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Communications, Information Technology and the Arts portfolio
Australia Post

Senator MACKAY —I note that Australia Post was not able to provide state by state figures on the number of returned government antiterrorism kits, as requested by the Senate on 10 February, until last Friday. Why was there such a long delay?

Mr McCloskey —Senator, we did provide that information back in February, through the normal channels.

Senator MACKAY —The reply to the question on notice came back last Friday.

Mr McCloskey —I am not sure what happened, but certainly we provided the answer to that question on notice back in late February.

Senator MACKAY —You provided it to whom? Where did you send it to?

Mr McCloskey —To the department.

Senator CONROY —To the minister's office?

Mr McCloskey —To the department.

Senator MACKAY —Minister, we did not get the information till last Friday.

Senator CONROY —That would be efficient for him. Come on, be fair.

Senator Alston —What are we talking about?

Senator MACKAY —This is the number of returned Australia Post kits. We put the question on notice on 10 February; we got the answer last Friday. Australia Post have just advised me that they sent it through the department in February.

Senator Alston —I suppose the department can tell us whether that is right.

Senator MACKAY —This happens all the time.

Senator Alston —There are so many conspiracy theories when you are in opposition, and so many genuine mistakes when you are in government. It is interesting, isn't it?

Senator MACKAY —Did you have any?

Senator Alston —I have had 10 years of remembering.

Senator MACKAY —Lots of conspiracy theories?

Senator Alston —Yes. You always presume the worst, don't you, if it suits your political purpose?

Senator MACKAY —No, that is not right. I know the old saying about a muck-up and so on.

Senator Alston —There you are. It is even above and beyond politics.

Senator MACKAY —However, four months is pushing the envelope a bit.

Ms Williams —I apologise, Senator Mackay. You asked me a question and I am trying to answer another one.

Senator MACKAY —Australia Post took a question on notice on 10 February about the number of returned antiterrorism kits. They sent the response to you in February. The response came to the Senate last Friday. What happened?

Ms Williams —As you would know, Senator, there is a lot of back and forth on these as to exactly what is required. I think this was one that was thought about quite hard to make sure that the answer was correct. There was some discussion between us and the minister's office to make sure that the answer was correct.

Senator MACKAY —Sometimes it is a conspiracy, actually.

Senator Alston —Do you think we should just cavalierly tick it through?

Senator MACKAY —It took 3[half ] months to get clearance from the minister's office. Which ministers were consulted?

Senator Alston —I am not aware of their regularly consulting other ministers. I would be very interested if they did.

Senator MACKAY —There is an Attorney-General issue here, Senator. Was there any consultation with the Attorney-General's office?

Ms Williams —Not from us.

Senator MACKAY —So it sat in the minister's office for 3[half ] months?

Senator Alston —I do not think that has been said so far.

Senator MACKAY —The information, now that we have got it, is pretty straightforward. It is a short answer. It just says that Australia Post have correctly provided information and then goes through, state by state, the number of returned kits. The preamble is one sentence. And that took 3[half ] months to get clearance from the minister's office. It is a long time to sit in somebody's in-tray. Is it a question of timing, that you had to give it to us because consideration of the estimates was coming up? That is the bottom line, isn't it?

Ms Williams —No. I do not think that is right. We looked at the answer, we talked to the office and there was some thought given to it.

Senator MACKAY —At what point did you talk to the minister's office about this? How many times did you talk?

Ms Williams —Since I didn't, I will have to find that out.

Mr Thomas —There were a number of discussions between us and the minister's office over this issue, and it did take some time to progress it through.

Senator MACKAY —When did you get clearance from the minister's office to provide the answer to the committee?

Mr Thomas —We would have provided the answer to the committee as soon as we were able to. I understand that the answer came through last week sometime.

Senator MACKAY —From the minister's office?

Mr Thomas —I think so, yes.

Senator MACKAY —Australia Post forwarded it to the department in February.

Ms Williams —We would normally send it as soon as it was completed and cleared. We would not hold onto it.

Senator MACKAY —Let me just restate that. Australia Post, very efficiently, provided the answer in February and sent it through to the department. The department then sends it through to the minister's office, where it sits for 3[half ] months. This is the answer on the return of the terrorism kits. On the Friday before estimates, the minister's office gives it the tick and the department, very efficiently, sends it to the estimates committee. Would that be a fair summation?

Senator Alston —I do not think the suggestion that it was sat on for 3[half ] months would be right.

Senator MACKAY —What did you do with it?

Senator Alston —I do not know, but I can certainly make some inquiries.

Senator MACKAY —Have you seen it? You have not seen it?

Ms Williams —As Mr Thomas said, there were some discussions about whether the information was complete, whether it was correct.

Senator MACKAY —Based on what? I am genuinely perplexed.

Senator Alston —Presumably, getting the figures accurate. Weren't you asking for numbers?

Senator MACKAY —But they have come from Australia Post. Why would you have cause to question them? What was the nature of the—

Ms Williams —I am not not answering; it is just that I was not involved in the discussions and I am not sure what they were about. But I presume it was questioning whether the figures were correct, whether they were the most recent figures et cetera. I do not know what they were about.

Senator CONROY —It took so long for them to come through that they could have been outdated by the time they got to us.

Senator MACKAY —I was going to say that maybe Australia Post could give us an update—it would probably take another 3[half ] months to get that! That is most interesting. Mr McCloskey, has Australia Post been able to actually count the kits or are these figures an estimate—if you can cast your mind back that far?

Mr McCloskey —The figures were an estimate.

Senator MACKAY —Senator Ellison, in an answer to me, said:

The arrangement has always been that Australia Post would estimate the number of kits returned.

That is correct. He continued:

This will continue to be done prior to the destruction of kits, so there will be no hiding of the number of kits that have been returned.

I do not think he counted on the estimates process! He continued:

The estimating will be done by Australia Post.

Ten out of 10 there! So it was an estimate, rather than an actual count.

Mr McCloskey —That is correct.

Senator MACKAY —It is a pretty good estimate for an estimate. For New South Wales and the ACT, you got 55,441. How did you ballpark that?

Mr McCloskey —I would not know how precisely how detailed a count was done at each centre. Some centres may have done it more specifically than others. Some may have estimated by having one container load of kits and multiplying it out across another two or three perhaps, and others may have counted every last one. I am not certain exactly how it was done, but we have always regarded it as an estimate.

Senator MACKAY —Mr McCloskey, are you sure that these figures are accurate?

Mr McCloskey —They are the figures that we were advised of. The count was undertaken—as we had undertaken to do at the estimates in February—as of 21 February. They are the broad numbers that had been returned at that date.

Senator MACKAY —I think that is the issue. I think what has happened is Australia Post's efficiency has in fact been stymied by the internal processes of the minister's office. When was the snapshot taken—10 February?

Mr McCloskey —No, 21 February. It was about a week after the end of the mailout. That was the date that we agreed on at estimates the last time.

Senator MACKAY —Absolutely; no problem at all.

Mr McCloskey —That is the date on which that count was taken.

Senator MACKAY —The snapshot as of 21 February was, for example, that there were 17,867 for Victoria. I am advised that there were 40,000 in the mail centre in Melbourne.

Mr McCloskey —I would have no idea where that advice has come from, I am afraid.

Senator MACKAY —What do we do now to get accurate figures as to how many have been returned?

Mr McCloskey —The figures that we provided as of 21 February were accurate as of that date. For Victoria, there were 17,867. In the final count, which was undertaken prior to the destruction of the kits, the Victorian figure had risen to 20,010. They are the figures that we have.

Senator MACKAY —So 20,010 as of when?

Mr McCloskey —That would have been around 25 March, when we received advice from the Department of the Prime Minister and Cabinet to proceed with the destruction of returned articles.

Senator MACKAY —So Victoria ended up being, as of 25 March, 20,010.

Mr McCloskey —20,010 is the figure.

Senator MACKAY —New South Wales-ACT?

Mr McCloskey —New South Wales-ACT was 78,000.

Senator MACKAY —Queensland?

Mr McCloskey —23,824.

Senator MACKAY —South Australia-Northern Territory?

Mr McCloskey —11,780.

Senator MACKAY —Western Australia?

Mr McCloskey —9,382.

Senator MACKAY —Tasmania?

Mr McCloskey —5,800. And that gives a national total of 148,796.

Senator MACKAY —The Tasmanian figure has not changed—is that right?

Mr McCloskey —That is right, Senator. It did not change.

Senator MACKAY —That is a bit odd, is it not?

Mr McCloskey —As I understand it, Tasmania was one of the first areas for distribution of the kit. It is a fairly small state, as you would know. Presumably those who were returning the kits did so within the period prior to 21 February. In other states, greater or lesser amounts continued to come back after that date and they are reflected in the numbers.

Senator MACKAY —Who actually did the estimates or the counting?

Mr McCloskey —They would have been done at the state level, within the facilities, where the returned articles were being kept.

Senator MACKAY —Would it have been the postal workers themselves who were responsible for them?

Mr McCloskey —It would have been a manager within the facility.

Senator MACKAY —The manager?

Mr McCloskey —Perhaps through some of his staff.

Senator MACKAY —So it would be the normal people who processed the mail, presumably?

Mr McCloskey —The normal people who have been involved in the storage of these kits on behalf of the Department of the Prime Minister and Cabinet.

Senator MACKAY —Are you absolutely sure that these figures are accurate?

Mr McCloskey —I am as sure as I can be. They are the figures we have been provided with back through our systems.

Senator MACKAY —Did you return those antiterrorism kits marked `Return to sender' if the recipient had written a return address to the Prime Minister on them?

Mr McCloskey —If those particular articles had not been repackaged, at the request of the Department of the Prime Minister and Cabinet, those articles, even if they had had a specific address on them, were held for the department at the Canberra delivery centre.

Senator MACKAY —And then destroyed?

Mr McCloskey —Ultimately, they would have been destroyed—that is correct.

Senator MACKAY —Who made the decision for the destruction process?

Mr McCloskey —That was a decision taken by the Department of the Prime Minister and Cabinet.

Senator MACKAY —My advice from Minister Ellison is that the Attorney-General gave approval for the destruction of the kits in the Canberra Mail Centre.

Mr McCloskey —That might be a reference to the fact that the people at the Canberra Mail Centre sought permission at the local level, within Canberra, to destroy kits that they had on hand. That permission was granted, but when they referred that particular request for confirmation to national headquarters they were told not to destroy them.

Senator MACKAY —Take me through that sequence again, because we were told in the parliament that when this issue blew up the Attorney-General had issued permission for the kits held in the Canberra centre to be destroyed. Take me through the decision-making process.

Mr McCloskey —Before proceeding to destroy the kits consistent with that permission that had been given, Canberra Mail Centre management referred the matter to national headquarters in Melbourne. They were told not to destroy the kits, that our intention was not to have any of the kits destroyed until we received an instruction to do so nationally from the Department of the Prime Minister and Cabinet.

Senator MACKAY —So some kits were destroyed?

Mr McCloskey —No, no kits were destroyed.

Senator MACKAY —So no kits were destroyed and a request went in through Australia Post's national office?

Mr McCloskey —The request for confirmation that they could proceed to destroy the kits was referred to Australia Post headquarters in Melbourne. In response to that, the Canberra Mail Centre was instructed not to destroy the kits.

Senator MACKAY —By PM&C?

Mr McCloskey —No, by Australia Post. Australia Post management in Melbourne took the decision that none of the kits was to be destroyed until and unless we had instruction from the Department of the Prime Minister and Cabinet to do so nationally.

Senator MACKAY —When did the instruction to do so come through?

Mr McCloskey —That came through on 25 March.

Senator MACKAY —This is most peculiar, because I asked a question of Senator Ellison in the Senate on 4 March and he responded:

The advice that I have from the Attorney-General is that approval has been given for the destruction of some kits in the Canberra Mail Centre to address storage issues.

