ACTING CHAIR (Senator GEORGE CAMPBELL) —I declare the hearing open. Mr Walters, I have a few miscellaneous questions which primarily I think are directed at you. Can you advise us how many trainees and apprentices were existing employees—defined as those employed in the business for less than three months full time or less than 12 months part time or casual—during the 2002-03 financial year, compared to the 2001-02 financial year?

Mr Walters —Obviously, with the 2002-03 financial year not being finished, we will not be able to answer that question now. The NCVER statistics for the end of June will appear in approximately October, so I could take that one on notice and give you the answer then.

ACTING CHAIR —Do you have any progressive statistics for the year to date?

Mr Walters —We have statistics which were released on 31 December, which I have and can give you in a moment. In terms of existing employees under the incentive scheme—and I did answer the question last night—the proportion has been roughly a third. It might be up to about 36 per cent. It has been fairly stable now for about two or three years. That is the answer I gave last night.

ACTING CHAIR —Based on the December 2002 NCVER statistics, and given that 28 per cent of all New Apprenticeships are existing workers, what was the total level of Commonwealth funding spent in the 2002-03 financial year on training of existing workers, in terms of incentive payments and funding to states for registered training organisations? I accept that that may be a progressive figure.

Mr Walters —You would like us to tell you how much has been spent so far in this financial year on existing workers.

ACTING CHAIR —Yes.

Mr Walters —Obviously I will have to take that one on notice.

ACTING CHAIR —Thank you. Can you tell me how much Commonwealth funding by way of incentives was paid to employers during the 2002-03 financial year for commencing trainees who did not complete their traineeships? Again, I accept it will be progressive figures.

Mr Walters —I think that would have to be an estimate because we also would need to define what you mean by trainees. I could give you the answer for the AQF II level, who are trainees for whom we do not pay a completion fee. We would probably be able to give you an estimate for that. For the AQF III level, we do not keep a clear distinction between trainees and apprentices. I make the point, too, that it would have to be an estimate for the simple reason that for apprentices at the AQF III level the standard completion time is four years, so anybody who commenced last year would not necessarily complete for another three years. Our experience is that they might take five or six years. We might have to see whether we could give you an estimate of that. I am not sure whether it would be possible, simply because it extends into the future.

ACTING CHAIR —I am happy if you focus it on AQF II and below.

Mr Walters —We could give you an estimate of the number of AQF IIs last financial year for whom we made a commencement payment and for whom there has been no completion. On NCVER figures, that would be approximately 55 per cent of those for whom a commencement payment was made, if the current completion rate is roughly equivalent to the completion rate that existed in the mid-nineties, which we are not sure about. I say that because we do not necessarily keep records of completions for AQF IIs because we do not make a completion payment. The purpose of the payment at the AQF II level is that they are fairly short traineeships and we only make a commencement payment. They are only about a quarter—20 per cent, I think—of the total. We do not necessarily keep completion records for them because we do not make a completion payment.

Senator GEORGE CAMPBELL —But you might be able to get those statistics.

Mr Walters —We might be able to come up with an estimate. It would be pretty loose.

Senator GEORGE CAMPBELL —Fine, thank you. On the apprentices in training at December 2002, can you provide us figures on how much funding was provided by way of incentive payments to employers for: (a) apprentices and (b) trainees? How did this compare with the period to December 2001?

Mr Walters —It would not work quite like that. I will explain a little bit about the system because it is commonly misunderstood. Because we only pay incentive payments at the three-month point and when a registered training organisation has been taken on, and because people can claim up to 12 months after that, it is a very long time before you can actually correlate the incentive payments with the point of registration. We could probably provide you with a breakdown of the incentive payments that were made in the 12 months up to 31 December. In looking at that information, I would ask that you please bear in mind that, as I said, although it is commonly assumed that we pay for every registration, we do not. We only pay at the three-month point if we have proof of continued employment and that a registered training organisation has been taken on.

Senator GEORGE CAMPBELL —Could you give me the comparable figures for the last two years?

Mr Walters —We could certainly give you the incentive payments that have been made in the calendar years of 2002 and 2001.

Senator GEORGE CAMPBELL —Fine, thank you. Do you consider the decline in people taking up trade based apprenticeships to be a problem?

Mr Walters —I would if there was a decline, but the NCVER statistics show that there has been something like a 13 per cent increase in the amount of traditional trade training since 1995, and the December NCVER statistics, from memory, show a 17 per cent increase in the number of traditional apprenticeships since 1997. That is not to say that in some trades, of course, the numbers have not declined, just as employment has declined in some trades. It is a mixed pattern. Over the whole area, there has been an increase.

Senator GEORGE CAMPBELL —Can you give us the figures for the increase or the decline for each of the trade groups over that period?

Mr Walters —Yes, we can.

Senator GEORGE CAMPBELL —We have figures that show that in some areas the decline is as much as 24 per cent.

Mr Walters —I have seen a lot of figures quoted in this area. It is certainly the case that some trade areas have declined, just as we know that some trades have declined. The decline in employment does not necessarily correlate entirely with the decline in trade training, but the overall figures are up. The other point I would make is that sometimes I see figures assessed on this issue which do not take account of the discontinuity. This issue has come up with Senator Carr in the past. Sometimes there are recodings from one trade to another and people see a dramatic decline in the figures and do not realise that has been the result of a recoding. If you look somewhere else in the figures you will find a commensurate increase. The figures take quite a lot of skill in interpreting, but we will certainly give you the figures over the main trade groups.

Senator GEORGE CAMPBELL —Where that has occurred, can you indicate the link?

Mr Walters —In the case of declines where there have been changes in coding which have made significant differences, we will point that out.

Senator GEORGE CAMPBELL —Do you expect the number of people taking up trade based apprenticeships to fall again in 2003-04?

Mr Walters —As I say, it has not actually fallen; it has increased. The issue is whether it will now fall. The figures tend to be quite closely related to employment in the economy. Therefore, we look to DEWR forecasts of employment. I do not think we have seen anything which would suggest a significant trend one way or the other. As you know, the economy has been slowing recently, and there are factors which we have not yet fully taken into account, which are SARS and the effect that will have on the economy. I would not like to say I have an expectation one way or the other. Certainly we hope that the new marketing campaign will help to increase the numbers in traditional trades, or at least stop any decline. That is the objective: to increase interest in training in the traditional trades. We are very much trying to do that.

Senator GEORGE CAMPBELL —Given the figures that we went through last night across the various trade groupings where there are identifiable skills shortages, has the department given any consideration to providing additional incentives in these groupings to encourage the further take-up of those trade based apprentices?

Mr Walters —There was consideration given to this issue in the review of incentives which took place last year, in which there were a large number of submissions, but the outcome did not include any additional incentives for traditional trade groupings. It is worth bearing in mind that most of what will be called the traditional apprentices come at level III and above, where they attract much larger incentives than the AQF II level. Most of the traineeships which people regard as fairly short are at the AQF II level and only attract a commencement payment. AQF III level apprenticeships and the longer traineeships attract both a commencement and a completion payment, a total of $4,400—so they already attract substantially more money than short traineeships.

Senator GEORGE CAMPBELL —But it is also true, isn't it, that in the business community they are still arguing that that is not sufficient to make it attractive to take on trade based apprentices, given that for the first 12 to 18 months it is virtually an unproductive time?

Mr Walters —I have heard that argument, certainly. I would not say it is an overwhelming view of the business community. The business community is enormous and has a great variety of views. All of the views were canvassed in the review of incentives last year. The main changes coming out of that will kick in from 1 July. The main change has been a simplification of the system with a shift to completion payments, so completion payments for the higher level apprenticeships and traineeships are now about 62 per cent of the total. They all come in on 1 July. Certainly what you are referring to is one of the arguments that was put during the review, but it was not reflected in the outcomes.

Senator GEORGE CAMPBELL —Given that those trades that were indicated as having shortages across all states—we went through them last night, and they were remarkably similar across all states and territories—are fairly critical in terms of the contribution to our economy overall, has there been any consideration of improving the incentive payments in the trades area as opposed to the traineeship area?

Mr Walters —As I mentioned to you, this was all considered in the review of incentives last year. A large number of organisations put in submissions, and the outcomes will be implemented from 1 July. They did not result in any further differentiation between the low-level traineeships and the apprenticeships, which, as I have just explained, are already quite large. It is also worth bearing in mind that, while the traditional trades are of course critical to the economy, so are the service areas. As I mentioned to you last night, we have recently seen a report by Professor Schofield, in the South Australian government, which points out that in that jurisdiction over 90 per cent of all new jobs created over the last two decades have been in the service industries of property and business services, health and community services, retail trade and accommodation, and cafes and restaurants. So in deciding where to take the scheme, we have to balance the needs both of the traditional trade areas and of the service areas, which have provided the vast majority of employment growth in recent times.

Senator GEORGE CAMPBELL —As I also pointed out last night, Professor Schofield also makes the point that there are no skills shortages in those areas.

Mr Walters —This is not what industry tells us. For example, we have been looking with the retail industry at skills shortages in that industry. Skills shortages are not just a factor of the traditional trade. They exist, for example, in parts of the IT industry. They exist in retail—the retail industry has told us that there is a shortage in terms of people that want to go on to management. There are a lot of people that go into retail as a temporary job, or they do it as a first job. There are not enough people, they say, that want to actually go up through the management chain. Every industry will tell you—at a time of fairly low unemployment, as we have at the moment—that there are shortages of one sort or another. We try and work with all sorts of industry to address the problems that they have.

