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“I should add that under the NAIF Act I don’t approve loans. I have a limited ability as the minister to reject loans, but at the same time I have to declare that and be up front with the Australian people on that failure.”

Senator Canavan disclosed the inquiry at the same time he announced he had offered his resignation from the ministry because he would back former Nationals leader Barnaby Joyce in a challenge against party leader and Deputy Prime Minister Michael McCormack.

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The Northern Australia Infrastructure Facility, or NAIF, is a key agency within Senator Canavan’s portfolio and was used last year to fund a multi-use training centre at the club.

Senator Canavan issued a press release on December 3 last year stating “Canavan approves $20 million for NQ Cowboys” in an “excellent example” of help for regional Australia.

The loan was approved by the board members of the NAIF last November but was sent to Senator Canavan in the form of a “proposal notice” that required his consideration for 21 days under federal legislation.

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The inquiry into the loan raises the prospect that Senator Canavan may remain outside the ministry whatever the outcome of the Nationals leadership ballot.

The potential conflict has similarities with the resignation of former Nationals deputy leader Bridget McKenzie, who stood down because she had not disclosed her membership of a gun club when the club received money from the sports funding program she oversaw as minister.

Senator Canavan said he did not think he had breached ministerial standards because he held a membership to a different organisation to the one that had sought the loan.

He said he had signed up as a “regional supporter” of the Cowboys in the past and that this entitled him to membership of the leagues club, although he had no influence over that club.

“I currently have a supporters membership with the Townsville Cowboys which entitles me to membership of the Cowboys Leagues Club. This is a membership I have not previously declared,” Senator Canavan said in a statement.

“Investment Decisions are a matter for the independent NAIF Board. My membership of the Leagues Club provides no interest in the management of the Football Club.”

Cowboys chairman Laurence Lancini singled out Senator Canavan as well as Mr Morrison for their “ongoing commitment” to the project when announcing the funding last November.

David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.

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