Dr STONE (Parliamentary Secretary to the Minister for Finance and Administration) (6:31 PM) —I rise to speak on the Appropriation Bill (No. 1) 2005-2006 and to participate in the cognate debate on the related appropriations legislation. I had the great honour of following the Treasurer on the night of the budget commitment announcement, when, as Parliamentary Secretary for Finance and Administration, I was able to commence this debate in talking about what I think has been one of the most equitable and forward-thinking budgets produced by any government. It is one of many in the long line of budgets—some nine years of them—which have given this country a future. It will address intergenerational challenges and, at the same time, it understands and purposefully goes about establishing better funding for our social and physical infrastructure, given that in our 150 to 200 years of legacy we, like other developed countries, are reaching a stage where a lot of our original works are in need of rehabilitation.

In recent times, the private sector have been keen to stress their interest in partnering with governments in Australia to build new infrastructure. Some have suggested that they are frustrated at not seeing more opportunities for public-private partnerships. The federal government’s opposition has gone so far as to say that PPPs may be the panacea for what they claim is a crisis in national infrastructure provision. Few would agree that there is indeed a crisis. In fact, this government has put more funds on the table for roads compared to any others. For example, the Roads to Recovery funding has forged new relationships between the Commonwealth and local governments. Never before have we been able to respond directly to the crisis that the states had left us, where a backlog of gravel and poorly bitumened local roads were in such disrepair that it was affecting the economy of local communities dependent on the road infrastructure to deliver product to market.

In the Murray electorate we have seen, for the first time, local roads being addressed with the available federal funding, which, in this budget, was increased substantially to all of the local councils in my electorate. Besides the road infrastructure investment that this government has dedicated, there has been the substantial new program called AusLink. AusLink addresses not only roads but also rail, ports, air, communications and infrastructure, and more than $10 billion has been identified in the extraordinarily important AusLink project.

Over $2 billion has also been put on the table by the Commonwealth government—by this John Howard-led government—through the National Water Initiative, an initiative of such significance that we have been hailed internationally for our efforts to try to redefine property rights to water, the trading of water in the marketplace and also the conservation of water in the metropolitan areas. Increasingly with climate change, water is becoming a scarce resource that may curb our development in future years unless we address the issue of sustainable water supply. There is also some half a billion dollars for the Living Murray project, which specifically aims to secure the sustainability of the Murray River and its dependent ecosystems, ensuring that they are properly financed for the future generations.

Labor’s extremist language notwithstanding, the Howard government’s private financing policy of 2001 acknowledged that public-private partnerships may represent best value for money in the procurement of some major projects where particular characteristics are evident—for example, where there is a sufficient economy of scale, where the various elements over the whole of the life of the new infrastructure can be coalesced into one contract and where risks can be appropriately transferred to the partner who can best manage that risk.

Private and public sector partnering is not a new concept in building infrastructure here or internationally. Over the last 10 years the UK has had experience with over 600 PPP projects ranging from roads and schools to hospitals and waterworks, to name but a few. Of course, the bulk of Australian experience so far with public-private partnerships has been at the state level, where, traditionally, jurisdiction for infrastructure such as schools, hospitals, roads and ports has been found. At the Commonwealth level, the Australian government has been joint-venturing and outsourcing for many years, but some significant PPPs are now under active consideration. For example, we have a 12-year $900 million public-private partnership for Customs aerial surveillance, as well as the consideration of the $300 million Defence Headquarters Joint Operations Command facility. These projects present both exciting opportunities and major challenges as public-private partnerships, potentially.

For certain types of projects of sufficient scale, public-private partnerships allow the government sector to focus on delivering its key core business while leaving the support services to the private sector, which can perhaps best deliver things like security, catering, IT systems, fit-out and occupational health and safety measures. All these aspects of the infrastructure project are negotiated up-front into a single contract, unlike with a traditional procurement process. Proper consideration of PPPs, whether by the state or the Commonwealth, is definitely a balancing act that requires very careful consideration and selectivity. However, for a government, a public-private partnership may offer market-driven benefits such as innovation, excellence in support services and the best value for money, where it can deliver on-time completion and lower costs. To the private sector, it offers a good client-and-government long-term investment opportunity. This can generate bankable goodwill amongst taxpayers and for their future commercial dealings.