Senator GEORGE CAMPBELL —Why would Professor Schofield make a statement to the committee's inquiry that the only real skills shortages that exist are in the traditional trades and manufacturing?

Mr Walters —If you could just point me to the quote I might be able to see the context.

Senator GEORGE CAMPBELL —I only had the submission that she made to this inquiry I did not have the report because it was not released at the time.

Mr Walters —I would say that that is not what industry tells us. Industry tells us that there are also shortages that need to be addressed in places like IT, in retailing and in all sorts of parts of the economy. It is not just an issue for the traditional trades, according to industry. The traditional trades certainly have shortages, though, and we have been working with industry to deal with them. We are directing the marketing campaign at them, there are higher incentives paid at the higher levels. There is a lot happening. We have had NISI groups looking at engineering, electrotechnology, rural, building and construction, and various other industries. There is a great deal happening.

Senator GEORGE CAMPBELL —Isn't that going to be a critical phase, over the next three- to five-year period, when those major projects come on stream?

Mr Walters —I think if you listen to industry it is always a critical stage because industry is changing very fast. If you listen to the IT industry, for example, they will tell you things are changing very fast. I have heard a statistic quoted that in 20 years time something like half the workforce will actually be employed in occupations that do not exist at the moment. In addition to looking at traditional trades, one of the things we have been doing through the National Industry Skills Initiative is looking at emerging industries. We have recently, in association with the Australian Industry Group, published a report on emerging industries. There is going to be a working group taking forward how we actually adjust our skills needs to emerging industries, as well as traditional ones.

Senator GEORGE CAMPBELL —I understand what you are saying but is it not true that, if you look across this country at the moment, there is something like $18 billion to $20 billion worth of project work that is due to come on stream in the next three- to five-year period, which is going to suck the guts out of the metal trades people around this country. At the end of the day, there will not be skills shortages on those projects because the supply and demand will drive the wages up to the degree where it will be very easy to get them. There are going to be chronic skills shortages in the metropolitan areas in the traditional metal manufacturing and jobbing shops. That will force many of those businesses out of business, which did occur on one other occasion in this country. Are you suggesting there is nothing out there that is of any concern and somehow or other that will all just fix itself according to the market?

Mr Walters —The last thing I want to suggest is that there is no reason for concern. Professor Schofield, in this report, points out that because there are skills shortages it does not necessarily mean there is anything wrong with the vocational education and training system. She also goes on to say that unless skills shortages are addressed, it will have important consequences for the country. The Commonwealth accepts that. If you go back a few years, it is the reason for the creation of ANTA. It is the reason for the creation of the training package system, it is the reason why we have seen numbers in the vocational education and training system nearly double in 10 years. It is the reason we have seen a large increase in New Apprenticeships, including traditional ones. It is the reason why we have had the National Industry Skills Initiative. It is the reason why we have got the Commonwealth incentives program. It is the reason why we have got the new marketing program. The government entirely accepts that these are serious issues which need to be dealt with and we discuss them regularly with industry. We put an enormous amount of effort and energy into dealing with them, as does the Australian National Training Authority.

Senator GEORGE CAMPBELL —There are all those programs out there, yet the evidence that we are getting before us is that there are still skills shortages and that industry is training less and does not have the capacity to train. There have been a number of significant reports done for the Victorian Manufacturing Council, for example, on what is happening in terms of skilled workers in that particular area. We hear employers saying to us that young people come out of school, do not have the basic skills that they require, do not have the right attitude, do not have the right aptitude and do not have the sort of skills that are important for them to be successful in the work force, which goes back to the matter of competencies. All of those things that you say have been done over the past 10 years or so is true, but there is still very substantial criticism out there in the employer community in terms of the mix of our skills base, what they see as chronic shortages and the lack of the system's capacity at the moment to actually deliver what industry needs. That is what they are saying to us, so we can only go on the evidence that has been put to us.

Mr Walters —Criticism is very healthy. They put it to us, and we entirely agree, that the system needs to develop and evolve. At the same time, it is worth bearing in mind that it has grown—it has nearly doubled in 10 years. The system has increased by about 38 per cent since 1995. The New Apprenticeships system is now the largest in the English speaking world, so there has been an enormous amount of achievement. There is also a lot more that needs to be done. We are working very closely with industry, and we have a large number of programs aimed at addressing those issues.

Senator GEORGE CAMPBELL —But the New Apprenticeships system in the main, Mr Walters, as I understand it, is short-term training, isn't it?

Mr Walters —No, about 75 per cent of the system is at the AQF III level or above. At the AQF II level, it is around 20 per cent or slightly less.

Senator GEORGE CAMPBELL —And those AQF III levels are what, four-year programs?

Mr Walters —No, because we have seen in this country a move away from time based training for a number of reasons. Firstly, employers have seen it is too inflexible. Secondly, now that a large number of the young people that you are coming into the system have completed year 12 or at least done a lot more schooling than they had in the past, the prospect of a four-year apprenticeship is less appealing at the age of 18 or 19 than it is necessarily at the age of 15 and 16.

Employers have been telling us that young people are looking to get their competencies much more quickly and are also recognising that they have had more schooling. Interestingly, I found this too in Germany when I took a study tour last year and where I found that the traditional three-year apprenticeship which operates in Germany is curtailed to two years for people who have got the equivalent of year 12. I think both in Germany and here—and I mention Germany because they are often seen as market leaders—there is a recognition that basing training purely on time served is not necessarily the way to go for the future.

Senator GEORGE CAMPBELL —And that is what we have done here, although a number of employers have said to us that they want to keep the time served component of it because they think that is important. But isn't the shortening of the training period a contributing factor to the figures you gave us last night about the lack of skills in niche areas?

Mr Walters —I would not see a correlation at all. Certainly the ability to have more flexible training methods gives employers the ability to get more people into the work force more quickly if they can reach the level of competence. The entire training package system is based on competencies, so it is whether or not you have attained the competencies rather than whether you have served the time. This also, for example, gives employers the ability to bring mature age people back into the work force and to give them retraining, which is going to be very important for this country. The demographics show that the work force is getting older, and we need to make more use of older people in the work force.

Senator GEORGE CAMPBELL —But it is also about the range of skills that people pick up through the training process.

Mr Walters —And, in that respect, we now have a training package system that covers far more of the industry than the old traditional apprenticeship system. I think it covers something like 80 per cent of the work force—I see my colleagues in the training authority nodding—and we have also got the New Apprenticeships system which, again, covers virtually every major industrial area and provides training there, whereas the traditional apprenticeship system was based entirely on the traditional trade areas. It is worth bearing in mind, Senator, that traditional trade areas account for 13 per cent of the work force, yet they still account for 36 per cent of new apprentices.

Senator GEORGE CAMPBELL —But, if the system is working so well in the way you describe it, why are we getting considerable complaints, particularly from people in the trades areas who require licensing arrangements to be able to effectively operate? We had evidence given to us in Queensland, for example, from electrical apprentices who had completed their apprenticeship, been signed off as being competent and been refused their electrical licence because they did not possess the necessary skills to meet the needs of the licensing board. Some of these people have been forced to go back and do an additional six months of training in order to get those additional skills.

Mr Walters —The licensing system, coming on top of the training system, has been an issue which employer organisations have asked us to look at very seriously, because they take the view that people coming out of the training system with the requisite competencies should not have to go through a separate series of hurdles in order to be licensed. Therefore, the training authority has been leading an exercise to look at licensing in industry and cooperation with industry. In some cases, this means adjusting the training system to make sure it does meet fully the requirements of the licensing system. In other cases, I think it is going to mean changing the requirements of the licensing system so that the outcomes of competency based training are fully recognised. I do not know if the training authority would like to add anything on the progress of that particular project.

Ms Scollay —There is a considerable amount of work being done now on the integration of training issues with licensing issues. It really is a big issue for us; it is a big issue for the whole country. Sometimes it manifests itself because the industry licensing people do not have enough confidence in the VET system. Other times it manifests itself because there are eight different state and territory licensing systems, and in the development of the training package the consensus has been that the training package will meet the requirements of, say, seven of the eight states. We are trying to put pressure on the eighth state to change their licensing requirements to bring them into harmony with all the other states and territories. We are now at a stage of having reached agreement across the states and territories to confront this issue head-on. It has been quite difficult to get the VET sector, particularly the ministers in the VET sector, to deal with licensing issues because they are not within their portfolio in most state governments. It is usually in a different part of the government.

With a range of whole-of-government approaches we are now running a series of projects. We produced a report last year called A licence to skill, which highlighted a whole range of issues. I am sure it has been tabled already with this committee. If you do not have a copy we can certainly get you one. It highlights a whole range of issues to do with the interface between the VET system and the licensing system. I will give an example of the finance industry. We have had long negotiations with ASIC about the training system fulfilling the requirements for the competency standards that are now required under the legislation for financial advice. We have had to work with the finance regulators to make sure they are happy with the quality of VET training, so that a VET certificate gives you the licence as well. That has to happen across every industry. In some cases where you do not have a national regulator but you have eight state and territory regulators, there is a lot of work to do to ensure you get all the regulators agreeing that the set of competencies in any given training package will satisfy the standards for licensing. The example that you gave of the Queensland electrical apprentices is one of those cases where it is done on a state and territory basis. The training packages are always trying to set a standard which everyone will agree to, and if one state is different from all the rest then the pressure is on that state to try to bring their licensing requirements into line with every other state.

