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EMPLOYMENT, WORKPLACE RELATIONS AND EDUCATION LEGISLATION COMMITTEE - 21/02/2002 - DEPARTMENT OF EDUCATION, SCIENCE AND TRAINING - Commonwealth Scientific and Industrial Research Organisation

Senator CARR —I welcome Dr Garrett and the officers. I have a number of questions today, but can I start with discussion on the CSIRO strategic plan. I am wondering if you could indicate to me on what date the final version of the plan was adopted.

Dr Garrett —The end of May.

Senator CARR —Are you able to provide the committee with a copy of the plan that was adopted?

Dr Garrett —I am sure that would be in order. As you know, following your discussion with me, I let you have a copy subject to the approval of Minister McGauran, and he was happy with that. It is a company compilation.

Senator CARR —Do you have one here now?

Dr Garrett —I have my dog-eared one.

Senator CARR —Can we get a photocopy of that.

Dr Garrett —It is really a company confidential document. That was the nature of the document. It is not really in the public domain.

Senator SCHACHT —It is not commercial in confidence, though, is it, Dr Garrett? Are there any commercial interests in the document that would compromise CSIRO commercially.

Dr Garrett —I would say so, in the sense that, as you will know, we were quite ambitious in our growth targets. We indicate what our future strategy is. It is a document that we have not let free to the media, for example. It is the essence of our future strategy.

Senator CARR —The problem is that I understood that the document had been distributed quite widely within the CSIRO.

Dr Garrett —No that is not the case. As I say, it was in-company confidential—in other words, in house. Obviously, anybody who is on the CSIRO team had access to the version, and obviously the members of the board, and then, by special dispensation, individuals who requested a copy when I got appropriate permission—such as you.

Senator SCHACHT —Is there anything in the document that outright talks in commercial detail about arrangements with a private company.

Dr Garrett —No.

Senator SCHACHT —So we are not in commercial conflict; it is that you believe that other people reading it might be able to predict where your next commercial arrangements could be.

Dr Garrett —Correct. We are all in a competitive dimension.

Senator SCHACHT —On that point, who is competitive with CSIRO? You have $600 million or $700 million a year from the federal budget. There is no other scientific institution doing applied research that can go anywhere near the strength that CSIRO has in the marketplace.

Dr Garrett —If you look at the significant and increasing component of our revenue through our research and services, this year budgeting at around $250 million, in many examples that is competitive. This is our external revenue. We obviously also have revenue from international organisations, and therefore we are in a competitive environment.

Senator SCHACHT —But there is nothing in there about the details of your intellectual property.

Dr Garrett —Correct, but it is our—

Senator SCHACHT —It is not intellectual property; it is not a commercial contract. It is predicting where various areas of growth could be, but those other two areas are excluded in the contract. In view of the strength and size of CSIRO in the scientific market of Australia, and even internationally, you may be a little cautious.

Dr Garrett —Possibly. I would just say to you that we are increasingly in a competitive world. Part of our strategy is to help Australia gain its advantage in—

Senator CARR —I have some real concerns about what you are saying. First of all, at no point in our discussions have I understood that this was a confidential document in the sense that it was not open for discussion. I must advise you I have discussed this matter with people in the organisation and outside it. I wanted to congratulate you on the production of the document, but at no point was it made clear to me that this was a matter that was not to be discussed. I do advise you that I have discussed it.

Dr Garrett —I am very happy with that. Obviously I provided the essence of it, in media interviews, around the key messages, around our five-year mission—

Senator CARR —That is what I am saying; it has been widely discussed. Senator Schacht, as a former minister, has in fact advised me that these strategic plans are not new to the organisation. This is the first time I have heard the view being put that this is a secret document. I congratulate you on the openness with which you have addressed some of the problems facing the CSIRO. It does strike me that, as a public institution, you are accountable to parliament; parliament funds this organisation. It is one of the great institutions of this country. Of course the goings-on at the CSIRO are matters of public interest, and I would have thought you would want to encourage public debate about your work.

Dr Garrett —Which we have done.

Senator CARR —You have done that. Where you have problems, I would have thought you would also want to discuss those.

Dr Garrett —We have done that too.

Senator CARR —After all, the plan refers to the events that occurred prior to you being the director.

Dr Garrett —Yes.

Senator CARR —You may well be surprised at how widely this document is available within the CSIRO.

Senator SCHACHT —Not because you have distributed it, but other people have.

Senator CARR —No, not because I have distributed it. This has been discussed within the CSIRO.

Dr Garrett —I have no doubt about that whatsoever.

Senator CARR —You know the nature of the CSIRO. It is like every other public sector instrumentality; photocopiers are everywhere.

Dr Garrett —As Senator Schacht has said, we probably erred on the side of caution. It was my first strategic plan, and I had to seek advice from my colleagues and my ministers in the dissemination of this.

Senator CARR —The fact that the minister was only too happy for me to receive a copy of it—knowing full well the content of it—indicates to me the strength of the organisation, not its weaknesses, in the sense that you are prepared to front up to problems.

Dr Garrett —It was a very frank assessment of our—

Senator CARR —Extraordinarily frank.

Senator SCHACHT —I must read it.

Senator CARR —It was absolutely, extraordinarily frank, and that is what I want to go through with you, because I want to know how you are dealing with these issues.

Dr Garrett —Could I take it on notice in terms of the wider dissemination?

Senator CARR —I have asked for a copy of the document—

Dr Garrett —And you got one.

Senator CARR —I have got a copy, but I want a copy provided to committee members, which is the point of tabling.

Senator Alston —It is appropriate for Dr Garrett to take that request on notice because there may be some elements of sensitivity which he would still say should not be in the public arena. The idea of washing your dirty linen internally is not quite the same thing as hanging it out to dry. If your proposition were valid, the ABC would be coming in here and saying, as a publicly funded organisation, `How much can we tell you?' It is usually quite the opposite—

Senator CARR —As the minister, you would know precisely how much they tell.

Senator Alston —They are not actually anywhere near as commercial in their orientation as CSIRO is. It is out there competing for contracts. We will take it on notice and get back to you.

Senator SCHACHT —Dr Garrett, when Senator Carr asks you a question and you think it is sensitive, just indicate that you do not want to comment about that at the moment until you take it on notice and come back to us. Finally, might I suggest that another, alternative way, rather than waiting until June, is that this committee be reconstituted to deal with an in camera hearing dealing with the annual report.

Senator CARR —For a start, we cannot do that, Senator Schacht.

Senator SCHACHT —Yes, you can.

Senator CARR —It is an estimates committee.

Senator SCHACHT —The committee can be reconstituted to discuss the annual report—

Senator CARR —We will. You are quite right, Senator.

Senator SCHACHT —which we have done with Telstra on the COT cases. But we will see how we go.

Senator CARR —On page 4 of the report, you indicate that:

[middot]We have great people.

[middot]We aspire to excellence ...

[middot]Integrity, honesty and openness are fundamental to the way we operate.

[middot]Our customers and partners are essential to our success.

[middot]Our diversity and breadth allow us to tackle complex problems and opportunities on a national and global scale.

[middot]Trust is crucial to building high-performing teams.

You then go on to say:

[middot]We are overly focussed on short-term revenue targets.

Dr Garrett —`Often'.

Senator CARR —That is what I am saying; I want a final version, because to me it uses the word `overly'.

Senator SCHACHT —It is `overly', too.

Senator CARR —That is the version that I understand is floating around in the CSIRO:

Overly focussed on short-term revenue targets.

Limited by divisional and other silos.

Not fully sharing knowledge effectively across boundaries.

Too internally focused.

Too slow to respond.

Less cooperative than we could be.

Overly hierarchical and bureaucratic.

Could you expand on what you see? How do you see the plan that you are adopting addressing those concerns?

Dr Garrett —I would like my colleagues—my two deputy chief executives, Dr Wellings and Dr Sandland—to add to the comments I make. We are addressing each of the issues in turn. For example, the great strength of CSIRO is its organisational muscle: the fact that we have 21 divisions and you can take an entomologist, a water chemist, a materials specialist and an information scientist and package them together to tackle problems at a significantly higher level than many other institutions in our nation. Therefore, we are putting a lot of effort into this one CSIRO approach—building the team at the leadership level; using the functional groupings such as HR, communications and finance to work in single processes across the organisation; developing new information systems through an e-CSIRO initiative, led by Dr Sandland—to address some strategic deficiencies. That is one example. Shall I stop there? I can wax lyrical for an hour and a half on all of these, and I would be happy to do so, but I need to make sure we are focusing on your needs.

Senator CARR —Thank you for that. You also say that CSIRO is currently unsustainable. Could you comment on that with regard the whole organisation and with regard to the morale of the staff.

Dr Garrett —As you know, I have had 12 months in the organisation. It is a remarkable institution. Australia is indeed fortunate to have it. However, we are in a process of continual change in our nation, in the region and in the world, and we need to respond to those changes. We need to become more responsive to our external marketplace, and we need to become less bureaucratic and hierarchical. We are in the innovation business after all. We need to manage risk and not be risk adverse.

We have achieved a significant buy-in from the organisation—from the troops, if you like—to these initiatives. Many of these ideas germinated from the 17 task groups that we ran between February and May lead in to this document. In November we ran a staff satisfaction questionnaire, in which we examined morale in great depth. It will be one of the key metrics of organisational and management performance over the next five years. We will run it each year. We have a whole series of processes in place to implement the findings—the feedback we have from the staff—associated with it. We believe we can measure an improvement in morale associated with the need to put the changes in place that we have articulated here.

Senator CARR —I want to come back to this point. You say:

Our current mode of operation is not sustainable and is inhibiting growth.

Can you explain that to me?

Dr Garrett —Unless we change the way we operate—the way we respond to external clients and the way we run our organisational processes—we believe that we would face ongoing decline. We would lose staff, we would lose revenue, and we would not attract the key talent that we have—all those good things. So we believe we need to get into a comprehensive change process, which we are managing at this point in time. Many of the political stakeholders that we have on both sides of the political persuasion endorsed the findings that have been articulated in this report. We have had strong backing from a number of the industry groups that I have talked to. We talked about small business to Senator Schacht last time. We have a significant role to play—particularly in the structure of small business in Australia—to help small business to grow, to be more technologically aware and to seize the opportunities. But many small businessmen I talk to say it is just too hard to do business with us, so we need to change the way we engage. These are the processes if we want to grow into the future.

Senator CARR —Dr Garrett, we would like to help you in that regard. I repeat that I am struck by the openness with which you have approached these problems and I think you should be congratulated on doing it. That is the issue: I would have thought you would be trumpeting this report as widely you can. You acknowledge—

Dr Garrett —I have a philosophy of overdelivering and underpromising so, rather than trumpeting this and saying, `This is what we are going to do, guys,' I would prefer to actually get out there and deliver and then say, `We have delivered on that commitment.'

Senator CARR —It is a big thing for our premier research institution, the CSIRO—I think many people would see the CSIRO in terms of national prestige—to say:

we are commonly seen as aloof, arrogant and unresponsive—

and, furthermore, to say that you intend to change that. That is what you are telling this committee; would you agree? Have I interpreted you correctly?

Dr Garrett —That is correct.

Senator SCHACHT —Like Senator Carr, I congratulate you on your frankness in my discussions with you last year. I know that other people in industry probably said the same things, and maybe other national institutions as well. Which is that area of aloofness—what was the phrase?

Senator CARR —Aloofness, arrogance and unresponsiveness.

Senator SCHACHT —Of those three—when you put the three together it is pretty comprehensive—which is of the most concern to you in terms of your relations with customers and the community?

Dr Garrett —Responsiveness is a very important issue. We have just been through a process of reviewing how we manage projects in our environment, using a number of internal and external processes, and we will be measuring our delivery on required outcomes quantitatively. So that is an area we will be working on extensively. I think arrogance is something that the scientific establishment suffer from, and I think we have the responsibility as a community to outreach, to talk to the community, our stakeholders, much more effectively about what we do and why we do it, as opposed to expecting that we have a reason to live and saying, `Please just give us money and get out of the way.' I think that that is not the way the world operates in our business now. So those two things combined.

Senator CARR —You say your commercialisation record is `patchy.' What do you mean by that?

Dr Garrett —What I mean by that is that CSIRO has, for example, a patent portfolio of over 3,500 patents based on 720-odd inventions. It is a treasure chest of intellectual property. If you look at our licence revenue, last year it was $9.1 million. In our five-year mission, we have set a goal to increase by a factor of 10 our revenues from intellectual property over the next five years. That is what we mean by `patchy.' We have not put the processes in place to exploit and tap into this raw intellectual talent and the ability of the scientists in our environment. In a couple of areas we have, but that is why we use the word `patchy'; it is not congruent across the organisation. We are bringing in skills to help us in that process. Have I answered your question?

Senator CARR —Yes, you have. On page 1, you speak of developing a new business model and providing a sketch outline in the appendix of the report. Is it possible for the committee to have a copy of that business model?

Dr Garrett —I think this is in the same category as the previous one. I will certainly be very happy to do that; I will have to take the appropriate advice and make it available.

Senator SCHACHT —I refer to the business model. I have been around long enough to know, even before I was minister, some of the things you might be looking at. I hope that we do not reinvent the wheel and then reinvent the mistake. For example, in the eighties, CSIRO had something called Sirotech, which was to commercialise their intellectual property. In the end, the board—after a number of individual disasters—wound the thing up and wiped it out. Is that one of the areas you are looking at: going back to a dedicated structure within the organisation to handle and bring together the intellectual property and development to boost the licence income?

Dr Garrett —Let me preface it by saying that the business model—and it has gained significant acclaim, I think—clarifies for the organisation that we are in three separate businesses. We are in the strategic research business, we are in the specialised consulting and testing business, and we are in the business of capturing and exploiting intellectual property. They are different businesses that need to be managed in different ways. In the domain you are talking about here, we have pulled in some skills from the private sector and we are building our commercial group. We are of the view that they need to be working hand in hand in partnership with our scientists, developing skills all the way through, as opposed to putting in place some form of structure.

Senator SCHACHT —Are they working down at the divisional level or the institute level? For example, in Adelaide we have the viticulture centre. Are the people you are appointing to upgrade the outcomes actually on-site or regularly on-site talking to those in the viticultural research laboratory—which is connected with others out at the Waite—and being hands-on and saying, `Look, you have a wonderful thing here with this method of making a better cabernet sauvignon wine, but we have to do this in a commercial way. We recommend that you do this, this and this.' Otherwise, are they waiting for someone to feed that up through an email, fax or smoke signal that reaches Limestone Avenue, where someone says, `Oh, that's not a bad idea,' but it is five years too late?

Dr Garrett —That latter model is non-viable in my experience and in the view of my colleagues. We have what we call a `hub and spoke' model, where we have a central hub of commercial specialist skills linked in to commercial and business development managers in each of the divisions in each of the units.

Senator SCHACHT —In the divisions?

Dr Garrett —Yes. So all of our divisions are now increasingly upgrading their business managers so that they can work hand in hand with the scientists as ideas are developing, as opposed to throwing the ideas over the wall; that is not going to happen.

Senator SCHACHT —Dr Wellings, what particular area in CSIRO are you responsible for? I know Dr Garrett is the boss of everything. Which area or responsibilities do you particularly look after?

Dr Wellings —I have specific responsibility for business development across the whole of CSIRO, and I also chair a strategy team that deals with biotechnology and our investment in biotechnology.

Senator SCHACHT —Thank you, that is good for the record, so people know what you do.

Dr Wellings —On the commercialisation front there is a clear `hub and spoke' model. There are commercialisation officers out in divisions and there is a central group, based in Sydney, of key officers who pull together the high level deals and assist with divisional functions. In the case of the business development office, there is a network of business development officers across all divisions. There are between 20 and 40 of those people and, as Dr Garrett said, those skills are being upgraded. My office then deals with the coordination functions of and the development of the high level business development strategy for the organisation in terms of trying to work out where the optimal point for divisions working collaboratively will be in the future.

Senator SCHACHT —Where are you based?

Dr Wellings —I am based at Black Mountain here in Canberra.

Senator HARRADINE —Could I just ask a question about biotechnology. Is CSIRO involved in any way in embryonic stem cell research or other stem cell research?

Dr Wellings —To my knowledge, none of our investments in biotechnology relate to stem cell research in humans.

Senator CARR —These questions trouble me. This has important implications for government policy. While you cannot comment on government policy, you are able to assist me in the parliament's consideration of public policy. You indicate:

In many areas of research endeavour, CSIRO is no longer perceived to be competitive in either the international or national labour markets, due to a combination of factors:

uncompetitive salaries;

weak Australian dollar;

less scope to do strategic research;

high transaction overheads for scientists; and

insufficient flexibility in remuneration packages, terms of employment, etc.

While we do a number of things to counteract these factors ... A raft of studies and surveys in recent times have concluded that:

We do not provide a clear sense of `organisational direction' to our staff.

We have not adequately developed leadership skills in the Organisation.

Over-commitment and anxiety about meeting an (unrealistically?) wide range of expectations ...

We do not adequately recognise or reward the behaviour (teamwork, commercial endeavours) that we say we want people to exhibit.

Competitive remuneration is an issue when recruiting in `hot' areas.

Our attitude to employee equity holdings in that we are thus perceived as less commercially aware than universities and CRCs.

All of those are matters of extensive public debate. How are you addressing those concerns about what you describe as `our people'? How many staff have departed the CSIRO since 1996?

Dr Garrett —In June 1997 our total staff complement was 6,709, and in February 2002 it is 6,366, so that is a departure of 5.1 per cent or 343 staff. It is probably worth while to say that those are CSIRO officers.

Senator CARR —Has it contracted? What is the size of its contraction?

Dr Garrett —I am trying to give you that view with two pieces of additional information. The number of CSIRO officers has reduced. If you take the research scientist core—that is, the engine room of the organisation—in June 1997 it was 1,412, and in February 2002 it is 1,536, an addition of 124. We have managed to gain over that time an increase in the scientific core. Obviously, the support available to that core—other staff—has reduced substantially.

Senator CARR —How many fewer people do you employ at the CSIRO?

Dr Garrett —Over the last five years, as I have said, 343.

Senator CARR —There are 343 fewer staff on the payroll.

Dr Garrett —Since June 1997.

Senator CARR —Some of these issues that you have identified in terms of employment for people who work in the organisation, and they are quite serious issues, are beyond your control—for instance, the question of the Australian dollar.

Dr Garrett —We are working on that!

Senator CARR —What are you doing, for instance, to address uncompetitive salaries and the scope to do strategic research?

Dr Garrett —I shall address what we believe are the prime people-related issues. Firstly, it is important, as we have indicated, to provide a clear sense of organisational direction. We have worked hard at our vision of our business model of engaging CSIRO staff in where we want to be into the future. We are endeavouring to articulate the case for moving from a research institution into a research business or research enterprise. We are getting a lot of good support for that. People need a clear sense of strategic vision. They need to know that the organisation is well led.

Secondly, we have not in the past paid adequate attention to our leadership skills. We are putting in place a lot of developmental opportunities, additional course programs, a new approach to our leadership and career development training, and new pilot programs in the area of career development. We are putting a lot more attention into upgrading people's skills.

One of the areas of significant debate is that of staff sharing in commercial benefits. There was strong support from government for us to review our policies in this area. As you would have seen, it was previous policy that CSIRO staff would not share in commercial benefits. We have had a number of very good engagements with our board in recent times. At our last board meeting in February, we gained approval in principle for a new process for staff sharing in commercial benefits—in other words, the benefits of licence revenue, equity holdings et cetera. I think this will give a significant boost to our activities. I think we are also seeking, as you know, to build critical mass and focus, aligned with national priorities, around what we call our `big hairy audacious goals'.

Senator CARR —What was that?

Dr Garrett —`Big hairy audacious goals'. That is plagiarised from a former contact of mine at Stanford. I think we are getting a lot of—

Senator CARR —Would you regard yourself as being identified with this term now?

Dr Garrett —I think it is certainly becoming lingua franca in the organisation in galvanising all energies. It is about focus, relevance and impact into the longer term. While it is not the nicest acronym, I think it has meaning to us. Again, it provides an opportunity for strategic alignment.

Senator CARR —How do the women in the organisation respond to that expression?

Dr Garrett —We have had some difficulties with that. We now have a project office where we are calling these things `flagship programs', which I think has more user-friendliness to it.

Senator CARR —To continue:

6.4“ONE CSIRO”—DEATH OF SILOS

You indicate here that:

The Organisation could be characterised as having “a defensive, vertical structure”—structures and practices have better served vertical rather than horizontal communication and management of effort. In addition, competition over external and internal funding has actively worked against free and open dissemination of knowledge and best practice across the Organisation.

You go on to say:

Ongoing waves of top-down organisational restructuring have damaged trust across the Organisation making it a difficult environment to promote openness and the sharing of information.

Given that in the previous exchange you highlighted the need for there to be openness, communication and trust—particularly when it comes, I would have thought, to a research organisation sharing research results—do you see there being any inconsistency in terms of commercial requirements to report to commercial partners versus the responsibility as a research organisation for colleagues to talk to one another?

Dr Garrett —There are always tensions associated with that. As we build our growth path, as we work increasingly with the private sector—locally and internationally—we need to ensure that we have appropriate confidentiality arrangements in undertaking commercial contracts in the provision of technology. However, notwithstanding that, due to the fact that the substantial majority of our revenue is derived from the public coffers, we are engaging in a whole series of processes—Ron Sandland could add to this; maybe he should come in now—to actually enable knowledge to be transferred across the organisation more effectively. The answer is that we have to manage that tension.

Dr Sandland —I have responsibility for the e-CSIRO initiative and also for the information and communication technology research strategy overall. Indeed, we have identified in our e-CSIRO program a number of priorities. One of the priorities that have come forward has been knowledge management. We are using, and intend to use, an investment in information technology, but also in the cultural issues of enhancing this knowledge sharing across the organisation. That is a project in the process of becoming.

Senator CARR —How are you addressing the concern about top-down management restructures?

Dr Garrett —We are seeking to consult widely, inside and outside. For example, we have just initiated a review of CSIRO's response to the challenges over the next two decades in the energy domain, looking at what the forces are in the world, in the region and in Australia. In our nine divisions that are, in one way or another, associated with the energy business, are we being effective in the work that we are doing and in the way that we are organised? As part of this process of review, we have been widely consulting with individuals inside and outside about what we should be doing and how we should be doing it. At the end of the day, a judgment call has to be taken: this is our strategy, this is the way that we are going. But it is very important to get this wisdom from the people at the coalface. Much of the strategic action plan has been galvanised through several hundred people who were involved in task groups leading to these results. This provided a really valuable insight. So it is an enhanced concentration, as opposed to two guys getting together over a beer and making a call.

Senator CARR —The document says:

CSIRO's strengths in government relations lie in its timely responses to ministers and strong relationships with federal and state departments, and local government authorities. CSIRO's immediate and critical requirement is to build better links with (and “respect” from) Executive Government and key Federal Government Departments. Weaknesses in our relations at many levels of government have arisen because CSIRO's role is unclear and there is a lack of coordinated approach by CSIRO to government. Where CSIRO works with local authorities, ties are often very strong, and CSIRO needs to continue to enhance these linkages.

How are you getting closer to government?

Dr Garrett —All business is people business, in my view. With both government and the opposition we are seeking to establish personal relationships that are enhanced over the ones we have had in the past. In order to understand our political processes, we need to spend time with senior officials, ministers and bureaucrats, to assess and translate the policy trajectories into work that can direct our business. The way we are doing this is that we have recently consolidated our various strands of the communication domain. For example, we have a government relations operation, we have a publishing group, we have an external outreach group, we have a customer service response team et cetera. These were all operating off their own music sheet, and we are pulling them together and coordinating them under a new director of communications. We are trying to manage the process in a more effective way and to personalise our interactions with key decision makers. Dr Wellings would like to add some comments on what we might call key account management.

Dr Wellings —I thought I might make some comments about relationships with state governments, which is clearly one of the elements from the plan, Senator, to which you alluded. There are a number of mechanisms there that allow for extensive interaction between CSIRO and state governments. For example, Dr Hobbs, who is one of the deputy chief executives based in Perth, sits on a high-level committee that Premier Gallop has established to advise the Western Australian government. Similarly, I sit on a high-level committee in Victoria to advise Premier Bracks.

Yesterday, Dr Hobbs and I spent the day with directors-general in Queensland talking about the CSIRO strategy in the broad and their own strategy, given that they will go to state cabinet this year with a new Queensland strategy for science and technology. We are looking to make sure that where our priorities are being set is complementary with those that are being established at state level.

Senator CARR —I am very pleased to hear that. The organisation, I would have thought, should have the strength and confidence to engage in public life in this country. As public institutions, of course, the parliament is the focus of that, but the general public actually pay all our wages. In that development of personal relationships, you are not saying, are you, that we are talking about getting close to just the government?

Dr Garrett —Not at all. Look at our work in the media domain. I come back to an earlier point: the arrogant word we talked about earlier in relation to the scientific establishment. I have found it extraordinary the benefits of providing opportunities for our young scientists to talk at schools, go on school trips and be involved in all sorts of community related activities. They add value, they enjoy the exercise and they get close to it. Our media unit, which we will be putting a lot of effort into—they have done a good job in the past—will continually be trying to say, `How do we gauge what Joe Australia wants from an institution like CSIRO? How are they feeling about us? How are we communicating with the broader public?' So it is not just parliament, obviously.

Senator CARR —I value, as shadow minister, the capacity to talk to the organisation directly, and I acknowledge your willingness to engage in that. But I would have thought also that many of my colleagues on both sides of the two chambers would also value that capacity, given that they have so many facilities spread around the country, often in different electorates. Will you be anticipating a process to engage local members of parliament?

Dr Garrett —We have already started, under our new director, Di Jay, to evaluate where we have facilities linking into electorates, and inviting parliamentarians to participate in understanding what we are doing in their environment, to be involved in prize giving and really getting much closer to the organisation.

Senator CARR —Would it be fair to describe the CSIRO as seeking to be much more politically engaged?

Dr Garrett —I would use the word `engaged' rather than `politically engaged'.

Senator CARR —But that is the nature of the process. I am a politician, so I am not squeamish about using the word `political', as it is a proper use of the term. Are you suggesting the CSIRO is seeking to engage in the political debate about the directions of research funding in this country?

Dr Garrett —It makes a lot of sense. We must be doing that. We have a lot of skills to bring good advice into that environment.

Senator SCHACHT —But you will not be defensive if someone disagrees with you within that debate? That is part of the democratic debate.

Dr Garrett —Absolutely.

Senator FERRIS —For some years now CSIRO has conducted very useful information forums—which have been held often in this room, as I recall—on issues of the day, some of them quite political, as I recall, at the time. I wonder if you are planning to continue with those information sessions—I think they were called forums—or, in this context of re-examining things, are you looking to change that sort of interaction?

Dr Garrett —Not at all. We believe that that is a very useful forum of engagement. We present information and we get feedback from the participants. We actually want to increase that number now, not decrease.

Senator FERRIS —So you are actually planning to continue that?

Dr Garrett —We are very much planning to continue those.

Senator FERRIS —Can I tell you, both as a former employee of CSIRO—I should say that at the start—and a person who attended many of those forums, that I found them very useful. Whilst some of the issues could be considered, as Senator Carr says, towards the political, since the issue was in the public debate, it was also a very useful opportunity to interact with the scientist who was, generally speaking, one of the experts in that field. I do hope your organisation will continue to do that.

Dr Garrett —You would know, coming from the communication environment—coming back to this one CSIRO approach—that we had not adequately tapped into the communication network; that they were not together, that they did not have a single strategy for the organisation, that they were not meeting on a regular basis. We have made a lot of progress around that. We have now a strategy for the communications called the `communication revolution' in CSIRO, so we are tapping into that power. The forums that you talked about are very near the top of our list of priorities for communication vehicles.

Senator FERRIS —I would rather have the words `communication revolution' than `big, hairy audacious goals'.

Senator CARR —Dr Garrett, the document says:

There is a widespread perception that CSIRO spends more than 30 per cent of our resources in meeting our external earnings target, and that has led staff to discontent about the lack of head room to do strategic research.

Is that right?

Dr Garrett —That is our view, and in the last few months we have put in place a process to more effectively assess and understand through the project management work—and Ron can talk to this—where scientists are allocating their time. This is part of managing our projects better. That was a widespread view and we got that from the people, and we put in place processes to correct that.

Senator CARR —Can you advise me why the Chief Scientist's review of external earnings has been delayed?

Dr Garrett —I know it has been delayed. I do not know why it has been delayed other than presuming that it needs wider consultation.

Senator CARR —Would you expect that the external earnings targets of 30 per cent would be removed? Would it be recommended for removal?

Dr Garrett —Certainly our input into the process is that that rather coarse measure has, for want of a better phrase, passed its sell-by date.

Senator CARR —Yes.

Senator SCHACHT —Absolutely.

Senator CARR —So in your view it would be better to remove that particular target?

Dr Garrett —We believe so. There are other targets, and out of this process, which I find a good process, with the Chief Scientist we will be coming up with a series of what we believe are more appropriate measures for the performance of the organisation into the future.

Senator CARR —Given the public statements of the Chief Scientist, are you expecting he would agree with you?

Dr Garrett —I think we share a lot of common ground.

Senator CARR —In terms of a relationship with the universities, how do you see that working?

Dr Garrett —Again, Dr Wellings could come in here because he is leading this charge. I would use the words `significantly improving'.

Senator CARR —I see. Would it be off a low base?

Senator SCHACHT —It would be off a very low base, I would have thought, Dr Garrett.

Dr Garrett —I would use the word `patchy' again. I think there are some areas where we have been working very much hand-in-glove for many years, but there has been antagonism and lack of trust. My view is that, with Australia spending two per cent of the world's R&D, I worry that I am probably spending too much of my time on what is inside that two per cent as opposed to what is happening in the 98 per cent. We have to work more closely together. One of our key messages, as you will see from our strategic action plan, is `partner or perish', and we are working very actively on that. In the last year we have had two very special seminar workshops with at least 14 deputy vice-chancellors of research so that we can get an alignment and understanding of our mutual directions and where we can work more closely together.

Senator CARR —Do you think the CSIRO's attempts to secure ARC funding without a buy-in will improve relations with the universities?

Dr Garrett —I think your leading question is not the reality. We have not done that. I heard the debate this morning—

Senator CARR —What is your position on the access to ARC funding for the CSIRO?

Dr Garrett —We are in the policy area now. Obviously it is up to the appropriate ministerial views to lead this debate.

Senator SCHACHT —Dr Garrett, it is a double-edged sword. If you argue for access to ARC funding and win in some form or another, I will bet two bob to London Bridge that within two years the university sector will be arguing to have access to your triennial funding, and I am not sure that is to CSIRO's advantage in the long run. You have got triennial funding guaranteed as a one-line budget.

Dr Garrett —Yes.

Senator SCHACHT —You are a lot better off with that—whether it is few million dollars short—than trying to nibble something out of ARC. Once you get into that you are going to get mangled. There are, what, 37 vice-chancellors and, as one vice-chancellor once said to me, `The most evil committee in public life in Australia today is the vice-chancellors committee of the universities.' It was a very distinguished vice-chancellor who was previously chair of the vice-chancellors committee. I just think that it is a short-sighted view to end up over-arguing to get money out of the ARC.

Dr Garrett —I would say the following fact: we have not advocated a position for access to ARC money, new or old.

Senator CARR —You have not advocated a position.

