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Finance and Public Administration Legislation Committee
09/02/2016
Estimates
FINANCE PORTFOLIO
Department of Finance

Department of Finance

[15:08]

CHAIR: We will now begin examination of outcome 1 of the Department of Finance. I welcome officers of the department. We will deal with general questions first.

Senator McALLISTER: I just wondered whether you could provide an update on the Finance move to the new building in Canberra Avenue.

Ms Halton : Certainly. The officers will be here shortly, but I can start while the people who have all the detail arrive. We are proceeding based on two considerations. One is the completion of the internal fit-out. The landlord is currently undertaking that internal fit-out. We expect to have some people move into the building late in February. That is our expectation and our hope. The balance of the department, however, will not move into the building until, firstly, the rest of it is completed and also after the budget, because we cannot move the people who are doing budget until after the budget.

Senator McALLISTER: Which groups or branches do you expect will move? The completion is in February, but you expect the move itself to take place after that?

Ms Halton : Some people will move at the end of February, but Mr Hirschfeld can tell you in great and graphic detail.

Mr Hirschfeld : We will receive the building from the building owner on 15 February—next Monday. We will have a couple of weeks when we will install network services and so forth, and then we will start moving in on 29 February. The first group to move will be my division, the Information, Technology and Workplace Division. We will be in the building for a couple of weeks to, in effect, shake out both the network services and the building operations. We will then move a couple of small areas—the Finance Transformation Program and the Project Office. They will come into the building for a week or two, and then we will move the first major group, which will be C&GS. That will be at the end of March. Then we will not move anyone more until after the budget.

Senator McALLISTER: Do you have a sense of the scheduling after the budget?

Mr Hirschfeld : Not at this stage. At the same time we are rolling out the new electronic workplace environment, and that will start rolling out in mid-May. Again, my division will be the first division that uses that new environment, and we will probably use it for two weeks. The proper rollout to the whole of the department will begin in June, and I imagine that we will schedule moving the entire department or the rest of the department, which will be about 800 staff, in June.

Senator McALLISTER: This may well have been canvassed at previous estimates, but what is the nature of the new electronic workplace environment?

Mr Hirschfeld : That is going to provide us with a new desktop environment, and mail services, laptops, Surface Pros and so forth, and is in effect a refresh of our entire IT environment.

Senator McALLISTER: So, it is principally associated with the physical layer? Or it is a software—

Mr Hirschfeld : Yes, it is the physical layer and the support of Sharepoint, the email engine and exchange, and mobile device management.

Senator McALLISTER: That is a package that has been pulled together specifically for the building and then—

Mr Hirschfeld : Specifically for the department, but it allows us the ability to use modern technology in conjunction with the layout of the building. If you imagine—we are sitting on a platform that was designed some time ago—

Ms Halton : Quite some time ago.

Mr Hirschfeld : We do not have the opportunity to collaborate in the way you would expect in the 21st century. With the way we utilise Sharepoint, we will be able to share documents across the building. We will be able to use the collaboration spaces in the building and take a Surface Pro or a laptop from one place in the building into a meeting room or into a collaboration area and connect in that area without losing network connectivity in the building.

Senator McALLISTER: And who is the provider for that?

Mr Hirschfeld : ASG.

Senator McALLISTER: And what is the cost overall for the ICT upgrade?

Mr Hirschfeld : It is $29 million over four years.

Senator McALLISTER: And what year are we into now?

Mr Hirschfeld : We are into month 2. It is a six-month program to roll it out. We signed a contract in late December, and they have six months to deliver the service, and then we start using it in full around July. But, in effect, because we will be piloting and testing early on, my division will have it in May, and then we will roll it out—do the full deployment—through June.

Senator McALLISTER: Is the cost for the move something that is being met from within internal resources, Ms Halton, or is there something that was specifically funded?

Ms Halton : No, it is internal.

Senator McALLISTER: Obviously not the building, but the move itself and all the costs associated with that?

Ms Halton : Yes.

Senator McALLISTER: Is it possible to set out the costs that have been incurred with the move?

Mr Hirschfeld : I would not have those figures. We have not moved anyone yet. But, to be quite frank, the cost of the physical move is not—

Ms Halton : It is trivial.

Mr Hirschfeld : Yes. It is a small amount. Over the life of the lease, building in things like the administrative costs of the move and stuff like that, we save something like $55 million over 20 years.

CHAIR: You say you have not moved anyone yet. But I drove past yesterday and I am sure I saw some furniture and things on the top floor.

Mr Hirschfeld : There is a huge amount of work going on.

CHAIR: But there are no people in there at the moment.

Ms Halton : They are doing the fit out—

CHAIR: Okay, rightio.

Ms Halton : They have just taken the plastic off some of the furniture.

CHAIR: It looks pretty glamorous.

Ms Halton : At a very reasonable price.

CHAIR: Of course, Ms Halton.

Senator McALLISTER: Notwithstanding the fact that it is trivial in terms of the overall costs and benefits of moving the department, I think it would be helpful to understand the costs that have been incurred with the move. I am sure that you have developed a budget for it. If you were able to provide that to the committee on notice, we would appreciate it.

Ms Halton : Of course, we will not be able to provide that until we finish moving.

Senator McALLISTER: You must have a budget for the move?

Ms Halton : To actually physically move? No.

Mr Hirschfeld : I have estimates, but—

Ms Halton : No. It is not very much money—removalists.

Senator McALLISTER: But we have estimates. At some point someone must have a delegation of authority to move within a budget. It is not an unlimited budget—it is not a blank cheque—to move, so you must have made some assumptions about how much it would cost to move?

Ms Halton : When we have completed the move we will give you a number. We should have moved by May, so we will give you a number after that. We have been told April, I think, for when things are due. We will not be able to give you a number in that time. We will give you a number as soon as we have one, which should be probably a month or so after that.

Senator McALLISTER: I am surprised that you do not have an estimate. But, if this is your evidence, we will wait until May. Are any of the car parks that are available below the building currently being used? Not yet, as I understand it.

Mr Hirschfeld : Not yet, no.

Senator McALLISTER: Right. Will the minister have a suite in the new building?

Ms Halton : No. He asked me that the other day, and I—

Senator Cormann: I didn't, actually; I asked whether I will have a desk.

Ms Halton : That is true! I am verballing the minister. He asked whether he would have a desk, and I said to him: 'No, he could hot desk.'

Senator McALLISTER: Is everybody hot desking?

Ms Halton : No, they are not. It was a joke. We did say, however, that if he had to come to the department, of course, we would find him a space.

Senator McALLISTER: I assume that this means there is, similarly, no room provided for the minister's staff?

Ms Halton : Sorry?

Senator McALLISTER: Is there any room provided for the minister's staff in the new arrangements?

Ms Halton : No.

Senator McALLISTER: Can I turn now to the Belcher review. The report is dated August 2015. I assume that that is when Ms Belcher finished her review?

Mr Clively : The August date is essentially when Ms Belcher finished the review, yes.

Senator McALLISTER: And it was released, as I understand it, on 5 November?

Mr Clively : That is correct.

Senator McALLISTER: Whose decision was it to release the review?

Mr Clively : The decision to release the review was considered as part of the Secretaries Committee on Transformation and, I think, the Secretaries Board. It was a matter for the Secretary of the Department of Finance, in terms of releasing the conclusion there.

Senator McALLISTER: The Department of the Prime Minister and Cabinet, Attorney-General's, the Australian Public Service Commission and Finance are the four main entities associated with commissioning the review. Is that correct?

Mr Clively : The review was commissioned for the Secretaries Board.

Senator McALLISTER: I know; I apologise. But the four agencies of concern, in terms of regulating entities—?

Mr Clively : The findings out of the report mainly relate to those four entities as the ones most responsible for the regulation covered within the report.

Senator McALLISTER: Are there any other entities that might be responsible for implementation of the recommendations?

Mr Clively : There are a number. The ANAO, for example, is the direct audience for one particular recommendation, and the Department of Defence—there are quite a number. In fact, all agencies are affected in terms of—

Senator McALLISTER: their own practice.

Mr Clively : their own practices—and practices more generally.

Senator McALLISTER: For the interest of the committee, I think it would be helpful to understand which agencies have a role to play in impacting on the regulatory environment of other agencies that are separate to those four main ones that you identified. You mentioned ANAO and Defence. Perhaps you could take on notice to provide a short list of any others. I assume that is possible?

Ms Halton : I think we can give you information that is in the report. We can derive that. It is a public document.

Senator McALLISTER: Are we tracking implementation? It is intended to implement all of the recommendations?

Mr Clively : We are not tracking them, per se, in the sense that we do not want to create a new layer of red tape.

Senator McALLISTER: I can see the logic in that!

Mr Clively : What has happened is that secretaries, collectively, have endorsed the report. A number of recommendations are matters for the government consider, too, so it is up to each entity that is affected to take those recommendations forward and get them considered in the normal way. A number are of a more procedural nature, and they are being implemented when they can be done. But we are not doing a monitoring exercise across the landscape of all of the recommendations because we want to drive cultural change by having entities be responsible for those that are their responsibility. We are doing some other activities promoting the spread of the principles for internal regulation that are part of the Belcher review—the first recommendation. We are mainly in the mode of promulgation and joining things up, as opposed to monitoring specific progress with each recommendation.

Ms Halton : One of the changes that it recommends, for example, is a matter for the parliament, in terms of the tabling of annual reports. So these are not things that we can implement ourselves. But we can bring them to the attention of relevant people, which we are doing.

Senator McALLISTER: Minister, can I ask whether there is a cabinet-level process considering the recommendations, particularly those that require either a ministerial role or some kind of parliamentary change to enable their implementation?

Senator Cormann: Obviously these sorts of matters are before the government. If the government reaches a decision to progress with any of the relevant recommendations that are relevant to government consideration, we will be making relevant announcements. But at this point I cannot assist you with a timetable in relation to that. I might consider, on notice, whether there is anything else that I can add to that.

Senator McALLISTER: It is simply that we have been through this process. We have a big report. It has a range of things. I understand the logic of not wishing to create additional regulation by monitoring the implementation of it, but some level of coordination, or someone driving it, would seem to be important. If that is not happening—

Senator Cormann: There is a level of coordination and there is somebody driving it. Peter Hendy has whole-of-government responsibility for our deregulation agenda. In the end, he is drawing all of that effort across government together. He is located in the Prime Minister's portfolio. This is one component of a broader effort, and the broader effort is very much a coordinated effort. As I have indicated, if there is anything else I can add, then I will.

Senator McALLISTER: You may not be able to answer on behalf of Mr Hendy, but are you aware of any work in government to estimate efficiencies or savings that could be achieved if all of the recommendations are implemented?

Senator Cormann: I cannot answer on behalf of Mr Hendy; that is true. He is part of the PM&C portfolio. We are working across a whole range of areas. We traversed some of this ground in the context of the budget estimates in May-June last year. We are doing a lot of work as part of our smaller government agenda to increase the efficiency of government, to increase the efficiency and the effectiveness of government administration. In that context, we have been able to deliver savings in excess of $1 billion. I think the most recent number I saw was—

Senator McALLISTER: But no assessment about the impact of these recommendations?

Senator Cormann: In relation to the specific body of work that you are referencing, obviously there are still processes that are underway. I will just see whether Dr Helgeby has got something he wants to add.

Dr Helgeby : There are 134 recommendations. Some of them are bigger and some of them are smaller. Some of them are intrinsically difficult to get a handle on costings. For example, culture change is a very difficult thing to think about in costing terms. On the other hand, there are some other recommendations in there that go to things like tabling, where, if those sorts of things are accepted, it will be possible to assign a value to it. That is actually the subject of, or will need to be the subject of, conversations with the parliament. Until we have those conversations, it is very difficult to produce an aggregate figure. There are also some other recommendations in there which could have significant impacts, but a lot depends on the detail. For example, there is a recommendation about baseline security clearances and how they are done in relation to general employment checks that are done by agencies. Potentially, there is significant value and benefit in doing that, but you actually have to know exactly what it is that you are putting in place, how you are operating it, before you can assign a value to it. But the cumulative effect of these 134 recommendations, if pursued, will be a significant impact in how government works and the speed with which decisions can be made and, in that sense, the efficiency of government.

Senator McALLISTER: There are no plans at the moment, though, to provide an economic assessment?

Senator Cormann: To be honest, you are going into one very small subset of a broader program, and the government has already delivered well in excess of $1 billion worth of savings through our contestability and functional efficiency reviews, our general smaller government agenda. There are a whole range of subsets for these that all feed into an overall effort. Why don't I see whether we can assist you any further on notice.

Senator McALLISTER: Okay. Which recommendations directly impact on Finance's activities in terms of your own work?

Mr Clively : That would take a long time to answer. About 70 per cent of the recommendations are either for Finance to lead on or to support directly, not counting the ones that are of an-all entity sort of nature, where we would be involved as well. It is a very long list. Most of them are indicated in the recommendations in terms of: they spell out 'Finance'. There are one or two where the recommendation relates to Finance but another department is actually leading on it, but 70 per cent of the recommendations relate to Finance directly or indirectly.

Senator McALLISTER: Have you made a departmental decision to implement those recommendations that relate to Finance?

Mr Clively : We are adopting a very similar approach as we are to the whole of the service in terms of: about half of the 22 chapters relate to Finance work, and generally the area responsible—say procurement or property or risk—is taking forward the recommendations specifically or as part of some other review or they are being assessed. But essentially we are building them into how we do our departmental business.

Senator McALLISTER: Is there any tracking and monitoring at a departmental level about your implementation of the recommendations of these reviews?

Mr Clively : We are developing processes for that, but essentially we are also feeding into the process I mentioned before, which is for reporting to the Secretaries Board. We do have internal governance arrangements within the department that are looking at the strategic issues in terms of, say, maintaining the momentum for reform and also in respect of joining the department up across these various issues—so pushing forward the principles for internal regulation. The particular projects themselves are on different tracks. Some of them will take a number of years to deliver. They generally have their own project governance mechanisms, but we will be obtaining information as necessary from across the department to get an understanding of how things are going. We are trying to approach this in a light-touch way as well, without inventing new red tape. There will be some monitoring about how performance is proceeding, but the details are still being sorted through.

Senator McALLISTER: There has been no attempt yet to quantify what financial impact it might have on your operations?

Ms Halton : I do not think we will be making an assessment of the financial impact. As Mr Clively has indicated, what we are doing is looking to streamline our work. The reality is our workload goes up on a day-to-day basis, and that means that we can balance our workload. If you think about the things we are doing across the public sector, continuing improvements in efficiency are things we have to do to just deliver the day-to-day business. This is actually part of what we are doing.

Senator McALLISTER: I want to ask some specific questions about some of the recommendations. There is a recommendation on pages 26 and 27 in volume 1 in relation to the Budget Process Operational Rules. It makes a very specific reference to the 2017-18 budget process. Is there any intention—

Senator Cormann: Do you mean the 2016-17 budget process?

Senator McALLISTER: No, it specifically relates to the 2017-18 budget process, which is why I am asking the question about whether it might not be something that people consider ought to be commenced sooner?

Senator Cormann: This is obviously part of continuous improvement, so the process that we are currently in is the 2016-17 process, and there are some recommendations in relation to what we should consider doing from 2017-18 onwards. Obviously we are not yet in the 2017-18 budget process.

Senator McALLISTER: Yes, I know.

Senator Cormann: We are not even working towards the 2017-18 budget yet.

Senator McALLISTER: I can understand why that might be the case. Minister, I was really just asking whether any of this work about simplification and improvement of the Budget Process Operational Rules had taken place in relation to this round that you are currently working on?

Ms Halton : Perhaps we can be clear. The recommendations that you are talking about in relation to the 2017-18 process—which were recommendations in part 2 of the report—would necessarily be because the BPORs had already been decided for the next budget process. We had already gone through quite a streamlining process. This simply exhorts us to continue with streamlining wherever that is possible. And, when we do the review of this budget—which of course we have not had yet—to use that experience to think about whether or not we can do further streamlining. That is why it is referenced to 2017-18.

Senator McALLISTER: That makes sense. You mentioned that there has been a significant streamlining process already for the forthcoming budget process. Can you give us some indication of the headline actions as part of that streamlining process. What are the big ticket items there?

Ms Blewitt : Regarding our approach to the Budget Process Operating Rules for 2016-17, I cannot remember the full details but I think we went from around 140 to 150 different rules down to 40 to 50. I do not have the details in front of me. We also moved to a more principle based approach. We found that agencies, as they should, came to us for interpretation of the rules, but we put some principles to underpin those rules. For example, making sure that any decisions that were taken were value for money—those sorts of things. It was a big effort that went into streamlining, and hence next year we will be looking at whether we take that further.

Senator McALLISTER: The second specific recommendation I wanted to ask about, on page 28, relates to streamlining the arrangements for the approval process for operating losses. I think I understand why that might be an issue, but could you talk us through what the current annual approval process is for agencies that anticipate operating losses?

Ms Blewitt : I do not have the step-by-step, but the general process is that yes, we issue advice to agencies asking them to come forward and identify whether they are proposing to have an operating loss. With that process we pull together, so agencies fill in a template with why the operating losses occur. As a general principle, an agency should not have an operating loss unless they have had pre-approval or they have advised the Minister for Finance, so we pull that advice together. Sometimes operating losses can be due to accounting treatment, and there are a range of reasons; there are good reasons for that. We pull together that advice and provide it to the Minister for Finance and have a recommended position.

Senator McALLISTER: So there is a recommendation to streamline that process?

Ms Blewitt : Yes. My understanding is: say, for example, they thought it was to do with an accounting treatment, did they really need to write to the Minister for Finance, effectively, with that advice? But as you could appreciate, whether agencies are having operating losses is something we need to have good oversight of and have advance notice of.

Ms Halton : And to be really clear, if you read this recommendation, Finance consider whether the current annual approval process for operating losses be streamlined—so, in other words, it is asking us to have a look at what the process is. But, obviously, as part of that we would have to look at the implications because—take the complete opposite of where we are now: if there were no process and everyone ran a loss, it would mean your ability to predict for the budget would be impossible. This is asking us to look at it. We have not yet done that. Undoubtedly we will. It will be a policy decision, however, which means it is a question for government.

Senator McALLISTER: Turning to the MYEFO and the Treasurer's statement in December that government payments as a share of GDP have been brought back to 25.9 per cent, can you confirm which financial year the Treasurer was referring to in that statement?