Senator GEORGE CAMPBELL —That seems to be an issue that needs to be addressed with some urgency. It must be pretty debilitating for young people who get signed off as being competent then cannot get their licence to be able to practise but have to go back and do additional training in order to meet those requirements.

Ms Scollay —We would certainly agree with you. I would say that 18 months ago we could not get agreement around the states and territories to make this a top priority. That has now changed and this is something which ANTA is progressing now with a great deal of vigour.

Senator GEORGE CAMPBELL —Given the reduction in real terms of Commonwealth funding to the states and territories from $230 million, cumulative over three years between 2001 and 2003, to $218.7 million, between 2004 and 2006, combined with a continual unmet demand for vocational training places through TAFE—which is currently 40,000 per annum—how does the Commonwealth expect to fund increased training places to meet the skills development needs of industry?

Mr Walters —I am afraid your arithmetic is not quite right there.

Senator GEORGE CAMPBELL —Please correct me.

Mr Walters —The growth funding which has been available over the last three years continues and the extra money that we are talking about over the next three years comes on top of that, so there is not a reduction.

Senator GEORGE CAMPBELL —Where is the additional money in this budget for the VET system?

Mr Walters —The additional money that will be brought into the ANTA Agreement is as we described it last night. It is $218 million and it consists of $68.7 million—which comes from additional funding for Commonwealth priority areas in the welfare reform measures—together with indexation of base funding of $136.5 million, plus additional indexation on growth funding of $13.5 million.

Senator GEORGE CAMPBELL —Wasn't that a reduction?

Mr Walters —No, it is an increase.

Senator GEORGE CAMPBELL —What is the actual amount of increase?

Mr Walters —The amount of increase is $68.7 million in additional funding for Commonwealth priority areas—and that comes from various welfare reform measures—together with an indexation of base funding of $136.5 million, plus additional indexation on growth funding of $13.5 million. That makes a total of $218.7 million over three years.

Senator GEORGE CAMPBELL —And in the previous three years it was $230 million?

Mr Walters —For the previous three years of the existing ANTA Agreement, that is quite correct. As Senator Carr pointed out last night, there was $50 million in the first year, $75 million in the second year and $100 million in the third year—together with some indexation. By the way, all of that is to be matched by the states. So in terms of its impact on the system, it has doubled. What we are asking the states to do this time around is to match the indexation on the growth funding—which is $25.5 million—and to match the $119 million of additional funding for Commonwealth priority areas. If the states do that, and if they continue to match the growth funding, then they are being asked to match $445 million. So you have to add all of that in, in terms of the additional resources available to the system. That is dependent on the states agreeing to match the Commonwealth's funding, and that is one of the issues that will be discussed at the ministerial council next week.

Senator GEORGE CAMPBELL —What are the Commonwealth priority areas?

Mr Walters —The Commonwealth priority areas have been set out in two successive budgets. They were set out in the programs called Australians Working Together, which is commonly known as welfare reform; a Better Deal for People with Disabilities; Helping Parents Return to Work; and a Fair Go for Mature Age Workers. In last year's budget funds were set out under Recognising and Improving the Capacity of People with a Disability.

Senator GEORGE CAMPBELL —What was the level of expenditure on consultants used by the department and the Australian National Training Authority for the 2002-03 financial year?

Mr Walters —Our chief lawyer might have the figure in relation to the department, in a moment.

Dr Harmer —If it is not here we may need to take it on notice. If we have it here we will give it to you now.

Senator CARR —I have put a question on notice about this already.

Dr Harmer —I think we will take it on notice.

Senator GEORGE CAMPBELL —How many staff were employed, at what levels and in what areas in the department, and allocated to vocational education and training matters? And within the Australian National Training Authority what numbers are projected to be employed during the 2003-04 year compared to the 2002-03 year?

Mr Walters —Within the department the number fluctuates from time to time because of births, marriages, deaths, promotions and such like, but it is about 120. And out in the states we have perhaps another 40 or 50—again that fluctuates from time to time—working on programs in the vocational education and training area and in the transitions area, on Jobs Pathway and things like that. It is approximately that number, and there is no significant change between this year and next. It changes according to temporary needs. We might take a few temporaries on if we are doing a tender process or something like that but there is no basic change in the underlying base.

Senator GEORGE CAMPBELL —Is it the same for the department and for ANTA?

Ms Scollay —I will not have the data on the consultancies for ANTA for 2002-03 until the end of the 2003 financial year. I can certainly forward that to you.

Senator GEORGE CAMPBELL —That is on the consultancies?

Ms Scollay —Yes.

Senator GEORGE CAMPBELL —What about the staff employment numbers?

Ms Scollay —The standard operating number for staff is 100 to 101.

Senator GEORGE CAMPBELL —Is that predicted to change in 2003-04?

Ms Scollay —Not substantially, no.

Senator GEORGE CAMPBELL —The Victorian state government intends to broaden the range and type of courses it delivers and funds through VET, which includes training packages. It argues that current qualifications are not well matched to the skill needs of emerging occupations. It appears that there are requirements for a mixture of vocational, academic and generic skills not usually available through current qualifications. Queensland VET has flagged similar moves. Can ANTA comment on these developments? Are you aware of them? Do you consider that they indicate a need for a rethink of the current approach to vocational education?

Ms Scollay —I did not hear the introduction of what you said. Who was it who made that first complaint?

Senator GEORGE CAMPBELL —The Victorian state government and Queensland VET have flagged similar moves. They are essentially saying that the current qualifications are not well matched to the skill needs of emerging occupations. It appears that there are requirements for a mixture of vocational, academic and generic skills. I must say that we have heard this argument put to us from a number of people; many employers these days do not want simply a person with a particular degree or a diploma but with a mixture of elements out of the two areas. Are you aware of them? Do they indicate a need for a rethink in terms of the current approach to vocational education?

Ms Scollay —There are a couple of ways of approaching this issue. One is to say that the system that we have at the moment—the training package based system—where industry spells out the competency standards it believes it needs for the workplace, is a system which is contributed to by industry and all the states and territories, and the states and territories sign off on those training packages. In 1999 the Australian Industry Group produced a report called Training to Compete. It highlighted in a fairly strong way the extent to which there was a greater need from employers for what were termed at the time soft skills—generic skills and employability skills.

Since that time ANTA has been working with industry and with the states and territories to look at how we are going to better reflect the teaching and assessment of those employability skills. There is an enormous amount of work under way and there is work being piloted. There are different views about how to best teach and assess these employability skills, and there is some view that to some extent in some industries at some levels they need to be embedded in the way the work is done and the way the training is done. Others would say in some other areas you need to teach it quite separately and assess it quite separately. We are piloting a range of different methodologies as to how best to reflect these quite generalised employability skills through the training package system. All the states and territories are part of that process.

As well, you have really exciting developments through the system of post-compulsory education and particularly with the emphasis on VET in Schools. The Victorian government for instance has produced their VCAL qualification, which allows for even more variety in the school setting of general education, with vocational education and general employability skills. We would welcome that kind of move. To the extent that within VCAL they are doing vocational qualifications, they are still sticking with the training package. So they are trying ways of finding a more rounded approach to schooling that will assist those young people as they make their transition most likely into the VET system or the TAFE system.

There is at other levels a whole lot of movement of people between the VET sector and the higher ed sector, where you are seeing people realise the need of industry for a general education combined with a technical education. For instance, there is a very big movement of people, who already have a degree, towards getting a vocational qualification—as a specialist qualification, if you like—on top of the higher level general education they would have received at school. So you are now seeing a very large shift of people from uni to VET as well as VET to uni, which would have been the traditional pathway. There is a whole array of ways this is being picked up, but it is something we are all focusing on.

As I think I may have said to you before, there is a role for industry to play here too. We have all expressed concerns about what we have called the `institutional pathway' and the extent to which people can gain these employability skills if they do not have access to a workplace. Movements to try to enhance the engagement of industry in providing workplaces in order to develop employability skills, particularly in young people, is another area of high priority for all governments and all ministers. That is a focus too.

Senator GEORGE CAMPBELL —In Professor Schofield's submission to the inquiry, she was strongly of the view that employers ought to meet costs of those employability skills, because they were the ones demanding the skills and they could only be developed when people actually entered the work force.

Ms Scollay —We would agree that it is very hard to learn employability skills in a decontextualised way. That is why we are pursuing these employability skills so closely with industry.

Senator GEORGE CAMPBELL —It is the mix and match at the top end, where there is more demand coming from industry for the capacity to do that. That raises the issues around articulation, which still remain very much unresolved between the various sectors.

Ms Scollay —Yes, I think that is right.

Senator GEORGE CAMPBELL —I presume you are involved in working in that area of articulation.

Ms Scollay —Very much so.

Senator GEORGE CAMPBELL —It is unfair to generalise, because in some areas there are arrangements being made, but it has been put to us that there is no systemic program in place for articulation—it is very much a one-on-one negotiated arrangement between the various institutions.