Dr Garrett —We have not advocated it. We are not pushing that line. Secondly, one of the things I have tried to achieve with my colleagues in the last year in the national system of innovation is to differentiate the various knowledge providers, the knowledge infrastructure, which we have here in Australia. If CSIRO was to seek to get access to ARC funding, we would say, `Where is the relative position of CSIRO scientists vis-a-vis university scientists?'

Senator SCHACHT —Absolutely.

Dr Garrett —The policy of that it is obviously beyond me.

Senator CARR —I am interested in your policy, not the government's policy. Let us be clear about this. You are saying that the CSIRO has not sought access to the competitive grants program for the Australian Research Council.

Dr Garrett —Correct. Dr Wellings will add a point because he has responsibility here.

Dr Wellings —That is true, Senator. We have not sought entry into the ARC pool. One of the things that we have done is to move to allocate some of our own money in a collaborative venture with the ARC.

Senator CARR —Yes, that is right. There are a number of projects to which you have access at the moment.

Dr Wellings —I am saying something different. I am saying that, in the last 15 months, CSIRO has moved to generate a new program in collaboration with the ARC where we will allocate some of our resources in order to build a new pool of postdoctoral fellows, some of whom can come to CSIRO in an open competition with the university.

Senator CARR —That is a very important distinction.

Dr Garrett —Professor Sara talked about that.

Senator CARR —Yes. I would like CSIRO's view—not the government's view but your view—on what is the level of contribution CSIRO would make towards development of such a program.

Dr Garrett —The level is of the order of $1 million each year over the next three to four years. It is a collaborative joint process.

Senator CARR —Thank you. In the period prior to your appointment, was it the CSIRO's view that they should have access to ARC competitive grants programs?

Dr Wellings —No. Our view was that the institutional typology that exists in Australia—and exists in many other countries in the OECD—has a creature called a very large public research institution—the TNOs, VTTs and CSIROs—that sit on the landscape as a space somewhere between the universities and where industry is or where major community projects are. And I think our role is to either work directly with business or do things which are in the national interest.

Senator SCHACHT —The real issue here is that universities do more of the pure research and you do more of the applied research. You have divisions that do pure research, of course—radio astronomy, Antarctica—which are not very commercial; I accept all of that. But, by and large, I always thought the definition was that ARC grants went to more pure research and, hopefully, very rapidly they would get good ideas that would become commercial and make quids for Australia. And, by and large, you are the applied research and your research is applied to get outcomes that create products, wealth and jobs. The edges are always blurred. I have always been a bit intrigued that universities, under pressure of their own finances, are starting to move too much into the applied research rather than sticking to some of the pure research, because if we get pure research obliterated it is like we have got a hole in the doughnut. You do need good pure research to build into applied research. That is why I think your collaborative work is to be given a big tick.

Senator CARR —I can assure you that there have been discussions. I just want to be clear about this: these are discussions that you, as CSIRO, have not initiated or supported. As an institution you have not sought—

Dr Garrett —Let me try to be very clear, too. I am trying to remember the directive. The initiative was out of Backing Australia's Ability. That is where the suggestion originally came from, as I understand it. As Vicki Sara said this morning, we have only been involved in informal discussions, as I got to know personalities in the system. As we have said today, obviously we have to respond to government policies, but our view at the moment is that it would not make sense to us, for the reasons we tried to articulate.

Senator CARR —I appreciate the answer. I now turn to another issue, as time is against me. I have a range of questions on this report, which we will return to at the next round. I want to ask about the CSIRO property review. Mr Harley, I will save you a lot of trouble: I have a copy of the CSIRO property review, the final report dated February 2000. I also have a copy of your minority report. I thought that I would enlighten you with those observations. It will help us to process this. It helps so much if the public understands these issues. That is the point that I am making, because I think your role in this, from my observation and my reading of the documents, is above and beyond the call of duty and very honourable. I will go through these things with you, though. Can you tell me what is happening to the following properties: North Ryde, Gungahlin, Yarralumla, Limestone Avenue—

Senator SCHACHT —Yarralumla: are we selling Government House? We're not getting rid of the Governor-General, we are getting rid of his house.

Senator CARR —This mob own half the suburb—or they used to. And what is happening with the properties at Marmion in Western Australia and Cleveland in Queensland?

Mr Harley —Under the agreement between the CSIRO board and government, we took action to dispose of all those properties over a period of three years. Riverside, which is North Ryde, has been sold and leased back on a 20-year term plus options and the money returned to government.

Senator SCHACHT —How much?

Mr Harley —Sixty million dollars.

Senator SCHACHT —It is to go straight back to the government?

Mr Harley —Yes.

Senator CARR —What did it cost you to lease it back?

Mr Harley —I think it is about $4.5 million a year, which is underwritten by the government.

Senator CARR —So it will not take long for you to actually expend $60 million?

Senator SCHACHT —Fifteen years.

Senator CARR —After 15 years you will be paying for property you used to own: is that right?

Mr Harley —The government will be paying the rent, we will not.

Senator CARR —But is that the effect?

Mr Harley —That is a mathematical—

Senator CARR —Thank you. What has happened to Gungahlin?

Mr Harley —Gungahlin, Yarralumla and Limestone Avenue—CSIRO's headquarters—have been lumped together as a sale. We are now in the final stages of negotiation with a purchaser. It will be on the same basis as Riverside. We will probably net about $51 million and the rent, which will be returned to government, will be about $4.7 million plus outgoings which will be underwritten by the government.

Senator CARR —Again, 15 years is the changeover point. That is for redevelopment—

Senator SCHACHT —Yarralumla, Limestone and Gungahlin—all in Canberra.

Senator CARR —That is for redevelopment for subdivisional purposes, isn't it?

Mr Harley —Riverside or Gungahlin?

Senator SCHACHT —The Canberra sites.

Senator CARR —Are you going to put housing on them?

Mr Harley —No. We have a 20-year lease to carry on as if we were the owner and operator, so there is no prospect of them being developed for at least 20 years.

Senator CARR —You have a lease for at least 20 years?

Mr Harley —We have a lease for 20 years, with an option for another 20 years.

Senator CARR —So as far as you are concerned the properties will be secure for CSIRO purposes?

Mr Harley —We negotiated the best possible conditions we could to protect CSIRO's interests.

Senator CARR —The only issue here will be the amount of money it costs.

Mr Harley —Yes.

Senator CARR —I want to come back to that. Where did the proposal for the property review come from?

Mr Harley —It is part of the government's policy that, broadly speaking, the government should not be in the business of owning real estate.

Senator SCHACHT —It came from DOFA—did they drive it?

Mr Harley —As the government department responsible, yes.

Senator CARR —When that proposition was put to you as a statutory corporation, did you express the view that it was in the public interest for the CSIRO to retain ownership of its property, particularly its specialist sites?

Mr Harley —That was CSIRO's view—that all our properties, except for the one on Limestone Avenue, were special purpose and it was in the public interest that they be retained.

Senator CARR —Is that still the view of the CSIRO?

Mr Harley —We have not been back to our board, but I would assume that it would be.

Senator CARR —To what extent do the recommendations of the final report compromise the future CSIRO strategies and research programs?

Mr Harley —Insofar as the agreement reached between the board and the government and negotiations over the leases that we are putting in place or have put in place are concerned, the operations of CSIRO will not be compromised as such.

Senator CARR —In terms of its future strategies and research programs, though, if you are having to expend this money that you otherwise would not have had to expend, will there not be an effect on the capacity to undertake research programs?

Mr Harley —The principle of the agreement between the government and CSIRO is that the government will pick up all rentals and all outgoings that we would normally not have had to pay had we owned the properties.

Senator SCHACHT —So that is $8 million per year or thereabouts—nearly $9 million—for those two lots?

Mr Harley —Yes, plus other outgoings.

Senator SCHACHT —And they will give you supplementary budget support to pay for that for the next 15 years?

Mr Harley —For the next 20 years; in principle, forever.

Senator SCHACHT —So after about 13 or 14 years, the federal budget will be helping you to pay for something that once cost them nothing. There must be some economic whiz over in Treasury who thought this up. No wonder they always get the projections wrong.

Senator CARR —Mr Harley, 15 years is a helluva long time in government. What are we looking at in that period?

Senator SCHACHT —Five elections.

Senator CARR —What government can commit five governments to this proposition?

Dr Garrett —That is a policy question, Senator.

Senator CARR —What is not a policy question? The obvious point I make is that I am only too well aware of it. But what contractual arrangements do you have with the Australian government that protect the interests of the CSIRO over that 15-year period—over the life of five parliaments?

Dr Garrett —We have a contract, do we?

Mr Harley —We have a cabinet decision.

Senator CARR —A cabinet decision? Gee, that is secure!

Senator SCHACHT —Hold your breath: that is not a contract.

Senator FERRIS —We inherited decisions from your government which were binding.

Senator CARR —The point is that there were many decisions that Labor cabinets made which were overturned in 1996. The Public Service was decimated by cabinet decisions made by subsequent governments. That is the point.

Senator FERRIS —I think there was a $10 billion debt to be repaid. That is why.

Senator CARR —Whatever the excuse was.

Senator FERRIS —That is not an excuse; that is a reason.

Senator CARR —Mr Harley, other than a cabinet decision, do you have any other form of security?

Dr Garrett —That is what we have, Senator, and I believe that we are getting into territory outside our—

Senator CARR —Yes, I do not want to press you any further than that.

Senator SCHACHT —Apart from the cabinet decision, is there no other contract, compact or agreement signed separately between CSIRO and the Department of Finance and Administration?

Dr Garrett —No.

Senator SCHACHT —Good luck.

Senator CARR —In the property review there were 13 properties listed. How many have subsequently been sold?

Mr Harley —Only the one to date. That was Riverside, North Ryde.

Dr Garrett —But the agreement only focused on six.

Senator CARR —So it is on the six that I listed before. So those others are off the list now?

Dr Garrett —That is correct.

Senator CARR —So, Mr Harley, would it be fair to say that the CSIRO strategy was to in fact reduce the list down to those six?

Mr Harley —We would have preferred to have no properties sold.

Senator CARR —Yes, I got that impression, but do you think you have actually—

Senator SCHACHT —Have you kept the barbarians away from totally looting and pillaging your castle?

Mr Harley —At the time, I think the agreement was the best that we could expect.

Senator CARR —In your view, it was an agreement, so it is a negotiated outcome.

Mr Harley —Yes.

Senator CARR —Which was the best deal you could get.

Mr Harley —Yes.

Senator SCHACHT —Well done. I know who you were fighting—Attila the Hun and Genghis Khan over in DOFA.

Senator CARR —There has been a change in management, so I can ask you these questions, Mr Harley. Was the CSIRO senior management sympathetic to the issues you raised in your minority report?

Mr Harley —Yes.

Senator CARR —And were CSIRO's concerns ever raised with the ministers involved?

Mr Harley —I believe so.

Senator CARR —What was the result?

Mr Harley —The result was a negotiated settlement between the CSIRO board and government.

Senator CARR —You stated a proposition in the minority report that the lease-back recommendation would create additional costs to the CSIRO. Is that still the case?

Mr Harley —I believe that in any situation where you do not own a property there are additional costs that will sneak in.

Senator CARR —What sort of things, do you think?

Mr Harley —For a start, you will be paying rates, which we have never paid before. Somebody has to pick them up, so the government will be paying. There will be a debate over land tax, which we are exempt from now but which we may not be. It depends who buys the property as an investor. There will be inspections from local government inspectors that we did not have before. These things could sneak into the equation.

Senator CARR —Have you got any assessment of what the total impact will be, in your judgment?

Mr Harley —It may not be significant to CSIRO. It will be significant to the government.

Senator CARR —To the public purse.

Mr Harley —To the public purse.

Senator CARR —What do you think that impact will be to the public purse?

Mr Harley —I think you have alluded to it before. The sums run out at between 12 and 15 years.

Senator CARR —So upon that, the equation changed to the disadvantage of the public purse.

Mr Harley —Yes.

Senator CARR —You stated in your report that the property review committee, which I see was basically dominated by agencies outside the CSIRO, neglected other important terms of reference dealing with the relative cost of ownership and leasing. Are these the sorts of factors you were referring to?

Mr Harley —Yes.

Senator CARR —In relation to schedule A of your report, dealing with the financial aspects of the possible leasing of the sales, do you still stand by the sort of figuring you have in that?

Mr Harley —Schedule A is the comparison between all the properties and the internal rates of return, I take it?

Senator CARR —Yes.

Mr Harley —Yes. They are still relevant.

Senator CARR —It has a heading about Commonwealth property principles.

Mr Harley —Yes.

Senator CARR —So you still hold by that.

Mr Harley —Yes.

Senator CARR —To what extent do you think the imperative to sell the assets rather than the CSIRO strategic interest was driving the consideration of the committee at the time?

Mr Harley —CSIRO has never had a policy that we must own everything. We have always had a policy that we should have the best tenure we can for the use, whether it is long term, medium term or whatever. We have never been against selling or leasing. That was always our position. We thought we had it fairly right, and we still do. I think it was government policy. Quite often, around the world, governments change from owning to leasing. If you look at the history of the last 200 years, that is how it has been. One government will come in and sell it all, and the next one will come in and buy it back.

Senator CARR —That is what I mean about the cabinet decisions. The majority report appears to have ignored the advice of the Australian Valuation Office, the Australian Government Solicitor and CB Richard Ellis on the internal rate of return on the CSIRO property. Do you agree with that?

Mr Harley —Yes. They used a different approach from the one used by the Australian Valuation Office and others.

Senator CARR —Is it also the case that the review committee took values calculated in accordance with an advice which took the view that the overwhelming majority of the CSIRO properties would never be able to meet.

Mr Harley —Yes.

Senator CARR —In fact, there is surely an argument on that basis that all the properties should have been sold.

Mr Harley —Some were excluded by the majority of the committee.

Senator CARR —In public interest terms?

Mr Harley —In public interest and financial terms; very few under financial, but the public interest.

Senator CARR —Basically, the political flak that it would have caused. That is a judgment I make. Thank you very much for your answers. I appreciate the way in which it has been treated.

Senator SCHACHT —Dr Garrett, I would like to say—and I acknowledge that my colleague Senator Carr and I have a difference of opinion—that I am disappointed that the government, in the restructuring of government responsibilities and administrative structures after the election, transferred CSIRO and similar agencies like ANSTO out of the industry portfolio and into the education portfolio. I think you are better placed with industry and, now that small business is back in industry, you would have been better in that portfolio. That is my personal opinion. Nevertheless, we get on with the job. One of my questions is—and I always ask this, as you know, when I turn up—are there any outstanding legal disputes between CSIRO and a range of characters out there who believe you diddled them? I said `believe you diddled them'; I did not say you had.

Dr Garrett —No material ones.

Senator SCHACHT —Good.

Dr Garrett —All the big ones have been fixed, as per our June hearing.

Senator SCHACHT —Good. Sometime in the recent past, you sent an email to the minister, Peter McGauran, when he asked for some information about biosensor technology et cetera. In that email, you explained it and gave an example of a company called Ambri, which is a spin-off from the CSIRO and other investors of the CRC earlier in the 1990s. You mentioned that you had received an update from Ambri and that the current information is that they are now into commercialisation, they have raised money et cetera. You say that the biosensor they have developed:

... still stands as the world's only example of a working nanodevice and, therefore, puts Australia at the forefront of the new field of nanotechnology. The Ambri biosensor research is a spin-off of new areas of research with CSIRO, and has created new materials and devices by blending biological concepts with engineering devices for the areas of telecommunications, molecular electronics and new diagnostic platforms.

That is just part of the quote. I do not know exactly when you sent it, but it was in the recent past. I do not know whether you can recollect sending it.

Dr Garrett —Yes. Minister McGauran, in one of his visits to us, expressed interest in how things had progressed, because he was minister of science when there was an early launch of this activity.

Senator SCHACHT —You may not be aware of this, Dr Garrett, but I think some of the other senior staff would be. On 15 November last year, CSIRO's commercial director, John Read, organised a meeting with Ambri in Sydney at their offices in Chatswood. At this meeting, John Read and three senior CSIRO divisional chiefs, Annabelle Duncan, Richard Head and Warren King, met with the Ambri management and discussed a proposal by Ambri to work with CSIRO to get the best commercial return on research outcomes from CSIRO and Ambri's specialist market area of time critical medical diagnostics. This was November last year, when CSIRO agreed to consider the proposal and to quickly respond.

I am informed that since that meeting, and despite many requests, there has been no response from CSIRO to say yes, no or `go jump in the lake; it's a useless idea' on this joint venture. I declare not a conflict of interest but, ever since I met the company when it was a CRC when I was minister, I have followed Ambri with some interest. Can anybody give us any information on why there has been a close to three-month delay in giving any answer back to Ambri on the proposal, which they believe is good for them and good for you?

Dr Garrett —I will have to take that on notice because I am not aware of that delay. Obviously it is a cause of concern to us, particularly in the context of our debate about responsiveness. I will investigate it immediately.

Senator SCHACHT —I ran into the chief executive the other day in Sydney and he said, `If they want to tell us to go jump, that is fine, but we want to know so we can go on to do something else.' It is really the lack of an answer that is frustrating them. As you or other staff might know, the chief scientist of Ambri is Bruce Cornell, a former division chief, I think, and head of the CRC for biosensors. I think it is his invention or discovery or intellectual property that Ambri has now successfully floated or got shareholders in. I would appreciate it if you would take that on notice, and not only respond to me but also respond directly to them.

Dr Garrett —We will do that.

Senator SCHACHT —The other question I wanted to raise was that a Mr Healy—

Dr Wellings —Can I stop you for a minute. I have to come back to your comments about whether the intellectual property belonged to Bruce Cornell. For the record, it would have been either CRC intellectual property or CSIRO intellectual property.

Senator SCHACHT —I misphrased it. He was at the forefront of developing the intellectual property at CSIRO when he was the head of the division, as I understand it.

Dr Wellings —But the IP would certainly be institutional IP.

Senator SCHACHT —Yes, of course. I think when they spun it off under the CRC it went through all of those negotiations, but when he was the head of the division and director of the CRC, as I understand it, it was his research work with others.

Dr Wellings —Indeed, he was a co-inventor of the technology.

Senator SCHACHT —He explained it to me when I visited his laboratory. I said, `I can't understand this; give it to me in layman's terms.' He said, `Well, what we have invented is a sensor that, if you put a cube of sugar into Sydney Harbour we could detect the sugar in all that volume of water.' I know he gets sick of me quoting it back to him, but that is the only way I can understand that this must be a pretty good idea, and that is why I think that this has been successful. Has Mr Terry Healy been recently appointed to some position of legal counsel or general counsel?

Dr Garrett —He is our legal counsel and has been for quite a number of years, in my understanding.

Senator SCHACHT —Has he been designated general counsel? What is his actual title? Does it mean that he is the head shebang in CSIRO for all legal matters?

Dr Garrett —In essence, yes.

Senator SCHACHT —Did he have any involvement in the sad episodes of Sirotech going down the gurgler, the legal advice about Charter Pacific, Cassegrain and issues that are now well behind us? Was he involved in any of the advice at the time that those were a problem for CSIRO?

Dr Garrett —My colleagues advise me that the answer is yes.

Senator SCHACHT —And he is still the general counsel on legal advice?

Dr Garrett —Yes.

Senator SCHACHT —Do the senior management believe that he is not responsible for any of the difficulties that CSIRO got into in reaching a resolution of the contractual arrangements of Cassegrain, Charter Pacific and/or the collapse of Sirotech?

Dr Garrett —Paul, will you speak on that?

Dr Wellings —As I understand the matter, and I am happy to check it, Mr Healy was the legal negotiator on the cases that actually led to the resolution of Cassegrain and Charter Pacific in the way that they were resolved.

Senator SCHACHT —Yes, but was he also at the beginning providing the legal advice on the structure of the contracts that got us into strife?

Dr Wellings —Not that I am aware of.

Dr Garrett —His title is general counsel.

Senator SCHACHT —Back in the early 90s the CSIRO opened an office in Collins Street, and the one at Parkville in the suburb near Carlton.

Senator CARR —`Suburb near Carlton'! It is a bit more than that.

Senator SCHACHT —I mean, John Elliott and the Carlton footy club might own it, but I want to be careful about dealing with Carlton footy club.

Senator CARR —But the CSIRO and Melbourne University have the rights on the rest of it.

Senator SCHACHT —Are any of those two properties still being rented by CSIRO? Mr Harley might know this.

Dr Garrett —The Collins Street office lease—and Mr Harley, please add to the comments I make—comes to an end—

Mr Harley —On 31 March this year.

Senator SCHACHT —How much rent were you paying per annum for that?

Mr Harley —About $250,000 a year.

Senator SCHACHT —For how many square metres?

Mr Harley —About 800.

Senator SCHACHT —It is not a big office, is it, for $250,000 a year?

Mr Harley —It is pretty reasonable rent for the CBD in Melbourne.

Senator SCHACHT —Has anyone been using that office in the last two or three years?

Mr Harley —Yes. It is being fully utilised until—

Senator SCHACHT —Up until March. Who has been utilising it?

Dr Garrett —It has been utilised by the legal department, by some of the commercial offices, by at least one divisional chief, Professor Neil Phillips, and Peter O'Callahan from risk assessment—from internal audit.

Senator SCHACHT —They could all have been put out at Broadmeadows or even up at Limestone Avenue at a much cheaper price and saved a lot of money—which you could probably have put into research, Dr Garrett.

Dr Garrett —We have in fact made the decision to move the staff. Many of them will be operating out of Clayton offices and also from Parkville where we have our health science and nutrition.

Senator SCHACHT —In recent times was the only reason you had the staff there because you had a lease and you had to use the space, even though to have people on those duties there really was a waste of cost?

Dr Garrett —We took the strategic decision that the benefit-to-cost ratio was not appropriate for that office.

Senator SCHACHT —When was the last time that that office was used by a senior executive of CSIRO?

Dr Garrett —Dr Adam, my predecessor, used that office extensively.

Senator SCHACHT —Was it his permanent office?

Dr Garrett —No, it was not. I will ask Dr Sandland to handle this. He was around.

Dr Sandland —It was his permanent office. Then he took on the position of acting chief executive where he had an office in both Limestone Avenue, Canberra, and in Melbourne.

Senator SCHACHT —When did we start with that office? Was it in 1992 or 1993?

Dr Sandland —No. We were at Collins Street from 1997, I would think.

Senator SCHACHT —What was the reason we got the Collins Street office?

Mr Harley —You were the minister, I think, at the time—

Senator SCHACHT —No, I had finished. You cannot slot me in for this. You can slot me for many things, Mr Harley, but you ain't going to slot me for this one, I can tell you. If I was responsible I wouldn't be asking the bloody questions. I would have disappeared out of the door and had a cup of tea.

Mr Harley —I was going to suggest that we did take an office to Royal Parade, Parkville, in the early nineties—

Senator SCHACHT —But why did we take this one in Collins Street?

Mr Harley —When we decided, as an organisation, to move from Parkville—

Senator SCHACHT —to Collins Street.

Mr Harley —we decided, in consultation with the Victorian government, that CSIRO should have a presence in the CBD. So we removed our head office at the time back to Canberra and we took some strategic people over to Collins Street.

Senator CARR —When was that decision taken?

Senator SCHACHT —When I became minister, Parkville was already going, which I thought was odd, and after I left as minister the Collins Street thing turned up, which I thought was even odder. It was a waste of hard-earned cash that CSIRO could have put into research.

Dr Garrett —I understand that the motivation was associated with being at the centre—the hub—of the Victorian business community and that it would assist with building relationships.

Senator SCHACHT —On the way into the lift or something the chief executive could run into the head of BHP? Is that what it is about?

Dr Garrett —That is a decision in the past. We have obviously changed that decision now.

Senator SCHACHT —Good, I am pleased.

Senator CARR —This is the Paris end of Collins Street.

Senator SCHACHT —Please take on notice, Mr Harley, just out of my vindictive curiosity: how much did you spend on the Collins Street office from the time you got it till when it ends in March?

Mr Harley —I will.

Senator SCHACHT —My other question is about Parkville: how long did you have Parkville for? I am told it is somewhere near the university, near the Carlton footy ground.

Mr Harley —I think we were there for about four years.

Senator SCHACHT —When did you get into Parkville? It was certainly before my time as minister.

Mr Harley —The early 1990s.

Senator SCHACHT —When did you leave: 1996?

Mr Harley —About 1996 or 1997.

Senator SCHACHT —What was the reason for having an office at Parkville—next to Carlton footy ground, Melbourne University and close to a nice park?

Mr Harley —It was a rather pleasant place to be. The rationale at the time was that the CSIRO was to move a strategic headquarters to Melbourne.

Senator SCHACHT —Why not move it to Adelaide? Why move it to Melbourne?

Dr Garrett —You will have to ask our predecessors.

Senator SCHACHT —I know why—it suited the living arrangements of some senior management at the time. But it was a waste of money. Now you are all back at Limestone Avenue, is that correct?

Dr Garrett —That is correct, and enjoying Canberra.

Senator SCHACHT —Very good. If you want to know, strategically, I want you to move to Adelaide, my home state. You cannot do better. It is better than Melbourne, all round. But that would still be a waste of money. Thank you. I do not have any more questions at the moment.

Senator CARR —Dr Garrett, do you have a brief on Pacific Magnesium Corporation? I have received extensive correspondence on this matter.

Senator SCHACHT —This is the Gladstone project?

Senator CARR —Yes. I am sure I am not the only one in this building who has received extensive correspondence on the matter. I am told that the CSIRO has some exclusivity agreement with the Australian Magnesium Corporation, and it has since 1998. Is that true?

Dr Garrett —That is correct.

Senator CARR —Did this exclusivity agreement expire in late 2001 or was it renewed for a further four years?

Dr Garrett —I would have to check the dates and take that on notice.

Senator CARR —Does the agreement preclude the CSIRO from carrying out any work related to magnesium production with other parties?

Dr Garrett —While there are confidentiality agreements in place between CSIRO and AMC, we are able to undertake work for other companies, yes. It is a tightly specified agreement. We have had some informal discussions with another company in the industry and a number of significant areas where CSIRO can offer support have been identified. I should go on to say that we have had discussions with Pacific Magnesium Corporation, formerly Golden Triangle, but they have decided to develop their technology elsewhere.

Senator SCHACHT —Pacific Magnesium—the mob at Gladstone, if I have got it right—has decided to do research elsewhere?

Dr Garrett —They have decided to develop their technology elsewhere.

Senator SCHACHT —Let me get this straight—

Dr Garrett —The Golden Triangle group—Pacific Magnesium.

Senator SCHACHT —Yes, which is Pacific Magnesium—the Gladstone Project?

Dr Garrett —No, it is not the Gladstone Project. The Gladstone Project is AMC.

Senator SCHACHT —AMC, sorry. That is what I wanted to clarify, I misunderstood.

Senator CARR —Can you advise me whether or not, on 9 April 2001, an officer of the CSIRO advised Golden Triangle Resources—now Pacific Magnesium Corporation—that, due to an exclusivity arrangement with AMC, they were unable to work with any other company on magnesium production related matters?

Dr Garrett —Again, I would have to take that on notice to check the facts. I would say that that could well have happened, but I will confirm that with you.

Senator CARR —I understand the officer is Mr Julian Land, Principal Commercial Adviser. If that did occur, is that contrary to what you have told the committee about your capacity to work with other organisations?

Dr Garrett —I would need to evaluate the precise fields of coverage of the confidentiality agreement. My understanding—and I will check these facts on notice—is that there is capacity within that confidentiality arrangement with AMC for us to work in other domains in the development, processing and application of magnesium alloys. However, there could well have been, in this particular set of discussions, too close a correspondence between the confidentiality agreements with the AMC and the interest areas of the former Golden Triangle group.

Senator CARR —How can it possibly be justified, in terms of one of our leading research agencies, that an exclusivity agreement would be entered into—particularly in the light of competition policy, all of which has developed since 1988—which would cover not just a single technology—which I understand is not the issue—but, rather, an entire field of light metals research?

Dr Garrett —Senator Schacht will remember asking this exact question in June—

Senator CARR —I am sorry, I was not aware that Senator Schacht had asked this question, but what was your answer then?

Dr Garrett —I am going to read my answer when I find it in Hansard so I can be consistent.

Senator SCHACHT —Very wise. You have to remember in politics, Dr Garrett, that consistency is the sign of a small mind.

Senator CARR —Says a former minister!

Senator SCHACHT —That is a Reg Withers quote.

Senator CARR —Yes, it is terrific.

Dr Garrett —What I would do, though, in the interests of time, is refer you to my response—

Senator CARR —Can you take that on notice? Because I do think it may need to be reviewed.

Dr Garrett —Okay.

Senator CARR —If you establish that this meeting did occur on 9 April 2001 and that you did make the statements—and I understand Senator Minchin has made similar statements—about the capacity of the CSIRO to undertake this research, how is it compatible that these events have occurred? Also, can you explain to me if it is true that in November 2000 Senator Minchin announced a $50 million commitment through the CSIRO to commercialise the AMC technology. The terms of the agreement provide that the CSIRO will share the intellectual property development as a result of the investment. Is that true?

Dr Garrett —That is correct.

Senator CARR —Were similar opportunities available to other research programs? Or was this a just a one-off arrangement?

Senator SCHACHT —You have signed similar contracts with commercialisation. This is a very big one.

Dr Garrett —I am just trying to understand the senator's question.

Senator CARR —You normally sign it in regard to the use of a particular technology. What I am being told is that this affects an entire industry. There is a very substantial difference. I would have thought it raised a whole lot of other public policy questions.

Dr Garrett —I think the decision was made in view of both the federal and Queensland governments' perspective that this provided a very significant opportunity for Australians to develop a major industry based on 15 years of CSIRO technology and interaction with the AMC.

Senator CARR —But the Commonwealth government, I understand, invested a very large sum of money in this.

Dr Garrett —That they provided a non-recourse loan to the CSIRO, which will be repaid out of the royalty earnings of the order of three cents per tonne on magnesium sales.

Senator CARR —How much was that loan?

Dr Garrett —It was $50 million.

Senator CARR —So that is the extent of the Commonwealth exposure on this matter?

Dr Wellings —In relation to the CSIRO, there may well be other investments by the Commonwealth government into the project, but I think that would be a departmental matter.

Senator CARR —As far as you are concerned, it was only $50 million.

Mr Garrett —Just for clarification, there was a prior agreement in the early nineties—1992, I remember—where $20 million was put into that exercise to develop a pilot plan and there was $5 million from the Queensland government. So the $50 million was building on that earlier investment.

Senator SCHACHT —I draw your attention to the Senate estimates on the industry portfolio yesterday in the economics committee. My colleague Senator George Campbell raised the issue, and I raised it, of the proposal by another company to build a magnesium plant near Port Pirie. They are arguing, of course, that all the money has gone to one company in this exclusive agreement. All up, the federal government has put $100 million into the project: $50 million to you and $50 million to the company, as I understand it. It is $100 million project, isn't it—from the federal government, through the strategic investment plan? Is it $100 million all up from the feds?

Mr Garrett —I am not aware of what the exact figures are for the Commonwealth as a whole.

Senator SCHACHT —But yours was $50 million for CSIRO.

Mr Garrett —In the most recent round, ours was $50 million.

Senator SCHACHT —The issue other companies have raised, including the company in Port Pirie, is this: how much does exclusivity stop you doing anything in the broad base of technology and scientific research generally into the uses of magnesium as the new so-called wonder metal? Is it all tied up so that whatever you do goes to this company where you have a major commercial opportunity to make a lot of money for yourself and Australia, or can you go sideways to a university or another company who say, `Actually, that technology up at Gladstone is now superseded. We have a better idea.' Are you actually precluded from investigating the better idea?

