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Environment, Recreation, Communications and the Arts Legislation Committee - 10/06/98 - DEPARTMENT OF COMMUNICATIONS AND THE ARTS - Program 1—Arts and heritage - Subprogram 1.4—Australia Council

Senator SCHACHT —First of all, I have a couple of questions which I will read out—but you may wish to take them on notice. Does the agency have any public relations or promotional campaigns under preparation or currently under way? If so, for which program or policy? What is the timing of the campaign start and finish; the cost of the campaign; the source of funding; from whom was the request for the campaign—for example, was it from the minister, the government or anyone else; names and costs of consultants; ministerial involvement in timing and content; tendering for consultants and advertising agencies; and whether or not the campaign was arranged through OGIA?

Does the agency own or lease any property with vacant space? If so, what is the location of the building and the vacant lettable space; the cost per square metre of that space; the contract terms; and what attempts have been made to sublet or make alternative arrangements or renegotiate? Those are points which you can take on notice, if you wish, you can give me any information you have at the moment and partly take it on notice.

Mr Lynch —The answer to the second question, I think, is just no, we do not.

Senator SCHACHT —You do not have any vacant space?

Mr Lynch —We do not have any vacant space. With regard to the first question, there are a number of campaigns that we are running at any one point in time. The only one that I am aware of that I can give an answer on at this stage is the 30th anniversary of the council, which takes place on 8 July this year. It will involve a range of activities throughout the balance of 1998. Those plans have not yet been made public but we will certainly be doing that. I would certainly need to consult with my officers with regard to the other questions.

Senator SCHACHT —Thank you. A report appeared in yesterday's newspapers saying:

Australia's leading performing arts companies face extreme financial vulnerability and have run at an aggregate loss each year since 1992, according to a landmark study. . .

`The seriousness of the situation should not be underestimated,' said the Australia Council report, released yesterday.

Do you have a copy of that report available for the estimates committee?

Mr Lynch —The report is in draft stage, but I do not think that there is any objection to—

Senator SCHACHT —But the report said it has been released; is it just a draft?

Mr Lynch —Yes, it was released yesterday to the companies and to the states on Friday—so I would have no hesitation in providing it to the committee.

Senator SCHACHT —Okay, thank you. Do you have a copy here today?

Mr Lynch —Yes, I think we do have a copy here.

Senator SCHACHT —How many pages is it? The secretariat might be able to photocopy it.

Mr Lynch —It is a substantial report running to 33 pages.

Senator SCHACHT —Mr Acting Chair, perhaps Mr Lynch would not mind providing that report to the secretariat during the morning so enough copies could be run off for the four members of the committee—to start off with.

ACTING CHAIR (Senator Eggleston) — I am sure they could do that.

Senator SCHACHT —Thank you very much, Mr Lynch. The newspaper report said:

Twenty companies recorded cumulative losses of $12.3 million from 1992 to 1997 and in four of those years most of the 20 recorded a deficit.

I presume the report lists those 20 companies, does it?

Mr Lynch —Yes, it does.

Senator SCHACHT —The report continued:

Last Friday, representatives of the MOF—

which I presume is the Major Organisations Fund—

Mr Lynch —Yes.

Senator SCHACHT —It continued:

. . . symphony orchestras, opera companies, federal Arts Minister Richard Alston . . . State funding bodies and the Australia Council met to discuss the report.

Is that correct?

Mr Lynch —That is right.

Senator SCHACHT —What was the outcome of the discussion?

Mr Lynch —A representative of Richard Alston was there, not Richard Alston.

Senator SCHACHT —So the arts tsar of Australia, Mr Neville Stevens, was representing the minister?

Mr Stevens —No, I think it was probably Mr Palfreyman on this occasion.

Senator SCHACHT —My God! Mr Palfreyman—a well[hyphen]known arts and cultural devotee, as I understand is Mr Stevens.

Mr Stevens —I am informed that I inadvertently misled you. It was Mr Neilson who represented the department at that meeting.

Senator SCHACHT —I would have thought that you would have been absolutely enthusiastic to attend such a meeting, Mr Stevens, knowing your full interest in all matters cultural, your tastes, et cetera.

Mr Stevens —It is not a question of that; it was a question of competing priorities.

Senator SCHACHT —So a meeting of some interdepartmental committee on dealing with access regimes for mobile phones from space took priority over this issue.

Mr Stevens —I have read the report with some interest; the issue is of some interest to us.

Senator SCHACHT —Is Mr Neilson present?

Mr Stevens —Yes.

Senator SCHACHT —Mr Neilson and Mr Lynch, can you both outline to us the outcome of the discussion about the financial weakness of so many companies?

Mr Lynch —There is no outcome from the discussions. The process has been going on for some time; it was partly dealt with through the Cultural Ministers Council and the work they have been doing on looking at the MOF companies. This was a report that the Australia Council has been working on for the past six months in looking at some of the issues and the pressures on those companies.

The intention of this meeting was to bring together the federal and the state funding bodies and the companies at their board level and at their executive and artistic director levels to address some of the issues, to get feedback from the companies and the states in regard to the report. A working party of organisations and state funding bodies has been set up to look at some of the other issues, particularly the relationship to venues, to look at issues in regard to funding and to look at issues in regard to the range of the competing demands now on those companies. It is an ongoing project.

Senator SCHACHT —Mr Neilson, did you on behalf of the minister explain how the Australia Council will be able to help these companies with their financial situation when funding in the budget outlays for the next four years, including this year, for the Australia Council declines from $71.8 million to $63.9 million in the year 2001[hyphen]02?

Mr Neilson —If I focus on the last part of your question, the decline in the forward estimates is related to the cessation of a number of programs that had a finite life in Arts for Arts Sake.

Senator SCHACHT —Can you give me a list of those arts programs that have had a finite life and that are going to come to an end in the next four years? You might have to take it on notice.

Mr Stevens —A finite life does not mean they will not be renewed by the government; it simply means that the forward estimate cover is not available at this point in time.

Senator SCHACHT —So the forward estimates are meaningless, Mr Stevens?

Mr Stevens —I am not saying that at all; I am simply saying that the forward estimates reflect the government decisions of the day. There will obviously still need to be consideration at the appropriate time as to whether those programs may or may not be renewed—as happens in a range of programs.

Senator SCHACHT —Are any of those programs that have a finite life, that run out and have not yet been renewed by a policy decision of the government either directly or indirectly providing funds to these various performing companies?

Mr Lynch —The four programs are the contemporary music export fund, the regional arts fund, the major festivals fund and the emerging artists fund. The only program that is related to the major organisations that were the subject of the report and of the meeting on Friday is the major festivals fund. A number of the major organisations have received funds from the major festivals fund.

Senator SCHACHT —When does the major festivals fund—

Mr Lynch —I am sorry, there also have been some grants given to those companies under the emerging artists fund.

Senator SCHACHT —What are the totals that both of those funds have provided to the companies?

Mr Lynch —I would have to take that on notice.

Senator SCHACHT —Do you know, Mr Neilson?

Mr Neilson —No, the Australia Council is responsible for the allocation of those moneys.

Senator SCHACHT —They are separate funds, they are separate programs which have a finite life, but when the amount of money for those funds is provided to your council there is no indication given as to how much of that would go to the major companies—that is up to the council to decide. Is that correct?

Mr Lynch —They exist alongside the other programs of council. They are programs in regard to the major festivals and the emerging artists funds. They are subject to agreements between a range of companies. We would need to break down what has actually been given out to those companies.

Senator SCHACHT —Obviously, by definition, when emerging artists funding goes to a symphony orchestra or something like that, it is to be used for `encouraging and employing emerging artists'. Is that correct?

Mr Lynch —That is correct.

Senator SCHACHT —That is the definition, but you, in conjunction with the symphony orchestra, pick which emerging artists get it.

Mr Lynch —Yes, we make the decisions in consultation with the artform funds.

Senator SCHACHT —So you cannot give me at the moment how many millions of dollars or hundreds of thousands of dollars in total are available to these?

Mr Lynch —They are not the significant funders of the major organisations companies.

Senator SCHACHT —Is it a million? Between both?

Mr Lynch —Off the top of my head, the Black Swan company and the Company B Belvoir company were given $200,000 for the production of Cloudstreet from the major festivals fund, and the Meryl Tankard dance theatre was given $70,000 from the major festivals fund. I think they are the most significant ones. In regard to the emerging artists fund, there were grants to the Western Australian Ballet and to Musica Viva for supporting individual activities by those companies with emerging artists, and those would amount to only about $25,000.

Senator SCHACHT —Which company was the one with the $200,000 for a production?

Mr Lynch —Black Swan Theatre Company in Western Australia and Company B Belvoir in Sydney.

Senator SCHACHT —If they do not get another equivalent amount to $200,000 next year—or whenever it is—their ability to put on productions will be proportionately reduced?

Mr Lynch —The programs were limited to three years. The final year is 1998[hyphen]99. We were obviously pursuing the idea of the extension of those programs, particularly in regard to that major festivals fund. We see it as a major way of supporting new Australian work and the possibility of Australian work that may ultimately be able to go overseas.

Senator SCHACHT —I may return to this in a moment, but you have taken it on notice to give me the breakdown of that funding. Mr Neilson, you just reiterate that you had an interesting discussion but there was no outcome from the discussion last Friday?

Mr Neilson —There was certainly an outcome in the sense that the Australia Council and the companies and the states and us are going to take the matter forward in the sense—

Senator SCHACHT —Forward to where?