Ms Scollay —That is right. I think that situation will remain as long as the framework for the movement from schools to unis, schools to VET or VET to uni remains: you have a national system of VET, and when it gets into schools it gets atomised into eight state and territory systems which then try to articulate into university; you then have VET running a national system, which has to negotiate with 37 universities. We are constantly negotiating those boundary issues. We have the cooperation of something like 22 of the universities already, for fairly good articulation arrangements between VET in Schools and tertiary entrance scores and university entrance. However, as you know, each university retains its right to assess each individual on their merits in terms of what they will accredit. That is something we are constantly working on with the university sector.

Senator GEORGE CAMPBELL —One of the issues that appears to be important is probably much more basic, and that is the way in which the funding arrangements work. There are concerns about funding not dripping from one bucket into the other bucket and about there being a cost to one of the other sectors. That is one of the issues that will have to be addressed if articulation is going to work effectively in the longer term. We understand that the Western Australian state government has issued a consultancy to look at these issues. I do not know when that will be available, but it may shed some light on the way forward. You stated in your submission to the current and future skills needs inquiry that the public VET sector is delivering skills to 1.76 million students, and in 1992 there were just over one million students. Can you advise me how many of these 1.76 million students were involved in New Apprenticeships at certificate II or below level?

Ms Scollay —We will be able to give you that figure. For 2001, there were a total of 374,800 new apprentices. Mr Walters has already given you the figure for the number that are at certificate II or below. It was in the order of 20 per cent. I can look it up; I have it here.

Senator GEORGE CAMPBELL —Can you take it on notice and give us the precise figures?

Ms Scollay —Yes, I will give you the precise percentage.

Mr Walters —I can confirm that. The number of new apprentices in training at AQF II or below is under 20 per cent. The figure is—this is for December—67,424 out of 1.7 million VET students.

Senator GEORGE CAMPBELL —Thank you for that. Are there any new initiatives in the 2003-04 budget designed to encourage or provide incentives to enterprises to upgrade the skills of their workers?

Mr Walters —The entire New Apprenticeships Scheme is really designed to help employers upgrade the skills of their workers in the sense that it is paying—

Senator GEORGE CAMPBELL —That is not a new incentive. That has been there for—

Mr Walters —In terms of new incentives, the incentive scheme was announced last year and comes into effect on 1 July. I can certainly give you an account of the outcomes of that if you wish. It is all on the web site. But a number of changes were made. In particular, the scheme was redesigned in order to be simpler. In the past, at the AQF III level and above there were incentives for commencement, at the mid point and at completion. Everyone said that it was too complex. Therefore, we only have two main payments: we have the commencement payment, which is paid at the three-month point when a registered training organisation has been engaged; and we have a completion payment when evidence of completion is received. We have also at the same time, in order to encourage completion, redistributed the mid-point payment 80 per cent towards to completion and only 20 per cent towards increasing the commencement payment. The overall payment now is something like 62 per cent loaded onto completion. That was the main change.

We have made some changes to the payments to group training organisations in order to bring them onto the same basis as other employers and in order to enable group training organisations to provide a more effective service, and we have provided transitional arrangements for them. We have extended disabled apprentice wage support to all new apprentices, whereas it is currently available for apprentices only and not trainees. We have increased the rate of the living away from home allowance to help new apprentices who have to live away from home. We have also introduced an additional incentive for disadvantaged mature age workers over 45 who are welfare dependent, who are returning to the work force or who are made redundant. That is going to be an extra $825 commencement payment and an $825 completion payment. That kicks in on 1 July.

Additionally, we have relaxed the barriers to taking on new apprentices with old prior qualifications so that if a prior qualification is more than seven years old it can now be discounted for the payment of employer incentives. The reason we have done that is the one I mentioned earlier on: we are told that qualifications change so rapidly now that they fairly quickly can become obsolete. There are people with qualifications more than seven years old that really do not help them gain employment any longer. In future, they will be eligible.

All of those incentives will come in on 1 July. In addition, from 1 January just gone there was a new incentive introduced for New Apprenticeships in innovation industries. That started on 1 January, together with additional incentives to encourage school based New Apprenticeships. There has been a large amount of change in that area. The main changes have been to simplify the system and to encourage completions.

Senator GEORGE CAMPBELL —Can you provide us with the current suite of programs that provide incentives for enterprises to use VET to upgrade their employee skills and how much is spent each year on these programs?

Mr Walters —Yes.

Senator GEORGE CAMPBELL —You have mentioned a number of them so I am having trouble following you.

Mr Walters —You will find that the overall figures are in the Portfolio Budget Statements on page 132.

Senator GEORGE CAMPBELL —Does that cover the whole suite of programs?

Mr Walters —Yes, it does. You will find under output 2.2, `Support for New Apprenticeships', provision in the budget estimate for 2003-04 of $533 million. You will see that that is up from an estimated actual in the current financial year of $454 million, so it is a fairly substantial increase.

Senator GEORGE CAMPBELL —Does that give a breakdown of each of the component parts of the programs?

Mr Walters —We have already agreed to answer that question in the form of the answer on the different incentives, which you have already asked for.

Senator GEORGE CAMPBELL —That will give me a breakdown?

Mr Walters —Yes.

Senator GEORGE CAMPBELL —Is the department of the view that the status of VET in the general community needs to be lifted?

Mr Walters —We strain every nerve—as do the National Training Authority—to do precisely that. The minister has been taking a great deal of time out to stress that there is a prevailing view, which sometimes one sees in the media, that the only pathway for young people that matters is the university one. The minister has repeatedly taken the opportunity to stress that that is not the case and that vocational education and training, particularly New Apprenticeships, represents a very good pathway for young people and also very good opportunities for older people in the work force. It is an interesting fact that in Australia we have the highest rate of participation in post-school education for the over 40s group in the whole of the OECD, and for the 30 to 39 age group we have the second highest rate in the OECD. So we have a particularly strong system both for young people and for older people.

Senator GEORGE CAMPBELL —How much money is spent each year on promotional campaigns on the status of VET?

Mr Walters —We have already dealt with the issue of the marketing campaign for New Apprenticeships that is coming up. There will be an additional $7 million and, I think from memory, another $4 million available for Commonwealth New Apprenticeships marketing next year. The National Training Authority has a small budget, which is voted every year by the states and territories, in the region of $2 million or $3 million, which is spent on marketing. Beyond that, the states and territories all have a budget of their own for marketing and that is frequently devolved down to the local TAFE. For example, in New South Wales there is a very large book that is produced every year which lists all the TAFE courses. There is advertising in all of the local media and I think on the radio, in the newspapers and possibly on television. So there is a large amount of advertising which is conducted at state level by the TAFE system and by the private providers. Of course, we do not collect that information centrally.

Senator GEORGE CAMPBELL —Has the department paid for any consultants to develop ideas and campaigns to improve the status of VET?

Mr Walters —The most recent exercise that comes to mind is the one which was conducted by the National Training Authority a couple of years ago, and perhaps Ms Scollay may care to mention that.

Ms Scollay —In 1999-2000, the Australian National Training Authority did a major piece of market research looking at the values and attitudes of Australians to learning. We interviewed and surveyed both a very large segment of the Australian population as individuals and also a small sample of enterprises. Out of that work, we particularly targeted a group of young people who were at risk of dropping out of the system. For several years we ran a marketing campaign called `It pays to stay,' and that is being continued now by the states and territories.

Senator GEORGE CAMPBELL —What has been done specifically in terms of VET in schools?

Ms Scollay —In relation to marketing?

Senator GEORGE CAMPBELL —In relation to promoting that and in relation to enhancing the capacity of that to deliver outcomes. What has become quite clear—you may or may not be aware—in the process of carrying out this inquiry is that, where there are partnerships between schools and industry, VET in Schools is working very well and seems to be getting very good results. In fact, we have been told by people who have gone through the system that when they commenced an apprenticeship the drop-out rate was fairly negligible. But that is not very uniform across the country. In fact, there are widely different experiences. I wonder to what extent those positive experiences are being taken and used to build a platform for expanding the activities across the rest of the school system.

Ms Scollay —I think that is a good question, in the way you have expressed it to me just then, and we should probably pick that up and do more about it. We have been aware of perceptions of a mixed set of outcomes from VET in Schools. We gave evidence to the VET in Schools inquiry that there is a perception from industry that doing VET in schools is not as good as doing VET in VET. We have had a study undertaken to test that perception on the part of industry, but we do not have the full results of that consultation yet. When we get it we will certainly share it with this committee. Early indications are, from the point of view of quality, audits and complaints, that there is no greater problem in schools than there is in any other part of the VET sector.

It is true that VET in Schools is treated differently across different schools and in different states and territories. Some states have decided that it is better for a lot of young people to get a little bit of experience—a sort of tasting view—and other states have taken the view that they want a smaller number of students to do things in greater depth. It is quite clear that, where a school has a very good relationship with industry, it is working very well. We also know that in particular schools, where some teachers are really passionate about their particular area and have a lot of expertise in that area, it is working very well.