So what we are saying here is that permission was given by the Attorney-General and was actioned by Australia Post on 25 March?

Mr McCloskey —No. That permission given by the Attorney-General was presumably relayed to us through the Department of the Prime Minster and Cabinet, which is the department through which our local people would have made the request in the first instance. When they referred that to headquarters in Melbourne for confirmation, they received an instruction not to proceed with the destruction of those particular kits.

Senator MACKAY —Not to proceed?

Mr McCloskey —Not to proceed.

Senator MACKAY —I am confused.

Mr McCloskey —Those kits were not destroyed until we received the national request from Prime Minister and Cabinet to destroy them on 25 March.

Senator MACKAY —And that is when they were destroyed—on 25 March?

Mr McCloskey —No. That is when the instruction came through. It would have been in the period following 25 March that they were actually destroyed.

Senator MACKAY —Do you know when they were destroyed?

Mr McCloskey —I am told that it was done progressively up to early May and that it would have been done through a secure contractor.

Senator MACKAY —Commencing when?

Mr McCloskey —Probably in the period fairly shortly after 25 March. It just had to be organised.

Senator MACKAY —So from 25 March through to—

Mr McCloskey —Early May.

Senator MACKAY —early May, there was a sort of progressive destruction at the Canberra Mail Centre?

Mr McCloskey —This would have been nationally. It would have been done separately in each centre. Arrangements would have been put in place locally.

Senator MACKAY —Have all the kits now been destroyed?

Mr McCloskey —Yes, they have.

Senator MACKAY —How were they destroyed?

Mr Sinclair —The process for the destruction of the articles was arranged in coordination with the Department of the Prime Minister and Cabinet. An external contractor was engaged for that process.

Senator MACKAY —Is that usual?

Mr Sinclair —That is a common arrangement that we have with other customers as well.

Senator MACKAY —Who was that external contractor?

Mr Sinclair —In this case it was Thiess.

Senator MACKAY —How were they destroyed by Thiess?

Mr Sinclair —Through their standard documentation destruction service, which is a secure service that is offered to customers.

Senator MACKAY —What did they do with them? Did they burn them or chuck them on the tip?

Mr Sinclair —I would need to confirm that for you, but generally the service comes through the form of a secure storage process, which is then subject to either a shredding destruction or, indeed, an incineration destruction.

Senator MACKAY —So we do not know whether it was shredding, then incineration or either/or?

Mr Sinclair —It could have been either/or. I can confirm that for you.

Senator MACKAY —Did Thiess do the contract work for Australia Post throughout Australia?

Mr Sinclair —My understanding is that Thiess were the prime contractor. They may have used subcontractors on some occasions, but again I would need to confirm that arrangement. That would be a matter for Thiess.

Senator MACKAY —So you are not sure whether they in fact used subcontractors in some instances?

Mr Sinclair —That would be a common practice for this type of national requirement, particularly in some of the more regional areas, for example.

Senator MACKAY —If subcontractors were used, how can you be assured that the security provisions were strictly maintained?

Mr Sinclair —That was a requirement of the contract between Australia Post and Thiess.

Senator MACKAY —It was in the contract, but did the contract cover the issue of subcontractors?

Mr Sinclair —I would need to take that on notice.

Senator MACKAY —How much did Thiess get for the destruction of the kits? What was the contract worth?

Mr Sinclair —I do not have that information available. The payment for the contract was under the standing contract we have with the Department of the Prime Minister and Cabinet, and it was to the department's account.

Senator MACKAY —Does that mean that Australia Post are not apprised of the final figure?

Mr Sinclair —We may be aware of it. I would need to confirm that final figure for you.

Senator MACKAY —Would that be hard to find out?

Mr Sinclair —We can investigate that.

Senator MACKAY —I would prefer that, rather than you taking it on notice because answers to questions taken on notice take a while to get back to us. So, in fact, PM&C ended up picking up the tab?

Mr Sinclair —Under the terms of the contract with the department, yes.

Senator MACKAY —Did the original contract between Australia Post and the government make any provision for the cost of the destruction of the kits?

Mr Sinclair —There was provision for the requirement of destruction.

Senator MACKAY —Really!

Mr Sinclair —There was no specific dollar amount identified in the contract, as I understand it.

Senator MACKAY —Why did the contract make mention of the potential destruction of the kits?

Mr Sinclair —Under the general conditions of contract we have with the Department of the Prime Minister and Cabinet there is a provision there in the event that documentation security and destruction is required. That is what I am referring to.

Senator MACKAY —Is that in all your contracts with PM&C?

Mr Sinclair —That is a general condition of contract for this type of comprehensive service that is offered to customers.

Senator MACKAY —Do you have a copy of the contract here?

Mr Sinclair —No, I am sorry.

Senator MACKAY —Can you get a copy? I do not want a copy for the committee; I just want to ask some questions about it.

Senator MACKAY —Senator Alston has deserted you, so you have no protection.

Mr McCloskey —We might be able to source one through our Canberra office. We can endeavour to do that. It may take a little while.

Senator MACKAY —Were any of the returned kits individually enveloped?

Mr McCloskey —By that, do you mean repackaged?

Senator MACKAY —Yes.

Mr McCloskey —Our assumption is that some of them would have been, but if they had been repackaged we would not have been aware of the content. If they had been repackaged, stamped and addressed, we would have delivered them as addressed.

Senator MACKAY —So they were dealt with just as normal mail, effectively?

Mr McCloskey —Yes, that is correct.

Senator MACKAY —How many return to sender terrorism kits were returned to recipients as opposed to those returned to sender?

Mr McCloskey —I am sorry, I am not sure that I understand.

Senator MACKAY —Just to contextualise it for you, we have some reports that recipients who put their kits back into the mail had them arrive back in their letterboxes a second time.

Mr McCloskey —I am not sure how that would have happened, given that there would presumably be no identification on the returned kit to enable it to be sent again to the person who had endeavoured to return it. It was an unaddressed service.

Senator MACKAY —That is odd. Maybe they got two lots of kits. Anyway, that is what we were advised. If Australia Post were concerned with potential tampering, why did Australia Post not get the packs checked out by the police?

Mr McCloskey —We have in place a very detailed set of procedures for dealing with any articles coming through the mail that may be suspected as containing biological, hazardous or chemical material. Those procedures would have applied to this particular mail-out or any of the returned articles in the same way as it applies to any article that goes through the postal network.

Senator MACKAY —So what is that procedure?

Mr McCloskey —If an article is suspected of containing any hazardous material, then there are procedures in place to deal with that. The first of those procedures would be to isolate the article, to assess its possible degree of hazard and then, if required, to engage the emergency services or the police, and indeed Australia Post's corporate security group, and take from there, depending on the assessment of the hazard that the article presents. There are very well established procedures in place for dealing with such articles. They have been in place in particular since the anthrax scares in the US in late 2001 and they are procedures that staff are well versed in.

Senator MACKAY —So the first step in the procedure would be to isolate the article?

Mr McCloskey —That would be correct, yes.

Senator MACKAY —The second step in the procedure is—

Mr McCloskey —Would be to assess whether or not in fact it does present a real hazard.

Senator MACKAY —What were the actual logistics of that?

Mr McCloskey —I think that would normally be that our corporate security people would assess—

Senator MACKAY —Did that happen in this case?

Mr McCloskey —In which particular case?

Senator MACKAY —In the case of the returned kits.

Mr McCloskey —In fact, of all of the returned kits there was only one instance where a kit was assessed as possibly posing a hazard because it appeared to contain a white powdery substance.

Senator MACKAY —Where was that?

Mr McCloskey —In Camperdown in New South Wales.

Mr Sinclair —On 7 March.

Senator MACKAY —So you have got all these returned kits. Are they all isolated? Forgive us for being somewhat confused. You have outlined a process. Were all of the kits suspect or none of the kits suspect? How did you determine which kits were suspect?

Mr McCloskey —Each article will be treated on its merits.

Senator MACKAY —So someone in Australia Post looked at every one. Is that right?

Mr McCloskey —No. If a particular article, as it was coming through, was seen to be suspect in some way then it would be isolated. That would apply to every article going through the postal network.

Senator MACKAY —So only one was regarded as suspect?

Mr McCloskey —That is correct—only one was seen as containing a white powdery substance that may have presented a hazard, and that was at Camperdown in New South Wales on 7 March.

Senator MACKAY —And how many were regarded as suspect?

Mr McCloskey —I do not have a figure on that. I do know that some that were initially put aside were seen to contain rice that had been put into it.

Senator MACKAY —Do you know how many were regarded as suspect?

Mr McCloskey —No, I do not have a figure on that. They would not have been logged, because as soon as they were seen to have been rice they were determined not to present a hazard and were not referred onto Emergency Services.

Senator MACKAY —Can you ballpark a figure?

Mr McCloskey —No, I cannot. No record would have been kept of those. There were reports, but there would not have been that many insofar as I have information. But I could not ballpark a figure.

Senator MACKAY —So what happened to the Camperdown kit? What was in it?

Mr McCloskey —That was referred to the New South Wales Police, I believe.

Senator MACKAY —What was the result of that investigation?

Mr McCloskey —The report back was that it did not contain any hazardous substance.

Senator MACKAY —What was in it—nothing?

Mr McCloskey —We do not know. We were just told that it did not contain any hazardous substance.

Senator MACKAY —What was the instruction to managers as to how they were to convey the message that there may be hazardous material in the kits to postal workers?

Mr McCloskey —I do not think there would have been any specific instruction to managers as to how they were to convey particular messages.

Senator MACKAY —But how was it conveyed?

Mr McCloskey —It would have been conveyed to those who were involved in handling the returned kits, which would have been I think a minority of our workers. It was first conveyed in early February when we received word of an email campaign that was urging some people to return articles with substances in them as a protest.

Senator MACKAY —But was it conveyed in writing? Logistically, how was it conveyed? I do not know why you are looking so bemused. I do not think it is that hard a question.

Mr McCloskey —How was it conveyed—

Senator MACKAY —Did you issue an instruction or did you put a letter out to your workers?

Mr McCloskey —I think an advice would have gone out from our national headquarters to the states.

Mr Sinclair —Just to add to Mr McCloskey's comment, that type of information is generally sent out in the form of a staff information bulletin or a management information bulletin. As Mr McCloskey mentioned, such advice was initiated early in February with respect to raising the awareness of the potential for such substances.

Senator MACKAY —So what date in February was the staff bulletin issued?

Mr Sinclair —On 6 February.

Senator MACKAY —And it was distributed to workers on 6 February?

Mr Sinclair —That information was distributed to management on 6 February.

Senator MACKAY —What is the normal turnaround time between instructions to management and then to workers? Presumably they pass it on pretty quickly, do they?

Mr Sinclair —Depending on the nature of the advice and the form it takes, and depending on the method that is used to further communicate the advice—through direct handouts, through noticeboard application or through staff face-to-face briefing sessions. It depends on the method.

Senator MACKAY —What happened this time around?

Mr Sinclair —As I am advised, a combination of those forms were used. I might add that, in the 12-month period leading up to, say, February or March of this year, in the order of 20 management information bulletins and staff information bulletins were issued on the subject of awareness of the potential for these sorts of substances to be in mail articles.

Senator MACKAY —Do you have a copy of the staff bulletin?

Mr Sinclair —I do not have a copy of the staff bulletin with me.

Senator MACKAY —Broadly, what did it say? This is, to be frank, something that I think you should probably have with you.

Mr Sinclair —The general intent of the bulletin would have been to inform management and staff and employees that there is some potential for hazardous substances to be present in the mail stream based on information that was circulating in the community via various forms of emails and newspaper articles.

Senator MACKAY —And it then went on to say what in terms of what an Australia Post worker should do?

Senator MACKAY —Did it then go on to say what Australia Post workers should do?

