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Wednesday, 20 June 2001
Page: 24769


Senator BOSWELL (Leader of the National Party of Australia in the Senate and Parliamentary Secretary to the Minister for Transport and Regional Services) (4:43 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

GOVERNOR-GENERAL LEGISLATION AMENDMENT BILL 2001

This bill is to set the salary to be payable to the next Governor-General. Section 3 of the Constitution precludes any change to the salary of a Governor-General during the term of office, and whenever a Governor-General is to be appointed, changes to the salary of the office must be made by way of amendment to the Governor-General Act 1974 prior to the appointment. The salary must be set at that time at a level that will be appropriate for the duration of the appointment.

On this occasion, in conjunction with the prescription of the salary to apply to the next Governor-General, the government has taken the opportunity to update the taxation provisions applying to the Governor-General and to State Governors. This will involve removing the exemption from income tax that has long applied to official salary and overseas-sourced income. The exemption will be removed for Governors with effect from the next appointment of a Governor in each State. Removal of the income tax exemption makes it necessary to set the salary for the Governor-General at a higher level than has previously applied.

The bill also makes a number of changes to ensure that the superannuation surcharge on the retirement allowance payable to governors-general will apply in the same way that it applies to the rest of the community. It also provides an option for post-retirement commutation of the allowance to meet surcharge liabilities as is being done in other defined-benefit superannuation schemes.

Salary

The salary proposed in the bill has been set in line with the convention applying since 1974 under which the salary of the Governor-General has been set with regard to the salary of the Chief Justice of the High Court of Australia. In the past, the Governor-General's salary has differed from that of the Chief Justice in being exempt from income tax and in not being able to be changed during the period of an appointment. Because of these differences, the comparison of the two salaries has necessarily been of after-tax equivalent incomes over a notional term of appointment.

The salaries of successive governors-general have been set by calculating the after-tax equivalent of the Chief Justice's salary at the time of appointment of the Governor-General, projecting its likely future movement, and then estimating the average after-tax salary for a notional term of appointment of a Governor-General of five years. The practice has then been to set the Governor-General's tax-free salary at a level estimated to moderately exceed the projected average after-tax salary of the Chief Justice of the High Court over the notional 5 year term of the Governor-General.

In proposing a salary for the next Governor-General, the government has maintained the link with the salary of the Chief Justice. I note that the Chief Justice's salary is determined annually by the Remuneration Tribunal, a body that is independent of government.

The tax free salary calculated for the Governor-General when Sir William Deane was appointed in 1996 was $135,000 (which was reduced to $58,000 to take account of a pension he received as a former High Court Judge). This represented an increase of $40,000 from Mr Hayden's salary of $95,000, set in 1989 on the basis that Mr Hayden's parliamentary pension was suspended during his appointment. When the change in tax treatment is taken into account, the increase now proposed in the Governor-General's salary will be of the same order as the increase in 1996.

It is proposed that the Governor-General's before-tax salary should be $310,000. This compares to the present salary of the Chief Justice of $276,800 and takes account of the fact that the Chief Justice's salary will be adjusted periodically while the Governor-General's salary will remain unchanged during the Governor-General's term of office. If, as anticipated, the salary for the Chief Justice continues to increase in line with recent trends, it will be significantly ahead of the salary being proposed for the Governor-General at the end of the notional five year term.

Income Tax

Section 51-15 of the Income Tax Assessment Act 1997 presently provides for exemptions from income tax of the official salary and any income derived from outside Australia of a taxpayer who is a vice-regal representative. The proposed amendment will remove these exemptions by the deletion of section 51-15 of the Income Tax Assessment Act.

The exemption for the official salary has existed at least since 1922 and the exemption for income from outside Australia at least since 1936. When these exemptions were introduced, vice-regal appointees were normally drawn from the United Kingdom and for income tax purposes they were treated in the same way as non-diplomatic representatives of foreign governments or organisations. Today, the Governor-General and State Governors are invariably Australian citizens and there is no longer any reason to continue to treat them like foreign representatives.

There has also been an additional change relating to taxation payments by the Crown. In the 1920s, the Crown did not pay income tax but since 1993 Her Majesty The Queen has voluntarily paid both income tax and capital gains tax.

In the context of these changes, the government considers it appropriate to remove the income tax exemptions for vice-regal representatives.

