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Bishop, Sen Mark
Ludlam, Sen Scott
Xenophon, Sen Nick
Ruston, Sen Anne
Milne, Sen Christine
Whish-Wilson, Sen Peter
Gallacher, Sen Alex
Sterle, Sen Glenn
Di Natale, Sen Richard
Carr, Sen Kim
Madigan, Sen John
Cash, Sen Michaelia
Heffernan, Sen Bill
Ronaldson, Sen Michael
Mr B Wilson
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Economics Legislation Committee
(Senate-Tuesday, 3 June 2014)
Australian Renewable Energy Agency
Mr G Wilson
Mr D Wilson
Senator KIM CARR
Senator DI NATALE
Mr B Wilson
Senator MARK BISHOP
- Australian Renewable Energy Agency
Australian Bureau of Statistics
Senator MARK BISHOP
Australian Prudential Regulation Authority
Senator MARK BISHOP
Australian Office of Financial Management
Royal Australian Mint
Senator MARK BISHOP
- Australian Bureau of Statistics
- INDUSTRY PORTFOLIO
Content WindowEconomics Legislation Committee - 03/06/2014 - Estimates - INDUSTRY PORTFOLIO - Australian Renewable Energy Agency
Australian Renewable Energy Agency
CHAIR: I welcome officers of ARENA.
Senator MARK BISHOP: When will the abolition of ARENA formally take place?
Ms Beauchamp : As soon as the legislation is passed.
Senator MARK BISHOP: Has the government foreshadowed when the bill will be introduced?
Ms Beauchamp : Not yet, no.
Senator MARK BISHOP: Minister, do you have any advice you can offer us about when the bill might be introduced?
Senator Ronaldson: I cannot add anything more to the secretary's comment.
Senator MARK BISHOP: ARENA, then, will continue for the foreseeable future.
Ms Beauchamp : Until the legislation is repealed, yes.
Senator MARK BISHOP: There are no plans as yet to introduce it, but its abolition is conditional upon the passage of the bill through both houses of parliament.
Ms Beauchamp : That is correct.
Senator MARK BISHOP: And there are no plans yet to produce the bill that you are aware of.
Ms Beauchamp : It will be shortly. I just do not have an exact date.
Senator MARK BISHOP: I understand that there are approximately 180 existing contracts worth about $1 billion being managed by ARENA and that some of these have a remaining life of up to eight years. Can you confirm that?
Ms Beauchamp : I might hand over to Ivor.
Mr Frischknecht : That is correct. There is about $1 billion of currently, actively, managed contracts. If you include those that have already been completed it is more like $1.2 billion.
Senator MARK BISHOP: They have a life of up to eight years?
Mr Frischknecht : That is correct.
Senator MARK BISHOP: Can you just take this on notice and give me a table that shows a break-up of the numbers of contracts that expire, on a per-annum basis—year 1,2,3,4, up to 8. Is ARENA still in the business of advocating for business or have you made an internal decision not to engage in anything further?
Mr Frischknecht : Under our act, as the secretary said, we have a number of functions that we are required to perform while the act is available and live. Those functions include providing financial assistance to renewable energy technologies and companies. The board has looked at this matter closely and decided that the lowest risk path for them is to continue with their business, neither accelerating nor decelerating what ARENA is doing. So we continue to accept applications; we continue to assess applications; and we continue to commit funding to new projects.
Senator MARK BISHOP: Is ARENA a purely independent agency or are you housed within the department or within the portfolio?
Mr Frischknecht : We are our own independent agency in the sense that we have our own act and a commercially oriented independent board, although the board members are appointed by the minister and the secretary is also on board. There are two employees—you are looking at both of them—and the remainder of our employees are made available by the department. We are physically housed within a departmentally owned building.
Senator MARK BISHOP: The net of that is that at the moment it is business as usual. Applications for funding are received and they are processed in the normal way. Unless you are advised otherwise or the board makes a decision otherwise that practice will continue until, if and when, the repeal legislation goes through both houses. Is that correct?
Mr Frischknecht : That is correct.
Senator Ronaldson: The government is also developing an energy white paper that will outline a comprehensive, cohesive and sustainable energy policy focused on maintaining a secure supply of adequate, reliable and affordable energy and prioritising support for energy technologies to meet Australia's needs. It is not just a matter of waiting for ARENA legislation. We have other processes in place.
Senator MARK BISHOP: Sure. I just want to establish where we are before I go forward. Has the board or the department given consideration yet to what will happen if the legislation does go through both houses of parliament sometime, say, in the next six months? In particular, have you developed any plans or protocols for handling extant contracts that are live at the time of the cessation of the organisation?
Ms Beauchamp : We have certainly considered how those functions, when they roll back into the department, will be managed, particularly the existing contracts.
Senator MARK BISHOP: You have considered or you are currently considering?
Ms Beauchamp : We have been considering and still currently working through exactly what is required.
Senator MARK BISHOP: You have not yet come to a final position on how those contracts would be administered if ARENA should be abolished?
Ms Beauchamp : The staff who are currently managing ARENA contracts are managed by the department—they are departmental employees. I would expect some of those to remain on for continuity of business to continue managing those contracts.
Senator MARK BISHOP: Regarding all current contracts and likely new contracts that might be signed off in the near future, are staff in the administration arm employees of the department and not of the organisation itself?
Ms Beauchamp : That is correct, except for the two officers here, who are statutory officers.
Senator MARK BISHOP: Subject to some cuts that the government has foreshadowed across the board, unrelated to the elimination of ARENA, is it fair to presume that the contracts will continue to be administered for their life?
Ms Beauchamp : The government, in terms of the budget, also announced funding to the department to continue to manage the billion dollars' worth of contracts in the field. So departmental funding has been provided to maintain the staff to manage those contracts.
Senator MARK BISHOP: The minister referred to the energy white paper, and he said in his remarks that the government, through the white paper, was intending to prioritise some areas in respect of renewable technologies. Is that a fair reflection of what you said, Minister?
Senator Ronaldson: I think the wording is that we are prioritising support for energy technologies to meet Australia's needs.
Senator MARK BISHOP: Okay. We are on the same path then. Is that decision to commit to the white paper a reflection of the coalition's Direct Action Plan, or is that something that has been determined elsewhere?
Senator Ronaldson: As I understand it, it will outline, as I said, a comprehensive, cohesive and sustainable energy policy focused on maintaining a secure supply of adequate, reliable and affordable energy and prioritising support for energy technologies to meet Australia's needs. I do not know whether I can add much more to it than that.
Senator MARK BISHOP: In that case, I will ask the officers. Is the decision for the government to commit to the energy white paper a stand-alone decision relating to energy needs going forward, or is it more related to the coalition's Direct Action Plan?
Ms Beauchamp : I think it is a much broader policy initiative of the government to look at energy more broadly: energy security, energy technology and a range of other matters impacting on the production, use and consumption of energy, including gas, electricity and a range of other—
Senator MARK BISHOP: That had been my assumption. It is energy across the board.
Ms Beauchamp : Indeed.
Senator MARK BISHOP: It is future availability, future use and all of the matters that are attached to that.
Senator Ronaldson: It is also investment in renewable, clean, energy efficient industries, the success of which will advance those areas for the benefit of all Australians.
Senator MARK BISHOP: Of course. That is fine. Is the energy white paper likely to address the 2020 target of a five per cent reduction on emissions?
Senator Ronaldson: The energy white paper will be released in the fullness of time, and I am not going to rule in or rule out what may or may not be in the energy white paper. But, as the secretary says, it is a wide-ranging paper looking at the nation's future needs in that regard. I think you will see the directions of the energy white paper when it is released.
Senator MARK BISHOP: When is the white paper due to be delivered to the government?
Ms Beauchamp : The white paper will be out towards the end of this year. But in the interim a green paper will be put out as a basis for consideration as well.
Senator MARK BISHOP: What is your thinking on the likely publication of the green paper—August or September?
Ms Beauchamp : It may be earlier.
Senator MARK BISHOP: I take it from that then that it is well advanced.
Ms Beauchamp : Indeed.
Senator MARK BISHOP: Is the process of the green paper done purely within the department and consulting whom you think is appropriate, or have you called for and received public submissions?
Ms Beauchamp : There has been quite a comprehensive process. I might hand over to my officers in terms of consultation with stakeholders and how they have engaged—
Senator MARK BISHOP: Very briefly, Mr Ryan. I am time-limited here.
Mr Ryan : We have received over 260 submissions. We have conducted consultations with various groups and also with state governments and that will continue when the green paper is released.
Senator MARK BISHOP: All right then. So we are on track then for August-September, or perhaps earlier, to publish the results. Are we still receiving submissions?
Mr Ryan : We expect to do a round of consultations when the green paper comes out and then on the basis of that the white paper will be produced.
Senator MARK BISHOP: Thank you.
Senator LUDLAM: Just along those lines, I want to ask about a couple of projects that ARENA funds in Western Australia. Minister, I take your point about the process of the green paper and the white paper that the government is engaged in, but it does seem a little pre-emptive to be bowling over the Clean Energy Finance Corporation and ARENA, putting a lot of these people out of business, before that green paper is in.
Senator Ronaldson: Sorry, pre-emptive to do what? I missed that.
Senator LUDLAM: You have abolished effectively anybody with any expertise in renewable energy before you have taken consultations on your green paper and then your white paper. Doesn't that seem somewhat pre-emptive?
Senator Ronaldson: I do not know whether I agree with that comment.
Senator LUDLAM: You are not proposing to abolish ARENA?
Senator Ronaldson: You would be aware, Senator, that the government is determined to abolish the carbon tax—
Senator LUDLAM: I did not ask you about that, Minister.
Senator Ronaldson: We, as you are aware, believe that is a significant inhibitor on this nation.
Senator LUDLAM: You are aware I did not ask you about that?
Senator Ronaldson: I would again ask you to take into account when you are making deliberations on this matter what is in the best interests of this nation when you are deciding—
Senator LUDLAM: Believe me, I do that.
Senator Ronaldson: how the carbon tax should be dealt with.
Senator LUDLAM: That is it, isn't it? That is amazing! All right. Let us go to a couple of projects that ARENA is in the process of funding. One that is very close to my heart and my home town is the Carnegie project in North Fremantle that is developing a wave energy farm off the back of Garden Island. Is the allocation you have made to them at risk by the closure of ARENA or are they actually through and clear?
Mr Frischknecht : All of the existing projects have a budget allocation for them, including that one.
Senator LUDLAM: Was that everything that they had sought from ARENA or is there a staged process, progress payments or anything like that? Have they got everything that they were hoping to get from ARENA?
Mr Frischknecht : They still are entitled to some progress payments, assuming they continue to perform. They have been doing a good job so far.
Senator LUDLAM: They have, and assuming that ARENA continues to exist. How much funding is at stake if you are no longer there when their next milestone comes up?
Senator Ronaldson: The abolition of ARENA does not impact on the continuation of funding for projects. There are nearly 200 projects across a range of renewable energy technologies that have received ARENA funds: Victorian Wave Partners, $66.5 million; a large-scale project—
Senator LUDLAM: I am just going to stick to WA.
Senator Ronaldson: at Broken Hill, $166 million; and your Carnegie wave energy offshore from Garden Island. I do not know whether you missed the comment before, but maybe someone can just go through the allocation of funds and the continuation of these projects.
Ms Beauchamp : I will just confirm the government's intention to commit and honour contracts that have been entered into to the value of about $1.2 billion. The government also provided departmental funds to ensure those contracts and milestone payments are managed in accordance with existing arrangements.
Senator LUDLAM: I am not taking it as read by any means that the parliament will consent to the abolition of ARENA but, if that does come to pass, you will honour everything that is through the gate thus far?
Ms Beauchamp : The government has already made that commitment in the budget, yes.
Senator LUDLAM: Can I take you to the grant of US$420,000 to Abengoa, the Spanish solar thermal company. I visited one of their facilities in Spain with Senator Milne a year or so ago and was very impressed. What can you tell us about that project and what the Australian taxpayer gets for that grant?
Mr Frischknecht : It is in a location called Perenjori—I hope I am pronouncing that right—
Senator LUDLAM: You are close!
Mr Frischknecht : which is out near Geraldton in Western Australia. It is a feasibility study for a solar thermal plant, as you rightly said. It is a 20-megawatt solar thermal plant that is being evaluated. A solar thermal plant of that scale has about 200,000 square metres of mirrors that would focus up onto a single point, at which point steam is essentially heated to a very high temperature. Interestingly, there is technology that may well be deployed, and it is being investigated in this feasibility study that has been developed at CSIRO in Newcastle, also with some support from ARENA. They are in the process of making the first supercritical steam out of a solar thermal plant. That is very important because supercritical steam can be used in a coal fired power station and existing technologies at very high efficiencies.
Senator LUDLAM: So it has a wide number of applications. Is the $420,000 the sum total of the commitment of ARENA and its successor body—whatever that is—to Abengoa, or, again, are there a set of progress payments for various milestones?
Mr Frischknecht : That is the sum total commitment. I am not familiar with how exactly that $420,000 is paid out—whether it is one, two or three milestones. Typically, there would be at least a couple. That obviously would not support the full project. This is just a feasibility study and the idea is to learn and to share those learnings with the industry in Australia to determine whether or not projects like this are commercially viable and, if not, how much further they have to go to be commercially viable.
Senator LUDLAM: As a Western Australian, I am very interested in synergies with the mining industries and your assistance to these industries in effectively eliminating their diesel fuel bill or their gas fuel bill. You have had a recent partnership with Rio to install solar in one of their bauxite mines. Would you sketch for us very briefly the importance of ARENA staying engaged in mining projects as various mining operators want to take the lead in going to zero emissions power generation.
Mr Frischknecht : Their motivation tends to be cost as opposed to emissions.
Senator LUDLAM: Fine, I do not mind.
Mr Frischknecht : But that is why we are pursuing it, because there is actually a lot of value in reducing costs. As of today, if you put solar power—PV solar panels—into a diesel powered mine site, that typically is cheaper today or is very close to cheaper. So we are trying to change behaviours of those miners because they do not typically recognise that it is cheaper and, even if they do, there are a whole bunch of existing behaviours that need to be changed. For example, they have standardised parts and standardised training schemes that only focus on training diesel mechanics; but, if you show them that they can actually save money through this program, they will do it on their own. One of the interesting things is that, out of the 72 applications we received for the off-grid program, with a number of them, once we have worked through the application with them, we have jointly discovered that they do not need a grant. It is economical and they are doing it on their own. In a number of other cases, the grant would be fully recoupable.
Senator LUDLAM: Thank you very much. I wish you well and the Greens will be doing everything that we can to ensure that you can continue to do the important work you do.
Senator XENOPHON: I want to go to the issue of contracts. Contracts that have been entered into will obviously be honoured—correct?
Mr Frischknecht : That is the intention of the government.
Senator XENOPHON: Has there been a freeze on any new contracts given the government's position in the budget to shut down ARENA?
Mr Frischknecht : There has not, simply because our act remains extant and we have a number of functions and obligations under that act.
Senator XENOPHON: I understand that, but does that mean that there has been a slowdown or a pause or a freeze in any new contracts being entered into, given the intention of the government to introduce legislation to shut down ARENA?
Mr Frischknecht : There has not because the board is an independent board and it has taken the position that we should neither accelerate nor slow down. So we continue business as usual.
Senator XENOPHON: So it is a steady approach; it is business as usual.
Mr Frischknecht : Correct.
Senator XENOPHON: You are not signing more contracts, but you are not signing fewer contracts in terms of the history of what you have done in the past.
Mr Frischknecht : In terms of the pace of operating, that is correct. It turns out, simply because we had an application deadline at the end of December, that there actually is somewhat of a bulge of applications that we are dealing with right now. Whether that results in more signatures than normal, I am not sure yet, but there certainly is an assessment bubble, if you like.
Senator XENOPHON: Right, but—
Mr Frischknecht : We are certainly not slowing down.
Senator XENOPHON: you are dealing with it as though the legislation will continue, but—
Mr Frischknecht : Correct.
Senator XENOPHON: if the legislation is changed then you will deal with accordingly then?
Mr Frischknecht : If the legislation is changed my role automatically ceases and the board's role presumably would cease, especially if the legislation is repealed.
Senator XENOPHON: Okay—in particular, repealed.
I just want to go to a South Australian issue—the Port Augusta solar thermal future plant, or the proposals that Repower Port Augusta has been heavily involved in. ARENA has funded a feasibility study for that. Is that correct?
Mr Frischknecht : That is correct.
Senator XENOPHON: When will that feasibility study be completed?
Mr Frischknecht : I believe it is 2016.
Senator XENOPHON: So even if the feasibility study says, 'This has got legs to be funded by ARENA,' if you are not around, that is it? It is axiomatic: that if there is no ARENA—if the legislation is repealed—even a favourable feasibility study will mean that it will not be up and running?
Mr Frischknecht : What I can tell you is that there is $30 million of funding allocated for new programs and projects within that time frame.
Senator XENOPHON: In terms of funding, the initiatives and programs currently open for funding applications include the Southern Cross Renewable Energy Fund. Is that correct?
Mr Frischknecht : Yes.
Senator XENOPHON: I want to understand how this would work in the context of the legislation. The Southern Cross Renewable Energy Fund is a joint venture with Softbank Southern Cross Ventures Partners Pty Ltd was appointed to manage the fund and Softbank China Venture Capital matched ARENA's $100 million investment, creating the $200 million Southern Cross Renewable Energy Fund. I am reading from your website, so presumably it is correct.
Mr Frischknecht : Yes, that is right.
Senator XENOPHON: I just want to understand how this works. There is $100 million of private capital in this fund. Correct?
Mr Frischknecht : It is a commitment.
Senator XENOPHON: It is a commitment. Okay.
Mr Frischknecht : So it is drawn down as the investments are made by the manager.
Senator XENOPHON: So in the event that the legislation to repeal ARENA is passed, what would happen to that fund, given that there is a commitment of $100 million from Softbank China Venture Capital? Does that mean the fund would continue with just $100 million in it, or would it continue with $200 million, or would it not continue at all because of the funding mix is changed?
Mr Frischknecht : No, it will continue in its present form unchanged, because the entire $100 million commitment from the Australian government is covered in the funding envelope that was allocated by the budget, and it counts as an existing project.
Senator XENOPHON: Right. So notwithstanding that the funds have not been expended—I think I have counted up about $4 million or $5 million worth of projects in respect of that—that $200 million will remain?
Mr Frischknecht : That is correct.
Senator XENOPHON: And would the criteria for that fund be different from the other funding criteria for other ARENA projects, given that it is a joint venture, it seems, with Softbank China Venture Capital?
Mr Frischknecht : No. The funding agreement for that particular project—the $100 million commitment from ARENA—is essentially a binding contract with the Commonwealth.
Senator XENOPHON: So that $100 million is going to stay in there with that other $100 million of private capital?
Mr Frischknecht : That is correct. There are a number of things that could occur, such as Softbank China, the counterparty, could stop honouring its part of the bargain or the government could change its mind some time down the road. But the current plan, and there is an agreement in place, is to fully honour the $100 million, and so the $200 million fund will remain.
Senator XENOPHON: Finally, I just want to understand the interaction between the Clean Energy Finance Corporation and ARENA in terms of any synergies between the two, because obviously there are different funding criteria.
Mr Frischknecht : Sure.
Senator XENOPHON: And in that context I am particularly concerned about geothermal—whether ARENA has been funding geothermal research, because the technology is not quite there, I think it is fair to say. There are some technical problems, but it has enormous potential. What role has ARENA played in respect of geothermal and what will these legislative changes do in respect of advancing or progressing geothermal; and, secondly, what is the interaction between the two—how have they interacted with each other to date and how will that change if ARENA is abolished and the Clean Energy Finance Corporation is not?
Mr Frischknecht : I will take geothermal first. We have a number of projects. There are study type projects which are essentially done at universities and research institutions to try to advance the technology. One very important study that we have currently underway is an international geothermal expert group that is looking at exactly the question of how we best progress that industry. That group is near to reporting.
Senator XENOPHON: How much money is being spent on that?
Mr Frischknecht : That is a study in the order of $200,000 to $300,000, or something like that.
Senator XENOPHON: Quite a modest investment.
Mr Frischknecht : Yes, that is right. It really is about trying to figure out the best next step to take. We expect that to be published over the next couple of months. That is what is happening on the study side. On the project side, we have a project with Geodynamics and also with Petrotherm. The total amount of funding that we have committed to the sector is $135 million with a total project value of $642 million.
Senator XENOPHON: That has been committed?
Mr Frischknecht : That is all in funding commitments today, yes.
Senator XENOPHON: And that cannot be rescinded?
Mr Frischknecht : Correct. Of course those projects need to continue to meet their milestones, which has been challenging in the sector particularly in finding the coinvestment for the larger projects.
Senator XENOPHON: And that coinvestment, presumably, goes to that earlier question about the Clean Energy Finance Corporation being a potential coinvestor for geothermal?
Mr Frischknecht : Yes. Let me address the relationship with the Clean Energy Finance Corporation. It is very much complementary to what we do. ARENA is focused on the innovation side of renewable energy, so in the long term, bringing the costs down, and we support the entire breadth of technologies across the development pathway— so desktop research through to near commercial. We do so effectively as an equity investor and we take a substantial amount of risk in the outcome. The Clean Energy Finance Corporation is very much focused on the more mature technologies. They are interested in typically taking a debt interest, so you could imagine the projects down the more commercially—
Senator XENOPHON: I might put something more on notice about this because time is short.
Mr Frischknecht : I would be happy to.
Senator XENOPHON: So if you can on notice. There is that transition when something that is a nascent emerging technology then becomes a mainstream proven technology—so how would you jump from an ARENA type thing to a CFC? If you could give me some more details on that—
Mr Frischknecht : There is overlap.
Senator Ronaldson: There is enormous investment by the Australian government and the Australian taxpayer in the out years in relation to the ARENA administered funding—about $1.15 billion.
Senator XENOPHON: Are you going to repeal the legislation?
Senator Ronaldson: The money will be expended. It is $1.15 billion over the forward estimates. There is investment under the Department of Environment as well, the Emissions Reduction Fund, of about $2.55 billion. The total, all-up, with a number of other programs—that others at the table might have a better understanding of than I do—have a total investment in the out years of $4.694 billion. This is a huge investment on behalf of this nation. There are other industries that could only dream of this sort of investment, so the notion that the current government is not putting money into renewables or not putting money into a number of these sorts of programs, is simply not right. I think that $4.694 billion is a fair indication of the government's commitment in the out years.
Senator RUSTON: Just following on from the comments from the senator, how many other agencies are currently undertaking work in the climate science renewable energy field including government and Commonwealth agencies?
Mr Hoffman : I might have to get a full answer for that on notice. Certainly the ARENA and the Clean Energy Finance Corporation have been mentioned. The department itself, through AusIndustry and other areas within the department, is also a significant investor and funder of this sort of activity. CSIRO has a significant program in energy. One of its flagship programs is Energy Transformed. You would point to Geoscience Australia and its work, including in characterisation of the geotechnical research and the deep-earth heating that we were just speaking about with Senator Xenophon. They are probably the main ones that come to mind. Obviously the universities, particularly ANU here in Canberra, receive significant government funding, and many of them—including UNSW, in photovoltaic research—have significant capabilities in this area as well.
Senator RUSTON: In addition to that obviously there is work going on in the private sector as well, one would imagine. Do we have any idea of larger private companies that are working in this space as well?
Mr Hoffman : Certainly there are a range of energy related companies working in this space, particularly in developments in the wind sector, which is a fully commercial technology, and significant companies, with names like Infigen and Pacific Hydro, for example, are significant investors in wind projects.
Senator RUSTON: Mr Frischknecht is probably the better person to answer this. What percentage of the 200 projects that are currently with ARENA that will be continuing would relate to wind technologies?
Mr Frischknecht : Very few. We are not directly funding wind projects that would build wind turbines, unless there is some sort of unusual circumstance—for example, off grid, where it has not typically been done. However, we are supporting a number of study-type projects—for example, community ownership of wind farms, so new business models around wind.
Senator RUSTON: So the wind farms tend to be something that is the purview of the Clean Energy Finance Corporation, more so than the type of agenda that you have got?
Mr Frischknecht : Correct. We are less about deploying large amounts of renewable energy today and more about driving down the cost long term and increasing energy security long term.
Senator RUSTON: Are we aware of many state government bodies or state owned enterprises that are also operating in this space? It is probably back to you, Mr Hoffman.
Mr Hoffman : Certainly Hydro Tasmania, a state owned entity in Tasmania, is a significant renewable energy operator. They are actually the prime proponent of a project funded by ARENA on King Island that is looking at the integration of a range of renewable energy and storage solutions in a mini-grid situation, being an island. To the extent that there are remaining state owned energy retailers who are subject to the RET obligation, they may well be investors or at least contracted parties to renewable energy projects in order to acquit their RET obligations.
Senator, if I could address the prior question as well. At the end of last year BREE, the Bureau of Resources and Energy Economics, in one of those regular studies, noticed that there were at that stage 18 renewable projects under construction or preparing to commence construction, with an estimated value of $4.4 billion, planned additional capacity of over 2,000 megawatts. They are at the stage of advanced planning; they may or may not all proceed. That is the case for projects in all sectors. But 14 of those 18 were wind projects.
Senator RUSTON: Just to bring it to a conclusion on the back of the minister's previous comments, we have obviously seen a lot of activity in this space, a major amount of investment in this space, both by various levels of government and industry. To quantify that, what has been the trajectory in terms of the increase in spending in this space in the last 10 years? It sounds like it has been quite significant, or is it just because we are talking more about it?
