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Economics References Committee
11/08/2017
Governance and operation of the Northern Australia Infrastructure Facility

LAWSON, Mr Mike, Acting Deputy Secretary, Department of Industry, Innovation and Science

LOCKE, Mr Chris, Head of Division, Portfolio Policy and Innovation Strategy, Department of Industry, Innovation and Science

TALBOT, Ms Louise, General Manager, Department of Industry, Innovation and Science

[11:43]

CHAIR: I now welcome representatives from the Department of Industry, Innovation and Science. I remind officials that the Senate has resolved that an officer of a department of the Commonwealth or of a state or territory shall not be asked to give opinions on matters of policy and shall be give reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions of matters of policy and does not preclude questions asking for explanations of policies or factual questions about when or how policies were adopted. Thank you for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so. Then we will go to questions.

Mr Lawson : The department has portfolio responsibility for the NAIF and for supporting the Minister for Resources and Northern Australia. In this regard, we took over this role from Treasury after the NAIF was announced in the 2015-16 budget. We were involved in the establishment of the NAIF. We provided a submission where we articulated the sorts of processes that we have been through in developing the legislation and the investment mandate which underpin the NAIF's establishment and operation. We note that the NAIF have made a very detailed submission about themselves, and we believe their internal operations are their matter.

CHAIR: Thank you very much. You may have heard some of the earlier testimony from witnesses today. Your submission talks about what you call an 'extensive public consultation' process—45 stakeholder meetings, with 200 stakeholders involved—and yet there appears to be quite a lot of concern about the NAIF's governance and processes. Would you care to give us your assessment of why there seems to be a gap in perception there?

Ms Talbot : The development of the NAIF Act and the investment mandate were done in a very consultative way, as you have mentioned. The department was responsible for the act and the investment mandate. Once the NAIF came into operation, the NAIF set up its own governance arrangements. So they would be questions for the NAIF. But, certainly, the NAIF Act was out for exposure draft consultation. It was referred to the Joint Standing Committee on Northern Australia for consideration. The investment mandate was put out for public consultation as well. And, prior to that, there was a public consultation paper and a large range of stakeholder consultations undertaken by the department.

CHAIR: So you're saying that any deficiencies perceived in the governance and processes of NAIF are the responsibility of NAIF, rather than the legislation?

Ms Talbot : What I'm saying is that questions on the governance of the NAIF would be questions for the NAIF.

CHAIR: Okay. Now, your submission talks about NAIF as an independent gap financier, and you make the point that a financing problem for infrastructure was an outcome of Infrastructure Australia's audit of the white paper. Can you go into more detail about this evidence of a problem of gap financing?

Ms Talbot : I think you're referring to the northern Australia infrastructure audit there. The northern Australia infrastructure audit, as we outlined in our submission on page 2, identified that there were some difficulties for investment in economic infrastructure in the north due to remoteness, extreme weather conditions, the low population density and the small and dispersed industry, which increase the risk and uncertainty for project construction and can also lead to, I believe, longer time frames for projects to become economically viable. The Northern Australia Infrastructure Facility was a policy response to some of those deficiencies.

Mr Lawson : I add that, in the Northern Australiaaudit: infrastructure for developing the north, they made the point:

Infrastructure owners may not capture the full benefits of addressing opportunity gaps, i.e. the economic growth resulting from increased scale in downstream industries. In these circumstances, infrastructure that unlocks economic opportunities will be under-provided if left entirely to the market.

They said cost gaps linked to low economic scale can be a source of market failure. They noted 'first mover disadvantage' and network coordination externalities, and they talked about service standard gaps. All that is in the executive summary of the northern Australia infrastructure audit report.

CHAIR: So is this gap financing issue the biggest problem getting infrastructure built in northern Australia, or are there other issues?

Mr Lawson : It's not the biggest problem. One of the issues is that it's a way of managing the government's involvement in these infrastructure provisions. Because the NAIF would be a gap financier, that requires there to be, in the case of the NAIF, external commercial finance. This is a way for the government to manage its risk. Unlike the Clean Energy Finance Corporation, which can take 100 per cent of investment and therefore the government takes on the whole risk—it does that for the externalities associated with the Clean Energy Finance Corporation—there are risks, externalities, associated with developing the north. So the government's trying to provide this facility to encourage development in the north, but a way of managing the risk is to restrict the NAIF to being a gap financier, not the lead financier.

