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Friday, 28 November 1986
Page: 3036

(Question No. 1392)

Senator Jones asked the Minister for Finance, upon notice, on 25 September 1986:

(1) Is information available to the Federal Government on amounts of money offered to the Queensland Government in the form of Commonwealth grants and subsequently diverted into that Government's Consolidated Revenue Account;

(2) Which Federal Government Departments were involved, and what projects have been denied to the Queensland Government because the Bjelke-Petersen Government has either failed to take up the Commonwealth offer or has diverted it for general purposes in that State; and

(3) What explanations have been forthcoming from the Queensland Government relating to-(a) allegations of failure to take up money, and (b) the diversion of Commonwealth money into the Queensland Government's Consolidated Revenue Account

Senator Walsh —The answer to the honourable senator's question is as follows:

The Government is aware of four instances in which funds were either directed to Queensland as a specific purpose payment and subsequently diverted into Queensland's Consolidated Reveune Account, or were not taken up by the Queensland Government. Of the following instances, only the first relates to the former category while the other three relate to the latter category.

(a) Accumulation of Surplus Funds under the States and Northern Territory Grants (Rural Adjustment) Act 1976

(1) and (2) The Rural Adjustment Scheme (RAS) under the above Act was administered by the States and Northern Territory Rural Adjustment Authorities on behalf of the Commonwealth.

Under the provisions of the Act, the Commonwealth provided funds to the States through the Commonwealth Department of Primary Industry for on-lending to farmers at concessional rates of interest. The States were required to repay to the Commonwealth 85 per cent of these funds over 20 years at an interest rate of 8 per cent. A three year principal repayment holiday also applied. Terms and conditions of loans to farmers were a matter for State Rural Adjustment Authorities.

As loans to farmers were generally for shorter periods and at higher rates of interest than the Commonwealth applied when originally making these funds available to the States, surpluses of funds were built up in advance of their due date for repayment to the Commonwealth. It was envisaged that these funds would be available to the States to be recycled for further RAS lending. However, the 1983-84 Annual Report of the Queensland Rural Reconstruction Board revealed that, of surpluses of $40m generated in this manner under RAS and its predecessor, the Rural Reconstruction Scheme (RRS), the Queensland Government had chosen to divert $10m of these funds to its Consolidated Revenue Account.

The Queensland Government has indicated that it intends to divert all surplus RAS funds to the Consolidated Revenue. Following a request from me, the Minister for Primary Industry wrote to his State counterparts on 11 March 1986 seeking information on the uses to which surplus RAS/RRS funds had been put. Queensland has not responded to this letter and, accordingly, up-to-date information on the use of these funds is not available.

(3) Apparently Queensland considers that the funds provided by the Commonwealth have been used in accordance with the relevant agreements and that the surpluses which have been generated under the Scheme are legitimately State funds until they are due for repayment to the Commonwealth. Although from a legal point of view this may well be the case, the clear intent of the schemes was that the assistance provided by the Commonwealth was for the benefit of rural industries, not for general States' purposes. To the extent that surpluses have not been recycled for RAS purposes, the rural sector has been denied funds for adjustment purposes.

Under the new Rural Adjustment Scheme, introduced on 1 July 1985, there is little opportunity for the States to benefit from accumulated funds in the abovementioned manner.

(b) Sugar Industry Assistance

(1) and (2) In late 1983, following the termination of an International Monetary Fund (IMF) sugar stock financing facility, the Queensland Premier sought from the Commonwealth an alternative stock financing arrangement on concessional terms similar to those which had been offered by the IMF.

In response to this request the Commonwealth, through the then Minister for Trade who had responsibility for this matter, on 25 November 1983 put the following offer to Queensland:

Queensland be offered a short-term loan until 30 June 1984 of up to $700,000 to meet the difference between the lowest available commercial interest rate and the concessional IMF interest rate; and

On the basis of the outcome of further discussions between the Commonwealth and the sugar industry about the financing of additional stocks, Cabinet would consider additional assistance to the sugar industry.

The Queensland Government did not accept this offer and it lapsed on 30 June 1984.

(3) The Queensland Government, in refusing the offer, sought a commitment from the Commonwealth to provide further assistance from the Budget, over and above the loan of up to $700,000 which had been offered, to cover not only the interest differential on sugar stocks originally funded by the IMF facility, but also any other stocks which had to be accumulated, until such time as the stocks were sold.

(c) Mortgage and Rent Relief Scheme

(1) and (2) The Mortgage and Rent Relief Scheme, administered by the Department of Housing and Construction, was introduced by the Commonwealth Government in March 1982. All States except Queensland agreed to join the scheme at that time. The Queensland Government refused to accept from the Federal Government $3.1m in Federal funds offered for Mortgage and Rent Relief for the financial year 1982-83.

(3) It is understood that the Queensland Government had concerns regarding the objectives of the Scheme. Negotiations between Queensland and the Commonwealth were undertaken in 1982-83. Queensland decided to join the Mortgage and Rent Relief Scheme in September 1983 and has taken up all Federal funds made available to it since that date.

(d) The Transfer of Nurse Education from Hospitals to Colleges of Advanced Education (CAEs)

(1) and (2) The program, for which the Department of Health has responsibility, involves a Commonwealth subsidy to States and Territories to assist them in meeting the cost of transferring Nurse Education from hospitals to CAEs. The transfer is being phased in by quota over the period 1985 to 1993. The subsidy includes $1500 (estimated December 1983 prices) per annum for each transferred student place within the quota, a contribution towards course development costs and payment of TEAS living allowances to all eligible students. In addition, States and Territories undertaking the transfer are eligible for funds for the retraining of qualified nurses to meet current shortages.

The transfer is either well under way or planned for commencement by 1988 in all States and Territories except Queensland. Queensland has been offered a quota of 450 places for 1987. At this time it has not forfeited entitlement to Commonwealth funding in 1986-87 but should the Queensland Government decide not to proceed with the transfer in 1987, it is expected that these places will be reallocated to other States.

(3) The Queensland Government is refusing to accept the terms of the Commonwealth's offer of assistance, claiming that the Commonwealth should meet the full cost of the transfer.