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House: House of Representatives

Portfolio: Transport and Communications

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Purpose

To clarify the power of certain government business enterprises to enter into hedging agreements, clarify the power to register people to operate aircraft and operate in certain shipping positions in the Great Barrier Reef area and to make other minor amendments to legislation administered by this portfolio.

Background

As there is no central theme to the amendments contained in the Bill, the background of each area being amended will be dealt with below.

Main Provisions

Australian National Railways Commission Act 1983

Australian National Railways Commission (AN) is a Commonwealth enterprise and operates Tasrail in Tasmania, the non- metropolitan lines in South Australia, the inter- State network between Broken Hill and Kalgoorlie, and carries inter- State freight and passengers in conjunction with the State railway bodies.

AN's major operations are in freight and the transport of bulk goods and AN has made a profit in this area in the past three years ending in 1989- 90 (the last year for which figures are available), when a profit of $11 million was made. Passenger services are continuing to run at a loss, although the amount of loss has decreased in recent years, with losses of $5.6 million in 1988- 89 and $3 million in 1989- 90. Cost recovery for passenger services in 1989- 90 was approximately 50%.

The rail transport industry was recently reviewed by the Industry Commission (IC), which released its report on 21 August 1991. The IC identified a number of problems facing the industry, including that operating conditions have changed slowly and have not kept up with technological change; lines and services that are no longer viable have yet to be closed; fares and freight rates are not flexible enough to allow the best use of capital stock; capital has been mis- invested; and governments have presented operators with conflicting social and financial objectives.

The suggested reforms are based on the need to allow greater commercial operation of the railways and freedom from government social objectives. The report also suggested that there should be open competition between road and rail, with restrictions to traffic on routes removed. (The question of the real cost of road transport appears not to have been reviewed.) The report estimated that the annual cost of a failure to reform the rail transport industry was approximately $5 billion in GDP.

Part of most major business operations is the entering into of hedging contracts to minimise risk, and although this has been the case with AN, its power to do so has been called into question by a recent English court decision regarding government enterprises. Hedging basically involves entering into deals that will reduce the risk of a forward commitment by spreading the risk of changes in future prices due to the delay in payment or the use of foreign currencies where there is the chance that changes in the exchange rate could result in significant losses (or potential gains). The usual example given is that of a contract entered into for payment in the future in a foreign currency. Instead of taking the risk of a substantial change in the relative value of the foreign currency to the Australia dollar, hedging involves entering into a range of deals that will involve the delivery of that amount of the foreign currency due on the date for payment. This way, the risk is spread over a number of deals and the chances of a large gain or loss greatly reduced.

Proposed section 64A, which will be inserted into this Act by clause 5, will specifically allow AN to enter into hedging contracts dealing with borrowings, investment or commodity purchases. The Minister may set guidelines that deal with AN's power to enter into such deals. Such guidelines may provide that AN is only to enter into deals of a specified type. A contract will be taken to have been entered into for hedging purposes if it reduces the risk related to borrowings, revenue obtained by AN from an investment, the cost of commodities obtained by AN, or to maintain the value of AN's investments or property. The proposed section will apply to contracts relating to currency, interest rates, futures, swaps in any of these matters, and options, including futures options.

Civil Aviation Act 1988

The Civil Aviation Act 1988 (The Principal Act) established the Civil Aviation Authority (CAA) which has as its primary function the safety regulation of civil aviation in Australia and on Australian aircraft operating overseas. The need to ensure safety is balanced with the cost of safety measures and the CAA directs its resources at the efficient maintenance of safety levels. In the six months to July 1990, there were 152 accidents in civil aviation, 15 of which were fatal resulting in 33 deaths. The rate of fatal accidents per 100 000 hours flown in this period was an estimated 1.02. 1

The CAA gains its revenue from charges to aircraft operators for the services it provides, and the major sources of funds are from en- route charges, terminal charges and rescue and fire fighting charges. Total revenue in 1989- 90 was $555.8 million, a slight decline from the previous year which was due to the domestic airlines pilot's dispute. Expenditure in 1989- 90 was $569 million, which resulted in a net loss for the year of approximately $13.2 million. The main areas of expenditure were for staff and general and administrative costs.

Recent controversy surrounding the CAA has arisen from a proposal to introduce a new air traffic control system, at an estimated cost of $300 million. The original proposal planned for two air traffic control centres, in Brisbane and Melbourne. This plan has been changed and it is now proposed that these two centres will be the main air traffic control centres, but Sydney, Cairns and Perth will control the area near their terminals. It is not yet clear if Canberra will also have a air traffic control centre. Other difficulties for the program have arisen over the question of the prime contractor for the new air navigation system ,TAAATS, that will accompany the new arrangements. The CAA offered six firms the opportunity to tender to be prime contractor and none of the firms was Australian. This led to calls from an Australian consortium that it should be allowed to tender for the project. The matter was examined by Estimates Committee F on 10 September 1991. The Chief Executive Officer of the CAA, Frank Baldwin, when asked about the policy regarding tendering by Australian companies replied ~There is no special policy requiring a certain percentage of Australian content, beyond what is required under the government policies. But at the same time, it is fair to say that we have encouraged - and I use that word in its full sense - Australian industry to work with and get in behind the prime contractors invited, and it has done that successfully.' 2 He then went on to explain the requirements to be the prime contractor, such as a successful record in such programs, as distinct from the ability to contribute to the program.

