CHAIR —Welcome. In what capacity are you appearing?

Prof. Hundloe —I am appearing in two capacities. As well as being Chair of the Board of the Wet Tropics Management Authority, I am also Professor of Environmental Management at the University of Queensland. I am going to wear two hats.

CHAIR —That is fine. The committee prefers all evidence to be given in public, but you can at any time ask that some of your evidence or an answer to a question be given in private and we will consider that request. I now invite you to make an opening statement and, in doing so, I note that you were involved with the 1995 report on understanding Great Barrier Reef economics, so it would perhaps be useful if we could look at some of that in considering the general topic that we have before us. After you have made some opening remarks we will ask you some questions.

Prof. Hundloe —It might help the committee if I give you a bit of history and a bit about my background. I am an economist. I am now what you would call an ecological economist and I have had an interest, either a research or a managerial interest, in protected areas for a long, long time. With regard to the Great Barrier Reef, in 1979, after there was an agreement between the then prime minister and the then premier of Queensland--the so-called Emerald agreement--and the first management plan for the Barrier Reef was established, I went to the Great Barrier Reef Marine Park Authority on secondment from my then position at Griffith University, my previous university, and worked there for a year to establish that plan.

Before that, I was involved in economic research on Fraser Island--there was a major inquiry in 1975 or 1976--and on Moreton Island. To jump forward in history, when the Wet Tropics area was being World Heritage listed in 1986-87, my unit at Griffith University undertook most of the economic studies that were used by then Senator Richardson and his department in justifying the social and economic side, not the ecological side, of the issue. At various times through my life, I have undertaken research which has looked at the willingness to pay and also the willingness to accept compensation--excuse the jargon, I am sure you have heard a lot of it--for the Barrier Reef in general, for recreational fishing, and so on.

I have some empirical data, but I apologise that I have not had time in the last few months to put together anything in terms of a written submission; I have just been too busy. We now have a plan for the Wet Tropics, which took about 10 years to get. I am pleased that that as happened, but it took a lot of my time and effort. Those few facts might help. I am certainly willing to talk about the data, to the extent that I can recall the data from the various studies which I have done or been responsible for. In a nutshell, I suppose my position is that it is not going to add anything to what you do not already know, but I wrote a small article in the Australian last year, on World Environment Day, where I pointed out that this country is an OECD country, signed up to the polluter-pays principle in 1977. But I also point out that governments--Commonwealth, state and local--have been generally reticent to attempt to put that in place.

In recent years, we have had the view promoted that we should be reducing taxes, not increasing taxes. Things like entry fees or user charges for the environment--you name it--are seen in the public eye to be taxes. When you have governments saying, `We're not going to have any new taxes, in fact we are going to reduce taxes,' you have in the public's mind a dilemma, a dichotomy.

It is fairly obvious to me from all the work that I have done, and it is work that has involved having my staff interview thousands of people, that tourists by and large--I will not talk about locals--are willing to pay for protected areas if the money is spent in the area. I will make a very strong point, that I am sure you have heard from many others, that user-pays has a bad name because it is often seen as a way of filling the coffers, going into consolidated revenue.

To digress for one moment, I was for seven years the environment commissioner with the Industry Commission and I had the misfortune to recommend a $20 charge for recreational fishers. The report I did in 1992 or 1993 was jumped on by all and sundry. The idea was to use that money to restock inland fisheries, do research et cetera. But the then government and all and sundry saw it as another tax. They did not read the fine print in my report. I think if had they it would have been supported.

By and large, that is a slight digression. It is certainly my experience, and I think it can be proved ,that visitors to areas, whether it be the Barrier Reef, Kakadu, Uluru or the Snowy Mountains, are willing to pay an entry fee if they believe that money is being spent to manage and maintain the environment they are coming to see. I could also talk a little about elasticity of demand if you want me to.

