Senator LUNDY (1:26 PM) —The Electronic Transactions Bill 1999 is based on the recommendations of the electronic commerce expert group or the ECEG which reported to the government in March 1998. This group's recommendation included the need for the Commonwealth to enact legislation based on the United Nations Committee on International Trade Law or the UNCITL model law on electronic commerce of 1999 with some modifications.

The bill is based on two principles: functional equivalence, also known as media neutrality; and technological neutrality. The term `functional equivalence' means that transactions conducted using traditional mediums should not be treated any differently by the law than those conducted in an electronic environment. Technology neutrality means that the law should not discriminate between different forms of technology—for example, by specifying technical requirements for the use of electronic commerce that are based upon an understanding of the operation of a particular electronic communication technology.

The bill establishes the validity of electronic transactions and contains specific provisions which state that electronic communication is a satisfactory medium for the writing, signing, production and retention of documents under Commonwealth law. Contrary to the recommendation of the ECEG, the bill only applies to transactions under Commonwealth law. Complementary state and territory legislation is also required to ensure the equality of electronic commerce with respect to transactions. The government claims that it has adopted this approach for what it claims are constitutional reasons, and the ECEG has criticised the government's failure to show stronger national leadership on this issue.

The Labor Party will be supporting this bill. However, I note that a stronger national approach to the bill may have been more effective. I know that we will have the opportunity to consider this in a forthcoming amendment. Two of the areas in which the bill could have been strengthened are that of the government legislating to the maximum extent possible under the constitutional heads of power and the government seeking a referral of power from the states on a national uniform scheme in relation to those matters for which the Commonwealth's constitutional authority is uncertain, in particular, the power to regulate transactions with state governments. However, it is more than obvious that the national interest clearly favours the enactment of a scheme to regulate electronic communications, even if that scheme is far from perfect. Accordingly, having noted our concern, we will not be opposing the bill.

There are a number of other matters in relation to the bill that I think are definitely worthy of note. One of them is confidence in electronic communications. Electronic commerce depends on business and consumers having the confidence in the people and the organisations with which they are dealing. Verification of identity is fundamental to this. Whilst legislation alone would be insufficient to address the technically more difficult area of ensuring that business and consumers can verify whom they are dealing with, it is disappointing to note that the Electronic Transactions Bill 1999 does not specifically address this concern. Subject to ensuring reasonable access for law enforcement, appropriate recognition of the role that encryption plays is fundamental to addressing this issue.

Those who see the ability to exchange information securely on the Internet as a right have long advocated cryptography, or the scrambling of electronic data to make it confidential, for privacy reasons. The level of cryptography regulation in Australia is currently more stringent than the recommendations of the Waasenaar arrangement, which offers guidance to participating countries on the permissible level of encryption within that jurisdiction. Connected citizens and business want to have confidence in the Internet—this is the medium we are primarily talking about here—and I believe they are demanding access to secure levels of encryption. The recent changes to the Waasenaar arrangement loosened the approach to exporting encryption associated with financial institutions in response to this pressure, but as yet Australia is to act to reflect this shift.

On 19 August 1998 the National Office of the Information Economy released a discussion paper on the establishment of a national authentication authority. The aim of the authority was to administer a national public encryption key authentication scheme. This scheme would entail a single-purpose national framework for a national infrastructure that would enable strong authentication of users involved in electronic transactions. The system would provide for the unequivocal identification of an individual or entity. It would not provide specific assistance for a user who wished to use encryption to reduce or prevent unauthorised access to data or information. This is in line with activities both in Australia and overseas to separate authentication techniques from encryption techniques.

The problem faced by corporations and governments is to provide an infrastructure that will provide the necessary service and enable benefits to be gained. Public/private key cryptography is widely recognised as one of the enabling technologies for authentication within a globally dispersed environment. Not only does this technology exist today but also there is a need to provide some supportive framework to allow a trusted infrastructure and the education of users and potential users. By addressing only authentication, public/private key systems sidestep many of the difficult regulatory issues with the use of encryption. However, this really just puts off addressing the broader issue, which is that encryption needs to be fundamentally addressed as part of online transactions.

