COMMONWEALTH OF AUSTRALIA
Official Committee Hansard
SENATE
ECONOMICS LEGISLATION COMMITTEE
Consideration of Budget Estimates
THURSDAY, 1 JUNE 2000
CANBERRA
BY AUTHORITY OF THE SENATE
Thursday, 1 June 2000 SENATE—Legislation E 459
SENATE
ECONOMICS LEGISLATION COMMITTEE
Thursday, 1 June 2000
Members: Senator Murphy (Chair), Senators Chapman, Conroy, Cook, Gibson and
Ridgeway
Senators in attendance: Senators Calvert, George Campbell, Chapman, Gibson, Harradine,
Lundy, Murray, Murphy, Schacht and Watson
Committee met at 9.10 a.m.
INDUSTRY, SCIENCE AND RESOURCES PORTFOLIO
In Attendance
Senator Minchin, Minister for Industry, Science and Resources
Executive
Mr John Spasojevic, Deputy Chief Executive Officer
Industry Policy Division
Mr Terry Lowndes, Head of Division
Innovation and Science Division
Dr Warren King, Head of Division
Mr Eric James, General Manager, International Relations and Technology Diffusion
Branch
Ms Tricia Berman, General Manager, Innovation Branch
Ms Carolyn Walsh, General Manager, Science and Technology Policy Branch
Ms Carolyn Jenkins, Manager, Innovation and Industry R&D Section
Mr Steven Brown, Assistant Manager, Innovation and Industry R&D Section
Dr Cliff Bott, Manager, Science and Technology Policy Section
Business Competitiveness and Development Division
Ms Hellen Georgopoulos, Head of Division
Energy and Environment Division
Mr Bob Alderson, Head of Division
Mr Chris Hyman, Executive Officer
Services and Emerging Industries Division
Ms Patricia Kelly, Head of Division
Dr Joe Hlubucek, General Manager, Biotechnology Australia
Manufacturing, Engineering and Construction Division
Mr Garry Wall, General Manager, Industry Contact and Policy Team 1
Mr John Dean, General Manager, Industry Contact and Policy Team 2
Mr Alan Coleman, Manager, TCF Policy Unit
Petroleum and Electricity Division
Mr Rick Pickering, General Manager, Petroleum Industry Branch
Mr Kevin O’Brien, General Manager, Electricity Reform Branch
Ms Tania Constable, Executive Officer
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E 460 SENATE—Legislation Thursday, 1 June 2000
Coal and Minerals Industries Division
Mr Malcolm Farrow, Head of Division
Mr Robin Bryant, General Manager, Energy Minerals Branch
Mr Jeff Harris, General Manager, Minerals Access and Rehabilitation Branch
Dr Caroline Perkins, Manager, Rehab/Radwaste Management Section
Sport and Tourism Division
Mr Robert Crick, Head of Division
Mr Keith Maxted, General Manager, Best Practice and Program Development Group
Mr David McCarthy, General Manager, Business Development Group
Ms Janet Murphy, General Manager, Tourism Market Access Group
Dr Peter Robins, Director, Bureau of Tourism Research
Mr Stephen Richards, Manager, Sport 2000 Team
Mr Aulis Mikkonen, Team Leader, Administration and Coordination
Invest Australia
Mr David Purcell, Executive General Manager
Mr Bruce O’Meagher, General Manager, Policy, Marketing and Partnerships
Mr Murray Fearn, General Manager, Projects and Client Services
Analytical and Mapping Division
Mr Drew Clarke, Head of Division
Dr Sandra Hart, General Manager, AGAL
Mr Peter Holland, General Manager, AUSLIG
Mr David Hobson, Manager, Executive Program and Support, AUSLIG
AusIndustry
Mr Drew Clarke, Executive General Manager
Mr Bill Peel, Deputy Executive General Manager
Mr Phil Constable, General Manager, Program Management, Industry Programs
Dr Russell Edwards, General Manager, Program Management, Industry Innovation
Programs
Mr Kevin Noonan, General Manager, Information Management Group
Mr Paul Sexton, General Manager, Customer Services Group
Ms Rhonda Henry, General Manager, ACT Regional Office Executive
Mr Sam Skrzypek, General Manager, Marketing and Corporate Services Group
Mr David Luchetti, Manager, Venture Capital Section
Mr David Gallagher, Manager, R&D Start Program Management
Corporate Services Division
Dr Andreas Dubs, General Manager, Knowledge and Information Branch
Mr Chris Dainer, General Manager, Corporate Finance Branch
Mr Trevor Rodgers, General Manager, Ministerial and Coordination Group
Mr Paul Malone, Manager, Coordination and Communications
Mr Peter Moore, Manager, Budget Coordination Team
Ms Loretta Petroff, Budget 2000 and Output Pricing Review Taskforce
Mr Krishan Singh, Portfolio Coordination Team
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Thursday, 1 June 2000 SENATE—Legislation E 461
PORTFOLIO AGENCIES
IP Australia
Dr Ian Heath, Director General
Australian Tourist Commission
Mr John Hopwood, General Manager, Business Services
Ms Margaret Hudson, Manager, Corporate Strategy
National Standards Commission
Dr Judith Bennett, Executive Director
Australian Institute of Marine Science
Dr John Bell, Acting Director
Dr Peter Isdale, Executive Manager, Business and Finance
Ms Sue English, Policy and Liaison
Australian Nuclear Science and Technology Organisation
Prof. Helen Garnett, Executive Director
Mr John Rolland, Director, Government and Public Affairs
Mr Stephen Lutze, Chief Financial Officer
Mr Stephen McIntosh, Government and Public Affairs
Commonwealth Scientific and Industrial Research Organisation
Dr Colin Adam, Acting Chief Executive
Dr Ron Sandland, Deputy Chief Executive
Ms Marie Keir, Manager, Ministerial and Parliamentary Liaison
Mr Malcolm Mahon, Acting General Manager, Corporate Finance
Mr Chandy Paul, Manager, Financial Management, Corporate Finance
Mr Robert Pang, Chief Accountant, Corporate Finance
Mr Ian Rout, Assistant Manager, Budget, Corporate Finance
Australian Geological Survey Organisation
Dr Neil Williams, Chief Executive Officer
Dr Trevor Powell, Chief, Petroleum and Marine Division
Dr Chris Pigram, Chief, Minerals Division
Mr Tony Robinson, General Manager, Corporate
Australian Sports Commission
Mr Jim Ferguson, Executive Director
Mr John Boultbee, Director, Australian Institute of Sport
Mr Bob Hobson, Director, Sport and Business Services
Mr Steve Arnaudon, Director, Sports Development and Policy
Mr Geoff Strang, Director, Sports Management
Ms Ann Fox, Director, Commercial
Ms Henny Oldenhove, Director, Participation
Mr Allan Smith, Manager, Planning and Financial Services
Mr Simon Kidman, Assistant Manager, Budget and Planning
Australian Sports Drug Agency
Ms Natalie Howson, Chief Executive
Mr John Mendoza, Deputy Chief Executive
Mr Adam Groves, Corporate Finance Officer
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E 462 SENATE—Legislation Thursday, 1 June 2000
CHAIR—I call the committee to order. Today the committee will examine the budget
estimates for the year ended 30 June 2001 for the Industry, Science and Resources portfolio.
The committee will examine the department and agencies as set out in the circulated program.
I welcome Senator Minchin, the Minister for Industry, Science and Resources, before the
committee, along with relevant officers. The use of mobile phones during hearings last week
interrupted the work of several committees. Accordingly, could I please request that all
mobile phones be turned off. Minister, do you wish to make an opening statement?
Senator Minchin—No, thanks, Mr Chairman, except to say that we would appreciate your
earliest advice on whether there are any agencies that will not be required today so that we
can notify them. I would just appreciate your cooperation on that.
CHAIR—Yes, thanks, Minister. I have asked the opposition to check out and come back to
me about that.
Senator Minchin—Thanks.
Senator GEORGE CAMPBELL—We will try my best to do that as quickly as possible.
Senator Minchin—Thank you Senator Campbell.
[9.11 a.m.]
AUSTRALIAN TOURIST COMMISSION
CHAIR—Okay. We will start off with the Australian Tourist Commission.
Senator LUNDY—Chair, could I just clarify an amendment to the program. Having had
discussion with just some of the members of the committee at this stage, we were hoping it
was possible to move sport and the Australian Sports Drug Agency to immediately after the
Department of Industry, Science and Resources. It is just changing those agencies around a
little.
CHAIR—That is okay. Are there any questions to the Australian Tourist Commission?
Senator SCHACHT—Yes. Minister and staff, I point out that even after the last week and
a half these PBSs are still not clear to me in the sense of accrual accounting and finding
information in a friendly, easy way, so if I ask a naive question, I apologise. If you can point
out anything I have missed somewhere, please do so. I note that the appropriation has gone up
by just under $2 million for the Tourist Commission. Is the increase in the appropriation just
basically a CPI figure?
Mr Hopwood—If it was a CPI figure we would be roughly looking at about $3 million to
$4 million.
Senator SCHACHT—So you have had a cut?
Mr Hopwood—If you relate to CPI, yes.
Senator SCHACHT—Yes, okay. As a result you have had to make internal savings to
meet the budget which you have been allocated?
Mr Hopwood—Yes.
Senator SCHACHT—What have you cut to meet the budget?
Mr Hopwood—Within the calculation of that figure is a cut of just over $400,000 for
savings generated in Australia relating to the flow through of goods and services tax
implementation.
Senator SCHACHT—Closure of the what, did you say?
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Thursday, 1 June 2000 SENATE—Legislation E 463
Mr Hopwood—They are savings relating to the implementation of the goods and services
tax. That is just over $400,000 worth.
Senator SCHACHT—The introduction of the GST has saved you $400,000?
Mr Hopwood—Yes. If you look through the supply chain in relation to supplies which are
generated and paid for by the commission, it is determined that the cost of those supplies will
be less to the commission in Australia, so the cost should be reduced.
Senator SCHACHT—So clearly you therefore have not been able to seek, or needed to
seek, any increased funding for GST compensation for the operation of the commission?
Mr Hopwood—That is correct.
Senator SCHACHT—It is a wonder the government has not trumpeted you as a
wonderful example of the GST in that you have actually been able to make savings of
400,000. Now, that is the $400,000; there is still clearly a shortfall in what would have been
the CPI increase?
Mr Hopwood—Yes.
Senator SCHACHT—Where else did you make that up?
Mr Hopwood—We do not have the full details of where that flows across the world yet
because we only had that figure as of a couple of weeks ago, but where we will be looking is
to efficiency savings in some of our support costs and also changes in the way we will market.
We do not require too significant changes to make up that sort of dollars. To give you an
example, we are moving significantly towards Internet marketing overseas and Internet
marketing is more cost effective than, say for instance, marketing on straight cable television.
We believe that that is the dimension or the direction that we need to go anyway so that will
be reflected in our total marketing costs.
Senator SCHACHT—Again pardon my ignorance, I may have missed it, but where are
your savings on efficiencies in your overseas marketing operation outlined in the PBS,?
Mr Hopwood—I do not know if we actually stated the extent or if there is direct comment
in relation to those savings because we have a total figure and we just work to that total figure
and we generate those savings as we work through. I have not actually stipulated specifically
that that is a stated objective in the figure.
Senator SCHACHT—So apart from the $400,000, which is a GST saving, the actual
places you will get the savings will evolve through the financial year; is that correct?
Mr Hopwood—Yes, that is correct.
Senator SCHACHT—I presume the finance department signed off on that, did they?
Mr Hopwood—Yes.
Senator SCHACHT—Are Finance getting soft in the head or something these days? My
memory was that they would get you to have fingerprints and formulas identifying where the
savings would be to meet the budget. Can you assure me that there will not be any staff cuts
as a result of meeting the further savings required?
Mr Hopwood—Well, I cannot actually assure that, but if you have a look also at our
figures there, you will see that we have an increase in staff as a matter of fact. Again, as part
of our changed marketing environment, if we are to move from things like television and
media placement we require staff to undertake other activities, such as generating cooperative
campaigns. By moving our mix of marketing around, we can change the total dollars spent,
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but in a lot of respects we need more staff to coordinate and manage those activities. So rather
than cut staff we will actually be increasing.
Senator SCHACHT—Okay. Regarding the change in the mix, you implied there less
reliance on television; is that correct?
Mr Hopwood—That should be the end result of using the Internet, yes.
Senator SCHACHT—So by using the Internet there will be less need to buy television
time; is that right?
Mr Hopwood—That should be the end result, yes.
Senator SCHACHT—That should be the end result.
Mr Hopwood—Yes.
Senator SCHACHT—Can you give me a rough idea of what you expect to reduce in paid
television advertising time?
Mr Hopwood—No, I have not got those figures, Senator. If you like, I could go to our
regions and tell you.
Senator SCHACHT—Well, I would be interested, partly because in general it is a further
example of the impact of the Internet and information technology on more traditional media. I
am not in any way querying the right or correctness of your decision. I would just be
interested in a further example of where a new form of media, the Internet, is impacting on
the traditional television/radio that we have had—at least for television—for the last 40 years.
Was that just as happy coincidence that the Internet is coming on stream to save you money
from television advertising or was that a well planned measure?
Ms Hudson—I would not necessarily call it a happy coincidence in terms of us being at
the forefront of looking at what is happening in marketing around the world. We would be
very silly not to embrace what is happening in the Internet, so it is more in line with adopting
best practice in marketing strategy.
Senator SCHACHT—When the government outlined the one line budget figure, which
was not the full counter for CPI, did you say to them, ‘We can pick up that shortfall by the
impact of the Internet et cetera,’ or did they themselves say that you were going to have to
bear this cost because of some other reason?
Mr Hopwood—I do not think the process is that simple in that—
Senator SCHACHT—I know dealing with departments of finance is never really simple; I
would agree with that, Mr Hopwood.
Mr Hopwood—The other aspect of the complexity which I am bearing in mind here is the
movement from the previous funding mechanism to the current mechanism, which
incorporates accrual accounting, impacts of provisions and the capital user charge et cetera, so
that the total figure that we now see is more an accounting figure, rather than a cash
allocation, and is very difficult to compare the current way we get funded through to the
former way. The bottom line, however, is that there is a smallish type reduction in the cash
which is available for the things, but there was not any conscious communication between us
and the department, or vice versa, saying, ‘This is bottom line your dollar cost, you’ll have to
find efficiencies in marketing.’ It was the way the figures fell out.
Senator SCHACHT—All right. I would appreciate it if you could provide me with the
information that I have requested. We mentioned before the GST and that you were one of
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Thursday, 1 June 2000 SENATE—Legislation E 465
those lucky organisations, apparently, where the GST has reduced your own costs by
$400,000. Has the tourism industry put to you cases of where they think their costs are going
to go up because of the GST?
Ms Hudson—Senator, I am not aware that we have had any comments from the industry
on that. Looking from the flip side of it, I think there are a number of factors that go into why
a visitor would choose to come to Australia, and pricing is one factor only. But in terms of the
Australian industry, no, I have not had any comments from them in regard to it.
Senator SCHACHT—You are a statutory authority but obviously there are various other
tourism organisations—a promotional organisation from the local town council who is into
promoting tourism, major industry organisations, for example the Australian Hotels
Association is a tourism organisation, and you might say the airlines are tourism
organisations—after all, tourism is essential to their success. Do you have you any details of
the impact of the GST and the 10 per cent—or up to 10 per cent—going on hotel rooms?
Have the hotel industry or the motel industry, in both domestic and international markets,
expressed a view of what it may do to their industry?
Ms Hudson—Again, no, I am not aware of any direct comments to us on that. But I am
sure that those people, who in terms of industry associations are representing the views of the
industry, are certainly looking at those issues.
Senator SCHACHT—It might be a naive question on my part, but do you have any for-
mal structure where the various elements of the tourism industry can directly have an input
into any advice to the Australian Tourist Commission about what they think is going on in
tourism—the good, the bad and the ugly—and where you might be able to assist them, advise
them, change your marketing strategy accordingly et cetera? Is there a mechanism you have
for that?
Ms Hudson—Yes, Senator, there are certainly a number of both formal and informal
mechanisms for that. One of the initiatives that we have introduced in the last six months in
fact is a CEO forum where we have the heads of the key industry—
Senator SCHACHT—A CEO forum?
Ms Hudson—I am sorry, the chief executive officers of the key industry associations meet
with us on a quarterly basis—so, four or five people around the table—where we then listen
to their views and hear what they have to say. Also, it is a chance for them to give us direct
input in terms of what their members are saying about our campaigns.
Senator SCHACHT—Sounds like a worthwhile initiative. How many meetings have you
had so far?
Ms Hudson—It is a new initiative. We have had one meeting; the second one is scheduled
for August. I would add, however, that prior to that obviously we were always talking to those
people but we have just formalised it..
Senator SCHACHT—Yes, of course, I understand: the phones ring hot. Who were the
four or five CEOs that you have invited to participate and they have agreed to be
representatives of those other industry related organisations?
Ms Hudson—The names of the industry associations are Tourism Task Force, the Tourism
Council of Australia, the AHA, and the Inbound Tourism Organisation of Australia.
Senator SCHACHT—Right, thank you very much. And the initiative for that, did the
industry lobby for it or did it come as a pro-active decision from the Tourism Commission?
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Ms Hudson—It was in fact an initiative of the ATC to implement that forum.
Senator SCHACHT—Very good. What is it, a half day meeting?
Ms Hudson—I think the last one was about a three or four hour meeting, yes.
Senator SCHACHT—Right. Will you put some description of the outcome of those in
when you print the annual report for next year? Could we suggest that it might be useful to
have at least a paragraph or so about the fact that you have got the structure.
Ms Hudson—Certainly.
Senator SCHACHT—Has anybody complained that they were not invited? There are
always more people wanting a guernsey to be on the football side than there is available
positions; has anyone—
Ms Hudson—Not that I am aware of, no.
Senator SCHACHT—All right. I might come back to some of those organisations in a
moment. At the first meeting, nobody raised a concern directly with you about the impact on
the tourism industry of the GST’s implementation?
Ms Hudson—No. I think the attitude would be, you know, that they need to wait and see
what happens, obviously.
Senator SCHACHT— See what happens. Like most members of parliament, I have to
travel a fair bit around Australia and stay in hotels and motels of varying size, quality and so
on—I am not sure that many of us stay in five star, or even in hotels that might be particularly
for international tourism, but we stay in a lot. Do you have any information that the, say, $150
charge for a two or three star hotel/motel room—it might be a bit more, it might be a bit less;
certainly in a country town in a motel it will be a fair bit less—would be up to around the $15
10 per cent increase on that hotel bill?
Ms Hudson—Senator, that is very hard for me to answer because our role is the marketing
of Australia internationally, we do not really get involved in those sort of pricing issues within
the industry in Australia.
Senator SCHACHT—And none of those pricing issues were raised at your first meeting
with the CEOs?
Ms Hudson—No.
Senator SCHACHT—Have you had to take any decisions in your own marketing
strategy—consumer marketing and trade marketing strategies—to advise potential tourists
that prices in Australia will go up somewhat?
Ms Hudson—In terms of providing factual information to incoming visitors, we refer in
our publications overseas to the web site that has been set up relating to things like the GST
Tourism Refund Scheme, for example, as a piece of information for visitors. That is one
specific that I am aware of. That is the sort of thing that we would be doing in terms of factual
information to incoming visitors.
Senator SCHACHT—One of the things I notice when I stay in a hotel in Sydney is that
you get the bill and on the bill there is that line, I think it is a 10 per cent fee for the hotel
room levy for the Olympic Games. It is clearly defined as the levy and whether you like it or
not you have to pay it as part of the contribution to the Olympic Games. Do you expect that
after 1 July there will be a separate line saying, ‘GST’ and whatever the amount is—it might
not be the full 10 per cent, of course?
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Thursday, 1 June 2000 SENATE—Legislation E 467
Ms Hudson—Again, Senator, it is an operational issue for hotels that I am not really aware
of.
Senator SCHACHT—Why I am saying it is I am a little surprised that the AHA, who are
a pretty regular lobby group in every direction, might not have raised that at your CEO
meeting, but we will wait until after the introduction. While we are on the GST, is there any
money in the budget just complete—in the financial year just coming to an end—or in next
year that you have put aside specifically to explain the operation of the GST to what you
might call your constituents?
Ms Hudson—Not that I am aware of, other than in the general informational publications
that already would exist. Therefore, it would be a matter of including factual information in
the web site that exists, in publications that exist, and just making sure that any facts that are
relevant are provided to incoming visitors.
Senator SCHACHT—There has been no money set aside for any sort of advertising,
either in the electronic media or the print media, explaining the GST with Joe Cocker and
chains around it, et cetera?
Ms Hudson—No, Senator.
Senator SCHACHT—As an old Joe Cocker fan for a long, long time, which I think
indicates my age, and a great devotee of the Mad Dogs and Englishmen tour, a seminal piece
of rock and roll history, I also note that Joe Cocker—and I do not in any way criticise him for
this; I believe it is a matter of a victimless crime—was busted in Australia for marijuana; I
think it was even in Adelaide, my home city, in 1972. I was old enough, Minister, to
remember, as a long-time resident of Adelaide. Not that it worried Joe too much, as I can
remember. But you are not concerned about the image of having Joe Cocker, convicted in
Australia of a drug bust, being trumpeted all across this country singing his song?
Ms Hudson—Senator, in terms of our role, we are promoting Australia as an international
tourist destination, hence the people are overseas so they do not really see it—
Senator SCHACHT—Well, the present tourists might see it when they are in Australia,
because you cannot miss these ads—they are ubiquitous, everywhere at any time if you
happen to turn television or radio on. But there has been no request to you to provide any
advertising or any promotional material to explain the GST?
Ms Hudson—No.
Senator SCHACHT—Has any government department sought access to any database you
have of your constituents, your industry lists et cetera, to supply to another department - like
the taskforce in Treasury - to mail out material explaining the GST and its propaganda of Joe
Cocker unchained et cetera?
Ms Hudson—No.
Senator SCHACHT—Has your minister written any letters to any section of the industry,
with your assistance, on the GST issue?
Ms Hudson—No.
Mr Hopwood—None that we are aware of.
Senator SCHACHT—Mr Spasojevic, representing the department, has the Minister for
Tourism written to any parts of the tourism industry explaining or promoting the GST as part
of the information campaign, as the government calls it?
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Mr McCarthy—I will answer that, Senator.
Senator SCHACHT—Welcome back, Mr McCarthy. Good to see you again.
Mr McCarthy—The minister has produced a leaflet explaining the GST and its impact on
the tourism industry, but it is a very general one and a very small one—in size that is. The
more detailed explanation of the GST and its impact on the industry is included in booklets
that have been released by the Australian Tax Office.
Senator SCHACHT—I think when we get back to the department appropriations we will
ask you and other members of the department to then explain in one hit what the cost of those
leaflets are. But on tourism, just while I have you here, there was a leaflet produced?
Mr McCarthy—That is all.
Senator SCHACHT—That is all. Did the minister write to any sections of the tourism
industry in the last period of time explaining and providing information about the wonders of
the GST?
Mr McCarthy—I would need to take that on notice, Senator. I can get that information for
you.
Senator SCHACHT—Well, can you get it during the day before we finish the
department? You implied the leaflet was a small, modest leaflet. In terms of finance, this
government has a different perception of what is small and modest and about half a billion has
been spent so far on GST ‘information’. Can you provide us today with a copy of the leaflet
the minister sent out to the tourism industry on the GST?
Mr McCarthy—I will try and get hold of that for you, Senator, yes.
Senator SCHACHT—And how many did you produce? Was it 5,000, was it a half a
million?
Mr McCarthy—Certainly not half a million. It would be in the hundreds, I would think.
Senator SCHACHT—In the hundreds of thousands?
Mr McCarthy—In the hundreds, or up to a thousand. It would not be any more than that.
Senator SCHACHT—And you will give us an idea of where you distributed it?
Mr McCarthy—I will try and get all that information for you today.
Senator SCHACHT—And as far as you are aware, the minister did not send out a letter?
Mr McCarthy—I said I would need to take that on notice.
Senator SCHACHT—Was your section, which is in charge of tourism in the department,
asked for advice of what comments or information could be put in any such letter? Did you
get advice on that?
Mr McCarthy—I would need to take on notice whether there was a letter.
Senator SCHACHT—Okay. We will go back to the leaflet. Did you draft the leaflet?
Mr McCarthy—Yes, we drafted the leaflet.
Senator SCHACHT—Did you check it with the GST taskforce over in Treasury?
Mr McCarthy—Yes, we did. It was cleared by them.
Senator SCHACHT—It was cleared by them, right, but not paid by them?
Mr McCarthy—No.
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Thursday, 1 June 2000 SENATE—Legislation E 469
Senator SCHACHT—Treasury have a habit of doing that to you, do they not?
Mr McCarthy—They do, indeed.
Senator SCHACHT—To us all. Thank you for that; I will come back to tourism. Does the
Tourist Commission, in its budget for the next 12 months, put aside any resources to properly
evaluate the impact of the GST on the Australian tourism industry?
Ms Hudson—I think, Senator, that is something that we would consider if we were
hearing, as you said earlier, that it was an issue. But again, I stress that our constituency are
our visitors and our key focus is on attracting international visitors to Australia, so I think the
measurement of whether there was any impact would only come out if we were seeing a
deterioration in those big macro numbers and then we would look at a number of factors that
may cause it. But, as I said earlier, price is only one small factor in a number that influence
whether a visitor comes to Australia.
Senator SCHACHT—Do you think the GST will have a bigger impact on international
tourism or internal tourism in Australia?
Ms Hudson—Senator, we are only responsible for international tourism, so I would
comment that international—
Senator SCHACHT—I see, thank you for straightening me out on that. Well, we will wait
and see. You mention in the budget papers about the impact of the Olympic Games and the
marketing opportunity. It has been unfortunate that there has been some, to put it politely,
adverse publicity about the preparations for the Olympic Games—much of it, I suspect, only
got publicity within Australia, and we might also thank goodness for that. Was there much
indication that the adverse publicity about the preparation for the Olympic Games—from
ticketing to the IOC, the torch relay issues, band issues, all that sort of preparation—got any
sort of significant publicity overseas? We got plenty in Australia, we know, but did any of that
get publicity overseas in a level that you noted might have an impact on the image and the
branding of the Olympic Games as part of a major icon for our international tourism?
Ms Hudson—Senator, obviously we monitor very closely the way that Australia is
portrayed in overseas media. I can say that there has been very limited coverage, and certainly
when you compare it to the Australian situation very limited and very minor reporting of a
number of those negatives that in the Australian media we have seen widely reported.
Senator SCHACHT—What about the coverage of the investigations into Salt Lake City?
Some members of the IOC got suspended, some got sacked or dismissed, some resigned. Did
that get publicity around the world?
Ms Hudson—I am not 100 per cent sure on that one, Senator—again, our key focus is
monitoring on the tourism angles. I am not really aware of that.
Senator SCHACHT—And the fact that some of our Australian IOC figures got publicity
in some of those investigations, that did not seem to be an area of monitoring for you, vis a
vis the impact on tourism?
Ms Hudson—Certainly, it was not reported to us from our international offices as being
significant.
Senator SCHACHT—I will ask some questions on the Olympic Games. Have you
requested to the government that it may be necessary to reduce the curfew hours for Sydney
Airport?
Ms Hudson—No, Senator, we have not done that.
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Senator SCHACHT—Have any of your constituents asked for it?
Ms Hudson—Could you clarify what you mean by our ‘constituents’?
Senator SCHACHT—Well, there are those CEOs, there are airlines who are basically
about a large section of tourism—Qantas, Ansett, the international carriers coming in?
Ms Hudson—Senator, I think those organisations would approach government directly.
They have not come through us to do so.
Senator SCHACHT—And you do not have a view about it?
Ms Hudson—No. As I said, our view and our key role is the marketing of Australia. We
leave it to the others to look at those issues.
Senator SCHACHT—Do you have any figures of what you expect the increase to be in
international tourists coming into Australia in the period just prior to the games and going out
just after the games? Do you have a figure?
Ms Hudson—Senator, we are represented on the Tourism Forecasting Council and about, I
think it was two years ago, the Tourism Forecasting Council produced a series of estimates of
the increases that would occur in terms of actual visitation, both during the games period and
in the preceding and following years. From memory, I think in the Olympic period itself we
were talking about an additional 111,000 visitors, which is comprised—
Senator SCHACHT—In the Olympic period?
Ms Hudson—Yes, which I think is taken as being the September/October period. It is
covering the Olympic family, the athletes, the key people. In that report they also went into
detail about the direct and indirect effects, for example, who are the other visitors who are
likely to come. That report certainly is available in terms of that detail. From our perspective,
we believe that the publicity that will be generated through the games is certainly going to
position Australia very, very well in terms of the enormous impact, and that has been factored
into those forecasts.
Senator SCHACHT—The 110,000 visitors, when you exclude athletes, officials et cetera,
IOC board members, how much of the 110,000 is then left as genuine tourists coming because
they are going to go and be spectators at the games?
Ms Hudson—Senator, that report does break it down.
Senator SCHACHT—Sorry.
Ms Hudson—I was just trying to look for the numbers. The report does break it down into
a number of categories.
Senator SCHACHT—Has that report already been made public?
Ms Hudson—Yes, that report has been released.
Senator SCHACHT—My colleague Joel Fitzgibbon would already have that, so I do not
need to ask you for that. Does that figure also suggest how many may stay on and do other
tourism things in Australia?
Ms Hudson—Yes, it does specify the proportion that are likely to visit other states and
territories, yes.
Senator SCHACHT—Does the Tourist Commission have a corporate box at any of the
venues at the Olympic Games?
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Thursday, 1 June 2000 SENATE—Legislation E 471
Ms Hudson—Senator, we have been working closely with Prime Minister and Cabinet and
a number of agencies in terms of the management of Olympic publicity and those sorts of
things. My understanding is that through that we have been granted access to a number of
seats allocated through Prime Minister and Cabinet for international guests that we will bring
in for that Olympic period.
Senator SCHACHT—I see, and roughly how many is that?
Ms Hudson—I think we will be bringing in 15 international guests over the entire period
in, I think, three waves of five people.
Senator SCHACHT—Can you give me an idea of the people you are inviting?
Ms Hudson—Yes, certainly, I have a list actually.
Senator SCHACHT—Oh, great. I just want to see, out of envy, who the 15 are.
Ms Hudson—Senator, what we have done is target the key decision makers in the
international tourism area. For instance, we have the senior managing director of the Japan
Travel Bureau, which is obviously one of the key travel companies in the world.
Senator SCHACHT—How does he get the job to be that sort of—
Ms Hudson—At this stage one of our other guests will be the chairman of the China
National Tourism Association. That is the sort of calibre of people.
Senator SCHACHT—I see, fine. Are you bringing in any people in that 15 who are
actually major commercial operators, rather than associations?
Ms Hudson—Oh, yes, Japan Travel Bureau is a company.
Senator SCHACHT—That is a company that operates commercially itself?
Ms Hudson—Correct. That is the type of people that we targeted.
Senator SCHACHT—And the one that you mentioned in China is also a commercial
operator?
Ms Hudson—A slightly different situation, being China, but in principle that is the sort of
key decision maker we needed to attract from that market.
Senator SCHACHT—And those 15 people will be here for the length of the games?
Ms Hudson—No, we have three different waves happening. I think the duration of most
programs is five days around the Olympics, and if they are coming from a longer haul market,
such as the US or the UK, there is a three- or four-day additional.
Senator SCHACHT—Okay. And you pick up the airfare and the accommodation and
PM&C picks up the costs of the seats?
Ms Hudson—Senator, in terms of the airfares and accommodation, I think we have been
able to try and secure those through our contacts in the industry. I am not sure of the actual
costs to the ATC.
Senator SCHACHT—Well, I suppose if you could not do it the rest of us would have no
hope. Can you just provide me with a list—or table it for the committee—and, secondly,
provide a list of what would be the cost to the commission of providing that assistance to
those 15? Did you have to get approval from the PM&C department about who the 15 were?
Ms Hudson—I am not sure whether it was formal approval, but the calibre of the people
was certainly something our officers have worked closely with them on.
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Senator SCHACHT—And when at Olympic venues they will use the seats that the federal
government has purchased, in negotiations, from SOCOG?
Ms Hudson—That is my understanding, yes.
Senator SCHACHT—When they are here—I think you said there were three waves of
five—will they be accompanied by people from within the Australian tourism industry who
will be at the venues with them?
Ms Hudson—I think, Senator, that is still to be decided. But in principle, yes, it would be
perhaps one or two other people.
Senator SCHACHT—Who picks up the cost of the tickets for those from within the
Australian tourism community? How do you sort out who is the lucky person to go along and
get a free ticket to sit with the Japanese representative?
Ms Hudson—I think, Senator, there are two things. Firstly, we have reserved it for
overseas guests and I think it is a matter of looking at those final allocations, and our people
will talk to PM&C about that. In terms of who those people would be, it would obviously be
looking at the people who have the best connections and who are the most appropriate for
hosting those types of guests.
Senator SCHACHT—I do not have any argument with the process and what you have
done, but, for the record, when the list is ready could you could provide it to us on notice and,
as I say, the total budget. I presume that separate from going to the Olympic venues there will
be the appropriate dinners, cocktail parties, going to the theatre and other activities. Do you
provide them any opportunity to go elsewhere in Australia, to see things like the wonders of
the Barossa Valley in South Australia and Adelaide, which is a part of Australia?
Ms Hudson—Indeed, Senator, the two regions—
Senator SCHACHT—Your minister is very keen on this too, I must point out.
Senator Minchin—Very busy!
Ms Hudson—For those from our two longer haul destinations, being Europe and the US,
apart from the five days that they will be in Sydney, I believe that there are three or four days
add-ons to that Sydney core program for those guests. I am not privy to exactly where they
will be taken, but it is out of New South Wales.
Senator SCHACHT—But who does the organisation of the add-on; is that you?
Ms Hudson—We would be working with the state and territory tourist commissions on
that.
Senator SCHACHT—I see. So I should tell my colleagues in South Australia to put a bid
in immediately.
Ms Hudson—You should, yes, Senator.
Senator SCHACHT—And Senator Minchin will do the same. The other question I want
to raise, do you have any concern or comment that the levels of accommodation for tourists
coming in, not just at the top end of the tree - the five star hotels—but down through the
various levels of the number of hotel/motel rooms are adequate for the 110,000 that you
anticipate, excluding the athletes et cetera?
Ms Hudson—I would say that at this stage, in terms of the supply that is there it will
hopefully meet the demand that comes in. I am not aware of any particular issues in terms of
—
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Thursday, 1 June 2000 SENATE—Legislation E 473
Senator SCHACHT—No-one has raised issues yet or the international operators are not
expressing concern that when they are booking their flight people say, ‘Well, there is no use
flying unless we get a bed.’ There has been no hitches or no kinks in the supply system?
Ms Hudson—For Olympic-related visitors, I understand that is probably all put to bed, so
to speak, in terms of organised at this stage. We obviously are talking to the industry
internationally about any impact on their regular business that would normally be coming
through Australia during that period, but given that we have had such a long lead time in
terms of knowing when the Olympics were on, my understanding is that those issues have
been sorted through by now.
Senator SCHACHT—Okay. So, touch wood when we say this, we should not have too
many atrocity stories of someone arriving and finding that there has been a double booking or
there is a shortage of beds. Unfortunately for Hansard you have to say yes or no, you just
cannot smile, it does not record.
Ms Hudson—Yes.
Senator SCHACHT—Yes, okay. On page 109 of the portfolio statements in Output 1,
Consumer Marketing, it mentions 200 media visits to Australia as part of the visiting
journalist program. Will there be extra journalists brought in under that program during the
Olympic period?
Ms Hudson—Yes, Senator. We have a regular visiting journalist program but during the
Olympic period it is almost as if that program becomes one and the same. I think the overall
estimates of additional visiting journalists that we will bring in during that period could be up
as far as another 1,500 throughout the Olympic period.
Senator SCHACHT—Say that again: 1,500?
Ms Hudson—Throughout the entire year of 1999-2000, the financial year, what I am
saying is that when you take into account the Olympic period as well as the entire year the
figures could be another 1,500.
Senator SCHACHT—It says here:
. At least 200 media visits to Australia as part of the Visiting Journalists Program (VJP)
You pay for them to visit, you pay part of their airfares or accommodation or part of their
expenses?
Ms Hudson—We pay a small part, but in fact we manage to get great support from
partners who have a strong interest, obviously, in bringing these people in.
Senator SCHACHT—What was the budget in a non-Olympic year for what you provided
for visiting journalists under the visitor program?
Mr Hopwood—I do not have those details with me, Senator, but, again, I can supply those
particulars to you.
Senator SCHACHT—The budget will obviously go up a bit because of this surge for the
Olympics, will it not?
Mr Hopwood—Yes.
Senator SCHACHT—Okay. And again, the journalists are selected by consultation
between the industry and you about who they would be—if you want to bring a wine writer
into South Australia from somewhere, that is by consultation with the appropriate industry
people in South Australia?
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Ms Hudson—Indeed. We work very closely with the state and territory tourist
commissions on this program because they are delivering a lot on the ground to make sure
that the program works and that the journalists see the things that they should be seeing and
are hosted appropriately.
Senator SCHACHT—The budget of $95 million in the coming year in Consumer Mar-
keting, when you read what is in the PBS, you have ‘Quality’, you have ‘Quantity’. The dot
points under ‘Quantity’: 200 media visits—or now 1,000 media visits—might be worth sev-
eral hundred thousand dollars et cetera; the 24 million paid access on the ATC consumer web
site, that might be worth maybe a few million; the PR equivalency achieved through media
generated from the visits; and the response to the consumer marketing campaigns. Again, this
my consistent complaint, that I am not sure that this accrual accounting system layout actually
provides information in a friendly user way. You obviously will give me a very good explana-
tion, but I find that description of ‘Consumer Marketing’, both ‘Quality’ and ‘Quantity’, then
have a price of $95 million. Can you explain where most of the $95 million is going to be
spent? I mean, it is not on the 200 media visits. Under ‘Quality’ it states:
. Australia’s rating as first, second or third ideal, preferred and considered tourist destination in at least
70 per cent of the markets in which ATC is actively marketing and conducting tracking studies.
I presume the $95 million is in ‘marketing and conducting tracking studies’, but I would like
to get some more breakdown of what the bulk of the $95 million is spent on? Again, this is
my criticism of the PBSs. I think the way they lay this out is useless, quite frankly, and I think
it is useless even to the organisations because it meant every time there was a senator in three
other estimates committees have to spend over half an hour asking for stuff that should have
actually been in the printed document.
Mr Hopwood—Yes, interesting observation. At the end of each year, of course, we
produce a set of financial statements and these financial statements are in a traditional
accounting format. I have just taken the financial statements from last year as an example, and
if I read from the notes of our financial statements I can tell you, for instance, last year the
equivalent of this figure—and unfortunately they do not split it into ‘consumer’ and ‘trade’,
but the majority would be consumer—there was $49 million in advertising, there was $24
million on promotion, $16 million in publications, and $13 million in research. I think that is
the sort of breakdown that you are looking for.
Senator SCHACHT—Absolutely, and I want to say, Minister, and to the department, Mr
Spasojevic, I just find it incomprehensible that $95 million is put there with three lines, in
‘Quality’ and ‘Quantity’, when in fact the most relevant information is what Mr Hopwood has
just said when he breaks it down. You could actually take marketing, I suppose, as television
advertising, but I would have thought somewhere in ‘Quality’—or however you want to
describe it—you would have said, ‘television advertising’, and how many millions that was,
and then, ‘printed advertising’, as the breakdown of marketing. Because it is a nonsense, and
this is what Finance ask you to do.
Mr Hopwood—Yes, this is the format. If it is more informative, we could try to put that in
the commentary.
Senator SCHACHT—Sorry?
Mr Hopwood—We could try to put that in the commentary somewhere, but it would be
lost in the words.
Senator SCHACHT—Yes. Will it be put in the annual report?
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Thursday, 1 June 2000 SENATE—Legislation E 475
Mr Hopwood—Yes, that is the standard format.
Senator SCHACHT—That is what you quoted from?
Mr Hopwood—Yes, so it is publicly available.
Senator SCHACHT—The problem we have is the annual report is six months out-of-date.
That annual report I have is 1998-1999.
Mr Hopwood—Yes, it is the same one.
Senator SCHACHT—That is the one you are using, and here we are talking about the
forward estimates which has no breakdown of what you are thinking of spending that $95
million on. Is it $40 million for television, or have you dropped it by $10 million to $35
million and there is a very good reason you are doing that.
Senator Minchin—We will pass those comments on to the Department of Finance,
Senator Schacht.
Senator SCHACHT—I think you will find that every committee is passing them on. I
went through this agony with Veterans the other night and it took an hour and a half because
they had stuck to the book and it just did not work out. You do not have information with you
indicating who that $95 million, in the way you have just described it from last year, will be
spent?
Mr Hopwood—I will have a quick look in my background notes for you, Senator. Of
course, in determining those figures we do have to work it back upwards again.
Senator SCHACHT—Yes.
Ms Hudson—I would also add that that $95 million is comprised of the government
appropriation as well as the dollars that we receive through the work that we do through with
industry and investment in our programs. So it is a combined figure.
Senator SCHACHT—So the $95 million is not the appropriated figure?
Ms Hudson—No, that $95 million, Senator, refers to our total revenue.
Senator SCHACHT—You see, that is not made clear in this explanation. Mr Spasojevic,
you might be able to point that out to me somewhere else, perhaps to the table on page 111,
whether that indicates there your revenue from elsewhere which is not appropriated. The
budget overall is $91 million operating revenue.
Mr Hopwood—Yes.
Senator SCHACHT—You see, I just find this is a useless system, quite frankly.
Mr Hopwood—What you are referring to on that particular table, we have $91 million
from the government, we have—
Ms Hudson—Senator, we are looking at Table 1.1.
Senator SCHACHT—Yes. Here, yes.
Mr Hopwood—So you have got $91.7 million, say, appropriation. In addition to that, we
have revenue which we raised from the industry and other sources, giving us a total spend of
$130 million. Now, that $130 million is then split up into both ‘Consumer’ and ‘Trade’ and
within each of those you have those components that you are seeking.
Senator SCHACHT—So the $95 million you are spending in consumer markets is not all
appropriated money?
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E 476 SENATE—Legislation Thursday, 1 June 2000
Mr Hopwood—Correct, yes.
Senator SCHACHT—How much of it is non-appropriated money, which you might well
say is none of the business of the parliament?
Mr Hopwood—Well, it is all linked, Senator, because we use appropriated money to
generate other funding, as an example.
Senator SCHACHT—I will still ask you the question, but—
Mr Hopwood—I think there is a page which actually splits that up, but if you like,
Senator, I can provide almost like an equivalent of what is an annual report but it breaks down
those two components and breaks them into those line items. I can do that.
Senator SCHACHT—I would appreciate that if you would. When you come back at the
latter part of this year for supplementary estimates the annual report for 1999-2000 will be
available, which will be useful. Mr Spasojevic, you did not produce in the department a
separate document for the budget papers putting in some of this information? Last night in
Foreign Affairs, Defence and Trade, the Overseas Aid Bureau had a document like this which,
was incomprehensible, explaining where the money was being spent. It was not until we went
to their separate budget paper that I think senators actually got to the core of where that
agency was spending its money by comparison with previous years et cetera and that you
could actually follow it. I do not want to create a paper wall, but if Finance insists on
producing this document is there any chance for the next budget that we could get a timely
supplementary document in the budget papers outlining some of the information that Mr
Hopwood has freely provided here to make it easier to understand what we are doing,
Minister?
Senator Minchin—I am quite happy to take that on board. I think it is a fair point. It is a
question of not weighing the thing down so you can never find anything, but I see your point.
I think it is more information and I will follow it up.
Senator SCHACHT—We used to get that information in the old way out of these people.
Two or three years ago, before we went to accrual accounting and these inputs/outputs, in the
old layout of the PBS you got the information the way I have been asking for it. Anyway, this
is a debate that I think the Senate will have internally and with the government.
Senator Minchin—I am sympathetic to the point you make.
Senator SCHACHT—I may as well wait until I get some of the stuff on notice and come
back in half a year’s time—in December when I get the annual report—because I am only
going to delay the estimates unnecessarily as we try to get some of this stuff out. By the way,
do you make any contribution to the Tourism Council of Australia?
Ms Hudson—We work closely with the Tourism Council of Australia, as we do with the
other industry associations. I understand we do joint research projects with the Tourism
Council of Australia.
Senator SCHACHT—And how much is that contribution worth?
Ms Hudson—I think it has been in previous years a maximum of $30,000 a year.
Senator SCHACHT—Are any members of the Tourism Council also members of the
board of the Tourism Commission; is there a crossover?
Ms Hudson—Do you mean are any board members of the Tourism Council—
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Thursday, 1 June 2000 SENATE—Legislation E 477
Senator SCHACHT—Yes, who are active at a senior level on the Tourism Council also on
the board of the Tourist Commission.
Ms Hudson—Not that I am aware of.
Senator SCHACHT—Not that you are aware of, okay. Can I ask Mr Spasojevic or Mr
McCarthy: does the department make any contribution to the Tourism Council of Australia?
Mr Crick—Perhaps, Senator, I might come in there. We do not make any direct
contribution to the Tourism Council of Australia but we do work with them and on occasion
might sponsor a particular project or be a contributor to a particular project. For example, we
have been sponsoring each year the annual Tourism Awards that take place—which, in fact,
were originally set up by government many years ago. So, no direct contribution, just one-off
sponsorships for particular projects.
Senator SCHACHT—The reason I asked is that I have been provided with a copy of an
independent audit report on the Tourism Council of Australia Limited, which was signed by
Ernst and Young on 14 April, which states:
At the 31st of December 1999, the company’s current liabilities exceeded its current assets by
$594,124. There is an overall excess of liabilities over assets of $365,355 and the company produced an
operating profit of $40,654 for the year ended on that date. Accordingly, there is significant uncertainty
as to whether the company will be able to continue as a going concern or whether it will be able to pay
its debts as they become due and payable and realise its assets and extinguish its liabilities in the normal
course of business and at the amount stated in the financial report.
Is the department or the Tourist Commission aware of that report, in view of the fact that
modest contributions at the most have been made and there may be joint ventures and there
may be other activities that the council is involved in?
Mr Crick—Senator, we are aware of the financial report and that is a matter for the
tourism industry. I think the tourism industry generally has a very strong commitment to the
Tourism Council of Australia.
Senator SCHACHT—But what you can assure me of is that you are fully aware of the
situation and therefore any funds provided for any particular program that the council may be
conducting will go for that particular project and not to write off other debts.
Mr Crick—Any funds that we provide, Senator, for a particular project are pretty tightly
written into a contract with performance outcomes and acquittal procedures and we can be
confident that that would be the case.
Senator SCHACHT—And the Tourism Commission?
Ms Hudson—Yes, that would be exactly the same situation.
Senator SCHACHT—So the money you provide is for joint projects on a particular
defined time limited program?
Ms Hudson—Indeed.
Senator SCHACHT—Do either you or the department have any knowledge of why the
council unfortunately looks like it has a bit of financial problem?
Ms Hudson—No. Our role is to market Australia and we work with those organisations
but—
Senator SCHACHT—Yes, I know that, but you indicate you are regularly on the phone
and proactively involved in the tourism industry, which is the proper way you should be
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E 478 SENATE—Legislation Thursday, 1 June 2000
acting. I just wondered if you had any knowledge. Also to you, Mr Crick, this is an important
body, apparently, for the tourism industry in Australia. Do you have any knowledge of what
the industry broadly may be doing to have the council survive? You obviously chip money in,
I suppose.
Mr Crick—It is not an issue that it would be appropriate for me to speculate on. Just to
repeat what I said before, the tourism industry is very strongly committed to TCA and I am
sure they will be working on that issue.
Senator SCHACHT—Is the Tourism Council of Australia effectively the peak body for
the Australian tourism industry?
Mr Crick—There are a few—
Senator SCHACHT—I know there are a lot of demarcation disputes and revolutionary
groups here and there within the industry claiming various things, and I do not want to get
into that argument, but do you recognise the Tourism Council as being the peak body?
Mr Crick—I think it is fair to say yes to that question, Senator.
Senator SCHACHT—The council revenue comes from various other tourism bodies and
commercial operators paying an affiliation fee or some sort of amount of money to be a
member?
Mr Crick—I am not aware of the intricacies of how they raise all their funds, but that
obviously would be an aspect of it.
Senator SCHACHT—Does the department send representatives along - not necessarily
the board members but I presume there is an annual meeting of the Tourism Council?
Mr Crick—They have an annual conference and they have an annual award night and we
certainly participate in that. They have certain committees that look at policy issues and we
participate in some of those, so we work fairly closely with them.
Senator SCHACHT—If, unfortunately, they got liquidated or one of the creditors decided
to take them to court to wind them up because of the debt, would that be a very retrograde
step in terms of the operation of a peak body providing common advice and views to the
government?
Mr Crick—I would imagine, Senator, that the tourism industry would work out some way
of presenting its views to government.
Senator SCHACHT—They would recreate or metamorphose themselves into a new
conference or something?
Mr Crick—That would be for them to work out.
Senator SCHACHT—Thank you for that. Has the Tourism Commission itself been
invited to attend any tourism industry seminars about the operation and implementation of the
GST?
Ms Hudson—Senator, we are certainly aware that the Tourism Council of Australia in fact
have run a series of seminars around the country. The primary focus of those seminars has
been on—
Senator SCHACHT—Who ran them?
Ms Hudson—The Tourism Council of Australia organised a range of seminars across the
country. My understanding is that the focus of those seminars was very much on industry
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Thursday, 1 June 2000 SENATE—Legislation E 479
operational issues, and therefore not of direct relevance for people within the ATC. However,
obviously we are aware that they are happening and pleased that that is happening as an
educative part of the process.
Senator SCHACHT—Did the department provide any money to the Tourism Council of
Australia to run those GST implementation industry seminars?
Mr McCarthy—No.
Senator SCHACHT—They got the money, what, from the GST implementation taskforce
out of Treasury/Taxation?
Mr McCarthy—Yes, I believe they received some financial assistance from the GST
taskforce.
Senator SCHACHT—Do you know how much it was?
Mr McCarthy—It was of the order of $3 million, from my recollection.
Senator SCHACHT—Three million? In view of what I have previously read out about the
Tourism Council having a greater list of liabilities over assets, do we know that all of that $3
million went on GST seminars?
Mr McCarthy—We do not know, Senator. That is really a matter between the Tourism
Council and the Treasury.
Senator SCHACHT—Gee, it would be ironic, wouldn’t it, if Treasury allowed some of
their money to disappear. Oh well, they will live and let learn, I suppose. Have we finished
completely with Treasury in these estimates, Mr Chairman?
CHAIR—No, they are back tomorrow.
Senator SCHACHT—Thank you for that. I will make sure that question is asked to ensure
that they are aware of the unfortunate financial difficulties and that the $3 million all went on
the seminars. Were you invited, even in an observer status, to go to those seminars on the
tourism industry?
Mr McCarthy—Yes, we were.
Senator SCHACHT—And someone attended?
Mr McCarthy—Yes.
Senator SCHACHT—Was it your observation that they well attended by a good cross-
section of the tourism industry in Australia?
Mr McCarthy—I did not personally attend so I could not tell you that. The feedback I
have had is that they were well attended.
Senator SCHACHT—From your officers who were there as observers?
Mr McCarthy—Yes.
Senator SCHACHT—I will ask this tomorrow of Treasury, but did your officers make any
assessment of how many people attended?
Mr McCarthy—I do not think they could because there were a large number of seminars
right across Australia.
Senator SCHACHT—In the tourism area?
Mr McCarthy—Yes.
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Senator SCHACHT—Okay, I will leave that for Treasury tomorrow. Did any issues come
out of the seminars that provoked your department to say that there were particular issues that
have arisen about the implementation of the GST that you should address or should take up
with Treasury to deal with?