I mentioned this article in the Australian. I believe and am fairly sure that you can apply economic principles and also principles of equity to this. The taxpayer should not pay some of the management costs. Users, and if you like, people polluting should pay more than average. It is very easy to say. What you need is empirical evidence to work out how much users or polluters, if it is a pollution tax, should pay.

I think the real difficulty is with local residents. Something that I am going to face in the Wet Tropics has been faced in the Barrier Reef. You have people living adjacent to these World Heritage areas. They think, understandably I suppose, it is their right--and maybe God-given right--to access these areas.

CHAIR —It is their backyard.

Prof. Hundloe —Their backyard. You find two views: one they do not necessarily like all the tourists coming and swimming in their local swimming hole, but they love the revenue that flows, by and large, into the local economy.

Secondly, if some sort of entry fee system is to be imposed, it is their backyard, as far as they are concerned. I have a degree of sympathy with that view. That is the one I can help solve. You are grappling with a lot of the other issues, but that is a difficult one. Local residents, particularly in areas which have large areas of national parks or protected land, have a rate base that is somewhat diminished, compared to Canberra, Brisbane, Sydney or Melbourne. Maybe they are paying more rates on average. That is the major difficulty.

I was interested to hear your questioning of the previous witnesses. There are some things that one would think are public goods in an economic sense, but also in a lay sense they are public goods, in as much as the public believes they own them--like Parliament House. It would be ludicrous in a democracy to charge people to come into Parliament House--maybe you should pay them to come!

The economic principles are the ones that, as an educationist, I grapple with--what is the public good, what is the private good. The same, I believe, applies to our heritage. The taxpayer should pay a certain percentage. It might be the cost, for example, of resuming an area for a national park or for building a museum or whatever. It is there and that taxpayer--you or I--may never visit the area, though we get some utility, to use some economic jargon, some satisfaction knowing it is there.

Once we go there and use it we increase the demands of management. The non-user who values it as a taxpayer pays his or her share; the user pays an amount that at least covers the management costs. If you are looking at ecological systems, you want to sustain those indefinitely, and with the notion of ecotourism, sustainable development and the management agencies, I must admit that I struggled getting enough money for my agency to meet those costs to sustain the ecosystems which people value. In a nutshell, that is the principle. What you need is data and, as I said, in some cases there are data that are useful.

CHAIR —Before I pass to Senator Tierney for the first few questions, could you expand on the elasticity of demand for us? An issue that has come up with quite a few of our previous witnesses has been where we get to the point where the public says, `Okay, I'm not going to go there.' We have had some interesting statistics from Victoria as well where they actually got rid of a fee. I think there was a threefold increase in the number of people that then went to that particular museum. First of all, please expand, but if you can also get us some hard data that would be most helpful.

Prof. Hundloe —If I get time I will certainly try and provide hard data, and if you let me know when your inquiry finishes I will attempt to meet that request.

As an example, Fraser Island, which is now a World Heritage area, used to be a place where you could go free of entry charge, just as long as you got yourself there. Somewhere in the late 1990s after Tony FitzGerald held his major inquiry, which we all know about, he held another inquiry which was into land use on Fraser Island. I did a major study for the Queensland government. At about that time an entry fee--a camping fee, a vehicle access fee--was imposed. You could easily plot the increase of visitation to Fraser Island up to the entry fee and you saw quite a substantial dip for about a year, then away the curve went, so that itself was an interesting point.

With regard to areas like the Great Barrier Reef, for example, the major work I did was in 1986-87 at the same time, and the average willingness to pay per visit I think was something like $8--that was over and above what people were paying. At that stage people were paying roughly $40, $50, $60 to get on a large catamaran to go coral viewing, snorkelling, diving and whatever else, and now they pay twice or three times that amount.

But you did not get a great deal of variability around that. Certainly, if you looked at the increase, that meant that for someone who was an overseas visitor--and I forget the figures now, but in today's terms you are looking at the average visitor to Australia spending at least $2,000--if you add $8 or $10 on to that it would seem insignificant.