Obviously, though, the substantial up-front consideration and project assessment require significant skill and resource in public sector agencies. To help government agencies build their capacity in determining the best procurement method that should apply to deliver the best value for money to taxpayers, the Department of Finance and Administration has developed, and I have had the honour of launching, financial management guidance. This includes guidelines on the Commonwealth policy principles for the use of private financing, business case development of private financing or public-private partnerships, risk management and contract management; a guide to discounting rates is still in production. These guidelines will help ensure that agencies can reduce the cost of bidding as they assess best value for money, which we need to remind ourselves does not always rest solely on the lowest cost. We need to look at the whole-of-life footprint of projects as they come forward. As mentioned before, PPPs will work best where there are opportunities for cost-effective risk transfer to the party best able to manage it, a mix of public-private skills to realise project outcomes, innovation, a single point of accountability, efficient bundling and efficiencies derived from economies of scale.

All these issues, as I said before, require there to be significant capacity, experience and skill in our government agencies. So in the Department of Finance and Administration we have developed a second tool to assist our agencies in evaluating the best procurement method for each large and significant program. Recently I launched what we call the private financing panel. This panel consists of some 20 financial and commercial advisers. The panellists have been competitively selected based on their extensive experience and expertise in areas of significance in the consideration of public-private partnerships as a procurement method. This panel can be accessed by all Australian government agencies that want specialist advice as they work through a PPP as an option for an infrastructure project. The panellists will give general policy and private financing advice, as well as risk management, taxation, accounting and strategic business advice. Some 20 Australian firms are represented on the panel.

There can be a gap in the experience, knowledge and skill levels between the private and public sector and between agencies. So, to ensure that the government are always in a position to negotiate the best deal and that our infrastructure is delivered on time and for the agreed price, it is important that our agencies increase their capacities by using this new panel and the guidance materials and at the same time access, whenever they wish, the specialist advice of the department of finance officials who are there to work with the other agencies in a collegiate fashion. In particular, special consideration is needed of intellectual property protection and the cost of PPP pre-tender preparations.

All this is also the subject of significant intrastate, interstate and Commonwealth consideration in what we have called a new national PPP forum. Despite being a relative newcomer to PPPs, the Australian government accepts its leadership obligation to support and encourage a national approach to PPPs. This includes the finalisation of relevant tax treatments. To harmonise policies and processes, the national PPP forum, which consists of all Commonwealth, state and territory governments, is working towards reducing bidding costs through harmonised documentation and the sharing of lessons learned. The Commonwealth is actively participating in this forum.

The next issue I want to discuss is the current drought, which is the worst on record for my electorate of Murray and throughout much of Australia. We used to believe, and I used to regularly state, that the irrigation systems had drought-proofed agribusiness in northern Victoria. The oldest of these irrigation systems was built in 1886, and this is the first time that we have seen them unable to deliver the basic water right; this has occurred over the last few years. Unfortunately, annual rains are needed to fill farm dams as well as irrigation infrastructure dams, such as the Eildon, the Eppalock and even the much larger Dartmouth dams. Over generations, these dams have made the Murray and Goulburn irrigation areas the food bowl of Australia.

Much has been said in recent days about the need to increase the government’s response to this natural disaster of drought, which is affecting much of eastern Australia as well as other parts of the country. Let me put on the record that so far the Commonwealth government has committed more than $60 million in the Murray electorate alone. This has been for both irrigation and dryland farmers, from dairy farmers through to livestock producers and those involved in cropping. Over 2,500 families have received the exceptional circumstances payments—and some are now into their third year. In addition to those on exceptional circumstances payments, there is also the Farm Help program. This program has filled the gap where, unfortunately, the state government has refused to declare drought, which is the entry point for the commencement of negotiations where exceptional circumstances are considered warranted. The threshold entry requirement for consideration of exceptional circumstances for drought relief is that state agreeing that there is, in fact, a drought.