Dr Garrett —I would have to take on notice the details of the contract. As I indicated earlier, my understanding is that there is significant field definition in that commercial relationship, but outside that field definition, as we are already having discussions with other companies—

Senator SCHACHT —Okay, because you see the issue is that if you get precluded from using your research—you are one of the biggest organisations in Australia—you cannot do any more research. That may well be against the national interest. It may be good for the interest of the joint venture, but if you cannot go and do something else on general research because it might be contrary to that contract then I think we have a problem.

Senator CARR —That is why we want you to have a look at it for us and we will discuss it at the next round if we can. Does that seem reasonable?

Dr Garrett —Yes.

Senator CARR —Thank you very much. I have other issues that flow from that about the actions of your—

Dr Garrett —Other important policy issues?

Senator CARR —Yes. Policy questions and operational issues that go to the response of officers of CSIRO which I want to deal with. I want to establish what the nature of the arrangement is to start with. Regarding the CSIRO pricing review, is it correct that over the last six months or so CSIRO has participated with DOFA in a pricing review of the organisation?

Dr Garrett —That is correct.

Senator SCHACHT —Is this the 459th pricing review CSIRO has conducted in the last 20 years?

Dr Garrett —I am not sure how many other pricing reviews we have had, but there certainly seem to have been a number of reviews.

Senator SCHACHT —There has been a lot.

Senator CARR —Can you indicate to me who were the members of the review?

Dr Garrett —This was a joint steering committee organised between CSIRO and DOFA. The members of the committee on our side were Bob Garrett; Bruce Hobbs, the Deputy Chief Executive; and Dr Colin Boothroyd. On DOFA's side, members of the pricing review committee were Mr M Loudon and Ms Julia-Lynn Sisson.

Senator CARR —What are the principal conclusions and recommendations of the review?

Dr Garrett —My advice is that this is still in the process of being put through to ERC in March.

Senator CARR —Oh, I see. So it is a budget matter, is it?

Dr Garrett —It is a budget matter.

Senator CARR —Will you take it on notice that once that is concluded I would like a copy of the review?

Dr Garrett —Yes.

Senator CARR —Thank you. Does the pricing review relate to your strategic action plan?

Dr Garrett —The strategic action plan obviously provides a framework for the future of the organisation and therefore was taken into consideration during the process; however, it was not specifically a part of it.

Senator CARR —I ask you to take this on notice because I do not expect you to answer it now: in what ways has the pricing review amended the strategic action plan?

Dr Garrett —Thank you.

Senator CARR —Are there property issues that need to be reassessed in any way as a result of the pricing review?

Dr Garrett —I do not believe so.

Mr Harley —No.

Senator CARR —How many of the reviews has CSIRO commissioned or participated in with DOFA in the past two years?

Senator SCHACHT —Apart from too many.

Senator CARR —We have the property review and the pricing review that I am aware of; how many others?

Dr Garrett —I would have to ask my colleagues whether they knew about last year or the last two years. Those are the two this year. Last year?

Mr Garrett —There was the review of triennial funding.

Dr Garrett —There was the review of triennial funding and the external earnings review. But that was through the Chief Scientist, not specifically with DOFA.

Senator CARR —You mention the triennial funding. Normally one would expect the triennium funding for the forward triennium to be announced about now.

Dr Garrett —Correct.

Senator CARR —Why was it not announced?

Dr Garrett —At our suggestion, our instigation—and this was approved through the appropriate processes—we were of the view that, with our strategic action plan, which has a very strong implementation focus to it, we needed time to embed the initiatives that we had articulated. That is point 1. Point 2 is that, as part of the lead[hyphen]up and some of the key initiatives out of that around focus, critical mass and the flagship programs, we have a detailed planning process which is aligning hopefully with the whole debate around national priorities that would come to fruition towards the end of this year. But it is certainly not in the bag, so to speak, at this point in time. So it was around major initiatives of the organisation in the future.

Thirdly, I think it was important for us to get the benefit of some of the benefit-cost studies independently done in the international environment out of the pricing review to feed into that triennium funding process. Fourthly, with the external earnings review, out of which will come hopefully a new set of quantitative and qualitative indicators of performance, it would be much clearer at the end of the year than at this point in time what CSIRO's deliverables and its metrics of performance are. Therefore, there is a whole series of issues that I have explained here that led us to believe that, if we could put off the application for the triennium by this 12-month period, still with the triennium starting in July 2003—so we were not putting off the date of commencement—

Senator CARR —Did you think you would get a better deal at the end of the year than you would now?

Dr Garrett —We would hope so.

Senator CARR —That is what I figured was the rationale behind it.

Dr Garrett —Yes.

Senator CARR —In terms of the priority setting process that you referred to, what will be CSIRO's role in that?

Dr Garrett —We were active participants in the process that was led by the Chief Scientist and Peter Wills through the middle of last year. It was consistent with our own processes. In fact, as a new person in the environment, I was—as Senator Schacht will know from our discussions—anxious to try and get a 20[hyphen]year perspective of where we are going in Australia, what the big challenges are and how we as an institution could respond. We also believe that our organisation must be closely aligned—in a differentiation sense, vis-a-vis the universities, for example—with key national priorities and challenges, and we are an organisation of significant muscle that can contribute to them. So we were very active participants in that process.

Senator CARR —So you are represented on PMSEIC?

Dr Garrett —I am the representative on PMSEIC.

Senator CARR —When were you advised of the government's decision to allocate 33 per cent of the ARC funding?

Dr Garrett —When I read it in the newspaper.

Senator CARR —There was a meeting in July in Limestone Avenue to discuss the priority setting exercise. Is that correct?

Dr Garrett —That is correct. I participated in that with a couple of my colleagues.

Senator CARR —Can you tell me how many people were there? I am told it was 42.

Dr Garrett —I was going to say 40.

Senator CARR —I was told 42. Are you able to provide me with a list of the people who were there?

Dr Garrett —I could give you the list on notice.

Senator CARR —Thank you. Of course I do not expect you to read off the 42 now.

Dr Garrett —I thought—again, it was six months into my life in Australia—it was a good spectrum of perspectives.

Senator CARR —PMSEIC met in the first half of the year; it did not meet in the second half. Did you participate as one of the members of the subcommittee?

Dr Garrett —The national priorities subcommittee? I did.

Senator CARR —What meetings took place of that subcommittee?

Dr Garrett —There were at least two, potentially three. I would have to go back to my notes. There was a lot of circulating correspondence.

Senator CARR —The bulk of the work was done by email?

Dr Garrett —I believe so. The responsible officials in ISR I think did a good job under quite tight time frames.

Senator CARR —Do you recall when the meetings were?

Dr Garrett —No, I do not. They would have been in the July-August period.

Senator CARR —When were you advised that cabinet had made a decision?

Dr Garrett —I do not think I was ever advised that cabinet made a decision; I do not recall getting any correspondence, although I might have.

Senator CARR —Would you this take on notice, if you would not mind: the dates of the meetings of the subcommittee of PMSEIC that you were able to participate in?

Dr Garrett —I can do that.

Senator CARR —At what point did you see a draft paper outlining possible priorities?

Dr Garrett —Around August. Again, I would have to give you the date—

Senator CARR —Did that draft paper indicate actual priorities, or was it just on the issue of priority setting?

Dr Garrett —No. I know that the ARC and Professor Sara's leadership had done a lot of work. I think there were 50 or 60 people involved in that process around the research priorities. We were obviously engaged, and had been for the last year, under Dr Hobbs's guidance because of the work we had done on our 2025 scenario planning around what you might call the national `thematic' priorities—and it is important to distinguish the difference between those two.

Senator CARR —Is a copy of the draft paper available?

Dr Garrett —I do not believe so. I think it was a cabinet-in-confidence document.

Senator CARR —So a cabinet-in-confidence paper went to 60 people?

Dr Garrett —No, not at all. I was one of the people on the working group that was helping put together the paper.

Senator CARR —I see. So PMSEIC got a copy of a paper; not the 42 at Limestone Avenue?

Dr Garrett —Not at all. That was a consultative group, and then there was a working group—

Senator CARR —That is my point. That is what I am getting to. In terms of the consultation, you would appreciate that there is been considerable criticism of the fact that there was very little consultation.

Dr Garrett —I understand that.

Senator CARR —There appears to have been a series of meetings at the ARC which developed 12 priorities, and I understand it was proposed that 10 per cent of the moneys be allocated.

Dr Garrett —Yes.

Senator CARR —There was a cabinet decision in September that there be four priorities. A question about the consultations is how effective they are when people do not know what they are talking about. That is the point. If they do not know what the parameters are of the priority setting exercise, how can they effectively contribute to the process? You are in a different category; you are actually on the PMSEIC subcommittee. But in the meetings that you participated in, do you think the other researchers would have been able to deduce from those discussions the nature of the priority setting exercise?

Dr Garrett —I cannot answer that. When I say I cannot answer that, I mean I do not know what the answer is.

Senator CARR —That is a subjective judgment.

Dr Garrett —Yes.

Senator CARR —The criticism has been made to me that people never knew—

Dr Garrett —Sure.

Senator CARR —As distinct from the general concept to the specifics. It was further put to me that the priorities established by government, which were notified to the ARC on 25 January, are effectively CSIRO priorities. How do you respond to that criticism?

Dr Garrett —Say that again?

Senator CARR —The four priorities established by way of direction to the ARC are effectively the CSIRO's priorities.

Dr Garrett —I do not read that at all. I have never had any indication that that is the situation.

Senator CARR —You have not been made aware of the criticism that the CSIRO has effectively dominated this process?

Dr Garrett —Yes, I have obviously responded to media requests that have interpreted it that way. My response has been that I have had no indication or feedback or any conversations whatsoever in any way—

Senator CARR —You have done very well out of the priority setting exercise. Would you agree?

Dr Garrett —What do you mean by `very well'?

Senator CARR —The four priorities relate to key areas of research that the CSIRO currently is undertaking.

Dr Garrett —We are already involved, and that is because our processes in the past. I guess we are very good around picking important areas for the future.

Senator SCHACHT —The minister is not at the table, but I think he describes Telstra as the 600-pound gorilla in terms of telecommunications. We might say that CSIRO is a 400-pound gorilla in terms of influence in research issues in Australia.

Dr Garrett —I should say the following: we had very limited input into the debates that Professor Sara ran but we were comfortable with the sort of process that she ran around the 12 lists there; they made a lot of sense to us.

Senator SCHACHT —But the four that Senator Carr mentioned generally fit easily with what CSIRO is about at the moment—your own priorities.

Dr Garrett —Yes. You are looking at complex systems, nano materials and the genome-phenome link. Those are the areas that are important for the future, and we believe that our nation should be working in those domains.

Senator CARR —What about photon research? How strong are we in photon research?

Dr Garrett —Again, I agreed with Vicki's response about the broad nature of photon research and, in terms of how strong we are as a nation, I cannot comment on that. I would have to take that one on notice.

Senator CARR —Yes, because it has been put to me that is an area of weakness. It is not necessarily an area of strength through our research effort at the moment.

Dr Garrett —We obviously have some strong activities in that area. As you are doing your strategic planning and you recognise the important areas for the future, we need to bolster that domain. That is how you make those decisions.

Senator CARR —It has been put to me there are only about half-a-dozen major researchers in this area. Would you agree?

Dr Garrett —I would have to take that on notice. I do not know the answer to that.

Senator CARR —If you could, please. I have one final issue—and I know that Senator Harradine has been most patient here—and it is the question of health and safety at CSIRO. There has been the incident in Geelong where a man died. There was considerable concern expressed about a death on a site. Can you explain to me the circumstances surrounding—

Dr Garrett —Dr Wellings was the acting chief executive at that time and took responsibility for the events at that time. He will talk to this issue.

Senator CARR —Can you explain the circumstances that led to the death of one of your scientists?

Dr Wellings —For clarification for Senator Schacht, it was at the AAHL laboratory in Geelong and not in the wool division in Geelong. It was in the animal health laboratory. On the morning of 11 December, an employee of AAHL was found dead in an airlock at that facility. The response from CSIRO was to call in the Victorian police and WorkCover Victoria, which deals for Comcover. The cause of death of the officer has not yet been found by the coroner, and so whatever I say now you have to accept is a view that I give you and not a view from the coronial inquiry.

Senator SCHACHT —It will be a view that CSIRO will give to the coronial inquiry?

Dr Wellings —But the cause of death—normally the coroner—

Senator SCHACHT —When the inquiry takes place, will you, or someone on your behalf, present to the coronial inquiry roughly what you are going to say here?

Dr Wellings —Indeed. If we are called to the coronial inquiry, we will give evidence, yes. An officer was found dead in an airlock at AAHL. We believe that he had entered the airlock on the late afternoon of 10 December.

Senator SCHACHT —Which day of the week was the 10th?

Dr Wellings —It was a Monday. He was going into a facility to retrieve some specimens. We know that he opened the first door to go into the airlock and entered the airlock. The computer shows that the inner door was opened for a period of time and then was closed again—I think the gap is about 20 seconds—and the officer was found dead in the airlock. We think that the inner room had no oxygen in it. It was a room in which there were samples stored in liquid nitrogen, and there is a venting system to control the amount of nitrogen in the environment. We think that there was no oxygen at all in that room when he entered the room and that he would have died, we think, rapidly at that time. His body was discovered the following morning. This event happened at about 4.45 p.m.

Senator SCHACHT —On the Monday evening.

Dr Wellings —On the Monday evening at a time when officers were leaving—this is within the high security zone of AAHL, so you have to imagine those circumstances. His body was found the following morning and, at that point, we started an inquiry. There are three inquiries running at the moment: the Comcover inquiry, the police inquiry and, through internal CSIRO policy that was on foot already, in the event of the death of an officer, there is a CSIRO inquiry that is established.

The CSIRO inquiry has up to three months to report. An independent divisional chief chairs that and there is a set membership prescribed by policy. I think Dr Cullen from CSIRO Entomology, who is the divisional chief leading that inquiry, has until 8 March to report to Dr Garrett with the outcome.

The preliminary advice that I have is that on the afternoon of Friday, 7 December, one of the fans in the inner room appears to have failed. The engineers came in and rectified the problem. We think that a backup fan then also failed simultaneously with an oxygen detector which would normally have been on the outside of the airlock. So two mechanical failures at that point have taken place. On that Friday afternoon the room, I think, was signed to say that it was hazardous, and those signs were certainly there on the Monday.

There were warnings given over the internal tannoy system within the high security facility both on the Friday afternoon and on the Monday morning to remind people that it was a hazardous area. Notwithstanding that there was a sign on the door, we think that the officer still entered the room in order to retrieve samples. We are not sure what circumstances would have caused him to have done that and whether there had been some operational breakdown where he thought that the signs were a false alert rather than a positive alert at that point.

Senator CARR —You do not think there is a problem with your maintenance program?

Dr Wellings —In a facility like AAHL, which is such a sophisticated and complex facility, there is always ongoing maintenance. I am advised that there are regular minor breakdowns of elements within a large complex facility of that sort, in the same way as there would be in a building of this sort.

Senator CARR —Two critical pieces of equipment break down. I am not saying that is the cause, but from what you have just said it seems to have been a significant event in the death of an officer.

Dr Wellings —We expect the CSIRO internal inquiry to make some report back to the chief executive of the extent to which there was a maintenance schedule and the regularity of the maintenance program that—

Senator CARR —We will come back to this.

Dr Wellings —I cannot advise you at this stage, because I am just not privy to that level of detail.

Senator SCHACHT —Without naming him, was the officer a scientist, a technician, an assistant or a cleaner?

Dr Wellings —He was a 44-year-old staff member who was a technical officer in the microbiology security team. He had experience with the work that he was doing, the facility and the equipment at AAHL, and he had worked in AAHL since 1986.

Senator SCHACHT —Was he authorised to enter through the lock into the special laboratory? There was no question that he was not authorised and he did something unauthorised?

Dr Wellings —No, he was going about his job.

Senator SCHACHT —I presume that there was a security pass, that he had to go through the lock to get it open, that he had to push buttons or something?

Dr Wellings —No, I think the arrangement is that you pass through security in the morning in order to enter AAHL. You would then undress, shower and put on the normal quarantine clothes that officers within AAHL wear, strip off rings, watches and all those things and then go into AAHL. I think that at the time that particular airlock was one he could operate either directly or off a card, but it certainly would not have been a locked facility that he was going into. It was his normal job.

Senator SCHACHT —Were there any rules about someone going into the airlock? Did this room have a particular experiment being conducted that meant all the oxygen had been sucked out for some reason?

Dr Wellings —It was a storeroom which was chilled, and the microbiological samples were held in liquid nitrogen and racked and stored in an appropriate way.

Senator SCHACHT —The rules enabled him to enter without having to be accompanied by anybody else, or to have anybody else near him? An individual can go in and out of the area of the lock?

Dr Wellings —Indeed.

Senator SCHACHT —Was there any sign, or should he have known, that there was no oxygen in that room?

Dr Wellings —I was explaining to Senator Carr while you were out of the room that there is a detector outside the airlock that was reading zero, we think—or certainly very low. It should have been reading 18 per cent, which is the normal ambient oxygen level. And there was a physical sign on the door, which was the alert from the occupational health and safety team, saying that there had been a problem on the previous Friday. So there was a sign up on the door, and when he entered the airlock there would have been an alarm going within the inner room—which I am not sure that he would have actually heard—as it detected the fact that the oxygen level was below 18 per cent.

Senator CARR —Can we come back to this? If you have got various committees investigating, we will have another look at it. I want to ask you about another facility at Griffith. This involves the potential of exposure of staff to dangerous chemicals. I understand it is in the land and water division. Is it the case that there were concerns raised about safety in the working environment on this site for nearly a year before any concrete action was taken?

Dr Garrett —It is true that concerns had been raised about safety. I visited the site and had discussions with the staff. Following discussions with the union I sent one of our occupational health and safety people to do an independent investigation for me. She came back with a report, which I had assessed. Following that input we gave the authorisation for very substantial funds, of the order of $3.75 million, to make the corrections and engage in a new building program there. So the answer is yes, but whether it is a year I am not sure—I would have to check the facts on that.

Senator CARR —Is it the case that staff were moved to a temporary building?

Dr Garrett —Certainly staff were operating in temporary accommodation, which was the motivation for building reconstruction, yes.

Senator CARR —Was it the case that reconstruction was ever stopped?

Dr Garrett —There was a proposal to go ahead that I arrested subject to investigation on the safety issues, the research program issues, the accommodation issues and all issues relating to the Griffith program. At the same time, we had a proposal in to the MNRF, and part and parcel of that would have been a substantial upgrade. So there were some delays associated with that proposal too.

Senator CARR —Was it the case that staff were told that the management of CSIRO do not believe in bricks and mortar?

Dr Garrett —That is not true. The discussion that I had with staff, in a tight financial climate, was to indicate that we are in the brains business more than the bricks business. But obviously we need to be looking after the care and safety of our staff. Therefore, I ran the process that I have indicated to you, and we have made the decisions that we have for expansion.

Senator CARR —Did you commission a report into the working conditions at Griffith?

Dr Garrett —Yes, I did.

Senator CARR —Are we able to get a copy of the report?

Dr Garrett —I do not know the answer to that. Can I take it on notice?

Senator CARR —Yes. What concern me are reports I have received that it took a further six weeks, while the staff were working in these substandard conditions—in fact, conditions described as unsafe—for decisions to be made, and that Comcare was called in to examine the facility. Is that true?

Dr Garrett —I do not know whether or not Comcare was called in; I will have to take that one on notice. Certainly there were complaints from staff about safety. As I said, I personally investigated it and had a series of discussions, and I think there were differences of interpretation around that. There were unsafe aspects, which we have agreed to fix at substantial outlay.

Senator CARR —I raise this because the issue down in Geelong—this question has been brought to my attention in the short time I have been involved with your organisation—does concern me. What action are you taking in regard to the general questions of occupational health and safety within the CSIRO?

Dr Garrett —That is a very important issue; it was a hot topic at our board meeting in early February. We have been required, rightly so, to provide more regular assessments on our OHS and E activities. We have recently restructured our OHS and E activities, we have brought in a new general manager in this domain and we have required divisions to increase the level of safety officer in their own environment. It is correct to say that we are now taking this safety area much more seriously than we were doing in the last while.

Senator CARR —Has there been an increase in the level of accidents within CSIRO facilities?

Dr Garrett —No, there has not. If you look at the last two years, it is basically stable in terms of the normal indicators of medium-term and lost-time injury frequency rates. It is also perhaps worth while pointing out that, as far as the comparative compensation premiums go—in other words, the advantage that you get, associated with increased claims or decreased claims—we had a premium of 0.76. The Commonwealth averages 1.02, so we are much better than the average. As far as our own standards are concerned, we have a long way to go, which is what we are trying to fix.

Senator CARR —I understand that a review of the occupational health and safety issues within the CSIRO has recently been prepared.

Dr Garrett —Correct.

Senator CARR —Can we have a copy of that review?

Dr Garrett —I will take that on notice.

Senator CARR —In the strategic plan, I did not see a lot of attention to this issue of occupational health and safety. You speak of the fact that CSIRO research is no longer cutting edge; would it be fair to say that this is one of the products of the pressure on resources—that is, a run-down of facilities?

Dr Garrett —I would say that the organisation has worked very hard to inhibit a run-down of facilities. I personally, having spent a lot of my life in organisations around the world, believe that since the building plan that was put in place in the last decade—because there were some major problems in the 1990s—very substantial expenditure has been made, and I think we have world-class facilities across the regime.

I think there is an attitudinal and behavioural problem, which we have discussed with scientific staff, in terms of their attitudes to health and safety. It is not an issue that can be solved by throwing money at it alone. We are taking a multipronged approach to solving this problem. It starts at the bench. Although it is not specifically mentioned in the action plan, you will note that one of the strategic priority areas is organising arrangements and operating excellence, and it is implicit in that we needed to lift our game in several areas, including this area.

Senator CARR —The emphasis in the plan is on improving services rather than addressing the issue of infrastructure. Is that because of the pressure you are under in terms of public funding for research?

Dr Garrett —There is obviously always pressure on resources, but I do not believe it is accurate to say that the safety domain would be the first to go. That is not the case. In fact, even in a complex and difficult financial time, we are taking this even more seriously.

Senator CARR —I appreciate that you, as the chief executive officer, would respond in that way to the questions that I would put to you. You have had a death in the organisation, and I have had reports of quite serious occupational health and safety issues, sufficiently serious for you to commission reviews, so I think that I am not talking about an insignificant matter. It seems to me that the question of infrastructure and occupational health and safety, which is directly related to the standard of infrastructure, is a matter of considerable concern, and so I look forward to the reports on the incidents at Geelong to see whether or not there is a stronger correlation than you are suggesting to us at the moment. It may be a matter for debate. I have finished my questions for the CSIRO witnesses. Thank you very much.

CHAIR —I thank the officers for their evidence today.

[5.23 p.m.]

CHAIR —We now move to output 3.2, Science, policy and innovation.

Senator HARRADINE —I wish to raise questions about the $5.5 million awarded to the National Centre for Advanced Cell Engineering. How much of that money has been expended to date and for what purpose?

Mr Cook —None of the grant has been paid as yet because we are still going through the process of working with the applicants to finalise things such as their business plans and the contractual arrangements which will apply in relation to that grant.

Senator HARRADINE —What are the contractual arrangements or the contractual safeguards—to use the current jargon—which will apply to this centre?

Mr Cook —There are the normal standard arrangements in any grant contract about reporting and accounting for the appropriate use of funds. In addition, there are contractual provisions dealing with the fact that research undertaken in such a facility needs to comply with normal Commonwealth and state laws and regulations and ethical and research guidelines such as those specified by the National Health and Medical Research Council and, in addition, in relation to this particular project, that the project will comply with whatever outcomes the current COAG process results in.

Senator HARRADINE —Before I go into that, precisely how was it that the applicants you refer to received the money and not somebody else? Who were the successful bidders? I presume there were advertisements or was it just a claim made by a group of persons?

Mr Cook —No, Senator—and Ms Henry might be able to help my memory if I fail. The Major National Research Facility program was announced as part of the Backing Australia's Ability package on 29 January 2001. A set of guidelines was developed and calls for applications were made. I am a bit hazy on the timetable but my recollection is that the applications closed in about May last year. A special advisory committee was formed to advise the minister on how these funds might be allocated.

Senator HARRADINE —Was that an ad hoc committee?

Mr Cook —That is correct.

Senator HARRADINE —Who was on that committee?

Mr Cook —I will need to turn to Ms Henry to give you that information. It was chaired by Dr Peter Jonson and I was a member.

Ms Henry —We have the list, Senator—it was provided at the last hearing. The committee members are Dr Peter Jonson, Dr Robin Batterham, Dr Chris Nicol, Professor Beverley Ronalds, Mr Grahame Cook, Professor Mark Von Itzstein, Professor John Coghlan, Dr Greg Smith, Dr Deborah Rathjen and Dr Brian Schmidt.

Senator HARRADINE —Thank you.

Mr Cook —That committee looked at all the applications which came in—there were 86, from memory—and went through a short listing process of those who should be interviewed. Something of the order of 30 applicants were interviewed. Then as a result of the interviews, the committee sought additional information from the people who were interviewed. From the application, the interview process and the additional information, recommendations were then made to Senator Minchin, who was the relevant minister.

Senator HARRADINE —Was the successful applicant a company? Who comprises the company? Is it a group or a company?

Ms Henry —A group of collaborators came together to form the proposal. We have a list of the collaborators in the application. However, we do not have a final list of who those people will be because, through the contract negotiation process, this centre is looking to take in additional companies and collaborators in the process. We know who was in the application; we do not know who the final group will be.

Senator HARRADINE —In other words, you could have other companies involved?

Ms Henry —Correct. We will know that through this process.

Senator HARRADINE —Who are the main ones that you awarded the contract to?

Ms Henry —I can tell you who was in the application. The collaborators were Monash University, the Monash Institute of Reproduction and Development, the Department of Biochemistry and Molecular Biology at Monash University, the Department of Microbiology at Monash University, the Department of Pharmacology at Monash University, the School of Physics and Material Engineering at Monash University, the Department of Chemical Engineering at Monash University, Prince Henry Medical Research Institute and ES Cell International Pty Ltd.

Senator HARRADINE —And BresaGen was not involved at all?

Ms Henry —Not in the original application.

Senator HARRADINE —Are they involved now?

Ms Henry —There are discussions occurring with them.

Senator HARRADINE —In regard to Monash, was Professor Trounson involved in any of this?

Ms Henry —Yes.

Senator HARRADINE —As I understand it, he is going to be the principal researcher.

Ms Henry —I am not sure whether he is classed as the principal researcher. I would have to check.

Senator HARRADINE —Was the department or the expert committee aware of the fact that Professor Trounson had circumvented Victorian law in obtaining stem cells? Are you aware that the Victorian law prevents stem cells being extracted from human embryos to their destruction?

Ms Henry —I am not aware whether the committee knew that.

Senator HARRADINE —Is the department aware of that?

Ms Henry —We are now.

Senator HARRADINE —And you were not then?

Ms Henry —I was not specifically informed at that time, no.

Senator HARRADINE —Did you know that Professor Trounson then circumvented that law and obtained stem cells from Singaporean embryos? This is very important. The question is whether the department and the government takes a different view as to what ought to be the treatment of Singaporean subjects as against Victorian subjects.

Mr Cook —The committee was aware of Professor Trounson's interest in stem cell lines from Singapore. That was clearly the case. It is not circumventing any Commonwealth law to import stem cells.

Senator HARRADINE —You know that is not what I said. I ask you again: were you and are you aware that the Victorian law prevents the extraction of stem cells from human embryos in Victoria? In other words, Professor Trounson was prevented by a Victorian law from getting his hands on those stem cells.

Mr Cook —That is not our understanding of Victorian law. We understand that there is no bar under Victorian law to the importation of stem cells. There is a difference, I think, between—

Senator HARRADINE —Are you seriously making that statement knowing full well that that is not what I asked you? I did not ask you whether in fact the Victorian law had a provision which prevented experimentation on stem cells. Obviously, the Victorian law assumed that researchers would not do it because they were not able to obtain stem cells from Victorian embryos. So why would the Victorian law have gone on and said that stem cells can be utilised? If you read the transcript, you will see that what I have been putting to you has nothing to do with the statement you made. Are you aware or are you not aware that the Victorian law prevents a researcher in Victoria from obtaining stem cells from Victorian embryos to their destruction?

Mr Cook —I am not aware of that, Senator.

Senator HARRADINE —Isn't that a relevant consideration that the department should have been aware of? Shouldn't the department have notified the expert panel of the matter? Isn't it a relevant consideration?

Mr Cook —As I said, our understanding of Victorian law is different.

Senator HARRADINE —How is it different from what I have been asking you?

Mr Cook —We may be talking at cross-purposes, but our understanding is that Victorian law does not prevent the reproduction of stem cells in the facility that we are talking about.

Senator HARRADINE —That is not what I asked you. I asked you whether, at the time this was awarded to Professor Trounson and to ES Cell International, you were aware of the fact that the Victorian legislation prevented a researcher from obtaining stem cells from Victorian embryos to their destruction?

Mr Cook —No, I was not aware at the time.

Senator HARRADINE —Are you aware of it now?

Mr Cook —Well, I am hearing what you are saying, Senator, but the grant was given for a building in which reproduction of stem cells would take place. It is not a grant for research on stem cells.

Senator HARRADINE —The grant is for a building—

Mr Cook —That is correct.

Senator HARRADINE —for the reproduction of stem cells.

Mr Cook —Yes, the multiplication of stem cell lines.

Senator HARRADINE —Are you aware that BresaGen also circumvented South Australian laws in regard to the obtaining of stem cells from human embryos to their destruction?

Mr Cook —Our understanding is that BresaGen is operating within the law.

Senator HARRADINE —That is not what I asked you.

Mr Cook —No, you are asking me to make an assumption about incorrect behaviour by the company. I am saying that I have no knowledge of that.

Senator HARRADINE —Why? Isn't that relevant when you are considering these matters? If two of the principals who have received taxpayers' money are circumventing existing state laws by getting the stems cells from Singapore and importing them into Australia, the question that I am asking you is: isn't that a matter that should be of concern to the department or do you think that Singaporean embryos are less worthy than Australian embryos?

Mr Cook —We do not make those sorts of judgments, Senator. We assess these things in accordance with the law and regulations at the time and there is no Commonwealth law which prevents the importation of embryos.

Senator HARRADINE —I am talking about the attitude of a company that circumvents the laws of the states in the manner that Professor Trounson and BresaGen Ltd did.

Mr Cook —I understand your point.

Senator HARRADINE —Is Professor Trounson still experimenting on those stem cells derived from Singaporean embryos?

Mr Cook —I do not have any personal knowledge of his current research activities.

Senator HARRADINE —But he has the money.

Mr Cook —No, Senator.

Senator HARRADINE —He is getting $5.4 million.

Mr Cook —No, a collaboration headed by Monash University will get the funds, not Professor Trounson.

Senator HARRADINE —He will be the principal researcher.

Mr Cook —I understand he will be one of the researchers.

Senator HARRADINE —Is he or is he not still experimenting on stem cells from Singaporean embryos?

Mr Cook —I have no personal knowledge of that.

Senator HARRADINE —Will you find out?

Mr Cook —I can ask him.

Senator HARRADINE —And will you let the committee know?

Mr Cook —Certainly.

Senator HARRADINE —Will you ascertain from BresaGen whether it too circumvented South Australian law?