Mr McCarthy—Yes, there were a number of issues associated with the implementation of
the GST and we have therefore been working closely with the Australian Tax Office in
settling some of the outstanding implementation issues. The Tax Office has actually formed a
consultative committee with the tourism and hospitality sector to work through some of the
outstanding issues and that has been a very successful and productive process.
Senator SCHACHT—Are the outstanding issues such things as tax rulings?
Mr McCarthy—Yes, there are draft rulings made on various issues. These are discussed
between the industry and the Tax Office and then there are final rulings made in the areas
concerned.
Senator SCHACHT—There has been some suggestion in the media that the taxation
department is being swamped with the demand for tax rulings in the implementation of the
GST. In the tourism industry have you been aware of any complaints tourism operators have
not got all the tax rulings they need to know how they should operate their businesses?
Mr McCarthy—By and large, the feedback that we are getting from the tourism industry
is that the consultative committee that has been set up between the industry and the Tax Office
has been a very effective mechanism for resolving these sorts of implementation issues. There
are still some issues outstanding but the industry expects that these should be able to be
resolved.
Senator SCHACHT—What are those outstanding issues, Mr McCarthy?
Mr McCarthy—I would need to come back to you with—
Senator SCHACHT—I would appreciate it if you would. Is there any chance for you to
come back during the day? I do not expect a definitive list to the last I dotted and T crossed,
but some of the areas I would appreciate it while we are still in estimates because we do not
get another chance at you until November or December which is six months away.
CHAIR—Thank goodness.
Senator SCHACHT—‘Thank goodness’, says the chairman, and I probably would not
disagree in some senses either. I diverted off the Tourism Commission and into the
department, but this overlap will consistently occur. In Output 2 on page 109, which is called
‘Trade Marketing’, again we have this large sum of $35 million. First of all, I presume that the
$35 million is a mixture of both appropriated money and revenue you have generated?
Ms Hudson—That is correct.
Senator SCHACHT—Is the proportion of appropriated money and income in the $35
million roughly the same proportion as the $95 million in Output 1? Is the allocation of what
you earn yourself proportionate in both programs?
Mr Hopwood—Senator, if you were to go to Table 2.1, which is earlier on in the report, it
breaks down both the—
Senator SCHACHT—Sorry, that was Table 2.1? Yes, I have that.
Mr Hopwood—You will see there under ‘Revenue from other sources’, halfway down the
table, we have a consumer and trade split, so you can see the proportion then of the revenue.
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Thursday, 1 June 2000 SENATE—Legislation E 481
Senator SCHACHT—Oh, yes, I see.
Mr Hopwood—Or again, right at the beginning of section 2 it is diagrammatically
represented and again you have your total price and your appropriation component in Output
1 and 2. It is the same figures.
Senator SCHACHT—Thank you. Under ‘Trade Marketing’, again I would make the same
comment about the description in Output 1: $35 million is listed there and though I can see
some things there would cost if you put them all together, I would like more indication of
where the $35 million is spent - if you run a lot of trade events, seminars et cetera, and all
those sort of things, that that would consume a fair bit of money. Again, can I just ask from
last year how that $35 million proportionately breaks up in the trade marketing area and what
are the big ticket items in trade marketing?
Mr Hopwood—On an actual figure basis, what I will do is when I supply those figures to
you, as I mentioned before, I will break that down. But just conceptually, the larger costs
relate to trade event activities, aspects of cooperative marketing and areas relating to the
meetings incentives and conventions and exhibitions areas. But again, I can give you some of
those details.
Senator SCHACHT—For example, trade events is one of the biggest ticket items, is it?
Mr Hopwood—Yes.
Senator SCHACHT—A trade event is one where there is an international tourism trade
event somewhere in the world, you put on an exhibition, a display, invite commercial
operators to participate, they pay some sort of fee et cetera. How many of those international
trade events would you anticipate being in in a year?
Ms Hudson—Senator, it varies every year. This week we have the major one for the year
happening, the Australian Tourism Exchange.
Senator SCHACHT—Where is that held?
Ms Hudson—That is being held in Sydney this year.
Senator SCHACHT—Has it ever been to Adelaide?
Ms Hudson—Not at this stage, however, all states and territories are welcome to tender for
that particular meeting.
Senator SCHACHT—It is a bid, I see.
Ms Hudson—In terms of your question about the overall number, there are two categories
of trade events that we are involved in: the one that is happening this week that we actually
run as a trade event, and, secondly, there are a number overseas where we participate—we
organise with Australian industry to represent Australia at a trade event that is organised by a
company or within another country. The total number of those trade events per year does vary
depending on which ones are happening around the world at which time and which are the
more appropriate for us to be involved in.
Senator SCHACHT—What would the commission spend on the trade event that is on this
week in Sydney?
Ms Hudson—It is very difficult to tell because there are so many factors in terms of the
range of sponsorships that we are able to get from carriers, for example, bringing in delegates.
Mr Hopwood—I do not have a specific figure.
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E 482 SENATE—Legislation Thursday, 1 June 2000
Senator SCHACHT—Would it be half a million, $300,000?
Ms Hudson—I think it would be more than that, Senator.
Mr Hopwood—It is in the multiples of millions.
Senator SCHACHT—Is it?
Mr Hopwood—In total cost being spent.
Senator SCHACHT—But that is total cost. Your proportion would still be in the millions?
Ms Hudson—That is a complicated situation.
Mr Hopwood—I would have to take out the sponsorships but I do not have that in front of
me.
Senator SCHACHT—So of that $35 million, those trade events would soak up 60-70 per
cent of the budget?
Mr Hopwood—I would have to look at that because, again, the $35 million is the cost side
but if we were to look at the revenue side, of course, that would offset it. So the bottom line
cost to the taxpayer is actually quite small for trade events.
Senator SCHACHT—The $35 million in running these events, that is only your
contribution to the event. If the event was worth $1 million, this is only what your
contribution to the event is, not the total cost of the event, of course, because other people
have contributed. Fine. Are most of these events held in Australia or held overseas?
Ms Hudson—Senator, as I said, the main one this year is in Australia, and that is held
annually in Australia. Most of the other trade events are ones that we participate in which are
held in all parts of the world.
Senator SCHACHT—And there would be, what, a dozen of those a year?
Ms Hudson—Around about that number, perhaps slightly less.
Senator SCHACHT—If I was an operator running tours through the Flinders Ranges et
cetera, five-day packages, as an individual operator do I have the opportunity to be involved
in this trade event in Sydney this week? What sort of role could they get at the trade event
without being lost or swamped?
Ms Hudson—We have a number of different categories of participation. If, for example,
you were a new product, we have a particular focus on encouraging new product into the
industry and therefore we have a specific section of the trade show which is designated for
new product and marketed as being new product. There is great interest from the overseas
buyers who are here in making themselves aware of what is new in the market, so that would
be one way. If you had been established in the market for a number of years, you would take a
booth at this particular trade event and have scheduled appointments with the overseas buyers.
Senator SCHACHT—And those established ones who have a booth, they are paying for
that themselves but are they badged as part of the Australian Tourist Commission presentation
or are they freestanding, by themselves et cetera?
Ms Hudson—At the event that is held in Australia they are freestanding. If that particular
company was to attend a European trade event they would be part of the entire Australian
presence.
Senator SCHACHT—But this event in Sydney is basically a Tourist Commission event in
total; is that right?
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Thursday, 1 June 2000 SENATE—Legislation E 483
Ms Hudson—Correct.
Senator SCHACHT—Whereas the ones overseas someone else is running and you are
buying a space and there you badge everybody together?
Ms Hudson—Correct.
Senator SCHACHT—Have you ever run into problems where, in an industry as diverse as
yours, some recalcitrant says, ‘No, I’m going to go off and do it separately, I don’t want to be
part of the badging’?
Ms Hudson—I would imagine over time that has occurred, Senator, but there are a lot of
advantages in an operator going in with a combined effort.
Senator SCHACHT—Because badging was mentioned in your description about badging
Australia as a market destination. Does the industry in all its diversity accept the advantage
that whatever the argument they have about not doing this area strongly enough and this area
too strongly, that the badging of Australia is the biggest advantage of all for everybody, that
there is a consistent badged image as an Australian international destination?
Ms Hudson—Yes, Senator, I think there is a good understanding of that principle and its
application in the market place.
Senator SCHACHT—How do you get on with vigorous state tourism bodies who say,
‘Tasmania’s better than the rest of Australia’? I used Tasmania because they always believe
that.
Ms Hudson—Senator, we have a program called Partnership Australia which comprises
the state and territory tourist commissions and the Australian Tourist Commission. That
grouping meets regularly to discuss marketing campaigns, content, programs, to share
research, and that is the mechanism for which those sorts of issues are resolved and worked
through.
Senator SCHACHT—So that is resolvable?
Ms Hudson—Yes, it is.
Senator SCHACHT—You do a large amount of advertising overseas and those are well-
known campaigns. People have various comments about the quality of them, the image et
cetera, but they are, by and large, recognised as being pretty successful. Do any of the state
tourism commissions do specific South Australian, Victorian, Tasmanian overseas advertising
as well?
Ms Hudson—Yes, Senator, they do and what we try and encourage is if a particular state
and territory has a budget where they are able to do their own television advertising our whole
focus is to encourage them to work with us on that. For example, some of our television ads
run whereby they start with the overall, what we call ‘brand Australia’, marketing the country,
and then a state or territory commission add-on can be placed at the end of that ad. We
encourage states to do that to get a greater benefit than taking their own air time in a separate
media.
Senator SCHACHT—And you run a quality control across that there are not steam-age
black and white box brownie photos added to the end of your $300,000 production?
Ms Hudson—Yes, we do.
Senator SCHACHT—Okay. And you also run a control that Tasmania does not put an ad
on bagging the South Australian wine industry as being poison?
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E 484 SENATE—Legislation Thursday, 1 June 2000
Ms Hudson—Yes, we would certainly not be advocating that.
Senator SCHACHT—So it is agreed across the states that, by and large, now the
sophistication is that you do not compete against each other per se by bagging each other, it is
a positive message for everybody?
Ms Hudson—Indeed, and in fact what we have seen in the last few years is even a further
breakdown of some of those state borders so that, for instance, wine tourism can develop
itineraries that feature product in both states, or a number of bordering states. This is
occurring and it is obviously an advantage because the international visitor does not
necessarily recognise state borders.
Senator SCHACHT—Of course, and neither they should because it is all Australia. I
think most of the rest of my questions are not to the Tourism Commission, they are to the
department. Mr Hopwood and Ms Hudson, I appreciate your help in overcoming my inability
to decipher the PBS in a meaningful way and I appreciate you have taken a lot on notice. I
also appreciate that the minister has acknowledged some deficiencies in this area which are a
wider issue for us all. Anyway, I wish you all the best for the Olympic period and look
forward to getting your report afterwards. That is it for me.
CHAIR—Thank you very much, Senator. That finishes the Australian Tourist Commis-
sion.
[10.28 a.m.]
DEPARTMENT OF INDUSTRY, SCIENCE AND RESOURCES
CHAIR—We now move to the department and questions from Senator Campbell.
Senator GEORGE CAMPBELL—I have a series of questions which go a bit to the
generality of expenditure across a number of the outcomes. I may try and go through those
without getting locked in to which part we are dealing with and then come back to specific
issues under some of the outcomes. That might be the easiest way to do it. I would first of all
ask: what was the total appropriation for DISR for the year 1999-2000.
Mr Dainer—The appropriation for 1999-2000 was $1,269 million. That was made up of
departmental expenses of $223 million, administered expenses of $912 million, there was a
capital appropriation of $134 million. In addition to the $1,269 million, there was also a
special capital appropriation for the SMHEA matter, which was $910 million.
Senator GEORGE CAMPBELL—So you say it was $1,269 million?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—In the PBS the figure given is $1.007 million.
Mr Dainer—No, that is for this year; I gave you 1999-2000.
Senator GEORGE CAMPBELL—Sorry, you did. What is the difference between the
expenditure for the 1999-2000 year and the year 2000-01?
Mr Dainer—Excluding the special capital item, the SMHEA item, a reduction of 21 per
cent in appropriation.
Senator GEORGE CAMPBELL—Twenty-one per cent?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Does that represent a cut in expenditure of about eight
per cent?
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 485
Mr Dainer—Twenty-one per cent.
Senator GEORGE CAMPBELL—A 21 per cent cut?
Mr Dainer—Reduction in appropriations, yes.
Senator GEORGE CAMPBELL—For the department. The total administrative expenses
for outcome 1 in 2000-01 is $387 million; the 1999-2000 expenditure was $556 million. This
represents a reduction of around about 30 per cent. Is that included in the figures you just
gave me?
Mr Dainer—Yes, I have given you outcome 1 and outcome 2 combined.
Senator GEORGE CAMPBELL—Right, so that is the total package, and the totality of
those two together is a reduction of 20 per cent in expenditure. Can you outline for us what
specific programs in the portfolio have had spending reductions in the appropriations for
2000-01?
Mr Dainer—Do you want the full list of movements between the years? They are not
necessarily cuts, they are just reductions which may come about from rephasings or whatever.
Senator GEORGE CAMPBELL—Yes.
Mr Dainer—The major ones: there was a drop off in the administered expense item for
pharmaceuticals of $60 million; the Maralinga program, a reduction of about $9 million;
domestic tourism of $6 million; the offshore petroleum item dropped by about $120 million—
that was a major contributor. Then there were a number of ups: TCF up $12 million; sport and
rec up $5 million; regional minerals up $3 million. So it was a combination of a whole range
of things.
Senator GEORGE CAMPBELL—Can you tell us why these reductions or cuts
occurred?
Mr Dainer—There are, I think, about 40 items which combine to make our administered
expenses. They are made up of a range of things. The TDP, which is one of the measures, was
reduced, there was a cut to that program, but in other programs it is because decisions which
were announced in previous years are now coming to an end of the program’s life, the pro-
gram was phased in a way where it was not constant across the years—it was perhaps a higher
start-up or a lower start-up, building up or building down.
Senator GEORGE CAMPBELL—Will the running of these programs be affected in any
way because of these reductions?
Mr Dainer—The running cost component?
Senator GEORGE CAMPBELL—The actual running of the programs.
Mr Dainer—In some areas they would be.
Senator GEORGE CAMPBELL—Can you identify what those areas are?
Mr Dainer—I can get you that information.
Senator GEORGE CAMPBELL—What will the effect of the reductions be, for example,
to the Bounty Ships Act? Why has that reduction been made?
Mr Spasojevic—I think that is a demand-driven appropriation and there is just a reduction
in the call on the program. There is no cut, so to speak—the program stands as it is—but there
is just a smaller demand anticipated for take-up of the bounty.
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E 486 SENATE—Legislation Thursday, 1 June 2000
Senator GEORGE CAMPBELL—The actual expenditure in that program in the last
period, 1999-2000, how did that compare with the allocation in the 1999 budget?
Mr Spasojevic—We will just try and find that figure for you, Senator; I do not have it off
the top of my head.
Mr Dainer—The actual allocation was $14,730 million and the estimated outcome for this
year is the same, so fully spent. That is for 1999-2000.
Senator GEORGE CAMPBELL—Can you give us a bit more detail, Mr Spasojevic, as
to why that program has reduced by $3 million in the next financial year?
Mr Spasojevic—I will get the relevant officer to come to the table.
Mr Peel—Essentially, as Mr Spasojevic said earlier, it is a demand-driven program. The
amount budgeted this year is an estimate of activity in the industry which would result in
claims. If activity exceeds the estimate, there is a facility for us to go to the Department of
Finance and get additional funding, which would appear in the additional estimates.
Senator GEORGE CAMPBELL—How did you calculate that figure?
Mr Peel—It was calculated by looking at current activity in the industry and our links with
the people that currently draw down on that program.
Senator GEORGE CAMPBELL—Can you give us some more detail about the actual
areas where there is a drop off in demand?
Mr Peel—I do not have that with me, Senator, but I could take that on notice and provide it
later.
Senator GEORGE CAMPBELL—Can you explain to us what the effect of these
spending cuts will be to the Urban Exports Program?
Mr Dean—This is not actually a cut, this is pretty much in line with the forward estimates.
It is down a little bit to allow for the savings from the embedded taxes in the GST situation
but it is not actually a cut.
Senator GEORGE CAMPBELL—Sorry, could you just repeat that again. Could you
speak up a little—it is my boilermakers’ deafness; I cannot hear unless you speak up.
Mr Dean—The forward estimates for this amount are broadly in line with the figure that
has been provided previously; it is not actually a cut or a change. It is down a little to allow
for savings with the removal of the embedded taxes with the new tax system. I think the
previous figure was $1 million.
Senator GEORGE CAMPBELL—How did you make that calculation?
Mr Dean—Which calculation, Senator?
Senator GEORGE CAMPBELL—The removal of the embedded taxes.
Mr Dean—This is an estimate of the savings that will accrue as a result of the tax changes.
Senator GEORGE CAMPBELL—Who made that estimate?
Mr Dean—I believe that was done based on modelling by the Department of Finance and
Administration.
Senator GEORGE CAMPBELL—So the Department of Finance and Administration did
a modelling on your portfolio area and came up with a figure of—what does that represent in
percentage terms?
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 487
Mr Dean—It is about three per cent.
Senator GEORGE CAMPBELL—Were the people that are affected by this program
consulted in respect to these cuts for embedded taxes?
Mr Dean—We are going through a process of consulting them at the moment.
Senator GEORGE CAMPBELL—But you have already made the decision.
Mr Dean—There is a figure in the papers—
Senator GEORGE CAMPBELL—Explain to me what the point is of now going and
consulting the people who are reliant on this program about an indicative cut that you have
already made, based on, I presume, some modelling that DOFA has done?
Mr Dean—I think that that will not be a major problem because most of the contracts that
would be let under this amount have not yet been let. So, presumably, the market will operate
and we will get prices for the work that needs to be done which reflect the savings that are
expected to flow through.
Senator GEORGE CAMPBELL—What happens in a set of circumstances where the
savings do not flow through, because there is a substantial reduction in that program, is there
not?
Mr Dean—No, it is not a large amount, Senator, it is $33,000 out of $1 million.
Senator GEORGE CAMPBELL—So you will make that up out of some other—
Mr Dean—I expect to be able to manage my program without adverse consequences.
Senator GEORGE CAMPBELL—Going through the table of resources on page 36 of the
PBS, there are a range of programs there where there has been a reduction in funding. Does
the same principle apply to each of those programs?
Mr Dainer—Perhaps I can answer that. It applies to most of those programs but it does not
apply to special appropriations or payments to the states.
Senator GEORGE CAMPBELL—But in respect of these general programs, there has
been a dividend for embedded taxes of, what, three per cent?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Perhaps you can answer the question, Mr Dean, in
respect to how that calculation was made. Is that just simply some modelling that was done by
DOFA and three per cent applied to each of those programs, or were people who are recipients
of the programs consulted about potential impacts of embedded taxes or the GST on those
programs?
Mr Dainer—Perhaps I should answer that question. The number originally came out of a
model that DOFA commissioned which then fed into, obviously, the budget process and
decisions were taken in that context.
Senator GEORGE CAMPBELL—This was the Murphy model, Econtech?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—MN303 it was called—it sounds like an old rifle used
in the Second World War. So that has been applied across all the programs based on that
model?
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E 488 SENATE—Legislation Thursday, 1 June 2000
Mr Dainer—Yes, administered expenses, excluding special apps and payments to the
states.
Senator GEORGE CAMPBELL—But you do not really know whether or not that is a
true reflection of what the outcome might be after the application of the GST, and presumably
embedded taxes have been taken into account. What if these calculations are not right? I
noticed somewhere in a statement or a letter I saw from the minister it said that budget figures
this year are indicative only—indicative of what?
Mr Spasojevic—I do not know how to follow on from that statement. In which regard?
Senator GEORGE CAMPBELL—The minister sent a letter out on 10 May, I think it
was, and in part in that letter he says that program funding levels set out in the Department of
Industry, Science and Resources portfolio budget statement are indicative only. How
indicative are they? What is the margin of error: one per cent, three per cent, 10 per cent?
Mr Spasojevic—As Chris Dainer has set out in explaining the process, a three per cent
reduction, on average, has been applied to those programs.
Senator GEORGE CAMPBELL—This is based on a model done for DOFA by Chris
Murphy of Econtech
Mr Spasojevic—That is correct.
Senator GEORGE CAMPBELL—Which, according to newspaper reports, has been
applied across all departments.
Mr Spasojevic—We are now in a process of consulting but we understand that for some of
those programs the WST savings may be slightly larger and for some they may be slightly
smaller. In the consultation process we will be trying to extract the maximum WST savings
for the taxpayer and that process is currently under way.
Senator GEORGE CAMPBELL—But in one area that I am aware of there has been
considerable concern raised about the impact of this approach, and that has been in an area
which has been the subject of considerable public debate in this portfolio over the past 12
months or so, and that is in research and innovation. People in that area are raising real
concerns about the impact that these so-called cuts are going to have on their area. I think Mr
Cullen from—
Senator Minchin—Senator Campbell, I think you are referring to the CRC program. I
would point out that the R&D tax concession, which is the primary deliverer of support for
R&D, is not affected in any way.
Senator GEORGE CAMPBELL—Well, the tax concession is affected.
Senator Minchin—No, it is not.
Senator GEORGE CAMPBELL—It is affected by the reduction in the corporate tax rate.
Senator Minchin—It is not affected by the clawback of WST which is the subject that we
are talking about. If you want to get on to that subject, we can talk about that, but you are
talking about the clawback of WST.
Senator GEORGE CAMPBELL—Yes, I am talking about the clawback.
Senator Minchin—That is not affected by that. Mr Cullen was speaking on behalf of the
Cooperative Research Centres and their argument that they will not have available to them
savings of the order of three per cent. I am meeting with the CRC association in the next week
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 489
or two to discuss their views on this matter and have indicated my willingness to work with
them in the implementation of the government’s decision.
Senator GEORGE CAMPBELL—So in terms of Mr Cullen’s position, Minister, if he
can demonstrate a genuine case will that position be rectified?
Senator Minchin—I am not at liberty to give that sort of undertaking. The government has
made a decision that in respect of these administrative programs a three per cent saving—
being the government’s estimate of the reduction in cost as a result of the removal of these
taxes—should be appropriated for the taxpayer. We have undertaken to consult with all
affected areas in relation to the implementation of that and I will listen attentively to what
position the CRCs wish to put to me as to how the decision should be implemented in their
case.
Senator GEORGE CAMPBELL—But there is no commitment that any funding shortfall
will be restored?
Senator Minchin—I cannot make that commitment. I am bound by a government decision
as to the appropriation and the savings that must be achieved.
Senator GEORGE CAMPBELL—Why was it done in this form, Minister, across gov-
ernment agencies, to make the arbitrary cut and then set about seeking to talk to recipients
about the impact on their businesses or their organisations or their programs?
Senator Minchin—As you know, Senator Campbell, the government has been anxious to
ensure that the private sector does the right thing by Australian consumers in reflecting in
their own pricing structures the benefits to be gained by the removal of a number of indirect
taxes and the benefits that will derive from that. It is therefore incumbent on the government
equally to reflect in its own activities the benefits of the reductions in expenses for various
organisations by virtue of the removal of those taxes. We, with the benefit of modelling done
by DOFA, have determined that that benefit should be of the order of three per cent—
Senator GEORGE CAMPBELL—When you say ‘we’, you mean the government has
determined?
Senator Minchin—That is right, the government has determined that that figure is in the
order of three per cent. The alternative is to say that you are going to have an increase in the
appropriation of three per cent, if you did not act upon it, and to completely contradict the
position we are putting to Australian business that they should take into account in their
pricing the fact that their costs are being reduced by the abolition of these taxes. It was the
government’s decision that those savings be realised and, in effect, passed on to the taxpayer
by the imposition of this three per cent reduction. That was a decision that had to be
announced in the budget because the budget figures for the next four years had to be
determined on the basis of a budget decision that could only be announced, of course, on
budget night. But by virtue of the letter I have sent out, a copy of which you have, I have
indicated our willingness to consult closely with all affected groups as to the implementation
strategy.
Senator GEORGE CAMPBELL—I will come back to the implementation strategy in a
minute. There have been a number of other government agencies who did not take that
approach but who actually went to their suppliers and asked their suppliers to identify the
savings up-front and then based their calculations on that. Why was that approach not taken as
a whole of government approach?
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E 490 SENATE—Legislation Thursday, 1 June 2000
Senator Minchin—I can only say in the context of the ERC and the budget cabinet that the
best advice available to the government was that the savings would be in the order of three
per cent and that they be applied in the way they have been.
Senator GEORGE CAMPBELL—And that represents a figure of about $800 million
across the budget?
Senator Minchin—I have not done the estimate of that but I do not think it is of that order,
Senator Campbell. You would have to ask the Department of Finance what estimate they may
have for the savings across the government but I am not aware that it is a figure of anything
like that order.
Senator GEORGE CAMPBELL—On page 40 of the PBS there is a whole series of key
initiatives identified, and presumably the funding for those come out of the administrative
funds?
Mr Dainer—No, these come out of the departmental expenses; these are outputs.
Senator GEORGE CAMPBELL—Yes, sorry, out of the departmental expenses. Has the
same rule of thumb been applied to this?
Mr Dainer—Our departmental expenses were reduced for the same reason, the clawback.
Senator GEORGE CAMPBELL—So the funding for all of these programs,
Implementation of Downstream Petroleum Products Action Agenda et cetera, have all been
arbitrarily cut by three per cent?
Mr Dainer—This is a slightly different approach. This is identifying what we will do with
our departmental expenses next year. Those internal budgets are set after we get our budget
allocation in a global sense.
Senator GEORGE CAMPBELL—What, are you saying that the rule of thumb of three
per cent has not been applied to departmental expenses?
Mr Dainer—It is not three per cent on departmental expenses?
Senator GEORGE CAMPBELL—What is it?
Mr Dainer—It is a bit over one per cent.
Senator GEORGE CAMPBELL—A bit over one per cent. Why the variation there?
Mr Dainer—Again, this was originally derived out of the model but then flowed up the
line into the budget process.
Senator GEORGE CAMPBELL—I am just getting it interpreted.
CHAIR—Minister, we might have a 10-minute break.
Proceedings suspended from 10.53 a.m. to 11.18 a.m.
ACTING CHAIR (Senator Watson)—The hearing of the committee will resume.
Senator Minchin—Mr Chairman, is there any advance on agency requirements yet?
Senator GEORGE CAMPBELL—They are still—
Senator Minchin—Still working on that? Thank you, Senator Campbell.
Senator GEORGE CAMPBELL—Mr Dainer, I want to come back to an answer you
gave me at the start, just for clarification. When I asked you about the appropriations, you
lumped all of the figures into one bundle. I want to unbundle them so that I understand the
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 491
difference. In the budget portfolio statement on page 24, it says the total appropriations in
2000-01 is $1,007 million.
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—I understand that the 1999-2000 total was
$1,094 million and that that represents a cut of about eight per cent. Is that right?
Mr Dainer—No. I think you might be going from the budget number for 1999-2000,
which I think was the $1,094 million. I will check that. Yes, that was the budget number for
1999-2000, but I have taken account of additional estimates to give you the $1.269 billion.
Senator GEORGE CAMPBELL—You have added those in?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—So in fact the figure for 1999-2000 actual was what?
Mr Dainer—The appropriation, after AEs, $1.269 billion.
Senator GEORGE CAMPBELL—And the current appropriation of $1,007 million—
Mr Dainer—For 2000-01.
Senator GEORGE CAMPBELL—What does that represent as a percentage?
Mr Dainer—Twenty-one per cent.
Senator GEORGE CAMPBELL—On the administrative outcomes it was $387 million—
Mr Dainer—You are going back to outcome 1 and outcome 2.
Senator GEORGE CAMPBELL—Yes.
Mr Dainer—I gave you a total for both, of $912 million in 1999-2000 and $726 million in
2000-01.
Senator GEORGE CAMPBELL—And that represents a cut of what?
Mr Dainer—Twenty per cent.
Senator GEORGE CAMPBELL—So it is 21 and 20 per cent. Thanks for that. If we can
come back to those individual programs on page 36, I think we got the explanation on the cuts
in the Ships Bounty Act or we have taken on notice an explanation as to why there has been a
shift in that area. We were discussing the urban exports. What about the grant to national
recreation safety? Does that just reflect the 3½ per cent?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—What about the industry cooperative agreement?
Mr Dainer—The reason that has gone to zero is because that program has been transferred
to the Australian Greenhouse Office as of 1 July.
Senator GEORGE CAMPBELL—What about the National Energy Efficiency Program?
Mr Alderson—The figure there, Senator, represents funds that were transferred to the
Australian Greenhouse Office for them to carry out programs associated with minimum
energy performance standards for appliances and industrial equipment. The residual funds
that remain with the department are funds that we are using for energy efficiency activities.
Senator GEORGE CAMPBELL—Does the combination of the funds you have and what
has been transferred to greenhouse still represent the $526,000 or has that figure been cut?
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Mr Alderson—It is roughly equivalent to that, Senator. I do not have the precise figure but
it represents essentially that program being split in this year. There might be some minor
variation but it would be of a minor nature.
Senator GEORGE CAMPBELL—What about the Enterprise Development Program
being cut out altogether?
Mr Alderson—Again that represents the fact that those funds have been transferred from
this department to the Australian Greenhouse Office, so the funds themselves essentially
remain but no longer are allocated to this portfolio; they go to the Australian Greenhouse
Office. That function, however, is continuing but is administered by them.
Senator GEORGE CAMPBELL—What about the assistance to pharmaceuticals?
Ms Kelly—The majority of that reduction of about $60 million represents a change from
the Factor F Program to a new program, the Pharmaceutical Industry Investment Program.
Under the Factor F Program, annual expenditure averaged about $88 million a year for the
previous 10 years. Under the PIP program, annual expenditure will average about $60 million.
Our projections are that next year it will be about $55 million.
Senator GEORGE CAMPBELL—Why the cut of $20 million? Can you explain why the
funding has been reduced? What changes are have occurred to the program to reduce the
funding?
Ms Kelly—The program is based on companies putting forward submissions for targets of
production and research and development. The program provides a subsidy level of around
20 per cent for approved activities. The $55 million represents that 20 per cent on the
approved activities that are put forward by companies and enshrined in contractual
agreements.
Senator GEORGE CAMPBELL—So the figure that is in here is based on the demand
from within the industry for that assistance?
Ms Kelly—It was a competitive program, Senator, whereby companies put forward
applications with activities in them and they were chosen on a competitive basis. We then
entered into five-year contracts with these companies to undertake the activities they had put
forward in their applications and to pay them this 20 per cent on those approved activities.
Senator GEORGE CAMPBELL—Was there a cap set in terms of the pool of money that
would be available for this activity, at $55 million?
Ms Kelly—The program itself was capped at $300 million over five years. As a result of
reductions to take account of the embedded tax changes, the indicative figure for that
program, the figure that is now in budget estimates, is $292 million.
Senator GEORGE CAMPBELL—The original estimates for the program have been cut
by the three per cent?
Ms Kelly—Yes, Senator.
Senator GEORGE CAMPBELL—Investment promotion facilitation?
Mr Fearn—That was a result of a carryover of funds from the previous year into 1999-
2000 and that figure would have been inflated by some $200,000. There is a figure of
$250,000 that is expended over each year for that program of about four years, concluding
next year.
Senator GEORGE CAMPBELL—Can you just explain that again?
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Thursday, 1 June 2000 SENATE—Legislation E 493
Mr Fearn—The number actually was inflated because of a carryover from the previous
financial year.
Senator GEORGE CAMPBELL—The $435,000?
Mr Fearn—That is correct.
Senator GEORGE CAMPBELL—So that represents moneys that were not spent in the
previous financial year?
Mr Fearn—There were moneys that were allocated to projects that were approved for
expenditure under that program in the 1998-99 financial year. Because of delays to the project
or other circumstances, those moneys were not paid out to companies but were carried over
into the next financial year.
Senator GEORGE CAMPBELL—What was the allocation in the last financial year,
excluding the moneys carried over?
Mr Fearn—It would have been $250,000.
Senator GEORGE CAMPBELL—That program hasn’t altered?
Mr Fearn—That program has not altered.
Senator GEORGE CAMPBELL—You have not been subject to the three per cent?
Mr Fearn—No.
Senator GEORGE CAMPBELL—If you have not been subjected to the three per cent
for embedded taxes, why is that?
Mr Dainer—I am sorry, it has been.
Senator GEORGE CAMPBELL—You say it has been?
Mr Dainer—It has been.
Senator GEORGE CAMPBELL—I will have to take your word for it. Does support for
industry service organisations represent the three per cent difference?
Ms Georgopoulos—No change other than the three per cent, Senator.
Senator GEORGE CAMPBELL—Defence of common law actions?
Mr Dainer—Three per cent.
Senator GEORGE CAMPBELL—You took the three per cent off the lawyers, too?
Interesting. Where are the embedded taxes in their operations?
Senator Minchin—Wholesale sales tax affects everybody, Senator.
Senator GEORGE CAMPBELL—If you have a look at the ACCC rulings, they give a
much higher increase for GST for the legal profession than any other profession.
Senator Minchin—I see.
Senator GEORGE CAMPBELL—It may reflect the number of lawyers on the
government’s front and back benches. Climate change measures, I assume, has gone across to
Greenhouse. Is that correct?
Mr Spasojevic—Yes, it would have.
Senator GEORGE CAMPBELL—Is that three per cent represented in the strategic
investment coordinator, major investment incentives?
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Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Why would you cut a program like that by
three per cent for embedded taxes? I thought this was about facilitating and accounting.
Senator Minchin—That is not the incentive program per se. That is the admin. expenses
of running the program. As has been indicated, the three per cent has gone across.
Senator GEORGE CAMPBELL—This is not the pot of money?
Senator Minchin—It is not the pot of money, no. When we provide an incentive it does
not come out of this.
Senator GEORGE CAMPBELL—This money is purely for the administrative operations
of that strategic investment coordinator?
Senator Minchin—That is my understanding.
Senator GEORGE CAMPBELL—That is $3 million?
Senator Minchin—We will clarify that. I am sorry, that is incorrect.
Mr Fearn—That line item represents the allocation out to VISI of that strategic incentives
process, representing the $3 million grant that is provided for each year for the next five
years. It actually comes under the consideration of the three per cent but it is part of the
overall package. We are currently looking at the various parts and how the impact does
happen in relation to that program.
Senator GEORGE CAMPBELL—I will come back to that in a minute. The Enterprise
Development Program payments to states?
Mr Peel—That is not a reduction. It represents a phasing down of the program. The
program has been funded for four years and this is the final year. What it covers is the
Business Information Service, which is part of the government’s business entry point Internet
site. That is a payment to the states to put Commonwealth licensing information on that site
on the Commonwealth’s behalf. That is just a phasing down of the payment as the program
comes to an end.
Senator GEORGE CAMPBELL—Does that involve the three per cent?
Mr Peel—No, it is a payment to the states; the three per cent does not apply.
Senator GEORGE CAMPBELL—Can I come back to the minister’s letter which went
out on 10 May, on the night of the budget. You refer in that letter, Minister, to your request to
the department to develop an implementation strategy for each affected program. Which of
these programs has there been an implementation strategy developed for and what is the
nature of that implementation strategy?
Mr Spasojevic—None of them have an implementation strategy which has yet been
agreed. We are still in the process of working with the affected parties to develop that strategy,
which we hope to have in place before the beginning of the financial year.
Senator GEORGE CAMPBELL—Before the end of the financial year?
Mr Spasojevic—Before the end of this financial year and the beginning of the year in
which the WST clawback takes effect.
Senator GEORGE CAMPBELL—Which is next month.
Mr Spasojevic—Which is next month.
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Thursday, 1 June 2000 SENATE—Legislation E 495
Senator GEORGE CAMPBELL—Are these discussions at an advanced stage?
Mr Spasojevic—I think it is fair to say that they are at various stages, depending on the
different organisations.
Senator GEORGE CAMPBELL—Can you give us some generality of what is envisaged
in these implementation strategies?
Mr Spasojevic—I cannot do that at this point in time, I am afraid, Senator.
Senator GEORGE CAMPBELL—Another part of the minister’s letter says:
For example, I am aware that for a number of these programs contractual commitments are in place in
relation to funding in future years.
What does that mean? Can you explain what the minister was meaning by that sentence? Or
perhaps the minister can explain it.
Senator Minchin—It means exactly what it says, that some of these programs are
delivered by way of a contract between the Commonwealth and the recipient and that any
implementation of this strategy will have to take account of that delivery mechanism.
Senator GEORGE CAMPBELL—Is that in effect saying, Minister, that where there are
contractual arrangements entered into, firm contracts for supply or whatever, you may not be
able to claw back the WST on those contracts.
Senator Minchin—I am confident that that hypothetical issue will not arise and that, as a
result of our discussions with these various recipients, sensible and consensual outcomes will
be achieved. But it was appropriate that in the letter that I sent out on budget night I obviously
acknowledged the fact that because some of these programs are delivered via contractual
arrangements, that will necessitate more detailed discussions between the department and the
recipients as to the method of implementation of the decision.
Senator GEORGE CAMPBELL—Why do you suggest this hypothetical, Minister?
Senator Minchin—Because I am confident that we can work cooperatively and
consensually with the recipients of programs that are delivered by virtue of a contract.
Senator GEORGE CAMPBELL—That you can use your persuasive powers for them to
vary their contract?
Senator Minchin—I am confident that these groups that are the recipients of generous
benefits from the taxpayer understand the rationale of the government’s decision,
acknowledge the savings that will derive from the abolition of various indirect taxes and will
cooperate with the government in implementing a government decision.
Senator GEORGE CAMPBELL—Can you give us an example of who some of these
groups might be?
Senator Minchin—I will ask the officers to indicate which programs are delivered via
contract, if they are able to.
Mr Spasojevic—I do not have a list with me of all those that are delivered by contract. I
will have to take that on notice.
Mr Dainer—Most of the programs would have contractual agreements which would cover
the grant payments. The question is whether they have been entered into yet, or if they are
pre-existing.
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Senator GEORGE CAMPBELL—So there is a potential in this process for some of your
recipients to be treated differently from others, if you cannot get the goodwill that the minister
has referred to.
Mr Dainer—I think any supplier of any good or service has a requirement to pass on price
savings.
Senator GEORGE CAMPBELL—But if they have entered into a contract 12 to 18
months ago to provide services, why wouldn’t they?
Mr Dainer—If they are meeting expenses against that contractual agreement next year
when wholesale sales taxes have been removed, they will have lower cost and the taxpayer
should be able to realise those.
Senator GEORGE CAMPBELL—But there is no way in which you can compel them.
Mr Dainer—I think there is a requirement on them to actually pass on savings.
Senator GEORGE CAMPBELL—I think if you go back and look at the evidence of the
ACCC that is not the case—contracts that have been entered into—
Mr Dainer—I am not sure it was the same point.
Senator GEORGE CAMPBELL—I thought it was the same point. Mr Spasojevic, you
just said you have a list.
Mr Spasojevic—I did not say we had a list but I said we would take that on notice and get
you a list of those which are covered by contracts.
Senator GEORGE CAMPBELL—The total departmental appropriation for output 1 is
$126 million. This represents a cut of seven per cent on the 1999-2000 budget. Is that correct?
Mr Dainer—Yes, against the estimated output for this year.
Senator GEORGE CAMPBELL—What was the total budget departmental appropriation
for 1999-2000?
Mr Dainer—The total appropriation for departmental expenses for 1999-2000 was
$223 million. There was also an equity injection of just under $10 million.
Senator GEORGE CAMPBELL—And the reduction in spending is about
seven per cent?
Mr Dainer—On expenses, yes.
Senator GEORGE CAMPBELL—On expenses. Can you give us an outline of what the
seven per cent is made up of?
Mr Dainer—There are a couple of things. One is a measure announced which related to an
output pricing review that the department undertook that led to a reduction of $5 million a
year. There was the removal of embedded taxes, the issue we have been speaking about, off
departmental; that is a couple of million dollars a year. There have been programs which have
ceased: country of origin labelling; there was removal of money that has been transferred to
the Australian Greenhouse Office—there were transfer payments involved in that; plus the
Energy Efficiencies Unit is now funded from the AGO. There was a reduction in biotech
funding which was a phasing effect; Tough on Drugs was $1 million. So there is a range of
variations which go to it. There was also continuation funding for the ABC board and also
additional funding for the Science and Technology Awareness Program. It is made up of quite
a few variations.
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Thursday, 1 June 2000 SENATE—Legislation E 497
Senator GEORGE CAMPBELL—In the appropriations for output 1.1, Strategic industry
leadership, there is 25 million; it was $30 million I think before 1999-2000. This represents a
17 per cent cut. Is that correct?
Mr Dainer—It is about that.
Mr Spasojevic—Why has this cut occurred?
Mr Dainer—There are a number of variations which have occurred between outputs from
this financial year to next, some of which I have just gone through. For instance, the country
of origin labelling was $1.1 million, the transfers to the Greenhouse Office, et cetera. I might
just point out that we have recast the activities which contribute to the outputs. Underneath
these outputs we have a level of funding which is called an activity. We have gone from, I
think, 120 activities across the department leading into the eight outputs to just over
50 activities, so it is very hard to do comparisons from one year to the next.
Senator GEORGE CAMPBELL—That is what concerns us about this accrual
accounting; they keep shifting the goalposts.
Mr Dainer—As I mentioned, country of origin labelling was one which was in 1.1. Energy
was in 1.1. There was also the fact that we included carryovers which were funded through
the equity injection in those numbers; that has dropped out.
Senator GEORGE CAMPBELL—In output 1.3, Industry program design and
management, the appropriation for 2000-01 is $24 million as against $29 million for the
previous budget year. It also represents a cut of 17 per cent.
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Is that purely accidental or is there some consistency
about this 17 per cent figure?
Mr Dainer—I actually have 15 per cent so I am not sure if they are consistent.
Senator GEORGE CAMPBELL—I will not argue with your figures.
Mr Dainer—Output 1.3 had a significant component of carryover funds provided for it in
this financial year and that ceases at the end of this year.
Senator GEORGE CAMPBELL—Sorry, when you say carryover funds—
Mr Dainer—In previous years if you underspent your appropriation it went from one year
to the next under the running cost arrangements, up to a maximum of 10 per cent. When this
year’s budget was put together on an accrual basis, we were funded for departmental
expenses. Carryovers from last year to this year were not considered to be funded as
expenses, we got it as an equity injection. As an internal departmental measure we tried to
minimise the effect of that through this year by recognising some of that equity injection for
the purposes of spending on these outputs, but that ceases this year. It was an internal measure
to try and get through the year.
Senator GEORGE CAMPBELL—Let me try and understand what you are saying. You
had an allocation of funds.
Mr Dainer—Expenses.
Senator GEORGE CAMPBELL—Expenses that were allocated that were underspent.
That money was then retained by the department as an equity injection?
Mr Dainer—It was paid to us as an equity injection.
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Senator GEORGE CAMPBELL—And you were able to use those moneys across a
variety of other programs for expenses. Is that correct?
Mr Dainer—Across outputs.
Senator GEORGE CAMPBELL—Are we able to identify the specific programs that
have been underspent and where those additional moneys are going to?
Mr Dainer—That would have been in the 1998-99 financial year. That would have been at
the overall departmental running cost level.
Senator GEORGE CAMPBELL—Yes.
Mr Dainer—That would be at divisional level, which was under the old organisational
approach that was in the PBSs.
Senator GEORGE CAMPBELL—The point I am trying to make here is that presumably
that process will continue?
Mr Dainer—No.
Senator GEORGE CAMPBELL—It won’t?
Mr Dainer—No. The rules have changed under accruals. Basically, if you run a surplus—
new terminology—on your operating statement—that is, revenue is more than expenses—you
have run a surplus. It is underpinned by cash. That will carry over and go into your balance
sheet, so you will have cash, but it is not recognised as revenue in the following year.
Senator GEORGE CAMPBELL—What happens to it?
Mr Dainer—It stays on your balance sheet, unless you say you want to operate at a loss
and get approval for that or you spend it on capital or it is run down to meet employee
liabilities.
Senator GEORGE CAMPBELL—But you cannot shift it from one program to another?
Mr Dainer—No, not in that way, unless you go for an operating loss to spend those funds
on expenses. There are some transitional rules going from cash to accruals which make this
reasonably complicated. We have tried to manage it this year.
Senator GEORGE CAMPBELL—I will give you an example of the sort of
circumstances that I have a concern about, and you might be able to tell me whether it can or
cannot happen, to be able to satisfy me. I think in the 1998-99 year, or it might have been the
previous year, there was something like $50 million underspent in the—
Mr Dainer—Yes, that was a program.
Senator GEORGE CAMPBELL—We were told at estimates that it went back into the
department and was spent across other programs in other areas, which was against the rules
basically at that time.
Mr Dainer—Yes, but there is a difference. On outputs, we are talking departmental
expenses.
Senator GEORGE CAMPBELL—Yes, I understand that.
Mr Dainer—I think I recall the particular discussion. What you are talking about was on
the program side, which is now called Administered. It is a separate bucket money and
separate rules.
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Thursday, 1 June 2000 SENATE—Legislation E 499
Senator GEORGE CAMPBELL—Yes, I understand that, but what I am saying is: can
that same principle apply?
Mr Dainer—No.
Senator GEORGE CAMPBELL—It cannot?
Mr Dainer—No, because the administered appropriations under accruals remain annual
appropriations.
Senator GEORGE CAMPBELL—And specifically allocations for those specific
programs?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Whereas on your expenses side it is just a pot of
money that is allocated for the department to use in whatever way it will?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—What was the appropriation for the industry program
design and management for 1999-2000?
Mr Dainer—Are you talking about output 1.3?
Senator GEORGE CAMPBELL—Yes.
Mr Dainer—The estimated outcome here is $28.6 million.
Senator GEORGE CAMPBELL—Can you tell us what the actual reduction in spending
is for that from the previous two financial years?
Mr Dainer—No.
Senator GEORGE CAMPBELL—You cannot?
Mr Dainer—We went from a running cost system under cash in 1998-99 and previous
years—which is now departmental expenses, previously organised on a program basis, fed in
by organisational units—to this year which is organised on an output basis. We can have a go
at that but I am not sure that I can get down to an absolutely precise conversion.
Senator GEORGE CAMPBELL—Can you have a go at it and try and give us a figure?
Mr Dainer—I will.
Senator GEORGE CAMPBELL—I have a figure of 17 per cent and I do not know
whether that is accurate or not. It is probably a best guesstimate, but it would be useful if you
could do some calculations in that area. I don’t suppose you are able to tell me in which
specific areas in 1.3 that reduction in spending is?
Mr Dainer—From this year to next, it is essentially in the AusIndustry area.
Senator GEORGE CAMPBELL—How much is that? Is that substantial?
Mr Dainer—I can give you that detail, but I cannot do it now.
Senator GEORGE CAMPBELL—Can you take that on notice?
Mr Dainer—I will.
Senator GEORGE CAMPBELL—Can you also take on notice, if you can, what the
effect of the cuts will be on the feasibility of AusIndustry programs. To put it another way,
what areas of AusIndustry will suffer as a consequence of any cuts?
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Mr Dainer—We will take that on notice.
Mr Clarke—Senator, rather than going through this on notice, perhaps I could try and help
you in that area. AusIndustry’s program delivery functions are covered in 1.3 and 2.3 in the
current structure. We are not all of 1.3, but we are a large part of it. There are no specific cuts
to specific program delivery elements—that is, our departmental costs—in this budget.
Senator GEORGE CAMPBELL—Are there any cuts to your actual programs?
Mr Clarke—Can I make sure I understand the question. The departmental costs, which are
our organisational running costs?
Senator GEORGE CAMPBELL—Yes.
Mr Clarke—Or the administered items, which are the program funds?
Senator GEORGE CAMPBELL—The administrative items.
Mr Clarke—They are included in some of the ones you have gone down in that schedule,
and there is another set of discussions in outcome 2 where START, IIF and CRCs are picked
up. I am happy to deal with those now, if you like.
Senator GEORGE CAMPBELL—Please do.
Mr Clarke—I think you have reached the end of the long table going down, and
I presumed you were going to refer to table 2.1.2 on page 46.
Senator GEORGE CAMPBELL—Yes, I was.
Mr Clarke—That is the counterpart table for outcome 2.
Senator GEORGE CAMPBELL—Yes.
Mr Clarke—I can cover all bar one of those, if I may?
Senator GEORGE CAMPBELL—Yes, please.
Mr Clarke—The Industry Innovation Program is START grants. The reduction there
reflects the embedded tax discussion and nothing further. The Tech Diffusion Program I
cannot address. I would need to ask one of my colleagues to do that. That is not an
AusIndustry program. There are two elements to the CRCs reduction: one is the embedded
tax, as has been discussed; the other is simply a phasing issue in different peaks and troughs
of about $4 million to $5 million, as the costs of the CRCs vary. Funding for IIF tax liability
is a direct result of the LookSmart returns under the IIF program. MNRF has two elements.
Senator GEORGE CAMPBELL—Sorry, is that the return on the investments?
Mr Clarke—No, that is tax on the return. Major national research facilities has two
elements: a program phasing and an embedded tax item in there. The Shipbuilding Innovation
Scheme is an increase, which is a forecast of the anticipated demand for that program in the
coming financial years.
Senator GEORGE CAMPBELL—Can I just come back to the tax liability. Where is the
income located here from the IIF investments?
Mr Clarke—Senator, I am not going to point you to that part of the table. I know where
the money is, but I do not know where it is in this document.
Senator GEORGE CAMPBELL—I am interested in where the money is.
Mr Clarke—The money was the return to the Commonwealth from our investment in the
AMWIN fund, which in turn made a substantial profit from its investment in LookSmart. I am
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Thursday, 1 June 2000 SENATE—Legislation E 501
happy to go through where that money has all been disbursed at this point, or whenever you
like.
Senator Minchin—I am pleased to note, Senator Campbell, we had a victory over Finance
in ensuring that those proceeds would be available for innovation, and not simply disappear
into a hollow log.
Senator GEORGE CAMPBELL—That is always a constant struggle, I can tell you.
Senator Minchin—It is indeed.
Senator SCHACHT—They were not returned to Finance as a savings?
Mr Clarke—I am happy to go through that. Senator, the total return to the Commonwealth
from the LookSmart investment by AMWIN was $51.37 million. The Commonwealth’s
interest in the AMWIN fund was $27.5 million, so the first usage of the return was repayment
of the equity of $27.5 million.
Senator SCHACHT—That was the equity return?
Mr Clarke—Yes.
Senator SCHACHT—So after that you kept it?
Mr Clarke—No, it is not that simple, Senator. Indeed, there is a cashflow issue as well.
We have not actually put the full $27.5 million into AMWIN yet because they are still at the
early stages of their investment cycle. But, given the substantial success of LookSmart, we
have already recovered the intent of the investment in one part.
Senator GEORGE CAMPBELL—The profit to the Commonwealth is $24 million.
Mr Clarke—I am sorry, the difference between $27 million and $51 million. Bear with
me.
Senator SCHACHT—Let us get back to the $27 million.
Senator GEORGE CAMPBELL—Yes.
Senator SCHACHT—You know, because of the success of the project, you have $27
million to be able to repay the equity investment.
Mr Clarke—Correct.
Senator SCHACHT—But at the moment you do not have $27 million back from the
project.
Mr Clarke—We have it. It is in the bank.
Senator SCHACHT—Where is it?
Mr Clarke—It is in the bank.
Senator SCHACHT—It is in your bank, not in theirs.
Mr Clarke—Correct.
Senator SCHACHT—When are you going to pay that equity? Is that the money you are
going to pay back to Finance, because they gave you the money in the first place, under a
program?
Senator GEORGE CAMPBELL—Let us take it a step back further because I want to be
clear.
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Mr Clarke—Let us call it $51.4 million. It comprises three parts: $27.5 million, which is
the return of the Commonwealth capital; interest of $4.1 million; and profit of $19.8 million.
The return of the Commonwealth capital plus the interest is the money that the minister was
talking about that had gone into the revolving fund for future IIF type programs.
Senator SCHACHT—I see. You have won that with Finance.