The NOIE discussion paper is in direct opposition to the recommendations of the Attorney-General's Electronic Commerce Expert Group, which argued that a detailed legislative regime which specified an operating framework or the use of a particular technology could seriously impede Australia's ability to participate in international electronic commerce. The Labor Party generally prefers an approach that will allow the market to determine the most effective means for transactions to be verified, as governments should not be in the job of predicting the level of satisfaction the market will require. What is actually happening in that marketplace is that new technologies are being created all the time. Even in the last few months we have seen significant progression in how the providers of services online are offering solutions to consumers online in the hope of gaining their confidence with respect to transactions. Whichever approach the government adopts, it needs to do so quickly and in line with international practice. It also needs to provide appropriate sanctions against the use of encryption technology in the commission of a crime, as such conduct should attract significant criminal penalties.

Secondly, the legislation, as does the UNCITRAL model law, fails to address issues of appropriate consumer protection law. By default, the legislation applies the consumer protection law that applies in the relevant jurisdiction. Given that consumers and business will often not consider or appreciate the differences that exist across jurisdictional boundaries, the failure to address this issue will become more and more important. It is disappointing that the government did not try to use this bill as a mechanism to help nationalise some of Australia's consumer protection laws.

The current Australian consumer protection provisions prohibit unfair practices such as misleading and deceptive conduct, false representations, misleading statements, harassment and coercion, bait advertising, referral selling and pyramid selling. There are also provisions relating to unsolicited goods and credit cards. Consumer and many business transactions are automatically given warranty protection by the law, whether or not suppliers give their own warranties or guarantees. This protection includes the right to refund if goods are defective. The government could have taken the opportunity in this legislation to ensure these same protections are afforded to all Australians in their conducting of business-to-business or business-to-consumer transactions in an online environment.

Thirdly, the bill contains a blanket exemption in relation to dealings with Commonwealth entities in connection with applications for the grant of permission, certificate or similar thing where the permission, certificate or thing is of a kind that is not capable of being granted to an Australian citizen. This provision is expressly stated in the explanatory memorandum as preventing the application of the bill to applications made under the Migration Act 1958 or the Australian Citizenship Act 1948. Given that the specific provisions can otherwise be exempted by regulation, it is unclear why this exemption has been included in the legislation. Whilst the provision is not of itself objectionable, the Labor Party would prefer that this matter be dealt with by way of regulation in whatever way is required, as I have discussed.

Finally, I note that paragraphs 9(1)(d), 9(2)(d), 10(1)(d), 11(1)(e) and 11(2)(e) have been inserted into the bill. These paragraphs ensure that an electronic transaction can be validly engaged in only with a person who is neither a Commonwealth entity nor a person acting on behalf of a Commonwealth entity if that person consents to the use of electronic communication as a means for the purposes of the transaction.

We support this approach, as those people or businesses that do not want to engage in electronic transactions should not be forced to do so. With respect to the government's provision of service—and I will refer in a short while to a recently released Australian National Audit Office report which looks at the depth to which governments are transferring their services online—there is a question of equity. At the moment, 22 per cent of Australians have Internet access. So to try to mandate the provision of a service via electronic commerce or online services in that way through this bill would be a cause for grave concern. Also, during a period of great transition in the way in which governments deliver services, it is absolutely essential that electronic transactions by way of engaging citizens with the government not be mandated. We need to have a choice and the government still needs to be able to work with citizens in a more traditional way. However, given that the use of e-commerce by Australians is increasing at an exponential rate—from 409,000 up to 650,000 users in just the last 12-month period, according to ABS statistics—it will increasingly be in both consumer and commercial interests to participate in the electronic framework.