Mr Cook —I do not think I am in a position to put a question like that to them, Senator.

Senator HARRADINE —Why?

Mr Cook —Because there is an assumption behind it that it is not appropriate for me to carry forth.

Senator HARRADINE —What is the assumption?

Mr Cook —You are talking about circumventing South Australian law.

Senator HARRADINE —Are you aware—if you are not aware, you should be—of the South Australian laws in respect of this matter?

Mr Cook —I am aware that South Australia has laws in place, but I am not across the details.

Senator HARRADINE —Why not? You are dealing with the matter; you are dealing with the BresaGen company. Is it a fact or is it not a fact that BresaGen, knowing that it could not obtain stem cells from South Australian human embryos to their destruction, imported stem cells from elsewhere into South Australia and experimented on them?

Mr Cook —I believe they have imported stem cells, yes.

Senator HARRADINE —Would you ask them, since they are receiving money from you, or presumably are going to receive money from, whether they are still experimenting on that and whether those experiments will continue to be undertaken while they are in receipt of Commonwealth money?

Mr Cook —The Commonwealth funding is not for that research. The very nature of the major national research facilities is to provide a physical infrastructure to enable groups of scientists, in collaboration, to undertake research; it was not to fund the research. Whatever research is undertaken, it will have to be subject to the normal laws, regulations and guidelines which pertain to that research.

Senator HARRADINE —Notwithstanding that, you will be able to continue providing these scientists with Commonwealth money, taxpayers' money, despite the fact that they continue their experiments on embryonic stem cells obtained from Singapore or elsewhere?

Mr Cook —Providing they comply with the relevant laws and guidelines; that is the critical thing.

Senator HARRADINE —They circumvented those laws. That was the point I was making. You say that the grant of $5.5 million is for a building.

Mr Cook —That is correct.

Senator HARRADINE —That's it?

Ms Henry —And possibly equipment and some operational costs. Research is specifically a non-eligible cost in this program.

Senator HARRADINE —Who is going to own the building?

Ms Henry —It belongs to the collaborators. The Commonwealth has an agreement with the collaborators and asset disposal would have to be cleared through the Commonwealth.

Senator HARRADINE —So you are providing the building and laboratories for what purpose?

Mr Cook —The purpose in the application is for the multiplication of stem cell lines.

Senator HARRADINE —What does that mean?

Mr Cook —I understand that the proponents have access to a number of stem cell lines and it means being able to multiply them for use by researchers.

Senator HARRADINE —For what purpose?

Mr Cook —For a whole range of activities, as I understand.

Senator HARRADINE —Like what? Would you provide in detail to the committee precisely the purpose for which this replication—or reproduction, as you describe it—is to take place in that building?

Mr Cook —We can do that. There was a fairly detailed description given in the minister's press release at the time.

Senator HARRADINE —Yes, but I am asking you to provide the committee with information about precisely what will and what will not be allowed in the building.

Ms Henry —Some of that might be commercial-in-confidence information. We can provide you with the description that was publicly released and cleared by the centre.

Senator HARRADINE —I am sorry: in what way could it be commercial-in-confidence?

Ms Henry —Because we ask specifically for a commercialisation plan on the activity, there would potentially be information in that application that might be commercial-in-confidence information.

Senator HARRADINE —I am asking you for details of what is going to take place in that building—paid for by us, the taxpayers—and I expect to get that information.

Ms Henry —We can provide you with a summary of what the facility is intending to do.

Senator HARRADINE —Are the embryonic stem cells to be used as assay systems for the assessment of gene function or for drug screening and toxicology or for recombinant protein production?

Mr Cook —I would have to take that on notice. I do not recall that detail.

Ms Henry —I do not know. Could you please repeat the question, and we will make sure we get everything that you are asking for.

Senator HARRADINE —I am sorry. What positions do you hold?

Ms Henry —I am the Assistant Secretary, Science Programs, in the Department of Education, Science and Training.

Mr Cook —I am the First Assistant Secretary of the Science Division.

Senator HARRADINE —I will come back to that. Within the department, was no ethical evaluation made of this program?

Ms Henry —No, none was.

Senator HARRADINE —None whatsoever?

Ms Henry —As is the case with many of these research programs, no ethical assessment is done of the program. To handle that issue, there is reliance on the laws and regulations that govern the particular areas that we are addressing.

Senator HARRADINE —What if they do not make mention of what is likely to take place? For example, the Victorian law does not mention it because the Victorian legislators presume that, as there is a proscription against the taking of stem cells from embryos to their destruction, the type of work that is going to be pursued in that building, thanks to the taxpayers of Australia, will not take place.

Ms Henry —In putting together the Commonwealth agreement with these centres, we will be ensuring that the rules and regulations are abided by through contractual agreements with the centres.

Senator HARRADINE —I just said that they will not be going to these areas for the reason, as far as Victoria is concerned, that they assume that the embryonic stem cells will not be available. So you make no ethical evaluation at all? Again I ask: does this research include among its aims the utilisation of these embryonic stem cells as an assay system for the assessment of gene function, for drug screening and toxicology or for recombinant protein production?

Ms Henry —I do not have that information.

Senator HARRADINE —Would you provide that information?

Ms Henry —Yes.

Senator HARRADINE —In doing so, would you provide information as to what is meant by each of those procedures?

Ms Henry —Are you asking for an explanation of the procedure itself?

Senator HARRADINE —I am asking for an explanation as to what is meant by each of those procedures that I have just read out. Also, what sort of monitoring is going to be undertaken?

Ms Henry —There is a requirement for a centre to have an annual report produced, and there will be performance indicators in the agreements with the centres. That is largely how we would undertake the monitoring.

Senator HARRADINE —So you will not be doing any inspections of what has taken place?

Ms Henry —No, it is not normal with this program.

Senator HARRADINE —We are dealing with situations which go to the very essence of human life, and I do not think that this would be regarded as a normal grant. Are you are saying that it is a normal grant?

Ms Henry —This program funds the facility, not the research program. If we look at the facility, we can see that it is built or established, but we would not be looking at the research program.

Senator HARRADINE —You will not be looking at the research program?

Ms Henry —No, it is not part of this program.

Senator HARRADINE —You are not going to look at the research program taking place in a building funded by taxpayers?

Ms Henry —No, not with this program.

Senator HARRADINE —So you could not care whether experimentations that are not part of this grant are taking place within that building?

Mr Cook —Yes, we would, at the broad level, in that the research has to be consistent with the purpose to which the facility is being provided, and a number of checks and balances are built in. In terms of corporate governance of this facility, one of the standard provisions is that it has to be managed by a board and the chair should be a person independent of the group that are directly involved in the day-to-day operations of the facility. There is the reporting process that is required of the centre, and of course the program would be subject to normal audit processes, after a few years of operation, to ensure that it was going correctly.

Senator HARRADINE —I am asking you to take on notice the question as to what precisely the department is going to do, on behalf of the government, to examine what is taking place in that facility and provide a report to the committee.

Mr Cook —We can do that, Senator.

Senator HARRADINE —What sort of independent, ongoing ethical evaluation will take place of what is being undertaken in that building?

Mr Cook —The independent ethical evaluation that takes place is the system run by Monash University.

Senator HARRADINE —Oh, yes! You think that is arms-length, do you?

Mr Cook —It is a process set up by the university to ensure that the research that is undertaken complies with the appropriate guidelines, and the people involved in that are doing a professional job, as far as we understand.

Senator HARRADINE —I am asking you about an independent, ethical evaluation of what is taking place.

Mr Cook —I understand, Senator, and we were not building that into our processes.

Senator HARRADINE —Why not? I have just heard it said that you are discussing now with various companies their involvement in the matter.

Ms Henry —The collaborators are having that discussion as we speak.

Senator HARRADINE —In respect of what sort of research?

Ms Henry —I do not know; we are not part of that negotiation.

Senator HARRADINE —Am I to understand, from what you have said, that the building has been erected for one purpose and one purpose alone, and that is for the reproduction of, to use your term, human stem cells?

Ms Henry —Yes.

Mr Cook —That is the primary purpose, as I understand it.

Senator HARRADINE —Is that the sole purpose of the research in this facility? Is it for the development of stem cells from adults, given the Minnesota breakthrough recently, or what?

Ms Henry —We do not have that level of detail. We would have to ask for it.

Senator HARRADINE —Don't you read ministerial correspondence?

Ms Henry —Yes, Senator.

Senator HARRADINE —Have you read my letter to the minister?

Ms Henry —Which letter are you referring to, Senator?

Senator HARRADINE —I am referring to three letters that I wrote last year and one this year. Surely you have come prepared to answer some of these questions? Again, I ask the question: what is meant by the reproduction of stem cells?

Mr Cook —In layperson's terms, it is the multiplication of the stem cell line so that they can be available for a variety of researchers to access.

Senator HARRADINE —In other words, you are establishing the building to be a manufacturing plant of stem cells, is that right? Are you are aware of the ethical problems surrounding the continued use and reproduction of embryonic stem cells?

Mr Cook —Yes, we are aware of the debate about those issues, Senator.

Senator HARRADINE —Are you also aware of the fact that the work on adult stem cells is proceeding, and, with the recent work that has been done in America on stem cells from the patient, those cells are now being regarded as the way to go? They are histocompatible with the patient and thus their use is considered both medically, and certainly ethically, better than the use of embryonic stem cells.

Mr Cook —We have kept a watching brief on those developments and are aware of those developments. But we are also aware that there is still some debate within the scientific community about which is preferable from a number of research points of view.

Senator HARRADINE —How much money does the department provide for research on the patient's stem cells? They call them adult stem cells; I do not know why they call them adult stem cells when they can be taken from a child who is a patient. How much money is being provided by the department for research in this area?

Mr Cook —None, as far as I am aware, Senator.

Senator HARRADINE —Is it proposed that this money could be utilised for that purpose?

Mr Cook —Yes, Senator, the centre could well utilise that. I am sorry, to be correct, none of this money—this $5.5 million that we are talking about—can be used for research, but the facility could certainly be used for adult stem cell reproduction.

Senator HARRADINE —For the development of adult stem cells?

Mr Cook —If that fell within the scope of the application, yes.

Senator HARRADINE —I am interested—again, if you cannot answer this, take it on notice—in whether it is intended to ask those partners involved to desist from the use of embryonic stem cells in research in that particular facility. I just want to get clear in my own mind what it is all about—$5.4 million for the replication of stem cells.

Mr Cook —As I said, the money is not for research as such; it is for the facility. The grant would provide a facility for human embryonic stem cells to be replicated.

Senator HARRADINE —Who will own the intellectual property?

Mr Cook —The intellectual property issues have to be agreed between the various people collaborating in this centre.

Senator HARRADINE —Could you provide to the committee a breakdown of who constitutes ES Cell International, which apparently is part of the project?

Mr Cook —The ownership structure?

Senator HARRADINE —Yes. Is there a Singaporean element in that?

Mr Cook —I think Ms Henry has the information here.

Senator HARRADINE —You can take it on notice. It is nearly time to clear out.

Ms Henry —Our understanding is that ES Cell International is owned by the Monash Institute of Reproduction and Development, Haddasit Medical Research Services and Development Israel, the National University of Singapore, Life Sciences Investments Pty Ltd and ES Cell Australia. ES Cell International is registered in Singapore but managed in Melbourne, and majority shareholding ownership is Australian.

Senator HARRADINE —Would you provide the committee with the details of all of the collaborating parties in this particular grant?

Mr Cook —Yes.

Senator HARRADINE —I have a number of questions, but I think we have run out of a quorum.

CHAIR —Have you finished on this matter?

Senator HARRADINE —I have not finished on it, but time being what it is—what time do you finish?

CHAIR —We have two major programs to go, so anything you could put on notice would be greatly appreciated.

Senator HARRADINE —It may not be on notice; it may be in a different sphere. But I will be interested in the responses that I get.

CHAIR —Are there any other questions on science policy and innovation?

Senator CARR —The officers from ANSTO suggested that I speak to you, Mr Cook, about the current position in regard to the national strategy for nuclear waste. What is the situation?

Mr Cook —Quite a lot of progress has been made in terms of the handling of low level and intermediate level waste.

Senator CARR —The hour is late. Would you take a question on notice and give me a detailed brief on the current status of the development strategy?

Mr Cook —Yes, Senator, we can do that.

Senator CARR —I may want to talk to you again about it. I am particularly interested in the application by ANSTO to ARPANSA in terms of the Lucas Heights facility, especially given that the matters relate to the EIS clauses that say that the minister for ARPANSA and the Minister for the Environment have to be satisfied that there is a nuclear waste strategy in place—particularly for the rods, but also for other nuclear waste—which is not clear in the EIS statement. Could you give me a detailed response to the development of the strategy? Further, has there been a site identified as the location for a repository for intermediate level waste?

Mr Cook —You can easily get confused about this, Senator. The repository is for low level waste.

Senator CARR —Yes, I know that. I am talking about the medium or intermediate level waste and high level waste.

Mr Cook —Yes, which we talk about as being the national store. No, a site has not been identified as yet. There is an examination of Commonwealth land going on to see whether a suitable site can be found.

Senator CARR —It was said to us today that the material coming back from France will mean that there will have to be a decision by 2010. Is that correct?

Mr Cook —Yes, broadly that is right.

Senator CARR —That is your assessment?

Mr Cook —Our expectation is that short listing of potential sites for the store will be completed by around the end of this year.

Senator CARR —Is it anticipated that there will be an announcement on that?

Mr Cook —Yes, in due course there will be.

Senator CARR —Can I have a look at the material produced and we will come back to that in May? I have some other questions I will put on notice. Thank you for the way you have dealt with that question.

CHAIR —Thank you. I thank the officers from the science department.

[6.08 p.m.]

CHAIR —We now come to outcome 1, Schools systems.

Senator CARR —Is 3.1 to be dealt with later on?

CHAIR —Yes.

Dr Shergold —This morning we were asked the outcome of the 2001 selection round for the Major National Research Facility program. If you are in agreement, I can table that information.

CHAIR —If there are no objections, it is so ordered.

Senator CARR —I welcome the officers from the schools division. I have a simple question to start off with for Mr Evans. In answer to questions E160 and E161 which went to the issue of the Commonwealth's percentage share of the total public funds for government schools and non-government schools, you indicated to me that an interim answer was being prepared and that it would be available in mid-August. Was that ever delivered?

Mr Evans —I have an answer here to E160 and E161.

Senator CARR —I am looking at E160 and E161, but it refers to an interim answer. Was there a subsequent answer?

Mr Evans —There is a full answer here. If you would like, I could get a copy.

Senator CARR —Thank you. That would save us a lot time. As I said, that was an easy one for you to start off with. E78 provides 2002 ERI classifications for all non-government schools. Does the department still collect information from non-government schools on their private income including fees and non-fee income?

Mr Evans —The department undertakes an annual financial questionnaire which does collect information on behalf of all non-government schools on fee income, other sources of income and expenditure of non-government schools. The last questionnaire undertaken was in 2001 on the 2000 program year. We are presently reviewing the financial questionnaire in the light of the shift from ERI funding arrangements to the SES funding arrangements in respect of doing a collection in 2002 of the 2001 program year. We engaged Ernst and Young to assist us with that review and we are at the stage where we are consulting with the non-government sector about the basis of the review that could be undertaken this year in respect of 2001.

Senator CARR —Can I have a copy of the material that related to the 2001 survey results? Can I have a table providing the private income separately listing fees and non-fees for all non-government schools in receipt of Commonwealth recurrent grants?

Mr Evans —We can provide you with information of that type, but it would be in a form that could not identify individual schools.

Senator CARR —Why is that?

Mr Evans —There are privacy arrangements about the Commonwealth collecting information from schools so we would not be in a position to be able to provide—

Senator CARR —What form of information can you provide to me?

Mr Evans —I would have to look at it, but it might be in a form that, for example, aggregated the Catholics and other groups within that sector.

Senator CARR —Is that the best you can do?

Mr Evans —I might be able to provide it in a form that identified it in bands of income.

Senator CARR —That's fair enough; by bands would do. However, I would like to know in quite close detail. I mean, you have SES school ranges for a start.

Mr Evans —That said, the collection in 2001 on 2000 is collecting information in a form against an ERI category. It is not going to correlate back to an SES category that is operating in 2001.

Senator CARR —No, but I will have a rough idea of what it means. Could I please have it provided in the highest level of detail possible?

Mr Evans —I will take that on notice and come back to you, Senator.

Senator CARR —Do you recall that, throughout the debate on the SES funding, there were considerable numbers of claims made about the capacity of non-government schools to keep their fees down, as a result of the increasing largesse of the Commonwealth? In fact, I recall a number of letters were distributed by some of the category 1 schools suggesting that, if there was a change of government at the last election, fees would rise.

Mr Evans and Mr Greer, can you account for the fact that the following schools have increased their fees in the following manner: Brighton Grammar School, 8.3 per cent; Carey Baptist Grammar School, 10.6 per cent; Caulfield Grammar School, a minor increase of only four per cent; Eltham College, 7.1 per cent; Firbank Anglican School, nine per cent; Haileybury College, 6.5 per cent; Melbourne Girls Grammar, six per cent; Scotch College—they vary slightly—8.1 per cent; St Catherine's School, 6.4 per cent; Toorak College, six per cent; Trinity, 12 per cent; and Wesley College, 19 per cent. How do you account for such extraordinary rises, given the amounts of money that the government is now paying to these extremely wealthy schools?

Mr Greer —Fee increases at non-government schools, as you will appreciate, are a topical issue at the beginning of each new school year. I think the claims by government at the time that the SES was introduced were that, over time, as the SES regime phased in—and you appreciate that it is phasing in at 25, 50, 75 per cent—it would increasingly bring some downward pressure. But it is the prerogative of individual schools and their boards to determine the fee levels at those schools. It is not an appropriate role necessarily for the Commonwealth.

Senator CARR —I understand that. But the minister, Dr Kemp, said that the government's bill would push down the pressure on school fees, making all schools much more accessible. He said that Wesley College, for example, has announced it will be reducing fees. Now, my calculations tell me that Wesley, rather than reducing its fees, has actually increased them by 19 per cent.

Mr Evans —Senator, on the point you made about becoming more accessible, I think the point that Mr Greer is making is that, as the SES arrangements are phased in, they will receive extra money, making them more accessible over time. That is the way I see that answer.

Senator CARR —You mean over a considerable period of time like 20 years, 30 years?

Mr Evans —No, not that far out.

Senator CARR —We will all be on the pension by the time these fees are reduced, I would have thought.

Mr Evans —There is a second feature here too. If you look at the AGSRC for the government sector for secondary, say, you will see that the movement in average government school costs for secondary last year was over seven per cent. That is across the whole of the government secondary sector. As the Commonwealth is only paying a component of the assistance to these non-government schools, it is reasonable to assume that parents might have to pay an increase of the same order as the rate the costs are increasing in the secondary sector, and the figures you read out to me seem to be of that order.

Senator CARR —So you have a fee increase of 19 per cent at Wesley. How much did Wesley get last year in extra Commonwealth moneys?

Ms Andruska —The estimated primary per capita is $629—I am sorry, maybe I will keep looking at my information to find the answer.

Senator CARR —I understand that it was about $600 to $800 per child, but didn't that add up to over a million dollars?

Mr Greer —I think it was a shade under.

Senator CARR —I do not recall all of the thousand schools, but I do recall that one as being a substantial sum. In the first year it is a million. I am told that it billed about $3 million by the end of the program. If you are running at a 19 per cent increase now, what figure can we anticipate in three years?

Mr Greer —They are largely decisions for the school—

Senator CARR —I know.

Mr Greer —and the board of that school.

Senator CARR —The trouble is that the minister said repeatedly that Wesley College fees would decrease. They have increased by 19 per cent. If that is the case, surely it demonstrates that this program is not reducing fees; it may encourage some schools to increase their fees. Is there an end to the process? When do you anticipate that the fees will come down?

Mr Greer —As the government said, the expectation is that over time as the system is fully phased in, increasingly downward pressure will be put on fees.

Senator CARR —It is a 19 per cent increase. I am waiting for the downward pressures. What correspondence has the department received from schools or various peak bodies about fee increases?

Ms Andruska —I will have to take that question on notice.

Senator CARR —Have there been any meetings or discussions with the various schools or their peak bodies about fee increases this year?

Ms Andruska —There have certainly been discussions with some peak bodies about seeking advice from them on what fees schools are going to charge and so forth. We have been trying to get some information so that we can inform ourselves of what is happening across the country with regard to school fees.

Senator CARR —Have there been any discussions with those schools about making them accountable for the expenditure of Commonwealth moneys with respect to fee levels and fee increases?

Mr Evans —All non-government schools are accountable for the funding that they get. They are fully accountable in terms of financial accountability and educational accountability.

Senator CARR —But if there is a government policy objective to put pressure on fee increases and we have a fee increase of 19 per cent at Wesley, clearly the policy is failing. What action is the department taking with these schools to encourage them to keep their fee increases within a reasonable level?

Dr Shergold —I will let my officers answer that question, but I will not accept your assertion in presenting the question that clearly government policy has failed. None of my officers has said that. Indeed, they have argued to you that the increases have helped to constrain those rises.

Senator CARR —I concede that. As you are an expert in this field—

Dr Shergold —I am not an expert in—

Senator CARR —can you explain to me how a 19 per increase is restraint?

CHAIR —It could have been higher without those measures.

Senator CARR —Were you anticipating a higher than 19 per cent increase?

Mr Evans —I didn't say that.

Senator CARR —When was the last time a fee increase of 19 per cent was recorded at Wesley?

Mr Evans —I do not have that information at my disposal.

Senator CARR —Can you take it on notice for me, please?

Mr Evans —I will take it on notice.

Senator CARR —I want an assessment of how well this policy is working. If a 19 per cent increase has been recorded in one year, when was the last 19 per cent increase, given that there has been an additional $1 million of Commonwealth money pumped into that school? How would you measure success in those circumstances?

Mr Evans —A successful what, Senator?

Senator CARR —Pressure on school fees or reductions in school fees. The minister said that there would be a reduction at Wesley.

Mr Greer —I am not specifically aware of the purported quote that you are giving. What we are aware of is that non-government schools are independent organisations and their governing bodies are responsible for setting their fees. The Commonwealth is not involved in the internal operations of government or non-government schools, and indeed nor should it be.

Senator CARR —Mr Greer, I appreciate the point you make. It is quite clear that the Commonwealth has no capacity to influence the level at which school fees are charged or the rate of increase. Would you agree?

Mr Greer —It is not the Commonwealth's role to be involved in the internal operations of those schools.

Senator CARR —But you do not have any capacity to influence them, do you?

Dr Shergold —I think it would depend on how we defined that. The fact that more money is available to those schools will undoubtedly influence the level of fee increases. It is a rather different question.

Senator CARR —Has the Commonwealth a capacity to influence school fee charges? Mr Greer, can you tell me that?

Mr Greer —Indirectly, yes.

Senator CARR —How does that occur?

Mr Greer —Indirectly, through the new regime. As we say, funding these schools at levels of need should increasingly bring downward pressure to bear on costs.

Senator CARR —Apart from a pious hope, where can you point to me in any policy statement issued to the schools that their fees will be reduced? Are there any contractual arrangements you have entered into or any enforceable device by the Commonwealth that would lead to that outcome?

Mr Greer —Fees in one sense are a private investment in education. One of the objectives of the new regime was in fact to increase private investment in education.

Senator CARR —The problem is, Mr Greer, we are talking about a $14 billion public investment in private education. That is the bit I am interested in: the public investment.

Mr Greer —That is correct.

Senator CARR —We were told that this policy would lead to a reduction in fees.

Mr Greer —We may need to debate that point. My recollection of the government's position on this is that the policy would lead over time to downward pressure on fees.

Mr Evans —The other point to make in this is that you refer to a 19 per cent increase for Wesley. In some schools, there have been increases in the number of scholarships they offer, so you actually have to scratch beneath the surface for some of this.

Senator CARR —A huge increase! How many?

Mr Evans —In that sense, I would like to come back. In answering the question on notice, I would like to come back with some more information for you.

Senator CARR —That would be some separate questions on the issue of scholarships. How many scholarships have been issued at each of the former category 1 schools that we referred to? What has been the increase in number from the period when the ERI was working to the period in which the SES formula is now in operation?

Mr Greer —To the extent that that information is available, we will endeavour to secure that. One other point, though, Senator: clearly, you have, in focusing on Wesley, looked at one end of a continuum. There is of course another end to that continuum and around this period, the start of the year, we understand that there were a number of schools—or there have been at least several schools that we are aware of—where the fee increases have in fact been about four to five per cent.

Senator CARR —I did list them, too. I went through a number of schools in Victoria, former category 1 schools and the range was, true enough, four or five per cent. But many were over 10 per cent.

Mr Greer —But there were several that were less than that, Senator. My understanding is that Ivanhoe Girls Grammar was four per cent, Melbourne Girls Grammar was four per cent, Carey Baptist Grammar was five per cent, Caulfield Grammar was six per cent, Melbourne Grammar was six per cent, Trinity Grammar was seven per cent, Scotch College was 7.1 per cent, St Leonard's was about 7.5 per cent and Presbyterian Ladies College was about 7.7 per cent. It is not dissimilar to the proportion of increase in AGSRC, which is the average government cost of schools.

Senator CARR —That is true.

Proceedings suspended from 6.29 p.m. to 7.32 p.m.

CHAIR —I welcome to the table the Hon. Judith Troeth, parliamentary secretary. We were considering outcome 1, schools. We have some questions from Senator Crossin.

Senator CROSSIN —How has the $74 million, of which some is detailed as being managed by the Australian Principals Association, been spent?

Mr Greer —Please direct me to the page, because we have a couple of contracts with them.

Senator CROSSIN —It is on page 26.

Mr Greer —I am not sure if I can tell you the actual details of total expenditure, other than to say that I think that contract may have been fully expended. The contract has now terminated. It was a contract with the Australian Principals Associations Professional Development Council to run a series of conferences around the nation during that year. That enabled us to engage over 2,000 principals directly in taking to them the message on indigenous education. The contract has now expired. We are considering the evaluation of that contract, with the prospect of looking to maintain the momentum of that initiative.

Senator CROSSIN —Obviously it has not been operational from 2001 to 2002, is that right?

Mr Greer —The program itself expired, I think, in June this year. I can clarify for you the total expenditure on that.

Senator CROSSIN —Can you give me a breakdown by state and territory of where the 1,200 school principals have come from?

Mr Greer —Certainly. We have that detail. Essentially what happened is that we held a national conference in Melbourne which brought together up to 200 principals from across the nation. Following that we took that type of conference to each of the states, including your own state, the Northern Territory. We had two of these conferences in New South Wales, one metropolitan based and one country based. Mr Buckskin may be able to provide some more detail on that.

Senator CROSSIN —No such contract exists at the moment, while that one is under evaluation, is that correct?

Mr Greer —We are in the process of briefing the minister about maintaining the momentum of what, by any standards, was an exceptionally effective mechanism—one through which we really were able to engage the educational leaders in the community and, in a professional development capacity, really push the message of indigenous education to them.

Senator CROSSIN —The $80 million quality teaching initiative, Teachers for the 21st Century, is over how many years?

Mr Greer —That initiative came out of the 1999 budget. If you bear with me, I will turn that up for you. The initiative was announced in the 1999-2000 budget. The then minister announced the Teachers for the 21st Century initiative on 11 September 2000. That initiative has a number of elements. There is a quality teaching program element, which is about $74 million. That initiative essentially targets teachers who had completed their initial teacher education 10 years or more ago, teachers re-entering the teaching force, casual teachers and teachers of disadvantaged groups, particularly indigenous students. A focus of that program has been to look at students in rural and remote locations. Of the $80 million, the element associated with that initiative was about $74 million. Other elements of the program are a Quality Leaders initiative of $1.5 million and a Quality School Management Initiative of $2 million. Another element of the strategy was the Recognition of Quality initiative.

Senator CROSSIN —Do you have an end date by which you are expecting this money to be expended?

Mr Greer —Yes. That program will lapse unless there is a positive decision to do otherwise. It will lapse, I think, at the end of the next fiscal year. Of course, an election commitment of the incoming government was to maintain this initiative into forward years, but we will need to wait for the budget process for that.

Senator CROSSIN —It is a good initiative. Can you give me a breakdown since 1999 of the expenditure of that money by financial year?

Mr Greer —I can certainly get that for you. I do not have that handy by year, but I certainly have what the contract value of the $74 million was, by jurisdiction.

Senator CROSSIN —Can you tell me how much of that $74 million you have spent was in the first financial year or the second financial year?

Mr Greer —We certainly can, but I do not seem to have it in the briefing papers that I have.

Senator CROSSIN —Can you take that on notice, then?

Mr Greer —I can certainly take that on notice, but I can give you this other schedule which indicates, by jurisdiction and by sectors within jurisdictions, what the contract value has been, and funds paid to date.

Senator CROSSIN —That would be handy as well. How many teachers have participated in the scheme to date?

Mr Greer —My colleagues might correct me, but my understanding from a monitoring report that I have recently seen is that in excess of 30,000 teachers have already participated in professional development opportunities through this initiative.

Senator CROSSIN —Again, do you have a breakdown of those by state and territory?

Mr Greer —Yes, we should have.

Senator CROSSIN —Could you take that on notice as well?

Mr Greer —Certainly.

Senator CROSSIN —Also, do you have a breakdown of what particular programs people are participating in? Is there one program rather than another that people have tended to favour?

Mr Greer —Yes. Under this program, we engaged with each of the jurisdictions and, where possible, tried to get a collaborative mechanism working within a jurisdiction so that the government, non-government and independent sectors worked together. They brought forward strategic plans for the period of the program. That strategic plan is not dissimilar to the types of plans that we had in place for literacy and numeracy. Against the guidelines and the priority areas that we had focused on, jurisdictions then brought forward initiatives that they wanted to run with. We have been funding and monitoring those and we have an independent evaluation at arm's length that has been parallelling this. We would hope to have the outcomes of that evaluation by the end of this year.

Senator CROSSIN —Could you provide me with a list of numbers by state and territory and numbers for each of the strategic projects under that plan?

Mr Greer —Certainly, Senator.

Senator CARR —Mr Buckskin, I wondered if you could assist me with question E96, which is the question about Abstudy. Can you provide details of the Student Financial Supplement Scheme including eligibility, the rules, the administration, interest rates applied and the relationship to Austudy loans? That is a fair bit of detail. Are you able to assist me now or do you want to take that on notice?

Mr Buckskin —I might take that on notice, Senator.

Senator CARR —Thanks. Does the scheme replace the Austudy loan scheme?

Mr Buckskin —No, it does not. It is supplementary to it.

Senator CARR —Could you also provide me with details of the number of recipients in each category—Abstudy and Austudy—over the years for which the program has been in operation and the average loan taken out by each recipient? I will put that on notice.

Mr Greer —We will provide the information to the extent that it is available and to the depth that it is available. Whether it is available for each individual we will have to see. But, certainly, we will provide it to the level of detail of your usual expectations.

Senator CROSSIN —I wanted to ask you about figures on page 29 of your annual report. Can the department offer me any explanation as to why the retention rate for males has remained consistent since 1997? There is no increase in that number, and there is a marginal increase for females.

Mr Evans —It is probably useful to consider that retention rates in schooling is one figure. Some people actually undertake education and training in the training sector. I might take it on notice, Senator, and provide you with details of what is happening across the age cohorts, because I think that is probably a richer way of looking at what is happening in this area rather than solely focusing on the retention rate. What you are showing here, though, is that there is a fairly stable pattern of retention rates for males and females.

