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Finance and Public Administration Legislation Committee
(Senate-Wednesday, 25 May 2011)
PRIME MINISTER AND CABINET
Department of Regional Australia, Regional Development and Local Government
CHAIR (Senator Polley)
Senator IAN MACDONALD
National Capital Authority
Senator IAN MACDONALD
- Department of Regional Australia, Regional Development and Local Government
FINANCE AND DEREGULATION
CHAIR (Senator Polley)
Medibank Private Ltd
Department of Finance and Deregulation
- Medibank Private Ltd
- PRIME MINISTER AND CABINET
Content WindowFinance and Public Administration Legislation Committee - 25/05/2011 - Estimates - FINANCE AND DEREGULATION - Department of Finance and Deregulation
Department of Finance and Deregulation
CHAIR: We will commence with Program 1.1 this afternoon and then move into consecutive programs and relevant portfolio agencies either tonight or tomorrow as circulated in the program. Officers and senators are familiar with the rules of the Senate governing estimates hearings. If you need any assistance the secretary has copies of those rules. I particularly draw the attention of witnesses to an order of the Senate of 13 May 2009 specifying the process by which a claim of public interest immunity should be raised. The committee has set Friday, 8 July 2011 as the date by which answers to questions on notice are to be returned. Do you have an opening statement?
Mr Tune : Could I just ask a question about a matter of process? If we are dealing with Outcome 1 tonight, I have a lot of people from the other outcomes here. If they are going to be tomorrow, I wonder if they can be excused, unless there are general questions that might cut across all of the outcomes.
Senator Wong: We are just trying to avoid every outcome here in the next room. Obviously they are here tomorrow. We are just questioning whether or not we will have general questions across all outcomes so we have to keep everyone here or whether we are going to—
CHAIR: We will be dealing with general questions and then we will be going program by program under the dot points as outlined in the program.
Senator Wong: Perhaps you can let us know when general questions are over and we will send everyone but outcome one away. Is that all right?
Senator FIFIELD: There are about eight or nine colleagues who have questions for finance. There may be general questions, so we will just have to suck it and see.
Senator Wong: Sorry?
Senator FIFIELD: We do not necessarily know the exact areas that each and every one of them want to ask so we might just—
Senator Wong: We are just trying to be economical with people’s time.
Senator FIFIELD: I appreciate that. I am just trying to give you the lay of the land from our side. General questions may go for a while.
CHAIR: The way we have worked thus far is that we deal with general questions, which could go for some time, but then we will be going through dot points just so that it is easier for us to keep track of where we are at in the program. We will be able to give you a better indicating after the dinner break.
Senator CORMANN: I might just start off by asking some questions to you, Minister, in relation to the government’s assertion about strict physical rules, which are supposed to include the commitment to offset new spending with commensurate savings. I refer you to table 3 on page 314 of the Budget Paper No. 1. If you look at the 2011-12 financial year, which is of course the budget that we are looking at and that the parliament is voting on, the net impact on the budget as a result of policy decisions since MYEFO is in fact minus $2.6 billion. That is right, is it not?
Mr Tune : For 2011-12, that is correct.
Senator CORMANN: The 2011-12 is of course the budget that we are dealing with. That does not quite the match the commitment to offset new spending with commensurate savings, does it?
Senator Wong: We have done so over the budget period. If you look at the net budget impact of policy decisions in the line which is about two-thirds of the way down that table, you will see it is some $5 billion over the forward estimates.
Senator CORMANN: That is the $5.1 billion?
Senator Wong: Correct.
Senator CORMANN: But of course the $21.6 billion worth of savings, as it says in Budget Paper No. 1, actually includes about a third—I think it says there—of new taxes, tax increases and other revenue measures; does it not?
Senator Wong: If we are going to have this argument about savings, you better stop talking about your $50 billion worth of savings if you believe that there should be no revenue measures.
Senator CORMANN: I am not suggesting there should not be revenue measures, but I note that the Treasurer in his budget speech talked about $22 billion worth of savings without the proviso that was included in the budget papers, which was dutifully reported in the press as $22 billion worth of spending cuts. In fact, on the front page of the Financial Review it said there were $22 billion worth of spending cuts. Of course, $6.2 billion of that are revenue measures, including $1.7 billion for the flood levy. If you exclude new taxes, tax increases and other revenue measures to the tune of $6.2 billion, your net budget impact of policy decisions over the forward estimates is actually a net increase in spending, is that not right?
Senator Wong: We use the same definitions of savings that you have used in both government and opposition. If you are asking me whether or not I think it is a sensible fiscal position to remove a tax expenditure for sound policy reasons—well, that is our position. It is a sensible thing to do.
Senator CORMANN: I think you have taken the spin on how you sell new taxes, tax increases and other revenue measures to quite a unique level.
Senator Wong: If you want to talk about spin, I think the most extraordinary example of spin is that the alternative Treasurer, the shadow Treasurer, asserts $50 billion in savings, which comprises an $11 billion black hole and—
Senator CORMANN: According to you.
Senator Wong: No, not according to me. According to—
Senator FIFIELD: A point of order, Chair.
Senator Wong: I am responding to a proposition—
CHAIR: There is a point of order before the Chair. Your point of order?
Senator FIFIELD: It is going to be an extremely long night if the minister at the table treats this estimates hearing as though we are in question time. This is not question time. This is an estimates hearing. We ask questions and those on the other side of the table give answers.
Senator Wong: On the point of order—if I am accused of spinning and other such political statements in questions, I am going to respond to them and refute them. If you want simply to ask questions, I am happy to play by a pretty strict rule book, but it is pretty hypocritical of opposition senators to include a whole amount of political rhetoric and accusation in their questions and then not like it if they get a bit coming back.
CHAIR: On the point of order, I remind all committee members and the witnesses that the process is asking questions and then having the opportunity to respond. As I have expressed earlier today and yesterday, if there are political statements made in questions and assertions made, you have to expect that those at the witness table are going to respond to those. It is a matter of how committee members want to use the time available to them. I would suggest that we continue on with the processes outlined under the standing orders.
Senator Wong: I was just making the point that, if the opposition wants to perhaps be more honest about their savings, I am happy to have that discussion. It might be helpful for you to look at the table facing that table, which is on page 315. This really relates to a test that the shadow Treasurer mentioned, which was to look at whether government spending as a proportion of the economy rose or fell. If you look at that table, you will see that the government spending or payments as a proportion of GDP over the forward estimates fall to 23.5 per cent of GDP. That is a fall of one percentage point over the forward estimate period. So, effectively the size of government in terms of the size of the economy is smaller. My recollection is that the average over I think the last decade preceding the global financial crisis was 24 per cent, but I will check that.
Senator CORMANN: We are going to get to that, but I am just going to stick to my own roadmap in terms of questions. When deciding on savings, is it true that the department provided a list of options above and beyond the $21.6 billion?
Senator Wong: If you have been through a budget process, of course, in the ERC process, or any government budget process, a range of matters are considered by that subcommittee of cabinet.
Senator CORMANN: I noted in the Sydney Morning Herald the day before the budget that you had to stand up to the Prime Minister to get some of your savings up. Could we have a list of the savings where Minister Wong won the battle and the proposed savings where the Prime Minister won the battle, the things that got into the budget and the things that did not.
Senator Wong: This Prime Minister has always been acutely aware of the importance of fiscal responsibility and has carried that commitment through all her decision making, if I may say, far more economically and fiscally responsibly than her counterpart.
Senator CORMANN: But it was you who went to the media the day before the budget to say that at times you had to stand up to the Prime Minister in order to get a lot of tough decisions made. Where did you lose? Which savings did you take from your department into the process and the Prime Minister overruled you and said, ‘No, Minister, this is not going to happen.’
Senator Wong: I would make two points. Firstly, I would invite you to look at what was actually said by me in that article. Secondly, the decisions of the government are reflected in the budget papers.
Senator CORMANN: So, you did not tell the Sydney Morning Herald that you had at times to stand up to the Prime Minister?
Senator Wong: The decisions of the government are in the budget papers.
Senator CORMANN: The headline ‘… Wong labours hard for cuts’ and ‘has at times had to stand up to the Prime Minister …’ is wrong?
Senator Wong: I do not write headlines. Do you write headlines?
Senator CORMANN: I am sure you enjoyed the headline. I am sure you like to be presented by a tough finance minister standing up to the Prime Minister, but I want to know how successful you have been. Did you take $21.6 billion worth of savings to the Prime Minister and get them all through or did you take $30 billion and the Prime Minister overruled you on about $9 billion worth of savings? Or did you take $50 billion worth of savings and she more than halved it? How tough and effective were you in standing up to the Prime Minister? You gave that indication, clearly, to a journalist that that is what you did. How successful have you been in standing up to the Prime Minister?
Senator Wong: The government has made its decisions. They are in the budget papers.
Senator CORMANN: How many savings did you take into the process beyond the $21.6 billion?
Senator Wong: Other than simply to try to make a political point, you are not seriously using an estimates hearing to try to suggest I should be talking to you about the entirety of the ERC process; are you?
Senator CORMANN: No, not the entirety. I do not want the entirety. All I want is the savings.
Senator Wong: This is not a serious line of questioning and you know it. That is why you are smiling and smirking the way you are.
Senator CORMANN: You are smiling. I am just smiling back.
Senator Wong: I am just saying that you are not using this estimates—
Senator CORMANN: I am just smiling back—
Senator Wong: If you have no questions about the budget—
Senator CORMANN: That is great.
Senator Wong: If you have no serious questions about the budget I am sure all of us would like—
Senator CORMANN: These are—
Senator Wong: If I can finish? If you have no serious questions about the budget and just want to perform, then frankly there is plenty of work I can do and I am sure there is plenty of work the officers can do.
Senator CORMANN: But the finance minister of the Commonwealth went to the media the day before the budget trying to demonstrate how tough she was, suggesting that at times she had to stand up to the Prime Minister. We have a budget with $21.6 billion in savings. I want to know whether that is a reflection of your toughness or whether that was all you were able to get past the Prime Minister?
Senator Wong: And I have said the decisions of the government are reflected in the budget papers. I am not going to engage in this.
Senator CORMANN: So, you took more than that $21.6 billion worth of—
Senator Wong: I am not going to engage in this.
Senator FAULKNER: Don’t be modest, Senator Wong.
Senator CORMANN: I agree with Senator Faulkner. You should just say that you took a much bigger list of spending cuts to the Prime Minister.
Senator FAULKNER: Senator Wong is really tough—okay. Hold the front page, I am sure another headline will be written about this.
Senator CORMANN: Indeed. What percentage of the savings are actually funding deferrals? We have $6.2 billion worth of savings that are new taxes or tax increases. Which of the savings, rather than spending cuts, are deferrals in funding into later years?
Mr Tune : I do not think we have that number. We will take that on notice.
Senator Wong: Do you want us to disaggregate this and give you some sense of how much was deferral?
Senator CORMANN: I want to know how much of it is spending cuts.
Senator Wong: If you are not spending it in the year, that is a spending cut.
Senator CORMANN: If you just defer it, then it is cash-flow management really.
Senator Wong: Why don’t you tell us what you are asking and we will take it on notice.
Senator CORMANN: Exactly. We know that $6.2 billion was new taxes, tax increases or revenue measures. So, that leaves another $15-plus billion. How much of that was actual cuts in spending where the spending is not expected to ever happen again? How much of it is a deferral into the out years or later years, into years beyond the budget, but where the expenditure is still actually going to happen? That is what I am getting at.
Mr Tune : I understand your question. I do not have that number with me so we will take that on notice.
Senator CORMANN: In the budget papers it states that the face value of total stock of Commonwealth government securities by 30 June is expected to reach $192 billion.
Senator Wong: I am sorry, if we are going to do budget papers can you take us to where you are reading from?
Senator CORMANN: Budget Paper No. 1, page 713, and there is table I think in section 9. I do not have the page. You would remember, though, what the face value of total stock of Commonwealth government securities would be by 30 June—$192 billion by 30 June?
Senator Wong: I think I have answered that question previously.
Senator CORMANN: The current limit is $200 billion. The thing that you have not answered—and I am just trying to have another crack at this—is that given it is expected to be $192 billion by the end of June, when will you reach the current limit of $200 billion given that you are borrowing about $135 billion?
Mr Tune : You really need to talk to the Australian Office of Financial Management about that one. They will be in charge of that issuance and they will have the timing and so forth. We are not in a position to answer that, I am sorry.
Senator CORMANN: I will ask them, but is that not something that you track? There is currently a debt ceiling—
Mr Tune : We do not track it day by day, no. AOFM will.
Senator CORMANN: But AOFM—
Senator Wong: It is within the Treasury portfolio.
Senator CORMANN: So, Finance does not keep any track of this?
Mr Tune : No, issues around the management of debt are the responsibility of the Treasury and the Office of Financial Management.
Senator CORMANN: That is interesting.
Senator Wong: It is the same division of responsibilities that would have existed under you.
Senator CORMANN: Treasury advised last year that $10 billion of stimulus spending was to be outlaid in 2011-12. Are you able to provide us with a detailed breakdown of the spending?
Senator Wong: In which program?
Senator CORMANN: Stimulus spending in 2011-12.
Mr Tune : We will need to take that one on notice as well.
Senator CORMANN: You do not know?
Mr Tune : Not the detail of it, no. It is basically the remainder of those programs that are in the stimulus package, like some of the infrastructure programs, the remainder of the BER and those sorts of programs. But I will get you a breakdown.
Senator Wong: In terms of completion or projects committed, I think the figure is about 97 per cent. But we will see if we can assist with anything further.
Senator ABETZ: I will not go into descriptors about whether the budget is tough or indifferent. What I do want to do is get a handle on the exact figures. Is it correct, Minister, as claimed by you on 11 May that the net save across forward estimates is only $5 billion?
Senator Wong: The $5 billion number is the one I was just referring Senator Cormann to at page 314 of Budget Paper No. 1.
Senator ABETZ: It is $5.819 billion?
Senator Wong: It is 189.
Senator ABETZ: So, we are agreed on that.
Senator Wong: That is the net of what we call measures—
Senator ABETZ: The net save position is about five and a bit billion dollars?
Senator Wong: That is right.
Senator ABETZ: Is it a fact that total expenses across the forward estimates are approximately $1,560 billion?
Mr Tune : That would be about right. I am just adding them up roughly.
Senator ABETZ: Is it a fact, therefore, that this budget will save about $5 billion out of about $1,560 billion?
Senator Wong: I think a point should be made in terms of the figures I gave to Senator Cormann. If you look at what is occurring and you look at page 315 in Budget Paper 1 you will see a reduction in the size of government as a share of the economy—a reduction to 3.5 per cent.
In terms of real growth and expenditure—and you would know from your experience a range of government programs grow at different rates; for example, many of our income support payments are indexed—we have a cap on real growth and expenditure of two per cent. We better that in this budget over the forward estimates period. We have on average a one per cent per annum growth. That compares with the last five Costello budgets, with a 3.7 per cent per annum real growth. In fact, the last time a government restrained growth and expenditure to this extent is somewhere in the 1980s.
Senator ABETZ: My question was: is it a fact, therefore, that this budget will save about $5 billion out of about $1,560 billion?
Senator Wong: The net budget impact of policy decisions over the forwards is five and a bit billion dollars, yes.
Senator ABETZ: Out of a total budget over the forward estimates of expenditures of $1,560 billion?
Senator Wong: I have not—
Senator ABETZ: Mr Tune has indicated that is right.
Senator Wong: I have not added those up. Are looking at the figures between 2011-12 to 2014-15 of payments?
Senator ABETZ: I think we have agreed, have we not, that the total expenses across the forward estimates are approximately $1,560 billion.
Mr Tune : If you want to measure it that way, that is correct. But the other way of thinking about it is as a percentage of GDP, when you add the measures and the forward estimates variations.
Senator ABETZ: I am sure there are lots of other ways of dealing with it.
Mr Tune : That is the normal way of looking at it.
Senator ABETZ: I am just dealing with the raw figures. Does $5 billion out of $1,560 billion equate to about 0.32 per cent or, to put it another way, a saving of about 32c for every $100 the government is spending over the next four years?
Mr Tune : I do not have a calculator with me, so I cannot confirm those numbers.
Senator ABETZ: But you would not deny them either, would you?
Mr Tune : I am just not commenting on that point. Unless I calculate them myself, I cannot confirm or deny.
Senator ABETZ: So you just are not going to comment on them?
Mr Tune : I beg your pardon?
Senator ABETZ: So, the secretary of finance cannot assist us in relation to whether a saving of $5 billion over the forward estimates, out of a total expenditure of $1,560 billion, equates in rough terms to a saving of 32c of every $100. That will be well received, I am sure, Mr Tune, by lots of Australians, that the secretary of the department of finance is unable to confirm that for us.
Senator Wong: Senator Abetz, I am not sure you should be speaking to a senior public servant in that way. I invite you, the Leader of the Opposition in the Senate, to perhaps reflect on demonstrating a slightly better standard.
Senator ABETZ: They have a duty to respond.
Senator Wong: If I can finish, the secretary has made two points. Firstly, that is not the usual way in which these numbers are reflected in the budget papers—and that is not how Mr Costello would have reflected numbers in the budget papers. Secondly, you are not putting anything other than a calculation to Mr Tune and he does not have a calculator. You are effectively asking him to calculate something utilising an approach that is not the way in which it is reported in the budget papers.
Senator ABETZ: If it is such a difficult task, Mr Tune, you can take it on notice. If you could come back with a calculation after dinner, that would be very helpful.
Mr Tune : I am not saying your figures are wrong. I am just saying I cannot confirm 0.32 because I do not have it in front of me. But you are probably in the ballpark; that was my point.
Senator ABETZ: If you could do that calculation for confirmation purposes and tell us after dinner, I would be much obliged.
CHAIR: Senator Ronaldson, you have the call, with some general questions.
Senator RONALDSON: I have some follow-up matters for Mr Martine and Mr Tune around the Department of Veterans’ Affairs, the War Memorial and the informal inquiry that we talked about in February. If you remember, when I asked you when contact was made between the Secretary of the Department of Veterans’ Affairs and Mr Tune, we were told that it was in September. You subsequently wrote to the department secretary and said that it was basically his problem. Can I confirm that you wrote to the secretary of this committee on 1 March clarifying several matters of evidence and that, following a letter from myself to the chairs of both this committee and the Defence, Foreign Affairs and Trade committee, another amendment was made whereby Mr Martine apparently clarified that it was in June rather than September? I would assume that Mr Martine was in no doubt about his evidence when he gave it here and when he left the building and did not seek to clarify that at all at that stage.
Mr Martine : That is correct. At the time I gave the answer, it was my recollection that it was October, and it was subsequent to the hearings that I was reminded that it was in fact during June, when Mr Tune was on leave.
Senator RONALDSON: When?
Mr Martine : June.
Senator RONALDSON: Yes, but when were you reminded?
Mr Martine : As far as I can recall, it was certainly well after the hearings. I cannot remember exactly when it was, but I recall that—
Senator RONALDSON: Who brought it to your attention?
Mr Martine : I think it would have been my staff. It may have been late March.
Senator RONALDSON: It was after you had received my letter, was it not—when I requested contact? Otherwise, how would it have been brought to your attention?
Mr Martine : I think that is correct.
Senator RONALDSON: So, your staff had heard the evidence. It is fair to say, while I have not experienced it on that side—I hope to do so shortly—you have staff who go through evidence and your staff would have been aware of these matters. It was a highly sensitive issue, so presumably people were listening and there was no need to clarify.
Mr Tune : One of the issues here was that it was informal, so records of phone calls and so forth are not kept. That creates a bit of an issue in terms of tracking it down. As soon as we were aware—
Senator RONALDSON: With great respect, that was not the issue. The issue was that no-one who had heard the evidence from Mr Martine’s department or his offices thought that the evidence he gave was in any way incorrect. You and I well know how politically charged this was and what a sensitive issue it was. What I am asking is: was there contact from the Department of Veterans’ Affairs in relation to this matter?
Senator Wong: To which matter?
Senator RONALDSON: In relation to the quite substantial difference between September and June.
Mr Tune : I think there was. I have a recollection of a discussion with Ian Campbell, the secretary of the department. I cannot recall when, but it was after our hearing when he raised it with me. Because I was, as Mr Martine has said, on leave at the time, it did not ring any bells with me at the time. When we realised that and Mr Martine checked with his staff, we realised there had been—
Senator RONALDSON: What date did the secretary of the Department of Veterans’ Affairs contact you?
Mr Tune : As I said, I cannot recall.
Senator RONALDSON: Can you take that on notice?
Mr Tune : I cannot recall. It was a discussion. I have no record of it. I am just saying I recall a discussion.
Senator RONALDSON: With the greatest respect, I actually do not think that is good enough. There is no explanation. You have sort of flicked off a letter and said, ‘We are changing the evidence from September to June.’
Mr Tune : With respect—
Senator RONALDSON: Just let me finish and then you can have your go. So, it is only when this matter has been brought to your attention via a letter to the chair of this committee and a letter also sent to the chair of the Defence committee that this has been altered. The question of when these discussions took place is absolutely fundamental to the process involved in extra funding for the Australian War Memorial. I would find it very hard to believe that you do not have some record of your conversation with Mr Campbell in relation to clarifying evidence, given that he no doubt told you he had given contrary evidence to the Defence committee when I questioned him in relation to that matter.
Mr Tune : I consider what we have done to be the right thing. Once we realised we had made an error, we rectified it and wrote a—
Senator RONALDSON: No, you did not realise it. I told you that you had, and that is what you responded to. Mr Martine just acknowledged that. So, are you telling the committee that you actually had a phone call from Mr Campbell prior to this and then did not do anything about it?
Mr Tune : We confirmed that and we changed the record accordingly. I think we did the appropriate thing to change the record accordingly.