Senator Cormann: He was manifestly referring to 2015-16. If you look at the payment as a share of GDP ratio as reflected in the Mid-Year Economic and Fiscal Outlook, you will see they are forecast to be at 25.9 per cent.

Senator McALLISTER: When you said that they have been brought back, it is implicit that the payments as a share of GDP had been higher than 25.9 per cent at some previous point. Is that correct?

Senator Cormann: I think I know where you are going. The forecast at budget time was that payments as a share of GDP for 2015-16 would be 25.9 per cent but, subsequent to that, a number of decisions were necessary to increase expenditure. I will give you one example: in order to facilitate passage of the fuel excise indexation-related legislation we reached an agreement—which is on the public record—with the Labor opposition. In order to secure the support of the Labor Party for that piece of legislation we needed to direct an additional $1.1 billion over two years into the Roads to Recovery program. There was additional expenditure required as the result of a decision by the government to welcome 12,000 additional refugees from Syria and the like, and there has been a range of decisions made by government since the budget that had the effect of increasing payments and, as such, increased payments as a share of GDP.

The work that we did in the lead up to the Mid Year Economic and Fiscal Outlook, consistent with our fiscal discipline, is to ensure that wherever we have to make a decision for whatever reason to increase payments on a comparatively higher priority area, we offset that fully with reductions in expenditure in other areas. What the Treasurer was referring to was that, when he took on his responsibility in September 2015, by that time, since the budget in May, the government had made a series of decisions such as the ones that I have just mentioned, which had the effect of increasing expenditure, including as a share of GDP. At one point we were looking at expenditure as a share of GDP in excess of 26 per cent, but, as a result of the decisions to identify further payment reductions and further savings, we were able to bring that percentage back down to 25.9 per cent, which is where we had been in our forecast in May for the 2015-16 financial year.

Senator McALLISTER: Is it not the case that when you look, for example, at table 3.5 in the MYEFO, it sets out how it was that the budget bottom line moved. The principle cause of that was parameter and other variations, was it not?

Senator Cormann: Parameter and other variations on the payment sides actually improved the budget bottom line.

Senator McALLISTER: Indeed, they did.

Senator Cormann: That is right. What that table shows is that payments are $13.3 billion less, and that includes things that are outside of the government's control as well as policy decisions—

Senator McALLISTER: Which policy decisions does it include? I am sorry to interrupt you, Minister.

Senator Cormann: They are listed in the actual document. If you go to page 41, it sets them out in some detail. In relation to payment estimates, it sets out very clearly the decisions that the government has made since the 2015-16 budget. If you go to pages 42 and 43, you can see the various parameter and other variations listed in detail. These are all things that are on the public record, but if you have got a specific question in relation to any individual variations I am happy to assist.

Senator McALLISTER: I suppose the general point is that, given that the major improvements to the budget bottom line come from parameter variations rather than policy decisions, I struggle a little bit to see how this s a consequence of the government's good work.

Senator Cormann: I do not really understand the point that you are trying to make. The Mid Year Economic and Fiscal Outlook is a half-yearly budget update, so the objective, from the government's point of view and in the context of the half-yearly budget update, is to ensure we do not go backwards as a result of policy decisions. We have more than achieved that, because any policy decision of the government since the budget in May which had the result of either reducing revenue or increasing payments has been more than fully offset with reductions on the other side of the ledger to increase revenue or reduce payments. In fact, if you look at the payment part of the budget in isolation, you will see that any policy decision to increase payments on things like $1.1 billion additional for Roads to Recovery, about $909 million additional to pay for 12,000 additional refugees fleeing the conflict in Syria and nearly $621 million for the PBS has been more than offset with spending reductions. Not only have we made decisions to increase spending on these priorities that we had to deal with, we also made related decisions on how to pay for it with spending reductions in other areas. All of that is laid out in the Mid Year Economic and Fiscal Outlook and is consistent with the fiscal rules and the fiscal discipline that we have imposed on ourselves.

Senator McALLISTER: That is very decent.

CHAIR: Senator McAllister, w are scheduled to have a break—

Senator McALLISTER: Indeed, we are.

CHAIR: so we might just pause it there and suspend the committee.

Proceedings suspended from 15 : 43 to 16 : 01

CHAIR: We resume the additional estimates hearings for the Senate Finance and Public Administration Legislation Committee. We are dealing with the Department of Finance on outcome 1 and we will go to Senator Dastyari.

Senator DASTYARI: Ms Halton, I might need you to walk me through something, and I apologise because this may be a little elementary, but I am newer to all of this—

Senator Cormann: How long are you going to claim the 'new' bit?

Senator DASTYARI: About another term, I reckon!

Ms Halton : Would that be a six-year term, Senator?

Senator DASTYARI: Happily, yes; unless there is a double D. But we have already had the Electoral Commission.

Senator Cormann: I think you have been in the Senate for longer than I have been in government.

CHAIR: He has been controlling senators for longer than you have been in government!

Ms Halton : What are we talking about, Senator Dastyari?

Senator DASTYARI: We have not started talking about anything yet.

Ms Halton : I know. That is why I am asking the question.

Senator DASTYARI: I want to talk a bit about Finance's role when it comes to costing policies. But, before I do that, I want to get a bit of a helicopter understanding of how it all works and what the interaction is between Finance and the different departments, because obviously there is a limited role for Finance—you do not own the policies themselves; they are owned by the host portfolio.

Ms Halton : Correct.

Senator DASTYARI: Is my understanding here very broadly correct—that, where there is a new policy proposal, ownership of that policy proposal is really within the host department, be it Education or Health or wherever else?

Ms Halton : Correct.

Senator DASTYARI: And, before it is able to go through appropriate government processes, it is looked at to see whether or not there is a revenue component and whether or not there is an expenditure component, and the costing of the expenditure component has to be agreed with by Finance and the revenue component gets agreed with by Treasury, and there is some process of conciliation, which is an agreed document, and then it progresses forward? Is that a very simplistic view?

Ms Halton : Yes, although I just want to put a caveat on it, if I might. The issue of things being considered, as in who controls things being considered—if 'considered' is shorthand for cabinet Expenditure Review Committee blah, blah, blah—that process is not run by us; that is run by the Department of the Prime Minister and Cabinet, so that is not something we can answer questions about. In terms of your other broad characterisation—do we verify, or otherwise dispute or what have you, the costs of measures as opposed to revenue?—you are broadly correct.

Senator DASTYARI: I just want to touch on that, because there is a kind of a difference. Does that mean that you cost it for them, or they cost it and bring it to you and you check their costings?

Ms Halton : No. They present us with something and say, 'Please look at this. Is it accurate?'

Senator Cormann: Costings have to be agreed with Finance. They are the independent arbiter within government. It is essentially a level of central agency scrutiny to ensure that the assumptions and the methodology used by the portfolio agency are accurate. There are adjustments made, as required, so that we get as accurate a cost estimate as possible.

Senator DASTYARI: So by the time they come to you they have already costed it in their own opinion, and there is a separate process which you use to check it?

Senator Cormann: We verify the work that was done. Depending on the circumstances, there might be a process to identify areas for improvement and the approach taken to ensure that we get to as robust a costing as possible to inform government consideration.

Senator DASTYARI: Is that a very simple level? Again, this is a very helicopter view. You are responsible for expenditure.

Senator Cormann: I am looking after the expenditure side of the budget and, in a simplistic way, the Treasury looks after the revenue side of the budget, when you look at the fiscal side of things. There are obviously a range of other things which come into play both for Finance and Treasury.

Senator DASTYARI: I assume there are exceptions from time to time, but how things progress normally is something called an NPP—a new policy proposal—which does not necessarily mean that its new, but it is a policy proposal. It gets developed by the department or lead agency or whoever—

Senator Cormann: The first thing that comes is that there has to be authority from the Prime Minister to bring forward a new policy proposal. If there is authority, it is then brought forward by the relevant minister, obviously working with his or her department. As part of this there is a set of budget process operational rules that would kick in in relation to the way these sorts of new policy proposals would have to be costed and would have to be paid for through the usual government process.

Senator DASTYARI: Correct me if I am wrong, but as part of this process you end up with a situation where there needs to be—

Senator Cormann: Costs have to be agreed.

Senator DASTYARI: Costs have to be agreed, as does revenue, but the cost part of the agreement is done through Finance.

Senator Cormann: That is right. On anything to do with expenditure, any proposal going forward for government consideration, according to the rules has to have cost agreed with Finance.

Senator DASTYARI: Is it fair to say that that is everything? Everything you do in one way or another has a cost attached to it.

Senator Cormann: The rules provide that in relation to any new policy proposal going forward which involves expenditure, costs have to be agreed with Finance.

Senator DASTYARI: To be able to do that, obviously information has to be made available to you. You do not operate in a vacuum.

Senator Cormann: The government works as a team, that is right. There are relevant officers in the budget and financial reporting group of Treasury, which Ms Blewitt looks after at the moment and which works with relevant parts of other departments. Ms Blewitt's team is essentially structured—

Senator DASTYARI: That is the part of Finance that you are in, Ms Blewitt?

Ms Blewitt : Yes.

Senator DASTYARI: Can I ask you about a couple of specific and new policy proposals and where we are up to?

Senator Cormann: You can ask the questions, and I will determine whether I need to answer them. If they are about policy considerations and policy proposals, then obviously—

Senator DASTYARI: I think some of these are going to end up being in Treasury and other agencies. I acknowledge that your role in this would be limited. In relation to the government's childcare changes—I think it is called the Jobs for Families package. Can you explain to me what the role of Finance would have been in the development of that?

Senator Cormann: I can explain it for you at a high level, and why don't we see where you want to take us? In the Social Services portfolio there have obviously been some changes since the change in leadership, but in the context of the 2015-16 budget the childcare package and broader related elements of the families package at the time were entirely within the Social Services portfolio. Since then, some parts have moved into the education portfolio, I believe. At the time, obviously the policy proposal was put together by the then for Minister for Social Services, Minister Morrison, working with his department every step of the way. As submissions went to the Expenditure Review Committee of the cabinet, obviously Finance's role was to ensure that the costings of various options put forward for consideration by government were as robust as possible and were the best possible estimate to inform government decision making.

Senator DASTYARI: Do you want to add to that, Ms Blewitt?

Ms Blewitt : No.

Senator Cormann: That pretty well sums it up. That is the process.

Senator DASTYARI: You may have to take some of this on notice, but if we stay with the helicopter view for the moment, you are saying that every costing part of the process—does that mean that the department does it and then hands over to you, or are you embedded in the department to do it?

Senator Cormann: There is going to be limited to what extent we can be helpful on the specifics, because you are very much going to cabinet and Expenditure Review Committee processes, the Expenditure Review Committee of course being a subcommittee of cabinet. There is a well-established process by which new policy proposals are considered. In the context of putting a budget together, it is not as if one proposal arrives, you make a decision and then that is the end of the matter. With complex areas of policy, or areas where you have to make decisions on how to fund an increase of expenditure over here with a reduction of expenditure elsewhere, generally you consider a whole range of options. These options all have different financial implications. It is self-evident, and would not surprise you, that in relation to some of the more significant packages and more complex policy matters it is a process that can go over a period, where things go backwards and forwards in an iterative way. Obviously costings have to be adjusted as design features might be adjusted based on decisions that are made by the government at any one point in time.

Senator DASTYARI: I suspect that this is not a matter for Finance, and perhaps you can direct me to where would be the right place to be asking this, but in something like the Jobs for Families package, which I know you know quite well, the model is owned by—

Senator Cormann: Social Services then, and now it is with the education portfolio.

Senator DASTYARI: But because the model relates to employment, some of that would still have an involvement of Treasury as well in developing the model.

Ms Halton : No. Perhaps I can be helpful here.

Senator DASTYARI: We have education tomorrow.

Ms Halton : When you are the portfolio secretary in one of these portfolios—I speak as a former portfolio secretary who owned an awful lot of models—essentially you own that model. Periodically, Finance will appear and opine about the worthiness or otherwise of your model. Sometimes you agree with Finance that you need to update your model. But basically it is the model, in that particular kind of case, that drives the numbers.

There is a distinction between something which has been costed from the ground up, where it is just a new idea, and it is agreed that someone can work on it and therefore do costing, which we would then look at and say, 'Yes, we agree' or, 'No, we don't' or, 'We think there is an alternative,' and we negotiate to a position where the numbers are agreed. In cases where there are models, there are parameters that may come from elsewhere in government. But those parameters are known and they feed into the model. As a line agency you accept those parameters, but that model itself is something that you have done the work on. Periodically you will have to do more work on it because we know that with models sometimes over a period they can become less accurate or less good at forecasting, depending on what factors you have built in. As Finance, if we are costing a proposition which includes some ground up things and some things to do with something that is currently the model, we would look at what the department concerned gave us and we would either say, 'Yes, we agree with that' or more likely we would say, 'We think that you can bring the cost of that down a bit.'

Senator LUDWIG: You always say that.

Ms Halton : That is true, Senator. You have been on the receiving end, I know.

Senator DASTYARI: This is the bit I want to clarify. This is something that I will be pursuing tomorrow with the agency. In terms of the Jobs for Families package, people like to blame Finance and flick things up to Finance—

Ms Halton : Of course. That is our job.

Senator DASTYARI: and say, 'All matters to do with costings are a matter for Finance, not a matter for us.' Do you verify it? If you are agreed on the costings, the ownership of the model and the costings is with them?

Senator Cormann: The short answer is 'yes', but let me go a bit further. The job of the Finance portfolio and my job as finance minister is not just to ensure that we have accurate information on costings. My job, supported by the Department of Finance, is also to ensure that we spend as much is necessary but as little as possible to achieve the policy objectives of the government. In that context, as policy proposals come forward from one of my colleagues who are portfolio ministers, this is where the iterative process comes in. Just because they come forward with a proposal with a particular cost and the cost is agreed does not necessarily mean that we take a passive role in relation to it. We take an active role to ensure that, given a particular policy objective, we are using the most efficient and effective way to get there. That is where the Expenditure Review Committee process comes in, where these sorts of issues are fleshed out between central agencies—Prime Minister and Cabinet, Treasury and Finance—and relevant portfolio ministers, so that ultimately you end up with a policy decision of the government which is reflected in budget and budget updates.

Senator DASTYARI: I will take a lot of that to education tomorrow. Minister, I would like to touch on the government schools funding policy. As I am sure you are aware, because we have talked about this and you have been asked a question about this in question time, there has been a statement from the minister and there have been leaked Liberal Party talking points—

Senator Cormann: They are your words.

Senator DASTYARI: Whatever you want to call it. I do not think the idea of talking points is that suspicious—everyone has them. I tend not to use them, which I think is known. I have a copy of them here. It says '…decide an indexation rate that better reflects the increase in the cost of schooling' and a statement from the minister which is, 'We will have proper discussions with the states and territories and the non-government sector and will be releasing appropriate policies in relation to schools education ahead of the election.'

At this point in time, however, the government document that is relevant, which I have here, is budget paper 3, page 36, which says, 'From the 2018 school year onwards, total recurrent funding will be indexed by the consumer price index with an allowance for changes in enrolments.' That is current government policy—is that correct?

Senator Cormann: That is current government policy from 2018 onwards, consistent with what we said before the last election. Before the last election we said that we would keep in place the funding put in place by the former Labor government for so-called Gonski over the four-year budget estimates period at the time of the last election. Of course we did better than that, because the previous education minister, Mr Shorten, took $1.2 billion away from schools in Western Australia, Queensland and the Northern Territory, $1.2 billion that we put back in, so over that four-year period we actually put more money into schools, not less.

What we also said is that over the medium to long term, given that promises had been made by the previous government in the shadow of an election that they had a fair indication they might lose, a series of spending growth promises that were not funded in the budget and that were for the period beyond the published forward estimates. We said very clearly before the election that we did not commit to that unaffordable, unfunded, unrealistic spending growth trajectory from years five and six onwards. In the 2014-15 budget we gave effect to that decision. That decision is reflected in the budget forward trajectory, so from 2018 onwards the indexation formula, as you have just indicated and as I have indicated on the record as late as last week, is CPI plus an element to factor in the effect of enrolment growth. That of course means that funding for schools will continue to increase moving forward.

Senator DASTYARI: And that has not changed from when the budget documents—

Senator Cormann: That is the policy position of the government. I think you will find that the education minister and I are in violent agreement that that is the policy position of the government. Let me just finish, for completeness. It is obviously always open to government, it is always open to any minister, to put forward an alternative policy if there is authority to bring an alternative policy proposal forward, but the budget process operation rules require that any policy proposal that would have a negative impact on the budget bottom line has to be fully offset with a related policy decision to reduce relevant expenditure in other parts of that portfolio.

Senator DASTYARI: It is fair to say, Minister—and again I am quoting you back at you, so I think we are going to be in agreement here on what you said in Senate question time, because I know everyone here watches it—

Senator Cormann: I was there, and I stand by what I said.

Senator DASTYARI: Sometimes we are there and we do not even remember. You said:

the budget is a reflection of policy decisions of the government. It is very simple.

Senator Cormann: That is right. It is very simple.

Senator DASTYARI: And the decisions of the government are that it will be indexed to CPI with an allowance for changes in enrolments.

Senator Cormann: From 2018 onwards, consistent with what I just said.

Senator DASTYARI: We are agreeing. It is a rare thing. It is a good thing. On 28 January Minister Birmingham says:

We'll have proper discussions with the states and territories and the non-government sector and we'll be releasing appropriate policies in relation to school education ahead of the election.

Senator Cormann: There is nothing wrong with that.

Senator DASTYARI: No; you are saying that has not happened yet and if it were to happen—

Senator Cormann: That is a question really for Minister Birmingham. Obviously any portfolio minister in our government has a very consultative approach, and of course I would expect Minister Birmingham to have discussions with state and territory governments about school funding. I would be very surprised if they were not having discussions, and I would also expect Minister Birmingham to have discussions with relevant non-government organisations operating in this space. None of this is in any way surprising.

Senator DASTYARI: The only bit I want to check is something you said, Minister, on Sky News on 2 February. I spend a lot of time following what you say, Minister Cormann.

Senator Cormann: I think you are just going to ask me something that I have already confirmed this afternoon, but, anyway, go for it.