Mr Sinclair —I do not have the item in front of me. I have tried to describe the general intent.

Senator MACKAY —Just `Be afraid, be very afraid'? It must be more than that. You put out an issue to Australia Post workers saying there is this potential hazard. You presumably give them some instructions about what to do.

Mr Sinclair —Certainly. The instruction would have referenced the procedure that Mr McCloskey described, which is the standard procedure for CBR, to provide awareness of the need to exercise that particular procedure, and to provide points of contact for individuals if they indeed need further information.

Senator MACKAY —Would we be able to get a copy of the staff bulletin?

Mr Sinclair —I believe that is possible, yes.

Senator MACKAY —You said there were about 20 bulletins issued in that 12-month period. Was there also a bulletin issued regarding the retention of kits and not destroying them—that is, `Keep kits, don't destroy'? We have just been through with Mr McCloskey the process there.

Mr Sinclair —Could you rephrase the question for me, please?

Senator MACKAY —Did you put out any bulletins with respect to keeping kits and not destroying them?

Mr Sinclair —Instructions were issued to facility management with respect to the holding of the kits at the specified locations until a specific directive was given. As Mr McCloskey identified earlier, that directive was provided after 25 March, when we were provided with a direction to destroy those kits, by the Department of the Prime Minister and Cabinet.

Senator MACKAY —How does Australia Post account for the fact that we were advised that so many postal workers were unaware that the antiterrorism kits were not being treated in the same way as other returned unaddressed mail?

Mr McCloskey —I think it is fair to say that, given the particular arrangements that were in place, there was no need for most staff to be aware of any arrangements in relation to the kits, because it did not form part of their day-to-day working procedures. Those staff that did need to be aware were made aware.

Senator MACKAY —Are you sure?

Mr McCloskey —Certainly, yes.

Senator MACKAY —When the kit in Camperdown was identified, who did Australia Post tell other than the New South Wales Police? Did you communicate with PM&C?

Mr Sinclair —No.

Mr McCloskey —No, we would have had no need to communicate with PM&C.

Senator MACKAY —So PM&C do not know about the one kit in Camperdown until today, when it has become public through estimates?

Mr McCloskey —We would have had no need to advise them. We certainly did not advise them.

Senator MACKAY —So they did not know? They know now, because it is publishable.

Mr McCloskey —They would know now; but, no, they would not have known previously.

Senator MACKAY —Was there no general instruction to staff to keep the kits and not throw them out with other unaddressed returned mail?

Mr Sinclair —There were specific instructions to management and supervisors with respect to the need to keep those items.

Senator MACKAY —To keep the kits in general?

Mr Sinclair —The returned kits.

Senator MACKAY —When did that instruction go out?

Mr McCloskey —The first instruction went out on 10 January. That was one that went to issues such as the general handling and distribution arrangements, including an indication that a count would be required at some stage in the future. Similar general instructions went out on 28 January, and again on 7 February.

Senator MACKAY —When did the kits start to be posted out?

Mr McCloskey —On 6 February. Distribution of the kits went from 6 to 14 February.

Senator MACKAY —The instruction that was issued on 10 January was issued to whom— management and then through to the workers concerned?

Mr Sinclair —That instruction was issued by the mail networks division to the state operations managers, with the intent that it be forwarded to their facility managers.

Senator MACKAY —Was it?

Mr Sinclair —That is my understanding. And, as Mr McCloskey said, that general advice was issued on 10 January, 28 January and 7 February.

Senator MACKAY —How did supervisors pass on, say, the instruction that was issued on 10 January? Was it formal, informal? How was it passed on? The reason I am asking all these questions is we have had reports of the kits being treated in the normal returned mail way, not being put aside—hundreds and thousands of them. I am just trying to work out where the breakdown in communication occurred, just a contextualise it for you.

Mr Sinclair —I can only describe the general practice for such instructions, which is that the facility managers would provide either a verbal or written direction to their supervisors or production managers and that would be then communicated through face-to-face contact with various team leaders, who provide the first line of supervision, through team communication sessions or through direct transfer on pieces of paper. As I said earlier, it could have been, and most likely was, a combination of those.

Senator MACKAY —Is Australia Post aware of circumstances where the instruction perhaps was not passed on—maybe it was a verbal instruction or whatever—and Australia Post workers were handling these kits in the normal way they would handle returned mail?

Mr Sinclair —I am not aware of that.

Senator MACKAY —Is anybody else in Australia Post aware of that?

Mr McCloskey —I am not aware of that. There would be no reason for the instruction not to be passed on.

Senator MACKAY —I do not think it was, in many cases.

Mr McCloskey —We have no reason to believe that it was not.

Senator MACKAY —Do you have any evidence that it was not?

Mr McCloskey —No, we do not.

Senator MACKAY —Do you have any evidence that some kits were handled in the normal way that returned mail would be handled, as distinct from the way that this particular mail was to be handled?

Mr McCloskey —No, we do not. We put in place arrangements at the request of the Department of the Prime Minister and Cabinet for these particular items to be treated in a particular way. Arrangements were put in place across the network for that to happen, and that is what happened.

Senator MACKAY —Did you check?

Mr McCloskey —In what way?

Senator MACKAY —Did you check to see whether there were any kits being handled in the normal way in which normal returned mail would be handled, as distinct from the provisions of the contract with PM&C?

Mr Sinclair —I cannot advise you on that question, other than to say that this matter had a high degree of visibility and the normal vigilance and assurance processes would have been applied.

Senator MACKAY —So you did not check. We know that there were kits being handled—

Mr McCloskey —Some people may have checked at different times. As Mr Sinclair said, there was a high degree of visibility. So I have no doubt that some sorts of checks and confirmation took place along the way to ensure that it was happening.

Senator MACKAY —I understand that you have no doubt, but what evidence to you have that checks were undertaken?

Mr McCloskey —I do not have any specific evidence.

Senator MACKAY —You are just assuming there were checks. You do not know that there were checks.

Mr McCloskey —That is correct. It is an assumption. But I think in terms of the operational environment in which we operate it is reasonable to assume that certain checks would have been taken. Certainly instructions were issued and those instructions were reinforced a number of times.

Senator MACKAY —Mr Sinclair, have you got copies of those instructions there?

Mr Sinclair —Not with me.

Senator MACKAY —You have got there the dates that they were issued, but you have not got copies of the instructions?

Mr Sinclair —That is correct.

Senator MACKAY —Mr McCloskey, we were advised that thousands of kits were handled in the normal way returned mail is handled. Are you saying that our information is incorrect?

Mr McCloskey —We do not have that information. I am certainly not in a position to contradict you absolutely, but we put in place particular arrangements, and to the best of our knowledge those arrangements were complied with.

Senator MACKAY —But you have not checked?

Mr McCloskey —I have not personally checked, no.

Senator MACKAY —Has anybody checked?

Mr McCloskey —There were instructions, as I said earlier, that were issued, reissued and reinforced and there would have been phone calls, emails and the like, I am sure, through the system. It is a very complex and diffuse network that we operate in, so we had to ensure that the message was out there—and we did.

Senator MACKAY —I know that. That is why I asked whether you had checked—because it is complex and diffuse.

Mr Sinclair —I am aware of and was involved in a number of specific instances where the mail network division did teleconference, certainly on a weekly basis and every several days, with the responsible operations managers. The purpose of that process was to ensure that the instructions and the directions were visible and to ensure that the status of the various accounts and processes was under way. But I would reinforce Mr McCloskey's comment that we are unable, at this point, to specifically answer your question in the affirmative, other than those comments.

Senator MACKAY —All right. Perhaps you could take it on notice. Can Australia Post confirm for the record the net profit, total ordinary dividend and total special dividend for 2001-02?

Mr Meehan —Certainly. The total profit after tax for the corporation for that period was $291.8 million. We distributed $175.1 million of that in ordinary dividend and $116.7 million in special dividend.

Senator MACKAY —What are Australia Post's projections for net profit, ordinary dividend and special dividend for 2002-03?

Mr Meehan —That is not something that we normally provide at this time of year, though our expectations are that our profit will be similar to that of last year.

Senator MACKAY —I see. You do not do projections?

Mr Meehan —We do.

Senator MACKAY —So what are your projections?

Mr Meehan —Those projections are done as part of our corporate plan process with the shareholder ministers, and discussions go on between the directors and shareholder ministers about that profit and the expected dividend out of that process.

Senator MACKAY —Okay. So what are the projections?

Mr Meehan —I do not believe that is appropriate at this stage. These figures are confidential—between us and the shareholder ministers—and at this stage the final result is not known. Our expectations are that they will be similar to last year.

Senator MACKAY —That is not good enough. We have just been through an exercise with Telstra where they actually managed to finally tell us how many staff reductions they were looking at. These are Senate estimates, this is the parliament of Australia, and Australia Post is totally publicly owned.

Mr Meehan —Certainly.

Senator MACKAY —I want to know what your projections are for 2002-03.

Senator Alston —They are commercial-in-confidence.

Senator MACKAY —They are not commercial-in-confidence—it is the government.

Senator Alston —You do not think the government is running this as a government business enterprise?

Senator MACKAY —It is a contravention of standing orders and you know it.

Senator Alston —You do not think this is government business enterprise?

Senator MACKAY —It is a contravention of standing orders, Richard, and you know it. They have to provide their information.

Senator Alston —If you are arguing that commercial-in-confidence does not apply, then you are throwing a very hallowed concept out the window. That has never been accepted by these committees and it will not be accepted now.

Senator MACKAY —What are budget estimates for, Richard?

Senator Alston —To ascertain legitimate information, but not to prejudice—

Senator MACKAY —For which financial year?

Senator Alston —not to prejudice—

Senator MACKAY —For which financial year—this financial year or next financial year?

Senator Alston —It depends on the question you are asking.

Senator MACKAY —Which budget are we talking about? Are we talking about the 2001-02 budget or the 2002-03 budget? I think we might be talking about the 2002-03 budget.

Senator Alston —I am talking about matters that might be commercial-in-confidence. They do not necessarily relate to budgets. They might relate to past years. I would have thought last year's figures would probably give you a pretty fair indication of this year's.

Senator MACKAY —I am not going to argue about this. You are in contravention of standing orders.

Senator Alston —That is asserted.

Senator MACKAY —You are. Are you instructing Australia Post not to provide that information?

Senator Alston —Do you get away with this sort of nonsense at branch meetings? You just tell people.

Senator MACKAY —If you are telling Australia Post not to provide us with information— is that what you are doing?

Senator Alston —I am saying that if they tell you that they are entitled to withhold that information because it is commercial-in-confidence—

Senator MACKAY —On what basis is it commercial-in-confidence?

Senator Alston —Because it could prejudice their commercial activities.

Senator MACKAY —I am not asking you; I am asking Mr McCloskey.

Mr McCloskey —There is a very clear process in place with regard to our projections and reporting our results and our performance against our projections.

Senator MACKAY —Yes. On what basis is it commercial-in-confidence?

Mr McCloskey —Our act lays down specifically the sorts of things that we have to include in our annual report for a particular year, including what the profit and dividend projections for that year were and what they were in actuality subsequently.

Senator MACKAY —That is not my question. There are very strict procedures now within the Senate for agencies, particularly agencies like yours, for claiming commercial-in-confidence. On what basis do you claim commercial-in-confidence?

Mr McCloskey —Under the legislation, there are very specific elements within our corporate planning process and our relationship with our shareholder or with government. That process is very clearly laid out there. It is a corporate planning process that is undergone each year, and certain—

Senator MACKAY —Just hold on. I am going to get the secretary to get advice from the Clerk. We will continue with the questions.

CHAIR —The question can be taken on notice.

Senator MACKAY —They are refusing to take it on notice.

CHAIR —So be it. If it is commercial-in-confidence, that can be determined. If Australia Post is claiming commercial-in-confidence because the matter is commercially sensitive, then there is very little we can do about it. That is the way it is.