Senator CROSSIN —And either a slight increase for females and none for males. Are you inferring from your answer, Mr Evans, that the same figure for males attending vocational education and training in schools would have then remained consistent from 1997 until now?

Mr Greer —Senator, I am not too sure how much you can infer from this. Again, what you have touched on is an issue of boys' education, an issue which has been the subject of inquiry by a House of Representatives committee over the past couple of years. It would be very interesting to see what that inquiry has—I have no doubt that that inquiry, amongst other things, would be focusing on this issue of retention rates for boys, vis-a-vis girls as well.

Senator CARR —On the issue of retention rates, the minister's statement that people should not be too concerned if they do not complete year 12—was that on advice from the department?

Mr Greer —I recall the reference that you are talking to. My understanding is that the minister was suggesting that year 12, or its vocational equivalent, is very important and every young Australian in fact should be encouraged to complete it. And it is important that we encourage and support young people to stay at school if that is the best pathway for them. However, traditional pathways such as year 12 should not necessarily be the sole measure or should not be forced on all young people. Clearly, year 12 is a desirable outcome from schooling, but it is not necessarily the only one.

Senator CARR —That is right.

Mr Greer —It is important to encourage all young people to participate in education and the government is currently doing that—all governments are doing that—through more flexible approaches such as VET in schools, structured workplace learning and so forth. Indeed, the national goals for schooling, agreed by all education ministers, encompass that dual approach. That is that all students should have access to high quality education to enable the completion of school education to year 12 or its vocational equivalent.

Senator CARR —I could not agree more with all of that, Mr Greer. When did you make that available to the minister? Has he been briefed now on what the objectives of the national goals of schooling are and how much work you are doing in VET in schools in regard to the operations of every other Commonwealth minister for education since the Commonwealth actually established a minister for education?

Mr Greer —Absolutely, Senator.

Senator CARR —You made all that clear to him, and he still made the statement?

Dr Shergold —Senator, I think what Mr Greer is suggesting is that the statement made by the minister is entirely in line with the national goals for schooling.

Senator CROSSIN —Or was his statement or what he said not entirely what he meant?

Mr Greer —I am reading from an article by the minister in the Age of 30 January—

Senator CARR —I understand the article.

Senator CROSSIN —Who would have written that?

Mr Greer —where he is saying that every young Australian should be encouraged to complete year 12.

Senator CARR —Mr Greer, your section wrote that for the minister, did it not?

Mr Greer —We certainly did not write the final of this, Senator.

Senator CARR —No, not the final version. You provided the draft to him?

Senator Troeth —Senator, that is not for the officer to answer.

Senator CARR —But that is the normal way it works.

Dr Shergold —We would certainly, in a normal situation, provide drafts to ministers for consideration.

Senator CARR —But, you see, the problem is that that article appeared well after the public statements were made. That was an exercise in damage control and, as responsible Commonwealth officers, I would expect nothing less from you. What troubled me was that this statement was made by the minister, who appeared to be in complete ignorance of all the things you have just read out, Mr Greer.

Mr Greer —I do not read that into the article.

Senator CARR —No, because you wrote the article.

Dr Shergold —Nor do we read it into the statement, senator.

Mr Greer —What I read into the statement was a way of articulating what the national goals for schooling were saying-that is, all young Australians should be encouraged to stay to—

Senator CARR —So, Mr Greer, the minister will be making no more statements along the ones that he originally made prior to 30 January this year—that people do not have to finish year 12 if they do not think it is—

Dr Shergold —Senator, an officer cannot give you, nor should give you, such an assurance.

Mr Greer —All I can point to is a statement that the minister made in the House yesterday, where he talked about the importance of young people taking flexible—

Senator CARR —I am very pleased, Mr Greer, that you are having such a positive effect on the minister's education. Is the minister aware that 70 per cent of year 11 and 12 students—and if I add in part-time apprenticeships, 75 per cent of year 11 and 12 students—will be undertaking VET in schools by 2004?

Mr Greer —I am not sure what the minister is aware of in that sense. What I do know the minister is aware of is that around 70 per cent of young people who leave year 12 do not go immediately on to university, and in that sense he recognises the importance of alternative pathways.

Senator CARR —Absolutely. Mr Greer, you know a fair bit about VET in schools now, since you are running the program. How many applicants for apprenticeships—young people, not those applying for mature age apprenticeships—are able to secure an apprenticeship without year 12?

Mr Greer —I am not responsible for the new apprenticeships area. I think that is a question—

Senator CARR —No, but you are responsible for the VET in schools project and you would understand the transitional arrangements between year 12 and apprenticeships, so perhaps you could take this question on notice: which new apprenticeships are available to persons who do not have year 12 and, of the 330,000 or so that are on offer, how many commence with young people without year 12?

Mr Greer —Without checking the papers, what I can say is that clearly there are at least 6,000 young people below year 12 who are currently engaged in new apprenticeships whilst at school.

Senator CARR —Absolutely, these are the part-time mickey mouse ones, the AQF1s, aren't they?

Mr Greer —AQF1s and AQF2s.

Senator CROSSIN —I am not sure whether this is the right place, or whether you want to do it under Indigenous, but I want to ask questions about the money that was to go to Jabiru area school. I am wondering where that is at. If you remember, there was $300,000 from your department and $300,000 from the environment department.

Mr Buckskin —As you recall, DEST provides funds to the Department of Environment and Heritage and we understand there is now an agreement between the department of environment and the Northern Territory education department. We have assisted the department of environment to set the performance indicators and the targets for the project, and they are now agreed to by the Northern Territory government.

Senator CROSSIN —So, if I understand it, you are telling me you handed the department of environment $300,000?

Mr Buckskin —Yes, we have made a contribution with their contribution.

Senator CROSSIN —So what sort of input has this department had in terms of monitoring educational outcomes in that project?

Mr Buckskin —The agreement has just been signed, so this is the first year of the project. It took us most of last year to get to an agreement on the performance indicators.

Senator CROSSIN —Who was involved in negotiating those?

Mr Buckskin —My office. Dr Rosalie Grant, who is the Director of the Monitoring, Evaluation and Reporting Section, worked with the Northern Territory department of education and their officials and with the Jabiru school.

Senator CROSSIN —Is the $600,000 over a three-year period?

Mr Greer —That is correct.

Mr Buckskin —That is correct.

Senator CROSSIN —When will the first lot of money be paid?

Mr Buckskin —I will take that on notice. I thought there was a payment made earlier this year, because the first payments were paid in the first quarter of this year.

Senator CROSSIN —Will this department have any further role in that project?

Mr Buckskin —Yes, we will because there are monitoring arrangements; anybody in receipt of the Indigenous Education Supplementary Assistance money has to agree to two face-to-face monitoring meetings a year, and we have ensured that that was in the contract that the department of environment has with Jabiru, through the department of education. We will be a part of those monitoring group meetings with the Department of Environment and Heritage.

Senator CROSSIN —Have there been any other situations around this country where such an agreement has occurred?

Mr Buckskin —No, this is unique. It is the only one we have.

Senator CROSSIN —It is still unique, is it?

Mr Buckskin —It is still unique. We think it is a very good collaboration with the department of the environment to fund a school directly so as to get this particular group of indigenous people involved in managing and understanding environmental type work.

Senator CROSSIN —The principal of that school has recently left. Is that correct?

Mr Buckskin —I am not aware of that.

Senator CROSSIN —Can you provide me with a copy of that agreement, or is it yet to be signed off?

Mr Buckskin —I think you would need to get that from the department of environment.

Senator CROSSIN —I would need to ask them to do that? Is that correct?

Mr Buckskin —Yes. We could take it on board to ensure that they understand you would like a copy of that tomorrow.

Senator CROSSIN —But at future estimates, the monitoring and performance of that contract would be through this department. Is that correct?

Mr Buckskin —We would like to jointly monitor the contract because it is in receipt of a significant amount of IESIP dollars.

Senator CROSSIN —That is all I have for the minute.

Senator CARR —I will return to those matters I raised just before the break concerning private school funding. Mr Greer, can you give me the title of the report by Ian Harding into the SES formula, undertaken by the Institute of Social and Economic Research, just to make sure we are talking about the same one?

Mr Greer —I am just looking for my reference, if you can bear with me for one minute.

Ms Andruska —The most recent work that NATSEM is doing for us was research covering a range of issues. It was undertaken as part of the ongoing monitoring of the SES arrangements. The minister has not yet been briefed on the report at this point.

Senator CARR —When was the report concluded?

Ms Andruska —The report was concluded on 10 October.

Senator CARR —Last year?

Ms Andruska —That is correct.

Senator CARR —I have asked a question about this in the Senate chamber. Where are we at? Are you going to provide a copy of the report to the committee?

Mr Greer —As Ms Andruska has indicated, we will need to brief the minister. I would have thought that, subject to clearance, it would ordinarily be made available.

Senator CARR —Is this the basis for re-examining the SES formula?

Ms Andruska —No. The work that we got NATSEM to do covered a range of issues.

Senator CARR —Can you outline the issues again for me?

Ms Andruska —I do not have the details of all the issues, but of the sorts of things that have been raised in a number of forums, for example the effect of indigenous populations on the SES model. The Jewish day schools have raised the issue of family size and the effect of that in terms of their funding. There were also issues raised about whether the SES scores should be calculated on a census district or at a school level. Those are some of the sorts of issues. But a range of issues were examined.

Senator CARR —It is the sort of material that could provide you with the evidence for the reassessment of the SES mechanism, isn't it?

Ms Andruska —Without going into detail, which I think is not appropriate because we have not had the opportunity to discuss it with the minister, the report does not discredit the SES methodology.

Senator CARR —Does it reinforce it?

Mr Greer —I think the report would enable us to test and model a number of different variables—if a model needs to be tweaked, the `what ifs' and so forth.

Senator CARR —You have my question on notice. I will obviously continue to seek the report. Are you familiar with the university secondary college at the University of Adelaide?

Mr Greer —No, I am not unfortunately.

Senator CARR —So there has been no application, Ms Andruska, for an establishment grant?

Ms Andruska —Is that a new school for this year?

Senator CARR —That is what I understand, yes.

Ms Andruska —As I understand it, the department has received approximately five applications for new schools, none of which have been approved. So I do not have any details of the individual schools.

Senator CARR —But you have not received an application for a new school, called the University Secondary College, at the University of Adelaide.

Ms Andruska —I do not know. We may have.

Senator CARR —Perhaps you can take these on notice and we will bring it back in May. Has recurrent grant funding for this school been considered by the department? Has recurrent grant funding been approved by the department? Has there been any consideration of rejecting such an application?

Ms Andruska —We will take those on notice.

Senator CARR —Has there been any consideration of establishment grant funding? If so, has the school been deemed eligible or ineligible for funding. You can give me some of the detail of that when you have had a look at your files. A number of private schools have been established on the Murdoch University campus. There are three schools: Murdoch College, Winthrop College and Somerville College. I understand that all three schools receive Commonwealth recurrent grants. Is that true? Are you able to advise me whether those three schools received Commonwealth funding?

Ms Andruska —I am aware that Murdoch College receives Commonwealth funding.

Senator CARR —But you do not know about Winthrop?

Mr Greer —We may need to take it on notice.

Senator CARR —Thank you. What I am interested in here is the public policy issue of schools that are established for profit—that is, essentially for commercial activities—working in conjunction with a university in receipt of public funds, while at the same time those same universities are receiving funds from the higher education division of your department. Is this within the guidelines?

Mr Greer —My understanding is that the Commonwealth schools legislation stipulates that schools funded must not be conducted for profit. The department requires the approved authority of each applicant school to provide a copy of its constitution to ensure that that requirement is met. Many schools have some activities that generate a financial surplus—for example, there are a large number of schools that provide private education to overseas students and make a surplus on that activity. That is in line with the Commonwealth's policy of fostering the export of Australian education. The making of a surplus is acceptable under the schools guidelines as long as that surplus is used within the school and is not for the benefit of individual members.

Senator CARR —So you can assure me, Mr Greer, that those guidelines have been fulfilled?

Mr Greer —I am saying that they are the guidelines. We will run those past the several schools that you have mentioned when we respond to you.

Senator CARR —I am particularly interested in Murdoch, which you have acknowledged is receiving Commonwealth moneys. I understand that that school also received establishment grant funding. Is that the case?

Mr Evans —That is correct, Senator.

Mr Greer —In relation to Murdoch, section 47 of the schools act requires that schools funded under the act are not conducted for profit. The constitution of Murdoch College in Western Australia, which has close connections to university, was examined to ensure that that requirement was met. At the 2001 school census day, Murdoch College had 304 overseas students. It also provided school education for 167 local students. No Commonwealth general recurrent funding is available for overseas students.

Senator CARR —What did you fund them on?

Mr Greer —On the basis of 2001, it would have been 167.

Mr Evans —It was for 167 students.

Senator CARR —So you only funded them on the domestic students. Is it the case that this is a business arrangement between Alexander Education Group and Murdoch University?

Mr Greer —I do not have that detail.

Senator CARR —I am interested to know how thorough the departmental examination goes.

Mr Greer —I am not suggesting that the departmental investigation was not thorough; all I am saying is that my briefing that is at the table may not be—

Senator CARR —Could you indicate to me what the department believes to be the relationship between Murdoch College—this school, which I say is a for-profit secondary school owned jointly by the university—and a private company, Alexander Education Group, which I understand is also registered in Western Australia. There are some records publicly available. Has the department looked at exactly whether or not the school pays rent? Who owns the buildings?

Mr Greer —To the extent that that level of detail is covered in the normal processes of scrutiny, we will make that available. To the extent that it is not, we may not be in a position to do that.

Senator CARR —In terms of the effectiveness of the guidelines, I would have thought the business relationship between these other entities would be of significance—not just whether the constitution says certain things but that what actually happens would be a matter of interest to the department. Mr Greer, can you advise me whether the school pays rent? Who owns the building? How much of the university's money is directly or indirectly invested? Is that Commonwealth money? Is it the case that Murdoch College's students use the university library in return for a commercial fee?

Mr Greer —We will take that on notice. As I said, to the extent we can provide that detail, we will certainly provide it to you.

Senator CARR —Ms Andruska has indicated to me that there will need to be further investigations. There are two other schools which rent land from Murdoch—it is quite an entrepreneurial university by the sounds of it; it is running a number of schools—but Winthrop College I understand was split into two separate groups. I trust they are both not receiving Commonwealth moneys. How many establishment grants were paid to Winthrop?

Mr Greer —My understanding is no.

Senator CARR —No moneys at all paid? No applications?

Mr Greer —You asked me how much establishment grant money has been paid to a school called Winthrop.

Senator CARR —I have been told that Winthrop College is what it is called.

Mr Greer —My understanding is that no establishment grant funding—

Senator CARR —Ms Andruska is going to have a look at whether an application is pending. I am interested to know, if that is the case, whether there is one application or two. They have split the school in two, and I understand there is some quite serious infrastructure work being undertaken to divide the two schools' campuses. Is Somerville Baptist College eligible for an establishment grant? Obviously you will undertake the same inquiries about the school, which I understand is an offshoot from another school that operates from the very same address. Can you check that? Are there any other schools registered at the same address?

Mr Greer —We will certainly take that on notice.

Mr Evans —Senator, you asked how much money has been paid to Murdoch College. The answer is that, in 2001, they received establishment grants funding of $22,750. Unfortunately we were unable to pay them a further $60,750—

Senator CARR —Because our amendments were not accepted by the government.

Mr Evans —That is correct, Senator.

Senator CARR —You will get your chance again—fairly soon, by the sound of it. We will just see whether or not there has been any reconsideration, perhaps a more reasonable attitude taken by the government on these matters. I will keep going through this, because I am interested that there is such a development of primary and secondary education at Murdoch University. Did you want to ask something?

Senator CROSSIN —While we are on this issue, I am interested to receive from you a list of schools that sought establishment grants in 2000-01 and those that have already applied this year. I appreciate that you probably do not have them on you at the moment. I would like a list of those schools that were approved, the number of students at each of those schools that were approved, the amount of money they got and the amount of money they still have owing to them, pending the legislation that is before parliament.

Mr Greer —Certainly. We will make that available. I think in fact we have already made that available to the shadow minister, but we will make it available to the committee.

Senator CROSSIN —Thank you.

Senator CARR —Ms Andruska, just continuing with this inquiry I have regarding Murdoch University: do you talk to the higher education division of the department on these sorts of matters? Is there any dialogue between the two sections of the department?

Ms Andruska —We talk to the higher education division on matters.

Senator CARR —Does this particular matter ever come up in discussions between the two divisions?

Ms Andruska —I cannot particularly comment on that. I do not know whether the officers in the branch have been talking with other officers, but it would be normal process that, if there were issues arising that we thought they would be able to help us with, we would be talking to them.

Senator CARR —You will not mind me asking then in this section whether or not—this is bearing on the eligibility of Winthrop Baptist College—it was the case that the university actually went so far as to guarantee a $500,000 loan with BankWest for the school? The loan was in part to enable the school `to avoid any further deferral of lease payments to the university'. Did the higher education division consult with you about these matters and whether or not the problem continues about the non-payment of rent? The policy question I guess I am asking the department to consider is whether or not the schools division is aware that a school in receipt of Commonwealth recurrent funding has been in debt to a public university for a matter of years and the university itself has sought to underwrite a loan to the school to assist it to pay the rent. Does that have any bearing on their eligibility for Commonwealth moneys?

Ms Andruska —I will have to take that on notice.

Senator CARR —As I say, Mr Greer, I am sure that guidelines are there to cover this situation; it is a question of what action the department has taken—that is the question I want to take on notice—to ensure that the guidelines are actually adhered to in all respects.

Mr Greer —Certainly.

Senator CROSSIN —On page 30 of your annual report there is a table of national reading benchmark figures for 1999. Do you have an update on those? Have the year 2000 figures become available yet?

Mr Greer —My understanding is that the MCEETYA secretariat may well be poised to release the 2000 year five and year three benchmark data within the next month or so—I think it will be in March. Mr Thorn may have greater specificity on that.

Mr Thorn —Yes. I think the release of the figures will be through the annual national report on schooling. My understanding at the moment is that those results are being checked by the relevant authorities prior to finalisation of the text for inclusion in the annual national report on schooling.

Mr Evans —I expect that those results will be released by MCEETYA because they have such importance to the education community, like we did with the 1999 release. There was a document put out just to provide advice on the 1999 literacy and numeracy results.

Senator CROSSIN —I am assuming, then, that all state and territory governments have signed off on their performance targets and measures. Is that correct?

Mr Evans —When you say `signed off,' do you mean in respect of literacy and numeracy?

Senator CROSSIN —Yes, that is right.

Mr Evans —I think that is the point that Mr Thorn was making—that in that sense at the moment there is a verification exercise. So in that sense there is a signing-off of the 2000 results that is going on at this moment. Once states are satisfied with the veracity of the figures, then we will be in a position to have them released.

Senator CARR —In the department's investigations of the acquittals for the establishment grant expenditures, have you discovered any examples where the funding that has been given to these schools has been spent in an inappropriate way?

Mr Evans —Financial accountability operates such that there has to be an accountability statement provided by 30 June following the program year. As the first payments of establishment grants were made during 2001, there is no formal requirement for an accountability statement until 30 June this year. I am not aware of any issue that has arisen about establishment grants or any concerns about the level of payment. I will take it on notice—if there are any I will come back to you but I will not come back to you if there are not.

Senator CARR —Yes, if there are any examples I am sure you will do that. We will have an opportunity to discuss it in May. My reading of it is that it would be almost impossible to have an inappropriate payment as the requirements for the funding are so generalised.

Mr Evans —That is incorrect, Senator. I would take issue with that. In the first instance, the establishment grants hang off the census for all schools, so schools have to sign off that their census results are correct. Secondly, we have a verification exercise that accompanies the census, so that a number of schools are sampled as well. We actually send people in there to test the veracity of the census statistics. So I would not accept—

Senator CARR —It is a per capita fund. The use the school makes of it is entirely at the discretion of the school, is it not?

Mr Evans —That is not correct. There are particular purposes for which the establishment grant moneys can be spent. They include teacher salaries and professional development of teachers. There are a number of aspects of general recurrent funding that they may spend that money on.

Senator CARR —Materials and salaries?

Mr Evans —I do not believe that they include materials. They include salaries—that is correct.

Senator CARR —A new suit for the principal, and that sort of thing?

Mr Evans —No, I think we had this discussion on a previous occasion.

Senator CARR —That is my point. That is part of the salary package—motor cars for the principal, and so on. There is no limit on it, provided it is called a part of the salary package.

Mr Evans —If the principal is paid a salary and he chooses to buy a suit with it, it is no different to your situation or mine.

Senator CARR —No, if it is part of his salary package and if he is entitled to clothing or entertainment, couldn't he dine out on the Commonwealth under those grants?

Senator FERRIS —That is pretty offensive, Senator Carr.

Mr Evans —I would not accept that position.

Senator CARR —What is the smallest school that can receive Commonwealth moneys?

Mr Greer —The smallest school that can receive Commonwealth moneys is whatever level of school is approved by the state registration authorities, and it could run from one or two to 20, 30 or 40. At the end of the day it is the state registration authority that recognises whether a school is a new school, and Commonwealth funding can only be paid on—

Senator CARR —Absolutely, so the Australian International Conservatorium of Music, which was approved for funding in 1999, had one student on census day.

Mr Greer —It was approved for funding by the New South Wales—

Senator CARR —Yes, that is what I am saying. It had one student—so that is the minimum, isn't it?

Ms Andruska —That is correct.

Senator CARR —So can we just be clear on what a terrific scheme this is—a school of one.

Mr Greer —That is recognising that the Commonwealth does not approve new schools.

Senator CARR —My point is that the state registration process is totally inadequate, and I have argued this with you for a number of years, since the abolition of the new schools policy. We now have clear evidence that a school of one is entitled to Commonwealth funding.

Mr Greer —And state funding, upon registration and recognition.

Senator CARR —I am not arguing about the adequacy of the state funding. This is the Commonwealth parliament and Commonwealth money, and you are relying on state processes. I am saying to you that under those processes a school of one can receive public funding—Commonwealth government funding.

Mr Evans —You are approaching it from the position of approval only. That school has to still be operating and meeting the level of teaching and learning that is deemed necessary by the state government.

Senator CARR —I am sure it absolutely could. The breadth of curriculum must be outstanding at a school of one. The facilities provided must be absolutely sensational.

CHAIR —Senator, we can do without those kinds of comments.

Ms Andruska —Senator, four of the state governments now have planning provisions: Victoria, South Australia, Western Australia and Queensland. Among those planning provisions some of them require minimum enrolment numbers. They take into account things like teacher registration, buildings being certified, the likely impact of other schools in catchment areas and choices offered in terms of religion, philosophy and mode of education delivery. They look at the projected school-age population.

Senator CARR —I see what you are addressing.

Ms Andruska —So these states, over a period of time, have developed.

Senator CARR —They have started moving that way. I just wonder if you could break down each state in terms of each one of those criteria and whether or not they have a minimum requirement. Which states, for instance, do not require a minimum? Are you able to tell me that?

Ms Andruska —I have not got that detail but I will take it on notice.

Senator CARR —Clearly, if we are going into a significant parliamentary debate on these matters it would be of importance to have that sort of information available. Can you update E72 and E74 in terms of the enrolment numbers?

Mr Greer —Yes, we can do that. I am not sure whether we can do that here.

Senator CARR —Will you take that on notice?

Mr Greer —We will certainly take that on notice.

Senator CARR —I will put that question down for you. The same table presents figures for enrolment under the establishment grant allocation for the same period. According to this table, as I read it, they peak in 2002 at 12,000 and fall back to 8,400 for the remaining years. Do you have any variations on that figure, now?

Mr Evans —We will come back to you on that. The reason they peaked in 2002 is that it is the second payment. It is the pipeline effect of the large increase in the first year, the second payment that occurs in 2002 and the numbers that come on stream in 2002. In that sense, what this table shows—and I think the forward estimates also show it—is a levelling out once you get beyond that pipeline effect at the beginning.

Senator CARR —I can see that. It is 8433, 8433, 8433. That is what you call levelling out. I agree with that.

Mr Evans —We will take it on notice and we will come back to you with information on that table.

Senator CARR —Thank you. Is it correct that the establishment grants are payable to schools registered and applying for Commonwealth funds after 9 May 1999?

Mr Evans —That is correct but it is 11 May.

Senator CARR —My apologies, it is 11 May. The backlog, including the 99 schools: they will receive two-year funding under this program in 2001-02, assuming you get the parliament to agree with you. Is that right?

Ms Andruska —That is correct.

Senator CARR —Why is there what I regard as an unusually large projected enrolment confined to 2002 and not repeated in 2001? Can you explain that to me?

Mr Evans —That is the point I was making. The effect in 2002 is the effect of the numbers that were on the program in 2001, the second payment falling in 2002 and then the numbers that have come onto this program in 2002.

Senator CARR —I recall in a previous hearing you actually argued, Mr Evans, that there was a number—about three, if I recall—of unusually large schools which were not characteristic of the new schools arising in this sector. Do you still hold that view?

Ms Andruska —Yes.

Senator CARR —So there is no evidence to suggest that this was not an anomaly?

Mr Greer —Sorry?

Senator CARR —Are you are still holding to the view that it was only the three schools that effected the very large increase?

Mr Evans —Our experience of the trends of new schools in recent times is that the numbers would be smaller.

Senator CARR —I will put all that on notice and you can give a considered answer. The government Gazette on 19 November provided a list of the percentage of AGSRC for both primary and secondary school levels for all non-government schools. You gave a set figure here. Is there an assumption in those figures that all non-government schools have both primary and secondary enrolments?

Mr Evans —No.

Senator CARR —So how was it calculated?

Mr Greer —The detail of how the AGSRC is calculated was provided in answer to your question E79 from June.

Mr Evans —The actual figure for primary and secondary is calculated by MCEETYA. It reflects the actual weighted price movements for schooling in each state, in the government sector.

Senator CARR —Since we are getting on so well, I intend to put a whole heap of questions on notice here.

Senator CROSSIN —I have some issues relating to indigenous students. Some of my questions are related to 2.1, but we will wait until we get to that, if you like. This question relates to 1.2: Mr Buckskin, have each of the states and territories signed off on their IESIP agreements now for 2001-04?

Mr Buckskin —Yes, they have, in all jurisdictions, both schools and government TAFEs.

Senator CROSSIN —Were they all completed before the end of last year? Were they all signed off by then?

Mr Buckskin —Yes, they were.

Senator CROSSIN —What is the amount of on-costs across the board. Is it 10 per cent across the board for each state and territory?

Mr Buckskin —Some are certainly less than that, but there is no more than 10 per cent.

Mr Greer —As we indicated previously, there is a specific provision now built into the IESIP contracts of all jurisdictions that on-costs of that nature should not exceed 10 per cent.

Senator CROSSIN —Can you provide me with a table of what the on-costs for each state and territory are?

Mr Buckskin —Yes.

Mr Greer —I think we have already done that, Senator, but we will update that table for you.

Senator CROSSIN —The last one I have is for 1999.

Mr Greer —We will update that for you, Senator.

Senator CROSSIN —I have ATAS and Abstudy questions, but perhaps they should wait until 2.1.

Senator CARR —You just never know.

Senator CROSSIN —Mr Buckskin, were states and territories required to report on their IESIP outcomes for just the year it was extended—2000, I think?

Mr Buckskin —The current IESIP reports are due on 31 March.

Senator CROSSIN —Is that from all states and territories? Do you have any that might have come in early?

Mr Buckskin —I do not believe there are any there at the moment.

Senator CROSSIN —So we would expect them all to be in by the time we get to the May estimates?

Mr Buckskin —Yes, we would. It is important this year because we have to produce a report to the parliament, and we wish to have that done by September or October, in line with the department's annual report.

Senator CROSSIN —In your annual report, you made reference to an ATAS review that was being undertaken.

Mr Buckskin —Yes, that was to do with ATAS bulk funding arrangements to secondary schools and universities. There was a recommendation out of the previous direct assistance reviews that asked us to look at bulk funding arrangements.

Senator CROSSIN —Has that been completed?

Mr Buckskin —No. We came to the lead-up to the election last year. We are now putting another brief to the minister, seeking his terms of reference for a bulk funding review. Our timetable is to do it this year and have it completed by the end of this year, and that is in line with the decision that was taken by the previous minister. We just think that it is probably courteous to inform Dr Nelson that these reviews have to be completed by the end of this year and give him the opportunity to have some input into their terms of reference.

Senator CROSSIN —I cannot find it in this report. Was a review of ATAS only a proposal in this report?

Mr Buckskin —No, it was a decision out of the direct assistance review to note that there were bulk funding arrangements in boarding schools and some TAFE institutes and they asked us to review that.

Senator CROSSIN —And that review has not yet commenced?

Mr Buckskin —It has not yet commenced. It has to be done by the end of 2002.

Mr Evans —That annual report is for activities up to 30 June last year, so in that sense it would not report on that.

Mr Greer —One of the recommendations of the review of IEDA was to review ATAS. It is that recommendation out of the IEDA review that is now being progressed, following briefing—

Senator CROSSIN —Is that before the minister for his approval?

Mr Buckskin —Not yet. The minister has not been briefed on this matter yet.

Senator CROSSIN —I assume then that you anticipate that that approval will be given and that review will commence as soon as possible. Is that correct?

Mr Buckskin —Yes. As I stated, I think it is appropriate for the department to inform the new minister that this review is to take place this year, so that he has the opportunity to look at the terms of reference and comment on those.

Mr Greer —The background to that was provided in a response to E236 from the last sessions, and Mr Buckskin has given you the update on that.

Senator CROSSIN —Yes, that is what I am after. I am just tracking where all these reviews go.

Senator CARR —Are you able to provide me with assistance regarding the literacy benchmarks? The minister made an announcement to the effect that there is a proposal for there to be e-benchmarking arrangements. Do you have any information on that, Mr Greer? It was called e-testing. It was announced in another of those highly considered press reports; I trust you provided considerable background material, Mr Greer. The article appeared on 1 February. The minister announced that, on top of our literacy and numeracy benchmarks, we are now going to have a literacy and numeracy testing program—e-testing, he called it. Are you aware of this?

Mr Greer —I am aware that one of the key areas that MCEETYA has agreed is the area of information and communications technology.

Senator CARR —What I am asking about is whether you are aware of the minister's statement that the Commonwealth is now to have a new literacy and numeracy testing program, known as e-testing.

Mr Greer —I do not have the particular statement in front of me.

Mr Evans —As Mr Greer said, the Commonwealth and the states are looking at proposals to develop testing of ICT across the states and territories. Several responses to a request for tender have come back in; they are at the stage of being considered, and I cannot go into detail about the output of people who have put in responses to that request for tender.

Senator CARR —This is the second example we have had of what appears to be a significant policy initiative being announced that seems not to have—

Dr Shergold —It is the second time that my officers have suggested to you that it is in line with existing policy.

Senator CARR —I see. What is e-testing?

Dr Shergold —I thought our officer had explained the—

Senator CARR —No, he has explained what MCEETYA said; I am just wondering what the new Commonwealth e-testing program is?

Mr Evans —I have explained that it is a proposal for testing in the area of ICT that is being progressed by the Commonwealth and the states. I have also indicated that I cannot go into a lot of detail at this stage, because of where those discussions are at.

Senator CARR —Would that be anything to do with the fact, Mr Greer, that this has taken you somewhat by surprise? Were you aware that this matter was going to be raised tonight or was this news to you?

Mr Greer —The performance measures and areas have been agreed nationally; it does not come as a surprise.