Mr Lynch —The basis of the report is to look at the ongoing stability of the performing arts sector across Australia. We were looking at a range of pressures that had built up certainly over the last five years, looking at things that we might be able to do in concert with the companies in looking at the relationship between the various levels of government.

Senator SCHACHT —So, in Mr Neilson's point, in going forward you identified a number of things that could be done?

Mr Lynch —Yes, there are a number of things.

Senator SCHACHT —Is that available to the committee?

Mr Lynch —We have asked the companies to provide direct feedback over the next two weeks to the draft report.

Senator SCHACHT —Does the draft report make recommendations?

Mr Lynch —The draft report proposes some issues to be investigated. We have got a copy of it for you to look at, and I think it has been given to the secretary.

Senator SCHACHT —To be photocopied. As I have just got it, it is a bit hard to ask you questions while trying to read it at the same time.

Mr Lynch —I understand that. I refer you to page 22 onwards of the report. We look at options that we have proposed. We are now looking for a response from the companies and from the other funding bodies to a range of issues that have come out of the report.

ACTING CHAIR —Senator Allison is looking for a copy of the report.

Senator SCHACHT —Who?

ACTING CHAIR —Senator Allison.

Senator SCHACHT —Sorry. Were they run off?

Mr Lynch —I have just given you the one copy.

Senator SCHACHT —That is the problem. Other members want to look at it as well.

ACTING CHAIR —Could we borrow Senator Schacht's copy?

Senator SCHACHT —I will give it back to you. They can go and photocopy it.

ACTING CHAIR —You might like to pursue another line of questioning.

Senator SCHACHT —Yes, until that comes back. But any of those recommendations or suggestions include—I did not have a chance to read all the four pages in 32 seconds—requests to state and federal governments for increased funding?

Mr Lynch —They do highlight the fact that funding to these companies has been static over the last five years and that there is an issue for both state and federal governments to address.

Senator SCHACHT —Does it identify whether any state or federal government had actually reduced funding?

Mr Lynch —It does. In a couple of states there are reductions that have taken place.

Senator SCHACHT —Which states have been cultural barbarians and reduced their funding?

Mr Lynch —I may have to take that on notice or come back to that after resorting to my notes.

Senator SCHACHT —The funding from the federal government has been static over this period?

Mr Lynch —Yes.

Senator SCHACHT —So, although there have been the normal increased costs, even though we have low inflation in Australia, there has not been an increase to account for even that from the federal government budget?

Mr Lynch —That is correct.

Senator SCHACHT —So, in real terms, there has been a slow decline in the funding to the major organisations?

Mr Lynch —Yes, that is right.

Senator SCHACHT —Minister, I understand you were in Singapore last week, so you were not able to represent yourself at this discussion that took place. Does the government take any note of this report which identifies the financial difficulties more and more companies are finding themselves in?

Senator Alston —I think it is a very valuable report. It certainly spells out a number of the factors that are impinging on the activities of the major organisations, a number of which are essentially beyond their control—globalisation, the increasing tendency of international acts to come here and compete, the extent to which companies that have traditionally operated in their own squares are finding that they are competing directly with other artforms. There is a lot there that is food for thought and it certainly does not suggest that there is any one single solution.

It does, for example, explore the possibility of more infrastructure sharing between companies and, certainly in the last few years, the whole purpose of the Major Organisations Fund has been to enable the companies to see whether they can cooperate more effectively in exploring sponsorship opportunities, making sure that they have their business plans well articulated and properly tested. It seems to us that there is certainly a case to be made that, probably going back more than five years, there has been quite a significant change in the overall environment which does make life difficult.

From memory, I do not think it says that this is principally a function of lack of government funding; it is simply pointing out that in many respects there are pressures to which the companies respond. They will not necessarily be solved by additional funding, particularly if it is just a general purpose grant. There needs to be a lot more attention given to the structural difficulties.

Senator SCHACHT —Mr Lynch, does the report identify declining audiences across the board for these organisations?

Mr Lynch —One of the disturbing aspects is the inability of companies, particularly those outside Sydney and Melbourne, to grow their audiences.

Senator SCHACHT —Not `grow'. To start off with: are they audiences—

Mr Lynch —In some parts of the country they are declining. There is some detailed information—

Senator SCHACHT —Does that identify why they are declining?

Mr Lynch —There are the issues that Senator Alston has just raised. There are no significant contributing factors.

Senator SCHACHT —Competition?

Mr Lynch —Competition from other forms of entertainment is obviously a major issue, but there is also the issue of globalisation.

Senator SCHACHT —The reason the ones based in Sydney and Melbourne are better off is that the marketplace is bigger; there are just more people to draw from. Is that the argument?

Senator Alston —One of the things they point to is, for example, the unintended consequence of touring exhibitions. We inherited that from you. We expanded it to some extent—we thought quite sensibly. They make the point that, in themselves, these are very positive initiatives. We included an intrastate touring component. But the end result is that places in regional Australia that did not otherwise have access to high quality works or, if you like, the best available on a national basis and were therefore content to patronise the local
version suddenly found that they were getting high quality groups coming into town from Sydney and Melbourne. Naturally enough, that can lead people to say, `Well, we've just seen the best. Why should we go to the local?'

Senator SCHACHT —When you say `regionally', does that also include the smaller state capitals vis[hyphen]a[hyphen]vis Sydney and Melbourne?

Mr Lynch —In terms of the touring question?

Senator SCHACHT —I do not know how often the Australian Opera or the Australian Ballet, et cetera go to Adelaide, go to Perth, go to Brisbane—

Senator Alston —Oz opera, for example, is now making a major push to travel around all the capital cities and a number of the major regional centres.

Senator SCHACHT —Does this mean, for example, that in my own state of Adelaide, the Australian Opera, by now touring more to Adelaide—if it is the case that they are—is putting more pressure on the State Opera of South Australia to survive?

Senator Alston —To the extent that they do, it would. I am not sure that the Australian Opera has recently gone to Adelaide, but the point is valid, I think.

Mr Lynch —I think competition, whether it comes through the touring program, through festivals or through a range of other work, is creating much greater competition, particularly outside the Sydney[hyphen]Melbourne markets. So there is some real pressure in those other states.

Senator Alston —And impresarios are bringing in these major international spectaculars, which can mean that people do not see as much of the local works as they used to.

Senator SCHACHT —But is it mainly in the area of opera and ballet that impresarios are bringing in international events, et cetera?

Mr Lynch —It think it operates across the music, theatre, dance, opera and ballet areas.

Senator SCHACHT —Are you saying that in theatre it is things like Phantom of the Opera which have an impact?

Mr Lynch —That is right, yes.

Senator SCHACHT —But impresarios have been bringing in those sorts of events for decades, haven't they?

Mr Lynch —Yes.

Senator Alston —But a lot of the festivals are beefed up. The Melbourne International Festival has gone up a couple of rungs in recent years. Sydney, if I may say so, has made some fairly significant changes in recent years. There is a lot more pressure from bringing in international acts. The Adelaide Festival has, I think, been very successful over a long time, but again they are bringing in a number of international performers.

Mr Lynch —The report actually outlines that there has been a nine per cent increase in the level of both state and federal government support for festivals when all the other areas are either static or declining. So the festivals are posing one significant level of competition to companies existing in each of the state capitals.

Senator SCHACHT —I now have the full report in front of me, Mr Lynch. Going back to pages 23 to 25 where you have the list of things that could be done, many of them are directed to the companies themselves. `The way forward,' to use Mr Neilson's remarks: who handles implementation? You have got two weeks for these suggestions to be responded to by the
companies, subject to the companies accepting some of them or most of them. What then happens? Who is in charge of driving the program on?

Mr Lynch —We fund the 17 major organisations companies, but we had broadened it out beyond the major organisations companies for this meeting and for the distribution of the report. That group included the opera, the state opera companies and the six symphony orchestras which are either funded directly by state governments or through the Department of Communications and the Arts. So, from our point of view, we will be looking at—

Senator SCHACHT —So you can say to the companies that you fund, `These are the suggestions we make. We want a decent response from you as to how you're going to adopt them and put them into place, and if you don't respond positively to these suggestions'—and I do not blame you for saying this implied threat, I have to say—`you may actually lose more funding.' I have to say that I am not saying that in a critical way.

Mr Lynch —We look at this as a constructive way rather than as a punitive way.

Senator SCHACHT —Of course, but in the end in being constructive it is always useful that they know that, in the back of the cupboard, there is a bit of stick that you can pull out, which in this case is the funding.

Mr Lynch —We are coming to the end of the first three-year agreements with the MOF companies, and part of the agenda for the meeting was to advise the companies as to how we would be renegotiating those agreements over the balance of this year. On the basis of council having received its training or funding agreement from government, we would then be in a position to enter into new training or funding agreements with the major organisations companies. That will take place over the next three or four months. We look at the relationship between the companies as being a positive relationship.

Senator SCHACHT —I am not decrying that. So it will be the council rather than DOCA that will drive the consultation process to make sure that these issues are taken up and are addressed constructively?

Mr Lynch —We see a genuine response from all of the groups. It runs parallel to activities that have already taken place within the Cultural Ministers Council.

Senator SCHACHT —Who is going to drive it? Will only you be driving it?

Mr Lynch —We will be driving it in regard to the outcomes of the MOF report.

Senator SCHACHT —Minister, what role will DOCA have? Presumably, Mr Neilson will be in various discussions to oversee, from your point of view, that the report is being implemented?