Transitional provisions will ensure that the amendment does not apply to the current Governor-General or to incumbent State Governors. Removal of the exemption will take effect with the appointment of the next Governor-General and, in each State, when a new appointment is made to the office of Governor.

Superannuation

The current provisions in the Governor-General Act relating to superannuation require amendment. In addition, and as is being done in other public sector defined benefits superannuation schemes, it is desirable to provide for post-retirement commutation of pension to meet surcharge liabilities. In general, the changes will ensure that the surcharge applies to the Governor-General in the same way that it applies to the rest of the community.

The Governor-General Act was amended in 1997 to implement the superannuation surcharge. Under these provisions, the extension of a Governor-General's term of office or an early retirement could cause some anomalies in the recovery of surcharge liability. I note at this point that this scenario is by no means hypothetical as three of the five most recent Governors-General have had their terms of office extended and one retired earlier than the notional five-year term used to calculate salary and retirement benefits.

The amendments proposed in this bill would ensure that the rate of reduction in a Governor-General's retirement allowance would not exceed the maximum 15 per cent surcharge rate, regardless of the timing of retirement. Changes with similar intent are being considered for the Judges' Pension Act scheme.

It is also possible in some circumstances that a notice or notices of assessment of surcharge liability may be issued after the retirement of a Governor-General and at present there is no provision for payment of these liabilities by reduction in the retiring allowance. The bill proposes such a provision and I note that provisions with similar intent are increasingly common in defined benefit superannuation schemes and are being made in other Commonwealth public sector schemes.

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DAIRY PRODUCE LEGISLATION AMENDMENT (SUPPLEMENTARY ASSISTANCE) BILL 2001

Introduction

The Dairy Produce Legislation Amendment (Supplementary Assistance) Bill 2001 provides for additional assistance to be made available to Australian dairy farmers and the communities most adversely affected by the removal of market milk pricing regulations by all Australian States last June. The Bill is a further response by the Commonwealth Government to the needs of dairy farmers and their communities and highlights again the inaction of most State governments in helping their farmers cope with change they implemented.

This assistance comes on top of the substantial package of adjustment assistance already provided to the dairy industry by the Commonwealth Government. Last year, in the lead up to the decision by all States to deregulate their fresh milk arrangements, and as a result of a united request by industry leaders across Australia, the Federal Government put in place a generous dairy adjustment package to the value of $1.78 billion to assist the transition to a deregulated environment.

Implementation of existing package

The $1.78 billion Commonwealth Dairy Industry Adjustment Package provides quarterly Dairy Structural Adjustment Program (DSAP) payments for eight years. It also provides a lump sum payment of up to $45,000 tax-free to those dairy farmers wishing to leave agriculture and provides $45 million over 3 years under the Dairy Regional Assistance Program (Dairy RAP) to assist dairy-dependent communities affected by deregulation.

The implementation of the Commonwealth dairy adjustment package is well advanced. Virtually all people with an interest in a dairy farm on 28 September 1999 have applied to the Dairy Adjustment Authority (DAA) for payments under the DSAP, 99% have been notified of their entitlements and 95% are now receiving payments. The remaining applicants are essentially only those whose entitlement is under appeal or who are involved in legal action of one kind or another.

Farmers have used their payments for a variety of purposes, including to improve farm productivity and profitability in the new market environment. Some have reduced their farm debt, while others have invested in new farm capacity and other means of improving farm productivity. Some have chosen to leave the industry and are using their payments to re-establish.

Uptake of Dairy RAP has been significant and has focused heavily on assistance for new business or business diversification. For example, the Bega Cheese factory was provided a grant under the Dairy RAP to assist with the purchase and installation of a new cheese shredding line.

Industry adjustment is underway, although the nature of the adjustment burden varies markedly across the country. Restructuring and rationalisation within the Australian dairy processing and manufacturing sector has intensified as firms expand their operations, or seek to merge in the search for increased scale and production efficiencies. The larger dairy companies are looking for partners in the market to improve their competitive positions, both domestically and internationally.

However, despite the successes of the Commonwealth's substantial assistance measures, the Government is aware that many producers are still experiencing very difficult circumstances where farm gate price reductions following deregulation have been greater than many farmers expected. In November 2000, the Government asked the Australian Bureau of Agricultural and Resource Economics (ABARE) to investigate the impacts of deregulation to get to the facts of the adjustment situation facing dairy farmers and their communities.