Senator Wong: I can understand that you want an explanation of this. Obviously a lot of evidence is given in these estimates, and when this became something that was apparent to the secretary, he outlined how the department sought to respond.
Senator RONALDSON: Do you think it is appropriate that this matter was clearly not picked up by Mr Martine, Mr Tune or their staff and was only responded to, altered, after I had written to the chair, Senator Polley, and Senator Bishop in relation to it? The letter was received in March and, from recollection ,the clarification was made on 5 June. I find it difficult to believe that the conversation with the secretary and Mr Tune was held in late March and that prompted the clarification. I want to know when the discussion between Mr Tune and the secretary of the Department of Veterans’ Affairs was held.
Senator Wong: You have asked a range of things there. The first was essentially: do I think it is good enough? Obviously we always strive to make sure that any errors in evidence are corrected as soon as possible. What I would say to you is that this is a very hardworking department that does an enormous amount of work and it is not always humanly possible to make sure every single issue at estimates is picked up in the time frames you might seek. But the second point I would make is that you can press Mr Tune on his conversation with the departmental secretary. I think his evidence—and he can correct me if I am wrong—is that he recalls having a conversation but he cannot recall precisely when. That is a truthful answer from him and there is little point in his taking it on notice because he is not sure he has a record. You may say that that is not good enough, but I think those are the circumstances. It is not that surprising. Perhaps you have a photographic memory, but if I were asked to provide every date on which I had a conversation with somebody I would have difficulty in accounting for them.
Senator RONALDSON: Mr Tune wrote on 13 April to Ms McDonald, the secretary of this committee. He said:
Dear Ms McDonald, Thank you for your letter of 31 March.
The letter of 31 March was following my letter to the chair asking for clarification between the two secretaries of the departments. He continued:
Thank you for your letter of 31 March regarding evidence given by the Department of Finance and Deregulation at the additional estimates hearings of Tuesday, 22 February 2011. I understand my department provided a number of minor corrections—
I do not think they are minor, I have to say—
on Tuesday, 5 April 2011, including clarification of evidence that you sought.
And there was just one line with Mr Martine’s evidence changed. I assume, Mr Martine, you still acknowledge that the clarification resulted from the letter from Ms McDonald to you following my request for clarification from the two chairs?
Mr Martine : I cannot recall the sequence of events in terms of my correcting the record and whether it was before or after your letter of 31 March. It may well have been after 31 March.
Senator RONALDSON: The clarification was not given until 5 April.
CHAIR: You have asked a question, Senator Ronaldson. I yet again remind those participating in these estimates that, if you put a question, you should allow the witness to complete before asking your next question. All we are doing is eating up valuable time. Mr Martine, you were in the process of responding.
Mr Martine : I think I finished, Chair.
Mr Tune : Can I just say that, if we have messed up, I apologise for that and I will have a look at the process and try to ensure that it does not happen again. I am not trying to say there was not a stuff-up or a mess-up by us; there may have been. We were in the middle of a budget process and things may have slipped between the cracks. I cannot say that they did not, and, if they did, I apologise for that.
Senator RONALDSON: I drew this to the attention of the Secretary of the Department Veterans’ Affairs, Mr Ian Campbell, within say a week. And I do not think it was a week. There was only a week of additional estimates in February, so I presume it was a couple of days. Given the sensitivities, that contact had been made reasonably quickly by him and that you acknowledged that you received a phone call, if I had not sought clarification through the two chairs in late March would you have actually clarified this evidence?
Mr Tune : Because I cannot recall when the conversation with Mr Campbell took place, I cannot give you an answer.
Senator RONALDSON: So, you would not have a file note of the discussions in March between yourself and Mr Campbell?
Mr Tune : No, I would not.
Senator RONALDSON: Then where was the file note—and can you provide that to the committee—about the informal discussions which you say were in June, not September? They are the same informal discussion. On what basis does Mr Martine change his evidence from September to June on the back of informal discussions, of which presumably there is not a record either, but apparently there is no knowledge of this formal discussion?
Mr Tune : When we became aware that it was June, I was not around, as I mentioned earlier, and we went back and thought about it. Reminded where the discussions took place, it sort of pieced it together and, yes, it was June rather than September.
Senator RONALDSON: What evidence did you have to change? You have acknowledged that the evidence given to this committee is importance evidence, the truthfulness of which, I presume, you would pursue to the greatest lengths.
Mr Tune : I would agree, yes.
Senator RONALDSON: So, did you have a file note that indicated the informal discussions or did you just respond to the request from Mr Campbell to change the evidence from September to June?
Mr Martine : I did not have the conversation with Mr Campbell in June. Mr Campbell called the acting secretary at the time. I clearly remember that conversation because I remember the acting secretary calling me to raise the issue of a review of the War Memorial. It was my recollection at the hearings in February that that was in September, but subsequent to that, as we have been discussing, when it was brought to my attention that Mr Tune was actually on leave in June, not September, it was very clear in my mind that the conversation that I had with the acting secretary was in June, not September.
Senator RONALDSON: And that is solely the basis on which you have changed your evidence?
Mr Martine : Yes, I remember very clearly the discussion I had with the acting secretary, and it was while Mr Tune was on leave.
Senator RONALDSON: Thank you, Chair.
CHAIR: Senator Faulkner had a question on the same issue.
Senator FAULKNER: Mr Tune, I suppose the principle behind this is the issue of agency protocols in relation to correction of evidence. You would be aware, I assume, that it is not uncommon for agencies—in fact, it is very common—to have to correct evidence that is provided before estimates committees. You would be aware of that?
Mr Tune : I am.
Senator FAULKNER: Yes. It is common; it is always—
Senator RONALDSON: Can we move on from this Dorothy Dixer?
Senator FAULKNER: It is not a Dorothy Dixer.
CHAIR: Senator Faulkner has the call.
Senator FAULKNER: I think you will probably appreciate it if you listen, if you are able to; you might learn something.
CHAIR: Senator Faulkner, just put your question.
Senator FAULKNER: Thank you, Chair. I would like to do that without interruption if possible. There has been some interjection about suggestions that this is not common. I would get a significant number of email messages each estimates round from agencies correcting evidence provided at the table by witnesses. I will also say that it is normally quicker than what has occurred here. Having said that—
Senator RONALDSON: Why don’t you put this in your book. Do you have a question?
Senator FAULKNER: Yes, I do have a question; you might be interested in it and you might not.
CHAIR: Senator Faulkner has the call.
Senator FAULKNER: You can leave, Senator Ronaldson, if you are not interested. You have asked your questions.
CHAIR: Senators will stop interjecting and allow Senator Faulkner to complete his question so we can move on with the answer and then go back to someone else.
Senator FAULKNER: Given that you are aware of this background, firstly, are you satisfied with the adequacy of the department’s protocols? Secondly, does the protocol acknowledge the importance of any corrections—I believe it should, by the way—to be provided as soon as an agency becomes aware of them?
Mr Tune : We do not have a formal protocol written in that sense, but we do have a process whereby people review their evidence. I certainly do that. I read the transcript and look at it and think, ‘Have I got that right?’, and go back and check a number if I have to and confirm it in my own mind, and officers do that of their own accord as well. If we have made a mistake in the evidence, we do have a process whereby we pool that together and write to the committee as soon as we can, because we do take very seriously what we provide to the—
Senator RONALDSON: The answer to your question is no, there are no protocols.
CHAIR: Senator Faulkner has the call. Senator Ronaldson, you are not assisting the hearings.
Senator FAULKNER: I am not sure whether there are any formal written protocols in government.
Senator RONALDSON: Any formal ones.
Senator FAULKNER: No, I am not sure whether there are any formal protocols in any agency; are you? You might know of it. I am not aware of any. There are, nevertheless, protocols in dealing with these matters that I think are well understood throughout the Commonwealth. Is it your insistence as secretary that that occur as quickly as possible? You are apprised of the importance of that?
Mr Tune : If there is an issue, people generally draw it to my attention. Sometimes we would leave it for a little while; we know there might be a couple more, and so rather than write six letters we might write two letters, one letter or something like that. That is the judgement you make at the time.
Senator FAULKNER: Thank you for that. I found that very interesting.
CHAIR: Senator Humphries.
Senator FAULKNER: You think I am going to write a book about estimates?
CHAIR: Senator Humphries, I gave you—
Senator RONALDSON: I fear you will.
Senator Wong: These are all budget questions. Are we still in general questions?
CHAIR: I am trying to listen to the minister. We are still in general questions.
Senator Wong: These are all budget questions now, which I am fine about, but I just wondered if we are only doing budget questions.
Senator FIFIELD: Senator Humphries has a general question, then Senator Abetz, and there might be one more person after that with a general question.
Senator Wong: Thank you.
CHAIR: Senator Humphries, you have the call.
Senator HUMPHRIES: My question might appear to be about a fairly mundane matter at one level, but I think it is a—
Senator FAULKNER: Colleagues from your own side of the table will object to something they claim is mundane.
CHAIR: Senator Humphries, continue.
Senator RONALDSON: Senator Faulkner is interrupting, Chair.
CHAIR: Senator Humphries, ignore the interjection and ask your question.
Senator HUMPHRIES: I can make a mundane question exciting, I am sure. The department of finance issues members and senators with a mobile telephone. I understand that the requirement that comes with each—
CHAIR: Senator Humphries, that is moving on to outcome 3, which is tomorrow. This is general questions relating to the budget. We will get to outcome 3 tomorrow.
Senator Wong: If it is only a short question—
CHAIR: Minister, can I just say that there is going to be, I would suggest, a number of questions relating to that.
Senator Wong: I was just going to say, if I may, that we are happy to deal with it. I think we have people here to deal with that. The only issue would be that, if there is a very lengthy process, you might want to consider doing it tomorrow because there are always questions in this outcome.
Senator HUMPHRIES: It is really a question on notice, I would have to say.
Senator Wong: We will see whether we can assist.
Senator HUMPHRIES: The phone that members and senators are issued with comes with a requirement to refresh the password every 15 minutes. I have been told informally that that requirement is one that has been imposed not by the department but by the Defence Signals Directorate. If I can have confirmation of that I can, with confidence, ask questions of that agency next week when it comes before the Foreign Affairs, Defence and Trade committee.
Mr Tune : That is my understanding, but I will confirm it for you. I should be able to do that very quickly.
Senator HUMPHRIES: Thank you very much.
CHAIR: I think you will find, Senator Humphries, that that has been a regular question at estimates since we have had the Blackberries.
Senator HUMPHRIES: Okay.
CHAIR: Thank you. We are going to Senator Abetz.
Mr Tune : It is a DSD requirement. I have just had that confirmed.
Senator HUMPHRIES: Thank you very much.
CHAIR: Senator Abetz, you are dealing with outcome 1, in general.
Senator ABETZ: I have cross-portfolio unanswered questions relating to Shannon’s Way advertising, which I asked about at the October estimates and the February estimates. We still do not have an answer. I am wondering what the explanation for that is because a considerable period has elapsed. I think they are questions 14(a) to (k) that were taken on notice during a hearing on 19 October 2010.
Senator Wong: Could you give us a minute?
Senator ABETZ: Yes.
Senator Wong: This will come up in outcome 2. Would you allow me to have a look at that overnight? This is a question on notice that has not been answered, so I will just track that down.
Senator ABETZ: Yes, it is from the transcript of the October estimates.
Senator Wong: Yes. If you can leave that with me, I undertake to get back to you.
Senator ABETZ: It is for outcome 2. Thank you.
CHAIR: I take the opportunity to remind officers to put their nameplates at the front of the table to assist Hansard and committee members. Thank you. Senator Ryan.
Senator RYAN: I would like to turn to some regulation issues and the Office of Best Practice Regulation. Minister, I will address the questions to you, but obviously the officials may be in a better position to answer. I know the annual report lists departments that undertake regulatory activity and compliance—and I will get to that in a second—but does the office publish a list of all the agencies of the Commonwealth that exercise what might be broadly described as some regulatory function? I note that you do tend to list by misbehaviour rather than by capacity. Do you have a list of all the agencies that undertake regulatory activity, whether it be subordinate regulation or the different forms of instruments?
Mr McNamara : No, I do not think we have a list as you have described.
Senator RYAN: I am relatively new to this area, so please feel free to inform me otherwise. When people are complying with the rules set by the office, do they notify you of their compliance? Obviously you keep a record of their compliance or otherwise.
Mr McNamara : Yes. We are not just keeping a record of non-compliance; we are recording compliance as well. Our annual report will list all agencies that have complied with the requirements over the financial year.
Senator RYAN: Does that list statutory authorities separately or under the departments to which they are related?
Mr McNamara : We do this by agency. We do not distinguish between whether they are statutory, independent or not. It is more by portfolio in terms of how we are actually reporting in our annual report.
Senator RYAN: I will be able to find such a list simply by looking at the annual reports, which will show, presumably since at least 2008, when the office was created in its current form, effectively a time series of the agencies that were active in this space?
Mr McNamara : Yes, there is a time series.
Senator RYAN: I would like to explore, if I could, the issue of exceptional circumstances for the purposes of an exemption from RIS requirements. Is that a power that can only be exercised by the Prime Minister declaring exceptional circumstances?
Mr McNamara : Yes.
Senator RYAN: Are there any criteria that you are aware of? I appreciate that the Department of the Prime Minister and Cabinet might have some, but are there any in the department of finance for the exercise of that?
Mr McNamara : No.
Senator RYAN: Are you provided with written reasons for the exercise of exceptional circumstances exemptions by the Prime Minister?
Mr Tune : The Prime Minister would write to the portfolio of the minister who has requested an exemption.
Senator RYAN: Are they published?
Mr Tune : No, they are not.
Senator Wong: The fact of.
Senator RYAN: But the reasons themselves are not?
Mr Tune : No.
Senator RYAN: Have they been asked for before? Is there a reason why they would not be supplied if I put those questions on notice?
Senator Wong: There may be a reason. If you wish to put them on notice, that is your right.
Senator RYAN: The point I am making is that there is no cabinet type blanket exemption with respect to these that I am unaware of.
Senator Wong: They may be cabinet in confidence.
Senator RYAN: I appreciate that.
Senator Wong: I suggest that rather than dealing in the abstract and in the hypothetical that if you want to put that on notice then we will take it.
Senator RYAN: I take your point. I am just checking. There is no exemption for these particular documents as a specific category that I am unaware of. If they are cabinet documents, that makes sense and I understand that, but I have not missed an exemption for the provision of these documents that is specifically related to these documents and not related to one of the other criteria that are exempted?
Mr Tune : No. As the minister said, they may be cabinet in confidence.
Senator RYAN: The last annual report lists the legislation that was granted ministerial exemption for 2009-10. Do you have a current list of those that have been granted this exemption for 2010-11?
Mr McNamara : Yes. All exemptions are on our website. Under the new system that applied from July last year, when the measure was announced, if there is a PM’s exemption associated with it, that goes up on our website.
Senator RYAN: How long would the delay be? Would I be thinking a day or could there be a reason that it might be a month between the Prime Minister writing to a minister, granting an exemption and it appearing on the website?
Mr McNamara : It depends on the gap between the decision and the announcement of the policy. That is usually reasonably short.
Senator RYAN: Is that a matter for the government to decide upon with the announcement?
Mr McNamara : Yes.
Senator Wong: It may simply be that is the time frame around the decision making.
Senator RYAN: I appreciate that. I am trying to clarify where the line from the office and the department to the minister is actually drawn.
Mr Tune : If there is an exemption given there is still a requirement to undertake a post-implementation review within one or two years of the proposal being implemented, so it does not escape the net completely.
Senator RYAN: That is quite a convenient segue to another question that I had, so I will just change the order. There was an exemption for the NBN legislation, was there not?
Mr Tune : Yes.
Senator RYAN: That is subject to a post-implementation review which is required within one to two years of proposals to grant an exemption?
Mr McNamara : It is required within one to two years of implementation of the regulation, so not of announcement of the decision.
Senator RYAN: When does the two years expire on that?
Mr McNamara : In terms of the PM’s exemption it will be from when that regulation is actually implemented. I would have to take that on notice in terms of when we determine that essentially it has been implemented.
Senator RYAN: Do you start the clock at that point?
Mr McNamara : Yes. We start the clock once we have made a judgment that it has actually been implemented.
Senator RYAN: This was a significantly large piece of legislation. There is more than one regulation, or more than one regulatory regime, that will be the result of it. I imagine some have not been promulgated as yet. Presumably you would start the clock from the promulgation or activation of the first element of regulation that arose from that legislation.
Mr Tune : There may have been a number of regulation impact statements relating to different aspects of the announcement. As you would appreciate, it was a large announcement so it might have been broken down.
Senator RYAN: Even with the size of it, it is extraordinary that it was exempted from pretty much any third party oversight. That is why I am chasing this matter up. Obviously I am interested in when the clock started or how you would calculate when the clock started.
Mr Tune : All I am saying is that there might be part A, B, C, D and E and each of those will be implemented at a different time, and therefore the clock will start at a different time even though they are all related to NBN.
Senator RYAN: Given that it was prime ministerial exemption for a very large piece of coat hanger legislation—with lots hanging off it—do you effectively have multiple clocks running?
Mr Tune : We would in that situation if there were multiple RISs around it.
Mr McNamara : Essentially, what we determine and what requires post-implementation review is what would have been required in the area at the time, so the scope of what is in the post-implementation review, including the different topics within it, would determine what would have been required in a RIS at the time.
Senator RYAN: So can you take on notice when you think that two years expires for various RIS elements of this particular legislation?
Mr McNamara : Yes, I can take that on notice.
Senator RYAN: At the end of that two-year period, if the government continues with its approach to not want scrutiny of this particular legislation, can the Prime Minister issue another exemption?
Senator Wong: I try not to interrupt you because you are usually fairly reasonable, but I do not think that you can say that we do not want scrutiny of it. I accept that there was, in exceptional circumstances, exemption in relation to those parts of that legislation which would otherwise have required it, but I do not think that you can suggest that the NBN, as a project, is not the subject of a very substantial amount of public oversight through the parliament.
Senator RYAN: I would suggest that, with respect. The Productivity Commission cannot look at it.
Senator Wong: You have a joint committee of which some of your members and senators are members. You have the Senate estimates process. You have the publication of the plan.
Senator RYAN: And hundreds of pages of amendments tabled on Thursday afternoon with amendments to amendments being drafted down—
CHAIR: Senator Ryan, I will just remind you to allow the witness, and in this case it is the minister, to complete her answer and then you can ask another question.
Senator Wong: If you want to talk about amendments at the last minute, I can recall a very large number of amendments—I cannot remember how many hundred it was—to the WorkChoices legislation that I got with some 33 minutes notice prior to the debate in Committee commencing. I simply make the point that there is a lot of scrutiny of this project, as there should be, both before Senate estimates and also before the parliamentary committee which has been established, in addition to the documentation which the company has published.
Senator RYAN: Thank you. I will move on to the question that I was asking. That was my preamble. If, at the end of that two-year period, the government determines that it does not want to go through what effectively is a RIS type process, can the Prime Minister issue another exemption or are they compelled to go through this post-implementation review?
Mr McNamara : There is nothing in the system at present that allows the Prime Minister to grant an exemption from the post-implementation review.
Senator RYAN: So it is inevitable that this will happen in some form with the various regulatory schemes under the legislation?
Mr McNamara : Yes.
Senator RYAN: I would like to turn to the OBPR annual report. Please correct me if I am wrong—I note that one of the departments that did not publish an annual regulatory plan was the department of finance.
Mr McNamara : That is right.
Senator Wong: You need to talk to Mr Tune about that.
Senator RYAN: Minister, I am surprised you are not more upset; it is in your title. The department for whom you brought in this agency from the statutorily independent Productivity Commission has not published its own annual regulatory plan. How do you, in all good faith, face up to other departments and demand theirs when you have not done your own?
Senator Wong: I am going to await Mr Tune’s response.
Mr Tune : I do not have an answer at the moment, but I will check it out.
Mr McNamara : At the start of the year it may be the case that departments can choose that they do not need to do an annual regulatory plan because they are not going to make any regulatory decisions or be involved in any regulatory decisions in the coming year.
Senator RYAN: That would be a touch odd for the Department of Finance and Deregulation, would it not?
Mr McNamara : No. As a department, in terms of regulation that impacts directly on business and the not-for-profit sector, there is not a lot within the finance department.
Senator RYAN: If we take a broader sense, the guidelines that you set up for government procurement have a pretty significant impact upon business.
Mr McNamara : They can.
Senator RYAN: Particularly if the government is your client. There is the payment of bills.
Mr McNamara : In terms of how the RIS system works and what we are looking for in annual regulatory plans, we do not generally capture the procurement system and regulation under the procurement system simply because of the nature of that regulation. That regulation relates to the price that essentially the government is getting for a service and how it operates in terms of purchasing.
Senator RYAN: I understand that. I am wondering if Mr Tune has someone who can, at some point during this discussion, provide an answer why the department did not. I can move on if you are looking, Mr Tune.
Mr Tune : I am not looking for the answer. I am looking for the fact that we did not publish one, which I have found. I will need to take on notice why we did not. There is hardly any regulatory activity. I do not deny that we do have regulatory activity, but there is not much that we do, if any, that requires a RIS. I would not say that we never do, but it is not that often. Mr McNamara has mentioned that it could well have been the case, in early 2009, that there was an expectation that we would not be doing anything in that area.
Senator RYAN: Mr Tune, I am surprised, with all due respect, that you cannot provide an answer for this, as opposed to just taking on notice as to why this plan was not provided. Like you said, there may be a very simple reason, but there also may not and this is the only opportunity that I have to ask you these questions until October or November.
Mr Tune : I will come back to you before the end of the hearing.
Senator RYAN: Is the office provided with written reasons as to why agencies are not providing ARPs? The department of finance was not the only one.
