Australia’s contentious resettlement deal with Nauru is expected to cost Australian taxpayers around $2.5 billion over the next 30 years. The agreement focuses on the processing and housing of deportees. It entails significant financial contributions from the Australian government, including an up-front payment of $408 million and annual payments that begin in the second year.
The settlement requires an initial payment of $20 million. The full $40 million will be paid to Nauru as soon as the first deportee lands on its shores. Following this payment, Australia will pay approximately $70 million per year. This funding will be used to establish a trust fund and provide direct financial assistance for Nauru’s handling of deportees.
Financial Breakdown of the Agreement
• The total lifetime cost of the deal, which will be about $24 billion, has alarmed lawmakers and observers of all stripes. The first payment of $408 million is intended to kick start a state disaster trust fund. Both countries will jointly administer this fund. This trust would be the entity to hold the majority of the upfront payment. In the interim, we will set aside $20 million of this new funding for direct payments to assist Nauru in absorbing the new cohort.
Nauru has continued to benefit from the annual interest produced by the trust. It won’t be able to touch its principal. This structure is designed to provide for predictable, continued support, while providing a sustainable financial model for both countries.
“This is an extraordinary amount of money,” – Independent senator David Pocock
The deal specifies that starting in the second full year, Australia will pay about $70 million annually, making the total cost of the program closer to $1.5 billion. These funds are poised to massively inflame Nauru’s economy. Nauru is unlikely to issue visas to members of every cohort of deportees.
Speculation Surrounding Long-term Value
Foremost among those concerns have been the speculative nature of the deal’s long-term financial benefits. The combined cost per individual, if all members of this cohort are processed in Nauru, is well over $7 million. Observers note that factors such as visa issuance and potential changes in government policy could significantly impact the overall financial outcome.
“That allocation between trust fund and noting the effect of the claw-back mechanism means it’s pretty speculative to say it will definitely be worth that much money [$2.5 billion] to Nauru at this point in time,” – Ms. Sharp
The agreement requires that if it is ever terminated for any reason, the trust funds be returned to Australia. This provision just injects a whole new level of complexity into the longer term financial picture for each country.
Implications for Nauru and Australia
As currently drafted, the agreement would last for 30 years, which would be a large long-term investment from the Australian government’s perspective. The costs go far beyond the obvious dollar amounts. They include Australia’s ongoing diplomatic relations with Nauru. Through significant development assistance, particularly in Nauru’s infrastructure and social support structures, Australia hopes to strengthen its ties with the Pacific nation and address criticism over Nauru.
As the deal develops, policymakers on both sides will be watching to see how it impacts the economies and international relations of both countries. The pros and cons of managing a deportee cohort in a small island nation like Nauru are both significant and tempting. These developments present profound questions regarding the future of governance, funding priorities, and basic human rights.