Senator DASTYARI: You said:

As with anything, if any Minister wants to suggest changes that have a negative impact on the Budget bottom line, they would have to find other areas in their portfolio to pay for it through offsetting savings in other areas of their portfolio.

Senator Cormann: What I worry about is that you do not actually listen to what I have been saying to you this afternoon, because I made that exact same point 10 minutes ago, and I would invite you to review Hansard.

Senator DASTYARI: No, Minister.

Senator Cormann: That is exactly what I said.

Senator DASTYARI: My understanding of what you said 10 minutes ago may have been incorrect. What I understood you said 10 minutes ago was effectively this: the government has a policy and has come to a decision—and we can argue around the politics of it, but park that—and you have released that publicly in your budget.

Senator Cormann: That is right.

Senator DASTYARI: If somebody wants to change that—

Senator Cormann: Well, not somebody; if the minister wants to put forward a proposal for government consideration, that is obviously open to him or her to do that—to him in this instance—but there is a process that needs to be followed. As I indicated to you a little while ago, any proposal to increase expenditure in a portfolio because there is a view that there is a higher priority at any one point in time needs to be offset by a decision to reduce expenditure in another area of the portfolio in order to pay for it, because in the end we are in deficit. We cannot keep borrowing more in order to pay for things with money that we have not got.

Senator DASTYARI: Sure, but surely there is another path, even if you wanted to go down that path, which is about government priorities. It sounds like what you are saying is: there is no way the government could increase schools funding without cutting from another part of the Education portfolio.

Senator Cormann: In the end, the discipline that the government has at an aggregate level, on a whole-of-government basis—and we went through this before—our fiscal discipline as a government, is that we are committed to ensure that we do not go backwards in terms of our budget position, so that we continue on the improving trajectory moving forward. We do not want to go backwards as a result of policy decisions. If there is a policy decision taken with a negative impact on the budget bottom line, at a whole-of-government level, that has to be offset by a decision to improve the budget bottom line in order to pay for it. I guess our criticism of the previous Labor government and our criticism of the current Labor opposition is that announcements are made about increased spending promises without a credible indication about how they are going to be paid for.

Senator DASTYARI: It sounds like you are saying two things here. I want to be sure that I am correct. I may be misunderstanding here. You claimed 11 minutes ago now and you said on 2 February on Sky:

As with anything, if any Minister wants to suggest changes that have a negative impact on the Budget bottom line, they would have to find other areas in their portfolio to pay for it through offsetting savings in other areas of their portfolio.

Senator Cormann: That is a direct reflection of the well-advertised budget process operational rules for the 2016-17 budget, the 2015-16 budget and the 2014-15 budget.

Senator DASTYARI: And you are saying, Minister, that there is no way to—

Senator Cormann: We have gone round and round in circles on this and I have made the point very clear. When you say 'there is no way' that is not what I said. I did not say 'there is no way'. I said that the budget process operational rules are very clear. Any minister who wants to bring forward a proposal to increase spending in an area that he or she considers to be a higher priority for the government needs to identify offsetting savings to pay for that increased spending by pointing to reductions in expenditure in comparatively lower priority areas.

Having said all of this, obviously it is always open to the government at a cabinet level on a whole-of-government basis to find any offsetting savings and offsetting reductions in expenditure in other parts of the budget. But the process for a minister wanting to put forward a new policy proposal in the first instance is to identify offsetting savings in their portfolio to pay for it. Alternatively, if you need to increase expenditure, say, on roads and we do not say, 'Can you find a way to reprioritise the already committed expenditure?' what we would be saying is that we have to go into other parts of, like social services, education—

Senator DASTYARI: Isn't that what the ERC does?

Senator Cormann: A very important initial discipline is that if you as a minister want to put forward a proposal to increase spending, the first approach should be to identify savings in your portfolio through reprioritisation of your spending to pay for it. If that is genuinely not possible, obviously, if it is in a position, the government can choose to make a decision. But that is a hypothetical now, I have to say.

Senator DASTYARI: We are in this funny bind. You get upset when we talk about hypotheticals and when we talking about specifics you say, 'I'm not here to talk about the specifics of individual matters that are kind of before us.' Minister Cormann, you are effectively saying that there are two ways that it can be funded. One is through savings within the portfolio and the second is if the government itself decides as a whole-of-government priority that it wants to find the savings from somewhere else?

Senator Cormann: There is only one pot of money, and that is the consolidated fund of the government. In the end, if there is a proposal to increase expenditure because there is a few that a particular item of expenditure is a higher priority—

Senator DASTYARI: Things change. Government priorities change.

Senator Cormann: then it has to be paid for, under our discipline, by reductions in expenditure elsewhere. The way it works is that it is incumbent in the first instance on the relevant portfolio minister to identify savings in his or her portfolio to pay for any proposal to increase expenditure. But that is assuming that there is an appetite to increase expenditure—and obviously it is not a given at all. The policy position of the government is as reflected in the budget. That is the position of the government unless or until such time as there is a decision to change the policy.

Senator DASTYARI: There is no way of concluding from what you have said other than if there is a decision to increase funding for schools—and you said the so-called Gonski or we can call it whatever we want to call it, for the years 5 and 6—there is no way of doing that without finding money from the existing education portfolio.

Senator Cormann: No. You did not fund it. There was no money in the budget for it. In fact, you deliberately put the ramp-up in the period beyond the published forward estimates. It was a piece of pre-election trickery and, quite frankly, electoral dishonesty.

Senator DASTYARI: We have funded it and we can fund it.

Senator Cormann: No, you have not. That is just not true. I am quite happy to go through your $50 billion-plus black hole. Because of the savings measures that we have passed that you want to reverse to the tune of about $30 billion, because of the savings that you have continued to block, and because of the additional spending promises that you have already made, essentially the only proposals from Labor on the other side of the budget are fundamentally tax increases, and—not even to a large degree—only to a very small degree, does it address the massive increases in spending that you are suggesting.

Senator DASTYARI: Senator Cormann, I am just trying to get my head around the point. If the minister wants to change—

Senator Cormann: The minister cannot change policy.

Senator DASTYARI: If the minister wants the policy to be changed, and we know ministers always want policy to be changed—

Senator Cormann: If the minister wants to put forward a proposal to government for consideration by government—

Senator DASTYARI: At the first point of call they have to find—

Senator Cormann: No. Going back to what we discussed right at the beginning, before they can do anything they have to get an authority to bring forward a policy proposal.

Senator DASTYARI: Sure.

Senator Cormann: Assuming they get that authority then they have to identify not just the additional expenditure opportunity but also how they propose to pay for it. It is pretty common sense.

Senator DASTYARI: So they have to propose both an expenditure and a revenue component.

Senator Cormann: The 'revenue component' are your words. You are suggesting that they have to identify a revenue component.

Senator DASTYARI: But you are saying—and it makes sense—that the first point is that they try to find it within the portfolio; that the proposal would require it to be found within the portfolio.

Senator Cormann: I feel like you did not hear what—

Senator DASTYARI: These are your words. You seem to agree with you and then you disagree with yourself. I am really confused.

Senator McKenzie interjecting

Senator Cormann: Maybe have a look at Hansard afterwards.

CHAIR: Talking over each other does not help. Did you have something to add, Senator McKenzie?

Senator McKENZIE: No, I was interested in the minister's response. Senator Dastyari does not seem to be able to understand.

CHAIR: What we might do is try to prevent going over the same ground again, again and again. If there are questions of clarification let's get to that point and try to clear them up.

Senator DASTYARI: Minister Cormann, you stand by the statement that:

… if any Minister wants to suggest changes that have a negative impact on the Budget bottom line, they would have to find other areas in their portfolio to pay for it through offsetting savings in other areas of their portfolio.

an overall statement—correct?

Senator Cormann: That is 100 per cent the requirement under the budget process operational rules.

Senator DASTYARI: So, to apply that in the instance of education funding, the interpretation of that would be that, if the education minister wants to suggest changes that have a negative impact to the bottom line, they would have to find other areas in their portfolio to pay for it through savings in other areas of their portfolio?

Senator Cormann: That is right.

Senator DASTYARI: Fine. I am happy on that.

CHAIR: See how we can cooperate and get it all cleared up very quickly.

Senator DASTYARI: Minister Cormann and I both appeared in a show on the SBS recently about being first generation migrants. So perhaps the language—

Senator Cormann: I did not realise that we appeared together.

Senator DASTYARI: You did not watch it then.

CHAIR: Did you have a first generation mobile phone in that one?

Senator DASTYARI: No, that was one of the old kind of Nokia bricks.

CHAIR: All right, let's keep going.

Senator McALLISTER: I want to return to MYEFO and page 18 of that document. I am really interested in why the commitment to have a budget surplus of at least one per cent of GDP by 2023-24 has been abandoned and replaced with one that targets a surplus of at least one per cent of GDP as soon as possible.

Senator Cormann: It is very simple. Just look at the update in the Mid-Year Economic and Fiscal Outlook on the revenue side of the budget as a result of circumstances outside of the government's control. With what has been happening with our terms of trade, what has been happening with slower global growth, slower economic growth and below trend growth in Australia and the implications of that on the revenue side of the budget, we have been very transparent that we did not believe that it would be sensible for us to aim for a surplus of one per cent as a share of GDP by 2023-24. But, as a result of the revised forecast and the revised projections, our commitment remains to do so as soon as possible. Obviously, our economy is in transition from resource investment and construction-driven growth to broader drivers of economic activity and growth. There are some challenges that come with that on the revenue side of the budget. Our focus has been on making sure that we do not go backwards in that context as a result of the financial implications of policy decisions of the government. But beyond that, given what has been happening in the economy and what has been happening to revenue, we revised what was realistically achievable.

Senator McALLISTER: In the forecasting that you have is there any point where the budget is modelled to reach a surplus of at least one per cent of GDP?

Senator Cormann: Again, we have publicly announced in the context of the Mid-Year Economic and Fiscal Outlook the revised timetable on when, based on our current projections, we expect to get back to surplus. What you will see is that over the current forward estimates period the budget position continues to improve, the underlying cash balance continues to improve, both in dollar terms and as a share of GDP. At the end of the forward estimates we expect to reach a deficit of 0.7 per cent as a share of GDP. We are expecting to get to surplus slightly later than anticipated in previous budgets and budget updates. But, nevertheless, we believe that we are on a realistic, believable and achievable timetable back to surplus.

Senator McALLISTER: Does that mean that the previous commitment to have that one per cent surplus in place by 2023-24 was too optimistic?

Senator Cormann: It was a commitment that was made with what we knew at the time. The facts and the environment have changed. As any responsible government does and should do we have adjusted the outlook and we have adjusted what we believe is achievable in terms of the timetable in which a surplus can be achieved, given the manifest and obvious change in circumstances.

Senator McALLISTER: Who does make that decision?

Senator Cormann: Obviously, the government makes decisions in relation to policy measures. But when it comes to putting the budgets or budget update together, there is obviously a range of factors that feed into that, including economic growth forecasts, employment growth forecasts and all sorts of forecasts that are the responsibility of Treasury, much of which, in terms of the impact of the global economy on domestic economic growth, is obviously beyond our direct control. We do not control what happens to global commodity prices, but it does have an impact on the level of our revenue collections. There are also flow-on consequences on the expenditure side of the budget from some of these economic and employment trends. In any budget or budget update there are things reflected that are outside of our control. These are reflected and they are based on relevant expert advice out of Treasury or Finance. Then there are things that are the result of a policy decisions of the government. They, at their foundation, also have Finance or Treasury involvement, as appropriate, in relation to costings.

Senator McALLISTER: That is a useful explanation of some of the sources of advice and factors that you consider in the process, but is that decision-maker you, Minister Cormann?

Senator Cormann: The Treasurer and I take responsibility on behalf of the government for the budget document or the budget update document. The decision-maker on these things is the government. The decision-maker on policy measures that are reflected in the budget is the cabinet. There is a process that leads to that, which obviously involves the Expenditure Review Committee. Obviously, the Treasurer has the lead responsibility when it comes to matters related to economic growth forecasts and the like, acting on advice and working closely with Treasury as appropriate.

Senator McALLISTER: It is perhaps worth observing that from the opposition perspective these are many of the same factors that were considered during the period we were in government and yet your party was pretty dismissive of our attempts to explain the need for us to adjust our budget circumstances in response to external conditions. I am interested that you provide that same explanation to this committee. I wonder if you see that there is some level of dissonance between the approach that was taken in opposition by senior members of your government and the approach you are taking now.

Senator Cormann: I do not accept that. Our terms of trade in what is obviously a commodity-based economy until 2012 were on their way up. The prices that we are able to achieve for our iron ore exports peaked in 2012 at record levels. We had the best terms of trade in 140 years. National income from iron ore exports exceeded 20 per cent back then. Obviously there has been a significant fall in our terms of trade since then. There has been a significant fall in the price we are able to achieve for things like iron ore and coal exports and the like. That certainly started towards the tail end of Labor's last period in government.

I guess our criticism is that at the time, instead of adjusting the expenditure, given what was entirely predictable and indeed predictable by many—and that is that the record prices we were able to get at that time for our iron ore exports would not last over the medium to long term—at exactly that time when it became obvious that our terms of trade were starting to fall, the previous government made a decision to significantly and permanently and structurally increase expenditure across a range of areas. Instead of reflecting that in the period beyond the budget forward estimates at that time, the ramp-up in relation to supposed promises to increase spending on state hospitals, promises to increase spending on state schools, promises to increase spending in the context of the National Disability Insurance Scheme—all of that massive ramp-up, which was agreed to at a time when the revenue outlook was starting to deteriorate—was locked in in the period beyond the published forward estimates at that time.

What we have been trying to do since then, given we are committed to delivering the NDIS, for example, is to try and make fiscal space in the budget by achieving savings obviously in other parts of the Social Services portfolio and other parts of government in order to pay for some of that expenditure, but we have had to adjust unaffordable and unsustainable spending growth promises that were made in relation to state schools and state hospitals because manifestly in the current environment they are not affordable.

Senator McALLISTER: Minister, it is certainly, obviously, your prerogative to answer at length. I tend not to provide lengthy statements in my questions.

Senator Cormann: You asked me a political question so I had to—

Senator McALLISTER: I did ask a political question but it was very long.

Senator Cormann: You asked me a charged political question so I had to provide a proper answer to you.

CHAIR: I cannot prevent the minister from providing comprehensive responses.

Senator McALLISTER: You certainly cannot.

CHAIR: I think he modelled himself on Senator Ludwig when he was in the position some time ago.

Senator Cormann: I remember. Senator Faulkner was very good at making sure that any political aspirations—

Senator McALLISTER: Minister, just for the record, it was also the case that Labor in government and indeed in opposition proposed, and proposes, a sensible, moderated budget strategy—

Senator Cormann: That is your characterisation. I do not agree with that characterisation.

Senator McALLISTER: to have the budget in balance over the cycle and to meet the commitments that are expected of government by the community.

Senator Cormann: That is a political point and I do not accept that characterisation. In particular, as I have indicated earlier, right now if all of Labor's policy positions were reflected in the budget, our budget would be more than $50 billion worse off. Obviously I do not consider that to be an appropriate budget strategy.

Senator McALLISTER: All right. Well, let us turn then to your policy decisions and their impact on the budget. I am just interested in having a bit of a look at table 3.5 in MYEFO, which I think is on page 31. Over the forward estimates it indicates that the total impact of policy decisions on the underlying cash balance is $3.7 billion. What I do not understand is how you reconcile that with the statement that all of the policy decisions of the government have been offset.

Senator Cormann: I do not understand your question. You have to be a bit—

Senator McALLISTER: Okay. There is a table on page 31.

Senator Cormann: As we qualified at the time, and as is qualified very clearly in the text, if you look underneath, we have offset the impact of all of the policy decisions on the budget bottom line, after you take a previous allocation for the China-Australia Free Trade Agreement in the contingency reserve into account, to the tune of about $4.1 billion. If you go to the next page, page 32, and look at table 3.6, you will see the provision made for the China free trade agreement. That $4.1 billion is essentially a reduction in revenue from tariffs that no longer will be collected in the context of the free trade agreement. Obviously, there is a flip side to this, and that is that China will no longer collect tariffs imposed on relevant exporters from Australia into the Chinese market.

The impact of free trade agreements is appropriately excluded from the offsetting provisions because, if we required an offset either on the revenue side or on the expenditure side to account for the impact on tariff revenue in the context of free trade agreements, what we really would be saying is that we should increase taxes or reduce expenditure in Australia to pay for less taxes imposed on businesses in China. Given the objective of boosting trade, and given the fact that there is a related benefit to Australian business, that is not something that we think is appropriate. That is why—and that is transparently reflected in the document and was explained at the time—you have to deduct that $4.1 billion from that figure. Once you do, you will see—you have to go to table 3.6—that the net budget impact of new policy decisions is actually an improvement of just below $2 billion, $1.871 billion. That is even after taking the financial implications of negotiations and decisions in the Senate into account.

Senator McALLISTER: Why is it then that that does not show up in table 3.5? You will have to forgive me; you are more familiar with—

Senator Cormann: It is a technical accounting issue.

Senator McALLISTER: It sounds like it.

Senator Cormann: Obviously, the decision to proceed with the China-Australia Free Trade Agreement was taken well before the 2015-16 budget, and it was reflected in the budget bottom line, but it was reflected—and this is a matter really for Treasury—as a heads-of-revenue deduction. That is technical. It is effectively an estimates variation in expenditure terms but the equivalent in Treasury context. But, once the agreement was formally signed and implemented, it was then categorised as an active policy decision of the government. But it was not actually that we took a decision between the budget and the budget update to enter into this agreement which had this effect. That decision was previously taken, previously reflected in the contingency reserve, and in any event it would not be desirable to increase taxes in Australia, on the Australian economy, or to reduce expenditure in Australia to account for a reduction in tax revenue from Chinese exporters into Australia. That is why it is treated the way it is.

Senator McALLISTER: Nonetheless, despite the fact that we are moving money from the contingency reserve and using it to explain the impact of your policy decisions overall, the underlying deficit has deteriorated by $2.3 billion since the budget.