CHAIR: The Productivity Commission's 2015-16 report Trade and assistance review 2015-16 mentions that NAIF funding was meant to overcome the financing gap to start construction and that a project proponent should refinance the loan at market rates not long after construction is finished. Does the department support that view?

Mr Lawson : The Productivity Commission didn't talk to us before they put their submission in. The Productivity Commission's report talked about the NAIF, but I'd say that their description of the issue doesn't mention the issue of northern Australia. It talks about finance availability for infrastructure in particular, so it was looking at the question that the inherent assumption that lies behind a concessional loan facility such as the NAIF is that the risk of a firm being unable to service and repay the loan falls once the infrastructure is under operation. That's part of the story. We agree entirely with that, but there are a range of other aspects that the Trade and assistance review didn't go to, which are going to the development of the North and are covered in Infrastructure Australia's northern Australia audit.

CHAIR: Let me see if I understand what you've said. Would it be correct to say that in the future, if we see NAIF investing in several different projects, once they're constructed a few years later, those loans should be repaid and the funds then reallocated to new projects?

Mr Lawson : No, that's the presumption that the analytical piece of the Trade and assistance review appeared to understand. That's not the government's legislation. So I think they hadn't talked to us when they did this. There are a few bits in there where they say, 'It could be this; it could be that.'

CHAIR: What about the views of the Productivity Commission that there's a long history of government support for infrastructure investment in regional Australia in the construction phase, only to have to prop up operating costs of that infrastructure afterwards?

Mr Lawson : Indeed. That's precisely why it's a gap financing model. I grew up in Western Australia. I remember the Ord River being the great development. That was government finance. This is trying to get private-public partnership type arrangements, bringing in the commercial discipline and with NAIF operating as a gap financier. That's why there aren't projects starting on day one. It's requiring lead by the commercial financial sector in addressing some of those issues.

CHAIR: What about investment in dams? How do you respond to criticisms such as the CSIRO research in respect of investment in dams?

Mr Lawson : Other than my personal childhood experience of watching what was happening with the Ord River, that is well outside our expertise. You'd be better off talking to the Department of Agriculture and Water Resources or Infrastructure Australia about that.

CHAIR: All right. I might just leave it there.

Senator HUME: I have a couple of quick questions about the gap financier role, and this crowds in the public sector finance. You've mentioned the words 'crowds in'. I thought that was quite an interesting term. I haven't heard that before. My understanding, from what your submission says, is that one of the key reasons that the NAIF seems to require that commercial-in-confidence nature of its projects is exactly that it brings in those private financiers and that's very early on in the process. Throughout the process, well before it gets down to short lists or anything else, the private finance sector must be included in the conversations, and that's why commercial-in-confidence is so vital for this particular organisation. Is that correct? Am I reading this correctly?

Mr Lawson : Indeed. That's exactly the case. But, of course, once a decision is made, the decisions are public.

Ms Talbot : Yes, that's exactly right, and that gap financing role means that the NAIF needs to make an assessment of the smallest amount of gap finance that it provides to put the least amount of public funds into a project. In order to undertake those negotiations, that information around the other financiers and testing that market gap and how much it really is needs to be kept confidential.

Senator HUME: Is that in order to create the best outcome for the taxpayer in each particular circumstance in each particular project?

Ms Talbot : It is to minimise the amount of gap finance that needs to be provided by the public NAIF fund, and also the amount of concessionality that needs to be provided for a particular transaction to proceed.

Senator HUME: What risks are associated with that commercial-in-confidence aspect being waived or ignored for projects currently in the pipeline or potential projects?

Ms Talbot : I can't refer to any specific project, but in general, if you're looking for the NAIF to fill the gap in the finance, you would make sure that other financiers provide the maximum amount of finance they can. They need to be able to test that without providing information to the market about what they might be looking at.