Senator Minchin—We agreed with Finance that it should go into a revolving fund and not
simply go back into consolidated revenue.
Mr Clarke—Senator, the $19.8 million splits out two ways. One part is the tax that the
Commonwealth company will pay on that—
Senator GEORGE CAMPBELL—Which is the amount here, isn’t it?
Mr Clarke—Yes. The second part is the return to CRF, consolidated revenue, which is
about $3 million to $4 million.
Senator GEORGE CAMPBELL—The hollow log, where is that?
Mr Dainer—That is not shown in the budget papers yet. That is in the provisional or
contingency funds in DOFA’s overall budget numbers. It appears in the overall forward
estimates but not in ours because it has not been agreed in which year we actually want to
draw the money down.
Senator GEORGE CAMPBELL—Is it identified in DOFA’s contingency fund?
Mr Dainer—It would be, yes.
Senator GEORGE CAMPBELL—What is it identified as?
Mr Dainer—I cannot tell you exactly where it is identified in their numbers.
Senator GEORGE CAMPBELL—Does Ms Berman know how it is identified? How is it
tagged?
Senator Minchin—We will get you an answer.
Senator SCHACHT—On the same matter: does the profit of the investment go into
consolidated revenue?
Mr Clarke—Taxed.
Senator SCHACHT—After the tax is paid, it goes into consolidated revenue. You have
been able to keep the original investment you got as agreed under the program with interest of
$31 million.
Mr Clarke—Correct.
Senator SCHACHT—And you have now got that in the department’s bank account,
physically?
Mr Dainer—No, that is not how the system works.
Senator SCHACHT—Who signs the cheque to get the $31 million out of whatever
account it is in?
Mr Dainer—The money will have to be appropriated.
Senator SCHACHT—If you want to put the $31 million back in the revolving fund, as the
minister has said, you have to now put it through an appropriation?
Mr Dainer—That is right.
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Thursday, 1 June 2000 SENATE—Legislation E 503
Mr Spasojevic—That is why it shows up in the Finance contingency spending. It is agreed
that it will happen but we do not know when, so the money cannot be appropriated to us until
we need it. It shows up as an increase to contingency in the DOFA book.
Senator SCHACHT—I see. You have won the principle, but you have to win the specific
argument that when you want to put it back into the revolving fund to do something else, you
have to convince Finance that that is a legitimate use of the money to go back into the
revolving fund.
Mr Dainer—It is more that we need to identify which year it needs to go back in to be
appropriated.
Senator SCHACHT—It is only a yearly thing.
Mr Clarke—Can I emphasise too that we are in the middle of these transactions, of the
cash flowing at the moment, but the scope is as described. The money is there for the program
and this is the source of the funds.
Senator GEORGE CAMPBELL—There is likely to be more of it, hopefully.
Mr Clarke—Hopefully, there will indeed be more, yes.
Senator SCHACHT—From this particular investment?
Mr Clarke—No. The LookSmart investment itself is now fully realised but from the IIF
program or even from the AMWIN fund we would hope that there will be similar profits and
returns.
Senator GEORGE CAMPBELL—As I understand it, DOFA are acting as bankers for
DSIR.
Mr Spasojevic—Correct, as the Commonwealth bankers, yes.
Senator GEORGE CAMPBELL—When you decide to invest some more money in some
of the other funds you will draw down on that contingency.
Senator SCHACHT—And they accept, in policy terms, that when you ask for it you will
get it.
Senator GEORGE CAMPBELL—That is why the minister wants it tagged. They want to
be confident it is always there.
Mr Clarke—Just going down to table 2.1.2 on page 46, we have dealt with funding for IIF
tax liability. I think I have completed that table. They are the grants elements of the
innovation, research and development programs. If I refer you to page 27, table 1.4, you will
see the loan or equity type program funds and you will see in there, in the AusIndustry area,
the R&D Start concessional loans and premium amounts and the IIF programs also. These
types of funds are not affected by the embedded tax clawback.
Senator GEORGE CAMPBELL—These ones that are set out here: in comparison with
the last financial year, are those increased allocations or decreased allocations?
Mr Clarke—They are all just phasing differences as the program rolls through but there
are no specific decisions in this budget on any of those.
Senator GEORGE CAMPBELL—There is no change to the forward estimates that we
had on the last occasion or we had in 1998-99?
Mr Clarke—Correct.
Senator GEORGE CAMPBELL—This goes to that five-year—yes.
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Senator SCHACHT—The loan to Australian Leather Holdings: that is the long-running
dispute with America?
Senator GEORGE CAMPBELL—Correct.
Senator SCHACHT—That was paid in the financial year just ending. Fortunately, we
should have to pay no more loans on that issue, but how do you get the money back? It is
down as a loan. That means you have lent them the money, or is that just a description; that
we are calling it a loan but we do not expect to get it back?
Mr Spasojevic—It is a loan both in name and in actuality, with the contract backing it up,
with a repayment profile stretching out into the future.
Senator Minchin—It is genuinely a loan.
Senator SCHACHT—They are contractually obligated to repay it and if they do not they
are in debt to the Commonwealth and there are contractual arrangements to take a penalty.
Was that the full amount of the money we provided to that company to get them out of the
difficulties we were in with the Americans and the WTO?
Senator Minchin—There might be somebody here who is more familiar with it than me,
but my recollection is that the difficulty with the WTO was the grant that was given to the
company—the loan was not ruled out by the WTO but the grant was.
Senator SCHACHT—We turned a grant into a loan.
Senator Minchin—The dispute at the moment with the WTO is over the grant and
whether or not it was should be paid.
Senator SCHACHT—But this $13 million was the grant turned into a loan. Is that right?
To get out of our difficulty, or whatever you want to call it, did we turn a grant into a loan?
Mr Spasojevic—Rather than try to answer off the top of my head, I will take it on notice.
Senator SCHACHT—Yes. I can be loose in my questioning but you have to be very
accurate on this in your answers, for obvious reasons.
Mr Dean—It would be better to take it on notice.
Senator SCHACHT—Okay. I have the figure in my head that in one form or another it
was more than $13 million in assistance, or whatever you want to call it, to the leather
company—or was that the total amount? Was that the only amount we were required to make
the change to a loan?
Mr Dean—I will have to take that on notice.
Senator SCHACHT—The last question on this one: is there a likelihood in the future that
we will be required to provide, because of arguments in the WTO, any further form of
assistance, changes on this, to this company or have we sort of drawn a line underneath it?
Mr Spasojevic—I think the best answer to give the committee is that we are currently in
negotiations with the United States on the settlement of the WTO dispute.
Senator SCHACHT—Good.
Mr Spasojevic—And at this stage it would be premature to make any commitment one
way or another.
Senator SCHACHT—If by some chance the company, through circumstances beyond
your control or anyone else’s control, goes into liquidation, through bad trading or whatever,
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Thursday, 1 June 2000 SENATE—Legislation E 505
that loan would just be one of the creditors; we would just be one of the creditors waiting for
the loan to be paid out of whatever assets were available.
Mr Spasojevic—I believe that is the situation.
Senator Minchin—In terms of the information I have here, I remind you that the WTO
panel found that the September 1999 $13.654 million loan which the WTO—
Senator SCHACHT—How much was that, Minister?
Senator Minchin—$13.654 million.
Senator SCHACHT—The same figure, yes.
Senator Minchin—That is the same figure; was WTO-consistent, but found that the
$8 million grant repayment at the same time was negated by the advancing of the loan, so the
group had not effectively paid anything and Australia had not met the earlier WTO directive
to withdraw the grants judged to have been illegal export subsidies.
Senator SCHACHT—The $8 million is seen as something separate from the $13 million,
and that is still a debate we are having with the WTO and it is responding to that criticism?
Senator Minchin—Yes.
Senator SCHACHT—And that is a bilateral discussion as well with America,
Mr Spasojevic?
Mr Spasojevic—Correct.
Senator SCHACHT—Good luck.
Senator Minchin—Minister Vaile intends to pursue the matter at the APEC meeting next
week.
Senator SCHACHT—Are there any other like complaints about the WTO from other
countries where they have complained about industry assistance programs similar to those we
have with the leather company that are in dispute?
Mr Spasojevic—Senator, I am not aware of any other disputes in this portfolio.
Senator SCHACHT—Thank you.
Senator MURPHY—Mr Chairman, I want to ask a couple of questions with regard to the
shipbuilding and SIS. With regard to the budget papers in terms of performance outcome 1
and in your key initiatives in output 1.2, right at the bottom of page 40 there is a statement
there that says:
• Determination of the future of the shipbuilding construction support arrangements.
Can you explain it to me? What is intended there? What is the initiative that you have there?
Mr Wall—Senator, I will just explain the determination of the future of the shipbuilding
construction support arrangements. As it is currently legislated, the construction support
terminates from after 31 December 2000. There is a phase-out provision incorporated in the
legislation so that the construction support applies to those ships for which contracts are
entered into before 31 December of this year and are completed before 31 December 2003.
Senator MURPHY—So it really does not mean anything different to what we have
already been doing?
Mr Wall—That is correct.
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Senator MURPHY—With regard to the budget statement, I firstly want to refer to the
11 May 1999 budget statement where, on page 28, the minister says, as it relates to the
extension of the shipbuilding production bounty:
The government has committed $28.3 million from 1999 to 2003, of which $13.7 million will be
provided in 1999-2000.
That was provided?
Mr Peel—Senator, $14.73 million was provided in 1999-2000.
Senator MURPHY—It was actually $14.7 million?
Mr Peel—Yes.
Senator MURPHY—Can you tell me, in terms of the 2000 budget statement on page 40,
under ‘Shipbuilding bounty’, it says
The Government has committed $28 million over four years to 2003 towards the Shipbuilding Bounty,
of which approximately $12 million will be provided in 2000-01.
If I took $14.7 million off the $28.3 million announced on 11 May 1999, that leaves me with
something around 13 point—
Mr Peel—Senator, the program is a demand driven program, so the government has
committed $28 million but what is actually paid out, naturally, is based on claims from the
shipbuilding industry. Our estimate at this stage is that $11.95 million will be drawn down this
year. If the shipbuilding industry puts in claims beyond that, we can go to the department of
finance and get the additional funds.
Senator MURPHY—I am just trying to understand the difference between $28.3 million
announced in 1999 and $28 million announced in 2000. Is this a constant $28 million
available?
Mr Peel—The program expires on 31 December.
Senator MURPHY—Yes, 2003.
Mr Peel—With a phase-out period to 2003.
Senator MURPHY—Yes. That has been the case for some period of time, though, and it
has been reviewed on the basis of the OECD agreement being signed, which it has not been,
and it was due, I think, to phase out initially in December 1997 and has been reviewed annu-
ally from that time forward. What I want to understand is: we have now set a 2003 phase-out
and that is for the ships that have been contracted for construction prior to 31 December this
year. Is that what I understood Mr Wall to say?
Mr Wall—Senator, there was an independent review of the shipbuilding industry
undertaken in 1998 and the current arrangements were determined after that review. The
review recommended the phase-out of the bounty from 31 December 2000 with a three-year
phase-out to 31 December 2003 for those ships in work for which sales contracts were in
place. That arrangement parallelled one that had been announced by the European Union for
its shipbuilding subsidies.
Senator MURPHY—I understand that. The phase-out as at 31 December this year is
going to proceed no matter what circumstances may eventuate in the OECD or those that are
occurring in South Korea with regard to price cutting. Is that the case?
Senator Minchin—Senator, the government’s decision to extend the scheme is based on
timing and on the best advice available to us about where the OECD was heading. If there
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Thursday, 1 June 2000 SENATE—Legislation E 507
were any change to that timetable, then I would certainly be seeking to have the government
consider the consequence of such an eventuality for our own shipbuilding industry and what
future arrangements were appropriate in the face of that outcome. This is put there because of
the unfair situation in international shipbuilding, and if the unfairness continued then that
provides, in my view, a basis for a serious consideration by the government of what action we
should take in the face of that situation continuing.
Senator MURPHY—Can you inform me what stage the OECD is at in terms of its
agreement and taking account of the South Korean circumstances, given that they are a
signatory to it?
Senator Minchin—I cannot do that off the top of my head. I do not know if anybody else
can, otherwise we will take it on notice.
Senator MURPHY—Somebody must have some information.
Mr Wall—Senator, I have some information if it would help. With respect to the Korean
shipbuilding industry we understand that agreement has been reached between the Korean
government and the European Union governments over the prices at which Korean ships are
sold into the European markets. There is some reduction intention in that market. We also
understand that the European Union, having reached some satisfactory settlement with the
Koreans is firm in its resolve to phase out its shipbuilding subsidies, as per the timetable they
announced previously. That is the latest information we have received.
Senator Minchin—Are you going to monitor that closely? I am very sensitive to the
issues.
Senator MURPHY—I appreciate that. The problem is that by 31 December the phase-out
program we have is for ships contracted prior to 31 December. The EU has been firm in its
resolve with regard to this phase-out for some period of time and from what information I can
glean they have two hopes—Buckley’s and none. That means our shipbuilding industry has to
take a ‘wait and see’ approach. I am just curious as to when the government is going to
address the issue for 2001 ship construction contracts. When do you plan to address the
question to make some judgment that the EU is not going to meet the timetable that it has
failed thus far to meet, and advise the shipbuilding industry in this country that they can be
assured that contracts signed after 31 December will still be subject to this support? I would
have thought people would commence negotiations towards the end of the year at least for
new contracts—probably now.
Senator Minchin—We are not contemplating a change in the policy. As Mr Wall has
indicated, the information we have to hand is good in relation to the OECD’s phase-out of its
own subsidies.
Senator SCHACHT—The OECD or the European Union?
Senator Minchin—Yes. The European Union. If there was any reason to believe that there
should be any change to our policy settings, obviously I would want to be informed of such a
development and consider an appropriate response. That is not the situation at the moment on
the advice available to me.
Senator SCHACHT—What about the Americans, Minister? Has the American Congress
shown any disposition to remove what I think is called the Jones Act which restricts the
purchase of ships for domestic use in America and American cargoes? It is an extreme
inhibition restriction on free trade.
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Senator Minchin—I am not personally aware of any indication that that unfortunate
situation is likely to change. I do not know if any of the officers are aware.
Mr Wall—Senator, we are not aware of any likely change in the American position.
Senator SCHACHT—That one alone would mean there is going to be no agreement
within all the countries of the OECD to get rid of the direct and indirect restrictions, bounties,
protections by the end of this year.
Senator MURPHY—Our phase-out program, in effect, ends at 31 December.
Mr Wall—Which is exactly the same as the European phase-out decision and our
understanding is that the European phase-out arrangements are not conditional on the
Americans ratifying the OECD agreement.
Senator SCHACHT—It is not?
Mr Wall—No.
Senator SCHACHT—They are getting soft, are they?
Mr Wall—It depends how you look at it. They are getting tougher or—
Senator SCHACHT—Yes, I know. In the shipbuilding industry there has been a big
demand for the construction worldwide of super cruise liners. The Italian shipbuilding
industry, I think up near Venice, has been promoting itself and has major contracts for
building those cruise ships using the Caribbean by American and European companies. These
ships run into hundreds of millions of dollars. Do we know that the Italian government is not
providing levels of direct and indirect assistance and subsidies to get that work? They are
certainly in the OECD and they are in the European Union.
Mr Wall—Senator, our best information is that the European Union will be steadfast in its
termination of the subsidies. We will investigate the situation with the Italians.
Senator SCHACHT—The Italians have been particularly successful in the last few years
at building, for several hundred million dollars a pop, these great big super liners for cruise
tourism. Are you telling me that the Italians, in northern Italy, quietly walk away from those
benefits and subsidies without there being some minor riot?
Mr Wall—Senator, that is our advice.
Senator SCHACHT—The Lombardy League will not get going again? Goodness me, that
is your advice. Thank you very much; I hope you are right. Can I come back to the
Americans. Within our industry for fast ferries, there is a big market in coastal America for
the ferries, both passenger and cargo. We cannot sell any of our ferries into that market
because of the Jones Act. Is that correct?
Mr Wall—I think that is basically correct, Senator.
Senator SCHACHT—Why would we sign off on an agreement for one of the biggest
markets we could potentially have which refuses to let our product in by legislation?
Senator MURPHY—And in light of the WTO rules.
Senator SCHACHT—The WTO rules. Is the WTO selling America, or has America got
the numbers on the WTO to tell them to go jump?
Senator Minchin—My recollection of the policy we have in place at the moment is that it
was developed in close consultation with the Australian shipbuilding industry, which does see
Europe and Asia as its principal market and is doing extremely well, as you know. We all
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Thursday, 1 June 2000 SENATE—Legislation E 509
regret the circumstances in relation to the US but, of course, that is a situation that applies to
every country on earth. None of us can get in there for domestic shipping. The EU regardless
is pursuing its phase-out and I think obviously international pressure must continue to be
maintained on the United States. I have talked to Australian shipbuilding companies about
how they intend to deal with the situation in the US, and they have various strategies for
dealing with it; they are imaginative. But that is not of itself the reason—
Senator MURPHY—Yes, like going to the US and constructing them there.
Senator SCHACHT—That is the point. They could be forced to go and do it by subsidiary
companies in America.
Senator MURPHY—And build them there.
Senator SCHACHT—And build them there. That is the only way in.
Senator MURPHY—No jobs in Australia.
Senator Minchin—I am certainly not defending the US government’s policy.
Senator MURPHY—What are we doing about it in terms of the WTO even?
Senator Minchin—You would have to talk to the trade minister about the strategy for
taking on the US on that. I presume there is an international alliance to try to break the US
position, but I am not the expert on that.
Senator SCHACHT—Our decision about keeping or reviewing is not dependent upon the
Americans doing the right thing by repealing the Jones Act. That is off the agenda.
Senator Minchin—It is linked to the EU.
Senator SCHACHT—But the EU might reach agreement with Korea. The EU will not
reach agreement with America because Congress will not repeal the Jones Act. If the
Americans will not repeal it we would still get rid of our bounties if there is an agreement
between Korea and the EU. Is that right?
Senator Minchin—I cannot answer that question. I will take it on notice.
Senator SCHACHT—Let me take another issue about the Asian market for shipbuilding.
The other major market for fast ferries is Japan. They operate over 3,000 ferries around the
coast of Japan with inland sea, et cetera. There are particularly hard, informal restrictions on
selling our fast ferries into the Japanese market. They say it is an open market. It just so
happens you never get around to being able to sell one. There are hidden barriers. Unless the
Japanese remove some of those barriers, we are restricted in that market. Is that on the table in
Japan’s amendment with the OECD? Shipbuilding: will they put those on the table to remove
them, because we can sell the fast ferries at three-quarters of the price, better quality, better
capacity than anything the Japanese have been able to build. They only sell them because they
have this restriction.
Senator MURPHY—I note in the most recent annual report there is some mention about
the Japanese market and there have been representations made. You claim significant market
access inroads have been made. I just wonder if you can explain it.
Mr Wall—I think, as Senator Schacht has indicated, the Japanese market is a difficult one.
There have been restrictions in the past. Some of these related to the documents that were
required to be submitted at the time of tendering. They related to the languages and they also
related to the specifications of vessels at the time of tendering which were thought to get into
the realms of commercial proprietary issues. Through representations to the Japanese
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E 510 SENATE—Legislation Thursday, 1 June 2000
authorities we have made progress on a number of those issues. In fact, there were
negotiations under way between one of Australia’s shipbuilders and a Japanese transport
operator. I personally do not know whether those negotiations have led to the sale of a vessel.
I do, however, know that there have been visitors from Japanese shipping transport operators
to the major Australian shipbuilders in the past 18 months or so to continue those discussions.
Proceedings suspended from 12.31 p.m. to 1.33 p.m.
CHAIR—I understand that officers from the following divisions will not be required:
IP Australia, Australian Geological Survey Organisation, Australian Institute of Marine
Science and the National Standards Commission. So they can be dismissed. Further
questions?
Senator MURPHY—We discussed the shipbuilding matter before. Somebody can take it
on notice but I want to find out where the $28 million was shown in the budget papers. That is
all.
Mr Peel—Senator, at page 36 of the Portfolio Budget Statements there is a total of
$26½ million if you look at 1999-2000 and 2000-01 together.
Senator MURPHY—There is $14,730,000 for 1999-2000 and $11,946 million for 2000.
Mr Peel—That is the only reference I am aware of in the papers here, Senator.
Mr Dainer—There will not be another specific mention but it is wrapped up in the forward
estimates. If you want, I can give you the numbers.
Senator MURPHY—As I said, I was curious when I first asked the question about the
$28 million, whether it is a rolling $28 million or where that comes from.
Mr Dainer—It is a total $28 million.
Senator MURPHY—From when? From 1999 or when?
Mr Dainer—Yes, 1999, $13.7 million, $12.4 million in 2000-2001, $1.5 million in 2000.
Senator MURPHY—In the 9 May 2000 statement it refers to $28 million.
Mr Dainer—I think the numbers I am giving you add up to $28 million.
Senator MURPHY—This is the 2000 budget statement, that is all. I can understand if we
are talking about it from 1999, which was $28.3 million at that time, take off $14.7 million.
Mr Peel—Senator, it is saying the total is $28 million including the previous year.
Senator MURPHY—It does not quite say that in the statement. Thank you.
Senator GEORGE CAMPBELL—Mr Spasojevic or Mr Dainer, going back to this
discussion we had earlier about the cuts across the various programs, has the TCF SIP
program had cuts in its appropriation?
Mr Peel—Senator, the TCF SIP is a new program which starts next year. There has not
been any cut.
Senator GEORGE CAMPBELL—It has not. Has the funding been adjusted for the
three per cent?
Mr Peel—Yes, it has.
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—What is the amount of appropriation?
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Thursday, 1 June 2000 SENATE—Legislation E 511
Mr Dean—It is $680 million over five years, Senator.
Senator GEORGE CAMPBELL—That is from now until when—2005?
Mr Dean—Next financial year, 2000-01.
Senator GEORGE CAMPBELL—Through to 2005.
Mr Dean—Yes.
Senator GEORGE CAMPBELL—So that is the end of the 10-year period. Has the PIP
program had a cut in its appropriation? That is the Pharmaceutical Investment Program.
Mr Spasojevic—Yes.
Senator GEORGE CAMPBELL—What is the size of that cut?
Mr Spasojevic—Three per cent.
Senator Minchin—It is $292 million over the life of the program.
Ms Kelly—It is a cut of $8 million over the life of the program. I think the cut for next
year is $2.2 million.
Senator GEORGE CAMPBELL—That represents three per cent cut of the embedded
taxes.
Mr Dainer—An average of three per cent, Senator.
Senator GEORGE CAMPBELL—I may have asked you this question before this
morning but I want to get it clear in my own mind. The three per cent or 3½ per cent,
whatever it was, that DOFA had modelled in terms of the embedded taxes, was that applied
across the whole of the appropriation and then taken off a section or was each individual
program looked at and the three per cent applied and then came to a cumulative figure?
Mr Dainer—The cut was applied to our administered expenses items, so it was across the
board—all the administered expense items.
Senator GEORGE CAMPBELL—But was it done on an individual basis? Did you look
at each item or just apply it to the total that was allocated?
Mr Dainer—The model looked at individuals and then wrapped them up into an overall
average.
Senator GEORGE CAMPBELL—But you did not look at the specifics of each
individual program.
Mr Dainer—The model looked at each individual program, took what the percentage was,
wrapped them to up to see what the overall reduction should be across the item.
Senator GEORGE CAMPBELL—You are now going back, as I understood the discus-
sion this morning, to talk to the recipients of each of those individual programs to see whether
or not that is a fair and reasonable thing or whether or not you can recover some of the mon-
eys that are locked up in contractual arrangements and so forth.
Mr Dainer—That is right.
Senator GEORGE CAMPBELL—And to put in place this implementation strategy
which Mr Spasojevic said will be in place by 30 June. Can I ask you, Mr Spasojevic, to take
on notice whether or not we can have a copy of the implementation strategy or a pro forma of
the implementation strategy or a sample of the sort of implementation strategies that are
worked out?
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E 512 SENATE—Legislation Thursday, 1 June 2000
Mr Spasojevic—Sure.
Senator GEORGE CAMPBELL—Take that on notice. It will save me waiting six
months to ask you for it again. Have you asked the grant recipients for a set of specific
information or have you asked them in general to demonstrate to you where the embedded
taxes are in their programs?
Mr Spasojevic—I do not think we can answer that at that level. We are starting to make
contact with the different associated groups. I do not think we have sent out a pro forma
asking them to respond at this stage. We are scheduling meetings with them over the weeks.
Senator GEORGE CAMPBELL—So you have not got to that level of detail.
Mr Spasojevic—I do not believe that is the case.
Senator GEORGE CAMPBELL—If you do, Mr Spasojevic, can I put on notice a request
for the pro forma that you send out to them.
Mr Spasojevic—If a pro forma goes out, we will provide you with a copy.
Senator GEORGE CAMPBELL—When you looked at the application of the
three per cent of the embedded tax approach, did you take into account the savings that were
estimated in the ANTS package of 3.6 per cent for scientific research?
Mr Spasojevic—I do not believe that was part of the process. There was a modelling
exercise done to estimate the WST savings specifically. That information, as Chris pointed
out, went to Finance and was part of the ERC process. A decision was made that a
three per cent reduction was an appropriate figure for WST savings.
Senator GEORGE CAMPBELL—So no consideration was given to the figures that were
in the ANTS package?
Mr Spasojevic—We are not privy to the process.
Senator GEORGE CAMPBELL—You are not privy to the process within DOFA.
Mr Spasojevic—Correct.
Senator GEORGE CAMPBELL—But you did not relate anything in this area to what
was in the ANTS package?
Mr Spasojevic—My understanding was that we were asked to provide input into the
DOFA model in a specific form and that is what we provided to DOFA.
Senator GEORGE CAMPBELL—I do not think we have anything else on the general
issue of the clawback at this stage. Can we go to some of the measures in this year’s budget.
When do you envisage the National Biotechnology Strategy being implemented?
Ms Kelly—The strategy is expected to be launched in July. The main implementation will
take place from the beginning of the following financial year.
Senator GEORGE CAMPBELL—There is no allocation of any funding for the year
2000-01.
Ms Kelly—That is correct. We do have some existing funding which is used to keep
Biotechnology Australia running, and will be used to fund the start-up phase of the programs
under that strategy.
Senator GEORGE CAMPBELL—So what sort of activity is expected to occur in 2000
and 2001?
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Thursday, 1 June 2000 SENATE—Legislation E 513
Ms Kelly—We expect to undertake significant consultation with the research community,
industry and state governments about the design of the biotechnology commercialisation pro-
gram which receives about $20 million, starting from the end of the upcoming financial year.
There are existing activities under way in terms of a public awareness program, a program to
improve intellectual property management and a program to clarify access to biological re-
sources.
Senator GEORGE CAMPBELL—Do you have a figure on the amount of money that
will be spent on this in the year 2000-01?
Ms Kelly—I can get you a precise figure for the Biotechnology Australia expenditure for
2000-01. It is approximately $5 million, but I can get you a precise figure.
Senator GEORGE CAMPBELL—Could you take that on notice, please. What level of
importance is being put on the implementation of this strategy?
Ms Kelly—A high level of importance. It is looked at in terms of an area where the
government is already investing significant funds of around $250 million a year in the
promotion of biotechnology research. The government, as you know, last year doubled
funding for the National Health and Medical Research Council. So it is looked at as being a
strategy that should facilitate, in particular, achieving commercial outcomes out of that
investment. There are other elements to the strategy which are also receiving quite a deal of
attention at the moment, including the setting up of a regulatory framework for biotechnology.
Senator GEORGE CAMPBELL—When can we expect you to be able to say you have a
complete strategy in place?
Ms Kelly—We expect that complete strategy to be released in July.
Senator GEORGE CAMPBELL—In July of this year?
Ms Kelly—Yes.
Senator GEORGE CAMPBELL—Presumably that will be launched, with bells and
whistles on it, by the minister?
CHAIR—You had better believe it!
Senator Minchin—Would you like an invitation, Senator Campbell?
Senator GEORGE CAMPBELL—I would like an invitation, Minister. I am just worried
that, with all the programs in this department being cut and shrunk, there might be no industry
policy department left, so anything with bells and whistles on it—
Senator Minchin—We are just getting more efficient.
Senator GEORGE CAMPBELL—Anything with bells and whistles on I would be very
pleased to go along to.
Senator Minchin—Okay.
Senator GEORGE CAMPBELL—And then we will search for the substance. How much
of the Biotechnology Strategy has been allocated for commercialisation of the industry?
Ms Kelly—The budget allocation for the commercialisation program is $20 million over
the three out years commencing from the end of next financial year. There is also an amount
of $3.3 million that has been allocated to the AFFA portfolio to look at some
commercialisation initiatives related to the food and crop industry, around identity,
preservation and segregating supply chains.
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Senator GEORGE CAMPBELL—Can you give us an explanation of how this
$20 million will be spent in respect of commercialisation. What sort of activities are going to
be undertaken?
Ms Kelly—It is intended that the money will be used to support very early-stage
commercialisation, the sort of support we do not see coming at the moment from the IIF
funds. It is at an earlier stage than that, the stage that involves taking the research concept and
proving that it has commercial application. On the details of the program, we are seeking to
negotiate with state governments, whom we hope will work in partnership on this program,
and with the research community and industry. We do not have the detailed program design at
the moment.
Senator GEORGE CAMPBELL—But how is this going to operate, like a mini venture
capital fund? What sort of amounts of money, what sort of assistance, will be involved?
Ms Kelly—It is envisaged, if we are looking at comparable kinds of activities overseas,
that the amounts of money would be relatively small, in the region of perhaps up to half a
million dollars per project.
Senator GEORGE CAMPBELL—Bankcard capital. But specifically for what types of
purposes?
Ms Kelly—Specifically for the purpose of taking something that has been proven in the
laboratory, if you like—at the research stage—but it has not been demonstrated that the
discovery has a commercial application, so it is that early, proof of concept stage, before you
can get to the business plan and start up the venture capital.
Senator GEORGE CAMPBELL—And how would you envisage doing that?
Ms Kelly—As I said, we have not finalised the details of that program. We are talking to
the states about whether they would wish to be a partner in some way in the delivery of that
program. We will not be finalising the details until we have talked to the states, the research
community, and industry. We will also have a biotechnology consultative group which will be
involved in the design of that program.
Senator GEORGE CAMPBELL—When will that be finalised?
Ms Kelly—Over the next six months, Senator. The program funding starts to flow from the
following financial year.
Senator GEORGE CAMPBELL—And this group that you will put together, will they be
talking to manufacturers about how this can be done, how some of these products can be
proved?
Ms Kelly—It is a group that does include a number of people who are in small to medium
sized biotechnology companies, as well as a range of people representing the research
community and the service community, such as intellectual property lawyers, et cetera.
Senator GEORGE CAMPBELL—I am trying to get a more definitive analysis. Are we
talking here about a group that comprises practitioners of manufacturing processes along with
the scientists that would look at these things and say, ‘There’s a practical commercialisation
reality in that,’ or are we talking about the scientific community or the academic community
making these assessments? Who are the people who will actually sit down and judge whether
or not some of these ideas have a commercialisation capacity?
Ms Kelly—Sorry, are you asking about the expertise that is available as part of the
BioCoG—the Biotechnology Consultative Group?
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Thursday, 1 June 2000 SENATE—Legislation E 515
Senator GEORGE CAMPBELL—Yes. Is the group going to do it, or is the group going
to get practitioners in the field to make the analysis? Who exactly is going to make the
analysis of whether or not the specific projects have a commercialisation capacity?
Ms Kelly—I cannot answer that at the moment because the detailed program design has
not been done. So if you are asking who will decide which companies or institutions get
grants under this program, that has not been decided yet.
Senator GEORGE CAMPBELL—I can understand you have not decided which
companies or which institutions, and you may not have even got to this level, but has there
been a discussion about where you ought to go, where the focus ought to be, in terms of
proving the commercialisation realities of these projects? Are you looking at practitioners in
the field, people who are in manufacturing processes currently? Or are you looking at the
academic, scientific organisations?
Senator Minchin—Senator, we have a biotechnology advisory group which advises the
Ministerial Council on Biotechnology and Biotechnology Australia on government policy and
programs. That group will be consulted on the design of this scheme, the proof of concept
program. As part of that consultation we will come to a decision on the mechanism for
delivering it. I would envisage it being something like the IR&D board, an independent panel
which was representative of the biotechnology industry. It would have industry practitioners,
manufacturers, scientists, et cetera, involved in it that can provide the expert advice on
delivering the program. But we have not reached that point yet.
Senator GEORGE CAMPBELL—What you are saying, Minister, is that you do envisage
having practitioners in the field for the process.
Senator Minchin—Absolutely, yes.
Dr Hlubucek—Senator, if you wish, I can elaborate a little bit more on your question.
Senator GEORGE CAMPBELL—Please do.
Dr Hlubucek—In relation to the funds that we are looking at for early stage
commercialisation, we would be working with partners from the investment community,
because this is an early stage investment, so these are people who can evaluate research and
the potential for it going forward and being a commercial opportunity.
Senator GEORGE CAMPBELL—So you are talking about the current venture capital of
the IIF funds that are in existence.
Dr Hlubucek—Yes, particularly those who are interested in early stage. A lot of the
venture capital operations at the moment tend to look at later stage funding.
Senator GEORGE CAMPBELL—Yes, that is right. And I understand the gap that you
are trying to plug in terms of this program. I was trying to get a feel for whether or not we are
talking about real practitioners or some more esoteric assessment of these particular
proposals. On page 32 of the PBS, it says:
This will result in a reduction in the resourcing for ISR of $5m per annum.
This is the efficiency dividend. Where have the efficiencies occurred in the department that
have enabled you to pay the dividend?
Mr Dainer—We were required to undertake an output pricing review which was
conducted jointly with the Department of Finance and Administration. We did some
benchmarking. We also looked at other aspects of our processes and how we stood. As part of
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that, there were some areas which were behind best practice. It was decided that a $5 million
reduction in our expenses was a manageable amount of money. We are engaging, next
financial year—we are actually starting the process now—of looking at activity based costing
and benchmarking processes and business process re-engineering to achieve these savings,
building on what came out of the review.
Senator GEORGE CAMPBELL—Has there been any requirement, Mr Dainer, for a
reduction in staff to meet these savings?
Mr Dainer—No. There may be some reductions in staff overall once we go through a
process of A, B, C or business process re-engineering but we have not quantified savings.
Senator GEORGE CAMPBELL—-So in terms of this specific $5 million, there have
been no staff cuts as a consequence of—
Mr Dainer—Not specifically identified. We would be looking more at the salary side of
things and the processes, our support services, et cetera.
Senator GEORGE CAMPBELL—Stationery, pens and pencils.
Mr Dainer—Property, whatever.
Senator GEORGE CAMPBELL—Whatever, yes, but no focus on staff cuts. Is there any
reduction in the number of employees in the department since the last financial year?
Mr Dainer—Our ASL numbers for this financial year compared to next year: we are
projecting a reduction of about 12.
Senator GEORGE CAMPBELL—Why 12?
Mr Dainer—It is a process of going through managers, identifying the numbers of people
they would need next year. The numbers come out to be 12 less. It is not a deliberate thing to
say we have to get down by 12 people.
Senator GEORGE CAMPBELL—Based on the changes in programs?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Would those 12 individuals be offered employment
elsewhere in the APS?
Mr Dainer—I do not think there would be any problem with meeting that sort of target
through attrition.
Senator GEORGE CAMPBELL—What is the turnover in the department, on average?
Mr Dainer—I am sorry, I would not want to give you a number which I was not sure
about.
Senator GEORGE CAMPBELL—You do not have a rule of thumb?
Mr Dainer—There is something in the back of my mind but I just cannot grab it.
Senator GEORGE CAMPBELL—Maybe if it grabs you before we are finished you will
let us know. If not, could you take it on notice and give us a figure.
Mr Dainer—Right.
Senator GEORGE CAMPBELL—You would have a rough idea of what turnover is in
your organisation. I am not asking you to be precise and exact.
Mr Dainer—I was involved in knowing about that but not in my present position, so I
cannot answer that question.
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Thursday, 1 June 2000 SENATE—Legislation E 517
Senator GEORGE CAMPBELL—Can anybody in the room answer that question?
Mr Spasojevic—I think the number is in excess of 10 per cent. It is probably a fair bit in
excess of 10 per cent in the normal turnover. So, on a staff ASL number of 1,600, natural
attrition of 12 is well and easily achievable.
Senator GEORGE CAMPBELL—So it is on about a 10 per cent average a year.
Mr Spasojevic—I think it is more than 10 per cent average a year.
Senator GEORGE CAMPBELL—On page 33 of the PBS there is a heading of ‘Support
for the development of Gas to Liquids Technology’. In that there is reference to a $40 million
conditional loan to Syntroleum to ‘facilitate further research and development leading to
commercialisation of the GTL technology in Australia’. Where is that research going to be
carried out?
Mr Fearn—Senator, that research will be carried out in Australia. What is proposed to
happen is that—
Senator GEORGE CAMPBELL—Whereabouts, Mr Fearn?
Mr Fearn—It has not been determined yet. We are working with CSIRO and other
organisations, including the state governments, looking at research opportunities and
developing a consortium that will look at research activities in relation to GTL technology.
Senator GEORGE CAMPBELL—It says:
The provision of a loan facility to the Syntroleum Corporation affects the composition of the
Commonwealth’s financial assets, and for this reason, this measure is shown as having a zero impact on
fiscal balance.
Can somebody put that into the English language for us?
Mr Dainer—The Commonwealth’s asset position has not changed. Instead of holding
cash, it is shown as a non-financial asset loan repayment licence fee. That is held on the asset
side of the balance sheet.
Senator GEORGE CAMPBELL—I see. So it is transferred from one side of the balance
sheet to the other.
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—What are the conditions on the loan?
Mr Fearn—There are a number of conditions relating to the loan. It is conditional on
certain things: that they demonstrate the commercial feasibility of the GTL fuel technology in
Australia’ they participate in a research consortium with Australian research institutions,
universities and other companies to develop and improve that technology; and they need to
undertake and complete a feasibility study in relation to the development of a GTL fuels plant
in Australia before 2004.
Senator GEORGE CAMPBELL—How large a company is Syntroleum?
Mr Fearn—They are a company that is listed on the US NASDEC. It has a capitalisation
at this stage of $US500 million.
Senator GEORGE CAMPBELL—Why have we provided them with a $40 million
conditional loan?
Mr Fearn—The company decided to invest in a $700 million GTL synthetic products
plant in Australia on the North West Shelf. Arising out of that opportunity there was an
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opportunity to look at further blue sky and further additional activities beyond the synthetic
specialty products plant that utilise Australia’s gas resources. Effectively they were looking at
investing in Australia and this was an opportunity to promote further activity in Australia
relating to GTL technology.
Senator GEORGE CAMPBELL—Is this $40 million in the same category as the
$40 million loaned to the mill in Tumut? Is that a strategic investment program?
Mr Fearn—It was considered under that process but the $40 million package that was
provided to Tumut consisted of $25 million out of existing government programs and a
$15 million grant to the company.
Senator GEORGE CAMPBELL—Does this $40 million come under the Strategic
Investment Program?
Mr Fearn—It does get administered under that program.
Senator GEORGE CAMPBELL—It is part of that strategic investment initiative.
Mr Fearn—That is correct.
Senator GEORGE CAMPBELL—Is it repayable?
Mr Fearn—It is repayable.
Senator GEORGE CAMPBELL—Over what period?
Mr Fearn—Twenty five years.
Senator GEORGE CAMPBELL—At what rate of interest?
Mr Fearn—There is no rate of interest on it.
Senator GEORGE CAMPBELL—It is interest free.
Mr Fearn—That is right.
Senator GEORGE CAMPBELL—That is not a bad deal. It does not matter whether it
was negotiated before the interest rate hikes or not. It is immune to Reserve Bank decisions.
Mr Fearn—They are required to do certain activities for further investment that may result
in several more billion dollars of investment in Australia.
Senator GEORGE CAMPBELL—Are there any other tax concessions or provisions
available to them?
Mr Fearn—No. The other component of the assistance package was that we are looking at
purchasing a $30 million technology licence for GTL fuel technology from the company.
Senator GEORGE CAMPBELL—From the company?
Mr Fearn—That is right.
Senator GEORGE CAMPBELL—Would that be a straightforward commercial
transaction?
Mr Fearn—That is correct.
Senator GEORGE CAMPBELL—On page 34 there is a discussion about the reallocation
of funds from the TCF post 2000 initiative. There is reallocation of $500,000 to assist the
industries in the South Pacific island countries under SPARTECA. Has any assessment been
made of the implications of this policy for jobs in the TCF industry in Australia or the transfer
of jobs in the industry to those South Pacific island countries?
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Thursday, 1 June 2000 SENATE—Legislation E 519
Mr Dean—We have had long and detailed discussions with the industry on this proposal.
There is currently a modelling exercise being finalised which has been done in conjunction
with the industry.
Senator GEORGE CAMPBELL—Can you give us a bit more detail about the modelling
exercise?
Mr Dean—Australia is part of a supply chain into Fiji where textiles manufactured in
Australia have gone to Fiji to be made up into garments or other items and are brought back
into Australia. That trade has developed fairly significantly from a small base over the last
10 years. With the closure of the Import Credit Scheme, which was scheduled to take place
this month—
Senator GEORGE CAMPBELL—It was a very creative use of that scheme.
Mr Dean—The way that SPARTECA and the Import Credit Scheme have been used
jointly was probably not intended when it was set up. The reality is that both Australian
manufacturers and the industry in Fiji have become somewhat dependent on it. The intention
in the new arrangement in place has not been to provide benefits that would continue that
level of trade but to wind down gently over the next five or six years.
Senator GEORGE CAMPBELL—Is that what the model is aimed at?
Mr Dean—We have had conflicting signals from the Australian industry about how this
scheme will impact. There is an issue to do with particularly manufacturers of woollen
textiles and the impact that it might have on them. We will resolve that in the next couple of
weeks. It is not the intention to set up a scheme which would impact adversely on Australian
industry.
Senator GEORGE CAMPBELL—That is specifically to get them jobs?
Mr Dean—It is looking at likely export outcomes, which are related to jobs. It is not
looking specifically at the number of jobs. What you have is a situation at the end of this
month where, in the absence of something else being put in place, there will be job losses
both in Fiji and in Australia because the export of fabric out of Australia will decline and the
make-up of garments in Fiji will decline. This initiative is designed to soften that.
Senator GEORGE CAMPBELL—When will the modelling be completed?
Mr Dean—I would expect in the next week or so.
Senator GEORGE CAMPBELL—What is the anticipated activity from completion of
the modelling?
Mr Dean—There is a conceptual basis for the scheme. What has to be worked out then is
the detailed parameters of the scheme: what types of fabrics and garments would be included
in it and what would not. We have to do that within our WTO obligations as well.
Senator GEORGE CAMPBELL—When do you expect to make a public announcement
about the scheme?
Mr Dean—We hope to have advice to the minister so that he can consider that by the end
of this month.
Senator GEORGE CAMPBELL—How long does the minister think he will take to
consider it?
Senator Minchin—I never take very long, Senator.
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Senator GEORGE CAMPBELL—Unlike some of your predecessors. The expectation is
within the next couple of months we could have a scheme out which essentially would define
the parameters of this program.
Mr Dean—That is right.
Senator GEORGE CAMPBELL—On the automotive industry, Minister, are you still
insisting there is not a buyers strike?
Senator Minchin—Senator Campbell, at the dinner last night I found the comments of the
Chairman of the Chamber of Automotive Industries quite interesting, as I am sure you did.
Senator GEORGE CAMPBELL—I thought they were being nice to you.
Senator Minchin—As he said there:
We now find ourselves on the eve of introduction of the GST and while it has had negative impacts in
terms of some buyer hold-off, the market has in the main illustrated a remarkable ability to just keep on
going.
I think the industry itself is acknowledging that while there has been just recently a little
uncertainly, essentially the market remains strong and relatively buoyant.
Senator GEORGE CAMPBELL—That is a case on one dimension but there was an
argument around the table I was sitting at about the fact that the reason it has continued is that
they have cut prices considerably in order to maintain market share and volume. If they had
not done that, the cost to the industry would have been much more significant.
Senator Minchin—Again, as Mr Hamberger put it:
While it can be said that this is as much a consequence of aggressive marketing by the industry, it also
reflected the strong consumer confidence that underpinned it.
So certainly the industry has been aggressively marketing its products, to the great benefit of
Australian consumers but, as Mr Hamberger acknowledges, there is strong underpinning
consumer confidence.
Senator GEORGE CAMPBELL—Do you still acknowledge your statement of February
that, despite the fact that the taxation nature on vehicles might change, the price may not
necessarily fall?
Senator Minchin—Senator Campbell, I would draw your attention to the fact that the
prices of automobiles in this country have fallen some 14 per cent since we came to office,
following a 22 per cent rise in the five years prior to us coming to office. Consumers have
been significant beneficiaries of cheaper automobiles already under this government. There
has clearly been a pull forward in relation to the price reductions that will occur as a result of
the reduction in taxation on motor vehicles. In effect consumers have benefited from those
lower prices in advance of the GST coming into effect. As I said back in February, the sticker
price on an automobile is a function of a number of factors of which taxation is only one.
Senator GEORGE CAMPBELL—But the reality is that in respect of the auto industry
you would recognise, as I think everybody recognises, that the price of vehicles will not fall
by eight per cent on 1 July. It may be partly attributable to some of the things you have said or
it may not.
Senator Minchin—I recognise that prices have already fallen. I also note that the ACCC
in its publication made the point that it was looking at the price effects purely as a function of
tax reductions. I saw Professor Fels say himself that people should understand in relation to
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Thursday, 1 June 2000 SENATE—Legislation E 521
that price publication that he was talking about the effect of tax changes and the list did not
take account of other factors. So he was simply recording the fact that if you take 22 per cent
WST off and put a 10 per cent GST on, taxation on cars falls, as we know, by some $2,000 on
a $30,000 automobile. There has been significant price activity already that is
well acknowledged. As I keep saying, it is an extremely good time to buy a car right now.
Senator GEORGE CAMPBELL—It certainly is. I saw someone on the Parramatta Road
a couple of months ago, a second-hand dealer, who was selling them for $100 just to get them
off the lot.
Senator Minchin—There is a lot of aggressive marketing.
Senator GEORGE CAMPBELL—Demand had fallen so badly. It is a pretty good time
for a buyer in those circumstances. Minister, do you recognise that the truck industry is not
the same as the car industry and needs to be considered separately when considering your
transitional arrangements for a GST?
Senator Minchin—The truck industry is a huge beneficiary of the tax change and the
benefits to that industry from tax reform are very significant. We did not put in place any
transitional arrangements with respect to trucking but consumers of trucks and the trucking
industry itself will benefit enormously from the tax changes because the dollar effect is
massive in relation to trucks.
Senator GEORGE CAMPBELL—But are you aware, Minister, that some truck
manufacturers are blaming your complacency on the fact that any pick-up in the demand for
trucks will probably be met by fully imported trucks?
Senator Minchin—I would not want to assume that would be the case. I see no reason to
believe that there would be any change per se in the source of trucks as between domestic and
foreign as a result of the tax change. That does not follow logically at all. Trucks will be
cheaper for Australian consumers and the market should expand as a result of the significant
price reductions but there should not be any inherent reason why there would be a shift from
domestic to foreign as a result of those tax changes.
Senator GEORGE CAMPBELL—Minister, you have had your department monitoring
what has been happening in the automotive market. What results has Mr Wall been getting in
terms of the activity in the marketplace in relation to trucks?
Mr Wall—Our information is that the truck sales have been strong over the past three
years. In the first four months of this year sales have been much the same as they were in
1999. In 1999 they were up by 11 per cent on 1998, so aggregate truck sales have been firm.
Senator GEORGE CAMPBELL—Truck sales have been booming, did you say?
Mr Wall—Heavy trucks. I am not saying truck sales have been booming, I am saying
heavy truck sales have been firm.
Senator GEORGE CAMPBELL—Why would Kenworth, for example, be forced to lay
off staff? They are saying it is directly attributable to the GST bias.
Mr Wall—Our information is that Kenworth have had strong sales over the past three
years and its sales over the first four months of this year are up by over 20 per cent compared
to last year.
Senator GEORGE CAMPBELL—Why would they make that statement? Have you
talked to Kenworth?
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Mr Wall—Yes, we have spoken with Kenworth.
Senator GEORGE CAMPBELL—Have they said to you that it is because of the bias that
they have had to lay these employees off?
Mr Wall—Kenworth mentioned a range of factors in discussing staff reductions. They
have said that it is because of the change in the tax arrangements but they have also
acknowledged there were other factors involved as well, so they have not pointed at one
particular factor, being the change in the tax arrangements.
Senator GEORGE CAMPBELL—Did they say the change in the tax arrangements were
the principal reason or that there were other factors in the principal reason?
Mr Wall—I do not have information that they identified principal reasons and minor
reasons. I know they have mentioned a range of reasons but they have indicated the change in
the tax arrangements. They are involved with some other matters in regard to a report on
safety of their vehicles and there are some legal matters relating to purchasers of Kenworth
trucks which may have something to do with their current sales performance.
Senator GEORGE CAMPBELL—Did Kenworth talk to you before they made the
decision to lay off staff? Did they give you a pre-warning of what was likely to happen in
their company?
Mr Wall—I do not have a record of whether we received advance notice of that before it
took place.
Senator GEORGE CAMPBELL—Who would have received the notice?
Mr Wall—The notice may have come to people in the department. It may have been
passed to the minister’s advisers.
Senator GEORGE CAMPBELL—But you head up the area in the department that
handles these matters?
Mr Wall—That is correct, yes.
Senator GEORGE CAMPBELL—If a company rang up and said, ‘Look, we’re in a bit
of trouble. We’re going to have to lay off staff for a variety of reasons. We want to talk to the
department,’ you would not be aware of that?
Mr Wall—I do not think the company made an approach in those terms. It was a more a
case of, ‘We’ve decided to do something.’ The question you asked was did we know the
announcement was made before or after and I do not know the answer to that.
Senator GEORGE CAMPBELL—I realise I was asking you a few questions. I was
asking you whether or not the company talked to the department about its circumstances
before it made the public announcement of the outcome of those circumstances, so to speak.
Did it talk to the department about what options were available to it? Did it seek advice of the
department?
Mr Wall—The company did not make that sort of approach to the department.
Senator GEORGE CAMPBELL—So it did not seek any advice at all.
Mr Wall—I do not believe so.
Senator GEORGE CAMPBELL—Did you talk to the company when you were aware
that they were making these accusations?
Mr Wall—I have not spoken to the company directly, Senator.
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Thursday, 1 June 2000 SENATE—Legislation E 523
Senator GEORGE CAMPBELL—Has anyone in the department spoken to the
company?
Mr Wall—Yes, they have.
Senator GEORGE CAMPBELL—Have they spoken to the company about their diffi-
culties? Have they tried to provide them with advice and assistance? What was the nature of
the discussions with the company?
Mr Wall—I believe the nature of the discussions with the company was to understand the
reasons for the job reductions that they had announced.
Senator GEORGE CAMPBELL—So there was no attempt by the department to talk to
them about what assistance might be available, or what could be done to assist them over the
difficulty, or what advice it could provide to them—all the sorts of things the department has
been doing for years.
Mr Wall—Senator, if there had been something that could have been done by the
department, the people concerned would have discussed that with the company.
Senator GEORGE CAMPBELL—But you don’t know if they did or not?
Mr Wall—No, I do not know whether that was part of the conversation.
Senator GEORGE CAMPBELL—Mr Spasojevic, is the department still as proactive as
it used to be in terms of the various industry sectors in providing advice and assistance to
them?
Mr Spasojevic—Yes, it is.
Senator GEORGE CAMPBELL—Are you satisfied that it has been proactive on this
occasion?
Mr Spasojevic—I am satisfied that it is consistent with the long history of my department.
It is exactly as we would have done in the past.
Senator GEORGE CAMPBELL—Are you aware of what happened?