Senator Cormann: No. Since the budget, as a result of policy decisions, the bottom line has improved by $1.8 billion. Once you take the effect of decisions and negotiations with the Senate into account, the total impact of policy decisions is about $395 million. We have made policy decisions to improve the budget bottom line to offset decisions that detract from the budget bottom line, which improve the budget bottom line to the effect of $395 million. But 1.476 of that related to decisions and negotiations in the Senate, including $1.1 billion that Labor required us to direct into additional funding for Roads to Recovery in order to pass the fuel excise indexation measure. If not for that, the net effect of new policy decisions of the government is actually an improvement of the budget bottom line of $1.871 billion, and all of that is reflected on page 32.

Senator McALLISTER: You would accept that it is confusing. The first sentence on the top of page 31 says:

The 2015-16 underlying cash deficit has deteriorated by $2.3 billion since the … Budget …

Senator Cormann: Sorry, what are you reading out?

Senator McALLISTER: The top of page 31.

Senator Cormann: Sure, but that is another matter altogether because that does not relate to decisions of the government. That relates to all of the moving parts, including the moving parts on the revenue and the expenditure side that are outside of our control, bearing in mind that there is actually a reduction, when payments over the forward estimates as a result of parameter and other variations are actually $13.2 billion less than what we thought they would be at budget time, so we are now expecting at MYEFO time to spend $13.2 billion less than we thought we would be spending at budget time over the forward estimates. So the $2.3 billion figure is a netted out figure of all of the moving parts, both those that are under our direct control and those that are not under our direct control.

Senator McALLISTER: I am going to have to reflect on that question of accounting and leave it for another time. Can I ask about the MYEFO measure relating to changes to diagnostic imaging and pathology.

Senator Cormann: That is a matter for the Health portfolio.

Senator McALLISTER: Nonetheless, you answered questions about that in the press conference around MYEFO.

Senator Cormann: Ask the question, and we will see whether I can help and to what extent.

Senator McALLISTER: At that time, you were asked what sort of impact it was expected to have on people, and you said:

It is not expected to have an impact on people.

Senator Cormann: That is right.

Senator McALLISTER: What is the basis on which you made that claim?

Senator Cormann: I have to go through a bit of history here, and this is outside my direct portfolio responsibility. This particular budget measure deals with effectively a bonus payment, the bulk-billing incentive payment, that is paid on top of a 100 per cent rebate compared to the Medicare Benefits Schedule fee for a particular service. What has happened across the Medicare Benefits Schedule is that, for GP services and across the Medicare Benefits Schedule generally in the past, historically, the benefit payable by government was 85 per cent of the fee on the MBS. But then at some point the previous government decided to make that 100 per cent of the Medicare Benefits Schedule fee, so 100 per cent of the fee is now paid as a rebate by the government.

Then at some point, in relation to GP services, a previous Howard government decision was to provide a bulk-billing incentive payment in order to encourage GPs to bulk-bill, but the Howard government quarantined that particular bonus payment to reward a GP for bulk-billing a particular patient. It targeted that bulk-billing incentive payment towards patients on concession cards, children under the age of 16 and the like.

When the previous Gillard Labor government introduced an equivalent bulk-billing incentive payment on top of the 100 per cent rebate of the Medicare Benefits Schedule fee for radiology and pathology, they applied it indiscriminately across the board, which in our judgement means that the payment of limited taxpayer resources is not sufficiently well targeted.

Now, in relation to radiology, from memory, the measure is to essentially align the arrangement in terms of bulk-billing incentive payments exactly to that which applies for GP services, so it makes it consistent—that is, it targets it towards concession card holders, children under 16 and the like.

In relation to pathology, when we looked at the history of the expansion of the bonus payment in order to encourage behaviour to bulk-bill patients, and we showed the effect that it actually had, it had a very limited effect. The bulk-billing rates before the payment was introduced by Labor were about 96 per cent, and then they moved from 96 per cent to 97 per cent. There was a very marginal effect, and there are very high bulk-billing rates.

So the reason I made that statement is that, in the end, the fee that is charged by the provider to the patient is a matter for the provider. There is a competitive market when it comes to radiology and pathology services. We do not believe that a bonus payment on top of paying a 100 per cent rebate compared to the fee was a good use of taxpayers' money in the circumstances, particularly given that we face some pressure when it comes to paying for access to additional drugs. In MYEFO we have allocated another $621 million in additional funding for new drugs on the Pharmaceutical Benefits Scheme, principally in relation to cancer treatments. Since then, the Minister for Health, Sussan Ley, has announced further listings of additional drugs with another cost of several hundred million dollars.

So, as I said earlier, if you need to spend more on a higher priority area, you have to find ways to pay for it. We believe that this measure is a sensible way to pay for it. And, no, we do not believe that patients who need to get access to the benefit of bulk-billing arrangements should have to pay more, because we do not believe that there is any justification for radiology or pathology providers to increase their fees to impose an out-of-pocket.

Senator McALLISTER: Okay, thank you.

Senator Cormann: Well, you did ask the question.

CHAIR: Minister, I do really appreciate the comprehensiveness of your answer—

Senator Cormann: Outside my portfolio.

CHAIR: because I think it is very enlightening, and the fact that you are across so many aspects of other people's portfolios is a credit to you. But I do want to point out to everyone in the room that we are going to be a bit pushed for time, and I do not want to have a spillover date, so whatever we can do to facilitate getting through the agenda as quickly as possible would be advantageous. Senator McAllister, do you have anything else in this area?

Senator McALLISTER: To be honest, I do.

Senator Cormann: The thing is that when you ask a question like that it is very hard to do justice just in one or two sentences.

CHAIR: I understand. I do understand.

Senator McALLISTER: Minister, the chair has been very even handed and has encouraged us not to interrupt ministers, and I am trying to comply with that. From time to time, perhaps I could direct you to the bit of the question that interests me most. I know you wish to provide a very long answer, but sometimes I am not interested in quite as much as you wish to provide.

Senator Cormann: You probably wanted me to say that I was wrong, but I wanted to make sure that you were in no doubt as to why I was right.

Senator McALLISTER: Minister, I am simply trying to scrutinise—

Senator Cormann: That is fair enough.

Senator McALLISTER: the government, as is the purpose of the committee. Can I come back to this idea, though, that this will not have an impact on people. I accept that you may not think it is a useful deployment of public money, and that is your rationale for the policy. You have explained that here and previously in the chamber. I just wonder if it really is possible to say it is not expected to have any impact on people, given the range of people who are now asserting that it will produce an increase in costs for users of these services. Did you have any advice to—

Senator Cormann: I stand by my statement. Yes, we do have advice. Taking into account the advice just now by the chair, I am not proposing to go back to what was a very comprehensive answer and which directly answered the question that you have just put to me again. The risk is that by asking the same question you are going to end up getting the same answer. But, in short, given that the government is paying a 100 per cent rebate of the Medicare Benefits Schedule fee, given that the government continues to pay the bulk-billing incentive payment in relation to radiology to concession card holders, given that in relation to pathology the bulk-billing incentive payment did not result in a material lifting of already very high bulk-billing rates, we have no reason to believe that, given the competition in those markets, there is any reason to expect that people who should be bulk-billed, patients who should be benefiting from bulk-billing, will not be bulk-billed.

Senator McALLISTER: But some other people might—

Senator Cormann: By definition, if someone continues to be bulk-billed, they are not going to be worse off than previously when they were being bulk-billed.

Senator McALLISTER: That was a more concise answer, and I appreciate it.

Senator Cormann: I am trying.

Senator McALLISTER: I can tell.

CHAIR: I think it is because it is your first estimates as deputy chair, Senator McAllister, that—

Senator McALLISTER: That the minister is being as helpful as he is.

CHAIR: Overly helpful, I would suggest.

Senator McALLISTER: I want to ask about the presentation of information in MYEFO. For example, at page 175 there is a table—and I will wait until officers come to the table.

Senator Cormann: Page 175?

Senator McALLISTER: Yes.

Senator Cormann: That is a measure. Which one?

Senator McALLISTER: Mental health streamlining.

Senator Cormann: Yes.

Senator McALLISTER: It does not provide any indication of the profiling of the expenses or any savings associated with this, although the text indicates that the government will achieve savings of $141 million over four years.

Senator Cormann: You have to read the next sentence:

Savings for this measure have already been provided for by the Government and will contribute towards the related expense measure The Australian Government's Response to the National Ice Taskforce Final Report.

The government is realising $141 million in savings, which are immediately reinvested, consistent with the announcement on 26 November 2015, which is why there is no impact on the budget bottom line.

Senator McALLISTER: If I wanted to find out where those savings have been obtained—

Senator Cormann: It is best to ask questions in the Health portfolio, such as in community affairs estimates.

Senator McALLISTER: Is that right. This is not the only table of this kind in the MYEFO. I just wonder if—

Senator Cormann: The Treasurer and the Finance minister in budget and budget updates obviously draw together in one document all of the relevant financial information across all of the government, but the responsibility for specific measures is still within the relevant portfolio.

Senator McALLISTER: Of course. I imagine that the department would have information about the profiling of all of those savings.

Senator Cormann: When you say 'all of those savings', what do you mean?

Senator McALLISTER: This is not the only table that presents information in this way. I am wondering if it would be possible to get a table that shows the year-by-year breakdown—

Senator Cormann: We will take that on notice, but I mean—

Senator McALLISTER: of all of the funding that has been provided for—where it is in the MYEFO—

Senator Cormann: If you can be more specific and maybe if you can provide the question on notice in writing in terms of exactly what it is you are after—

Senator McALLISTER: To short-circuit this, the best way to approach this might be for us to create a list.

Senator Cormann: Generally, when it says 'savings for this measure have already been provided' it means that previously the government made a decision. On this occasion, I would suspect that in the lead-up to the 2015-16 budget it was a decision taken but not yet announced, which is now being announced. If you tell us on notice exactly what it is that you are after, we will try on notice to be as helpful as possible.

Ms Halton : Senator, to be helpful, if you look at page 185, you will find the National ICE Taskforce response expenditure in that item.

CHAIR: Would you like to continue to have the call, Senator McAllister, or would one of your colleagues like to intervene for a bit? Are you happy to keep going?

Senator McALLISTER: It is alright. I am just having a look at the page reference. I think we can pursue that through questions on notice. It is a good suggestion. Thank you, Minister.

I notice that the Auditor-General issued a qualified audit opinion on the basis that there was a noncompliance with an Australian accounting standard in relation to specialist military equipment and the requirement that that be carried at fair value where it can be reliably measured. There is an indication that this is being investigated, that work is underway to determine how to reliably measure specialist military equipment at fair value and that that work will be done for the 2015-16 statements.

Senator Cormann: I will give you a high-level answer to this.

Senator McALLISTER: That would be great.

Senator Cormann: And then Dr Helgeby will go into the specifics. There was a change in accounting standards which, as you have indicated, now requires the government to account for the value of various pieces of military equipment on a fair value basis, whereas historically we have accounted for it on a historical cost basis. It involves a level of work, and obviously this is pretty specialised equipment and there is quite a bit of complexity around how you actually determine fair value. So that work is going to take place, but it is not going to be something that can be done within a week or two. It is fair to say that fair value is likely to be higher than historical cost value, which means that, if anything, the result of that will mean that the value of relevant assets held by government will actually be higher than what is reflected in the relevant financial documents right now. You are right: the national auditor appropriately did point to this issue where there is technical noncompliance with a reasonably new and revised accounting standard. The government, and the Department of Finance in particular, is working to get into a compliant position as soon as possible. But Dr Helgeby might want to expand on that.

Dr Helgeby : As technical accounting issues go, this one is very technical, and it goes back to a change in accounting standards sometime last decade where a process of harmonisation of economic statistics with accounting standards was put in place to try to bring them closer together. As part of that change, the expectation came upon the public sector of introducing fair value measurement in many instances where it did not previously exist. One of those categories is Defence weapons platforms. Defence weapons platforms were given an exemption by the Australian Accounting Standards Board from that change for a number of years, and the reason for that was the complexity of essentially providing a market value, or attempting to provide a market value, for things that are not traded in a market. We buy them, but we do not sell them in a market, and true markets really do not exist for these sorts of things. So, given that complexity, the Australian Accounting Standards Board gave the government an exemption for a period of time. That exemption lapsed this year. In the period between the start of this year and the completion of the consolidated financial statements, it was not possible to produce a reliable fair value measurement across the class of assets known as Defence weapons platforms, of which there are about 28 different types. Essentially, the Auditor-General has to audit against the standards as they exist.

Senator McALLISTER: Sorry to interrupt you, but I do understand that basic element, and I think the Auditor-General explains it when he sets it out. I am really more interested in the work that is being undertaken to come into compliance, which I assume is underway.

Dr Helgeby : Yes, it is. It will be work that involves us and the Department of Defence, and we will also be engaging with the ANAO, the Audit Office, around its understanding of these issues as well. Part of that work will be to have in-depth discussions with the only two other governments in the world which have had a go at this, the UK and New Zealand. In fact, there will be Defence people, our own people and ANAO people visiting those jurisdictions in the near future to understand the methodologies they use, which may or may not be directly relevant to the problem in Australia. But out of that work we expect to see a range of approaches available, or a range of possible approaches at least identified.

We will be having discussions with the ANAO about those methodologies and with the Department of Defence about those methodologies to agree on a way forward for the next consolidated financial statements. So the work is definitely underway and that field work is imminent.

Senator McALLISTER: We did know that the exemption would expire this year, so it might have been better had this work commenced earlier.

Dr Helgeby : The exemption was due to expire, but it was also actively considered by the Australian Accounting Standards Board earlier this year. And so there was active consideration of whether to extend the extension, if you like—I think in February-March or so earlier this year. So, in one sense, the whole question about what the basis is for measurement was still a live issue up until that point. Even after that point, it is very difficult to try to get a handle on how to tackle a fair value measurement for these assets.

Senator McALLISTER: In terms of the work that has been done so far on that question: do we have any indication of whether the difference between fair value and historical cost would be material? The minister suggested that it would be and that it would in fact have a positive impact.

Senator Cormann: I did not say 'material'. Intuitively, if you value something based on historical cost value I think it is fair to assume that the fair value at any one point in time of an existing piece of equipment is going to be higher than the historical cost value—that is particularly when it comes to this sort of equipment. But that is an intuitive statement. Let's see what comes out of the work that is to be undertaken.

Dr Helgeby : In the absence of a measurement, it is actually hard to say whether the variance is material. But presumably the reasoning of the Auditor-General was that it could be material. In that sense, he had to take it into account.

Senator Cormann: Just for completeness, right—because this really is a technical issue: the presentation of the balance sheet, including in relation to the measurement of specialist military equipment, is the same as it has been for all Australian governments since June 2002. It is a relatively new issue when it comes to working your way through all the implications of a change in the accounting standard. But the government's commitment is to comply with the accounting standard as soon as possible, and we are working through the relevant issues to that effect.

Senator McALLISTER: It impacts on the balance sheet. Are there other—

Senator Cormann: It does not impact on the line cash balance or the fiscal balance aggregates, though.

Senator McALLISTER: No—I understand that.

Senator Cormann: It is literally a balance sheet issue, and the presentation of the balance sheet is consistent with what it has been in the past. If anything, in aggregate I think it is fair to say that historical cost value, given the age of some of the equipment we are talking about, would underestimate what the assessed fair value would most likely be through this process.

Dr Helgeby : If the argument that the Auditor-General was examining is right and there is a material variation, then in fact the balance sheet understates the position rather than overstates it. So it is a conservative position to take the historical cost basis.

Senator McALLISTER: Right, thank you. Would there be any other places in the budget papers where it might flow through if you see an adjustment to the value of these assets?

Dr Helgeby : I think the simple answer is 'no'.

Senator McALLISTER: Right. Can I turn to the Automotive Transformation Scheme?

Senator Cormann: You can turn to it, but it is a matter that comes within the industry portfolio. But if I can help you with any knowledge that I have, I will see what I can do.

Senator McALLISTER: Okay, that sounds good! There was an answer provided to question F60 from the October 2015 Senate estimates. Under the legislation, can we confirm that there is $1.5 billion allocated in the 2014-15 year for the Automotive Transformation Scheme?

Senator Cormann: I think we have gone through these in the past. Under the legislation, yes. But there have been adjustments as a result of estimates variations. The reason for that is because of what has, of course, been happening in that particular part of the market. Given the eligibility criteria for payments from the ATS, which were set, incidentally, by the previous Labor government, it is not expected that there will be much opportunity for take-up. This is in the context of car manufacturers announcing that they will cease manufacturing in Australia from 2017.

It is a matter of public record that it was decided in the 2015-16 budget not to proceed with previously announced savings measures related to the ATS on the basis that most of the savings will be realised as a result of decisions taken by car manufacturers. The net impact of the 2015-16 budget decision is $105 million from 2014-15 onwards. As per the answers I have previously provided, this reflects the reality that the decisions taken by motor vehicle manufacturers to cease production in Australia by the end of 2017 have reduced demand for this scheme by $795 million over seven years from 2014-15.

Senator McALLISTER: I want to explore the administrative consequences of a gap between legislated funding and the funding estimated—the demand that has been estimated. For example, in 2017-18, $258 million was legislated but $63 million is the expected demand. How does that work? How does the appropriation work where there is a difference between what is legislated and what is actually budgeted for?

Senator Cormann: The legislation does not say to us, 'Here is a pot of money; now get it out the door.' The legislation says, 'Here is a funding envelope for a particular purpose, these are the terms and conditions under which certain organisations might be able to apply for certain funding, and these are the eligibility criteria for people who might apply for certain funding.' What I am saying to you is that the government has made a judgement against the eligibility criteria reflected in that legislation about what the likely exposure of the government is going to be. I will stress again that the eligibility criteria were enshrined in relevant legislation, the Automotive Transformation Scheme Act 2009, by the previous Labor government. We have not changed any of that because we have not been able to get relevant changes through the parliament. So the eligibility criteria remain what they were. But because of what has been happening in the market—and principally because of the decisions by car manufacturers to cease manufacturing cars in Australia from the end of 2017—it is highly unlikely that there would be more than $105 million worth of demand against the funding envelope that was provided under the legislation.

Senator McALLISTER: From your answer, can you just confirm that your view is that this approach is consistent with the legislation and that you are not in breach of any legislative requirement to provide the funding that is set out in the act?

Senator Cormann: Our approach is absolutely consistent with the legislation. The legislation does not compel us to get all of that money out of the door no matter what. The legislation provides that a certain amount of money is available for a particular purpose. Related to that particular purpose, there are certain eligibility criteria specified. Given what is happening in the market, we made a judgement in relation to this—as the government makes judgements in relation to all sorts of expenditures under relevant pieces of legislation—about what the likely revised exposure to future payments is.