Mr Hoffman : There has certainly been a ramp up of government expenditure through ARENA and its predecessor programs. As Minister Ronaldson outlined, the actual expenditure of that cash is really going to take place over the coming four, five, six or seven years as contracts that were entered into hit milestones and as payments are made and projects delivered.
Senator RUSTON: It might be really interesting to look at what percentage of the science budget is expended on these clean energy projects. I do not imagine that you have that handy, but it would be an interesting statistic if you could get it.
Mr Hoffman : I think we can take that on notice.
Senator RUSTON: To go back to ARENA, of the $1 billion allocated to current projects by your organisation, what matching funding have you been able to achieve from industry to support these programs?
Mr Frischknecht : On average the total spend for our projects is $2.8 billion, and $1 billion of that is from us. For every dollar we put in, roughly $1.80 comes from the private sector.
Senator RUSTON: Does that equate to 200 projects or thereabouts?
Mr Frischknecht : Yes, 189 is the total number of projects we are currently funding or have completed. I think there are 175 that are active.
Senator RUSTON: So, 25 or thereabouts have been completed.
Mr Frischknecht : I think 18 have been completed.
Senator RUSTON: You have 18 completed and 175-odd on the go. How successful are these projects? Have we had an opportunity to quantify the outcomes to date? That leads on to: what outcomes are these 200 projects expected to deliver?
Mr Frischknecht : Senator, you have hit on my favourite topic.
Senator RUSTON: We do not have very long for it.
Mr Frischknecht : We have numerous exciting projects along the breadth of the innovation chain. Let me touch on just one—the AGL one. It is our largest; it is about a $450 million project and 155 megawatts in two solar farms—one at Nyngan and one at Broken Hill. In the long term what we expect these large-scale projects to do is bring down the cost of solar. There are a lot of early-mover disadvantages: for example, the costs of borrowing are higher; the costs of development are higher; the contingency margins for construction are higher. That is simply because nobody has done it before in Australia. All of those costs—which we estimate are at least 30 per cent of the total cost of the project or approximately our subsidy—should go away once we have done a handful of projects. So that is how at the large scale we measure it. We have different success measurements at the low end. There are, of course, some that do not succeed. We expect that either because they cannot find matching funding or because they fail technically, but that it part of the innovation process. One thing we have been able to do is claw back some of that money from the projects that are not heading in the right direction in total saving the government over $½ billion.
Senator RUSTON: It sounds as though you have done a very good job of doing your job.
Senator MILNE: I would like to go back to the super-critical steam project, which has hit the media today. According to the CSIRO energy director, it is a game changer for the industry. In fact he goes on to say, 'It's like breaking the sound barrier.' The technology is pretty exciting. I note that the $9.7 million research program is supported by ARENA. Can you tell me: given that you yourself have said that it is not yet ready for commercialisation—$9.7 million has gone in—if ARENA were to be abolished, and CEFC were to be abolished, what happens to that research given the cuts to CSIRO and that this is also being done in conjunction with CSIRO at the Newcastle energy centre?
Senator Ronaldson: There is a mixture of politics and question there but I will ask the officer at the table to answer that in a manner he feels comfortable doing.
Mr Frischknecht : One thing that often happens—and maybe I should take Carnegie Wave Energy as an example—is that there are multiple stages of funding that typically occur over a time frame of many years, a decade or two decades. In order to be prudent with the government's funding, each stage has only a relatively small commitment. As you rightly point out in the solar thermal case, the next stage of development would potentially be at risk here. The other things that could happen is that private industry or international research institutions could pick it up and carry it forward.
Mr Hoffman : Just to add to that, we have said that this is a CSIRO technology and CSIRO has a continuing important flagship in energy and the continuing ability to carry that forward. And, as Ivor just touched on, CSIRO also has a pretty good track record in the commercialisation and development of its technologies by bringing in further commercial and private sector funders. I do not think the assumption should be that a policy change the government makes on ARENA and CEFC necessarily puts this project at risk of not proceeding.
Senator Ronaldson: Senator, the minister is focussed on getting outcomes, making sure that milestones are met and projects delivered but, just as important, that the knowledge is shared. A lot of these projects are doing some groundbreaking work but there will be knowledge share at the end of it. You might not have been here but I detailed that there is some $4.6 billion in the forward estimates providing support in these areas. The sort of knowledge that is obtained from these projects will undoubtedly be shared with others, and that may well include potential commercial partners down the track, So this is a knowledge based program as well as a specific project based program, which I am sure you will appreciate.
Senator MILNE: I will just say that I asked CSIRO yesterday about their budget cuts and they are reprioritising fossil fuels over renewable energy. So I do not have the confidence at all that Mr Hoffman suggests I might have, but I will come back to your statement, Minister.
Senator Ronaldson: I will take that as a political comment rather than a question.
Senator MILNE: And that you have just told me what the minister has said about sharing this information. I can tell you what he said. He said, 'If after five 5 years it has produced zero, zack, nothing, diddly-squat, then you might say perhaps this was not the most efficient program'. He also said, 'It was a lot of money which was bandied around which in the end had not actually delivered anything.' I would have thought that this groundbreaking research, this description of 'it is like breaking the sound barrier' might have delivered something'. I would go to that as well.
Senator Ronaldson: But Senator, if we did not accept there was terrific work being done—and there are some great projects—then we would not have $1.13 billion in the forward estimates to continue this work. What the minister has said, and quite rightly, is that we are determined to ensure that these projects lead to identifiable outcomes and not only in the environment space but for the taxpayer and the general community. I am sure that you would expect there needs to be a layer of transparency and accountability across any taxpayer expenditure. You have just given an example of some work that has come out of one of these funded programs. What the minister has said is, 'That is exactly what we want to happen,' there will be shared knowledge. I have not read the particular newspaper article but if I am picking up correctly on what you said, the information that has come out of this groundbreaking work will be shared with others. If we did not accept the fundamental integrity of the program we would not be putting $1.13 billion dollars into it over the forward estimates. What the minister has said is that it quite rightly expects that there are going to be some outcomes and that project KPIs are met. This is an enormous amount of money—and I do not think you were here when I said it, but there would be other industries that would dream of this amount of funding—and we are going to make sure that it is properly spent. I think the taxpayer would expect us to do that. We are not stopping projects; we are putting the money in, we are hoping for the sort of outcomes that you have talked about today—and I do not know the details you do—but that is exactly the point. The information sharing from the use of the taxpayer dollar—
Senator WHISH-WILSON: I think we are getting the picture, Senator.
Senator Ronaldson: I was not actually speaking to you.
Senator WHISH-WILSON: You are speaking to all of us.
CHAIR: Senator Whish-Wilson, you will have your opportunity.
Senator Ronaldson: You have just been here for two minutes; we have been going for four hours. I will answer the senator's question. They are the identifiable outcomes that the government wants from this very significant government expenditure.
Senator MILNE: On that subject of transparency, that is precisely why ARENA was set up as an independent entity—so that it would provide transparency and expert decision making and not get gobbled up in a department, which does not have the same level of transparency.
Senator MILNE: I think that is quite offensive to the department, but they can speak for themselves. These are dedicated public servants who have been allocated a substantial amount of money under this portfolio, and I am very confident—as is the minister—that they will properly use those taxpayer resources in the best interests of this nation.
Senator MILNE: My preference is for an independent statutory authority, so I would ask what benefits to clean energy development can an independent board and institution bring that a scheme running out of a government department cannot?
Senator Ronaldson: That is seeking an opinion from the officers, and the officers are not going to provide opinion on those political questions.
Senator MILNE: Alright, I will go to the question of governance. The terms of the board expire before the repeal bill will be put to the Senate. Will the government be extending the terms of the existing board or will it leave the departmental secretary as the sole board member?
Ms Beauchamp : That will be a decision for the minister and government.
Senator MILNE: Clearly it will be. That is why I am asking the question. Minister, can you tell me whether the government will be extending the terms of the existing board or are we going to turn it all over to the departmental secretary as the sole board member?
Senator Ronaldson: That will be a decision for the minister at the appropriate time. It is 3 June, and the term expires mid-July, so presumably the minister will be making a decision around those time frames.
Senator MILNE: Can you tell me whether replacements for the board have been discussed by the government?
Senator MILNE: You do not seriously think I am going to discuss with you what may or may not have been discussed about the board. I have said to you that the minister will be making this decision. The terms do not expire until the middle of July. It is now 3 June, and the minister will be making those decisions within the appropriate time frame.
Senator MILNE: At what point were the government's election intentions to abolish ARENA made clear to the CEO or the board?
Senator Ronaldson: These were election commitments that have been followed up in the budget, and certainly there will be no discussions that might have taken place in relation to policy formulation or discussions in relation to the budget.
Senator MILNE: This is an independent statutory authority until it is abolished, so I would like to hear from the authority as to who ARENA's master in funding decisions is right now: the minister, who must approve the projects over $50 million, or the legislation that sets the annual funding?
Mr Frischknecht : We continue to operate under the legislation, and our board continues to meet regularly and make decisions on projects—including project funding—and the secretary is, of course, on that board as well. I take my direction from the board, and we operate the entity under the direction of the board. There has not been any interference or attempt at interference by the minister or the department in our operations. We continue, in my opinion, to act as the legislation intended.
Senator MILNE: Okay.
Senator Ronaldson: I might have misled you before, Senator, for which I do apologise. I think I mentioned an election commitment. I think these decisions were made in the budget framework and not prior to that, so if I misled you I apologise.
Senator MILNE: On 2 April ARENA contacted its stakeholders and put a notice on its website saying, in effect, that there is little point in preparing applications. Can you tell me what prompted that notice?
Mr Frischknecht : Yes. It was really that we within ARENA and the board members were getting a sense that the budget was going to be a difficult budget and that there may well be a risk to ARENA's funding. We had no specific knowledge about specific funding reductions or the potential abolition of ARENA, but we thought it prudent to put a letter out to stakeholders essentially putting them on notice that there was risk to ARENA's funding. Now they should have been aware of that anyway, but the board thought it prudent to put out that letter.
Senator MILNE: I would like to tease that out a little bit more. Given the minister is talking about just how much money is available to fund all these new projects, is there any money for anything new left to ARENA?
Mr Frischknecht : Yes, there is. There is $30 million, which was explicitly allocated under the budget process for new projects. In addition to that, we have some additional funding that was intended for decisions that were essentially in the pipeline. So the board will be able to continue to operate until the legislation is repealed or amended; it will be able to continue to make those investments and for those investments to be within the budget envelope and to be honoured.
Senator MILNE: Can we get that to that very specifically then: the 30 million is allocated for new projects and that is it, that is all?
Mr Frischknecht : That was allocated by the budget, but let me tell you what the exact amount available is as of today.
Senator MILNE: And in doing that, if you would not mind clarifying—
Senator Ronaldson: Let the officer answer your question and then you can ask the next one.
Senator MILNE: It was in relation to that. I just wanted to have clarified 'the existing pipeline' refers to what—if you could just clarify that please.
Mr Frischknecht : Yes, the existing pipeline—this is projects that we are in active discussion about, many of which have an actual application—is 2.4 billion of funding ask for a total project value of 7.7 billion. I should emphasise that not all of that 2.4 billion would have received funding because you would not fund everything. In fact, on average I think we have a 10 per cent success rate, so the funding ask gets reduced by a factor of 10 essentially and that amount gets funded.
Senator MILNE: What I would like to understand here: that $2.4 billion pipeline of asks was in relation to a particular application round—am I understanding that correctly?
Mr Frischknecht : No, that is across multiple programs.
Senator MILNE: What I am trying to understand here is 30 million has been put in for new projects, there has been a $2.4 billion ask: how much have you got to address that $2.4 billion ask, notwithstanding what you said—that is, you would never necessarily fund all those anyway?
Mr Frischknecht : We just did get the number, sorry, Senator. So it is 30 million this year over and above our existing board commitments, plus the 30 million in 2015-16 and 2016-17. So a total of approximately 60 million.
Senator MILNE: So you have 60 million and you have 2.4 billion in asks.
Mr Frischknecht : That is correct.
Senator MILNE: So there is no way, even if you—there is only a tiny percentage of those that you will be able to fund.
Senator Ronaldson: Senator, in the out years there is a total allocation of $1.15 billion for these projects.
Senator MILNE: Could I ask the CEO to explain that discrepancy with what you are saying?
Senator Ronaldson: It is not a discrepancy.
Senator MILNE: It is a discrepancy.
Mr Frischknecht : The minister is right in the sense that that amount of funding is available, but it is committed. It is committed to projects.
Senator MILNE: Thank you. So that covers the commitments, but in terms of the round that you were talking about now, there is a 2.4 billion ask. Even if there was only 10 per cent of those to be funded, you would need 240 million and you have 60 million, so you only have 25 per cent of even what is left. So effectively ARENA is over in terms of funding new projects under this government.
Mr Frischknecht : Is that a question?
Senator Ronaldson: No, I think that is a statement.
CHAIR: Thank you to the officers from ARENA.
CHAIR: We will now move to more general energy and resources questions.
Senator RUSTON: I want to ask about the new Exploration Development Incentive program announced in the budget, particularly in the context of coming from South Australia and the amount of mining exploration that has been going on there. I was wondering if you could give me a little bit more meat around what this $100 million initiative is all about and what benefits it is going to deliver for the junior miners I suppose more than anything in my home state.
Mr Hoffman : It is a program that, being a tax measure, is primarily the responsibility of Treasury, but I am very happy to make some initial comments and colleagues might add to that. As you note, it is aimed at junior explorers, who tend to be the ones who make the most initial greenfields discoveries. They are often loss-making and so this program is available to companies that are loss-making in the sense that they have exploration expenditure without the income at this stage. Effectively there is $100 million available over the four-year forward estimates period that enables eligible exploration expenditure to effectively be passed through as a tax credit to their investors. It effectively lowers the cost of capital for junior explorers. There are similar sorts of programs that have been in operation in other countries, particularly Canada, which in some senses is a major competitor to Australia for this sort of investment. The government is treating this as the first stage. It will look to an evaluation of its impact over the period and I believe it has made statements that it will consider then, at the end of that 100 million period, further investment of this type.
Senator RUSTON: Did this come on the back of industry indicating to or expressing a concern about the lack of capacity that these guys had to try to attract capital investment?
Mr Hoffman : I think there has been a long period of input from a range of industry, both industry associations and individual companies in this field, around the competitiveness of Australia for investment in greenfields exploration.
Senator RUSTON: What sort of impact is projected from this into some of our regional economies? Obviously it is an entirely regional program, so have we made any estimate about the kinds of benefits it will generate within those economies?
Mr Hoffman : Unless my colleagues have another answer, I am not aware that there has been specific modelling of the regional economic impact. I am happy to take that on notice though and check for you. But it is going to be relatively small in terms of the $100 million of eligible tax credits being passed through. The real impact is if it leads to, over the medium term, the development of a new mine or a new mining province. The impact is likely to be down the track rather than immediately.
Senator RUSTON: So it would be too early to say whether there has been any generation of increased confidence in that sector. It is the one that seems to always be hit hardest. When commodity prices or the Australian dollar do something it is that part of the market that is affected. We look forward to speaking to you next time to see the results of it.
Senator GALLACHER: Geoscience Australia is currently reviewing the maritime ban, is that correct?
Mr Hoffman : Yes, Senator. There is ongoing activity and a program of that type.
Senator GALLACHER: How long is that process expected to take until completion?
Mr Hoffman : Geoscience as an agency was on yesterday, so I will attempt to answer your question to be helpful to the committee—
Senator GALLACHER: If you could just supply on notice the process and when it is going to be formally completed. I think that is a very important part of this line of questioning. Is somebody aware of the Woodside Browse gas field, and the discovery of the rocky outcrops that are part of the North Scott Reef, which is technically islands?
Mr Hoffman : Yes, Senator.
Senator GALLACHER: When did the Federal government become aware of the rocky outcrops that have potentially prompted a redrawing of Western Australia's maritime boundaries?
Mr Hoffman : There has been a process of work over a couple of years on this matter by Geoscience Australia as they do the work that you first referred to and then they need to test and be certain of how high these things are so that effectively they remain dry at high tide. That has involved a series of physical inspections by Customs vessels, when they can be scheduled to be there at the right time and take precise measurements et cetera. It has been a detailed and careful process of evaluation. GA came then to a formal conclusion on this matter earlier this year, and through March-April they were consulting with ourselves the department and with the Attorney-General's Department in terms of the application of the Sea and Submerged Lands Act and how it actually worked, to come to the formal consideration or decision that these did represent land and therefore had an immediate flow-on impact into the definition of state waters. That advice was then formally provided to the minister in early May, and then the consequential notifications went to the Western Australian government and to the holders of the petroleum leases in the region.
Senator GALLACHER: When you have a boundary, it does not just go out laterally and you draw a line; does it follow the contour of the land?
Mr Hoffman : That is correct. It is a three-mile limit, basically.
Senator GALLACHER: Why did you mention the height of these outcrops?
Mr Hoffman : The height was simply to establish that they were land rather than just a reef. If a wave breaks over it then it is not land, it is just a reef. You still need to know it is there for shipping purposes, of course, but if it is above the high-water mark then it qualifies as land, it becomes an island, and you draw a three-mile circle, effectively, around it as state waters.
Senator GALLACHER: How far are they off the coast?
Mr B Wilson : I think they are about 80 to 100 kilometres offshore.
Senator GALLACHER: If they were not discovered, where would the boundary be, for Western Australian purposes?
Mr B Wilson : There are two leases that are WA territory within the Torosa gas field. If these rocks had not existed, which was our previous understanding, then the reef was Commonwealth territory. This now extends the WA territory that is there out around that reef, as Mr Hoffman said, three nautical miles.
Senator Ronaldson: It is appropriate for these officers to answer what they can. Geoscience were here yesterday and I think they might have been—
Senator GALLACHER: Excuse me, Minister, I will work the questions out. You can work out whether you want to answer them or not.
Senator Ronaldson: You have picked up some very bad habits from Senator Carr, Senator Gallacher.
Senator GALLACHER: I have been well trained by you!
Senator Ronaldson: They were here yesterday. The officers will answer what they can, but if you have got more detailed, technical questions then, as I am sure you will understand, we will take them on notice.
Senator GALLACHER: Thank you very much, Minister. I do not have any more detailed, technical questions. I just wanted to get my understanding of the issue up to speed.
Senator Ronaldson: I was just trying to be helpful, and I always am.
Senator GALLACHER: The officials were being more help. The Western Australian Minister for Mines and Petroleum, Mr Marmion, has been quoted as saying:
We are now working closely with the federal government to determine WA's share of the Browse field and its exact implications.
Can you tell us what stage these negotiations are up to?
Mr Hoffman : Demus, do you want to talk about those discussions?
Mr King : We are continually working with NOPTA, the National Offshore Petroleum Titles Administrator, and the Department of Mines and Petroleum in WA to work through what this actually means. The communication is multiple times per week as we work through what exactly needs to happen to determine both the geological location of the resources and the state-Commonwealth boundary changes there. At this early stage we are also working with the joint venture partners to gain their understanding on those two factors as well and come to a common landing, so it is a work under progress.
Senator GALLACHER: Will these negotiations pre-empt the official redrawing of the boundaries?
Mr King : The official redrawing of the boundaries occurs when the Attorney-General's Department confirms the location and confirms the information from Geoscience Australia. That has occurred; however, it does not impact on the retention leases until those retention leases are renewed or changed.
Senator GALLACHER: Will this precipitate a reconsideration of unitisation of the Browse gas fields?
Mr King : It would. I would describe it as, rather than unitisation, an apportionment of the gas resources. That is part of the work that we are conducting with the Department of Mines and Petroleum in WA and with NOPTA to understand both the geology and the location of the boundaries.
Senator Ronaldson: I think that will ultimately be a decision of both governments. I would assume that would be the responsibility of both governments. I do not think the others can pre-empt what the outcome of those discussions are likely to be, unless I am advised otherwise.
Senator STERLE: Last week the Premier of Western Australia said he could not possibly say but he believes it is up to 65 per cent. I welcome your input to say that it should be worked out. Premier Colin Barnett is up and running. He is excited.
Senator Ronaldson: I could give you input on matters that I am aware of. Not that I disbelieve you; I am not aware of the Premier's discussion, but there is more than one party involved in this and I am sure that when both parties come to an understanding we will understand what the break-up is.
Senator GALLACHER: Until this process is finished, does the Torosa field remain within Commonwealth jurisdiction?
Mr Hoffman : Torosa field was always subject to both some state and some Commonwealth leases. It was always split. The question is just that, with this redrawing because of the new islands, more of the surface area leases will be state ones as opposed to Commonwealth ones. There will still be some Commonwealth leases across the Torosa field and more state ones now than previously.
Mr B Wilson : Just to be clear, Senator, those leases will not change until they expire at the end of the year. Those lease boundaries that are there, both the state and Commonwealth ones, currently exist.
Senator GALLACHER: The determination of retention leases under the Offshore Petroleum Greenhouse Gas Storage Act—that application will change because there has now been a discovery, at low tide, of a rock or two?
Mr Hoffman : The retention leases, as my colleague said, remain in place until their term finishes—as is. Then there will be the process of renewing, varying or cancelling those retention leases.
Senator GALLACHER: What are the implications for the petroleum resource rent tax?
Mr Hoffman : The simple implication is that, if there turns out to be less gas in Commonwealth leases that is, in the end, developed—and we are still a long way from actually having a development there—then PRRT will be calculated on the Commonwealth amounts and state royalties will calculated be on the state amounts.
Senator GALLACHER: The issue is that the WA government's share could go from an estimated five per cent to 65 per cent.
Mr Hoffman : I am not going to comment on the percentages because, as Minister Ronaldson correctly said, that is not settled. It is being debated. However, it is fair to say that this will lead to an increase in the state's share.
Senator STERLE: Yippee!
Senator GALLACHER: Before these new boundaries are formally determined, if retention leases are renewed or revised by the Commonwealth, that will have an application for five years. Is that right?
Mr King : A retention lease lasts for five years. The current retention leases expire on 23 December this year.
Senator GALLACHER: With all of these discussions that are going on in the background—Geoscience is doing its work and Attorney-General's are considering it—if there is a renewed lease between now and 31 December, that will have an application for five years?
Mr King : That is correct.
Mr B Wilson : A retention lease will be granted for five years. It does not prohibit moving to a production licence or anything at an earlier time.
Senator GALLACHER: That is very interesting. Thank you very much.
Senator WHISH-WILSON: Has the minister, secretary or any level of the bureaucracy had meetings with either Origin, AGL or Energy Australia in relation to the RET and the RET review—prior to or after the Warburton review commenced?
Ms Beauchamp : I will let other officers add to this, but we meet with our stakeholders on a regular basis and talk about a range of matters, including the RET.
Senator WHISH-WILSON: Can you tell us when you had those discussions?
Ms Beauchamp : I would have to take on notice when I have had discussions with those organisations. As I said, we do talk about a range of matters.
Senator Ronaldson: You do understand that this is an independent review and that we cannot pre-empt the outcome of those independent review discussions. I want to put a framework around what can and cannot be answered by the officers at the table. I am sure they will take that on board.
Senator WHISH-WILSON: With the scrapping of the Million Solar Roofs Program from the budget—without any reference or announcement—how actively were incumbent generators engaging with the department or the minister in relation to this policy?
Mr Hoffman : I struggle to answer that question in the sense that it was, I believe, discussed in the context of the Emissions Reduction Fund and the Direct Action Plan, which are the responsibility of Minister Hunt and the Department of the Environment.
Senator WHISH-WILSON: We have asked similar questions of Minister Hunt. He has taken those on notice, but we were told to also put the questions to Minister Macfarlane in terms of the industry fund. I suppose what we are looking for is whether you can confirm or deny that coal and gas generators, or their industry lobby groups, have been lobbying the government to drop this specific policy.
Senator Ronaldson: There is an independent review underway at the moment, and it is certainly not appropriate to discuss what matters may or may not have been raised with the minister. I cannot rule in and rule out what discussions may or may not have been had. In a general sense, we will take that question on notice and see whether we can provide you with any further answers.
Mr Hoffman : I will add to that. As the secretary said, we meet regularly with companies and industry associations across the whole range of views—clean energy companies, energy efficiency associations, et cetera—and they all put a perspective to us. One of the tasks of the Public Service advising the government is to take all those perspectives into account.
Senator WHISH-WILSON: Obviously it is fairly obvious that solar panels reduce electricity demand, particularly in the middle of the day and peak periods, which affects the profitability of coal and gas generators. So we would certainly be interested in any documentation on—
Senator Ronaldson: Taking it as a statement, I do not know whether that is correct. You may well be right; I do not know. It is certainly not within my knowledge, and this is more a matter for the environment department, I would have thought, than for us.
Mr Hoffman : The equation of the generation profile of PV panels in domestic situations with the peak load profile is a complex issue. It various significantly by region. With respect, I would say it is not as simple as saying, 'PV panels reduce the peak demand load.' It is something that varies significantly depending on location.
Senator WHISH-WILSON: I have a question in relation to one of Senator Ruston's questions around the $100 million mining exploration—the tax credit system that you talked about. How often will you evaluate the success of that? Having had a fair bit to do with mining exploration and the risks around that, some small companies especially are very good at mining shareholders over a long period of time. I would hate to see the same thing happen with taxpayers. How often are you—
Senator Ronaldson: Is this the EDI you are talking about?