Senator MACKAY —But they are required now to define the nature of commercial-in-confidence and why something is commercial-in-confidence. It is not a blanket defence.

Senator Alston —Let us take it on notice and we will do a proper analysis.

Senator MACKAY —I would like the secretariat to ask the Clerk of the Senate for the guideline with respect to commercial-in-confidence.

Senator CONROY —It is very narrow.

Senator MACKAY —You can take it on notice and we will come back to it later on in the questioning.

Senator CONROY —Very narrow.

CHAIR —Indeed it may be, but nevertheless—

Senator CONROY —And even then we can still ask.

Senator MACKAY —We will come back to it. What are the cumulative effects on Australia Post investment and business performance of not having any net profits to reinvest in the company in 2001-02?

Mr Meehan —We discussed this in the last period. The cumulative effects have not had a great influence on Australia Post. We have a standard dividend scheme where we provide the government with 60 per cent of our after-tax profits, so it is the excess of that. In each period that we are referring to, it is around a little over $100 million. If we did not have anything to actually invest it in—an acquisition or machinery—we would invest it at around five per cent. We would have income tax on that amount of investment earnings. We would pay a dividend potentially of 60 per cent. The net cost to us in profit terms, other than the fact that the cash is no longer with us, is under $2 million a year in the actual impact it would have on cumulative profits going forward. What it does mean is that we have less cash available than we would have. The Post has enough cash reserves. These decisions are only made in light of the economic circumstances at the time, our specific cash reserves at the time and our capital program in the 12 months going forward.

Senator MACKAY —Your contention is that it is not having a negative effect on Australia Post's overall performance?

Mr Meehan —It is not having a negative effect at this stage, no.

Senator MACKAY —So the funding situation is adequate?

Mr Meehan —Correct.

Senator MACKAY —Then why did stamps go up?

Mr Meehan —Stamps went up on the basis of maintaining our profitability as a government business enterprise.

Senator MACKAY —So if they hadn't gone up, would your profitability have been maintained?

Mr Meehan —No, not at this level.

Senator MACKAY —What would the shortfall have been?

Mr Meehan —The easiest way to describe it is to say that with the 5c increase in the basic postage stamp letters business will break even this year. The other easy way to describe it is to say that we used to lose 11c on every individually stamped piece of mail and we now lose 6c.

Senator MACKAY —What would the impact on profitability have been if you had not had to cough up the $100 million special dividend to Mr Costello? Would you have had $100 million more?

Mr Meehan —No, that is $100 million less in cash we would have to invest. The particular example I showed you before shows a less than $2 million impact on profit.

Senator MACKAY —So you have a $100 million special dividend to the government and you have got an increase in stamps.

Mr Meehan —Correct.

Senator MACKAY —If those two things had not occurred, what would Australia Post's financial situation have been?

Mr Meehan —The impact on the stamps for the full year this year is about $54 million—

Senator MACKAY —Right.

Mr Meehan —plus the special dividend. I have attempted to explain in the past—obviously not successfully—that there is a cash position and a profitability position, and the increase in this stamp price is all about the long-term profitability of Australia Post. I am sure senators are aware that the price had been at 45c for 11 or 12 years.

Senator ROBERT RAY —I have just been in another estimates committee, and for the last hour there we have been discussing the dispatch of centenary medals from Government House. The post office have managed to take bulk postage to an MP's office, open it up and send all the individual medals out to the recipients, which has, of course, wrecked any chance of holding a public ceremony. The post office have misdirected another whole bunch from Tony Abbott's office down to Ms Corcoran's office in Isaacs. Because you have been working on rectifying it, I assume you have got some explanation as to how this chain of events occurred. Seeing as I cannot say you have come up in a good light in the other committee, I am giving you a chance to put an explanation on the table.

Mr McCloskey —We are aware that there were some problems associated with the mail-out of the centenary medals in that a number of the bundles of packages that arrived in delivery centres for delivery to the local member were in fact unbundled and delivered as addressed to the individuals.

Senator ROBERT RAY —This was registered mail, wasn't it? That is what I have been informed, anyway.

Mr McCloskey —I am sure your information is correct.

Senator ROBERT RAY —I just wonder how you can take a registered mail item and unbundle it.

Mr McCloskey —I understand it to be the case that there were 10 of these packets that contained the medals and that there was a strap around them. The top packet was addressed to the local member and each of the other nine—because they were in bundles of 10—was addressed to the intended individual recipients.

Senator ROBERT RAY —Were these poorly packaged in terms of postage?

Mr McCloskey —No, they were strapped in this particular way.

Senator ROBERT RAY —They didn't fall apart, then?

Mr McCloskey —No, our information is that they did not fall apart and that they were unstrapped at the final office of delivery. Because the other parts of the package were items that were individually addressed they were subsequently delivered in that way to the recipient whose name and address was on the particular item.

Senator ROBERT RAY —I cannot understand that you have got bulk postage, which is registered, but the constituent parts can then be sent out unregistered.

Mr McCloskey —My understanding is that each of the items had an individual address, an individual postage paid imprint and an individual bar code on them.

Senator ROBERT RAY —Have you had any contact with Government House to suggest how these problems could be avoided in future?

Mr McCloskey —I believe that our account manager in Canberra has been in contact with Government House.

Senator ROBERT RAY —And the result is?

Mr McCloskey —They will be looking to ensure that there is absolutely no repeat of this in the future.

Senator ROBERT RAY —So you think the post office is responsible for the muck-up on this occasion?

Mr McCloskey —Certainly from what I have been told, I think there was some fault on the part of Australia Post.

Senator ROBERT RAY —`Some fault'. That is elegantly put.

Mr McCloskey —Pardon?

Senator ROBERT RAY —I thought it was elegantly put that you said, `some fault'— though I do not know where the rest of the fault lies. Why don't you just take total responsibility and I will go back to my other committee?

Senator CONROY —Can you advise us what number of full-time, part-time and casual staff are expected to be employed at the conclusion of 2002-03?

Mr McCloskey —I am not sure that we have any precise figures there. I do not think we would be expecting much change at all from the figure that obtained at the end of 2001-02.

Senator CONROY —Could you take that on notice and come back to us?

Mr McCloskey —Certainly.

Mr Meehan —I think it you would be around 35,000.

Senator CONROY —About the same. What was it last year?

Mr McCloskey —At the end of the last financial year we had a total of 35,762 employees, 26,950 of whom were full-time and 8,812 part-time.

Senator CONROY —Roughly the same number?

Mr McCloskey —We have no reason to believe that it will vary greatly.

Senator CONROY —What is Australia Post's current policy on staffing levels? Do you have any planned changes going into the future?

Mr McCloskey —We have no particular programs in place.

Senator CONROY —Not like Telstra, which has to get rid of 3,000 workers next year?

Mr McCloskey —Certainly not. Obviously there will be fluctuations up and down depending on the demand for employment.

Senator CONROY —Currently there is a dispute before the Industrial Relations Commission between you and the CEPU over the issue of dedicated outdoor delivery. It is a national dispute. I understand that Australia Post's intention is to seek to trial this concept— dedicated outdoor delivery—across Australia. Is there no-one in the building who knows anything about that. Is someone coming to the table? No?

Mr McCloskey —We would have to take that one on notice.

Senator CONROY —So no-one knows anything about it? I understand it is a fairly major dispute.

Mr McCloskey —There are issues before the IRC involving Post on a regular basis. We do not have anyone who is across the issue.

Senator CONROY —Are you familiar with the dedicated outdoor delivery concept? You are trialling it. You are doing it!

Mr McCloskey —We are a very big organisation.

Senator CONROY —I appreciate that 35,000 is a lot of employees. What position do you hold? Apologies for my ignorance.

Mr McCloskey —I am the corporate secretary.

Mr Meehan —We believe that it has been trialled, but we are not sure of any major focus about how it is going to be implemented, if at all, in the future. That is the only information we currently have, but we can certainly take that on notice.

Senator CONROY —My understanding is that the evidence given to the IRC is that you do intend to try and take it national. I am just trying to confirm evidence given by your organisation before the IRC.

Mr Meehan —Sorry, I cannot answer that.

Senator CONROY —Is it possible to find out a bit about it? We can move on to some other questions.

Mr Meehan —Certainly. We can do that.

Senator CONROY —I am very interested in this issue. Perhaps someone can get some information about it over the next half an hour or an hour. I do have a whole string of questions about the dispute and what is involved in it. I understand that it has been adjourned at this stage, so it is not happening right now. But it has been lodged, there have been some discussions and there are meant to be discussions pending. If someone could find out about it that would be good.

Some of your management in Melbourne seem to be getting particularly interested and involved in the union elections that are taking place down there. Is anyone from Melbourne here?

Mr McCloskey —We are from Melbourne.

Senator CONROY —Excellent. I understand that Australia Post complained about one of the union officials being given access to Post sites and sought an agreement from the union to have Steven Booth banned from a number of mail centres. He is an official of the union. Are you familiar with that?

Mr Meehan —No.

Mr Lee —We have just sent Mr Sinclair out to answer the other question. Can we take that one at the same time?

Senator CONROY —Sure. There is a particularly eager Post official named Mr Andrew Bowmeister—does that ring a bell for anyone?

Senator MACKAY —Yes.

Senator CONROY —It rings a bell for Senator Mackay.

Senator Alston —Is he a union official?

Senator CONROY —No, he is a Post official. He accosted a Mr Adam Cooper in a car park at Mulgrave—it is a public car park, where people park to access your retail shop—and he asked him to leave the car park. Are you familiar with this at all? In actual fact, he called the police and had the police remove him. He was sitting in his car in a public car park.

Mr McCloskey —No, I am not familiar with that incident at all.

Senator CONROY —The incident occurred on 20 May 2003. It was at the Mulgrave facility at about 5.15 in the morning. He was in the car park which is used to access the retail shop as well as a couple of mailboxes.

Senator Alston —There would not be too many retail shops open at 5.15 in the morning.

Senator CONROY —People have public access to this particular car park.

Senator Alston —He was accessing a retail store at 5.15 in the morning?

Senator CONROY —I did not say he was doing that. I said he was in a public car park.

Senator ALSTON —I would like to know what he was doing there.

Senator CONROY —I will come to that. He is a candidate in the union elections, so he was actually there seeking to canvass the staff of Australia Post, if that is okay with you—it is a perfectly democratic exercise of his rights. Mr Bowmeister did not agree that he could park there and threatened to call the police, to which Mr Cooper replied, `Go ahead.' At about 7 a.m. there was a knock on the window of his car and the manager, accompanied by two police officers, explained that his right to be there had been revoked and that, if he did not leave immediately, he would be arrested for trespassing—in a public car park. Of course, he complied, faced with the prospect of being arrested. He waited until 7.30 outside the car park to talk to members. At approximately 7.20, Mr Bowmeister stood outside the roller doors with a pen and paper to take down the names and details of any individual who came out to talk to him. This just seems to be a little over the top—or is it Post's position to interfere in union elections?

Mr McCloskey —I have no information whatsoever on that particular incident, but I am happy to take the question on notice and seek some information.

Senator CONROY —That would be most helpful. I do not think he was accused of causing any disruption. It was 5.15 and there was nobody around. He was just sitting in his car, basically, resting and waiting for the change of shift. Banning Steve Booth, who is the union official, from sites and throwing people out of public car parks seems to be a little over officious by Australia Post's Melbourne operation. I know you are keen to get the incumbent re-elected, but this seems to be carrying it a bit far.

Mr McCloskey —As I said, I am not familiar with the instance and I am happy to get information on notice for you.

Senator CONROY —If you can come back to me, I will come back on some of those other matters.

Senator MACKAY —I just wanted to ask a final question on the kits. Are you saying that PM&C never actually inquired from Australia Post whether there were any kits that had powder in them and that were dangerous?