Senator HUME: Are you saying that the commercial-in-confidence aspect of the NAIF's assessments is vital for encouraging private finance and ensuring potential project proponents are not deterred from going through the process?

Ms Talbot : Yes. It is also to make sure that proponents feel confidence in NAIF as a financier that is able to be at the table with those commercial financiers that have those commercial-in-confidence principles.

Mr Lawson : The process of negotiating is confidential. The end point is made very public, but things—the structure of the entity, the proportion of the loan, even the project—may change as they work through the negotiation. Public information to competing alternative financiers, presented as stable facts, would completely disrupt that negotiation process. Once the NAIF makes a decision to invest then that, by legislation, has to be put on the public record.

Senator HUME: That all sounds perfectly sensible, logical and in the taxpayer's best interest to me.

Senator DI NATALE: Talk me through the way the process works. Is it for constitutional reasons that a loan made to a particular project has to go through the state government? For example, the Adani loan would need to be directed through the state government and then onto the proponent.

Mr Lawson : I'm not a constitutional lawyer, and we don't want to go into legal advice, but there are two reasons we're going to deal with the states. It's their jurisdiction, and any project in their jurisdiction will need their involvement. There are, as I understand it, constitutional reasons for us to be involved through the state. That doesn't mean the cash has to flow through the state, but the state needs to be substantially involved in the process. The previous minister, Senator Canavan, tabled a response to a question on notice—we had a change of ministers recently—the current minister has written to the states, seeking permission to make the master facilities agreements publicly available once they have all been signed. They will show the details of those arrangements between the Commonwealth, the state or jurisdiction, and the NAIF.

Senator DI NATALE: Has a master facility agreement been struck with Queensland?

Mr Lawson : Yes.

Senator DI NATALE: Is that all that's necessary to be able to process a loan in Queensland—for example, the loan to Adani? What else is required?

Mr Lawson : The NAIF needs to fully consider—

Senator DI NATALE: The master facility agreement has already been struck with Queensland. In terms of the Queensland government's ability to receive the loan, what else is required?

Ms Talbot : Nothing else is required.

Senator DI NATALE: So, at the moment, the Queensland government—

Ms Talbot : For any particular project for which there has not been an assessment and a specific loan agreement, it would all have to be negotiated before a loan could be made.

Senator DI NATALE: That's right. Basically, at the moment, once that happens, the Queensland government is in a position to be able to accept funds to hand on to a potential proponent?

Mr Lawson : The master facility agreement sets a framework. Each individual project will be negotiated and sorted out in detail after the NAIF. The NAIF will talk during those processes with the jurisdictions as they go on to making a decision about whether they will support a particular project.

Senator DI NATALE: For an individual project, what are the specific steps that are required?

Ms Talbot : Individual project questions you should direct to the NAIF, because an individual project will need to approach the NAIF and go through their processes.

Senator DI NATALE: I'm talking about with the Queensland government.

Ms Talbot : The master facility agreement sets out the enabling framework to enable the objectives of the NAIF Act to be put into place. Grants for financial assistance to the states and territories are made under the NAIF Act. For any individual project that sits underneath the over-arching enabling framework, the specific documentation around what that transaction looks like—what that loan is and what the terms and conditions et cetera are—would need to be negotiated, agreed and signed up to by the project proponent and the state.

Senator DI NATALE: You're saying that for each individual state, based on the individual project, the terms of the agreement will be struck between the proponent and the state government, but—

Mr Lawson : The arrangements between the Commonwealth, the jurisdiction and the NAIF need to be individually set up. It's the nature of infrastructure that it's bespoke. The legal structures of the states are all different and the arrangements the states may wish to make on specific projects can differ. So it's a highly flexible arrangement that allows us to make whatever legal arrangements we need to do to specify for a particular project how the originating Commonwealth funds will get to the project proponent and how we can be assured that we'll get the money back, and the arrangements for maintaining that process.

Senator DI NATALE: And that's on a project-by-project basis?

Mr Lawson : Yes.

