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Wednesday, 6 June 1984
Page: 2700


Senator GRIMES (Minister for Social Security)(9.59) —I move:

That the Bills be now read a second time.

I seek leave to incorporate the second reading speeches in Hansard.

Leave granted.

The speeches read as follows-

AUSTRALIAN NATIONAL AIRLINES COMMISSION RETENTION BILL 1984

Mr President, I have very much pleasure in introducing this Bill.

The purpose of the Australian National Airlines Commission Retention Bill 1984 is to repeal the previous Government's legislation providing for the establishment of TAA as a public company and to remove any doubt that TAA will remain a Statutory Authority of the Commonwealth.

There is no doubt the previous Government's ultimate aim in setting TAA up as a public company was to sell it off to private interests. This has become clear in the Opposition's remarks made in the earlier debates on this Bill in the other place.

Although it was not their stated position, it is also clear now that the previous Government was gearing up to a situation where they could deregulate the industry. They wanted to set TAA up as a company, sell it off and then deregulate the industry. What would have resulted would have been chaos.

The new owners of the privatised TAA would then be thrust into a position of trying to survive in a market which traditionally has had a tendency towards monopoly. The new owners would be in this position at a time when TAA would be considering re-equipping with new aircraft to replace its DC9s.

The position of the Australian Labor Party is clear. It was clear when we were in Opposition and it is clear now. It is our stated policy that TAA will remain wholly owned by the Commonwealth.

In these circumstances (full Government ownership of TAA) there are no real advantages of moving to set the airline up as a public company over retaining it as a Statutory Authority.

The Government sees no reason to subject TAA to the turmoil and dislocation of transforming from a commission to a company when it can operate just as efficiently and with full accountability to the Government and the Parliament in its present form.

Indeed, retention of TAA as a Statutory Authority gives the Government a policy arm to ensure the best interests of consumers are served.

The previous Government's move to set TAA up as a public company, even at the initial stage of its being wholly owned by the Commonwealth, was frought with difficulties.

These difficulties were complex and had the potential of costing the taxpayer considerable sums if they were to be overcome. Some of the difficulties involved were:

The Transfer of matters from Commonwealth to State jurisdiction, for example, long service leave, workers' compensation, transfer of titles of land, eligibility for State taxation

TAA's overseas loans would require renegotiation which would likely result in further requirements for Government guarantees and increased costs to TAA

The requirement for specific legislation to allow TAA to operate certain of its intrastate services

The requirement to pay State stamp duty on the transfer of property and assets from the Commission to the company involving likely expenditure of $3-5 million.

The industrial implications over the potential changes in employment conditions and uncertainty over the future ownership of the airline.

In addition, the previous government's attitude to TAA and its public position of uncertainty over the future ownership of the airline had a serious impact on TAA's management and staff. It had a significant effect on performance and morale.

Why then go to the trouble. Why subject the airline to real uncertainty and reduce morale if they were not completely sure they would sell it and had not decided what the future regulatory arrangements for the domestic airlines would be towards the end of this decade.

Honourable senators will know that the previous government had indicated that a review of the regulatory arrangements would be undertaken. But, this review would be conducted after TAA was transformed into a company. Surely the most appropriate course is to conduct the review first and then implement the necessary arrangements.

This is the aim of the Government.

However, there is one important step which must be taken before the review is conducted. That step is to remove the shackles which have placed TAA at a disadvantage over its competitors and update the provisions of its Act so that it can operate in a commercial manner befitting an airline of its stature in the 1980's and 1990's. This is the purpose of the other Bill in this package-the Australian National Airlines Amendment Bill 1984.

Since coming to office, the Government has looked very hard at the difficulties faced by TAA and at the options for its future. The first major initiative on TAA taken by this Government was the injection of capital funds to reduce TAA's debt/equity ratio to a level more appropriate for a commercial business concern engaged in airline activity.

Even the previous government was well aware of the handicap imposed on TAA by inadequate capitalisation. Their own consultants believed that TAA was starved of capital, and would require a large capital injection before any sale option could be entertained.