It gets back, I think, to the issue that I raised earlier. I believe a problem in vocational education and training arises where there is no access to a workplace. We are relying on the quality of simulation to deliver the outcome for the students. That is an area that ANTA is now looking at much more closely, and it applies as well in TAFE as it does in school or with a private provider, where a student cannot find access to the workplace to demonstrate that competence. They are relying on some form of stimulation for that. The issue then becomes: what is the quality of that simulation?

Senator GEORGE CAMPBELL —There seem to be two key issues: one is the industry relationship, so that there is an access point to get into; and the other, which does not appear to be being addressed—and it may be related to the articulation issue and it may not—is the question of the quality of the teachers who are providing the VET in schools and the degree to which they possess the necessary technical skills.

Ms Scollay —I would put it to you that, to meet the requirements of the AQTF, teachers have to have the relevant qualifications or the assessment needs to be done by teachers with the relevant qualifications. If that is not the case, both in terms of teaching qualifications and industry qualifications—the competency for the industry—then they will not meet the requirements of the AQTF. Schools are being audited against those criteria, just the same as any other RTOs are. We are being assured that there is no greater problem in the school sector than there is anywhere else. The standards in the AQTF are being met.

Senator GEORGE CAMPBELL —I must say, that is not necessarily what is being said to us. Perhaps the information is being generated in a form that would be acceptable to different groups. But an issue that has been raised with us is that the quality of the teaching at that level leaves a lot to be desired in some areas. It may be an area that needs to be given a bit more attention.

Ms Scollay —That will be the subject of the research that we are having done, and when we get that report we will pass it on to you.

Senator GEORGE CAMPBELL —When is it likely to be finished?

Ms Scollay —In late July, I believe.

Senator GEORGE CAMPBELL —I have some general questions about literacy and language courses. What does the department do to measure, or what funding does the department give to Job Network providers to measure, the English literacy and language needs of job seekers?

Mr Walters —The department does not fund Job Network providers unless they happen to be also providers for one of our other services. You would need to direct that question to the department of employment.

Senator GEORGE CAMPBELL —I did direct that question to the department of employment and they told me to direct that question to you because you were the ones who ran the literacy and language course.

Mr Walters —We do. I can give you answers for our literacy program, but it is not necessarily directed to the Job Network. That is where I was thrown off balance. If you turn to page 132 of the PBS you will find under output 2.3 that there are two programs of particular interest. One is the Workplace English Language and Literacy program. That is basically the delivery of language and literacy training to the workforce—this is people already employed. It is done for the most part at the workplace through the aegis of the employer. You will see that the funding there is about $12.5 million.

Senator GEORGE CAMPBELL —I understand that. I do not want to cut across you but I am specifically talking about measures that are provided to job seekers.

Mr Walters —For job seekers? You will see that language, literacy and numeracy training, which is two lines down from that, has estimated actual expenditure of $35 million this year, rising to $40 million next year. That is a program which is aimed at job seekers; it is designed primarily for them. It was introduced as part of the mutual obligation suite of programs and it provides a number of different streams of language and literacy training.

Senator GEORGE CAMPBELL —How many job seekers are in need of support in language and literacy skills?

Mr Walters —We had 17,710 participants by 23 May, compared with the 2002-03 target of 16,000. We have exceeded the target this year. The number is 17,710.

Senator GEORGE CAMPBELL —That is what you have done. How does that compare with the demand?

Mr Walters —We have more or less met demand. We have had to slow things down slightly because we are over target but we anticipate that that will not mean more than a few weeks delay in actually meeting the demand. The appropriation rises next year so there will be the ability to take on more job seekers if need be. It is roughly in balance with demand as we know it.

Senator GEORGE CAMPBELL —Can you provide more detailed breakdowns of the cities or regions where there is the most need for language and literacy skill support among job seekers?

Mr Walters —I do not think we could do it in quite those terms. We can certainly give you a breakdown by region or state—

Senator GEORGE CAMPBELL —Can you do it by labour market region?

Mr Walters —of where we have the provision; where we have made the places available. That is roughly in line with our judgment of where the need is going to be.

Senator GEORGE CAMPBELL —Is it your expectation that 17,710 will be the number of people who will take courses this year?

Mr Walters —The target for this year was 16,000 so we have gone over the target already.

Senator GEORGE CAMPBELL —Was there an overspend in the program last year?

Mr Walters —Not last year. In the current year, there will probably be a slight overspend in the program, which we will accommodate by underspends elsewhere in outcome 2.

Senator GEORGE CAMPBELL —I understand for 2003-04 you have allocated more funds.

Mr Walters —Yes, we have. For 2003-04, the appropriation is $40,702,000 compared with $34,479,000 for the current year.

Senator GEORGE CAMPBELL —What is the average waiting time for access to these courses?

Mr Walters —It is no more than a few weeks. We have actually increased it a little bit lately because a lot of people will find employment and drop out very early on, so it is worth having a bit of a waiting time to make sure that they are people who really do want the training and are not going to swiftly move on to employment. Obviously it does not do people too much good if they drop out fairly quickly.

Senator GEORGE CAMPBELL —Sure. Can you tell me what was the longest period a person had to wait to undertake the literacy and language course?

Mr Walters —I do not think we would have that information centrally very readily. It would probably be somebody in a remote area for whom it took some time to fix provision up. That would be general across all of our programs. Obviously, if you are looking to make up a class size or something like that, it takes longer in remote areas. Between assessment and referral, we do have a guideline of eight weeks.

Senator GEORGE CAMPBELL —Can you take that on notice?

Mr Walters —I suspect that there is no more information we can provide on that, Senator. Eight weeks is the maximum, and that is what people aim at. In individual cases, it would depend on local Centrelink processes and so on.

Senator GEORGE CAMPBELL —I will just ask you to take it on notice and, if you can provide us with the longest waiting period, I would appreciate it.

Mr Walters —I will take it on notice. If there is any further information we can provide, we shall, of course.

Senator GEORGE CAMPBELL —Do you have any predictions about the average waiting time that might be experienced in 2003-04?

Mr Walters —Ms Cross manages the program. She is the Branch Manager, Quality and Access Branch in VET Group.

Ms Cross —We would expect that literacy and numeracy clients would be referred almost immediately after assessment. For basic language clients, it is a period of four weeks between assessment and training commencing.

Senator GEORGE CAMPBELL —Do you have a feedback process from participants in the courses? Do you ask for feedback from participants who have participated in the courses?

Ms Cross —Not directly, but we do have the usual program monitoring arrangements in place.

Senator GEORGE CAMPBELL —Can you table the results of those monitoring activities?

Ms Cross —Yes, Senator.

Senator GEORGE CAMPBELL —Thank you. I think you might have said it, Mr Walters, but how much funding has been allocated to improve the literacy and numeracy levels of the existing work force?

Mr Walters —That is the WELL program, and this is aside from the fact that part of the mainstream VET provision—quite a lot of it—does in fact consist of basic skills programs. It is worth bearing that in mind. But, leaving that to one side, on the WELL program—Workplace English Language and Literacy—if you look at page 132 under output 2.3, there is $12,225,000 for this year and, for next year, $12,484,000. It is roughly around the $12.5 million level.

Senator GEORGE CAMPBELL —The WELL program is for existing workers, and the language, literacy and numeracy training is for job seekers?

Mr Walters —That is correct. As I say, it is worth bearing in mind that quite a few of the basic level courses provided in the VET system are around literacy issues.

Senator GEORGE CAMPBELL —Mr Walters, why is there no provision in here for young job seekers? Or are they specifically accommodated within the general package?

Mr Walters —The department does have programs for young job seekers. For example, the Jobs Pathway program is an important program for young job seekers, and you might care to ask our Schools Group colleagues about that when they come on Friday.

Senator GEORGE CAMPBELL —Yes, but I am particularly concerned about literacy and language issues. We have had evidence given to us at the inquiry from employers that a lot of young people, virtually coming straight out of school, have deficiencies in literacy, language and numeracy.

Mr Walters —The Language, Literacy and Numeracy Program includes young people. They are eligible.

Senator GEORGE CAMPBELL —But have you had any discussions with the school system about how this issue might be addressed?

Mr Walters —I think you might care to ask our Schools division about that on Friday, because it would be their responsibility. They do have a number of programs aimed at addressing literacy issues, and they can talk to you all about them.

Senator GEORGE CAMPBELL —You do not differentiate, in terms of your packages, between various groups of job seekers?

Mr Walters —Not in this particular respect but, as I say, the Jobs Pathway program, which is run by our schools colleagues, does particularly look at young job seekers and those seeking a transition from school to the work force particularly. That is aimed at that. There are other issues around career advice. There is the career information system called My Future. Our schools department colleagues can talk to you about all of those issues on Friday. I am also reminded that we have the New Apprenticeship Access program, which you will find under output 2.2 on page 132, which has funding of around $9 million or $10 million. It is not limited to young job seekers, but a large number of them do it. It is particularly aimed at those who need a little bit of supplementary education and training to bring them up to the level where they can be considered for an apprenticeship or traineeship. That is the objective of the New Apprenticeship Access program.

Senator GEORGE CAMPBELL —How is that administered? Who administers it?

Mr Walters —That is administered through brokers. The department goes to brokers and the brokers arrange the local courses.

Senator GEORGE CAMPBELL —Thank you. I have no further questions.