Some general reflections about the growth in electronic commerce underlie the significance of legislation of this type and how it positions Australia in the global economy. Forrester Research have identified that, in Australian dollar terms, in 2003 there will be $2 trillion worth of trading in an electronic commerce environment in business to business transactions alone. Business to consumer transactions are also increasing at a phenomenal rate. In terms of the actual ratio, we know that business to business electronic transactions are still sitting at a rate which is about 10 times that of business to consumer. We can anticipate, however, in the context of the trend growth in Internet usage and the changing way in which consumers are starting to access the Internet for the purposes of purchases, that that ratio will close as time moves on and the number of electronic transactions that people are conducting online will increase phenomenally.

Back in February 1998 alone, with respect to EFTPOS transactions, and including the broadest definition of electronic transactions—so this is certainly far more than just the number of people purchasing off the Internet and businesses transacting on the Internet—there was $1.6 trillion being exchanged in that regard, involving 116 million individual transactions. So the impact of electronic commerce on our society as time moves on is becoming more and more prevalent.

What does all this mean? The most important point to remember here is that, in a global economy—and as Australia finds its place, as many other economies are doing, in that space—how we manage electronic commerce in the context of everything from our taxation framework, our international trade agreements, our capacity to participate in the international bodies that set regulations and laws about how privacy is managed to how security and encryption standards are managed will become increasingly important to Australia, because all those issues will start to define what our economic identity is.

We hear so much concern and trepidation expressed about the impact of globalisation on Australia, particularly on our economy and certainly on our cultural identity. I believe that how we manage electronic commerce will continue to define what our economic identity is in a global economy. We have to take great care as a parliament as to how we participate, through the support of bills like this, in establishing the environment that will, in turn, serve to create Australia's economic identity in a global economy. I believe that taxation framework conditions and trade agreements will be a significant part of that.

One of my main concerns in that regard relates to the taxation framework conditions that we are currently preparing for in this country with a goods and services tax. I know that I have mentioned this before in this place, but jurisdictional issues and the capacity to derive revenue through a consumption tax are going to come under significant and increasing challenges in a global economy. The reasons for this relate to the tracking of tangible products like books purchased over the Internet to what I call digital intangible products, which may be travel services, applications, other kinds of software or, indeed, creative content. These all present significant jurisdictional challenges for the purposes of deriving some sort of consumption tax. Both the World Trade Organisation, through their electronic commerce working group, and the OECD, through their taxation framework conditions and their finance working group, are grappling with these challenges now.

To date, many of these issues have been handled in either bilateral or multilateral tax arrangements. But the magnitude of growth of electronic commerce exchanges is starting to put a great deal of pressure on countries that do rely on deriving their internal revenues from consumption based taxes. This, more than ever, highlights the point that the GST is a tax for times past. It is not a tax that suits a global economy. It is not a tax that suits a country that is trying to position itself in the best way it knows how to benefit from the changes that are taking place with the Internet and our role in being able to capitalise on what is a fundamental benefit that electronic commerce and electronic transactions will bring to our economy.

For the first time, if it has not dawned on the government as yet, if you think about digital intangible products or anything that can be circulated, distributed, transacted or exchanged online, suddenly our geographic location is irrelevant. This is a significant export opportunity apart from anything else. So any taxation framework that inhibits that growth and any law that relates to the regulation of content on the Internet, like the Broadcasting Services Amendment (Online Services) Act as it is currently on the books in this country, undermine Australia's capacity to derive benefit that we should be deriving from the growth of electronic commerce in that global economy. It does go both ways, however. How we establish before our economic identity in the globalised world is an incredibly important thing.

This bill is a bit of a starting point. It is covering off a few bases that I believe the government could have covered off a long time ago. I certainly look forward to watching with very close interest continuing developments from a regulatory perspective and also how the government comes to terms with this process of transition. Australia's economic identity is metamorphosing from something that has been quite definable in the past, where we have defined ourselves as a nation primarily around our economic identity, to defining ourselves in a globalised society where globalisation is really a symptom of what the Internet has enabled in economic, social and cultural terms.