Mr McNamara : Generally, no. It is more a case of an audit type thing where we will write to the agency and say, ‘Under our previous regime have you published this?’, and we will get the answer back essentially of, ‘Yes, here’s the link to it’, or, ‘No, we haven’t’, and then that is what we put in the annual report.
Senator RYAN: Sometimes they might provide reasons though. I do not know. I am putting that to you.
Mr McNamara : No, not generally.
Senator RYAN: So it would be a one liner. ‘Dear Mr McNamara, I’m sorry I haven’t done my homework. We haven’t done an ARP.’
Mr McNamara : There are generally more reasons for non-compliance on RIS matters than non-compliance on annual regulatory plans. That is one of the reasons why we have changed the system, this year, where we publish all the annual regulatory plans online on our new website, so we think we have 100 per cent compliance this year because we have essentially been a bit more proactive. It is part of the previous system where we made an assessment after the year on what happened where now we are at the start of the financial year actually asking for those documents and that has increased compliance with the process.
Senator RYAN: Under the new system would I expect that in your next annual report, if there was such a table, there would be no ARP published?
Mr McNamara : Yes, that is right. In our next annual report I expect to have no non-compliance because all the annual regulatory plans are up on our website now.
Senator RYAN: Can you take on notice whether you were provided any reasons for non-compliance by the agencies listed on page 26 of the 2009-10 annual report, which are the Australian Securities and Investment Commission; the Department of Education, Employment and Workplace Relations; Families, Housing, Community Services and Indigenous Affairs, and whether you were provided any answers by your own department?
Mr McNamara : Yes. I can take that on notice.
Senator RYAN: I accept that it would be odd getting a letter from your boss explaining why he has not complied with your rules.
Mr Tune : That is an important point, not that I want to try to divert it. There is an important point about the independence of the OBPR and the department that we guard quite jealously.
Senator RYAN: I appreciate that.
Mr Tune : Mr McNamara operates independently of me.
Senator RYAN: I understand that and I was going to get to that, but he is inside the department.
Mr Tune : He is inside the department.
Senator RYAN: There is not a statutory guaranteed independence at all?
Mr Tune : No, that is right. There is an independence there.
Senator RYAN: This might be a time to talk about that. I am familiar with your statement to the Senate, Minister. Can you explain to me how inside a department you can guarantee independence of, effectively, a division or an office? Is it akin to a division of the department in a structural sense?
Mr Tune : For the purpose of the organisational chart it is a division of the department, yes.
Senator RYAN: Mr McNamara, do you report directly to the minister?
Mr McNamara : No, not really. I would not say that I report directly to the minister. I report through the deregulation group, through Ms Page and Mr Tune, to the minister.
Senator RYAN: So you report through the group and the secretary of the department to the minister?
Mr McNamara : Yes.
Senator RYAN: How is that different from a division? The word that you are using, Mr Tune, is ‘independent’? How is that different from another division?
Mr Tune : In the sense that I do not take a role. There is nothing to stop me taking a role, but I do not take a role and my predecessor did not take a role in directing OBPR in the views they should put in terms of making judgments about RISs that are put forward by agencies, including my own if I was doing them.
Senator RYAN: Is that a discretion available to you?
Mr Tune : It is, yes. It is implicit rather than explicit. I agree with that.
Senator Wong: The explicit commitments are the ones that I have made in the parliament.
Senator RYAN: I appreciate that, as I have mentioned.
Senator Wong: Which I do not have, I am afraid.
Senator RYAN: I do.
Senator Wong: I am very pleased that you have an interest in this, but I would have to say that this is not one of the areas that I anticipated would be first up or of a significant focus.
Senator RYAN: People have said that about me before, but I am assuming you are being more kind about it.
Senator Wong: I was being genuine.
Senator RYAN: I just want to explore this.
Senator Wong: This was a decision made by my predecessor in terms of bringing OBPR into the department.
Senator RYAN: I appreciate that and I know that you have made the statement in the Senate—
Senator Wong: Correct.
Senator RYAN: which was similar to the one made by your predecessor in the House. Have you directed Mr Tune or do you have a capacity to direct Mr Tune in this regard? Does your statement to the parliament constitute a direction to the secretary to not exercise these discretionary powers and have this implicit independence?
Senator Wong: I would have thought that, under our system of parliamentary democracy, if the accountable minister makes a statement in the parliament then the secretary of the relevant department would ensure that he complied with that in terms of how he approached the matter. It is a significant thing.
Senator RYAN: I appreciate that. I wanted to clarify it because Mr Tune made it clear that it was a secretarial discretion. So when these decisions on these issues are coming up through the department, Mr Tune, you are obviously cc’d or you see the briefs before they go to the minister.
Mr Tune : No, I do not. I see them either simultaneously when they go to the minister or afterwards.
Senator RYAN: So you have no capacity to engage with their development or you cannot, for example, exercise oversight over the office and suggest helpfully—I am not alleging anything else other than what may be helpful—the tweaking of briefs or recommendations or with your corporate knowledge that that might not be the best way to go. It is completely within the hands of Mr McNamara’s group.
Mr Tune : I can, but I do not do so. I have the power, but I respect the statement that has been made by the minister that we treat the OBPR as independent.
Senator RYAN: Mr McNamara, as an executive director, do you report through a deputy secretary to Mr Tune?
Mr McNamara : I report through Ms Page.
Senator RYAN: Ms Page, does your attitude reflect that of Mr Tune?
Ms Page : Yes.
Senator RYAN: Minister, there have been a number, with the BCA being one of them, that have talked about their wish for, in some ways, the office to be put back into the Productivity Commission, to be a statutory reflection of the independence that has been outlined here. Have you had any submissions or requests to reinstitute that since you have been finance minister?
Senator Wong: Yes. They are public. I think the BCA have made that view public.
Senator RYAN: They have and I was wondering whether they or other groups had approached you about that?
Senator Wong: We have an engagement, obviously, not just with the Business Council but with other members of the business community on a whole range of matters, deregulation being amongst them. That has been raised publicly by the Business Council. I think it was raised with my predecessor and the government took the decision that it did for the reasons we have articulated.
Senator RYAN: That was a nice segue.
Senator Wong: It was not intended to be a segue, it was intended to be an answer.
Senator RYAN: Sorry, the issue was a segue from where I was earlier because of one of the answers. I would like to refer to the office’s annual report where it outlines that Treasury did not comply with the Australian government’s best practice regulation requirements in 2009-10 and lists the legislation for which RISs were not prepared at the decision making stage. Are all the reasons provided by Treasury available publicly on the website?
Mr McNamara : No. On our website we will only say that the regulation required a RIS and a RIS was not provided to us, so an adequate RIS has not been prepared and we will name the agency, but we do not provide the reasons why there is no RIS. The agency may have a reason, but we do not publish that reason.
Senator Wong: It is open to you to put that to the relevant agency.
Senator RYAN: I can. Mr McNamara, can you provide to me on notice—and I will put some more in writing on this—of all the 15 proposals that came from Treasury for which RISs were not prepared, how many did they provide reasons for? You have said that on occasions they do not provide reasons, they just do not comply. I would be interested in knowing how seriously the Treasury takes this and whether or not they actually went to the trouble of explaining to you why they did not comply?
Mr McNamara : They will have formally responded. The process we have in putting the annual report together is that I write to each secretary and essentially say this is our findings for the financial year. I cannot recall if Dr Henry wrote back, but if it was not Dr Henry I think someone senior from Treasury wrote back outlining their views on the outcome for 2009-10, so we would be able to provide some answers out of that correspondence.
Senator RYAN: Again, presuming there is no other exemption applying under the public interest immunity claim, am I missing something here as to why those documents would not be publicly available or available if I asked for copies of those documents?
Senator Wong: Again, let us not do it in the abstract. If you want to put that on notice we will consider that.
Senator RYAN: The question I asked was not whether I could get them all. The question I asked was, again, have I missed something here?
Senator Wong: I am not going to prejudice any argument we may or may not make. I do not particularly have a view on that yet, but I am not going to get into having that argument in the abstract. If you put it on notice we will consider that. Obviously, if we assert a reason to not provide I am aware of the view that you are putting and the standing orders.
Senator RYAN: Has the office received a direction with respect to applying a one-in, one-out approach to regulation with respect to its feedback to the departments or in implementing that Labor election commitment of several years ago?
Ms Page : That is not a matter for OBPR. That is matter of regulatory management policy.
Senator RYAN: Which would be the department?
Ms Page : Which is the department’s responsibility.
Senator RYAN: Mr Tune, have you received such a direction?
Mr Tune : No, I do not think so.
Ms Page : Mr Tune issued a direction in the form of a finance circular.
Senator RYAN: I am assuming the direction started from the minister and cascaded down.
Ms Page : The government made a decision early in 2009 about a one-in, one-out policy and it was given effect through a secretary circular from the finance department early in 2009.
Senator RYAN: With the 12,000 regulations that have come in since, we might need to recirculate that circular. How does the department measure the government’s progress in reducing regulatory burden? What metrics do you use?
Mr Tune : We do not have metrics per se in that sense. We look at it in its totality, so we look at the work that has been done with the states around the deregulation priorities and the competition priorities that are set up by COAG, on which we take a very strong role in trying to coordinate and push forward. We set up a number of ministerial partnerships where the finance minister works with another minister in another agency to work through a particular set of regulatory burdens that we think have scope for rationalisation. We form a partnership with the other agency via the ministers and try to work through that. I will give you an example, which is of visa requirements in DIAC. We have a ministerial partnership around that where we are working towards that over a period of time. It is quite a complex area and not easy to push ahead on, particularly given the circumstances that have been faced in more recent times, but there is some scope there over time—it will not be tomorrow, but over time—to rationalise that. We take that practical approach to things.
Senator RYAN: I would describe that as a process or input based approach. Businesses, particularly with the regulatory burden upon business, may not have the same faith in groups of public servants getting together being the measurement of how the government is going on its deregulation agenda, as opposed to some sort of actual metric. So you do not have a metric? You do not have a metric in terms of the cost burden or the cost to the taxpayer that you use to measure the success of the government’s deregulatory policy?
Senator Wong: I could refer you to the work that is occurring in the COAG process.
Senator RYAN: The COAG process kills more trees than anything else that goes on in this country with the amount of paper that it produces.
Senator Wong: Frankly, there have been 27 priority deregulation reforms that were identified through the Seamless National Economy, a national partnership agreement. To date, 13 of those have been completed, so significantly more than occurred under you.
Senator RYAN: Yet you walk in the front door of a small business and they say the paper burden is going through the roof. Input measures are not what matters.
Senator Wong: I am sure you might want to recall how much paperwork you imposed with the GST on small business, particularly in the initial stages of implementation.
Senator RYAN: I look forward to you making changes.
Senator FIFIELD: We are still waiting for rollback.
Senator Wong: I am not sure that was the policy that we went to the election on, but I do recall that. There has been a lot of work done in the Seamless National Economy, as I said, with the national partnership agreement. Thirteen of 27 reforms have been completed. I would acknowledge the work of Senator Sherry on that who has a particular interest and is the minister assisting me on deregulation. I have to say that it is not easy. There is always talk about alleviating the regulatory burden across governments at all levels and all political parties and, as Ms Page I am sure can attest, there is a lot of detailed and sometimes laborious work to try to get agreement across state governments about reform.
Senator RYAN: A government can choose not to impose new burdens.
Senator Wong: We have implemented a process around that which is robust and far more stringent in terms of gate keeping than that which we inherited. Can we do better? Every government can do better on this. The history of all governments is that they can do better. I am pleased that we have achieved some of the reforms. As I said, it is 13 out of 27 in the SNE, Seamless National Economy. We are working hard to continue those.
Senator RYAN: Thank you for that.
Mr Tune : I might ask Ms Page if she can talk about measuring the impact and the reduction of burden on business. We do try to measure that.
Senator RYAN: You are a mind reader because I was about to head there.
Ms Page : The main metric that is used in Australia and internationally is reduced costs on business in Australia and also on the not-for-profit sector. There are a range of ways of doing that. There are various activity based models. We have a model in Australia called the business cost calculator, which is what OBPR uses. There is another model which is used in some states and internationally called the standard cost model. There are arguments about the applicability of both, but you can certainly model the reductions in the cost to business of not having to go through particular administrative and compliance processes. They are typically the type of costs that are used here and internationally to measure change.
Senator RYAN: I understand that when using, for example, the standard cost model, is it true that the departments are not required to compare different regimes and basically take the lowest cost option? Would that be an accurate description, that discretion to not take the lowest cost option is available to the department?
Ms Page : In relation to the RIS framework, the agencies are required to demonstrate a range of options which Mr McNamara can describe to you. The minister is not obliged to recommend the one with greatest net benefit to the community. But most regulation impact assessment processes around the world do not seek to favour necessarily the lowest cost model; most governments regulate on the basis of greatest net community benefit. It measures cost to business, but most governments, including the Australian government, weigh that against the overall cost to the community. Invariably there are greater benefits to the community as a whole. The purpose of the RIS process is to document the cost to business and to enable the decision makers to make an on-balance judgment about the extent to which those costs are necessary or unnecessary.
Senator RYAN: It does not really help when the biggest pieces of legislation in the last couple of years all get exempted though, does it?
Ms Page : As Mr McNamara has described, I think those decisions are subject to post-implementation reviews within 18 months to two years, so there is a way of testing—
Senator RYAN: It is the classic case of closing the gate after the regulatory horse has well and truly bolted, I would put to you.
Senator Wong: I am not sure that is a question.
Senator RYAN: When departments are looking at different costs and community net benefit they would presumably have consideration of different options within the department. They would presumably have a formal process whereby there might be a higher cost for this one but this one is considered to have greater community benefit for whatever other externalities or costs they take into account. Is that a fair characterisation—
Senator Wong: It depends on the policy.
Senator RYAN: Would you consider it to be good regulatory practice to consider different options?
Ms Page : I might ask Mr McNamara to explain what the RIS requirements are, because they really set out what the government requires in terms of choices.
Mr McNamara : Generally most RISs will have a range of options within them that could have very different costs and very different benefits. Essentially what we are looking for in most RISs is all feasible options—within reason, as you do not want RISs of 400 pages with every available option—but we are looking at the live policy options within a RIS. That is essentially what it should be examining: what are the live options within the policy space that the problem is looking to try to address? And we try to outline the costs and benefits of each option, and that includes quantifying business compliance costs.
Senator RYAN: In your annual report you list a sort of compliance with best practice regulation requirements, do you not?
Mr McNamara : I am sorry?
Senator RYAN: Your report on compliance with what would be described as best practice regulation?
Mr McNamara : Yes.
Senator RYAN: When would we expect the next annual report to be released in the normal course of events? I do not have the date of when the last one was?
Mr McNamara : In the normal course of events it is probably late November or early December, but this year’s report will be slightly different to previous years because most of the information on the current financial year is on our website currently so—
Senator RYAN: That would presumably mean that it is easier—
Senator Wong: It is so transparent.
Senator RYAN: Maybe you could release it before the next round of estimates. Commit to that, Minister.
Senator Wong: Most of it is on the website, as Mr McNamara just said.
Senator RYAN: That is the point I am about to get to. That means that presumably it would be easier to compile because there would be less information that you would need to compile with the annual report.
Mr McNamara : The difficulty we are going to have in the sense of the annual report is that we have also got to report under the old system as well as the new system.
Senator RYAN: Will you still be reporting on compliance with best practice regulation?
Mr McNamara : Yes.
Senator RYAN: It has been on a downward trend for the last few years. The numbers that I have in front of me are that in 2007-08 it was 90 per cent; in 2008-09 it was 85 per cent; and in 2009-10 it was 84 per cent.
Mr McNamara : That is right.
Senator RYAN: What reasons would you provide for the backward slide in compliance with what you measure as best practice regulation?
Mr McNamara : I think I answered previously on this that there has been a range of reasons that compliance has fallen over that period of time, and one of the key catalysts to actually reforming the RIS system that we now have in place from July last year was to try to increase compliance by essentially changing the system in a way that allowed it to follow the policy process a lot more closely, which made it more useful and influential in the policy process but also made it a lot easier to comply with. It is still early days in terms of the new system but I am hopeful that we can increase the influence of the system as well as the compliance of the system.
Senator RYAN: I hope the compliance rises, not just the number of compliances that comes out at the end.
Senator Wong: So do I—across government. I think Mr McNamara’s point about influence is an important one. It is not just that people should comply—they should—but the benefit of the process, I hope, is about better decision making. And some of the engagement between line departments and the OBPR, we hope, is assisting in that process. It should not just be a tick-a-box approach that we think about; the public policy objective is better decision making and a consideration of those matters which the RIS require you to consider. That is the more important end point. I am not trying to obfuscate here. Cultural change is not quite the right term but it is a way of trying to alter or improve our decision making undertaking—
Senator RYAN: You probably need some cultural change because it has been going backwards ever since you came to office. In terms of compliance, the Prime Minister issuing an exceptional circumstance would be counted as compliance; would it not?
Mr McNamara : Yes.
Senator RYAN: In terms of how you count the compliance, is it really just counting the legislative instruments effectively? I am not quite sure whether the NBN bill is a much bigger one than the tax law amendment bill No. 16 that might not have been complied with. Treasury did not comply with a few of those. Is it really a counting exercise?
Mr McNamara : No, we do actually look at the decisions as such, especially under the new system, which is a bit more about announcements. We actually will look at the different elements of the announcement. You could have a package of announcements but you will need RISs on different elements of it, so that is what we would be looking at. It may end up in one bill but—
Senator RYAN: Do you count the regulatory events, for lack of a better way of putting it?
Mr McNamara : Under our new system, yes, that is how we do that. You can get various elements. The banking package is an example of that, where there are quite a number of measures and the RIS requirements are on the individual measures not on the package itself. Equally, though, we are flexible enough in the way that things operate that people may just do one RIS that is quite large and cover multi stages or they may do six separate RISs—
Senator RYAN: Do you take that into account? I would not want there to be greater compliance because six RISs of 50 pages each have become one ream of paper RIS.
Mr McNamara : No, we are flexible in the sense that essentially we want the key regulatory elements that are going to impact on business or the not-for-profit sector reflected in a RIS. As to how that is done, the system does allow flexibility.
Senator RYAN: Do you basically decide how to deal with that?
Mr McNamara : We will determine whether it is compliant but generally we work with the agency to see what is the best way forward. Is it to have a larger RIS? Is it to have a series of smaller RISs? We will not generally dictate which approach to take. We normally work with the agency and just make sure that the requirements are met at the end of the day one way or the other.
Senator RYAN: Would it be fair to say that because of the diversity of issues you are dealing with you do not have any specific criteria as to how you make those decisions?
Mr McNamara : No, it is case by case. As I said, we will work more with the agency to see generally what they want to do and we will make suggestions. Sometimes it will be better to go one way or the other given the topic. Often we will try to influence that in terms of what we think will be most useful for the decision maker ultimately. If that RIS is ending up in cabinet in the end, what will ministers find the most useful in terms of format and approach?
Senator RYAN: Is it the case that you effectively publish the best practice handbook to actually guide your decision making on that—
Mr McNamara : Yes.
Senator RYAN: so if I read that and got across it I would have an understanding of how your interaction with other agencies would go?
Mr McNamara : Yes. In our new handbook we have outlined in a series of boxes what we actually do internally, so we provide a bit more transparency over the process internally to finance. That has been quite useful in again trying to interact better with agencies because they understand what we are looking for, not just if you like, 'Here are the rules—here is some more of the interpretation of the rules'.
Senator RYAN: That is all I have.
Senator Wong: I am not sure if anybody has ever asked Mr McNamara that many questions, so I am sure he enjoyed it. Thank you for that.
Senator RYAN: I might not be here later on, Mr Tune, for the answer that you might be able to get me, but I will endeavour to come back tomorrow.
Mr Tune : Okay.
Senator RYAN: Chair, if the answer from Mr Tune about why the department did not provide a plan provokes me to ask another question or two, I would appreciate the latitude of the chair because I cannot ask it now in the absence of an answer from the secretary.
Senator Wong: We will not have a problem with that.
CHAIR: I think we can accommodate that.
Senator CORMANN: In table three of the budget financial statements, Budget Paper page 9-5, there are provisions there of the forward estimates for sales of non-financial assets.
Senator Wong: It is in statement nine, at the top of the page.
Senator CORMANN: Statement nine, table three, yes, page 9-5. There are provisions there over the forward estimates for sales of non-financial assets. The estimates are $383 million for this year, $1.3 billion next year and then in 2012-13, $4.9 billion. Why is there a $3.5 billion jump in 2012-13? What is that?
Mr Tune : It is a commercial-in-confidence issue, so I cannot go any further with it. It does relate to a sale of an asset.
Senator CORMANN: Are you planning the sale of an asset in 2012-13? It is a significant jump. Next year it is $1 billion more than this year and then it is going to go up another $3.5 billion. What about the $1.3 billion in 2011-12? What is that?
Mr Tune : The same thing.
Senator CORMANN: Is there an asset that is about to be sold but you cannot tell us what it is?
Mr Tune : There is a statement from Senator Conroy that I can point you to dated 24 June 2010 that talked about the government’s aims to auction the digital dividend spectrum in the second half of 2012. That is what it relates to, but I cannot go further than that in terms of the numbers that are in this document.
Senator CORMANN: We have not gone anywhere yet. The numbers are there and you are now telling me that there is the big jump in the outyears. It goes back to $352 million. So what is causing the jump relates to the sale of the spectrum; does it?
Mr Tune : That is correct.
Senator CORMANN: Freed up by the move to a digital spectrum?
Mr Tune : Correct, a digital dividend.
Senator Wong: But we cannot comment on the quantum.
Senator CORMANN: Sorry?