Clause 8 will insert a number of sections into the (the Principal Act). Proposed section 20AA will prohibit people from flying an aircraft within Australia unless it is registered or is exempt under the regulations, or is performing private operations and has the nationality of a Contracting State (i.e. a party to the Chicago Convention on civil aviation). Australian aircraft are not to be operated unless a Certificate of Airworthiness and a maintenance release are in force or the aircraft is exempt from the regulations. The maximum penalty for a breach of these requirements will be imprisonment for two years.

Proposed section 20AB provides that people are not to operate, or maintain, an Australian aircraft unless they are authorised under the regulations to perform such activity. A breach of this requirement will carry the same penalty as mentioned above.

Proposed section 30A provides that where a person has breached the Principal Act or the regulations made under it, they may be excluded from any activity, eg. maintenance, that they are authorised to perform. The exclusion period may be indefinite.

Clause 10 will insert a new section 62A into the Principal Act that will give the CAA a clear authority to enter into hedging contracts in the same manner as for AN.

Proposed section 78A will make it an offence to remove an aircraft subject to a lien from Australian territory. The maximum penalty for a breach will be three years' imprisonment (clause 13)

Federal Airports Corporation Act 1986

As its name suggests, the Federal Airports Corporation (FAC) is responsible for airports that operate under the areas of Commonwealth control, which are referred to as Federal Airports. These currently include the major airports, as well as secondary airports such as Alice Springs, Townsville, Mount Isa and Tennants Creek. The major contentious project in which the FAC is involved is the proposed third runway for the Mascot Airport in Sydney. This subject has been considered by a number of bodies and has resulted in one of the largest environmental impact statements conducted in Australia, which, basically, agreed with the proposal to establish a third runway at Mascot. Opponents to this proposal have argued that the `fast tracking' of the Badgerys Creek second airport for Sydney would provide a more acceptable solution to the needs for increased airport capacity for Sydney.

The main amendments deal with Federal airport development sites. Proposed section 26A, which will be inserted into the Federal Airports Corporation Act 1986 by clause 19, provides for the Minister to declare land owned by the Commonwealth or the FAC to be a Federal airport development site. Proposed section 26B allows for the variation of such plans, but only on the recommendation of the Board of the FAC. A place will cease to be a Federal airport development site when this is notified in the Gazette (proposed section 26C). When Commonwealth land becomes a Federal airport development site, the land will vest with the FAC (clause 20).

Navigation Act 1912

This Act deals with the regulation of commercial shipping in Australian waters and Australian ships. It deals with such matters as the supply of seamen, their working conditions, the issue of safety certificates, salvage and wrecks. The application of the Act depends on the vessel concerned falling within one the definitions contained in the Act.

Proposed section 8AB provides that the Minister may declare that the Act applies to fishing fleet support vessels engaged in intra- Sate or inter- State trade (clause 28). The term fishing fleet support vessel is defined in section 6, which will be amended by clause 27, to be a ship that operates, or is being constructed to operate, in support of fishing operations. It does not include Commonwealth ships or ships operating on inland waterways.

Clause 29 will amend section 15 to provide that regulations may be made in relation to standards for masters, officers, seamen and pilots who operate in the Great Barrier Reef marine park.

Section 191B makes it an offence not to keep certain ships marked with load lines. Clause 31 will amend this section to introduce simpler language and increase the penalty for natural people from $1000 to $2000, the same level as for corporations.

Parliamentary Proceedings Broadcasting Act 1946

The amendments to this Act will reword and clarify the immunity from prosecution in relation to the broadcasting of Parliamentary proceedings. The main clarification will be to state that the immunity extends to the broadcasting of Parliamentary Committees.

Trade Practices Act 1974

Part X of this Act deals with international liner cargo shipping. Sections 10.17 and 10.27 provide that sections 45 and 47 of the Act, which deal with certain restrictions of trade, do not apply to certain conference agreements (i.e. agreements between international shippers). The amendments contained in the Bill will provide that sections 45 and 47 are not to apply to conference agreements that specify freight rates.

References

1. CAA, 1989- 90 Annual Report, p. 12.

2. Senate Hansard, Estimates Committee F, 10 September 1991, p. 128.

Bills Digest Service 6 November 1991

Parliamentary Research Service

For further information, if required, contact the Economics and Commerce Group on 06 2772460.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1991

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Published by the Department of the Parliamentary Library, 1991.