Senator Ronaldson: My understanding is that it will be reviewed in 2016 and, subject to the outcome, may be extended for a further period, but they will review in 2016.
Senator WHISH-WILSON: Can you tell me what the KPIs would be on that review? Would it be the number of new exploration permits or drilling activity or—
Senator Ronaldson: I do not have that level of knowledge. I am happy to take it on—
Senator WHISH-WILSON: It is $100 million so I was just interested in how you are going to judge the success of it.
Senator Ronaldson: I understand. I do not have that knowledge personally. I do not know whether the department do. If they have not, we will take it on notice and see if we can ask.
Mr Hoffman : I can give you a general answer but it might be best to take it on notice and we will give you the formal KPIs being established for the program.
Senator WHISH-WILSON: I appreciate that the mining industry and, presumably, the Minerals Council have lobbied to get the incentive in place. I would be very interested in how you judge the success of that, and I will follow that.
Senator Ronaldson: We are doing this to provide a quite significant boost to Australia's junior explorers in their quest to uncover new mineral resources. We think this is a very important incentive to enable them to do that. It will be reviewed in 2016 to see what its level of effectiveness has been.
Senator WHISH-WILSON: I would be very interested, because they are very good at doing what they do and have done for centuries—that is, take risk capital and go away and find ore bodies or find nothing at all.
CHAIR: My questions are about the $23 million that the coalition has allocated towards the development of a long-term national solution for radioactive waste. We are not a nuclear energy producing country, but we do produce nuclear waste. For the benefit of the committee, I would appreciate it if it could be explained what activities actually generate nuclear waste in Australia. Why do we need to have a radioactive storage facility?
Mr Sheldrick : Indeed, we do not have nuclear energy power in Australia, but we do undertake a number of activities, such as research and science activity based around the nuclear reactor in Sydney. These go toward some vital medical, industrial and agricultural uses for nuclear scientific applications. On the medical application, the statistics that are generally used in Australia, are that about one in three people will be, over their lifetime, likely to take advantage of medical applications that rely on nuclear material. Much of that material comes out of the research reactor and applications in Australia.
CHAIR: So one in three people will receive some treatment relying on radioactive or nuclear material.
Mr Sheldrick : That is my understanding, yes.
CHAIR: What percentage of medical procedures would involve the use of those materials?
Mr Sheldrick : Generally in Australia, as an advanced society, we estimate that about one-third of the procedures used in our hospitals—paediatric work, cardiological work and so on—rely on radiation or some form of nuclear medicine.
CHAIR: So one-third again. You mentioned Australia as a developed country; is that particularly high for developed countries or is it fairly standard across the board?
Mr Sheldrick : I would estimate that it is fairly consistent with advanced countries like Australia where there is an expectation and an ability to be able to deliver fairly advanced medicine. I would say that it is average.
Senator DI NATALE: Can I ask for some evidence on that one-third figure.
Mr Sheldrick : I would have to take that on notice.
CHAIR: You mentioned also medical research. What is the role of radioactivity in medical research?
Mr Sheldrick : Forgive me, I am not a medical expert, it is generally used for imaging-type activities. It is also used for diagnosis activities where the nuclear medicine is injected into people and then monitored through remote sensing. It is used in cancer detection and general imaging work.
CHAIR: So it is pretty important. I think Australia is pretty well known as being amongst the world leaders in terms of nuclear medical research. The outcomes that are being achieved in Australia and worldwide through this type of research are pretty exciting?
Mr Sheldrick : I would say in an economic sense it would be very exciting and quite a valuable set of techniques and practices that Australian medicine is developing. If I can put a personal perspective on it, for the individuals that are using this I think it goes beyond exciting if it can help with their medical diagnosis.
Senator Ronaldson: It could be life saving.
CHAIR: So saving lives?
Mr Sheldrick : Yes.
CHAIR: I am satisfied that the activities that are being undertaken that are generating this radioactive waste are worthwhile activities. What sort of waste is being generated out of that? Are we talking highly radioactive material? What sorts of materials are being stored or need to be stored as a result?
Mr Sheldrick : Australia does not generate high-level radioactive waste from any of its activities. I could classify it into two different streams of waste. There is the waste that comes out of the hospitals. I have been to facilities and seen some of this waste, and a lot of the time it is literally the gloves and gowns that are worn by the medical practitioners. So there is the waste that comes out of the use of the material but there is also waste that is generated in Australia by the development of some of the medicines and so on, and that is slightly different.
CHAIR: So that is a second category.
Mr Sheldrick : Yes.
CHAIR: Is that like spent fuel, in a sense, or is it something lower than that?
Mr Sheldrick : I like to make the distinction between spent fuel and waste. Spent fuel is not necessarily waste. As you may know, Australia has spent fuel which we send overseas for reprocessing. What we get back is waste. The spent fuel often has material in it that is still useful.
CHAIR: In terms of the need to store this material, the bulk of it by size, I would imagine, would be your used gloves, clothing and things like that, rather than the other category that you mentioned?
Mr Sheldrick : Volume-wise, there are various forms of waste that are currently held in Australia. Some of it is from the decommissioning of previous reactors. We have about 4,000 cubic metres of low-level waste. I would have to take on notice the percentage of that that is hospital produced waste.
CHAIR: I understand there are lots of locations around Australia where it is stored and we are reaching some capacity issues. How is it currently stored?
Mr Sheldrick : We estimate that it is stored in quite a large number of facilities around Australia. It is worth noting that in some cases the storage is also a facility for some of the materials or the sources that are still being used, as opposed to waste. Often those are in hospitals, research centres or universities. Some commercial operators have sources that they use to detect pipes and so on, so they are often stored in their offices. All of those are regulated. Of course, there is the large storage at Lucas Heights for a lot of the Commonwealth waste.
CHAIR: A lot of those facilities would not be built for purpose and are not necessarily ideal options for storing radioactive waste. Is that a fair comment?
Mr Sheldrick : I think that is a fair comment.
CHAIR: Is there sufficient capacity in those? As I understand it, the reason why we are looking for a national solution is that we have identified that the current ad hoc method of storage is not ideal. It presents capacity constraints. In the event that there is no coordinated and considered decision made as to how we store radioactive waste into the future, what are the consequences for the activities in Australia that are generating that waste?
Mr Sheldrick : It would depend on the ability for additional interim storage to be developed and made available in the time period.
CHAIR: Interim? What could that conceivably be?
Mr Sheldrick : It is sort of hypothetical, but conceivably you could continue to do what we are doing and maybe add additional similar interim storage. But, as you have noted and as the case is made in the initial business case that has been conducted, it is less than ideal. There have been comments made by the regulator—and I do not want to talk for the regulator—about the need for long-term storage options to be developed so that the regulators are happy with how we are handling material at the moment.
Ms Beauchamp : I think that was the reason why we have the new policy proposal included in the budget. As you say, I think there are interim waste facilities—over 100 different facilities—and the one at Lucas Heights is an interim facility. This practice requires a long-term solution to the ad hoc nature of low-level and medium-level waste in these facilities.
CHAIR: But the reality is we have got it, it is being stored and we are, in the interests of Australians and their health, probably going to be generating more, so the government has made a decision to actually address this in a considered and proper way.
Senator Ronaldson: The government's view was that it had no option but to develop a national waste management strategy, and that is why we take this responsibility of storing waste very seriously. By doing this, it will actually allow the industry to continue for the benefit of all Australians.
CHAIR: So what is the proposal that the government is now looking at doing?
Mr Sheldrick : The government has provided funding, as you stated earlier, for a program of work; and, at the risk of going into the process, we need to work through a two-stage capital works approval process, which is a requirement of the Department of Finance for this sort of work. Over the next two to three years, that process will entail the development of, essentially, a business case for the next stage of action. This current stage of action is not for the construction of a facility. It is a process to work through design criteria, environmental assessment processes, the regulatory processes under the ARPANS Act. Ultimately, it is about identifying some options—
CHAIR: Doing the proper groundwork and proper planning to understand it.
Senator Ronaldson: Developing a national strategy to—
CHAIR: Yes, to make sure that what you are doing is fit for purpose but also is safe and all sorts of things. Okay. And that is what the $23 million will be spent on? Or is there more to it?
Mr Sheldrick : All of these things, ultimately, come to a business case that can be put for future development. But there are a large number of components in that work. We will need to do some detailed site investigations of whatever sites are available. We would need to look at functional design briefs and, maybe, some concept design work and waste acceptance criteria. The facility will need to describe the type of waste that it handles—the packaging, and so on of that waste. All of these things need to be worked out over the next few years with the various stakeholders. There will be the siting options. As I said, there are a number of streams through this, so there will need to be environmental impact statements drafted and developed and taken through that EPBC process.
CHAIR: So it is all going to be dealt with properly, basically.
Mr Sheldrick : Yes.
CHAIR: It is a problem that is not going to go away. It has existed for decades, as I understand it. What you are saying is that the government has made a decision to actually address something that needs to be addressed that no previous government had actually tackled to this point—not properly.
Mr Sheldrick : No.
Senator Ronaldson: Sixty years of waste, I think.
CHAIR: Sixty years of waste, yes. Senator Di Natale.
Senator DI NATALE: Hopefully, this will be quick. It is on the issue of wind farms and health. I note that on the department's website it mentions that the department is implementing a 'commitment to resolve the community concerns surrounding wind farms'. It talks about two things:
… real time monitoring of wind farm noise and conducting a truly independent analysis of any potential health effects caused by wind farms.
Can you, firstly, tell me about the independent analysis and what that entails?
Mr Hoffman : In about February this year, the NHMRC released its most recent interim study on this, in terms of the potential health effects of subsonic noise and related factors with wind farms. We are currently in discussion with the Department of Health and the NHMRC as to the next stage in their work and how that work can give effect to the government's election commitment.
Senator DI NATALE: Just to be clear here, the NHMRC conducted what was essentially a literature review. My understanding of the interim report is that there is no evidence demonstrative of adverse effects. Given that, does the government intend to pursue further tests or studies?
Mr Hoffman : As I said, we are currently in discussion with the Department of Health and the NHMRC as to how to best give effect to the government's election commitment.
Senator DI NATALE: Has there been an allocation of funds for this project?
Mr Hoffman : There was not a specific allocation with the budget decision; in the recent budget to this department for that work, no.
Senator DI NATALE: My only reading of this is that, given that the NHMRC's work was effectively a literature review, any independent analysis is going to require having a study or trial set up by government. Is that the intention at this point?
Mr Hoffman : I am not able to confirm that intention one way or the other. As I said, it is still a matter with the NHMRC, the Department of Health and ourselves working through it.
Senator Ronaldson: The election commitment, from recollection, was that we would work through this issue in consultation with stakeholders. That is if my memory serves me correctly.
Senator DI NATALE: The commitment was a little more specific than that. In fact, the Prime Minister said very recently that he intends to make funds available for an independent study. In which case, I am just exploring what that would like. I just wanted a sense of whether the NHMRC in the final report indicates that there are no significant health impacts that can be demonstrated to have been caused by wind farms and whether the government intends to continue to conduct an independent study and allocate funds for that.
Senator Ronaldson: We will take that on notice.
Senator DI NATALE: Can I ask whether the department has had any correspondence about the issue of wind farms from any specific lobby groups or any other stakeholders?
Mr Hoffman : We would receive, as you would imagine, a large amount of correspondence across many issues. There may well have been correspondence on these matters. I am happy to take that on notice and give a specific answer.
Senator DI NATALE: Given that you do receive correspondence on a number of matters and given the dearth of evidence to suggest that there is in fact any physiological link between wind farms and health, why would you make specific reference to the issue of wind farms and health? Why would you do that and effectively ignore some of the other issues on which you may have received correspondence?
Mr Hoffman : I do not accept that we do ignore other issues.
Senator DI NATALE: The NHMRC already said that at this stage the interim report demonstrates no physiological link. I also know what the science says. The science is very clear on this.
Mr Hoffman : I do not accept that we do ignore correspondence on other topics. Your question is really a policy question and about the intent of the government. Minister Ronaldson could answer it.
Senator DI NATALE: You make specific reference to wind farms and health on the website. I am just interested as to why that is.
Mr Hoffman : It reflects the government's policy intention.
Senator DI NATALE: You will take that on notice?
Senator Ronaldson: It is on notice, yes.
Senator DI NATALE: We will get some information on it. Thank you.
Senator LUDLAM: I would like to come back to some of the issues that you were canvassing relating to radioactive waste and the practicalities of many, many years of flawed processes and hesitation. I want to just try and get a sense of what the current government's policy is. I am also aware that this matter is before the federal court in Melbourne at the moment, so I am not going to try and trespass over matters that are being canvassed there. I will stick to policy.
First of all, what is the current status of the regional consultative committee? I am going to do something that is probably unprecedented, and acknowledge and congratulate the government on setting that up because it is the first time in the eight years that I have been working on this issue that we might actually have a range of options open to us, rather than a foregone conclusion. So I do want put on the record that we are getting a lot more out of this minister than we ever did out of Minister Martin Ferguson. Let's get down to it. What is the current status of that committee; what is its work program?
Mr Sheldrick : Thank you, Senator. The committee has not been established yet.
Senator LUDLAM: Okay. I will take off the rose-coloured glasses then!
Mr Sheldrick : The reasoning behind that is that, as you know, the site selection process is still ongoing.
Senator LUDLAM: It is heavily contested.
Mr Sheldrick : That is right—which region. So it is a practical thing. There is an absolute commitment to establish the regional committee. But, with the current state of the site selection process, we have not yet established it. But you would be aware that, even without the committee, we have spent the last 18 months or so providing a lot of opportunities for consultation for the communities in the area around Muckaty Station, to the extent that, when the NLC approached us just 18 months or so ago for support for members of the NLC and some of the traditional owners in that region to go to ANSTO, we supported a visit down there. We have also supported, on request again from that area, people visiting an actual facility overseas, and that was—
Senator LUDLAM: In Spain?
Mr Sheldrick : in Spain. More recently, this year, we have also worked with the Central Land Council to support a visit by Central Land Council members to ANSTO again. All of those are just by way of supporting a fairly large regional group of people, to provide them with firsthand, factual information and provide an opportunity for all of those people to ask questions and get factual answers back.
Senator LUDLAM: What have you done to support the significant number of people, four out of the five family groups that are signatories to the Muckaty Land Trust, who very strongly oppose the Muckaty nomination and have done for eight long years? What have you done to support them?
Mr Sheldrick : The selection of the people to attend and participate in those information exchanges was up to the Northern Land Council.
Senator LUDLAM: Who are the proponents of the project.
Mr Sheldrick : They are a representative body. A land council, as you know, is a representative body for all of the people in that region.
Senator LUDLAM: It was their nomination, Mr Sheldrick. You have been at this probably for longer than me. You know very well where that nomination came from.
Mr Sheldrick : I know where the nomination came from but I also understand that the Northern Land Council represent the people in their constituency. They approached us for—
Senator Ronaldson: Sorry to interrupt. Chair, I am just concerned that some of this might be sub judice. Given the matter is presently before the courts and is due for consideration this week, I am a little uncomfortable about this level of—
Senator LUDLAM: Minister, I am happy to steer clear of anything that might trespass on those matters.
CHAIR: Yes. Minister, I am happy to take your guidance on that. If you object to anything on that basis, then—
Senator Ronaldson: I do not want to invoke the public policy issues. I think—in fact, I am almost sure, on reflection, that this would be sub judice. I do not want this committee to be—
CHAIR: Senator Ludlam, if you would bear that in mind when you are asking questions.
Senator LUDLAM: Understood. Let's just stick to public policy and to what the government is actually doing or not doing and we will steer clear of the Federal Court matters. Can you just confirm for us, then, that there is no present site characterisation studies that are planned on any time line—you are actually waiting for the outcome of that case?
Mr Sheldrick : That is correct.
Senator LUDLAM: Okay. Have you received any alternative nominations for sites, either on land trust land or elsewhere?
Mr Sheldrick : No, we have not.
Senator LUDLAM: Okay. That is nice and black and white. I like those ones. My understanding is that the court matters probably will not be resolved until well into next year. Is that the federal government's understanding?
Mr Sheldrick : That is a matter for the court.
Senator LUDLAM: Is it your expectation, though, if you are going to wait until the courts have cleared up the matter of whether the NLC broke the law or not among other matters, that you will not be setting up the regional consultative committee—not until those court matters are resolved?
Mr Sheldrick : That is correct.
Senator LUDLAM: That is correct? My understanding—and you are welcome to share your views, if you wish—is that that is going to be months, possibly at least a year.
Senator Ronaldson: We simply do not know when these issues are going to be resolved.
Senator LUDLAM: By what vehicle or unit or department is the Commonwealth proceeding? There is $22.6 million over the forward estimates from 2014-15 for the second stage business case for National Radioactive Waste Management. What form is that work taking at the moment, and how far can you proceed with that when you do not know where this material is going to wind up?
Mr Sheldrick : There is a significant amount of planning for a complex undertaking like this. There are a significant number of what I will call moving parts. The department is currently involved in a quite detailed project-governance planning arrangement. We are developing the accountability and reporting requirements that are going to be necessary to undertake this project.
Senator Ronaldson: This will form part of advice to the minister in a policy sense, and clearly as it will form part of that advice I do not think the officer can discuss these matters in greater detail. The decision will be made by the minister as to what form this will take and the steps that will need to be taken into the future. Given they are our policy and future policy matters and that this will all form advice to the minister for his consideration, I do not think the officer can answer. I am not being difficult and I acknowledge your generous comment at the start—
Senator LUDLAM: Well I take it back! I started with an acknowledgement that we might have a new era—
Senator Ronaldson: Well I take back what the officer has already given you on the record!
Senator LUDLAM: I am not sure you can do that. We have a consultative committee that looked as though it was going to be given quite an open brief. I am happy to acknowledge that it did not appear to be a foregone conclusion that a remote Aboriginal community was going to end up having stuff dumped on it against its will. That is the first time in 20 years that we might have had that open brief. If that is not the case, Senator Ronaldson, and if you are pulling the shutters down and that is not where we stand—
Senator Ronaldson: I am not pulling the shutters down, but unless I am advised by the secretary or Mr Hoffman that we can continue, my understanding is that a lot of this will form advice to the minister in relation to further decision making.
Senator LUDLAM: You could close down any estimates committee on that basis.
Mr Hoffman : The minister is correct, but in an attempt to be helpful I can add that the budget measure that provides for the second stage business case contains a number of work elements. The initial ones of those are not site specific, so there is a lot of work that can be done in terms of the functional specification, in terms of the development of a safety case that is not site specific. That plus the overall governance of the project that Mr Sheldrick referred to is what we are getting on with now. The issue of site selection, as you have mentioned and as you well know, Senator, is a difficult matter. Pending resolution of that the work that is site specific will then commence in the time frames that have been allowed for.
Senator LUDLAM: Can I take it from that—this maybe a straightforward policy question straight to you, Minister—that the government's present policy is for a national centralised radioactive waste dump at Muckaty. What will you do if the court throws that out and finds the nomination is invalid?
Senator Ronaldson: I certainly cannot pre-empt what the decision might be, so to that extent the second part of your question is theoretical. As to the first part, I would not want to mislead you in relation to the specific policy—this is not my portfolio area, as you will appreciate. So, unless the officers at the table are able to provide some further assistance, I think it is probably better that I take that on notice. I am sure the minister's office is listening. I am happy to get that to you as quickly as possible so I do not misrepresent the government's position.
Senator LUDLAM: I presume the officers at the table are not working completely in the dark, so to be very clear—because I do not think this is a question that should be taken on notice: is it present Commonwealth government policy, as far as the officers at the table understand it, to proceed with the construction of the radioactive waste dump on Muckaty Land Trust land?
Ms Beauchamp : Can I say that there is a commitment to pursue the feasibility study around a long-term solution to radioactive waste storage. I think the sight at Muckaty was a volunteered site, so I would have to take it on notice. I think a site has not been finalised, so, in a sense, they are two separate issues. One is the development of a long-term storage solution, and I think the site options probably need to remain open. If there are other nominations coming forward, I would have to seek advice from the minister and government on whether they would be ruled out.
Senator LUDLAM: All I would say is that they are not seen as being separate issues for the old people of the Barkly and of that region around Tennant Creek and Muckaty, who have had this thing hanging over their heads for eight years. It is not seen as separate by them. Is it that difficult to ascertain? What I am trying to do is work out whether the government is proceeding with Muckaty and has a decision point that is yet ahead of it depending on what the Federal Court determines. Or are options actually genuinely open? That is a reasonably straightforward question.
Senator Ronaldson: And I think, so that I do not in any way give you information that is not correct, we will take that on notice so that, if it requires any clarification, that can be done.
Senator LUDLAM: Maybe I will put the second one as a supplementary question on notice—whether or not the Commonwealth intends to proceed with the nomination even if the Northern Land Council is found to have breached the Aboriginal Land Rights Act, which is what is being considered.
Senator Ronaldson: Again, it is a hypothetical question. We have court cases before us. I think, quite frankly, that we should not be discussing either those or the potential outcome of those at the present time. I am sure you will understand that.
Senator LUDLAM: Late last year, Minister Macfarlane—and this was confirmed on 19 March in response to questions that I asked; thank you for the reply—said: 'I'm committed to visiting Muckaty Station when the schedules of all relevant parties allow.' That was a commitment we were never able to secure from the former minister who had carriage of this. Has that meeting been scheduled as such? What steps have been taken to advance it?
Mr Hoffman : I am not aware that that has been scheduled.
Senator LUDLAM: Why is that?
Mr Hoffman : There are a range of matters the minister is dealing with.
Senator LUDLAM: That is what you told us three months ago.
Ms Beauchamp : I still think that commitment remains.
Mr Hoffman : The commitment remains and it was subject to a range of parties' convenience, but I am happy to confirm and come back to you on that.
Senator LUDLAM: I am just after an answer as to whether this is a commitment that will hang in the air for another eight years or whether anything has actually been done to progress it. I do not think that is an unreasonable request.
Senator Ronaldson: There are a number of matters before the Australian courts at the moment. I am sure that the minister is taking those into account, in relation to both his schedule and other matters. We will take that on notice and let you know. I do not imagine, if the minister said he is going to go, that he has any intention other than of going. I am sure of that. It will be timely and it will depend on a number of circumstances, and it would be inappropriate for me to predict what they may or may not be.
Senator LUDLAM: I might put some questions on notice, Chair, if we are out of time. On the current status of bilateral talks aimed at advancing the planned sale of Australian uranium to India, I get to take that up with Dr Floyd, I think, from the foreign affairs department. I am just wondering whether this department has any visibility of that, but I will put that to you on notice.
Senator Ronaldson: Thank you.
Senator LUDLAM: A final question for you, Senator Ronaldson: there has been recent media reporting citing both Prime Minister Bob Hawke and current NT Chief Minister Adam Giles supporting the hosting of an international high-level radioactive waste dump in Australia. I presume the government is aware of those comments. What is the government's current policy on international hosting of foreign radioactive waste?
Senator Ronaldson: Well (a) I have not seen those comments and (b) I will take that question on notice.
CHAIR: Thank you very much. We will now suspend and will come back at two o'clock with the continuation of program 3, focusing on the subprogram of Industry.
Proceedings suspended from 13:00 to 14:00
CHAIR: Welcome back. We will resume with program 3, subprogram Industry. Questions, Senator Carr.
Senator KIM CARR: On page 163 of Budget Paper No. 2, Madam Secretary, I note a table halfway down the page: 'Automotive Assistance—Reduced Funding'. It appears to me that that is a figure of $318 million. Is that correct?
Mr Durrant : Senator, I was just coming up from the back of the room—
Senator KIM CARR: Mr Durrant, on page 163 Budget Paper No. 2, there are the figures 100 for 2013-14, 100 for 2014-15 and $118 for 2017-18. I take that to be $318 million. Is that correct?
Mr Durrant : Yes, that is the forward estimates.
Senator KIM CARR: Where does that money come from?
Mr Durrant : The minus 100 and minus 100 is a decision by the government not to proceed with the supporting automotive jobs sector measure. That is the first 200. Out in 2017-18, $9.7 million of that figure reflects money that was put aside in the automotive element of the contingency reserve. It has been taken as a saving. In addition, the $108 million that represents that figure, is the 2018 save from the Automotive Transformation Scheme.
Senator KIM CARR: Let's just go through it: $200 million out of the automotive jobs program. Is that right?
Mr Durrant : That right.
Senator KIM CARR: Are you anticipating that there will be more people employed in the automotive industry or less?
Mr Durrant : As you would be aware, this was a program set up by the previous government in the lead-up to the election.
Senator KIM CARR: That is the $200 million. And the $9.7 million is out of the contingent reserve?
Mr Durrant : That is right. In the contingent reserve there were some moneys allocated over various years, and $9.7 million was in 2017-18 and the government decided to take that as a savings.
Senator KIM CARR: Does the automotive contingent reserve still exist?
Mr Durrant : There is not such a thing at the moment.
Senator KIM CARR: When was the decision taken to get rid of it?
Mr Durrant : It is unusual to have any definitions within a contingent reserve.
Senator KIM CARR: There was under the previous government, would you agree?
Mr Durrant : There was. There is not such a thing under the current government.
Senator KIM CARR: When was that decision taken?
Mr Durrant : As part of the budget process.
Senator KIM CARR: Was it announced in MYEFO or was it announced in the budget?
Mr Durrant : The announcement is in the budget, as in page 163 of the document.
Senator KIM CARR: That is what that is; is it? That is the abolition of the automotive contingent reserve.
Mr Durrant : That is correct.