Senator McALLISTER: Within the department, who is responsible for the medium-term projections in the budget?

Senator Cormann: Medium-term projections in the budget are a matter for Treasury.

Senator McALLISTER: Organisationally, Ms Halton, no branch within your organisation is responsible for any role in the construction of medium-term projections?

Senator Cormann: Medium-term projections for the purpose of the budget are a matter for Treasury. Do we have people in Finance that deal with medium-term and long-term trends and the like? Of course we do. But, when it comes to putting the budget document together and the medium-term projections that are reflected in MYEFO or budgets or budget updates of any kind in the past, that is very much a responsibility for Treasury, who are appearing tomorrow.

Senator McALLISTER: Very good. It is exciting, isn't it? I do not seem to be able to locate it, but in the org chart that I took off the website I had thought there was a branch described as the long-term budget policy branch.

Senator Cormann: I just said that. There is a distinction. When it comes to medium-term projections in the budget document, it is the responsibility of Treasury, but, yes, we do have an area in Finance that of course thinks about long-term trends and the like, in particular on the expenditure side of the budget. But the responsibility for medium- and long-term trends as reflected in budget documents is a matter for Treasury.

Senator McALLISTER: Another organisational question: can you describe Finance's role in relation to the government's ICT agenda overall? I assume it is quite significant.

Ms Halton : We have a role in relation to the delivery of a number of platforms in terms of ICT. We have a role in scrutinising, for example, large projects. We do things called Gateway reviews, which you may be familiar with, and we deliver a series of what are most easily described as services. But the team can take you through any of those that you may be interested in.

Senator McALLISTER: I seem to have lost my org chart, which is making this line of questioning difficult. But, in reviewing the org chart, I noticed that there are quite a number of branches that seem to deal with ICT functions in different business units within Finance. Could you just describe or even take on notice to provide a list of each business unit which is involved in ICT and a description of the precise tasks that they undertake, how many staff are in each unit and a breakdown of the classification of each staff member?

Ms Halton : Certainly. We will take that on notice. But let us be clear. We have a whole-of-government responsibility in respect of procurement more broadly, and part of what we do is also in respect of ICT procurement. We make a distinction between people who work in the procurement space and people who actually do some of the delivery. In a number of cases, we deliver services for the whole of government, because it is cheaper for us to deliver those services for everybody else. We will give you some indication of where we are delivering a whole-of-government service.

Senator McALLISTER: It would be helpful to understand, in the broad, how you interact with the Digital Transformation Office, which I understand has recently moved from the department of communications into Prime Minister and Cabinet.

Ms Halton : That is right.

Senator McALLISTER: Also, any residual functions with the department of communications relating to ICT where you are interacting with them around the government's overall strategy. I am trying to get a handle—

Ms Halton : Yes. I get it.

Senator McALLISTER: on how the overall strategy is working and who is involved and what your role is in that, in particular.

Ms Halton : If I were to characterise this, the DTO has a responsibility in terms of working with the line agencies on some of what could be described as front of house, the consumer experience. We deliver a lot of back-of-house service for the whole of government. We do not deliver that for every line agency. You would understand that Human Services is a very big service provider; they hardly need us to do all of that for them. But, for example, we provide a very big platform on which we host a lot of government websites, and that is therefore much cheaper for departments than it would be if they all did it themselves. But we will give you that on notice—very happy to.

Senator McALLISTER: I think that would be useful.

CHAIR: Would you like me to ask a few questions while you gather your things?

Senator McALLISTER: That would be fine, Chair.

CHAIR: I know how stressful it can be trying to gather things together. Mr Halton, I understand that the department is seeking to have a bit more flexibility—shifting staff between higher pressure projects so you can match your staff against priorities. Is that a fair assessment of what you are attempting to do within your organisation?

Ms Halton : Yes, Senator. That is a very fair assessment. Essentially, as we know, if you staff every area in a department to the peak of its workload, you will have people who, for a lot of the time or part of the time—or at least some of the time—are not fully occupied. Our objective is to ensure that we can use our very capable staff as flexibly as we can so we can move staffing around where it is needed. We talk about the notion of surge capability, which is, to give you two practical examples: when there is a ministry change, there is a lot of work to go on in ministerial and parliamentary services in terms of both the physical aspect of that, but also the entitlements and everything else.

CHAIR: They have been quite busy lately.

Ms Halton : Same at elections—they are very busy—and it means that we can have a group of people elsewhere in the department who are trained and able to do that kind of work which, when there is a significant peak in workload, we can use those staff to assist with that work. We are doing the same with budget. We have budget surge, so we have people who can be deployed to work inside budget group, because obviously there is a huge peak in workload at a particular point in the year. You need people to understand how the budget process works and you need people who can actually do the technical work, but you do not need them there all the time. One of our challenges is to have a workforce who have the opportunity to develop a whole range of skills and then use those both in their day-to-day work and sometimes as the organisational and government's needs of the day dictate.

CHAIR: Does this flexibility require any changes to your EA?

Ms Halton : No. What we have actually asked staff to do is volunteer—people who are interested in a move or interested in being part of surge capability. We have actually just done quite a large training program of people who want to work in the budget context in a surge capacity. So we asked people who was interested, they volunteered and we put people through a training program, which means that, when we need them, we can actually use them.

CHAIR: That is the budget capability. You have done whole-of-government reviews and a whole range of other things. Do you have specialist surge teams, or is it just changing generic surges.

Ms Halton : Those are two examples of a very particular peak workload need that we have that is completely predictable—or at least known to be regular, even if you cannot precisely predict the date. We also have a group of people who do the project-like work that the government of the day requires. For example, we have done a whole series of pieces of work in relation to government assets and doing scoping studies on those. We have done some work more recently, which you are familiar with, in relation to, for example, the Air Warfare Destroyer project. That was done on a project basis, drawing staff from across the department to bring their expertise into a team to manage that project to its successful conclusion. What we then do is try to make sure that all those staff are redeployed across the department, because they have very important skills that we both want to keep and also give people an opportunity to exercise elsewhere in the department.

CHAIR: This is an efficiency measure, I am assuming, so that you can maintain people as actively involved in the day-to-day operations as possible. Is it pioneering, can I ask, among departments?

Ms Halton : One never likes to claim being too much of a pioneer, because departments are very flexible.

CHAIR: I am claiming it all the time.

Ms Halton : Are you now? Goodo. Cutting edge, no less.

CHAIR: I am not sure about that.

Ms Halton : Back to the seventies maybe, Senator.

CHAIR: The fifties, thank you very much, Ms Halton.

Ms Halton : The fifties! No David Bowie for you then.

CHAIR: He was a bit too progressive for me.

Ms Halton : Righto. Got the message. Essentially, in looking at having a larger pool of staff who are deployed flexibly—and I am told that is pioneering in terms of the public sector broadly, globally—we have said to the staff that what we want to do is give people the opportunity to have interesting jobs and skill development, and the opportunity to learn and develop their professional skills in a way that both meets our needs and gives them a career that they can focus on and an opportunity. So there is a kind of win-win here from our perspective.

The challenge is, with all of these things, figuring out how you deploy the resources, know where they all are and manage the money in a very careful way because there is not more money to run the department and there is a lot more work. So our challenge is to make sure that we can account for everything we are doing and account for where all of our resources are, and that includes our people and the skills that they have at any point in time. It is an early part in developing this for the whole of the department but we are, and I hate to say this, on the journey.

CHAIR: You just said that there is a lot more work. Do you mean in the department generally or a lot more work attached to this change in approach?

Ms Halton : No. In fact, there will be less work in the medium term in terms of managing it once the tools we are going to use are deployed. Everyone in their lives knows that information moves around much more quickly. Everyone is receiving correspondence not of the Australia Post variety but communications. We are all expected to network much more effectively. We are supposed to know what is going on more broadly. We are all just busier. That is the reality.

CHAIR: Also, it is fair to say that Finance is becoming increasingly relied on for whole-of-government reforms in a range of areas. I noted some of them before: the contestability reviews, scoping studies, public governance reforms and so on. You are taking on a fair bit of work.

Ms Halton : And, as I just indicated with respect to Senator McAllister's question in relation to what we are doing on IT, the reality is in some cases, and the minister has already talked about this today, it is better to do things once for the entire public sector than it is to duplicate, and to sometimes waste money by having people do the same thing multiple times over. Take the case we were just using as an example: the delivery of a platform for government websites. Can I say when we have rolled out that platform, it is not just the Commonwealth government agencies using it; we have had a state government say, 'Can we use that capability?' We were happy to agree that they could. In some cases, for example, travel, we have gone to a position where we now procure travel for government departments. So we now have one contract to do that rather than people replicating that across government.

CHAIR: Have you found cost efficiencies in the overall cost of travel?

Ms Halton : Yes—for example, going back to the IT question. If you negotiate with individual software providers 300 times across government, you are not going to get the same value for money when you procure once. Obviously, we do this progressively over time, but we have been looking to where it is efficient, where it is going to deliver a saving, to actually procure on behalf of government.

CHAIR: Okay, it does seem like common sense to me to take that approach, but there must be differentiations. For example, the Department of Defence may have specialist requirements and capabilities and things of that nature, so there is still the need for that flexibility for individual departments to cater to their own needs when necessary.

Ms Halton : Yes. But the one thing I would suggest to you is one does need to take a very careful and sometimes slightly sceptical eye to the 'I'm different and special' claim. There are cases where people are different and special and they need to procure something particular for a particular need. Everyone acknowledges that. But there are a number of things—for us old-fashioned and possibly not from the 1950s—

CHAIR: I am as up to date as I am ever going to be.

Ms Halton : Righto. I just have this image of you now in platform shoes, which I am struggling with.

CHAIR: That was the seventies.

Ms Halton : Yes, true. Okay, the fifties. For those of us who have iPhones and those people who have Samsungs, we all just accept the basic software that is on those devices. We make do, and it actually meets 99.9 per cent of our needs. We just have to ask ourselves the question, which is what we do: do we actually need all that tailoring or, in some cases, is the product off the shelf good enough? Tailoring comes at a cost. So you just ask the question; you do not prejudge the answer. A lot of what we are doing is asking those questions.

CHAIR: In actual fact we have seen that with the provision of IT for parliamentarians. It seems to be much more sensible now than it was some years ago. Finance has abolished some bodies that were part of the structure. I remember we asked about the Albury-Wodonga Development Corporation on a number of occasions. Has that gone now?

Ms Halton : Yes.

CHAIR: There was the Australian River Company and ComSuper—

Ms Halton : We talked about that earlier today.

CHAIR: They are all out of your portfolio. Has that made any efficiencies or simplified your operations?

Senator Cormann: We have saved about $1.4 billion across government. Through the efforts so far and, obviously, the work is continuing.

CHAIR: Has that needed any rationalisation of staffing operations?

Senator Cormann: That is partly how you achieve those savings. We can provide you with a list of all of the efficiencies that we have achieved, but to give you one significant example. After coming to government we made a decision to merge AusAID into the Department of Foreign Affairs and Trade, and there were some efficiencies on the staffing front that could be achieved as a result of that change. There were a number of similar, though not as significant, changes that had similar beneficial consequences in terms of savings and efficiencies. All of that is reflected from time to time in budget updates. Of course, in terms of staffing numbers across the Public Service, our focus has been to bring staffing numbers back to 2006 or 2007 levels and we have achieved that and we are on track to stay at that level.

CHAIR: I am going to say that I am encouraged there is a smaller government and a more efficient government. It is necessary from the performance point of view—both from a programs and Public Service perspective—but has it been a positive step for the Department of Finance, both from your own experience and that of your team?

Ms Halton : In terms of the changes we have been making, absolutely. That is certainly my view. One of the challenges when you are sitting across—and I have done this a number of times in my role as secretary—a very complex portfolio with lots of little agencies is the fragmentation that that implies and the duplication it also involves in terms of back office. It is not to say that all of those agencies are not very earnest in their endeavours—they are—but the opportunity periodically to see whether in fact you can deliver the business of government in a more streamlined and indeed more flexible way is a good thing. We have been doing that internally in order to ask: what are the key things we have to deliver for government? How are we going to do that inside the resourcing that we have? We have to think about that quite creatively. We are borrowing shamelessly—plagiarising shamelessly—from whomever we can find in the private sector and the public sector. But certainly the streamlining is a strength. I think it helps us to focus on the core business and do that well, and that is what we all aspire to do—to do our jobs well.

Senator Cormann: From the government's point of view our policy objective is to ensure that government administration is as efficient, as effective and as streamlined and responsive to relevant needs as possible. That is why we continue to pursue this as a rolling reform program.

CHAIR: I asked before whether you were pioneers and you are hesitant to claim that. Is this something that we hope to see, Minister, rolled out across government?

Senator Cormann: Our smaller government agenda is a whole-of-government agenda. We are certainly focusing not just on the Finance portfolio; we are focusing on all areas government. If you look at the number of government bodies that we have either abolished, merged or rolled into broader departments, then you will find across the whole of the government—I have mentioned AusAID into DFAT—there are examples from agriculture to infrastructure and to health and education. Right across the board we have been putting the ruler across government administration in a very comprehensive way. This is also where our rolling program of functional and efficiency reviews across all of the portfolios in government has been undertaken of the last 18 months and is ongoing. That is where that fits in. We had functional and efficiency reviews initially in health and in education. We announced a whole series of additional functional and official reviews in other areas of government in the budget, and there is a contestability review to see what functions of government could be better or best provided by the private sector. All of these activities are focused on making sure that government administration, the provision of government services, is as efficient, as effective and as responsive as possible, that we spend as much as necessary but as little as possible, as I said earlier.

CHAIR: Minister, I appreciate that. One of the things I find most interesting is this concept of the surge and the flexibility that it provides so that you can utilise the skills and the resources you have got to the maximum capability. Has that sort of approach been taken across multiple portfolios in the government?

Senator Cormann: It is an approach that we are trying to encourage across all of the government always. One of the mechanisms that we are using to have that conversation with relevant portfolios is what is described as the ASL offset rule. Whenever there is an additional pressure or additional policy proposal that might come before government, inevitably the proposal is accompanied by a suggestion that we need additional staff in order to deliver. That then triggers a conversation with us about whether that is really necessary, really appropriate or whether this is actually a surge circumstance, where there are other more appropriate ways to deal with a particular pressure rather than to expose the government to an ongoing liability by having additional people on our books forever and a day.

CHAIR: And Finance is a good example of an agency—

Senator Cormann: That is right. This is not a partisan statement; it certainly is not intended that way. Governments of all persuasions over the decades have dealt with particular issues and priorities and challenges that have come their way. Some opportunities you can see at a particular point in time and you structure certain administrative and process responses around it; you keep adding to it. It is important, from time to time, to have a strategic and comprehensive look back to see what is actually no longer required, what you can get rid of, what is no longer essential in dealing with the priorities of 2015 as much as it might have been an important priority in 1975. We have essentially gone through a stock take, and we have sought to set up the system such that we are in the best possible position on a rolling basis to maximise efficiency and effectiveness.

CHAIR: Finally, before I go back to Senator McAllister, you have done a stock take, you have got a review of new programs and everything else, but one of the things is about accountability and transparency so that—how would I put it?—the bloated mess does not creep back into the system over a period of time. Is that what your annual report—you have the Australian Government Organisations Register. Is that something to do with that?

Senator Cormann: That is a transparency measure to assist with the scrutiny of where decisions are made that was all in the creation of new bodies. I guess the ASL offset rule is part of that too because instead of just, in an automatic fashion, adding additional staff whenever an additional priority is identified, it should really force that conversation: 'Okay; there's a new pressure, a new priority, that needs to be dealt with today. Do we still need to do all of the things that we did before, or is there an opportunity to re-prioritise existing staff before we go into hiring new staff? Is there a capacity to use other means than permanent staff to deal with any surges in demand at a particular point in time?' These are the sorts of things that we are working through.

CHAIR: Thank you very much for that.

Senator McALLISTER: We are ready to move on to outcome 2 if everybody else is.

Senator Cormann: So we can release all of the outcome 1 people?

CHAIR: Yes, we can release the outcome 1 people.

[17:44]

CHAIR: We are going to go to outcome 2, support of an efficient and high-performing public sector. I think we have dealt with some of that anyway.

Senator LUDWIG: Coming back to F70 from the October 2015 estimates round, referring to telepresence: can you provide information on how many NTS phase 1 sites there are in operation for each of the financial years?

Senator Cormann: I am sure that somebody can.

Mr Sheridan : There are 38 large-room NTS facilities around Australia.

Senator LUDWIG: And the phase 2 units?

Mr Sheridan : There are 128 of those personal units.

Senator LUDWIG: I think we have talked about this before, but is there a tracking mechanism that you use to establish (a) an increased usage of both phase 1 and phase 2; and (b) what are the metrics, if you do track it, to show that there is an increased usage? And do you have a rule of thumb or an equation that you then use to calculate the opportunity of not flying—in other words, the cost that you can book against if someone uses a telepresence and that saves X number of dollars in airfares because those people would otherwise have had to travel to Canberra or to Brisbane, Sydney, Melbourne and so on?

Mr Sheridan : Yes. Since the system began in October 2009 until December 2015 the system has hosted more than 5,475 meetings and has placed 11,779 personal video calls, saving over $112 million in travel and related costs.

Senator Cormann: Let me say that, as a frequent user who is a resident of the great state of Western Australia, I use it a lot and I think it is fantastic. It is a great initiative that was taken by the previous government.

Senator LUDWIG: I wanted to check about the usage—do you break it down by phase 1 and phase 2 sites, or is it simply an aggregate?

Mr Sheridan : Generally speaking, those personal video calls—the 11,779 to which I referred—are on the phase 2 systems. The 5,475 meetings are generally on at least one of those systems in rooms, but the two can be interconnected.

Senator LUDWIG: Yes, I understand that.

Mr Sheridan : So you can join a meeting from an individual unit in a room.

Senator LUDWIG: So we have got that metric. Is that showing an increase or a flat line? In other words, how do you express it—is it by month, by year?

Mr Sheridan : We have the information by day, essentially, because it is recorded by the booking system that books the meetings and holds records of the calls. It shows a continuing increase in the use of the system.

Senator LUDWIG: That is what I am trying to identify, so if you have a metric or a graph that shows that, that will be helpful. Could you take that on notice?