For over twenty years TAA had struggled with a capital of $15m. This has meant that its investment in equipment has had to be financed solely by loan funds. The injection of a further $25m in December 1982 by the previous government helped, but at most it was a token gesture. The injection last June of a further $90m in capital by the present Government brought TAA's capital to $130m and gave the airline the flexibility to plan and finance its operations on a more commercial basis.

The effect of this move is now becoming apparent. In 1981/82 and 1982/83 TAA's operating losses were $6.6m and $16.9m respectively. For 1983/84, TAA is budgeting for an operating profit-evidence of a significant turnaround in its financial performance.

In defending the Australian consumer this Government's first plank is a strong, competitive TAA. Not one with its organisation under constant attack. This package of legislation achieves this aim.

From that base a sensible approach can be adopted to a change in the regulatory environment of the Australian aviation industry.

When we were in Opposition we did not believe that the 1981 airlines legislation should bind us to the two airline policy for a further 8 year period .

There is a need to review the current arrangements. The Minister for Aviation has announced his plan to initiate a review later in the year. This review will need to consider the total framework of regulation which best suits our unique national requirements.

It will be an orderly review and will place us in an informed position for determining the arrangements to apply into the 1990's. The review will need to look at previously neglected aspects of the industry which this Government is concerned should be covered in any future arrangements. In this category I include the protection of consumer interests. In other words, the balance will move away from what the airlines want to what the consumers want.

The Minister for Aviation has taken great pains to make it quite clear that the timing of completion of the review will be such that the possibility of a renegotiation of the airlines agreement by early 1987, when notice of termination of the agreement may be given, will be opened up.

It is not the Government's intention to leave aside an examination of the regulatory arrangements until the agreement runs its course. It is our intention to conduct an orderly and structured review.

Since coming to office both the Minister for Aviation and myself have pointed to the possible difficulties that will arise if we determine a deregulated regime, or a liberalisation of regulation, without a thorough examination and understanding of the Australian aviation system.

There are many issues to be examined before we can make a judgment.

The origins of the two airline policy must be remembered. These rest essentially in the natural tendency of the aviation industry in Australia to move to a monopoly. While the tendency in the late 1940's, early 1950's was move to a public monopoly, there are certain features of the present industry, even though the system is bigger and and the economy more complex, which make the general tendency to monopoly, whether private or public, applicable today.

Mr President, we should also be aware that the two airline policy is not just upheld by the legislation. It relates to the monopoly on expertise in operations and services the two airlines now enjoy. One of the reasons why deregulation has been possible in the United States is that there was a wealth of expertise and equipment which could be utilised by new airlines. A major impact of the deregulated regime was the laying-off of a large number of highly skilled employees by the existing airlines. This reservoir of skilled resources does not exist in Australia.

Another very major issue is that the operation of the two airline policy for some thirty years has resulted in Ansett and TAA having an effective monopoly on access to terminal and other infrastructure facilities. They would also have, from the first day of deregulation, a monopoly of the large jet aircraft in operation in the country at that time. Consequently, their ability to adopt predatory pricing on each other, and more importantly on a new entrant, would be a real possibility.

I agree Mr President, that it is worth examining the experiences of other countries. Many observers of the aviation industry point to the US experience. Others point to what has happened in New Zealand and to what is presently going on in Canada.

In New Zealand, the situation of deregulation was preceded by effectively the creation of Air New Zealand as a monopoly for both domestic and foreign operations. Other potential airlines are thus severely limited in their abilities to openly compete on the market.

The present moves in Canada appear to be much more realistic. The first requirement of the Canadian Government is to create an understanding of what is necessary for the Canadian airline system. This is to be based on a thorough understanding of the Canadian aviation environment. The government holds the view that this approach is the most appropriate for an examination of Australia' s domestic aviation sector.

Both the Minister for Aviation and myself consider the recent statement by the Canadian Minister for Transport sums up to a significant degree the views of this government in relation to our regulatory arrangements. The Canadian Minister of Transport said:

''However, these benefits of airline deregulation in the US do not mean that Canada should necessarily take the same road. The political, socio-economic, demographic and geographic differences between Canada and the US, coupled with the evidence that US deregulation has also had some disadvantages, dictate a unique, 'made in Canada' approach to regulatory change.''