Senator KIM CARR: All of that money was automotive contingent reserve, wasn't it?
Mr Durrant : It was $209.7 million. The previous government utilised $200 million of it for the supporting automotive jobs, and there was $9.7 million which had been utilised, and it was taken as a savings.
Senator KIM CARR: I see in the same statement on page 163 a reference to savings of $618 million for automotive. Is the $318 million a subset the $618 million?
Mr Durrant : I will give you the breakdown of that figure: $200 million for the supporting automotive jobs sector, as we have just discussed; $400 million in administrative funding from the termination of the ATS; $8.8 million in departmental costs relating to the termination of the ATS; and $9.7 million from the automotive element of the contingency reserve.
Senator KIM CARR: Right. Is it the case that to achieve these savings the government has to secure legislative change?
Mr Durrant : That is correct. The ATS will be required to be amended. The regulations would be required to be amended to institute the savings that were announced in the MYEFO context, and the termination of the ATS would be done through amendment to the primary act.
Senator KIM CARR: They need actual legislation. What happens if the legislation fails to secure parliamentary agreement?
Mr Durrant : At the moment, the legislation has a series of funding in the regulations. If that was not changed, that funding would be made available to the industry.
Senator KIM CARR: When will we see this legislation?
Mr Durrant : The government is considering how to approach the changes to the ATS.
Senator KIM CARR: We have not seen the changes to the regulations for the MYEFO proposed reductions of $500 million, have we?
Mr Durrant : That is correct.
Senator KIM CARR: When will we see those?
Mr Durrant : As I said, the government is working on that.
Senator KIM CARR: Perhaps the minister can advise us. When will the parliament see this legislation and these regulations?
Senator Ronaldson: I am not aware of the legislative program for that piece of legislation. I will take that on notice.
Senator KIM CARR: Thank you. Do you have a financial year breakdown or the profile on these savings, Mr Durrant?
Mr Durrant : Yes I do. The MYEFO savings for the ATS capped element represent a $100 million reduction in 2014-15, a $175 million reduction in 2015-16, a $150 million reduction in 2016-17 and a $75 million reduction in 2017-18.
Senator KIM CARR: Thank you. I see that the budget papers assert that there will be approximately $1 billion remaining in the ATS if these proposals are accepted by the parliament. How has that been calculated?
Mr Durrant : In the ATS capped funding in 2013-14 there is $294.7 million; 2014-15, $234.7 million; 2015-16, $125 million; 2016-17, $150 million; 2017-18, $75 million. That totals $879.4 million. In the uncapped element of the ATS, in 2013-14 there is $54.2 million; 2014-15, $34.1 million; 2015-16, $28.6 million; 2016-17, $20.1 million; and 2017-18, $6.5 million, totalling $143.5 million. Combining those two figures is in excess of $1 billion.
Senator KIM CARR: How many firms are registered on the ATS at the moment?
Mr Durrant : There are 131 firms registered.
Senator KIM CARR: Have you had any discussions with any of those 131 about the prospects of their survival?
Mr Durrant : I do not think I have ever put that directly to a company, but I certainly have regular conversations with industry associations like the representatives of the supply chain.
Senator KIM CARR: Yes, but have you spoken directly to the companies?
Mr Durrant : I have not spoken to a company and asked them about their survival.
Senator KIM CARR: Has the department done any assessments of the number of companies that would survive if these changes were implemented?
Mr Durrant : I have considered that issue. In general terms there are about 40 international companies that are here in Australia because of their international supply chain. The department suggests that it is unlikely that those international companies will remain in Australia once the motor vehicle producers leave. I qualify that by saying that I believe a number of the CEOs of those companies will try very hard to convince head office to stay. At the other end of the scale, there are a number of Australian domestic companies that will not have the financial capability or the capacity to continue operating as a supply chain company, so there is a group there. There is a group in the middle and some have already started the diversification process. Another group had the potential to diversify over the next number of years.
Senator KIM CARR: Could we go through the last group—the 90 or so domestic firms. You say they are in three broad categories. Of the 90, how many does the department believe will be able to maintain business operations in automotive?
Mr Durrant : As you would appreciate, that is a very sensitive discussion we are having.
Senator KIM CARR: I do not want you to name them at the moment.
Mr Durrant : I have provided advice to the minister on that issue, so it is advice to the minister at this stage.
Senator KIM CARR: The department must have an assessment of the implications of the budgetary decisions.
Mr Durrant : I certainly have an assessment of what we believe the survival rate—through want of a better term—will be of supply chain companies with the decisions made by the motor vehicle producers.
Senator KIM CARR: I have seen estimates of 25 per cent. Is that too high?
Mr Durrant : As we discussed at last estimates, I acknowledge that is about the number.
Senator KIM CARR: The issue I am concerned about—I will ask you this question, because you are not much interested in my concern: has the department done any international studies of circumstances in other countries transitioning arrangements in automotive? For instance, have you done a study of the British experience?
Mr Durrant : No, we have not. After talking to Holden and Toyota, General Motors and Toyota are quite interested in the Australian experience because there has not been an example where an industry has actually closed. Those companies have closed different companies within a country, but they have not actually had a situation where the industry itself is closing.
Senator KIM CARR: The British experience was that after Thatcher, when a similar sort of policy framework was introduced, there was a turnaround in the policy parameters and the industry has transformed itself and is actually quite strong. Would you agree?
Mr Durrant : In general terms, I think that is the case.
Senator KIM CARR: They have concentrated specifically on niche manufacturing and investment attraction. Their major manufacturers have, in recent times, invested in the United Kingdom. Is that true?
Mr Durrant : I do not have a full enough understanding to clarify whether that is true or false.
Senator KIM CARR: The British government has made substantial investments in automotive in recent times—a conservative government. Is that true?
Mr Durrant : They have.
Senator KIM CARR: In what areas that you are aware of?
Mr Durrant : There has been a regional policy, for example. They have given some support to companies such as Nissan in regional areas of the United Kingdom.
Senator KIM CARR: Particularly in engine manufacture. Is that not the case?
Mr Durrant : I do not have the details.
Senator KIM CARR: Does the department have a view about the prospects of the Australian industry being able to sustain some form of automotive manufacture in this country?
Mr Ryan : That is a pretty hypothetical question in one sense. We have not actually done analysis of that. We have worked with the motor vehicle companies and listened to what they are seeing as their strategies and risk management for continuing their production in this country until their desired exit date.
Senator KIM CARR: Eventually the companies are required to place with you advice on their investment strategies, are they not, under the terms of the ATS?
Mr Ryan : Under the terms of the ATS, yes.
Senator KIM CARR: Have any companies modified their statements to you since the government has announced its policy?
Mr Durrant : The ATS requires a five-year rolling business plan to be submitted in November of each year. There have been no changes to the ones we have submitted.
Senator KIM CARR: We have to wait until November next year. Do companies lodge, as a rule, in November or is it earlier?
Mr Durrant : It is during November. Maybe Mr Sexton could help with any further clarification.
Senator Ronaldson: I am sure the officer was going to get to it at some stage. When you talk about transition and investment, there is $50 million going to a manufacturing transition program and an industry skills fund of some $476 million. I am reading from a press release put out by the minister with an attachment to the website:
Industries which rely on a highly skilled workforce can apply for funding to retrain, reskill or upskill their existing workforce and to build on their capacity to diversify into new or emerging markets, adopt new or emerging technologies, enter export markets, reposition themselves because of market-driven structural adjustment or address critical skills gaps and shortages to increase the productivity and sustainability of their operations.
I am sure I do not need to remind you—
Senator KIM CARR: We will get a chance to talk about that.
Senator Ronaldson: that both Mitsubishi's and Ford's decisions to close their manufacturing operations in Australia were made under your government—probably during one of the times you were in the portfolio.
Senator KIM CARR: It was the first decision I had to deal with, Minister, since you raised it.
Senator Ronaldson: Indeed, the decisions by Ford and Holden were made entirely by themselves. Not only—
Senator KIM CARR: That is not true.
Senator Ronaldson: do we have an industry skills fund and the manufacturing fund of $50 million that I was talking to you about before—
Senator KIM CARR: It has been like this for two days.
Senator Ronaldson: You asked questions before about adjustments. You talked about the British situation and I—
Senator KIM CARR: You thought you would be helpful now, did you?
Senator Ronaldson: am just going through this for you.
CHAIR: Order! Minister.
Senator KIM CARR: He is doing really well.
Senator Ronaldson: There is also the Geelong Region Innovation and Investment Fund and Melbourne’s North Innovation and Investment Fund. You don't support those?
Senator KIM CARR: It was our program, remember? You cut money out of it.
Senator Ronaldson: It was our joint response with the Victorian government.
Senator KIM CARR: Let's get back to this.
CHAIR: Senator Carr, the minister is entitled to answer as he chooses.
Senator KIM CARR: He has not been asked a question.
Senator Ronaldson: $24 million has been allocated to each region. Ten funding recipients have been announced with more expected in the coming weeks and a second round of applications has been called for under the GRIIF. Clearly, the government is acutely aware of the need for these industries to transform. That is why there is $50 million going into the manufacturing aspect.
Senator KIM CARR: $50 million?
Senator Ronaldson: There is substantial skills funding as well. We are looking at a figure of $476 million for the industry skills fund to enable industry to streamline training and better position Australian industry to succeed in a rapidly-changing economy. I will find the quote—we have lots of time for me to do so—but I think you made some comments yourself some time ago as the industry minister, Senator Carr, that Australian industry is undergoing massive and rapid transformation and there is a requirement for governments to respond to that. The matters I have just gone through will assist in that, strengthening skills and strengthening Australian industry so that it can make that transition to a modern economy.
Senator KIM CARR: Is the figure of $618 million that has been cut from the automotive program announced in the budget in addition to the $500 million announced in MYEFO?
Mr Durrant : That is correct.
Senator KIM CARR: So we are in fact talking about a figure of $1.1185 billion cut from the automotive program?
Mr Durrant : That is correct.
Senator KIM CARR: And you want to talk to me about $50 million! Can I just take you through the statement in Budget Paper No. 2 on page 166 that says the government will provide $100 million in regard to the growth fund. It says that there will be a growth fund provided for investment in new jobs and economic growth in South Australia and Victoria. Do you see that, Mr Durrant?
Mr Durrant : Yes.
Senator KIM CARR: How many component manufacturers of the 131 that are currently registered on the ATS, not to mention the tier 2 and tier 3 automotive suppliers, would be outside South Australia and Victoria?
Mr Durrant : A very limited number.
Senator KIM CARR: How many people, do you think? How many automotive manufacturing jobs are there in New South Wales?
Mr Durrant : You would appreciate that there is a difficulty in answering this question. The head office of ATS could be in New South Wales and the production could be in another state.
Senator KIM CARR: I see your point. But it is true to say that there are automotive workers employed in Sydney, Brisbane and Perth. That would be true, would it not? Do you have the state-by-state breakdown of automotive employment figures, as you understand them?
Mr Durrant : I do not have state-by-state—
Senator KIM CARR: I will ask you to take on notice the department's latest thinking on the spread of automotive employment across Australia, direct and indirect.
Mr Durrant : I will just note that part of the growth fund includes extension of the Automotive Industry Structural Adjustment Program by $15 million. That program is available to automotive employees throughout Australia. It is not strictly for South Australia.
Senator KIM CARR: So there is $15 million there but, given that industry funding has been withdrawn by over $1.1 billion, I am just wondering what assistance is available for automotive workers outside of South Australia and Victoria as a result of this so-called growth fund.
Dr Green : I will go through a couple of the elements of the fund. A $30 million element of that industry growth fund is for skills and training. That will be available to automotive workers regardless of location in Australia. There is the program that my colleague just mentioned, the $15 million automotive structural adjustment program. That, too, is available to automotive workers throughout Australia. There is also the $20 million automotive diversification program to assist supply chain companies to diversify into new business opportunities. That, too, is available to automotive supply chain companies anywhere in Australia.
Senator KIM CARR: Was the government's policy for a growth fund based on the economic review of South Australia and Victoria?
Dr Green : Yes. The economic review informed the design of the growth fund response.
Senator KIM CARR: Did it look at the employment implications in New South Wales, Queensland and Western Australia in the automotive industry?
Dr Green : The economic review reports talk about 27,500 workers affected nationally. About 18,000 of them are in Victoria and about 5,000 of them are in South Australia. So the balance of approximately 7,000 to 8,000 would be in other states.
Senator KIM CARR: The review was completed at the end of March; is that correct?
Dr Green : The government released the review reports on 30 April.
Senator KIM CARR: Yes, that is right. But the report was undertaken and completed by the end of March; is that correct?
Dr Green : As I said, the government announced the reports—
Senator KIM CARR: No, that is not the question I asked you. You will see in a moment where I am going with this. Was the report concluded at the end of March? On what date was it provided to the minister?
Dr Green : The response was part of government consideration of that process, and it was finalised by the government shortly before it was released and announced.
Senator KIM CARR: I would like to know the date on which the minister received the economic review.
Dr Green : We provided drafts of the economic review as a secretariat to the review panels, to the minister, throughout the period of the review.
Senator KIM CARR: On what date?
Dr Green : We first provided drafts of the economic review reports to the minister's office on 14 February.
Senator KIM CARR: The final report was released on 30 April. Was there a substantial difference between the report provided on 14 February and the report that was released on 30 April?
Dr Green : I will just correct what I said—we provided a draft of the report for Victoria on 14 February.
Senator KIM CARR: When was the South Australian report provided?
Dr Green : We provided that on 19 February. The most substantial change between that time and the time of the public release of the report on 30 April was that the decision was taken to provide an integrated report. So there is a single document called Australian government economic review of South Australia and Victoria, whereas the initial drafts were separate reports for the two states.
Senator KIM CARR: Was it minor editing work to bring the two reports together, or was the report substantially rewritten?
Dr Green : In looking at the initial drafts, there was a substantial amount of overlapping material around the state of the automotive industry and the factors that had led to its circumstances and so on. I think it was decided that it read better as an integrated report with some specific sections or chapters related to the particular circumstances of the two states.
Senator KIM CARR: Who did the rewriting?
Dr Green : As a secretariat for the panels, we received advice through the minister's office around a range of editorial changes to the initial drafts.
Senator KIM CARR: The editorial suggestions were from the minister's office?
Dr Green : We provided drafts to the minister as the chair of the economic review panels, and the minister's office did the liaison with the panel members and provided us with further advice about the nature of changes to the report.
Senator KIM CARR: Were they substantial changes that the minister's office suggested?
Dr Green : I think the reports as they finally appear are broadly consistent with what was initially drafted.
Senator XENOPHON: Can I just ask a supplementary question directly on that? I think the question by Senator Carr was: were they substantial changes? I will just nuance that question. Were they material changes?
Dr Green : It is difficult to answer whether something is material. For example, the initial drafts were two separate reports and the final draft was a single integrated report, so you could call that a material change. On the other hand, the content was not substantially different from that process.
Senator KIM CARR: Weren't these review panels announced to be independent?
Dr Green : The panels have members of the government on them and the minister is the chair.
Senator KIM CARR: But it was an independent panel advising the government, was it not?
Dr Green : I do not think I recall the word 'independent' being used. The panel is chaired by the minister and they have other ministers on them, as well as business leaders from the two states.
Senator Ronaldson: With considerable industry representation.
Senator KIM CARR: Indeed. That is why I am interested to know this. If we were to FOI these draft reports, would we be able to pick up material changes as well as substantial changes?
Senator Ronaldson: That is hypothetical. If you want to FOI it, you can do it, but that is not a reasonable question to ask this officer.
Senator KIM CARR: That will spring to our attention if there are substantial and material changes to these reports.
Senator Ronaldson: We are not going to answer hypothetical questions. If you want to FOI it, and there is a difference, no doubt you will come back and tell us at another time.
Dr Green : The issue I have is with the use of the subjective judgement word, 'substantial'. What is a substantial change, is to some extent—
Senator KIM CARR: Do you have any issue with the word 'material'?
Dr Green : In terms of the major conclusions of the reports—for example, the number of employees affected and so on—there were no substantial or material changes to those findings.
Senator KIM CARR: Dr Green, it has been put to me that the report was so badly written, the quality was so poor, that it had to be rewritten in the minister's office. Is that true?
Mr Ryan : I think what happens, as you would appreciate, is that when you start to do your first draft of a report it tends to be longer than what you want and it tends to contain material which may not be specific to what you want. Through the course of the redrafting, over time, the changes come in. If you look from the first draft to the final document, whether you call it a material change or not is sometimes in the eye of the beholder. I think the panel and the minister were happy with the final version that they got.
Senator KIM CARR: I am sure that the minister finalised the reports. If the minister's office rewrote them, I have no doubt they are happy with their redrafting. The proposition I put to you is that the quality of the reports was so bad that they had to redraft them. How do you respond to that suggestion?
Mr Ryan : That is a subjective judgement and—
Senator KIM CARR: About quality?
Mr Ryan : About quality, yes.
Senator KIM CARR: It was the minister that finally accepted the reports. Is that the case?
Mr Ryan : As the chair of the panel.
Senator KIM CARR: Why did it take from 14 February and 19 February, respectively, to 30 April to conclude these reports? Why did it take so long?
Dr Green : That is a period of approximately six weeks. It is not an inordinately long time. There were a number of members of the panel whose input needed to be sought. The reports go to issues that touch on a number of portfolio interests, particularly in the Department of Employment. There was the intervening period of the South Australian election. There was the further announcement by Toyota that it, too, was closing. There were a range of events that were happening in that time frame that led to the reports being finalised at the end of April, rather than earlier.
Senator KIM CARR: Can I get a breakdown of the $155 growth fund? How much of that is Commonwealth money?
Dr Green : Approximately $101 million over the forward estimates.
Senator KIM CARR: Is state government money the remainder?
Dr Green : $12 million each from the two states.
Senator KIM CARR: Have they agreed to that?
Dr Green : They have agreed to that.
Senator Ronaldson: It is my understanding that the amount of the growth fund was increased following Toyota's announcement. I think it was, initially, a $100 million fund that went up to $155 million. My understanding is that the Commonwealth's contribution increased from $60 million to $101 million on the back of that. It was made up of $83.7 million in new money and $16.9 million in current automotive spending from the automotive diversification scheme. I notice, in relation to the fund, that it is a balanced, strategic, targeted and integrated response, which covers reskilling workers, diversifying auto component makers, accelerating new manufacturing investment and funding infrastructure projects.
Senator KIM CARR: I can read the press release.
Senator Ronaldson: It is not a press release. The fund also needs to be considered in the context of other initiatives that are forthcoming, such as our deregulation agenda, which has started, and the forthcoming industry investment and competitiveness agenda.
Senator KIM CARR: That will make auto workers feel a lot happier!
Senator Ronaldson: The auto workers lost their jobs under your watch. Are they the same auto workers that were hit with a carbon tax bill of $1.1 billion and a fringe benefit tax of $1.8 billion? Are they the same automotive workers?
Senator GALLACHER: Under your watch they paid that.
Senator Ronaldson: I will take the interjection from Senator Gallacher. The fringe benefits tax was yours my friend, and the impact on that, as you would well know if you had spoken to anyone in the automotive sector, was an absolute disaster potentially. The carbon tax has had a huge impact on the automotive industry.
Senator KIM CARR: How much was the carbon tax again? Why don't you tell us? Get the spiel out and let's get it over and done with. We will go through the dispute one by one again.
Senator Ronaldson: Didn't you hear me? I said $1.8 billion on the fringe benefits tax, $1.1 billion on the—
Senator KIM CARR: What effect did that have on domestic production?
CHAIR: Senator Carr! You asked him to—
Senator KIM CARR: I am just asking the minister. He has raised the issue. What effect on domestic production?
Senator Ronaldson: You are not seriously making—
Senator KIM CARR: Since it was never implemented, what effect did it have?
Senator Ronaldson: The fringe benefits tax, as you would well know, was roundly condemned by the automotive sector, was undoubtedly, as they said, going to lead to a significant reduction in production and guess what, Senator Carr—a reduced production actually has an impact on auto workers. Or has that been completely lost on you?
Senator KIM CARR: And guess what: it never happened!
Senator Ronaldson: What would have happened then if it had Senator Carr on that basis?
Senator KIM CARR: Yeah, right!
Senator Ronaldson: You know exactly what was said. Last minute, no consultation—not one ounce of consultation with the automotive sector.
Senator KIM CARR: I would like to know how much are each of the automotive firms putting into the fund?
Dr Green : Toyota and Holden are each contributing $15 million. That is $30 million from the auto companies. Each of the two state governments is contributing $12 million so that is $24 million from them. The Commonwealth is putting in $101 million, which makes up the $155 million.
Senator KIM CARR: And the Ford program is separate again?
Dr Green : Separate again, that is correct.
Senator KIM CARR: How is the fund being divided across the different elements of the program? Are you able to provide me advice on the split between the different elements?
Dr Green : Certainly. Thirty million dollars from the automotive car companies' contributions is going towards the skills and training program. As I said before, that is available to automotive workers regardless of location throughout Australia. Fifteen million is for the Automotive Industry Structural Adjustment Program, administered by the Department of Employment. Twenty million dollars is supporting the automotive diversification program, aimed at helping automotive supplier chain companies' diversity into new business. Sixty million will go into a next generation manufacturing investment program to encourage and bring forward new investment in non-automotive manufacturing opportunities. And $30 million will go into the regional infrastructure program to support business infrastructure investment in opportunities that are non-manufacturing.
Senator KIM CARR: Do you have a regional breakdown of the distribution? What is your expectation on how much will go to Victoria and how much to South Australia?
Dr Green : The relative contributions to the two states is something we are currently discussing between the government and the states.
Senator KIM CARR: Are there guidelines for the program?
Dr Green : The guidelines for the program have yet to be developed.
Senator KIM CARR: Will you require legislation for the program?
Dr Green : No, it will not be a legislative program, but there will be guidelines for these programs as is normal for programs—as I am sure you are aware.
Senator KIM CARR: Yes, that is right. When will the guidelines be published? When they are finished, but when will they be finished?
Dr Green : Within a matter of months I would think.
Senator KIM CARR: Months? Months? So they are months away—is that what you are saying?
Dr Green : Well in some cases it may be less than some months, but these programs are intended to be rolled out from 1 July and by the end of the year. Some of them are getting underway earlier, such as the skills elements, that are the most time critical of these. We will be bringing forward the guidelines over the winter and early in the new financial year.
Senator KIM CARR: Without the guidelines you cannot tell who is eligible, can you?
Dr Green : Those elements of eligibility and merit and so on are things that we are having discussion on with the other contributing parties to the growth fund. But the initial thinking from the Commonwealth—and just bearing in mind this is a collaborative fund involving four other parties as well—is not dissimilar to that on programs that you would be familiar with such as the current Automotive Diversification Program or the current Geelong Regional Investment Fund or the North Melbourne Investment Fund.
Senator KIM CARR: So when will the funds be open for business then and accepting applications?
Dr Green : Elements of the growth fund are expected to be rolled out from the middle of the year. We would hope that the programs would be opened in a time frame like September.
Senator KIM CARR: Are you saying that they are based on the same model as the Automotive New Markets Initiative that was the previous government's program?
Dr Green : The Automotive Diversification Program is similar in style to that program but it has a greater focus on diversifying companies into business opportunities outside of supplying the motor vehicle producers.
Senator KIM CARR: But the Automotive New Markets Initiative had $35 million in it. Your proposal has $20 million—is that correct?
Dr Green : I will let Mr Durrant answer that.
Mr Durrant : Over time there were changes in the funding arrangements and perhaps I could step you through those. The original new markets program had $20 million of Commonwealth funding and $10 million of Victorian funding, so it was a $30 million program. In response to the announcements by Ford to close its operations, the Commonwealth increased its funding to the program by $10 million and the Victorian government increased theirs by $2 million, so it was a $42 million program.
Senator KIM CARR: Would it be fair to say then that the proposal to have a $20 million program is in fact a $22 million cut on the existing program?
Mr Durrant : No, I do not think that that is a reasonable assumption.
Senator KIM CARR: So what would you say is a reasonable number to put on the amount of reduction and explaining the difference between the two funds?
Mr Durrant : There was $20 million of Commonwealth funding and the new program—
Senator KIM CARR: That was in 2007—right?
Mr Durrant : Yes.
Senator KIM CARR: In 2007 it was $20 million and it went up to $42 million.
Mr Durrant : But in noting that, there is $12 million worth of Victorian contribution.
Senator KIM CARR: But your proposal for a $20 million fund is substantially less than $42 million. Would you not agree?
Mr Durrant : It is, but please discount the Victorian contribution.
Senator KIM CARR: And that accounts for the difference, does it?
Mr Durrant : It accounts for a reduction in the funding.
Senator KIM CARR: But we are short $10 million somewhere, aren't we?
Dr Green : Senator Carr, you have also got to remember that program funding is being allocated already out of that program.
Senator KIM CARR: Of course. But if it was felt in 2007 that $20 million was an appropriate number given the circumstances of 2014 it strikes me as passing strange that you have got such a limited amount of money for this particular matter.
Mr Ryan : Maybe one thing that is worth pointing out, Senator, is that there was $17 million unspent out of the program—
Senator KIM CARR: That is because the companies were not collapsing the way they are now.
Mr Ryan : There was $17 million unspent so in using your $20 million comparison, you really need to look at the spending we were experiencing and the expenditure that we are looking forward to.
Senator KIM CARR: In budget paper No. 2 on page 95, why is there is a reference there to assistance to a Ford auto workers fund being cut? Why is that?