Mr Sheridan : We could take that on notice.

Senator LUDWIG: The other side of that equation is the costs of the system. Could you outline what the fixed costs are and then the variable costs are as well?

Mr Sheridan : The system initially cost $13.8 million over four years. That funding covered the room remediation we needed to do the units themselves, the central switching and related information. The interstate jurisdictions to which we connected contributed an additional $4.6 million for that work. The phase 2 work which was announced in the 2013-14 budget had an additional construction cost of $3.1 million and operating costs of about $3 million per annum.

Senator LUDWIG: Sorry, your ongoing costs—I missed that figure.

Mr Sheridan : Three million per annum.

Senator LUDWIG: Are there any plans to expand the number of TelePresence networks, either at phase 1 or phase 2?

Mr Sheridan : We do not have any plans to add additional networks. The infrastructure we have in place is large enough to sustain more units. Generally speaking, the demand is for personal units rather than additional rooms. We can supply those on the basis of either entitlement or, if agencies wish to purchase them, we can add them to the system for them.

Senator LUDWIG: Have you added any sites in the last three months?

Mr Sheridan : I would have to take that on notice.

Senator LUDWIG: I am happy for you to take that on notice. I want to go back to the other one that I have asked about in the past, the Intra Government Communications Network. It will not be privatised now, as I understand it, Senator Cormann?

Senator Cormann: I have announced that a little while ago—yes.

Senator LUDWIG: Yes. You announced that on 27 November. I guess you have the recommendations of the scoping study, which you based your decision on to not privatise, I assume. Can you confirm at least that part, or can you release the recommendations?

Senator Cormann: No, I cannot release the recommendations. Obviously, this was something that was part of the deliberative process of cabinet. I have, essentially, laid out all of the reasons and considerations of government in the press release on 27 November.

CHAIR: Sorry, Senator Ludwig, the secretary has just pointed out that we have gone to program 2.2—transforming government.

Senator LUDWIG: I was just jumping around.

CHAIR: That is okay. What we might try to do is, if it is easier, to work through them methodically, unless that would interrupt your—

Senator LUDWIG: It will not destroy me—no.

Senator Cormann: We are relaxed. We are happy to—given that with outcome 2—

Senator LUDWIG: Everyone from outcome 2 is usually—I can see most of them in the room.

CHAIR: Okay. As long as we have agreed on that and we know where we are going, we are going to jump around a little bit.

Senator Cormann: Let's keep going with outcome 2 until we exhaust it. We are totally relaxed.

CHAIR: Excellent. There we go.

Senator LUDWIG: Correct me, Minister: the media release states the government has commenced a program of work to implement specific recommendations—developing a technological strategy, introducing service level agreements, reviewing internal financial arrangements and improving governance arrangements. So the question then is: who is doing that work? Will Finance oversee that specific work?

Senator Cormann: The answer to that is: yes. If we can assist you with any specific questions, we are happy to do so.

Senator LUDWIG: Within that then, what section of Finance will be doing that? Is that overseen by a separate section? Have you recruited new individuals to do that work, or is that you, Mr Sheridan, who will do that?

Mr Sheridan : It is my division and the Government Network Services Branch in my division who are responsible for ICON.

Ms Halton : You have seen the current org chart—

Senator LUDWIG: Yes. For 'developing a technology strategy which considers ICON's potential role within a whole-of-government ICT framework', is that being acted upon, and is that within your section, Mr Sheridan?

Mr Sheridan : The whole-of-government ICT framework is a larger task for Finance. But the place ICON would have in it is our work, and we are looking at how we can improve the service in a technology sense.

Senator LUDWIG: This is not so much of a question: what you are doing is ensuring that it meets the whole of government—i.e. the ICT Finance framework—and how ICON fits within that is your job.

Mr Sheridan : Yes.

Senator LUDWIG: For the second area, which was 'introducing service level agreements to clearly define the level of service and improve on delivery', have you finalised that piece of work yet?

Mr Sheridan : We are continuing to do that.

Senator LUDWIG: Is there a current service level agreement in place, and what level are you trying to achieve? In other words, I am trying to get some metrics around how you are going to establish the baseline for your service level agreement and what the outcome is supposed to be, what are you supposed to achieve.

Mr Sheridan : It is probably necessary to understand the construction of ICON before talking about service level agreements. Essentially, ICON is a collection of individual links between one point and another. Such links are either operating or they are not. It is not a case of 'it can only work half as well' or something. Any service level is, generally speaking, going to be about whether or not it is connected, whether or not it is working, and we have very high levels of such connection at the moment. We also have across our links, except where agency CIOs have formally decided not to do so, redundancy of the system so that were a backhoe to go through one part of a cable an agency's links would still be connected and workable through the part of the connection. As a consequence, we have a very high rate of up-time, if you like. Agency interests around service level agreements are generally around the time taken to put new connections in place or make changes to connections.

Senator LUDWIG: I understand that. You raise an interesting point. Who has actually jumped out of the system recently—anyone?

Mr Sheridan : No.

Senator LUDWIG: You said that the secretary can make a decision as to whether or not they—

Mr Sheridan : When CIOs ask for a new connection we ask them whether they want redundancy. If they do not want redundancy through the ICON network, because there are other ways to provide that redundancy, we just record that.

Senator LUDWIG: How do you record it?

Mr Sheridan : In our files.

Senator LUDWIG: They do not require redundancy so—

Mr Sheridan : They will have arranged a different form of redundancy. It might be done through some other form of connection or some other way.

Senator LUDWIG: That is a matter for whole-of-government ICT?

Mr Sheridan : I beg your pardon, Senator?

Senator LUDWIG: Then that would be a matter for whole-of-government ICT?

Mr Sheridan : No, it is an agency by agency choice.

Senator LUDWIG: Have any agencies opted out of ICON then—in other words, decided not to adopt it?

Mr Sheridan : It is not a mandatory system. You do not need to opt out. If you want to buy a connection, you buy it. There are, I think, some 4,000 links across the system at the moment. Some agencies have quite a lot of links. I think one agency has just one.

Senator Cormann: It started off with just one cable and has obviously grown exponentially—

Senator LUDWIG: I can see that.

Senator Cormann: in the past few decades. There is a lot of communication going on across government, Senator Ludwig.

Senator LUDWIG: Yes. Thirdly, reviewing the internal financial arrangements to provide for future funding for strategic investment needs—how do the current financial arrangements work now then? Is it a billed system by connection and time use?

Mr Sheridan : We have a pay-as-you-use mechanism. Agencies pay for the number of links that they have and they pay for new work that they want done.

Senator LUDWIG: Lastly, improving governance arrangements to address due diligence issues such as property access rights and carrier licence exemption—what are the issues there?

Mr Sheridan : As the minister explained, this has had a very long history—

Senator LUDWIG: I think we have heard that. I think I recall that from past estimates.

Mr Sheridan : Indeed, and as a consequence there have been issues around—I am not a lawyer so I cannot give the exact words—essentially, the title of the cable routes that we might have, where cables have been laid and those things. The scoping study thought that it might be better if we did some more work around those records, if you like. We have not had any disputes around that in the history of the arrangement.

Senator LUDWIG: So it is just-in-case work because, as described, you have now got cables running all throughout interconnected departments across Canberra in conduits through properties and across properties where you would have originally, I presume, sought an access agreement for that conduit, and your records might still be there, or they may not be there.

Mr Sheridan : I think generally speaking they are there. It was a view amongst those conducting the study that we could do some more work in that area.

Senator LUDWIG: I will leave it at that.

Senator O'NEILL: I would like to ask some questions around the Taxation Office building in Gosford.

CHAIR: Is this in outcome 2? We will just get some confirmation. I am not trying to be tricky. Would this be in outcome 2?

Senator Cormann: It depends on the question.

Ms Halton : We do property and construction. It depends on what the question is whether it is us as a portfolio or not.

Senator Cormann: It could be the tax office.

CHAIR: Let's have a go, Senator O'Neill.

Senator O'NEILL: As you said, Senator, there are lots of parts of government talking to one another, so we will see what we can find out.

Senator Cormann: That is exactly right. We are.

Senator O'NEILL: Can you explain what Finance's role was or is in relation to the new Australian Taxation Office lease in Gosford, New South Wales?

Mr Edge : The ATO, like any other Commonwealth entity that is proposing to enter into a significant lease for new office accommodation, would need to comply with the requirements in the relevant finance resource management guide. There would need to be a notification of the intention to enter into a new lease, there would need to be a cost-benefit analysis done, and the lease would need to be endorsed by the appropriate decision maker.

Senator Cormann: Bearing in mind, of course—and I know that you know this, Senator O'Neill—that this is a specific election commitment that was made by the government in the lead-up to the last election. That obviously always has a bearing on things, because we are committed to delivering on our election commitments.

Senator O'NEILL: Any particular bearing in this case, Senator Cormann?

Senator Cormann: I am just making the point. This is an election commitment and we are delivering on that election commitment, so I am just putting that as an additional perspective on the answer that Mr Edge has just provided.

Senator O'NEILL: Who is the appropriate decision maker or makers in this case?

Mr Edge : The lease would need to be endorsed, and I would need to just check who the decision maker would be in this instance.

Senator O'NEILL: Could you provide me with documentation that shows the process that was followed.

Senator Cormann: We will take that on notice.

Senator O'NEILL: With who said what to whom and when, and who finally signed off on that. Do you know who the final signatory on it was?

Mr Edge : I would have to take that on notice. I am not aware of that.

Senator Cormann: We will give you that answer on notice.

Senator O'NEILL: You mentioned a number of considerations regarding approval for the ATO lease. That would be standard. What were the main considerations in regard to the approval of this particular lease?

Mr Edge : I would have to take that on notice. I am not aware of the detail of the approval of the lease.

Senator O'NEILL: I would appreciate some documentation around that. One of the arguments that have been made in a number of inquiries, including inquiries that were put to the Senate and in documentation that we have received, indicates that there was a value for money as part of the consideration. Can you confirm?

Senator Cormann: Who provided that documentation? Was that through the Treasury portfolio or through the Finance portfolio?

Senator O'NEILL: The ATO.

Senator Cormann: So the ATO provided that documentation.

Senator O'NEILL: The ATO provided some documentation. The final ATO proposal received the Department of Finance approval, it says.

Senator Cormann: And the ATO, of course, will appear tomorrow and in relation to—

Senator O'NEILL: And I will have some questions then too.

Senator Cormann: I am sure you will.

Senator O'NEILL: Could you confirm the amount of the successful tenderer, the Doma Group, and how much they will receive in rent as a result of the ATO lease in Gosford?

Senator Cormann: To be frank, that is probably a question that is more directly addressed to the Australian Taxation Office, but, in an abundance of helpfulness, I am happy to take the question on notice and we will see what we can assist you with.

Senator O'NEILL: Are you are aware of the release by the member for Robertson that indicated the estimated cost to the government over the next 10 years—

Senator Cormann: Sorry, in relation to the question you have just asked, it has been drawn to my attention by Ms Hall that I have actually answered that precise question on notice before. The value of the lease procurement is $42.9 million, as of course was also publicly reported on AusTender and as was announced in the 2014-15 Mid-Year Economic and Fiscal Outlook. It was announced that the Australian Taxation Office would meet the cost from within existing budget, and that answer was provided by me on 3 December 2015.

Senator O'NEILL: Could you just humour me, Senator Cormann, and explain again what that $42 million is, because that is the amount that is on AusTender—is that correct?

Senator Cormann: As I have just read out to you, and as I provided in an answer to a question on notice on 3 December 2015, $42.9 million is the total value of the lease procurement. But, in terms of specifics, specific questions in relation to this should be directed to the tax office, because obviously they are the organisation that is entering, or that has entered, into this lease.

Senator O'NEILL: Are you aware of the figure that was released on the day that the Treasurer made the announcement, 25 September, by the member for Robertson?

Senator Cormann: Which 25 September?

Senator O'NEILL: In 2015.

Senator Cormann: Not off the top of my head, but I see that you are reading off a document, so I assume that you have it there in front of you.

Senator O'NEILL: It says:

The estimated cost to the Government over the next ten years is approximately $70m from leasing and related expenditure. The construction costs will be met by the developer.

Senator Cormann, help me understand the gap between the $42.9 million that you are talking of and $70 million.

Senator Cormann: If we are getting $70-plus million in value in relation to a $42.9 million lease procurement value then I would have thought we were getting good value for money. But, to be frank, the specifics are best addressed to the Treasury portfolio and specifically the ATO. But manifestly, when you have a procurement of this nature and when you lease office accommodation of this nature, you would expect there to be value related to the cost of the fit-out and the like. What is reflected in my answer here is the value of the lease procurement itself, which is $42.9 million, as reported publicly on AusTender some time ago, but there are likely to be other related issues and values that come into it. I obviously would expect that the information provided by the local member is entirely accurate.

Senator O'NEILL: You would think that it would be accurate, but I am sure that you, as the Minister for Finance, would be able to elucidate the difference between value and cost for us. The statement is:

The estimated cost to the Government—

Senator SMITH: Perhaps you might like to table that release that you are working from.

Senator O'NEILL: Absolutely. It says:

The estimated cost to the Government over the next ten years is approximately $70m from leasing and related expenditure.

That number is also—

Senator Cormann: Over the next 10 years?

Senator O'NEILL: Over the next 10 years. The number of $70 million is also—

Senator Cormann: Are you not happy that the Australian Taxation Office is investing in that part of New South Wales? Are you against it?

Senator O'NEILL: I would love to discuss my happiness with you, Senator Cormann, but I just want to pursue these questions around the $70 million.

Senator Cormann: I am just trying to understand. As I said, it was a very clear and explicit election commitment that the government made, openly and transparently, in the lead-up to the last election. We are delivering on it. Obviously we are delivering on it with a view of achieving value for money, as you would expect us to do.

Senator O'NEILL: Senator Cormann, I am just trying to understand.

Senator Cormann: In terms of the specifics, given that the costs are met from within the ATO internal budget, I think that these sorts of questions ought to be directed to the ATO.

Senator SMITH: The difference with our costs—

CHAIR: Thank you, Senator Smith; you are not helping. Senator O'Neill, we are trying not to interrupt. I know that the minister is providing comprehensive answers, but if you wait for him to conclude his answer then you can re-ask your question.

Senator O'NEILL: Thank you very much, Chair. The $70 million figure is also indicated in correspondence from the Australian Taxation Office, to verify that number.

Senator Cormann: That just proves the point that you should direct any questions to the ATO, because it is obviously a number that comes from them.

Senator O'NEILL: But, Senator Cormann, as the Minister for Finance, isn't the gap of nearly $30 million between the $42.9 million, which is on the AusTender and which you have told me, and the $70 million, which the member is putting out as the figure, of concern to you?

Senator Cormann: It is not a concern to me, because, quite frankly, you are mixing apples with oranges. What is reflected on AusTender is the value of the lease procurement. Obviously, in relation to any such move as the move of the ATO into Gosford, you would expect there to be related fit-out expenditures and the like. This is squarely an area of questioning for the ATO. It is not a matter that we can really assist you with much further here.

Senator O'NEILL: One of the proponents who tendered for this bid was a joint venture between the Gosford City Council and a Central Coast developer. They put forward a case involving a cost of $37.9 million over 15 years. How did the government determine that the Doma bid was deemed better value for money than a bid such as that, which was less expensive and located the building on a site much more to the community's desiring?

Senator Cormann: Firstly, this is a tender that was conducted by the Australian Taxation Office. As you would expect, these sorts of procurements and decisions are actually conducted, appropriately, at arm's length from the government. If you want to ask specific questions as to why the Australian Taxation Office has made the decision that they have in relation to the choice of successful tenderer then you really have to direct those questions to the ATO.

Senator SMITH: I do not know that Senator O'Neill has properly represented the $70 million, because it makes it very clear here in the media statement:

The estimated cost to the Government over the next ten years is approximately $70m from leasing and related expenditure.

Senator O'NEILL: I am happy to go to that.

CHAIR: Well, Senator—

Senator Cormann: You have made that point. The related expenditure includes such things as fit-outs. This actually does not relate to this portfolio.

CHAIR: Could we confine our questions to matters related to this portfolio—notwithstanding how helpful the minister is and has been? If we could do that it would be of assistance to all.

Senator O'NEILL: I will see if this is at the boundary of what is acceptable: can I say that the inclusion of capital expenditure property-operating expenses and additional outgoings is an extraordinary gap between $42.9 million and $70 million?

Senator Cormann: Well, I encourage you to ask the tax commissioner, Chris Jordan, about that tomorrow.

Senator O'NEILL: Senator Cormann, in your role as Minister for Finance do you have any indication of how the Doma bid was deemed to be value for money?

Senator Cormann: I was not involved in the tender process, if that is your question—as I should not be. These sorts of tender processes do not involve ministers. These sorts of tender processes are conducted appropriately by the relevant public sector agency—in this case, the Australian Taxation Office, which I am sure will be very happy to assist you tomorrow.

Senator O'NEILL: Does it concern you that this arm's length process that you describe is somewhat compromised by the statement of the ATO with regard to, 'The ATO regularly updates the local member for Robertson, Ms Lucy Wicks, to ensure the government representative in Gosford is current with the progress of the procurement process'?

Senator Cormann: I think it is entirely appropriate for the Australian Taxation Office to inform the local member representing the local community in the House of Representatives in the way that the Australian Taxation Office sees fit. To what extent they think that is appropriate is a matter for them. I am very confident that the tax commissioner, Chris Jordan, will be very happy to answer relevant questions that you might have tomorrow.

Senator O'NEILL: Can I say, Senator Cormann, that the community is extremely concerned that while this claim of 'run at arm's distance' from members of parliament is now quite questionable, the community was not consulted?

Senator Cormann: Chair, I think there is a bit of commentary happening now instead of questions.

Senator O'NEILL: Why was the member for Robertson consulted?

CHAIR: Okay. I apologise, Minister—I was in consultation with the secretary.

Senator Cormann: Senator O'Neill is asking me why the tax office consulted and provided advice to the local member of parliament—

Senator O'NEILL: But did not consult the community.

Senator Cormann: That is squarely not a matter for this estimates. It is squarely a matter for the tax office.

CHAIR: You are quite right, Minister. If it is not within your portfolio department, please make that case very clear and very succinct, and I will keep a close ear out.