You can do the econometrics and you get a demand curve. The person who you probably could talk to and seek information from has just written a PhD on this on the Wet Tropics. Her name is Dr Sally Driml and she has actually derived a demand curve for visitor use of the Wet Tropics. So you would get some ideas of elasticities from that.

But by and large, over small increases, you are not getting a drop-off in demand but a small increase. Let us talk about the famous Reef Tax increase from $1 to $6. That would not have made any difference in terms of visitation. I can just about guarantee that from the data analysis that I did 10 years ago. Off the top of my head, I cannot recall where a daily visitor fee would start to bite, but in that range you have not got any problems. The Victorian work I have not seen. If I saw it I could probably comment on it, but most of my work has been on the natural environment. Fees of the magnitude I am talking about are on that part of the demand curve where it is fairly inelastic.

Senator TIERNEY —I just want to clarify some of the things you are saying. You seemed to say at one point that user pay was a tax. Could you explain why you are calling it a tax?

Prof. Hundloe —Most people think of it as tax. That is the point I am making.

Senator TIERNEY —But it is not a tax.

Prof. Hundloe —It is not, no. The dilemma I have as an economist is that the theoretical foundations for user pays or polluter pays or beneficiary pays go back to the famous economist Pigou, who actually talked of these things as being a tax. They are not a tax in the way that you as a legislator or I might see them as a tax--

Senator TIERNEY —If we are talking about access to heritage and someone turns up to see a national park or to go into a museum that is charging for an exhibition, they want a particular service at that point. They go in and see that service and pay a charge for it. I would not call it a tax.

Prof. Hundloe —I agree with you, but my point is that these things are perceived as taxes. There was a rather interesting decision by the High Court a couple of days ago, and I did an inquiry as industry commissioner into the tobacco growing and manufacturing industries, so I know they are excise duties; but by and large people see those things as taxes. A number of your colleagues--I am talking about politicians--called the reef management charge a tax, and the public sees it as a tax. That is all my point is. Economists often use a shorthand, and economists are not afraid of taxes. If people pollute things, they should pay a tax. Maybe politicians are afraid of taxes, but we are not.

Senator TIERNEY —`A lot of this user pay money goes into consolidated revenue.' Is that really true? I would have thought that the organisations who collect it actually use it.

Prof. Hundloe —I am sure I did not say that. I said the perception is that it goes into consolidated revenue. In some cases it clearly does, and I said user pays has a bad name where that happens.

Senator TIERNEY —Where does it happen that it goes into consolidated revenue? I would have thought that it stays with the institutions that collect the charge.

Prof. Hundloe —Take the increase in the reef environment management charge. When it was proposed that that be increased, the budget of the Great Barrier Reef Marine Park Authority was to be reduced. That is, in a sense, saying the money has gone into consolidated revenue. That is one case.

Senator TIERNEY —No, it is not. It is an offset, but it does not go into consolidated revenue.

Prof. Hundloe —I beg to differ.

Senator TIERNEY —But it does not.

CHAIR —I beg to have the committee differ on this as well. I think I agree with the witness here.

Senator TIERNEY —I wonder why you do, Madam Chair, because--

CHAIR —Maybe because I am not a member of the government!

Senator TIERNEY —Something going into consolidated revenue means a sum of money goes into consolidated revenue. If the money stays with the organisation and then there is an offset of reduced funding, you might say the net outcome is the same, but it is not going into consolidated revenue. That is what you have said, so that is why I was curious about that one. What broadly are you saying about user pays?

Prof. Hundloe —I think that when you are looking at national parks, world heritage areas or protected areas, those people who go there and use those areas should pay additional to what you and I pay as taxpayers. We might pay so much to have them established, to buy the land back from who knows whom; but if we get additional benefits because we go there, we should pay enough to meet the management costs so those areas are preserved. It is as simple as that. I am in favour of a visitor charge.

CHAIR —You do not think that excludes some low-income people?