Mr Spasojevic—No.
Senator GEORGE CAMPBELL—So you are assuming that it is.
Mr Spasojevic—I have listened to the exchange.
Senator GEORGE CAMPBELL—Mr Wall is not as confident as you are about the
department being proactive and providing assistance to Kenworth.
Senator Minchin—I think the problem is that we do not have that information off the top
of our heads. We can get that information for you, Senator Campbell, as to exactly what took
place between the company and the department and when it took place.
Senator GEORGE CAMPBELL—I am a bit worried these days about putting questions
on notice to the department because usually the officer who gets them disappears. It has
happened to me on three occasions now.
Senator Minchin—You are just unlucky, Senator.
Senator GEORGE CAMPBELL—I do not want to put the mocker on anyone. I will not
go through and ask about this whole series of statistics from VFACTS about the reduction in
sales of passenger motor vehicles—they will simply be denied, Minister, and keep referring to
Mr Hamberger’s speech last night.
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Senator Minchin—Probably, yes.
Senator GEORGE CAMPBELL—But predictable. Has the department had a look at
what the potential vehicle sales are for the next 12 months?
Mr Wall—Senator, the department has had a look at the industry predictions. We have also
had a look at material that has been commissioned by industry groups. There is a range of
forecasts of predictions in the marketplace.
Senator GEORGE CAMPBELL—Have you made your own independent assessment of
those?
Mr Wall—We do not publish any assessment of those, nor do we predict the market. The
assessments, to us, seem well founded for the most part.
Senator GEORGE CAMPBELL—What is the range of assessments you currently have
for the next 12 months?
Mr Wall—The range of assessments for the next 12 months is 750,000 to 850,000 sales
per year.
Senator GEORGE CAMPBELL—What do you think is the ballpark figure—in the upper
range or the lower range?
Senator Minchin—Are you talking for the year 2000 or the financial year 2000-01,
Senator?
Senator GEORGE CAMPBELL—I am talking about after 1 July, the financial year.
Mr Wall—We have not looked at it in financial year terms. Most of the predictions and
forecasts are in terms of calendar years, which is the way the industry operates.
Senator GEORGE CAMPBELL—So halfway through this year or so?
Mr Wall—Yes.
Senator GEORGE CAMPBELL—I thought some assessment would have been done on
the impact on sales and the introduction of the tax on 1 July—some assessment of what was
likely to happen—but you have not done that?
Mr Wall—Not specifically, Senator, no.
Senator GEORGE CAMPBELL—Can I ask you to take that on notice, Mr Wall, and see
if you can get some figures in respect to the financial year and what the predicted sales
volumes might be.
Mr Wall—That is for the financial year 2000?
Senator GEORGE CAMPBELL—2000-01, the next financial year.
Mr Wall—Yes.
Senator GEORGE CAMPBELL—Minister, why are campervans and mobile homes now
regarded as luxury vehicles?
Senator Minchin—I do not know that I can answer that off the top of my head, Senator
Campbell.
Senator GEORGE CAMPBELL—Can anyone in the department answer it?
Mr Wall—I think the matter you are referring to is a taxation description. Is that not the
case, Senator?
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Thursday, 1 June 2000 SENATE—Legislation E 525
Senator GEORGE CAMPBELL—They are regarded as luxury vehicles and they attract
a luxury car tax.
Senator Minchin—Are you suggesting that is a recent change?
Senator GEORGE CAMPBELL—Yes. I think it is part of the ANTS package.
Senator Minchin—Are you aware of that change?
Mr Wall—Not in those terms, no.
Senator GEORGE CAMPBELL—You are not aware of why they might be classified as
luxury vehicles, why they attract a luxury car tax?
Mr Wall—No, I do not believe they were included in the luxury tax before under the WST
arrangements.
Senator GEORGE CAMPBELL—Do you keep figures, Mr Wall, on the number of
mobile homes and campervans purchased in any period?
Mr Wall—No, we do not, Senator. I personally have not seen collections of those statistics.
Senator GEORGE CAMPBELL—They would show up on statistics somewhere, would
they not?
Mr Wall—It would depend on whether they were sold as trucks without chassis and then
the fit-out was done afterwards, so they may show up in the statistics as a light commercial
vehicle, for instance, or a passenger car and then subsequently be modified. I do not know
that they are sold in original form as luxury homes. Most of the VFACTS figures are
computed from retailer and manufacturer sales and I think the luxury homes probably escape
that kind of net.
Senator GEORGE CAMPBELL—Where do you get your statistics from, the manufac-
turer? If I am going out to buy a mobile home I do not go down and buy a chassis and go to
someone and get them to fit it out. There is a huge block full of them down around the corner
and I pick the one I want and drive off in it. I presume it is sold as a mobile home.
Mr Wall—But is it sold through a motor vehicle dealer?
Senator GEORGE CAMPBELL—Yes.
Mr Wall—That is probably recorded in the statistics but whether it is recorded as a mobile
home I cannot say.
Senator GEORGE CAMPBELL—Can you check with your sources whether or not those
statistics are able to be separated out.
Senator Minchin—Senator Campbell, like everybody else, we rely on VFACTS and
registrations. We will have to see if they are broken down.
Senator GEORGE CAMPBELL—I accept that. I am really asking whether or not you
can check whether they can be broken down to provide those statistics.
Senator Minchin—Yes.
Senator GEORGE CAMPBELL—The reason I do this is because I think the vast
majority of campervan and mobile home owners would be retirees or superannuants who used
up a little bit of money to get themselves mobile and travel around and see the country that
they have worked and lived in most of their lives—and see the parts that they have not seen. It
seems surprising to me that they have been slugged with an additional tax in this area, as well
as being slugged with a tax on the block of land that they park it on when they visit wherever
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they visit around the country. I am interested to try and understand the rationale behind the
new definition of these as luxury vehicles. If they can be identified for that purpose, they can
surely be identified in the statistics, as to the numbers and the sort of price range that they are
involved in. There are similar questions that arise from that which obviously I cannot ask until
we get to statistics. Minister, I have noticed some discussion in the papers over the past couple
of days on the APS vehicle policy. What has changed so significantly from our discussion of
three weeks ago?
Senator Minchin—Nothing has changed, Senator Campbell. We are talking about two
different categories of people and vehicles. The discussion we had previously related to
executive vehicles—those vehicles that are supplied to executives in the Public Service as a
function of their employment. The prima facie position is that they shall be Australian-made
vehicles, except now to the extent that they wish to obtain a vehicle which is not available as
an Australian-made vehicle; that is, a small four-cylinder vehicle. You will have seen that the
list of—
Senator GEORGE CAMPBELL—I thought the other part of that was that it had to be a
vehicle that was manufactured by a company who is manufacturing in Australia.
Senator Minchin—That is correct. If they wish to obtain a vehicle in that category, it has
to be produced by a manufacturer who is a beneficiary of the ACIS scheme—in other words,
they have some manufacturing in Australia—and sports versions are not available. The other
matter that has arisen in the last couple of days is a decision by the minister for the Public
Service, Dr Kemp, that those public servants who avail themselves of salary sacrifice
arrangements and lease a vehicle—leased by them at their own expense—will have no
restriction imposed by their employer, the Commonwealth, on the type of vehicle that they
may lease with their own money.
I have said that I think that is appropriate, as a matter of the rights of those employees.
After all, it is their money and they lease the vehicle; the vehicle is not leased or owned by the
Commonwealth. I have gone on to add that I would hope that the relatively few public
servants who have availed themselves of this scheme since it has been available would
continue to purchase Australian-made vehicles but that I agree with Dr Kemp in his
announcement that it is inappropriate for the Commonwealth to force them to purchase a
certain type of vehicle, given it is their salary and their money.
Senator GEORGE CAMPBELL—Salary sacrificing has been around for a period of time
and there was a restriction on it previously, in that they had to lease Australian-made vehicles.
What is the foundation for the change?
Senator Minchin—Someone can correct me if I am wrong but my understanding is that
the original design of the scheme was such that the Commonwealth would act as the leasing
agent. In other words, the Commonwealth would lease the vehicle on behalf of the employee.
The actual design of the scheme is such that that will not be the case. It will actually be the
individual public servant who will lease the vehicle. The lease will be in their name and they
will make the lease payments and therefore, given that outcome, it is no longer appropriate to
place that, in my view, improper invasion of their freedom of choice as employees upon them.
Senator GEORGE CAMPBELL—Are you effectively saying that you have no control?
Mr Dainer—Salary packaging in the Commonwealth has only been available in the last
few years. For instance, in ISR it has only been available since September 1998, when it was
actually provided for in our certified agreement. What is allowed for under that salary
packaging arrangement is for a range of things, including the use of novated leases—I cannot
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 527
go through how it is done in detail, but the employer basically takes over the payment of the
lease but the risk is held by the employee. If the employee leaves the organisation, the lease
goes with him.
Senator GEORGE CAMPBELL—I understood that the minister was saying that has now
changed; that the employee will hold the lease, not the employer.
Senator Minchin—That was my understanding—
Senator GEORGE CAMPBELL—I understood you to say that there had been a change
in the way in which things were done and that was the reason for the change the approach.
Senator Minchin—Minister Kemp sought my views on this back in March,
Senator Campbell, and I am trying to recollect the conversation we had at that time. I will
need to refresh my memory on that, but that was my recollection of the reason why he wished
to make this announcement, subject to my advice.
Senator GEORGE CAMPBELL—Is that the case, Mr Dainer?
Mr Dainer—I cannot add anything.
Senator GEORGE CAMPBELL—I have some sympathy, I suppose, for what the
minister is saying; that if we are paying a public servant a sum of money, it is purely his
decision to go out and lease a vehicle, then he can lease whatever he likes. However, if the
Commonwealth is involved in the process and there is a benefit to the employee because of
the actions of the Commonwealth, then we have some influence over how benefits should be
applied and that is a different set of circumstances.
Senator Minchin—My understanding is there is no benefit by way of a transfer from the
department to the employee. There may be, by virtue of leasing, a tax benefit, and the reason
why there are very few—20-odd out of 1,600 in our department who have availed themselves
of this—is that you would need to be in the top tax bracket and drive the vehicle for at least
25,000 kilometres per annum before there is any, in effect, tax advantage. It is not as though
there is a benefit in terms of the relationship between the employer and the employee. All the
costs of the lease must be borne by the employee, including FBT, et cetera. The decision was
made, as is the case in the private sector, where employees can avail themselves of these
arrangements. It is quite improper to prevent public servants from availing themselves of this
arrangement. The fact is that an employee is paying the lease and paying the full costs of the
lease and therefore it is not appropriate to force them to choose a particular vehicle.
Senator GEORGE CAMPBELL—Yes. What is the difference? Explain to me the
difference between that set of circumstances and the set of circumstances that apply to the
senior executive service or those CEOs in terms of the other provision of a motor vehicle.
Senator Minchin—Mr Spasojevic might be better placed to answer that but essentially the
vehicle is provided by the Commonwealth as part of their remuneration and the
Commonwealth is the lessee. Is that correct?
Mr Spasojevic—The Commonwealth is the lessee. Sorry, I cannot actually explain it much
better because I have never investigated the other avenue because I have an EVS vehicle, so
my explanation of the difference will be necessarily somewhat shortened.
Senator GEORGE CAMPBELL—In your instance the Commonwealth is the lessee?
Mr Spasojevic—The Commonwealth is the lessee.
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Senator GEORGE CAMPBELL—What you are saying, Minister, is in this new set of
circumstances the employee is the lessee? This is the point. You are saying one thing,
Mr Dainer is nodding his head in the opposition direction—
Senator Minchin—The advice to me from Minister Kemp’s office, who is the minister re-
sponsible for this, not me, is that this change has been made because, and I quote him, the
vehicle is neither owned nor leased by the Commonwealth, and the practical situation is that
the employee is sacrificing salary to lease the vehicle, whereas that is quite different to the
sort of situation Mr Spasojevic is in.
Senator GEORGE CAMPBELL—But Mr Dainer was saying that the Commonwealth is
the lessee of the vehicle.
Mr Dainer—Sorry. Put to one side the executive vehicle scheme, which is not salary
packaging. When you salary package, it is your decision to salary package and your decision
which of the items on the menu can be salary packaged, and you go and organise the lease
arrangement. The way it works is that your employer actually makes the payments and there
is a complicated novated leasing arrangement which theoretically says that the employer is
the one paying the lease but it is really driven from the employee. They go out and enter into
the lease.
Senator Minchin—As I understand it, the lease is in the name of the employee. Instead of
the payment from the employer going direct to the employee, it goes to the company who is
leasing the car to the employee.
Senator GEORGE CAMPBELL—So you are making a deduction out of the employee’s
wages and paying it to the lessor.
Senator Minchin—That is right.
Senator GEORGE CAMPBELL—On behalf of the lessee.
Senator Minchin—That is right.
Senator GEORGE CAMPBELL—So you are acting an agent.
Senator Minchin—Correct.
Senator GEORGE CAMPBELL—You are satisfied, Minister, that the arrangements have
changed from what they were previously.
Senator Minchin—They have changed from what was the original intent. I was satisfied
that Minister Kemp was well advised in the course he wished to follow and that while I am an
avid advocate of all Australians favourably considering Australian-made cars, including
public servants, it was not appropriate for me to argue against what he was proposing, given I
felt this was a matter of the proper rights of the employees.
Senator GEORGE CAMPBELL—I can in part understand that argument. I do not
necessarily agree and accept it in totality, but I can understand it. Do you have any figures,
Mr Dainer? How many of these sorts of arrangements would apply? How many cars are we
talking about?
Mr Dainer—Across the Commonwealth?
Senator GEORGE CAMPBELL—Yes.
Mr Dainer—No.
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Thursday, 1 June 2000 SENATE—Legislation E 529
Senator Minchin—I put out a statement today with David Kemp, based on the advice he
had that less than 1,000, less than one per cent, of the Commonwealth’s 100,000-odd public
servants currently avail themselves of this scheme. I have also made the point that it is very
unfortunate and quite pessimistic to assume that these employees will automatically, when
their leases expire, move from an Australian-made car to a foreign car. I earnestly hope and
believe that the overwhelming majority of them, when their leases come up, would continue
to lease Australian-made cars. I have said publicly and in this press release today that I would
encourage them to do so.
Senator GEORGE CAMPBELL—Did you say one per cent or under 1,000?
Senator Minchin—One per cent. Less than one per cent of the total Public Service.
Senator GEORGE CAMPBELL—The new automotive scheme, the ACIS, starts on
1 January 2001. Does the department have a sense of the likely take-up of the new scheme?
Mr Wall—Senator, we looked at the likely levels of activity several years ago when we
constructed the scheme. Our expectation is that the take-up will be substantial. The scheme is
capped but we believe that it is going to be adequate for the purpose.
Senator GEORGE CAMPBELL—How will the numbers stack up in terms of the number
of companies utilising the current EFS arrangements?
Mr Wall—There are probably likely to be a greater number of participants than those
currently using the EFS arrangements. At the moment the EFS arrangements are limited to
those who export. Under the new arrangements—to comply with the WTO, of course—that
will no longer be an eligibility criterion and the scheme will be open to a much greater range
of participants than the EFS is at the moment.
Senator GEORGE CAMPBELL—Have you had any early indications of what the likely
take-up is going to be in comparison with the old scheme?
Mr Wall—We have not done numbers as such, Senator, but our extensive consultations
with stakeholder groups suggest that there is a great deal of interest in the new scheme.
Senator GEORGE CAMPBELL—Has the department done any analysis of the benefits
of the new scheme over the old EFS scheme in terms of the financial benefits to companies?
Mr Wall—In aggregate, Senator, or to individual companies?
Senator GEORGE CAMPBELL—Have you looked at individual companies and
compared the benefits that they are receiving under the current scheme with what they are
likely to receive under the new scheme, whether that will be more or less beneficial to them?
Mr Wall—We have looked at those arrangements based on past behaviours but firms can
change their business strategies over time. In the case of the car assemblers we have a fairly
good idea of what sort of benefit profiles they are likely to receive. The component producers
have given some information which has enabled us to make some projections about the sorts
of benefits that might go to the larger component producers but, moving beyond that to the
medium and smaller ones, of course there are far more participants, as I said, than there are
currently in the EFS, so we have not done that on an exhaustive basis.
Senator GEORGE CAMPBELL—If you have done any analysis, Mr Wall, could you
make that available to us. I am not asking for information about specific companies but just
the profile and the comparative outcomes applying to the new scheme vis-a-vis the old
scheme.
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E 530 SENATE—Legislation Thursday, 1 June 2000
Mr Wall—I could take that on notice, Senator. It would depend on commercial
confidentialities. We must also bear in mind that firms, because of the way the industry
works, may take on new projects and activities which would make them eligible for a greater
range of benefits, so these things are going to change over time.
Senator GEORGE CAMPBELL—Yes, I understand that. I am really asking you to give
us a profile of a company pre 1 January 2000 which the old scheme was applying to and what
the benefits would be to that company post the year 2001 when the new scheme applies. I am
not asking for details of the company. I understand about confidentiality. It is really the profile
I am looking at—a comparative analysis of the two schemes—to see what the differences are.
Mr Wall—We will see what we can do, Senator.
Senator GEORGE CAMPBELL—Have you done calculations across the different
business activities, the different sectors?
Mr Wall—Component producers, tool makers, car assemblers, service providers—yes, we
have looked at those—but, again, the business plans and data of some of the firms in those
sectors is not well known to us.
Senator GEORGE CAMPBELL—In terms of giving us that profile could you look at the
various sectors and see if it can be done in respect of the various sectors?
Mr Wall—We could have a look at that.
Senator GEORGE CAMPBELL—What calculation has the department made as to the
impact of modulation on the returns to companies under the scheme?
Mr Wall—Senator, we have not looked at individual companies because modulation
operates in two ways. In one way modulation will be required to manage the overall funding
of the scheme within its fiscal limit. That depends on the uptake of the scheme in aggregate
and the cycle in the industry. So we have not looked at the impact of that on specific
companies. I guess the impact of that modulation will apply across the board to industry. The
other form of modulation relates to complying with our WTO and international trade
obligations which relate to the level of benefits that an individual firm can receive in any
period. This form of modulation will be specific to an individual firm; it will depend on the
sales of eligible products over the previous year and the rate of benefits that they expect to
receive in the year under consideration. The important consideration there will be to keep the
benefits below the ratio of five per cent of eligible sales. We are not aware of any individual
firm that is likely to trip that form of modulation based on the information we have to date.
Senator GEORGE CAMPBELL—How much notice will companies get, Mr Wall, of any
reduction to their grants due to modulation?
Mr Wall—We will have to take that on notice, Senator. There are a number of
conditionalities in this modulation process. One will be the global thing and it would be easier
to notify firms if there is a global tripping of the modulation process. For individual firms we
will need to look at the way the benefit profile and payments will be made.
Senator GEORGE CAMPBELL—Mr Wall, could you also detail for us—I do not expect
you to do this now but you can take it on notice—what the expected trends in the automotive
industry in Australia are in terms of investment, production, employment and exports for the
next years?
Mr Wall—I will have to take that on notice.
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 531
Senator GEORGE CAMPBELL—Mr Wall, in determining the shape of the ACIS
scheme I assume the government closely examined the market opportunities for Australian
automotive companies, both regional and globally, and also analysed the industry support
regimes maintained by other governments for their automotive companies. Can you provide
us with the details of any such analysis of market opportunities that were undertaken.
Mr Spasojevic—There is a false assumption in the way you have structured the question. I
do not believe that is the approach in the way the decision was taken. The government’s
approach was to look at the fundamental drivers of competitiveness in the motor vehicle
industry in Australia in the coming five years. It believed that was going to be investment in
R&D and that is the way the ACIS scheme was structured.
Senator GEORGE CAMPBELL—But are you saying that you did not look at what other
countries were doing in terms of support mechanisms they were providing to—
Mr Spasojevic—I believe that is the case.
Senator GEORGE CAMPBELL—I find that astounding.
Mr Wall—I do not think there was any model for the arrangements that we had to craft
with the—
Senator GEORGE CAMPBELL—Do not misunderstand my question. I am not asking
you whether you based it on some model that is existing somewhere else. I am asking you if
you took into account the various models that were applying in other countries and looked at
those before you developed or shaped the ACIS scheme.
Mr Spasojevic—Sorry, I may have misunderstood your question. Can you elaborate on
what you mean by models of assistance?
Senator GEORGE CAMPBELL—This essentially is about looking at market
opportunities. I would assume that you would have looked at the different regimes applying in
different countries—particularly those areas we are seeking to export to—and the models of
assistance they had available to their industries that may have impeded our market
opportunities.
Mr Wall—Senator, that was before my time in this current role. I could check on that.
Senator GEORGE CAMPBELL—Could you take that on board and check if any of that
market analysis was done. If it was done, could it be made available to us? The US
government has said it will pay careful attention to the implementationist program. What
assurances, Mr Wall, have we received from the US government not to prosecute Australian
companies for utilising the new scheme in exports to the US?
Mr Wall—Senator, there are no assurances at all with respect to this scheme. It will have
to withstand the full scrutiny of international trade bodies, as other schemes will.
Senator Minchin—Senator Campbell, we are very confident it can withstand scrutiny. It
was designed very carefully with an eye to the WTO rules. The design was done very much in
consultation with DFAT and the government’s experts on WTO rules. They are generally very
conservative about these matters. The government has implemented this scheme, confident
that it can withstand any such scrutiny.
Senator GEORGE CAMPBELL—Has there been any dialogue, Minister, between the
US government or other governments, for example, in respect to the scheme?
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E 532 SENATE—Legislation Thursday, 1 June 2000
Senator Minchin—Not that I am aware of. I can check with the trade department. Our
trade people of course are familiar with WTO rules and the likely activities of other nations
with respect to the implementation of those rules have been fully and closely involved in the
development of the scheme.
Senator GEORGE CAMPBELL—Could you take that on notice, Minister, and find out
if there has been any dialogue. Now turning to the building and construction industry, are you
aware, Minister, of reports that a number of home builders have publicly stated they will not
pass on the expected eight per cent GST increased cost of building a home?
Mr Dean—They will not pass it on to the consumer, Senator?
Senator GEORGE CAMPBELL—They will not pass it on.
Mr Dean—There are a number of marketing strategies—
Senator GEORGE CAMPBELL—There have been reports that already building costs
have increased by up to 15 per cent. The concern is that the GST increase on homes will be
much more than the 10 per cent.
Mr Dean—I am not aware of any reports indicating that there would be more than a
10 per cent increase. I would have thought that might be difficult legally. Most modelling
indicates an increase, certainly in the medium term, of considerably less than 10 per cent.
Senator GEORGE CAMPBELL—But the argument is that the increase has already been
applied.
Mr Dean—It is a tax issue, but I would have thought that would be problematic for the
companies doing that. I would have thought that was illegal.
Senator GEORGE CAMPBELL—The difficulty is how do you make the assessment? If
you were in the Sydney market how would you know it is GST or just market demand?
Mr Dean—There is not a GST at the moment, so claims that there is a GST-related
increase cannot be sustained.
Senator GEORGE CAMPBELL—I think everybody in the country, Mr Dean, including
you, knows that it is due on 1 July—
Mr Dean—Yes.
Senator GEORGE CAMPBELL—and that it is going to apply to building products. How
would you know—in the Sydney market, for example—whether or not builders have already
factored that in to their quotations or whether the increased quotations are as a result of
demand in the market?
Mr Dean—This might be a tax question but I am aware that the tax office is using both the
Master Builders Association and the Housing Industry Association to run seminars for people
in the industry so that they will be able to make the transition smoothly. Last night I was
talking to someone who was at one of the seminars in Alice Springs. Something like 100,000
people have been through those seminars over the last couple of months.
Senator GEORGE CAMPBELL—It has not had much of an effect on quotes in the
Sydney market. Minister, are you aware that the Australian Bureau of Statistics housing
finance for owner occupation for March 2000 was that seasonally it has dropped in the
number of dwellings financed of 8.1 per cent in March 2000?
Senator Minchin—Yes, I am, Senator Campbell. I am also aware that is still 13.9 per cent
above the levels of two years ago.
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Thursday, 1 June 2000 SENATE—Legislation E 533
Senator GEORGE CAMPBELL—But it is also far worse than the market expectation of
three per cent.
Senator Minchin—I am not aware of the market expectation figures; they are not in front
of me.
Senator GEORGE CAMPBELL—Are you aware that these statistics show a lapse in
construction for these commitments of 13 per cent and that the finance for the purchase of
new dwellings fell by 12.9 per cent on last month?
Senator Minchin—Yes, I am aware of those figures.
Senator GEORGE CAMPBELL—And this is the fourth consecutive monthly decline?
Senator Minchin—Yes, Senator Campbell.
Senator GEORGE CAMPBELL—What impact, Minister, do you think this will have on
the building industry?
Senator Minchin—Senator Campbell, as has been noted in the commentary, this is a
highly cyclical industry. There has clearly been some pull forward of activity in anticipation
of the GST, there is no doubt about that, but most forecasters believe that any short-term
effect of the GST will quickly wash through the system and that the cyclical nature and the
cyclical downturn has been anticipated for some time. I suggest that the cyclical downturn has
been delayed because of the pull forward of activity in advance of the implementation of the
GST.
Senator GEORGE CAMPBELL—Are you conceding, Minister, that the GST has had an
impact on home building activity?
Senator Minchin—I think everyone accepts, rightly or wrongly, that there has been a pull
forward of activity in anticipation of the implementation of the GST.
Senator GEORGE CAMPBELL—I do not know they say there has been a pull forward
because the statistics show that building approvals have also slumped.
Senator Minchin—But they have been extremely high quite recently.
Senator GEORGE CAMPBELL—Yes, they have but they have slumped. In fact, I think
approvals for April 2000 plunged something like 9.8 per cent. Last month’s was something
like 14.4 per cent.
Senator Minchin—It is true that activity has been extremely high up until the last month
or two as a result of a booming economy and activity that resulted from the anticipation of the
start-up of the GST. Whether or not the reduction in activity that we have recently seen is the
GST effect or not is not easy to disaggregate as the Reserve Bank notes.
Senator GEORGE CAMPBELL—It might be a combination of the GST and increasing
interest rates.
Senator Minchin—There is no doubt, as you would know from your wide political
experience, that consumers in a whole range of areas react with caution when interest rates
start to move. It is an interesting fact of consumer behaviour that, if interest rates are stable at
whatever level, they will maintain activity. But speculation about further interest rate rises,
from whatever level, always has a deleterious effect on consumer confidence.
Senator GEORGE CAMPBELL—But there is also a decline in consumer confidence
across the board.
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E 534 SENATE—Legislation Thursday, 1 June 2000
Senator Minchin—That is true.
Senator GEORGE CAMPBELL—And a decline in small business confidence with the
future direction of the economy.
Senator Minchin—I do think it is widely acknowledged. The Prime Minister has
acknowledged that the recent interest rate rises, albeit from a very low level, and small though
those rises are, do affect consumer confidence. That has always been the case.
Senator GEORGE CAMPBELL—Minister, in relation to the building and construction
statistics that show that collapse ahead of the GST, the estimation of the Housing Industry
Association is that it will cause something like a loss of 60,000 jobs in the industry. Have you
done any evaluation of this claim?
Senator Minchin—I will have to ask my officers if they have an answer to that.
Mr Dean—I am aware of that. I think it is quite an old piece of work; we might have
discussed it during this previous Senate estimates. The industry generally says that for each
house that is not built it is between one and two jobs as a rule of thumb.
Senator GEORGE CAMPBELL—Mr Dean, does your department do any analysis of the
impact of these movements on jobs in the various industry sectors? You are aware of the
statistical analysis, you are aware that it has been around for some time. As you said, I think
we have raised it on a previous occasion. Has the department had a look at the material that
has been produced and made any assessment of it?
Mr Dean—Yes, we try to familiarise ourselves with all the forecasts.
Senator GEORGE CAMPBELL—Is that an accurate forecast or not?
Mr Dean—It is one forecast that is in the marketplace.
Senator GEORGE CAMPBELL—I did not ask you that. What I asked you was is it
accurate or not?
Mr Dean—I am not sure I am in a position to say whether it is accurate. What we try to do
is to understand the range of forecasts put out.
Senator GEORGE CAMPBELL—Doesn’t that raise alarm bells? Do you just sit back
and say, ‘That's an interesting set of figures. We’ll wait and see what they produce in five
years time’?
Mr Dean—What it means is the industry has been at the top of a cycle and it would be
unrealistic to expect that, given it is a cyclical industry, you would maintain jobs at the current
level when the industry goes down.
Senator GEORGE CAMPBELL—But I would have thought, Mr Dean, given the
response from Mr Spasojevic before, when I asked the question about the department being
proactive in some of these industry sectors, that to some degree the department would have
some responsibility by looking at policies or initiative to try and even out that boom/bust
cycle across industries—try and cushion the impact from changes.
Senator Minchin—If you look back over this industry, it has been a roller-coaster for
decades. I think it is beyond any government or any single federal government policy to ‘even
out’ the cyclical nature of this industry. That may be something that governments should
attempt but I think it would be quixotic. If you have any suggestions, I would be interested to
hear them.
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Senator GEORGE CAMPBELL—I actually have, Minister. I would be happy to debate
them with you at some particular time.
Senator Minchin—But throughout the period of the Keating government and the Hawke
government, this was the case. I have got the graph in front of me which shows that it
collapsed in 1989-90 and then it rose again in 1993-94; then another collapse. It has been on
an upward trend ever since we have been in government but we are now approaching what
has been a very long history of cyclical ups and downs. I read with great interest of a
forecaster, whose profession is forecasting in the building area, who said that really this is not
a matter for government; the industry itself has to understand the cyclical nature of this
business and plan accordingly.
We do believe the fundamental responsibility of the government is to provide a stable
macroeconomic environment and the lowest possible level of interest rates, because that is the
main driver and the greatest influence on building activity.
Senator GEORGE CAMPBELL—Those are certainly factors. I do not think it is
reasonable to decide that because someone 20 years ago did not do anything about a problem
there is no compulsion on the current government to do anything about a problem. I thought
that part of the process of government was to continually look for ways of addressing
problems or inconsistencies in our environment or in our economy. For example, the New
South Wales government has taken an innovative approach to this issue by looking at
infrastructure projects that might be brought on stream after the current boom that is occurring
to take up that slack and to even out the cyclical nature of the industry.
Senator Minchin—In the case of New South Wales with something like the Olympics and
obviously a significant risk of a massive downturn after that, it is appropriate for the
New South Wales government to seek to take whatever corrective action it can. It is difficult
in relation to private dwellings because that is so much a function of the general state of the
economy, of interest rates, inflation, et cetera. The federal government has not traditionally,
under Labor or Liberal, undertaken infrastructure projects per se in response to an
approaching cyclical downturn in the building industry. But certainly I acknowledge and
indeed endorse what—
Senator GEORGE CAMPBELL—You have not forgotten the benefits of the
infrastructure projects put in place by the Keating government in 1993?
Senator Minchin—Remind me, please.
Senator GEORGE CAMPBELL—You do not remember the One Nation Program?
Senator Minchin—Oh, that.
Senator GEORGE CAMPBELL—Jeffrey Kennett put his name on every project in
Victoria and claimed responsibility for it.
Senator Minchin—It has traditionally been more the responsibility of state governments.
Senator GEORGE CAMPBELL—The figures I was told about, the 60,000 jobs, that cut
across both the construction and the housing industry are not confined to the housing industry
alone. Essentially we have the answer that I suppose we expected, that really the department
is not doing too much other than watching the statistics. Minister, are you aware of the BIS
Shrapnel forecast for the economy?
Senator Minchin—For the whole economy?
Senator GEORGE CAMPBELL—Yes. They are forecasting a growth of 1.1 per cent.
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Senator Minchin—The economy as a whole?
Senator GEORGE CAMPBELL—Yes.
Senator Minchin—In what period?
Senator GEORGE CAMPBELL—In the 2000 calendar year.
Senator Minchin—I am not aware of that. That of course is contrary to all the other
evidence of which I am aware; that is that the economy is growing at just under four per cent.
Senator GEORGE CAMPBELL—I agree it is contrary to a number of other economic
forecasts, Minister.
Senator Minchin—Extremely so.
Senator GEORGE CAMPBELL—But you could say that they are at the pessimistic end
of the forecasting business.
Senator Minchin—If that is their forecast that is very pessimistic and at the very
pessimistic end. All others are between the three to four per cent range.
Senator GEORGE CAMPBELL—Do you dismiss it?
Senator Minchin—As I say, I have not had that drawn to my attention.
Senator GEORGE CAMPBELL—Senator Gibson says ‘hopeless.’ I recall also another
forecaster two or three years ago described as being mad when they forecast the Asian
economic downturn. They were actually proven to be the only forecaster that got it right. But
I do not necessarily disregard any of them in a sense. Minister, are you are aware of the
alarming number of home building companies that have announced they are going into
liquidation or suspending from trading?
Senator Minchin—An alarming number? I think there have been a couple of recent
instances but I am not sure that it could be described as an alarming number.
Senator GEORGE CAMPBELL—There are some that have gone public such as
Avonwood Homes. What do you think the reasons for their difficulties are?
Senator Minchin—I do not have before me the statement of the company or any
independent analysis of why that particular company has gone into liquidation,
Senator Campbell.
Senator GEORGE CAMPBELL—The liquidator, Mr Paul Pattison, has said the GST has
been a significant factor in the demise of Avonwood.
Senator Minchin—I am not aware of the details of that company's financial position and
why it got into financial difficulties. With no disrespect to the person you quoted, we should
expect that if a company gets into financial difficulties at the moment, for whatever reason,
there will always be a tendency for them to seek to attribute blame to a change in tax policy,
even though that may have nothing to do with their circumstances.
Senator GEORGE CAMPBELL—Mr Pattison has said because of the GST there has
been an excess in the number of people signing up and the effect of this may be that homes
that would finish by 30 June would have the GST imposed, which would be payable by the
company. Does it not concern you that 800 home buyers have been left high and dry, so to
speak?
Senator Minchin—Of course that concerns me, but the reasons why that company has left
those people in that situation I cannot describe at this point.
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Thursday, 1 June 2000 SENATE—Legislation E 537
Senator GEORGE CAMPBELL—The liquidator has clearly put that on to the GST and
its impact on the industry.
Senator Minchin—I note that but I am not prepared to accept it at face value.
Senator GEORGE CAMPBELL—Are you aware, Minister, that Eastern Park
Developments are also having problems?
Senator Minchin—I am not personally aware of that.
Senator GEORGE CAMPBELL—And that there are also signs of it being caused by the
race to beat the GST.
Mr Dean—Perhaps I can provide some information. Eastern Park is a much smaller
developer than Avonwood. Our information is that the company states its problems stem from
delays in getting building approvals, supply and labour problems and the GST. It says the
GST is one factor there. With respect to Avonwood, it would be true to say that particular
company has been experiencing difficulties for at least the last six to nine months. There has
certainly been coverage in the press of people who have paid significant deposits as far back
as the middle of last year and have not been successful in having work completed on their
homes. I do not think it would be completely accurate to say the problems with Avonwood
have just emerged in the last couple of months.
Senator GEORGE CAMPBELL—Do you agree with the comments of the Prime
Minister who said, in relation to Avonwood Homes, that the tax did not cause them to go
broke?
Mr Dean—Yes.
Senator GEORGE CAMPBELL—So it was not the tax. I thought you just said it was a
contributing factor—
Senator Minchin—That is not the same. That tax per se is the cause as has been said.
There was a range of factors cited by the company itself and you cannot attribute blame to
any one factor.
Senator GEORGE CAMPBELL—Why would the liquidator be essentially putting the
blame on the GST?
Mr Dean—It is probably more the inability to manage a boom situation. This does happen
in booms, as it happens in busts. If a company is not able to manage with flexibility a high
level of demand, then it will experience problems. I think that has been the case with
Avonwood.
Senator GEORGE CAMPBELL—But is it not the reality, Mr Dean, that these home
buyers are being hit with a triple whammy by the government? They have been hit by the
GST on the work that is not completed by the end before the introduction of the GST, they
will not have access to the first home buyers scheme because they entered into the contracts
before the GST was introduced and thirdly, as far as Victoria is concerned, the Kennett
government has limited the compensation to 20 per cent of the contract price.
Mr Dean—I cannot comment on the compensation issues which are state ones but my
understanding of the GST is that it is only payable on that element of the building which is
worked on or is not complete after 1 July.
Senator GEORGE CAMPBELL—Assume they have entered into the contract before and
the work has been suspended so it will not be completed. They will be hit. The work has been
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suspended and the company has gone broke—which is no fault of theirs— they are still going
to be slugged with the GST if ultimately the work gets completed. They have been penalised
three times as a result of this activity. It would appear there has been no consideration given to
try and assist these individuals who are being punished in this way. Even more outrageous
was the attempt by the Prime Minister to blame the Bracks government for it. In this business
we are used to passing the buck but I think that was a classic example of throwing the ball
when there was no winger running up to catch it.
I have other issues and then my good colleague Senator Lundy can sport her stuff. Minister,
I put a number of questions on notice in respect of National Textiles and events at the
estimates in February. I only received the responses late yesterday, which made it difficult to
do a detailed comparison, being involved in other things. There are a number of questions I
want to pursue in relation to this matter. The letter that was referred to was sent to National
Textiles in April and I think it is the subject of an FOI. Are you in a position to tell us whether
or not a decision on the FOI has been made? Secondly, what is the nature of that April letter
to National Textiles?
Senator Minchin—My answer is no to both questions but I am happy to ask if any official
has a more in-depth answer.
Mr Dean—Senator Campbell, I believe the letter you are referring to is one that was sent
on 6 May. I have been over the files now and I think there was some confusion on the dates.
There was a letter sent on 6 May from the minister to National Textiles and to Bruck Textiles
announcing or advising of the decision concerning their request for support.
Senator GEORGE CAMPBELL—Sorry, I cannot hear you. Can you speak up a little bit.
Mr Dean—I think the document you are seeking, or you are referring to is actually one
dated 6 May. As far as I can see there was nothing sent in April. That was the letter to
National Textiles and a similar one to Bruck Textiles which advised of the government's
decision on their request for assistance.
Senator GEORGE CAMPBELL—That advice was that the assistance would not be
provided.
Mr Dean—The advice was that there was not enough information provided by the
companies to make a positive decision.
Senator GEORGE CAMPBELL—Regarding the letter of 21 June from Bruck Textiles
and National Textiles, in your answer on notice you said this letter was subject to an FOI
request but a third party had objected to its release.
Mr Dean—That is correct.
Senator GEORGE CAMPBELL—Can you advise who the third party is?
Mr Dean—I need to check. Let me answer by saying that the way an FOI request is
handled is that if the document belongs to another party or directly relates to them and the
delegate decides to release the information, they are given an opportunity to comment and
they can object. It has been through that process and one of the parties involved has objected.
Senator GEORGE CAMPBELL—When you refer to a third party, are you talking about
Bruck Textiles and National Textiles?
Mr Dean—It would be Bruck or National.
Senator GEORGE CAMPBELL—I could not understand what the reference to a third
party was. When will a decision about that FOI request be made?
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Thursday, 1 June 2000 SENATE—Legislation E 539
Mr Dean—It is prescribed in the act, the period of time for them to come back. It is
usually 28 days or 21 days, or something like that, from when it was—I am sorry, I do not
have the date, but it is usually within a three or four week period.
Senator GEORGE CAMPBELL—Do you know roughly when that is likely to be?
Mr Dean—It must be very soon because this was done early in May, from memory.
Senator GEORGE CAMPBELL—Yes. I think you said then that it was subject to an
FOI, so it cannot be that far away. Presumably if the FOI is granted, then a copy of the letter
can be made available to the committee.
Mr Dean—Yes.
Senator GEORGE CAMPBELL—Minister, or Mr Dean, can I ask why the Ernst and
Young report is regarded as being commercially confidential, given that National Textiles is
now in liquidation?
Mr Dean—I do not think National Textiles is in liquidation. I think it is still an entity. I
think it has a receiver and manager; it do not think it is in liquidation. That is my information.
Is that correct? It has not been liquidated.
Senator GEORGE CAMPBELL—I think it has been wound up, hasn’t it?
Mr Dean—No.
Senator GEORGE CAMPBELL—The employees have gone?
Mr Dean—No. I am not an accountant but my understanding is that the creditors accepted
a scheme of arrangement and that basically means National Textiles continues as an entity. It
may not be trading and it may not have many assets but it is still there as an entity.
Senator Minchin—In other words, it has not actually been liquidated.
Senator GEORGE CAMPBELL—I understand that, but if it is not a trading entity, it is
not trading, it has no assets, why would commercial-in-confidence be an issue?
Mr Dean—The examination was to do with both National Textiles and the company which
it was proposed to merge with, Bruck, so it is not just a matter of what is said about National
Textiles. It also has bearing on information which was provided by Bruck in confidence. The
other factor is that Ernst and Young were engaged on the basis that the document would be
prepared for departmental use only. They also have objections to it being put in the public
domain.
Senator GEORGE CAMPBELL—Have they objected?
Mr Dean—They have objected.
Senator GEORGE CAMPBELL—Have they put that objection in writing?
Mr Dean—Yes, they have.
Senator GEORGE CAMPBELL—Can we get a copy of that objection?
Mr Dean—I cannot see why not but I would need to check that there is no reason why I
cannot release it to you.
Senator GEORGE CAMPBELL—Is that commercial-in-confidence?
Mr Dean—I do not know.
Senator GEORGE CAMPBELL—Is anyone able to tell us what happened between the
letter on 6 May which was sent to Bruck and National Textiles, similarly advising them that
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their application was not granted or not agreed to, and the letter of 30 June from Mr Evans,
National Textiles stating that the proposal was viable and would make the terms and
conditions of whatever the name of the scheme was.
Mr Dean—What might be helpful is if I just give you what I understand the sort of
chronology of events here was. The first interaction with National Textiles and with Bruck
was in September 1998 when we became aware that they might be considering some sort of
reconfiguration. We had an initial look at them in October 1998 and at that stage the SIP,
which is what they were seeking support from, had not been devised or the legislation put in
place. So one of the complications here is that people were trying to be helpful without having
the benefit of a clear understanding of what the actual scheme would be.
Ernst and Young did an initial look at a proposal in October 1998 and the view of Ernst and
Young right through this process has been fairly consistent—and this is where the confusion
might arise. Ernst and Young have consistently said that conceptually some sort of
arrangement between National Textiles and Bruck had merit. The problem has always been
that Ernst and Young have not had enough information to advise the department that the
projections and the data on which Bruck and National Textiles were working was vigorous
enough to sustain the concept that was being floated.
At that early stage Bruck and National Textiles had approached the department for a level
of support which was considerably outside and in excess of anything that was envisaged
under the SIP scheme. They came again in April 1999 and submitted a business plan and
asked for support on that basis. Ernst and Young again reported that conceptually the idea of a
merger or some sort of reconfiguration between the two parties had merit but that there was
not enough information to confirm that the scheme would actually fly in practice. The
minister then wrote back to Ernst and Young on 6 May, which is the letter that I have alluded
to, and said that there was not enough information to provide any support, which at that stage
had been assessed against the criteria that were emerging for the SIP scheme. They had been
put into draft form. So at that stage the proposal had been considered against those criteria. In
June 1999 Bruck again came back with a formal application under the proposed regional
reconfiguration scheme. We again went to Ernst and Young and said, ‘Can you advise us on
the viability of this scheme?’ Ernst and Young came back and said, ‘The proposal has merit
conceptually but there is not enough information for us to be able to confirm that the scheme
is viable.’ Mr Evans then wrote to Bruck—and you have had that letter; it was released last
time—and what he said there was that the intent fits within the scheme. I do not have right in
front of me the words he used but the second part of the letter said, ‘You would need to
provide more information before we would be able to give any indication of support.’
Senator GEORGE CAMPBELL—I do not think he made that comment at all.
Mr Dean—This is the letter that was discussed at the Senate Estimates in the beginning of
May.
Senator GEORGE CAMPBELL—Yes. I do not think he made any reference to
additional information.
Mr Dean—What he said was:
Unfortunately, however, it is not possible to provide a meaningful indication of the amount that the
reconfigured entity would be entitled to be paid as a grant or grants under the proposed TCF SIP
scheme because of the lack of information currently available to the department. I would expect that if
National Textiles has prepared a report for its shareholders and has obtained an investigative
accountant’s report which is based on a due diligence exercise and that if that information were to be
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 541
made available to and relied upon by the department, then we would be better placed to provide you
with an indication of the possible level of grant assistance that might be available under the proposed
scheme.
Senator GEORGE CAMPBELL—Yes, but the emphasis that I drew from the letter was
that he was talking of a specific amount that might be available, rather than whether they
would get access to the scheme. I understand your explanation, Mr Dean, but the concern I
have is that the series of events in this whole process do not appear to jell, given the responses
we got from Mr Evans on the first hand and, subsequently, the answer we got on notice from
what we put on notice at the beginning of May and what you have just said. I note in the
written response to answers that you said no written advice was provided by the department
or the minister’s office in June 1999. Does that include no advice per se?
Mr Dean—I cannot answer that. All I can tell you is what is on the files. I do know that
this was a matter that was treated with great sensitivity because of the potential impacts on
employment. I am also aware that Mr Evans testified, I think it was in February, that he kept
the minister’s office informed, so I would expect that there was probably verbal
communication with the minister’s office.
Senator GEORGE CAMPBELL—Is there any way in which we can confirm whether
there was verbal communication with the minister’s office before the letter was sent on
30 June? That is the clear indication that I took out of what Mr Evans was conveying at those
May estimates.
Senator Minchin—I would have to take that on notice and check with my office what
records there are of what conversations took place.
Senator GEORGE CAMPBELL—Can you do that, Minister?
Senator Minchin—I can do that.
Senator GEORGE CAMPBELL—You provided us with a copy of the written advice
from Mr Evans to the minister’s office in April 1999 which you referred to. I note what you
say there, that the overview is consistent, however the recommendations are scrubbed out. I
do not know how the recommendations are consistent with the overview. Is there any
particular reasons why the recommendations are blotted out?
Mr Dean—There is a reason, otherwise they would not have been blotted out. I think that
the recommendations go to advice being provided to the minister and a range of options. I am
not sure that it is helpful or appropriate for us to be providing that in this forum.
Senator GEORGE CAMPBELL—So you are saying that there were a series of
recommendations here—A, B and C—
Mr Dean—There were options.
Senator GEORGE CAMPBELL—There were options?
Mr Dean—There were options.
Senator GEORGE CAMPBELL—Why can’t those options be made available to the
committee?
Mr Dean—That is a matter for the minister.
Senator GEORGE CAMPBELL—Minister, why can’t those options be made available
to the committee?
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Senator Minchin—Senator, I have only just seen this, really, for the first time in quite
some time so I have no—
Senator GEORGE CAMPBELL—I thought you were going to say you had just seen it
for the first time!
Senator Minchin—I only have the same copy you do. I cannot recall the nature of those
recommendations, whether the information provided there was of a commercial-in-confidence
nature, which it might well be.
Senator GEORGE CAMPBELL—Can I ask you to take it on notice.
Senator Minchin—I am happy to do that.
Senator GEORGE CAMPBELL—Sometimes knowledge just may clear up a lot of
anxieties that people have. That page is numbered 9. What happened to the eight pages ahead
of it? Or were those eight pages not relevant to this issue?
Mr Dean—Mine is not marked.
Senator Minchin—That would be a cover page. I think this is a file number.
Senator GEORGE CAMPBELL—At the bottom?
Senator Minchin—Yes.
Senator GEORGE CAMPBELL—I see. So this would be the extent of the written advice
to you?
Senator Minchin—There would normally be some background to these ministerial
advices. That is a cover sheet and there is normally some background with more detailed
information. But that is the first page of the advice to me.
Senator GEORGE CAMPBELL—Can I also ask you to take it on notice, Minister, and
provide the background.
Mr Dean—I will take it on notice, Senator Campbell.
Senator GEORGE CAMPBELL—We can leave that issue for the moment until we see
what response we get to those questions on notice. Mr Clarke, have there been any further
appointments to the Industry Research and Development Board?
Mr Clarke—Senator, since we last spoke about this issue there have been two
appointments to the Tax Concession Committee.
Senator GEORGE CAMPBELL—None to the board?
Mr Clarke—Correct.
Senator GEORGE CAMPBELL—Does that bring the Tax Concession Committee up to
its full complement?
Mr Clarke—It brings it up to six members. The minister is still considering one further
appointment to that committee.
Senator GEORGE CAMPBELL—What about the IRDB?
Mr Clarke—We have not put any proposals in front of the minister for further
appointments to the board. Whilst its numbers are below its legal maximum, we believe they
are at a healthy level and there is no need to pursue any further appointments at this time.
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 543
Senator GEORGE CAMPBELL—While you are at the table, Mr Clarke, can I just
confirm that the figures in table 2.1.2 on page 46 represent a two per cent cut on the 1999-
2000 figure.
Mr Clarke—Yes, I am happy to go over that list again. The Industry Innovation Program
number, which are the Start grants, is three per cent. That is the only change there. I cannot
speak for Tech Diffusion. There are two items in the CRC reduction. One is the three per cent
and the other is a phasing of CRC expenses year to year. Tax we have discussed. National
Research Facilities—two again, an embedded tax and a phasing issue. And Ship Building is
demand driven, so it does not apply.
Senator GEORGE CAMPBELL—Have those departmental appropriations all essentially
been adjusted for the three per cent?
Mr Dainer—These are the departmental areas where there was a slightly greater than
one per cent reduction.
Senator GEORGE CAMPBELL—Did you say slightly greater than one per cent?
Mr Dainer—Yes—the administered expenses.
Senator GEORGE CAMPBELL—This is the efficiency dividend?
Mr Dainer—Are you talking about the clawback?
Senator GEORGE CAMPBELL—I am trying to establish, under the heading
Departmental Appropriations, what that differential is. Is that the clawback or is that the
efficiency dividend?
Mr Dainer—There will be elements of quite a number of variations that have gone on:
there will be the pricing review, there will be the clawback, there will be the efficiency
dividend, et cetera.
Senator GEORGE CAMPBELL—So they are all rolled up in those figures?
Mr Dainer—Yes.
Senator GEORGE CAMPBELL—Is that because there has been an adjustment? You
said this morning that different programs went into different areas or achieved—
Mr Dainer—We are also affected by that process I spoke about this morning, with change
to the output compositions.
Senator GEORGE CAMPBELL—Somebody should draw us a mud map of these
changes. I cannot follow them. In table 2.1.2, output 2.4, the allocation for scientific business
services is $46.8 million. How does that compare with the 1999-2000 allocation?
Mr Dainer—Of $47.6 million? It is a slight overall reduction.
Senator GEORGE CAMPBELL—What specifically is that caused by, the same—
Mr Dainer—Yes, the same process.
Mr Clarke—There is at least one specific item of appropriation that varies across those
years, which is a ramping down of the Sydney Olympics drug testing research program,
which had its peak year in the financial year just ending in terms of its cost. There is another
year to run but it is at a lower level.
Senator GEORGE CAMPBELL—I am sure my colleague will have a few questions
about that in a few minutes. The Technology Diffusion Program I notice has been cut—no,
that has been terminated, I think.
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Mr Clarke—No, it continues.
Senator GEORGE CAMPBELL—It is a reallocation.
Mr Dainer—Yes, we have used it to partly fund the Tech and STAP measures.
Senator GEORGE CAMPBELL—How much is the cut? Can you explain what has
happened there? It was a big thing a couple of years ago. It was bigger than Ben Hur.
Dr King—There was a $12.7 million reallocation over two years: $6.6 million of that is
going to the National Biotech Strategy, $2.8 million is going to the Science and Technology
Awareness Program and $3.3 million is going to the mapping of the Antarctic Territory.
Senator GEORGE CAMPBELL—What was that second one?
Dr King—$2.8 million for the Science and Technology Awareness Program. In the
forward estimates there was just $0.8 million in the budget for that. In the next financial year
$2.8 million has been reallocated to that to take it up to the full $3.6 million.