Senator JOHNSTON —I want to ask some questions of Ms Scollay with respect to the Australian National Training Authority. Are you aware of the Western Australian group training scheme operating out of the Balga TAFE?

Ms Scollay —Not specifically.

Senator JOHNSTON —It has 155 apprentices.

Ms Scollay —I think Mr Stephens might be able to answer that or perhaps the Commonwealth—

Senator JOHNSTON —It is a registered body with ANTA.

Mr Stephens —I will start by indicating that, yes, we are aware of the scheme. It has been a registered group training company through the arrangements that the Western Australian government have in place for group training organisations. It is an organisation that has been funded over a number of years.

Senator JOHNSTON —How much is that funding?

Mr Stephens —I am not aware of how much has gone specifically to that scheme, but we could take that on notice and follow that up.

Senator JOHNSTON —Could you estimate roughly what you think the funding might be for 155 apprentices?

Mr Stephens —No, I could not at the moment, sorry.

Senator JOHNSTON —Would it be hundreds of thousands of dollars or tens of thousands of dollars?

Mr Stephens —I would have to take that on notice to give you a reasonable estimate. I could not do it off the top of my head.

Senator JOHNSTON —If you would do that, I would be obliged. There is clearly some Commonwealth funding going to the WA group training scheme through ANTA?

Mr Stephens —If it is a program that has been funded under the joint policy program that ANTA is involved in, that would undoubtedly be the case. We fund the joint policy scheme on a matching basis between the state and ANTA—it is a fifty-fifty arrangement.

Senator JOHNSTON —Are you aware of how many other Western Australian training schemes such as this you are funding?

Mr Stephens —I do not have the exact number in front of me, but I am aware that we do fund a number of group training companies through the state in Western Australia.

Senator JOHNSTON —Are you aware of ANTA being approached by the Construction Skills Training Centre in Welshpool to take over the WA group training scheme?

Mr Stephens —No, I am not aware of that approach directly to ANTA.

Senator JOHNSTON —Are you aware of the board of the Construction Skills Training Centre resolving to take over the WA group training scheme?

Mr Stephens —I have seen a press report in the WA papers, I think a number of weeks ago, which outlined a whole range of issues in that scheme. Yes, I think it did mention that in the press report.

Senator JOHNSTON —Are you aware of the findings of the Cole royal commission with respect to the training at the Construction Skills Training Centre? We gave them a million dollars in 1999.

Ms Scollay —I am not aware of that particular case.

Senator JOHNSTON —Do you know that we gave them a million dollars in 1999 and that the Cole royal commission found that that was given on false pretences? Do you know and understand that the Construction Skills Training Centre is run and operated by the CFMEU in Western Australia?

Ms Scollay —I did not know that. My understanding is that ANTA did fund that skills centre in 1998 and I can get you more information about that.

Senator JOHNSTON —Was it to the tune of $1 million?

Ms Scollay —I will have to get you the exact figure.

Senator JOHNSTON —When you are doing that could I draw your attention to the fact that the commission mentioned that the compulsory training levy and the $1 million grant from ANTA were based on what is now known to be wrong information used in an application form for revenues to go to the skills training centre but which instead go to the CFMEU. So the money was diverted not into training but into the CFMEU. Less than a third of the money is loaned back to the Construction Skills Training Centre. The CFMEU makes no secret of the fact that it wants the 155 apprentices at the WA group training scheme as a revenue base. Is ANTA not aware of any of this?

Ms Scollay —I am not aware of that particular case, but now that you have drawn it to my attention I will certainly write to the Western Australian State Training Authority and ask them for the detail of the case.

Senator JOHNSTON —Are you aware of their attitude in this matter? They want to see the group training scheme money go to the Welshpool centre of the CFMEU because after the Cole royal commission, this union has a problem with revenue. Is the Commonwealth not aware of any of this?

Mr Walters —These matters have been raised with us by another senator in the last day or so. We really have not had a chance to look at them.

Senator JOHNSTON —But you did not know about it until it was raised?

Mr Walters —This is a matter of funding. It flows through the training authority through the Western Australian government so we are quite at a distance from all of this.

Senator JOHNSTON —So we are happy to allow the Western Australian government to take Commonwealth money and divert it into a training scheme that funds a union?

Dr Harmer —Mr Walters has said that we are at arm's length but he did not say that we were happy if there is something being done with the funds that is not appropriate.

Senator JOHNSTON —Are you going to remain at arm's length in the circumstances of the Cole royal commission with its findings?

Ms Scollay —ANTA certainly will not remain at arm's length. We are aware of another case which we have followed up with the Western Australian State Training Authority to ask them what they intend to do about it. We will certainly do that, now that the case you have given has been brought to our attention. I am not sure whether the issue you are raising is funding for a skills centre or whether it is the joint policy funding of group training which Mr Stephens just highlighted. I need to work through the detail of that. We certainly do pursue the states and territories in terms of what they are doing with Commonwealth money.

Senator JOHNSTON —I thank you for your answer.

Senator NETTLE —I have some questions that relate to funding issues. I would like you to identify some things for me in the Portfolio Budget Statements. Could you explain how much Commonwealth funding goes to three different areas? I am looking at last year and also forward estimates for next year for: first, TAFE and other public providers; second, adult community education; and, third, private providers of vocational education and training.

Mr Walters —You will find the appropriation for vocational education and training on page 132 of the PBS under output 2.1. You will see the top line there is the appropriation, which goes to the states and territories via ANTA under the Vocational Education and Training Funding Act. The money is administered by the states and they determine how much of it goes to the TAFE system, how much of it goes to private providers and whether any of it goes to the ACE sector. So we do not keep that information and I do not think that ANTA do. What we know nationally is that around 85 per cent of that provision, which is publicly funded, comes through the TAFE system, so that would give you an approximate idea. But I do not think, from looking at the National Training Authority, that they would have that information.

Ms Scollay —We would have to take it on notice.

Senator NETTLE —Can we get on notice a breakdown into those three different areas, both for last year and the forward estimates for the coming year. I understand the states administer the money, but clearly the Commonwealth is aware and can get those on notice.

Ms Scollay —Yes.

Senator NETTLE —I would appreciate that.

Mr Walters —You would not have anything in the forward estimates, because of course that depends on the provision that the states make for next year. The amount that flows, for example, into private providers will depend upon the policies that they have in areas like user choice—we know that in and around a number of recent state budgets there have been changes made. So we would not essentially have any ability to estimate what the effects of that are likely to be at the present stage except to say that they appear to be quite likely to suppress demand, particularly in the areas of private providers.

Ms Scollay —Yes, we would be only be able to do it, as Mr Walters said, on the basis of policy continuity. You could predict, but policy changes, such as on user choice, would certainly affect any projections you might make.

Senator NETTLE —Perhaps to get that sense of policy continuity I could ask you for that breakdown for that last five years. I understand your comment on the forward estimates for next year. You made a comment about the changes in user choice at the state level and that you anticipated that that would impact on demand.

Mr Walters —It is certainly very early to estimate the effect of some of these changes, but what we are hearing from industry groups is that they are likely to depress demand because they will make it more difficult for private providers to access user choice funding in some cases.

Senator NETTLE —I just want to get that clear: your understanding is that these changes in user choice will lead to a decreasing capacity for private providers to access the Commonwealth funding.

Mr Walters —And state funding, I might add. The Commonwealth funds about a third of the system overall, and two-thirds is funded by the states and territories. So the amount that flows out into either the TAFE system or the private providers cannot be distinguished from the source—it all gets mingled.

Senator NETTLE —Yes, I understand that.

Mr Walters —We have seen recently a number of changes around the states to user choice policies and other related policies which will also impact on demand, such as a change in Victoria on payroll tax. We are hearing from industry groups that they expect these combined changes to drive demand down, but of course it is very early days, we do not have all the details of the policy changes and it is a bit difficult to assess the impact.

Senator NETTLE —I appreciate you explaining what you are hearing from the industry groups. Three years ago we had one per cent of hours being taught by private providers; in 2001 we are looking at 12.6 per cent. Looking at the trends, I am a little bit surprised by your comment that we are looking at a decreasing amount of public funding going to the private providers. By my understanding of the trend in hours taught, we are looking at increasing funding to the private providers. Can you explain to me why you believe we are looking at a decrease in funding going to the private providers? Certainly my understanding is that we are looking at an increasing number of private providers coming online and at an increasing percentage of overall public funding going to those private providers.

Mr Walters —In terms of the number of private providers coming online, as you put it, an important change was made last year with the introduction of the Australian Quality Training Framework on 1 July, which has raised the auditing requirements for providers generally. Initial indications we are seeing—and I have heard this, for example, from Queensland—are that as a result the number of private providers has declined. So I would not necessarily assume that there will be a continued rise in the number of private providers. The amount of money flowing to private providers is basically dependent on the policies which are operated around the states and territories—such as their willingness to fund training which goes through private providers, rather than simply through the TAFE system—combined, of course, with the ones operated by the Commonwealth, such as incentives provided to employers.

Around a number of the states recently we have seen some changes to the rules under which the user choice policy is run, which industry groups are telling us are likely to cut down the ability of employers to access training provided through the user choice system by private providers. As I said, it is very early days, but there have been some significant changes made to the rules on user choice around the states and territories. That is what the industry groups are saying to us.