Senator DI NATALE: And what you're suggesting is that the master facility agreement has been done, for example, in the case of Queensland, and then for each individual project, on a case-by-case basis, there'll be a separate agreement involving the Commonwealth, the proponent and the state government?

Ms Talbot : And the NAIF.

Senator DI NATALE: Of course, the NAIF.

Senator IAN MACDONALD: Is the master facility agreement public? Can we get a copy of it?

Mr Lawson : As indicated, we're in the final stages of negotiating the final arrangements with Western Australia. Western Australia had an election, and that caused a delay with their process.

Senator IAN MACDONALD: With Queensland?

Mr Lawson : We have said that, once all three have been finalised, which we suspect will happen imminently, the ministers will seek the agreement of the other parties, the treasurers of those jurisdictions, and we expect to table—

Senator DI NATALE: To be clear, you've struck an agreement with Queensland and the Northern Territory, but you don't have one with Western Australian finalised yet?

Ms Talbot : Correct.

Senator HUME: But that's because they have only recently changed government and haven't quite caught up with their administrative responsibilities.

Ms Talbot : Correct.

Mr Lawson : They went into caretaker so things weren't completed. And it wasn't on the top of the criteria for a new government; they needed to do some other things. But we did meet with the minister and officials very recently in the margins of a COAG Industry and Skills Council meeting, and there's very good will. Each state has different arrangements for how it deals with large projects, so we just have to accommodate that.

Senator DI NATALE: I have a question around the commercial-in-confidence issue that was discussed earlier. Some comparisons have been drawn with the CEFC. In terms of commercial-in-confidence, the CEFC choose not to disclose applicants from projects on a case-by-case basis, but there's no legislative restriction. Is there such a restriction within the NAIF framework?

Ms Talbot : There is no legislative restriction.

Senator DI NATALE: So, basically, we have the CEFC, which does make proponents public in many instances. Why has the NAIF made a blanket decision not to disclose any of the project proponents? Is that a question for the NAIF?

Mr Lawson : That is a question for the NAIF, but I think we can assist to some degree. The Clean Energy Finance Corporation can lend 100 per cent.

Senator DI NATALE: But it doesn't always lend 100 per cent.

Mr Lawson : It's a driver of the projects, whereas the NAIF has been structurally set by government policy to be a gap financier, not to lead the project.

Senator DI NATALE: Hang on—it's the driver of the projects, but NAIF can't lend money to a project that can't get off the ground without it. Why is that not a driver of the project?

Mr Lawson : It's a gap financier and it requires commercial—

Senator DI NATALE: But, in the case of the CEFC, they will often engage in a partnership. They will, on occasion, publish the name of a proponent. Why does NAIF not do that?

Mr Lawson : The NAIF has disclosed the names of proponents.

Senator DI NATALE: Which ones?

Mr Lawson : My colleague could look for those. They go through a process of talking, like the CEFC, no doubt. They engage with the proponent to find out if there is an issue about publishing the thing.

Senator DI NATALE: The CEFC do it on a case-by-case basis and they will make some of them public, whereas the NAIF have a blanket approach: 'We're just not going to talk about any projects?'

Mr Lawson : This would probably be better dealt with by the NAIF. I think you are conflating two issues. One is the name of proponents and the other is detailed information about the project negotiations. On the names of the proponents, the politically sensitive one that people are concerned about, Adani, has been published.

Senator DI NATALE: It has been published? Is Senator Macdonald in the room? I wonder if he's aware of that. He's made repeated accusations. In fact, he stated to witnesses that they've effectively misrepresented the position of Adani and NAIF. It is on the public record that Adani is a proponent?

Mr Lawson : Adani have put on the public record that they were talking to the NAIF.

Senator DI NATALE: And NAIF have agreed with that?

Mr Lawson : I think you should talk to the NAIF about that.

Senator DI NATALE: We can talk to the NAIF about that. Thank you. So it's on the public record.

Senator IAN MACDONALD: You've abuse me in a typical Greens way and then want to move on. What I've asked is: does NAIF accept and acknowledge—

Senator DI NATALE: No, sorry. Chair, I've got the call.

CHAIR: Senator Macdonald, you don't have the call at the moment.