Senator GEORGE CAMPBELL—What does the TDP do? There is a minus allocation of
funds for 2001-02, 2001-02 and no funding for 2003-04. Does that mean we have abandoned
the program?
Dr King—At this stage it is a terminating program and subject to review next year. We
would put in a new program proposal for extra funds but it is a terminating program at the end
of that stage next year.
Senator GEORGE CAMPBELL—These funds which have been reallocated, are they
funds that were once spent that had been allocated in a forward estimates and had not been
spent on the Technology Diffusion Program?
Dr King—They had not been committed. It is an ongoing program. It is somewhat similar
to R&D start in that sense, but proposals come in and they get funded based on the merit of
those proposals.
Senator GEORGE CAMPBELL—Who is going to be affected by cutbacks in this pro-
gram?
Dr King—Those putting proposals in over the next two years will face stiffer competition
to get funding under this particular program.
Senator GEORGE CAMPBELL—Who are those people likely to be?
Dr King—They are industry associations, for example, looking to put up proposals for
diffusing technology and setting up feasibility studies for looking at this diffusion and that
sort of arrangement. The fund is also used for showcasing Australian technology.
Senator GEORGE CAMPBELL—This program initially was set up, as I understand it, to
promote the take-up of technology, new technology by Australian industry.
Dr King—It is a fairly complex program and it has a number of uses, one of which is to
enable Australians to get access to overseas technology—the other 98 per cent of technology
done overseas—to set up research alliances between Australian researchers and overseas
researchers and to promote generic diffusion of technologies in Australia to Australian
industry. It is a fairly complex program.
Senator GEORGE CAMPBELL—It is complex but the guts of it was to try to encourage
Australian firms to pick up new technologies, introduce them and as a consequence increase
our competitiveness—
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Thursday, 1 June 2000 SENATE—Legislation E 545
Dr King—That is exactly right.
Senator GEORGE CAMPBELL—Have we reached the stage where we are satisfied that
Australian companies are doing that of their own volition and do not need this prodding or
assistance?
Senator Minchin—Senator Campbell, the allocation even after the redistribution is still
$20½ million for that program. The funds that have been directed towards the STAP program
and biotechnology are nevertheless broadly in line with the overall objective of the
Technology Diffusion Program. In other words, the funding as a global amount remains,
albeit that some of the TDP money goes specifically to enhance the Scientific Awareness
Program and specifically to the biotechnology program we discussed with you earlier which,
in my view, is defensively consistent with the overall aims of the TDP.
Senator GEORGE CAMPBELL—But in essence, Minister, this program has got no
forward funding.
Senator Minchin—This does. It is $20½ million, as you can see on page 46.
Dr King—And approximately a further $20 million in the following year.
Senator Minchin—Next year, yes. It was designed as a four-year program initiated I think
in 1998.
Dr King—That is correct.
Senator Minchin—We will need to, as it comes to the end of its four years, decide
whether we go in to bat for a rollover for another four years.
Senator GEORGE CAMPBELL—What is the forward estimate of expenditure in this
program?
Mr Spasojevic—I can give you those numbers. In the coming financial year $20 million,
in the year after $17 million and in the year after that $4 million.
Senator GEORGE CAMPBELL—So in 2003-04 we are down to $4 million.
Mr Spasojevic—2002-03 is the last year in which there is money available.
Dr King—Obviously that will have to be considered in the budgetary context as we
approach what is now the end of its four-year life, as to whether we have it continued or not.
Senator GEORGE CAMPBELL—I think I understand what you just said. That is all,
thank you.
Proceedings suspended from 3.53 p.m. to 4.08 p.m.
ACTING CHAIR (Senator Watson)—Senator Lundy, would you like to ask the first
question.
Senator LUNDY—Thank you, Chair. What R&D agreements are currently in place with
Australia and other countries? What, if any, are under negotiation at the moment? I do have
some questions relating to information technology management, if those officers are present.
What business or business capabilities databases does the Department of Industry, Science
and Resources maintain, if any? Can you give me an overview?
Dr Dubs—At the moment, internally, we do not. We use some of the commercial databases
and some of the areas would have databases of their clients and client companies.
Senator LUNDY—In terms of the ones you get information from to enhance the services
that DISR can offer, what sort of databases do you have access to; which ones?
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Dr Dubs—There is a database on biotechnology and there is one on IT for the IT industry.
The IT industry is not maintained by us as far as I know. There is also a project at the moment
within the department where we have set up an industry directory which is a product which
we want to make available on the Internet.
Senator LUNDY—That is one I am interested in.
Dr Dubs—That is not currently in place. It will be similar to what is available currently for
IT&T and biotechnology.
Senator LUNDY—With respect to that industry capability database, have you released a
request for tender for that particular database? What stage of the process are you in
building—
Dr Dubs—All we have done there is get some advice on the specifications for it but we
have not released the request for tender, no.
Senator LUNDY—Do you intend to release the tender, as I have suggested, or are you
planning to build it in-house?
Dr Dubs—No, we do not actually build any of these major developments. Apart from very
minor things, we do not build anything in-house, so it would be done outside. It would be
done through a tender.
Senator LUNDY—Was the industry capability database something provided for in this
year’s budget?
Dr Dubs—Not as such, no. It would be funded through internal departmental funds, so it is
not—
Senator LUNDY—How much? Is there a cost allocated against that particular project?
Dr Dubs—No. There is a cost allocated internally to the redevelopment of the Internet site.
Then as part of that there is earmarked about $100,000 for seed funding for some of those
products—what we would call new products. The industry capability directory is only one of
those products. We would expect that the products are essentially funded through the line
areas and this central funding would be used to help some of the products along which cannot
be funded through the line areas.
Senator LUNDY—Just to clarify this, the industry capability database is within a bigger
project, which is redeveloping DISR’s Internet site.
Dr Dubs—That is correct, yes.
Senator LUNDY—Which currently has $100,000 notionally attached to it in terms of
coordinating—
Dr Dubs—For products of that kind.
Senator LUNDY—For products of that kind. So when you talk about product, are you
talking about the web site or the database?
Dr Dubs—I am talking about things like the directory.
Senator LUNDY—What is the timing for the redevelopment of the Internet site?
Dr Dubs—We intend to go to restricted tender for that within a couple of weeks.
Senator LUNDY—Within a couple of weeks?
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Thursday, 1 June 2000 SENATE—Legislation E 547
Dr Dubs—Yes. This is a tender for the central infrastructure—that is, for the
redevelopment of the site rather than what I have previously called ‘products’.
Senator LUNDY—By ‘restricted tender’, do you have a list of preferred tenderers that you
will be asking to submit to that particular process?
Dr Dubs—They would be selected on the basis of the software products we currently use.
Senator LUNDY—Why?
Dr Dubs—Why? Because we actually have capabilities in-house to use those products and
we already have applications built with those particular software products.
Senator LUNDY—What particular suite of software products are you talking about?
Dr Dubs—It is probably better if I do not try to tell you off the top of my head.
Senator LUNDY—Could you take that on notice.
Dr Dubs—Sure.
Senator LUNDY—Thank you. In terms of putting that out to restricted tender, what will
you actually be asking companies to tender on?
Dr Dubs—It will cover what we call the look and feel of the site. It will cover the elements
of distributed authoring—that is, we want to set up the site so that a number of authors in the
department can provide information into templates which then can be put onto the web, so it
is designing that sort of aspect. It is also designing a metadata database, which is used for
searching for information. A number of aspects of the project will also be in line with the
government online initiative, even though to a large extent the project was developed for a
different reason. Certainly some of the requirements of that strategy will be automatically also
built into the project that will be undertaken over the next three or four months.
Senator LUNDY—In terms of the Office of Government Online strategy, their database
for companies relates back to the Australian Business Register, which is being built by two
other departments. Is it proposed that the database you have described—the industry
capability database—be linked through those metadata searches to that Australian Business
Register database?
Dr Dubs—I cannot answer that. I am not sure that anybody could at this stage. When I said
we would satisfy the government online requirements, I was not talking about the database as
such, I was really talking about the requirement to be able to search on agreed metadata; the
access requirement for remote users or other users who may not have the latest technology,
those sorts of things. There is a whole range of requirements, including privacy statements
and security requirements and so on, which have to be covered, as you would know. That is
what I was really referring to, rather than the database that OGO has.
Senator LUNDY—So you would create your own database of Australian companies?
Dr Dubs—Yes. In fact, the current plan—and it is really nothing more than a skeleton
plan—is to have it so that companies can input their own data. So it is actually an interactive
thing where people can put in or modify their own data, perhaps through some control
mechanism, to make sure that the quality of the data is satisfactory.
Senator LUNDY—Minister, are you familiar with the development of the Australian
Business Register?
Senator Minchin—No, I am not, Senator Lundy.
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Senator LUNDY—Minister, can you tell me—and if you do not know, take it on notice—
whether or not the industry capability database which we are discussing is being built on the
basis of being able to tap into information collected by the taxation department, prompted by
the provision of ABN numbers by Australian companies to build a database for use by all
departments in the sorts of search mechanisms that are being described here.
Senator Minchin—I do not have the answer to that.
Senator LUNDY—You have already taken some questions on notice, which has kept me
happy, so if you would take that on notice, that would be useful.
Senator Minchin—Yes.
Senator LUNDY—Thank you. You mentioned the IT&T capability database. That is not
managed by you?
Dr Dubs—No.
Senator LUNDY—Who is it managed by?
Dr Dubs—It is DCITA, I believe, but that is just general knowledge, I do not—
Senator LUNDY—Yes. That is my understanding as well. Why doesn’t the industry
department manage the IT&T capability database, seeing that you are building one for all of
Australian industry?
Dr Dubs—As I understand it, the IT&T database was with the department when the
information technology task force was with the department. With the removal of that
responsibility to DCITA, the database moved with that responsibility. It really has not been an
issue, of course, so far.
Senator LUNDY—Just a general question with respect to industry's involvement with the
IT&T industry, is there anything within the portfolio, Minister, that addresses IT&T
specifically? Or has it all moved to Senator Alston’s department?
Mr Spasojevic—My understanding would be that it is essentially all now in his
department.
Senator LUNDY—Why is that?
Mr Spasojevic—It was the government’s decision.
Senator LUNDY—In terms of this industry capability database project that has just been
described, is it proposed that the IT&T industry will not be included in that, given that
Senator Alston’s department has an IT&T industry capability database?
Dr Dubs—The current thinking is that it will be building on a similar model; it will use
the same sort of approach, and we clearly want to link with that. We would not recreate an
IT&T industry capability that is already there. I also understand there is one for the
biotechnology industry. So we would not reproduce that, but we obviously would want to
integrate it. That does not mean physically integrate it, but integrate it in terms of searches
and so on.
Senator LUNDY—Thank you. Dr King, how many R&D collaborative agreements or
agreements are in place with other countries or groups of countries like the EU?
Dr King—I cannot be exactly sure, but last time I counted it was 27, I think. I can take that
on notice. I think there are two in the interim stage of being negotiated.
Senator LUNDY—With whom?
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Thursday, 1 June 2000 SENATE—Legislation E 549
Dr King—One of them initially was the South American group called Mercosur, which is
the South American equivalent to the CER agreement we have between Australia and
New Zealand, like a free trade area. There was a proposal to set up an S&T agreement with
them. We also have on the table a proposal that we should negotiate a similar agreement with
Thailand.
Senator LUNDY—Have you received any direction from the minister about a proposed
R&D agreement between Australia and Israel?
Dr King—We have certainly been negotiating that for some time.
Senator LUNDY—Right. Are there any others that you are negotiating at the moment?
Dr King—No. The S&T agreement I think you are referring to with Israel has details of a
proposed fund and that is the thing that is mostly being negotiated at the moment. We already
have an S&T agreement with Israel. What has been negotiated with them is a proposal to have
a joint collaborative fund, and that is the thing that is on the table at the moment.
Senator LUNDY—What is the time frame for that proposal’s consideration?
Dr King—Something has been put on the table with the Israelis and it has been, if you
like, in their court since the Prime Minister visited Israel, and we are waiting for a response
from them.
Senator LUNDY—What are the details of that proposal?
Mr James—The existing treaty-level agreement with Israel covers quite a wide range of
things—technical cooperation and cultural issues—and we have proposed, and I think the
Israelis have agreed, that the science and technology agreement should be in the form of a
memorandum of understanding under that umbrella agreement. What has been proposed to
them is that the agreement would cover scientific research and development and industrial
applications of research and development; that it would be a pilot program, and we have
spoken about an amount of half a million dollars from each side for a period of two years. The
status of that at the moment, as Dr King was saying, is that we have provided a draft wording
to the Israelis, and we are still awaiting their reaction to that, but I suspect it is just a matter of
the details of the wording being sorted out.
Senator LUNDY—I believe we have a research and development agreement with the
European Union. Is that right?
Dr King—That is correct. That is the European Union Fifth Framework.
Senator LUNDY—In terms of the level of commitment that requires, is there any financial
commitment that is part of that agreement?
Dr King—No. Indeed, what happens with most of our S&T agreements is that people who
are looking for collaboration have to find the basic funds for the research itself on a
competitive basis in Australia from whatever institution they are aligned with, and we use the
complex TPD Program we were talking about earlier to fund the peripheral activities—that is,
works, travel, et cetera—the idea being that we give Australian researchers an equal chance, if
you like, to collaborate with people overseas as they would with their Australian counterparts.
It is to make them be more global. But they have to find the funds for the core research
themselves, from whatever institution they belong to, or whatever competitive process they
would normally compete in.
Senator LUNDY—Is there a capacity for people seeking the government’s support in that
regard to actually apply for that funding support, be it travel costs and things like that?
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Dr King—Yes, certainly, and that is done on a regular basis.
Senator LUNDY—What is the pool of funds available to service that demand?
Dr King—We do not actually have a quota for that. Basically, we have been prepared to
look at proposals on a merit basis and if they satisfy our requirements and they have approval
for the core research which generally means they have competed for the core funds in their
host institution, and if it is collaborative their partners have had to compete as well—by and
large, as long as they meet certain requirements, we typically would fund them.
Senator LUNDY—How many applications would you get, typically, and what is it worth
on an annual basis?
Dr King—I cannot answer off the top of my head.
Mr James—I cannot give you an exact figure, but it would be of the order of 100 to 150.
That would cover a wide range of different types of applications. Quite a lot of them are for
fairly small amounts of money, to make single overseas visits for the purpose of some form of
collaboration. At the other end of the scale, some of the applications that we have received
have been for hundreds of thousands of dollars for substantial work involving a number of
organisations on both sides involving travel and related activities. They do cover quite a wide
range.
Senator LUNDY—Is there an allocation that applies specifically to the fifth framework
agreement with the EU or does this relate to all technology diffusion across the—
Dr King—No, there is no specific allocation for the European Union fifth framework. In
discussions with our European counterparts recently, the Australian Research Commission
and the NHMRC were actually thinking, themselves, of allocating a pool from their
competitive funds and trying to work out if they would have a joint call for funds to access
those funds. So there is the possibility that there may be a small amount of funds available to
people in that competitive framework.
Senator LUNDY—How do businesses hear about this opportunity that they have to get
government support for international collaborative research? How do you promote it?
Dr King—We have been running workshops around the country which businesses have
been invited to attend. We typically have talking at those not just the department but people
who have been successful in applying for grants under that and telling their story as to how it
has worked for them, why it has been successful, how they have used it, et cetera.
Senator LUNDY—What is the cap on the pool of funds available for these types of
grants? You said before you did not work to a budget but there must be some sort of limit.
Dr King—Of course. Under the TDP the total amount available is some $20 million, of
which a bit more than half is used for diffusion of technology within Australia and the other
half is used for relationships, things overseas. So you could say it was in the order of $8
million to $10 million. It is very crude. That covers a multitude of arrangements.
Senator LUNDY—Do you publish an annual report that would itemise all of the grants
allocated under the process that you have just described?
Dr King—No, I think is the answer to that.
Mr James—I will just check with Mr Dainer. I think the annual report lists all the grants
we make.
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Thursday, 1 June 2000 SENATE—Legislation E 551
Mr Dainer—I am not sure. But certainly we could provide you with a list of those. That is
not a problem at all.
Senator LUNDY—Yes, if you could. Thank you. Just some general questions now. The
Department of Industry, Science and Resources is a member of group 5. Their IT is
outsourced and has been for a little while now. I want to know if the department has found it
necessary to seek that penalties and sanctions be applied to the outsourcer in terms of the
performance. I am looking for a bit of a summary on their performance and whether or not
you have had any reason to be dissatisfied to date.
Dr Dubs—Yes, we are part of group 5. Advantra is our service provider. That started last
June. There were some teething problems initially, as one would expect, since it is a fairly
hard task to take on from one day to the next to provide the services to a fairly complicated
department. Under the contract there are service credits imposed if there is a performance
below certain service levels which cover all sorts of aspects of the service. Many of those
service levels were not reached in the initial months and service credits have been imposed,
yes.
Senator LUNDY—Has the company suffered a financial sanction as a result of those
service credits not being achieved?
Dr Dubs—When I say the service credits were imposed, I mean—
Senator LUNDY—They had been fined.
Dr Dubs—the actual discount on the invoice was applied.
Senator LUNDY—How much?
Dr Dubs—Of the order of 15 per cent.
Senator LUNDY—Fifteen per cent. That is quite significant. Do you think that is quite
significant in terms of your expectation for the contract?
Dr Dubs—I think it is significant. I should perhaps correct—15 per cent off the normal
service charges.
Senator LUNDY—Yes, I appreciate that.
Dr Dubs—There are some transition costs and so on which would be in addition.
Senator LUNDY—When you say 15 per cent, what is the monetary value of that discount
that was applied to their invoice?
Dr Dubs—We have not received invoices beyond February but to date it would be about
$280,000.
Senator LUNDY—Has there been more loss of service credits since February?
Dr Dubs—I really cannot say.
Senator LUNDY—If you could take that on notice and just provide the information to me.
Dr Dubs—Yes. We have not received the data. These service credits are on a monthly—
some of them are on a three-monthly rolling basis.
Senator LUNDY—I am not sure of the technicalities on asking for something on notice in
advance if you are actually receiving it. But I will try my luck and just put that on notice that
you provide that information when it becomes available to the department. That would be
useful.
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Dr Dubs—Sure.
Senator LUNDY—In terms of the actual costs incurred by the IT outsourcing by the
department, have your costs varied from the original contract price in any way?
Dr Dubs—Yes, they are lower than the contract price.
Senator LUNDY—You would be a first. Do you get to keep that money or do you have to
give it back to Mr Fahey?
Dr Dubs—I probably should clarify it. The contract prices are essentially unit prices, that
is for PCs—
Senator LUNDY—No, that was not my question. My question was the contract price, not
the unit cost price of the units you are actually purchasing. My question was the contract price
overall, not the unit cost price.
Dr Dubs—Yes. There is no actual price in the contract, there is no final figure.
Senator LUNDY—There must have been because there was for the whole group 5 and
you must have at least identified a component for the use of that.
Dr Dubs—Yes, Senator, but it is an extrapolation of the expected usage. It is not a fixed
price. In our contract there is a central cost which is essentially fixed for the purpose of this
anyway. If there is memory increase and so on, there can be variations. But there is a unit cost
per laptop, per PC and so on, which covers both the leasing and the service. While the unit
cost has stayed essentially constant or perhaps increased a bit, because there are some
additional features in the units that we get now, then—
Senator LUNDY—So the unit cost has not even decreased?
Dr Dubs—No, but the contract cost has. What you call the total cost. What we have paid
so far is below what we budgeted for.
Senator LUNDY—Can you take on notice providing me figures for the original cost
relating to Industry, Science and Resources’ proportion of the original contract price for the
group 5 project. I want to know that bottom line cost without any of the unit price equations
contained in that. You will probably find it on Minister Fahey’s web page because he made an
announcement of the value of that contract. I want to know the proportion within that amount
announced by the minister that is attributable to you. How many other agents are there in
group 5?
Dr Dubs—There are four others. We are one of the bigger ones.
Senator LUNDY—So you have all got a component, if you like, of that price. I think it
was valued at—
Dr Dubs—It is about $100 million. It was about $80 million, thereabouts.
Senator LUNDY—Yes, I am just looking for the figure. Was it that much?
Dr Dubs—Yes, I think of that order.
Senator LUNDY—Yes, it is five: yourselves, the Department of Communication, IT and
the Arts, PM&C, the ACCC and Transport and Regional Services. So you have the proportion
of the original contract value that was ascribed to you.
Dr Dubs—Yes. It is about a quarter but I will give you the exact figures.
Senator LUNDY—Thank you. In the portfolio budget statements there is a section there
that says ‘CTC Outsourcing, competitive tendering and contracting’. Has the department lost
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Thursday, 1 June 2000 SENATE—Legislation E 553
any money out of their budget that is a pre-empted savings from competitive tendering and
contracting out?
Dr Dubs—You are not referring to IT here.
Senator LUNDY—No. It is the program commonly known as the CTC program by the
minister, I believe.
Dr Dubs—Yes.
Senator LUNDY—I am looking at page 53 of the PBS.
Dr Dubs—I think that is probably one for you, Mr Dainer.
Senator LUNDY—There is just one single paragraph:
During 2000-2001 the Department will be market testing elements of its corporate services. The cost of
this market testing exercise is estimated to be $0.6m.
Does it cost that much to market test something or is that the contract out price?
Mr Dainer—No, that is the cost of running the market testing exercise, for it to be done
properly.
Senator LUNDY—Thank you for that qualification. I would expect as much. In terms of
that market testing exercise of its corporate services, can you describe for my benefit the types
of services which you define as corporate services within the agency?
Mr Dainer—Within the scope of this particular exercise , in the corporate division, we
have gone through a process of looking at what might be the first tranche to be market tested.
Those sorts of things would be accounts processing, payroll processing, financial support
services, property services.
Dr Dubs—There is also information and records management.
Senator LUNDY—How many people work in corporate services at the moment within the
department?
Mr Dainer—About 170.
Senator LUNDY—Will they lose their jobs?
Mr Dainer—This process is to see that we are paying the right price for our services.
Senator LUNDY—I think you will find that Minister Fahey has mandated it.
Mr Dainer—No.
Senator LUNDY—That is not the case?
Mr Dainer—No, we are going through a market testing process.
Senator LUNDY—In questions to the department of finance—and it is contained within
the questions to the Office of Asset Sales and Information Technology Outsourcing which
will be managing the CTC program on behalf of the minister for finance—I am informed that
in fact it was a mandatory process that to market test corporate services would place a
requirement on agencies to proceed with outsourcing.
Mr Dainer—It depends on the business case. The office is actually assisting, not managing
the process. We are managing the process.
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Senator LUNDY—Can you take on notice to provide me with confirmation of the fact that
it is not a mandatory requirement by Finance that the Department of Industry, Science and
Resources outsource their corporate services?
Mr Dainer—Yes.
Senator LUNDY—You are one of the few departments to have actually named a figure of
the cost of market testing. Do you intend to benchmark your internal costs before you market
test?
Mr Dainer—We are going through a process of ABC at the moment.
Senator LUNDY—Of what?
Mr Dainer—Activity based costing.
Senator LUNDY—Is it like benchmarking?
Mr Dainer—We establish baseline costs.
Senator LUNDY—Once you establish those costs you will prepare a request for tender?
Mr Dainer—Expressions of interest.
Senator LUNDY—A request for information?
Mr Dainer—I am not running the process but I understand it is expressions of interest.
Senator LUNDY—Who is running the program?
Mr Dainer—It is being run by the division head.
Dr Dubs—To clarify it, there is a two-stage process. We will invite expressions of interest
in June to establish who is actually prepared to, or is able to, deliver the services. That will
focus on the ability to deliver and then there will be a second step in August to go out for a
request for tender.
Senator LUNDY—Minister, can you tell me if your understanding of the minister for
finance’s CTC program effectively creates a compulsory situation for departments and
agencies to outsource their corporate services?
Senator Minchin—No, I cannot tell you that off the top of my head. I am happy to take it
on notice.
Senator LUNDY—Did you lose any money out of your budget in anticipation of savings
relating to the CTC program?
Dr Dubs—I do not believe so.
Mr Dainer—We have been through a pricing review which is about establishing the right
level of prices.
Senator LUNDY—You lost $5 million there, did you not?
Mr Dainer—Yes, that is right.
Senator LUNDY—Was that attributed to CTC? It certainly read like it was.
Mr Dainer—No. It is not based on CTC.
Senator LUNDY—What is it based on?
Mr Dainer—It is based on an output pricing review process which went through, looked at
external benchmarks of other agencies, practices that we could improve, and we are going a
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Thursday, 1 June 2000 SENATE—Legislation E 555
process of ABC to establish baseline costs. We are looking at process re-engineering and I am
talking about generally across the department.
Senator LUNDY—Yes.
Mr Dainer—In terms of corporate division we are looking at the market testing process
which is part of CTC.
Senator LUNDY—So there is a relationship between the loss of that $5 million and the
ABC process you described which is in fact what you are going through with your corporate
services.
Mr Dainer—There is a linkage.
Senator LUNDY—The same link, I would guess.
Mr Dainer—Yes.
Senator LUNDY—Have you attributed any proportion of that $5 million in your internal
budgeting to the ABC process in any other aspect within the department as yet?
Mr Dainer—I do not understand the question.
Senator LUNDY—You have not done the benchmark for corporate services so you do
not—
Mr Dainer—No, we have gone through and done an internal budget allocation process
based on the total departmental expense available to us. We have not foreshadowed in that
process that we will be making savings in corporate.
Senator LUNDY—So have you allocated or found the $5 million that you are losing from
elsewhere in the department already?
Mr Dainer—Yes. By a priority setting exercise, et cetera.
Senator LUNDY—Can you provide me with details as to where you found that $5 million
within the department?
Mr Dainer—Yes.
Senator LUNDY—Thank you. By ‘details’ I mean specifying the program and all the
associated descriptions, not just outputs. Can you tell me in actual project terms?
Mr Spasojevic—I think that would be a very difficult exercise because we are going to
give you a hypothetical amount which might have been spent, with an amount which will be
spent. I do not think we have the hypotheticals for some of the priorities so I do not think the
question can actually be answered. In terms of finding an efficiency saving I do not know how
we can come to that third answer for you.
Senator LUNDY—I keep looking for validation that there is not a little sort of amount
predetermined there sitting waiting for corporate services outsourcing. That is what I am
looking for confirmation on.
Mr Spasojevic—I do not think we can give you any numbers which are going to provide
more confirmation than our telling you here that there is not.
Senator LUNDY—So you cannot tell me where you found that $5 million that you lost
from Finance?
Mr Spasojevic—We can tell you because what we have done is looked across all the
activities in the department and allocated amounts of money on a priority setting basis to all
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the different activities. That money adds up in total to the funds which we are going to have
appropriated to us.
Senator LUNDY—But none of those are related to the CTC program?
Mr Spasojevic—Correct.
Senator LUNDY—If you actually do end up saving some money in corporate services by
outsourcing, do you get to keep the savings within the department?
Mr Dainer—There is nothing to say we will not.
Senator LUNDY—I think the minister for finance has said that he wants half. Do you
know anything about that?
Mr Dainer—I do not recall anything along those lines.
Senator LUNDY—Minister, do you know anything about that?
Senator Minchin—No, I do not, Senator.
Senator LUNDY—Could you take on notice whether or not there is any requirement on
you to return a proportion or part thereof of savings realised under the CTC program to the
department of finance. Thank you.
Mr Dainer—You asked a question about the annual report and discretionary grants. The
annual report at appendix 7 does have a list of all of our programs and the values for
expenditure in the 1998-99 financial year.
Senator LUNDY—Does it list the actual projects?
Mr Dainer—It does not list all of the individual projects.
Senator LUNDY—I would like a listing of all the individual projects, with their value.
Thank you.
ACTING CHAIR—Minister, we can now release everybody from output numbers 1 and 2
because we are moving now to sport.
Senator Minchin—Can I ask if we have finished with the department itself and from now
on will only be dealing with agencies?
ACTING CHAIR—Senator Lundy, have we finished with the department itself?
Senator Minchin—Has the committee finished with the department?
Senator LUNDY—No, because we still have sport, which does require officers of the
department, and ASDA. I think the rest are agencies.
[4.51 p.m.]
AUSTRALIAN SPORTS COMMISSION
Senator LUNDY—What is the total drop in appropriations from 1999-2000 to 2000-01 for
sport?
Mr Crick—Sorry, Senator, do you mean in the department or across the portfolio for
sport?
Senator LUNDY—Across the portfolio for sport.
Mr Crick—The bulk of that money is with the Sports Commission.
Senator LUNDY—I am asking you because I want to know across the portfolio.
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Thursday, 1 June 2000 SENATE—Legislation E 557
Mr Crick—I am not in a position to answer it across the portfolio, Senator. I think the
only appropriate and practical way to answer that question is to ask the agencies.
Senator LUNDY—It was actually a little rhetorical, Mr Crick. I suppose I could look it up
in the PBS. I was hoping you could just help me sort of preface a few questions.
Mr Crick—Sorry, your question was rhetorical?
Senator LUNDY—I actually know that there is a drop so I was hoping you could just
clarify for me to make sure that I am reading the PBS correctly.
Mr Crick—The only perceived drops that you would find in the PBS I think are under the
statutory bodies. So I think it is appropriate for the statutory bodies.
Senator LUNDY—So I am asking you to add those sums together and what it is overall.
Mr Crick—Without a calculator I could not do that and I would not like to answer the
questions relating to the statutory bodies, Senator. It would be inappropriate.
ACTING CHAIR—You might have to take it on notice, I think.
Senator LUNDY—It is not a hard question, Chair.
Senator Minchin—The individual agencies can answer the question in respect of their
budgets.
Senator LUNDY—There is an allocation to the department in terms of sports, however,
isn’t there—in terms of your patch, Mr Crick?
Mr Crick—There is an internal allocation in the department to my patch, as you say,
Senator, yes.
Senator LUNDY—And you know what that is?
Mr Crick—I know what that is, Senator.
Senator LUNDY—And do you know what that is compared to last year?
Mr Crick—I know what that is compared to last year, Senator.
Senator LUNDY—Well, let’s start there.
Mr Crick—But it covers the whole division, which is sport and tourism.
Senator LUNDY—Right.
Mr Crick—And the allocation this year to me within the division is about $9½ million.
Senator LUNDY—And what was it last year?
Mr Crick—It was about 11.3.
Senator LUNDY—Can you disaggregate those figures for me between sport and tourism?
Mr Crick—Roughly, last year it was about two-thirds tourism and one-third sport.
Senator LUNDY—Okay.
Mr Crick—This coming year I would expect it to be a higher proportion of tourism and a
lesser proportion of sport.
Senator LUNDY—Why is that?
Mr Crick—We had some particular expenditures last year. We had a particular allocation
in the budget that was in last year’s portfolio budget statement of $1.1 million for the Drugs in
Sport Summit and, as we have discussed before, there was close to $300,000 I think spent on
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the Oakley exercise. So they are amounts of money on sport from this current financial year
that of course will not need to be repeated in the new financial year.
Senator LUNDY—So out of that, let’s say, one-third of $9.5 million there is about
$3 million, say $3.13 million.
Mr Crick—Well, no. It was one-third of the 11.3. It will be less than one-third of the
nine—
Senator LUNDY—No, I was working out one-third of 9.5.
Mr Crick—No. It will be considerably less than the one-third because last year’s
one-third had those substantial figures in it that will not be repeated this year.
Senator LUNDY—Right, the $1.1 million.
Mr Crick—Yes.
Senator LUNDY—And what was the other one?
Mr Crick—It was about $300,000, less than $300,000 for the Oakley.
Senator LUNDY—$270,000, wasn’t it?
Mr Crick—$270,000, yes.
Senator LUNDY—I am glad you reminded me of that figure.
Mr Crick—I am sure you would not have forgotten it, Senator.
Senator LUNDY—So we are down a notional budget for sport within your patch, down to
about what, $2.5 million or less?
Mr Crick—You are talking in very broad terms, Senator.
Senator LUNDY—I know, round figure, ballpark. Less? $2 million.
Mr Crick—$2.5 if we are talking in broad figures. It does not matter.
Senator LUNDY—Within that, what are your special projects for this year?
Mr Crick—In output 1 or output 2, Senator?
Senator LUNDY—Either.
Mr Crick—The very special project I think that will continue will be the sport and rec
Action Agenda.
Senator LUNDY—That is a very special project.
Mr Crick—That will be, I think, a fairly high profile project.
Senator LUNDY—The Action Agenda?
Mr Crick—The Action Agenda, which is an important part of the portfolio’s industry
policy approach, and we have action agendas across several sectors and sport and rec is one
that is being developed.
Senator LUNDY—How much have you spent on that to date? I think you have already
told me that, haven’t you?
Mr Crick—We have given you some data on that.
Senator LUNDY—Can you remember how much—
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Thursday, 1 June 2000 SENATE—Legislation E 559
Mr Crick—I can call upon my colleague who is more involved in that to give more detail
on that, Senator.
Senator LUNDY—That would be great. Can you tell me how much money has been
spent on the Action Agenda for sport to date.
Mr McCarthy—To date the first stage of industry consultation and the development of the
discussion paper cost $41,000. The second, which was conducting focus group workshops in
February and March of this year, cost $13½ thousand. We are now into the third stage, which
is conducting industry consultative group meetings, and we have budgeted $40,000 for that.
Senator LUNDY—What else is in your budget for the Action Agenda in the forthcoming
financial year?
Mr McCarthy—We have budgeted $25,000 for the production of the strategic plan
document, because that will be published and circulated.
Senator LUNDY—How many copies will you be publishing for $25,000?
Mr McCarthy—I do not have the figures but we would be probably publishing in the
order of 2½ thousand.
Senator LUNDY—Where would they be sent?
Mr McCarthy—They will be sent out to the people who have participated in the process,
in the main.
Senator LUNDY—Do you have anyone else in mind?
Mr McCarthy—It will be made publicly available on the web site.
Senator LUNDY—I am just adding it all up—$118,000 total expenditure on the Action
Agenda? That is very impressive, Mr Crick. Can you show me where that special project was
identified in output terms?
Mr Crick—It is not specifically identified in output terms, Senator. It does come under
output 1.1.
Senator LUNDY—I love how these outputs are expressed. How is output 1 expressed in
your statement?
Mr Crick—Output 1.1 is strategic industry leadership.
Senator SCHACHT—That is on page what?
Mr Crick—Page 39. It starts on page 37.
Senator SCHACHT—Where was the mention of sport?
Mr Crick—The way the outputs are expressed in the portfolio budget statement, not every
aspect of the department’s activities under a particular aspect are mentioned, so we have
included in there some selective highlights.
Senator SCHACHT—But it does not rank a dot point on page 39?
Mr Crick—It comes under the last dot point, Sport and tourism business development
initiatives.
Senator SCHACHT—Thank you very much. Where is the $118,000 you added up?
Senator LUNDY—That is a significant amount to be spent on yet another report into
sport, Mr Crick. Maybe I should ask the minister. Minister, what is the justification for
spending another $118,000 on yet another sport report, given the department has just spent
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$270,000 allegedly creating a blueprint for the future of sport—a white paper which they have
not even referred to yet—and now they are spending $118,000 on another one.
Mr Crick—Senator, it is difficult to address—
Senator SCHACHT—Is sport actually in your administration, Minister? Are you the
minister for sport, the senior minister?
Senator Minchin—No, I am not the minister for sport. Mr Crick will answer the question.
Senator SCHACHT—I want to ask first of all, Mr Chairman, have you got administrative
orders that completely delegate sport to Jackie Kelly, or do you have any responsibility as the
senior minister?
ACTING CHAIR—Senator, can we just answer one question at a time.
Senator SCHACHT—Well, I will wait for him to come back later, then.
ACTING CHAIR—Mr Crick is waiting to answer a question.
Senator SCHACHT—Fine.
Mr Crick—Senator, I think you posed your question on the premise that that was a very
significant amount. I think $118,000 for the development of what will be a significant impetus
to the further growth and productivity of the sport and recreation sector is probably a very
small, humble investment for a significantly great return.
Senator LUNDY—With due respect, I would be saying that too if I had paid that much
money for a report. That is what you are obviously hoping for. One hundred and eighteen
thousand dollars is a lot of money, particularly in the context of a number of other reports that
have been produced. You have offered up strategic industry leadership as one reason. What is
it actually going to say?
Mr Crick—Senator, you should not look at it as $118,000 for a report.
Senator LUNDY—Why not?
Mr Crick—Because it is $118,000 that is being contributed to the development of specific
actions that industry and government will be able to take to remove impediments to the
growth of the industry, to its export potential and to its increased productivity. That is why it
is called an action agenda. It is not just a report.
Senator LUNDY—I would say that if I were you, as well, I guess.
Senator SCHACHT—I just want to get this clear, Minister. You have signed
administrative orders that completely delegate all issues of policy and development and
administration of sport within the department to Ms Kelly. Is that correct?
Senator Minchin—Minister Kelly is the minister responsible for sport and tourism within
the portfolio. That is correct.
Senator SCHACHT—I want to compare this with arts. Senator Alston says he is the
senior minister for arts and that Mr McGauran is the actual designated minister for the arts,
but he maintains, as cabinet minister, a particular role in promoting the government’s policies
on arts, and being involved and listening, et cetera. Do you fulfil the same role in the sports
area as Senator Alston does in the arts area as the cabinet minister?
Senator Minchin—He is a much more talented man than I, and my capacity is very
limited. I find Industry, Science and Resources is all-consuming, Senator Schacht, and I do
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Thursday, 1 June 2000 SENATE—Legislation E 561
rely on the expertise which Jackie Kelly brings to the portfolio by her very capable handling
of sport and tourism, as required of her by the Prime Minister.
Senator SCHACHT—I presume that in the system all the memos, briefs and the processes
going to Ms Kelly are copied to you—which you obviously do not read.
Senator Minchin—There is a good working relationship between our two offices. Any
matters that Minister Kelly might want to bring to cabinet obviously would be drawn to my
attention and discussed with me beforehand, although she would, as the actual minister, be in
cabinet for any matters affecting her. It is a watching brief, but she performs her functions
more than adequately.
Senator SCHACHT—So the action agenda for sport that my colleague Senator Lundy
was asking about is not a matter that you have any sort of eminent detail about?
Senator Minchin—No. They are simply handled within the department and by the
department. The action agenda process is a very good one and I am actively involved in the
action agendas within the Industry, Science and Resources areas, but the one relating to sport
is properly handled by Minister Kelly's office and the relevant departmental officials. I am not
involved.
Senator SCHACHT—Do you find it a nuisance, Minister, having sport in your portfolio
empire?
Senator Minchin—Of course not, Senator Schacht. I would dearly love to be the Minister
for Sport and Tourism. I think it is a wonderful portfolio and I am very jealous of Minister
Kelly for having it, but I am not going to impinge on her very capable handling of it. She is
capable of handling it on her own.
Senator SCHACHT—I was just comparing the way Senator Alston made sure that people
understood that arts had a cabinet voice. Do you give sport a cabinet voice?
Senator Minchin—My view is that Minister Kelly provides a very effective voice for
sport and tourism.
Senator SCHACHT—But she is not in cabinet every meeting, is she, by definition?
Senator Minchin—I cannot recall an occasion where a sport or tourism matter has come
up before cabinet where she is not present, and obviously I would be, and always am, very
supportive of any propositions she would bring to cabinet.
Senator SCHACHT—I would be staggered if you were not.
Senator Minchin—I am stating the obvious, but you seem to want me to state the obvious.
Senator SCHACHT—I do not need it to be said, because it is quite clear. I think you do
find it a bit of a nuisance.
Senator Minchin—That is not clear at all to me but, of course, you may have your
politically biased opinion.
Senator SCHACHT—It is just my observation. All right, that is a subjective observation.
Senator LUNDY—I want to refer to a statement issued by the minister. I have two at least,
and I would like to reference both of them. On 11 May 1999, the minister says that there is
$5 million additional funding in the budget. This was in fact announced last year, obviously,
on 11 May 1999 in last year’s budget. Then there is another announcement on Tuesday,
9 May 2000 which says, ‘We have allocated an additional $5 million.’ I would like to know if
the minister has announced the same funding two years running or if the $5 million that she
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announced in last year’s budget has in fact been added to by an additional $5 million in this
year’s budget, because she neglects to make reference to the fact that it is already in the
budget from the previous year. Can you clarify that for me, please, Mr Crick?
Senator Minchin—You will be pleased to hear, no doubt, that it is an additional
$5 million, but I will allow the officers to give you the details.
Senator LUNDY—Yes, please.
Mr Hobson—Senator, they are two separate amounts. One is an additional $5 million for
the continuation of the OAP program to December 2000.
Senator LUNDY—Which $5 million is that?
Mr Hobson—The $5 million that was announced in May 1999 was an additional funding
for the OAP program. The further $5 million was for transition funding for the next financial
year, which is additional to that $5 million.
Senator LUNDY—In terms of the actual out years funding, the drop from 1999 to 2000—
I am just looking at the departmental allocation overall—the sport allocation stood at
$112.894 million, in 2000-01 they were listed in the out years to fall to $95.806 million and
then in 2001-02 to $90,709,000. Can you clarify for me where that additional $5 million on
top of the $5 million is in reference to this year's out years allocations?
Mr Hobson—Senator, it is not specifically referenced. The first $5 million, which is the
OAP, I think you will find is built into the funding of the commission, which was the figure
within the $109 million.
Senator SCHACHT—That is shown on what page, in what table?
Mr Hobson—On page 253, table 3.1, and the revenues from the government in 1999-2000
are $109.944 million, and included in that figure was the $5 million for the OAP.
Senator SCHACHT—So the first $5 million is now a base figure running on forever.
Mr Hobson—No, it is not.
Senator SCHACHT—No, that is what I thought.
Mr Hobson—It was included in the appropriation of last year, or at least included in the
forward estimates for last year. That is the figure.
Senator LUNDY—That was the first $5 million.
Mr Hobson—That is correct.
Senator LUNDY—So point out where that first $5 million is in these figures on page 253.
Mr Hobson—In 255?
Senator SCHACHT—No, 253.
Mr Hobson—In 253.
Senator LUNDY—Wherever you said it was.
Senator SCHACHT—Whichever table is the best table.
Mr Hobson—Page 253 and, in fact, I was wrong in saying it was 1999-2000. It would
have been in the $96.639 million. The original forward estimate for last year showed there
was an additional $5 million.
Senator SCHACHT—So it is still in—
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Thursday, 1 June 2000 SENATE—Legislation E 563
Mr Hobson—Correct. It is still in that figure.
Senator SCHACHT—It is in the $96 million and that is going to be spent this year.
Mr Hobson—The next financial year, in 2000-01.
Senator SCHACHT—Then it drops off in 2001. This is the first $5 million. It no longer
appears, of course, in the $87 million.
Mr Hobson—Neither of the two $5 million appears in 2001-02.
Senator SCHACHT—So $10 million is gone from the beginning of July next year.
Mr Hobson—As the forward estimates show. That is correct.
Senator LUNDY—What prompted the government in this year’s budget to allocate
another additional $5 million?
Mr Hobson—I cannot answer that.
Senator LUNDY—Minister?
Senator Minchin—I think it is a very generous contribution by the government to provide
an additional $5 million for transitional funding upon the conclusion of the Olympics. There
was a recognition that there should be a phase-down in relation to the elite athletes once the
Olympics had been completed, that the money would not stop bang but that there would be a
phase-down following that. It is new money and it is a credit to Minister Kelly that she
successfully sought and received these additional moneys.
Senator LUNDY—Minister, in last year’s budget Minister Kelly said that the $5 million
allocated for this coming financial year, which was represented at that time in the out years as
extra money, and I again refer to the statement by the minister just so that it is in some sort of
context. Last year the minister said:
... current four-year funding levels will be maintained up to the Sydney Olympics, including an extra
Budget allocation of $5 million to cover coaching and support staff contracts and athlete assistance
payments in the period between the end of the 1999/2000 financial year and the Olympics in October.
For a point of clarification can you tell me, of that $5 million allocated in last year’s budget
but carried over to this financial year, what proportion of those ‘coaching and support staff
contracts and athlete assistance payments’ was the original $5 million capable of covering?
Senator Minchin—I will allow officers to answer that, but I would remind you that it was
your government that instituted this program and designated it to come to a finish at the end
of June this year, before the Olympics occurred. It was our government that provided an
additional $5 million to ensure that it could at least continue until the Olympics, which you
had not provided for, and now we have provided yet another $5 million to allow it to continue
through the next financial year. The officers can answer your specific question.
Senator LUNDY—I will resist the attempt, Chair, to enter into debating the point with the
minister at this point in time.
Mr Boultbee—In relation to coaching and other staff that have been funded under the
Olympic Athlete Program, their funding and their positions will continue until 31 December,
utilising the $5 million extension of the Olympic Athlete Program into the next financial year
together, where necessary, with other funding.
Senator LUNDY—I am trying to compartmentalise the funding situation prior to this
additional $5 million being allocated in this year’s budget. You are telling me that the
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$5 million announced last year by Minister Kelly covered contracts up to 31 December. Did
you actually cost that out, Mr Boultbee?
Mr Strang—The figure was based on the cost of salaries of coaches that had been
employed under the Olympic Athlete Program, the salaries of high performance managers,
sports scientists, et cetera, so it was an estimate of the cost of their contracts until the end of
the calendar year 2000.
Senator LUNDY—Do we know exactly how many coaches we are talking about here?
Mr Strang—We do have those figures. I do not have them with me but I can provide that
on notice.
Senator LUNDY—Yes. The specific number of coaches and high performance managers
whose contracts will expire on 31 December?
Mr Strang—It is not that easy to come to that conclusion because from the next financial
year, 2000-01, the sports will be coming back to the Sports Commission by the end of August
with their high performance plans and programs, and at that stage we will be able to monitor
how many high performance managers continue and how many coaches continue.
Senator LUNDY—Right.
Senator SCHACHT—As of next year when both of these funds run out—
Senator LUNDY—Hang on, just let me finish this. I want to ask now whether or not any
of that $5 million from last year’s budget could be attributed to the athlete assistance
payments in that period between July this year and December this year, whether that
$5 million covered the continuation of those athlete assistance payments.
Mr Strang—There would have been some calculation of that cost included in the
$5 million. Since then, though, the commission has taken the decision to cease the payment of
direct athlete support consequent upon the taxation ruling that defined that sort of support as
income.
Senator LUNDY—Yes, I will come to that because I have some specific questions on that.
But in terms of that allocation of $5 million, was it designed to cover a continuation of athlete
assistance payments between the period of July and December 2000?
Mr Strang—It was more directed to athlete assistance between the period of July to
September at the end of the Games.
Senator LUNDY—July to September.
Mr Strang—Whereas the coaches’ contracts went to December.
Senator LUNDY—So that financial support for athletes stopped after the Olympics?
Mr Strang—Yes.
Senator LUNDY—What was the motivation for allocating that additional $5 million in
this year’s budget, Minister? Wasn’t it because those athletes were going to be left out on a
limb and wasn’t it because you are finding that coaches are being lured away through of lack
of job security here in Australia?
Senator Minchin—I think I answered the question, Senator Lundy. It is additional moneys
to effect a transition from what has been a one-off boost to sports funding because of the
Sydney Olympics, which was always going to come to an end, whether it was your
government or ours. What we have done is put in additional funding to ease the transition.
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Thursday, 1 June 2000 SENATE—Legislation E 565
Senator LUNDY—You keep making that point. If the chair does not pull you up on it, I
will.
Senator Minchin—It is an obvious point. I do not know why you keep going down that
line of questioning.
Senator LUNDY—In terms of the extra $5 million, will that be used to extend the athlete
assistance payments between September and December this year?
Senator Minchin—I will ask the officials to answer the specifics of it.
Mr Strang—As I mentioned before, it is difficult to foreshadow what the funds will be
used for because the sports have been given greater flexibility in the application of funds they
get in their bottom line, so until they come back to us at the end of August and tell us what
their plans and programs are for the full financial year it is impossible to answer that question.
Senator LUNDY—Will the athlete assistance payments continue from the end of
September, post-Olympics?
Mr Strang—Not from the Australian Sports Commission. The national sporting
organisations may choose to provide support to athletes under a different arrangement.
Senator LUNDY—Can you nominate what that additional $5 million provided for in this
year’s budget will be expended on?
Mr Strang—I cannot nominate that until the sports come back to us and tell us what their
plans and programs for the full financial year are. I would imagine that it would follow
similar lines to their current high performance programs but, until such time as they confirm
that, it is only speculation.
Senator LUNDY—We are not talking about an additional $5 million for a further exten-
sion of OAP; it is completely distinct from that. OAP will still cease that support to athletes
post-Olympics and with the completion of the coaches and high performance managers’ con-
tracts on 31 December.
Mr James—What we have done in 2000-01 is combine all the funds into what are called
now high performance programs, so the Olympic Athlete Program and the program that
preceded it—the Special Assistance Scheme—will no longer have those titles. All high
performance funds will go into the High Performance Program, including the $5 million.
Senator LUNDY—Including the $5 million?
Mr James—Yes.
Senator LUNDY—So how do you characterise that additional $5 million in the budget in
terms of your forward financial planning? Does it just go into the pool?
Mr Strang—It is going into the pool for athlete development.
Senator LUNDY—Minister, when you say it is about transition, can you explain further?
Is it pacification money or something because of the dire situation that sport was in?
Senator Minchin—Sport is not in a dire situation. The additional funds were granted over
and above the—
Senator LUNDY—The people I talk to seem to think it is.
Senator Minchin—base funds provided for the Olympic Athlete Program, which was
going to end, under your government, in June of this year. It has been extended with
additional money for the transition.
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Senator SCHACHT—We left office in March of 96. There would have been at least two
evaluations, if we had won the election and maintained office.
Senator Minchin—So you say.
Senator LUNDY—Minister, it is easy to keep making that point. I will point out that sport
has suffered a series of cuts to the general programs in the meantime. What I am trying to get
from you, Minister, is what you mean by transition funding. Is there some altered state or
sport to come? I have to say there is absolutely—
Senator Minchin—Some what?
Senator LUNDY—Some altered state of sport to come. What is going to change? As you
would be aware, there has been no activity on the front of actually looking at the white paper
that you commissioned, or the government commissioned, in terms of preparing for a future
for sport. So is this really just a filler, because the minister has not got her act together in
responding to the white paper, and the future of Australian sport, post-Olympics? Her
incompetence is costing you $5 million. You need to fill the gap because there is no future
plan for sport.
Senator Minchin—That is absolute nonsense, and I am staggered that you think you can
gain cheap political points by criticising a government decision to grant an additional
$5 million to sport. It seems quite an extraordinary and wasteful line of questioning. The
matter of future policy of course ultimately lies with the government as a whole, and the
government is still considering that matter, as to the timing of that statement.
Senator LUNDY—When will the government respond to the Oakley report, Minister?
Senator Minchin—At this stage, the government’s predilection—and, as I say, it is whole
of government matter—is to ensure—
Senator LUNDY—I am sorry, what is it?
Senator Minchin—A whole of government matter.
Senator LUNDY—What, the response to the Oakley report?
Senator Minchin—Yes.
Senator LUNDY—It is a whole of government matter?
Senator Minchin—Well, obviously.
Senator LUNDY—Sorry?
Senator Minchin—Obviously it is a whole of government matter. The government’s
predilection at this stage is to ensure that we allow ourselves the opportunity to learn all the
lessons of the Sydney Olympics in September before finalising the post-Olympics sports
policy, which seems to me to be eminently sensible.
Senator LUNDY—Has the minister for sport said that?
Senator Minchin—I am not aware of what her most recent statement on the matter is.
Senator LUNDY—It is actually a new argument.
Senator Minchin—I can tell you that that is the position.
Senator LUNDY—You had better make sure your officials send it over to her so she has—
Senator Minchin—She does not have the privilege of appearing before estimates
committees, but I do—
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Thursday, 1 June 2000 SENATE—Legislation E 567
Senator LUNDY—I know. It is such a shame!
Senator Minchin—and I am happy to make the statement.
Senator SCHACHT—We are more than happy to have her turn up.