Mr Tune : We cannot comment on the quantum
Senator CORMANN: Okay, you cannot comment on the quantum but is there anything that is out of the ordinary in the figures.
Senator Wong: I would ask you to be aware of the evidence Mr Tune gave in relation to commercial-in-confidence. Officers are not going to be able to give you information that might lead to disclosure of such matters.
Senator CORMANN: What have I asked that is beyond what I can ask?
Senator Wong: I am inviting you, given it is the federal budget, to understand what the officers have said.
Senator CORMANN: I understand very well what the officers have said, but what I see is that in—
Senator Wong: I was hoping you might take a responsible approach. I suppose that might be—
Senator CORMANN: I am very responsible, but you have got a budget that happens to have a significant increase in cash held in 2012-13, the year that we happen to be going into an early surplus supposedly, and you have a $4.9 billion asset sale when all of the other years it is $383 million, $352 million, $179 million. So it seems to be a fortuitous sale of a non-financial asset that seems to be fortuitously well timed.
Senator Wong: Is that a question?
Senator CORMANN: Yes.
Senator Wong: It is not a question; it is an assertion.
Senator CORMANN: You stop me in my tracks when I ask you questions because you are so worried about what I might ask.
Senator Wong: I would not have thought I was frightening enough to stop you in your tracks.
Senator CORMANN: You are not frightening but you are well capable of stopping me in my tracks when asking a question.
Mr Tune : Can I just explain—
CHAIR: Can I just interrupt at this point in time? I do appreciate that you have mutual respect for each other but it is not helpful for estimates. Mr Tune, have you got something to contribute?
Mr Tune : Yes, if I may, Chair. The timing is of course related to the rollout of the digital-TV situation. When that is completed, you bunch the spectrum together for that, then you would have this free spectrum that you can then sell. So it is related to that; it is not related to any other thing about being fortuitous.
Senator CORMANN: Leaving the digital rollout to one side for a moment, I will go back to the question that I asked before the minister interrupted me. Is there anything else in that figure that is not business as usual when it comes to the sale of non-financial assets other than what relates to the digital rollout?
Mr Tune : Yes, there is a further issue around where we deal with spectrum licences, which is a different part of the spectrum.
Senator CORMANN: But that is still related to—
Mr Tune : That is coming up for renewal, so in a sense it is business as usual. But there are other things in there; I do not want to leave the impression that all of it relates to those—
Senator Wong: We are not going to provide information that puts the Commonwealth at a commercial disadvantage.
Senator CORMANN: I am not asking you to put the Commonwealth at a commercial disadvantage; I am asking questions that are quite responsible. Mr Tune obviously thought it was okay to tell us that some of it relates to the move to digital spectrum. If he can tell me that, I am sure he can tell me what other things are in those figures related to sales of non-financial assets.
Mr Tune : I would have to take that on notice, but I have listed the two big ones that caused the lumpiness for you.
Senator CORMANN: Okay.
Mr Tune : I cannot go beyond that in terms of details.
Senator CORMANN: Thank you in relation to that. In the time that is left before the break, I might just ask you about act of grace payments that have been made by the government in relation to injuries or loss of life resulting from the home insulation program. I asked a question on notice in relation to that and you provided an answer a couple of weeks ago; thank you for that. I asked:
Have act of grace or other discretionary payments been made by the government in relation to injuries or loss of life resulting from the home insulation program?
Your answer was, ‘Yes.’ I guess my question then is: how many act of grace payments or other discretionary payments have been made by the government in relation to injuries or loss of life resulting from the home insulation program and to what value?
Mr Edge : I would have to take that question on notice in terms of the detail, although we may be able to get a response to you a little later this evening.
Senator CORMANN: That would be good.
Mr Edge : It is just identifying some facts around the payments. If you need an answer now I would have to take it on notice, but as I said we may be able to get the answer for you later tonight.
Senator CORMANN: I would appreciate it if you could get the answer because I assume it is not that large a number that it would be difficult to assemble the information.
Mr Edge : I think that assumption is correct. I do not think it is a very large number.
Senator CORMANN: That would be very useful. So, you do not know the total amount paid out by the government in relation to such payments is?
Mr Edge : No. But, as I said, I think we can get that information for you pretty readily.
Senator CORMANN: Do you know what the highest amount is that has been paid out?
Senator Wong: He has taken it on notice.
Senator CORMANN: Minister, sorry, but—
Senator Wong: You cannot ask someone and they take something on notice and then you ask more details about the question they have just taken on notice.
Senator CORMANN: I have got to say, I am asking differently now. This is an issue that I have asked a question on notice about. I got an answer 10 days ago. Obviously people know that I have got an interest in this, so it is not entirely unexpected.
Senator Wong: With respect, we have just done a budget. I am not sure we walk around thinking about your interests all the time; I am sorry to say that.
Senator CORMANN: No, not my interests, but I can see that Mr Tune has got a big file and if the system is still the same as what it used to be under the previous government, I am sure there is a lot of briefing notes in there about possible questions that may or may not come up, and you have got a pretty big file there, too, Minister. Maybe we should do a swap; I give you my questions and you give me your file.
CHAIR: Have you got a question?
Senator CORMANN: Are you saying that you cannot assist me in any way, shape or form in relation to—
Senator Wong: No, he is not saying that.
Senator CORMANN: Sorry, Minister, but can I finish my question?
Senator Wong: He has taken the question on notice and he said he would be able to get back to you tonight, so you are just asking him—
CHAIR: If I can just remind the minister and Senator Cormann: Senator Cormann had the call; he was in the process of asking a question.
Senator Wong: That is true; I interrupted him. I acknowledge that.
Senator CORMANN: That was very rude, Minister.
CHAIR: I do not think I need your help, Senator Cormann. I have given you the call. Can you complete your question so that we can establish before we go to dinner whether we are finished in general questions in this area.
Senator CORMANN: Thank you, Chair, and I appreciate your protection from the minister. Mr Tune, just to clarify: there is nothing that I can ask about act of grace payments now in relation to injuries or loss of life resulting from the home insulation program that you can assist me with now, so all of those questions we should come back to later in the proceedings tonight.
Mr Tune : Yes, that is right, and we will come back with issues around the number and the value if we think we can get that quickly for you. I think you mentioned something about the highest amount; we will try and find that as well for you.
Senator CORMANN: Thank you. In the 2012 budget there are a number of interesting things. I will just take you to page 7, part one, revenue measures, in Budget Paper No. 2. Right at the bottom of table one it talks about decisions taken but not yet announced and in fact there is over $300 million worth of revenue measures that have been taken but not yet announced, including $54.3 million worth of revenue on decisions taken but not yet announced between now and the end of June, which is of course five weeks away. Can you assist us in any way, shape or form as to what that relates to?
Mr Tune : I am afraid not. Any questions about revenue should be directed to Treasury; they look after revenue.
Senator CORMANN: Let me go to something that should go to you, then. There is also about $800 million worth of expenditure under decisions taken but not yet announced—Budget Paper No. 2, page 85—which, of course, includes $41 million worth of expenditure between now and the end of June and $476 million in additional expenditure next year, where the decisions have been taken but not yet announced. Can you assist us as to what that relates to?
Mr Tune : I am sorry I cannot. Almost by definition, decisions taken and not yet announced, because they have not been announced, I cannot talk about them.
Senator CORMANN: It has been two weeks since the budget and it is five weeks by when all of this money is supposed to have been expensed—$41 million—so when are we expected to find out what that $41 million is going to spent on?
Mr Tune : When the government announces it.
Senator CORMANN: So, we are going to get another $41 million worth of spending—
Mr Tune : No, that is not right. The $41 million is included in the budget bottom line, but it is just the details of it are not announced; that is the issue.
Senator CORMANN: So, we are going to get—
Senator Wong: It is reflected in the bottom line.
Senator CORMANN: I understand it is reflected in the bottom line, so I am sorry if I phrased that—
Senator Wong: I have to say, at least you understand it. I was kind of interested in one of the media reports where one of your side might have suggested that all of this expenditure was associated with the Department of Veterans’ Affairs. I think that is just where it appears; underneath in the table.
Senator CORMANN: I understand it is reflected in the bottom line. I am just trying to understand what the government would be spending $41 million on between now and the end of June. If the decision has been made to spend the money, why is it a secret? This is a budget estimates process; the expenditure is in the budget; why are we not entitled to ask questions about what the expenditure is supposed to be allocated to?
Mr Tune : There could be a range of reasons that it could be in there. One element of that might be it was a decision taken late in the budget process. It could be that; I am not saying it is. Often there is no opportunity to reflect that in the budget papers because you have to go back into the budget papers and if it is very late in the process you cannot do that. Other times it might just be that the government chooses not to announce it in the budget. With the budget it wants to make provision for it and announce it shortly thereafter the budget, which is obviously the government’s prerogative, but still to include it in the bottom line so that it is transparent at the time of the budget.
Senator Wong: This is not a new approach.
Senator CORMANN: Sure.
Senator Wong: But you do know that?
Senator CORMANN: I am not suggesting it is a new approach. I am just trying to find out what is in there, because you have also got $4.5 million worth of capital expenditure where there are decisions taken and not yet announced, which I am just interested in. It has been a while since the budget has been finalised. It has been a while even since the budget has been delivered. So, you are telling me that no announcements have been made in relation to any of this since—
Mr Tune : No, I am not saying that. I do not know.
Senator Wong: They will be made within the portfolio.
Senator CORMANN: We look forward with bated breath. I have got some other things but they will probably take a little while to get through.
CHAIR: Can I ask you if have you got any more questions of a general nature?
Senator CORMANN: Most of my questions could probably go into general or outcome 1, to be honest.
Senator Wong: Through you, Chair, I would really ask for the committee’s consideration that we have everyone across all outcomes waiting. If we are able to do this in sequence, it obviously is going to be of greater assistance to people who have been obviously working particularly hard in recent times, and generally, and if we are able to send non-outcome 1 people home, bearing in mind senators have the opportunity all day tomorrow to address any non-outcome 1 questions, I would really appreciate it if we could follow the agenda.
Senator FIFIELD: We have confirmed that there are no other colleagues with general questions.
Senator Wong: Thank you. So, we will send non-outcome 1 people home and we will ensure they are available tomorrow. Thank you. I appreciate the committee’s assistance on that.
CHAIR: Thank you. We will suspend now for the dinner break.
Proceedings suspended from 18:29 to 19:46
CHAIR: Welcome back, Minister and Mr Tune.
Senator ABETZ: We are now on the budget. I raised this matter earlier under general issues. I wanted confirmation that total expenses across the forward estimates are approximately $1,560 billion. We are agreed on that?
Mr Tune : Mr Martine has gone through it and done the arithmetic so will let you know what our numbers are.
Senator ABETZ: Excellent. So that $1560 billion is right, Mr Martine?
Mr Martine : That is correct, Senator, for the four years on expenses, which is an accruals number.
Senator ABETZ: Then $5 billion or, in fact, it might be closer to $5.2 billion will be the save. Is that correct?
Mr Martine : That is correct. There are two little points to note there. That is a cash number and it is a five-year number.
Senator ABETZ: Thank you. And the $1,560 billion number?
Mr Martine : The $1,560 billion number is a four-year accruals number. The four-year cash equivalent number, which is also in table four, is actually $1,530 billion. So it is effectively the sum of the year payments line.
Senator ABETZ: Yes. So your maths was?
Mr Martine : If I divide a cash number by a cash number and if I keep both the numerator and denominator at four years—so like with like—I get 0.46.
Senator ABETZ: So it would be 46c in $100.
Mr Martine : Yes, 0.46 per cent.
Senator ABETZ: So that would be 46c in $100. Is that correct?
Mr Martine : Yes, that is correct.
Senator ABETZ: We were told that there are $21.7 billion worth of savings. Is that correct?
Mr Martine : That is correct—table 3.
Senator ABETZ: Yes, table 3. I quote from an interview where the minister says: 'Just under $22 billion, that's right.' The journalist asked, 'Right and that’s over four years?' 'That's right,' replied the minister. Can I ask whether that in fact is correct.
Mr Tune : It is $21.681 billion.
Senator ABETZ: If I have a look at table 3, Mr Tune, on page 3-14, it is in fact over five years, isn't it, not over four years?
Mr Tune : The first year is 460, so it is 21.2, or something like that.
Senator Wong: It's 21.2.
Senator ABETZ: So the figure of 21.7 clearly is over five years and not over four years, as asserted by the minister.
Mr Martine : This may be one of these cash versus accruals issues. In the budget overview document, on page 45, there is a table that outlines the major savings and a five-year total is 22.2. The 2010-11 amount is 0.5.
Senator ABETZ: Is that 22.2?
Mr Martine : Yes, 22.2 total savings over five years.
Senator ABETZ: Let's be clear: the figure of $21.7 billion is the figure that is rounded up. It is the second item down the 'Total' column of table 3 on page 3-14 of Budget Paper No 1.
Mr Martine : Yes, Senator.
Senator ABETZ: And that is clearly the figure to which the minister was referring—not a figure of 22.2 but one of 21.7.
Senator Wong: Just so you are clear—go to page 45 of the budget overview, where there is the major savings table, which is also reproduced and provided publicly, and that shows the 22.2 figure. The difference between that and table 3-14 is that one is an accrual measure and one is a cash measure.
Senator ABETZ: That is all good, but you quoted a figure of $21.7 billion. I am sure that you would not be referring to $22.2 billion as being $21.7 billion. Let's not try and confuse the two different sets of numbers. Clearly 21.7 is the rounding up of 21.681, which is a fair enough thing to do—nobody quibbles with that. But clearly that is the figure, Minister, to which you must have been referring. You answered with $21.7 billion worth of savings. When that was put to you by the journalist you in fact confirmed 'Just under $22 billion, that's right.' So you clearly were not referring to 22.2, which is above $22 billion. So let's not try this dissembling. Let's stick—
Senator Wong: Senator, do not—
Senator ABETZ: Can I finish?
Senator Wong: No, I am not going to be verballed and accused of dissembling.
Senator ABETZ: Oh, thank you very much! We are now not allowed to finish questions.
Senator Wong: I am not going to be accused of dissembling.
CHAIR: Can I ask—
Senator Wong: It is just offensive. Mr Martine was attempting to be helpful in alerting the senator to the difference between the accrual and the cash figure. I am not having him in here simply accusing me of dissembling. If you want to have a fight about that, we can have a fight about that. That is not a question and answer; that is just an accusation.
Senator ABETZ: Get rid of the agro, Minister.
CHAIR: Senator Abetz, continue with your questioning.
Senator ABETZ: Thank you. Is it not a fact, Minister—just so we can be absolutely clear—that on ABC 891, on 11 May 2011, a journalist asked, 'There are $21.7 billion worth of savings over four years, is that correct?' and you, Minister, replied, 'Just under $22 billion, that's right.' So, clearly, with that answer, you could not have been referring to the $22.2 billion figure you are now trying to introduce, quite mischievously, to get us off the trail. You yourself acknowledged that it was below $22 billion, so it cannot be the $22.2 billion figure. Do you agree with that?
Senator Wong: Senator, as you know, we do lots of interviews in this job. I do not recall every question and answer I have given in the context of the budget. I had an interview—I think at least one—with 891 in the last couple of weeks. I was probably asked what the net save position was, and I answered.
Senator ABETZ: You were asked: 'There are $21.7 billion worth of savings over four years, is that correct?' You answered: 'Just under $22 billion, that's right.' How, on earth, when you say 'Just under $22 billion' can you now try to introduce a figure that is above $22 billion: $22.2 billion.
Senator Wong: When you have finished doing your little routine there, if you take the 2010-11 figure off the fiscal balance figure I just gave you, it is 21.7 over four years.
Senator ABETZ: Which figure?
Senator Wong: It is the 22.222 figure that Mr Martine helpfully referred you to. If you take the 2010-11 figure off that, then the net save position, on an accrual basis—I acknowledge that there is obviously an accrual-cash issue that sometimes gets a bit mixed up in the context of the budget—is 21.7.
Senator ABETZ: Would you run those figures by me again?
Senator Wong: Perhaps to be helpful to you we could provide you with a budget overview document, if someone has a spare copy.
Senator ABETZ: Thank you.
Senator Wong: Page 45.
Senator ABETZ: You are telling us that you were referring in this interview to which figures?
Senator Wong: I have not got the budget press release in front of me, but it is—
Senator ABETZ: Before dinner we were agreed that the figure was $21.7 billion.
Senator Wong: Yes, and that is the figure I have tended to use for—
Senator ABETZ: Whereas now, after dinner we introduced $22.2 billion?
Senator Wong: Did you want me to finish?
Senator ABETZ: Given your interruptions you are the least—
Senator Wong: Can I just say, we hardly introduced it. We put it out in the budget document on 11 May.
CHAIR: Senator Abetz, you put a question to the minister and she was in the process of responding. If you allow her to finish, you will have the opportunity to continue.
Senator Wong: Thank you. My recollection is that we have tended to use a figure of $21.7 billion or around $22 billion. It is true that in most interviews I probably would not have made some distinction between cash and accrual. I think that is unsurprising.
Senator ABETZ: Is this document, the budget overview on page 45, on the basis of accrual or cash?
Senator Wong: Page 45 is accrual.
Senator ABETZ: And page 314?
Senator Wong: It is cash. There is a marginal difference; it is not a huge amount.
Mr Martine : Just to clarify, Budget Paper No. 2, which summarises all of the measures, is on an accrual basis. Page 45 in a sense is a summary of the savings in Budget Paper No. 2.
Senator ABETZ: I am in Budget Paper No. 1. Do we agree that the net save position is about $5.2 billion?
Senator Wong: I think that is the figure we have given.
Senator ABETZ: Where do I find that?
Mr Martine : That is page 3-14.
Senator Wong: The one you have been on, Senator.
Senator ABETZ: Yes, that is what I was thinking. Which is cash?
Senator Wong: That is cash, yes.
Senator ABETZ: It is funny that in the one interview you talk about an accrual of the savings, but then with the net position you talk about cash. In the one interview, within a space of 15 seconds—I would imagine it was a maximum of 10 seconds—we go from accrual to cash, without indicating to the public what the difference is. It seems to me that, on the basis of the $5 billion figure that comes from page 314, the $21.7 billion also comes from that page 3-14. The two figures come from the same table in the same analysis and, on that basis, you are in fact incorrect because it was over five years and not four years, as per table 3 on page 3-14.
Senator Wong: That is an assertion, not a question.
Senator ABETZ: Do you usually deal in cash figures when you are talking about these things?
Senator Wong: It is true, and you know that your government introduced accrual accounting, which does provide in some ways a different measure by which you can assess the numbers. The budget figures, the budget papers, do present the numbers in both accounting frameworks, so—
Senator ABETZ: Yes, but usually when you talk about these matters you talk about them in cash, as you did in relation to the net saved position.
Senator Wong: I am not sure but I think I understand the point you are making. I would make a couple of points. One is—from my recollection; and obviously this is my first budget—that the spend save table is usually presented in cash terms. Yes, I am getting nods. And, second, it is true: we tend to talk in round figures in terms of the savings. I hardly think we are hiding them. All the figures in terms of spends and saves are presented in great detail in the budget papers.
Senator ABETZ: There is no doubt they are presented accurately or relatively accurately, I assume, in the budget papers. The point is what you were saying in the interview and whether or not that was correct. I have just been advised that, in fact, if you do the calculation as you are suggesting of taking 22.22.4 or taking that figure and then taking 468.2 off it—
Senator Wong: 21754
Senator ABETZ: 21754. I understand under these practices one would round that up to 21.8 and not 21.7. That is the usual Treasury method of doing these things, is it not?
Senator Wong: I am not sure—
Senator ABETZ: It is, isn't it, Mr Martine?
Mr Martine : That is correct.
Senator ABETZ: So why the figure of 21.7 by sheer accident as opposed to 21.8 when it is the 21.7 figure which we would be with a founding up that Mr Martine has just confirmed is in fact the figure on page 314. Clearly that is what you were referring to, Minister. Just admit it, and we can get on with it.
Senator Wong: I have said we have generally used in terms of the budget figures around $22 billion and—
Senator ABETZ: But you were asked a specific figure.
Senator Wong: Can I just say, I absolutely stand by the assertions we have made, and we have been completely upfront in outlining the spend save position in the budget papers. I have acknowledged it included some saves in the 2010-11 year as well. I would have thought that is hardly a matter of great conspiracy. I would also make this point: I would have some regard for what you were saying if I believed you really did care about accuracy on budget figures, but you are the leader of an opposition in the senate, where your shadow Treasurer talks about $50 billion of saves that do not exist. So you cannot come in here with an $11 billion black hole in your policy costings that you have never filled and try and make a political point because you think in an interview I should have said—I do not know what you are saying I should have said—something else. We have got savings. We have got real savings. We do not have an $11 billion black hole.
Senator ABETZ: Even on the best Treasury figures of 46 cents in $100 is a tough budget, but we can leave all of that salesmanship—
CHAIR: You are completing an answer, Senator.
Senator ABETZ: I am trying to get to the detail.
CHAIR: The minister has the call.
Senator ABETZ: She always does.
CHAIR: She had not finished because you spoke over the top of her. I think we have been through this a number of times, and it would save us all a lot of time if we just allow the witness, whether it is the minister or an official, to complete their answer.
Senator Wong: I am happy for that next question.
Senator ABETZ: Being so anxious to highlight the nonexistent coalition flaws, the simple fact is you said four years when you should have said five years in that interview to 891 ABC on the day after the budget, 11 May.
Senator Wong: I do not think anybody could suggest that we have not been upfront about our savings.
Senator ABETZ: Who else gave this interview?
