine.

The Government’s decision to bring Indigenous affairs together in one department is a good development. However, the Department of the Prime Minister and Cabinet has not previously had a significant role in service delivery.

There would be merit in establishing an agency within the portfolio with responsibility for Commonwealth Indigenous specific programme delivery and improving coordination between Indigenous specific programmes and mainstream programmes across the Commonwealth and the States. Reflecting the recent machinery of government changes the transition to a new agency could occur over a two to three year period.

Initially, the new agency should focus heavily on the skills and training of its staff. For example it should ensure that both policy and delivery staff have relevant experience working with and in Indigenous communities.

It should also invest in a robust data and evaluation strategy to collect meaningful information about the performance of all Commonwealth Indigenous programmes.

There are likely to be significant administrative savings under this approach. The Commission recommends that all administrative savings be reinvested in the educational vouchers programme.

Stronger mechanisms also need to be introduced to ensure mainstream programmes are working effectively for Indigenous people. There should be greater engagement with Indigenous people in the design of mainstream programmes and improved reporting on outcomes for Indigenous Australians.