Mr McCloskey —I am not aware that they did inquire.

Senator MACKAY —You have the Attorney-General issuing all these instructions, this huge controversy about potential occupational health and safety issues with Australia Post workers, and PM&C never actually asked Australia Post whether any of this had any veracity. Is that right?

Mr McCloskey —I would need to check on that, but I am not aware personally that there was any request. Some kits that were delivered addressed `Repackaged' may have had powdery substance in them, something like that.

Senator MACKAY —Did anybody from the government or any other agency involved in this ever ask Australia Post, at the end of this saga, whether there were any kits that actually involved the issue of the Camperdown kit? Nobody ever asked you? If they didn't, they didn't.

Mr McCloskey —As I say, I am not aware that the question was asked, but I would need to check and confirm that.

Senator MACKAY —If it was not, it just confirms our suspicions—not with you, but that it was a completely political campaign. That is extraordinary.

Minister, where are you at with the Australia Post Corporation amendment bill? It is Ground Hog Day again!

Senator Alston —We would expect to be introducing it into the parliament in the not too distant future, before the end of the financial year.

Senator MACKAY —Hurrah!

Senator CONROY —Goodness! Can we hold you to that?

Senator Alston —If you will promise to be less obstructionist, you could actually agree to pass the bill. How would that be?

Senator CONROY —If you have not gone to New Zealand by the next estimates, can we hold you to that?

Senator Alston —Reform is not really on your agenda.

Senator CONROY —That would defy the government's mismanagement of the processes in the Senate, but if you are still here and have not gone to New Zealand on your posting, we will hold you to that.

Senator MACKAY —Before the end of this financial year—that is, in the next two weeks. We have two weeks of sitting, so it will be in the next two Senate sitting weeks?

Senator Alston —I would expect so, yes. And the House of Representatives is sitting. Do you realise that?

Senator MACKAY —I know. It will be introduced in the House of Representatives but not in the Senate—is that what you are saying?

Senator Alston —I assume it will go off to a Senate committee, will it not? You can introduce it into the House of Representatives and have it referred to a Senate committee.

Senator MACKAY —It varies, but given that you are the minister and you are in the Senate—on some occasions it can be introduced—

Senator Alston —No, it is not normal practice.

Senator MACKAY —It has happened to me a number of times.

Senator Alston —I know it can happen, but normally we introduce bills into the House of Representatives.

Senator MACKAY —Okay. Then it comes to the Senate—

Senator Alston —If it is inevitable that it is going to be referred to a committee, they can do that before it is introduced—

Senator MACKAY —for the first reading.

Senator Alston —No, before it is introduced into the Senate.

Senator MACKAY —Then it goes to the Scrutiny of Bills Committee.

Senator Alston —You can refer it off to a committee before it is introduced in the Senate.

Senator MACKAY —I understand that. Sometimes the process is different—that is all.

Senator Alston —Yes.

Senator MACKAY —Has the draft legislation been circulated to interest groups?

Senator Alston —That is not the normal practice. We have had consultations, but we do not normally circulate draft legislation.

Senator MACKAY —Consultations with whom, Mr Thomas?

Senator Alston —We have certainly had discussions with Australia Post.

Senator MACKAY —Anybody else?

Mr Thomas —Not on the details of the legislation. We have had detailed consultations with Australia Post on a number of different aspects.

Senator MACKAY —Anybody else on the legislation in the broad?

Mr Thomas —No, Senator.

Senator MACKAY —So only Australia Post—that is it?

Mr Thomas —Yes. We have had some discussions with groups such as the Major Mail Users of Australia about some of the broader aspects of the legislation. Obviously, they were interested in some aspects of the press release, once it was released late last year. We have not gone into the detail with them.

Senator MACKAY —When was the last time you had consultations with them?

Mr Thomas —It would be some months ago now. I could not remember the exact date. It was a general verbal discussion about some of the broad aspects that they were interested in.

Senator MACKAY —Would it have been in February or March?

Mr Thomas —It would have been around that time.

Senator MACKAY —Is the government intending to show the opposition the draft legislation before it is introduced into the parliament, Senator Alston?

Senator Alston —We do not normally do that either. But even though I said that we do not normally show the draft legislation to interest groups, we did in this instance give a copy of the draft bill to Australia Post on 5 May.

Senator MACKAY —Minister, do you stand by your commitment not to deregulate Australia Post?

Senator Alston —I have said that we are not reintroducing the bill that you managed to frustrate last time around. We have announced what measures are to be contained in this legislation. We are very pleased that Australia Post is very supportive of what we propose.

Senator MACKAY —I will ask the question again: do you stand by your commitment not to deregulate Australia Post?

Senator Alston —You had better start defining your definition of deregulation. I am telling you what we are doing.

Senator MACKAY —I would be interested to hear your definition of deregulation. What is your definition of deregulation?

Senator Alston —I am simply telling you what we are doing. If you want me to go through the contents of the bill I will.

Senator MACKAY —Go on then; that would be good.

Senator Alston —The measures include requiring the Australian Communications Authority to monitor quality of service issues and report on Australia Post's compliance with performance standards and enabling the ACCC to inquire into disputes and make recommendations in relation to terms and conditions of Australia Post's bulk interconnection service. The ACCC will be required to make record keeping rules for Australia Post to demonstrate clearly the separation between Australia Post's reserved and competing services. Other measures proposed will benefit small businesses, providing document exchange and aggregation services. In the case of businesses, the proposed amendments will enable the operators of businesses to legally collect mail from their customers and deliver to their document exchange for processing and to deliver any mail from the document exchange back to the customer. In the case of aggregation services, the amendments will enable customers to legally deliver their mail to the operator so that it can be aggregated with mail prior to lodgment with Australia Post. These are essentially arrangements that have, in practice, operated for many years.

Senator MACKAY —Is that the general content of the legislation?

Senator Alston —Yes, I think so.

Senator MACKAY —Do you want a minute to look at it?

Senator Alston —Yes, they are the key elements.

Senator MACKAY —Are there any non-key elements that we should be apprised of?

Senator Alston —Australia Post have written to me saying that they are very happy with what has been outlined and included in the draft bill. They say that there are some, presumably, lesser aspects that they would like to be further considered and which they say are currently under discussion. That being the case, I cannot give you a final position on those elements. But on all the principal elements Australia Post are certainly satisfied that appropriate, practical safeguards have been included in the draft bill to ensure that the risk of any unintended impacts from the proposed measures are minimised. Australia Post understand that the explanatory memorandum will make it clear that the intent is simply to legitimise current longstanding practice and that the safeguards are designed to ensure that there are no unintended effects.

Senator MACKAY —Is there anything else?

Senator Alston —No, that is all.

Senator MACKAY —What is happening with the coalition's election promise to introduce a postal industry ombudsman?

Senator Alston —We are in the process of implementing that commitment. The first stage was the release of a public discussion paper. We have received 28 submissions. We expect to make an announcement later this year.

Senator MACKAY —Is there any contemplation of one of the options—the industry self-regulation option—which was in the discussion paper? Is that still being contemplated or are you going to go down the ombudsman track?

Senator Alston —Our commitment was to establish a dedicated postal industry ombudsman, so I would have thought—

Senator MACKAY —So that still stands?

Senator Alston —that is what we were in the process of doing.

Senator MACKAY —It is your discussion paper. I am just querying whether you are considering that.

Senator Alston —We will take account of all the suggestions and if there are some aspects that commend themselves that do not interfere with the essential nature of the proposal we would obviously be prepared to consider them sympathetically.

Senator MACKAY —But your intention is to establish a postal industry ombudsman?

Senator Alston —Yes.

Senator MACKAY —I think the chair wants to break now.

CHAIR —Yes, I do.

Proceedings suspended from 4.05 p.m. to 4.20 p.m.

Mr Thomas —Before we start again, I want to say something further in response to a question earlier concerning consultation. We have, of course, as part of the consultation process, talked in detail with the Australian Communications Authority and the ACCC on the relevant aspects as well.

Senator MACKAY —Thanks for that.

Senator CONROY —Can Australia Post advise on the current number of corporate post offices, licensed post offices and community postal agencies?

Mr McCloskey —The latest figures I have are as at 30 June last year, which are the figures that would have appeared in our 2002 annual report.

Senator CONROY —That is almost a year old.

Mr McCloskey —That is correct, but they are the latest figures that I have. They will be updated for this year's annual report. There will not be much change, but I can give you the precise breakdown as of 30 June.

Senator CONROY —I am sure Lindsay Tanner's office has read your annual report. I was just hoping for an update. Can you take it on notice if there is an update. I appreciate the point you made that they will probably be pretty much the same.

Mr McCloskey —In broad terms they will be the same. I am happy to take on notice an update.

Senator CONROY —Where is Australia Post at with its planned franchise outlets?

Mr Jackson —We have been doing some work on a model of franchising which is an alternative to the existing model, which is our licensed post office outsource model. We have been having a look at a number of implementation issues associated with that. We have had a trial going on for some time, but we are looking at some aspects regarding implementation and we have been having some consultation with the CEPU and POAAL on the implementation issues.

Senator CONROY —Do you actually have any franchised outlets running yet? You said you had a trial going.

Mr Jackson —We have had four outlets on trial—one in Victoria and three in Sydney— and they are continuing.

Senator CONROY —What are the targets for franchised postal outlets over the next five years?

Mr Jackson —In a previous committee hearing we indicated we were looking at about 150 outlets. We probably need to confirm, subject to the consultation processes that I just mentioned, the number of outlets and what types of outlets would be involved—whether they would be corporate converted or licensed buybacks rebadged and packaged so they are franchised.

Senator CONROY —You do not really have a number then?

Mr Jackson —We had an indicative number of 150. We would need to confirm that or otherwise, subject to the considerations of implementation and consultation.

Senator CONROY —Can you give us an update on the current number of postboxes in Australia, which was listed at 15,689 in last year's annual report? Are there any programs to reduce the number of postboxes? If so, can Post outline the details of such a program and advise how many postboxes are under threat?

Mr McCloskey —I would have to take on notice an update as to the precise number of street posting boxes that we currently have but, as you say, in last year's annual report it is listed as 15,600-odd. There are no programs in place to reduce the number of street posting boxes.

Senator CONROY —Do you have a principle of maintaining it roughly where it is at the moment?

Mr McCloskey —Broadly speaking, there is often a need to put in new street posting boxes in developing areas and there may be other areas where, from time to time, through underutilisation—

Senator CONROY —What are the criteria for the removal of a postbox?

Mr McCloskey —Normally, if the average yield from a street posting box is less than 25 articles a day, it would be eligible to be considered for either relocation or removal.

Senator CONROY —You will come back to us with a rough number of where you are at now?

Mr McCloskey —Certainly.

Senator CONROY —I want to talk about the Tullamarine mail screening facility. Can Australia Post advise on the current stage of the tendering process for the Tullamarine mail processing facility? Has a tender been awarded to any company yet?

Mr Howard —The last tender process we had closed with no successful tenderer, because we could not find anyone who could comply with the national code of conduct.

Senator CONROY —So there were no bidders?

Mr Howard —There were six tenderers who, in their tender process, were asked to offer compliance with the national code. Each of those contenders offered compliance. In our due diligence process—in other words, our tender review—we could not find that the original preferred tenderer actually could meet the code of conduct. We then reviewed the other contenders and asked them to see if they could come up with compliance and we were unsuccessful, so we closed the tenders.

Senator CONROY —So you are just not going to build it anymore?

Mr Howard —We are looking to see if we can find a range of builders who will comply with the code and offer those for review by the Department of Employment and Workplace Relations.

Senator CONROY —The original completion date for the new state-of-the-art processing centre was in June 2003, which is next month. It sounds like you are running a bit behind.

Mr Howard —It could be up to 15 months behind.

Senator CONROY —Right now you could be up to 15 months behind?

Mr Howard —Yes.