Senator Alston —We will obviously take a very close interest in the outcome. We will be having discussions with the Australia Council as well. I have already had discussions with Dr Nugent about it.

Senator SCHACHT —You have had discussions yourself directly with the chair of the Australia Council?

Senator Alston —With the chair of the major organisations funding it.

Senator SCHACHT —Apart from what the Australia Council provides, is there any direct funding from the government to any of the major organisations?

Mr Stevens —There is the Australian Opera of course.

Senator SCHACHT —Yes. I have not had a chance to read this report. Is Australian Opera one of the companies that is under some stress financially?

Senator Alston —They lost two[hyphen]and[hyphen]a[hyphen]half million last year.

Senator SCHACHT —I have not had a chance to read the report. Is it covered in the report, Mr Lynch?

Mr Lynch —Yes. We are looking at it up to end of the calendar year 1997.

Senator SCHACHT —Even though you do not fund the Australian Opera because it gets its own, direct one[hyphen]line budget allocation, does that mean that it is a matter for DOCA to have discussions with Australian Opera if they are taking up the report?

Senator Alston —Yes, I think that is right.

Mr Lynch —Yes.

Senator SCHACHT —Who in DOCA is in charge of that—Mr Neilson?

Mr Neilson —Yes.

Senator SCHACHT —I see. Assisted considerably by Mr Stevens?

Mr Stevens —Yes.

Senator Alston —He gets the tea!

Senator SCHACHT —Is Australian Opera the only one that gets direct funding—the only one with a one[hyphen]line budget allocation?

Mr Lynch —The symphony orchestras receive funding through Symphony Australia.

Senator SCHACHT —I presume a number of symphonies, particularly in the smaller states, have probably got some stress as well. Mr Neilson, is that correct?

Mr Neilson —I am not concerned with the funding of the symphonies.

Senator Alston —I have just recently launched a couple of them as they have corporatised. I think the last thing on their minds is that they are under funding pressures; they are really celebrating the fact that they have got their freedom at last.

Senator SCHACHT —You would always say that anyway. You would say that is because they get freedom from the ABC, I suppose.

Senator Alston —I think there have been a number of reports that have recommended that over the years.

Senator SCHACHT —There have been two. Before I move on to something else, I just want to know if other senators have questions in this area because I want to move on to some other area.

Senator ALLISON —I do not have any, except to make the comment that it would have been interesting if we had had this document a little earlier. I note that Victoria has an extraordinarily low level of spending on the arts compared with the other states.

Senator SCHACHT —It is all going into the casino, I think.

Senator Alston —Mr Kennett would be very quick to point out to you that over the last six years he has spent close to $1 billion, largely on capital works.

Senator SCHACHT —For the casino?

Senator Alston —No. It is from a variety of sources. That is one source.

Senator SCHACHT —But on the casino, not from it.

Senator Alston —No, not on it.

Senator ALLISON —I am talking about state government here, Minister. I am not going to be challenging the federal figures, you will be pleased to know.

Senator Alston —I am just pointing out that the state government's funding has been in large measure directed to capital rather than recurrent funding for organisations.

Senator ALLISON —Yes. My question to Mr Lynch was going to be: are those differences in funding base levels reflected in attendances? What is the significance of those very different levels of spending?

Mr Lynch —Which section is that?

Senator ALLISON —I am looking at page 11: `Major Performing Arts Companies—State Government[hyphen]based grant', exhibit 4.

Senator SCHACHT —Victoria certainly comes last.

Senator ALLISON —If that table were rejigged to be per capita, that would be even more extraordinary.

Mr Lynch —I would not particularly wish to comment on breaking up the figures and what the consequences of that are.

Senator ALLISON —I note that you have got tables of attendances per state and so on. I have not had time to look and see how they compare. It is just a useful piece of data to examine to see whether that has had any effect.

Mr Lynch —There has obviously been some stress in Victoria for a range of companies. That has been public knowledge for some time. It also means the demise of the State Opera of Victoria, which is no longer there as a purely Victorian company.

Senator SCHACHT —Hang on! When was the demise of the State Opera in Victoria?

Mr Lynch —Two years ago.

Senator SCHACHT —This figure goes back to 1992[hyphen]93, long before its demise.

Mr Lynch —Sorry, the end of 1996.

Senator SCHACHT —These figures show Victoria back in 1992, 1993, 1994 and 1995 being below every other state. I notice that Tasmania does not even get on the graph. You haven't forgotten the island, have you?

Mr Lynch —There are no major performing arts companies there with the exception of the Tasmanian Symphony. These are the MOF companies that we are talking about.

Senator ALLISON —I would invite you to expand on this table.

Mr Lynch —Certainly I can provide that information in terms of the background. I do not wish to make the analysis from this seat at this moment. I am quite happy to provide that to senators.

Senator ALLISON —I will read this report and, if any questions arise from that, I might put them on notice.

Senator SCHACHT —Acting Chair, because members of the committee have not had a chance to read the report—we have just received it today—if we have got further questions on notice out of the report, can we have an opportunity to lodge them by, say, the close of business on Friday?

ACTING CHAIR —I would have thought so.

Senator SCHACHT —That would give us reasonable time to read the report.

Senator SCHACHT —Can I now go back to the program itself. You had better take this on notice, Mr Lynch. Could you give the committee a breakdown of the council's $71.8 million expected outlays for 1997[hyphen]98, including a separation between running costs and one[hyphen]off outlays for the financial year as well as identifying administration costs?

Mr Lynch —Yes, we will take that on notice.

Senator SCHACHT —Could you explain the $429,000 savings from the Australian artists creative fellowships as identified in table 4.14 on page 48 of the PBS?

Mr Lynch —The program was abolished in the budget in 1996 but the commitments to the existing fellowship holders were maintained. The final commitments run out in 1998[hyphen]99.

Senator SCHACHT —So it will end in this coming financial year.

Mr Lynch —It ends this coming financial year. There is $297,000 to be expended in 1998[hyphen]99 and one fellowship to be expended in 1999[hyphen]2000.

Senator SCHACHT —The government has ended this program; what did they institute in its place, that you are aware of?

Mr Lynch —Some new programs came in. The emerging artists program was one of the programs that replaced the Australian artists creative fellowships.

Senator SCHACHT —Do you administer the emerging artists program?

Mr Lynch —We do.

Senator SCHACHT —And how much is that for 1998[hyphen]99? This document I have in front of me does not mention it at all.

Mr Lynch —It is a three[hyphen]year program; it is $1.5 million in the 1998[hyphen]99 financial year.

Senator SCHACHT —Could you provide us with a list of those people who have received emerging artists grants for the year just ending, 1997[hyphen]98?

Mr Lynch —Yes, we can.

Senator SCHACHT —If I ask any questions that have been asked at a hearing earlier this year or late last year please point it out to me. Would you be able to provide a list of those expected to receive the grants for 1998[hyphen]99?

Mr Lynch —Not at this point. Those decisions will be made over the balance of this year.

Senator SCHACHT —Do any of the grants flow across one year into the next?

Mr Lynch —No. We assisted 26 individuals and 43 groups under the emerging artists program in 1997[hyphen]98. We will be able to provide a report on that and the information will be incorporated in our annual report for 1997[hyphen]98.

Senator SCHACHT —How much per annum was the Australian artists creative fellowship fund running at at its height? What was the expenditure on the fellowships before the program was wound down?

Mr Lynch —It was $1.7 million per annum.

Senator SCHACHT —Emerging artists are getting about $1.5 million.

Mr Lynch —Yes.

Senator SCHACHT —Minister, you announced that the emerging artists grants would replace the creative fellowships. In a sense you have also cut $200,000.

Senator Alston —There are a lot more people and organisations, particularly deserving ones, getting money under our approach than under the Keatings where simply a few high profile and relatively well[hyphen]off individuals got fellowships. That is the essential difference.

Senator SCHACHT —Who was well off?

Senator Alston —John Olsen, Reg Livermore, Don Burrows—

Senator SCHACHT —I also saw plenty of examples where some of the people who got them were not exactly rolling around in it, or what you in the Liberal Party would accept as well heeled.

Senator Alston —Tozer could have almost been a millionaire on the strength of two separate grants. If you combined the two Tozer grants you came close to $600,000 or $700,000 or even a $1 million.

Senator SCHACHT —Over how many years?

Senator Alston —Over about a six[hyphen]year period.

Senator SCHACHT —Minister, you say you are giving money to more people; they get it for one year as emerging artists. The funding in the area overall as a result of one program being replaced by another has been reduced. You might say it is only $200,000, but it is still $200,000.

Senator Alston —There are other programs—the contemporary music export fund and the expansion of the touring programs, including festival Australia. You cannot just look at replacing one program with another; we replaced a number of programs with a number of other programs.

Senator SCHACHT —That is just an excuse to cover the fact that you have actually reduced some funding.

Senator Alston —No. Basically we did not like the idea of handing out money to a few high profile and often relatively well[hyphen]off individuals so we scrapped that. Instead of it we do a number of things across the board. The emerging artists fund is one of them—it was not necessarily designed to be a straight replacement because we did not like that concept.

Senator SCHACHT —Mr Lynch, this coming year the emerging artists fund will have been going for two years.

Mr Lynch —The final year is 1998[hyphen]99.

Senator SCHACHT —So people will be coming up now who have had a year's funding—their funding is ended. Do we have any assessment that, after their funding is ended, their economic circumstances have improved and that they are now in a better position to earn income in the commercial world?

Mr Lynch —Obviously it has had some impact. As an occupational group, artists are the least well paid people across the country. I cannot say whether that is going to change on the basis of that program.