In Victoria, the state government initially offered $20,000 per farm in areas that the government had declared drought affected. When this was enthusiastically taken up by farmers, alarm bells rang in the Treasury of the Victorian Bracks-led government. Ironically coinciding with the re-election of the Bracks government, the $20,000 per farm grant ceased. Across the electorate of Murray a very small proportion were able to access the state funds. The majority were not able to receive a drought declaration for their area from the Bracks government—which would have left the state embarrassed because no $20,000 was then on offer—and this stymied their capacity to apply for exceptional circumstances funding.

We also have the problem of a significant difference in irrigation systems across the electorate. Those on the Murray system continued to receive 100 per cent water right whereas those on the Goulburn system received substantially less in the way of water right. I commend the Commonwealth government for changing the way that farmers could assess their eligibility for exceptional circumstances and for allowing farmers to model forward into future years so that different irrigation systems could be worked into exceptional circumstances payment consideration.

I also commend the Commonwealth government for an extraordinary program called Drought Force. This was derived from the Work for the Dole concept. It was understood that one of the biggest impacts of the severe drought would be the loss of the next generation of farmers to city work. There were farmers who were unable to pay their farm labour, often their sons and daughters who were in the process of taking over the farm, because of the lowered income as a result of the drought. The Drought Force program enabled those sons, daughters and other farm workers to access the newstart allowance while they returned to the properties they had been forced to leave. They could then work at least 2½ days per week on the farm and they could volunteer for more work if they wished. They were eligible for the Work for the Dole training component but they were not required to actively look for other work. Drought Force allowed farm workers to stay on properties in drought affected regions, thereby maintaining the work force that is so essential. One of the myths about droughts is that farmers somehow have less work to do because their crops are not growing or their livestock has been sold. To the contrary: in drought, there is daily feeding of livestock and, more than ever before, farm maintenance must be continued as natural systems wind down.

Drought Force has given more than 150 individuals in the Murray electorate a capacity to stay on the land and it has helped drought affected farm owners. The government’s expectation and hope is that, when the drought does break, that farm work force will be in place to resume the work that they had done before. I commend the Howard government for the very swift response to this loss of work force in rural areas with this innovative and most humane use of the newstart allowance, very appropriately applied to people in rural and regional areas.

I want to look at another way of drought-proofing properties, which in arid regions now also often suffer from severe soil erosion and the loss of remnant vegetation or indigenous vegetation and where weeds and feral animals are putting additional pressure on the remaining native vegetation. Payments for ecosystem services, also sometimes known as environmental services, can help protect these environments. It is acknowledged that, on privately owned properties, farmers not only produce food and fibre for the domestic and export markets but also, as part of their farm work or agribusiness production, produce ecosystem services for the public good. These ecosystem services may include such things as managing the water table by keeping vegetation in place on the groundwater accession areas that are vulnerable. They may include feral animal and weed control to retain native vegetation, which in turn helps to protect water quality. These ecosystem services include soil erosion work and the maintenance of urban water supply catchment areas. There is a whole range of ecosystem services that agribusiness delivers and supplies to the broader population.

Through the Natural Heritage Trust, there have been at least three pilot programs in Australia—I should call them ‘beyond pilot’ programs—with very successful applications of the ecosystems service process. These have occurred in the north-east of Victoria, in Gippsland, and in the Mootwingee area of New South Wales. Property owners have had to tender to supply services which would deliver the ecosystem benefits that have been identified by catchment management authorities or other cross-management agencies. The tender processes ensure value for money, and agribusiness owners have had to identify how they can maintain the ecosystems on their properties cost-effectively.

Across parts of Australia where the droughts have been so severe—where there is a likelihood, with climate change potential in the future, for climates to be even more arid and for higher temperatures to prevail—there may be even more need for this environmental service or ecosystem service payment to farmers, who can manage all or part of their property for active food and fibre production and can, on other parts of that property, deliver ecosystem services to the broader Australian society. This would sustain the environment and keep the populations in place so that in small towns and regional cities the social services and community of interests are retained. There would not be the growing internal migration because rural families have lost heart. State governments would not be required to maintain this land that has been degraded or is under threat. The best people to do that work are those with a love of this same land, who often have intergenerational experience. (Time expired)