Senator CONROY —So is there a completion date?

Mr Howard —At the moment, we are planning that, if we have contenders who comply, it will take us about eight weeks for us to review the contract for successful pricing, and then it should take somewhere between 12 and 15 months to build. That is our estimate.

Senator CONROY —So you could be anywhere up to three years behind?

Mr Howard —Two years behind.

Senator CONROY —You said that you are 15 months behind at the moment.

Mr Howard —Approximately, yes.

Senator CONROY —And it could be about another five to 15, so 15 and 15 come to 30.

Mr Howard —Yes, roughly that—or somewhere in between, depending on the building type and the progress of the builder.

Senator CONROY —It sounds like it is going really well!

Mr Howard —We are very fortunate that we met the 100 per cent compliance with the guidelines seven months early—in April last year—by actually improving the existing facilities.

Senator CONROY —So you can confirm that the successful tenderer, Hansen Yuncken—

Mr Howard —They were not a successful tenderer. When we did our due diligence—

Senator CONROY —They were disqualified later?

Mr Howard —Yes.

Senator CONROY —So they did successfully tender. You then did further due diligence, so the successful tenderer and the successful runner-up were then disqualified?

Mr Howard —Our term is preferred tenderer. We then go through our normal commercial negotiations to confirm their tender response and draft a contract. So our term is preferred tenderer. In the end, they were not successful, so we call them the unsuccessful tenderer.

Senator CONROY —It is a semantic discussion. We will not waste the time of the Senate on it. But Hansen Yuncken and Baulderston Hornibrook were disqualified for failing to comply with the national code of practice. Is that fundamentally correct?

Mr Howard —That is correct, yes.

Senator CONROY —In fact, none of the tenderers complied?

Mr Howard —We did have one tenderer that we thought may comply, but they withdrew.

Senator CONROY —Did you take legal advice on this?

Mr Howard —Yes, we did.

Senator CONROY —In regard to the Australia Post legal advice on the Hansen and Baulderston bids, was Hansen compliant with the national code of practice for the construction industry?

Mr Howard —Our understanding was that the overall intent of their agreement was compliant.

Senator CONROY —The overall intent?

Mr Howard —Yes. The reason I say that is that not all of the agreements, as you are probably aware, are exactly the same. They usually have a base line of agreement and they vary on builder and union awards.

Senator CONROY —That probably leads me to about a thousand other questions, but I will just move on. So they were compliant in intent?

Mr Howard —Yes—as far as we could see, from a broad legal perspective.

Senator CONROY —So they complied legally?

Mr Howard —No. I am not the lawyer. We asked for general legal advice before we submitted to the department.

Senator CONROY —And the legal advice said that they were okay—generally.

Mr Howard —Generally, yes.

Senator CONROY —It was the department that said they were not.

Mr Howard —The department advised that they did not believe that they complied with the code.

Senator CONROY —But your legal advice said that they did.

Mr Howard —In the general context, yes.

Senator CONROY —Was Hansen compliant with the associated Commonwealth guidelines?

Mr Howard —I am talking about the national code of conduct—no.

Senator CONROY —So they met the national code but they were not—

Mr Howard —No, they did not meet the national code.

Senator CONROY —According to the department. But according to Australia Post they won the tender, and your legal advice said that they—

Mr Howard —Our legal advice assumed that they were generally compliant. We submitted the documents to the Department of Employment and Workplace Relations, who advised that the agreement did not meet the national code of conduct and therefore they were disqualified from being available to be awarded—

Senator CONROY —But it was the department that disqualified them, not Australia Post.

Mr Howard —Their advice was that the code was not complied with. Under our deed of funding arrangements, whomever we award the contract to must meet the national code of conduct.

Senator CONROY —Which department do they get submitted to?

Mr Howard —The Department of Employment and Workplace Relations.

Senator CONROY —So, even if your legal advice says, `No, this is fine,' the department can override you?

Mr Howard —Yes, because it is the department who approves the compliance from our perspective of meeting the funding deed.

Senator CONROY —Did you explain to them your legal advice?

Mr Howard —Yes, we did.

Senator CONROY —Did they see your legal advice?

Mr Howard —Yes.

Senator CONROY —And they disregarded it?

Mr Howard —I can only assume that they took that. But they saw a broader context of non-compliance.

Senator CONROY —A broader context! Can we have a copy of the department's advice to you where it explained that there was a broader context involved?

Mr Howard —We will take that on notice.

Senator CONROY —You will take it on notice?

Mr Howard —We will have to take that on notice, yes.

Senator CONROY —Take what on notice?

Mr Howard —That we will provide—

Senator CONROY —Are you taking it on notice that you will think about providing it or are you taking it on notice that you will provide it?

Mr Howard —We will provide it.

Senator CONROY —Thanks very much. According to your legal advice, were Baulderstone compliant with the national code of practice?

Mr Howard —We were unsure of the real compliance there. We needed to submit that again to the department for their approval.

Senator CONROY —So that one was a little less clear.

Mr Howard —Yes.

Senator CONROY —On what basis did Australia Post determine that it could discriminate against these two tenderers who both have lawful industrial agreements with the CFMEU? These are agreements that are legal contracts, and you are discriminating against them on the basis of these contracts.

Mr Howard —Under our funding deed—

Mr McCloskey —This is all in the context of funding that has been provided by the Commonwealth to Australia Post to put in place facilities which will allow sustainable 100 per cent screening of all incoming international mail into the future. One of the conditions of the funding deed is quite explicit—that all tenderers for projects to be funded under the deed must comply with the national code of practice for the building industry.

Senator CONROY —Has the minister, the minister's office or the Department of Employment and Workplace Relations been in contact with Post in relation to the project or the terms of agreement which might relate to the project?

Mr Howard —They have, in responses to our requests for advice on preferred tenderers, yes.

Senator CONROY —Has the minister? I am presuming that covers the department.

Mr McCloskey —Our contacts have been with the department, where we sought an opinion as to whether particular tenderers met the conditions of the national code of practice.

Senator CONROY —But I asked if the minister or the minister's office have been in touch with you, not whom you are contacting. I appreciate that you are just going through your normal processes, as required, but the question is has the minister or his office—

Mr McCloskey —Neither the minister nor his office has been in touch with us.

Senator CONROY —Has not been in touch with anyone in Post?

Mr McCloskey —No, they have not.

Senator CONROY —So there is no suggestion of any pressure being brought to bear on Post by the minister or his office?

Mr McCloskey —No, there has been no pressure brought to bear on Post. We of our own initiative submitted the particular EBAs to the department for their view as to whether or not they complied with the national code.

Senator CONROY —And you accept that these are legally enforceable EBAs?

Mr McCloskey —We understand that, but also we believe and we know that we have a legal obligation under the funding deed to make sure that they are compliant.

Senator CONROY —I understand that. I am not trying to blame you. I think we can all see where the blame lies for you guys being nearly 2[half ] years behind schedule—and we presume that is a fair bit of money you have wasted. How much would you have spent on the tendering process that the department spiked at the end?

Mr McCloskey —The money for that actually comes from the funding deed; it is Commonwealth money given to us.

Senator CONROY —How much money has been wasted by the department? It is not Post money—I accept that. How much money has been wasted by the department in this tendering process?

Mr Howard —By the department?

Senator CONROY —It has just been explained that it is the department's money that pays for the tendering process. How much has that process cost?

Mr Howard —Most of the tendering costs would be my staff, which would be probably two people and a project management firm of two people who do the tender assessment.

Senator CONROY —What is your estimate on that?

Mr Howard —You are talking about something based on staff costs.

Senator CONROY —I got the impression that there was some money being contributed by the department. You said that the money for the tendering process was given over.

Mr McCloskey —The cost to Post would be set off against the funding deed. We receive a certain amount of money from the government under this funding deed over a period of four years and we can account for any expenses that are legitimately—

Senator CONROY —So you must have a rough idea of what you are going to be offsetting.

Mr Howard —I cannot give you an exact figure. I am happy to provide that.

Senator CONROY —Are we talking $50,000-$100,000?

Mr Howard —Probably somewhere between $50,000 and $100,000.

Senator CONROY —That is just for the failed process so far. You are now engaged in a further process of trying again.

Mr Howard —We are not formally employing anyone at the moment to go through a continuing process.

Senator CONROY —But you are going to have to do that, presumably.

Mr Howard —We will have to do that, yes.

Senator CONROY —Do you have a rough estimate of what this little frolic is going to cost?

Mr Howard —As I said earlier, it will take about eight weeks to go through what are called the trade packages with an approved tenderer before we can award the contract.

Senator CONROY —So far we have wasted between $50,000 and $100,000 of Australian taxpayers' money, when your legal advice said it complied with the intent but the department dug their heels in and said no.

Mr Howard —As was said earlier by Mr McCloskey, we are required to have the department approve a national code of conduct.

Senator CONROY —I am not holding you responsible at all. Can I confirm that you are considering the tender of BCG.

Mr Howard —I am sorry, that name is not familiar to me.

Senator CONROY —A firm owned by Len Buckeridge—

Mr Howard —No.

Senator CONROY —who recently stated in a speech to the H.R. Nicholls Society that he had threatened to kill 30 unionists.

Mr Howard —I am sorry, I have no idea what you are talking about.

Senator CONROY —If you find BCG or Mr Buckeridge—and I can refer you to the H.R. Nicholls Society, because apparently in this particular body it is perfectly acceptable to threaten to kill unionists—could you seek legal advice about whether threats to kill comply with the federal government's national code of practice for the construction industry and the associated Commonwealth guidelines, just in case he bobs up on your radar screen?

Mr Howard —The answer is no. Nothing like that has been across my table. I have no idea what you are talking about.

Senator CONROY —If BCG and Mr Buckeridge end up on your desk, you might want to track me down and get a copy of his speech at the H.R. Nicholls Society where he makes these quite extraordinary statements. He probably got a big round of applause down at the H.R. Nicholls Society for it.

Senator MACKAY —Is Australia Post expecting another special dividend for the government?

Mr McCloskey —Our board will consider its dividend recommendation probably at its August meeting.

Senator MACKAY —Have you been asked at this point for the special dividend by the government?

Mr McCloskey —As part of its corporate plan, the board will have given the government an indicative level of dividend that it is anticipating for the current year. In the light of the financial results, it will be considering its recommendation in the normal way in August.

Senator MACKAY —That was not my question. Has the government asked you for a special dividend?

Senator Alston —I am not sure whether that is disclosable anyway. I think it should be taken on notice.

Senator MACKAY —Have you asked Australia Post for a special dividend?

Senator Alston —I haven't. I am not aware that we normally put out press releases on the subject, so I think I would like to consider whether any such request should be made public. I am not aware of any.

Senator MACKAY —You are not aware of anything?

Senator Alston —Even if there is such a request—

Senator MACKAY —That is okay. You are not aware of anything personally?

Senator Alston —No.

Senator MACKAY —On the other hand, I guess you may not be.

Senator Alston —Indeed.

Senator MACKAY —Take it on notice. When you appeared before us in November 2002 you advised that Australia Post intended a further roll-out of the franchise model, with an estimate of 100 corporate outlets and perhaps around 50 LPOs being converted to franchised post shops over the following three years. How many of these conversions have been made to date?

Mr Jackson —I think I just answered that question: there has been no change.

Senator MACKAY —My question is perhaps more detailed than Senator Conroy's.

Senator CONROY —Definitely.

Mr Jackson —No conversions have been made to date.

Senator MACKAY —So where are we at?

Mr Jackson —At the moment we are in a process of consultation with stakeholders and the CPU and POAAL, so we have not proceeded with the roll-out of the implementation.

Senator MACKAY —When is it planned to commence?

Mr Jackson —It is a bit hard to identify specifically because there are a number of considerations we have to go through in terms of implementation, and associated with that is consultation. So at this stage I am not in a position to say exactly when we might be starting to roll it out, because those processes could take some time.