As I said earlier, what we need is an orderly approach to change in the regulatory environment. That orderly approach will also be based on what is the best set of arrangements which match the unique Australian system.

What we have and will continue to do is to make certain that the changes that take place are in the interests of all consumers. During this period we will continue to maintain control over capacity-that is, whether or not additional aircraft should be imported and we will continue to have a strong, stable, properly equipped, TAA.

In contrast to the Opposition, the Government will pursue a logical and structured approach to the future of the Australian domestic aviation industry. We will not pursue change for change's sake.

We will conduct a comprehensive review to recommend on appropriate domestic aviation regulatory arrangements, and we will make the necessary changes in a measured and deliberate manner. Our aims are to ensure that the interest of consumers are properly protected and that the aviation industry is provided with the stability necessary for its future development. The retention of TAA in full public ownership and as a statutory authority, is an essential pre-condition to the achievement of these aims. A strong and vital TAA will be a major asset to all Australians, whatever regulatory arrangements apply to Australian aviation in the future.

I commend the Bill to the Senate.

AUSTRALIAN NATIONAL AIRLINES AMENDMENT BILL 1984

Mr President, I now introduce the second Bill in this package of legislation.

Honourable senators will be aware that TAA has been operating at a significant disadvantage to its competitors for many years.

The principal difficulties faced by TAA in recent years have been threefold.

First, it was severely under capitalised

Secondly, it has had to carry a superannuation burden considerably higher than its principle competitors, Ansett

Thirdly, outdated provisions in its legislation have unduly hampered the management of TAA.

The first of these difficulties-the under capitalisation of TAA-was quickly addressed by this Government when we assumed office. In June 1983 we increased the capital base of TAA from $40 million to $130 million. This has provided TAA with the working capital base needed to ensure that it can operate effectively, and has been a major factor in enabling the airline to significantly improve its financial performance during this financial year.

The Bill now before the Senate will address the two remaining areas of difficulty to which I have referred.

TAA has suffered significant disadvantage through the level of contribution the Commission has been required to make to the Commonwealth Superannuation Scheme.

Let me deal with the superannuation problem first.

The effect of the arrangement whereby the groundstaff of TAA were eligible to join the Commonwealth Superannuation Scheme, has meant that the Commission has been required to make employer contributions to the scheme at a level significantly greater than for schemes provided for similar employees in Ansett and other private organisations. In fact, the level of contribution by TAA has been around two and a half times greater than the equivalent industry rate.

As a result, the Commission, in consultation with its various industrial organisations, has set up private superannuation schemes for new employees and existing staff who took up the option of transferring from the Commonwealth Scheme. The level of contribution by the Commission to these schemes is commercially negotiated and is generally equivalent to Ansett's schemes. However , many TAA employees exercised their right to remain with the Commonwealth Scheme.

This is one area where even the previous government realised TAA was facing an unfair burden.

The Government has decided to remove this disadvantage and embody in legislation the provision that TAA pay employer contributions to the Commonwealth Superannuation Scheme at the same rate as it contributes to its equivalent private scheme.

Outdated provisions in its legislation have required the Commission to continually obtain the approval of various arms of Government in matters which, in comparison with its competitors, were of a relatively minor, day to day nature. This has imposed unnecessary management constraints on the Commission.

The Government has therefore undertaken a close examination of the relationship between TAA and the Government. In carrying out this review, the Government has had the benefit of the Commission's views on the best way of improving the commerciality of TAA.

Against this background the main objective of the Australian National Airlines Amendment Bill 1984 is to give TAA greater flexibility of management and greater responsibility in its commercial airline operations while providing an appropriate level of ministerial control and oversight.

This Bill achieves this purpose.