Mr Durrant : It is a matter for the Department of Employment.
Senator KIM CARR: So it is not a decision you took? Did you have any consultation with the Department of Employment about cutting your restructuring assistance for Ford workers?
Senator Ronaldson: Interagency discussions in the context of the preparation of the budget are not going to be discussed here today, as you will appreciate.
Senator KIM CARR: Is it their expectation that the Ford workers will rely on this other form of funding—is that the intention?
Dr Green : The workers at Ford will have access to the elements of the program, just like other automotive workers.
Senator KIM CARR: How much of the $15 million you have put into this new fund—the growth fund money for training—is actually new money?
Dr Green : There is money that has been re-allocated from the previous Automotive New Markets Initiative. The other money is new money.
Senator KIM CARR: How much?
Dr Green : I think from memory it is $83 million worth of new money, and approximately $18 million reallocated from the previous Automotive New Markets Initiative program.
Senator MADIGAN: Have any of you gentlemen, or anybody in the department, physically gone and visited any automotive component manufacturers in any of the capital cities or in regional or rural South Australia or Victoria and spoken to them face to face?
Mr Durrant : As part of our day-to-day responsibilities we talk to automotive companies—
Senator MADIGAN: That is not what I am asking you. Have you physically gone and visited and spoken to the people at the coalface of this industry? Has anybody in your department or any of you physically gone and spoken to them in regional or rural Victoria or South Australia or in Melbourne or Adelaide?
Mr Ryan : In my case, yes.
Senator MADIGAN: How many, Mr Ryan, as a ballpark figures?
Mr Ryan : The most recent one was with Backwell IXL in Geelong. That is the most recent one I can point to.
Senator MADIGAN: Any others?
Mr Ryan : As part of our reviews of Victoria and South Australia we had meetings with a number of the component suppliers and companies that were diversifying. We provided a list of those consultations when that report came out, on the website.
Senator MADIGAN: Amongst any of the companies that you have spoken to, that are currently in the automotive sector, have any diversified into other areas such as manufacturing for the solar industry?
Mr Ryan : Backwell IXL.
Senator MADIGAN: Are you aware of the angst that is out there amongst manufacturers in the component sector who are genuinely trying to diversify, and have been for a number of years? They feel as if they are being knocked from pillar to post. We have had announcements in the ARENA area, where funding has been cut and we have—
Senator XENOPHON: Soon to be abolished.
Senator MADIGAN: Senator Xenophon says it is soon to be abolished, subject to legislation. Now we have had cuts in the funding to the automotive sector proposed. Does the department have any empathy with investment decisions that have to be made, lead times, R&D prototyping et cetera, developing new markets and the potential havoc these measure are going to wreak on these companies and their forward decisions?
Senator Ronaldson: I will take that. I do not want to go over old ground about the money that is allocated in this budget for an industry skills fund, a growth fund, a manufacturing transition fund et cetera. But I will say this. I was the member for Ballarat, as you know, for 12 years. I spent an enormous amount of time with the component manufacturers in our home town of Ballarat. They were making these transitions from the early nineties, because on day one they would have a contract with Holden, Ford or someone else and then they lost those on the global competitive market.
Those component manufacturers were constantly having to innovate to stay relevant in the automotive industry. This transition is decades old, not 12 months old. Some did and some did not. Some that did not were actually friends of mine who could not make the transition and could not get the contracts with these very large global companies who quite frankly had little or no concern for where someone was located or whether there might have been generational supply of parts by a family owned company to those automotive sectors. So this has been happening for a long time.
The government is acutely aware of the impacts of the two closures under the former government and the two closures under this government and the flow-on effect for the component industry. What we are trying to do is take out red tape. We are trying to provide a skills upgrade—
Senator Kim Carr interjecting—
Senator Ronaldson: You might find it funny. We are trying to get a skills upgrade to help these firms and their workers transition. Do we think this is going to be an easy task? No, we most certainly do not. We believe the programs—we have got the growth fund, the industry skills fund and the other matters you have talked about today—are going to enable these companies to transform. I want to see them transform, you want to see them transform and I hope everyone else in this room wants to see them transform. We believe that the package of measures we have put together is best placed to assist with that transformation. I do not know whether or not it is going to work. I hope it does, but I think we are now putting the right money into the right areas to address the northern metropolitan issue, the Geelong issue that you are acutely aware of as a Victorian, the wider Victorian issue and the wider South Australian issue where the impact is going to fall the most. I hope we will be sitting around here in two years time and saying this has been successful, but we have to transform these industries. We have to give them the best opportunity through a range of skills and assistance to achieve that transformation. I do not mean that in a political sense; I have actually, as you well know, seen the results for those who have been able to transform and the diabolical results for those who have not. This is a global market, and we are now trying to encourage local industry and get some transformation of skills. I tell you that, with my family background in manufacturing, no-one in this room hopes more than I do that this transformation is going to be successful.
Senator MADIGAN: Did the department do any analysis of the transition that happened in South Australia and Adelaide in the northern suburbs with the demise of Mitsubishi when looking at this policy?
Dr Green : The economic review reports do contain an analysis of what has happened over the period 2005 to 2011 in the most affected regions in South Australia and Victoria. That analysis is available in the released economic review reports.
Senator MADIGAN: How successful do you think the assistance was to help those companies that were affected by the Mitsubishi closure?
Dr Green : Broadly speaking, the review reports found that the adjustment that took place in Adelaide from 2005 to 2011 was a reasonably good adjustment. The impacts on the increase in unemployment were quite modest even though it is quite a high area of unemployment in Australia. Those losses from unemployment in north Adelaide did not significantly change the unemployment rate in those affected areas.
Senator XENOPHON: Are you sure about that? It is 21 per cent.
CHAIR: You will have your opportunity in a moment.
Mr Ryan : I refer to the report where we did some analysis using the ABS longitudinal data. We took workers in 2006 and workers in 2011. What we found is that, of workers in 2011 who had been in the automotive industry in 2006, only 36 per cent of them were still in automotive in 2011. Where did the rest go? Fifteen per cent went to other parts of manufacturing; 37 per cent went to other industries; three per cent were unemployed; and seven per cent had left the workforce and retired. So when we went through the—
Senator KIM CARR: So 10 per cent did not get a job.
Senator XENOPHON: Which study is this, Mr Ryan?
Mr Ryan : This is an analysis of the ABS census longitudinal data.
Senator XENOPHON: Who did that analysis? Was it the ABS?
Mr Ryan : No. We did that using the ABS data.
CHAIR: And that appears in the economic review reports that have been released.
Senator XENOPHON: I think there have been some other reports that have put a different figure on that. Would you acknowledge that?
Mr Ryan : There have been other studies done which have not looked at it in exactly the same longitudinal way, but there have been studies that have looked just at the Mitsubishi workforce and what actually happened there. What this is saying is that, if you look at the results for South Australia and the results for Victoria, you get nearly exactly the same set of results in both cases. The South Australian results included the closure of the Mitsubishi plant.
Senator XENOPHON: Yes, during the mining boom.
Mr Ryan : And the GFC.
Senator RUSTON: Can I go back to some questioning on the Entrepreneurs' Infrastructure Program from this morning. I am assuming that you have still got the people here for that, have you? During questioning this morning, there were a whole heap of numbers that were being thrown around. I think somebody said something about 500,000 contacts and somebody else referred to 30,400 business capabilities. There was a number of 23,000 and a number of 26,000. I became totally confused as to what all these numbers meant. What are they referring to?
Ms Beauchamp : I think there were two things that were overlapping and I think that is why the confusion arose this morning. There are a number of new programs that the government has announced as part of the portfolio, and one of those is the Entrepreneurs' Infrastructure Program. One of them is the Industry Skills Fund. There are a range of other programs, whether they be the manufacturing transition program, the Growth Fund, which we have just spoken about, and a range of other things. With the entrepreneurs program, we are setting up a single business service delivery centre. So the numbers you have been referring to probably talk about the universal offering that we will be providing to all SMEs, regardless of eligibility, for a particular program. So, in a sense, it is a one-stop shop for SMEs to get market and industry information, business advice and a whole range of other things. It is not tied to a particular program.
Underneath that sits, for example, the entrepreneurs program, which is a specific announcement to support entrepreneurs in business skills, the commercialisation of ideas and a much deeper intervention in terms of assisting small and medium enterprises to access supply chains, access export markets and help them diversify, which is something we just spoke about, from other industries. Of the 500,000, we expect, through the Entrepreneurs' Infrastructure Program, to deliver—and I might get my colleagues to confirm—between 23,000 and 30,000 support services under the entrepreneurs program.
Ms Morris : The number of services that we would expect to provide through the program over the forward estimates would be the 23,000 figure that was given this morning.
Senator RUSTON: I suppose what I was trying to work out was the take-home message that I had got from the questioning by Senator Carr. Somehow there were going to be a whole heap fewer businesses in Australia who were going to be able to access the resources that were offered, within this space generally in the department. I suppose there were two points there. Is this the case? Does it mean that there are going to be a whole heap fewer business or people accessing these programs, or is it still available to the same number of businesses or thereabouts?
Ms Beauchamp : I am expecting that we probably will provide support to more businesses because the single business service centre will act as a triage point, not necessarily just to our programs and the government's programs that they have just announced but perhaps, more appropriately, to other programs in other portfolios as well. So we are expecting access at top level to all small to medium enterprises. I think we are expecting about 500,000 there. And then I do not think we can compare the old programs to the new programs, because they are very different in design, although we have picked up some elements of the old programs that we think really add value to small and medium enterprises, such as bringing researchers and businesses together. So I think it is a brand new way of working and a brand new way of working with both industry and researchers and other partners in this space.
Senator RUSTON: I suppose I am just concerned that we seem to be fixated on numbers this morning, instead of being fixated on outcomes and the delivery of the best possible outcomes but also enabling people to have access to them. But there is not much point in having access if we are not delivering outcomes. Can I just take that one step further—
Senator Kim Carr interjecting—
Senator RUSTON: Senator, I did say yesterday that I never interrupted you. I think a little respect—and do not interrupt me.
Senator KIM CARR: Sure. Perhaps you can tell me—
CHAIR: Senator Carr!
Senator RUSTON: One of the things that basic Economics 101 tells you is that competition is really good for business and it is really healthy for business. I suppose one of the things that were concerning me through much of the discussion that was going on before—not that, obviously, we do not want to see a fantastic manufacturing sector in Australia—is: doesn't this constant reliance on corporate welfare actually encourage inefficiency in our businesses? That is probably asking you to make comment on a—
CHAIR: That is an opinion.
Senator RUSTON: It is, yes.
Senator KIM CARR: That is in every other country that—
Senator RUSTON: No, I am asking the department or the minister. If they choose—
CHAIR: The senator has asked the question. It is up to the officers or the minister to answer as they choose.
Senator RUSTON: In terms of your program development, do you take into account that, if you constantly are providing assistance, particularly to one sector that is not necessarily getting it somewhere else, you are potentially making them weaker? And are your programs designed in such a way as to minimise that happening?
Ms Beauchamp : There are probably a couple of points to make here. I think the Prime Minister has announced, as part of the National Industry Investment and Competitiveness Agenda, where the focus of government wants to be to allow businesses to thrive in a global economy. He has been talking about economy-wide measures to boost competitiveness, whether they are deregulation, tax arrangements and the like—so making sure that the regulatory and tax settings are right for businesses. But also I think that from our portfolio it is to encourage innovation and support for research and development for commercialising good ideas, hence the entrepreneurs program. Obviously, another key determinant of that growth is looking at skills and capabilities, so the investments in the Industry Skills Fund and the vocational education and training system are absolutely critical to that.
We have also looked at and mentioned in our budget papers the global areas of growth: what is it that we can do from our perspective and a whole-of-government sense to support the competitiveness of industries to compete in those global growth areas? I think that in the transformation—in terms of what is occurring in the auto—to advance manufacturing there are some fantastic case studies of successful companies that have achieved that diversification. I will ask Mr Ryan to talk about that in a moment. We are always focused on the doom and gloom rather than the opportunities that the global market presents. In a sense, what the government wants to do is make sure the settings are right so we can compete. There are a range of other things that will be considered as part of the Prime Minister's competitiveness agenda, which the Prime Minister, I think, is hoping to put out in the second half of this year.
So there is some work that we are involved in with the Department of Prime Minister and Cabinet and other agencies to look at what other economy-wide incentives and arrangements we need to put in place in addition to the government announcements through the budget process. It is probably worthwhile looking at an element of those global growth strategy areas. One of them is advanced manufacturing, and it probably is worthwhile talking about a couple of those companies that have diversified and that are absolutely now thriving on a global market. I might ask Mr Ryan to talk about a couple of those by way of example.
Mr Ryan : First of all, in our report that we did for Victoria and South Australia we did identify what we saw as the sectors that were showing the most growth prospects. For South Australia that included food and agriculture, advanced manufacturing, medical devices, aerospace, machined products, health and biomedical products, oil and gas, mining equipment, technology and services, tourism and education. The sorts of companies that you see associated with that are companies like Precise Advanced Manufacturing Group. This is a company which is and was a supplier to the automotive industry, but it has diversified itself now out into a range of other products. These deal with the pharmaceutical sector, the Defence sector—
Senator XENOPHON: [inaudible]
Mr Ryan : It is Precise Advanced Manufacturing Group. What is interesting when you talk with them is—
Senator KIM CARR: What was the name of that company?
Mr Ryan : It is called Precise—
Senator KIM CARR: Yes, I know that. I was just interrupted. Did you name any other company?
Mr Ryan : I can name some others for you.
Senator KIM CARR: Because I am going to then ask you for how much money each of them got from the Commonwealth government to assist in their transformation.
Mr Ryan : That is fine. I can certainly indicate which programs they have benefited—
Senator RUSTON: Mr Ryan, could you address my question and ignore Senator Carr.
CHAIR: Senator Ruston has the call. He says he is going to ask you, so he can do that when he has the call for that.
Mr Ryan : For Victoria, the sectors that we identified for Victoria were, again, food and agriculture, advanced manufacturing, scientific and medical equipment, aerospace, machined products, biomedical products, mining equipment, technology and services, financial and professional services, tourism, education and health services. I think the important thing to note from those sectors when you look at them and what is happening in the economy is that you certainly can see that, in an aggregate, manufacturing has shrunk over the years, but these other sectors have grown. They have been the fastest growth employment sectors for us. While we are concerned about the 27,500 that are involved in the auto sector, the Productivity Commission's draft report drew the analysis that 355,000 people were made redundant or displaced out of the workforce in a 12-month period to February 2013. So all of those people have moved and changed jobs and gone forward. The Reserve Bank recently put out its data where it is showing that in excess of 400,000-plus jobs are created each month. Now, admittedly, 400,000 jobs go. There is a greater increase in employment numbers than the change. But it just shows you how much the economy is changing all the time and the dynamism of it. While we have some government programs, a lot of this happens outside of where governments are.
Senator Ronaldson: If I may just add to that, throwing money at an issue never actually gets the right resolution. It has got to be strategic and it has got to be targeted, and that is indeed what we are doing. But it is wider than that. It is things such as—as we intend doing—strengthening the antidumping regime. It is a multifaceted approach to where we need to be. It is the National Industry Investment and Competitiveness Agenda. It is about government not just throwing money at something and walking away but having an active engagement in where we want to be; and, if you do not know where you want to be, it is very hard to get there, as you know. That was the trouble under the previous government. They had no idea where they wanted to be. They were happy to throw money at it, but that simply did not work. Now we are borrowing $1 billion a year to service the Labor Party debt—$1 billion a month, I should say, in repayment on that debt. There is not money to be splashed around. We think we have got targeted programs that are going to maximise the chance of both industry—small, medium and large—and employees to have a future. I do not need to remind you that, under the former government, every 19 minutes, one manufacturing job went.
Senator KIM CARR: And how many is it under yours?
Senator Ronaldson: Under the former government, every 19 minutes, one manufacturing job went. And we believe that we have—
Senator KIM CARR: It is down to about every four minutes now?
Senator KIM CARR: Down to four minutes?
Senator Ronaldson: an overall and multifaceted approach to—
Senator KIM CARR: You've done well! You're down to four minutes—
Senator Ronaldson: addressing this issue.
Senator KIM CARR: in nine months. Quite an achievement!
CHAIR: Senator Ruston.
Senator RUSTON: Taking that one step further, when you make a decision that you are going to fund this company as opposed to that company, how do you not end up creating an unfair advantage for the one that you are giving money when the other missing out? I draw this example to your attention. Senator Xenophon will be well aware of the situation that happened in my home state, where they set up—
Senator XENOPHON: We live in the same state, Senator.
Senator RUSTON: Indeed we do!
Senator GALLACHER: It is mine as well!
Senator RUSTON: Of course. I forgot Senator Gallacher. I am sorry.
Senator Gallacher interjecting—
CHAIR: Ignore the interjections, Senator Ruston, please.
Senator Ronaldson: I married a South Australian, so there you go.
Senator RUSTON: There was a $20 million program that was put on the table for diversification in the river land area because of the Murray-Darling Basin and the impacts of water reductions. In the allocation of this funding, $1 million might be given to Joe, but Fred, who was neighbouring Joe, did not get $1 million, giving Joe a competitive advantage over Fred. It caused massive conflict within the community. I know that is only a small example. But how, when you are developing your programs, do you ensure that you do not end up giving one group, one party, one business or whatever a competitive advantage over someone else?
Mr Ryan : That is good question. You do try to at least make the playing field level for all the players within an industry. The challenge, particularly with a diversification program, is that you do not create an unfair advantage, that by helping one company you do not put another one out of business. In drafting the guidelines—and this is something that we are conscious of in drafting our guidelines—we do try to look for activities which are more likely to go into export markets rather than into the local market. We are looking for activities that might bring new products onto the market. If it is a completely new product, then it is not competing with another product that is involved in the market. But, at the end of the day, it is a worry, yes. We try to guide it so that we do not create that unfair advantage.
Senator RUSTON: Okay. Senator Cash, before I finish, can I ask you about the manufacturing transition program. Where does it sit within those broader objectives we were just talking about? What are its objectives and where we are at with them?
Mr Ryan : Senator, the manufacturing transition program is a $50 million program. It is an election commitment for the government. This program is aimed at assisting manufacturing firms develop into new product ranges and activities. The program is—have we put the guidelines out yet?
Dr Byrne : The guidelines are currently under development.
Mr Ryan : Sorry, the guidelines are under development at the moment.
Senator RUSTON: Okay, so there is not a great deal more that you can give us on what the specific details of the program are.
Mr Ryan : It will be a three-year program. The expectation is that it is more likely year 2 is the year that most of the activity will take place.
Senator RUSTON: I suppose what I am asking for is any details. You have said that you are spending $50 million to try to develop new products, ranges and activities, but are there any specific things that you are suggesting that this program should be doing to deliver those outcomes? Or is that still under development?
Mr Ryan : It is still under the guidelines, yes.
Senator RUSTON: Okay. It is a three-year program. When do you think the program will actually start?
Mr Ryan : The first part of the expenditure will occur in the next financial year, but as I said the majority of it will occur in year 2 and then the remainder, the residual, will occur in year 3.
Senator RUSTON: Is there a jobs target attached to this program in terms the creation of new jobs or the transition of existing jobs into new areas? Is there a focus on this?
Mr Ryan : There is no jobs target.
Senator RUSTON: So in the development, the creation of jobs growth was not one of the driving criteria?
Mr Ryan : With most programs what you seek to do is to try to create a net economic benefit for the economy. You do try to put industries onto sustainable footings so that they are not on a long-term assistance program. It is meant to be a catalytic change.
Senator RUSTON: So more job security then. Thank you.
CHAIR: Before we head back to other senators, and presumably the car and automotive industry, I want to ask another couple of questions before we get them back up. This is something that I flagged I was going to ask about earlier—that is, the Tasmanian Major Projects Approval Agency. I am curious as to what progress has been made in the establishment of this agency as we work towards assisting rebuild the Tasmanian economy.
Mrs Bray : We are currently in negotiation with the Tasmanian government. We will be working together with them and the Office of the Coordinator-General, which is a new initiative of the Tasmanian government. How will we be working between the two agencies? We have had a number of discussions and we are on track to open the agency on 1 July. In terms of employees for the agency, we have appointed those people who will be in the agency allocated in Tasmania, in Launceston. In terms of the advisory board appointments, we have provided some recommendations to government and government is currently considering those possible appointments.
CHAIR: Is that a federal government or a state government decision—or both?
Mrs Bray : We are hoping that the advisory board will include two ex officio members who are state government and Commonwealth government, as well as two other appointments out of industry or the community. In terms of the two non ex officio appointments, that is a decision for government.
CHAIR: If you are intending to meeting the election commitment on 1 July, which is less than a month away—you say you are doing it—presumably that is well advanced.
Mrs Bray : I believe so. We have the likely location determined, and negotiations are occurring right now in terms of the premises. Those will be in the same building in Launceston as a number of agencies that are in the Commonwealth but also in the Tasmanian government. The Department of State Growth is the new department in the Tasmanian government, and they are located in that building. We hope to be very closely located to the Office of Coordinator-General.
CHAIR: What is the primary aim of the Tasmanian Major Projects Approval Agency? How much money has been allocated for it and what is it intending to achieve?
Mrs Bray : Over the next three years funding for 2014-15 is $0.926 million; in 2015-16 it will be $0.904 million and in 2016-17, $0.901 million. In terms of the activities, the aim of the Tasmanian Major Projects Approval Agency is to help inform major project proponents of all the regulations or approvals that they need to do across the Commonwealth. We hope to work with the Office of Coordinator-General to identify the state and local ones. Then the aim is to attempt to map those in terms of when they need to be done, when the milestones need to be achieved, to look at any overlaps and to see what might be the critical path through those, and to try to streamline them if possible.
Certainly, the aim is not to usurp any of the regulations or approvals—they are in place—but it is to try to identify them and make sure that people do not miss the ones that they need to meet. And the aim is to coordinate them, if there are any ways of doing that.
CHAIR: So the aim is essentially to assist those who are looking to invest in the state, streamline the processes of dealing with government regulations—not to usurp, as you said, but to make it easier for proponents to identify what they are and understand what they need to do and to meet those obligations.
Mrs Bray : Yes, indeed.
CHAIR: That is with the end aim, presumably, of attracting more investment or making it easier for investment in Tasmania, and therefore job and wealth creation.
Mrs Bray : Yes, there are a number of benefits if you can reduce any opportunity costs, through unnecessary delays because a proponent did not know about a particular regulation. That is one benefit. That means that investment can occur faster. And there is the benefit of possible investment attraction because the agency is there to assist.
Senator Cash: Chair, perhaps—given you are a senator for Tasmania—I could just add, for the record, that you would be aware that this was an election promise by the then opposition, which is now the government. It was set out in our election commitment policy, The Coalition'sEconomic Growth Plan for Tasmania. You will be aware that the agency will commence its operations on 1 July 2014.
If I could add to your question in relation to the primary aim of the Tasmanian Major Projects Approval Agency, I will advise as follows, for the record. The overall objective of the agency is to facilitate private sector investment in Tasmania, and to create an environment which will aid investment attraction to the state. In particular, it will aim to improve the speed and efficiency of Commonwealth and state regulatory approvals in Tasmania for new projects that require some form of Commonwealth regulatory approval or compliance-reporting processes; ensure that the proponent is aware, up front, of all approval requirements and time lines; and manage all approval processes for projects that intend to invest a minimum aggregated total of $50 million in new gross fixed capital within Tasmania by no later than 2020.
So, certainly in terms of delivering on our election commitment, we are well and truly doing that.
CHAIR: And everything is on track of 1 July of this year?
Senator Cash: My understanding is that it is, unless the department tells me otherwise. We are on track for a commencement date of 1 July 2014.
CHAIR: Excellent news. Thank you.
Senator MADIGAN: Mr Ryan, in Senator Ruston's questions you spoke about encouraging innovation. Does the government have any policy or any intention of addressing the concerns of intellectual patent trademark protection that Australian companies face with the ripping off of their designs and intellectual property by foreign firms and individuals? To support them to protect those things; it is one thing to innovate but if our government does not help them protect their intellectual property, their patents and their trademarks, this has an adverse effect on them when they are exporting to overseas markets.
Mr Ryan : As part of the competitiveness agenda, we are looking at a number of aspects about protecting intellectual property. We are also looking at issues about encouraging the development in Australia of ideas that are patented here—and might be developed in Australia—being sold to go overseas.
Senator MADIGAN: Is there anything specific proposed to help our innovative companies to protect their intellectual property, their trademarks and their patents?
Mr Ryan : I am wondering what it is in the current process that is of concern? It is a pretty good system that we actually run now.
Senator MADIGAN: Many companies that I know, and quite a few who do export, are continually saying to me how their trademarks and their product get ripped off. There is product coming into Australia that trades under a very similar name to theirs. It is a rip-off of their product. It is their product; they have patents. It is their intellectual property. It is their IP—and there is little or predominantly no assistance for them to help them protect their property.
Ms Beauchamp : I will add a couple of things. We are looking at IP arrangements as part of the competitiveness agenda that Mr Ryan spoke about. We will be looking at how our entrepreneurs program and commercialising ideas are managed. We do have IP Australia as part of the portfolio. They were not called to these hearings. But I am happy to take that back and see if there is a particular problem—the systemic problem that you seem to inferring. I think we have a fairly robust system that meets international standards. I will take that on notice, if that is okay with you.
Senator Cash: Senator Madigan, could you provide some additional details—particularly in relation to the people who have come to you—so that we are able to look at those specific examples to give you an informed response.