Senator NETTLE —You just made the comment that obviously the policies of the state government with regard to user choice interact with the policies of the Commonwealth government. You also outlined the Commonwealth policies in relation to incentives for industry provided training and employer provided training. Perhaps you could outline for me any other Commonwealth policies that you think impact on the percentage of funding going to private providers. I would appreciate that.

Mr Walters —There is a whole series of different levers here. It is a bit like driving a car. You have a gas pedal and a brake, you can put your foot on the gas pedal or the brake, and if you try putting it on both at once, you will find that one neutralises the other. As we go through this system, a whole series of changes is being made. For example, the Commonwealth is offering additional funding under the new ANTA Agreement and that will increase the ability of the states and territories to provide training. We estimate there will be something like an extra 71,000 places over the next three years.

At the same time, we have changed our own incentive scheme in order to put slightly less money into commencement payments and more into completion payments, in order to encourage completions. We hope we can balance that out so that it will not depress demand, but it is going to have an impact. Around the states and territories, obviously some money goes straight into base funding for TAFE systems and some is put on the market as contestable funding, both through user choice and through other mechanisms. That is one which would tend to depress things. There is the willingness of employers to take on apprentices and trainees that make up something like 20 or 25 per cent of the market. In Victoria, you have seen the abolition of payroll tax relief. That was a major incentive for employers to take on apprentices and trainees. The government says that it has put in place other incentives, and that there is a new completion incentive which will act as a counterbalance. Some industry groups are saying that it will not have that effect and demand will go down.

So you have what is technically known as chaos theory, but it is organised chaos because we are the government, and therefore it must be organised. Chaos theory means you can have a lot of different things happening at once and you have to assess what the overall impact will be. In terms of user choice and the ability to access private providers, industry groups are telling us that they are concerned and that they think demand will go down.

Senator NETTLE —I might just move on to a comment you made about the ANTA Agreement. I am sorry I do not have all of this information with me. I am wondering if you can tell me about how the amount of proposed growth relates to the period that we have seen where, I understand, in terms of the Commonwealth, we have not seen growth in that ANTA Agreement.

Mr Walters —That is not actually accurate. Under the current agreement, which finishes at the end of this year, there has been $230 million worth of growth money put into the ANTA Agreement. You might be referring to the period before that—

Senator NETTLE —Yes.

Mr Walters —when we had the previous agreement, which is going back a little bit in history. It was a period where it was called `growth through efficiencies'. The states and territories were asked, and they agreed, to produce extra places while funding was held constant in real terms. Under the current agreement—and we are currently in the third year of that—there has been $230 million worth of extra funding from the Commonwealth. A condition of getting that money has been that the states and territories have had to match it. So they have had to put in an extra $225 million. When you add the $225 million to the $230 million, you get $455 million—I never could add up—going into the system. That is really quite a substantial amount in terms of the Commonwealth's contribution, which is about a billion dollars a year. This year, the Commonwealth is putting an extra $100 million into the system. That is about 10 per cent up on what it was three years ago.

Senator NETTLE —I have a couple of questions about that. Has the Commonwealth department done any modelling of the impact of the `growth through efficiencies' period that you described?

Mr Walters —It delivered in the region of 160,000 extra places—something like that. Ms Scollay might correct me, or if that is substantially wrong I will correct it on the record. It is going back a bit now, so I have forgotten, but it did deliver a fairly large number of extra places.

Senator NETTLE —In terms of the additional funding you talked about in the most recent ANTA Agreement, could you tell me how that relates to increases in real terms or in matching inflation?

Mr Walters —In terms of the current agreement?

Senator NETTLE —No, I need to ask about prior to the `growth through efficiencies' program—the next period. I am sorry, I do not have it with me; I am just working on memory here. It is in terms of the first ANTA Agreement we saw that included growth funding after the `growth through efficiencies' period.

Mr Walters —That is the current agreement. We provided an extra $225 million in real prices and another $5 million in indexation. By the way, we also indexed the base funding at the same time, which is around the $900 million mark. That has been indexed, too.

Senator NETTLE —I have two more questions. I have a copy of the minister's media release from 13 May, having written to state ministers offering them an additional $218.7 million between 2004 and 2006. I wonder if you can point out for me where this funding is in the Portfolio Budget Statements, and, if it is not in the Portfolio Budget Statements, where it is intended it will come from.

Mr Walters —It is included in the Portfolio Budget Statements. If you look at page 132, at the top line, `Vocational Education and Training Funding Act 1992', it is included in that line of figures.

Senator CARR —We have canvassed this at some length on about three occasions now.

Senator NETTLE —Okay. Sorry, I am new to reading these things, so it is useful for me to have the opportunity for you to—

Senator CARR —And he has thoroughly misled you, but do not worry about that. We will go over that again.

Senator NETTLE —Thank you.

Mr Walters —I do not think I quite heard that, Senator!

Senator NETTLE —I just have one more question, which relates to my understanding that the cost for each one per cent increase in student numbers in vocational education and training is $30 million and that each year the underlying growth demand is approximately six per cent. My question is: where do we expect the additional $180 million in costs, looking at that increasing demand, to come from?

Mr Walters —The question really revolves around: what additional demand is likely to arise on the system in the period ahead? Some work has been conducted on this particular issue for the National Training Authority by a company called Access Economics. It has come up with a range of variables. At the moment, over the next decade the forecast is that growth will be around 2.7 per cent per annum. Over the next three years, which the ANTA Agreement period it is intended to cover, it averages 2.9 per cent. That is largely frontloaded to next year. For two years after that, the growth is around 1.7 per cent. That is because Access Economics are forecasting a downturn in the building industry, and that has a knock-on effect on training as a whole. In the second and third years of the agreement it comes down to 1.7 per cent. If you look at the Commonwealth's offer that we have described to you under the ANTA Agreement, in terms of a percentage increase on the Commonwealth's contribution to current funding, it is around 2.49 per cent per annum.

We are a bit concerned about the Access Economics figures because we do not think they take into account the effects of recent changes around the states in terms of incentive payments and user choice, as I have mentioned. We also have a number of technical issues with them, where we think a couple of figures may have been double counted. But if you take into account, as I said, certainly in the second and third years the Commonwealth's offer is in front by a considerable margin of what is being forecast as the growth figure. Obviously this is all open to interpretation. The other point is that the system does continue to deliver efficiencies, so it is not necessarily the case that you need to provide additional funding to cover all of the extra places.

Senator NETTLE —I want to check whether my assumption of growth in student numbers, where a one per cent increase cost $30 million, was the assumption used in the Access Economics costing.

Mr Walters —I would not like to comment on that without having a bit more detail of where it has come from. I do not think there is necessarily a linear relationship between available funding and the number of places. But if it helps, in costing out these 71,000 extra places—roughly, or an equivalent number—that we think will be delivered by the new agreement over the next three years, we have used a unit cost of around $3,000, except for the places which are earmarked for disability, where we have used a higher figure of $5,000 because obviously catering for disabled students is more expensive. We gave a breakdown of that to Senator Carr yesterday, so I imagine it will appear on the record.

Senator CARR —I tabled the document, so it is with the secretariat.

Senator NETTLE —You spoke before about efficiency. What measures does the department have in place to ensure that efficiency does not mean a reduction in the quality of provision, a reduction in course offerings and a gross exploitation of TAFE teachers in terms of their working conditions?

Mr Walters —Obviously, the employment of TAFE teachers or indeed of staff by private providers is a matter for the employers themselves, and that varies around the states. Some have very centralised TAFE systems; some have very decentralised TAFE systems. In terms of the quality of the system overall, the Commonwealth has placed a very high priority on increasing quality standards in recent years. So, from last year, we have had the Australian Quality Training Framework, which has had higher auditing standards and a more consistent national approach to quality; we have instituted the National Training Quality Council, which is a committee of the National Training Authority, which oversees all aspects of quality; and, in general, we have done everything possible to increase quality standards around the system. Under the new ANTA Agreement, we have asked the states and territories to make quality one of the two highest priorities in addressing the new ANTA Agreement and accepting the money that is on offer. The other priority is skill shortages. So our two top priorities are quality and skill shortages.

Senator NETTLE —When you say you have asked the states to put a top priority on quality, what flows on from that? Is there any Commonwealth involvement in ensuring that that takes place or has been taken up by the states. Also, in what way is there an expectation by the Commonwealth of seeing the states making quality their priority?

Mr Walters —For example, one thing we have done is propose that there be model clauses so that the whole legislative basis on which training provision is regulated and audited can be put on a standard national basis. Everything could then operate to the higher standards introduced by the Australian Training Quality Framework, which came into effect last year. The model clauses will be introduced by the states and territories by 1 July next year and progress on that is being monitored by the National Training Authority. Model clauses do not sound like very much but, in fact, they amount to a substantial piece of legislation which is going to be enacted by the states and territories. Please bear in mind that quality within the training system is a matter for the states and territories. It is the states and territories that both regulate training providers and own and run the TAFEs, which are the major training providers. Through the ANTA Agreement, we have said, from the Commonwealth's point of view, `We are putting in $3.6 billion for this over the next three years; quality has got to be a top issue. Please get the model clauses in place and work with us through the National Training Quality Council'—which is chaired by a member of the ANTA board. We are constructing under the aegis of the training authority a comprehensive risk management framework, so we will look at all the risks in the system to quality and try to address them. That process is still going through.