Senator LUNDY—Has the minister instructed the Sports Commission on how to spend
the additional $5 million in any way?
Mr Hobson—No, Senator.
Senator LUNDY—You have it; it is in the pool?
Mr Hobson—That is correct. The board determined the breakup of funding.
Senator Minchin—We do not have a whiteboard.
Senator LUNDY—Very funny, Minister!
Mr Hobson—The $5 million, of course, Senator, was specifically for elite transition
funding, so to that extent, yes, there was some direction that that money had to be spent on
elite sport.
Senator SCHACHT—That is the second $5 million?
Mr Hobson—The second $5 million, and presumably the first $5 million as well, because
it was OAP.
Senator SCHACHT—I can see that follows OAP funding.
Mr Hobson—Yes.
Senator SCHACHT—The second $5 million was a bit less clear to me in the description
of ‘transition’. You are saying that the direction was that that went to assist the winding-
down—to use the minister’s words—of the elite programs to a different level. So the
guillotine will not fall in October of this year, it will fall on 1 July next year, because that
$5 million then runs out at that stage. Is that correct?
Mr Hobson—Senator, as the forward estimates indicate, that would be the case.
Senator SCHACHT—On that basis, can you give me—Mr Boultbee or Mr Strang—any
idea, in round figures, how many people will have to be displaced from employment in July
of next year when that second $5 million runs out?
Mr Strang—Again, we would need to wait on the responses from the sports in terms of
their plans for next year. Some sports have already indicated they intend to continue high
performance management. Others have indicated they will not. So until such time as they get
back to us—
Senator SCHACHT—So you are saying that the sport will have some flexibility to
indicate the level at which they may wish to use more of the money to employ high
performance managers/coaches?
Mr Strang—Absolutely.
Senator SCHACHT—Others will indicate they would like to put it into international
competition, et cetera.
Mr Strang—That is the case.
Senator SCHACHT—I must declare, again, my self-interest as President of the Australian
Volleyball Federation, so that it is quite clear that that is on the record. You are our biggest
sponsor, Mr Boultbee, Mr Strang and Mr Ferguson. What flexibility is there, within that
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money for the future, when they come back to you—any sport—between what goes on
coaches, high performance coaches, directors, and what goes to athlete support and
international competition? Do you have a parameter of, ‘You can’t have it all on coaches and
you can’t have it all on international competition, there’s got to be a balance’?
Mr Strang—We have given each national sporting organisation a suite of high
performance activities we would like them to consider. They will address those activities and
come back to us with their priorities and we will then negotiate with them about what we
think is a reasonable thing.
Senator LUNDY—What have the national sporting organisations indicated about what the
options are for management of that new funding? What feedback have you had from them?
Mr Strang—About the management of the funding?
Senator LUNDY—Yes, managing this additional money.
Mr Strang—The feedback we have had is limited but reasonably positive in terms of
sports being comfortable with being able to administer their own funds without continually
coming back to the Sports Commission or the AIS for direction or for endorsement of what
their actions intend to be.
Senator LUNDY—The minister and the commission have talked about performance based
funding in terms of some of the ways in which the commission will allocate funds in the
future. Can you explain how that will work?
Mr Strang—What we have done this year for elite sport is to broadly split the funds into
what we call high performances in terms of rankings of individual athletes and teams in the
previous year, and provide a sum of money, depending on the ranking, to the sport. We have
also assessed what we call their high performance infrastructure, which is the number of
coaches, managers, and sports scientists, and their profile in developing their high
performance programs. We have assessed that, and that is also scored, and a monetary amount
is allocated to the sport.
Senator LUNDY—That seems pretty dry in terms of your analysis.
Mr Strang—It is based on the experience of the Olympic Athlete Program. We have found
that, over the six years of the Olympic Athlete Program, 40 per cent of funding went to
national competition, which was performance based, and 60 per cent of funding went for what
we call high performance infrastructure. We are continuing that, because that is what the
sports found was most successful for them.
Senator LUNDY—So you are continuing the funding principles that were developed
under OAP but without the additional money?
Mr Strang—Absolutely.
Senator LUNDY—So can you tell me what impact that has on those national sporting
organisations that have previously sustained participatory and development programs, with
their elite program being funded by the OAP?
Mr Strang—The national sporting organisations will continue to receive separate funding
for participation activities.
Senator LUNDY—Are you able to tell me to what degree their participatory and
development funds will be reduced as a result of inserting into their overall budgets this
performance based requirement for elite funding?
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Mr Strang—I am not able to do that, but I am sure my colleagues will be able to answer
that question.
Senator LUNDY—Thank you.
Mr Hobson—Senator, there is no reduction in funding to national sporting bodies for
participation purposes.
Senator LUNDY—You are going to have to do a better job of explaining it to me because
if we are losing so many millions of dollars from the OAP and the same funding principles for
elite sport that were applied under OAP are now going to be built back into Sports
Commission funding generally—
Mr Strang—No, that is for relief only.
Senator LUNDY—I beg your pardon.
Mr Strang—I think you need to differentiate between elite sports funding and participation
funding. The OAP principles apply only to elite sport. They do not apply to participation.
Senator LUNDY—So you are not diminishing the pool that is available to national
sporting organisations for participation in development programs?
Mr Strang—No.
Senator LUNDY—What percentage of the funding provided to national sporting
organisations characterises elite funding?
Mr Hobson—If you will just bear with us we can tell you, Senator. Close enough to
80 per cent is for elite. Twelve per cent is for participation and the remainder is for outcome 1,
which is infrastructure, Senator.
Senator LUNDY—Is that your breakdown for your allocations of funding or is that what
you look at in terms of the internal finances of a national sporting organisation's spend?
Mr Hobson—That is a breakdown of the appropriation across the three outcomes.
Senator LUNDY—So that is the Sports Commission.
Mr Hobson—Correct.
Senator LUNDY—The Sports Commission is planning to restructure into two separate
units, elite and sports development. Can you elaborate on that restructuring and how that
related to the 80 per cent for elite, 12 per cent for participation and eight per cent for
infrastructure?
Mr Hobson—Senator, I am not sure that you can elaborate too far, in the sense that,
following a fairly detailed review of the structure of the commission, the board considered a
report from a consultant and subsequently made a decision to restructure the commission into
two units or three units, one being development, which includes the participation function of
the commission. The other is into the AIS, which is essentially the scholarship programs of
the AIS, and the third unit is a sports policy area which is the key area for funding and
national sporting bodies and the corporate activities of the commission.
Senator LUNDY—So who did that review?
Mr Hobson—Dr Hugh Watson.
Senator LUNDY—For the board?
Mr Hobson—For the board.
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Senator LUNDY—It was commissioned by the board?
Mr Hobson—It was commissioned by the board.
Senator LUNDY—Was the commission aware that report had been commissioned?
Mr Hobson—The board of the commission commissioned—
Senator LUNDY—Yes, but were officers in the commission aware that they were
currently being looked at for restructuring?
Mr Hobson—Absolutely. It was announced as soon as it was decided to take Dr Watson
on.
Senator LUNDY—How much was that consultancy worth?
Mr Hobson—It was about $36,000.
Senator LUNDY—You are building up a really big list of reports here. When was that
delivered?
Mr Hobson—It was delivered in May.
Senator LUNDY—So it is only new.
Mr Hobson—It is.
Senator LUNDY—Are there any public statements made by the minister in relation to that
restructuring of the Australian Sports Commission?
Mr Hobson—I am not aware of any public statements by the minister but the chairman of
the board has certainly made some public statements.
Senator LUNDY—What is the board’s response to that consultancy? Have they endorsed
the recommendations? Was the announcement that they would embark upon—
Mr Hobson—They have endorsed the recommendation, the report, yes.
Senator LUNDY—It is a decision of the commission to restructure in the way that you
have described?
Mr Hobson—That is correct.
Senator LUNDY—You have said new areas, a sports development area, an AIS
scholarship area, a sports policy area. Can you describe for me the changes that will take
place within the Australian Sports Commission as a result of that restructuring, particularly in
terms of jobs lost, given that we already know that some 50-odd jobs are going to be lost from
the Sports Commission as a result of loss of funding? Was this review done as a result of the
budget squeeze on the Australian Sports Commission? Is that what was part of the
motivation?
Mr Hobson—The board had always intended to review the commission's structure and had
said so quite some time ago, particularly as the OAP came to an end. I think the board had
made quite public the fact that it was going to look at the structure to take it forward beyond
the Olympics and that is essentially what it has done.
Senator LUNDY—So it is all tied in. The cost of employees in the budget drops from
$24.3 million to $23 million, so it is a difference of $1.4 million. According to agency
statements, this is due to cessation of OAP funding and the application of internal
administration efficiency measures. Is that where the 56 jobs are coming from?
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Thursday, 1 June 2000 SENATE—Legislation E 571
Mr Hobson—That is correct. There are approximately 50 positions that we have identified
at this stage, or up to 50 positions, with a full year effect next year of about 33, so not all
those positions of course will cease immediately. There is a progression and the progression is
that there will be up to 17 by 30 June this year.
Senator LUNDY—Really? 30 June?
Mr Hobson—That is correct.
Senator LUNDY—So in the next month. Have they been given notice?
Mr Hobson—There were 10 redundancies and there were seven vacant positions which
will no longer be filled and then up to 22 positions under OAP will cease—and I say ‘up to’
because some of those may continue under the additional transition by 31 December this
year—and there will be a further seven positions which are non-OAP positions which will
cease by 31 December and then a further 11 positions by 30 June next year. Most of those we
hope would be through natural attrition.
Senator SCHACHT—Which brings a total of?
Mr Hobson—Close to 50.
Senator SCHACHT—That is 50 by 30 June next year?
Mr Hobson—Correct.
Senator LUNDY—In terms of the people who are being made redundant, you said 10
people are being made redundant before 30 June this year?
Mr Hobson—That is correct, Senator.
Senator LUNDY—Have they been given notice?
Mr Hobson—They have. With one exception they are all voluntary redundancies.
Senator LUNDY—So you made a call for voluntary redundancies.
Mr Hobson—Not necessarily a call but we looked across the areas of the commission.
Senator LUNDY—So you said, ‘You’re redundant. Do you go voluntarily?’
Mr Hobson—No, not quite.
Senator LUNDY—What did you say to them?
Mr Hobson—It was definitely a mutual thing. People were happy to go.
Senator LUNDY—They were happy to go? They were happy to lose their jobs. Forgive
me, but I find that a little—
Senator SCHACHT—Were these people who held the positions identified in the
consultancy completed in May and they just so happened to be also thinking about leaving,
anyway?
Mr Hobson—Out of the consultant’s report, out of the restructuring, there were identified
changes in the commission and, as a result of that, those positions were identified, yes.
Senator LUNDY—You mentioned some OAP positions which would go between now and
31 December.
Mr Hobson—That is correct.
Senator LUNDY—Can you remind me again of the number? It was some 30-odd?
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Mr Hobson—It was up to 22. It may not be the full 22 because we are still in a stage
where staffing is being looked at with some of the AIS programs, for example. Some people
will be retained.
Senator LUNDY—They will be transferred somewhere else?
Mr Hobson—No, not necessarily—as new sports come in.
Mr Boultbee—Some of the Australian Institute of Sport scholarships were funded by the
Olympic Athlete Program up until the cessation of that program and they will be taken on by
the AIS out of it’s base funding and so some of those who were employed under the OAP
funding will continue to be employed in the AIS with AIS funding.
Senator LUNDY—I might get you to take on notice to provide the details of any positions
that have been transitioned in that way.
Mr Boultbee—Been?
Senator LUNDY—Moved across in funding.
Mr Boultbee—Yes.
Senator LUNDY—In terms of those 22 OAP positions, what sorts of jobs are we talking
about? Can you provide a more graphic explanation?
Mr Hobson—It is a mix of scientific, administrative and coaching positions.
Senator SCHACHT—Coaching positions that are not with the national sports program,
elite programs?
Mr Hobson—Funded out of the OAP program who are directly employed by the
Australian Institute of Sport or Australian Sports Commission.
Senator SCHACHT—Not through—
Mr Hobson—Not through the national sporting bodies, no.
Senator SCHACHT—So they are not the head coach of hockey or something like that,
employed by the hockey program?
Mr Hobson—No.
Senator LUNDY—I am still seeking further elaboration. Are these people aware of the
fact that there are 22 jobs to go in their area? I am really conscious of the fact that in
canvassing this stuff we are anticipating some very bad news for some people.
Mr Hobson—Senator, all those people who are currently occupying OAP positions, and
have known for some time they will cease somewhere between 1 July and 31 December, have
been written to, saying that eventually—whatever the date is—their positions will come to an
end.
Senator LUNDY—Given the review you did was delivered to the commission in May, and
the budget came out in May, does the additional $5 million mean that any of those jobs are
potentially saved? Will any of those up to 50 jobs which were going to go now not go because
of the transitional funding that the minister so aptly described earlier?
Mr Hobson—Senator, as I said before, some of those 22 positions, particularly some of the
coaching positions transferring from OAP to AIS base funding, will be retained.
Senator LUNDY—Is that facilitated because you have access to this special funding, this
special $5 million?
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Thursday, 1 June 2000 SENATE—Legislation E 573
Mr Boultbee—In fact the AIS funding remains the same as it was without OAP funding.
The bulk of the extra $5 million is going to the national sports organisations.
Senator LUNDY—So the AIS is not getting any benefit from the additional $5 million
transitional funding.
Mr Boultbee—It is not specifically earmarked for the AIS, no. It has gone into the elite
funding outcome, which is partly national sport organisation grants and partly Australian
Institute of Sport funding.
Senator LUNDY—Was the commission planning—you mentioned it before I think,
Mr Hobson—to conduct this review anyway, regardless of the budget and the budget cuts? If
you had not had the budget cuts would you have embarked upon a similar process in terms of
job shedding?
Mr Hobson—It is somewhat of a hypothetical question. Firstly, the OAP funding was
foreshadowed as ceasing and the commission had to work on what it knew. The commission
had also foreshadowed itself that it would be reviewing its own direction and, indeed, it has
already produced its own strategic document in terms of Beyond 2000 and had foreshadowed
in that context that it would also be doing some form of restructuring. Obviously the budget
funding has had an impact on that.
Senator LUNDY—When you mentioned the strategic document, were you referring to the
paper commissioned by Hugh Watson?
Mr Hobson—The Beyond 2000 document was a strategic document the commission put
out last year in terms of where it saw the commission going post 2000, yes.
Senator LUNDY—The minister commissioned the white paper about the same time. Yet
another document about the future of Australian sport. Did that Beyond 2000 document
canvass restructuring in the form you have now had to embark upon?
Mr Hobson—It certainly talked about moving towards a similar structure to what has now
been put in place—that is, having key business units.
Senator LUNDY—Did you envisage losing that many jobs in Beyond 2000?
Mr Hobson—I do not believe the document canvassed that at all, no.
Senator LUNDY—When you prepared your strategic future document, Beyond 2000,
there was no obvious appearance of the ability to shed jobs or some excess capability within
the Sports Commission?
Mr Hobson—It was always expected there would be a change in staffing levels. There was
also an expectation—and certainly Dr Watson addressed the issue of the future skill
requirement across the commission, and that has also prompted part of the need to restructure.
Senator LUNDY—Can you clarify for me the figures you mentioned before of what jobs
are disappearing and when?
Mr Hobson—Yes.
Senator LUNDY—Can you provide a document to that effect, providing the explanation
in a cohesive way for the committee’s benefit? You can take that on notice.
Mr Hobson—Yes.
Senator LUNDY—Also could you tell me, within those calculations, how many of those
jobs will actually go before the Olympics?
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Mr Hobson—There are 17, Senator. There are seven vacant positions which will not be
filled. There will be 10 redundancies on 30 June. I think the last one is due to go on 5 July, or
something like that, but certainly at the start of July.
Senator LUNDY—You have taken on notice specifically how many coaches’ and high
performance managers’ contracts terminate on 31 December. What steps are the AIS and the
Sports Commission taking to retain those coaches in Australia and retain that overarching
capability in Australian sport post Olympics?
Mr Boultbee—The key coaches were approached immediately after the budget was known
to ensure they were retained or at least offered a position that would retain them. Immediately
we worked to make sure those who were the key coaches employed by us, employed by the
AIS, were retained where was agreement to retain them with the national sports organisation,
which is the usual thing. Secondly, as pointed out, where an AIS program was funded by the
Olympic Athlete Program and will continue but be funded with AIS funding, we have moved
to retain some coaches there; as many as possible there that we can. The other thing is that
around the country, now that the national sports organisations know the size of their high
performance program grant, they are actively working to come back to the Sports
Commission in August, saying how they will spend their grant. From discussions had with
sports so far, they are very conscious of the need to retain coaches employed by themselves
and also to continue to put some of their high performance program money into state
institutes to retain what were ITC—intensive training centre—coaches. At the moment there
is a lot of work being done to retain as many coaches as possible within Australia.
Senator LUNDY—Could you clarify for me the final point you made about the High Per-
formance money or resources that the national sporting organisations have going into state
academies.
Mr Boultbee—Under the Olympic Athlete Program, a part of it was known as the
Intensive Training Centre Program, where a sport was allocated money specifically to set up
intensive training centres in conjunction with state institutes in their sports. Under the new
system, they can choose to do so within the flexibility they have within their overall High
Performance Program funding grant. So far in the discussions we have had, most of the sports
who have had intensive training centres up until now are intending to keep them, although,
because it is their money and not our money now, they are being much more careful and much
more selective in which ones they will retain.
Senator LUNDY—In terms of the AIS’s ability to (1) fund, I understand, three new
sporting programs, and (2) absorb OAP programs into the AIS, what implications does that
have on your overall budget and resource allocations?
Mr Boultbee—It has brought about some changes in a number of AIS programs. The
changes that have been brought about are partly budget driven but, also, we consider it has
enabled us in some sports to reshape the program in a way that could well be better. For
example, some of the programs that have been residential up until now will now be
non-residential. That is, they will only come into Canberra for camps or extended periods
before major championships. Whilst that is a saving, it is also in many cases a more effective
way, in our view, to run the AIS program. There are a number of programs where we will
reduce the number of athletes and the number of coaches, but that had been foreshadowed in
any case in some of the programs.
Senator LUNDY—Can you tell me which programs were formerly residential which will
no longer be residential here at the AIS in Canberra and, indeed, whether your comments
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Thursday, 1 June 2000 SENATE—Legislation E 575
about the residential programs relate to other AIS centres around Australia or whether it is
something that is specific to the physical institute here.
Mr Boultbee—The Canberra programs that will move from being residential to
non-residential are men’s water polo and women’s soccer and, outside of Canberra, canoeing
will move that way. Also, the new triathlon program will be set up in that way as well, a
non-residential program where the athletes will come to Canberra for extended periods but
not full time.
Senator LUNDY—You mentioned those changes to the non-residential programs being
budget driven.
Mr Boultbee—Partly budget driven.
Senator LUNDY—You mentioned some programs will be reduced or wound back. Can
you tell me which of your sports will have their program funding reduced?
Mr Boultbee—The programs which will have reduced numbers will be athletics—
Senator SCHACHT—In respect of the residential aspect?
Mr Boultbee—Yes, they are three residential programs and they will have reduced
numbers.
Senator SCHACHT—They will remain as residential but they will have fewer people in
residence?
Mr Boultbee—That is right. They are rowing, athletics and gymnastics.
Senator LUNDY—What is the extent of the diminution of those programs? How many
positions will be lost?
Mr Boultbee—Rowing will move from 32 athletes on scholarship during the whole year to
22 on scholarship during the domestic season. That will enable the AIS program to grant
scholarships to more members of the national team when the national team is selected. It is a
reduction for half the year, in reality. Athletics will move from 24 to 15 athletes, but some
other steps are being considered with athletics at the moment to extend the coaching and other
benefits of the AIS to other athletes without having them on a full residential scholarship. The
number of athletes that will be served by the AIS will not be less but the number that are on
full scholarship will be less. The numbers in gymnastics are yet to be determined.
Senator LUNDY—Can you provide them to the committee once those figures become
available?
Mr Boultbee—Yes.
Senator LUNDY—Because we have already heard this evening that the elite funding for
the national sporting organisations will be performance based, and you identified a formula
for that, how will the sports who have had their program reduced in this way in significant
numbers—which I am sure must have in some way, shape or form an impact on their
performance—be in a position to fairly compete for that performance based funding offered
by the commission?
Mr Boultbee—Do you mean AIS sports?
Senator LUNDY—Yes. In terms of the national sporting organisation, you talked about
the formula by which elite sport is allocated. I made some notes earlier.
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Senator SCHACHT—Can I just get some figures. How many positions go from men’s
water polo by no longer being residential?
Mr Boultbee—Do you mean coaching positions?
Senator SCHACHT—You said no longer residential for athletes for men’s water polo.
Did you have athletes in residence in that program?
Mr Boultbee—We had athletes in residence. There will not be any athletes in full-time
residence but there will be athletes coming in from time to time.
Senator SCHACHT—For camps?
Mr Boultbee—Yes.
Senator SCHACHT—The full-time athletes in residence were how many, roughly?
Mr Boultbee—I think water polo was 20 or 22.
Senator SCHACHT—Women’s soccer, roughly?
Mr Boultbee—Twenty.
Senator SCHACHT—Twenty-odd. And canoeing?
Mr Boultbee—About 12. I do not have the exact figures. I can find them in the papers.
Senator SCHACHT—In conjunction with that, they would have also lost coaches’
positions and so on. If they are no longer in residence, would they lose coaching positions,
high performance managers, directors? Would some of those positions go as well because
they are no longer in full residence?
Mr Boultbee—At the present time each of those three programs—canoeing, water polo
and women’s soccer—will lose an assistant coach position, unless the sport chooses to use
some of its high performance program funding for that purpose.
Senator SCHACHT—Again, I presume you cannot give us the figure for gymnastics.
How many are in residence at the moment in gymnastics?
Mr Boultbee—Gymnastics is quite a different program. There are three female athletes in
residence but there are a large number who live in Canberra and their families have moved to
Canberra.
Senator LUNDY—They have moved here specifically.
Senator SCHACHT—How many of those?
Mr Boultbee—At the moment, female scholarship holders in gymnastics are 20 and male
scholarship holders are 14. There will be a reduction on those numbers.
Senator SCHACHT—Could you explain to me what the advice is to those who have
moved here with their kids to live with their families, which is a very nice thing to do with the
family structure? What will they have available to them if they still live in Canberra as far as
being in an elite program or getting elite coaching and servicing?
Mr Boultbee—Those currently in the program will continue to be in the program. We just
will not replace the ones who retire. That will be the main way of reducing it. If that does not
achieve the required reduction, those in Canberra will still be able to use the facility and ob-
tain coaching but not receive the funding to go to competitions.
Senator SCHACHT—You are not stopping the coaching available for those who live in
Canberra?
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Thursday, 1 June 2000 SENATE—Legislation E 577
Mr Boultbee—In gymnastics?
Senator SCHACHT—In gymnastics.
Mr Boultbee—There will still be a residential program in Canberra.
Senator SCHACHT—I see. It will not be—
Mr Boultbee—As big.
Senator SCHACHT—as big. It is only three now in residence; it could get much smaller.
Mr Boultbee—It is a bit of terminology. We will still retain a centralised program in
Canberra where the athletes reside in Canberra. Three of them reside at the institute residence
and the others reside with their families at the present time. But the number of scholarships
will be reduced.
Senator SCHACHT—They will be reduced through attrition?
Mr Boultbee—Substantially through attrition.
Senator SCHACHT—Some would be reduced anyway because there is a judgment that
their performance is not at the required level?
Mr Boultbee—This has yet to determined.
Senator SCHACHT—It happens in all sports.
Mr Boultbee—Yes. It has yet to be determined but if we need to make further reductions
and the athlete is of an adequate standard and wishes to continue they will have training
rights, the opportunity to use the institute coaches and facilities for training purposes without
any funding attaching to it.
Senator SCHACHT—Whether it was partly budget driven, or partly restructuring to get a
better outcome—and you would have done this anyway—what is the total saving of those six
sports and a mixture of complete residential abolition, part reduction, et cetera? What is the
total saving to the AIS?
Mr Boultbee—In dollar terms?
Senator SCHACHT—Yes. Fewer people eating food—and less DAS money, I suppose.
Mr Boultbee—I would have to take that on notice. There would be 78 fewer full-time
residential athletes, and that has an effect on the amount of sports science and sports medicine
that is provided and so on. If you really want to, we can do the calculation.
Senator SCHACHT—I think it would be useful, not only for the estimates committee but
I think for the sports community. I am interested that you said, Mr Boultbee, part of it is
budget driven and part of it is driven by a better assessment of the needs of the sport, of how
to handle the sport, which I think is fine. In the end your assessment and my assessment as to
how much is budget driven and how much is driven by the needs for restructuring to give a
better outcome for the sport I suppose they really come down to a matter of judgment. You
could not separate the two, could you?
Mr Boultbee—No, it is hard to separate the two.
Senator LUNDY—Just on that point, how many athletes in residence are there at the
moment?
Mr Boultbee—Actually in residence, at the residence in Canberra, I do not know the exact
number. It is approximately 175.
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Senator SCHACHT—And 78 are leaving out of that 170?
Mr Boultbee—Not all those 78 are in residence. Many of them live out in private housing
in Canberra.
Senator LUNDY—But you will lose that many athletes on scholarship?
Mr Boultbee—On full-time residential scholarship, but we are taking on three new pro-
grams where athletes will come on scholarship, but they are not programs that will be full
time in Canberra. We are taking on sailing, women’s cricket and triathlon. But sailing and
women’s cricket will not have a significant presence in Canberra.
Senator LUNDY—I am just trying to get an idea of what is being reduced here in
Canberra, so can you give me an indicative figure as a proportion of the AIS’s athlete
scholarships that will be removed from Canberra and not replaced in proportional terms by
new programs here or anywhere else?
Mr Boultbee—We can prepare those figures for you, yes.
Senator LUNDY—It seems to me that there is a significant diminution of the facility here
in Canberra in athlete terms and certainly in residential athlete terms.
Mr Boultbee—There is a change of the use of the facility to a degree. There are fewer
full-time scholarship holders but more camps coming in.
Senator LUNDY—Yes, I appreciate that, Mr Boultbee. You have been director for a
number of years now. The AIS facility here in Canberra is constructed as a residential
institution, is it not?
Mr Boultbee—It is a residential institute but it also serves a very important role as a
national training centre for squads that are not in residence at the institute. I expect what we
are saying is that the emphasis is changing slightly, not hugely, to the second role.
Senator LUNDY—It has been loosely described by me as well as other people observing
the evolution of the AIS—and I think it was the National Council for Elite Sports—as the
evolution of the AIS into effectively a camp based institute, bringing specialist services on a
periodic basis to the various sports. Is that the direction in which you have been taking the
AIS, in light of these budget cuts?
Mr Boultbee—There is a movement in terms of numbers slightly away from residential
scholarships in favour of national training centre usage of the facility. But it is not really of
great significance. The AIS remains substantially a residential institute, and the only
residential institute in Australia, and that is its major role and it will continue to be seen as
such. The report that you are referring to from the National Elite Sports Council is
substantially a report from state institutes.
Senator LUNDY—That is right, yes.
Mr Boultbee—In a way they would prefer to see the AIS reduced to being just a training
centre. That is not happening.
Senator LUNDY—I am reassured to some degree by your comments. Is that a continuing
campaign on behalf of the National Elite Sports Council, to reduce the role of the AIS and the
residential programs there?
Mr Boultbee—I think there is a better understanding by the state institutes of the role that
the AIS plays. Also a number of the programs that the AIS are continuing with and the new
programs will be joint programs with state institutes, and the cooperation between all the
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Thursday, 1 June 2000 SENATE—Legislation E 579
institutes is improving, and the system of athlete support throughout Australia is improving
accordingly.
Senator LUNDY—How contingent is the AIS on the decisions of the national sporting
organisations in how they shape the high performance or elite aspect, of their individual grant
allocations by the Sports Commission?
Mr Boultbee—The sports have been given two figures. One is their high performance
program and the other is a figure for their AIS program. The figure for their AIS program
does not get paid out to the sports. It is used here to run the AIS program but the sports have a
significant say on the shape that the AIS program has to ensure that it fits into the whole elite
pathway of the sport. But once that is decided, the funding and the program is managed by the
AIS.
Senator LUNDY—That takes me back to the question I asked earlier. There were two
allocations within the elite funding aspects for the national sporting organisations. I think
60 per cent was related to high performance infrastructure and 40 per cent related to—
Mr Strang—International competition based on performance.
Senator LUNDY—Can you tell me, with the international competition based on
performance, if you had more athletes competing internationally you would have a greater
opportunity to perform under that 40 per cent benchmark, wouldn’t you?
Mr Strang—Probably, yes, assuming more money is spent on national competitions.
Senator LUNDY—I am being a little rhetorical. It would make sense that if you had more
people competing in medal events at the world championships you would have better odds in
actually achieving some medals. In terms of those sports, I think the point I wanted to make is
that where sports have a number of athletes sponsored through a scholarship program re-
duced, that actually undermines their ability to secure funding through that 40 per cent high
measure. Is that a fair comment?
Mr Strang—Yes.
Senator LUNDY—In terms of the 60 per cent, what was that?
Mr Strang—That was for high performance infrastructure, their coaching, sports
management, sports science, technology.
Senator LUNDY—They have to demonstrate to you that they are capable of delivering a
high performance infrastructure to the Sports Commission and they are rated on that and
allocated funds accordingly?
Mr Strang—Yes.
Senator LUNDY—If they lose coaches and lose high performance managers between now
and August, when they are due to apply—
Mr Strang—They are due to come back to us by the end of August.
Senator LUNDY—they could actually be disadvantaged under that criteria as well,
couldn’t they, if they lost people between now and then?
Mr Strang—The high performance infrastructure component is based on the quality and
effectiveness of the elite pathways. We have assessed the infrastructure on the basis of
performance to date and given them a figure to continue that high performance infrastructure
in 2000-01. At the end of 2000-01, they will be assessed on their performance this year in
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terms of whether they have reached their benchmarks and they will be then given a different
amount of money, depending on whether they are more successful or less successful.
Senator LUNDY—In terms of sports that are up and coming and striving to improve their
performance at an international level or at a national level, this formula seems to me to place
them at a disadvantage because they perhaps do not have performance indicators allowing
them access to this elite funding. In turn they cannot develop their elite capability if a sport is
striving to become a world competitor or world’s best. What do you have in your program
funding which can allow sports to develop a higher level of performance at a national level in
this funding?
Mr Strang—It is a difficult question to answer.
Senator LUNDY—If the answer is ‘nothing’, you are allowed to say that, too.
Mr Strang—It will depend on how the sports apply their funding. The experience we have
drawn on is the athletic program where we have done significant reviews on an annual basis
and then every two years on performance. The sports have been apprised of the fact, before
the year starts, that they are expected to reach a certain level of performance at the end of the
year in terms of international competition results. When they have not met those results, there
has been a decline in funding for that area.
It does not necessarily mean there will be a continuing spiral of performance because
performance is irregular and it depends on the critical mass of athletes coming through. You
might have an outstanding talent which will bring the sport up just on the basis of one
performance. Again, it is difficult to speculate exactly how it is going to happen but obviously
when there is less money around there is going to be less activity, there will be probably less
coaches, less high performance managers, less use of sports science over the next year.
Senator LUNDY—Yes. It is a vicious circle for those sports that are not achieving. They
actually have no mechanism to achieve, to strive.
Mr Strang—It will be difficult for them to achieve the level where they will get increased
funding for the years to come.
Senator LUNDY—Isn’t this building a system where the sports that are currently
performing well are the ones most able to attract the levels of funding to sustain that
performance and the sports that are not performing well currently are at an active
disadvantage because they will find it difficult to access basic levels of funding to grow their
sport and achieve those elite levels? Remember, of course, that world class sport is
expensive, and certainly I am aware, as you are, that funding international programs does in
fact cost a lot of money. Are you building a discriminatory system for funding of sport at the
elite area?
Mr Strang—We take a holistic view of sport and we are not just concentrating our activi-
ties on elite sport.
Senator LUNDY—No, but this question is, with respect, to elite endeavours across a range
of different sports. I was not referencing participatory programs. I am talking about
discrimination amongst elite sport and the different levels being achieved at an elite level
amongst sport, if you know what I mean.
Mr Strang—We have put some funding aside for this year for what we call special
initiatives, which will allow some of those sports which believe they have been
disenfranchised to come back to us with good ideas for them to improve their management,
their elite programs or whatever. It is only a very modest amount.
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Thursday, 1 June 2000 SENATE—Legislation E 581
Senator LUNDY—How much is that?
Mr Strang—About $800,000.
Senator LUNDY—That is less than you would allocate to any of the big national sporting
organisations, isn't it?
Mr Strang—In some cases, yes.
Senator LUNDY—It is not much. What are you doing to ensure we do not end up in a
country where, for example, the sports that win gold medals at the Olympics are the only ones
that achieve decent levels of funding from the government and the rest rot?
Mr Strang—We have been working with national sporting organisations on a program
called Managing Improvement, which allows us to provide support and assistance for them to
look at their governance management and operational arrangements where we can actually
improve the way they market themselves and look at sponsorship opportunities, et cetera. We
are looking at not only on the field of play activities but how the sports can actually improve
the way they do business and become more effective in governing their own affairs and
raising money for their own purposes.
Senator LUNDY—That might improve their chances under the 60 per cent proportion—
that is, the infrastructure proportion within that sport—but it will not improve their chances
under the 40 per cent relating to international performance, will it?
Mr Strang—Not necessarily, no.
Senator LUNDY—There is still some structural discrimination in there against the sports
that perform less well at international level, isn’t there?
Mr Strang—I think there is always difficulty in maintaining equity, particularly if you are
a national sporting organisation that believes you require more funding to be able to build
when your performances are not as good as others. It is always difficult in terms of balancing
the bottom line across the sports to make sure that everyone has the same opportunity. But I
think it is also realistic to say that never has sport been funded fully by government and there
has always been an expectation that sports would generate their own funds.
I recall that in 1993, when Sydney was awarded the Olympic Games, the Australian
Olympic Committee then asked sports for an ambit claim of high performance program
funding to get them to Sydney. It was something like $487 million. As long as the string was
then, obviously we could not afford to afford to provide that level of subsidy and that will
always be the case. Their ask will always be more than the government can provide.
Senator LUNDY—In terms of you taking the opportunity to provide that explanation,
Mr Strang, I would like to add something on it. The role of public investment in sport is for
the purposes of ensuring there is some equity across the distribution of public money, not the
enhancement of those already with some advantage.
Senator SCHACHT—On this list of these sports, Mr Strang and Mr Boultbee, I have
declared my interest and as a result I am aware of certain letters you have sent out to sports,
indicating those who have various categories of funding for the future post the Sydney
Olympics. The sport I am president of is quite pleased with the allocation for the future and
the discussions we will have. First of all, I understand you have categorised the various sports
funding from a category A down to about a category E. How many sports are in category A,
which I think is the top category?
Mr Strang—There are five.
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E 582 SENATE—Legislation Thursday, 1 June 2000
Senator SCHACHT—What sports are they?
Mr Strang—This has some mobility built in over the years but at present it is basketball,
men’s and women’s hockey, swimming and netball, and there are some professional sports—
Australian football, cricket, rugby league and rugby union.
Senator SCHACHT—They met a certain criteria, which Senator Lundy spoke about, and
are obviously very successful in one form or another, winning medals or potentially winning
medals. The next category is B. How many sports in B? Can you read them out.
Mr Strang—In Olympic sports, the B categories are athletics, baseball, cycling,
equestrian, gymnastics, rowing, sailing, men’s soccer, softball, triathlon, volleyball and water
polo. In the non-Olympic sports there are men’s and women’s bowls, women’s cricket, skiing,
squash, surfriders, tenpin bowling and water skiing. In the professional sports it is basically
golf.
Senator SCHACHT—Can you table that list?
Mr Strang—Yes, certainly we can table the list.
Senator SCHACHT—When you put in those categories, you have certain criteria you
have to reach to get into the category to be given the funding.
Mr Dainer—The category is based on four criteria: the size of the sport in Australia, the
size of the sport internationally, the performance of the sport internationally and a loose
description of how important the sport is to Australians.
Senator SCHACHT—There is no discrimination, once you meet those categories,
between whether you are an Olympic sport or a non-Olympic sport.
Mr Dainer—No, there is not.
Senator SCHACHT—Coming down the list to E, would a category E sport have any
chance to have even a camp at the AIS once a year?
Mr Strang—I think there are differences.
Senator SCHACHT—You would give some assistance?
Mr Strang—Yes, they all have the capacity.
Senator SCHACHT—The point Senator Lundy made was, if you don’t watch out this
thing becomes self-fulfilling. You will always be at category A because you will always get
the funding to keep you at category A. If you are down at category E you will never be able to
break out unless you get the funding for coaching sport and development and whatever. In
your criteria, which you have just described, can you say that could take account of
Senator Lundy’s point?
Mr Strang—We have started to take those things into account. For instance, from 2000-01
we have kept the professional sports of Australian football, cricket, rugby league, rugby union
and golf down to very modest levels of funding simply on the basis they have the capacity to
generate their own funds. The board has indicated it is going to review that even further in the
next financial year.
Senator LUNDY—What is the impact on talent identification programs? I think they
usually come through either the ITCs or the national sporting organisation itself.
Mr Boultbee—The amount the Australian Institute of Sport has been putting into the talent
identification program has been reduced over the last two to three years. I think the budget
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Thursday, 1 June 2000 SENATE—Legislation E 583
figure is similar. The majority of the money in talent identification programs is now being
provided by the states who are actually conducting them. The Australian Institute of Sport
does the coordination and some of the research but not the actual identifying.
Senator LUNDY—Can you tell me what complaint, if any, there will be as a result of
these budget cuts on the sports science professionals and support staff within the AIS?
Mr Boultbee—The level of funding for the sports science/sports medicine division of the
AIS is reduced by the removal of the Olympic Athlete Program funding of about $1.7 million.
The level of sports science/sports medicine funding is at the level prior to the Olympic
Athlete Program. That has led to some staff finishing after the Olympics, but they were the
staff hired under the Olympic Athlete Program.
Senator LUNDY—Were they mentioned in the overall figures related earlier?
Mr Boultbee—Yes, they were.
Senator LUNDY—Have those individuals been notified as yet?
Mr Boultbee—They have.
Senator LUNDY—How many sports scientists are we going to lose?
Mr Boultbee—I think it is about seven or eight.
Senator LUNDY—Out of how many?
Mr Boultbee—I think there are 60. That is just off the top of my head.
Senator LUNDY—Is that in that whole group, or are there other professionals in that
sports medicine area?
Mr Boultbee—The people that are lost are not all senior scientists or medical personnel.
There are some technical and support personnel included in those numbers.
Senator LUNDY—I certainly do not want to put anyone in a difficult position. I
understand both the position of executive director of the Sports Commission and the director
of the AIS’s contracts are due for completion soon. Is that the case?
Mr Boultbee—That is the case, Senator.
Senator LUNDY—What is the timing for that? When are those contracts due to expire,
Mr Crick?
Mr Crick—The contract for the executive director of the Australian Sports Drug Agency
is towards the end of this year. I will take counsel from Mr Ferguson. I think the executive
director of the ASC is early next year.
Mr Boultbee—We can probably tell you, Senator.
Mr Ferguson—My contract ends at the end of this year, on 31 December, and
Mr Boultbee’s ends, I think, on 10 or 12 September.
Mr Boultbee—The 18th.
Senator LUNDY—When do the Olympics start?
Mr Boultbee—The 15th.
Mr Ferguson—We are extending him until the end of the Olympics.
Senator LUNDY—What is the process for advertising for these positions?
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Mr Ferguson—My position has been advertised in the press a week or so ago. The
director of the AIS will be advertising together with the spill of all the positions at that level
later in the year.
CHAIR—It is time for us to suspend for the dinner break.
Proceedings suspended from 6.30 p.m. to 8.00 p.m.
Senator LUNDY—I have some questions relating to the positions that are going to be
spilled in the forthcoming period. I was asking some questions about the executive director of
the Australian Sports Commissioner position currently held by Jim Ferguson. I understand the
contract for Mr Ferguson’s position finishes on 31 December?
Mr Hobson—That is correct.
Senator LUNDY—In the public statement, which has the Chairman of the ASC’s contact
number on it, it makes the statement in the second paragraph that Mr Ferguson will leave the
Commission in September this year. Is it December, September or what is happening there?
Mr Hobson—His contract falls due in December and Mr Ferguson made clear his intent to
retire. That needs to be said. It is not an issue of his contract not being renewed but, more
importantly, Mr Ferguson retiring from the Commission. As I understand it, it is his intention
to leave immediately following the Olympic Games. As he has leave owing to him, and so on,
it is his intention to leave some time in October, I think.
Senator LUNDY—Thank you for clarifying that. I had presumed that Mr Ferguson was
retiring, as you pointed out. Chair, just out of interest, it is very unfortunate that Mr Ferguson
has gone, because this may well have been his last appearance before the Senate estimates in
his capacity as the Executive Director of the Sports Commission. I would like to acknowledge
that on behalf of the committee. He has survived—if that is the appropriate word; I am
referring to the statement in terms of the search—something like seven sports ministers, and
that is quite an achievement in any sense. I would like to acknowledge the work of Mr
Ferguson in the context of this committee.
Senator Minchin—I appreciate your sentiments. I accept the blame for suggesting to him
that, in his condition, he should go home.
Senator LUNDY—We are all very sympathetic to his condition. Can you clarify whether
that position is being advertised both nationally and internationally?
Mr Hobson—At this stage the position has been advertised in at least four newspapers
nationally. The company that has been contracted has been contracted to look more broadly
than just through the newspaper response, so it does not exclude the possibility of looking
internationally.
Senator LUNDY—And that is the executive search organisation that has been contracted
for that?
Mr Hobson—That is correct.
Senator LUNDY—Is that Sport Employment Australia Pty Ltd?
Mr Hobson—That is right.
Senator LUNDY—This public statement is dated 17 May, so this company is obviously
engaged for a period of time—until they find someone.
Mr Hobson—Yes.
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Thursday, 1 June 2000 SENATE—Legislation E 585
Senator LUNDY—Will the salary and conditions or the role and title of that position be
changed in any way?
Mr Hobson—Not that I am aware of. The salary is set by the Remuneration Tribunal. The
title is executive director, although they have referred to it as chief executive officer in the
advertisement.
Senator LUNDY—Why is that? Is it because it is trendier now to call people CEOs rather
than executive directors?
Mr Hobson—Yes, I think that is part of it.
Senator LUNDY—In terms of the executive search organisation being granted the
opportunity to search overseas, what flexibility is there in the Remuneration Tribunal package
to negotiate the salary?
Mr Hobson—The Remuneration Tribunal sets the salary package and they are also
examining the way in which statutory office holders are remunerated. Some months ago we
wrote to the Remuneration Tribunal indicating to them that we would want more flexibility in
being able to offer a range for the new executive director. It will be up to us to put some sort
of case to the Remuneration Tribunal in the very near future to look at that as well. At this
stage, the remuneration is quite clearly set by the Remuneration Tribunal.
Senator LUNDY—What about Mr Boultbee’s position as Director of the Australian
Institute of Sport? Is that position being advertised?
Mr Hobson—As Mr Ferguson said, the board intends to advertise all of the senior
executive positions at the commission, including the position that Mr Boultbee holds.
Senator LUNDY—So who else does that mean?
Mr Hobson—There will be the new position of General Manager of Sports Development;
the position in charge of the sports policy area; the corporate position; and the Assistant
General Manager of Elite Sport in the AIS.
Senator LUNDY—Will you have an executive director of the AIS?
Mr Hobson—There is a director of the AIS.
Senator LUNDY—So it is that last position you mentioned, which is the AIS, and what?
Mr Hobson—It is titled the Assistant General Manager of Elite Sport within the AIS
scholarship program.
Senator LUNDY—I am sorry; you have confused me. The three areas—sports
development, the corporate policy aspect and the AIS—are the three senior positions?
Mr Hobson—All of the positions that are being advertised are: Director of the AIS;
Assistant General Manager of Scholarship Programs within the AIS; General Manager of
Sports Policy; Assistant General Manager of Corporate Support; and General Manager of
Sports Development.
Senator LUNDY—Have any of those positions been advertised yet?
Mr Hobson—No.
Senator LUNDY—Do all of those contracts conclude on the same date?
Mr Hobson—There is only one contracted position at the moment, and that is Mr
Boultbee’s position. The others are employed within the terms and conditions of the enterprise
agreement for the Australian Sports Commission.
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Senator LUNDY—Is there going to be any change in the nature of the contract of the AIS
Director? Is it still going to be a contract or is it going to change in some way?
Mr Hobson—I think it is the intention of the board that they will all be contracted
positions.
Senator LUNDY—They will all be contract positions?
Mr Hobson—All contracted within the terms of an Australian workplace agreement.
Senator LUNDY—Yes, unless there is an election in between perhaps. What is the
selection process for all of those positions in such a spill? Were they scheduled to be
readvertised at that point in time, or has this come as a direct recommendation of the review
conducted by the commission?
Mr Hobson—It was a recommendation of the consultants that they should be.
Senator LUNDY—Really?
Mr Hobson—Yes.
Senator LUNDY—That is quite unusual then, isn’t it?
Mr Hobson—I am pretty certain it is within the report and accepted by the board.
Senator LUNDY—Is there some implication with respect to that recommendation that
there is some dissatisfaction within the management strata of the Sports Commission?
Mr Hobson—No; I do not think that is the case at all. It is more the issue of ensuring that
the competition for those positions is open and there is a proper process that is gone through. I
do not think there is any suggestion, that I am aware of, that there is any dissatisfaction with
the performance of the people. Indeed, the compelling argument is that they are significantly
different positions to what exists at the moment.
Senator LUNDY—Can you take on notice providing me with the management structures
as they exist at the moment and the proposed changes to the structure as approved by the
board as a result of the review.
Mr Hobson—Yes.
Senator LUNDY—Can you also provide me with details as to the remuneration for the
new structure as compared to the old structure.
Mr Hobson—We can do that. I should say that the remuneration for all of the positions,
with the exception of the director of the AIS which is also subject to Remuneration Tribunal,
is being determined. The board has asked that Cullen Egan Dell actually look at the
remuneration levels for those positions as well and report back to them.
Senator LUNDY—That who look at it?
Mr Hobson—Cullen Egan Dell, which is a company that specialises in job remuneration
analysis and procedures.
Senator LUNDY—Will performance pay criteria apply to those people who fill those
positions?
Mr Hobson—We can tell you what the performance criteria will or will not be, if you like,
in due course once we get the report back from Cullen Egan Dell.
Senator LUNDY—Yes. I am just curious as to the relationship with the performance pay
criteria that various agencies and departments have implemented across their SES.
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Thursday, 1 June 2000 SENATE—Legislation E 587
Mr Hobson—The only two positions that obtain performance pay within the commission
at the moment are the two positions of the executive director and director, both of which are
subject to the Remuneration Tribunal and obviously fall within the determination. There are
no other positions within the commission that obtain performance pay as such.
Senator LUNDY—Right. But will there be after this restructuring with those five or six
positions under contract?
Mr Hobson—I am not sure if that is the specific intention of the board, but they have
asked Cullen Egan Dell to report to them on the appropriate remuneration for those positions.
Senator LUNDY—Is there going to be a spill in the department as well?
Mr Hobson—No.
Senator LUNDY—How many applications were received for that public relations position
that you advertised in April, Mr Crick?
Mr Crick—We got about 24.
Senator LUNDY—How many were short-listed?
Mr Crick—We are still finalising that.
Senator LUNDY—It is now June. Is there any reason why there is such a delay?
Mr Crick—It is almost finalised. There have been 24 fairly lengthy applications to go
through and give due consideration. It does take some time to do it justice, Senator.
Senator LUNDY—You have not had to do it yourself, personally?
Mr Crick—I have done it myself, with the other person on the selection panel.
Senator LUNDY—Right. Who is on the selection panel?
Mr Crick—A person by the name of Jane Harris, who is a public relations officer in
another department.
Senator LUNDY—Which department?
Mr Crick—The Department of Transport and Regional Services.
Senator LUNDY—Why is she on the selection panel?
Mr Crick—She has an intimate knowledge of the job because she used to occupy it—
Senator LUNDY—Oh!
Mr Crick—and she is at an appropriate level.
Senator LUNDY—She is now where?
Mr Crick—Regional Services.
Senator LUNDY—When will the appointment take place?
Mr Crick—When we go through the applications and do the interviewing.
Senator LUNDY—What are you aiming for?
Mr Crick—Probably a few more weeks.
Senator LUNDY—You are nearly short-listed so you are nearly at interviewing stage?
Mr Crick—Yes.
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Senator LUNDY—Last estimates you said that a public relations manager does things like
drafting media releases which are then punted up to the minister’s office. Can you give me an
idea of the specific duties this person will do in return for $75,000 a year?
Mr Crick—Drafting media releases is but a very humble part of the job, Senator.
Senator LUNDY—That is all you had to offer last time around.
Mr Crick—I would doubt that that was all I had to offer. The job essentially is mapping
out a strategic public relations plan for the Sport and Tourism Division, working with clients,
helping stage events that we might do, overseeing the publication of a lot of information
documents and periodicals, generally a public relations function for Sport and Tourism within
the department.
Senator LUNDY—I asked last time and I will ask again: to what degree will that person
be required to do duties related to the minister’s office?
Mr Crick—Essentially the functions are of a departmental nature, but obviously there is a
certain degree of serving the minister of that day by providing factual information and draft-
ing policy type press releases, but not of a political nature.
Senator LUNDY—So they will be drafting press releases for the minister’s office?
Mr Crick—They will be drafting press releases that could or would form either part or
whole of a press release the minister might put out, if it is of a policy or factual nature.
Senator LUNDY—Organising events, you mentioned—for the Sports Commission or for
the minister?
Mr Crick—To give you an example, we had the launch of the Drugs in Sport strategy,
which was done here in Parliament House, so inviting people, arranging that and arranging
the due publicity is a function of the public relations area.
Senator LUNDY—But the minister launched it.
Mr Crick—The minister attended and launched it, yes.
Senator LUNDY—Where does that person spend the majority of their time?
Mr Crick—In Canberra, in the office.
Senator LUNDY—Which office?
Mr Crick—In the office in the department.
Senator LUNDY—Has the department filled the policy advisers positions advertised in
April?
Mr Crick—Not as yet. They are fairly close to completion as well.
Senator LUNDY—Where are they at?
Mr Crick—They are all in the department.
Senator LUNDY—What is the remuneration for those again? I cannot remember.
Mr Crick—They are standard public service positions. We advertise at the APS 4, 5, and 6
level.
Senator LUNDY—At what stage is that selection process at?
Mr Crick—That is at the stage where some people, I think, have been identified for
selection and there will be a process of interviewing others.
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Senator LUNDY—Can you provide me a full description and details of duty statements of
each of the positions that you are either in the process of filling or have filled or will be going
to fill?
Mr Crick—We can provide you with the generic duty statement for people who are
employed at that level.
Senator LUNDY—Can you provide me also with details about who was on the selection
panel for the policy advisers, and how many applications were received. All in all, how many
positions are you going to fill?
Mr Crick—We had this discussion last time.
Senator LUNDY—Yes, I know. I am asking you to refresh my memory.
Mr Crick—We do not have positions, as such.
Senator LUNDY—No, but you have something because you have got an ad in the paper.
We had that discussion too, from memory.
Mr Crick—That’s right. We will have jobs to do and a budget to oversee that. We will be
making a judgment, taking into account the calibre of the people who applied, the level and
nature of the work identified, and the—
Senator LUNDY—What is the maximum number of people you can employ with the
budget you have available?
Mr Crick—That is not a judgment I could make easily offhand because as we enter into a
new financial year we are in the process of making assessments as to what our priorities are,
what our costs will be and what our salary rate will be.
Senator LUNDY—Excuse me, Mr Crick, you have advertised for these positions. Are you
misleading applicants?
Mr Crick—Absolutely not.