CHAIR: I have a couple of questions about automotive industry assistance. At the last estimates a question was taken on notice where I asked what the total quantum of government assistance was that had been provided to the automotive sector since the 1980s. I received an answer on that which suggested that it was around $30 billion since 1997. How many cars have been made in Australia since 1997?
Mr Durant : Around five million—something like that.
CHAIR: That is roughly $6,000 worth of assistance per car that has been made in that period?
Mr Durrant : I am just giving you an estimation. I would have to check.
CHAIR: Would you mind taking it on notice? If it was, then that would be around about $6,000.
Mr Ryan : They may have actually put a figure in the draft PC report. Currently it sits at $5,000 per car.
Senator KIM CARR: That is highly disputed.
Senator CASH: Senator Carr, the official has given his answer in terms of the Productivity Commission report.
CHAIR: The $30 billion, according to the answer to the question on notice, also came from the Productivity Commission report. The $30 billion according to the Productivity Commission, if it is applied to roughly 5 million cars, works out at about $6,000. Maybe it is a few more cars than to give you the $5,000 figure. But $5,000 per car, in terms of assistance, is what the Productivity Commission has calculated was used to make the cars.
Senator GALLACHER: Mr Ryan, what is your title? Is it strategic policy adviser? I have seen senior policy advisers and policy advisers. What is a strategic policy adviser?
Mr Ryan : Someone who is older, I think.
Senator GALLACHER: Is it? Well, you are being questioned by someone who is older. In your brief, you would obviously be aware of the South Australian government's supply chain mapping exercise to determine the size and concentration of the automotive industry in South Australia and the exposure of associated suppliers in the event of the withdrawal of GM. Would you be aware of that?
Mr Ryan : I am aware of it generally, yes.
Senator GALLACHER: It is very clear in your evidence here today that you have a strong view on lots of things. This exercise found there were 33 tier 1 companies where GM and/or the auto industry in general are the firm's core business. In South Australia they employ 3,719 people, providing components and services to all three OEMs—original equipment manufacturers—Holden, Toyota and Ford.
These tier 1 companies have a combined revenue of $1.131 billion and supply the three OEMs with the support of 1,270 suppliers nationally. A further 719 companies, employing 28,000 to 32,000 people are estimated to supply a wide range of services and products to the tier 1 companies. Is that an incorrect summation of the situation in South Australia?
Mr Ryan : No, Senator.
Senator GALLACHER: That is a very clear, factual summation including the amount of dollars—$1.131 billion—and the really high number of people totally dependent on this sector.
Mr Ryan : That is consistent with the numbers we have come up with. We have said that, overall, there were 27,500 auto workers affected. Of that, around 5,000 are in South Australia.
Senator GALLACHER: There are 3,719 people providing components to all three OEMs. That does not count the people employed at Holden. There is another 1,700 there.
Mr Ryan : I can only tell you the numbers we got from the automotive—
Senator GALLACHER: There is no need to go into too much of a debate but suffice to say this is a very significant number—$1.131 billion—and lots of people.
One of the officials up there said something about North Adelaide. Let me tell you: the Holden plant ain't in North Adelaide! If it was in North Adelaide, I would be on Senator Ronaldson's side: they can look after themselves. But it is not. It is Elizabeth, it is Munno Para, it is Davoren Park—it is the northern suburbs, and there is a big difference between the northern suburbs of Adelaide and North Adelaide. So wherever you have mentioned North Adelaide, do not worry about using that one again.
Only 25 per cent of these Tier 1 companies are sufficiently diversified to continue in the market were domestic car manufacturing to cease; and
All 719 companies surveyed would be vulnerable, with risks ranging from moderate to severe. The most pessimistic forecast places 6,600 out of 7,700 FTEs at risk.
Do you or your department, or does any of the evidence you have, dispute any of the assertions made in this submission to the Productivity Commission?
Mr Ryan : We work off the figures that we have of the number of employees that are registered on the Automotive Transformation Scheme. There are various other studies that are done to look at the impacts that can happen. The results of those studies really depend a lot on the models and some of the assumptions that you are making in there.
Senator GALLACHER: I am not making any assumptions. I am quoting from a submission to the Productivity Commission and I am asking if you have read it. Have you, as a strategic policy adviser, evaluated it and found any flaws in that logic in that submission?
Mr Ryan : As I indicated, I am aware of the report. I cannot say that I have evaluated it, but it would have certainly come to our team's evaluation. The Productivity Commission itself would have evaluated it as well.
Senator GALLACHER: Is there any dispute about the submission that the South Australian government has put up? Are people saying it is not factual?
Mr Ryan : I would have to give a more detailed response in terms of going through precisely what our assessment of that report is.
Senator GALLACHER: We have heard here today that you cannot just keep putting money into manufacturing. It is not a good idea. I think even the secretary had a stab at that. I am talking about real people in real companies doing real work in an area of Adelaide that has been manufacturing cars for a long time.
Ms Beauchamp : I think the government has made announcements about how to respond to some of those elements in terms of the growth fund and the manufacturing transition program.
Senator GALLACHER: I am going to get to that. I am going to ask those questions. I want to lay it out on the table, because I did not hear it in any great detail. I am being very parochial. I want to put on the table exactly what is at stake. Then I will be absolutely delighted to hear about it. As I said to Senator Birmingham in the chamber: 'Show me the way forward, Simon. Show me the way forward. Show me where I can tell those workers they are going to go and get a job.'
CHAIR: Senator Gallacher, do you have a question?
Senator GALLACHER: Yes, I do. And I will eventually get to it. Another critical element to this submission was that the low level of diversification and the high dependency on the automotive industry amongst the tier 1 companies meant that only 44 per cent of SA supplies have achieved sufficient levels or significant levels of diversification. There are suppliers which have invested in niche markets and high-tech capability, but there is an extremely high number who have not. So there is nothing in this submission that says what you have suggested here today. Is that contrary to your findings and your strategic policy advice?
Mr Ryan : Can you be a little but more specific? I am not quite sure where we are—
Senator GALLACHER: You made mention of Precise Engineering.
Mr Ryan : Yes.
Senator GALLACHER: Forty-four per cent have achieved some level of diversification. You came up with one company. Is 50 per cent of the other tier 1 companies just at risk? Is that also the reverse of what you have found?
Dr Green : The economic review reports that the government has released are very candid about this issue and about the prospects for any of the automotive supply chain companies. The reports are very candid about that issue.
Senator GALLACHER: So there is no solution in the marketplace? People can just redirect their manufacturing capabilities to other areas?
Dr Green : No, I think—
Senator GALLACHER: I am building a case for what is going to happen.
Dr Green : As Mr Durrant explained earlier, a number of international companies who are here support the passenger motor vehicle manufacturers. As he explained, more than likely they will make a decision notwithstanding the representations from their local CEOs. They will make a strategic decision to exit the Australian market. There are a number of other companies who do not have either the financial capability or other capabilities to diversify, and then there is another group who may well have opportunities, who may have gone down the path already to some extent and who may have further opportunities. The reports are very candid about the likely prospects of the automotive supply chain.
Senator GALLACHER: In terms of geography, of the 719 companies participating in the automotive supply chain in South Australia, 203 operate from the northern suburbs—not North Adelaide, the northern suburbs. This high percentage of retail and distribution oriented companies in the northern suburbs is indicative of the complex requirements of the sector. The exercise indicates that the northern suburbs are likely to sustain more severe employment impacts than other regions. Is that also consistent with your evaluation of the sector in your strategic policy advice role?
Mr Ryan : It is certainly true that the activity is concentrated in those areas. As we put in our report, we had a look at what happened to the employment outcomes when we looked at what we call the highly affected regions, which were Playford, Salisbury, Tea Tree Gully and Onkaparinga. One of the things we found in that analysis of the ABS data was that between 2006 and 2011, while the national unemployment rate went up, in Playford the unemployment rate actually went down marginally, in Salisbury it went down, in Tea Tree Gully it went up and in Onkaparinga it went down.
Senator GALLACHER: What about Davoren Park, Munno Para and Elizabeth? Have you been to the Holden plant in South Australia?
Mr Ryan : They were not included in the study.
Senator GALLACHER: Which of the suburbs is the closest to the GM plant?
Mr Ryan : Elizabeth.
Senator GALLACHER: But they were not included. Okay. Basically, all I sought to do there, Chair, was say, 'This is the situation we in South Australia find ourselves in.' I would be excited and very pleased to hear the way forward with this $50 million, whether it is the manufacturers transition program with nothing in the first year and the guidelines not drawn up yet—that is what I think Mr Ryan said, so people are not going to get too excited about that program. But what is there for people, manufacturers, small businesses and employers?
Ms Beauchamp : The growth fund has outlined key elements of assistance to be provided to both the component elements of the supply chain and employees. There are a range of skills, diversification and infrastructure elements with the growth fund. There is the manufacturing transition growth fund, which is also more of a national focus. There is also the industry skills fund that we are looking at in terms of making sure they are tailored to support employers taking on particularly vocational education and training applicants. We are also looking at the entrepreneurs program in terms of opportunities to commercialise ideas and bring SMEs and researchers together. So there are a range of different sorts of interventions. Primarily the growth fund has been specifically designed around the auto industry transition.
Senator GALLACHER: And how many components manufacturers or representatives of component manufacturers have been spoken to about these projects? Have you had detailed discussions with them? Have you sent them a letter or put it on a website, or are you actually going to talk to people?
Ms Beauchamp : There are quite a number of organisations that have contributed and made submissions to these reviews in South Australia and Victoria.
Senator GALLACHER: My question is: has the department had any discussions?
Dr Green : We are about to launch consultations around the design elements of the growth fund in consultation with the contributing partners—the state governments and the auto companies. I think it is worth noting that there are still some 200,000 cars being produced in Australia, and we need to ensure that people are available and that the companies who are supply those car makers at the moment continue to be available through to 2017. There are a number of years to go to 2017, and when we look at the elements of the growth fund we need to look carefully at when the elements of the fund become available in order to best support transitions at the appropriate time.
Senator GALLACHER: Thank you.
Senator KIM CARR: How can you say that while the government is taking $1.15 billion out of the automotive program? How can you possibly say to this committee that we have to look toward 2017 and the employment of those people and production of those vehicles when the government has proposed to take $1.15 billion out of the automotive program?
Senator Cash: I assume you asked yourself those same questions when you were the relevant minister. This situation did not happen overnight—
Senator KIM CARR: Rubbish. Complete Rubbish. You drove the auto industry out of the country.
Senator Cash: I would like to see reflected in Hansard that you asked yourself that during the six years that you were in charge of this industry.
Senator KIM CARR: Complete rubbish.
CHAIR: In accordance with the program, we will now break until four o'clock.
Proceedings suspended from 15:45 to 16 : 01
CHAIR: We will recommence, continuing program 3, subprogram industry.
Mr Ryan : Could I just correct the record for something that was said in the previous session. This clearly shows I do not come from South Australia. I was asked why Elizabeth was not in our analysis. I was talking about the local government area of Playford. Playford covers Elizabeth, Craigmore, Davoren Park, Smithfield, Munno Para and Virginia. So I just want to make sure—
CHAIR: I imagined when you were talking about north Adelaide you meant northern Adelaide as opposed to the suburb of North Adelaide.
Mr Ryan : I think it was one of the other senators who actually said—
Ms Beauchamp : Northern suburbs.
Mr Ryan : One of the points to take out of Playford was during that period between 2006 and 2011 there were 553 jobs lost out of the auto sector, but there were 4,182 jobs created in the local government area.
CHAIR: Thank you very much.
Senator WHISH-WILSON: I have got a few questions on the Tasmanian Major Projects Approval Agency. I understand Senator Bushby has already raised it. Could you just confirm that that the project begins on 1 July and has $2.7 million allocated over three years?
Ms Beauchamp : That is correct.
Senator WHISH-WILSON: I understand the agency will work with major project proponents who intend to invest an minimum aggregated total of $50 million in new gross fixed capital. That is from the government's website. Has there been a list of projects already brought forward for the agency to work on, or does establishment mean it will not actually be set up for three years?
Mr Ryan : We have not yet established ourselves to look at those projects. But when we were designing the $50 million benchmark we did look at the range of projects that that covered in Tasmania. We looked back historically to see the types of projects that were covered off.
Senator WHISH-WILSON: Is that your expectation of the types of projects going forward that it would look at?
Mr Ryan : It is a mixture of mining and manufacturing and potentially even major tourism projects.
Senator WHISH-WILSON: In terms of the major tourism projects, there was an article in the Examiner this morning that said the first cab off the rank would be looking at developments in national parks. Would that sound right to you: $50 million proposals in Tasmania's world heritage areas and national parks? I am just saying that is what the article was reporting.
CHAIR: If you are going to quote from articles—
Senator WHISH-WILSON: I will quote directly from now on.
CHAIR: No, if you are going to do that you will probably need to table a copy of that article.
Senator WHISH-WILSON: Certainly, I am happy to table that.
Mr Ryan : It is the Office of the Coordinator-General within the Tasmanian government that would look at that.
Senator WHISH-WILSON: So, the Tasmanian state government?
Mr Ryan : The approval agency is going to work with the Tasmanian Coordinator-General's office. We are trying to see all of the approval processes that you need to get a major project up, and we will be looking at what Commonwealth approvals need to be met and making sure that they are not holding projects up, and then we will be working with the Tasmanians to make sure that the Tasmanian ones are being looked at. In that particular case, they seem to be the Tasmanian approvals.
Senator WHISH-WILSON: My understanding was that this would be for the whole country but based in Launceston. But is it just going to be for Tasmanian projects?
Mr Ryan : Just for Tasmania.
Senator WHISH-WILSON: Is there a reason why Tasmania needs a special streamlined process for development of major projects?
Mr Ryan : All I can say is that it was a government election commitment and you would have to ask the minister.
Senator WHISH-WILSON: I will not ask you about the politics around it, but I would like to ask your professional opinion on why this would be needed in a place like Tasmania.
Ms Beauchamp : It was part of a broader suite of measures in terms of the coalition's commitment to Tasmania. This was just one element of the program.
Senator WHISH-WILSON: I appreciate that. I am just interested in (a) how it is going to function and (b) why it is necessary to have a separate process in Tasmania that is different to other states.
Ms Beauchamp : The policy itself has merits, and, if it is successful, perhaps could be replicated elsewhere. But, in terms of getting approvals processed at the local government, state and Commonwealth levels, I think it will be a good mechanism to work closely—co-location being one of them—and with the key portfolios in the Commonwealth and the state to make sure that we can ensure projects and approval processes are streamlined and hastened as much as possible.
Senator WHISH-WILSON: But there are no precedents for this.
Senator Cash: Could I just confirm that you said that you are genuinely wondering why we had an economic plan for Tasmania versus the rest of Australia?
Senator WHISH-WILSON: No, this is specifically around planning, particularly.
Senator Cash: Okay.
Senator WHISH-WILSON: This is a major projects planning agency. I genuinely did think it was for the whole country but based in Launceston. I am just interested in why Tasmania has been singled out to have its own planning agency, for major projects—$50 million and larger.
Mr Ryan : We do, at the Commonwealth level, have a system which we call the major projects accreditation. So if a major project—usually it is foreign investment—is coming into the country, they seek this major project status and that gets a degree of support from the government, to try to make sure that that project does not get held up for particular reasons. It can also lead to consideration of certain benefits in terms of what we call by-law entry of equipment and so forth that they may want to bring in.
Senator WHISH-WILSON: Just so I can get this clear, though: within the existing processes that we have for major projects, will it still comply with all existing federal laws?
Ms Beauchamp : Yes.
Senator WHISH-WILSON: So, if that is the case, why would there be efficiencies or synergies from having this in Tasmania? Are you going to be, for example, relocating staff from other agencies and basing them in Launceston? Is that something that is being proposed?
Mr Ryan : We actually are going to move some of our staff down to Launceston, yes.
Senator WHISH-WILSON: Give me an idea of how many staff you would be considering.
Mr Ryan : There will be only three staff, or four staff.
Senator WHISH-WILSON: Four staff, yes. And has the project proceeded to the stage where you have selected a location?
Mr Ryan : Yes.
Senator WHISH-WILSON: As to the $2.7 million allocated, is that for renovations or rentals, or is that going to be a separate cost?
Mrs Bray : The money is allocated to a range of things—mainly staffing, and property costs in terms of rental of suites down in Launceston. There are some travel related costs, in terms of getting to major projects, and also a very small amount for an advisory board.
Senator WHISH-WILSON: I will obviously follow that with interest. I have just a couple of quick questions. Once again, it seems Senator Carr has gone into a fair bit of detail around the entrepreneurs infrastructure fund. Would it be fair to say the plan for this funding is that the money is for seed capital—for equity or risk capital—or is it going to be more of a financing arrangement?
Mr Ryan : As we said earlier today, we are still in the consultation process—actually working out the finer details of the way the Entrepreneurs Infrastructure Programme is going to run. We need to be a bit careful about what we call seed capital in this.
Senator WHISH-WILSON: For risk reasons.
Mr Ryan : But I understand what you mean. It is a sort of an equity investment into a project. Certainly the broad intent is that we are seeking to be in the space of trying to commercialise ideas. How that is actually going to show itself will become apparent once we issue the guidelines.
Senator WHISH-WILSON: I am involved in a project in Launceston doing a similar thing and the government has invested in infrastructure to bring communities together, but I am fascinated by how you might step into the seed capital space as a government, directly, and whether it is more about enabling the development of ideas.
Ms Beauchamp : Some of the feedback we have had, particularly from the industry peaks, is that our value-add in terms of the service offer could be more of a facilitation and brokerage role—making sure the SMEs develop robust business plans and can absolutely present a good, strong business case to potential financers, which we would then also seek to bring together.
Senator WHISH-WILSON: Can you think of any benchmarks, nationally, that you are basing the project on?
Presumably you have thought this through, because it is a fairly big chunk of money.
Ms Beauchamp : Yes.
Senator WHISH-WILSON: What is the model—the benchmark?
Mr Ryan : A lot of it has been based on the experience we have had with past programs and the feedback we have had from participants. What we have been trying to work towards is having, first of all, a more simplified approach to how we engage with companies and how we might respond to them, so it is more streamlined for them—so how they go in is less confusing. The beauty of the Entrepreneurs Infrastructure Programme is that it allows you to have the flexibility to actually, if you like, tailor the support for the company that is making the inquiry.
Senator WHISH-WILSON: That is interesting. Could I ask one final question; it is a fairly broad one. I sat here for an hour or so listening to discussions around the car industry and one of the earlier witnesses was talking about how the car industry had gone through five-year risk plans. I was just wondering if you could provide any feedback on how much free trade deals have influenced the disruption we have seen in the car industry? I did not hear it mentioned while I was in here, but do you have any comments in terms of feedback from the automotive industry itself?
Mr Ryan : The answer to your question is that the free trade agreements have been negotiated but have not come into effect yet.
Senator XENOPHON: Thailand.
Mr Ryan : Sorry, yes—Thailand. I thought you were talking about the current—
Senator WHISH-WILSON: Companies are forward-thinking. They would have done analysis into—
Ms Beauchamp : The companies were very clear, when they were making those decisions, on what basis they were making them. It was for a number of reasons and it looked like it was a cumulative impact, rather than one directly attributable to the free trade agreements.
Senator WHISH-WILSON: It is a cumulative impact, but they all very clearly fingered free trade deals as being a consideration. You said you had a five-year risk management process you went through with them. How much discussion was there with your department around the risks of free trade deals? How much—I would not say lobbying—was there? Clearly they were worried about more changes to tariffs and the impacts of those changes on the profitability of their industry.
Mr Ryan : Over the course of the negotiation of the two free trade agreements that I was thinking of, which are the Korean and the Japanese agreements, we have along with DFAT been in close consultation with the automotive industry, because we knew what those countries wanted in terms of what they wanted to be able to sign up to in an agreement and what we were seeking to get from those agreements. It was a very detailed analysis to work out what sort of phasing might be allowable in order to minimise the impacts on the industry over a period of years.
Senator WHISH-WILSON: Did you provide any advice to DFAT and the negotiators that the industry were speaking to you directly about their concerns on free trade deals.
Mr Ryan : They were talking directly with us and also directly with DFAT.
Senator WHISH-WILSON: I know they have been involved globally with the TPP, but I was just wondering if you had actually provided any briefs to the ministers around concerns on the free trade deals.
Mr Ryan : One of our staff was actually part of the negotiating teams in Korea and in Japan.
Senator WHISH-WILSON: So the negotiators would have been well aware of the potential impacts on the car industry, including the Korean free trade deal. Thank you.
Senator XENOPHON: Further to Senator Whish-Wilson's line of questioning in respect of free trade agreements, does the department provide advice to the Department of Foreign Affairs and Trade in respect of the negotiations of those free trade agreements? In particular, if I can go to the Thailand-Australia Free Trade Agreement, shortly after that free trade agreement was in entered into Thailand whacked non-tariff barriers of 33 per cent on Toyota Camrys and 40 per cent on Ford Territories based on engine displacement, which was done unilaterally. Was the department involved in providing advice to DFAT in respect of that?
Mr Ryan : I need my auto people or my trade people as I was not around at the time.
Senator XENOPHON: I am happy for it to be taken on notice, but to any casual observer it looks as though we were mugs in terms of the deal we entered into, only to find that the Thais were whacking big non-tariff barriers on Australian-made vehicles, which killed the opportunity to import vehicles made in Australia into Thailand. Can somebody confirm that was the case? Were these contingencies looked at?
Mr Trotman : I cannot speak to the Thailand free trade agreement; that precedes me.
Senator XENOPHON: You know it exists.
Mr Trotman : That is right.
Senator XENOPHON: You know the terms of it and you know that after we entered into the agreement the Thais whacked on these huge non-tariff barriers on Australian-made vehicles. Do you agree that they are incontrovertible facts?
Mr Trotman : That is right.
Senator XENOPHON: So you agree with that. To what extent did the department provide advice to the Department of Foreign Affairs and Trade in respect to negotiating these agreements to foresee that the Thais were going to do us in the eye, so to speak, after the agreement was entered into?
Mr Ryan : We will probably have to take that on notice.
Senator XENOPHON: Please do.
Mr Ryan : We have been up and down the table and no-one was around when that deal was done.
Senator KIM CARR: Mr Durrant has provided advice on that. I think you will find he is not inexpert in this matter.
Mr Durrant : Senator, even I was not around.
CHAIR: Mr Durrant, please ignore the interjections.
Senator KIM CARR: No, but you have provided advice on the question of the effects of the free trade agreement.
CHAIR: Mr Durrant, ignore the interjections. Senator Xenophon has the call.
Senator XENOPHON: I am happy for that to be taken on notice, but further to that question, what liaison is there between the two departments to ensure that we do not get treated like mug punters again with some of these free trade agreements? I will just go further to the questions asked by Senators Carr, Gallagher and Madigan in relation to the issue of funding and the legislative framework. Can I just clarify, further to Senator Carr's line of forensic questioning in respect of this, if this legislation is not repealed then the money still has to be spent under the ATS. Is that right?
Mr Durrant : That is correct . It is legislated.
Senator XENOPHON: So the government of the day cannot say, 'We are just going to park it and keep it in consolidated revenue'?
Mr Durrant : No. It is law.
Senator XENOPHON: I cannot hear you, I am sorry.
Mr Durrant : Yes, it is legislated that way.
Senator XENOPHON: So the money must be spent in the absence of the legislation being rescinded.
Mr Durrant : The money will be available. It is up to the companies to undertake the activities in order to be rewarded for those activities.
Senator XENOPHON: That begs a couple of questions. In the 2015 calendar year the ATS, according to the budget papers, will plummet from $300 million to $100 million. The industry, the component manufacturers in particular, are referring to this as a 'valley of death' in the sense that they will not be able to transition. Is that something that was considered by dealing with the peak bodies—the Federal Chamber of Automotive Industries, or in particular, the Federation of Automotive Products Manufacturers—which make up the bulk of employment in this sector?
Mr Durrant : The $500 million savings was made known by the coalition back in 2011. The coalition took that policy to the election and in the MYEFO it put in place those savings. The industry has known the current government's position for some time.
Senator XENOPHON: It knew about the promises made by the then shadow minister Ms Mirabella about a cut of $500 million, correct?
Mr Durrant : Yes.
Senator XENOPHON: The industry was aware of that. The further $400 million cut was something the industry was not aware of until the budget. Is that correct?
Mr Durrant : That is correct.
Senator KIM CARR: It is over $600 million.
Mr Durrant : With the rationale that with the closure in 2016 of Ford and 2017 of Holden and Toyota, the decision was made to close the ATS.
Senator XENOPHON: Is there not an alternative rationale that when an industry is in transition, as we saw with the textiles, clothing and footwear sector and, more recently, with dairy deregulation, there is even more need to ensure that the transition is undertaken properly so that alternative markets and/or alternative employment can be found for those workers that will be displaced by the closing of the OEMs, the original equipment manufacturers—Holden, Ford and Toyota—who will be leaving the country in a few years' time?
Mr Durrant : In response to that situation the government has put in place the growth fund.
Senator XENOPHON: It seems, from those in the industry I have spoken to, the need will be greater in order to allow for transition and transformation, but the moneys available are significantly less than was in the ATS in its current form.
Mr Durrant : Recognising that the money in the ATS, in its current form, is for automotive research and development, automotive components production and motor car production. It is for a particular area related to automotive and not related to transition out of automotive.