Under the arrangements proposed by the Government, TAA will be able on strictly commercial grounds to request additional capital; have more freedom in relation to staffing, purchase and disposal of assets; and more freedom in borrowing arrangements, application of profits after dividend, and insurance arrangements. These provisions will allow TAA to take decisions in line with commercial reality.

In addition, TAA will be required to set profit and dividend targets based on commercial criteria. However, to ensure an appropriate level of accountability, the Government will retain the right, under the proposed legislation, to approve or revise these targets.

I turn now to the specific provisions of the Bill.

Under clause 4, the Commission has been increased from seven members to a minimum of seven and a maximum of nine. This has been done to increase the level of representation on the Commission and to provide greater management efficiency in giving TAA the ability to draw on expertise when needed.

Clauses 5 to 7 update arrangements for the appointment of Commissioners and acting arrangements and procedures to be adopted where a member may have a pecuniary interest.

Clause 8 increases the Quorum for Commission meetings from three to four to cover the increased membership and to make the arrangements similar to those of the Australian Shipping Commission (ANL) and the Australian National Railways Commission (ANR).

Clause 10 allows the Commission to exercise its discretion in determining employment and employment conditions of its staff.

Salary and allowances of the General Manager will continue to be subject to determination by the Remuneration Tribunal. Although clause 11 repeals this reference in the Australian National Airlines Act 1945, the arrangement is presently covered by the provisions of the Remuneration Tribunals Act 1973. This will allow any future revisions to the arrangement for the determination of the Remuneration of Chief Executives of Commonwealth Statutory Authorities to be implemented without further amendment to TAA's Act.

In regard to the operation of Intrastate Services, clause 12 provides that the consent of the State Premier is no longer required before TAA can provide Intrastate Services in Queensland and Tasmania. This is replaced with the requirement that TAA operate these services in accordance with State Law and puts TAA on the same basis as any other operator wishing to engage in these services.

In passing I should point out that this amendment was proposed by the previous Government in its 1980 legislation.

Clause 13 revises arrangements that require the Commission to obtain the approval of the Minister before establishing or before buying shares in another body corporate, in circumstances where TAA would have effective control of that organisation. While the present Act does not contain the requirement for ministerial approval, its inclusion has been considered necessary to ensure there is proper ministerial accountability over the actions of the Commission in this area.

For a very long time, the Commission has been hamstrung by the requirement to seek ministerial approval before acquiring or disposing of any property, right or privilege, or entering into a contract for the construction of a building, where such arrangements exceed $250,000 in value. Ministerial approval has also been required for the lease of land where the period of the lease exceeds ten years.

Clearly these limits are now well out of date and clause 14 provides for an increase in the monetary limits to $5 million for land and buildings and $2 million in respect of other contracts. Ministerial approval is also required to cover circumstances where TAA guarantees the borrowings of a subsidiary or another organisation and thus may become liable for the repayment of the loan, if the potential liability exceeds $2 million.

Arrangements similar to those applying to ANR and ANL are to be included under clause 15 to ensure that TAA is reimbursed for any losses incurred in operating services where it has been directed to do so by the Minister. Similarly, the Minister is to table the details of those directions in the Parliament.

TAA will be able to seek the injection of additional capital from the Commonwealth in circumstances where the commission considers it is commercially justified, as provided in clause 16.

Clause 17 removes the existing arrangements for the payment of dividends. These are replaced by clause 18, whereby the commission makes a recommendation on commercial grounds to the Minister on the level of dividend for each financial year. The Minister can approve or direct the commission to pay a different dividend but in making a determination, the Minister not only has to take into account commercial criteria but is also required to table in Parliament a notice with reasons.

The effect of the amendment is the removal of the ability used effectively by the previous Government to limit TAA's access to funds-funds which could have been used to finance re-equipment programs or, invested elsewhere to reduce TAA' s heavy dependence on borrowings.

Let us be quite clear as to the impact of the policies of the previous Government.

Over the seven year period 1975-76 to 1981-82, TAA earned almost $20 million in profits but was required to pay back almost $18 million in dividends. This represents repayments of about 90 per cent of its profits.

Under the new arrangements, the dividend payment will be more attuned to commercial realities rather than to the revenue requirements of governments.