Senator SCHACHT —The program runs out at the end of next year and then it is up for government consideration to be renewed. Will there be an independent evaluation of the program to see whether the funding given to these emerging artists has led them to go on to bigger, better and brighter things in terms of their performance, capability and earning capacity once the funding is stopped? Do they just go back to being dirt poor or has the funding meant that their income has actually got better?

Senator Alston —Can I answer that, because it is almost a quasi[hyphen]philosophical debate. The Keatings were essentially handouts to people who were in mid or even late career. Don Burrows was 70[hyphen]odd. They were well[hyphen]established people and, on our judgment, they did not really need the money. We thought it made sense for the government to give money where it makes a difference. If you give it to emerging artists—people who are young and coming through the system; although Emily was a classic example of someone in late life emerging as an artist of renown—you cannot ask after 12 months if the person has made a big leap forward. It is seed funding. It may or may not result in a better quality output, but you are essentially taking a risk in the hope that you are backing a winner rather than simply handing over what we thought were very large amounts of money to people who did not need it.

Senator SCHACHT —You say a year is too early; that is fine. Has the program got three years to run?

Mr Lynch —The program has run for two years and we are now going into the final year of the program.

Senator SCHACHT —Normally, under the budget process, the central agencies—Finance at the very least—would ask, if you were putting up a bid to continue the program, what evaluation has been taken of the program and whether it has achieved its objectives. Even after three years you will have to put some information forward. Will that include an idea of where people ended up, what advantages they got out of the year's income and whether they have gone on to bigger, better and brighter things? I would think that would include, first, their performance ability—whether the quality has gone up and everyone is clapping louder—and, second, whether they are now being hired to perform, whether they are earning more money out of the private sector and, therefore, whether they are financially better off.

Senator Alston —My understanding is that the bulk of the funds has not gone to individuals in any event. It has gone to organisations to provide raw materials, performance spaces and inputs, which would make it inherently more difficult. But you are right to say that, when we are seeking an extension or an expansion, we will have to make a case and that will involve an assessment of how effective the program has been.

Senator SCHACHT —Mr Lynch, the minister has said that the money goes in bulk to groups and organisations. Do you have some say as to whether the money is allocated to buy materials that assist artists or whether it goes as income to artists?

Mr Lynch —It is not going as income to artists. They are competitive projects. We are looking at work that is being exhibited or recorded. The artists are developing either profile exposure or expertise. We are about to report back to the minister on the first two years of the program, and we will then be evaluating a range of outcomes of the program in our bid to try to ensure that the program is extended beyond 1998[hyphen]99.

Senator SCHACHT —The title of the program is Australian artists creative fellowship. Is that correct?

Mr Lynch —No, that is the one that has been abolished. It is the emerging artists program.

Senator SCHACHT —`Emerging artists' actually implies individuals. That is why I am trying to compare the two, and now the minister has said that the money goes more to organisations.

Senator Alston —There are 43 organisations and 26 individuals, but Mr Lynch is making the point that even the money that goes to individuals is not given as an income—

Mr Lynch —It is not income supplementation. It is looking at programs in terms of exhibitions or recordings—a whole range of activities that are undertaken for relatively new entrants into the various artform areas.

Senator SCHACHT —But you would be able to identify, in your records, that artist X got so much money to help with putting on an exhibition of his or her paintings.

Mr Lynch —All of our grants are identified in terms of where they go. They all have to be acquitted in line with—

Senator SCHACHT —And that will be in the next annual report?

Mr Lynch —Yes.

Senator Alston —It is project funding for individuals.

Senator SCHACHT —I just wanted to get that very clear. I do not know whether any other members of the committee have questions on the emerging artists or the Australian artists creative fellowships.

Senator ALLISON —I would like to go back to the table on state government base grant for major performing arts companies. Beneath that is a table of the federal government's spending over the same period. Is it possible to get that $17 million for 1997 broken down into states and to top up this table with that information?

Mr Lynch —The breakdown of the table?

Senator ALLISON —Yes, for the federal government base grant. How is that spent statewide?

Mr Lynch —I could get that information for you. I cannot break down the federal government grants now. The $12.2 million that goes to the MOF companies is included in our annual reports and the other information in regard to the DOCA funding is readily available. I can get you a breakdown.

Senator ALLISON —It would be good to have that table expanded to include the federal if it is possible.

Senator LUNDY —Will there be any rolling over of funds from your 1997[hyphen]98 allocation to 1998[hyphen]99?

Mr Lynch —Across the whole of the budget?

Senator LUNDY —Yes, across the whole of the budget.

Mr Lynch —Under the terms of the training or funding agreement, we can roll over, but at this stage I think, other than committed funds in agreement for either fellowships or grants that run over from 1997 to 1998, there will be less than $1 million rolled over from 1997[hyphen]98 to 1998[hyphen]99.

Senator LUNDY —Where do you expect those funds being spent and will they be spent to supplement pre[hyphen]existing programs? Can you describe in a bit more detail how you will expend that rollover?

Mr Lynch —We are starting a new triennium in 1998[hyphen]99. The balance will be the parliamentary appropriation for 1998-99 plus anything that we are able to roll over from 1997-98, the final year of the first triennium.

Senator LUNDY —When you roll over funding like that, do have an internal process which makes it a requirement that you spend it in the same area from which it came, or is it up to you to redistribute it?

Mr Lynch —In the budget process that the council has just gone through for 1998[hyphen]99 and the next two years, commitments are met that roll over from 1997[hyphen]98 to 1998[hyphen]99, but any unspent funds are reallocated by the council in the budget process, with the exception of those four designated policy areas that we have just been talking about. Those funds are earmarked to those programs.

Senator LUNDY —And that money stays within that program?

Mr Lynch —That is right.

Senator LUNDY —What proportion of that money would be allocated in that way? Is it more than half? Can you give me a rough idea?

Mr Lynch —I think the indication at this stage is that there will only be about $1 million. It will be split across the range of activities. We are still grappling with some of those budget issues for 1998[hyphen]99, and they will not be resolved until the council meeting in July.

Senator LUNDY —If you could perhaps take that on notice to give the committee an indication of the proportional split between that roll over when that occurs. Were there any funds rolled over in the 1996[hyphen]97 allocation to this financial year?

Mr Lynch —To 1997[hyphen]98?

Senator LUNDY —Yes.

Mr Lynch —Yes, there were.

Senator LUNDY —What was it from? Was it allocated to the same areas, or did council redistribute it in a way that differed from where the actual money came from?

Mr Lynch —No, other than commitments we have entered into, our process is that we look at the budget at the beginning of each financial year and set a budget based on the demands before us. I would have to come back to you in regard to specific detail as to where that money went. It went into the consolidated budget for 1997[hyphen]98.

Senator LUNDY —If you could take that on notice, that would be great. Referring to the Australia Council's press release of 14 May this year, what sort of impact will cuts to arts funding, particularly those in the budget out years, have on the Australian arts community generally and, in particular, on Australia's international standing with respect to arts?

Senator Alston —Which particular cuts did you have in mind?

Senator LUNDY —This particular press statement refers to an overall funding figure dropping from $71.8 million in 1998[hyphen]99 to $64.6 million in 2000[hyphen]01—the final year of the triennial funding arrangement. That is the cut I am referring to, Minister.

Mr Lynch —The issue is still on the table in regard to those discussions. It is either the continuation or not of those four program areas that finish in 1998[hyphen]99. If the government agrees to extend those programs, the council would hope that that will make a substantial impact in terms of building back that figure. There are also impacts in regard to efficiency dividends across government that take that figure down.

Senator LUNDY —Minister, perhaps you could just clarify whether that drop is in fact going to take place, and what contingencies are attached to perhaps the maintenance of that funding. What decisions do you have to make for that funding not to diminish so significantly over the next three years?

Senator Alston —We have to decide at the end of the next financial year whether to extend, expand or replace programs such as Playing Australia, Visions, Festivals Australia, Emerging Artists, Contemporary Music Export Fund—and there may be others. In other words, that press
release—I am sure for effect—posits a worse case scenario. In other words, if you were to assume that all of those programs were allowed to expire and were not replaced or extended, then that would become a new baseline. But, quite clearly, it is hypothetical at this stage.

I have already said publicly that, as far as I am concerned, I would regard all of those initiatives as being ones that have been very effective. Certainly I would be keen to see them continue, but that judgment is made at the end of the normal funding program. That is really the only time at which you can look at what the bottom line will be in the out years. The forward estimates simply assume, as they did with all the Creative Nation initiatives. They were four[hyphen]year programs. They expired and it was assumed that they were not replaced. In fact, we did replace a number of things. We extended SBSI, for example. It does not tell you anything about what is going to happen in the real world; it just makes a linear assumption.

Senator LUNDY —With respect to the triennial approach to funding, how does that degree of discretion or future consideration impact upon the concept of triennial funding, which I understand is supposed to provide that security in out years allocations? Can you explain to me how, on the one hand, you can allocate a triennial budget but, on the other hand, save up a package of initiatives for further consideration which can impact upon the broad triennial budget?

Mr Lynch —Under the terms of the first agreement, which we negotiated between the various departments and the minister, there was express provision that the exception to the base level of funding was new policy that government might want to put into the triennium at any point. We have not finalised the negotiation of the second triennial funding agreement, but we would be looking at certain exceptions in regard to the agreement which did enable us to seek or get access to funds over and above the base level.