Senator O'NEILL: Senator, are you aware of the concern of the community about failure to consult them throughout the process, when the member for Robertson was being consulted herself?

Senator Cormann: Again, you are referring to a process that has been managed by the Australian Taxation Office. It is entirely a matter for the Australian Taxation Office to explain the actions that they have taken and the reasons why.

Senator O'NEILL: To follow a slightly different line of questioning, was the old Gosford Public School site purchased or leased from the New South Wales government by the Doma Group?

Senator Cormann: To be frank, now—and for some time now—you are well and truly going beyond the areas of responsibility of the Finance portfolio. I have no knowledge in relation to the issue that you have just raised.

Senator O'NEILL: Did you approve the ATO's proposal to lease or purchase the property?

Senator Cormann: You asked that before and we have taken that on notice. We will provide an appropriate response in the appropriate time.

Senator O'NEILL: Will you be able to confirm for me what the breakdown of the $42 million or the $70 million is?

Senator Cormann: No, because, as I have indicated to you earlier, those questions should be directed to the Australian Taxation Office.

Senator O'NEILL: Could you take on notice why there is a $27.1 million shortfall.

Senator Cormann: If you put that question on notice in the Senate economics committee I am sure that the Australian Taxation Office would be very happy to assist.

Senator O'NEILL: I am a little uncertain at this point, because of your answering, about your role in the specific approval of the proposal to lease the property at 20 Mann Street Gosford from the successful Doma Group. What was your role?

Senator Cormann: You asked that same question two questions ago, and I took it on notice.

Senator O'NEILL: Do you know when you approved this process?

Senator Cormann: That is a variation of the same question, so—

Senator O'NEILL: The community would like to know.

CHAIR: Senator O'Neill, it seems to me the minister has taken what is relevant to him on notice. I understand you may have an interest in this area, but some of your questions are repeated and they should go to different areas.

Senator O'NEILL: It is such murky territory, I am trying to discern out of the mud where we are.

CHAIR: It is not murky, and this is one of the difficulties of estimates—acquainting yourself with where the questions should be asked. The minister has been very helpful in pointing you in the right direction, so rather than continuing to spin the wheels I ask you to perhaps approach the Taxation Office.

Senator O'NEILL: Can I move on to some questions to the secretary, Chair?

CHAIR: If they are relevant. Are they relevant?

Senator O'NEILL: We will see. Did the Secretary of Finance approve any aspect of the ATO's proposal?

Senator Cormann: We have already taken on notice the involvement of Finance and who the decision maker was in relation to these matters from the Finance point of view. That is just another variation of the same question that we have already taken on notice.

Senator O'NEILL: When you provide me with the answer will there be a clear indication of whether it was the Secretary of Finance who signed off, you who signed off yourself, Minister, or another representative of the government?

Senator Cormann: We have taken on notice who within Finance had what role in relation to this particular procurement, and I am very happy to assist further by specifying when any relevant decisions were made.

CHAIR: Senator O'Neill, I must concur. I have heard the same variation several times now.

Senator O'NEILL: To be clear, I would like to understand exactly when the lease was signed between the ATO and the Doma group.

Senator Cormann: That is a matter for the ATO.

Senator O'NEILL: Had the lease between Doma and the ATO been signed at the time of the announcement by the Treasurer, Scott Morrison?

Senator Cormann: Again, that is a matter for the ATO. They are appearing tomorrow and they would have that sort of information.

CHAIR: I am sure the Senate economics committee will be very helpful. Minister, I wanted talk about the ASIC registry. I think that comes out in this part, doesn't it?

Senator Cormann: That depends on what your questions are. The Finance portfolio currently is managing a process as a result of a scoping study—

CHAIR: That is what I am interested in—the market testing of the private sector interest to upgrade and operate the ASIC registry.

Senator Cormann: That is us.

CHAIR: Okay. You announced in December the beginning of what was described as an indicative bid phase. Is that correct?

Senator Cormann: Yes, that is right.

CHAIR: What does that phase encompass?

Mr Edge : The indicative bid phase follows on from two earlier stages of the ASIC registry process. One was initially a registration of interest process back in June last year to just determine parties that might be interested in participating in the opportunity to operate the ASIC registry. There was then an expression of interest phase which followed that when those parties were invited to respond to a fairly detailed expression of interest document that set out the possible terms and conditions that would be offered if this was to proceed.

The phase that we are currently in is really the third stage of that—that is, a more detailed opportunity for market participants to respond to the potential opportunity to operate the registry. There is quite a lot of commercial and other information about registry operations and processes that they have been provided with.

CHAIR: All right if I can cut to the chase, there is an expression of interest phase and then you are asking people to put in an indicative bid which is not binding. Is that right?

Mr Edge : That is right.

Senator Cormann: It is for them to put their best foot forward so we can make a judgement on where we go next.

CHAIR: Is that designed to narrow the field? Or is it screening process and you are going to say you will look at the top 10 bids?

Senator Cormann: It will give us an indication of which are the most attractive bids. Obviously it will help inform government decision making on the next steps.

CHAIR: Attractive bids—the higher they are, the more attractive they would be, wouldn't they?

Senator Cormann: There are serious of features on these. You are right; we are keen to realise some capital for the government up-front. But by the same token, we want to see what proposals potential bidders have to operate and improve the ASIC registry moving forward. There is a whole range of things that go into the assessment of what we would think is an attractive bid.

CHAIR: How many did you have in the expression of interest phase? How many expressions of interest?

Mr Edge : There was an announcement that there were more than 10 parties that responded to the EOI phase.

Senator Cormann: I publicly announced it previously.

CHAIR: When does the indicative bid phase conclude?

Mr Edge : Responses are due on 23 February this year.

CHAIR: Do you have any expectations of how many of those 10 will participate?

Senator Cormann: We will see.

CHAIR: Are you able to tell me the types of businesses that have shown an interest?

Senator Cormann: Sorry, no.

CHAIR: Are they domestic or are they international?

Senator Cormann: They are a range. It is obviously a confidential process until such time we make certain decisions.

CHAIR: In the expressions of interest and the bid phase, are there more details about what they would like to do with the registry such as adding value for Australian companies and things rather than just how much money they want to give to government?

Senator Cormann: We want them to build on what they put to us in the previous phase. As I have indicated, the financial return to government is one element. The investment into the operations of the ASIC registry moving forward and the capacity to operate and improve the operations of the ASIC registry moving forward are obviously important elements as well. The ASIC registry will need a level of investment to take it up to the appropriate standards in 2015.

CHAIR: I think that is an understatement.

Senator Cormann: I think you can hear what I am saying. Across a range of criteria we will be assessing the various bits that come forward.

CHAIR: The government has previously said it has got a preference to keep the existing operations in Traralgon and in the Latrobe Valley. Is that correct?

Senator Cormann: The ASIC registry has a strong local presence in Traralgon and in the Latrobe Valley area more broadly now. What we have said is that the government will take into account our strong preference for the ASIC registry to maintain its existing operations in those areas as we consider the various bids that come forward. So we would expect any bidder, as part of this process, to address that specific preference of the government which has been appropriately and transparently laid out in the public domain.

CHAIR: You mentioned the need for a level of investment in what I would characterise as the IT infrastructure for the registry. Are you able to provide the committee or I with an estimate of what that might be?

Senator Cormann: I worry that this goes into commercial in confidence considerations in the context of a live bid process, but I might just ask Mr Edge whether there is anything that we can appropriately provide you to assist.

Mr Edge : As the minister has said, Senator, it is an area where we are asking respondents to focus on, and it is an important part of the commercial process. It would not be, I guess, in the Commonwealth's commercial interest to speculate on what the level of investment is.

CHAIR: It is up to what? Services each individual bidder may determine that are worthwhile?

Senator Cormann: Every bidder has got to make their own judgement on what they think needs to be invested in to achieve what outcome and how it fits into the broader business model that they are putting forward.

CHAIR: The question, ultimately, is why does the government not make that investment themselves and maintain the registry? Is it because you have observed international efficiencies, or that you think other registry providers can do it more efficiently than government can? Maybe that is an ideological question.

Mr Edge : Sorry, say that again?

CHAIR: Why does the government not make an investment itself in upgrading the registry?

Senator Cormann: Because that may not be the most efficient allocation of limited resources. That is what we are exploring at the moment through this bid phase. In the context of a private provider being able to operate and add value to the ASIC registry better and in a more commercial way than would be appropriate for government, there may be an opportunity for that provider to invest in the necessary infrastructure upgrades, which, of course, means it reduces the burden on taxpayers and taxpayers can see their government direct limited resources into other higher priority areas.

CHAIR: Hence the second component of the question, Minister. Has there been an observation about privately run registries internationally where you have observed efficiencies that has taken you down this path?

Senator Cormann: We certainly believe that registry services, and not just this one—state land registry services and the like—are suitable for this sort of approach. There are examples in other parts of the world where this has successfully been done, and that is why we are exploring it.

CHAIR: To my mind, it is no different than perhaps a share registry service or something like that.

Senator Cormann: Yes. It is a database—it is the running of a database, essentially.

CHAIR: In conclusion, what is the process from here? Was 28 February the date?

Senator Cormann: 23 February is the deadline for indicative bids to be submitted. The government will make a decision on any further steps after those indicative bids have been properly evaluated. I expect that what will happen is that Finance, with relevant advice, will go through the evaluation and will then make a recommendation to me, which I will then put to government once we are all on the same page.

CHAIR: We are scheduled to break for dinner. After some discussion with the committee, we would like reduce the dinner break to one hour so we would conclude then half an hour earlier tonight. Is that horror on your face, Minister?

Senator Cormann: I have got two functions that I am going to in the break—including a function with the Indigenous Youth Advisory Council and a function for a delegation of members of the European parliament—outside the building. I was rather counting on the one and a half hour break to fit that in. Sorry, given that that was the program—I would rather have left at 10.30 than 11.

CHAIR: We can still leave at 10.30 if the answers are really short and the questions are succinct—we can do that. That is fine, we will continue with outcome 2 after the break and we will now suspend until 8pm.

Proceedings suspended from 18 : 29 to 20 : 00

CHAIR: We are going to resume the Senate Finance and Public Administration Legislation Committee additional estimates hearing. We are continuing with the examination of the Department of Finance and we are still dealing with outcome 2.

Senator LUDWIG: You would be familiar with today's Australian Financial Review 9 February article 'Lodge renos may blow out to $15 million', and an article in the Sydney Morning Herald, 'Lodge reno 11 million'. Who is responsible for the management of the Lodge refurbishment?

Ms Halton : It depends on what the meaning of the word 'management' is.

Senator LUDWIG: Ultimately, where does the buck stop for the $15 million reno? Who do I ask questions of?

Ms Halton : We can talk to you about the work that we were commissioned to do.

Senator LUDWIG: Is there work outside of that commissioned by others?

Ms Halton : I do not know.

Senator LUDWIG: We will start with what we know.

Ms Halton : So you can start with us, by all means. We are commissioned to do work by Prime Minister and Cabinet, so we can talk to you about all of that work—very happy to do so.

Senator LUDWIG: What was the original budget for the refurbishment?

Ms Hall : The original project funding, which was agreed in the 2011-12 budget cycle, was $4.8 million, excluding GST.

Senator LUDWIG: And was there a person or body or contractor in charge of all the work for Finance—in other words for that amount of money? What was included in that cost?

Ms Hall : Perhaps if I can approach the question in a slightly different way. Finance took over responsibility for the management of the official establishments in 2010.

Senator LUDWIG: Right.

Ms Hall : We did a range of what are called condition audits to understand the condition of the property. It was identified that there was a range of essential works that needed to be undertaken, for safety and compliance reasons primarily, and so some planning and estimation was done around what would have been required to address those works. The budget figure of $4.8 million, which was agreed to at that time by the then Special Minister of State, Minister Gray, had a 50 per cent cost certainty. As we worked through and did more due diligence and refined the design work, there was additional funding which was agreed to in the 2013-14 budget.

Senator LUDWIG: And how much was that?

Ms Hall : That took the total project budget to $6.7 million and that included a high level of cost certainty. That took the estimate to 100 per cent cost certainty.

Senator LUDWIG: If I pause you there: as I understand it, what you are saying is that the 100 per cent cost certainty meant it would cost you $6.7 million to refurbish the Lodge and that is all.

Ms Hall : For the agreed scope at that time, yes. That included estimates to address a range of latent conditions including asbestos removal and things that were discovered through the design and early works program.

Senator LUDWIG: What happened next?

Ms Hall : There was a further approval of $1.1 million in the 2013-14 budget approved by the then Minister for Finance, Minister Wong, which took the project budget to $7.8 million. That was predominantly due to deferral of the start of the construction.

Senator LUDWIG: Then, what happened next?

Ms Hall : The final budget increase of $3.9 million excluding GST was agreed as part of the 2014-15 budget. That took the total project budget from $7.8 million to $11.7 million excluding GST for the Finance delivered scope of works.

Senator LUDWIG: Has that work been completed?

Ms Hall : Yes, all of that work has been completed.

Senator LUDWIG: What was the final cost?

Ms Hall : The final cost, excluding GST, was $11.61 million.

Senator LUDWIG: For the work that was done in 2014-15, the additional amount which took it to $11.7 million as the estimated cost, what did that entail? What was the reason for that increase?

Ms Hall : Let me find that in my notes. That additional scope included demolition and construction of two new guardhouses, refurbishment of the gardeners including asbestos removal, construction of a new external amenities block, refurbishment of all the ground floor and first floor internal bathrooms and refurbishment of the female principal dressing room.

Senator LUDWIG: Where did the request for that work come from?

Ms Hall : I would have to take that on notice. I have only been in this role since October. I do not have that level of detail in my pack.

Ms Halton : It was a requested scope change and as—

Senator LUDWIG: I was going to get to that, but I am happy for you to—

Senator CORMANN: To be clear: the second set of requirements, under the Abbott government, were works that would be needed in due course in any event, including works for security and safety in the functioning of the Lodge. The guardhouses that we talked about, the disabled toilets for functions and the refurbishment of the bathrooms—the key point here is that these works would have been required at some stage so it made sense to do all of the work at once while the site was closed to day-to-day use.

Senator LUDWIG: You have said what you were responsible for. Has any other department done any other work there.

Ms Halton : We cannot—

Senator LUDWIG: You do not know that, or you do know?

Ms Halton : No. Essentially, Prime Minister and Cabinet own the building?

Ms Hall : They are the tenant.

Ms Halton : They are the tenant.

Ms Hall : We own the building and they are the tenant. They requested the scope. It was considered in budget processes and by the Public Works Committee. The various changes to the budget were approved by the Public Works Committee through the course of the project.

Senator LUDWIG: I will step you back a bit and use the 2014-15 budget as an example. Would PM&C have requested that work to be done? Would it have required a cabinet brief, a submission to cabinet or cabinet approval?

Senator Cormann: No, I do not believe that this is the sort of issue that would have gone to cabinet. To make the distinction: the internal furnishings and decorations were very much the responsibility of PM&C and they were dealt with after Finance formerly handed over the site late last year. Any questions that go to the internal furnishings and decorations are really matters that should be addressed with PM&C.

Senator LUDWIG: Thank you. You have second-guessed what I was going to ask. I was going to go to the furnishings—

Senator Cormann: I thought you might.

Senator LUDWIG: and fit-out. So PM&C should answer those questions?

Senator Cormann: Yes.

Senator LUDWIG: When did you hand over the building to PM&C?

Ms Hall : The certificate of occupancy for the external works was provided on 10 November and the building was handed over in the first week in December.

Senator LUDWIG: That is 2015?

Ms Hall : Yes, 2015—sorry, Senator.

Senator LUDWIG: So the contracted work that Finance oversaw did not include furnishings?

Ms Hall : No.

Senator LUDWIG: So all you handed over was the building?

Ms Hall : The building.

Senator LUDWIG: And fixtures, I presume.

Ms Hall : Yes.

Senator LUDWIG: I will just come back a little bit. From the 2014-15 work onwards, were there any contract variations to that? I am happy for you to take those on notice if you are not sure.

Ms Hall : There were a number.

Senator LUDWIG: Do you know how many? Do you have it there with you?

Ms Hall : I do not have that level of detail with me.

Senator LUDWIG: That increased the cost?

Ms Hall : Once the budget was approved, we would have varied the relevant contracts with the providers to include the additional scopes. There were a number of contracts—head contractor, design contractors. They were all on AusTender. We would have processed the variations. So I can get you the detail on notice.

Senator LUDWIG: That would be helpful. Thank you. You cannot recall how many contract variations there were during 2014 alone? Perhaps on notice you can take it by year or month as the case may be.

Ms Hall : Yes. In terms of breaking it down by period, we can certainly take that on notice. I can advise you that, in relation to the head contract for Manteena, there were 42 variations in total over the life of the contract.

Senator LUDWIG: And you cannot recall how many in the last—

Ms Hall : No. I do not have that detail.

Senator LUDWIG: Then I am happy for you to take it on notice. Since that handover, has a contractor Projects Assured assurance been undertaken?

Ms Hall : Finance has engaged Projects Assured to undertake an independent review of the project, a post-project-completion review.

Senator LUDWIG: Why is that?

Ms Hall : The Prime Minister requested that an independent review be undertaken.

Senator LUDWIG: Were there any reasons given? Was there a letter coming from PMO or Prime Minister and Cabinet to Finance explaining why you would engage Projects Assured to do an independent project review?

Ms Hall : Finance selected Projects Assured from our Gateway assurance panel, which includes a list of providers who do this type of work, undertake post-project reviews of big government projects.

Senator LUDWIG: So it is fair to say that the Prime Minister communicated a request for a review and then you took one of your standard people off a panel or a Gateway process to then undertake that work?

Ms Hall : That is correct.

Senator LUDWIG: At what cost?

Ms Hall : The total value of the Projects Assured contract is $45,875, excluding GST.

Senator LUDWIG: Has that been finalised?

Ms Hall : No. The contract commenced on 22 January.

Senator LUDWIG: When will it be finalised?

Ms Hall : Towards the end of February.

Senator LUDWIG: How was the request communicated from the Prime Minister to Department of Finance for a review of the project?

Ms Hall : I understand that the relevant deputy secretary in the Department of the Prime Minister and Cabinet contacted my deputy secretary in Finance to initially communicate the request.

Senator LUDWIG: On the phone?