Prof. Hundloe —This is where one gets into very interesting territory, and I am sure you have grappled with this. The market excludes low-income people from a lot of goods and services. It is an ethical equity issue I think we all struggle with at times. Governments deal with it, by and large, through a progressive tax system and/or subsidies to low-income people. We could quickly get into a discussion about reforming the tax system. That is where you end up once you get into it, and that is probably beyond your terms of reference, though it is certainly clearly related.

I must admit, on economic grounds--this is the standard line--economists would argue that if you sorted the tax system out separately then you could use a user pays system. But if you have not sorted the tax system out, and there is public disquiet about the tax system, then you have got a bigger problem.

CHAIR —I want to go back to that issue that Senator Tierney was discussing with you a moment ago: where the money goes. I think perhaps what does cause some difficulties, not just with the community who is paying, but with those people who are trying to run the facility, is that the user pays income sometimes does not increase the total available. We saw this at Uluru when we went up there. The user pays goes on, and then they see a proportional decrease in the government funding so that the user pays charge has no net impact on the amount of money available. Despite the total amount of money that comes in through the user pays system going up because tourism is going up, so expenditure needs to increase, their budget is being held at a particular level because, for example, so the Northern Territory government decides, `Great, you are making $1.1 million now, we will take $1.1 million out of your base funding.' I think that is perhaps where the community has some difficulties with the idea of user pays.

Prof. Hundloe —Yes. I saw the wet tropics budget cut by 38 per cent last year, before I took the chair. I do not know what the budget should be, but there is a need for some user pays there. I am sure you are right, and Senator Tierney is in a sense right; it is compensating. I was using a shorthand. I do not think there is any dispute, really, but the public does want to believe the money is additional money.

The first dollar per head charged at the Barrier Reef was additional money. It was money that was allocated to a CRC which was doing research--some of it good research--looking at, for example, platforms on the reef and the effect of shading, whether it killed or did not kill coral, so the tourist operators could have a sustainable business and so the tourists could enjoy the Barrier Reef. I think that is beaut, and there was no significant outcry about that.

CHAIR —Let me take you sideways for a moment and look at the actual issue of access to heritage per se, forgetting about the issue of user pays. Let us just look at what we have protected in this country and at what has happened with the wet tropics. Perhaps I can look at the issue of our native forests and the economic arguments that go on around whether it is okay to clear fell them and send them out as woodchips, or whether we should look at long-term tourism issues and the economics of some of the social issues--the economic costs of retraining, perhaps, or relocation. Is that an area where you have done some work?

Prof. Hundloe —Yes, indeed.

CHAIR —I could spend the rest of the evening on this, but I suspect we should not.

Prof. Hundloe —No, we should not. Tourism is our largest industry. The last major inquiry I did before I resigned as an industry commissioner was into tourism in this country. It is our largest industry. It is our largest employer. Ecotourism is growing. I am chair of the National Ecotourism Accreditation Panel. We are going around the country accrediting--

CHAIR —Yes, that is my next lot of questions for you. I will do that one in a minute.

Prof. Hundloe —If you look at the trade-offs between traditional forestry and tourism--and I will use one example, because it is the one I know best but, as I said, Dr Driml is the expert--when logging ceased in the World Heritage area, its gross contribution to the regional product was a 10th of what ecotourism is now. That does not mean there is a correlation--

CHAIR —No, but those figures and that information would be very helpful for this committee, because looking at heritage preservation, one of the issues that we keep coming up with, is `Oh sorry, we can't afford to preserve that. There's a forestry industry, or there's a mining company wants it, or somebody else wants to use it.'

Prof. Hundloe —The person to contact is Dr Driml.

CHAIR —I will ask the committee to do that. That would be most useful.