Senator LUNDY —That is in the positive sense, but what about in the negative sense? Is the government insisting upon retaining options to actually cut programs post the finalisation of that triennial agreement?

Mr Lynch —I do not think I can answer that.

Senator Alston —It is not only the current government; any government reserves the right at the end of a specific program period to review it. If you think it has been a dog, then you would not just keep it going for the hell of it; you would look at what else you thought might offer better opportunities. To some extent, it might be a function of the budgetary climate but, in general terms, you would be looking at how you could be most effective.

My starting point, at this stage, would be that each of those programs has done a very good job. We may decide down the track that you can do an even better job with a different type of concept, but they are entirely hypothetical judgments at this stage. In other words, it does not imply any reduction in funding beyond the expiration of the period.

Senator LUNDY —What figures actually appear in the out years in the forward estimates?

Senator Alston —The forward estimates assume that they drop dead.

Senator LUNDY —I would say then, Minister, that it was a reasonable assumption on behalf of the Australia Council to assume the worst case scenario, given that is what the budget statements say, wouldn't you?

Senator Alston —No—no more than you would have done after any of those Creative Nation programs. If they are time limited by definition, there is nothing there to replace them until you have reached the point of decision making, and that is at the end of the period. It is probably something that Finance has devised over many years. It would be quite speculative
to somehow put in another figure on some assumption that the government was likely to come up with a roughly equivalent program, even if it did not extend the existing one. The only safe basis, they would say, is to assume that, because no decision has been made, there is no funding commitment at this point. But the real world tells us—going back over many years—that you simply do not have a bunch of programs expire that are not replaced, unless there is some fundamental change in the environment, and that is not the case here. The arts, in many ways, is under more pressures, not less.

Senator LUNDY —Minister, going back to my original question about Australia's international standing and reputation with respect to the arts, given that such a cut has been identified in the budget and the anticipation of significant cultural events relating either to the Olympics and the year 2001 centenary of Federation, surely the government can see the merit in presenting the out years budget for the arts in the most positive light, as opposed to the most negative light. I do not want to enter into a debate with you, but I suppose the point is that reasonable assumptions about worst case scenarios are being interpreted by the arts I think in a highly reasonable way in a climate where the community is genuinely looking for some positive commitment, given the cultural events coming up.

Senator Alston —I think that is right, and I can certainly give them a general assurance that we are very committed to the arts, and we recognise the need for ongoing funding levels. I would not, for a moment, countenance the prospect of simply having these programs run out and not be replaced. But if you ask me about our international reputation, I have done interviews with a number of international magazines and met with arts writers here and abroad, and the general view would be that, over the last decade, funding has been cut back quite dramatically, certainly in places such as the US where there is hardly any government funding now. And Australia has done remarkably well. Given that we had that $10 billion budget deficit and the difficult times we have been through, they would—I know, you can roll your eyes—generally say that the arts has been able to weather the storm pretty well. That is because of a strong commitment on the part of governments—and we can include your government in that, if you like—so they do not see Australia as somehow suffering.

I think the more interesting question internationally is that, if you accept that governments are always going to be under pressure and that there are, by nature of the arts, companies coming and going and evolving and all the sorts of risks and pressures that the MOF report identifies, how can we try to expand the contribution from the private sector through philanthropy and elsewhere? That is really where the debate has been, rather than whether or not governments are pulling their weight. I would have thought Australia has done very well, by international comparison, over the last decade.

Senator LUNDY —Can I ask the Australia Council to take a question on notice. Could you provide the committee with a list of arts organisations and individuals who have received funding from the Australia Council in the 1995[hyphen]96 and 1996[hyphen]97 financial years but have since had their funding cut. Of those organisations, for example theatre companies, which ones have had to close or stop operating since the funding cuts? Does the Australia Council compile that sort of information?

Mr Lynch —Each year is competitive so there are many companies that are funded on an annual or project basis that are not funded on a repeat basis. We have obviously moved to triennial funding with regard to a significant range of companies. We can give you an attempt at that, but I would draw your attention to the fact that we give about 1,500 grants a year, and there are I think 6,000 applications a year, but they are not necessarily one and the same group of people. So we could provided some of that information. I think there are some restrictions
on what we are able to divulge of those that are unsuccessful. We can certainly give you the information with regard to the companies.

Senator LUNDY —Sure. I can take on board the qualification that a loss of funding is not necessarily a result of budget cuts but of some merit assessment of the particular project for a given organisation. I will certainly keep that in mind when looking at the information.

Senator Alston —Can I just add to that. I think you are right. The Australia Council has had to make some very tough decisions in that regard, and people do not often accept that the judgment is a merits based one. It does involve some very difficult calls, and I think they have generally handled it pretty well.

Senator LUNDY —Is it true that the arts are really struggling to compete for private sponsorship over sport, in particular, in the lead[hyphen]up to the 2000 Sydney Olympic Games? What is the Australia Council's experience with this?

Mr Lynch —In the report that we did in 1996 on corporate support, we documented that the arts were losing ground. It was not only to sport; it was to education and to the health and welfare sectors. In that report, which was looking at the previous four years, there were some disturbing trends. It did not take into account the significant amounts of money that have been committed to the Olympics from Australian companies. The evidence, through both some of the work done in the MOF report and in a range of other material coming to us through non[hyphen]MOF companies and other arts organisations, is that they are under a significant pressure by virtue of the large amounts of money that have been taken out for the Olympics. I think that is admitted even by the Olympics.

Senator LUNDY —Minister, do you think that these pressures in the context of the cuts to arts funding in the budget out years will result in a lost opportunity for what I suppose is quite a confined area worthy of government support in the lead[hyphen]up to the Olympic Games? Do you make your assessment in the context of these types of pressures with respect to funding and how you fund the arts?

Senator Alston —You make an assumption that they will be cut in the out years. I think a more valid point to make is that, given the pressures that there will be in the lead[hyphen]up to the Olympics, it is important to generally maintain the overall level of arts funding, and I would accept that proposition. I think it is more a matter of assessing programs on an ongoing basis but also looking to see whether there are any particular impacts that flow from poaching of funds by sporting organisations. Obviously we will be sensitive to that if we get specific advice. I do not know that I have had particular cases brought to my attention but, certainly, a number of companies have expressed the general concern.

Senator LUNDY —I just want to get a feel for whether the context in which you are contemplating your funding decisions includes that area of sponsorship pressures. You have confirmed that, so thank you.

Senator Alston —I think I would still be of the view in any event, even if the Olympics were not being held, that there are increasing pressures on the arts community, and therefore the overall level of funding is one that ought to be maintained rather than simply the opportunity taken to let programs expire and not be replaced.

Senator LUNDY —What sort of assessment has the government or your office done in terms of the opportunity that the Olympics represents for Australian arts?

Senator Alston —There are lead[hyphen]up cultural functions—I think four in all.

Mr Lynch —Yes.

Senator Alston —Mr Lynch might be able to give you more detail, but certainly it has been the practice over recent Olympics to have parallel cultural olympiads. I think it is a pretty big opportunity; certainly Leo Schofield thinks so.

Senator LUNDY —Is the federal government contributing funding to the cultural activities as part of the Olympics?

Mr Lynch —We contributed funding to the first of the cultural festivals, the Festival of the Dreaming, through the Aboriginal and Torres Strait Islander board and through council itself. We have contributed some support to projects that are incorporated in the second program. The major issue I think for us at the moment is the third cultural festival, Australia to the World in 1999, which is, from council's perspective, the one that provides the greatest opportunity to take advantage of the Olympics other than what is happening in Sydney at the time.

At this stage, we are still struggling a bit with how we are going to deal with that program. The Olympics have indicated that there is much less money to expend on that program than was originally intended or people had assumed. I think that has thrown the onus back on bodies like us and onto the state governments to fund that activity so as to take advantage of the opportunity. I am not sure at this stage that we are in a very good situation to be able to take advantage of that opportunity.

Senator LUNDY —Minister, can I follow that up with you. If in fact a proportion of the Australia Council's triennial budget is being allocated towards this specific Olympics cultural program, have you made the appropriate adjustments in their triennial funding to ensure that that does not in turn bleed other sectors that the Australia Council funds? Is there any special allocation for this Australia to the world initiative?

Mr Lynch —You may have misunderstood me. We allocated to the festival that happened last year. We have funded some indirect activity, but we have not at this stage funded any activity for 1999.

Senator LUNDY —Would that have to have been identified in this year's budget?

Mr Lynch —No. We are obviously looking at the options in regard to how we might fund that activity.

Senator Alston —If what you are asking is whether the federal government specifically earmarked funding via the Australia Council for the cultural festivals, I think the answer is no. It has been a matter of discretion on the part of the council in each year, and presumably they will continue to look at those opportunities.

Senator LUNDY —Or funding challenges. I suppose have just one more question on that. Minister, in terms of all of the arrangements for Olympic funding, what scope do you have as minister for the arts to support the Australia to the World cultural program? This is a very open question obviously, as I am not aware of the funding arrangements on the question of the cultural program between the federal and New South Wales governments.

Senator Alston —Maybe Mr Lynch can supplement this. My understanding is that there has been an infrastructure in place now for at least a couple of years. I think SOCOG might have made the appointments of people to the cultural organisational board, and they essentially are deriving funds from a range of places, presumably the private sector as well. We have not been asked to date to put in any particular level of funding. If you ask what the options are, if there comes a time when someone puts a specific proposal to us, then we would look at it. But that has not occurred to date.

Senator LUNDY —Would that go through the Australia Council though? Would that be the way you would direct such applications to be made?