Clause 18 also provides for revised arrangements in respect to borrowings, superannuation and financial policy.

In regard to borrowings, TAA will be given additional freedom to raise monies by dealing in securities. Similar provisions were included in the changes made to ANR and ANL last year.

The provisions covering Commonwealth guarantees on loans have been extended to cover the guarantee of penalty interest and to loans taken out by wholly owned subsidiaries of the commission set up to own and operate aircraft. This provision is to put TAA on a similar footing as its major competitor, Ansett.

This Government has recognised the particular disadvantage TAA has faced in the arrangements applying to those of its staff who are members of the Commonwealth Superannuation Scheme. Unlike Ansett, TAA has had to make employer contributions in respect of the Commonwealth Superannuation Scheme at a level of more than double the equivalent industry rate. TAA has established its own superannuation plan for new staff and existing staff have been given the option to transfer from the Commonwealth Superannuation Scheme. Under the new arrangements to be embodied in the legislation, TAA will only be required to make contributions in respect of employees who remain in the Commonwealth scheme at the same rate as it contributes to its own plan. In line with the previous Government's decision the Commonwealth will fund the shortfall. However, the impact of this liability will be gradual and will not affect the Commonwealth's budget for some time to come.

In regard to the financial policy of the Commission, the Bill, as mentioned earlier, enables the Commission to set profit targets on a commercial basis. These targets will be subject to the approval of the Minister who may direct that a different target be set.

I should emphasise that in setting the profit target, both the Commission and the Minister must take account of the need to maintain the net worth of TAA and to consider the profit on the basis of the need to ensure a reasonable return on capital.

The net worth of the Commission is the equivalent of a company's shareholders funds and is defined as the sum of capital, reserves and retained profits.

As is the case with respect to dividends, the Minister will be required to table in the parliament the notice of direction and the associated reasons where a different profit target has been determined.

During the currency of each financial year the commission will be required to periodically review its performance as it relates to the profit target.

To maintain an overall view of TAA's performance, the commission will be required to draw up annually a three-year rolling corporate plan. This plan will contain TAA's financial and operational targets, its policies and strategies and , because the commercial information in these plans would be of obvious benefit to TAA's competitors, it will remain confidential to the government.

Under clause 20, the commission will be given authority over the operation of its insurance accounts. This authority will be subject to a disallowance provision which the minister must exercise within 30 days.

I should emphasise that the new provision does not remove the requirement for TAA to insure against its major risks nor does it alter the basic function of the insurance accounts. What it does do is to require the minister to take positive action if he considers the proposed arrangements by the commission inappropriate.

Clause 21 allows the Commission the freedom to determine how the balance of profits, after the dividend has been paid, can be applied. This gives the commission the unrestricted choice in regard to commercial investment decisions.

The reporting requirements of the commission have remained basically unchanged. The only revision has been to place a time period of 21 days for the Minister for Finance to approve or make a direction altering the form of TAA's financial statements.

Clause 23 provides for an update in the reference to the current airlines agreement, while clause 24 extends the provision for compensation for damage to property to that owned by wholly owned subsidiaries owning and operating aircraft.

At the request of the commission, the Act is being amended by clause 25 to repeal the provision relating to the arrest of offenders.

The Bill also contains a number of machinery amendments to provide for the legislation to be in accord with modern drafting practice.

I am sure honourable senators will agree that the government is adopting the best arrangements, not only for TAA but the Australian travelling public.

TAA has already responded well to the injection of $90 million in capital funds last financial year. This Bill, by further enhancing TAA's competitiveness, will enable the airline to take further initiatives which would not have been possible under the previous government. They will make TAA a truly competitive force in Australia's airline industry well into the 1990's.

I commend the Bill to the Senate.

AIR NAVIGATION AMENDMENT BILL 1984

Mr President, the purpose of this Bill is to provide protection to aircraft crew members against the use of Cockpit Voice Recorders for purposes not related to air safety.