Senator LUNDY—Can you answer the question and stop equivocating.
Mr Crick—We did not actually specify a number of jobs that we would be doing. I cannot
give you a number until we finish the completion of the process.
Senator LUNDY—So you are advertising and interviewing concurrently to actually
establish whether or not you are going to employ anybody?
Mr Crick—I think you can make a safe assumption that we will be employing people
across those levels.
Senator LUNDY—Very good. Does that mean you will definitely be employing one
person?
Mr Crick—If we are employing people, the number is likely to be greater than zero. But I
cannot tell you what the maximum number will be.
Senator LUNDY—We will work on the basis that you are going to at least one person.
Because you used the plural, is there a reasonable assumption that you are going to employ a
minimum of two?
Mr Crick—There is a reasonable assumption we will employ a number in the plural. But I
would be misleading you if I tried to speculate on a number because I just do not know.
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Senator LUNDY—That is ridiculous. I am sorry, Mr Crick, but I just find your answers
quite pitiful. In terms of advertising at the APS 4, 5 and 6 level, there is a strong implication
there that you are going to employ at least three people. If you have no idea about how many
and continue to answer questions on this basis, I am going to have to actually ask the chair to
direct you to answer that question.
Mr Crick—We could creep up to three, four, five and six, but—
Senator LUNDY—You are the one playing games, Mr Crick. Just answer the question!
Senator Minchin—Don’t abuse him, please, Senator Lundy. He is doing his best to answer
your questions.
Senator LUNDY—You are sitting there listening to this, Minister. With due respect, I
think you have a responsibility to get your officers to answer questions appropriately.
Senator Minchin—There is no need for you to be so rude to the servants of the public.
You are more likely to get a decent answer if you are polite to the witnesses.
Senator LUNDY—I am doing my best.
Mr Crick—I am certainly not trying to be difficult. We have advertised across APS 4, 5
and 6. We did not specify any number of jobs that we would be filling. We have to make a
judgment on the basis of the calibre of the people, the various levels at which that calibre
exists, and how our job levels can fit that. That number could be anywhere between the two
we mentioned and some higher number. But if I were to speculate on a higher number I might
be in difficulties if we do not live up to that.
Senator LUNDY—Not with this amount of qualification, I assure you.
Mr Crick—So the number could be two, three, four or five, I just do not know.
Senator LUNDY—With those appointments, are you in a position to make sure that the
people losing their jobs at the Sports Commission are aware of those vacancies, given that
they are losing people and you are employing people?
Mr Crick—The jobs are advertised in the Government Gazette and in the newspaper. They
are widely advertised.
Senator LUNDY—But you would obviously consider for those positions people from the
Sports Commission who had not completed their employment but who were due to be made
redundant? Nothing would be stopping you from pursuing those people?
Mr Crick—My understanding from the earlier discussion we had was that there was only
one person that was not happy to take a voluntary redundancy.
Senator LUNDY—I did not say voluntary or otherwise—they are becoming redundant. I
just want some reassurance that there is absolutely no blockage to those people applying for
those positions within the department.
Mr Crick—Under the Public Service Act, anybody in Australia with Australian citizenship
is entitled to apply for those positions.
Senator LUNDY—I hope some of them find a job. I want to ask some questions now
about the participation programs. I would like to get some details about the benchmarks or
targets for increasing participation within the Australian Sports Commission.
Ms Oldenhove—Is this in relation to the collection of the data?
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Senator LUNDY—There is a lot to go through. Perhaps, in the first instance, I should be
specific and talk about women. What targets or benchmarks do you have for increasing the
participation of women?
Ms Oldenhove—Certainly, the benchmark is the statistics that we get through the
Australian Bureau of Statistics. The 1997 and the 1999 statistics show that there has been a
very slight increase in the participation of women, yet women’s participation still falls greatly
behind the participation of men.
Senator LUNDY—What are the current statistics?
Ms Oldenhove—I would have to take that on notice. I have not got them in front of me.
Senator LUNDY—I know they are certainly figures that are reported on. In terms of the
resources for women’s sport within the commission, it seems like years ago now that we
heard that the women’s sports unit was mainstreamed within the Sports Commission. Can you
give me a very brief report on what is happening in terms of the management of the resources
that facilitate that program?
Ms Oldenhove—Within the participation division, we still have a dedicated staff officer
for women in sport. One of her tasks is to look at working with other elements of the
participation division to address issues to do with the participation of women. For example,
she has recently been working very closely with our indigenous sports program, and we
recently held an ‘indigenous women in sport’ conference in Sydney. Her job is to make sure
that the issue of women is addressed not just by a single unit but throughout the participation
division.
Senator LUNDY—In terms of the resources allocated in the next financial year, do you
have an indication of whether that particular program within the commission has more or less
resources allocated to it?
Ms Oldenhove—It maintains the level of resources it currently has.
Senator LUNDY—What about indigenous sport?
Ms Oldenhove—For the indigenous sports program, we originally had a four-year
appropriation of $1.5 million from the government. That appropriation directly to the Sports
Commission ceases on 31 June.
Senator LUNDY—This year?
Ms Oldenhove—Yes. Despite this, the commission has maintained its commitment to
indigenous sports, and through its total budget has allocated an amount of $1.1 million for
indigenous sport specifically.
Senator LUNDY—Over how many years?
Ms Oldenhove—That is on an ongoing basis. That is part of our appropriation to the
participation division. In addition to that, we have had for the past four years a contract
arrangement with ATSIC to the tune of $2.5 million. We have been able to continue that
contractual arrangement for the next four years, which will continue an additional $2.5
million for indigenous sports in a partnership with ATSIC. In addition to that, this year we
have received a sum of $500,000 through the Olympic aid program which has been targeted
specifically for indigenous sport. In addition to that, this year we have received a sum of
$500,000 through the Olympic aid program which has been targeted specifically for
indigenous sport.
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Senator LUNDY—The reduction from $1.5 million to $1.1 million—was it?—when you
lost a specific budget allocation and the commission found that from within its—
Ms Oldenhove—In a sense, all the specific budget allocations were lost into a new recon-
figured base budget, and the commission has appropriated $1.1 million from that base budget.
Senator LUNDY—So there has been a drop of $0.4 million.
Ms Oldenhove—Correct.
Senator LUNDY—Is that money on an annual basis or over four years?
Ms Oldenhove—That is its new annual figure.
Senator LUNDY—What impact will that drop of $400,000 mean to that particular
program on an annual basis?
Ms Oldenhove—We have done a fairly significant review of the indigenous sport program
over the last six months. We have identified one or two of the programs that were probably
not as successful as we would have hoped, in particular, to some extent, the mentoring
program. Whilst mentoring in itself is very successful, the nature of the program was probably
not hitting the mark. Equally, we had three levels of scholarship programs—a regional one, a
national and a sort of national/international scholarship program. We are looking to re-
engineer that scholarship program, which will save us some of the moneys, because we are
finding a lot of the regional ATSIC councils equally provide support for athletes at a regional
level. There was a potential for some duplication.
Senator LUNDY—So you will probably drop off the national and regional aspect of that
scholarship program?
Ms Oldenhove—That is the area that we will probably drop off.
Senator LUNDY—If you could take on notice to provide to the committee the full detail
of the changes that you have just described in terms of those programs, that would be useful.
Ms Oldenhove—Certainly.
Senator LUNDY—Is the Olympic aid money that you spoke of, the $0.5 million, just for
one financial year?
Ms Oldenhove—Yes. That is a one-off as a result of the Olympics being held in Australia.
Senator LUNDY—Is that hypothecated for a particular project or does it go into the pool
and allow you to sustain these other projects for another 12 months?
Ms Oldenhove—No. There is a specific project targeted. As part of our contract with
ATSIC, we have 40 regional Aboriginal sport development officers throughout Australia. We
are looking at providing greater support to them and in particular greater support to regional
and rural communities through the development of a purpose built trailer of equipment as
being the area of greatest need. The money is targeted specifically to providing that sort of
support to indigenous communities, particularly in remote and regional areas.
Senator LUNDY—And that will travel around and be a—
Ms Oldenhove—We hope to be able to leave it within that region.
Senator LUNDY—So it will be a sort of mobile resources for sport?
Ms Oldenhove—Correct.
Senator LUNDY—What about people with disabilities?
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Ms Oldenhove—We have a program for people with disabilities throughout the
commission. There are three elements to it. There is the aspect for elite training for people
with disabilities, which is done under the auspices of the AIS. Another element for people
with disabilities is our coaching athletes with disabilities program, which is the delivery of
courses for people who coach people with disabilities. There is another element called
‘Willing and Able’, which is a program aimed at ensuring that children with disabilities are
properly accommodated within both school programs and community programs.
Senator LUNDY—Has there been any change in the resources or funding allocated to that
specific program?
Ms Oldenhove—Certainly not in the aspect of the coaching of athletes with disabilities or
the Willing and Able.
Mr Strang—Has there been any change to the funding relating to the elite program for
athletes with disabilities?
Mr Strang—This year, the disabled program received something in the order of $3.2 mil-
lion for elite disabled sport as compared to about $3.01 million last year. So there has been an
increase in funds, particularly because of the additional assistance that has been provided for
the preparation of the paralympic team for Sydney.
Senator LUNDY—Is there any drop envisaged for the out years?
Mr Strang—Because we have provided additional assistance for the preparation of the
paralympic team under the paralympic preparation program, with the demise of the OAP there
will be less money for disabled sport from 2001-02.
Senator LUNDY—How much less?
Mr Strang—Probably in the order of $1 million a year.
Senator LUNDY—So a third of that funding goes?
Mr Strang—Yes.
Senator LUNDY—How will that affect the program?
Mr Strang—Obviously, they will be doing less of the things that they have been doing so
well over the last three or four years.
Senator LUNDY—Can I just clarify on the out years with those other two programs too?
Are they sustained over the out years or is there a drop for women’s sport?
Ms Oldenhove—Those programs are sustained. The budget for participation was not
affected and we will maintain those programs.
Senator LUNDY—But there is like no OAP equivalent specifically for athletes with
disabilities?
Mr Strang—Yes, the Paralympic Preparation Program.
Senator LUNDY—I have a general question that goes back to the OAP questions earlier.
At what point is there going to be some acknowledgment by the government in response to
the decision of the Australian Sports Commission that the Sydney Olympics was not the only
Olympics and that Australian athletes will have to prepare at some point for the Athens
Olympics and the Athens Paralympics. Minister, at what point will the coalition government
acknowledge that there will be another Olympics after Sydney in funding terms?
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Senator Minchin—I think we are all aware that it is proposed to have an Olympics in
Athens in 2004, given that Athens is ready to host the games. I imagine that the federal
government will at an appropriate time give consideration to what, if any, additional effort is
required to ensure we have the best possible team ready for those games.
Senator LUNDY—Minister, there is nothing in the out years at all to indicate another
upswing in the elite funding either for Olympic athletes or Paralympic athletes. Does your
answer indicate that it might change over the next couple of out years? What does it mean?
Can there be some reasonable expectation within the sports community that the government
will make a commitment to achieving a strong outcome at the Athens Olympics?
Senator Minchin—I have not been involved in any discussions within the government
about the matter of the 2004 games. I would have thought we would not want to rule in or out
what actions the federal government might want to take to ensure that our athletes are
appropriately and properly prepared for those games.
Senator SCHACHT—If cricket was played in Athens, I suppose the Prime Minister
would be more interested.
Senator LUNDY—The question really does go to the heart of the asset that we have. It
might make it easier for you if I speak in economic terms. We have built up a significant
sporting asset in the Australian Institute of Sport and the Australian Sports Commission with
sports medicine and sports science expertise. There is a lot of concern in the sporting
community that, with the quite significant falling away of funding in all of these areas, that
built-up corporate expertise will be lost. To build it back up will cost the government and all
of the stakeholders a significantly greater amount of money than it would to have sustain it
over a bridge of time post-Sydney for a year or so. I would just like to get comments from
you, a minister of the government, about managing an asset in that way and the sustainability
of the strength that we have in Australian elite sport.
Senator Minchin—The point has just been made to me that what we have described as the
base funding for sport is materially in excess of the base funding that existed prior to the im-
plementation of the Olympic Athlete Program. In a sense, there is additional investment in
sport over and above what was the pre-OAP funding, and it is still a considerable investment.
That should place Australia in a good position to be well represented at the Athens games.
Obviously, your government recognised—and quite properly—that, given that the 2000
games were in Australia, that warranted a very special effort, given our enormous success in
Melbourne in 1956, for us to be seen to perform exceptionally well in our own games and put
an extra special effort into that. I am pleased that the base funding has been maintained and
increased. Once this games is completed and once the government gives final consideration to
sports policy post-2000, the question of how we deal with future Olympic Games, the training
of future athletes for Olympic Games and the role of the Commonwealth government in that,
and presuming that the Olympics will not return to Australia for some time, needs to be
treated very seriously. I accept and understand where you are coming from. I think it was ap-
propriate that there be a spike in funding for an Olympic Games in our own country. The
question is: what is the appropriate continued approach to the question of special funding for
Olympics preparation? I think that can only really be considered once the dust has settled on
the Sydney games.
Senator LUNDY—Minister, you made the point earlier about not contemplating what
comes next until post-Olympics, but back in 1998 the Howard government made a promise
that they would—and I quote:
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Thursday, 1 June 2000 SENATE—Legislation E 595
... commission a White Paper on sport and recreation post-2000, to lay the base for a comprehensive
policy statement that addresses principles, defined policy goals and objectives.
We have heard from the minister for sport on several occasions that that should have been
completed much earlier than it was. We have heard from the minister that there would be a
formal response to that, certainly by now. Now you are telling me that the government is not
intending to respond to that until post-Olympics so that you have the opportunity to see what
comes out in the wash, if you like. Can you tell me why the government has effectively not
fulfilled that promise to go through that process of commissioning a white paper and
preparing a blueprint for the future of Australian sport prior to the Olympics so that there is
some clear view forward during what is obviously a very distracting and exciting time for all
of those sports? I am sure you can appreciate the depth of uncertainty that they are finding
themselves in at the moment.
Senator Minchin—As I say, I would like to think that the commitment of additional
resources, to wit the $5 million for elite athletes, plus the significant base funding on a
forward basis, would reassure Australian sport of our commitment. We are honouring our
promise. We have received a report from the Oakley committee; that is currently before the
government. As I say, the government is now of the view, upon reflection, that in order to get
it right and because of the weight of the issues that we are discussing and, as you quite
properly pointed out, the whole issue of how the government deals with the twin objectives of
maximising participation in sport as well as ensuring appropriate support for elite athletes,
that we leave open the option of taking account of what actually happens at the Sydney
games. I think that is sensible. It is more important to get it right than rush it to meet an
arbitrary deadline. I have every confidence that it would be released prior to the end of the
year 2000 and, given that we are talking about the post-2000 approach, that seems reasonable.
Senator LUNDY—I appreciate your response, Minister, because this has been an issue of
consistent uncertainty and equivocation on behalf of the sports minister. The timing of the
response and the efficiency in both the minister’s office and the department in relation to this
matter have been in question. Just for the record, Minister, can I get you to acknowledge that
in fact the Oakley report was indeed the white paper as described in the 1998 election promise
that would be commissioned by the government?
Senator Minchin—I may stand to be corrected, but I think it was a report to the
government on what should occur post 2000. The government will, in enunciating a policy for
sport post 2000, take into account the report of the Oakley committee and, in a sense, by way
of enunciating a policy, respond to that report. I do not know whether or not you call it a white
paper. It was an input into the government’s deliberations in formulating a policy for sport
post 2000.
Senator LUNDY—I am sure you appreciate, Minister, there have been claims both from
the department and the minister herself that the Oakley report was not in fact a white paper; it
was in fact just another report that the minister had commissioned to contribute to her
developing views on sport. So I appreciate that clarification. I am sure you have just solved
one of the ongoing confusing issues within the sporting community.
With respect to the action agenda in End goal 2006—to which we were referring earlier in
my questions to Mr Crick—it seems to cover aspects of the future of sport, perhaps from a
slightly different perspective. I was wondering if you were also in a position to comment on
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this. In your mind, what comes next? Is the government actually committed to the recommen-
dations within that particular report, or are you intending to respond to that also post Olym-
pics from a ministerial perspective?
Senator Minchin—I do not have before me the proposed time line for that action agenda. I
reiterate that we are dealing with two quite separate animals here. We have a range of action
agendas in a range of industries where we are trying to develop international competitiveness
and opportunities. The healthy thing about this process is that we are recognising the
opportunities in sport as a commercial enterprise. That is separate and apart from the overall
objectives of both increasing participation in sport and outcomes in performance. So while
there may be obviously some connections, they are two different exercises. Does anyone have
a time line on the action agenda?
Mr McCarthy—We have not got a precise timetable. We have appointed a consultative
group, which is chaired by David Morgan, a former president of Ford Australia. That group
had its first meeting Friday of last week. It has developed a timetable of four, possibly five,
meetings through to August or September. But the committee will need to pace itself in terms
of bringing the industry along in finalising its recommendations to government. So it would
be premature, and probably inappropriate, for me to put a time line on that committee’s
considerations at this point.
Senator Minchin—I will certainly convey to Minister Kelly your interest in the time line
and that, as best we can, we ought to indicate where we are going with it.
Senator LUNDY—My particular interest is the relationship, if indeed there is any,
between the government’s considerations on the Oakley report and the issues and outcomes
that arise from the action agenda. I do not know how significant the crossover will be but I
have an interest in the timing because, if decisions are made based on the action agenda, they
could have a significant impact on some of the directions taken, for example, in the
government’s response to the Oakley report.
Senator Minchin—There really is not. We are talking presumably about sporting goods,
manufacturers and all that sort of thing. It is sporting equipment. The businesses in Australia
are involved in the production of goods and services that relate to sport and we have a lot of
competitive advantages there and a lot of great products that are winning markets worldwide.
With these action agendas, it is a kind of a massive government-industry swot analysis—what
are the strengths, weaknesses, opportunities, threats for that as a commercial enterprise? We
are doing it across 17 industries at the moment. In terms of the commercial opportunities for
Australian producers of sporting goods and services, it is a very important initiative and
objective. But it does not really bear upon the question of the government’s policy towards
enhancing participation in and output from sporting performance.
Senator LUNDY—I accept that explanation. I guess we will see as time goes on. On the
theme of what comes next, Minister, in inquiring about the participatory programs with
respect to the Sports Commission. I am thinking in terms of the legacy that the Olympics offer
not just to the sporting community but to the community generally. It is reasonably widely felt
in the Australian community that the Olympics do offer a very strong legacy for greater
participation in the community in healthy recreational sporting type activities. So far we have
heard evidence that some of those programs seem to be maintained, but some of them are also
losing out on some of their funding from that participatory perspective. What level of
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commitment is the government prepared to make, not just to sustaining levels of funding but,
perhaps—as part of this adjustment process—to look at actually building on what I think will
be a very strong legacy of encouragement and inspiration for many Australians to take up a
sport or some sort of organised activity?
Senator Minchin—I accept your point. I certainly agree with you that I hope the Olympics
will result in a sustained improvement in the participation of Australians in sport, because we
repeatedly see a survey suggesting that, no matter how much effort we all put in, that is still a
problem in Australia—the extent to which Australians are spectators rather than participants.
Mr Hobson, would you like to comment on the figures you were describing to me on forward
projections and budgets?
Mr Hobson—You would have been aware that the commission’s previous forward
estimates showed a sharp decline post 2000-01. The commission’s baseline estimates now
reflect a level much higher than what was originally the base funding, which was around $28
million. The base has been changed now to $96 million of government appropriation for next
year. If you look at the out years, allowing for the change in OAP, there is a slight increase in
the actual base funding for the commission leading up to 2002-03 of a further $1 million the
following year, in 2001-02, and another $4 million the following year. So there is an actual
increase in the overall level of base funding for the commission.
Senator LUNDY—Are you telling me that is going to be spent on improving participa-
tion?
Mr Hobson—No, I am not suggesting that at all. I am suggesting that there is an increased
level of funding in the commission’s base and, as yet, the commission itself has not addressed
beyond 2000-2001 how it will distribute the overall funds available to the commission.
Senator LUNDY—But you are saying the potential is there?
Mr Hobson—The potential is there. Sport has a certainty that they perhaps did not have
before in terms of a baseline of funding, and there is an expectation that there will be some
increase in that base level of funding over the next two years.
Senator LUNDY—To play devil’s advocate there, once that OAP funding is gone, that
small increase in base level funding will have to fill a much bigger empty space.
Mr Hobson—That is true. Nonetheless, the baseline funding is increasing.
Senator LUNDY—Who is participating in the consultative group involved in the
development of the action agenda that you mentioned before?
Mr McCarthy—There are 16 members. I could read them out, if you wish.
Senator LUNDY—Yes, please.
Mr McCarthy—David Morgan chairs the group. Mr Steve Haynes, Chief Executive, Sport
Industry Australia; Mr Lawrence Neild, Director, Bligh Voller Neld; Ms Diana Williams,
Managing Director, Fernwood Fitness Centres; Mr Jim Eddy, President, Australian
Amusement, Leisure and Recreation Association; Mr Tony Guihot, Chief Executive Officer,
Sport and Recreation Training Australia; Mr Terry Kearney, President, Recreation Industry
Council of Australia; Mr Paul Bull, Export Director, AV Syntec; Mr Graham Alder, Chief
Executive, Leisure Australia Group; Ms Helen Moore, Managing Director, Stormy Seas; Ms
Denise Langford, Director, Royson Engineering Pty Ltd; Dr Wanda McKinnon, National
Manager, Helix Capital Pty Limited; Mr Ross Kennedy, Executive Director, Office of Sport,
Recreation and Racing, Victoria; Mr Simon Forrest, Executive Director, Office of Recreation
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and Sport; Mr Hilton Seskin, Chief Executive Officer, Rebel Sport; and Mr David Mazetelli,
Deputy CEO, Department of Industry, Science and Resources.
Senator LUNDY—Is there anyone representing the Sports Commission?
Mr McCarthy—No, there is not.
Senator LUNDY—Why not?
Mr McCarthy—We have been closely with the Sports Commission throughout the
process. As the minister mentioned before, this exercise is concerned with the development of
the commercial side of the industry and the goods and services that hang off participation in
sport. So the committee was chosen because of its involvement in the commercial industry.
Senator LUNDY—I appreciate that, and certainly the membership is indicative of the sort
of membership you are looking for. I am curious, for the issues of coordination and staying in
touch, as to why there would not have been at least one officer from the commission involved.
Mr McCarthy—We are in the same portfolio and we consult very closely periodically
through the development of this process.
Senator LUNDY—Who decided on the membership of that committee and on whose
recommendation were those appointments made?
Mr McCarthy—The minister decided on the recommendations of the department.
Senator LUNDY—Did the department suggest—
Mr McCarthy—Also the views of David Morgan, who chairs the committee. He agreed to
the make-up of the committee also.
Senator LUNDY—Did the Australian Sports Commission ever make representations to
the department or the minister that they should be represented on that committee, that you are
aware of?
Mr McCarthy—No.
Senator LUNDY—On the issue of the commercial realities and challenges with respect to
sport, what analysis has been done either in the context of this study or by the department
generally on the implications of the GST in the sports commercial industry sector?
Mr McCarthy—Are you talking about the commercial sector?
Senator LUNDY—Yes, the area that you are talking about.
Mr McCarthy—The department has done some analysis—for example, on the effects of
the GST on sporting goods and services. The GST will apply to some sporting goods, like
apparel, which will have the effect of increasing the prices of those goods. The GST will
apply to other goods, like sporting equipment, which currently have a wholesale sales tax, and
the prices of those goods should fall. It is a mixed effect.
Senator LUNDY—So some things will go up and some things will go down.
Mr McCarthy—I expect so.
Senator LUNDY—You have done some analysis. Are you able to provide the committee
with the departmental analysis of the impact of the GST on sports industries per se, be it club
memberships or goods and products?
Mr McCarthy—On the club membership side, the Sports Commission has prepared a
booklet and provided some seminars to discuss with sporting bodies the impact of the GST on
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Thursday, 1 June 2000 SENATE—Legislation E 599
those organisations. But, to be frank with you, on the commercial side of the industry the GST
has not been a significant issue raised with us, either in submissions or in consultations. The
committee, at its first meeting, agreed on what it thought were probably the major issues that
needed to be addressed in moving forward the action agenda, and the GST was not an issue
that was raised.
Senator LUNDY—Are you familiar with the figures recently released by the ACCC in its
GST expected price variations guide?
Mr McCarthy—I am not closely familiar with them, no. I am aware that the guide was put
out last week.
Senator LUNDY—In terms of the ACCC’s view of the world post 1 July, they have listed
these items: sporting lessons will rise by seven to nine per cent, gym memberships will rise by
seven to nine per cent, sporting footwear will rise by eight to 9.4 per cent, cricket bats will fall
by one to 2.3 per cent, tennis rackets by one to 2.3 per cent and also fishing rods by one to 2.3
per cent. That seems to indicate a relative pattern, that things that previously did not attract
tax will have a rise of between seven and 9.4 per cent and yet things that previously attracted
the wholesale sales tax will only be reduced by one to 2.3 per cent. Aren’t those the sorts of
figures that would have a direct implication on some of the commercial interests that you are
consulting with and representing through the preparation of the action agenda?
Mr McCarthy—Those figures are consistent with the department’s own analysis, which I
mentioned before. Some things will go up and some things will go down. General apparel and
footwear will go up. Some equipment will go down. These things will obviously affect
industry. But looking at it in an international competitiveness context, imported goods attract
the GST in the same way. It is not expected by industry—
Senator LUNDY—I am sorry, but could you speak up a little. I will too.
Mr McCarthy—I was saying imported goods attract GST just as local goods attract GST.
It is not going to have a significant impact on the industry’s international competitiveness.
Clearly, the GST needs to be absorbed by these industries, as indeed it does by other
industries in the economy. All I am saying to you is that the industry has not identified the
GST as a significant issue affecting its development.
Senator LUNDY—Can you take on notice to provide to the committee the departmental
analysis, in whatever form it takes, that you spoke of before?
Mr McCarthy—It is not a detailed analysis. It is just a list of things that will go up and a
list that will go down.
Senator LUNDY—That would be terrific. It would be interesting to peruse. In terms of the
health industry, you mentioned that a number of people on that committee are associated with
the health and fitness service industries. In an answer to a question on notice about the GST
and health services, the ATO advised the committee that health services provided by a
recognised professional will be GST free; but Sports Medicine Australia have been arguing
that exercise physiologists are being discriminated against because they are not GST free. Can
you tell me the extent to which you have addressed this disparity between the health and
fitness professionals associated with sport as opposed to other health professionals’ services
which are GST free? Surely, in that area of health services, this would be quite a critical
question in terms of the report you are contemplating.
Mr Crick—If I may make a comment on that: to draw this portfolio into a detailed discus-
sion on the fine lines between what services will be within a GST framework and what will
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not in the health area would be dangerous ground for us and probably inappropriate. That is
very much an issue for the Australian Taxation Office to advise on.
Senator LUNDY—You said that last time. My question was using that as an example of a
potential impact on a growth industry in the context of sport. It is really a question about
whether, in your endeavours to promote and support industries associated with sport, you are
taking a position on it within this report. Has the GST as an issue been actively excluded from
the Action Agenda?
Mr McCarthy—Not at all.
Senator LUNDY—Minister, perhaps you could offer a view or at least take on notice—as
you have previously in answer to another question on the GST and health services—whether
the tax office has advised that health services provided by recognised professionals are GST
exempt? Who determines that? Does the tax office determine that or is that a political
decision?
Senator Minchin—I am sorry, I will have to take that on notice.
Senator LUNDY—Just to clarify the question, the point is that some tertiary trained health
professionals specialise in exercise rehabilitation and therapy for the recovery of patients
whether the patients are suffering from heart attacks or whether the professionals are working
in accidents and so forth. Those exercise physiologists are not recognised health professionals
at this point in time, and the question is why not, given that they are actually tertiary educated
professionals with all of the appropriate qualifications, and yet the vast majority of health
service providers are GST exempt. This is quite a specific question. Sports Medicine
Australia, the Australian Association of Consultants in Rehabilitation Medicine, the
Australian Cardiac Rehabilitation Association, the Australasian Faculty of Rehabilitation
Medicine and the Australian Association for Exercise in Sports Science have all actually
called for exercise physiologists to be included as recognised health professionals. I am
asking you to take that on notice and provide an explanation. Is that still a possibility and
what is the government’s position on that issue? Is there any hope for them to be included so
they are not the only health professionals out there—
Senator Minchin—Yes.
Senator LUNDY—that are excluded from that exemption?
Senator Minchin—We will get you an answer. I just do not know whether it rests with the
tax office or not.
Senator LUNDY—I will leave that up to you to sort out and respond to the committee.
Senator Minchin—Sure.
Senator LUNDY—I have a few questions that go back to participation. I would like to get
an explanation of the agency budget statement talking about the recognition of the Active
logo and the financial value of media coverage. I am just starting to get a real feeling that
Active Australia is becoming less of a program and more of a logo. Can you provide some
explanations to that reference in the agency budget statement and what is the state of funding
with Active Australia?
Ms Oldenhove—The Active Australia initiative is really an umbrella framework for
increasing participation. So it is a call to action and has a number of discreet elements to it.
There are two key aspects to it. One aspect is actually increasing the capability of clubs and
sports to deliver programs to the community. So we are talking about the upskilling of the
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Thursday, 1 June 2000 SENATE—Legislation E 601
sport sector to meet the needs of the community in a better way. So there is that element to it.
And then there is the other element of Active Australia, which is an encouragement to
Australians to increase their levels of physical activity and hopefully be able to find the
services and the programs in the community from these clubs and organisations. So the
strategy is certainly not one of just promotion. It is trying to link that call to action from the
public, and link it directly to those that provide sport and recreation in the community.
Senator LUNDY—It sounds like the minister wants to make another Life Be in It.
Ms Oldenhove—I will point out the difference. Life Be In It was a very good public
promotion. We can all remember it, but there was no infrastructure behind it.
Senator LUNDY—No.
Ms Oldenhove—With Active Australia, whilst there is still that public promotion aspect to
it, we are trying to harness the energies of what we believe to be about 60,000 clubs and
organisations in Australia to provide the infrastructure so that people are not just left
motivated but with nowhere to go. And that is probably the significant difference between the
strategy of Active Australia and the initial strategy of Life Be In It.
Senator LUNDY—What is the advertising budget for Active Australia as a percentage of
the total Active budget?
Ms Oldenhove—Extremely small.
Senator LUNDY—Okay; I will ask you to take that on notice.
Ms Oldenhove—I will find out and get you the exact dollar value, but it is a very small
component of the overall program.
Senator LUNDY—And how much of Active Australia’s budget actually goes to national
sporting organisations?
Ms Oldenhove—Given that the work is of the participation division, our budget for
participation programs to national sporting organisations is $1.6 million.
Senator LUNDY—I note on page 248 of the PBS that it says 80 per cent of Active
Australia’s overall outcome is outsourced. I presume that is through the involvement of
associated sporting and recreational organisations?
Ms Oldenhove—Yes, predominantly through two avenues. One is the national sporting
organisations themselves, and the other is a direct partnership with state departments of sport
and recreation so that we work in collaboration to really get close to the community.
Senator LUNDY—Can you provide me with a breakdown of that allocation of Active
Australia expenditure, to whom and in terms of categories, but also another subset of
information about the actual programs themselves? If this is better referenced to an annual
report, I am happy to take that reference.
Ms Oldenhove—I will certainly take that on notice.
Senator LUNDY—Thank you. I did want to ask Mr Boultbee another question before I go
on to a few questions relating to the sports medal. Can you provide the committee with a
complete breakdown of the allocations to sports within the AIS program and identify the
reduction in the allocations to their budget as a result of your deliberations as director in
trying to find a place for the cuts that you have experienced?
Mr Boultbee—Yes.
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Senator LUNDY—Thank you. I have here a couple of questions with respect to the direct
athlete support. A letter sent to those athletes, or the squad members, states that due to the
revised tax ruling, which was mentioned before, which identifies these payments as taxable
income, you are terminating those payments. What direct impact does this have on those
athletes? Are they able to secure support through another means so they do not have that
disadvantage? Can you explain what is happening about that direct athlete support?
Mr Strang—The athletes are still receiving direct athlete support until 30 June this year.
After that time we have encouraged sports to look at providing some sort of direct sport to
athletes, particularly those who have left work and study to train for the Olympics. It is up to
them to work out arrangements which are satisfactory to their budget and to the athlete’s
needs. At this stage we do not have any feedback on what plans they have made in that
respect. In terms of providing ultimate flexibility to sports, the money that was previously
allocated for direct athlete support has been folded into the bottom line budget and sports
have actually been supplemented by their proportion of direct athlete support for elite
purposes. So it is up to them now to determine how they allocate that money.
Senator LUNDY—Okay. Can you take it on notice to provide information as to how many
athletes are affected by this?
Mr Strang—Sure.
Senator LUNDY—And can you find out from sporting organisations some of their
proposals or assurances so that athletes will not be at some disadvantage as a result of these
tax ruling changes as they prepare for the Olympics and beyond?
Mr Strang—Yes.
Senator LUNDY—Thank you. I have a couple of questions now about the sports medal.
How many nominations have been received for the sports medal?
Mr Crick—I will take that on notice.
Senator SCHACHT—Is it for valour or for distinguished service?
Senator LUNDY—Who is running the sports medal program?
Mr Crick—It is a program that is run by the Department of the Prime Minister and
Cabinet.
Senator LUNDY—Really, so you do not have anything to do with it?
Mr Crick—Not directly. We might have been involved a little bit in some of the
administration, but we are not directly involved in the selection or those aspects.
Mr Strang—The Australian Sports Commission is working with national sporting
organisations in providing information on the sports medal and is collecting nominations—
Senator LUNDY—Who is?
Mr Strang—The Australian Sports Commission. It is collecting nominations on behalf of
sports which it then transfers to the Department of the Prime Minister and Cabinet.
Senator LUNDY—So you are doing all the administration for them.
Mr Strang—We are doing some of the administration.
Senator LUNDY—Are they paying you for that? Is there cost recovery?
Mr Strang—It is a cooperative process.
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Thursday, 1 June 2000 SENATE—Legislation E 603
Senator LUNDY—I said cost recovery, not cooperation.
Mr Strang—No, it is not a cost recovery program.
Senator LUNDY—How many nominations have you received for the sports medal?
Mr Strang—I cannot give you that number off the top of my head but I can find out and
let you know.
Senator LUNDY—Yes, please. Do you know how many are available or have been
manufactured for the program?
Mr Strang—We have information from the Department of the Prime Minister and Cabinet
about the number of medals that are being allocated and we can provide that to you.
Senator LUNDY—If you could provide all cost details associated with that as well.
Senator SCHACHT—Can you give me a rough idea now of how many? Is it 500 a year
or 50 or five?
Mr Strang—The figure off the top of my head is something like 30,000 medals this year.
Senator SCHACHT—Who does not get a medal? Even I might get a medal.
Senator LUNDY—This is a really important question. You said you passed on the
nominations to PM&C. Is that correct? You do not make the assessment about who is worthy
of an award of a sports medal?
Mr Strang—My recollection of the matter is that the minister has recently agreed to form
a subcommittee, on which we will be represented, to assess the nominations from the sports
community.
Senator LUNDY—So there will be someone associated with sport actually deciding—it
will not be handed out on a marginal seat basis?
Senator SCHACHT—And are there terms of reference for how they are to be allocated?
Mr Strang—Yes.
Senator SCHACHT—And is that decided by PM&C or by you?
Mr Strang—By PM&C.
Senator SCHACHT—But you provided advice about those terms of reference?
Mr Strang—To sports.
Senator SCHACHT—To?
Mr Strang—To the national sporting organisations.
Senator SCHACHT—But who has provided advice to the PM&C about what should be
the criteria for giving out 30,000 gongs a year?
Mr Strang—I cannot answer that question.
Senator SCHACHT—Did you find it strange, Mr Strang, with all your experience in
sport, that 30,000 medals for sport are going to be handed out? I do not want to any way
underestimate the number of people providing a role in sport in Australia, but Ruritania or
Transylvania give medals out for anything. What is the value of this medal? Is it a recognition
for a level of competence in sport or actually turning up at the football match as a spectator?
Is that an eligibility that you have been advised of?
Mr Strang—I am not personally familiar—
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Senator SCHACHT—Half the MCG gets a medal.
Mr Strang—The details of the program have been established by the Department of the
Prime Minister and Cabinet and we have been asked to provide those details to sport.
Senator SCHACHT—I am not in any way criticising you. I said flippantly 500, as what I
would have thought would be the upper level of people who each year make a contribution to
sport. When tell me 30,000—
Mr Strang—These medals are going to community level, so there will be—
Senator LUNDY—Can I just get some questions on notice, because I am very interested
in this particular program. I would like to know precisely how the government is vetting
nominations and making selections for recipients for the sports medal and if there are any
criteria within which they are allocating it across geographic regions, across age groups,
across gender groups, across community associations, across political parties, across
electorates—all of those issues. Could I be provided with those details. You mentioned that
you are now involved somehow in being consulted as part of the whole exercise. At what
point did you actually become aware of this sports medal program?
Mr Strang—I could not give you an accurate date, but it was some time late last year. We
were consulted in terms of our involvement in cooperating by providing information to
national sporting organisations and collecting nominations and passing them on to Prime
Minister and Cabinet.
Senator LUNDY—Who gets to award these sports medals?
Mr Strang—I would have to take that on notice.
Senator LUNDY—I suspect Minister Kelly will probably have a lot to do with it. Minister
Minchin, you might have been allocated a glorious role in presenting these, perhaps to your
constituents in your electorate. What is your knowledge of the sports medal program?
Senator SCHACHT—I think you would find every second one in South Australia.
Senator LUNDY—Do you get a quota and do you get to nominate them?
Senator Minchin—No. I have had no involvement in the matter whatsoever. I cannot
enlighten you at all.
Senator LUNDY—Even as a duly elected senator of the state of—where are you from
again?
Senator Minchin—The great state of South Australia.
Senator LUNDY—South Australia, of course; it is a wonderful place.
Senator Minchin—Exactly.
Senator LUNDY—Minister Kelly has not afforded you a special letter saying, ‘You, too,
get to present these medals to your constituents right on the dot of the Olympics so you, too,
can get photo opportunities with some glorious high achieving members of your
constituency’? Have you got that letter yet?
Senator Minchin—It is an extremely cynical question. I am not aware of any letter of that
kind.
Senator SCHACHT—It’s a bit of a cynical award, the way it has been done.
Senator LUNDY—How do I put a question on notice where I want all the sort of details of
the history of this particular program, including who is going to be awarding these medals,
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Thursday, 1 June 2000 SENATE—Legislation E 605
when and for what criteria? I am sure it is a glorious thing. I know if I were to receive one, I
would be immensely flattered out of the whole exercise. We will see who ends up getting to
be one of the lucky 30,000.
Senator SCHACHT—While we are putting questions on notice, as I understand it, there
are over 100 sports affiliated with the Confederation of Australian Sport. My calculation is
that 100 into 30,000 represents 300 medals per sport per year.
Mr Strang—It is a one-year only program.
Senator SCHACHT—It is a one-off?
Mr Strang—Only this year, in the Olympic year.
Senator SCHACHT—Will they only be involved in Olympic sports?
Mr Strang—Across all sports and it is retrospective. It will recognise champion sports
people.
Senator SCHACHT—Are they going to be issued posthumously? Edwin Flack, who won
a gold medal in the first Olympics in 1896, can get a posthumous sports medal. I am not
having a go at you, Mr Strang, but if they can be issued retrospectively, why don’t we issue
them to the dead?
Senator LUNDY—How much is this sports medal program costing?
Mr Strang—I am sure they will only be delivered to the living, but to recognise in some
cases champions of yesteryear.
Senator SCHACHT—I wish we had known this when we had PM&C before us last week
because it would have been hilarious to try to get a bureaucrat to explain how this would
work.
Senator LUNDY—Does the Prime Minister get to award them all at one massive
ceremony like a mass marriage—a mass award presentation?
Senator Minchin—I am very surprised at your cynicism about recognising the
achievements of sports men and women. I am very disappointed.
Senator SCHACHT—You say you know nothing about it. You are a senior cabinet
minister.
Senator LUNDY—The Sports Commission knows very little about it. Come on!
Senator Minchin—As I said, I have not been involved in the matter.
Senator SCHACHT—But you are a cabinet minister.
Senator LUNDY—It is being run by PM&C.
Senator Minchin—It is a PM&C program, but I am very pleased that the nation is going
to recognise the achievements of its sports men and women. I am sure you recognise that
objective.
Senator SCHACHT—Does every second member of the Liberal Party who plays
badminton get a medal?
Senator Minchin—In a nation of 20 million people, and with the recognition of previous
sports men and women, it is not surprising that you would want to have a program of that
kind.
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Senator SCHACHT—Do you know how many Australians have represented Australia at
the Olympic Games since 1896, including the dead? Including these games it will be 3,600,
give or take 50. If you said you were going give medals to those former Olympic athletes who
are still living, which would be 2½ thousand—
Senator Minchin—The point that is being made—
Senator SCHACHT—I would have thought that is a reasonable thing for a sports medal,
including another lot for officials who have contributed to the running of the Olympic Games.
Even some world athletes in non-Olympic sports; fine. But at that stage we are running maybe
at 5,000 or 6,000 medals.
Senator Minchin—The point was made that this extends beyond Olympic sports. Cer-
tainly, without knowledge of the program, nevertheless I would hope that the great sport of
Australian rules football, for example, would be recognised, and that is not an Olympic sport.
Senator SCHACHT—I am in favour of recognising people in sport, including people at
the community level.
Senator Minchin—I do not think cricket is an Olympic sport. I would hope that that would
be recognised.
Senator SCHACHT—If it were up to the Prime Minister, 29,000 of them would go to
every cricket player in Australia, as he has them queued up at the MCG. On the way in, as you
go past the gate, you get a medal, if you are a cricket supporter.
Senator Minchin—I think your mocking of the recognition of Australian sports men and
women does you no good at all.
Senator LUNDY—Of course we are mocking this medal program, Minister.
Senator SCHACHT—This medal, the way this is being done, is denigrating sport. That is
what I am mocking, Minister. And you don’t even know a thing about it.
Senator LUNDY—Minister, if you can provide all the answers to those questions we have
placed on notice, we will be in a far stronger position to take this as seriously as you claim we
should, once we see the criteria, the selection process, the funding and get some idea of the
motivation for this particular exercise. I take your point: it is a serious matter. But we have no
reason to be anything but cynical at this point, and I am sure you appreciate that. I have one
final question. It has come to my attention that a number of government departments—and
Finance in particular, which is intriguing—are allowing, and in fact encouraging, their staff to
take time off during the Olympics in order to volunteer and help out at Homebush and the
various venues.
Senator SCHACHT—The finance department?
Senator LUNDY—Yes. It is extraordinary, isn’t it? My question is: is the Sports
Commission and the department encouraging their staff to do something in the same order?
Mr Hobson—In respect of the Sports Commission, the first thing to say is that many of
our staff will be participating in the Olympics as coaches, scientists, et cetera. In respect of the
remaining staff, we have obligations to meet from a work perspective. Obviously, our site is a
site for the Olympics itself, so we have certain commitments there. The policy that we have
adopted is that, for people who have a need from a staff development perspective, we will
provide leave for those people to attend. For other people who have volunteered their time,
they will be required to take recreation leave. We believe that that is consistent with the broad
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Thursday, 1 June 2000 SENATE—Legislation E 607
policy that PM&C have put out in terms of what should be adopted across the
Commonwealth.
Senator LUNDY—In other words, no.
Mr Hobson—Correct. But I do not think it is a straight no.
Senator LUNDY—No, you did qualify it.
Mr Hobson—The fact is that a lot of our staff will be attending the Olympics.
Senator LUNDY—Sure. The question was in relation to those who would not have been
there in a professional capacity.
Mr Hobson—I guess the difficulty is: where do you draw the line in an organisation like
ours? The fact would probably be that many have volunteered their time.
Senator LUNDY—Are you knocking back leave applications?
Mr Hobson—No.
Senator LUNDY—Could you take on notice to provide the committee details of the
current management and structure of Sportnet and whether anything has changed, who owns
the intellectual property for that initiative and how it is going?
Mr Hobson—Yes.
Senator LUNDY—Thank you. Could you also take on notice an explanation of what is
happening in information technology management within the Australian Sports Commission?
That would be useful.
Senator SCHACHT—Senator Lundy made some remarks at the beginning of the session
about the contracts of a number of senior officers at the sports commission and AIS contracts
coming to an end. I speak not as a senator but take the opportunity as president of the Austra-
lian Volleyball Federation to put on record that our sport very much appreciates the contribu-
tion that Mr Ferguson, Mr Boultbee and their staff have made to the success volleyball has
shown in its growth to be a more competitive world sport over the last five years. I do not
want to give you the kiss of death, as a Labor senator, if you are reapplying Mr Boultbee. That
is why I say it as president of the Australian Volleyball Federation. We very greatly in your
debt and in debt to Mr Ferguson who unfortunately because of ill health is not here. So to all
of you, I say thank you very much.
Mr Boultbee—Thank you.
[9.33 p.m.]
SPORTS DRUG AGENCY
Senator LUNDY—The budget states on page 141 that, subject to an acceptable test being
validated and introduced at the Sydney 2000 Olympic Games, $1 million will be available. It
relates obviously to the EPO testing. Can you provide an explanation as to how this money
will be spent? Is it contingent on an acceptable test being available?
Ms Howson—This commitment does relate to a validated and approved method for the
detection of EPO using blood samples, so it is contingent on the success of that research
effort, and that research effort then being recognised as a valid method for detection of EPO
by the international sports community. The money will be used to establish the infrastructure
for the collection of blood samples in accordance with the policies determined by sporting
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organisations. That includes establishing the appropriate personnel to collect blood samples
from athletes, the protocols, the collection equipment, transportation equipment and so on.
Senator LUNDY—Does the appropriate committee of IOC have to validate any test before
it can be implemented for the Olympic Games?
Ms Howson—For the Olympic Games, yes.
Senator LUNDY—President Samaranch recently suggested that blood tests are no use at
all. Doesn’t this indicate that the IOC believes there not to be a valid EPO test in place?
Mr Clarke—As recently as 25 May, a few days back, the IOC put out a press release
titled, ‘IOC fast-tracks EPO test validation review’. That press release outlines the process
that they will follow to respond to the Australian research results when we present them in
July-August. So our most recent advice from the IOC is, in fact, that they are ready and
waiting for us to present our results and, if they stand up to the appropriate scrutinies, they
have committed to implement them.
Senator LUNDY—Acknowledging that timing, I would just like to draw your attention to
what I have been able to ascertain, which is public comment to date about the likelihood, or
perhaps unlikelihood, of that. There was a reference in the New York Times and Time
Magazine saying that both the EPO and HGH tests were unlikely to be approved for Sydney
and therefore that records could be called into suspicion. The press release that you have just
articulated obviously comes subsequent to those particular reports. What makes you think
there is some shift in the attitude of the IOC in relation particularly to the EPO tests as a result
of that public statement?
Mr Clarke—I certainly acknowledge that there is a lot of speculation by a lot of people,
both people within the IOC community and media generally, about the probability of an EPO
test for the Olympics. I will put aside HGH for a moment. Our experience since the IOC
accepted our research proposal, provided the $US1 million and the government matched it
with $US1 million is that we have only had good cooperation from the senior officials that we
have been dealing with within the IOC community to put it through.
We have been having a pretty straight signal at the direct level into the IOC that if it
works—and that is still the scientific ‘if’, of course—and the work is successfully validated,
then their commitment is that they will implement it. While that has been going on directly, in
a direct channel, there has been a whole lot of noise in the broader community around the
world speculating about it. We have not had a change of signal at our level.
Senator LUNDY—Isn’t it normal for a new drug test of this significance to have to be
tested or challenged in court, to stand up in court, before the IOC would accept it as being a
valid test in Olympic competition?
Mr Clarke—No, I would not agree with that. The process is that the test has to be scien-
tifically validated; it is then put into operation; there is inevitably a legal challenge, and we
take what comes from the legal challenge. The validation process that the IOC has specified
for the EPO test includes a legal review as part of that validation process. So they have built
in a legal check process, but I think that is separate to an actual test in an appeal situation in
CAS or whatever.
Senator LUNDY—So that legal challenge is not a prerequisite?
Mr Clarke—No. You cannot have a challenge until you have a test. You cannot have a test
until you have the scientific validation.
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Thursday, 1 June 2000 SENATE—Legislation E 609
Senator LUNDY—Right. Just to clarify my question, it was more that the test could be
introduced into world competition and be tested before an actual Olympics. The development
of this test coincides with the eve of the Olympics. That is the distinction that I am drawing.
Mr Clarke—I guess this is a question about what is possible and what is desirable. We
certainly regard it as highly desirable to introduce an EPO test for the Olympics. If it had been
available 12 months ago, that would have been terrific and we would have been there.
Senator LUNDY—You could have had the legal tests and gone through the process.
Mr Clarke—The fact is, we are in a race and we are doing the best we can. The validation
hurdles that the IOC has put in our way are quite legitimate and proper hurdles to ensure, if
the test is applied during the games, that all reasonable precautions and sureties have been
presented.
Senator LUNDY—Would this be the first blood sample based test for the Olympic games?
Mr Clarke—It would not be the first time that blood testing has been used in an Olympic
context. Blood testing is already very widely used by cyclists for the haematocrit health test.
Blood testing has been used in winter Olympics also.
Senator LUNDY—For the purposes of detection of the use of drugs in sport though?
Ms Howson—The blood testing that occurred during the winter Olympics has been for the
detection of blood doping. If the test is validated and approved, Sydney will be the first time
that a blood test has been used for the detection of the peptide hormones.
Senator LUNDY—I appreciate that. I am just playing devil’s advocate here in terms of the
process. Whose job would it be to ensure that all Olympic teams participating in the games do
not have ethical or religious problems with the exercise of giving blood, whether it be for the
purposes of a test or otherwise?
Mr Clarke—The IOC and SOCOG are managing that aspect of the process. The
laboratory end really only starts when the blood arrives on our front doorstep.
Senator LUNDY—I did not think it would be you, but I was not sure who was charged
with that. If it does not come about, for whatever reason, if it does not meet the validation
standard set by the IOC, what can ASDA do to ensure the reputations of athletes—I suppose it
is not your job to protect their reputations—to ensure that there is no innuendo associated
with the non-validation of that particular test and the numerous records that I have no doubt
will be set by many an athlete and many Australian athletes at the games?
Ms Howson—This goes to the heart of the Tough on Drugs in Sport strategy. We are doing
everything we conceivably can do to ensure that we can demonstrate the strongest deterrent
strategy in the lead-up to the games. Athletes are already using their testing record, for
example, if they need, to justify their drug-free status and we are certainly working very hard
to ensure that there is no point of criticism in terms of Australia’s preparation in an anti-
doping sense in the lead-up to the Olympics. We have been attempting, I think successfully, to
have demonstrated that we are working in terms of testing, education, supply control,
international advocacy and certainly implementing best practice in terms of analytical
research. Our laboratory is using leading edge technology—everything that is available is
being used in the Australian testing program. We are doing more tests than we have ever done
before. There is no question that the regime that Australian athletes are subject to is one of the
toughest in the world.
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Senator LUNDY—The minister used the phrase, in reference to an EPO test, ‘was likely
to be ready on 10 May’. Was that statement on her behalf reliant on a brief by you in your
optimism that in fact the test would be ready, or did you not have anything to do with that
statement?
Mr Clarke—I cannot speak to the specifics of the minister’s statement. Our advice to her
was that the research program is on track in terms of the schedule to produce the results. As
you know, the initial research on which the validation study is based was very encouraging, so
we have no reason to think that we will fail, but until you have done the study you really do
not know. I think she is just reflecting the optimism that we have that it will work and that the
project is on time and running according to schedule.
Senator LUNDY—Will the $1 million that was allocated be spent regardless of what
happens with respect to IOC validation?