Senator Alston —You would have to wait and see at the time what the shape of the proposal was, but I think planning is proceeding on the basis that that is not necessary.

Mr Lynch —From our point of view, the concerns are that, having had the budgets divulged to us of what is going to be spent on it, we see it as an opportunity which we do not believe the Australian arts should miss. That is an issue that we have been pursuing in pre[hyphen]budget discussions and other discussions with government, but at this stage the federal government have made it quite clear that they are not there funding the specific cultural program as a discrete part of the federal government's support for SOGOC or the Olympics.

Senator LUNDY —Was there any expectation in the arts sector that the federal government would be playing a role in funding the cultural program?

Mr Lynch —There are always expectations in the arts sector as to what the federal government does.

Senator Alston —The decision was made a couple of years ago that SOGOC would make the running on all this.

Mr Lynch —Very much. The cultural program was part of the bid process and is totally determined by SOGOC. The input of the outside world has been minimal.

Senator LUNDY —So the role of the federal government would perhaps be over and above—

Mr Lynch —I think they would like the federal government to pay for some of it.

Senator Alston —I am not aware of any direct representations to me about any particular projects or even about an increased level of funding. They may always live in hope but, as far as I am concerned, they are running their own race on most of that.

Senator ALLISON —I have now had a chance to skim through two chapters of the report that was tabled earlier. Minister, have you read the report?

Senator Alston —Yes, but a couple of weeks ago.

Senator ALLISON —Was there anything in there that you disagreed with significantly?

Senator Alston —Off the top of my head, there may have been a few things but I cannot recall them to date. What did you want to direct my attention to?

Senator ALLISON —The second last paragraph on page 20 says:

The seriousness of the situation—

this is in relation to the major performing arts—

should not be underestimated. A heavy toll is being extracted on the heartland of the performing arts in this country in a way that was clearly not contemplated by state and federal governments when they made the policy and funding choices they did in relation to venues, festivals, `Playing Australia' and the companies' base grants.

That is quite a damning statement to make.

Mr Lynch —I have to take responsibility for the statement, Senator.

Senator ALLISON —Yes, well, I am asking Senator Alston for his response to it.

Senator Alston —Maybe Mr Lynch takes the credit for the next paragraph, which says:

. . . there is little room for going back on most of these initiatives.

The fact is that you can point to unintended consequences, but in themselves those initiatives were very important ones and I think the arts community welcomes them. Certainly the direct recipients have done so in no uncertain terms.

Senator ALLISON —What do you mean by `unintended consequences'? Do you concur then that you did not intend that this would be the effect on those major performing companies?

Mr Lynch —Perhaps I could comment in regard to—

Senator ALLISON —I would sooner the minister reply, if you would not mind, Mr Lynch.

Senator Alston —There are a number of matters contained in this report that go to demonstrating the range of pressures on arts bodies, and that is simply one of the lesser ones in the scheme of things. It points to how high fixed costs and limited potential for productivity gains, technology in many respects overwhelming the sector as well and long lead times are matters that make it very difficult to plan ahead; and we can get dramatic changes in the environment. All it is saying is that, in the scheme of things, other initiatives were taken which are supported and which do have, to some extent, the effect of exacerbating the pressures on local community performing arts groups.

Senator ALLISON —Yes, but, Minister, the main pressure is the lack of base funding from governments, state and federal.

Senator Alston —That is not what it is arguing at all.

Senator ALLISON —I think it is.

Senator Alston —You point to it.

Senator ALLISON —Let me ask you about the fact that four of the six companies in—

Senator Alston —It says the—

Senator ALLISON —It is a common thread throughout the whole report that government funding—

Senator Alston —Well, you could say that.

Senator ALLISON —It says:

. . . Australia's major performing arts companies depend to varying degrees on government funding. From 1992 to 1997, government grants represented an average of 27[hyphen]28 percent of the total revenue for the major companies . . . The five largest Australian theatre, dance and opera companies stand now at 20% . . .

The report goes on to talk about how the overseas experience in UK and Canada indicates that Australian companies are operating efficiently by international standards, with lower levels of grant revenue, that is, from governments, state and federal, at 20 per cent compared with international standards of 35 per cent. It is pretty clear from the outset that this is a report about how the major performing arts companies are scrambling around trying to get it right, but their basic problem is that they do not have sufficient support from government.

Senator Alston —It does not follow at all. If you were to throw the same amount of money at a number of companies, you would get very different outcomes because they are subject to a whole range of different pressures. As it says:

. . . the impact on the companies of these initiatives, together with increased global competition in both the `mechanical' and `live' performing arts . . . has been profound.

There are a number of structural changes that have occurred which, in some respects, are beyond the control of these companies. To merely give them more money does not overcome
those problems. If a small theatre company is being overwhelmed by competition from major commercial international artists, giving them a bit more money will not help.

Senator ALLISON —We cannot even give them as much as the international standard, 35 per cent; ours is at 20 per cent.

Senator Alston —I do not know the validity of any international standard. There may well have been a disparity for very many years. But the fact is that this report does not identify the current level of funding, which has not changed dramatically over the last decade.

Senator ALLISON —Let me read another section.

Senator Alston —Where are you reading from?

Senator ALLISON —This is page 11:

The increases in core costs coupled with static core government funding are eroding the traditional balance between government base grants and core costs. In many cases, companies can no longer cover core costs from government grants and must rely on marginal surpluses from their production activities, as well as private sector support, to bridge the gap.

Right throughout the whole report, the theme of inadequate government support is running very strongly.

Senator Alston —That is how you may choose to read it, but I do not. The fact is that you are talking about both state and federal governments. Even if you were to boost the core grant or what you might call the base funding level, it does not follow that they are then immunised from a number of other pressures that in many respects are inexorable.

Senator ALLISON —I am not arguing that, Minister.

Senator Alston —If you are not arguing that, what is the point of saying that more money ought to be given for core grants if you are still going to be overwhelmed by tidal waves on a number of other fronts?

Senator ALLISON —With your argument, why not break it down to 10 per cent? Why rely on 20 per cent? We are trying to establish, I would have thought, what is an appropriate level.

Senator Alston —I am not accepting that there is a single straight[hyphen]line percentage figure that somehow achieves the target that you might want to aim for. What this is trying to do is have a much more sophisticated analysis of a whole mix of pressures and to work out ways in which you can alleviate those pressures. You do not just do it by throwing money at organisations.

Senator ALLISON —You do not just do it by keeping the money static, either, while the costs are rising. It seems to me that that is problematic.

Senator Alston —I know you choose to ignore $10.5 billion budget deficits. You just think it is a matter to be laughed off, do you?

Senator ALLISON —No, Minister, it is just that your answer always comes back to that when you run out of proper arguments.

Senator Alston —You think that is irrelevant, do you, and that somehow all your favourite causes ought to be quarantined and that someone else ought to bear the burden of redressing a very significant budget imbalance? No[hyphen]one else thinks that. If the Democrats want to go around picking out particular areas where they say people ought not to have to share in that burden, then spell it out on paper and we will have a good laugh about it in due course. The fact is that—

Senator ALLISON —We will have that wider debate some other time, Minister.

Senator Alston —governments around the world have been subject to very significant pressures, and most of them have not coped as well as we have in the arts sector. This report highlights, I think, the fact that there are a whole range of factors that need to be addressed in depth. It is a very simplistic answer to say, `Well, give them a bit more money.' We had that argument with the ABC. The ABC has managed to cope with $55 million in reduced revenue by no significant change in the level of output. It simply does not follow that by giving more or less money you contribute to the quality of the output or to the level of efficiency. There may be a whole range of factors in relation to each different arts organisation that need to be addressed separately.

Senator ALLISON —Minister, what if the major performing companies cannot manage to scramble a little more saving from their administration or make themselves a little more competitive? Already in 1997 we have annual results from four out of six companies returning a deficit. I quote from page 20 of the report:

The position in Western Australia has also weakened further, with two of the three companies in that state returning deficit results. Many of the companies based in Perth, Adelaide and Brisbane lack the critical mass of companies based in Sydney and Melbourne and find it difficult to compete in their local market with `national' and `global' competitors.

Is it just too bad? In a couple of years time, if those companies continue to return deficits, do we just close them down and say, `That's bad luck. There's the black hole we had to worry about. Too bad.' At what point, Minister, are you prepared to intervene and say, `Well, this is not good enough'?

Senator Alston —Take the theatre sector, for example. If you went back 18 months, I think four of the five state theatre companies, from my recollection, were in the red, some of them quite seriously, with accumulated losses of close to $1 million. Generally speaking, that situation has been turned around by a mix of prudent changes—not necessarily instigated by government. Bell Shakespeare was going through some pretty tough times 12 or 18 months ago. It has managed to turn around. In other words, the arts companies themselves recognise that there is a need for them to move with the times, to restructure, to look at opportunities for more professionalism and to get the balance in a number of areas right.

Senator ALLISON —So they are inefficient at present. Is that what you are saying?

Senator Alston —No, I am not saying that. I am saying that because of all these factors that bear on them they have to adapt to those changed circumstances. I read you a portion of the editorial in the Australian of 9 June:

Beyond the immediate crisis, the managers of our operas, theatres and orchestras must look at their own performance and devise means of attracting more corporate sponsorship and boosting box office takings. It is a job which must balance the need for artistic integrity and risk[hyphen]taking with commercial considerations—never an easy task. But using popular performances to subsidise experimental, less accessible works is a strategy which appears to have worked well for some companies over the past year. Governments and corporations can sometimes be persuaded to come to the party, and should do so. But, ultimately, the responsibility lies at the feet of those who are running the show.