Ms Beauchamp : Can I just add that there is $1 billion staying within the scheme. On top of that, there is the growth fund—and the other funds that we spoke about—to help during this transition period, even whilst there is no close-down until the end of 2017.
Senator XENOPHON: Is it not the case that the industry is now facing more significant transitional issues as a result of the impending departure of Ford, Holden and Toyota from Australia as original equipment manufacturers? I should make it clear that they will still be here as strong brands, but they will not be making vehicles and, as a result, that affects the supply chain, does it not?
Ms Beauchamp : It does affect the supply chain, indeed, and that is why the government has put in place a number of programs to assist with that transition.
Senator XENOPHON: What I am trying to establish is, has any economic modelling been undertaken to determine the extent of the sorts of funds needed to successfully transition the industry to other markets, to other products, given that they will not be part of the same supply chain in terms of the OEMs? I am happy for you to take that on notice.
Mr Ryan : The industry has been in transition for 30 years but in more recent times, if we look at what change has taken place in the industry, the volume of units has declined from 400,000 units in 2004 down to 220,000 units in 2012—
Senator XENOPHON: Mr Ryan, I am happy for you to put that on notice as we have a tight time frame. Further to the lines of questioning of senators Carr, Gallagher and Madigan, I just spoke a few minutes ago to one of the key industry bodies—FAPM; I hope they do not mind me mentioning this—and they told me that individual businesses had business plans, they did their individual business modelling, based on the ATS providing a certain level of funding in 2015, and that has now been cut from $300 million to $100 million. Many of these are locally owned firms of between 15 and 500 or 600 employees. There are about 150 firms in the automotive component manufacturing industry. Was there any consultation with the sector given that there is going to be a 66 per cent drop in the funding in the 2015 calendar year?
Mr Durrant : As I said earlier, this issue has been known by the industry since 2011—that potentially this was going to be the case. It is being suggested that they had not included it in their business plans, but surely they would have understood that this was a likely outcome, given the situation that the coalition had made.
Senator XENOPHON: I am terribly sorry, but the fact is that prior to the election Ms Mirabella, as the shadow industry minister, said that the coalition would take $500 million away from the scheme. That is a given. The industry was aware of that, in the lead-up to it. But the $400 million taken—Senator Carr says it is a greater amount—
Senator KIM CARR: $618 million.
Senator XENOPHON: I think the budget papers support Senator Carr. This is the feedback I have got from people today, from people in the sector: they are saying people had these funds—the post-Mirabella cuts, if you like—in their business plans and in their modelling; individual businesses were planning on this basis. This is what the industry is telling me. You are talking about 2011, but can you at least acknowledge that this $400 million or $600 million in cuts is something that is quite distinct and has affected the business plans that individual businesses have made in order to find export markets, to diversify, to find new products so that they have a fighting chance of surviving post the departure of the OEMs?
Mr Durrant : I appreciate your point, but I think the most significant thing that has happened for the business plans of the companies is the decision by Ford, Toyota and Holden to leave manufacturing in Australia. That has been the major shock to the industry. The decision of government to close the ATS is an action subsequent to those decisions. The business plans that businesses would have been developing, utilising the ATS, would have been done before the announcements by Toyota and Holden that they were leaving.
Senator Cash: That is the crux of the issue—the decisions were made prior. It is the chicken before the egg, almost. The decisions were made by those manufacturers, and business plans were based on that. We then reacted to that.
Senator XENOPHON: There is a fundamental flaw, though, in what has been put to me. You have a situation where FAPM and the FCAI are concerned that if there is a collapse in the component manufacturers there will be a collapse in the supply chain and that could hasten the departure—none of us wanted to see this—of some of the manufacturers. I think Toyota is the exception, because it has strong export contracts going to the end of 2017. I acknowledge that, but is there an acknowledgement that when an industry is in transition, following a shock to the industry that everybody acknowledges like that experienced by the component manufacturers, there are additional challenges and additional assistance is needed to transition to a successful future? Is that being considered by the department?
Mr Ryan : It has in terms of the growth fund—what is being put in place, and that has those elements in it. It has an element to encourage companies to diversify, and it has an element of what we call the new generation, which is for new industries or new investments outside of the automotive sector. It has elements in it for the jobs—
Senator XENOPHON: I know the elements, and I appreciate what you are saying. But do you acknowledge that the growth fund itself acknowledges that there will be some specific and serious challenges for the components sector post the departure of the OEMs? It is not a trick question. You acknowledge that?
Mr Ryan : Yes.
Senator XENOPHON: But do you acknowledge that those challenges with the impending departure of the OEMs will pose in itself greater challenges to those component manufacturers than the industry continuing as it was prior to the announcement of the impending departure of those manufacturers?
Mr Ryan : Exactly what you are saying is true.
Senator XENOPHON: Therefore, if there is a greater challenge, doesn't that mean that cutting off this fund and reducing the funding next year from $300 million to $100 million makes it almost impossible for these firms to transition? These are the businesses I go and visit in my home state, and Senator Madigan in his home state, and Senator Gallacher is very well aware of it, as is Senator Carr. They just want a fighting chance of being able to find new markets to make new products and processes to continue employing people.
Mr Ryan : I understand all of that.
Senator XENOPHON: But you are giving less money for a greater shock to the sector than the status quo that was continuing prior to their departure.
Mr Ryan : We do not know—but we have some indications—how the car companies are going to respond. One of their responses would be to increase the prices that they will pay to the component people to make sure that they stay. It is a factor that—
Senator KIM CARR: If that is the case, if you were taking 66 per cent of the money, do you think the OMEs will actually increase their prices?
CHAIR: Senator Carr, Senator Xenophon has the call.
Mr Ryan : The starting point is that the car companies are saying that they want to stay until December 2017. The car companies need the component people to continue to provide product, or they have to find an alternative way of finding product to stay open.
Senator XENOPHON: But you have been very gracious by acknowledging that the challenges with the OEMs departing post 2017 will be greater for the component manufacturers in that they have to find new markets, whether they be new markets in the automotive sector—and I do not think I am verballing you; you are agreeing with that—
Mr Ryan : Yes.
Senator XENOPHON: Or they need to make products outside the automotive sector. So there are very significant challenges. What I do not understand is that what the sector is telling me—and a lot of these are Australian owned businesses who have invested between them presumably hundreds of millions if not billions of dollars in plant and equipment—is that they are not going to have a fighting chance given that the ATS fund is being slashed from $300 million to $100 million in the 2015 calendar year. What they are telling me is that that could well be a tipping point to push them over the edge and make them unviable. And if that happens we will then see a collapse in the supply chain and with it the potential departure of the OEMs, particularly Ford and Holden, earlier—which none of us wants. Can you see what the concerns are?
Mr Ryan : I see what the concerns are, but I am saying that the car companies' ambition is to stay here until December 2017.
Senator XENOPHON: But then they are gone, and these people need to find alternative markets.
Mr Ryan : I understand all of that, too. So, you have component people today who have already diversified. Some of them are looking to diversify. And by the time we get to December 2017 some of them will close, some will move into different products. And that comes back to the point that I was trying to make earlier, which is that the economy is dynamic all the time. The growth sectors in South Australia and Victoria we outlined in our report. I have mentioned them again today. They are the growth sectors where all the employment and jobs are going to go.
Senator XENOPHON: Perhaps I can just put to you a quote from Richard Reilly, the CEO of FAPM, who said:
We know that the three domestic car manufacturers are leaving by the end of 2017 and we are working with them to ensure the supply chain can transition out of the industry and remain intact. These cuts—
as in the budget cuts—
will jeopardise that by undermining our ability to plan for an alternative future.
The industry also said, just after the budget, that this:
… sends a very poor message to the global business community. It tells global firms that Australia will not provide the policy certainty they need to confidently invest in Australia.
You work with industry. That is your brief, to work with industry, and for industry to grow. And I will say, so that Senator Cash does not think I am just having a go at the government, that I believe electricity prices are too high. I do not like the carbon tax. But it is more than that. You are not giving these people a fighting chance of survival. I do not understand how this fund is going to provide those funds for a transitioning of this industry.
Mr Ryan : It is quite true that some of these firms will not survive, and some will.
Senator XENOPHON: Have you calculated how many you think will survive and how many will not?
Mr Ryan : No.
Senator GALLACHER: You are going to let the market sort it out.
Mr Ryan : No, what we have done is put in place a program whereby we are seeking firms to come and put forward ideas to us on what we should be putting investment money into—the growth areas that they want to go with.
Senator XENOPHON: But it is a lot less money than the ATS.
Mr Ryan : But a lot of firms will grow without government help.
Senator GALLACHER: Letting the market sort it out.
Mr Ryan : It is. In South Australia you already know which are the industries that are growing.
Senator XENOPHON: Has the department considered—and I can put this to the minister—varying the terms of the ATS to allow greater flexibility given what will occur post 2017? In other words, at the moment the legislation is clear—the criteria are clear for funding. But given that some of these companies will need to transition out of automotive to another form of manufacturing, is that something the department and the government have indeed looked at?
Mr Ryan : What I can say is that the government has received the Productivity Commission report on the future of the—
Senator XENOPHON: Which has not been released yet.
Mr Ryan : It has not been released.
Senator XENOPHON: Can you tell me when it will be released?
Mr Ryan : I cannot tell you that, but I can say that when the government gives its response to that it may actually cover off what you are raising at the moment.
Senator XENOPHON: But are we looking at two months, three months, four months? I do not know whether the minister can help me on that.
Senator CASH: To the extent that I am able to assist you, my understanding is that automotive policy will now focus on assisting an industry that is in transition, so that is certainly the intent of the government. We are still considering the findings of the Productivity Commission's review into the automotive industry, and I understand that the minister hopes to respond to that in the coming weeks. In particular, in terms of the minister and the key players within the industry, my understanding is that the minister remains in constant contact with them. In relation to the rest of the question, though, I would have to take that on notice.
Senator XENOPHON: The cold comfort is that it is $300 million to $100 million next year, but there is that valley of death—
Senator Cash: And I appreciate the comment you made before, that you are not just having a go at this government; you are prepared to share the blame—
Senator XENOPHON: Well, I am having a go at this government for slashing the fund.
Senator Cash: I understand that. But, again—and I have made the point previously, and I will make it again for the record—this situation did not happen overnight. And I would hope, given your interest in this industry, that you would at least be prepared to acknowledge for the record that you do know that. We have been left with a situation that we now have to deal with as a government, and we are dealing with it in the most responsible manner possible. As I have said to you, we understand that this is an industry in transition, and going forward that is what our policy will focus on: the industry in transition.
Senator XENOPHON: And, just for the record, I do not think the Treasurer's statement last year taunting Holden—'are you going to stay or are you going to go?'—the day after they said they were prepared to stay was helpful either.
CHAIR: You mentioned, Minister Cash, that this is a problem that has been building up for some time. How many major car manufacturers have actually been in operation in Australia over the past century?
Mr Ryan : There have only been four.
Senator Cash: And to clarify, for the record, Mitsubishi and Ford made their decisions to close under the former Labor government.
CHAIR: That is what I was going to get to.
Senator KIM CARR: That is not actually true.
Senator Cash: Yes it is, Senator Carr.
Senator KIM CARR: That is not true. That is another untruth.
CHAIR: Senator Carr, perhaps you could hold your interjections. You will have an opportunity to ask questions in a minute. So, of those four, two closed during the period of the last government.
Senator Cash: Mitsubishi's and Ford's decisions to close manufacturing operations in Australia were made under the previous Labor government.
CHAIR: Which left Holden and Toyota—
Senator Cash: Correct.
CHAIR: who have announced since the election.
Senator Cash: Correct, and the decisions for both Holden and Toyota to cease manufacturing in Australia by 2016 were made entirely by the motor vehicle producers themselves.
CHAIR: Given that those decisions have been made—the two that occurred within the term of this government and the two that occurred under the previous Labor government—what decisions have been made by this government in terms of how it will proceed to help the auto industry transition and to provide a platform for industry to create new jobs and to find new markets?
Mr Ryan : What has been put in place is the growth fund, and the growth fund looks at the skills of the workforce within the auto industry so that even pre the closure of the car companies these skills will be recognised and developed. We also have a program that is looking at the diversification of the components sector, and we also have a program that is looking at new investment into new activities and growth areas. Finally, there is an element that just looks at what infrastructure investment could be done that might support manufacturing. In addition to that, there is the manufacturing-in-transition program. But, even broader, there is a range of broader policies that are based on regulatory reform and trying to make the Australian industry more competitive overall.
Senator Cash: For the record, in terms of the assistance that we are providing to industry across the board, perhaps I could read out to you the actual programs that we have in place in addition to what Mr Ryan has outlined: the entrepreneurs infrastructure program, $484 million; the manufacturing-in-transition program, $50 million; the growth fund, as referred to, $155 million in total; the Industry Skills Fund, $476 million; the Trade Support Loans, $1.9 billion; Geelong Region and Melbourne's North Innovation and Investment Funds, $54 million; and one that you would be aware of, the Tasmanian Innovation and Investment Fund, $11 million. So, in total, we are investing more than $2.25 billion into industry programs over the forward estimates, and that investment will deliver real jobs and real outcomes.
CHAIR: And opportunities for people from other industries to move into new industries, which may well include people who are currently in the auto industry.
Senator Cash: Exactly.
Senator GALLACHER: I appreciate that answer. How much of that funding over the forward estimates is available right now, today, for component manufacturers to access? You have talked at length about this transformation program, but I heard earlier that guidelines are not developed, there is no money in the first year, and it comes in in 2015. So, what is on the table right now?
Senator Cash: In terms of the forward estimates—you obviously understand what forward estimates are—
Senator GALLACHER: Probably not, Senator Cash. You might as well keep me educated.
Senator Cash: Mr Ryan might be able to explain to you what forward estimates are.
Senator GALLACHER: I am sure he could, and I would be very receptive to any information I am not privy to.
Mr Ryan : Some of the funds are actually current funds available today—
Senator GALLACHER: That is my question, really. If there is an emergency, where is it? What is on the table right now?
CHAIR: Perhaps you could allow Mr Ryan to answer.
Mr Ryan : Of the programs that were mentioned, the Geelong regional fund is available now, the North Melbourne fund is available now and the other funds that were mentioned become active in the forward estimates.
Senator GALLACHER: Being a parochial South Australian, and there are people I mentioned earlier in that submission to the Productivity Commission, I am wondering what is there for them.
Mr Ryan : The ATS is still in operation.
Senator KIM CARR: That is right. That is right. This whole thing is a sham.
Senator KIM CARR: You are taking $1.1 billion out—
CHAIR: Order, Senator Carr. Mr Ryan, Senator Carr does not have the call.
Senator KIM CARR: You are cutting funding by 66 per cent.
CHAIR: Senator Carr, you have the call now.
Senator KIM CARR: It is true, is it not, Mr Ryan, that, as Dr Green has just indicated, there is a view in the government that car manufacturing will go on till 2017?
Mr Ryan : The car companies have told us—
Senator KIM CARR: Yes, that is right. That is the view in the government.
Senator Cash: No, no. It is not a view of the government, Senator Carr. If you listen very carefully to what the official—
Senator KIM CARR: If you listen, Senator, I said—
Senator Cash: just told you—
Senator KIM CARR: it is a view within the government.
Senator Cash: it is the position that has been put by the manufacturers themselves. There is a fundamental difference between what the view of the government is—
Senator KIM CARR: So the government does not have that view?
Senator Cash: and the view that has been put—
Senator KIM CARR: So, Minister—
Senator Cash: The government is of the understanding—Senator Carr, we are not in Immigration estimates, so, seriously, calm right down. Calm right down, really.
Senator KIM CARR: So the government does not have a view that car manufacturing will continue to 2017?
Senator Cash: Don't verbal me, Senator Carr.
Senator KIM CARR: I am asking the question: is it the government's view that car manufacturing will continue to 2017?
Ms Beauchamp : The car companies have committed to 2017.
Senator Cash: Exactly.
Senator KIM CARR: Is it the government's view, Madam Secretary? Is it the government's view?
Senator Cash: Senator Carr, the car manufacturers have committed to it. If you are looking for a headline or a press release, you are not going to get one, unless of course you want to talk about the inaction—
Senator KIM CARR: I want an answer to a question.
Senator Cash: of the former government—
Senator KIM CARR: I want an answer to the question: is it the government's view?
Senator Cash: in relation to this portfolio.
CHAIR: Senator, you have put the question to the official at the table.
Senator KIM CARR: And I have not had an answer.
CHAIR: They have answered the way they have chosen to answer. If you have another question, please put that question; otherwise, we will go to a break.
Senator STERLE: He has asked the question four times.
Senator KIM CARR: Is it the government's view that car manufacturing will continue to 2017?
Senator STERLE: Just try yes or no. Knock yourself out. Yes or no—it is not hard.
Dr Green : The government has committed in the forward estimates to fund the ATS until the end of 2017.
Senator KIM CARR: That is right. But you have cut the funding by 66 per cent.
Dr Green : The coalition had an election commitment to take $500 million—
Senator KIM CARR: I am not asking you about the coalition. Is it true—
CHAIR: Senator, you have asked a question; the officer is trying to answer it. Please allow him to answer it.
Senator KIM CARR: No, he is not. He is trying to tell me what the coalition—
Dr Green : As Mr Durrant has explained, there was an election commitment by the coalition government which had been their policy since 2011 which, on election, they proceeded to implement. It was reflected in the MYEFO budget papers and it is reflected again in these budget papers.
Senator KIM CARR: And the $618 million—when does the car industry become aware of that?
Dr Green : The vast bulk of that money is after the car companies have said they are going to close, in 2017.
Senator KIM CARR: But the funding in 2015 is cut by 66 per cent; is that true?
Dr Green : And that is part of the election commitment to save $500 million from the ATS.
Senator KIM CARR: I am not asking a question about what the source of the decision is; I am asking for a factual answer. Is it true or not that you are cutting automotive assistance by 66 per cent in 2015?
Senator STERLE: Just go yes or no. What are you whispering about? Yes or no? What is hard about that?
CHAIR: The officers are entitled to—
Senator STERLE: What is hard about yes or no?
CHAIR: Senator Sterle!
Senator STERLE: It is only two words.
CHAIR: Order, Senator Sterle!
Senator Sterle interjecting—
CHAIR: Senator Sterle, do you want us to adjourn? We can adjourn now and we can go to dinner.
Senator STERLE: How pathetic, Chair.
CHAIR: Senator Sterle, we need a bit of order to make this thing work properly.
Senator STERLE: Yes or no? He has asked five times and they cannot answer once.
CHAIR: Senator Sterle! The officers are entitled to answer in any way that they think is—
Senator STERLE: Well, they are not, Chair. Their lips sealed together is no answer. They are whispering amongst themselves. They haven't got the guts to answer yes or no.
CHAIR: Senator Sterle!
Senator STERLE: Try it. Come on. Knock yourselves out!
Senator Cash: Chair, it is completely—
CHAIR: Do the officers have anything further to add to the answer they have already provided?
Ms Beauchamp : I just want to be clear about the figures that Senator Xenophon quoted. They are not in the budget papers. I think they are based on calendar year, compared to financial year. I just want to be clear about the numbers we are going to.
CHAIR: Senator Carr, I presume you have more questions.
Senator KIM CARR: I have many more questions.
CHAIR: If you want to have the opportunity to ask them—
Senator KIM CARR: If I could get some answers to them it would be even better.
CHAIR: you need to have a bit more decorum in this chamber.
Senator KIM CARR: It is quite clear what the budget papers show. It is quite clear that the government is taking $1.118 billion out of the automotive program. That is quite clear. You would agree, would you not? Mr Durrant, is it correct?
Mr Durrant : You have said 'the automotive program'. There have been a number of assistance programs, so let us not confuse—
Senator KIM CARR: No, no. We are going to go through this again, are we?
Mr Durrant : the ATS and other initiatives.
Senator KIM CARR: Okay. Why don't we just have a look at what the budget papers say.
Ms Beauchamp : Yes, let's.
Senator KIM CARR: What is the figure that the budget papers use for assistance for the automotive industry? Is a $618 million figure used?
Mr Durrant : It says:
The Government will achieve savings of $618.5 million over eight years …
Senator KIM CARR: That is fair enough. On top of that, there was $500 million taken out of MYEFO?
Mr Durrant : That is correct.
Senator KIM CARR: What is the total of those two figures?
Mr Durrant : We had this discussion earlier.
Senator KIM CARR: What is the total figure?
Mr Durrant : It is $1.118 billion.
Senator KIM CARR: That is the amount of money that is coming out the automotive program?
Dr Green : There is an issue about the eligibility of people who might be beneficiaries of the Automotive Transformation Scheme. After 2017, I think you will agree, there is an issue about whether or not that money would be eligible to be taken up after the car companies have closed.
Senator KIM CARR: That might be another issue entirely. It is a question of how much money the government is taking out of the automotive program as a result of this budget measure and MYEFO. I think we are agreeing that it is $1.18 billion.
Senator Cash: Which is almost the same amount as the carbon tax that Labor hit them with—so there you go!
Senator KIM CARR: Can I ask about contract number CN196461, which is a matter I raised in the cross-portfolio discussions, Mr Durrant.
Mr Durrant : The department had a contract with the Australian Government Solicitor. The Australian Government Solicitor for a number of years has provided advice on the ATS legislation. That was a contract of $25,000, and $9,003 of that contract was spent.
Senator KIM CARR: Has it been your custom and practice to record the Australian Government Solicitor's advice in this matter? Is this the regular pattern for recording the transaction?
Mr Durrant : Yes, it is.
Senator KIM CARR: It is a standard contractual arrangement.
Mr Durrant : Yes, and we report it along with other tenders the department have been involved in.
Senator KIM CARR: Why wouldn't you say 'Australian Government Solicitor' in the contract notes?
Mr Durrant : I was following procedure. I do not think it was any different to the way any other tenders are recorded, whether AGS, private sector or other.
Ms Tregurtha : Can I get the question again?
Senator KIM CARR: Why was the Australian Government Solicitor not referred to in the contract notes?
Ms Tregurtha : I would have to look at the contract notes. Is this off the legal services multi-use list?
Senator KIM CARR: This is the contract that I raised with the secretary yesterday—$25,000 for legal services. I understand you came to the table at that point.
Ms Tregurtha : Yes.
Senator KIM CARR: I cannot quite follow why we were not advised this was the Australian Government Solicitor.
Ms Tregurtha : Again, I would have to go and look at the exact record to see why it was put in in that way.
Senator KIM CARR: Okay, thank you. I will come back to the auto industry in a minute, but I have a lot of other business to deal with before we break. Can I go to the TCF program, please. Can you give me a breakdown of the various measures in the budget that relate to the TCF industry.
Mr Sexton : In relation to the TCF, are you talking about what measures go on or what measures—
Senator KIM CARR: No. What programs are reflected in the budget initiatives or in MYEFO?
Mr Sexton : The largest measure is the TCF BIC program.
Senator KIM CARR: That is the small-business program?
Mr Sexton : There is also the TCF Small Business Program and the TCF Structural Adjustment Program.
Senator KIM CARR: That is a $25 million reduction for the first two, is that right?
Mr Sexton : That is correct.
Senator KIM CARR: How is that split between the two programs?
Mr Sexton : It is $22½ million in relation to the BIC program and $2½ million in relation to the small-business program.
Senator KIM CARR: How much is involved with the structural adjustment program?
Dr Byrne : The budget measure for the TCF Structural Adjustment Program is the reduced funding by $1.5 million in 2014-15 to $1 million for 2014-15.
Senator KIM CARR: What about ethical clothing?
Dr Byrne : As you know, Ethical Clothing Australia funding is provided through the Department of Employment, basically to enable activities associated with what was the previous agreement for the application of Ethical Clothing Australia standards to the procurement of TCF supplies to apply for grants from the Commonwealth.
Senator KIM CARR: How much was that?
Dr Byrne : That is a savings measure under the Employment portfolio. As I recall, it may be $1 million for 2014-15. If you give me a moment I can check the Employment figures.
Senator KIM CARR: That is four TCF related programs that have been cut; is that right?
Dr Byrne : Three budget measures for our portfolio and one for the Employment portfolio.
Senator KIM CARR: Yes, but there are four altogether. How many of those require legislation?
Mr Sexton : The TCF BIC program and the TCF Small Business Program are covered by the TCF innovation and investment act. There will be legislative change required there.
Senator KIM CARR: Does SAP require legislation?
Dr Byrne : That does not require legislation change.
Senator KIM CARR: Does Ethical Clothing require legislation?
Dr Byrne : My understanding is not.
Senator KIM CARR: Is the structural adjustment program being completely wound up? Is there any money left in that program?
Dr Byrne : There is funding available for 2014-15 capped to $1 million. Essentially, the funding is to be administered by the Department of Employment for use by Job Services Australia providers to support displaced TCF workers. There is also an element, as you may be aware, in relation to TCF SAP which was funding provided to the Textile Clothing and Footwear Union of Australia, which is actually a facilitative mechanism. That funding also will not be progressed by the Department of Employment, which administers that program on our behalf.
Senator KIM CARR: How does that work? Was there a budget decision to stop the money to the TCFUA?
Dr Byrne : That is a question more appropriately directed to the Department of Employment, but I will comment that advice was provided to the Textile Clothing and Footwear Union of Australia in April this year from the Department of Employment indicating the expectation of the termination of that element of activity underneath the Textiles, Clothing and Footwear Structural Adjustment Program.
Senator KIM CARR: What programs for TCF industries will be left within the department?
Mr Sexton : The TCF BIC program and the TCF Small Business Program will still have expenditures in 2014-15 in relation to activities under the TCF Small Business Program which will occur in 2014-15.