Senator CARR —Would you have a look at the article in the Australian newspaper of 1 February 2002 headed, `Nelson considers national e-tests for school students,' and give me a response about what the minister was actually proposing?

Mr Greer —We will take that on notice.

Senator CARR —Thank you very much. Could you indicate to me when the department briefed the minister on this new initiative? I will put the rest of my questions about the benchmarks on notice. I think I have found out enough tonight. Could I indicate now, Mr Greer and Dr Shergold, that at the next hearing I will require ASTF officials to be present.

Mr Greer —ECEF?

Senator CARR —That is what the Commonwealth calls it. I am not certain that that has been a generally agreed term.

Mr Greer —That is its constitutional name. You may recall that in answer to your question 403 back in February about whether ECEF could or would appear before the committee, the response at that stage indicated that it is standard practice that the minister, or his or her representative, and officers of the department appear before the committee, and that the department would be happy to refer any questions to ECEF, should the need arise. But, having heard your request, we will certainly make arrangements for an ECEF representative to be here.

Senator CARR —Please see if you can get someone along. How much money is ECEF getting now?

Mr Greer —The Commonwealth has three funding contracts in place with ECEF that extend to 2004-05. In aggregate, the contracts provide for funding of some $107 million over that period. The principal contract has an aggregate value of some $94.14 million. There are three program elements of that principal contract: core funding for the foundation of $39.6 million, which is the same core funding that the ASTF received; a structured workplace learning element of $45.23 million over that period, which again is a continuation of the same level of funding provided for workplace learning under the ASTF; and a provision for expansion of geographic coverage of structured workplace learning, which was a feature of the last budget.

Senator CARR —Thank you very much. I think that we are entitled to expect that any organisation that is getting $100 million out of the Commonwealth should appear before the estimates committee.

Mr Greer —And we have taken your request on board.

Senator CARR —Thank you very much.

[8.40 p.m.]

CHAIR —We will move on to outcome 3, Australian institutions advance the knowledge base, contribute to the national innovation system and participate effectively in the global development of knowledge and skills. We will start with output 3.1, Higher education research and research training.

Senator BARTLETT —Can you tell me who decided that the University of Notre Dame could use Commonwealth funded places which are HECS liable at their Fremantle campus?

Dr Shergold —Chair, because we skipped two outputs, I have a problem—the officers are on their way. We alerted them when we thought we had about 15 minutes to go.

CHAIR —Are the officers next door?

Dr Shergold —No, they are not, otherwise I would bring them in. We ring up in advance as the outcome is approaching, and we were caught unawares because at that stage we still thought we were concluding outcome 1.

CHAIR —There can always be a rapid collapse in the batting order.

Senator BARTLETT —We can spend five hours standing in one spot and then go forward 100 miles in a second.

Dr Arthur —If any of the senators have questions specifically about research training, I am certainly happy to answer them.

Senator CARR —Where is Mr Gallagher?

Dr Shergold —As I understand it, he is speeding here.

Senator CARR —Did we catch him by surprise?

Dr Shergold —We did, because of the way we were moving between outcomes.

Senator CARR —Yes. Could I suggest taking a five minute break while we are waiting for the officers?

CHAIR —That seems a reasonable suggestion.

Proceedings suspended from 8.43 p.m. to 8.49 p.m.

Senator CARR —Do you recall recommendation 12 of the Senate report entitled Universities in crisis which, I remind you, called for the establishment of a national university ombudsman to investigate ancillary fees and charges, to conciliate complaints and to handle various other matters?

Mr Gallagher —Yes.

Senator CARR —Has the department undertaken any work in this regard?

Mr Gallagher —We are in the process of preparing advice to go to our minister with a view to a government response to that inquiry. We are looking at the arrangements that currently exist in the states—one of which has hit the news today.

Senator CARR —I am just about to ask you about that.

Mr Gallagher —I thought you might.

Senator CARR —I am pleased that you should mention it. You are aware of the events surrounding the allegations of Lord Gosper's involvement at Melbourne University, are you? The reports appeared on the front page of the Age this morning.

Mr Gallagher —Yes, I am.

Senator CARR —Are you aware that the Victorian Ombudsman has received a complaint regarding admissions procedures at the University of Melbourne? That is the one we are talking about?

Mr Gallagher —Yes.

Senator CARR —As I understand the situation, the claim is being made here that preferential treatment was given by the university in the allocation of a HECS-liable place in the Faculty of Engineering. The allegation occurred as a result of a number of phone calls from Mrs Gosper requesting that her son be given special treatment. In your view, if these allegations are demonstrated to be correct, would this be an appropriate use of publicly subsidised university places?

Mr Gallagher —I will just consult with my colleagues.

Senator CARR —I am being asked whether or not you got a Christmas card from the duke—since we have got onto the various stages of royalty.

Mr Gallagher —I can answer that one. No.

Senator CARR —I wonder if Lord Gosper will send you one.

Mr Gallagher —We have—as you would expect that we would—made inquiries of Melbourne University this morning so that we can brief the minister, but because we have been caught up here throughout most of the day we have not finalised that brief. Given that the Ombudsman has received a complaint and is investigating the matter, and in fairness to the student concerned and to the university—and to proper process—I do not think I should comment other than to say that the Commonwealth supports the autonomy of universities and their admissions procedures, and those admissions procedures are made on merit.

Senator CARR —That is what the claim is by the Commonwealth. We have here an example where it is alleged that the claim of access to HECS places on merit would appear to have been breached. It is put on the front page of one of our leading dailies that the intervention of some very powerful people has allowed preferential treatment to be given to an individual. I am also aware of other complaints, relating to veterinary colleges in Sydney, universities in Sydney, where similar types of events have occurred. I am interested to know whether or not the department is prepared to investigate the question of the misappropriation or misuse of publicly subsidised university places in this way.

Dr Shergold —I think what was said was that, in this instance, this is a matter which is already under investigation and it is entirely appropriate that we await the outcomes of that investigation.

Senator CARR —There are other issues which go to the question, essentially, of the concern I raised at the beginning of this session: about the capacity of people to make legitimate complaint. I understand that, in the case in Victoria, the officer at the University of Melbourne, who is the so-called whistleblower protection officer, is the same person whom the complaint concerns. Under those circumstances do you think it is possible for people at Melbourne University to actually get a reasonable hearing through the university?

Dr Shergold —We have made it clear that our knowledge of this is based upon the newspaper reports, that they are allegations at the moment, that there is an appropriate investigation under way, and that it would really be inappropriate for us to comment until the outcome of that investigation is known.

Senator CARR —When do you anticipate a response to the Senate report to be made?

Mr Gallagher —That is really a matter for the minister. We are currently preparing advice.

Senator CARR —What would be the process of your making inquiries as to the nature of this complaint at Melbourne University?

Mr Gallagher —We made contact with the officer at the University of Melbourne responsible for admissions procedures. This is a senior officer. We have raised the matters with him and have asked for his advice with a view to advising our minister.

Senator CARR —Is that the same admissions officer who is actually the subject of the complaint?

Mr Gallagher —In the first instance, it is, because he has been authorised by the university to make a statement explaining the university's procedures.

Senator CARR —I am just wondering how adequate it is, in terms of getting information about this matter, to go to the person who is actually the subject of the complaint.

Mr Gallagher —We go to the authorised officer in the university. In the first instance, we would normally go to the vice-chancellor. We know in this instance that there is another officer who has been given the delegation on this matter; therefore, our first port of call is there. I expect that, if we have any further questions, we would go direct to the vice-chancellor.

Senator CARR —What about the ombudsman?

Mr Gallagher —The ombudsman operates within the jurisdiction of the state—

Senator CARR —So you would have no capacity to approach him?

Mr Gallagher —We would not, in the first instance. We would initially take the advice of the university. That is what we normally do when a complaint is raised by a student or staff member. In the first instance, we take it up with the body with which we have our contractual relation, alert them to the situation, seek their advice as to what procedures they are following and then take counsel on what further action may or may not be appropriate.

Senator CARR —I presume that, if you want to speak to the person who has made the complaint, they have to approach you.

Dr Shergold —In the first instance, I anticipate that, if we take this further, we would want to talk to the ombudsman to find out what the process was being used for investigation, the timeframe of that investigation, the approach and so forth, because that is the appropriate person to conduct the investigation in this instance. Obviously, we will await the outcomes of that.

Senator CARR —There are a number of collaborating statements from members of staff in the Faculty of Engineering.

Mr Gallagher —I think it is fair to say—and you might not have seen this—that I saw the vice-chancellor interviewed on the television tonight about this, and he has expressed publicly his willingness to fully cooperate with the ombudsman and to undertake whatever recommendations the ombudsman makes.

Senator CARR —Mr Gallagher, given that this is a Commonwealth program—that is, the HECS funded places—the allegations go to the misuse of Commonwealth funded programs.

Mr Gallagher —Not exactly. They go to a breach of the admissions procedures of the university. We are, in effect, purchasing a set number of places from the University of Melbourne. The University of Melbourne meets its targets and fulfils its obligations to us in the strict sense. There are broader duties of care, I suppose, on behalf of the national interest to uphold the reputation of the university system, but we would want to be assured that admissions procedures are fair and transparent.

Senator CARR —I would have thought that the question of preferential treatment being given to certain well-known people would be a matter of public policy, not just a question of strict interpretation of what you say is the provider relationship.

Mr Gallagher —But the matter is an allegation at this stage, Senator. It is not fair to press it beyond that.

Dr Shergold —And it is an allegation which is already being appropriately investigated.

Senator CARR —We will come back in May and have a look at that in further detail. I have a significant amount of material on the details, so I trust that the inquiry will be conducted thoroughly.

Senator Troeth —Perhaps Senator Carr may then care to make that material available to the inquiry.

Senator CARR —I will have a talk to Mr Gallagher about that if he wants me to.

Senator BARTLETT —Who decided that the University of Notre Dame could use HECS-liable Commonwealth funded places at their Fremantle campus?

Mr Gallagher —This was a decision by Dr Kemp some years ago for the places for the Fremantle campus, for teacher education. That was made explicit when the Higher Education Funding Act was amended.

Senator BARTLETT —For the Fremantle campus?

Mr Gallagher —For the Fremantle campus. We also fund the University of Notre Dame Broome campus, but the Fremantle campus was for teacher education.

Senator BARTLETT —So when you say the decision was made by Dr Kemp some time ago, can you say, roughly, when that was?

Mr Gallagher —I think it was in 1999, but I would need to check that.

Senator BARTLETT —Was that before the additional places through the Backing Australia's Ability program were awarded to Notre Dame?

Mr Gallagher —Yes.

Senator BARTLETT —So obviously Notre Dame are aware of this. Were they informed at the time the decision was made by the minister that they could use places on their Fremantle campus for the Commonwealth funded places?

Mr Gallagher —They actually approached the Commonwealth to identify what opportunity there was for the Commonwealth to fund such places. At the time we had some unallocated places from the existing operating grant and we were able to provide a small number which could pipeline over several years to about 80 places.

Senator BARTLETT —Was the decision of the minister to provide Commonwealth funded places at the Fremantle campus two or three years ago made public?

Mr Gallagher —Yes, it was in the funding report, and I think you will find that it was in the speech that would have accompanied the amendment to the Higher Education Funding Act.

Senator BARTLETT —The Higher Education Funding Act?

Mr Gallagher —The amendment bill.

Senator BARTLETT —Back in 1998?

Mr Gallagher —It was 1998-99. The thinking was that on the east coast of Australia we have the Australian Catholic University, which is a multistate institution. Western Australia is not part of the Australian Catholic University, but it is effectively the ACU of the west coast and it does provide graduates into the Catholic school system.

Senator BARTLETT —When the amendment to the act was made to place Notre Dame on the A list in 1998, was that to ensure funding stability for the Broome campus?

Mr Gallagher —There were two tranches of it. Initially, there was funding for Notre Dame, for Broome, and subsequently the funding for Notre Dame was extended to include Fremantle, for teacher education.

Senator BARTLETT —Was the decision to extend it an administrative decision?

Mr Gallagher —No. It was a ministerial decision and it was associated with the appropriation through the Higher Education Funding Act. It included putting the University of Notre Dame in table A of the Higher Education Funding Act.

Senator BARTLETT —But was it a ministerial decision, following on from when the bill was initially passed, to enable them to get onto list A?

Mr Gallagher —No, the legislation required the appropriation to go to Notre Dame and for Notre Dame to be included in the schedule of the act.

Senator BARTLETT —Yes, but I am not talking about the funding to Notre Dame but about the distinction between the Broome campus and the Fremantle campus. I will read you a bit from when the legislation was going through in 1998. For example, in the House of Representatives, the parliamentary secretary stated:

The amendment will ensure that the University of Notre Dame will receive funding for operating purposes for its Broome campus [which] is consistent with the government's intention to provide a stable funding base for [that] campus

In the Senate, in November 1998, Senator Ellison stated in response to Senator Stott Despoja:

In relation to its public funding, the university has to acquit the money in the way it has been provided and for the purposes for which it has been provided I take it that you are not suggesting that the university would in any way try to fiddle the books or fudge the figures. The department will ensure that that does not take place I can give the Senate every assurance that the funding will relate to only the Broome campus.

That was the commitment given to the Senate in November 1998 by the minister representing Dr Kemp—that the funding would relate only to the Broome campus. Subsequent to the bill going through, then-Minister Kemp unilaterally decided to extend that to the Fremantle campus as well. Is that what happened?

Mr Gallagher —Yes. The minister made the decision to extend, but in order to provide for the funds there had to be an amendment to the legislation.

Senator BARTLETT —And that was that legislation at the end of 1998, the debate on which I was just reading from, which put Notre Dame on the A-list. The assurance then to the parliament was that this was to provide funding only to the Broome campus. I do not have a concern about them having been put on the A-list; my concern is that we were assured that that would be so they could have funding to the Broome campus—and subsequently they now have funding to the Fremantle campus as well.

Mr Gallagher —Let me check and come back to you on notice. My understanding is that there were two phases of the inclusion of Notre Dame. The first was explicitly for Broome and then there was a second—I thought agreed—inclusion of the Fremantle campus for teacher education purposes. Mr Mutton may be able to enlighten us further.

Mr Mutton —That is also my recollection. I am not sure to what extent there was consultation with the opposition at the time. Mr Beazley certainly supported—

Senator CARR —I can tell you now, I do not recall it being Fremantle. I recall the Notre Dame affair.

Mr Mutton —I think that is what Mr Gallagher said when he said there were two tranches. Originally it was simply Broome—

Senator CROSSIN —I think it was 1999, because I also think you put Batchelor college in there somewhere.

Senator BARTLETT —If you are talking about two phases, obviously the first phase was this legislation. I am saying that this was the assurance that was given to the Senate, and to the House of Representatives for that matter, that it would only be for Broome. Obviously the decision has been made after that to extend it to Fremantle. That did not need to go back to the parliament given that, once they were put on the A-list, you could then fund them across the board; that was not specified in the legislation. The assurance was given, though, that it would only be to the Broome campus. It appears that, despite that assurance, the minister has then gone on to the second phase, as you call it, without any need to refer back to parliament, without any need to refer back to the assurances that were given in both the House of Representatives and the Senate that it would only be for Broome.

Mr Gallagher —Let us check that, Senator. We have a different recollection, but you know what legislation has gone through the Senate. Let us check it and we will come back to you.

Senator BARTLETT —Following on from that, how many funded places will Notre Dame receive in 2002?

Mr Gallagher —The total number of student places is 333.

Senator BARTLETT —Three hundred and thirty-three?

Mr Gallagher —Sorry: 335.

Senator BARTLETT —Going back a couple of years, how many did they receive in 1999 as a result of that legislative change?

Mr Gallagher —I only have the 2002 figures in front of me. We will take it on notice.

Senator BARTLETT —Okay. If you do not want to make a guess, say `no', but in your expectation would it be significantly less than 335? Would less than 100 be feasible?

Mr Gallagher —I think that is right, Senator. These places pipeline, as you know.

Senator BARTLETT —Given that reasonably significant increase—from fewer than 100 in 1999 to 335 in 2002—apart from the 50 places for IT through Backing Australia's Ability, are Notre Dame's places still being funded through superannuation mechanisms?

Mr Gallagher —I have some figures for 2001 and 2000. I will take this on notice; these figures are not right.

Dr Shergold —There was a second question.

Senator BARTLETT —Apart from the 50 places under Backing Australia's Ability for IT, are Notre Dame's places still being funded through superannuation mechanisms or from direct appropriations under HEFA?

Mr Gallagher —The places at Notre Dame are funded on the normal operating grant arrangement for universities.

Senator BARTLETT —That is under the HEFA appropriation?

Mr Gallagher —Yes.

Senator BARTLETT —I will take you back again to comments that Senator Ellison made in the Senate when this bill was passing in late 1998. He made a statement basically to allay concerns that putting Notre Dame onto table A would further dilute the limited Commonwealth funded places. He said:

In fact, the funding for this can be found from legislated superannuation which involved an excess amount. This small amount of funding will be found from that amount at no cost to public funding for the tertiary education sector.

I presume that assurance and statement only applied for 1999 and, since then, funding is now coming from the general pool of public funding for the tertiary education sector. Is that the case?

Mr Gallagher —There was an excess of the provision for superannuation over what was required, so we changed from one purpose to a general operating purpose. Those funds have continued to be provided on that basis, but Notre Dame now receives its funds through the same section of the act as for general operating purposes. But there has been no diminution to any other university for the continued funding of Notre Dame.

Senator BARTLETT —The funding now provided to Notre Dame for these 335 places comes from the normal HEFA appropriation, but you are saying that the legislated superannuation excess is poured into that HEFA pool.

Mr Gallagher —Yes.

Senator BARTLETT —That total amount from the superannuation excess is at least equivalent to what is provided to Notre Dame.

Mr Gallagher —That is the way in which we could initially fund it.

Senator BARTLETT —I appreciate that might be the way it was initially funded; is that how it is still being funded?

Mr Gallagher —It has been rolled in now to the general purpose operating grant provision.

Senator BARTLETT —It has been poured into the pool. Can you separate out how much was poured in?

Mr Gallagher —Do you want to know the amount that Notre Dame receives?

Senator BARTLETT —The amount that Notre Dame receives, and the amount that has been folded in from the superannuation excess.

Mr Gallagher —It is the same amount.

Senator BARTLETT —It is an identical amount?

Mr Gallagher —Yes.

Senator BARTLETT —You take as much as you need from that superannuation excess and add it to the general funding, and the amount you take is calculated based on what Notre Dame needs. Is that right?

Mr Gallagher —Yes. The minister agreed to fund a number of places that would grow in the pipeline formula according to the amount of excess funds that we estimated in the superannuation account.

Senator BARTLETT —The growth of places at Notre Dame from less than 100 to 335 has been based on the growth in the amount available through that superannuation excess.

Mr Mutton —That would not include the Backing Australia's Ability places.

Mr Gallagher —Other than those, yes.

Mr Mutton —In 2002, their operating grant funding is $3,675,000.

Senator BARTLETT —And that is the amount that you fold in from the super. Has there been any communication, that you are aware of, from the former leader of the opposition—the member for Brand—to either the minister's office or the department on the matter of funding for Notre Dame since his letter to Dr Kemp back in 1998?

Mr Gallagher —I recall that the then leader of the opposition wrote a letter to the Prime Minister supporting the inclusion of Notre Dame on table A and in support of its teacher education places.

Senator BARTLETT —As far as you are aware, have you had any further letters of support or encouragement, or requests for expansion of places to include the Fremantle campus?

Mr Gallagher —The vice-chancellor is regularly seeking every opportunity, but I do not recall any other letters.

Senator BARTLETT —You don't recall. Are you fairly sure about that?

Mr Gallagher —Is there an explicit—

Senator BARTLETT —Are you fairly sure that there has not been further advocacy from the member for Brand to expand funding to Fremantle?

Mr Gallagher —I have not seen such a letter.

Senator BARTLETT —Can you double-check, without chewing up 20 hours of your valuable time?

Dr Shergold —We will take it on notice to see if we can identify any such correspondence.

Senator CARR —In relation to 2.1, questions E124 and E60 went to the issue of unmet demand across VET and higher education. Can you update the table? It goes through from 1995 to 2000; are the figures for 2001 available?

Mr Arthur —I think that it would be of assistance to repeat the question.

Senator CARR —E124 and E60 are on the issue of unmet demand across the VET and higher education sectors. Do we have a copy of that?

Dr Karmel —I do not have that question in front of me, but I can certainly provide you with the latest data for the higher education sector.

Senator CARR —This is infrastructure funding for post-school education system, so it is in group 2.1; it was listed. What I am interested in is both the comparisons of higher education and VET.

Dr Karmel —I do not have information on the vocational education and training sector with me, but I do have information on the higher education sector.

Senator CARR —Can the department have a look at providing information for the VET sector as well? They have provided it at some stage because they have given me a table for 1995-2000. What I want is 2001.

Dr Karmel —We will take that on notice.

Senator CARR —Obviously, you will not be able to answer this, but could the relevant section advise on how unmet demand in VET is measured to give you the figures? That will be an additional question with regard to supporting that table. I turn to the issue of the figures that the minister used in his media release in January this year. We had a dissertation this morning on how this event occurred and indeed a number of statements were made throughout the year which appear to have been incorrect. You will recall—and I am sure you would—that I have had considerable interest in Dr Kemp's media releases over the year. I made the point that I thought they were inaccurate on numerous occasions. I trust that with the new minister this will not happen too often. Did the department rely on the Australian Vice-Chancellors Committee to get the original data?

Dr Karmel —We have two series of data: one series comes from the Australian Vice-Chancellors Committee and the other series comes from the admission centres. The difference between them is a matter of timing, so you do get different numbers.

Senator CARR —Do you think it is a good policy for the department to rely on the Vice-Chancellors Committee for this sort of thing?

Dr Karmel —As I said, we do not rely on the Vice-Chancellors Committee. We certainly get their data, but we also get our own data from the admission centres.

Senator CARR —What has not been explained to me is how the figures were wrong to begin with. I have been told that they were wrong consecutively, that the department was wrong on repeated occasions.

Dr Karmel —There was one mistake made, and it was because of the juxtaposition of two series. One series was taken, the last observation was missing and we added another figure—and it turned out that it was from a series that was inconsistent with the first. That is the one mistake that was made.

Senator CARR —And repeated?

Dr Karmel —It was not repeated. When we found the mistake, we corrected it.

Dr Shergold —I am sure I said to you, Senator, that the mistake was first made in March of last year, and it was repeated twice to the present minister—in October and November—because no-one, at that stage, had spotted the error.

Senator CARR —That is what I am saying. Dr Shergold, we are in fierce agreement here: the mistake was repeated. It would appear that the error occurred on at least three occasions. Anyway, I take it you now have the systems in place, Dr Karmel, so that this will not happen again.

Dr Karmel —Certainly.

Senator CARR —Do you have a current estimate of unmet demand for higher education this year?

Dr Karmel —Yes. The number I have, which I checked as at five o'clock tonight, was 52,693. It is slightly different from the number I had yesterday, because there were some more offers made today.

Senator CARR —I hear there are a few down at Melbourne University.

Dr Karmel —That number will continue to change because at least Tasmania—

Senator CARR —There are a few more in Sydney, I think you will find, as well.

Dr Karmel —There may be. Certainly in Tasmania we expect some more offers.

Senator CARR —Fair enough. Do you have a figure on the total unmet demand of what I might call the higher education sector—that is, the postschool education system?

Dr Karmel —I only have a figure for the university sector.

Senator CARR —So when the table is updated we will get that information?

Dr Karmel —Yes.

Senator CARR —Are you able to provide an estimate of the 2002 figure? If you clearly have a figure of 52,000 as of tonight, presumably you can, when you produce this figure, include a 2002 figure.

Dr Karmel —Sorry, Senator; that is the 2002 figure.

Senator CARR —Yes, but I am saying that I asked before for 2001. I was not anticipating that you would be quite so efficient.

Dr Karmel —Sorry, my apologies; the figure for 2001 was 35,942, which is certainly a low over the decade.

Senator CARR —Let me get this straight. In 1999, unmet demand in higher education was 20,000.

Dr Karmel —That is not the figure I have here.

Senator CARR —I am working off the table that you have given me. Is that right?

Dr Karmel —As I said before, there are a number of series available here, and that is not the series that I was just quoting to you.

Senator CARR —What I would like is a consistent series, because the figure I have from the table I was asking you to update is 20,000 through to 18,800. What is the 2001 figure in that series?

Dr Karmel —I will take that on notice. When I look at the answer to question 124, there is a graph called figure 2 which gives a range of discounted, unsuccessful eligible applicants. That graph is based on the AVCC series and it looks to me as if the 2001 figure would be the midpoint of that last range, which would make it—

Senator CARR —You have not misled me with this answer as well, have you? That could not be right, could it?

Dr Karmel —No, of course I have not misled you, Senator. There are a number of series here.

Senator CARR —I will let you take it on notice because it is clear we are not going to get any further with that. We are going to be talking about two separate sets of figures, because in one series you are talking about 18,000 and suddenly it gets to 52,000. That seems to be an extraordinary jump.

Dr Karmel —That is a difference in magnitude. I can give you a quick outline of why that difference occurs.

Senator CARR —Yes, please do.

Dr Karmel —The figures that we were providing to you, which this year are of the order of 52,000, are obtained by looking at final applications and final offers. It is just a simple matter of arithmetic and you get the unmet demand in terms of the number of applications which did not receive an offer. The other figure, which comes from this graph that you can see from that answer, comes from the Vice-Chancellors Committee, and they use a range of discounting factors in order to come up with what they think is, in a sense, a tighter estimate of unmet demand. When you look at the crude figures, you could argue that there is no unmet demand because no doubt there is a place somewhere in a campus in Australia which has not been filled. What the Vice-Chancellors Committee is trying to do with that graph is to reduce the crude figure to take into account the fact that some people do not realistically have a chance of getting into the course of their choice, and to take into account interstate applications, and so on.

Senator CARR —Do you think the level of unmet demand is growing because the number of marginally funded places is declining?

Dr Karmel —There are a number of factors in the increase in unmet demand this year. The main factor is that the number of applications went up quite significantly. I would associate that with the uncertainty in the economy. It is true that the number of offers seems to have gone down by a small amount—but that is a relatively small amount.

Senator CARR —So has the number of marginally funded places increased or decreased?

Dr Karmel —I think you are probably right that the changes in the number of marginally funded places would have had some impact, but it would not be a huge impact.

Senator CARR —It does not account for the full extent of the change?

Dr Karmel —Certainly not. The increase in applications is the dominant factor.

Mr Gallagher —The estimates that we had from the institutions from the profiles submissions suggest that they would be seeking to pull back their overenrolment by the order of 8,000 to 9,000, and that pretty much explains a fair proportion of the increase.

Senator CARR —Eight to nine thousand? That is not quite what Dr Karmel was telling me, is it?

Dr Karmel —Perhaps I can give you some figures here that will help explain the situation. If we look at the increase in final applications, it was seven per cent this latest year compared to the previous year. If we look at the decrease in the offers, it is down by 0.5 per cent. So the dominant factor is the increase in applications.

Senator CARR —What are the 8,000 or 9,000 positions—

Mr Gallagher —That is the universities moving back from their levels of enrolment.

Senator CARR —Yes, I know what that is. I understand the point that you are making, Mr Gallagher, but what is the difference in the unmet demand figure that you are using? You have given me two sets of figures tonight. Does it constitute 8,000 or 9,000? Is that roughly comparable?

Dr Karmel —The figures I gave you tonight for 2002 were the final applications and the final offers. I have only given you one figure for 2002.

Senator CARR —I am extrapolating from the other series. What is the increase in unmet demand as far as you are concerned? Is it 8,000 or 9,000? Is it 10,000? What do you think it is?

Dr Karmel —According to these figures it went from 35,942 to 52,693.

Senator CARR —On that series?

Dr Karmel —On this series.

Senator CARR —I will let you answer the question on notice and we will have another look at that. I would like to ask about question E17, which is the HECS-liable load projections. In previous answers, the department has indicated that the decline in HECS-liable load projections for 2002 might be offset by the new places announced in Backing Australia's Ability. Do you still hold to that view?

Mr Mutton —I really need to look at the question. There are two kinds of HECS-liable loads. Some of them are fully funded and some of them are overenrolments. We could only talk with confidence about fully funded places—and they will have gone up, yes.

Senator CARR —Sorry, what were?

Mr Mutton —Fully funded HECS-liable places.

Senator CARR —Were they compensated by the so-called increase in Backing Australia's Ability places?

Mr Mutton —Yes.

Senator CARR —What, then, is the overall shortfall on the 2000 figures of HECS-liable places remaining after the new places were accounted for?

Mr Mutton —Which part of the answer is that, Senator?

Senator CARR —I am asking a different question. If we compare the figures that are available now—since this question was actually asked on 7 June 2001, I take it that we now have the 2002 figures in—is there a shortfall on the HECS-liable places?

Mr Mutton —Clearly there is, because we have been advised that the level of unmet demand has increased.

Senator CARR —What is the level of shortfall?

Mr Mutton —I will have to take that on notice.

Senator CARR —Thank you. In the response, could you provide me with a breakdown on a state and territory basis?

Mr Mutton —Yes.

Senator CARR —There have been repeated remarks by Commonwealth officials and ministers that the total number of fully funded places will increase by 6,500 between 2001 and 2004. Is that right? Is that the sort of increase you are anticipating?

Mr Mutton —That sounds right. That is 2,700 new places this year, with a pipeline through to 2004.

Senator CARR —What calculations were made about the growth in undergraduate places, which appears to exceed the net growth for the system as a whole? Have there been any calculations on that?

Mr Mutton —I am not sure that I follow the question.

Senator CARR —We will put it on notice. Give me a look at the tables and see if we can get an explanation, because I am having a bit of trouble following these statements. Going to the question of first round offers, an article appeared in the Courier-Mail in Queensland which told us that one-third of Queensland students did not receive a first round offer for 2002. Are you able to confirm those figures, Mr Gallagher or Dr Karmel?

Dr Karmel —I have some figures here. For Queensland this year there were 39,541 main round offers and, at the moment, there are 44,145 final round offers.

Senator CARR —Can you confirm that the University of Queensland has cut its offers by 500?

Dr Karmel —I would have to take that on notice. I do not have that data here.

Senator CARR —As a separate question, can you tell me the total number by which Queensland universities have cut their offers this year?

Dr Karmel —Yes, I have that number here. They increased their offers by 0.4 per cent.

Senator CARR —By 0.4?

Dr Karmel —Yes.

Senator CARR —And you cannot confirm at this point whether or not the University of Queensland actually cut theirs?

Dr Karmel —No, I do not have that data with me.

Senator CARR —It is quite a substantial increase between the first and second rounds. Is a percentage of that dimension about the norm?

Dr Karmel —Yes.

Senator CARR —Let us see what you can do in terms of Queensland. Thank you.

Mr Mutton —Can I go back to your earlier question about the decline in numbers. As I said, the HECS-liable numbers can include fully funded and marginally funded. The question related to the two added together. We cannot know how many marginally funded places there are in 2002, so we cannot—

Senator CARR —Why will you not know that?

Mr Mutton —We will, but not until June. So, you cannot get a meaningful answer until then. But, if you simply took their own projections which did not include the new growth and added on the new growth, then clearly the figure would be higher. That assumes that they maintain their planned overenrolment.

Senator CARR —I have a question there, if you could have a look at the detail. That is preliminary to what I was asking about. I am told that, despite a growth of four per cent in New South Wales, 18,000 students—or 25 per cent—were unsuccessful. Are you aware of those figures?