So, from the government's point of view, we have a role to play. We are not somehow saying, `You are on your own. Sink or swim.' We are saying, `We want to be able to provide assistance where it will make the difference, and we want to work closely with you to identify ways in which changes can be made to your overall structure that will enable you to work through any difficulties that might be experienced.'

The fact is that some companies actually do go to the wall. Their product might become outdated. A key principal might move on. The company can disintegrate overnight. So the arts
by its nature is more precarious in some respects. To simply say, `One group is in trouble. We will give them money,' may exacerbate the problem, because they will not make the necessary structural changes, they will not replace a non[hyphen]performing accountant, they will not bring in a new artistic director, they will not look for a smaller venue, they will not go out and get more sponsors; they will simply rely on the government handout. This has been said by a number of people—Hilary McPhee is probably the most high profile one that comes to mind. But certainly, increasingly, a number of leading people in the arts sector have recognised the need for the organisations themselves to address their own problems. We want it to be done in conjunction with government. That is why we are very supportive of this report. I think it throws a lot of new light on some of the underlying problems, and we are very keen to work with them and work through. But you do not just solve it in one hit by somehow conjuring up another few million dollars and adding it to the budget deficit.

Senator ALLISON —What about Perth, Adelaide and Brisbane, Minister? The report says they lack the critical mass of companies based in Sydney and Melbourne. Does the Australia Council's allocation of funds for the major performing arts reflect that? To what degree are you concerned that those states miss out in this new environment of finding commercial ways to increase revenue?

Senator Alston —I think it has always been a fact of life in Australia that it is more difficult to survive in more remote areas with smaller potential market audiences. Tasmania's difficulties were probably more chronic than those in Western Australia and South Australia in that regard. What we would expect to come out of this current exercise is advice from the experts themselves about how to cope with that problem. There may come a time when there is a rationalisation of performing arts groups—I am not advocating it for a moment—but it may well be that the economics of the 21st century are such that you cannot maintain the current structures. I do not want to prejudge that. We stand ready to assist but, again, to simply say that because companies in one or more states are having difficulties the solution is to hand over more money is, I think, likely to court the ultimate disaster, because you are just making sure that, in due course, they lose a lot more than they would otherwise have lost. So we want to know what the community itself thinks is the way ahead.

Senator ALLISON —How does the funding go at present in terms of the major performing arts—state by state?

Mr Lynch —A number of the major organisations' companies are national companies but we fund a state theatre company in each state other than Tasmania and Western Australia, where we do fund a theatre company but it is not nominally the state theatre company.

Senator LUNDY —Does that include the ACT?

Mr Lynch —With apologies, Senator, no—there is not a MOF company in the ACT. With regard to the dance companies, there are dance companies in Queensland, Western Australia and South Australia in addition to the two New South Wales companies and the Australian Ballet. With regard to the state level of funding for the theatre companies, the state level of funding in Queensland and South Australia is higher than the Australia Council funding. The funding for the Queensland Ballet is much higher from the state government than from the federal government. In the national companies, the majority of the money is coming from the federal government.

Senator ALLISON —Which are the two or three companies in Western Australia returning deficits?

Mr Lynch —The Black Swan Theatre Company and the Western Australia Ballet.

Senator ALLISON —Are there any other—

Mr Lynch —Those are the only two MOF companies in Western Australia.

Senator ALLISON —So there are only two and both of them are returning deficits? Is that right?

Mr Lynch —Yes, for 1997.

Senator LUNDY —Could I ask a couple of questions with respect to the ACT's status? You mentioned that the ACT obviously does not have a federally funded theatre company, and there is some history relating to that. What mechanisms exist within the Australia Council to rectify that situation, if any—or is it a straight up funding issue about allocation of funds?

Mr Lynch —There is a critical mass issue. To gain entry to the MOF, you have to be turning over more than a million dollars a year. That is one of the starting selection criteria. I do not think any of the Canberra companies come close to that.

Senator LUNDY —Returning to Senator Allison's issue of the state and federal funding split to these companies, do you, Minister, engage in any discussions with your state arts ministers about the changing proportions between state based arts funding and what the federal government provides, in the context of wider COAG arrangements or anything like that?

Senator Alston —There are regular Cultural Ministers Council meetings. We obviously have the opportunity for informal discussions at various art functions around the country. Certainly, if you take the orchestras as an example—from memory, the Western Australia government provides something like 45 per cent of their level of funding and I think the New South Wales government provides around 10 per cent—it might be a bit more. At times we do raise those issues about how the states themselves decide on the level of funding and what their ultimate commitment is to having a state based organisation. For example, in Western Australia I can think of three or four theatre companies that were all of quite good quality but which were probably jostling for support. State governments have to make some hard decisions. It is not really up to us to play favourites. It may well be not sensible for us to give any additional funding to a particular state based company if it is chronically in the black.

Senator LUNDY —Minister, page 10 of the report—under a section entitled `Static base funding'—makes reference to the total state government base grant funding for companies. This is either static or declining in real terms in all states except Queensland and Western Australia. Obviously the examples you have just used give an indication as to why. However, in your capacity as federal minister, have you ever expressed concern about this decline in funding from the state governments and the relative pressure it will inevitably bring to bear on your budget allocations to supplement state shortfalls? If, as you say, those harsh budget decisions may inevitably have to be made, couldn't it possibly make the difference between a company failing or succeeding in a given centre?

Senator Alston —I am not sure that I have gone out and berated anyone in particular, but I have certainly taken the opportunity to have discussions with state counterparts about how serious they are in achieving levels of funding. Going back to Senator Allison's point, you will find much higher levels of government support for opera in Europe than you do here, for example. That is not necessarily a good or a bad thing; it may simply reflect the fact that some governments have historically regarded opera as such an important area that they treat it as a universal service obligation, whereas in other places these companies have wanted a greater degree of independence from government and have relied much more on the private sector.

So you can have quite significant gaps in the level of government funding without necessarily implying that the quality of output is any different. That is why I think it is simplistic to simply look at how much money governments are giving. But, if you do take the global approach, I think we have managed to hold the line better than most other countries.

ACTING CHAIR —We have been on this program for an hour and a half, so perhaps if we could—

Senator LUNDY —I can put on notice a series of my questions that go to information about various applications, approvals, et cetera. I am certainly happy to do that to facilitate the time, but I do have some questions that I would like to ask now with respect to current issues.

Senator ALLISON —I have not quite finished on this.

ACTING CHAIR —Senator Allison can complete her line of questioning, if we can do it fairly expeditiously, and then we will come back to Senator Lundy. We do have a lot of programs to get through.

Senator ALLISON —Mr Lynch, what sort of time frame is there for the two companies you talked about in Western Australia to be able to do other than return a deficit, to turn that around? At what point do you need to say, `We can't retrieve this problem. We have dealt with the efficiencies in administration. We have tried the "Can't beat them join them" approach'? At what point do you say, `We can't fund them any more'?

Mr Lynch —In regard to both of those companies, the Australia Council is the junior funding partner and the major funding partner is the state government, so we work quite closely with the state government of Western Australia on those issues in trying to turn that around. I suppose the report looks at the totality of those issues affecting both individual companies and the performing arts sector as a whole to try to work out where those issues are.

Senator ALLISON —So are you saying that, if the deficits continue, it is not a choice that you would have but that the state government has to decide?

Mr Lynch —In essence, in regard to those two companies, the decision would largely be determined by the state government.

Senator ALLISON —Who picks up that deficit now?

Mr Lynch —I do not have the specific figures. The companies ran up deficits for 1997. The companies are both structured as companies limited by guarantee.

Senator ALLISON —So they just owe the bank.

Mr Lynch —They are not for[hyphen]profit organisations. There are obviously limits. I think neither of the companies have reserves. The issue of their continued trading would be a matter for the boards of the companies and then, ultimately, the funding bodies if the boards decided that they did not feel that they could continue to trade—which is the case with most of the companies we are talking about. A few of them are still set up as statutory authorities or have structures that are related to the nature of differences between the states, but in essence most of them are companies limited by guarantee with boards, some appointed by state governments, some of them appointed by the companies themselves.

Senator ALLISON —So the board would make a recommendation to the state government?

Mr Lynch —The board would make a decision in terms of their directors' liabilities as to whether the company was able to continue to trade. The state government, I assume, under many of the circumstances, is playing a quite detailed and involved role in those decisions.

Senator ALLISON —This is a hypothetical question and you probably will not answer it. In your view, without naming any of them, how many of these companies are seriously in that category of facing closure?

Mr Lynch —The issue, from our point of view, which is brought out in the report, is that only three of the companies have reserves. I think the situation of concern to the MOF itself and to the companies themselves is that they are effectively operating a high risk business from year to year on the basis of what happens in that year. Many of those companies need to look beyond one year in their planning and their lead times. It is an issue that they are continually monitoring.

We have a number of perspectives on it: one is what they are actually doing. You can certainly cut back the output of those companies in the numbers of people employed, the sort of work that they are doing and the artistic quality of the product. We are trying to juggle the various outputs of the companies to ensure that they have long[hyphen]term viability. We are also concerned that there be some basic infrastructure around the country, that it all should not be based in either Sydney or Melbourne.

Senator ALLISON —Winding back the number of performances is not an option you canvass in the chapter entitled `Creating options for the future', is it? Maybe I have not read that as thoroughly as I might have.