The ABARE report, released in January, confirmed that market milk price declines had been greater than the industry anticipated, particularly in the former quota States of New South Wales, Queensland and Western Australia. The report clearly indicated the magnitude of the challenge facing the dairy industry, particularly those operating in the former quota States where the proportion of market milk to manufacturing milk in the total production of the dairy enterprise was significantly greater.

The ABARE report also highlighted that, with the exception of Western Australia, States have done almost nothing to assist dairy farmers to adjust to deregulation, despite it having been State Parliaments which took the action of removing farm gate market milk price controls. After having ignored the pleas of the industry for so long, it seems improbable that State Governments will ever provide help to farmers affected by their decision to deregulate. The Commonwealth Government has decided to provide $140 million by way of additional assistance, closely targeted to those farmers and dairying communities that have been most severely affected by deregulation.

The Dairy Produce Legislation Amendment (Supplementary Assistance) Bill sets out the framework for the new measures. As with the earlier assistance provided by the Commonwealth, this assistance is not about providing compensation or income support. It is to help with adjustment by those farmers who are most in need, thereby easing their transition to a deregulated market and providing wider public benefits to regional communities.

Additional market milk payments

The new assistance will include some $100 million in additional adjustment payments to producers who were heavily reliant on market milk premiums before deregulation and who have consequently experienced significant losses in income. The additional market milk payment is to be made to people who delivered more than 35% of their total deliveries as market milk in 1998-99. The Government has accepted that, generally, above this level of market milk dependency before deregulation, farmers are now incurring income losses well above that typical of normal business cycles in dairying, and that some further adjustment assistance is warranted.

Specifically, the additional market milk payment entitlement will be calculated on the basis of a sliding scale from 12 cents per litre at 45% or more market milk dependency, tapering down to a rate of 0.12 cents per litre for those whose market milk deliveries were 35.1% of their total deliveries. An individual entity's entitlement will be calculated with reference to their DSAP delivery record in 1998-99. The payment will be subject to a maximum of $60,000 per enterprise, shared according to the allocation of the enterprise DSAP entitlements for market milk. The payments will only be available to those entities that were still in dairying on a date to be specified.

Farmers will have the option of receiving their entitlement as an additional market milk payment over 8 years, or as a lump sum payment. In effect, these payments are of the nature of a subsidy, and therefore will be subject to normal income tax whether the payments are made over an 8-year period or as a lump sum. The DAA will communicate directly with dairy farmers about this additional market milk payment.

Inevitably in an assistance package of the order of magnitude of the Dairy Structural Adjustment Program, there will be a need to require some adjustment to entitlements as new information becomes available to the DAA. The DAA has been able to correct all underpayments and most overpayments have been addressed on a voluntary basis. The Government stands by its commitment not to recover overpayments made by the DAA under the DSAP scheme where those who received a DSAP entitlement acted in good faith. The Government is aware that a few people with overpayments have committed funds to investments or borrowings on the basis of their advised DSAP allocation. The Government does, however, believe it is appropriate and reasonable for these overpayments to be corrected, and recovered where possible from these additional payments. The Bill, accordingly, makes provision for this to occur in the handful of cases involved where voluntary repayment has not been agreed.

Discretionary payments

The supplementary dairy assistance proposed in this Bill also includes provision for discretionary payments to be made in certain circumstances at an estimated cost of $20 million. The Government accepts that a relatively small number of people have been denied, or have received lower DSAP payment entitlements than they would normally have expected. This may have occurred because of changes in circumstances of farmers, an unfortunate coincidence of timing of the package, or atypical farm management arrangements during the eligibility period.

A Discretionary Payment Right is to be available to address the interests of these people. In principle, to be eligible for a Discretionary Payment Right, an applicant would need to demonstrate to the DAA that they had experienced a significant event, significant crisis or other significant anomalous circumstances which affected their eligibility for, or reduced their DSAP entitlement. Events that may be considered might include personal circumstances such as illness, injury related incapacity, death or animal disease that significantly disrupted production. Atypical farm management arrangements during the base year that resulted in a lower, or zero, milk deliveries by the applicant will also be considered on the merits of each case.