Senator Wong: Of course I gave the interview. There is this very clever cross-examination by you. You are asking about an interview I gave where you are saying I should have made clear something that you do not think was clear. I am saying to you that this is a new-found standard which you do not apply to yourselves. That is the first thing. The second is: we are being completely up-front. All the budget papers make clear where the savings are and all the budget papers make clear in which year the savings are. Yes, there are savings in 2010-11—that is a good thing. We should make savings in 2010-11 as well as in 2011-12, 2012-13, 2013-14 and 2014-15. That is what we have done.
Senator ABETZ: The royal plural that you use—
Senator Wong: We, the government. That is what we have done. I do not make savings and decisions without—
Senator ABETZ: It was you personally who gave the interview on 11 May asserting a figure of $21.7 billion that on the analysis provided to us by Mr Martine should have been $21.8 billion, if we are to accept the accrual basis rather than the cash basis. In fact, the cash basis from which you were clearly quoting, is over five years and not four years, as you mistakenly said on the radio.
Senator Wong: The cash figure is over five, so is the accrual figure. The accrual figure, if you take the 468 out, is $21.754 billion.
Senator ABETZ: Which Treasury acknowledges would be rounded up to 21.8. Whereas the cash figure on 3-14 is rounded up to 21.7. So we have got the clear case, on Mr Martine's evidence of the way Treasury does these things, that you must have been referring to the figure on page 3-14 of Budget Paper No. 1 rather than the budget overview on page 45, which has now been introduced as trying to have an accrual figure here and a cash figure there, and you have muddled them together within a matter of five or 10 seconds in a radio interview. It just does not seem to be credible. Minister, I give you one last opportunity to acknowledge that you made a mistake.
Senator Wong: I do not acknowledge that, Senator.
Senator ABETZ: It is human to err. What is worse is not acknowledging that when you do.
Senator Wong: I make many mistakes—there is not a day go by when I do not make many mistakes. That is a very human thing. But I think you are making a very odd, if I may say, attack given how transparent we have been. But I appreciate that is your position. We are just not going to agree on that.
Senator ABETZ: You have not in any substantive way been able to explain your interview, pretending that you used a figure from page 45 on the budget overview and then, five seconds later, completely discounted Budget Paper No. 1, but then used it immediately afterwards and mixed up two figures—one that was accrual and one that was cash—if we are to believe your version of events, Minister. Very sloppy either way. You have got yourself in a muddle here.
Senator Wong: No, I do not.
Senator ABETZ: If it is accrual, it is 21.8, not 21.7. If they are both cash, it is five years, not four years. That is your dilemma, you can take your pick. No matter which explanation you have provided to us, you are wrong on either count.
Senator Wong: You have asked this question. I disagree. Are we going to do this all night long?
Senator ABETZ: We can put the facts on the table and you can be oblivious to them. That is your prerogative as a minister, but it does not look very credible. Thanks, Chair.
Senator Wong: Senator, I would say this: if the standard that you are apparently setting is—
Senator ABETZ: How is this relevant to the question asked?
CHAIR: She is responding, Senator Abetz. You asked the question and she is entitled to respond. You may not like the response.
Senator ABETZ: Point of order, Chair. She cannot go and talk about whatever she wants and say, 'I might not like the response.' It does actually have to be relevant to the matter asked. Believe it or not, I did not ask about the coalition's election costings before the last election.
CHAIR: Minister, have you got anything further? As we all know, I cannot direct you on how to respond to a question.
Senator ABETZ: But you can stop the minister from responding if she is not in order.
CHAIR: Have you got anything else to add, Minister?
Senator Wong: I would just invite Senator Abetz, who appears to have a newfound interest in fiscal accuracy, to consider the position of the opposition and the fact that they simply have not been able to account for their saves nor their spends.
CHAIR: Senator Cormann?
Senator CORMANN: Thank you, Madam Chair, I am back.
Senator Wong: Have you done it?
Senator CORMANN: No, not yet; it is later. In estimates today the transport department—
Mr Tune : Sorry, I have an answer for you, Senator Cormann, on the act of grace. One act of grace payment made in relation to the Home Insulation Program. Total value of the payment $7,830.
Senator CORMANN: And that was in relation to loss of life or injury, was it?
Mr Tune : The payment covered the cost of some essential repairs to a property and some expenses incurred by the property owner arising from some work done on the property under the Home Insulation Program.
Senator CORMANN: I am just trying to find my questions that I have put away for later.
Senator Wong: You were asking about the range, but there is only one.
Senator CORMANN: I might have to come back to that.
Mr Tune : You asked for the number and the value and there is only one, which is the $7,830.
Senator CORMANN: Are there any others in the process of being considered?
Mr Tune : I do not know, Senator.
Senator CORMANN: You do not know. So how does that process work? Is that a process that runs through you for any part of government? Or is that a process that is handled by respective parties?
Mr Tune : It depends on the value. If they are under my delegation they would come to me for a final decision. If they were above that, they would go to the minister for a final decision.
Senator Wong: And I have delegated that decision-making absence from any conflict of—
Senator CORMANN: Sorry, like how?
Senator Wong: I am just letting you know, I have delegated that decision making to the Special Minister of State.
Senator CORMANN: Okay, the Special Minister of State. The question was different. I asked whether any act of grace payment that relates to anything that happens anywhere across government, does that ultimately channel through your department?
Mr Tune : Yes, it does.
Senator Wong: In the absence of another scheme, Senator. So within line portfolios there might be arrangements for people to seek something, there might be a program where people can seek recompense for something.
Senator CORMANN: Okay, so are there any pending claims?
Mr Tune : I do not know, Senator; I will take that on notice.
Senator CORMANN: If you take it on notice, obviously I would like to know—
Senator Wong: Sorry, is that any act of grace claim?
Senator CORMANN: No—it was in relation to this, yes.
Mr Tune : The officer will be here tomorrow, so we might be able to come back to it then if you want more information.
Senator CORMANN: Sounds good. Now to go back to where I was. In estimates earlier today the transport department told estimates that $2.1billion allocated for the Epping to Parramatta rail line is coming out of the contingency reserve. Is that right?
Mr Tune : I will just check this. Yes that is correct. Sorry for the delay
Senator CORMANN: That is all right. Why was it put into the contingency reserve?
Mr Tune : Because it was an election commitment and at MYEFO the government put all its election commitments that had not been announced in MYEFO into the CR. Some then subsequently became firm decisions announced in the budget. Some remain there. It would be one of the few, I suspect, that remains in the CR.
Senator CORMANN: What do you mean 'some of them became firm decisions'?
Mr Tune : They were announced as measures from the budget or MYEFO.
Senator Wong: This is not unusual. Governments would make provision for various spending decisions in terms of the CR prior to announcement for anticipated events and this appears to be one of them. It has already been provided for.
Senator CORMANN: Mr Tune, I am interested in your distinction between firm commitments and funding that is put into the contingency reserve.
Mr Tune : It is where they turn into measures either in the MYEFO or in the budget. Virtually all election commitments have been announced as firm measures. The detail of the Parramatta-Epping one is still being worked through. It remains an election commitment. It has been provided for in the CR; hence it is included in the bottom line.
Senator Wong: I assume you are aware of this, but 'measures' is the technical term for the policy decisions which are then locked down and for which there is clear expenditure over the forward estimates. That is what Budget Paper No. 2 comprises.
Senator CORMANN: There is a lot of shuffling going on there.
Senator Wong: We are just seeing whether or not we can give you a bit more information.
Mr Martine : It is in MYEFO—that is why we were struggling to find it in the budget papers. It was announced as a measure in the MYEFO, at page 188.
Senator CORMANN: The $2.1 billion for the Epping to Parramatta rail line was announced in MYEFO?
Mr Martine : That is correct.
Senator CORMANN: Why it is then in the contingency reserve?
Mr Martine : Because it is coming out of nation building 2.
Senator CORMANN: Is everything that is nation building 2 in the contingency reserve?
Mr Martine : At this point in time, yes.
Senator CORMANN: Why is that?
Mr Martine : Nation building 2 kicks off in 2014-15.
Senator CORMANN: Is that a firm measure now?
Mr Martine : It has been announced. There were about eight projects announced in the MYEFO and that was one of them, at $2.1 billion.
Senator CORMANN: So it was announced in MYEFO and it is now a firm measure. Why is it in the contingency reserve?
Mr Tune : Because it is in nation building 2, which is in the CR.
Senator CORMANN: Why?
Mr Tune : Because nation building 1 is still operational. The government has made a decision to put nation building 2 funds in the contingency reserve.
Senator CORMANN: You made a decision in relation to the Epping to Parramatta rail line but you have not made a decision on other things that are in nation building 2?
Mr Martine : There are a series of projects announced in MYEFO.
Senator Wong: If you go to MYEFO there is a policy decision in appendix A which goes through quite a number of projects which relate to NBP2, and they are itemised there.
Senator CORMANN: Sure, but why are they listed in the contingency reserve—hidden in the contingency reserve, in fact?
Senator Wong: We have answered that.
Senator CORMANN: No, you have not.
Senator Wong: We have. The government has made a decision that that is where the NBP2 funding will be.
Senator CORMANN: Why?
Senator Wong: The government has made that decision.
Senator CORMANN: But why?
Mr Martine : Perhaps I can help. The nation building 1 program, which extends across the forward estimates, comes to an end in 2013-14—I do not have the exact profile with me. The government has made a provision for a continuation of nation building program 1, calling it NB2, from 2014-15 onwards. Because it is a provision it is sitting in the contingency reserve. In addition to that, the government has announced its election commitments in the MYEFO, which will be funded out of the provision for nation building 2 from 2014-15.
Senator CORMANN: What other road funding is—
Senator Wong: You can go to page 188 of MYEFO.
Senator CORMANN: Okay, so these are the things on MYEFO. Is there anything that is not in MYEFO? Are there any other road projects not in MYEFO that are in the contingency reserve?
Mr Martine : Because they are in the contingency reserve, we cannot talk about anything that has not been announced.
Senator CORMANN: You cannot talk about them because they are in the contingency reserve—
Senator Wong: No, because they have not been announced.
Senator CORMANN: Yes, but the transport department has told us that the parliament—
Senator Wong: Those have been announced, Senator, they were in the MYEFO.
Senator CORMANN: Okay. Since MYEFO has anything else shifted into the contingency reserve that has not been listed in MYEFO but has been announced since?
Senator Wong: Across government, Senator?
Senator CORMANN: No. It would be interesting across government but I do not think you would accommodate me there.
Senator Wong: You would have to ask the transport department there. We do not track—
Senator CORMANN: It seems odd to put road funding—
Senator Wong: Nonsense.
Senator CORMANN: that is supposedly already critical—
Senator Wong: Senator, can I finish? We would not have to hand every announcement in every portfolio that the government has made between MYEFO and the budget. We can refer you to what was announced in MYEFO and we have explained how that has been provisioned for.
Senator CORMANN: Just going through evidence from other departments in other parts of estimates, the Department of Immigration and Citizenship told estimates that there is $130 million hidden in the budget to set up a regional processing centre for asylum seekers.
Senator Wong: Hidden in the budget?
Senator CORMANN: I am interested for you to show me—
Senator Wong: I do not think they would have said that. You should not verbal them in that way.
Senator CORMANN: It is 'hid $130million in the budget'. Are you aware of what I am talking about here?
Mr Martine : I am.
Senator CORMANN: Okay, tell us what Finance's role was in that, and maybe point me to the place in the budget papers where I can find that $130million.
Mr Tune : You will find it in the DIAC portfolio budget statement, mixed up with some other numbers.
Senator CORMANN: Mixed up with some other numbers, is it?
Mr Tune : Yes. It is operating costs for an offshore processing centre, as part of the government's policy on regional processing of IMAs.
Senator CORMANN: Why was it not identified as a separate line item in the budget papers?
Senator Wong: Senator, let me tell you: we give way more information in the budget papers than I ever got out of your lot.
Senator CORMANN: This was going to be the new era of openness and transparency, the sunshine was going to come in—
Senator Wong: Yes. That is why you get to ask the questions I could never get to ask.
Senator CORMANN: It is one thing to spend $130 million on offshore processing centres and you are not identifying it. Why is it not identified as a separate line item?
Mr Tune : Because the government is still working through the details of it.
Senator CORMANN: So it is in the contingency reserve, is it?
Mr Tune : No, it is an estimates variation.
Senator CORMANN: What is an estimates variation?
Mr Tune : It is an estimates variation on the basis that the government is contemplating and looking actively at policy of processing some IMAs offshore as distinct from in Australia. In that sense it is switching the estimates that we have in there for processing within Australia—and in Australia I am including Christmas Island, by the way—to doing it somewhere else. So it is just switching one set of estimates from location X to location Y, and on that basis we classify it as an estimates variation.
Senator Wong: Minister Bowen, when he announced the arrangements with Malaysia, made public the cost of that.
Mr Tune : And that is in the budget papers as a measure, because it is definite.
Senator CORMANN: What, it is definite that it is going to be $130 million?
Mr Tune : No, I am talking about the Malaysia one; it is a definite measure in the budget.
Senator CORMANN: And so what is the cost, remind me?
Mr Tune : Of Malaysia?
Senator Wong: I think he announced $216 million, from memory.
Senator CORMANN: So that is $216 million?
Senator Wong: No, there were two different components. There was the increase in the humanitarian program and then there was the support for the 800 to Malaysia.
Mr Tune : Yes, 75.9 over four years for support and maintenance transferred for foreign aid transferred to Malaysia, and 216.4—
Senator CORMANN: Sorry, transferred to Malaysia?
Mr Tune : Yes. And 216.4 million for the increase in the humanitarian migration program by an additional 4,000 places over the four years. They were announced as a measure in the budget.
Senator CORMANN: And so how does that relate to the $130 million in estimates variation?
Mr Tune : I was just making a distinction, Senator. That is a definite decision, a firm decision, whereas the other one is a decision that the government is still working its way through and therefore is not classified as a measure. It is classified as an estimates variation.
Senator CORMANN: So there is $130 million put aside just in case we find a location for another offshore processing centre—so we have got the money put aside to deal with it.
Mr Tune : That is correct, yes.
Senator CORMANN: Was it your decision to treat it as an estimates variation?
Mr Tune : In effect, it was a government decision, on advice from the Department of Finance and Deregulation.
Senator CORMANN: What other estimates variations do we have in the budget?
Mr Tune : Thousands.
Senator CORMANN: Thousands of estimates variations?
Mr Tune : Virtually every program will have an estimates variation.
Senator Wong: Do not ask us to talk about all of them; we will be here forever!
Senator CORMANN: I could always ask you to provide us a list on notice. How many are there? Is it thousands or hundreds or 50?
Mr Martine : Literally thousands of adjustments are made to the estimates across government, but we try to summarise the largest estimates variations in statement No. 3. There are a couple of pages in statement 3 that go through the—
Senator CORMANN: Can you take me to the page?
Mr Martine : It is in two parts. Page 3-17 is receipts. Page 3-19 is cash payments. It starts halfway down page 3-19 and continues on to 3-20.
Senator CORMANN: This is where the increased costs from a higher than previously expected number of irregular maritime arrivals comes in—the $825 million in estimates variations?
Mr Martine : That is correct.
Senator CORMANN: That is an estimates variation?
Mr Martine : Yes.
Senator CORMANN: Is the $130 million is part of the $825 million or does it come on top of that?
Mr Martine : That is separate.
Senator CORMANN: In relation to the increased cost of processing irregular maritime arrivals, we have $825 million plus $130 million. Plus anything else?
Mr Tune : As an estimates variation?
Senator CORMANN: Yes.
Mr Tune : No; I do not think so.
Senator CORMANN: So that is it?
Mr Tune : There might be small parts in other parts of the program; I am not sure. They are the big ones.
Senator CORMANN: Do you know what the $130 million will be spent on?
Mr Tune : It is provision for operating costs for an offshore processing centre.
Senator CORMANN: Which could be on Manus Island or in PNG?
Senator Wong: If you have policy questions about that, they should be directed to DIAC.
Senator CORMANN: Okay; you are just going to the costings. How can you put the money aside if there are no details about where it will be and what it will do?
Mr Tune : There are plans. The government is actively contemplating this policy issue, so we have some knowledge.
Senator CORMANN: You have some knowledge of plans?
Senator Wong: If you have policy questions they should be directed to DIAC.
Senator CORMANN: No, I do not have policy questions.
Senator Wong: In relation to provisions being made in the contingency reserve, that is something that governments of all political persuasions do to make appropriate provision for anticipated events. Obviously not all of them come to pass, but many do. As you know, it is good to have provision for those cases.
Senator CORMANN: Indeed, it is very good to have provision. It would be good to have provision for an offshore processing centre on Nauru. But I am interested in how accurate those costings are and how Finance has reassured itself that those costings are accurate. What involvement have you had in costing what is currently being considered by the government?
Mr Tune : We have been involved in doing that.
Senator CORMANN: You have been involved in costing a specific project?
Mr Tune : No, we have been involved in costing in a broad sense: the cost of operating an offshore processing centre. That might vary as the government moves through this. It is very often the case—
Senator CORMANN: So the costs could end up being higher?
Mr Tune : They could be lower.
Senator CORMANN: Having an offshore processing centre in Papua New Guinea would presumably have a different cost structure from having an offshore processing centre in Malaysia or Thailand. Or do you assume the costs would be equivalent across the board?
Mr Tune : They might vary a little bit, depending on how far afield you go. But there would be some consistency there, I am sure. We are largely talking about the operating costs. The cost of doing it is pretty much the same for the facility.
Senator CORMANN: So you cannot tell us on what basis you have costed that policy?
Senator Wong: What do you mean?
Senator CORMANN: What I mean is this: have you costed an offshore processing centre for Papua New Guinea or have you costed an offshore processing centre for somewhere else?
Mr Tune : We have done some costing on an offshore processing centre, full stop.
Senator CORMANN: And you have not made any costings specific to the possible location of the offshore processing centre?
Mr Tune : We have thought about the location, but there is not a location-specific costing.
Senator CORMANN: You have thought about the location, but the costings are not specific to the location?
Mr Tune : I am not in a position to go any further than that, Senator, I am sorry.
Senator CORMANN: So there is further to go, but you just cannot go there?
Mr Tune : No, what I am saying is what we have done. That is it.
Senator CORMANN: The immigration department says that this funding is to be used for a regional processing centre in Papua New Guinea. How can you cost that?
Mr Tune : I am not aware that they have said that, Senator.
Senator CORMANN: Well, that is my advice.
Mr Tune : It is not the advice I have.
Senator CORMANN: My advice is that the Department of Immigration and Citizenship revealed that it had been decided that this funding would be used for a regional processing centre in Papua New Guinea, and that is even though no such agreement currently exists with PNG. So you are saying that that is not right?
Mr Tune : I do not have the official Hansard, but I have some transcript of what was said and the DIAC officials do not talk about PNG or any other location.
Senator CORMANN: So, if that is my advice, that is inaccurate, is it?
Mr Tune : I do not know. I am going on what I have got; you might go on what you have got, but I cannot confirm your advice.
Senator CORMANN: I am interested in the costings because—again, correct me if I am wrong—I am told that $81.8 million of this funding is to go into administrative funds and $48.2 million within offshore asylum seeker management, and that there would be 30 staff, interpreters, food for asylum seekers and chartered flights. Are these all things that you have costed?
Mr Tune : Yes. Those are the sorts of assumptions that would go into it. It is a generic costing, pretty much based on the operating costs for Christmas Island. You are looking at that as your base line.
Senator CORMANN: When you set up an additional processing centre like this, is it usual to deal with that as an estimates variation?
Mr Tune : In the circumstances, yes, because you are procejssing them offshore as distinct from onshore.
Senator CORMANN: So if you did the same onshore—
Mr Tune : If you were doing them onshore, any change in numbers flows through as an estimates variation, and that is the number that was being referred to earlier, in the estimates variation.
Mr Martine : The 500-odd.
Mr Tune : Yes. This is just switching it from there to there, and therefore all that has changed is the location.
Senator CORMANN: So that money had previously been allocated for onshore processing centres?
Mr Tune : It would otherwise have been used for onshore, but it could then be used for offshore.
Senator CORMANN: So it is not additional money; it is just shifting money, is it?
Mr Tune : In a large sense, yes.
Senator CORMANN: Shifting within the department of immigration?
Mr Tune : Yes, definitely.
Senator CORMANN: So you are taking from somewhere else and then allocating it to the offshore processing?
Mr Tune : What you would have otherwise spent on processing onshore, you now spend processing offshore.
Senator CORMANN: Regarding the processing overall—onshore and offshore—by how much has the annual cost of that increased since 2007-08?
Mr Tune : I do not have that number, Senator.
Senator CORMANN: Could you provide to us on notice how much was spent on processing of illegal maritime arrivals in 2007-08, and then how much is going to be spent, on an annual basis, over the forward estimates?
Mr Tune : Yes, we can take that on notice.
Senator CORMANN: Thank you for that. So this $130 million does not include capital costs then, by the sound of it?
Mr Tune : No, it does not.
Senator CORMANN: Why not?
Senator Wong: Senator, we have provisioned, in accordance with the government's stated policy, which is to establish a regional processing centre. You have asked us about one component. I am not going to go into details about anything further that has been provisioned for. What we have said to you is that we have made appropriate provision. If and when such a policy is resolved and an announcement is made, obviously those figures would be fully transparent as a measure in whatever budget update. In fact, as the minister did, in the announcement, it may well be part of a new announcement.
Senator CORMANN: Hang on, let me get this right. You have allocated $130 million for an offshore processing centre in an undisclosed location. Everybody assumes is going to be in Papua New Guinea, but you do not have any—
Senator Wong: I think the minister talked about seeking to explore—that is not a secret.
Senator CORMANN: I am not suggesting it is a secret.
Senator Wong: There has been an announcement.
Senator CORMANN: The thing is, it is enough of a secret for our good friends at the Department of Finance and Deregulation not to tell us—
Senator Wong: It is not a secret, Senator. No, no, that is, with respect, a little unfair.