Senator NETTLE —Thank you very much, Mr Walters.

CHAIR —I will ask a question on adult education. Since the Commonwealth has become involved in adult education—following this committee's landmark report in the early nineties—I would like to catch up on where the Commonwealth involvement is up to on a number of measures. I would like to know what staffing is involved, what the budget is and what aspects of adult education the Commonwealth is involved in at this point in time. You may wish to answer that now or take some of that on notice.

Mr Walters —As you know, that is a complex issue and it encompasses both the higher education and the VET parts of the department. The broad picture that the country faces is that we come top of all the OECD countries in terms of participation in education by people over the age of 40. For people between the ages of 30 and 39 we come second. So we have a world-leading position in terms of adult education. In terms of the programs that we operate, most affect older people as well as younger people, and we have quite high participation rates in programs like WELL. We have introduced a new mature age incentive in the New Apprenticeship Access program and in general we have been participating in lots of cross-government work to look at further ways of developing policies on mature age people—given the demographic situation that the country faces with an ageing population and a need to make greater use of, and encourage greater participation by, older people in the workforce. It is a very complex picture, but that may give you a brief snapshot. If there are any particular issues you are interested in, Senator, I will take them on board.

I am also reminded that we recently introduced a program called BITES, which is proving very successful. It is about basic IT skills for older workers. It was an election commitment of the present government and it was introduced last year. You will find the appropriation line in output 2.3 on page 132. It is called `Improving IT skills for older workers'. That is about $6 million a year. The initial feedback we have had on that has been very enthusiastic. I might be able to give you some of the feedback in a second if I can find it, and if you are interested. The objective of the scheme has been to enable older people—and that is people 45 years and over, which is a very good club to belong to—

CHAIR —That is a very young older group, isn't it?

Mr Walters —The scheme's objective, over four years, is to provide 46,000 mature age people with up to $500 worth of training to obtain basic skills in computers and IT. To date over 4,000 older Australians have successfully participated in it and high success rates are being achieved—with better than 95 percent of participants, on completing the course, achieving the prescribed competencies. Feedback from attendees has been overwhelmingly positive, with comments like, `This is the best course that I have ever done,' and, `A relaxed atmosphere to learn in and great to be amongst similar aged people.'

CHAIR —Given that it is such a diverse sector and it is largely state and regionally controlled, has any mapping exercise been undertaken on what is happening in adult education in the country as a whole, or is that done at a state level?

Mr Walters —We keep in close touch with Adult Learning Australia, who keep a close interest in this. In terms of mapping, we have student statistics for VET which show that a very large number of older people participate in vocational education and training and in higher education. A very large number of older people undertake degrees and diplomas in higher education institutions.

CHAIR —Do you know whether anyone tracks things like participation within community based things like WEA?

Mr Walters —In terms of the adult and community education sector, there is an annual volume published by the National Centre for Vocational Education and Training which summarises all the statistics on that sector. We can easily supply a copy.

CHAIR —Yes, if you could. What is our total Commonwealth budget in this area?

Mr Walters —To get that you would have to take the higher education budget and the VET budget and then you would have to look at the number of students in both sectors and divide them up. The adult and community education sector is mainly funded by the states and territories, so direct Commonwealth funding is restricted to a grant that we give to adult literacy week. Occasionally we have other projects with organisations.

Senator CARR —You should put that in the ANTA Agreement among the list of things that the states can report on: Commonwealth funding in this area would be a good little table.

Mr Walters —The senator reminds me, and I am very grateful to him, that this is also an issue which we have identified as being a priority area under the ANTA Agreement.

CHAIR —Following our report, there was a part of the department established to oversee, I suppose, Commonwealth involvement in the ACE sector. Do we still have such a body, and how many staff are employed?

Mr Walters —Miss Cross has a section head who, as well as running the WELL program, devotes a good deal of her time to keeping a good liaison with Adult Learning Australia and other organisations active in that field. She has been doing it for a number of years and is very familiar with all of those people and keeps the minister well posted on developments in the sector.

Senator CARR —Part of our job as a committee is to review the PBS and its presentation. I am just interested to see that, in the performance measurements listed in table 2.3 on page 86 of the PBS, under `Employer satisfaction with VET', the figure is 80 per cent. It just strikes me that it may well be argued that these tables are presented in a rather arbitrary manner. Could you tell me about the three out years, which are all at 80 per cent, and how you arrived at that?

Mr Walters —The figures come from the NCVER employer survey.

Senator CARR —Is that a satisfaction survey?

Mr Walters —Yes. That is the actual figure for 2001-02. It is a pretty high level.

Senator CARR —What I am interested to know is: what was the target? That is what you achieved, so what was the target?

Mr Walters —We are giving the targets for the out years there. I rather assumed, but without having the old one in front of me, that that is what we set for the current year too. If you are suggesting that there is a deficiency in the format in that we do not give the target for the current year, then you might have a point there.

Senator CARR —Why was it not 100 per cent?

Mr Walters —It would be lovely to achieve 100 per cent—

Senator CARR —Why wasn't the target 100 per cent? A great department of state like this would surely have a target of 100 per cent satisfaction. You do not deliberately go out to have 20 per cent of your groups dissatisfied with you, do you? Do you reprimand people if you have too many people satisfied?

Dr Harmer —We do not, but we also would be highly criticised if we had a target that was unrealistic. It would raise cynicism.

Senator CARR —All right. It has not changed in the out years. So there is no improvement proposed in this department?

Mr Walters —It is a pretty high level. We must bear in mind that, in trying to give broad performance measures for the system, you are actually measuring the performance of the TAFEs, the private providers and the state training authorities—a myriad different agencies. Most of them are out of the direct control of the department. It is really an attempt to give parliament a general picture of how the system as a whole is operating.

Senator CARR —I would say it was extremely general, wouldn't you?

Mr Walters —I would have thought that that was a pretty high level of satisfaction to achieve.

Senator CARR —It is. I am just interested.

Dr Harmer —You raise a useful point. We will have a look at it.

Senator CARR —Okay. Further on there is the issue of completion rates, and there is no ideal target there. Why shouldn't it be 100 per cent? There is no question about whether it improves or decreases. It just strikes me as a rather meaningless presentation of the statistics. What I really do enjoy, though, is the policy advice to the minister. What is your recommendation for us there? Ninety per cent satisfaction! How do we get to that? Again, do we punish people that manage to satisfy the minister 100 per cent because it is over the target? Where do we fit? Why isn't it 100 per cent satisfaction with the department?

Dr Harmer —It is the same answer as before. We try to be realistic, and 90 per cent is a good figure. I think we should probably aim for higher, but 100 per cent would raise a great deal of cynicism.

Senator CARR —I just wonder what is so magical about 90 per cent? How did you derive the figure of 90 per cent satisfaction with the department? Was there a survey done of ministers? Was there a long search through the records to establish whether or not ministers in the past have had satisfaction rates of 90 per cent?

Dr Harmer —I do not know the answer to that in regard to the portfolio, but I would think 90 per cent is a high figure.

Senator CARR —Thank you. Do you actually have someone in the department that writes these things up and has a special task to make sure that they are as obscure as possible? What is the performance measurement on that?

Dr Harmer —Senator, we certainly do not have someone in the department whose responsibility it is to make things as obscure as possible. We do have people in the department who have responsibility for bringing them together, and some of your points are useful for us as we put together the next ones.

Senator CARR —I must say, it is not just the department. In the tables on page 163, `Trends in operational costs' and `Administered funds', the performance data there does seem to me a bit obscure. It may not appear to be a big deal, but I suggest to you that there is no point in putting these together if they just produce nonsense.

Dr Harmer —Agreed.

CHAIR —Thank you, and I thank the officers for appearing. Before you depart, I would like to particularly thank Ms Moira Scollay for her work with this committee over the last few years. Your professionalism and your ability to sustain the ANTA position has been very much appreciated by this committee. Thank you for your work.

Senator CARR —I support those remarks. As we saw with Paul Byrne's departure, I think that there is a changing of the guard at ANTA. I would just acknowledge the enormous contribution, Ms Scollay, you have made to the vocational education system in the time you have been with ANTA. While we often have a robust discussion across this table, I have come to sincerely appreciate the manner in which you have dealt with the committee, the way in which you have tried to answer the questions and, in fact, the competence with which you have administered the authority. Perhaps I will move formally at the relevant point that, as we did with Mr Byrne, we record that in the normal way.

Ms Scollay —Thank you very much.

CHAIR —Thank you, Senator Carr.

Dr Harmer —If it is appropriate, could I just record the department's thanks for Moira Scollay's work with us as well. It has been a very good partnership. Just before we break from VET, we have a couple of answers that we took on notice yesterday that I would like to finalise before we leave.

Mr Walters —There is the information that the senator was asking for yesterday about the Language, Literacy and Numeracy program, arising from the comment about growth in the PBS. There is also a question on notice from last time for which we are able to table the answer. I apologise that we have not done that before. It required some extra analysis, which ANTA has done with the ABS, and it is about the breakdown in unmet demand figures, so it is quite an interesting one.

Senator CARR —Thank you very much. I appreciate that.

CHAIR —That concludes matters relating to VET and ANTA.