There will also be scope for dairy farm lessors to demonstrate they have suffered a significant event or crisis, which resulted in their temporary or unforeseen change in status from producer to lessor, to be considered for a discretionary payment.

Secondly, limited discretionary payments will be available to other lessors who can demonstrate that they derived 50% or more of their total income from the dairy enterprise lease and who can demonstrate their annual lease income has fallen by at least 20% since 1 July 2000.

The DAA, the independent statutory authority responsible for administering the dairy adjustment program will make recommendations to the Minister for Agriculture, Fisheries and Forestry on the merits of cases coming forward for discretionary payments. The assessment guidelines will allow more scope for consideration of cases on their individual merits. Some people experienced difficulties in meeting the strict criteria which, for reasons of practical administration, addressed the typical circumstances of the large majority of DSAP applicants.

It is not intended there be a new general application process for discretionary payments, however, there may be some who self-assessed ineligibility under old arrangements, where applications will have to be considered. The DAA will contact dairy farmers directly. If necessary, additional information will be sought from potentially eligible people identified during the DSAP application process. The DAA will, of course, be happy to receive information from people who believe they should be considered when the eligibility criteria for the package are announced. Eligibility criteria and guidelines for administration of these discretionary grants will be announced as soon as possible.

As with the additional market milk payments, discretionary payments will be subject to income tax.

Expansion of the Dairy Regional Assistance Program (Dairy RAP)

As the final element of the new package, an additional $20 million will be made available for the Dairy RAP, administered by the Department of Employment, Workplace Relations and Small Business. Dairy RAP grants are to generate employment and encourage growth through support for new business investment, and establishment of community infrastructure, including counselling services. Priorities for funding will focus on those regions most adversely affected by deregulation, as identified in the ABARE report. The Bill provides for amendments to allow greater flexibility in the administration of the program, to ensure that more projects that are worthwhile can be brought forward and adequately supported early in the life of the program.

Funding of new assistance

The existing $1.78 billion dairy industry adjustment package is being funded from a consumer levy of 11 cents a litre on the sale of liquid milk products. The new assistance will be funded by an extension of the dairy adjustment levy into year nine (2008/2009). Although it is difficult to project levy receipts due to uncertainties such as interest rates and consumption levels so far into the future, it is estimated that the levy would be in place for an additional period of around ten months. The levy will also meet the administration and borrowing costs associated with the new assistance.

Industry consultation

Industry has been consulted on this new package of assistance and strong support is expected from farmers in the former quota States of New South Wales, Queensland and Western Australia, who the ABARE report identifies as being the most adversely affected by deregulation. However, farmers in all States will be eligible for the payments if they meet the eligibility criteria.

Widespread support is also anticipated for the discretionary payment provisions that will undoubtedly alleviate the hardship of those who have been inappropriately excluded from adequate structural adjustment payments. The expansion of the Dairy RAP will be welcomed by those communities in regional Australia who have been identified as being most adversely affected, and who will have the opportunity to bring forward projects for funding.

Timing of payments

The Government has moved promptly to address the concerns of vulnerable dairy farmers and their communities, in the light of the requests it has received from the industry, and as revealed by the ABARE report. Payments under the Supplementary Dairy Assistance Scheme will be largely based on DSAP entitlements and information already largely available to the DAA. Notification of the Additional Market Milk entitlements will be made shortly after passage of this Bill and payments can be made promptly on completion of acceptance processes. I therefore commend this Bill for early passage, so that payments can be made to these most vulnerable dairy farmers and dairy dependent communities as soon as possible.

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INNOVATION AND EDUCATION LEGISLATION AMENDMENT BILL 2001

It is now widely recognised that innovation is one of the keys to economic prosperity and will be a major driver of economic growth in the 21st Century. That is why we must grasp the opportunity now available to further develop the partnerships between the education, research, business and government sectors, necessary for Australia to generate and act on ideas. This Bill is an important step in the implementation of a comprehensive strategy that will see Australia harness its talents and resources to remain a nation at the forefront of innovation.

Innovation can be described as the process of developing skills, generating new ideas through research and turning those ideas into successful commercial outcomes. Government has two roles to play in a successful innovation system. Firstly, it must provide the economic, tax and educational framework that will allow innovative businesses to operate effectively and to ensure that people have the right skills and knowledge. Secondly, it must provide direct targeted support in areas where private sector funding is not appropriate or available. This Government is delivering on both these fronts.