Senator MACKAY —You said it would happen over the following three years. Will you roll it out in three years time or are you looking at a year's time, six months time or two years time? You must be able to give us some indication.

Mr Jackson —I guess that by the end of the calendar year might be a reasonable expectation, but that would be subject to how the consultative processes worked.

Senator MACKAY —I appreciate that. What budget does Australia Post have for this program for the next financial year?

Mr Jackson —We have no specific budget for it. We have made some provision for some capital expenditure, but we have no budget in terms of the cost.

Senator MACKAY —What is the capital expenditure provision?

Mr Jackson —Off the top of my head, it is probably in the order of 15 or something for fit-outs of outlets.

Senator MACKAY —What is the quantum?

Mr Jackson —It is probably in the order of $150,000 each.

Senator MACKAY —So $150,000 each for 15 outlets in the next financial year?

Mr Jackson —That is not final, but those are some of the indicative figures we will be looking at.

Senator MACKAY —Have you got any indicative figures for the out years?

Mr Jackson —No, and again that would be subject to the consultative process. You mentioned a ratio. It would depend on the consultation with both those stakeholders as to what the ultimate ratio might look like.

Senator MACKAY —Have you made any changes to your plans for the implementation of the franchise model since November last year?

Mr Jackson —The changes to the plans are in fact what I just mentioned regarding consultation and the involvement of implementation processes. We have not changed the model itself.

Senator MACKAY —Does Australia Post use employment agency staff to deliver mail on previously contracted mail runs?

Mr McCloskey —I am not sure that I understand the question: on previously contracted mail runs, do we use employment agency staff? I would have to take that one on notice.

Senator MACKAY —We are advised that Australia Post has converted contracted mail runs into those operated by temps or staff from agencies. This went to the industrial commission.

Mr McCloskey —I will have to take that one on notice. I had not heard of it. There are quite a wide range of issues, on a national basis and on a local basis, that go to the AIRC all the time.

Senator MACKAY —Are you employing staff from temporary agencies to deliver mail?

Mr McCloskey —As I said, I would have to take that on notice. It depends on the circumstances.

Senator MACKAY —Are you aware that there is a case in the industrial commission between the CEPU and Australia Post with respect to this issue? It has been adjourned indefinitely, pending further consultations between the CEPU and Australia Post.

Mr McCloskey —I am not aware of that particular case.

Senator MACKAY —In Western Australia, Post are using temps to deliver mail.

Mr McCloskey —In Western Australia?

Senator MACKAY —Yes.

Mr McCloskey —I would have to take that on notice and get the information for you.

Senator MACKAY —You have no idea?

Mr McCloskey —As I say, a range of issues can often come up at the local level in particular states that do not necessarily impact at a national level. If it is before the AIRC, it is before the AIRC.

Senator MACKAY —We are advised that, in Western Australia, Australia Post is using temps to deliver mail. Do you know anything about that?

Mr McCloskey —As I indicated, I am not across that issue at all. I would have to take any of those local matters on notice.

Senator MACKAY —This is very unsatisfactory. The questions on notice are: how many previously contracted mail runs are currently staffed in this manner; what is the cost to Australia Post of staffing a run in this manner compared to the cost of employing a contractor; what plans does Australia Post have for the further conversion of contracted runs; what are Australia Post's intentions regarding bringing these positions back in-house; under what conditions would such positions be created; what issues are Australia Post facing in employing staff in totally outdoor work positions; what is the time frame for the resolution of these issues; and how many hours of outdoor work per day are currently being undertaken by the agency staff employed to deliver mail on these previously contracted mail runs in Western Australia?

Mr McCloskey —I am happy to take those questions on notice and get all the information for you, but these local sorts of issues can only be taken on notice. It is a very large organisation. We have 35,000 employees.

Senator MACKAY —So is Telstra and, to be frank, they do better than this. We have a situation where you are not even sure about the budget figures. Can Australia Post provide an update on its relationship with the Licensed Post Officers of Australia?

Mr Jackson —Licensed Post Officers of Australia is a body which represents a number of licensees. We have a relationship with the Post Office Agents Association Ltd; we have a consultative agreement with them. There is no official standing in terms of the Licensed Post Officers of Australia.

Senator MACKAY —Is it the case that, even after the minister's 2001 letter requesting better consultation between the LPOA and Australia Post and the subsequent Deacons report into Australia Post consultative arrangements, Australia Post still does not have an effective consultative relationship with the LPOA?

Mr Jackson —Following the letter to the minister and following on from the Deacons report which we commissioned as a result of that, we have established a very extensive consultative process called a licensee advisory council structure, which is a best practice structure in terms of franchise operations. We invited LPOA—which is the Licensed Post Officers of Australia Ltd—to be a party to that at the outset. We have now held state based licensee advisory council meetings, we have held one national meeting and we have a second national one next Monday and Tuesday. We have instituted the key recommendation of the Deacons report to establish a licensee advisory council structure and we have in fact invited LPOA to be a party to that.

Senator MACKAY —So you would regard that as an effective consultative relationship?

Mr Jackson —Certainly. It will mature. We have an extensive list of items for the agenda next week which has been solicited through the state based licensee advisory council processes. From discussion with licensees advised in the national advisory council, everybody is very optimistic and very excited about the venture and they believe it will add a lot of value to the consultative processes with licensees in general and specifically LPOA has told me similar things.

Senator MACKAY —What representation of licensees is there in it?

Mr Jackson —We have set up an interim licensee advisory council—I will call it an LAC—where we have nominated participants and that is where we invited LPOA as well as POAAL to have membership. What we will be doing within the next six to eight months will be to have an election process, so licensees will be able to elect their representatives. We wanted to get an interim process going in the initial stages because of the Deacons recommendation and we wanted to institute some processes in a formal way where we can enhance the consultative processes.

Senator MACKAY —How will this ballot occur?

Mr Jackson —The forthcoming one?

Senator MACKAY —Yes. Who will represent the licensees?

Mr Jackson —There will be nominees and there will be elections. We have not worked out the detail. We will be discussing those things as part of the current LAC process.

Senator MACKAY —How will you have elections? Who will vote?

Mr Jackson —All the licensees in Australia will be eligible to vote. In the interim, on the national LAC we have a state representative and we have three direct nominees. Those state representatives are one person from the state LACs.

Senator MACKAY —So you have the LPOA on the interim one?

Mr Jackson —Yes.

Senator MACKAY —And you have the POAAL on it?

Mr Jackson —Yes.

Senator MACKAY —Then there is going to be a ballot in which you will ballot all of the licensees in Australia.

Mr Jackson —Yes.

Senator MACKAY —For one person or for an organisation?

Mr Jackson —No. We will be calling for nominations and then people will elect representatives from those nominations.

Senator MACKAY —How many?

Mr Jackson —Nationally there are nine and from memory the states are six or seven licensees.

Senator MACKAY —Per state?

Mr Jackson —Yes.

Senator MACKAY —Who will be conducting this ballot?

Mr Jackson —Australia Post will facilitate it.

Senator MACKAY —Really? Why would you not go through the Electoral Commission?

Mr Jackson —We will facilitate it. We have not worked out the details of it yet but it would be our intention to facilitate it.

Senator MACKAY —Why are you going for a ballot of this nature, rather than representational?

Mr Jackson —We feel that it gives a greater opportunity for people to have a consultative process right across the entire licensee network rather than having individual groups where small numbers of groups are represented. That was the representation of the Deacons report which was modelled on a best practice franchising process.

Senator MACKAY —Will licensees on the council be individual licensees or will they be representative licensees?

Mr Jackson —They will be individuals on the council as such but, if they represent a group, I guess they can gain insight into issues from their fellow members.

Senator MACKAY —What do the licensee organisations say about this?

Mr Jackson —They have been very positive about it so far and are prepared to give it a go. A lot of the machinery will be worked out at forthcoming meetings in terms of how it all works.

Senator MACKAY —Okay; I will watch this space. Is it the correct that Australia Post has reviewed the payments made to licensees in South Australia and the Northern Territory?

Mr Jackson —There is no specific state based approach to reviewing payments. There have been a number of disputes for some mail related payments made to licensees over a period of time. Our approach was that we need to have a look at that to make sure the interpretation of the payments is correct as per the agreement and if there were underpayments or overpayments then they would be adjusted accordingly on a consistent basis.

Senator MACKAY —So what has happened?

Mr Jackson —The process started off probably 18 months ago. Different states probably had more to review than others. As I understand it, some states have worked through the majority of theirs and other states are still working through a number of them. There are underpayments and overpayments involved.

Senator MACKAY —So for the states that have worked it through what has the outcome been?

Mr Jackson —I do not have the specific details of that, but there have been a number of licensees that have been underpaid and a number who have been overpaid for one of the allowances where there was a dispute about the interpretation of the agreement.

Senator MACKAY —So you will take all of that on notice?

Mr Jackson —Yes.

Senator MACKAY —Is it correct that payments made to licensees in South Australia and the Northern Territory have been reduced by over $250,000?

Mr Jackson —I could not answer that specifically because I am not aware of the detail. They would be underpayments and overpayments. I am not sure, as I said, how far through the process each state would be. The issue is to ensure that we have a consistent interpretation of that agreement for that allowance so that it can be applied fairly across the network.

Senator MACKAY —Which allowance are you talking about?

Mr Jackson —It is a mail service payment, which is an after-hours type of payment for when they need to attend early in the morning before the actual licensed outlet is typically open for customers.

Senator MACKAY —What is the issue there that may result in a reduction?

Mr Jackson —Over time there has been misinterpretation of the allowance. I guess it was a little unclear for interpretation purposes. There was some information put around about two years ago which seemed to interpret the allowance differently to what we had applied over a number of years. This caused it to apply to a whole lot of people and the need for all this to be reviewed and brought together in a consistent manner.

Senator MACKAY —Was that because there were a lot of people applying?

Mr Jackson —It was because a lot of people applied based on some information they had been given which was outside the normal interpretation that we had consistently applied.

Senator MACKAY —By whom?

Mr Jackson —POAAL brought forward a different interpretation to what we had always applied.

Senator MACKAY —And what was your view with respect to their interpretation?

Mr Jackson —We have clarified that since and pointed out very clearly what our position is. We have never changed our position on it. At this stage that position is unchanged and has been applied across the network in a fair and consistent manner.

Senator MACKAY —So did the clarification of your position occur internally?

Mr Jackson —Yes. We have ensured that it has been applied consistently internally.

Senator MACKAY —So what was your problem with POAAL's interpretation?

Mr Jackson —It seemed to pay people for the same amount of work under three different allowances. It was not really confined to the issue of whether the business was open. It was confined to a volume of work rather than an outside of hours allowance. So there is an interpretation issue. It is quite complex, but it would have resulted in people being paid for the same amount of work with a couple of different allowances if their interpretation had been applied.

Senator MACKAY —So what is the remunerative impact of Australia Post's clarification?

Mr Jackson —On the licensees?

Senator MACKAY —Yes.

Mr Jackson —As I said, I would not be able to give you a clear position until we have actually gone through each one and reviewed it, and I am not aware of the position of the ones that are complete, but we can provide you with that. Certainly there are unders and there are overs.

Senator MACKAY —I am advised that 56 had theirs reduced and four had theirs increased, so that is not really unders and overs, is it? It is more under and the odd over.

Mr Jackson —Is that in Northern Territory, as you said?

Senator MACKAY —Yes.

Mr Jackson —I could not be sure, but it could be so in one state.

Senator MACKAY —That is not unders and overs; that is a total change of policy, isn't it?

Mr Jackson —It is certainly a significant ratio.

Senator MACKAY —Does Australia Post intend to undertake a broader review of LPO payments?

Mr Jackson —We are looking at all the mail type related payments and that is one of them. We are looking to see if there is another way we can simplify it so we do not run into these sorts of issues in the future.