Senator HUME: Point of order, Chair. I think it's unreasonable for Senator Di Natale to impugn Senator Macdonald and then not allow him a right of reply.

CHAIR: No, there is no—

Senator IAN MACDONALD: Coming from Senator Di Natale, it doesn't matter. He never takes any notice—

Senator DI NATALE: Could I, on notice, have the name of all proponents, unless you've got them in front of you?

Mr Lawson : The NAIF hasn't published all its proponents. You need to address that to the NAIF. For example, recently for the Kidston stage 2 project, there was a joint press release from them and the NAIF saying they were looking at that project. The first stage of that project was funded by the Clean Energy Finance Corporation. The issue about the name of a proponent is different, depending on where they are in the process, and there is a lot of detailed information about where they are in the process, whether they have a due diligence process and those sorts of things.

Senator DI NATALE: This is a question for NAIF. They won't even confirm the name of a proponent without any other detailed information for many projects. Is that correct?

Mr Lawson : You should talk to them. They talk to the NAIF at a very early stage of the development. There is no confirmation that the project will exist. It's a potentially competitive project. If the NAIF published everybody who popped in the door, they couldn't do any business at all.

Senator DI NATALE: I'm aware that we have limited time for NAIF.

CHAIR: Before I go to the next person, I have a further question. I am interested in your response to criticisms from stakeholders about the $50 million threshold. In my own consultation with people, it's come up that the $50 million may be set too high. How was that $50 million threshold was arrived at? Let's start with that.

Ms Talbot : The $50 million project size is a non-mandatory criteria under the NAIF's investment mandate. Projects do not have to meet that criteria in order to be considered for funding for the NAIF. The NAIF is taking a flexible approach to that because in some jurisdictions that might be too big. The reason the threshold was set at $50 million is that the purpose of the $5 billion fund was to develop transformational infrastructure for the north. So it's got $5 million and it has five years to run The idea was that it would be involved in large transactions, not lots and lots of very small ones. But it is a non-mandatory criteria so that if a particular economic infrastructure project comes forward that meets all the other criteria then the NAIF can consider it.

CHAIR: How well is it known that it is a nonmandatory? The perception out there is that unless you have something that is above that threshold you need not apply. How does the NAIF convey that aspect?

Ms Talbot : You would have to ask the NAIF about how they convey that aspect. Certainly in the investment mandate in the legislative framework that exists for the NAIF, it's very clear that it's a non-mandatory criteria.

Senator IAN MACDONALD: Following on from Senator Di Natale's question, do you say that the NAIF should publish who the proponents are?

Ms Talbot : No, we did not say that. I think what we said was that there was information published on a particular project.

Mr Lawson : Some proponents have agreed with the NAIF that their projects are in a state where, essentially, it would be appropriate to state the name and very limited information about the project and the NAIF.

Senator IAN MACDONALD: The term 'proponent' is being bandied around in this committee and more widely by people opposed to any development in the north. But—as I understand it, and correct me if I am wrong—if I want to investigate the NAIF supporting my project for $100 million, I talk to them first. I have a bit of a chat with them. Then, eventually, somewhere along the line, do I put a proposal to them such as: 'This is how I propose to finance it. This is how it is going to benefit the north.' Is that how it works? Or how does it work?

Mr Lawson : I think you might be best talking to the NAIF about those details. John Hopkins from Efic explained some of that process. It is very much along those lines.

Senator IAN MACDONALD: Yes.

Mr Lawson : There's a lot more discussion. It is a major infrastructure project. These things are not simple matters that are all exactly the same. The project and the arrangements have to be worked up. There's a lot of interaction before the boards make a decision about 'are we going to look at this in a substantive way', and so on. Then they have their criteria to set in.

Senator IAN MACDONALD: So if I want the money, the first thing I do is knock on the NAIF's door and say, 'Hey, I want to have a bit of a chat to you about something'. Does that then make me a proponent for an application for funds?

Mr Lawson : In the language that I have been informally using, yes. The NAIF have a structured process for determining that they have so many people who have expressed interest and so many have got to various stages of the process.