Dr Karmel —For New South Wales and the ACT together, the main round offers were 47,698 and the final round offers were 60,869.

Senator CARR —I am relying on what the New South Wales vice-chancellors have said when they claim they had no choice but to make a reduction in intakes. Is that true? Have they reduced their intakes?

Dr Karmel —They certainly have reduced their offers, but only by 0.8 per cent. As for intakes, we will have to wait until June to see that.

Senator CARR —I see.

Mr Mutton —It might help to know that last year in New South Wales, universities were overenrolled by 13.4 per cent. That was of their own choosing. They may well have decided they ought to reduce it.

Senator CARR —But they were funded at a marginal rate for those overenrolments, weren't they?

Mr Mutton —Yes.

Senator CARR —That is the point I am making. We have an argument about how much the reduction in marginally funded enrolments accounts for the decline in places, but I am suggesting it accounts for a significant proportion of the decline. I am told that Macquarie actually cut its intake by 700. Can you confirm that?

Mr Gallagher —We cannot confirm the actual numbers, but it is consistent with the discussion that we had with Macquarie which was 20 per cent overenrolled last year. When you are getting 20 per cent overenrolment at a marginal funding rate matters of quality need to be addressed.

Senator CARR —Absolutely.

Mr Gallagher —It is consistent with the government's interest in improving the quality of the system to have Macquarie come back in terms of its overenrolment.

Senator CARR —It is one of the concerns we have been raising. I am not disputing the impact on quality. What I also notice is that the Macquarie University Assistant Registrar, Ron Kendall, said, `There is no point in us teaching students we can't fund.' I am just wondering how those sorts of comments sit with statements by Dr Nelson that universities were not underfunded.

Mr Gallagher —That is an admission by Macquarie University that they were overenrolling excessively.

Senator CARR —That is how you read that?

Mr Gallagher —Yes, Senator.

Senator CARR —I am advised that in Victoria there were 1,760 fewer first round offers than there were last year. VTAC, on 8 February, showed an eight per cent decline in university offers overall, on the last year's figures. How do you account for that? Can you account for that six per cent decline?

Dr Karmel —The figure I have is not six per cent, but there was a decline in offers.

Senator CARR —What does DEST say is the level of decline?

Mr Gallagher —In Victoria, the main round offers were down by 4.3 per cent and the final round offers were down by 3.5 per cent.

Senator CARR —Is that the largest decline of any of the states?

Dr Karmel —No. The figures I hear suggest that the South Australian decline of final round offers was 5.3 per cent.

Senator CARR —How about the first round?

Dr Karmel —The first round was up three per cent, so these numbers do bounce around a bit.

Senator CARR —They certainly do. What do you say to the claim that Victoria is underfunded in terms of its Commonwealth distribution of university places?

Mr Mutton —Victoria has the highest rate of participation in Australia, to the extent that every other state, apart from the ACT, is below the national average.

Senator CARR —Why is that an argument for Victoria to receive fewer places?

Mr Mutton —You could say everyone else should go up as well, but in terms of equitable levels of participation it is in a very favourable position, comparatively speaking.

Senator CARR —I am sorry, I cannot follow that that is an argument why Victoria should receive fewer, because its average education is higher.

Mr Mutton —And so it should receive less.

Senator CARR —It receives less of its share; that would be the argument, wouldn't it? It would certainly be the argument the Victorian government would put.

Mr Mutton —Since it is funded on the same basis as other states, and the participation rate is significantly higher than other states, it is a bit hard to see how it could be less well funded.

Senator CARR —Let's just go through it. Tell me where I am wrong, but I have been advised that between 1996 and 2001 the number of fully subsidised places for students at Victorian universities declined by 6,382 EFTSUs, or 5.7 per cent, which compares unfavourably with the Australian average of a decline of 1.2 per cent. Is that true?

Mr Mutton —I cannot vouch for the figures, and others may correct me if I am wrong, but as I recall Victoria had no ongoing growth pipelined from earlier growth during that period, reflecting its population. Queensland, on the other hand, had significant growth from about 1994 and flowing through those years, reflecting its population and its significantly lower participation rate. New South Wales also attracted additional growth, as did Western Australia, so, comparatively, Victoria fell behind, but not in absolute terms. It just fell behind in that period.

Senator CARR —It is quite a substantial period.

Mr Mutton —When the cuts were made to forward estimates there was no growth in Victoria, so they went down. In other states, the cut to forward estimates still did not bring them down below where they started from at the beginning.

Senator CARR —Let's be clear about the period we are talking about: 1996 to 2001. That is in the last five-year period that we have figures available.

Mr Mutton —And those cuts were from 1997 to 2000.

Senator CARR —I am also advised that, according to the latest published figures, in 2000 Victoria had 19,439 eligible students who did not receive a place in Victorian universities. Let us compare this to other states. Queensland, for instance, had 12,202 and New South Wales had 9,555. If the need is greater in Victoria, is there not a case for additional resources?

Mr Mutton —It is only one consideration. The arguments vary from state to state. You will not be surprised to hear that WA thinks that is a poor argument and that an impressive argument would be that they have a lower participation rate than in Victoria and they ought to be brought up to that.

Senator CARR —What do you regard as an impressive argument?

Mr Mutton —It is a mix of those things. There would have been no point in giving places simply on the basis of participation, say, to Tasmania where, some years ago, bringing them up to the Victorian participation rate would have been impossible because the demand simply was not there. But I do not think Western Australia is in the same position, so it is a mix of those things.

Senator CARR —In 2002, 1,760 fewer university first round places have been offered than last year, despite an increase in overall demand for university places in Victoria of 9.5 per cent. Would you agree with those figures?

Mr Mutton —Senator, I do not know all of those figures off by heart. I have just explained the circumstances.

Senator CARR —Yes.

Mr Gallagher —Senator, just for the record, the number of fully funded undergraduate places for Victoria was 91,530 in 1996, and 92,450 in 2002. There is an increase of almost 1,000—and this for a state that does not have high demographic growth and whose participation rates are already well above every other state.

Senator CARR —But the level of demand increased during this same period.

Mr Gallagher —Yes.

Senator CARR —Let us go on. Going to the Commonwealth's decision on research training places, I am advised that the number of research training places in Victoria has been cut by 1,370. That is about 31 per cent of all the HECS liable research places expected to be lost nationally. Is that the case?

Mr Mutton —Again I would need to check the figures, but they could have retained those research places if they were prepared to compete with other universities. Instead, they chose to convert those places into undergraduate places to meet some of the demand you were talking about.

Senator CARR —So it's their own fault.

Mr Mutton —It is their own choice.

Senator CARR —`Fault' is the word I used.

Mr Mutton —If they thought they were good enough to compete, they would have retained the places. They were not forced to abolish them; they converted them into undergraduate places.

Senator CARR —Now this is a real beauty which I will ask Mr Gallagher to give me an explanation on. The Commonwealth announced an additional 670 commencing places for students in regional universities in campuses in Australia. Victoria received 45 of those places, which is less than seven per cent of the national allocation. How did that come about?

Mr Gallagher —You will have to go to the criteria.

Senator CARR —I will be very interested in the criteria. I think I announced this before the announcement was made.

Mr Mutton —One of them has to do with low levels of participation rates.

Senator CARR —Nothing to do with marginal seats?

Mr Mutton —No.

Senator CARR —Can you give me a breakdown on the regions where these places occurred and the seats in which they occurred?

Mr Mutton —I do not think we would know which seats they were in.

Senator CARR —I am sure you would.

Mr Gallagher —We can show you by university, though.

Mr Mutton —By university.

Senator CARR —You can tell us the federal electorates in which they are based.

Dr Shergold —We will seek to look that up. We do not collect the data in that way. We will see if it is possible.

Senator CARR —I think I have asked for similar information on other occasions. Dr Shergold, I stand to be corrected, but I do not think the department would have any difficulty disaggregating it on an electoral basis.

Mr Gallagher —The only problem, Senator, is if you take, say, La Trobe University, as you know it operates in Shepparton, Wodonga—

Senator CARR —Of course it does. But it is located in Bundoora, you see. How many places did Bundoora or La Trobe get?

Mr Mutton —I am not sure that La Trobe got any places.

Senator CARR —Yes, that is right.

Mr Mutton —We could give you the participation rates.

Senator CARR —I want to know where the single criterion places were located.

Mr Mutton —The criterion was not which electorate they were in. It was: what was the participation rate in certain districts? It was one of several criteria.

Senator CARR —I do not expect you to come here and tell me that you allocated them on the basis of the minister's demand for support in marginal seats. What I am interested to know is whether or not there is a correlation between the allocation and marginal seats.

Mr Mutton —But you are not interested in the correlation with local participation?

Senator CARR —I am delighted for you to tell me about that. I am interested to know why Victoria only received seven per cent of the special allocation of 670 places for students at regional universities and campuses in Australia.

Mr Mutton —Because it does not have a low participation rate in regional areas, compared with other parts of Australia.

Senator CARR —What is the participation rate in Ballarat?

Mr Mutton —I do not know that.

Senator CARR —I am sure you will be able to find out. What is the participation rate in Wodonga or in the Goulbourn Valley at Warrnambool? Some of these are very poor parts of Australia—extremely poor. I would like to know why their participation rates were not taken into account. I bet you will find that they are low.

Mr Mutton —Some were. I cannot recall where they went to in Victoria. I can look it up here, but that was the main criterion.

Senator CARR —Is the allocation made by the minister?

Mr Mutton —Yes.

Senator CARR —On the advice of the department?

Mr Mutton —Yes.

Senator CARR —But it was a personal decision of the minister?

Mr Mutton —Sorry?

Senator CARR —It was at the discretion of the minister?

Mr Mutton —He is the minister; he seeks advice and makes a decision. It is nothing unusual.

Senator CARR —Thank you very much. Can I go to the issue of the gap in entry scores between those qualified for HECS liable places and those who are prepared to pay a full fee. Does the department monitor success rates for the two categories of students?

Dr Karmel —We have not done a run to do that. We would be quite happy to do that for you.

Senator CARR —Thank you. I am particularly concerned, because there was a report in the Sydney Morning Herald that said the University of New South Wales had cut-off scores for its Arts-Education double degrees of 72 for full fee paying students and 91.9 for HECS places, which seems to me to be an extraordinary gap.

Dr Karmel —I do not know about those figures. I would be quite happy to produce for you a distribution of the TER scores for that university, for comparable groups. The work that I have done to date on this suggests that there is quite a wide distribution among both groups.

Senator CARR —Let me give you a few more. The University of Melbourne web page shows first round cut-off entry scores for both HECS liable places and those prepared to pay up front fees. What I read and note is that there is a 95.5 cut-off score for those seeking entry into a HECS liable place in the Arts Science degree and 80 for those seeking entry via a full fee paying place. Is that the sort of discrepancy you expected when this policy was introduced?

Dr Karmel —I can only go on the data that I have looked at and, as I said, there is a pretty wide distribution among both groups. The first run we did suggested that, on average, the fee payers did have a higher TER than the non-fee payers. But in a sense, you would expect that, because—

Senator CARR —Of course you would. I do not dispute what you are saying, as that it is to be expected. But a gap of this dimension—15 percentage points? In the case of Arts-Education, it is much larger at the University of New South Wales—just under 20 points difference.

Dr Karmel —The admission criteria are up to the university.

Senator CARR —Of course; that is exactly the point, isn't it? I am just wondering what implications this has, in terms of the fairness and equity arrangements, with the expenditure of Commonwealth moneys. Have they been considered? Has there been any evaluation within the department of these matters? What do you think is a reasonable gap between those who can afford to pay for a place at university and those who earn a place through ability?

Dr Karmel —The point I make is that every place that is taken up by a fee paying student means that a HECS place is vacated for somebody else.

Senator CARR —Not if they do not qualify. That is the point: they are way under the benchmark, aren't they?

Dr Karmel —There are clearly different cut-offs for different courses. What this policy is doing is allowing students who do not get in automatically through their TER score to make another choice.

Senator CARR —Does the department have any mechanism to monitor the impact of the government's policy on fee paying students on participation by the various designated equity groups that you register in other parts of the department's activities?

Dr Karmel —We are certainly happy to have a look at that. The point I would make is that the number of fee payers is so small that it will not shift the distribution by equity groups.

Senator CARR —What is it—about six per cent?

Dr Karmel —The number of fee payers?

Senator CARR —Yes.

Dr Karmel —I would have to check that, but at the undergraduate level it is pretty small. Does Mr Mutton have a figure?

Mr Mutton —Something like 3,000 EFTSU out of something like 400,000.

Senator CARR —So what we have here is a small group of people who appear to be incredibly well-off—the fees being charged in these courses are quite astronomical—who have considerably lower TER cut-off points, or whatever they are called in each of the states. This is designed to cater for a very small group of wealthy people. Is that the case, Mr Mutton?

Mr Mutton —I do not think the government thinks its policy is designed for anyone other than someone who thinks that it is an appropriate investment that they can make.

Senator CARR —For instance, how many indigenous students or those from a low socioeconomic background are taking up these places? Have you any indication on that, Dr Karmel?

Dr Karmel —I do not know that off the top of my head.

Senator CARR —What really troubles me, though, is when I read on the web sites of universities such as Monash College, which is accredited by Monash University, that if you are able to take up a place through that college, the Monash College development program ensures a Monash place for students who have narrowly missed out on direct entry into the university and that students will be given an automatic entry into a HECS liable place in their second year. How does that fit with the policy?

Mr Gallagher —It is quite consistent with the policy that has existed for many years under Open Learning.

Senator CARR —It is consistent?

Mr Gallagher —It is quite consistent with the policy of open admission, that is, no qualification to undertake units of study through Open Learning Australia—which, as you know, is a consortium of Australian universities and TAFE providers. Each of them admits students to their own programs and accredits fully the courses that they pass online. That is a fee paying course.

Senator CARR —So you think this is consistent with the policy, that if you were to buy a place in your first year, you are guaranteed a HECS liable place in your second year. Do you think that is within the policy guidelines and is a reasonable approach to take?

Mr Gallagher —We should put it into perspective. Of the 470,000 or thereabouts HECS liable undergraduate students enrolled in 2001, only 105 had been students in fee paying places in the previous year.

Senator CARR —This does not ameliorate my concern. The Herald Sun refers to them as `wealthy under achieving students who buy their way into courses' and says that `rich Victorian teenagers are buying their way into top university courses despite substandard VCE scores.' Isn't that the impact of the government's policy?

Mr Mutton —I think 105 is not a lot of people and they have to do very well to get a HECS place. There is not a standard policy, but as I recall, if one can generalise, they usually need to get a credit average, so they are not dumb students.

Senator CARR —So they need to get a credit average in their first year—

Mr Mutton —That is a generalisation. It varies from university to university. I do not know whether the whole 105 got a credit average.

Senator CARR —But they have to pass their first year—I am reassured to hear that.

Mr Mutton —I think we are on safe ground on that one.

Senator CARR —That is a tremendous breakthrough. Can I ask you some questions about other franchising arrangements: has the relationship between Deakin University and the Melbourne Institute of Business and Technology been brought to the department's attention? Did that come up in the profiles discussion?

Mr Mutton —I am wondering whether we are talking about the same group. They had an arrangement with an information technology group for employer funded places. Are you talking about that?

Senator CARR —I am talking about the whole issue of being able to buy your way into university without the necessary academic qualifications. That is the issue I am concerned about here. In this case, I am told that they advertise that students who have not achieved the university entrance score they were expecting and do not think they are qualified to enter university can be provided a direct pathway to second year at Deakin university by enrolling with Melbourne Institute of Business and Technology, with guaranteed entry following satisfactory completion of MIBT diplomas. I am wondering if the department has monitored these sorts of arrangements, in terms of people who have undertaken the initial part of their course on a fee paying basis getting access to HECS liable places?

Mr Gallagher —That program at Deakin was discussed with us. It was initially discussed with us in terms of the relationship with the company, to see whether or not it could fit within the rules for HECS liable courses. The government has a policy, as you know, of being interested in universities establishing closer links with industry and in students undertaking at least part of their studies in environments that are able to develop in them the range of skills needed for appropriate employment. So, in looking at the interest of the company, Deakin University sought to structure a program which would be attractive to students and which would give them advanced standing with the university, if they successfully passed units which were tailored for the purposes of that firm.

Mr Mutton —Perhaps it is worth emphasising that a large proportion of students do not gain entry to university through TER scores. Dr Karmel can probably give us a figure. It is quite a high figure. Many disadvantaged people gain access in that way, by recognition of special experience or whatever. People who have completed TAFE qualifications also often gain entry.

Senator CARR —Through special admission programs?

Mr Mutton —There are a whole range—

Senator CARR —What is the percentage of people who get entry to university through special admission programs where they have not completed the prerequisites?

Dr Karmel —I do not have those figures with me, but I think you have to define such questions very carefully. In many cases, the notion of prerequisites does not exist. There is no matriculation mark that one must get to go to university.

Senator CARR —No.

Dr Karmel —In fact, a high proportion of the cohort who get into university have pretty low TER scores, and they do quite well.

Senator CARR —I appreciate that. But what we are being told here at Deakin is that you can go through a special entry program to get into a HECS place.

Dr Karmel —I can certainly provide you with the numbers of students who enter university not on the basis of a TER. I do not have those figures with me, but I can obtain them for you.

Senator CARR —And how has that shifted? Are you able to give me a time series on that?

Dr Karmel —Yes, I can give you a time series on that.

Senator CARR —Thank you very much. Are you able to indicate the nature of those special entry arrangements?

Dr Karmel —We have some information on those—we know how many people come from TAFE.

Senator CARR —How many would fit into the mature age entry category, for instance? Are you able to provide that sort of information? I would like to know the breakdown, to the best of your ability.

Dr Karmel —Yes, I will provide you with the breakdown that we have.

Senator CARR —Thank you. I am told that the average HECS charge in 2002 is $4,511. Is that right?

Mr Mutton —Yes, that would be about right.

Senator CARR —A medical degree will cost $36,000: is that about right?

Mr Mutton —Yes.

Senator CARR —Is it true that university tuition fees through HECS have more than doubled since 1992? There are all the implications that brings with it, but is it true? Do you have to take that on notice? Is your knowledge not that encyclopaedic.

Mr Mutton —It is not even close to encyclopaedic, Senator.

Senator CARR —What I am interested to know is the cost of participation. Would you agree that Australia is one of the most expensive countries in which to undertake higher education in the public system?

Dr Karmel —No, it is not.

Mr Mutton —That is an awfully hard question to answer.

Dr Karmel —For a three-year average degree, it is not.

Senator CARR —I know where you are going with that. You will compare those mickey mouse colleges in the United States with our magnificent, pristine institutions.

Mr Gallagher —Are you talking about Harvard?

Senator CARR —No, I was talking about those community colleges that you have such disdain for—like Greenwich.

Senator CROSSIN —It is too late at night to say that.

Senator CARR —I have a few on Greenwich, do not worry.

Dr Karmel —Senator, the major cost of going to university is actually the opportunity cost of not earning. As well as the cost of accommodation—

Senator CARR —We can kiss the night goodbye with this sort of talk.

Dr Karmel —Australia is actually pretty cheap because many students live at home, unlike many other places. Australia is a pretty cheap place to get a degree, on average.

Senator CARR —Will you be able to get me some international comparisons? They will have that information available?

Dr Karmel —International comparisons are always difficult, Senator.

Senator CARR —I know. That is why I want to see what you think they cost. How do costs for Australian universities compare with those for European and British universities? I know you like to compare our universities with universities in the United States, because they have such a diversity of educational experiences.

Mr Mutton —You would want to take into account living costs, because you only get loans in Britain, not grants. You do not get youth allowance.

Senator CARR —I am told that we are one of the four highest in the world now. Is it right that we are up there with Japan—that sort of thing?

Mr Mutton —Probably not.

Mr Gallagher —I doubt it, Senator. We do not think so. We can show you some figures.

Senator CROSSIN —Excluding the youth allowance?

Mr Mutton —You cannot separate these things out.

Senator CARR —Can you give me any information on bridging courses for overseas trained residents?

Dr Arthur —Yes, Senator.

Senator CARR —I noticed that there is a section in your annual report that deals with bridging courses. I understand that they now involve full fees for residents undertaking bridging courses: is that right?

Dr Arthur —It is the case that it was announced in the 2001-02 budget that a program would be introduced to provide an interest-free deferred payment loan to assist overseas trained professionals to undertake bridging courses.

Senator CARR —There is an assessment fee subsidy for disadvantaged overseas trained Australian residents. Is that the case?

Dr Arthur —That is correct.

Senator CARR —How much is that? What is the cost to the budget of that?

Dr Arthur —I do not have that figure with me, but that particular program is not being affected by the changes.

Senator CARR —Right. Are you able to tell me whether or not you are monitoring any shifts in the number of places available for overseas trained residents undertaking bridging courses?

Dr Arthur —Given that the program will not commence until the next financial year, no, we have not undertaken any monitoring to date.

Senator CARR —My office tells me that there is nothing on your web site about this program, the Bridging Courses for Overseas Trained Program—NBCOTP. Why is that not on the web site?

Dr Arthur —The legislation has not been passed for the program, therefore the program, at this stage, does not exist. As I said, it was announced in the 2001-02 budget and is part of the current government's legislative program.

Senator CARR —When do you anticipate that coming before the parliament?

Dr Arthur —I would defer to another officer regarding the legislative program.

Senator CARR —Mr Kriz has been waiting all day for a question.

Mr Kriz —Senator, we do not have the information with us. I can get it to you.

Senator CARR —I have not seen anything about this on the forward legislative program. Is it the intention of the department to put this up for legislative priority?

Mr Kriz —Yes. It is its own piece of legislation. It is in now.

Senator CARR —Where is it? Is it in the House? Do you think it has been introduced?

Mr Gallagher —If it has not, it is about to be.

Mr Kriz —We would have to get back to you on that.

Senator CARR —What is the name of the bill? I have got you completely buggered this time, haven't I?

Mr Kriz —I am trying to work out whether this is already in the public arena or not.

Senator CARR —Surely the name of the bill is not a secret?

Mr Kriz —If it has been released. We have four bills now that have been introduced. I can get the information to you tomorrow about where this is at.

Senator CARR —Do you want to take it on notice?

Mr Kriz —Yes. It is not a question of anything untoward, I just do not have the information. We can get it to your office tomorrow.

Senator CARR —Thank you.

Senator CROSSIN —Could I ask you to provide me with a copy of that information as well, Mr Kriz?

Mr Kriz —Yes.

Senator CARR —The AVCC has published A survey of Australian undergraduate university student finances, by Michael Long and Martin Hayden. Mr Gallagher, are you aware of the report?

Mr Gallagher —Yes, Senator.

Senator CARR —Do you have any response to what appear to be quite disturbing statistics contained in it?

Mr Gallagher —I thought it was interesting that the report indicated that students are working considerable hours now—even when they are enrolled as full-time students—of the order of 20 hours a week on average. One of the implications for universities is that they really need to look at the changing forms of student attendance and use of campus facilities, and look at their responsiveness to meeting the changes in those patterns of usage so that they can be more convenient in their service to students.

Senator CARR —You thought that that was the most significant issue? An average of 20 hours a week means in excess of 20 hours for many people which, I would have thought, was considerably more than the restrictions on overseas students. Would you agree? That is the case, isn't it? We are now acknowledging that domestic students are allowed to work longer than overseas students—in paid employment, that is.

Mr Gallagher —There are other reasons for the restriction on overseas students.

Senator CARR —Like what?

Mr Gallagher —Well, they are here to study.

Senator CARR —I would have thought that the students at university were there to study too. A full-time student, one would have a reasonable expectation, is there to study. I know that this has often proved to be inconclusive but 10 per cent of students are frequently missing class, 20 per cent of students in paid work say they have been adversely affected, 20 per cent of students with dependent children miss classes because they cannot afford child care, and 10 per cent of students miss classes because they cannot afford the cost of travel to university.

Mr Gallagher —But they were also missing class because the classes were not available at times that were convenient for the students.

Senator CARR —And you think that that is the more significant issue?

Mr Gallagher —Well, it is an issue.

Senator CARR —So has there been any assessment of the impact this situation would have in terms of student financial support by government?

Mr Gallagher —In another portfolio, yes.

Senator CARR —In another portfolio area. I would like to go back to the MIBT matter. Did I understand you correctly, Mr Gallagher, when you said that you had actually investigated this particular arrangement?

Mr Gallagher —I would need to confirm that. If it is the course that I think it is, then there was quite extensive dialogue between Deakin University and ourselves.

Senator CARR —It was put to me that a number of the students were admitted, on the basis of a bare pass and with a considerable history of failure of eight units—identical with a Deakin's first year course—straight into the second year course. Are you satisfied that there is not favourable treatment given to these people over and above other students seeking HECS-liable places? Is that the nature of your investigation? Were you able to establish that proposition?

Mr Gallagher —Deakin consulted us on the curriculum design and structure of the course, not on those matters. Now that you have raised them, we can raise them with Deakin.

Senator CARR —I would suggest you have another look at it, because we are getting complaints to say that the operations of the program are producing a result that I would be surprised you would intend. I would like to ask you about the report of the computer failure at RMIT. Have you had any discussion with RMIT about that matter?

Mr Mutton —Yes.

Senator CARR —What are you able to tell me about that?

Mr Mutton —I understand that their student systems have had serious problems. They forewarned us of that and we, in turn, indicated that if the problem persisted beyond a certain point they would have to seek agreement to moving their census date under the legislation. They are aware of that. We checked a couple of days ago and they were still optimistic that they would get the HECS notices to students in time, but they were not in a position to guarantee us that that would happen.

Senator CARR —Can you give a report to the committee on when that census date is determined?

Mr Mutton —Yes. If it were changed, it would have to be gazetted. It is not unprecedented.

Senator CARR —No. But you can advise the committee of an intention to change that.

Mr Mutton —Certainly.

Senator CARR —I would like to turn to the question of nursing and teacher education places. There has been considerable discussion, particularly in the New South Wales press, concerning the issue of vacancies in nursing education. I am told there are actually a number of vacancies in eight of the 11 institutions where degrees are offered in nursing in New South Wales. Is that true?

Mr Gallagher —I think `vacancies' may be code for a claim by the health authorities in the New South Wales government that a number of places that were agreed some years back between the departments of health in the state and the Commonwealth have been shifted into other fields over various years in response to shifts in student demand. So there are no vacancies in the sense that there are parking lots with no cars in them—the places have been allocated to students in fields of more popular demand.

Senator CARR —I am also told, though, that there has been a breach of an agreement about the level of funding for university places for nursing in New South Wales.

Mr Gallagher —I have read that, too, in the media. There is no agreement between the Commonwealth education authorities and the state education authorities. Even if there were to have been, it related to numbers from the mid-eighties that you could not envisage would be fixed, irrespective of shifts in labour market requirements. There has been an extensive debate on this matter for some years now, as you are probably aware. The New South Wales vice-chancellors were seriously concerned at the high failure rates of students being admitted into nursing and wanted to ensure that they were commencing students with the capability of successfully passing the courses. Had they met the requirements of the New South Wales health authorities, they would have had to accept students that they were then setting up for failure, and they were not prepared to do that.

Senator CARR —Has there been any direct representation by the New South Wales authorities on the issue of the claimed breach of agreement?

Mr Gallagher —We have annual meetings with the officials in each state education authority before and after our visits to the universities, and the New South Wales authorities have raised this matter with us from time to time.

Senator CARR —What is the proposed resolution of this conflict?

Mr Gallagher —As you know, there is a national review of nursing education under way at the moment, chaired by Ms Patricia Heath. It has issued a discussion paper and quite a number of commissioned reports, and the matter is being consulted on across the country, including extensively in New South Wales. I think it would be prudent if we await the findings of that consultation process.

Senator CARR —I will put some questions on notice for you to have a look at. I am sorry, I have just missed one here. Can you update estimates question E32 in regard to the level of HECS debts? Have the estimates for 2003-04 been revised, and could you provide the current estimates of outstanding and doubtful HECS debts? Do you have that information here now?

Mr Mutton —If you can repeat the question, I can look for it while you are talking to someone else.

Senator CARR —I will put it on notice. A question of particular concern to me has been raised by blind university students. This goes to the question of the disabilities services for university students. Blind Citizens of Australia have advised me that blind students are facing discrimination as a result of the failure of universities to actually provide transcription services for blind students at universities. I would like to know how many university students are blind or vision impaired—are you able to help me with these things now?

Dr Karmel —I would have to take that question on notice.

Senator CARR —How many of these are estimated to require transcription materials? I will place a series of questions on notice. I might also say to you that I have here a letter written by you, dated 10 September, to the Blind Citizens of Australia, where basically you are not offering very much assistance at all. Would that be a fair description of the Commonwealth's position?

Dr Karmel —I do not think that is a fair description. Universities, like all other bodies, have obligations under the Disability Discrimination Act to all students with disabilities, and universities have a very large operating grant with which they need to meet those obligations. In addition to that, the government has recognised some particular difficulties for universities in meeting these obligations and, at the last budget, a program was introduced. The program will be brought in this year to explicitly assist universities in this regard and it is for some—if I recall—$7.8 million over the next three years.

Senator CARR —That is the cost of support needs, including for students with visual impairments?

Dr Karmel —Yes.

Senator CARR —Eight million dollars over three years is not exactly a huge sum of money, though, is it?

Dr Karmel —It is a substantial sum.

Senator CARR —It is better than nothing.

Dr Karmel —I would certainly prefer to have it.

Senator CARR —I am sure the blind would, too. The question, though, is that you say here that it is the universities' responsibility to support their visually impaired students.

Dr Karmel —That is correct.

Senator CARR —That is the Commonwealth position, is it not?

Dr Karmel —Yes.

Senator CARR —That is why I say there is not a lot of comfort here for the blind people. In effect you are saying, `Go back to the universities.'

Dr Karmel —The universities have obligations to these people.

Senator CARR —You also go on to say that monitoring of the new program should place you in a position to identify problems the sector may have in meeting their responsibilities as they arise.

Dr Karmel —We will be monitoring the new program, yes.

Senator CARR —So it may well be three years before the Commonwealth is in a position to feel the need to act?

Dr Karmel —I cannot comment on that. I do not know what the results of our monitoring will be.

Senator CARR —I will put those questions on notice. I also indicate to you that I wish to return to this question at the next round, so you may find it helpful to check your files on the matter.

Mr Mutton —Senator, you asked about HECS debt and doubtful debt. I am happy to provide a table.

Senator CARR —Thank you.

Mr Kriz —Senator Carr and Senator Crossin, if you wish, I can provide you with information now in relation to that.

Senator CARR —Thank you. What is the information?

Mr Kriz —The bill which has the bridging course measures is the Higher Education Legislation Amendment Bill (No. 1) 2002. It was introduced into the House of Representatives on 14 February. It is scheduled to be referred to the Main Committee of the House on 13 March, and the opposition spokesperson, Jenny Macklin, was briefed on it last week.

Senator CARR —Are you able to help me with the question of quality audits? Who is handling quality audits?

Dr Arthur —I am.

Senator CARR —Thank you, Dr Arthur. The AUQA is performing its first round of audits, is it not?

Dr Arthur —That is correct.

Senator CARR —Who have they audited at the moment?

Dr Arthur —The audits are taking place in this calendar year. I am subject to correction, but I do not think it would be accurate to say that they have audited universities at the moment. There were some trial audits carried out last year, but this is the first year of actual operation of AUQA.

Senator CARR —Which universities are they looking at?