The Bill will place restrictions on the access that interested parties may have to information obtained through Cockpit Voice Recorders (CVRS) in Civil Aircraft , and on the uses that may be made of such information in Australia.

Cockpit Voice Recorders have been in use in Australian Civil Aircraft since 1964. They were installed for air safety purposes, as a means of obtaining information about the causes of accidents involving aircraft.

Australia was among the first countries in the world to work on the development of Cockpit Voice Recorders, and then to require their use in certain classes of Civil Aircraft for air safety purposes. However Australia has lagged behind other countries in clarifying the uses to which information from CVRS may be put .

CVRS record voice communications, announcements and other audible sounds in the cockpit of an aircraft, including crew conversations that may not be relevant to operation of the aircraft.

The decision to require installation of CVRS in certain classes of Civil Aircraft operated in Australia was announced by the then Minister for Civil Aviation in March 1961. This decision was in response to the report of a Board of Accident Inquiry into the loss of a Fokker Friendship Aircraft at Mackay in 1960. The Board had been unable to reach any firm conclusion as to the causes of the accident, because there had been no survivors and no means of determining what had happened.

The Board of Accident Inquiry referred to the desirability of having a record of crew conversation and the readings of flight instruments up to the moment of impact. The Board recommended that the search for suitable equipment should be pursued.

Flight crews in Australia and elsewhere accepted the use of Cockpit Voice Recorders for air safety purposes, but from the outset expressed strong reservations about the possible future use of information from such equipment for purposes other than were originally intended.

Flight crews saw CVRS as an invasion of privacy in the workplace. They were prepared to accept this in the interests of maintaining and enhancing air safety , but sought safeguards that the information not be used for other purposes to their possible detriment.

Concern on the part of air crews has been heightened in recent years with the introduction by various countries of Freedom of Information Legislation.

The International Civil Aviation Organisation, an agency of the UN, has recommended that information from CVRS be used only for air safety purposes, and some countries have legislated to remove uncertainty about uses that may be made of such information.

CVRS are used in Australian Civil Aircraft under agreements reached between the Department of Aviation, and its predecessors, and the Australian Federation of Air Pilots (AFAP) which date back to 1964.

However, the present arrangements are not satisfactory to either party.

The most recent agreement between the Department and the AFAP was negotiated in 1975 and provides that use of CVR information in air accident investigations will be restricted to accidents which result in death of the pilots, or their incapacity to the point where they are unable to give evidence as to events leading to the accident.

From the viewpoint of air safety investigators, the full potential of CVRS to contribute to the enhancement of air safety is not being realised.

At the same time, the AFAP continues concerned that the agreement now in force might not withstand legal challenge and CVR information may be used for purposes that were not originally envisaged and to which the Federation had not agreed.

Under the Bill I have now placed before the Senate, a cockpit voice recording or the information it contains cannot be used for disciplinary purposes or criminal proceedings against a crew member. The definition of crew member will exclude someone who is also the operator of the aircraft. A party to civil proceedings may seek that the court admit CVR information in evidence. The court may, on the grounds of public interest and the need for the information to establish a material question of fact, order that the information be admitted. However, the use for evidentiary purposes is limited by proposed sub-section 27A (6).

It will be possible to use information obtained from a CVR to establish damages liability against an employer of a crew member or against someone else who is not a crew member.

Misuse of information obtained from CVRS by Commonwealth officers is an offence against the Crimes Act. Under this bill misuse of such information by persons not subject to that act, will also be an offence.

The protection offered under this bill has been sought by air crew members for twenty years. It is therefore proper that officers of the Department of Aviation and the Attorney-General's Department should feel a sense of achievement in developing a bill which strikes a balance between the legitimate concerns of air crews on the one hand, and the public interest in the proper administration of justice on the other.

Might I also say that the pilots have shown considerable forbearance on this matter. I appreciate very much the spirit in which their representatives have conducted negotiations with us. They have been constructive as befits people concerned with the safety of air operations as well as the requirements of their members.

This is a measure which materially advances the safety of our aviation industry .

I commend the Bill to the Senate.

Debate (on motion by Senator Collard) adjourned.