Senator MACKAY —Is `simplify' code for cheaper?

Mr Jackson —No.

Senator MACKAY —So what is the process for your review?

Mr Jackson —The process for the review is that we would draw the line in the sand at a certain agreed point with POAAL. We will engage some consultants—we have been having some consultation with POAAL in recent times about the process—to have a look at this range of payments and come up with some recommendations about how they could bundle them together in a more simplified commercial manner so that we can go forward.

Senator MACKAY —The opposition formally requests an adjournment for five minutes to discuss the issues below the day.

CHAIR —We are going to have a private meeting for five minutes, so there will be a short adjournment.

Proceedings suspended from 5.02 p.m. to 5.06 p.m.

CHAIR —Senator Mackay has a matter that she wishes to raise.

Senator MACKAY —I just wish to put on record the opposition's view with respect to Australia Post's claim to commercial-in-confidence. We have sought advice from the Clerk, and I understand that the committee is not going to take this, so I just want to put our position on the record. The Clerk has indicated very clearly and has advised me to tell Australia Post that as they are dealing with public money they are required to answer all questions with respect to the budget. That is the nature of budget estimates. I also have here resolutions that have been carried from 1971 on clarifying the situation with respect to statutory authorities. I do not agree with the ruling of the chair, and Senator Lundy and I do not agree with the resolution of the committee to accept the advice that it is commercial-in-confidence. We will be seeking further advice from the Clerk, and it is likely that we will be raising this matter in the Senate.

CHAIR —Thank you, Senator Mackay. May I say in relation to that that the basis upon which I have accepted the request of Mr McCloskey not to answer the question is paragraph 8.45 of the committees manual, which says:

Statutory bodies and their members may ask to be excused from providing certain evidence or documents, but it is for a committee of the Senate in the first instance, and the Senate ultimately, to determine whether any such requests will be granted.

This committee has met, and a majority has decided that it accepts the request of Australia Post not to answer this question and provide the information.

Senator MACKAY —Chair, it might be easier to have these resolutions incorporated into Hansard, rather than my reading them out, which I could do.

CHAIR —The committee secretary advises that in the opening statement the general thrust of those matters has been included, and that can be reread if you so desire. Before we move to questions, I remind the officers that the Senate has resolved that there are no areas in connection with the expenditure of public funds where any person has a discretion to withhold details or explanations—

Senator MACKAY —Correct.

CHAIR —unless the parliament has expressly provided otherwise. In this case, the committee has decided that it accepts the grounds put forward for not answering the question, and it is up to the Senate to agree or disagree with that decision if they so desire.

Senator MACKAY —We will do that. Thank you, Chair. Moving right along, having a reduction of payments in South Australia and the Northern Territory seems a bit pre-emptive in that you are contemplating a national review. How will that impact on the national review?

Mr Jackson —It should not impact on the national review at all. What we would be looking to do is draw a line in the sand in terms of the total amount of payments. In fact, the new process will work out a simplified method of payments for that total value. In other words, this should have no impact on it.

Senator MACKAY —In that you are regarding it as a different issue?

Mr Jackson —Because we would be drawing a line in the sand from a position before now if we have still got those adjustments to come through.

Senator MACKAY —Why have you decided to look at the adjustments now, rather than wait for the national review process and consider them in the context of the national review?

Mr Jackson —We are not just looking at them now; we have been looking at them for some time, as I said.

Senator MACKAY —But why have you not put them in the context of the national review? For example, will the line in the sand be drawn after the reduction or before?

Mr Jackson —We would be consulting with POAAL, whom we are obliged to consult on this, but our position would be that it would be largely before all of these are effected; that might be in the pipeline right now.

Senator MACKAY —Can you please outline the new identification procedures for non-business customers wishing to send parcels overseas?

Mr McCloskey —As a result of a direction received late last year from the Department of Transport and Regional Services that our new security arrangements be put in place for parcels carried by air out of Australia, it is a requirement now that individuals produce identification, which can be either photographic identification or signature identification, when lodging those parcels. That information is then recorded and retained for a period.

Senator MACKAY —What payments do LPOs receive for this additional work?

Mr McCloskey —LPOs do not receive any additional payment for it.

Senator MACKAY —Why not? It is additional work.

Mr McCloskey —There are additional requirements, yes, on the part of whomever is receiving it, so it may take a little bit of time.

Senator MACKAY —Therefore, additional work. So you are saying that they are not remunerated for this additional work?

Mr McCloskey —Insofar as parcels are concerned, I think the LPOs—and I say this subject to correction—receive as a commission a percentage of the value of the stamp that goes on that item.

Mr Jackson —That is correct.

Senator MACKAY —In respect of these new provisions?

Mr McCloskey —As a general principle—

Senator MACKAY —In the broad, yes.

Mr McCloskey —they receive a—

Senator MACKAY —I know that. But do they get any extra money for this extra work that you have created for them?

Mr McCloskey —They will get something in that it is planned that there be a price adjustment to reflect the additional costs in relation to air parcels and those security arrangements. It is not announced yet, but it is planned and when that comes through it will flow through in the normal way to LPOs.

Senator MACKAY —When will the announcement be made that there is going to be an increase in postage?

Mr McCloskey —I am not sure of the timing of the announcement, but the increase is planned for 1 September. It will be in the order of 50c per parcel.

Senator MACKAY —And the 50c is broadly designed to cover the additional costs et cetera?

Mr McCloskey —To cover the additional costs incurred as a result of the new security arrangements. That is right.

Senator MACKAY —Thank you for that. Has Australia Post ballparked the cost to it of implementing these new security arrangements?

Mr McCloskey —Yes, we have. Our estimate is that on an annual basis the additional costs—and this would include licensees—are in the order of $4.1 million.

Senator MACKAY —What is the value of the postage forgone on mail that has been delivered to ADF members deployed overseas as part of peacekeeping or other activities? Are you able to answer that?

Mr McCloskey —My understanding is that the Department of Defence reimburses Australia Post for the concessional mailing arrangements that are in place for personnel who are serving overseas and so there is no revenue forgone for Australia Post as such.

Senator MACKAY —So PM&C picks up the tab?

Mr McCloskey —No, the Department of Defence.

Senator MACKAY —Defence picks up the tab, sorry. Where was the decision made to provide this free, or heavily subsidised, rate of postage? Who made that decision?

Mr McCloskey —The decision would be one made by the Department of Defence. I have been corrected. It is the Australian Defence Force, not the Department of Defence.

Senator MACKAY —The ADF?

Mr McCloskey —Yes.

Senator MACKAY —Are they empowered legislatively to make decisions like this?

Mr McCloskey —I assume so. Basically they negotiated an arrangement with Australia Post for the arrangements under which mail will be carried to members of the defence forces serving outside Australia.

Senator MACKAY —So they make that decision and PM&C picks up the shortfall?

Mr McCloskey —No, it is ADF or—

Senator MACKAY —Sorry, the ADF.

Mr McCloskey —I am not sure technically whether it is ADF or the Department of Defence, but one or other of them reimburses Australia Post.

Senator MACKAY —So how does Australia Post bill the ADF? What is the process for the cost?

Mr McCloskey —I would have to take on notice the technical arrangements that are in place for that.

Senator MACKAY —What about LPOs in all this? Is there any impact on the LPOs?

Mr McCloskey —I am not aware of any impact.

Senator MACKAY —The ADF reimburses Australia Post in some form—a process that we do not know yet. What about the LPOs?

Mr McCloskey —I am not sure that there would be any impact on an LPO.

Senator MACKAY —What I am getting at is: how do the LPOs get reimbursed from the ADF?

Mr Jackson —I am not aware specifically of that treatment.

Senator MACKAY —Is it right that LPOs get paid for sending parcels currently?

Mr Jackson —They get commissions in terms of their stamps, so when there is payment of postage on articles they get a certain percentage of that.

Senator MACKAY —So now you have a whole lot of parcels that have been sent free or heavily subsidised and the tab has been picked up by the ADF. What happens to the normal remuneration the LPOs would get?

Mr Jackson —I am not aware of the detail of that.

Senator MACKAY —Do they get it still? Do they get a kick-in from the ADF?

Mr Jackson —I am not aware of it.

Mr McCloskey —I imagine that we would be talking about a relatively small number of parcels in the case of any individual office.

Senator MACKAY —But the answer is they obviously do not. Australia Post gets some money from the ADF process, yet undetermined, but the LPOs do not get recompensed, it seems.

Mr McCloskey —We would have to take that on notice and get back to you on that one.

Senator MACKAY —At the last Senate estimates Australia Post were asked in relation to the DFAT discussion paper and the commitments on the supply of small letters—this is GATS—whether they were aware of the kind of commitment requested. Mr Jackson, I think you answered these questions.

Mr Jackson —Not GATS.

Senator MACKAY —Who answered GATS when we had estimates in Melbourne?

Mr McCloskey —It was Mr Grosser.

Senator MACKAY —Who is not here.

Mr McCloskey —Who is not here today, no.

Senator MACKAY —I will put it on notice. Is it correct that many LPOs have received an overpayment of their MSP, or mail sorting payment?

Mr Jackson —There was an error 18 months ago in terms of the calculation for that payment based on an hourly rate. It was when the GST was implemented. The GST had been applied incorrectly. There were a number of licensees—I cannot remember the exact figure, but it would probably have been about 10 per cent of all licensees—who had been overpaid.

Senator MACKAY —And you are making them pay it back; is that right?

Mr Jackson —A majority have paid it back. There were arrangements put in place for them to pay it back. Some of the amounts were very small. Where the amounts were not small and the licensees had specific hardship issues we had special arrangements put in place so that they could pay it back over a long period of time.

Senator MACKAY —What was the process for the recovery of the overpayment?

Mr Jackson —The process was that our field people notified them of what the overpayment was and gave them the option of paying it back in one lump sum or discussing a satisfactory means of repaying it over time. I believe a lot of it has been repaid. There are probably some licensees still to repay it over time.

Senator MACKAY —How did this occur? It was a GST miscalculation, but what precisely occurred?

Mr Jackson —When the GST came in we had a whole lot of changes we had to make in the payment systems and there was a very complex set of applications for different aspects of the business. I understand there was an error in the GST being applied twice on this rate.

Senator MACKAY —How did that happen?

Mr Jackson —The situation was reasonably complex because—

Senator MACKAY —As is the GST.

Mr Jackson —we had to treat things differently in different parts of the payment scheme. Two people had to work for almost 12 months on actually going through the whole lot of the payment processes. This must have slipped through the cracks, you might say.

Senator MACKAY —It is a pretty bad error, isn't it?

Mr Jackson —Yes.

Senator MACKAY —So you have taken steps to ensure that this does not occur again?

Mr Jackson —Yes.

Senator MACKAY —What about LPOs who left the industry in the interim?

Mr Jackson —LPOs who had left by the time we discovered it we have not chased up.

Senator MACKAY —On the basis that it would be too hard to get the money back?

Mr Jackson —Yes.

Mr McCloskey —I would like to correct some evidence that was given earlier by Mr Howard—and it would be good if this could be drawn to the attention of Senator Conroy. The evidence was in relation to the facility at Tullamarine. Mr Howard said that his recollection was that Hansen Yuncken, the preferred tenderer, was assessed under our legal advice as being broadly compliant with the code of practice. In fact his recollection was not correct. Our legal advice, both internal and external, was that they were noncompliant and we referred the matter to the Department of Employment and Workplace Relations for confirmation of that. They subsequently confirmed our understanding that the EBA of the firm in question was in fact noncompliant. I would appreciate it if that could be drawn to Senator Conroy's attention because he had a particular interest in that evidence. I apologise for any inconvenience caused by the evidence that was given previously.

CHAIR —Thank you. I thank Australia Post for appearing. I call the Australian Communications Authority.

[5.29 p.m.]