Senator IAN MACDONALD: But simply picking up the phone and saying to the NAIF, 'This is my project. Do you think I might be able to apply?' does not make me an applicant for funding for $100 million.

Mr Lawson : No, indeed.

Senator IAN MACDONALD: The only other thing I might ask of you—this is a big ask and I ask you to do this sensibly—is to look through some of the evidence that's been given today. I do not know if you have been following it but to me there were so many inaccuracies. I do not want you to enter into the debate, but where matters are referred to as 'matters of fact' I wonder if, on notice, you could go through and have a look and, where there are glaring inaccuracies, if you might, on notice, alert the committee to them?

Mr Lawson : Yes, we can take that on notice.

Senator IAN MACDONALD: As I say, if you did it properly, it would take three weeks. I am not asking you to do that, but perhaps you could go through it.

Mr Lawson : I think a number of those issues were raised in the submissions by us, by the NAIF and by Efic. People would see that the answers to many of those questions were there. I could perhaps add, in relation to a question that Senator Di Natale asked of Efic, that I might have additional information that might help. You asked about Efic's involvement in the early stage of the arrangement. Prior to the existence of the NAIF, we were responsible for getting the NAIF up and running. We contracted with Efic to provide various services to assist in starting up that process. We did that in a way to make sure that, when the NAIF came into existence, it would have the ability to choose who its service provider was. We did not want the NAIF to be in a position of having to start from nothing on 1 July, so it's appropriate that the department contracted with Efic to provide certain services.

Senator WATT: What role does the department, as opposed to NAIF itself, have in the appointment of the directors of the NAIF?

Mr Lawson : The appointment of the directors of the NAIF is a ministerial appointment that goes through the cabinet process. That was something we managed.

Senator WATT: You managed that as opposed to the NAIF itself?

Mr Lawson : Correct.

Senator WATT: I am sure you remember that, at the last estimates, I asked questions about some of the directors there. In terms of the existing directors of the NAIF, I think I read that the department had undertaken some sort of a search process and had no doubt come up with names of potential appointees. That is correct?

Mr Lawson : Yes, Senator.

Senator WATT: But at the last estimates Senator Canavan admitted that he had nominated a particular director, Ms Way-McPhail, for consideration for appointment? Is that correct?

Mr Lawson : I can't remember. 'Admit' is not an appropriate word.

Senator WATT: Well, he stated that he had.

Mr Lawson : These things are appointed by ministers, not by departments. The department conducts a search. We often, as in this case, bring in professional services companies to assist in that search—because this was a field well outside our normal expertise—to considerably widen that. Ministers always make suggestions as to their own processes. If they make suggestions, that goes back, we do the due diligence process on those things and then there is a cabinet process of due diligence. So all those standard sorts of processes for significant appointments that go to cabinet were adhered to.

Senator WATT: So, aside from Ms Way-McPhail, were there any other existing directors of the NAIF board whose nomination was put forward by a minister?

Mr Lawson : That's a cabinet process about who nominates those things. I am not suggesting whether Senator Canavan did or didn't nominate—

Senator WATT: I accept the decision was ultimately made by cabinet. We are not asking what cabinet decided. What I am asking are questions that we ask at every form of estimates and every form of hearings about a process for appointment. Senator Canavan has already stated that he put Ms Way-McPhail forward for consideration for appointment. My question is: aside from her, were any of the other directors put forward for consideration by Senator Canavan or any other minister?

Ms Talbot : All appointments to the NAIF board are ministerial appointments under the NAIF Act. So it is up to the minister to make a decision on who is appointed to the NAIF.

Senator WATT: I understand that.

Ms Talbot : What I can tell you is that the department undertook its usual standard processes to support that appointments process, and an executive search agency was used to produce names. Also, because this is northern Australia, we went to get nominations from the Queensland, Western Australian and Northern Territory governments, and then, as is standard practice, the department's own research. At the end of the day those appointments are ministerial appointments, so those decisions are decisions for the relevant minister.

Senator WATT: I understand that. With great respect, we are very short of time and so far my question has not been answered. In addition to the executive search process, outside of that there's at least one director whose name was put forward for consideration by the then minister. My question is, aside from her, were others put forward by the minister?