Mr Lynch —I think it is in there. Obviously, the companies themselves have the option to cut cast sizes, cut dancers or move from being full[hyphen]time organisations. Many of them have already explored some of those options.

Senator LUNDY —Can you give a run[hyphen]down of the major findings in the KPMG report that was commissioned by the council into the impact of a goods and services tax on the arts?

Mr Lynch —I assume you have a copy of the report.

Senator LUNDY —Yes. Can you give us the general concerns? There have certainly been some reported.

Mr Lynch —I suppose one of the highlighted issues that is of general concern is the fact that some of the economic modellers have indicated that the cultural sector is likely to be affected quite severely, and I think that has been discussed quite broadly in the press. The issue of the application of a VAT or a GST to grants is causing us concern at the moment, and obviously we are endeavouring to find out what the situation is in regard to that.

Senator LUNDY —How are you finding out? Who are you asking?

Mr Lynch —The submissions have gone to government. We have had ongoing discussions with government. We understand that the minister has written to the Treasurer on that as one of a number of issues related to the issues raised in our report and a number of other reports. On the broader issues, we are doing further work on impacts, but it is obviously difficult at this stage until we have the details of the package as to what the impacts are going to be.

Senator LUNDY —With respect to that particular study, can you outline very briefly what the impact of a GST has been in countries such as New Zealand, Ireland, et cetera.

Mr Lynch —At this stage there is not a lot of information. The information in the UK is now 25 years old, so it is not particularly helpful. The New Zealand experience I suppose is the one that is most relevant, but the problem in New Zealand is that there are very few companies. As we can divine, and from the work that was done, the impact was felt in the first three to four years of implementation of a tax reform package. It is very difficult at this point to be conclusive as to what those impacts are going to be.

Senator LUNDY —Has the council done any estimate of the extra funds that would be required to compensate—compensate is probably the best word—artists and organisations if a GST was in fact imposed?

Mr Lynch —We are trying to do work on that at the moment, but there are some real difficulties until we know what the details of it are going to be. We are able to look at individual companies in terms of some basic assumptions, and look at those impacts, and we are providing some advice to government on that at the moment.

Senator LUNDY —Have you received any complaints or representations from individuals or organisations with respect to concerns about the imposition of a GST and its impact on the arts?

Mr Lynch —Complaints?

Senator LUNDY —Yes, or queries.

Mr Lynch —There is obviously concern about some of the issues associated with the introduction of tax reform. We tried to canvass in the report both the impacts or the likely impacts of a VAT on the arts as a whole, but also to look at other taxation measures that might be able to be implemented at the same time to offset some of those impacts.

Senator LUNDY —I note that there was a committee established to look at the taxation regime surrounding donations to the arts. Is it possible, Minister, that you will contemplate setting up a similar type of committee or consultative mechanism to allow the arts community a more direct and effective way of assessing the impact, with government support?

Senator Alston —I am not sure that has been asked for.

Senator LUNDY —I am not saying it has. I am just asking if the government is going to facilitate the various sectors in making these analyses, once your package is released.

Senator Alston —We obviously want to work closely with as many of the arts bodies as possible to identify their concerns and then take them into account as much as we can. So it will probably be an ongoing process rather than simply trying to have a mini[hyphen]summit to resolve all issues in one go.

Senator LUNDY —Does the Australia Council keep any statistical record of complaints or queries about issues such as this that you receive?

Mr Lynch —We keep records of all complaints and obviously all queries that are either made through a formal government process or whatever else. I do not think at this point we have a strong level of knowledge about the complaints.

Senator LUNDY —Would you take it on notice to provide the committee with whatever analysis you have about the complaints that you receive from artists' organisations and individuals with respect to government programs or proposals, if indeed you have that information.

ACTING CHAIR —Wouldn't it be true that in the theatre world, as in all sorts of spheres of activity, there would be a very wide range of sales tax paid on various items used and services given within the theatre, so a GST would bring some uniformity to that?

Mr Lynch —Unfortunately, there is not a lot of sales tax in it. The major input for most of the performing arts companies, and one of the issues in the performing arts sector, is that labour is the major input cost.

ACTING CHAIR —But you also use paint and materials and film and all sorts of other things which are sales taxed, aren't they?

Mr Lynch —Yes. Obviously, there will be some offsets. There is no question about that.

ACTING CHAIR —Thank you.

Senator LUNDY —With respect to the Copyright Amendment Bill 1997 relating to moral rights, has the Australia Council received any complaints, queries or any representations from artists or organisations about the waiver for moral rights and the impact on artists?

Mr Lynch —The Australia Council has not been involved in the recent public discussions in that they tend to be in the film and broadcasting sector. The Australia Council, I think, started the argument about 23 years ago in regard to moral rights, so we have always taken a strongly supportive view of the artists.

Senator LUNDY —Perhaps I could leave that question with you: if you have received any and you have records of those, perhaps you could provide an analysis.

Mr Lynch —We have had approaches from the Australian Writers Guild in terms of support. There is a strong level of support for the concept of moral rights.

Senator LUNDY —From the council?

Mr Lynch —The more detailed issue of waiver is really sitting outside any direct impact on our activities.

ACTING CHAIR —Senator Lundy, we have now been going on this for 1[frac34] hours.

Senator LUNDY —Yes. It was not all me, Senator Eggleston, as you know.

ACTING CHAIR —No, but I was just wondering if we might move a bit more expeditiously to end this program.

Senator LUNDY —Yes, Senator. I have just a few questions now on assistance to the music industry. You provided an answer to a question taken on notice during the last round of estimates with respect to assistance provided to contemporary music from the music fund. Have you completed your second round of funding?

Mr Lynch —In regard to the contemporary music export fund?

Senator LUNDY —Yes. Part of your answer to a question on notice was that an announcement was expected to be made about 22 April this year.

Mr Lynch —I think we have now finished the allocations for 1997[hyphen]98 from the contemporary music export fund. The next round will be done in 1998[hyphen]99 when there is a further amount directed towards that program.

Senator LUNDY —Perhaps you could take this on notice: could you provide details of the funding provided in the last financial year and in this financial year—as separate categories—by the music fund to contemporary music in the same subcategories as you provided in the answers to questions on notice from the last hearing? That was a very straightforward presentation. With respect to the answers to the questions taken on notice about the music fund, contemporary classical music receives a very large proportion of those funds compared to contemporary rock and other categories. Can you provide an explanation as to why there is that disproportionality and whether or not it is a reflection of the assessment criteria favouring contemporary classical over other categories?

Mr Lynch —In terms of the contemporary music export fund, its support is really geared towards the contemporary rather than the classical.

Senator LUNDY —Sorry, I am talking about the music fund.

Mr Lynch —The fund itself?

Senator LUNDY —Yes.

Mr Lynch —There are demands from the music area. It has to cover every area from jazz to classical to contemporary.

Senator LUNDY —Yes.

Mr Lynch —I guess the issue there is that there are not enough funds to deal with the substantial number of requests across every area.

Senator LUNDY —Your answers to questions on notice show total support for contemporary popular music and country music as being $34,800, and I think it is to three different initiatives. It shows just over $400,000 for contemporary jazz and $889,000 for contemporary classical. Do you see what I mean about those proportions? Are they based on the proportionality of applications received or are they reflective of the criteria?

Ms Gardener —The grants given in any particular round will be dependent on those applications that are received, which could be a completely open process, and depending on their competitiveness against a standard set of criteria.

Senator LUNDY —Is that proportionality a general feature of most allocations under that particular fund?

Ms Gardener —I could not say off the top of my head. We would have to look at each one.

Senator LUNDY —Could you provide some comparisons—going back, say, three years—of the different proportions? I think I asked for that in my previous question anyway. Also, perhaps you could provide the criteria so I can have a look at them?

Ms Gardener —We can certainly provide the criteria, yes.

Senator LUNDY —Thank you. I have a couple of questions about the government's proposed parallel importation of CDs, and changes to copyright too. Has the council undertaken any research or done an assessment of the impact that parallel importation of music CDs would have on the Australian music industry?

Ms Gardener —The Australia Council itself has not, no.

Senator LUNDY —Has the council received any complaints or representations from individuals or organisations raising their concerns, either formally or informally, over the plans by the minister to make changes to the Copyright Act?

Ms Gardener —I would have to check.

Senator LUNDY —If you could take that on notice. Is the Australia Council taking the opportunity to express a view about the impact upon the protection of the intellectual property of Australian artists of the implications of that bill? Perhaps you could just take that on notice? That would be most useful.

Mr Lynch —Sorry, Senator. I have a bad case of flu.

Senator LUNDY —Perhaps if I could direct that last question and then I will conclude. I was just asking whether or not the Australia Council was in a position to take or express a view with respect to the implications of the downgrading of the intellectual property rights of Australian music artists in the context of the Copyright Amendment Bill (No. 2).

Mr Lynch —We fund the Copyright Council and rely on the Copyright Council to provide us with advice or provide advice on behalf of artists. From our point of view, that is really all I could say at this stage.

Senator LUNDY —All right, thank you. That is all I have for the Australia Council, but I will be placing some questions on notice.

ACTING CHAIR —Thank you, Senator Lundy. I thank the Australia Council staff for being here this morning and providing such interesting answers. The next subprogram is 1.5—the Australian National Maritime Museum. I have some questions for them.

Senator Alston —Mr Lynch is labouring under severe personal difficulties at the moment.

ACTING CHAIR —We can see that, and we hope you recover soon.

[11.06 a.m.]