Senator KIM CARR: They are being wound up early?
Mr Sexton : There are 10 rounds in the TCF Small Business Program. Round 9 is close to finalisation and relates to activities that those small businesses will incur next financial year. In relation to the TCF BIC program it does relate to activity this year, but the entitlements will be paid next financial year.
Senator KIM CARR: If legislation is not passed will the money still be paid?
Mr Sexton : In the same way as the ATS program, they will be law. Therefore, those moneys would still be available.
Senator KIM CARR: The Manufacturing Leaders Group, the services leader group: why were they abolished?
Mr Ryan : We are in the process of reviewing all of the advisory bodies that we have within the portfolio and establishing some new bodies. Every portfolio has to have a ministerial advisory council, and we are in the process of establishing that. That would, to a serious extent, duplicate some of the roles that these previous bodies would have done.
Senator KIM CARR: Who will be represented on the ministerial advisory council?
Mr Ryan : That is yet to be determined.
Senator KIM CARR: Will unions be invited?
Mr Ryan : That is yet to be determined.
Ms Beauchamp : These will be decisions for the minister.
Senator KIM CARR: Is there a policy decision to maintain a tripartite basis for ministerial councils?
Mr Ryan : There has been no advice along those lines.
Senator KIM CARR: I understand the Manufacturing Leaders Group was working on a project before it was abolished concerning smart manufacturing for a smarter Australia. Dr Green, you were executive officer, were you not, for that body?
Dr Green : Yes, I was responsible for the secretariat of that group.
Senator KIM CARR: Are you familiar with the project Smarter Manufacturing for a Smarter Australia?
Dr Green : All the contracts that we let under that leaders group funding line have been continued through to their conclusion.
Senator KIM CARR: Was there a project contract issued for $100,000 for that project?
Dr Green : I do not recall a project of that specific name. That may be an adaption of the name of the grant.
Senator KIM CARR: I may well have it wrong. There may be a slight variation, but was there a reference group which worked with AiG and the department on a research program to analyse the scope and scale of non-compliant imported building and electrical products. Was there such a project?
Dr Green : Yes, there was a study. We let a contract for $100,000 to the AiG to undertake that work, and that study was completed.
Senator KIM CARR: That would be the same one. It was completed. Did industry put up $108,000 in kind for that project?
Dr Green : I would have to check the details, but I believe that is broadly correct.
Senator KIM CARR: Would you take that on notice. What has happened to that project—or the project report perhaps?
Dr Green : We have obviously received the report and we continue to work on the issue of non-compliant building products.
Senator KIM CARR: You know that is not going to wash. What you mean 'work on'? Are you going to have a look in it or get the mirror out? What do you do?
Dr Green : We have the Anti-Dumping Commission, we have Customs, we have a range of representations about particular products, we have a product certification scheme that runs under the Building Codes Board, and we continue to assess the situation in relation to compliance with a range of product standards.
Senator KIM CARR: I see. You assess the situation. So what is happening to this particular report? Will it be released. Will it be available publicly?
Dr Green : The report is already in the public domain.
Senator KIM CARR: What recommendations were there in the report?
Dr Green : I do not have the report in front of me at the moment, but essentially the report says that government should work together with industry and other stakeholders to assess the situation further and assess what reasonable steps could be done.
Senator KIM CARR: Is this the same report that AiG released?
Dr Green : Yes, that is the report.
Senator KIM CARR: The government did not release it; AiG released it. Is that right?
Dr Green : That is correct.
Senator KIM CARR: Is it the same report?
Dr Green : That is correct. We gave them a grant to undertake this work, and they produced the report and released it.
Senator KIM CARR: Did the report find that non-conforming products were widespread across the building and construction sector, to the extent that 92 per cent of respondent countries reported non-conforming products in their market sector and 45 per cent reported having adverse impacts on revenue margins and employment numbers. Is that correct?
Dr Green : I think that is a correct statement of something that is in the report.
Senator KIM CARR: The report did contain a number of recommendations. Is that correct?
Dr Green : Yes, there were some recommendations in the report.
Senator KIM CARR: What are you doing about the recommendations?
Dr Green : I think it would be better to take specific actions that were undertaken on notice.
Senator KIM CARR: Thank you.
Dr Green : I did want to just say that the report was compiled from a survey of about 220 respondents and 240 interviewees. Those figures that you referred to before are based on work that is a relatively small sample of what is quite a large industry.
Senator KIM CARR: So you do not regard the report as credible?
Dr Green : No. I am just saying there are limitations in the scope of supporting analysis that goes into that report.
Senator KIM CARR: Did you express this view to the working group?
Dr Green : Yes.
Senator KIM CARR: What action did they choose to take on the matter?
Dr Green : The Ai Group did not expand the scope of their survey work beyond what they had undertaken as part of the contract.
Senator KIM CARR: Can I ask you with regard to Australian Industry Participation Plans—do you handle those, Dr Green?
Dr Green : Sorry?
Senator KIM CARR: Did you handle the Australian Industry Participation Plans?
Dr Green : I will just get another officer to come and support me on that.
Senator KIM CARR: Mr Wilson, my recollection of the Australian Industry Participation Plans regulatory statement, contained in the Australian Jobs Bill, which, I understand, was prepared by the department, states:
To the extent that AIP plans lead to improved opportunities for Australian industry, the absence of formal AIP plans will lead to reduced opportunities for competitive Australian suppliers.
I also understand that results of a survey of Australian industry participants and, namely, the project proponents in the survey: 71 per cent of respondents said, 'AIP plans had a positive impact on Australian suppliers'. If I put those two propositions together, which were statements prepared by the department, would you agree that getting rid of AIP plans will actually have an adverse effect on Australian business?
Mr G Wilson : The government has not taken a decision to get rid of Australian Industry Participation Plans.
Senator KIM CARR: Has it not cut the money for these plans?
Mr G Wilson : That is true. It has cut the money from 31 December 2014. However, the department is undertaking a review of Australian industry participation policies and programs and so all the activities that are being reviewed will continue to be funded until considered by government.
Senator KIM CARR: Is it the case then—as you are saying—the plans do not exist, there is just no money for them? Is that the proposition?
Mr G Wilson : No. There is money to continue that activity, mostly.
Senator KIM CARR: Was it not a proposition put to this committee that one of the regulatory savings was around removal of these plans?
Mr G Wilson : I am sorry. I am not sure what you are referring to.
Senator KIM CARR: Mr Chiswick indicated to us that it was one of the areas in which—
Dr Green : Senator Carr, I think as we had discussions about this earlier, at the previous estimates in February, the department and the portfolio does have obligations to the government's deregulation agenda. As part of the assessment of regulatory burdens that the department's legislation, policies and programs have, we are reviewing and the regulation reform task force is leading this review activity. We are looking at all of the regulatory burdens that the department imposes on business. Those related to Australian industry participation are part of that broader assessment.
Senator KIM CARR: So do you regard them as being excessively costly? In your assessments of these plans, did you form any judgment as to the cost of operating these plans?
Dr Green : The government has not made that determination as yet.
Senator KIM CARR: It has removed the funding. It has made a determination.
Mr G Wilson : It is reviewing those costs and looking at the benefits of Australian Industry Participation Plans.
Senator KIM CARR: Sorry, Mr Wilson, did you not say that they removed the funding?
Mr G Wilson : The 'opening up opportunities through Australian industry participation' measure has been closed by the government.
Senator KIM CARR: Yes. So they have made a decision.
Dr Green : There are a number of elements of that program that do not necessarily relate to the AIP plans themselves.
Senator KIM CARR: How much money is left for the AIP plans?
Mr G Wilson : Which AIP plans are you referring to?
Senator KIM CARR: You indicated there is money still available for them.
Mr G Wilson : There is.
Senator KIM CARR: I am responding to your information.
Mr G Wilson : There are different ones. There are the AIP plans for government procurement, grants and funding that is provided to the states and territories. There is money for that until 31 December. There is also funding to implement the Australian Jobs Act.
Senator KIM CARR: So there is money for six months; is that right?
Mr G Wilson : Correct.
Senator KIM CARR: And how much money is available for the Australian Jobs Act?
Mr G Wilson : There is funding to continue implementing that until 31 December.
Senator KIM CARR: Do you anticipate the legislation will have been passed by that date?
Mr G Wilson : The legislation has already been passed.
Senator KIM CARR: Which one? To remove these plans?
Mr G Wilson : No, to create the Australian Jobs Act. There is no other legislation planned at this point.
Senator KIM CARR: Fair enough. Is it correct to say that these plans only apply to projects of $500 million or more?
Mr G Wilson : Under the Australian Jobs Act, yes.
Senator KIM CARR: Yes. And what is the cost on that project? I am told it is between $50,000 and $150,000 per project. Would that be correct?
Mr G Wilson : The regulatory impact statement suggested a figure of around $200,000 in total over a period of five years.
Senator KIM CARR: Five years. So, on a $150 million project, that is less than 3c for every $100. Would you agree?
Mr G Wilson : I have not done the maths, but the review of Australian industry participation policies and programs will look at the costs of the act in particular but also of all Australian industry participation plans. The consultant will be consulting with major project proponents as well as suppliers.
Senator KIM CARR: The statement that I referred to before refers to a survey which suggests that 70 per cent of proponents said AIP plans improved procurement outcomes for their firm. Do you agree with that finding?
Mr G Wilson : That is what the regulatory impact statement says, yes.
Senator KIM CARR: Do you believe that that was an accurate reflection of the situation?
Mr G Wilson : I believe that is what the survey found, yes.
CHAIR: Senator Carr, in terms of asking officers their opinion, you might rephrase the question to enable them to—
Senator KIM CARR: All right. Does the department have any evidence to suggest that that survey result was wrong?
Mr G Wilson : The department has engaged a consultant to look at the costs of implementing Australian industry participation plans. We have information that suggests that the costs of implementing Australian industry participation plans is greater than that—
Senator HEFFERNAN: It terms of capital costs—
CHAIR: Order, Senator Heffernan!
Senator HEFFERNAN: It is relevant.
CHAIR: Do you mind if Senator Heffernan asks a question?
Senator KIM CARR: Senator Heffernan and I get on famously!
CHAIR: Senator Heffernan, you have the call.
Senator HEFFERNAN: As part of the industry building program, and the programs that Senator Carr is talking about, do you include in that the disadvantage or advantage of the patience of Australian capital?
Dr Green : I am not sure that we understand the question yet.
Senator HEFFERNAN: Not many people do!
Mr G Wilson : Australian industry participation plans, in their simplest form, are simply to ensure that Australian suppliers are given the same opportunities that international suppliers have.
Senator HEFFERNAN: But I am talking about the financing side of that.
Mr G Wilson : That is not covered by Australian industry participation plans.
Senator HEFFERNAN: Well, it bloody well should be.
Senator HEFFERNAN: Well, it is true.
CHAIR: It was the language I was concerned about.
Senator HEFFERNAN: I come from the bush.
CHAIR: We are not in the bush.
Dr Green : Senator Heffernan, I am not sure if I understand your question. There is no obligation under this policy framework for the procuring project proponent to buy equipment that would otherwise be more expensive than other competitively priced equipment.
Senator HEFFERNAN: No, but in terms of the actual money that we use, why is it that Australian super funds do not have patient capital? It is because they do not have the tax advantage of foreign capital.
Dr Green : I think that is a question better directed to Treasury.
Senator HEFFERNAN: But it certainly goes to the financing of acquisition. Senator Carr would understand that if you do not join the dots up you never get to understand the issue. They are sick of hearing me saying last year there was three trillion dollars of tax avoidance, for instance, in the transfer pricing market and we looked the other way. In terms of the financing, the acquisition capacity of industry, part of it is the patience of the capital they use. You have not got your head around that?
Mr Ryan : I think we are struggling just to, as you say, join the dots. If a project is, say, $500 million, the project then has project managers and they have a timeline of when they want to build the project and so forth. What we are looking at is the Australian participation there. Regarding the actual financing of that project, we are just grappling with—
Senator HEFFERNAN: You cannot participate unless you can finance it.
Mr Ryan : Correct.
Senator HEFFERNAN: And it is the disadvantage of Australian capital that I am talking about, compared to the advantage that foreign investors have, because they have all these tax perks. This might be a learning curve; you probably do not understand the swap market for that matter. You might ask yourself: why would the Commonwealth's own Future Fund have 13 companies in tax havens? That is what I am getting at.
Dr Green : It is probably a question better directed to another portfolio.
Senator HEFFERNAN: No, it is actually a question for you. It is just that you have to get your head around it. It is a serious deterrent to Australian capital. Back to Senator Carr.
Senator KIM CARR: Mr Wilson, you said there was evidence that the costs associated with the plans is greater than I have indicated was revealed in the Australian Jobs Act, which was last year. Is that right?
Mr G Wilson : Yes. What I said was that we have information from a small number of major project proponents indicating that the costs are greater.
Senator KIM CARR: I see. Are these the same proponents that actually opposed the introduction of Australian industry participation plans?
Mr G Wilson : I do not know that.
Senator KIM CARR: How do we test this allegation?
Mr G Wilson : Through the review.
Senator KIM CARR: I see. We will have a look at that. Is it true that the legislated AIP plans, the mandated AIP plans, resulted in increases in local businesses of $1.6 billion per annum?
Mr G Wilson : No.
Senator KIM CARR: You do not know that?
Mr G Wilson : That is the analysis in the regulatory impact statement.
Senator KIM CARR: Yes, it is.
Mr G Wilson : That is not the actuality of the plan.
Senator KIM CARR: So you dispute that now?
Mr G Wilson : No. I am just saying that we have only had one Australian industry participation plan, which was only approved within the last few weeks, so we do not have the evidence from that.
Senator KIM CARR: I am just wondering, Mr Wilson: when did the advice of the department change?
Mr G Wilson : No. You asked me whether that was—
Senator KIM CARR: I know, but I am asking you now: when did the advice of the department change? If the advice that was published in the regulatory impact statement for the bill—and you would agree it was prepared by the Department of Industry—
Mr G Wilson : Indeed.
Senator KIM CARR: When did the advice change?
Mr G Wilson : It has not. What I was suggesting, and perhaps incorrectly, was that you were suggesting that the $1.6 billion figure was an actually outcome.
Senator KIM CARR: I am saying to you, and you have agreed, that is in the RIS—
Mr G Wilson : Correct.
Senator KIM CARR: prepared by this department, in another form, but by essentially the same group of officers.
Mr G Wilson : Indeed.
Senator KIM CARR: How long ago was that?
Mr G Wilson : It was done in 2012.
Senator KIM CARR: So it is not that long ago.
Mr G Wilson : No.
Senator KIM CARR: Have you got evidence that was presented to the parliament?
Mr G Wilson : I am not disputing that analysis.
Dr Green : Senator Carr, we may be just a little bit at cross-purposes here. You quoted an expectations statement or analysis from the RIS, but the question that you asked a few minutes ago related to—
Senator KIM CARR: I accept that. I have rephrased the question to meet your objection. If the RIS makes an assertion, according to your advice to the parliament—not to the government but to the parliament—that there is a $1.6 billion per annum return on these measures, I want to know whether you have changed your opinion?
Mr G Wilson : No, and I can explain how we arrived at that figure, if you like.
Senator KIM CARR: Yes, please do.
Mr G Wilson : So ICLN, Industry Capability Network Limited, advised that a good Australian industry participation plan could result in somewhere between five and 20 per cent of the capital cost in opportunities that would go to Australian suppliers that might otherwise not occur. At the time we did that analysis it showed there were around 23 projects a year that would be captured by the act. On that basis, the calculation was around $32 billion in capital costs, of which five per cent is $1.6 billion.
Senator KIM CARR: You are indicating that you have not changed your opinion.
Mr G Wilson : That is the analysis.
Senator KIM CARR: On the basis of that analysis, is it also true that the $1.6 billion per annum equates to at least $6.4 billion of work for Australian business over the forward estimates?
Mr G Wilson : That is the 20 per cent figure. So five per cent to 20 per cent—five per cent is $1.6 billion and 20 per cent is $6.4 billion.
Senator KIM CARR: Yes. There is no reason to change that proposition. Now that the budget lists the Australian industry participation plan as one that should be abolished, how do you expect those figures to be realised over the forward estimates?
Mr G Wilson : The Australian Jobs Act is not listed to be abolished.
Senator KIM CARR: No, the Australian industry plans.
Mr G Wilson : That analysis relates to the Australian Jobs Act.
Senator KIM CARR: I see. It does not just relate to the Australian industry participation plans.
Mr G Wilson : No, that covers projects over $20 million and that is government procurement—
Senator KIM CARR: That is right. There are two figures—$500 million for private, and how much for public?
Mr G Wilson : It is $20 million—
Senator KIM CARR: Under these proposals, will those arrangements cease?
Mr G Wilson : They are being reviewed.
Senator KIM CARR: Will there be a consequence of the removal of the Australian industry participation plans that those requirements will be removed as well?
Mr G Wilson : There has been no decision by government to remove those plans.
Senator KIM CARR: What is the consequence of the removal of the Australian industry participation plans?
Mr G Wilson : The funding for the implementation of those plans continues while the review is undertaken and considered by government.
Senator KIM CARR: How much money was set aside for the Australian industry participation plans?
Mr G Wilson : For the AIP plans for government procurement there were five ASL allocated.
Senator KIM CARR: How much?
Mr G Wilson : Five ASL.
Senator KIM CARR: Five ASL. What about in terms of budgetary commitments? Were there any budgetary commitments for government procurement?
Mr G Wilson : There was just staffing to—
Senator KIM CARR: There were no private sector financial implications for the government.
Mr G Wilson : For AIP plans for government procurement or for the Australian—
Senator KIM CARR: Was the government providing any financial assistance to run the Australian industry participation plans?
Mr G Wilson : If you are referring to Australian industry participation plans for government procurement, no. It was just five ASL.
Senator KIM CARR: No, I said for the private sector.
Mr G Wilson : Are you referring to the Australian Jobs Act?
Senator KIM CARR: In the Jobs Act, was there money provided for the Australian industry participation plans?
Mr G Wilson : Yes.
Senator KIM CARR: How much?
Mr G Wilson : I do not have that figure. What I can say is there were around 20 ASL allocated by the former government that consisted of around 10 to set up a new agency, which has not happened, and around 10 to implement the Australian Jobs Act.
Senator KIM CARR: Is there a budget savings figure associated with this measure?
Dr Green : There is a budget savings figure associated with not setting up the agency.
Senator KIM CARR: What is the budget saving associated with the removal of the Australian industry participation plans.
Dr Green : Overall is a budget savings measure associated with a range of initiatives around this space, which is $82.3 million over the forward estimates.
Mr G Wilson : That is opening up opportunities through the Australian industry participation measure.
Senator KIM CARR: So that is the effect of the measure. There is a removal of $82 million.
Dr Green : I think it would be helpful to understand that this area is characterised by an area around ensuring there is full, fair and reasonable access to opportunities, and that is where there are the AIP plans and the obligation for government grants and procurement and through the Jobs Act for private sector major project proponents to provide Australian industry participation plans. The funding for the department is associated with the assessment and management and processing of those plans.
Senator KIM CARR: And monitoring?
Dr Green : And monitoring of those plans, indeed. Then there are a number of other initiatives which are around helping suppliers develop capability. The majority of the funding associated with that number that I just gave you is on that side. That work will be part of the new initiatives that the department has through the Single Business Service Delivery Agency.
Senator KIM CARR: So there will still be a requirement to put in Australian industry participation plans?
Dr Green : The Jobs Act is still in place and still has its requirements, as do the Commonwealth Procurement Guidelines, which still have their obligations.
Senator KIM CARR: Is it still going to be a trade-off against the tariff concessions?
Dr Green : The Enhanced Project By-Law Scheme still remains.
Senator KIM CARR: What is the funding for administering that?
Dr Green : We can take that on notice.
Senator KIM CARR: I want to know what is the effect of this budget savings measure of $82 million.
Dr Green : The majority of the effect is on the assistance that was provided through initiatives like the supplier advocates, which you may be familiar with, in terms of developing capability—
Senator KIM CARR: Are they going?
Dr Green : Those initiatives are part of the savings that have been listed and you read out this morning in relation to the savings measures that offset the new programs.
Senator KIM CARR: So the supplier advocates are all going?
Dr Green : Those types of activities will be carried forward under the Entrepreneurs' Infrastructure Program in the Single Business Service Delivery Agency.
Senator KIM CARR: I am not quite clear about what that means. Will we have supplier advocates or not?
Dr Green : We will not have supplier advocates by that name.
Senator KIM CARR: What will they be called?
Dr Green : Those advocates worked with capable supply chain firms to help them access opportunities identified through the major project plans in the Australian industry participation plans, and those types of activities will be part of the new service delivery model and the Entrepreneurs' Infrastructure Program.
Senator KIM CARR: So we will have Australian supplier advocates in some form?
Dr Green : There are a range of activities and services in that space that are part of the new program.
Senator KIM CARR: Dr Green, I will ask the question again: will you have supplier advocates in some form?
Ms Beauchamp : We will have the functions performed by the supplier advocates included in the entrepreneurs program.
Senator KIM CARR: Who will perform the functions?
Ms Beauchamp : It is quite likely that the network of business advisers that we are proposing will pick up some of these functions.
Senator KIM CARR: So it will be absorbed in that. What about the Industry Capability Network? What will happen to that?
Mr D Wilson : Funding for the Industry Capability Network is part of the review.
Senator KIM CARR: Has there been a decision at this point to withdraw support from the Industry Capability Network?
Mr D Wilson : No—as I said, it is part of the review—
Senator KIM CARR: There has been no decision at this point?
Mr D Wilson : No decision has been taken by the government.
Senator KIM CARR: What about Buy Australian at Home and Abroad? What has happened to that program?
Mr D Wilson : That is an element of Opening up Opportunities through Australian Industry Participation, so that is part of the $82.3 million.
Senator KIM CARR: So that will go as well?
Mr D Wilson : That will close, yes.
Senator KIM CARR: So we do not have a requirement to buy Australian?
Dr Green : We have obligations under the Jobs Act and the Commonwealth procurement and granting guidelines to have Australian industry participation plans which provide full, fair and reasonable opportunity for Australian industry to participate in government procurement activities and major project activities.
Senator KIM CARR: What other functions were in the Buy Australian at Home and Abroad program?
Mr D Wilson : It included four of the supplier advocates—those for the energy, minerals, iron ore and steel sectors; Supplier Access to Major Projects funding for resources projects; the Resources Sector Supplier Advisory Forum, the Resources Sector Supplier Envoy; and also some Enterprise Connect funding for business growth services to the resources sector.
Senator KIM CARR: What functions will be maintained?
Dr Green : Those will be part of the new Entrepreneurs' Infrastructure Program and the single business service delivery model, which I think has been explained. That is under development and a discussion paper will come out shortly.
Senator KIM CARR: Can I look to anything at the moment to confirm that those functions will continue under the new program?
Ms Beauchamp : Can I confirm what the officers were saying earlier: Most of the programs under this initiative will continue until the end of 2014. In the meantime, the government has initiated—as I have identified in our portfolio budget statement—an evaluation or review of this program. What comes out of that review will inform, perhaps, other programs and the ongoing nature of any of those functions that need to be performed.
CHAIR: Senator Carr, it is now 5.30 pm. That brings the allotted time for program 3 to an end. Program 4 has, by previous arrangement, already been done through the cross-portfolio. I am happy to give you a few more minutes to finish off, but that is it.
Senator KIM CARR: Can we notify Senator Bishop that there is going to be a change in the batting order? There will be other senators required here; otherwise you are going to—
CHAIR: No. We will now go to a break—a suspension.
Senator KIM CARR: Can I turn to clinical trials. Who is responsible for clinical trials?
Ms Hemmings : Could you please ask the question again?
Senator KIM CARR: I have not asked one yet. I just asked if we could turn to it; obviously we can.
There is $9.9 million available over five years for the implementation of clinical trial reforms. How will that money be spent?
Ms Hemmings : The funding was split between the industry department, the health department and the NHMRC.
Senator KIM CARR: How does the split work?
Ms Hemmings : This department received just over $3 million for education and training activities and a clinical trials portal.
Senator KIM CARR: How has the money been distributed?
Ms Hemmings : There is $878,000 for departmental costs across the five years and $2.95 million for administered costs.
Senator KIM CARR: This is to drug companies?
Ms Hemmings : No, that is to undertake two procurements: one of them to develop education and training materials and the other one to develop a clinical trials portal which will be accessed via a website.
Senator KIM CARR: How much of this money is new money?
Ms Hemmings : This initiative was started in 2012. The money was allocated in the 2012 budget.
Senator KIM CARR: So there is no new money; it is from the same program as in the previous government.
Ms Hemmings : It is continuing the work that existed previously.
Senator KIM CARR: How many clinical trials do you anticipate will be undertaken as a result of this money?
Ms Hemmings : I do not have that number, I am sorry. I do not think that assessment has been done. I do not think the work has been assessed in terms of—
Senator KIM CARR: Could you take that on notice for me and give me what your estimates are.
CHAIR: That brings to a close the Senate estimates for the Industry portfolio. Thank you, Secretary. Thank you to all officers from the department for assisting us over the last two days. Minister Cash, I failed to acknowledge you when you arrived but thank you for your assistance. Thank you to Minister Ronaldson and Parliamentary Secretary Birmingham, who also assisted. With that we will close and resume with the Treasury portfolio at 7.30 pm.
Proceedings suspended from 17:34 to 19:31