Senator DI NATALE: That weren't identified in the initial process.

Mr Lawson : The then minister decided, with the cabinet process—

Senator WATT: I am not asking about who decided. I am very familiar with that.

Mr Lawson : We'll have to take on notice as to—

Senator DI NATALE: How many weren't on that list?

Mr Lawson : They're all on the final briefing.

Senator DI NATALE: No, no. The search that you conducted and the names that were put forward—how many of the appointees who are currently board members weren't on that list?

Ms Talbot : My understanding is that all names were on that list and the appointees were chosen from that list. But we would have to check that.

Senator WATT: So you don't know which other directors and you will take that on notice? We understand that one of the directors, Ms Pitkin, has now resigned. We were read a statement earlier. Had she ever expressed concerns about corporate governance processes with the NAIF?

Ms Talbot : She had not expressed any concerns to the department.

Senator WATT: What process is or will be used to replace her and to come up with a new director?

Ms Talbot : The standard appointment process—the usual process that I've outlined already—will be used for a replacement.

Senator WATT: So an executive search process?

Ms Talbot : With board appointments, the decisions are ministerial decisions.

Senator WATT: I understand that. I am talking about how you come up with a pool of potential appointees.

Mr Lawson : We don't need to do a new executive search process, because a very substantial one was done originally. So we have a full list.

Senator WATT: Has any minister given you any suggestions as to possible appointees to replace Ms Pitkin?

Ms Talbot : The appointments process for a replacement for Ms Pitkin is still in process.

Senator WATT: Sure. Has any minister given you any suggestions as to possible appointees to replace Ms Pitkin?

Senator IAN MACDONALD: Why don't you ask Annastacia Palaszczuk, who appoints every union hack to all the boards in Queensland?

Senator WATT: I know you had a late night last night, but let's just get on with it.

Mr Lawson : We go through an iterative process with—

Senator WATT: I understand that. This is just a really quick question: has any minister given you any suggestions as to possible replacements for Ms Pitkin?

Ms Talbot : The appointment process is still subject to government consideration, so I can't comment on that.

Senator WATT: You can't tell us whether any minister has given you any suggestions as to possible appointees?

Ms Talbot : I can't comment on a current appointment process that might be in place with the government.

Senator WATT: Why not?

Ms Talbot : Because it's a ministerial decision.

Senator WATT: I know the decision is, but you've already said that you manage the appointment process.

Mr Lawson : I think we might have to take this on notice to cut through this. There's a cabinet process that's adopted with the appointment of ministerial board positions. We don't tend to give a running commentary on those processes.

Senator WATT: But I think you can understand that it's our job to ask questions of public servants about processes concerning the spending of public money.

Mr Lawson : But the minister decides. The minister takes the proposal to cabinet.

Senator WATT: I know. That's not what I am asking.

Mr Lawson : Whether the minister suggested or not—I'm sort of failing to understand the implications. We've said the minister decides.

Senator WATT: I know who decides. The question is the qualification that that person has and any connections they might have to ministers. That came out at estimates. I think we're quite interested in making sure that the appointees, going forward, are legitimate.

Mr Lawson : Ministerial appointment processes include a skills matrix process. All those sorts of things are gone through. But, in the end, the minister makes a recommendation and either decides, if it's within his or her purview, or, if it's a significant appointment, it goes to a cabinet process to be ticked off.

Senator WATT: I understand that.

Mr Lawson : The full forces of the cabinet processes come into play to make sure that appropriate decisions are being made.

Senator IAN MACDONALD: Can I ask a follow-up, Chair?

Senator DI NATALE: No. We're out of time.

CHAIR: Just a very quick follow-up, Senator Macdonald, because we have to move on.

Senator IAN MACDONALD: If I or Senator Watt give you a name of a reasonable, possible approach, can I get an assurance that you'd pass that on to the minister for consideration as well?

Ms Talbot : Absolutely.

CHAIR: Thank you very much, Mr Lawson, Ms Talbot and Mr Locke, for appearing before us.