Dr Arthur —I am checking to see whether we have that information. There are about five—Dr Karmel corrects me; I think it is nine—but I do not think we have the names. We can certainly take that on notice.

Senator CROSSIN —Can you tell us if there has been an evaluation of the trial of the two universities and the education authority involved?

Dr Arthur —I do not have that information. I would stress that the AUQA operate independently. They have a board. We obviously liaise with them, but I am not aware of whether they have carried out that particular activity of reporting on their experiences with the trial.

Dr Karmel —I think the major purpose of the trial was to finetune the manual they were developing.

Senator CROSSIN —What is the formal mechanism for communication between the agency and the department?

Dr Arthur —The minister has appointed members of the board of AUQA, and there is a reporting relationship to the minister.

Senator CARR —Are you able to advise me on the audit at the University of New South Wales?

Dr Arthur —I am not.

Senator CARR —Is anyone here able to advise me?

Dr Arthur —I can now provide the information on the universities that are being audited in 2002. They are the University of Adelaide, the Australian Catholic University, Australian Maritime College, Macquarie University, the University of Newcastle, Swinbourne University of Technology and the University of Southern Queensland. Regarding your previous question, I would only speculate that it may have been involved in the trial program, but I am not in a position to say.

Senator CARR —They were. I know. I can tell you they were.

Senator CROSSIN —Can you give us advice on how to find out about the outcomes of the review of the trial?

Dr Arthur —We will take that on notice.

Senator CARR —In regard to the trial program, when will the findings of the audit at the University of New South Wales be available?

Dr Arthur —I will take that on notice.

Dr Karmel —I do not think they will be available as a trial audit. This year the audit will be published but not the trials, as I understand it.

Senator CARR —I understood there was an audit undertaken at the University of New South Wales—in fact, I know there was. In the process of audits, certain matters were not brought to the attention of the authority—for instance, the Auditor-General's reports into the university educational testing centre, which was the subject of both an ombudsman's report and a New South Wales Auditor-General's report which went to some very serious issues involving hundreds of thousands of dollars. You know the one I mean, don't you?

Dr Arthur —I am aware of some of the issues surrounding the educational testing centre.

Senator CARR —You are aware of the audit findings? The report says:

... its financial and operational management was deficient in that there was:

[middot]limited reporting against key performance indicators

[middot]poor control allocations of costs and overheads

[middot]inadequate use of budgets for performance monitoring

[middot]pricing decisions based upon inadequate information

[middot]failure to comply with established university procedures for:

[middot]purchasing

[middot]approving expenditure

[middot]recruiting and employment of staff

[middot]approving expenditure on staff functions

[middot]soliciting gifts from suppliers.

The University's Strategic and Operational plans only reflect its core academic business and do not appear to recognise the different exposure to risk and control requirements of activities such as ETC.

Hundreds of thousands of dollars were involved, and there are quite serious allegations of impropriety. These are subject to reports of state government authorities and not made available to the audit commission.

Mr Gallagher —Can I check the date of that audit report?

Senator CARR —I am looking for the date on the back of the report, but it was certainly available prior to the audit being done.

Mr Gallagher —I think it is several years old.

Senator CARR —No, it is not several years old.

Mr Gallagher —I think it gave rise to the university making some structural decisions.

Senator CARR —No, these were matters that were raised at the Senate inquiry last year. These are not several years old.

Mr Gallagher —But hasn't the university subsequently restructured that whole operation?

Senator CARR —Only late last year, I understand.

Mr Gallagher —In advance of the quality audit.

Senator CARR —What I am saying is that the quality audit was undertaken without reference to this document or the ombudsman's documents. Therefore, I am asking the question about how adequate these processes are.

Mr Gallagher —They are not the only processes that the government has in place. The matter of that audit—and this is why I wanted to query you—was discussed with us at the profiles meeting, and the vice-chancellor at some length indicated the new arrangements for that commercial organisation as between the splitting of the research function and the extension services and testing services. So it has been drawn to our attention. It is something that came to us not as a quality audit but as a prudential issue, and it seemed to us that the university already has action in hand consistent with the recommendations of the auditor.

Senator CROSSIN —Mr Gallagher, those universities involved in the trial were the ones that you have named this year in the audit. Are they compensated in any way for personnel or time taken to participate in these audits?

Mr Gallagher —They have to pay some costs. They only have to do it every five years.

Senator CROSSIN —And they wear the costs themselves in terms of time?

Mr Gallagher —The quality agency levies a fee.

Senator CARR —I am interested in your distinction between what could be called prudential issues and quality issues. How do you draw that line?

Mr Gallagher —This went to the financial management of a number of their business enterprises. When we look at the financial position of the university and its controlled entities, we have a discussion with them annually at the profile meeting about their financial position, and the solvency of their commercial arms is a matter at your enjoining, Senator.

Senator CARR —That is right. Absolutely.

Mr Gallagher —We have raised it with them for some years. You can conceive that such matters are part of the quality of management of the institution, but I was putting to you simply that that particular audit I thought had been addressed by management and therefore you would not necessarily expect that this quality round now would be looking at a matter that has already been looked at.

Senator CARR —The trouble is that the Auditor-General's report was to the parliament of New South Wales in 2001, so it is very much a live issue and contemporary to this audit being undertaken. The reason I know about this audit being undertaken is because I actually made it my business to ask persons who are involved in it. I asked them, `Were you made aware of these documents?' I would have thought it was the university's responsibility. What that audit report said—and this is the recommendation of the New South Wales Auditor-General to the parliament of New South Wales—is:

... there is also a need to review the overall governance and accountability arrangements within the University itself.

The University must work to ensure that a governance culture is defined for its staff and is embraced by them. It must ensure that all its managers and employees understand its standards of accountability, values and information.

Perhaps most important of all, senior management must offer unequivocal leadership in setting uncompromising high standards of corporate behaviour and transparency.

These are very strong words about the management of a university. What troubles me is the way in which you are seeking to distinguish or wipe this off as an incidental matter. I thought that the reference to the difference between a quality issue and a financial matter perhaps would lead me to the view that this sort of document might well be dismissed if that is the view that is taken more widely. Aren't you surprised that this sort of document was not made readily available by the university?

Mr Gallagher —We do not know the extent of the pilots in terms of whether they focused in different institutions on different matters. As Dr Arthur said, the institutions volunteered for that first set of trials to road test themselves, and the AUQA was willing to train some of their people and test some of their procedures. That was driven primarily by that. The ambit of the audit may not have been comprehensive at UNSW. I don't know but I can find out. But I still was simply trying to say to you that you can address these issues from a number of different perspectives. You don't have to put everything under the umbrella of a quality audit.

Senator CARR —Sure. And I trust that my conversations are very specific and have drawn your attention to these matters. I can assure you that at the time at which that audit was undertaken, up to that point, these documents were not made available by the university. Isn't that the problem, that the audit office is in fact dependent upon the goodwill and cooperation of the management of the university? They are actually reliant upon being fed rather than having the capacity to get into the details of the operation of the university.

Mr Gallagher —That is not quite true. In the first instance, the quality agency is asking the university to make a self-assessment against a pro forma that the quality agency itself has constructed. In that regard, it is listening to the information that the university seeks to bring forward. It will then verify that by looking at other documentation if it wants to call for it, and by having site visits and interviews with staff, students and others. If in the process of those inspections it finds the need to drill down further, it has the power to do that.

Senator CARR —The Auditor-General in New South Wales identified that many of the problems had occurred for several years but the university failed to detect or act on them. Do you think these processes that you are now suggesting, in terms of the quality agency, will force universities to act on these sorts of problems and will force them to detect these sorts of difficulties?

Dr Arthur —Do you understand the difference in the role of an auditor-general of a state and the agency we are referring to? As Mr Gallagher has indicated, this is a process which universities themselves welcome as an opportunity to demonstrate their quality, and indeed for which they pay. The role of an auditor-general of a state—given that universities are established under state and territory legislation—is to investigate, with the full powers that their legislation gives them, the kinds of issues that you have raised. They are quite different functions.

Senator CARR —That is my point. What I read in the agency guidelines is that the quality agency audits will take account of universities' international activities, commercial partnerships, franchising arrangements, academic standards and grievance procedures, and they will provide useful feedback to the universities on the effectiveness of their quality assurance processes. That is all so much hot air, isn't it, when we find a situation like this, where it would appear that only the auditors-general of the states have the capacity to actually go to these issues?

Dr Arthur —For universities that are established under state legislation it will be the case that only bodies which have power which is relevant will be able to investigate those issues that you have referred to in the manner that an auditor-general of a state should do.

Senator CARR —My observation over the last couple of years that we have been looking at these quality assurance issues is that there are substantial problems in other areas, but the biggest problems are in the so-called commercial or franchising arrangements—the controlled entities. Is the Commonwealth prepared at any point to consider the need to strengthen the Commonwealth's capacity to audit those facilities?

Mr Gallagher —That is a matter for government to determine. In the first instance, the government has set up the AUQA. That is quite a major step forward. In the first year of the formal auditing of a number of institutions, let us see how robust the reports are. I saw David Beanland being reported in the press the other day as enjoining the universities to lift their game, because they are going to be scrutinised pretty closely. That is the intent; let us see what the performance is before deciding whether the policy framework is inadequate.

Senator CARR —It is fair enough too that the quality agency will be open to scrutiny here as well. That ought to be acknowledged as part of the process. I notice in the training report—following the recent debate we have had in this committee and in the chamber—a section about the protection of the word `university'. The minister now, in terms of the protocols, has the capacity or the power to adjudicate on the use of the term `university'. Do you understand that to be the case?

Dr Arthur —It is not so much a consequence of the protocols as a consequence of the changes in the arrangement within the Commonwealth. In terms of the protected status of the word under the Trade Practices Act, the relevant minister to make decisions is now the Minister for Education, Science and Training.

Senator CARR —That is right, and, in fact, it is under the Corporations Act.

Dr Arthur —Yes.

Senator CARR —So the point I make there is that, first of all, clearly if it is appropriate under the Corporations Act for the Commonwealth to assume the power to control the use of the term `university', then I presume that power also extends to the capacity of corporations that are operated by universities. It does seem to me that it opens a precedent.

Dr Arthur —The protocols certainly do address the issue of when it is appropriate for an entity to be termed a `university'.

Senator CARR —Has the minister been required to adjudicate or assess any proposals on the use of the term `university' since the signing of those protocols?

Dr Arthur —I will take that on notice, but we are not aware of any instances.

Senator CARR —I will put some questions on notice for you to have a look at.

Dr Arthur —The only comment I would make is on the issue, which is part of the government policy statement, of the Australian Maritime College. There was a policy statement from the parties before the last election that they would facilitate a change to the name `Australian Maritime University'. That, obviously, is an issue which would need to be considered in terms of the appropriate processes.

Senator CARR —In view of the use of the term `university' and the prescription by the Commonwealth, are you aware that the Duke of Brannagh is now promoting himself in China and offering an MBA degree from Greenwich? He is presenting Greenwich University as an Australian university and saying that its degrees are recognised in Australia, the United Kingdom, Commonwealth countries and the United States. I have had the Chinese translated; I will provide you with a copy of it if you like.

Mr Gallagher —We would appreciate that.

Senator CARR —What I am told it says is that Greenwich University is the only non-traditional private university in the world that has government approval. Do you know which government that might be referring to?

Mr Gallagher —The Legislative Assembly of Norfolk Island.

Senator CARR —They would be the only government in the world that would do it, too.

Senator Troeth —Well, there are only 12 in that assembly.

Senator CARR —There is an incredible minister in this parliament who believes that an Internet university can be confined to an island. Anyway we probably will not go over that again. In fact, the web site actually has a photograph of Greenwich University Australia. Can you have a look at that. I am wondering whether any action can be taken to alert the Chinese government that this is not an Australian university. I do think of our interest in the matter of attracting Chinese students. I understand that you were planning a trip there. I do not know whether or not you can raise—

Senator CROSSIN —Greenwich University as your first point of discussion.

Senator CARR —Maybe not, but what I am interested in is whether or not what is clearly a program of deceit can in any way be repudiated.

Mr Gallagher —We will look at that.

Senator CARR —Thank you. I will provide you with a copy of their web site. I have no doubt that you have your own Chinese translation services. Anyway, I would appreciate it if you would take those matters on notice.

Senator CROSSIN —In recent weeks the new minister has announced that he will be conducting a review of the university sector. Is this something that the department has been involved in?

Dr Shergold —Yes.

Senator CROSSIN —In what way?

Dr Shergold —In providing advice to the minister on how such a review could be conducted.

Senator CROSSIN —Are there any plans for any sort of formal review?

Dr Shergold —That is still a matter for discussion with the minister.

Senator CROSSIN —Are there plans to announce some sort of formality to this review in coming weeks?

Dr Shergold —That is a matter for the minister to consider.

Senator CROSSIN —So watch this space—is that what you are saying to me?

Dr Shergold —That is it, Senator.

Senator CARR —I am interested in the higher education funding reports which indicated to me that 10 institutions were running at a deficit. How many institutions do you anticipate will have been running at a deficit in 2001?

Mr Gallagher —The information that comes to us on the universities' financial position is from the audited financial statements of institutions. Until we have that data, I cannot answer that question.

Senator CARR —I understand, Mr Gallagher, that in the profiles process you actually ask for forward projections on financial viability. Is that the case?

Mr Gallagher —We do our own estimates from our own analytical tools and we discuss those with the universities on a commercial-in-confidence basis.

Senator CARR —Do they provide you with detailed forward projections on their financial status three years hence?

Mr Gallagher —They provide us, in advance, with some data, such as their domestic and overseas enrolment profile. From that we can estimate, for instance, revenue from fee paying students and the like. They provide us with some other expenditure information such as that related to capital maintenance and capital works, but they do not give us a full financial projection for a three-year period.

Senator CARR —What information do you have for Australian universities on forward projections of their financial status?

Mr Gallagher —We have sufficient information to have a useful dialogue with each institution about the trend of its financial position, giving us the opportunity for early warning if there are particular pressures.

Senator CARR —How many institutions do you predict will be in deficit by the end of this financial year?

Mr Mutton —The order of magnitude is often very small. Even they could not always predict whether they are going to be just in surplus or just in deficit.

Mr Gallagher —It is hard, too, because the volume of overseas student activity is such that the exchange rate has had quite an impact on the net operating result.

Senator CARR —The problem you have, though, is that sooner or later you will have to contemplate bailing out some of these institutions. Is that not the case?

Mr Gallagher —I think the minister is on the public record as saying that some institutions are doing reasonably well in the current environment, most are managing and a few are finding it difficult.

Senator CARR —In fact a quarter.

Mr Mutton —It is important to keep in mind that nine universities were in deficit seven years ago.

Senator CARR —How many is it now?

Mr Mutton —You have just said 10.

Senator CARR —So that is a quarter.

Mr Mutton —In between, it has been five or six, but it is not the only figure that counts.

Senator CARR —Thank you, Mr Mutton. I appreciate the point you make. What is the evidence that the situation is going to improve? There is a bargaining round due at the end of the year.

Mr Mutton —Yes.

Senator CARR —So what is the evidence that there is going to be an improvement in the financial situation for universities?

Mr Gallagher —The universities are making more aggressive efforts to grow their commercial sources of income: from overseas students, from domestic fee paying students, from industry and from commercialisation of research.

Mr Mutton —They are also cutting back on overenrolment.

Senator CARR —Yes, that is right.

Mr Mutton —So they are looking at both the expenditure and the revenue sides.

Senator CROSSIN —What of those universities that have no capacity for a revenue side or limited capacity for a revenue side, for example, regional universities?

Mr Gallagher —Some of the regional universities are the most active in the international markets, including through extensive online or offshore activities.

Senator CROSSIN —And some of them are doing dismally poorly.

Mr Gallagher —They have the opportunity, if they so wish, to manage it.

Senator CROSSIN —Is it not true you need to spend a dollar to make a dollar sometimes? It is difficult for some of these campuses.

Dr Shergold —I feel relatively confident that many of the issues you are raising will be ones that will be considered in the minister's review.

Senator CARR —Yes, we will come to that in a minute, Dr Shergold. In terms of the annual reports and the financial statements, the training report does provide some information on operating results before abnormal items. What the reports indicate to me is that the University of New South Wales had a $38 million increase in its profits and Melbourne University had a $34 million increase. Between the two universities, therefore, we have clearly a very substantial figure. What percentage of the increase operating across the sector is made up by those two universities? I looked down the list—this is sourced from the annual reports' operating results—and what I see is that two universities have, in their consolidated accounts, increased their operating profits by $38 million and $34 million respectively. No-one else on the list has anything like that. The rest are minuscule. So in terms of the operating improvements—if we can put it in those terms—of the whole sector, it is almost exclusively at two universities. Would you agree?

Mr Gallagher —No.

Senator CARR —Who else is doing well?

Mr Gallagher —RMIT and Curtin are quite extensive.

Senator CARR —Oh, RMIT is doing well. What is RMIT's financial situation?

Mr Gallagher —I think it is solvent.

Senator CARR —Solvent? That is a good start.

Mr Gallagher —It has got extensive assets.

Senator CARR —That they could flog off, I suppose, couldn't they?

Mr Gallagher —It has one of the largest overseas operations in the country.

Senator CARR —Indeed it has. But has not its operating deficit dropped 10, down from 20, and this year it is down to zero? In fact, they are operating at a deficit. Is that the case? It has gone down from 20, down to 10, down to zero.

Mr Gallagher —I do not have the institutional figures here, Senator.

Senator CARR —Will you take that on notice? And how many others are in a similar situation across the sector? This is before we get into the enterprise bargaining round—that is my point. You have two major institutions here doing well; the rest of the sector, from my reading of those accounts, is actually looking pretty shaky. Your own reports suggest to me that in terms of financial status, the risk factors are growing across the sector. How well placed do you think the universities are for this enterprise round?

Mr Gallagher —I think it is evident that, on the basis of the discussions and the comments that both senators are making, it will be tight and they will have to find productivity improvements and ways of increasing their net income.

Senator CARR —They will have to find ways of improving their net income at a time when they are expecting quite a significant increase in their costs. That would be right, would it not?

Mr Gallagher —Well, some costs are escalating.

Senator CARR —You are not suggesting that the enterprise round will not increase costs, are you?

Mr Gallagher —They usually involve productivity offsets.

Senator CARR —So their wages bills will go up?

Mr Gallagher —One would expect that.

Mr Mutton —Prices will go up for the things that they sell.

Senator CARR —The prices would go up?

Mr Mutton —Presumably.

Senator CARR —When will the government funding go up?

Dr Shergold —We cannot comment on that.

Mr Mutton —That is a matter for the government.

Senator CARR —Because we are rushing through some of this stuff, I am not able to explore it fully. In regard to the indexation of operating grants, what is the current formula? How does it work?

Mr Gallagher —The cost adjustment factor has two components: a safety net adjustment for the salary component and the Treasury measure of underlying inflation for the non-salary component.

Senator CARR —How will the process of the supplementation for wage rises work?

Mr Gallagher —The SNA is used for the salaries component.

Senator CARR —Is it the Commonwealth's intention to continue the supplementation funding?

Mr Gallagher —That is a policy question, Senator.

Senator CARR —Is there a provision for it in the forward estimates?

Mr Gallagher —There has been no policy decision on that.

Senator CARR —As a straight, factual question: is it in the forward estimates?

Mr Gallagher —Currently?

Senator CARR —Yes.

Mr Gallagher —The forward estimates are based on the status quo.

Senator CARR —What are universities required to do to get the supplementation?

Dr Karmel —For the indexation, they are not required to do anything. It is just factors that we apply to the Commonwealth grants.

Mr Gallagher —Do you mean the two per cent?

Senator CARR —Yes.

Dr Karmel —Under the workplace reform program, there are 14 criteria, which are published. In the first round, they had to satisfy nine of those criteria to get the funds. In the second round, they have to demonstrate that they have achieved progress on those criteria.

Senator CROSSIN —Have all universities now qualified and received funding in round 1 of the workplace reform program?

Dr Karmel —Yes, that is my understanding.

Senator CROSSIN —How many have applied for, and have been successful in getting, money under round 2?

Dr Karmel —I am not sure how many have applied, but from memory two have been successful.

Senator CARR —Which two?

Dr Karmel —I do not have those names with me, Senator—or I cannot find them, anyway.

Senator CARR —Can you tell me this: is the round 2 funding built into the university operating grants?

Dr Karmel —For the two that are successful in round 2, it will be built into their operating grants.

Senator CARR —What about the others?

Senator CROSSIN —Can you take it on notice and provide us with the names of the universities?

Dr Karmel —Certainly.

Senator CARR —I am interested to know whether or not this round 2 funding will be incorporated into the operating grants.

Dr Karmel —It will be.

Senator CARR —In all cases?

Dr Karmel —As with any program like this, you have to look at the fine print, but certainly in principle that is the case. There are some situations where universities are still operating on the basis of enterprise agreements that have lapsed. There are some things that they would have to do if they were to certify a new agreement.

Senator CARR —What will they have to do?

Dr Karmel —They would have to satisfy the second round funding guidelines.

Senator CARR —I need to have more information on that. How are the second round funding guidelines different from those of the first funding round?

Dr Karmel —They are the same 14 criteria, but universities have to demonstrate on a number of those criteria that they have actually improved productivity and obtained efficiencies. It is all spelt out in the guidelines, which are in the public domain on the Web.

Senator CARR —What I am being told, though, is that the department is becoming increasingly intrusive into the operations of the universities. I am told, for instance, that you are writing quite detailed letters to the universities, seeking information on how their various management structures work and whether or not a university has so many pro vice-chancellors—those sorts of questions. Is that true? Has there been an increase in the level of intrusiveness by the department in response to these requirements for second round supplementation?

Mr Gallagher —I think there might be some confusion there, Senator. We did, with the agreement of the AVCC, do a survey recently of a couple of things—one of which was the governance structures of universities so that we could update, for the production of a national report, data on the composition of university councils. It had no connection with the workplace reform program.

Senator CARR —So there is not an increase in intrusiveness, in your judgment—

Mr Gallagher —Not driven by that program.

Senator CARR —Is there an increase in intrusiveness of the department into the management of universities in response to a request for second round funding?

Mr Gallagher —I do not think so, Senator. There is always room for us to find ways of reducing the compliance burden on universities, but in that program I do not think we have added to it.

Dr Shergold —I cannot see how we could have, because in making the application universities themselves decide the information they wish to supply.

Senator CARR —Whether or not the application is successful is dependent upon your satisfaction with their answers. That is the way the intrusion occurs; is that the case?

Dr Shergold —No, because the universities decide the level of information they wish to provide to see if they have met the criteria for second round funding.

Dr Karmel —It certainly is the case in second round funding that, if the university has provided us with insufficient information for us to make a proper assessment of a particular criterion, we have sought more information so that we can make a proper decision.

Senator CARR —Are you now seeking further information than you did in the first round?

Dr Karmel —Yes.

Senator CARR —What is the nature of that further information you are seeking?

Dr Karmel —It is information so that we can make a proper assessment of the application in respect of a particular criterion.

Dr Shergold —Which I think you would expect us to do in terms of the probity of the process.

Senator CROSSIN —How is that assessment made if a university presents to you a case that it believes efficiencies have been made in a certain area? What mechanism do you have to check whether or not that is accurate?

Dr Shergold —Usually, we would examine the application. If the information that has been provided is clear in how it meets the criteria, there would be no further seeking of information. Usually, further information is sought where a university does not, on the face of what has been provided, appear to meet the criteria, and an attempt is made to see if it can in fact do so on the basis of additional information.

Senator CROSSIN —But, Dr Shergold, wouldn't you agree with me that universities are autonomous bodies and can control their own destiny to some extent?

Dr Shergold —Absolutely. It is completely up to any university whether it wishes to apply for this funding.

Senator CARR —I want to get to the nub of this problem. Mr Gallagher, can you tell me whether or not universities have been recently advised that any new agreement will have to be assessed in order for universities to retain round 2 funding?

Mr Gallagher —In order to retain round 1 funding so that it is then built into the base of their operating grant, they have to meet the round 2 criteria, which is demonstrating that they have actually done the things they said they would do.

Senator CARR —So any new agreement—given that we have a new enterprise round coming on this year—may well affect funding that has already been granted?

Dr Karmel —I think that is most unlikely, Senator. We are assessing the second round applications on the basis of their current enterprise agreements, most of which were negotiated not that long ago. The only point I am unsure about is whether it might be possible, if the university had been operating for some time on a lapsed agreement and then it was to certify one, that we would have to check that.

Senator CARR —We are talking about two sets of agreements, then: there are those agreements that have run out in recent times—and there may be a multitude of agreements at any particular site involving a number of different unions—

Dr Karmel —Yes.

Senator CARR —As far as you are concerned, all agreements have to satisfy your requirements before the round 2 funding will be granted. Is that right?

Dr Karmel —That is more or less true.

Senator CROSSIN —So the autonomy of the university only extends to somebody's box in your office getting ticked or crossed. Is that right?

Dr Karmel —As Dr Shergold said, this program is voluntary. The universities do not have to apply for the money.

Dr Shergold —And there are a number of different criteria on which you can meet it. Essentially, as we have kept emphasising, in terms of this consideration it is whether the commitments that universities made, which got them the first round money, have been met.

Senator CARR —There are 14 criteria. How many criteria do you have to be satisfied have been met?

Dr Karmel —Nine.

Senator CARR —Nine of the 14. In the case of agreements that have expired recently and where second round funding has already been granted, are you now saying to me that it is possible for that second round funding to be—

Dr Karmel —No. If the second round application was successful on the basis of progress against a certified agreement, then the funding would stand.

Senator CARR —Under what circumstances would second round funding agreements by the Commonwealth be repudiated?

Dr Karmel —In those terms, Senator, I do not think they would ever be repudiated.

Senator CARR —It is not possible, once the agreement is reached by the Commonwealth—

Dr Karmel —I will take on notice that question in relation to one particular circumstance which I have alluded to, which is when enterprise agreements have lapsed and we have made an assessment on that basis.

Senator CARR —I am interested to know about that particular situation. Now I would like to take you to the next step. With the new round, will there be another round of supplementation?

Dr Shergold —We cannot anticipate that.

Senator CARR —They are in the forward estimates.

Dr Karmel —Within the current program, the two per cent was to be wound into operating grants after the second round.

Senator CARR —Yes. So indexation will occur, effectively, to those grants.

Dr Karmel —Senator, what do you mean by indexation?

Senator CARR —I am going to rely on what you said—

Mr Gallagher —It is not an index, Senator; it is a one-off supplementation of two per cent and it is built into the base forever if they pass two years.

Senator CARR —I understand that. In the old DETYA e-news on Higher Education, the first publication on workplace reform—the date I have is 12 February last year—the Commonwealth said to the universities:

To qualify for second round funding, and thus have the funding incorporated into their operating grants, institutions will have to demonstrate progress in implementing reforms in workplace relations arrangements, management and administration since the date of their successful first round application.

Does that still hold?

Dr Karmel —Yes.

Senator CARR —Does that mean that it is possible for the Commonwealth at some point—obviously between now and the third round—to say that the second round no longer applies?

Mr Gallagher —Do you mean if there was a regression—

Senator CARR —In your view. Are you able to determine, in the terms of those agreements, that there has been a regression?

Dr Karmel —As I said, Senator, if we had made the initial round 1 assessment on the basis of a newly certified agreement and the university was successful and then if we assessed, at the second round, progress against the criteria on that agreement, then that funding is wound into the base.

Senator CARR —So you cannot see a circumstance where that would be—

Dr Karmel —In that situation, no.

Senator CARR —Is that right? You are clear on that? You have not told the universities recently, in any form, that the new agreements have to be assessed in order for universities to retain round 2 funding? I am sorry to press you on this, but my advice is quite strong to the contrary.

Dr Karmel —I said I would take on notice the point about what happens when we work on the basis of a lapsed agreement.

Dr Shergold —The confusion is about how you retain round 2 funding, in that most universities have not got that yet. We have talked about two universities at this stage, so I do not know what the reference to retaining round 2 funding refers to.

Senator CARR —Mr Gallagher, is it your expectation that universities will satisfy the—

Dr Karmel —Perhaps there is some confusion here. There is a criterion which says that for the second round the certified agreement has to have been in place nine months so that there has been an opportunity for the university to make progress against that agreement. That is certainly the case and we have informed a number of universities of that point.

Senator CROSSIN —So they cannot apply for second round funding until at least nine months are up?

Dr Karmel —After an agreement has been certified.

Senator CARR —When do you expect most universities to qualify for that? Are they qualified now?

Dr Karmel —The timing for most institutions would mean that they would be able to apply for the second round so that there is no gap in funding between the first round and second round. But the timing for some universities is not so.

Senator CARR —At what point do most universities qualify? Are they qualified now? When do the nine months expire for most universities?

Dr Karmel —I would have to take that on notice to get the exact dates for every university.

Senator CARR —The point I am making is that there is a new round coming up towards the end of the year—

Mr Gallagher —You mean a new enterprise bargaining round?

Senator CARR —Yes. There is a new round of enterprise bargaining coming up. Clearly the department considers this to be a highly significant matter for the sector. I know the vice-chancellors do and I know that the people employed in universities do because it is their wages and conditions, their livelihoods, that are at stake. How is the government intending to respond to this new development, given—

Dr Shergold —I can answer that. That will be a matter for the government to decide. There is, as yet, no such decision.

Senator CARR —But the forward estimates make no provision for the next round. Is that the case?

Mr Gallagher —There are a number of issues here that I think might be being run together. The forward estimates at the moment, in terms of the way in which general operating grants are indexed, reflect the status quo indexation arrangements. On top of that, there is a two per cent rise, which universities succeed in gaining if they meet those nine out of 14 criteria. They have all met the first round's criteria; now they are being gradually re-assessed to instate that funding in their operating grant forever, basically.

Senator CROSSIN —So your forward estimates include a premise, based on the fact that the two per cent will be in the operating grants?

Mr Gallagher —Yes. The two per cent is in the forward estimates applied across the sector but there is no forward estimate indication of any other change.

Senator CARR —I return to the issue of the financial statements. Do you have any assessment of the capital works being undertaken by universities? For instance, I see that page 5 of the training report indicates that $300 million between 1999 and 2000 was spent, which continued high levels of investment by the sector in capital works. Have you had any breakdown on expenditure across the sector in proportionate terms in regard to capital works against individual universities?

Mr Mutton —Proportionate to what?

Senator CARR —Year on year. I noticed that a number of the universities are running up quite significant debt levels with their refurbishment programs.

Mr Mutton —Yes.

Senator CARR —Have you had any assessment on the financial risk associated with the capital investment programs for individual universities?

Mr Mutton —They are very small. The debt-to-asset ratio is minuscule compared with that of a private organisation, but it ought to be conservative. I am not sure what specific information you want; if it is university by university, I certainly do not have that.

Senator CARR —I will put some questions on notice and perhaps that will elicit further details.

Mr Mutton —Is it clear that it is retrospective and not forward information?

Senator CARR —As I read it, it is the current situation. I am interested in trying to deduce from the current information what sort of position the sector is in, in a very short period of time. It is my contention that this bargaining round is going to be very significant for higher education in this country. It will obviously be a matter of considerable debate in the parliament—

Mr Mutton —We can provide that information; that is fine.

Senator CARR —so I would be interested to know what the shape of the finances is across the sector. That concludes my questions. Thank you very much.

CHAIR —Thank you, Senator Carr. I thank the parliamentary secretary and I thank Dr Shergold and the officers of the department. That concludes the additional estimates for the Education, Science and Training portfolio.

Committee adjourned at 11.21 p.m.