Mr Clarke—Yes. That was $US1 million or $A1.5 million, so it is $A3 million all up. We
will run through the whole validation process. Most of that money is the logistics of collecting
the samples from over 1,000 athletes worldwide and running the administration studies in
Australia and overseas. The money will be spent and then we will find out the answer,
basically.
Senator LUNDY—Whether or not you get it up?
Mr Clarke—Yes. And should the answer be no—and there are a range of possible
reasons—that should not be interpreted as money lost, because if the answer is no it will point
to what has to be done to make it yes and we will be that much further down the track.
Senator LUNDY—I was not going to imply such a thing. If the answer is no, as you say, it
will point to what needs to happen next. I guess any financial burden of further testing would
be more likely to be shared amongst other participants.
Mr Clarke—It depends on the reason. Obviously, we are in the realm of speculation now
as to why the tests may not be implemented. If it is because it requires further validation with
different population groups, then perhaps the costs will be relatively small. It is hard to
predict.
Senator LUNDY—I can sit here and speculate about it. Would you like to take this
opportunity to make any other points about the EPO test and the pathway that is being
embarked upon?
Ms Howson—No.
Senator LUNDY—That is fine. In an answer to a question on notice about the impact of
the GST on ASDA’s drug testing, it was stated that preliminary modelling by ASDA indicated
that there will be a net cost saving. Can you briefly explain your modelling and, perhaps, take
on notice providing a detailed explanation if in fact your assessment at that time is still the
same?
Ms Howson—We are still seeking reliable data on how the abolition of indirect taxes will
impact on the cost of the goods and services that we acquire from suppliers and how it will
affect our pricing. Our modelling is still in the very preliminary stages. We are seeking that
information from suppliers.
Senator LUNDY—Are you in a position to still stand by that claim that you will have a
net cost saving?
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Thursday, 1 June 2000 SENATE—Legislation E 611
Ms Howson—With regards to drug testing services, we will certainly not be increasing the
cost by more than 8.5 per cent. We are very confident of that.
Senator LUNDY—I am sorry; could you say that again?
Ms Howson—The GST-inclusive price for the delivery of drug testing services will not
increase by more than 8.5 per cent.
Senator LUNDY—That is good. I do not think you knew that information last time.
Ms Howson—No. We have been able to get some further information and some
preliminary modelling from the drug testing laboratory is informing that.
Senator LUNDY—So everyone wanting a drug test will be paying 8.5 per cent more?
Ms Howson—The GST-inclusive price will not increase by more than 8.5 per cent.
Senator LUNDY—It will be a maximum of that. When you said there will be a net cost
saving, that is to ASDA itself in terms of the purchase of goods and services, where you hope
to actually get some benefit from the removal of—
Ms Howson—Of the indirect taxes.
Senator LUNDY—But you are still finalising that?
Ms Howson—That is right.
Senator LUNDY—If you could take on notice to provide that to us when you finalise it,
that would be useful.
Ms Howson—Yes.
Senator SCHACHT—I have a question that I wish to raise with the agency, but I think it
might actually be more a requirement for the minister to respond. We had the hearing of the
Senate legislation committee dealing with amendments to the Customs Act about higher
penalties for people bringing in illegal drugs for sport. Mike McKay and Nicole Stevenson,
two Australian athletes, came and gave evidence in support of what were actually quite
draconian penalties if someone is caught and found guilty by an Australian court. I have to
say my colleague Senator Barney Cooney, who is a great civil libertarian on these issues, and
a few others of us raised our eyebrows about the level of the penalties going up compared
with penalties in many other areas. I have to say that we were overwhelmingly convinced, not
only by the evidence of the agency but particularly the evidence of those two athletes.
They gave evidence about the impact in the past of athletes from other countries who won
medals at the Olympic Games and clearly had the advantage of using illegal drugs. Of course,
there is the evidence of the East Germans—the file is now available from the Stasi secret
police, and so on. I innocently raised the question as to whether those athletes believed there
should be some effort in support of those athletes who were cheated out of their proper
medals; that they should, in retrospect, be given those medals? Both athletes responded very
positively to that. I did not realise until after that Nicole Stevenson would have won a gold
medal at, I think, the Moscow Olympics if the evidence in the Stasi files is correct. Have I got
the right Olympics, Mr Boultbee? Which one was it?
Mr Boultbee—I do not think she was involved in that.
Senator SCHACHT—Did she get a silver, Nicole Stevenson?
Mr Boultbee—In 1988.
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Senator SCHACHT—In 1988? Come to the table, Mr Boultbee, because I want this to be
accurate. You have corrected me: she was 1988.
Mr Boultbee—I think she was 1988.
Senator SCHACHT—And she got a silver medal?
Mr Boultbee—Yes.
Senator SCHACHT—And I think that there is some evidence around that she may well
have been cheated out of a gold medal. What I want to raise—I have raised this with the AOC
on behalf of my sporting federation, which I have declared here—is that the AOC and the
IOC have looked at it and have shown, for various reasons, some of them understandable,
some reluctance to really press home an investigation because it is now some time ago: the
legal standing of the files, the information in East Germany, et cetera. I suspect the only way
that this may get to fruition is if it is taken up diplomatically, government to government,
because in the end it is a legal matter in the files—the evidence is in a country’s legal system.
I hear that there is an inquiry in the united Germany about it now.
My question really is to you, Minister, and I would prepared for you to take it on notice. Is
there any opportunity for the Australian government, firstly, to seek out a view from the
German government as what they are doing with the files in their investigations, and in a way
that, if the evidence is clear those athletes from the old East Germany either wittingly or
unwittingly were drugged or used banned substances, that evidence can be taken and used—
even if it means in Germany or some other country—to put the evidence to the IOC that this
is clearly an illegal act that took place? I do not think it can happen by the IOC by itself
because it is not a national country. It might have more power than a nation state.
As a president of a sporting federation, when I see our athletes overwhelmingly competing
and they are clean and going in to compete and someone is trying to cheat on them, I feel
distraught about the fact that they might get done out of what they are due because someone is
cheating. You can see that in the past our athletes and other world athletes clearly have been
cheated out of their rightful recognition, even though it might be 20 years ago. I put this to
you in rather a long question that you can take on notice: can you see what representations
can be made country to country, and to Germany in particular where the evidence is obviously
available?
Senator Minchin—I certainly share your sympathies for any athletes cheated out of their
medals in that fashion. I am not directly familiar with the issue. I am not familiar with
whether or not the Australian government has in the past made any such inquiries or
endeavours, but I am happy to take it up with Alexander Downer. I will pursue it.
Senator SCHACHT—Thank you very much. I presume the agency has no objection to
such representation being made?
Ms Howson—No.
Senator LUNDY—Can the government provide details of representations from Sports
Medicine Australia and other groups who have been representing the discrimination of
exercise physiologists in relation to the GST? Could you provide dates of meetings and any
correspondence to or from those organisations and the department in relation to that issue?
That was the one point I missed earlier. Thank you very much.
CHAIR—We have now concluded with the Australian Sports Drug Agency. We will now
move to the Commonwealth Scientific and Industrial Research Organisation.
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Thursday, 1 June 2000 SENATE—Legislation E 613
[9.57 p.m.]
COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH
ORGANISATION
CHAIR—I welcome the officers from the Commonwealth Scientific and Industrial
Research Organisation.
Senator HARRADINE—Could the officers please give the committee a run-down as to
what is happening with the McMaster laboratory?
Dr Adam—The McMaster laboratory is a part of the Prospect site part of the division of
animal production. The organisation has taken a decision to integrate two livestock divisions,
the divisions being animal production and animal health, located at Geelong and Prospect,
into a new division of livestock industries. That advice to the organisation has come from the
chairman of our sector advisory committee, John Blood, on whose advice the deputy chief
executive responsible for the agribusiness area, Dr Mallett, has acted. We will be integrating
those two laboratories. We will ultimately be closing the Prospect site and relocating people
from the McMaster laboratory to other sites in Australia, most probably, at this stage, at
Armidale and Brisbane. The staff concerned in the division have been given assurances that
they will all be provided with jobs in the new division at other locations. I think it is relatively
early days in that reorganisation. The chiefs of the two affected divisions, animal production
and animal health, Dr Mayo and Dr Rickard, along with another one of our chiefs, Dr
Elizabeth Hay, form an implementation team that are dealing with a number of those issues
about the appropriate places for science to be carried out in the future and the appropriate
ways in which staff will be assigned to other laboratories. Most of the details of that
restructuring are provided on our web site.
Senator HARRADINE—Yes, I understand that. Will the McMaster laboratory be
relocated as a going concern?
Dr Adam—My understanding is that most of the staff from that laboratory will probably
relocate to Armidale but some of them will go to Brisbane, to the new livestock research
institute at the University of Queensland. I cannot give you a detailed undertaking about the
disposition of all of the staff members at this stage, but I would be happy to inform you when
those decisions of the implementation committee are available.
Senator HARRADINE—There are two aspects. The McMaster bequest was intended to
assist the Australian livestock industries. As I understand it, the McMaster laboratory is
performing that function. Is the McMaster laboratory going to be relocated as a whole? Is the
McMaster laboratory going from Prospect to another site or are the people who are currently
working at the laboratory going to Armidale and Brisbane? Will the McMaster laboratory still
exist?
Dr Adam—No. The McMaster laboratory, as it exists in Prospect, will essentially be
closed, but the function of that laboratory will be provided at other sites.
Senator HARRADINE—What was the nature of the McMaster bequest? Was that
envisaged by the executors?
Dr Adam—I will have to take that on notice, Senator. I do not have the details of that
bequest with me.
Senator HARRADINE—Don’t you think it might come as a bit of a surprise to some
people who know some of the background of the McMaster bequest that the McMaster
laboratory will go out of existence?
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Dr Adam—I think we will relocate the function of that laboratory.
Senator HARRADINE—Yes, you mentioned that.
Dr Adam—In fact, it could still be named the McMaster laboratory. But as science has
changed, some of the work that has been done in the past has been implemented into the
industry and the requirements of the industry in the future are quite different from those of 20
or 30 years ago. I would be happy to look into the details of the bequest and provide you with
that information. I simply do not have it with me.
Senator HARRADINE—How many officers are going to be affected by the decision?
Dr Adam—The new division will have something like 650 staff. From memory, there are
about 190 at Prospect.
Senator HARRADINE—How many did you say are likely to accept relocation? They
either accept relocation or they go, don’t they?
Dr Adam—The staff have not made that decision. I only briefed them less than two weeks
ago. We anticipate that most of the relocations will have taken place within two years, but as I
indicated to staff, they have some quite significant personal decisions to make. We will allow
those people to consider their particular family situations. Where their children are going to
school, we would like them to complete that school year and possibly even their secondary
schooling, if necessary. So the period over which they are going to locate is quite flexible. As
far as I know, we have no indication of how many people will be relocating and how many
people might consider staying in Sydney.
Senator HARRADINE—So is it the intention of the CSIRO to dispose of the land on
which the Prospect laboratory stands for residential sites.
Dr Adam—We have no plan to dispose of it immediately, but I think that is a fairly logical
conclusion in the longer term.
Senator HARRADINE—What else would you do with it?
Dr Adam—The property is jointly owned by CSIRO and the Australian Wool Corporation
so we have a partner with whom we need to consult on that issue. We currently have no plans
to sell that site. In all probability, it will be disposed of, but I have not discussed it with the
minister. It certainly has not been considered by the CSIRO board.
Senator HARRADINE—If it is disposed of, what is the likely destination of the proceeds
of the sale?
Dr Adam—The equity in the site is roughly 50 per cent Australian Wool Corporation and
50 per cent CSIRO. We would normally invest proceeds from the sale of property into the
continuing research of the organisation. In this case, were that property sold, my anticipation
is that it would be invested in continuing livestock research in the new laboratories located in
St Lucia in Queensland.
Senator HARRADINE—I know what answer you will give me. Isn’t there a worry that, if
this occurs, there will be a reduction in the fields of research in the health and animal
production at a time when other countries—for example, New Zealand—are realising the
great importance of pouring money into research in animal health and animal production?
Dr Adam—I think the livestock committee, who are principally our external advisers
about the health and welfare of that industry, realise that some new science has to be brought
to bear on a whole range of animal genetics and animal health. It was really their
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Thursday, 1 June 2000 SENATE—Legislation E 615
recommendation that we should do that work at the University of Queensland in far superior
facilities than the Prospect facilities and that we should give our staff the opportunity to work
in new laboratories with their colleagues at the University of Queensland. I think it is a very
positive outcome for the scientists themselves and their careers and also the organisation. That
is certainly the view taken by the external sector advisory committee, on whose advice Dr
Mallett has acted, so we have accepted that recommendation.
Senator HARRADINE—Could you please take on notice a request to provide us with the
personnel who are on that advisory committee?
Dr Adam—I would be very happy to do that, Senator.
Senator SCHACHT—I see in the budget strategy papers that from last year to this coming
year there will be a loss of 133 staff in CSIRO. Why the loss and from what program areas?
Are they on the research side or the administration side and what are the proportions?
Dr Adam—I think it is fairly clear that the organisation has now some thousand fewer staff
than it had several years ago. The average loss over that period, therefore, is about 100 to 150
staff each year. That has, in its genesis, a whole range of changes. The nature of the science
that the organisation is doing is changing always. The sector advisory committee process that
we have in place has emphasised some areas of science as being somewhat more important
than others, so I think it is difficult to say that the loss comes in any one particular area of the
organisation.
In our last priorities exercise, we emphasised three areas for growth and, correspondingly,
there were some areas for decline. The growth areas were in marine science, in relation to
work that had to be done for the EEZ. There was increasing attention being paid to aspects of
mineral exploration and petroleum. We saw some countervailing decreases in investment in
areas of like forestry and some aspects of our rural work which were considered no longer as
important as was once the case. That reflected largely the inability of the external industry to
co-invest with CSIRO in areas of research. It particularly is borne out by the decreases in the
rural areas and our inability to sustain research at the levels they once invested at.
Senator SCHACHT—You said that this has been a steady decline because of the changing
nature of the research. Is there a bottom to this decline? Next year, will it be another 130 and
every year for the next decade another 100-odd jobs going until it is down to 5,000 staff or
4,800 or whatever? Or is it going to bottom out?
Dr Adam—I think we would believe that the current budgets, if sustained, would see the
staff plateauing at about 6,000.
Senator SCHACHT—Which is what you have got about now.
Dr Adam—Yes.
Senator SCHACHT—Government has made great play of the fact that special emphasis
will be given to employment, et cetera, for non-metropolitan areas of Australia. Are any of
those 133 jobs going from non-metropolitan Australia from research centres you have—
which are not all in the capital cities, thank goodness?
Dr Adam—I think the largest losses in that particular group of 133 people would have
been from Canberra and from Melbourne.
Senator SCHACHT—With all due respect to Canberra, I do not think they are a rural
area. I think that they are part of the Canberra-Sydney-Melbourne axis. You would not be
taking Canberra as a regional area, as such, though there might be an argument that the
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surrounding areas are in that area. Senator Lundy might be more interested to hear about the
numbers that are going from Canberra. Are they out of administration over at headquarters?
Dr Adam—No. I think it is fair to say that probably two-thirds to three-quarters of those
staff would be science and research.
Senator SCHACHT—Out of the staff at Black Mountain and those sorts of areas?
Dr Adam—Yes. Forestry in Clayton was a group that was particularly hard hit, as was the
division that formerly worked in chemicals research in Melbourne.
Senator SCHACHT—We had this discussion in sport, actually. Senator Lundy raised it
and it is relevant here. If the low income areas, which are the traditional rural areas, cannot
match the funding because their industry is doing rather poorly in commodity prices, et cetera,
doesn’t that mean that they just get worse and the spiral continues downwards? Because they
are not getting any, their research is dropping off, and those that are doing well and can afford
to put money in continue to get the matching grants or the increased grants. So the better off
industries with income are actually getting the research dollar proportionately higher than
those industries that probably need research to find ways to be more efficient, more
productive or even find new ways of devising products from their base commodity.
Dr Adam—As a generalisation, that is probably true. But I am not sure that applying it to
CSIRO is necessarily relevant. What we have done, though, in rural research—
Senator SCHACHT—You might want to take it on notice. If I may be so bold as to
suggest it, you might want to put a comment covering that issue in the annual report when it
comes out at the end of this year. You might comment that in the broad sense it might, as we
discussed in a couple of other areas in estimates, but—if you are confident that it will not in
CSIRO—why that is not going to happen in CSIRO and how you are dealing with it. I
suppose you still have a disproportionately—not in a pejorative sense—higher research in
those more traditional areas anyway, haven’t you?
Dr Adam—I think that is probably true. But I would be happy to take that on notice.
Senator SCHACHT—It has been 18 months since I have asked this question and a simple
answer will do. Are you still in legal dispute with Charter Pacific?
Dr Adam—Yes.
Senator SCHACHT—I was hoping, after 18 months away from the issue, that you would
have said ‘no’.
Dr Adam—I would have loved to have been able to say that.
Senator SCHACHT—I know. Are you actually at a court stage yet or is there just an
endless round of interlocking documents being sent backwards and forwards? Is there any
chance of mediating it or will it go to the court. I do not want you to say anything here that
might prejudice your case if you do not wish to.
Dr Adam—I think Dr McIntosh gave quite a fulsome disclosure.
Senator SCHACHT—That was a good 18 months to two years ago. That is why I have
laid off for a while.
Dr Adam—I think it is fair to say that the projected court date which Dr McIntosh spoke
about, which was August this year, now looks like being early 2002. The company has
successfully challenged the date at which discovery stopped, late 1996, and moved that
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Thursday, 1 June 2000 SENATE—Legislation E 617
discovery period now through 1997, 1998 and 1999. I think that advances the possibility of a
court hearing to early 2002.
Senator SCHACHT—One other question on notice: I cannot find something, and I would
not expect it to be in these PBSs, which are now rather cloudy, obfuscating documents under
the way the finance rules have them set out. What is the legal cost to CSIRO in this long-
running saga with Charter?
Dr Adam—It is $3.8 million to date. I think Dr McIntosh’s answer last year was of the
order of $3.08 million. It has now increased by approximately another $800,000.
Senator SCHACHT—Can I ask on notice—as it is not in the document here—what you
have put aside in this coming budget not just for Charter Pacific but for general legal costs?
Answer generally because you have got to protect yourself on patents, you have got to protect
yourself on intellectual property, so I expect that the bill would be always, in your
organisation, a bit larger than what some of us would like, but I understand why it is so.
Dr Adam—We have budgeted roughly $1.5 million for a range of legal issues, much of
which is unrelated to Charter Pacific but covers a number of issues where we have to take
external advice.
Senator SCHACHT—And there is no other major case like Charter Pacific that is
bedevilling you at the moment?
Dr Adam—No.
Senator SCHACHT—I am not prejudging the merits of the case either way. That is the
only major legal case you have?
Dr Adam—That is correct.
Senator SCHACHT—Thank you for that. I want to go to the property sell-off which is
outlined in this particular PBS and the proceeds of the sale. I want to get this clear—when you
sell it, you will then lease back the property I understand. Do you keep the proceeds of the
sale or does that go to consolidated revenue?
Dr Adam—The arrangement that has been made is exactly that. But, in the event that we
lease those properties back, we will be augmented by Finance for those lease costs.
Senator SCHACHT—For 2000-01 there is $23 million anticipated. Do you have any idea,
without giving away any indication to the people who will own it what you might be willing
to pay individually as a leasing arrangement, of what you would be asking the government to
supplement you for the leasing costs?
Dr Adam—In the budget estimates there are some figures that indicate what those sorts of
cash flows would be to reimburse us for the lease costs.
Senator SCHACHT—Can someone tell me what page that is on in this PBS?
Dr Adam—Page 192.
Senator SCHACHT—I see—5.9, 8.4 and 10.7. And that is a guarantee from Finance?
Dr Adam—That is a guarantee.
Senator SCHACHT—Minister, did you attempt the usual: to try and keep the proceeds of
the actual sale for the agency?
Senator Minchin—As you know, the previous arrangements with respect to the CSIRO
had been that it managed its own portfolio of property and that meant that it retained the
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proceeds of sales and developed its own property. We came to an amicable agreement with
Finance, and indeed the ERC, that the property sales agreed would be met by an appropriate
supplementation to ensure that the CSIRO was at no stage disadvantaged by the agreed
property sales. In other words, there would be full supplementation to compensate the CSIRO,
on the understanding therefore—
Senator SCHACHT—I imagine you reaching an amicable agreement with Finance on
that. Was it amicable with CSIRO?
Senator Minchin—It was consensual and done in good spirit, and I congratulate the
CSIRO on its cooperation.
Senator SCHACHT—With an arm halfway up the back yes. With this arrangement, it
goes back into consolidated revenue, which means the government picks up in cash terms a
lot more in one whack than it pays out that coming year in the lease. Over the period of time,
you might say the leasing cost is more than you will get from the property. Is there any
arrangement to stop Finance in particular getting out their eagle eye and running across the
large number of properties of CSIRO and saying, ‘Well, we sell the lot. We will take several
hundred million dollars over a couple of years as a cash contribution to the bottom line of the
budget, and then we will let you lease it all back to help out a short-term budget problem’. Is
there any agreement that they cannot determine the property sale issues for CSIRO?
Senator Minchin—Well, that is the basis on which this agreement has been reached, after
all the CSIRO itself has the title to the properties. This agreement was as a result of the
review, the review on which CSIRO and my department participated and came to the
conclusion that these six properties should be sold. The CSIRO agreed to proceed with those
sales on the understanding of the commitments made by the government through the
Department of Finance as to compensation. So there is no possibility of an arbitrary Finance
move on the rest of the property.
Senator SCHACHT—Well, you never know what is going—
Senator Minchin—Well they simply cannot.
Senator SCHACHT—CSIRO is a totally owned subsidiary of the Australian government.
It is a statutory authority. A budget bill can always amend its powers if they got recalcitrant
and if someone wanted to take the risk, I suppose. Is there an arrangement now on an annual
basis that CSIRO will have a discussion with Finance to reach agreement on what would be
appropriate property sales?
Dr Adam—I do not believe so, Senator. I think the triennial budget arrangement—
Senator SCHACHT—So each year, if there is to be a property sale, that will be freely
reached by CSIRO’s own judgment about not needing that property any more. Then it would
be put on the table for Finance to go through this process that the minister has outlined.
Dr Adam—I think there was a very full review of what Finance call the social cost of
capital, and the six properties that were identified were essentially at the top of that list. As
one runs further down the list of all our properties, it becomes increasingly less and less
attractive to sell property. So the six properties identified were ones that were deemed to be
saleable and for which there was a reasonable prospect of market forces being willing to
arrange a sale on lease-back.
Senator SCHACHT—I see, but—
Dr Adam—They were the most prospective for that—
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Thursday, 1 June 2000 SENATE—Legislation E 619
Senator SCHACHT—it was still your decision to put them on the table?
Dr Adam—Yes. Well, the—
Senator SCHACHT—I am always a little suspicious of Finance’s ability to come
crunching in and say, ‘Look, we have had a bit of a look around. You have got two properties
sitting over at Black Mountain, Limestone Avenue or anywhere else. We think those are better
off sold’. You might have a very good scientific argument, but the bottom line is when they
get desperate in the ERC, we know who usually wins out, unfortunately.
Dr Adam—I think the minister was really quite successful in convincing the ERC that the
CSIRO board—
Senator SCHACHT—This time around.
Dr Adam—and its board audit committee was capable of making that decision on behalf
of the organisation.
Senator SCHACHT—Minister, next year the sales will be freely put up by CSIRO and
will not be under the pressure of the ERC or Finance?
Senator Minchin—I am satisfied with the joint and collaborative process we followed to
identify whether there were any properties that would be more sensibly sold off. That review
came up with these six properties. The CSIRO has agreed to sell them on certain agreed terms
and conditions. That is the end of the matter, so far as this process is concerned. Obviously the
CSIRO and its board will continue to properly manage its property portfolio, as it always has.
Senator SCHACHT—The six properties are named by city but not by actual site. Were
they old laboratories or were they more administrative places?
Dr Adam—There is a mix. The biggest facility is at North Ryde, in the Prime Minister’s
electorate.
Senator SCHACHT—What does that mean—you actually sold it to him?
Dr Adam—There are properties in Western Australia and Queensland, at Marmion, at
Gungahlin, two in the ACT—
Senator SCHACHT—Could you provide on notice the actual detail of the properties,
because we are going to run out of time.
Dr Adam—I am happy to do that.
Senator SCHACHT—This question, more related to science, is about the CRC program. I
notice there was a drop of about $8½ million from 1999-2000 to 2000-01 in the budget for
CRCs. Is that just an unfortunate dip in the cycle of CRC programming or is there something
structural that means the budgeting is dropping off and that that is going to continue?
Dr King—I am answering on behalf of Drew Clarke on this matter, I guess. There are two
issues, as he explained for some of the other programs. One is phasing—it just happens to be
this year that the demand on the CRCs, according to their seven-year contract, is down—and
the other is the three per cent clawback that he spoke about this morning.
Senator SCHACHT—That means it is not the beginning of a structural decline in the
program?
Dr King—That is correct. It could well have been that phasing increased the amount in this
particular year.
Senator SCHACHT—Fine. That is all I have.
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E 620 SENATE—Legislation Thursday, 1 June 2000
Senator LUNDY—I have a number of questions relating to competitive tendering and
contracting. I notice in your portfolio budget statement that the CSIRO has, as all agencies in
departments have, a CTC requirement placed on the agency. I want to know firstly how much,
if any, of your budget allocation was deprived from CSIRO as a result of the CTC program
specifically in this budget?
Dr Adam—I should probably take that on notice, but my recollection is that the answer to
that would be almost none. We have not yet got into that process. So I am not sure that I can
answer that question with any degree of precision.
Senator LUNDY—From experience, some agencies have incurred a reduction in their
budget allocations that can be attributed, either all or in part, to that CTC program
specifically, much in the same way as agencies and departments have incurred a reduction in
their budget as a result of the IT outsourcing project. Indeed, both the CTC program and the
IT outsourcing program will be managed by the Office of Asset Sales and IT Outsourcing. If
you could take on notice whether there is anything specific relating to CTC, that would be
good.
Dr Adam—I would be happy to do that.
Senator LUNDY—I do have some specific questions in relation to the IT outsourcing. For
my benefit and the benefit of the committee, could you outline for the previous years and the
out years what budget allocation has been taken away from you—that is, what you have lost
in your budget as a direct result of Minister Fahey’s IT outsourcing program?
Dr Adam—Perhaps I could introduce Dr Sandland and ask him to respond to that. He has
been dealing with that issue with a great deal more detail than I.
Dr Sandland—The full year cost that has been removed from our budget is $6 million, but
that has not occurred yet. I believe the figure is around $3 million as a part year figure at this
stage.
Senator LUNDY—Is this for the forthcoming financial year?
Dr Sandland—The $6 million is for the forthcoming financial year.
Senator LUNDY—What about in previous years—for example, the current financial year
and the year before that?
Dr Sandland—I believe the figure is around $3 million, but to give you an accurate an-
swer I would have to take that on notice.
Senator LUNDY—In terms of incurring that reduction, my understanding is that CSIRO is
part of group 9. According to evidence from OASITO last week, the tender process for group
9 is due to commence in September. Is that your understanding?
Dr Sandland—That is our understanding, although we believe it is probably going to slip
into October.
Senator LUNDY—I am certainly finding, having taken an interest in this particular
program for some time now, that many of the agencies who have outsourced their IT are not
only not experiencing the quality service levels that they maintain, but also many of them are
finding that they are having to apply sanctions and penalties to the outsourcers because of the
lack of achievement of the service levels within the contracts. What work have you done to
date in assessing the relevance of the IT outsourcing program to the CSIRO?
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 621
Dr Sandland—We are currently working with OASITO to do a scoping exercise to
determine what areas of our IT infrastructure will be in scope and what areas will be out of
scope. That is currently progressing, even as we speak. We have done quite a bit of
preliminary investigation within CSIRO. We have been assured by OASITO that the final
outcome will be such as to have no deleterious impact on CSIRO’s ability to carry out its core
mission which, of course, is research, and in which information technology is both a
component of our research activity and a key underpinning technology for delivery of our
results. We are working very hard to ensure that that will not be impacted negatively in any
way.
We have an internal project team that is working on this issue. We are also involved in
working with the OASITO team. Indeed, we have seconded a senior IT professional from
CSIRO to work with the audit team, Walter and Turnbull, that has been put in place by
OASITO, to go through that process with them, so that the particular issues that relate to a
science agency will be understood by those auditors in working through the issues. As you
might understand, IT outsourcing in a research agency is a different issue from IT outsourcing
in some other agencies. There are new issues that we are confronting and we are working
through those issues determinedly. We also have the assurance from OASITO that they
appreciate that process and they understand our business requirements, and have made a
commitment that the ultimate contract that is entered into will honour those requirements.
Senator LUNDY—With all due respect, Finance said that to every other agency engaged
in this process as well. Are you aware that once OASITO assists you in the drafting of the
contract, once it is signed, they take absolutely no responsibility for its management or the
outcomes you are capable of achieving within the scope of that contract?
Dr Sandland—That specific part of the process is a phase that we are just about to enter
into.
Senator LUNDY—I am asking you if you are aware of the extent of OASITO’s role and
where their involvement actually ends.
Dr Sandland—Yes, we understand that OASITO’s involvement does end at that stage. We
have indicated, and are currently discussing with OASITO, the importance of putting in place
a process for monitoring the outcomes of the IT outsourcing process. That is an area that we
are going to work through with our risk assessment group which we have in Melbourne. They
will be looking at it in a completely objective way. We are also committed to a process of
performance monitoring and evaluation in CSIRO, and we are hoping that those people will
also help us with a monitoring program.
Senator LUNDY—Are you aware of the views of the CSIRO Staff Association with
respect to the proposed IT outsourcing?
Dr Sandland—Yes.
Senator LUNDY—They have made some quite disturbing observations about the likely
effect or impact of IT outsourcing. Perhaps I could reference some of those comments by
saying that they feel very strongly that IT is an increasing part of CSIRO’s core business and
that further outsourcing—because I understand a proportion is already outsourced, as is
appropriate—will impact on the conduct of research. They have certainly expressed that view.
Do you have a response to their particular concerns? How are you trying to address them?
Dr Sandland—The response to their concerns is that the extent of the IT outsourcing will
be limited to the infrastructure rather than to areas like software development and so forth. In
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E 622 SENATE—Legislation Thursday, 1 June 2000
limiting it to that infrastructure, which is the understanding that we have at the moment—
although we have not got to the stage of writing requests for tender, we are still going through
this scoping exercise—I think that those fears could well prove groundless. But we take them
sufficiently seriously in that we understand the area of concern and we are working both with
OASITO and internally to ensure that those areas of impact that you alluded to will not
become a negative in this arrangement.
Senator LUNDY—Were you aware that the Australian National Audit Office is currently
inquiring into the IT outsourcing program, in particular to the operation of the first three con-
tracts let under that program?
Dr Sandland—Yes, I am aware of that.
Senator LUNDY—Are you going to take into consideration the outcomes of that ANAO
report before signing any contract or engaging in this process to a point of no return?
Dr Sandland—We have made it very clear—and it has been agreed by OASITO in a
meeting with Dr Adam and myself—that signing off on that contract will take into account all
of the concerns we have at that time. OASITO has agreed that we will sign off on that
contract when and only when we are convinced that the arrangement we have is a satisfactory
one.
Senator LUNDY—In terms of the nature of the contracts themselves, the concerns raised
by the staff are about the impact on research. Evidence that I have been able get through
estimates committees with agencies that already have outsourcing contracts in place show that
there is quite a demonstrated impact in terms of service levels, for example, to the desktop,
with the type of in-house techy style support to people using computers within the workplace.
The evidence is that has been significantly affected, primarily because that techy support is no
longer in-house and has to be called in and paid for on an itemised pre-structured scale. What
is your response to that sort of what I would consider factual knowledge about the experience
to date of agencies that have had these contracts in place for some time?
Dr Sandland—Basically, although there has been a lot of anecdotal material around, the
general response to that has been that this is part of a settling in process. I am not aware of
any steady state data that is clearly indicative of a steady state diminution of service quality in
the long term. I know there have been significant early phase impacts, but I am not in a
position really to comment on the experience of those other agencies.
Senator LUNDY—Perhaps I could provide a service in drawing your attention to those
agencies involved in the cluster 3 contract which was let back in July 1998. It has been in
operation for two years now and they are still finding cause to apply financial sanctions to
their contractor for failure to achieve service level agreements contained within the contract.
With respect to the proposal, is it mandatory for CSIRO to outsource their information
technology?
Dr Sandland—In the sense that it is government policy, yes.
Senator LUNDY—Right. Minister, if it was demonstrated through the market testing
exercise that the proposal to outsource the information technology at CSIRO—or any other
agency within your portfolio—did not make sense either economically or in terms of the
quality of output from that agency, are you in a position to advocate on behalf of that agency
for their exemption from the IT outsourcing program in the interests of maintaining the
quality of outputs of those individual agencies?
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 623
Senator Ellison—As has been said, outsourcing is government policy, but it should be
implemented sensibly. I would certainly endeavour to ensure that it is. It is our obligation to
comply with government policy.
Senator LUNDY—Minister, I draw your attention to the fact that the Department of
Foreign Affairs and Trade is being granted an exemption by virtue of arguing a case to the
government that the disparate locations of their particular requirements do not suit the model.
What I see in the advocacy of the staff association of the CSIRO are powerful arguments,
albeit distinct from DFAT’s arguments, that the IT outsourcing policy in all its ubiquity is not
the most appropriate way to move forward for information technology infrastructure within
those agencies. I draw your attention to those considerations as CSIRO move further down
the path as required.
Senator Ellison—There may be special considerations in relation to the Department of
Foreign affairs and Trade relating to security. Certainly, in the hypothetical situation where an
agency put to me a case that I felt ought to be put to the Minister for Finance, I would
certainly do so.
Senator LUNDY—In group 9, there are five agencies involved in that particular cluster
which has been mandated by the department. I understand CSIRO are 70 per cent of the
cluster in critical mass. ANSTO, CSIRO, the Australian Institute of Marine Science, Bureau
of Meteorology and the Antarctic Division are all designed to come under the one cluster, so
each of those agencies are required to get together and come up with a common agreement
around one contract. I am certainly aware that there are similar arguments being presented to
me that those agencies suffer similar challenges and concerns at least from a staff perspective,
as does CSIRO. It is not just an issue confronting CSIRO but perhaps something worthy of
your investigation as minister responsible for each of those.
Senator Ellison—Not every one of them. Certainly it is a matter in which I will take an
interest. I observed the recent publicity surrounding the matter and Minister Fahey’s letter to
the Financial Review—or one of the newspapers—reassuring the scientific community of the
commonsense of the process, but I will continue to take a keen interest in it.
Senator LUNDY—Thank you. I have no further questions.
ACTING CHAIR (Senator Chapman)—That excuses the CSIRO. Thank you very much
to the officers.
[10.45 p.m.]
AUSTRALIAN NUCLEAR SCIENCE AND TECHNOLOGY ORGANISATION
ACTING CHAIR—I welcome Professor Helen Garnett and her colleagues. On behalf of
Senator Forshaw, can I offer an apology. He was intending to be here to ask some questions
but had to leave before ANSTO was called on. I understand he has passed his questions to
Senator Lundy.
Senator LUNDY—Indeed he has. Chair, I am conscious that it is now quarter to 11 and
that we are scheduled to finish at 11. I anticipate my questions will take a little longer than
that, although I undertake to move through them as quickly as possible.
ACTING CHAIR—You have until 11 o’clock.
Senator LUNDY—You are going to shut it at 11?
ACTING CHAIR—I am. I am on an early plane in the morning.
ECONOMICS
E 624 SENATE—Legislation Thursday, 1 June 2000
Senator LUNDY—But it is better than coming back for a spill-over. That is why I am
making the point.
ACTING CHAIR—The spill-over is tomorrow and that is being devoted to Treasury.
There is no further provision for a spill-over.
Senator Minchin—You could segregate your questions on the basis of those which could
be put on notice and those which you would like to ask tonight.
Senator LUNDY—We have done our best to do that. But I am also very conscious that
officers from ANSTO have been here all afternoon, and I wanted to make it at least worth
their wait.
Senator Minchin—I am sure they would be happy to go at 11!
Senator LUNDY—I am sure they come here wanting to spend as long a time as possible
before the committee! I raise this on the basis that, if it is just another 15 minutes or so, I
would prefer to be able to ask my questions.
ACTING CHAIR—I might stretch it to five minutes but not 15.
Senator LUNDY—It would save ANSTO from having to respond later to questions on
notice. Professor Garnett, I would like to refer primarily to an article published in the Bulletin.
I have a series of questions that obviously relate to that and to the current challenges before
you, in particular the proposed new nuclear reactor. Has the successful tenderer been decided
yet?
Prof. Garnett—The evaluation process is still proceeding according to schedule.
Senator LUNDY—Perhaps you have already made the anticipated date for the
announcement available—is there a date yet?
Prof. Garnett—No.
Senator LUNDY—Is there a time frame within which you must make a decision?
Prof. Garnett—The time frame that we have publicly indicated is that we hope to be able
to sign a final contract sometime in the third quarter of 2000, or the first quarter of the 2000-
01 financial year. We still hope to be able to do that.
Senator LUNDY—Who makes the final decision on the tenderer?
Prof. Garnett—The tender evaluation process is a complex process involving a lot of
different groups of people. The way that it was established is that ANSTO would make a
recommendation, but ANSTO cannot enter into contracts of this magnitude without approval
from the minister, and that is the normal process.
Senator LUNDY—So you will make a recommendation to the minister?
Prof. Garnett—Correct.
Senator LUNDY—Minister, in terms of your process, do you involve other people in that
decision making process or is it something that is really just due process—getting you to sign
off on something because it is so big?
Senator Minchin—By law, ANSTO cannot enter into contracts of a certain size without
ministerial approval. The decision making process within ANSTO and its associated bodies is
extremely rigorous, and I have every confidence that when ANSTO puts a recommendation to
me it will be for the best tenderer. I will be consulting my cabinet colleagues on the matter. It
is a big decision for Australia, and it is a big investment. The expert advice that will be made
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 625
available to me will be of the highest order. Given the weight of it, I will be involving my
cabinet colleagues.
Senator LUNDY—That answers the question. You will seek cabinet approval for that de-
cision?
Senator Minchin—I will be discussing it with cabinet.
Senator LUNDY—Is it the same thing?
Senator Minchin—Legally, the decision rests with me as to whether or not I approve
ANSTO’s proposal to enter into a contract. But as a matter of commonsense and due process
within government, before I make my decision I will be discussing it with my cabinet
colleagues.
Senator LUNDY—On page 167 of the portfolio budget statement there are a number of
performance targets for the design and construction of the new reactor. Professor, are you
confident that these targets will be met?
Prof. Garnett—They are certainly the targets we have set, and the contract is signed July
2000—in the third quarter this year. We are hoping that we can meet that first target in the
third quarter and that the rest of the milestones will flow from there.
Senator LUNDY—What will be the structure of the contract? Will it be a single contract
or several contracts for the different stages of the proposal?
Prof. Garnett—It is a detailed design, construct, commission contract. It always has been
one.
Senator LUNDY—It will be one single package, one contract?
Prof. Garnett—Correct.
Senator LUNDY—One contractual relationship with one entity?
Prof. Garnett—Yes, for the reactor facility and buildings associated with it. The only
separate entities are for beam live instruments that go on the ends of the beams. Some of those
instruments maybe would move from HIFAR, and others would be new instruments
constructed through teams of scientists working both at ANSTO and overseas. There could be
some contractual arrangements associated with those.
Senator LUNDY—Are the costing for those contractual arrangements lumped in with the
overall estimates for this project?
Prof. Garnett—With the new instruments, there always was a component in the original
estimate and the project budget for them.
Senator LUNDY—What proportion of the total project will be undertaken by Australian
companies? Is there a proportion that is mandated by virtue of government policy involving
Australian companies?
Prof. Garnett—The advice to the four pre-qualified vendors was that we sought to
maximise Australian content. Initially, it was based on 46 per cent Australian content. That
was the goal, but we aim to make that at least fifty-fifty.
Senator LUNDY—You mentioned four pre-qualifying vendors. Who were they?
Prof. Garnett—They were announced back in December 1998. There were four different
reactor vendors: Technicatome in France, Siemens in Germany, AECL in Canada and INVAP
in Argentina.
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E 626 SENATE—Legislation Thursday, 1 June 2000
Senator LUNDY—Is it your intention to make the contract documents public once they
have been signed?
Prof. Garnett—No. The contract documents are commercial documents. This whole
project is being run as a commercial project with all of the appropriate probity associated with
it. They would be appropriate commercial documents.
Senator LUNDY—Would you be prepared to make those documents public with their
commercial-in-confidence bits blacked out?
Prof. Garnett—I think that would be something that would have to be discussed whenever
we get around to the issue of whoever the successful tenderer is; but it is normal practice in
this industry for that not to happen.
Senator LUNDY—I appreciate that. Because of the interest surrounding this project, I
thought you may have been considering making it public in some form in the public interest.
In terms of the style of contract—I am a little familiar with building and construction
contracts—is this structured to be an alliance style contract as opposed to a more price fixed
time with a structured project manager contract? Do you understand the distinction?
Prof. Garnett—The tender documentation is very clear in that it would be a lump sum.
Senator LUNDY—Within that contract, is the structure to have a principal contractor and
subcontractors working to that principal contractor?
Prof. Garnett—With the structure, the tender documentation and the information about
who the vendors have teamed with is fairly available on our web page but, indeed, it was up
to them whether they formed joint ventures with other companies or, indeed, they formed
alliances.
Senator LUNDY—Have any of the vendors formed an alliance model contract?
Prof. Garnett—What they have put forward are their parties and, as I say, there are some
that are joint ventures and some that are alliances.
Senator LUNDY—Oh, I see. The significance of the issue is that under an alliance
contract there tends to be greater flexibility in how the contracted outcome is actually
achieved within both design features and construction methodologies. During the phase of
construction it more fast track so it is harder to monitor from a contractual management
perspective—some say.
Prof. Garnett—All I can say to you is that we have an experienced project manager who
has been in the industry for some time.
Senator LUNDY—Will the fixed price that you mentioned provide for a degree of
escalation or variation during the term of the construction, and under what conditions as far as
the RFT goes?
Prof. Garnett—As I have said, it is a lump sum and, as we have always indicated, we had
agreement with the department of finance about the parameters that would be used for any
adjustment well in advance. They are consistent with the department of finance guidelines and
there are indices that are in the construction indices. They are the only variations.
Senator LUNDY—Again referencing that article—I am aware that you have traversed this
issue on many an occasion within estimates—the original estimate for the total cost of the
new reactor was $286 million. It is now stated in 99 terms as $326 million over nine years.
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 627
Can you explain, in the first instance, the rising costs and in the second instance, why it is
over nine years?
Prof. Garnett—The first issue is that it was $286 million in 1997 dollars, without any
parameter adjustments for out years. Indeed, the figure that you have this year is the estimate
based on assessments for the department of finance with those parameters. The issue of nine
years is that we tend to operate in triennia and it goes through into the third triennium.
Senator LUNDY—Right. Then it does not necessarily mean it is going to take nine years.
It is scheduled to be operational by when?
Prof. Garnett—By 2005.
Senator LUNDY—Any particular date in 2005?
Prof. Garnett—The schedule would suggest that we hope it is being commissioned early
in 2005 because there is a need for parallel operation of the two reactors before HIFAR shuts
down in early 2006.
Senator LUNDY—I have a series of things which I want to know whether the estimate of
the costings include. I will just run through them because it may be better for you to take them
on notice.
Prof. Garnett—It might well be.
Senator LUNDY—The retooling of any facilities on site; the establishment of a proposed
synroc facility for conditioning waste from isotope production; the retraining of personnel
necessitated by the new facility; possible additional costs from meeting licensing
requirements imposed by ARPANSA during the licensing process; various contingency plans
for waste disposal, including on-site storage of spent nuclear fuel; and costings for upgrading
safety and infrastructure design to meet international earthquake standards necessitated by the
results of the probabilistic seismic hazard analysis commissioned by DISR. Can you take all
of those on notice?
Prof. Garnett—I can take those on notice.
Senator LUNDY—And provide a response as to whether or not they have all been
addressed within your costings. Finally, can you show me where in the forward estimates in
the portfolio budget statement the expenditure on designing and constructing the new reactor
is detailed?
Prof. Garnett—The reactor project is outcome 1. If you look for outcome 1, it is
mentioned in a number of places.
Senator MURPHY—What the does the government intend to do about the medium level
waste problems and also the low level waste matter that you now have to deal with, given the
South Australian government has passed legislation to not allow you to proceed unless you
proceed of your own volition on Commonwealth land?
Senator Minchin—Can I thank the South Australian government for its continuing
cooperation with respect to the low level waste repository in regard to which it has, as
recently as yesterday, confirmed that it has no objections and that it will continue to cooperate
in the final establishment of the repository for low level waste. With respect to intermediate
level waste, as I have said publicly, no decision has been made yet on where that store should
be. We have not even begun the selection process for the store. I have repeatedly said that co-
location is only one option but that we will go through a nation-wide search based on new
criteria, expertly designed criteria, and that the whole nation will as far as we are concerned
ECONOMICS
E 628 SENATE—Legislation Thursday, 1 June 2000
be involved in the selection process. In other words, there will be no area of Australia either
ruled in or out.
Senator MURPHY—Even if a state government has passed legislation that for land under
its control the Commonwealth will not be permitted to store the intermediate level waste?
Senator Minchin—That is correct. In my view, and I am sure you would have the same
view, the obligation of the Commonwealth is to ensure that the site is in the best and safest
place in Australia. As the Commonwealth, we cannot go down the path of ruling anywhere
out.
Senator MURPHY—Despite state governments’ views.
Senator Minchin—I note those views. As I say, it is premature because we have not made
a decision with respect to South Australia. The fact is that the state legislation cannot override
the Commonwealth legislation. There is federal legislation already in place. There are some
who believe that the state legislation will prevent the Commonwealth legislating. The fact is
there is already Commonwealth legislation in place which allows the Commonwealth to
establish facilities subject to the regulatory requirements for licensing. The point is that the
state government cannot override the Commonwealth, not that the Commonwealth is going to
override the state.
Senator MURPHY—But does the Commonwealth legislation only have application to
Commonwealth land, or does it have application to land in general?
Senator Minchin—It enables the Commonwealth, under proper constitutional authority, to
establish a radioactive waste facility. As you know, under the Constitution, wherever there is
conflict between state and federal legislation the federal legislation prevails. Given that there
is already Commonwealth legislation, any licensing under that legislation of a
Commonwealth facility could not be overridden by contradictory state legislation.
Senator MURPHY—You will not be ruled by public opinion?
Senator Minchin—I accept that it is easy for opportunistic political parties of the kind that
the state Labor Party in Australia is to whip up a scare campaign about this material.
Senator MURPHY—I thought that was a state Liberal government that passed the
legislation.
Senator Minchin—I have said publicly that I lay the blame squarely at the feet of the
opportunistic state Labor Party in South Australia which, in the way in which it has attempted
to whip up a scare campaign on this matter, has resulted—
Senator MURPHY—It must have scared them a bit, because the South Australian Liberal
government has put the legislation through.
Senator Minchin—Exactly. The Democrats and Labor had already proposed bills and
whipped up a campaign, and in response to that the state government has seen fit to introduce
its own legislation, and that is regrettable. It is in my view a political response to a campaign
being waged by the Labor opposition. Nevertheless, the Commonwealth will not be deterred
from its responsibility to conduct a proper, scientifically based search for the safest site in
Australia, wherever that may be.
Senator MURPHY—All right. Thank you.
CHAIR—It being six minutes past 11, the committee stands adjourned, unless there are
some further questions.
ECONOMICS
Thursday, 1 June 2000 SENATE—Legislation E 629
Senator LUNDY—I would like an answer to my question.
Prof. Garnett—I can give you the answer to your question. It is in a couple of places, but
possibly the easiest is on page 176, Senator. If you look under ‘Non-financial assets’ you will
see there ‘National facility asset under construction’. They are the cumulative figures as the
dollars are expended.
Senator LUNDY—This is under non-financial assets?
Prof. Garnett—Yes. It says, ‘National facility asset under construction.’
Senator LUNDY—Yes, across the out years.
Prof. Garnett—And that is cumulative, so that is saying that, by the 2003-04 financial
year, it will be $283,786,000.
Senator LUNDY—That is less than $326—
Prof. Garnett—That is correct, because it goes beyond that year. That is the question you
asked me earlier. It goes into the 2004-05 financial year, the 2005-06 financial year, and
indeed any contract will be withheld so that there are certain payments that are only pending,
a certain percentage held back on operation.
Senator LUNDY—Are you able to nominate the figures in the out years for 2004-05 and
2005-06?
Prof. Garnett—I am sorry, I would have to take those on notice.
Senator LUNDY—Yes, if you would, please. I just have a couple more questions, and I
will only take a minute. Professor, I would like to again refer you to the Bulletin article and
ask you about a claim in the article that at least one prominent bureaucrat has warned you
privately about an overrun and ‘urging an independent review of ANSTO’s impending
selection of a contractor to build a new reactor’. I want to ask you, (1), whether that is the
case and, (2), if it is, who is that bureaucrat? Are you getting lots of what I presume are at
least reasonably friendly warnings about potential blow-outs in relation to the project?
Prof. Garnett—I am not sure who that is meant to refer to, Senator. I think it is fair to say
that, given some other projects around, from time to time people have been asking, ‘Well, this
isn’t going to be, is it?’ My response has been ‘No, this is a very carefully assessed project
and we are confident of the way we are carrying it out’.
Senator LUNDY—Are you or the minister in a position to guarantee that the reactor can
be built within the nominated price range—that is, the $326 million?
Prof. Garnett—I guess all I can say, Senator, is that we advised the four vendors back in
1998. They were aware of the likely budget, in fact of the budget. We had no indication from
people that they would not bid for a project that was within that budget range, and we
received four bids.
Senator LUNDY—So you can guarantee it?
Prof. Garnett—I could say that we would be confident that we can be within budget.
Senator LUNDY—Minister, are you prepared to go any further than that and offer a
guarantee, given all these reassurances we have heard tonight?
Senator Minchin—That will be the basis on which the contract is awarded. ANSTO is not
authorised to enter into a contract that exceeds the appropriation.
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E 630 SENATE—Legislation Thursday, 1 June 2000
Senator LUNDY—You would be as familiar as I with the ability of contractors to be
completely unscrupulous in seeking variations, though, Minister. I guess that is what has
prompted my question.
Senator Minchin—This will be managed in such a way that that will not be a possibility.
Senator LUNDY—I want to hear how hard line you will be on those variations.
Senator Minchin—It will be absolutely hard line. It will not be possible to exceed the
budget.
Senator LUNDY—You will have to go back to cabinet and ask them for more money.
Senator Minchin—No, that will not be necessary.
Senator LUNDY—Because there will not be a blow-out.
ACTING CHAIR—Did you ask about the about the shortlist or anything like that?
Senator LUNDY—Yes, I did.
ACTING CHAIR—I was not listening.
Senator Minchin—That was published some time ago.
Senator LUNDY—It is on the web.
ACTING CHAIR—When is the final decision?
Senator Minchin—Soon. Pay attention, Acting Chair!
ACTING CHAIR—Are the Argentineans still in the running?
Senator Minchin—There are four tenderers, as you know. They were all published.
Senator LUNDY—I would like to thank ANSTO for being patient today. I know it has
been a long wait, and this time you have ended up last on the list.
Prof. Garnett—Thanks, Senator.
ACTING CHAIR—That concludes the questioning of ANSTO. It also concludes the
consideration of estimates for the department.
Senator LUNDY—I also will be putting some questions on notice.
ACTING CHAIR—Okay, we will accept those. That concludes the consideration of the
Department of Industry, Science and Resources and Sport and Tourism.
Committee adjourned at 11.11 p.m.
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