Prof. Hundloe —She did her PhD here at the ANU. She has just completed it. In some sense it differs from area to area. Again, to use the World Heritage area, the Wet Tropics, economic justice required that those people who had to cease their logging were compensated. They were. This parliament allocated something like $75 million in 1989 or so to compensate the loggers, the mill owners and the local communities. Not all that money was spent. Some of it, in fact, was wasted because a particular organisation that was paid did the wrong thing. That is all public knowledge.

The notion of compensation is clearly supported in economic theory. If there are going to be winners more than losers, you can afford to compensate them. The winners in the Wet Tropics were not, one would argue, just the environment people who fought for it, but tourists and the Australian public. There were short-term losers. The compensation package included retraining for those people who wanted retraining and for those who were a certain age and wanted, in a sense, a golden handshake, they got that. For the mill owners there was a compensation for forgone profits. One of the mills, the famous one at Ravenshoe, was actually retooled to handle soft wood. That was the one where some things went wrong.

One can go anywhere in Australia and look at that issue. I do not pretend to be an expert on forestry around the country. The Resource Assessment Commission did an enormous report on that and subsequently we are spending a lot of money trying to refine boundaries and there are regional agreements. I think we probably ought to get on and do it, rather than spend the money, going to the details that have been gone into. However, that is another issue and I am not an expert on that, but the same principles apply.

CHAIR —It is just that it has been suggested, particularly in East Gippsland that the ecotourism industry is not getting off the ground because of the lack of certainty and the problems with some of the protected areas only being interim protected areas. The potential is there--

Prof. Hundloe —I really would not want to comment on that. What Victoria offers--and what the rest of the country is sort of waking up to--is great football. You are a South Australian, Madam Chair, I believe. That is why people go to Victoria for football, for cultural events. Ecotourism is not anywhere near as big as it is in Queensland and New South Wales.

CHAIR —Some people would suggest that that is because the areas are simply not protected.

Prof. Hundloe —You have to have, as the tourist people would say, the product. The Great Barrier Reef is the largest and the best protected reef in the world. Fraser Island is the largest sand island. I do not want to knock Victoria but I go to Victoria for the football, the good coffee and the meals. That is the point I am trying to make.

CHAIR —I would like to ask you a couple of questions on ecotourism. We got to this yesterday and people suggested that we talk to you today, particularly looking at how the judgment is made as to whether or not an organisation should be accredited; not just the style of product and the experience people are having but also the actual impact. Do you consider the impact on the World Heritage area, the national park, the Great Barrier Reef or whatever of that particular activity?

Prof. Hundloe —The short answer is: yes. There are quite substantial criteria. I must point out, if you have not been told already, that it is basically a self-assessment process which comes to the panel I chair; so people have gone through. They have had referees validate what they have said. I have known personally virtually all the products, to use the jargon, which have been accredited so far. I have been visited there, at my own expense. The issue of the impact on surrounding areas is a consideration as well as what they do if it is a resort, whether the soap is in plastic or not. All those things are covered.

I would think that, over time, we will refine the process. It has been accepted as a self-assessment process with an expert panel overseeing it. It is working well. We are basically leading the world in this, but we also recognise that as we sit down and meet and come across interesting little anomalies that we have to refine it.

CHAIR —So, as part of the self-assessment process, is the impact of this activity on the environment one of the--

Prof. Hundloe —That has to be addressed.

CHAIR —That has to be addressed as part of the self-assessment process?

Prof. Hundloe —Yes.

CHAIR —Then you assess whether or not they have actually answered the questions properly?

Prof. Hundloe —Yes. We, in a sense, audit the answer. A shorthand way of saying what we do, yes. You will still have arguments. Some very excellent tourism projects were argued about when they were being constructed because they were adjacent to a national park. There is a place on Fraser Island which was on private land. There was quite an argument about whether that resort should have been built there, even though it was on private land. You will not overcome those arguments, notwithstanding the fact that it is accredited ecotourism and a very well done establishment. You still will not overcome all arguments.

CHAIR —Thank you very much for your time today. If you can get us those few details on the impact of user pays that we talked about it would be most helpful.

[2.50 p.m.]