Senator CORMANN: I am not meaning to be unfair.
Senator Wong: No, I know, and I am trying to be very reasonable, Senator, because we are getting along quite well—and I am getting tired and I do not want to fight at the moment. Even I run out of fight sometimes, Senator Cormann. Things being provisioned in the contingency reserve is not hiding. They are provisions for things which one anticipates but which have not yet eventuated. It is what Mr Costello did and it is what we have done. We have been, in fact, more than transparent about the fact that there is provision on a policy that has been announced that has not yet been finalised in terms of where and how a regional processing centre would be put in place.
Senator CORMANN: Have you got an allocation for capital costs related to this particular initiative in the contingency reserve?
Senator Wong: We have made provision for a regional processing centre in the contingency reserve. I am sorry, Senator, but I am not going to get into any further detail about that. All of that, if and when that occurs, will be made public.
Senator CORMANN: But hang on, you are able to put $130 million in operating costs—
Senator Wong: I do not think I did, actually; I think you did.
Senator CORMANN: I did? I did not put the money into the budget.
Senator Wong: I think you put that to me.
Senator CORMANN: I am saying you are able to identify and make a costing to identify that operating a regional processing centre would cost you about $130million, and you have identified that that is going to be wages for 30 staff, interpreters, food for asylum seekers, chartered flights and so on, but you are not able to give us any indication as to how much it is going to cost to build the thing?
Mr Tune : The difference goes back to what I was saying earlier, Senator, that the $130 million is in effect just a switch from one location to another one, and the way we have costed it is consistent with that. Christmas Island was the basis of the costing. So that is more certain. There is no decision—no further decision, yet, other than the government's investigations, which are yet to be finalised—about a location, so therefore the capital costs are far less certain and therefore you do not put them in as an estimates variation or a measure, for that matter, until there is a decision.
Senator CORMANN: The Commonwealth has built detention centres in the past, and in fact the Commonwealth is in the process of building quite a few of them as we speak, or refurbishing existing facilities.
Mr Tune : But each one is unique and has a different cost structure in terms of capital. Operating is more consistent, capital is—
Senator CORMANN: So operating a processing centre, whether that is in Papua New Guinea, Thailand, Malaysia or Australia, is the same—
Mr Tune : There will be some consistency. I am not saying it is absolutely one for one, but you have got a basis at least for making an informed judgment, which may turn out to be incorrect, and you may have to adjust it up or down, as I mentioned earlier, but at least you have got a basis for it.
Senator CORMANN: But you cannot make a judgment for capital?
Mr Tune : With the capital one, you are not sure enough to be able to come up with the view so you put something in, yes, as the minister has mentioned, but it is not certain enough to be able to call it a measure, particularly when the government has not made a decision about what that location might be.
Senator CORMANN: So once that decision has been made, where will that money come from?
Mr Tune : Where will that money come from? It will need to be appropriated.
Senator CORMANN: So that would then be an additional policy decision and an additional spend.
Mr Tune : No, no.
Senator Wong: No, it is already provisioned for.
Mr Tune : Because it is in the CR it is in the bottom line.
Senator CORMANN: So it is in the CR.
Mr Tune : Yes.
Senator CORMANN: Ok, so you can confirm that.
Mr Tune : I can.
Senator CORMANN: You just cannot tell me how much is allocated for it in the CR.
Mr Tune : Correct.
Senator CORMANN: And you cannot tell me whether what is allocated for in the CR is likely to be enough or whether it is going to have to be more or less?
Mr Tune : It is our best estimate at the moment, that is what I can say.
Senator CORMANN: As everything is, yes. It is very hard, of course, to scrutinise what is on the table in that sort of context. You would remember the government's Operation Sunlight—I think, Minister, that was initiated under your predecessor—where the government said that Treasury and Finance would publish on their website material changes in revenue and expenses every three months, and fiscal and cash balances. Has this happened?
Senator Wong: We do, yes.
Mr Tune : Monthly.
Senator Wong: In fact, I do it monthly. Well, I do not, but I release them and they are published monthly.
Senator CORMANN: I have to confess I have been looking around for it and I cannot find it, and maybe that is due to my inadequate skills in travelling through Commonwealth department websites, but—
Mr Tune : You will find it on Finance's internet site.
Senator Wong: Monthly financial statements, I think.
Senator CORMANN: Maybe someone can assist us with a little piece of paper with the address on it?
Senator Wong: finance.gov.au, Senator, and I am sure there is a link somewhere.
Senator CORMANN: So that $130 million presumably then is listed and clearly identified in there, is it?
Mr Tune : No, this are actuals.
Senator CORMANN: There are no estimates—
Mr Tune : Monthly financial statements are actuals, month by month.
Senator CORMANN: Okay, your fiscal and cash balances, yes.
Senator Wong: So you do see? It gets some media, Senator.
Senator CORMANN: What do you mean?
Senator Wong: Certain economic writers will write about what the last financial statements looked like and how they are tracking against estimates et cetera.
Senator CORMANN: Sure. In terms of this digital television switchover assistance for—
Senator Wong: My officers, in fact, told me that you have asked a question on notice about the monthly financial statements, so clearly you might have—
Senator CORMANN: They are very quick, I have indeed.
Senator Wong: So you clearly know about them, Senator?
Senator CORMANN: I do know about them; I am just trying to more easily navigate your department's website.
Senator Wong: That is all right. It is very easy to find David Tune on that website, I find. There are lots of photos of Mr Tune.
Mr Tune : I am on your side, Minister.
Senator CORMANN: I hope you are not saying I was distracted by that.
Senator Wong: No. There is a little 'Ask David' thing, as well—
Senator CORMANN: I am desperate to get to a couple of questions about set top boxes.
Senator Wong: Sorry.
Senator CORMANN: Can you explain to us how this was costed?
Mr Tune : How it was costed? It was costed in the normal way that we cost policy proposals coming before government in the ERC.
Senator CORMANN: You are now telling me the process, but I am interested in the substance of the costings. What did you assess as part of your costings? What is involved in the costings?
Senator Wong: We will take that on notice.
Senator CORMANN: Why would you take that on notice?
Senator Wong: Because to be honest with you, I want to consider the extent to which we are going to get into—this is the path you were going—every assumption underpinning every Commonwealth costing.
Senator CORMANN: So why am I not allowed to ask about assumptions underpinning Commonwealth costings on a measure like this?
Senator Wong: I do not recall that generally being disclosed by governments and I would want to consider that. I am happy to consider it and we will take it on notice.
Senator CORMANN: But you are just shutting down a line of questioning on the costing of set top boxes. I was not even going to ask that many questions. You now make me suspicious that you have something to hide.
Senator Wong: No, not at all. I think that there are questions about assumptions I want to consider. You asked a lot of questions about assumptions in relation to the previous costing.
Senator CORMANN: But why would you not tell us on what basis you have identified the costing of this proposal where the Commonwealth is going to contract people to provide—
Senator Wong: I am happy if you want to ask questions about what the measure means. That is a different question. We can tell you about the measure, although probably that is best addressed to DBCDE—that is, the Department of Broadband, Communications and the Digital Economy, which I think is appearing tomorrow.
Senator CORMANN: I am interested in the costings of the measure done by Finance. What is involved? Which aspects are going to cost how much? What is the breakdown? Surely the department has involved themselves in how much is going to be paid for each set top box and how much is going to be paid for contractors to go into people's homes to set them up?
Senator Wong: Some of that is subject to tender, Senator, so again I will take that on notice if that is the sort of information you want. In terms of the measure, that is set out on page 112—I am sorry; I do not think that is right. Is that right?
Senator FIFIELD: Senator Cormann might have to go on the Finance website and click 'Ask David' and 'submit'!
Senator Wong: No, no. I am told, by the way, the monthly statements are available; there is a link on the first page of the website. So the measure is on page 112 of Budget Paper No. 2. I will take on notice your questions about assumptions—and, if you have questions about the policy that is being funded and how that will operate, I would ask that you ask that of Senator Conroy tomorrow.
Senator CORMANN: I am not asking you questions about the policy; I am asking you about what the detailed costings are of the various aspects of this particular measure. How much is the cost of set-top boxes, how much for participation, pick-up rates, contractors?
Senator Wong: If you go through them now, we will take them on notice. You had two more there. If you want to add to them, we will take them on notice.
Senator CORMANN: So are you going to be able to assist us at least with whether there is any allocation—perhaps in the contingency reserve—for any cost blow-outs?
Senator Wong: This is a measure, Senator.
Senator CORMANN: Yes, I know it is a measure.
Senator Wong: That means it is a measure. It is in the budget—
Senator CORMANN: So what? I know it is a measure, but there is always money in the contingency reserve for programs like solar panel rebates and others, just in case the money runs out—
Senator Wong: This is another of the costing errors that your shadow finance minister and shadow Treasurer keep making, and I am surprised that they have not—
Senator CORMANN: I am not making any errors; I am asking questions. Just say—
Senator Wong: No, they do. They act as if the contingency reserve is just some bucket that can continue to be raided like that. That is not how it works.
Senator CORMANN: You know you have the Epping-Parramatta railway in the contingency reserve.
Senator Wong: You can provision the contingency reserve for anticipated expenditure; and, when that expenditure is crystallised, that is disclosed, transparently. In relation to this policy, the digital switchover—which is an existing program and has already been rolled out successfully, but I will leave that to Senator Conroy to talk about—there is a measure in Budget Paper No. 2 which transparently sets out the costs of it. You have asked questions about the assumptions. I am happy for you to articulate them and we will take those on notice.
Senator CORMANN: Mr Tune, is there anything in the contingency reserve as a matter of general principle for possible cost overruns for government programs?
Mr Tune : No.
Senator CORMANN: So you do not have anything in the contingency reserve to deal with that. I understood there was something in the contingency reserve related to the cost of the private health insurance rebate, for example. That is a discussion we had two or three years ago.
Mr Tune : It is a Treasury issue, the PHI rebate, so you would need to talk to them about it, Senator.
Senator CORMANN: That is because you do not know by how much it is going to go up, potentially, so—
Senator Wong: Senator, he just said it is a Treasury issue.
Mr Tune : It was announced as a measure at the time, and that is always a measure.
Senator CORMANN: So, if demand for the set-top boxes program happened to exceed the available funding, what would happen?
Mr Tune : There would be an estimates variation at the time.
Senator CORMANN: And where would the money for the estimates variation come from?
Mr Tune : Appropriation Bill No. 1.
Senator Wong: It still has to be provisioned for.
Senator CORMANN: But before when we were talking—
Senator Wong: It is still in the bottom line, Senator.
Senator CORMANN: Yes, sure, because money in the contingency reserve is in the bottom line. I understand that.
Senator Wong: No, no. But that is not what you just asked. If things cost more, Senator, than is provisioned for, whether or not it is an estimates variation, the government still has to then provision for it or find the money to allocate to that program, and that is what you do in budgets.
Mr Tune : You do that through the appropriation bills.
Senator Wong: And then the parliament gets to look at it.
Senator CORMANN: So what you are saying is that there is no money put aside if there are cost overruns.
Mr Tune : No.
Senator Wong: This is a measure.
Senator CORMANN: We have had measures in the past where there were cost overruns, Minister. It does happen.
Senator Wong: Yes, and they have to be dealt with.
Senator CORMANN: Indeed.
Mr Tune : They get adjusted at the time, as necessary.
Senator CORMANN: When you say they get adjusted at the time, is that through new appropriations?
Mr Tune : Yes.
Senator CORMANN: Right—which would increase the deficit or increase the level of debt if it is—
Senator Wong: Or we could do what we have done, which is more than offset all new spending.
Senator CORMANN: Which, of course, you have not.
Senator Wong: We have.
Senator CORMANN: Including through increased taxes and other revenues.
Senator Wong: On that, Senator, you need to go and talk to Joe Hockey, because his $50 billion just got even worse. His $11 billion black hole got even worse.
Senator CORMANN: You have a $22 billion spending cut, supposedly, which of course it was not.
Senator Wong: At least we have some real spending cuts, as opposed to the $11 billion black hole—that is all I can say. Nobody believes the $50 billion any more.
Senator CORMANN: Minister, you recently appointed former coalition finance minister John Fahey to oversee a government program to make sure that money was spent wisely, that there was not going to be mismanagement and overruns in the same way as has happened in the past. Are you going to appoint somebody like this to make sure there are no rorts in relation to the set-top boxes program?
Senator Wong: Questions about the operation of that program should go to Senator Conroy.
Senator CORMANN: Who appointed John Fahey to oversee? I understood that that was part of your portfolio, wasn't it?
Senator Wong: I think that announcement was made by the Prime Minister, from memory.
Senator CORMANN: Sure, the announcement was made, but which portfolio does it come under?
Senator Wong: I think it might be Minister Crean's, although it does administer funding—
Senator CORMANN: So—
Senator Wong: If I can finish, there is funding also administered under the NDRRA which would be in the Attorney-General's portfolio—that is the national disaster relief and recovery arrangements.
Senator CORMANN: So what role does Finance take in making sure that money is spent wisely across government?
Mr Tune : I am a member of the inspectorate, Senator.
Senator Wong: No, this is across government, I believe he is asking.
Mr Tune : Oh, sorry.
Senator CORMANN: So you only focus on spending money wisely within your department?
Mr Tune : I am sorry, I thought you were still on the inspectorate from Mr Fahey. I misheard your question, sorry. In terms of value for money, we monitor spending on a reasonably regular basis. Estimates variations are not just accepted as a fait accompli; we analyse those and come to a view about the appropriateness of them.
Senator CORMANN: So if somebody says to you, 'We need more money because our program is running over,' you say, 'Prove yourself,' but you do not proactively go and make sure that risk is minimised? You trust them until a certain point?
Mr Tune : We have some frameworks that we would like people to operate under in the way they operate programs, yes, that is true.
Senator Wong: There are a number of processes, but I also made a speech—I think it was last year, pre-budget—where we laid out a range of additional reforms to improve implementation.
Senator CORMANN: So what is the framework that you have put in place to make sure there are not going to be any rorts in relation to the set-top boxes program?
Senator Wong: You should direct that to the department of broadband.
Senator CORMANN: I thought that you took an interest in setting the framework, in making sure that—
Mr Tune : We set a framework, which in effect is the Financial Management and Accountability Act, and then departments have to operate within that act and ensure that they provide value for money. So they would be looking at those things. We look at some, as the minister mentioned. We have taken a greater interest in implementation in more recent times, but this one, as the minister also mentioned, is an ongoing program. It is not as if it is a new program with no experience; it has been operating for a while.
Senator CORMANN: So at this stage you trust that it will be handled appropriately until you learn otherwise?
Mr Tune : That is correct, and we agreed the costings on that basis.
Senator CORMANN: So how much have you allocated for the advertising campaign for this set-top boxes policy?
Mr Tune : I will take that on notice along with the other assumptions.
Senator CORMANN: That is not an assumption; it is a question about a specific expense.
Mr Tune : We will take all the issues around the costings process on notice.
Senator CORMANN: So you are not going to answer any questions about the set-top boxes?
Senator Wong: We did not say that; we said we would take it on notice. I keep saying this, but these are matters that really should be dealt with by the relevant departments.
Senator CORMANN: Which year had the fastest growth in government spending over the last 35 years? Can you assist me with that? The year over the last 35 years?
Senator Wong: I would assume it was around the time of the greatest global economic crisis since the Great Depression—the one that your shadow Treasurer referred to as a hiccup.
Senator CORMANN: The greatest global financial crisis, so 2008-09, of course. That is when spending in real terms went up by 11 per cent, and the following year it went up by 6.4 per cent. Do you accept that it is a bit disingenuous to use that inflated base to then assert that spending is under control because of that inflated base? Obviously a further increase in spending, even if it is below two per cent, is much more significant than it would have been if spending had continued to grow according to trend?
Senator WONG: No, I do not agree with that. The fiscal consolidation is 3.8 per cent over two years. That is an extraordinarily fast fiscal turnaround. We have restrained expenditure very substantially. As I said, the real growth over the forward estimates period—and it is the forward estimates period—is about one per cent per annum. You have to go back to the 1980s to see where a government achieved that kind of spending restraint. Also, the figure I referred you to earlier—I cannot find it right now—that looks at the size of government expenditure as a proportion of the economy, falls by one per cent of GPD over the forward estimates to a level lower than that which preceded the financial crisis. As a government we are spending less in the economy than your government did on average over a decade. That would also include some of the last years of the Labor government, I suppose. Those facts demonstrate a very substantial amount of fiscal restraint.
There is a chart at 225 which looks at growth in public final demand—you will see the reduction in that-
Senator CORMANN: I take you to statement 3 on page 10, Budget Paper No. 1. If the inflated base—because of the 17-plus per cent increase in real spending between 2008-09 and 2009-10—does not matter, why have you excluded it from this graph? It distorts the figures, does it not?
Senator WONG: We can fight about the fiscal stimulus. I know your party has a view about that. We stand by the stimulus. It supported jobs and it ensured that this economy did not fall into recession. We did not see the sort of capital destruction and high levels of high unemployment that you saw in many comparable advanced economies. I appreciate that you have described it as a hiccup. That is quite an extraordinary position, but the figures here are clear. I refer you to the figure at 216, where you see the contributions to real GDP growth. You will see the contribution or the detraction from the sale of public expenditure. In other words, the government is reducing its footprint—for want of a better word—in the economy.
Senator CORMANN: We can indeed have arguments as to whether the size of the stimulus was right, whether the money was well spent and everything else. Leaving that to one side, you are using the record levels of spending growth—we have established certainly that there has been the biggest growth in spending in real terms in 35 years—as a new base from which to assess spending growth moving forward-dare I use that term?
Senator WONG: That would make sense if the size of government kept growing. But if you go to 315, which we were on before, and look at the payments line and at the percentage of GDP—this is a measure of how much government spending is as a share of the economy—you see that it falls by one percentage point over the forward estimates period, and ends lower than the 10-year average for the years preceding the global financial crisis. What that shows is a budget which reduces the size of the spend of government in the economy.
Senator CORMANN: Minister, you are obviously talking about forward estimates. We are not talking about reality here. I know you like talking about net debt as a proportion of GDP.
Senator FIFIELD: We will have to wait and see.
Senator Wong: That is fair enough. We will all be held to account, I am sure.
Senator CORMANN: Of course, we have had a deterioration in the budget bottom line of about $8 billion this year and about $10 billion next year. We will see what happens after that. Could you just remind us what the current—
Senator Wong: You cannot make that assertion without me responding to it.
Senator CORMANN: Go for it—please.
Senator Wong: It is convenient for you to forget, in talking about that, the floods, the cyclone and the natural disasters in Japan and New Zealand which, as the budget papers disclose, had a very significant effect on our economy and on revenue. The entirety of the—
Senator CORMANN: Australia has never had floods before?
Senator Wong: No—that is not right. The deterioration in the 2010-11 deficit is, from memory, almost entirely due to the write-down in revenue.
Senator FIFIELD: The reason that is in deficit in the first place is primarily about policy decisions—
Senator Wong: Do you want to have and I commend over the stimulus? Yes, we went into deficit—
Senator FIFIELD: But you keep talking about revenues as being the reason for deficits.
Senator Wong : No.
Senator CORMANN: You did not have any flexibility or—
Senator Wong : Hang on. Stop.
Senator CORMANN: any resilience in the budget left. That is the reality.
Senator Wong : You are mixing apples and oranges, and I am not going to be verballed here. I was responding to Senator Cormann who was making some criticism of the deterioration or the change in the deficit figures for 2010-11 and 2011-12. I was making the point that the majority of those are as a result of write-downs in revenue and that it is not a reasonable proposition to ignore the effects, not only on the economy but also on government revenue, of the natural disasters, of which I have spoken.
Senator FIFIELD: I was making a separate point—
Senator Wong : You were making a separate point, Senator, which is to relitigate the stimulus.
Senator FIFIELD: which is that the reason the budget is in deficit in the first place is because of policy decisions by government.
Senator Wong : Correct, and we stand by those policy decisions, which saw that 200,000 Australians and their families, who would otherwise be unemployed, are employed today, and we have seen 720,000 or so jobs created since we came to government.
Senator CORMANN: So, Minister, what is the expected dollar figure of net debt for 2010-11 and what is it estimated to peak at?
Senator Wong : For 2010-11, was it, Senator?
Senator CORMANN: Yes, 2010-11, and what is the estimated peak?
Senator Wong : I have got 2011-12 onwards.
Mr Martine : Senator, in 2010-11, it is 82.4.
Senator CORMANN: And what is it estimated to peak at over the forward estimates?
Mr Martine : It is 106.6 in 2011-12.
Senator CORMANN: And which year is that?
Senator Wong : 2011-12; 7.2 per cent.
Senator CORMANN: Sorry—one was 106.6 in 2011-12?
Senator Wong : Yes.
Mr Martine : Yes.
Senator Wong : It is 7.2 per cent of the GDP.
Mr Martine : Senator, on page 3-24 of Budget Paper No. 1 there is a table that summarises the balance sheet aggregates.
Senator CORMANN: There was actually a better one—a table somewhere at the back, I think.
Mr Martine : There is a historical table on page 10-8.
Senator CORMANN: And then it sort of drops off slightly to $104.6 billion net debt. And then in 2012-13—
Senator Wong : Sorry—gross net debt? No, just net.
Senator CORMANN: That is what I have just said. So we have got $106.6 billion 2011-12, then $104.6 billion in 2012-13, and then it increases the following year, even though we are supposed to be in surplus. What is causing that?
Mr Tune : You are probably best to ask Treasury that, Senator. They are responsible for these numbers.
Senator Wong : It is a stock-and-flow comparison with those numbers.