During the term of this Government our economy has enjoyed an unprecedented period of economic growth, averaging 4.5 per cent in the last three financial years, coupled with low inflation and impressive employment and productivity performances. We now have an internationally competitive taxation system, with low company tax rates and a GST to replace the former inefficient indirect tax system. We will soon have a new Capital Gains Tax system that will encourage entrepreneurial behaviour. On the education side, the real value of the Commonwealth's investment in education has risen from $9.4 billion in 1995-96 to $11.1 billion in 2000-2001.

In January this year, the Prime Minister announced a package of measures, the Government's Innovation Action Plan, Backing Australia's Ability, that are the next steps in the Government's strategy to directly encourage and support innovation. The current Bill deals with the elements of the Innovation Action Plan that are to be delivered through Australia's high quality higher education sector.

Universities have a vital role in the innovation system. They are the nation's leading providers of training for our future research workforce and generate much of the new knowledge that drives innovation. Although our investment in higher education research and development as a share of GDP is already high by international standards, the Government has recognised that further investment in higher education research, research infrastructure and skills development is needed.

This Bill provides the first instalment of the $1.47 billion in additional funding being provided over the next five years to boost research and higher education in Australia. This funding will be critical to strengthening our already strong research base and to developing and retaining Australian skills. Together these elements will ensure the flow of the new ideas which underpin innovation.

The Government's Innovation strategy includes doubling funding for the national competitive grants administered by the Australian Research Council over the next five years. The extra $736 million will improve the competitiveness of researchers' salaries and increase the support available under the Discovery and Linkage elements of the ARC's grants programme. The additional funding will be focussed on areas in which Australia enjoys, or wants to build, a competitive advantage.

Complementing this substantial increase in grants funding, will be a total of $583 million over five years in extra funding to maintain and build up the research infrastructure in our universities. $337 million will provide the infrastructure needed to support project-funded research from ARC and National Health and Medical Research Council grants. $246 million will be available to upgrade the basic infrastructure of universities, such as scientific and research equipment, libraries and laboratory facilities.

The Government also seeks to strengthen Australia's skills base, encourage a wider interest in science, mathematics and technology and retain and attract back to this country the best Australian researchers. Our strategy includes building Australia's capacity in key enabling technologies such as information and communications technology and biotechnology.

This Bill encompasses two key components of the strategy. The Bill establishes the new Postgraduate Education Loans Scheme (PELS). PELS is designed to encourage life-long learning and to help Australians upgrade and acquire new skills. It is expected that the loans provided under this scheme will amount to some $995 million over the next five years and will assist about 240,000 students in their aspirations to undertake further advanced education.

The Bill also provides the initial years of the $151 million over five years for additional university places in the priority areas of information and communications technology, mathematics and science. The new funding will support an additional 2,000 university places each year, rising to nearly 5,500 places a year, as students continue through the system; or 21,000 equivalent full-time student places over the five years.

A component of the doubled ARC funding will be used to support 25 new Federation Fellowships each year to retain, or attract back, the very best Australian researchers. Each Fellowship will be worth an internationally competitive $225,000 a year in salary for five years.

The Bill will also introduce some amendments to the Higher Education Contribution Scheme and related schemes to streamline their administration and provide important protections in relation to the public's investment in these schemes. The Bill will give the Minister the discretion to impose a cap on the maximum amount of debt students can accumulate to discourage irresponsible use of the schemes and excessive fee increases. Other provisions in the Bill will make it easier for universities to operate in an electronic environment consistent with the requirements of the Electronic Transactions Act 1999.

The Bill includes a minor amendment to the States Grants (Primary and Secondary Education) Assistance Act 2000 to ensure that the Government's commitment to maintaining special education per capita funding levels is honoured. A minor increase in funding will ensure that the full level of funding required is available so that independent schools are not disadvantaged by the new arrangements for special education per capita funding introduced in the Act.

The Bill also amends the States Grants (Primary and Secondary Education Assistance) Act 2000 by increasing the funding for establishment assistance to new non-government schools for the 2001-2004 program years, in line with current estimates of demand.

Debate (on motion by Senator Denman) adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.