Senator CORMANN: Even after forecasted surpluses in 2012-13, 2013-14 and 2014-15, we will still have a net debt of more than what we have right now?
Senator Wong : Net debt peaks next year, Senator.
Senator CORMANN: But right now it is $82.4 billion and over forward estimates we are still going to be over $100 billion in net debt. So, at the end of those forward estimates, we are still $18 billion more in the red than we are today?
Senator Wong : The budget figures are there, Senator, as to net debt.
Senator CORMANN: So the government would have paid off less than $4 billion of the debt for 2012-13 by 2014-15. That is, of course, the figures that I just went through. And that is when the budget is supposed to be in surplus for each of those years. How are we getting on top of this net debt situation?
Mr Tune : Over time, if you look at the next page, 3-25, you will see the projection of net debt over the various years, and it is coming down as a percentage of GDP. We are getting back to zero.
Senator CORMANN: That is assuming no additional spending decisions.
Mr Tune : That is correct.
Senator Wong : Assuming we comply with our fiscal strategy to bank upward revisions of revenue and maintain the spending cap until the surplus is one per cent of GDP.
Senator CORMANN: Assuming we do not have another year where your spending goes up by 11 per cent and 6.4 per cent.
Senator Wong : We can argue over and over again the stimulus. I think the success or the merit of the government's stimulus can be seen by looking at what happened in the Australian economy. On the net debt figure, I make the point that we peak at 7.2 per cent of GDP. From memory, the average of the advanced economies is just under 90 per cent of GDP.
Senator CORMANN: How did you pick those advanced economies that you compare us to? On what basis do you choose whom you compare yourself to?
Senator Wong : From memory, the G7.
Mr Martine : Senator, page 1-13 is probably the chart you are referring to. It is a comparison of Australia versus the G7 economies, and they relate to the numbers the minister was just referring to.
Senator CORMANN: Are you aware that there are many developed commodity exporting countries like Australia who not only have no net debt but actually are in significant—
Senator Wong : I saw that table that Mr Hockey put up in the National Press Club.
Senator CORMANN: You might find that amusing.
Senator Wong : What was interesting about it is that quite a number of the countries he referred to also had carbon prices. I thought it was interesting that on the one hand he wanted to say we should be like them on some issues but on the other hand he ignored the fact that a number of the nations he put up on the little screen were nations that have had a carbon price in place for some time. That is just an aside.
Senator CORMANN: Which nation is that, Minister?
Senator Wong : I am referring to—
Senator CORMANN: Countries in Europe?
Senator Wong : My recollection was Norway and Finland.
Senator CORMANN: Where they have collected over six or seven years $2.6 billion worth of revenue which, you were going to collect in three months. For the whole of Europe, which is 40 per cent of—
Senator Wong : We are going to have—
Senator CORMANN: You brought up the subject of the carbon tax.
Senator Wong : I am just making the point.
Senator CORMANN: I did not ask you about the carbon tax. You brought it up, so I cannot let it pass.
Senator Wong : This is true. It was one of my more amused moments when watching that very interesting performance by Mr Hockey at the Press Club. He put up all these countries that he said we should emulate and quite a number of them have had a carbon price in place for some time. But I guess his view of about emulation only went so far.
Senator CORMANN: Let me just test this a bit. You want to compare the net debt position of Australia to the net debt position of G7 economies, which, of course, Australia is not. But you are not prepared to compare us to developed commodity exporting countries, which, of course, Australia is. The starting position of the UK and the US in terms of their level of debt when they went into the GFC was very, very different from the starting position that Australia was in when it went into the global economic downturn. So why is it that you are not prepared to compare Australia to the net debt position of Norway, which, is minus 157 per cent, Finland, which is minus 52 per cent, Sweden, which is minus 35 per cent, Chile—
Senator Wong : All have had carbon prices.
Senator CORMANN: I can tell you now: the carbon tax that you are looking at obviously will raise way more revenue the way you are looking at it than anything that has been collected elsewhere. The European scheme, and you should know this, was deeply flawed. It issued more permits than there were emissions.
Senator Wong : Deeply flawed. You have talked to Mr Robb for too long. He always uses that—
Senator CORMANN: Even supporters of the carbon tax make the concession that the European scheme was flawed. So if you want to have a debate about the carbon tax—
Senator Wong : I am making the point that it is somewhat inconsistent for the coalition to assert we should be comparing ourselves to Finland, Norway and Sweden for the purposes of a net debt position but wanting to ignore the net debt positions of the United Stars and the United Kingdom, for example, as if somehow they are not relevant.
Senator CORMANN: What was their net debt position in 2007-08?
Senator Wong : Let me finish, please. On the other hand Norway, Sweden and Finland from memory—and I could be wrong—have had a carbon price in place some time, which you say will destroy the economy. How is it that these are countries which you say we should look to because they are in such good economic shape and we should be emulating them but, on the other hand, the carbon price that they have had in place for some time is somehow going to destroy our economy? You cannot have it both ways. In relation to the debt position, I would have some regard—
Senator CORMANN: I can absolutely have a poet's licence.
Senator Wong: Let me finish. I would have some regard for the position you are putting if you practised what you preached, but you do not. The reality is that, when you count your $11 billion black hole, your double-count costings and all the saves you have opposed in the parliament, the fiscal position of the coalition is in deficit in every year of the forward estimates. To lecture us about bringing the budget back to surplus when you are not prepared to act responsibly in the parliament or even to do your own costings properly—
Senator FIFIELD: We did have a different starting point.
Senator Wong: Yes, your different starting point is in a black hole. I will take that interjection, your different starting point is in a very, very big black hole.
Senator FIFIELD: That is the point of being in government, we would have had a different starting point.
Senator FAULKNER: The important thing is not the starting point; it's the end point of the story.
Senator CORMANN: The end point is hopefully not you. I would be quite happy to engage the minister about her carbon tax and the fact that—
CHAIR: We are not here to engage in a debate. The minister responded to your question.
Senator CORMANN: Madam Chair, on a point of order—
CHAIR: If you allow me to finish, Senator Cormann: the minister responded to your question. I draw everyone's attention to the fact that we are not here to debate these issues. There is a time and a place elsewhere for that. You have the call and I encourage you to move on to your next question.
Senator CORMANN: Okay, Madam Chair, but I still raise a point of order. I did not ask the minister about the carbon tax. If she wants to make statements about the carbon tax then I should be able to respond to the minister's provocations.
CHAIR: There is no point of order, Senator Cormann. Your next question, please.
Senator CORMANN: Mr Tune, on what basis is the decision made to include or exclude a particular country for comparison purposes in relation to net debt?
Senator Wong: This is in Budget Paper No. 1? I think this is something Treasury should answer.
Mr Tune : This is a Treasury chart. You should ask them.
Senator CORMANN: It is statement 1.13.
Senator Wong: It is a Treasury chart.
Senator CORMANN: Minister, you say that now, but the only reason I asked that question—
Senator Wong: You asked about net debt.
Senator CORMANN: No, let us go back a step. You said how good we are looking compared to the US and others. Your statement led me to the question about how the decision is made to make the comparison with the US, the UK, France, Italy and Japan and why we are not comparing ourselves with Norway, Finland, Sweden and Chile.
Senator Wong: That led to a whole range of interesting discussions. I probably should have just referred you to the Treasury estimates at which I will also be representing the Treasurer, but I thought it would be good for me to respond to you on the net debt issue. This statement and this chart were prepared by Treasury, so if you want to ask questions about why certain countries were included or not included, please do so when I have Treasury officials in the Treasury estimates.
CHAIR: This is the final question before we suspend for the break.
Senator CORMANN: I have a series of questions about why there is no—
CHAIR: You might want to start that when we return from our 15-minute break.
Senator Wong: How many questions do you have?
Senator CORMANN: I have a few. The problem is I have to leave—
Senator Wong: He has to go and do Lateline. Do you want to read them out, Senator?
Senator CORMANN: If I could make a suggestion to assist the committee and officers: I propose that we do not take a break now and I will conclude at 10 o'clock.
CHAIR: That might be your preferred position, but it is not the position of the committee.
Senator CORMANN: I am not requiring it, just proposing it. If you want to take a break, take a break.
Senator Wong: I thought you were going to read through questions that we might be able to provide answers to.
CHAIR: We will take a break.
Proceedings suspended from 21:15 to 21:32
Senator CORMANN: There is no detailed discussion of structural deficits in the budget, unlike in the 2009-10 financial year, and there is post-budget analysis from the ANZ which says that there is nothing of note done to improve Australia's structural budget deficit. Did the budget papers not provide an update on the status of the structural deficit because it is in such bad shape?
Mr Tune : I beg your pardon?
Senator CORMANN: Why was there no discussion in the budget papers about the structural deficit?
Mr Tune : Structural deficit issues are really ones for Treasury, so you might want to direct your questions to them.
Senator CORMANN: I was wondering whether you would say that. Do you have anything to say about that?
Mr Tune : No.
Senator CORMANN: So you do not have any involvement—
Senator Wong: Please do not make a political point, at this time of night, of the fact that the officer is saying it is more appropriately directed to another department.
Senator CORMANN: I was not making a political point.
Senator Wong: The structural position of the budget is something I am happy to discuss but, as a portfolio matter, it resides in Treasury.
Senator CORMANN: Please indulge me to test that for a moment. In the department of finance's red book to the incoming government the department warned of the long-term structural pressures facing the budget. Don't you think that being transparent about the structural position of the budget—and this is a question for you, Minister, rather than for the department—is the best way to address and track the problems that your department has identified?
Mr Tune : The issues we were raising in the incoming government brief were—
Senator CORMANN: This is awkward. When I ask you questions the minister tries to answer them and when I ask the minister one you answer it.
Mr Tune : I am sorry. I will give you mine.
Senator Wong: We are very close!
Mr Tune : It is about the incoming government brief, finance document.
Senator CORMANN: Go for it.
Mr Tune : We were alluding to the expenses side of the budget in that particular document; in particular, drawing on the IGR, the Intergenerational report, which is a Treasury document itself. The expenses side of the budget is largely our side of the budget. If you talk about structural deficit you need to think about both the expense and the revenue side and that is where Treasury bring it together. That is why it is more appropriate for them to answer the question.
Senator Wong: That is why, when you are looking at savings, there are savings which you might call a structural save. They are not just a program not being spent, but changes to a pattern-what the inbuilt expenditure is. Although it is a tax expenditure-you might want to ask someone at the Treasury about it or you might want to say, 'I'm not interested'-the dependent spouse tax offset that we propose to abolish for anyone born after 1971 is in effect a structural save because it is removing that as an ongoing expenditure.
Senator CORMANN: When you say Treasury brings it all together, there was a Treasury paper late last year which identified—
Senator Wong: A roundup.
Senator CORMANN: This is a preamble to a question: which identified that the budget then-and that was before the latest deterioration-was going to be in structural deficit until 2019-20, from memory. Are you, Finance, still concerned about the long-term structural pressures on the expenditure side facing the budget?
Mr Tune : If you look at the IGR, yes. It is an issue which has been acknowledged by all sides of politics, I think. The ageing of the population in particular is going to put pressure on various expense items, particularly the aged pension, aged care—
Senator Wong: Health expenditure.
Mr Tune : Health expenditure in particular is driven by the ageing of the population and the improvements in technology occurring in the health sector at a pretty rapid rate. Yes; there are pressures on the expense side of the budget, which are well known by society.
Senator CORMANN: As the department of finance, do you have a clear explanation of whether the structural position of the budget would improve budget documentation and make it more transparent? Is that a matter for the Treasury?
Mr Tune : It is a matter for the government.
Senator CORMANN: Ultimately, the government is right.
Mr Tune : These are government documents.
Senator CORMANN: Minister, do you have a view or a clear explanation?
Senator Wong: This is why I really ask you to address these questions to me in the Treasury portfolio.
Senator CORMANN: But you are still going to be the same person.
Senator Wong: There will be officers who can talk about the ways in which those sorts of sensitivities—I use that not in the political sense but in the economic sense—are expressed or dealt with in the budget papers. I refer you to a recent speech by the new Secretary of Treasury. I am happy to have that discussion, but I would prefer to do that with the appropriate officers.
Senator CORMANN: Minister, you win: let's move on.
Senator Wong: I did not think that was a win!
Senator CORMANN: You made the decision to increase the efficiency dividend for every department and agency from 1.25 per cent to 1.5 per cent. How was the efficiency dividend for this budget determined?
Senator Wong: By government.
Senator CORMANN: Was there some scientific basis for it, or was it that it is currently 1.25 per cent and you were going to increase it?
Senator Wong: No, of course we take advice on these matters. We took advice, we considered it and we determined the increased to be 1.5 per cent for 2011-12 and 2012-13 years.
Senator CORMANN: Minister, now it is going in reverse—I asked Mr Tune and you jumped in.
Senator Wong: Sorry, I thought you addressed that to me. I am happy-I will eat my jatz.
Senator CORMANN: No, I am asking what the basis is-
Mr Tune : The 1.25 per cent was an election commitment. The government made a decision in the budget context, for the two years the minister referred to, to increase it to 1.5. That was obviously a government decision. We provided some advice on that, in particular we were asked to look at what that might mean for departmental operations. Our advice was that, at least on the staffing side, this was fine in terms of departments' capabilities and capacities to absorb that without any impact on staff in a major way. Whilst that was not deterministic in terms of the decision, it was advice we provided to the government to assist it to make its decision.
Senator CORMANN: What is the impact on the staff per se?
Mr Tune : We think it is fine. We do not see it as a problem.
Senator CORMANN: You think it is fine, but that is a very subjective assessment. Can you give me a more objective assessment? What does it mean in numbers?
Mr Tune : If you make a worst-case assumption that all of the extra 2.25 over those two years was to impact on staff costs—wages and salaries—and that is fed into a change in staff numbers to keep your extra 0.25 on the salary side, all of that could very comfortably be accommodated by natural attrition across the APS.
Senator CORMANN: Give me a number for natural attrition over the forward estimates on the basis of this increase in efficiency dividend. What would be the number?
Mr Tune : We do not have a number in that sense, but we looked at it in its totality and natural attrition—I have forgotten the number now—is reasonably high. This number we came up with, which I cannot recall now, was way below that, so it was a very comfortable fit.
Senator CORMANN: So on notice you are going to tell me how much?
Senator MOORE: I just want to clarify that term 'natural attrition'. You said you came up with a number and it was quite high. What does that mean?
Mr Tune : That is the number of people who separate voluntarily from the APS per annum. They do not move to other jobs within the APS; they move to jobs outside the APS.
Senator MOORE: And is that looked at historically?
Mr Tune : Yes, there would be some numbers in the APSC's State of the service report. That is collectively reported on annually.
Senator MOORE: So it does not take into account the people who are forcibly removed from the service. It is only people who leave by—
Mr Tune : Yes, it does, but they are such a small proportion that they hardly count.
Senator MOORE: And it is a standard process that is done every time in the budget. When you look at the term 'natural attrition,' there is an agreed process for how that works?
Mr Tune : There is an agreed way of measuring that, which the APSC utilise.
Senator MOORE: Thank you.
Senator CORMANN: So on notice you are going to give us a number as to what your expectations are?
Mr Tune : Yes, I will take that on notice.
Senator CORMANN: Because the election commitment, of course, was not to increase the efficiency dividend beyond 1.25 per cent, wasn't it?
Mr Tune : That was the government's election commitment, yes.
Senator CORMANN: Not to increase it beyond 1.25?
Mr Tune : No, the election commitment was to increase it to 1.25. It did not say anything beyond that.
Senator CORMANN: Okay, so there could be another efficiency dividend next year?
Mr Tune : I am not going to answer a hypothetical question.
Senator CORMANN: It is a hypothetical—I withdraw. Will some departments and agencies be exempt from the efficiency dividend in the future?
Mr Tune : The agencies that are exempt or partially exempt from the efficiency dividend currently will also be exempt from the change as well.
Senator CORMANN: So there are not going to be any new exemptions like the one that was proposed by the member for Banks, Daryl Melham?
Mr Tune : There is a change in the sense that the government has decided to operate the efficiency dividend on a whole-of-portfolio basis so that there is flexibility for ministers to vary the amount of the efficiency dividend that applies to particular agencies inside their portfolio. So that flexibility is there to address some of the unevenness, perhaps, that may impact on some agencies in a portfolio.
Senator CORMANN: So a portfolio minister could say, 'I, the minister, am going to exempt the National Library and I'm going to take a bit more off somewhere else'?
Mr Tune : That is what they could do, yes.
Senator Wong: That is right.
Senator CORMANN: That is what they can do.
Senator Wong: It was a recommendation arising out of a report. Have you discussed that, Mr Tune?
Mr Tune : No, we have not. There was a review that was done on the efficiency dividend.
Senator Wong: There was a review undertaken of the efficiency dividend, which I released publicly, I think at the same time as the announcement of the budget decision. One of the recommendations, probably the central recommendation of that review, was that the ED—the efficiency dividend—be applied across portfolios. So we picked that up. It enables ministers, if they have agencies where they believe there is more scope for efficiencies, to direct that those take a greater proportion of the ED than another agency in their portfolio.
Senator CORMANN: So there is now furious lobbying from different parts of individual portfolios as to who is going to cop the cut?
Senator Wong: That has not happened yet, to me, but it might.
Mr Tune : I have not seen it yet either.
Senator CORMANN: Well there is some evidence of it because Daryl Melham is speaking out against—
Senator Wong: I am sorry—I thought you meant from heads of agencies.
Senator CORMANN: I am sure that there is a degree of communication between heads of agencies and some members of parliament, perhaps.
Senator Wong: Who would have thought?
Senator CORMANN: You do not think that happens?
Senator Wong: I am not entirely naive.
Senator MOORE: Could I ask about the process of this decision, Mr Tune. The minister said that the process is such that within a larger agency in particular there is going to be some variance. Who has the delegation for making the decision? Does the head of the agency have it or does it have to come back through your portfolio or the minister to have that clarified?
Mr Tune : It is the portfolio minister.
Senator MOORE: So they have full delegation?
Mr Tune : They do.
Senator MOORE: And they do not have to check that with anyone?
Mr Tune : As long as it is cost neutral, and then they write to the Minister for Finance and Deregulation.
Senator MOORE: And it has to be cost neutral to meet the new figure across their portfolio?
Senator Wong: Correct.
Mr Tune : Correct, yes.
Senator MOORE: And are they given that in dollar terms?
Mr Tune : Yes, they are.
Senator MOORE: So each head of agency has a figure, now?
Senator Wong: Each minister.
Mr Tune : For their portfolio, yes.
Senator MOORE: And then the head of agency makes a decision and of course communicates that with their minister, and then back for discussion?
Mr Tune : Correct.
Senator CORMANN: But who manages that for the minister? Every agency and every department in his or her portfolio would be potentially—there is a potential conflict there, though, so who takes the overarching portfolio perspective?
Mr Tune : You would expect the secretary of the department that is within the portfolio to take the lead on that.
Senator CORMANN: But the secretary in the department—and I am not reflecting anyone in particular—is an interested party himself, though, isn't he?
Mr Tune : Correct.
Senator Wong: Or herself.
Senator CORMANN: Or herself, yes.
Mr Tune : And that is why it is important to have ministers involved too. Agency heads or departmental secretaries are required to look at the whole portfolio, not just their agency. My responsibilities around the portfolio are within the terms of my responsibilities to the government.
Senator CORMANN: So the way it would work in practice is that—
Senator Wong: I am very happy to have this discussion, but obviously it has not happened yet.
Senator CORMANN: Yes, but you must have some ideas—
Senator Wong: We are all hypothesising, but how we envisage it would be, as Mr Tune says, portfolio ministers have the discretion. I would anticipate that the secretary of their department ought advise them on this. But obviously you are right, the secretary is an interested party. However, I would hope that most secretaries would be pretty professional and responsible and make a pretty good judgment about how it was best allocated within the portfolio. Ministers will have to consider that advice and if they choose to change how the ED is applied within portfolio, they do it by notification, I think, to me.
Mr Tune : Correct.
Senator CORMANN: Presumably when you talk portfolio, you talk cabinet minister level?
Mr Tune : Yes.
Senator CORMANN: So if I am the minister with responsibility for the Australian War Memorial—I am an outer ministry minister—and I want to make sure that the Australian War Memorial is—
Senator Wong: I suppose you talk to your portfolio minister.
Senator CORMANN: I am getting to that. So then I would have to convince my portfolio minister to take more money off Defence in order to protect the Australian War Memorial. That is the way it would work, is it?
Mr Tune : In that instance, yes.
Senator CORMANN: It will be interesting to see how it works out. I hope it works out well.
Senator MOORE: And it has not worked in this way in the past, has it?
Senator Wong: That is right.
Mr Tune : No, it has not; it has just been allocated to the agency.
Senator Wong: I know Senator Moore has an interest in this. One of the live issues which you would be aware of was a view—at least one parliamentary committee looked at this—about the effect of the efficiency dividend on small agencies.
Senator MOORE: Yes.
Senator Wong: And one of the things the review—in fact, I think Mr Martine was a member of this review, were you not?
Mr Martine : The recent one?
Senator Wong: The recent one.
Mr Tune : On the steering committee.
Mr Martine : No. It was done inside the Financial Management Group
Senator Wong: One of the things they did consider was what is a reasonable way to apply the efficiency dividend and how to deal with some of the assertions, the views and the experience of smaller agencies. In the report you will see that they do deal with this. Notwithstanding the fact that there is some sympathy for that view, the point was also made that size is not the only indicator of a difficulty in achieving the efficiency dividend. This approach of portfolio basis was seen, and certainly I took it this way, as an attempt to try and deal with some of those issues without going to a hard and fast blanket rule of 'anything below this size needs to be exempted'.
Senator MOORE: In a portfolio such as human services, which is going through a structural change as well as having quite significant component parts, this particular efficiency dividend would be calculated over the two years, but there would be ability to fluctuate during those two years?
Mr Tune : No, it applies year by year. You have only got flexibility within your—
Senator MOORE: Right, and the structural change that is going past, that is something that the secretary has to balance?
Mr Tune : Correct.
Senator MOORE: They are completely changing the structure—as they are, in human services—
Mr Tune : Yes, and the human services portfolio—there is a measure in the budget—
Senator MOORE: Yes, I saw that.
Mr Tune : that provides quite substantial up-front funding for human services, with benefits down the track.
Senator MOORE: Okay, thank you.
Senator Wong: A bit of upfront investment there for the savings.
Senator CORMANN: Are you doing any costings for the Greens or the crossbenchers?
Mr Tune : We have done some, yes.
Senator CORMANN: Since we last met?
Mr Tune : Can I take that on notice?
Mr Martine : I think that is correct.
Senator CORMANN: You have done some since then?
Mr Martine : I think so.
Senator CORMANN: Can you give us an indication of how many policies you would have costed for the Greens or crossbenchers since the last election?
Mr Tune : We have probably done six or seven, I suppose.
Mr Martine : Since the election, from memory, we have costed, I think, around 15 for the Greens.
Senator CORMANN: Fifteen for costs and expenditure.
Mr Martine : Yes.
Senator CORMANN: Fifteen for the Greens on costs and expenditure.
Mr Martine : I am not quite sure. Treasury may have costed—
Senator CORMANN: You costed expenditure.
Mr Martine : Yes, we only cost expenditure.
Senator CORMANN: I will check with Treasury.
Mr Martine : I think, from memory, it is around 15.
Senator CORMANN: How much time does that take?
Mr Martine : It has not been particularly time consuming, from memory.
Senator CORMANN: Can you be a bit more specific on what 'time consuming' means?
CHAIR: It depends so much on the complexity of the proposition.
Senator CORMANN: You have done 15. How many resources have you had to allocate to that?
Mr Tune : We do not measure anything like that. There is an understanding via the government, with the Greens, that if we are in a particularly busy period, like in the lead-up to a budget, the government's budget gets priority and any costings get put aside to when there is a small amount of down time. There is some flexibility in the system. We do not measure how much time we spend on that sort of thing.
Senator CORMANN: So people do it just before they go home or something like that. After they have done the work for the government they squeeze it in?
Mr Tune : No, it is not quite like that.
Senator CORMANN: I am do not want to verbal you, but tell me what it is.
Mr Tune : The finance department, in particular, as with the Treasury, is extremely busy between the months of, say, February and May—the budget—and that is the peak workload.
Senator CORMANN: Were you asked to cost any Greens policies between February and May?
Mr Tune : I think we might have done a couple that—
Mr Martine : I think, from memory, we did cost some proposals during that period.
Mr Tune : But if necessary, we say: 'We are very sorry, but this is a complex one that will take us time . We will have to put this one off.'
Senator CORMANN: You costed 15 policies for the Greens. How many did you do for the Independents, given that you had such a nice specific figure?
Mr Martine : I think there were two.
Senator CORMANN: Two?
Mr Martine : I think so.
Senator CORMANN: I am do not mean to stray into areas that—
Senator Wong: I think for most of them you need an FOI, Senator.
Mr Martine : I think there were two proposals for the Independents.
Senator CORMANN: Is the department costing any alternative policies to the government's policies? Are you going through any alternative policy-costing processes?
Mr Tune : Only those that are referred to us via the government for the Greens and the Independents.
Senator CORMANN: The only costings you are doing right now are for government measures, the Greens' policy proposals and the Independents' costings, and that is it.
Mr Tune : Yes.
Senator CORMANN: In terms of the Greens' and Independents' costings, are you able to give me an indication as to how much time would have been allocated to that by the department?
Mr Tune : No, we do not measure it.
Senator CORMANN: You do not measure it.
Mr Tune : No. We are not charging them for the costings; it is just a function we have.
Mr Martine : It is certainly not a significant addition to the workload. Obviously, as Mr Tune indicated, depending on the time of the year, if we are very busy in the budget process we might need to say that we cannot cost it on a best-endeavours basis of the five days, it might be a bit delayed. But it is certainly not an issue that we are concerned about in terms of the additional workload.
Senator CORMANN: All right. What input has your department had, to this point, in terms of the Parliamentary Budget Office?
Mr Tune : We have been involved in providing a joint submission with the Treasury to the parliamentary committee that was looking at that, chaired by Senator Faulkner. As you know, the government made provision in the budget for staffing and resourcing for the PBO, so we were assisting them in that as well.
Senator CORMANN: I asked some questions of the Department of Parliamentary Services earlier in the week and they, essentially, were pointing at you as the lead agency and that it what was happening was all up to you.
Mr Tune : The government is in the process of developing its response to the committee's inquiry, and that will set the scene for the way it will operate. There will be a piece of legislation from the government's point of view about that. But it is clear-cut that the resourcing will be as per the committee's report—that is a budget measure. There is a slight difference between what was proposed and agreed with the Independents after the election and what was in the committee's report about where the PBO should sit. The agreement suggested it sit within the Department of Parliamentary Services, while the committee has recommended that it be separate from the Department of Parliamentary Services, and the government has accepted that latter view, so it will be quite independent of the DPS.
Senator Wong: There is a measure in Budget Paper No. 2.
Senator CORMANN: I know—$24.9 million. I have seen the measure; that is what I asked questions about earlier in the week. So there is $24.9 million in the budget for it?
Mr Tune : That is correct.
Senator Wong: That is right.
Senator CORMANN: So how much of that is running costs and how much of that is capital?
Mr Tune : I think it is all running costs, from memory.
Senator CORMANN: Is it all running costs?
Mr Tune : I will confirm that, but I am pretty sure it is.
Senator CORMANN: So where would you envisage it be located physically?
Mr Tune : I am assuming in Parliament House, but I do not really know.
Senator CORMANN: So somewhere you must have made an allocation for—
Mr Tune : It is all operating costs, I am told.
Senator CORMANN: So there must be an allocation somewhere for refurbishing or setting up—
Mr Tune : Or using existing accommodation somewhere inside the House.
Senator CORMANN: So you think that we are just going to find a couple of desks and put some people there?
Mr Tune : We will need to work through that, obviously, or the PBO itself will need to work through that. The PBO is quite independent from us, remember.
Senator CORMANN: Sure. Well, it will be once you have finished your processes, I guess—hopefully. But the DPS, earlier in the week, pointed out that the minimum recommendation in terms of resourcing from the committee—was $6 million, which of course over four years would be $24 million; but that is the minimum amount. Then I think it ranged between $6 million and $9 million per annum. There are different scenarios: the minimum scenario was $6 million and the better scenario was $9 million. So the government went close to the minimum scenario, didn't it?
Mr Tune : I would have to check what was in the report, but my recollection is that it took the report's view. I cannot recall whether there were options in there or not, Senator. I might get Mr Youngberry to elucidate.
Senator CORMANN: Go for it.
Mr Youngberry : I think what you are referring to, Senator, is that the Department of Parliamentary Services made a submission to the inquiry that contemplated a range of resourcing options. The committee, when it reported, has just recommended a single amount of $6 million for the PBO.
Senator CORMANN: Have you made any decisions in relation to information-sharing arrangements between the Parliamentary Budget Office and the departments of finance and Treasury? Is there going to be a free and open flow of information?
Mr Tune : There will be a flow of information, that is true, and we will need to work through the details with the PBO. What we are envisaging is to have a memorandum of understanding between us and the PBO, and Treasury would have one as well, being the two key government agencies that would be interacting with the PBO. As to the detail, we just need to work that through once the legislation is settled and the functions of the PBO are clear-cut.
Senator CORMANN: Have you got an interdepartmental committee working on this?
Mr Tune : I do not think we do, do we?
Mr Youngberry : No, not a formal committee, Senator.
Senator CORMANN: Not a formal committee. Have you got an informal committee?
Mr Youngberry : No, we do not. We have a working relationship with Treasury and the parliamentary departments.
Senator CORMANN: So you do not have a formal committee, you do not have an informal committee; you just have a working relationship.
Mr Youngberry : Indeed.
Senator Wong: Money has been provisioned in the budget for it, Senator.
Senator CORMANN: Sure. And does that working relationship include the Department of the Prime Minister and Cabinet on this particular budget measure?
Mr Youngberry : We have consulted with the Department of the Prime Minister and Cabinet in relation to the development of the measure.
Senator CORMANN: So who is taking the lead?
Mr Youngberry : The department of finance is taking the lead.
Senator CORMANN: That is what I thought. So when do you envisage that the MOU will be completed?
Mr Tune : That will not be done until the legislation is in place and passed by both houses of parliament, of course.
Senator CORMANN: And of course you do not know when that is going to be.
Mr Tune : No, we do not. That is what we are envisaging will be the process—that we will need an MOU to make sure those responsibilities are delineated and the means of cooperation between the agencies are set down clearly.
Senator CORMANN: But there are a lot of things in the budget that are subject to legislation that has not been passed yet where you still have a view on time lines.
Mr Tune : Yes. I am not trying to say we are not doing work on this—we are—but we cannot finalise it until we know exactly what the PBO is doing.
Senator Wong: But the budget measure commences next financial year.
Senator CORMANN: I understand that.
Senator Wong: Do not just dismiss that. The point is you are making a suggestion about when it is going to be up and running. We have provisioned for it from 2011-12. Have you two finished? Is this another 'bromance'?
Senator CORMANN: A what?
Senator Wong: Senator Brandis today described Mr Abbott and Mr Hockey as having a 'bromance'. I said that Mr Abbott might not be very happy.
Senator FIFIELD: I missed that one.
Senator CORMANN: I missed that one too.
Senator Wong: I am glad that Senator Birmingham sees the humour in that.
Senator CORMANN: There are a lot of measures in the budget that will only start next year and you have clear ideas on the time lines. You have not got a clear idea of the time line here. Will you wait until parliament?
Mr Tune : No, sorry—maybe I am misleading you. I did not mean to.
Senator CORMANN: When is the Parliamentary Budget Office expected to be up and running?
Senator Wong: In the 2011-12 financial year.
Mr Tune : As soon as we can get it going, basically.
Senator CORMANN: Could it be by December?
Mr Tune : You will need a piece of legislation to appoint the parliamentary budget officer, who will lead the organisation.
Senator CORMANN: Minister, when do you intend to introduce that legislation?
Senator Wong: I am not sure that that has been finalised. Obviously there is a lot of legislation to get through. If you want to tell us that you are going to pass all of the budget measures without demur, I can probably give you a pretty clear time line on the PBO.
Senator CORMANN: I will bring this to a close.
Senator Wong: You did not respond to that.
Senator CORMANN: You want a blank cheque, Minister. I cannot give you a blank cheque.
Senator Wong: I do not think it is a blank cheque.
Senator CORMANN: We will, as we always do, make sure that there is proper scrutiny of all of the things that the government puts into the parliament. You, of course, would not expect anything else from us.
Senator Wong: I hope that if you are in the position of opposing savings measures that you put up your own. Otherwise your fiscal position becomes a bit embarrassing.
Senator CORMANN: We will have these debates in the parliament.
CHAIR: I would call the minister and Senator Cormann to get on with the next question.
Senator CORMANN: What did I do?
Senator Wong: That is true. That was me, Chair; I accept that.
CHAIR: You said you had another engagement, so I am trying to give you the opportunity to put your questions.
Senator CORMANN: As a closing question from me, have you made any decisions on classes of information that would be restricted from access by the PBO.
Mr Tune : No, we have not.
Senator CORMANN: Is your working assumption that everything would be available for the PBO unless there are highly exceptional circumstances?
Mr Tune : Not necessarily. What we want to do is work on the basis of close cooperation with the PBO and maximise the assistance we could provide to the PBO in costings. I cannot give a blanket answer, because there could well be things that are just not possible for us to do in providing information to them. The MoU is going to set down a set of rules and a framework that we hope we can utilise to make judgments about those.
Senator CORMANN: Presumably when we speak later in the year at the next estimates, you might be able to give us some more information.
Mr Tune : I would hope so. We should have that defined by then.
Senator CORMANN: Thank you.
Senator MOORE: I want to ask some questions about the savings measures, because the figure of $22 billion was put on record. The budget paper, on pages 6 to 9, gives some highlights of some of the key areas where savings have been proposed. Can we get some detail on those? It is carefully hidden under the term 'major savings'.
Mr Martine : We talked earlier about the summary of savings on page 45. Perhaps the best way to answer your question is just to identify some of the major structural savings that are a part of the $22 billion of savings in the budget papers. I will identify in turn the ones mentioned in those few pages following on pages 6 to 9. Reform of family payments—pause in indexation of upper limits and thresholds for a further two years: that is a saving of $1.2 billion.
Senator MOORE: Over the two years?
Mr Martine : The $1.2 billion is over the forward estimates. Reform of family payments—pause in indexation of supplements for three years—is $803 million over the forward estimates. Defence increased efficiencies is a saving of $1.1 billion. The efficiency dividend, which we discussed earlier, is a saving of $1.1 billion over the forward estimates.
Senator MOORE: That is across the whole service.
Mr Martine : That is across the whole of government.
Senator Wong: That is over and above the election saving.
Mr Martine : No, that incorporates it.
Senator Wong: I apologise, I thought that was the case.
Senator MOORE: That is the total saving.
Mr Martine : That is the total saving, including the election commitment. Changes to the Higher Education Contribution Scheme give a saving of close to $300 million over the forward estimates. Those are some of the key expense savings. On the revenue side, the main changes are FBT: improving the tax treatment of car benefits with a saving of $954 million, changes to the dependent spouse tax offset with a saving of $755 million and some tax compliance measures with a saving of $425 million. Those are the main structural savings identified in the budget as part of the $22 billion.
Senator MOORE: What about the deferral of Commonwealth funding for road and rail infrastructure?
Mr Martine : I think you are referring to the second last paragraph on page 6-9.
Senator MOORE: Yes.
Mr Martine : There are some savings in Budget Paper No. 2. I have to find the relevant references that talk about decisions of government to defer a range of particular projects over the next three years. That is what that paragraph refers to.
Mr Tune : A number of those were announced with the floods package back in March, in particular taking account of possible capacity constraints in Queensland because of the impact of all the flood reconstruction work. It was seen as appropriate not to put pressure on the construction industry, in particular on prices, or to try to minimise that pressure by deferring some of the infrastructure projects so that made sense.
Senator MOORE: Some of the previously announced ones?
Mr Tune : That is correct.
Senator MOORE: The $1.5 billion in the previous paragraph looks at a range of internal savings across those portfolios. That is where the Department of Human Services changes to service delivery reform will be harvested, in that area?
Mr Tune : That is correct.
Senator MOORE: How far out is that calculated?
Mr Tune : Out to 2014-15. As I mentioned, there is a bit of upfront investment and then you generate the savings in the latter years of the forward estimates.
Mr Martine : From memory, the changes in the Department of Human Services and that portfolio over the forward estimates are broadly budget neutral. There are some spends upfront, then there are some savings and over the four years it is about neutral, but the savings then continue forever.
Senator MOORE: So it is built into the forward expenditure. Mr Martine, the things you identified should come very close to $22 billion?
Mr Martine : Yes, as I said, it is a subset.
Senator MOORE: I am adding these up as you go along and I have not quite got there.
Senator Wong: Do you want us to give you a table?
Senator MOORE: A table would be good.
Mr Martine : The best page to refer to, as we said earlier, is page 45 of the budget overview document. That gives a summary of the main savings that are included in the budget. On page 45 we try to summarise the major savings that are included in Budget Paper No. 2. Some of those that I identified are listed there.
Senator MOORE: Thank you, Mr Martine.
Senator BIRMINGHAM: Can you explain to me what the principle of budget neutrality means?
Mr Tune : It could mean a lot of things. In general it means that whatever you spend, you offset, basically.
Senator BIRMINGHAM: Whatever you spend, you offset. It sounds like a very reasonable statement, and in fact I think I have even heard Senator Wong use those words before.
Senator Wong: I do not think I used quite those words, did I?
Senator FAULKNER: It is very unusual.
Senator BIRMINGHAM: I think, not necessarily offset or spend all the money that comes in, it is ensuring that you do not exceed. So that it probably the best way of looking at it.
Senator Wong: His was probably pithier.
Senator BIRMINGHAM: Do not spend more than you achieve through income streams. Mr Tune was definitely pithier than that bit.
Senator Wong: Yes.
Senator BIRMINGHAM: The carbon tax, or the carbon pricing mechanisms that are being developed by the Multi-Party Climate Change Committee released some principles on 21 December last year, one of which was that the carbon price mechanism and associated assistance measures should be budget-neutral. What is the expectation of the department of finance in relation to what that package and assistance measures will be?
Mr Tune : It says in the budget papers, Senator, page 8.5 of Budget Paper No. 1, that talks about budget neutrality in the package.
Senator BIRMINGHAM: Page 8.5 of number 1. I did not put my budget papers in here, I apologise.
Mr Tune : 8-5, sorry.
Senator MOORE: No doubt you will be able to get one.
Senator Wong: It depends how the magic pudding behind me is going.
Senator BIRMINGHAM: And talks about budget neutrality, page 8.5, BP1.
Senator Wong: The penultimate paragraph.
Senator BIRMINGHAM: 'The proposal will be developed consistent with the principle that the overall package of a carbon price mechanism and associated assistance measures should be budget-neutral.'
Mr Tune : So we would interpret that, in the department of finance, as being budget-neutral over the course of the forward estimates.
Senator BIRMINGHAM: Over the course of the forward estimates.
Mr Tune : Yes. So it balances over the four years of the forward estimates. There may be differences within years, there may not be, but budget neutrality is generally measured over that forward estimates period.
Senator BIRMINGHAM: Okay. Minister, do you concur with that definition?
Senator Wong: I think that is broadly how we have assumed it previously. I am just thinking through various programs where you would look at that—you tend to look over the forwards rather than any specific year.
Senator BIRMINGHAM: As you are well aware the previous CPRS package ran at a deficit for the first seven years, I think. It was either six or seven years.
Senator Wong: You say, 'as you are well aware'. I do not carry those figures around in my head. It was two-and-a-bit billion over the decade was the budget hit, from memory.
Senator BIRMINGHAM: Ultimately, I think it was over 12 years to 2020.
Senator Wong: Yes, we did it out to 2020.
Senator BIRMINGHAM: But over the first seven years—
Senator Wong: I recall the aggregate being that, I cannot recall the sequence of how long that occurred, Senator.
Senator BIRMINGHAM: Nonetheless there is a commitment from government that the carbon pricing mechanism as being developed will be budget-neutral, and the understanding of the department of finance of that commitment is that over the forward estimates, as it applies, it will be at least budget-neutral and will equal itself out over that period of four years.
Senator Wong: I should make the point, Senator—and you were not in here for Senator Abetz's very lengthy set of questions about four or five years.
Senator BIRMINGHAM: I heard a rumour.
Senator Wong: I made a statement before about how we would generally approach budget periods. We do, for example, in the spend/save table that he was referring me to, look at it over the five years, from memory. I was just clarifying that, because I talked about four before, so I just wanted to make sure that I was accurate.
Senator BIRMINGHAM: Indeed. I do not want to end up in a lengthy argument over four or five years in this regard.
Senator Wong: No, let's not.
Senator BIRMINGHAM: Obviously a measure like this has a potential to impact on the surplus in any one year, and given the government's surplus projections, surplus commitment and the size of those commitments, is there a concern to ensure budget-neutrality particularly in the years where the surplus is forecast to be of a smaller level than other years?
Senator Wong: Senator, I will just say two things about that. First, obviously decisions on the carbon price have not been finalised and so I am not going to get into a speculation about what might or might not be decided. The second and key point is that the government's commitment to return the budget to surplus remains.
Senator BIRMINGHAM: Is it possible that the carbon price will knock something off the surplus in the forward years?
Senator Wong: That is a hypothetical around decisions which have not been made, Senator. The government's commitment to the surplus remains.
Senator BIRMINGHAM: Under the definition of budget-neutrality that Mr Tune has given us, it is obviously possible that the carbon price mechanism will knock something off the surplus in the forward years.
Senator Wong: That is a hypothesis. These are decisions which have not been made. When they are made you and can, I am sure, have a lengthy discussion about the government's decisions.
Senator BIRMINGHAM: I am sure that we will have a lengthy discussion in that regard, Minister. There is no commitment from the government, though, as regards to the surpluses that apply in the forward estimates at present, that none of them will be undermined to some extent by a revenue-neutral budget carbon price mechanism.
Senator Wong: Senator, I am not going to, as I said to you in the climate change estimates—and as you put a press release out quoting me—I am not going to get into a position where you simply provide me with a rule in, rule out proposition that I am going to have to respond to. I have told you what the government's position is. Our commitment to the surplus remains. In relation to the carbon price, those decisions have not yet been made, and when they are made we will account for them in the usual way.
Senator BIRMINGHAM: Has the department of finance provided any advice on budget-neutrality and what the expected approach to the carbon pricing mechanism would be?
Mr Tune : No, Senator, no, other than what is stated in the budget papers.
Senator BIRMINGHAM: Okay. And you have not been asked to do so by the multi-party committee or others?
Mr Tune : No, we have not. No.
Senator BIRMINGHAM: Thank you, Mr Tune. Thanks, Chair.
CHAIR: Thank you, Senator. Are there any further questions? If not, we are finished for tonight, and we stand adjourned until tomorrow morning at 9 am. Travel home safely.
Mr Tune : Have we finished outcome 1, Chair?
CHAIR: Yes we have.
Mr Tune : Thank you very much.
CHAIR: We will open tomorrow with outcome 1, program 1.2. Thank you.
Committee adjourned at 22:16