Mr Edge : That would be me. Yes, I was contacted by PM&C and the request was conveyed to us.

Senator LUDWIG: Was the request by email or phone, then followed up by written request?

Mr Edge : There was certainly a phone call from the relevant deputy secretary.

Senator LUDWIG: Did they explain what the concerns were?

Mr Edge : One of the characteristics of the project was that the scope of work was increased a number of times, and I think there was a desire to just review the management of the project and how those changes in scope may have affected the overall costs of the project.

Senator LUDWIG: And that was conveyed to you. Was anything else said?

Mr Edge : That was the essence of the conversation.

Senator LUDWIG: So the essence of that conversation was that Mr Turnbull has requested a review, or did the deputy secretary request the review?

Mr Edge : I cannot quite recall exactly whether there was a specific reference to the Prime Minister or whether it was the Prime Minister's office. I cannot quite recall exactly what was said.

Senator LUDWIG: Did you take a note? I am happy for you to take it on notice and refresh yourself.

Mr Edge : Yes, I can take it on notice.

Senator LUDWIG: If you took a note then you can clarify the record if need be.

Senator Cormann: The truth is that I am not quite sure where you are trying to go with this line of questioning. When you have this sort of additional expenditure on top of what was previously anticipated, I would have thought it good practice for an assurance review to be conducted. It does not always happen, but surely for a project of this nature, with this sort of public interest and that was subject to the laws of variations along the way I would have thought it good practice. Finance obviously has the expertise in managing construction, but it is very reasonable that there be a level of oversight in how the decision making in this project has evolved.

Senator LUDWIG: Ultimately, though, would you make an assessment—this is a question for you, Minister—that Finance managed this project well when you look at the start figure, the variations that have occurred and then at the final figure?

Senator Cormann: The short answer to your question is yes, but there are a range of reasons as to why there was additional expenditure. The audit will identify whether, beyond the additional scope that has been included in the project, there were other issues. I would not want to pre-empt the findings of the relevant assurance review, but based on the information in front of me now, yes, absolutely.

Senator LUDWIG: Will you make the project assured report public when it is available?

Senator Cormann: That will be a decision, once it has been received and considered by government.

Senator LUDWIG: Is the 11.6 plus the 45 the final figure you have arrived at? Is there any other cost that Finance has accrued in relation to your work at the Lodge?

Ms Hall : No.

Senator LUDWIG: That is the total. If I want to see what the additional costs for furnishings and the remainder are I would have to talk to Prime Minister and Cabinet.

Ms Halton : Yes.

Senator LUDWIG: So your contract has come to a conclusion. You have handed the building over and there is no more work to be done.

Ms Hall : We have handed over the property. We are in the final processes of project closure and finalising invoices, but the figures I gave you in terms of the actual costs incurred of $11.61 million include all amounts that have not yet been paid but are anticipated to be finalised over the next little while.

Senator McALLISTER: Ms Hall, was the project manager a Department of Finance employee?

Ms Hall : We have a contracting structure where we engage a head contractor, which is a building provider, in this case Manteena, to undertake the building works. We have an architect designer, which in this case was HBO+EMTB. We have a professional project manager that essentially sits over the top and coordinates the managers—all of the activity.

Senator McALLISTER: In this instance was that person an external contractor?

Ms Hall : It was a firm, GHD— Gutteridge, Haskins and Davey. Then we have a couple of staff internal to the department who are contract managers, essentially. They manage those contracts for the delivery of the works.

Senator McALLISTER: Was the nature of the contract with GHD that any of their fee was at risk or associated with performance?

Ms Hall : I would have to take that on notice.

Senator McALLISTER: Can I ask then from a project management perspective about the client? You mentioned that the client in this instance is PM&C. Which branch or division of PM&C are you dealing with?

Ms Hall : It is Government Division.

Senator McALLISTER: I understand that this is something that you do routinely for tenants or clients in your building. What is the ordinary relationship between that client and the internal project manager within the Department of Finance?

Ms Hall : For projects of this nature and the other major construction projects that we undertake, we establish a project governance arrangement whereby we have a steering committee, which is generally comprised of SES level officers from our department, the client department and, in some cases, related departments. In the case of The Lodge project, we had members from the Attorney-General's Department and the Australian Federal Police participating in the steering committee. That was the top-level governing body for the project and then you have lower level project control groups and so on.

Senator McALLISTER: So there was a project control group?

Ms Hall : Yes.

Senator McALLISTER: Just one?

Ms Hall : Yes, reporting to the steering committee.

Senator McALLISTER: Any other governance bodies besides the project control group?

Ms Hall : No.

Senator McALLISTER: And the steering committee of course.

Ms Hall : Yes.

Senator McALLISTER: And there are staff who are more active than others on the project group?

Ms Hall : Yes. That would include a number of employees of the various contractors as well. Manteena, GHD and HBO would have representation on those groups, and they would be responsible for more of the operational elements of the project.

Senator McALLISTER: In terms of the contract variations that we have been talking about this evening, would they have been signed off by the steering group?

Ms Hall : They would have been endorsed or recommended by the steering group to the relevant delegate.

Senator McALLISTER: Where does the delegate sit in that governance structure?

Ms Hall : The Finance official with the spending delegation in relation to the various contracts.

Senator McALLISTER: I am trying to imagine the org chart associated with this project. Does that person sit on the project control group or the steering committee?

Ms Hall : More often than not, the steering committee. It would depend on the level of the spending that you were talking about.

Senator McALLISTER: So the steering committee would make recommendations to the officer with the delegation for sign-off of variations to the contract, and they would do so and communicate that to the project control group.

Ms Hall : Yes.

Senator McALLISTER: How would the prospect of a variation be brought to the steering committee?

Ms Hall : The steering committee generally met monthly and would go through the status of the project, the status of the budget, any areas where there were variations in relation to that or any additional areas where expenditure might be needed. These budgets are quite fluid. As you move through the course of a project, things happen. So there would have been reports on a monthly basis indicating that there were additional requirements or that spending in a particular area was less than anticipated and so on and so forth and then decisions would have been taken based on the overall position of the budget to deliver the agreed scope.

Senator McALLISTER: What is the role in all of this of the professional project manager for one of the three contracts that are being managed as part of this project?

Ms Hall : To scrutinise the recommendations that are coming forward from the various members of the delivery team.

Senator McALLISTER: So they sit between the delivery team and the project control group?

Ms Hall : They are participants in the project control group, but yes.

Senator McALLISTER: That paints me a useful picture. Thank you very much.

Senator LUDWIG: I have one question before we move off The Lodge. So there is a project group and a project steering committee approving the variations. Was there any ministerial oversight? From 2013, was the money just being spent through the steering committee or was there a minister signing off on each variation?

Ms Hall : No, the relevant delegate within Finance was responsible for signing off on variations within the agreed budget, but the total approved budget was, as I indicated, approved and was a measure in the 2013-14 budget context.

Senator LUDWIG: And that was brought forward by which minister?

Ms Hall : The finance minister.

Senator LUDWIG: The finance minister, Senator Cormann?

Ms Hall : Yes.

Senator LUDWIG: So you are responsible for the additional expenditure ultimately?

Senator Cormann: Obviously the government is responsible. I am happy to say that, as finance minister, I am obviously responsible for anything and everything that is authorised by Finance.

Senator LUDWIG: So you did not think it was necessary to have any oversight of the contract variations at a ministerial level from—

Senator Cormann: There was oversight.

Senator LUDWIG: Let me finish. I said ministerial oversight for the variations that occurred from September 2013 onwards.

Senator Cormann: If you want to talk about who was responsible within government in relation to property matters, it was not actually the Minister for Finance; it was the Parliamentary Secretary to the Minister for Finance, which I am sure Ms Hall will confirm—

Ms Hall : Yes, Senator.

Senator Cormann: It was Mr McCormack, as my then parliamentary secretary, who had responsibility for the oversight on a day-to-day basis. He had responsibility for Commonwealth-related property matters across the Finance portfolio overall for the time that he was my parliamentary secretary.

Senator LUDWIG: Thank you, Minister.

Ms Halton : Can I just add to this, so there is an absolute abundance of clarity: when you talk about scope change, it is important to understand that any scope change by government that increased the budget was appropriately approved. The scope change that Ms Hall is talking about is inside the budget that is agreed. So the fact that one little component of the project goes up and another little component of the project comes down, it is in the context of delivering the agreed scope inside the agreed budget. So this project was delivered—as she has already indicated—inside the agreed budget. So, yes, compared to what was initially approved, but because of some of the factors that have been outlined, the budget went up. But each time that budget went up via a decision of government then the project was delivered inside that budget to the scope that was agreed.

Senator LUDWIG: Thank you, Chair.

CHAIR: We will go on to a different section now. Senator Ludlam.

Senator LUDLAM: Thank you, Chair. I have a couple of questions—not too many—to follow up on the Commonwealth surplus property program, so specifically the Commonwealth land disposal register and the Commonwealth surplus property divestment program. Do you have a comprehensive list for the properties that have been listed and then sold under these two programs since they have been in operation?

Senator Cormann: I am sorry, which two programs?

Senator LUDLAM: The Commonwealth land disposal register and more recently introduced, I think in the 2014-15 budget, the Commonwealth surplus property divestment program.

Senator Cormann: Yes, we can provide that to you, probably on notice, if you do not mind.

Senator LUDLAM: Yes, if it is a reasonable amount of material.

Ms Halton : The answer is yes, but probably not here.

Senator LUDLAM: That is a great, thank you. This is publicly owned land and premises, some of it developed, some of it not, that is being sold off to the private market. I would appreciate the lists of the two. I might put some further questions as we go about how you might be able to disaggregate some of that material for us so that we can get a read on what is walking out the door. Maybe without having tabled it, if you can tell us: does it include information including things like type of property, size, location, sale price, purchaser, condition of sale—things like that?

Ms Hall : Yes, for properties we have divested. For properties that are currently in the market for sale, we would not necessarily disclose evaluations. But we can provide most of that.

Senator LUDLAM: Okay; I get that. The stuff that is already out the door and that is reasonably and reliably available, that is great. As to the policy on asset disposal—and pick me up if this policy does not apply equally to both; if there is a distinction please draw my attention to it—Commonwealth property having no alternative efficient use is to be sold on the open market at full market value. That is the Commonwealth's—

Ms Hall : That is Commonwealth property disposals policy. It applies to real property.

Senator LUDLAM: To?

Ms Hall : Real property, so land.

Senator LUDLAM: When was that policy last reviewed?

Ms Hall : I would have to take that on notice.

Senator LUDLAM: If you could. When that was set down would be good to know. What I am going to come to is whether there are any outcomes or conditions or possibility of bringing a conversation about housing affordability into this rather large-scale sell-off of Commonwealth real estate that is underway. Could you point me to any housing affordability outcomes or objectives that are attached to any of these sales.

Senator Cormann: Sorry. When you classify it as a large-scale sell-off, I just have to remind you here that the parliament made a decision or endorsed a proposal by the government by passing relevant legislation to wind down the Albury-Wodonga Development Corporation, which you may or may not recall that then Prime Minister Gough Whitlam set up in the seventies—

Senator LUDLAM: It is a bit before my time.

Senator Cormann: as part of an effort to create a new capital city on the boundary between New South Wales and Victoria. So 120-odd properties that are now within the Finance portfolio and progressively being sold relate to that winding down of the Albury-Wodonga Development Corporation. So I do not know that I accept your characterisation in your question—that is all.

Senator LUDLAM: I am not sure how any of that helped us at all.

Senator Cormann: I thought it was a very important clarification. What you describe as a wholesale sell-off is an orderly process to divest properties that are surplus to requirements for the Commonwealth.

Senator LUDLAM: No, I did not imply that it was disorderly. I am trying to establish whether there are any housing affordability outcomes attached as conditions of sale or—

Senator Cormann: In a small way, we are increasing the supply of relevant properties into relevant markets, but it is probably not material enough on its own to have a housing affordability impact.

Senator LUDLAM: Is there any reason why not? Is housing affordability something that is of interest to this government?

Senator Cormann: Of course, but this does not come within the context of the Commonwealth government's divestment of surplus land.

Senator LUDLAM: Exactly, and I am trying to establish why on earth it does not. Why doesn't it?

Senator Cormann: You are suggesting we should sell property at prices other than market value? Is that what you are suggesting?

Senator LUDLAM: I am suggesting that, if we are in the middle of liquidating the Commonwealth's stock of land in the middle of—

Senator Cormann: 'Liquidating', again, is quite emotive.

Senator LUDLAM: You choose your language—'disposing of', 'selling', 'divesting'.

Senator Cormann: There is a specific issue in the Albury-Wodonga region which relates to the winding down of the Albury-Wodonga Development Corporation. Beyond that, it really is spread across a very large continent.

Senator LUDLAM: Correct.

Senator Cormann: And the number of properties is relatively small, so it would not be realistic to expect a material impact on property prices from the comparatively small property divestments that we are talking about in a national context.

Senator LUDLAM: I am not proposing that, by divesting these holdings of land, you would have a material impact on property prices just by throwing it back onto the open market. What I am suggesting is that, as a condition of sale, or even as the purpose of the sale, you could be putting this into affordable forms of tenure and making a material difference in those particular areas, whether it be Albury-Wodonga or anywhere else, and you appear to be saying that there is no link whatsoever between this government's housing affordability policy—if there is one—and the disposal of these assets. I am asking you why not.

Senator Cormann: These assets, as is our responsibility, are divested at market value. That is what the Australian taxpayer would expect us to do.

Senator LUDLAM: Some Australian taxpayers are experiencing extraordinary housing stress. They might expect you to take an interest in that as well.

Senator Cormann: With the very small number of properties, how would you propose—

Senator LUDLAM: It is actually quite a few thousand hectares.

Senator Cormann: Maybe you need to specify your questions in relation to specific geographic areas where there is such opportunity in your view.

Senator LUDLAM: It is more than 600 properties. I will know a little bit more about it when the list has been tabled. It is a shame you do not have that to help guide this conversation. It is more than 600 properties across the entire country. There are demand ends of the equation. There are significant supply problems as well. You are sitting on substantial supply—hundreds if not thousands of hectares of land—that you could kick out the door with affordability conditions attached as a condition of sale. Is that something that has occurred to anybody inside the government?

Senator Cormann: As you say, you do not have relevant information in order to properly inform your judgement in relation to these matters. I suggest that you wait until we provide that information to you on notice before you jump to conclusions on what may or may not be possible. I understand the point you are trying to make, but again, when it comes to residential property, the program in relation to the Albury-Wodonga region is obviously very geographically contained.

Senator LUDLAM: Why do we keep coming back to Albury-Wodonga? There are sites scattered right across the whole country.

Senator Cormann: Because that is the largest single number of residential properties that Finance is currently involved in divesting.

Senator LUDLAM: Do you believe the Western Australian housing market is experiencing a certain amount of stress? People are living in housing stress in WA?

Senator Cormann: We are also involved in a divestment program in relation to some properties in the Parliamentary Triangle that are not suitable for residential accommodation, so you cannot make a generic statement in relation to every property that might be subject to a potential divestment.

Senator LUDLAM: I am not arguing that all of them should have housing affordability conditions attached. Question on notice No. F54 said, 'The 2013 Commonwealth land audit identified 470 properties that may be divested with 351 potentially suitable for residential use.' Let us just stick to the 351. Why has the Commonwealth government not attached any housing affordability conditions to the disposal of any of those properties? If I am wrong and you have been doing that I would be delighted to have that error pointed out.

Senator Cormann: What would you describe as housing affordability conditions?

Senator LUDLAM: Pooling it into the NRAS, for example. Imagine if one government department talked to another one.

Senator Cormann: We actually do talk to each other.

Senator LUDLAM: You have got very talented public servants working on housing affordability. You are shaking your head as though I have asked you to solve cold fusion from the desk. Is it really that hard to attach housing affordability outcomes to the disposal of surplus Commonwealth land?

Senator Cormann: Why don't you keep putting your questions and we will see to what extent we can assist you.

Senator LUDLAM: Okay. Does that mean your advisers are checking the register to see if there are any affordability outcomes? This is really the only question I have got. You offered to take the material on notice.

Senator Cormann: If that is the only question you have got, let us take on notice what it is that we are doing in that context and we will get back to you on notice.

Senator McALLISTER: I wanted to ask some reasonably technical questions around Operation Tetris, which has 'delivered property efficiencies'—I refer to your release, Minister.

Senator Cormann: Excellent. I was worried that you had missed it.

Senator LUDLAM: We were not going to miss Tetris.

Senator Cormann: Operation Tetris is very popular across government.

Senator McALLISTER: This is a government in-joke that I do not understand.

Senator Cormann: There is a history to this. Your predecessor as deputy chair, Senator Gallagher, took a particular interest in Operation Tetris.

Senator McALLISTER: Okay. It has delivered nearly $200 million in savings.

Senator Cormann: That is what my press release says and that is right.

Senator McALLISTER: Thank you, Minister. On notice, would you be able to provide a breakdown of the individual actions that have built up to that $200 million?

Senator Cormann: Yes, we can.

Senator McALLISTER: That would be terrific. Can you just explain to me, at a methodological level, how you calculate the savings figure? What I am really asking here is this: is there a general rule of thumb that says, 'We imagine a certain level of savings per square metre of property that we are able to dispose of', or is it a more granular approach looking at the value of leases cancelled?

Senator Cormann: I will get Mr Edge and Ms Hall to go through the specifics, but on a conceptual level the problem we were confronted with was that there was too much leased accommodation across the ACT where we are obviously a dominant player in the property market, a dominant tenant in the rental market. There was too much leased accommodation that was vacant while at the same time various departments, in a way that was not appropriately coordinated across government, were allowed to pursue further accommodation opportunities given their specific needs as individual departments. What we have sought to do on a whole-of-government basis, through a more coordinated approach, is to ensure that any available surplus, vacant, leased office accommodation that is available across the ACT is utilised before individual departments are able to go into the market and pursue other rental opportunities down the track. The reason it is called Tetris is that we try to fill all the gaps.

Senator McALLISTER: I think—

Senator Cormann: You got that?

Senator McALLISTER: Yes.

Senator Cormann: Okay. Great.

Senator McALLISTER: I am with you!

Senator Cormann: I am just trying to be helpful. But, in terms of the specific methodology, why don't I get Mr Edge to go into more detail.

Senator McALLISTER: That would be great.

Mr Edge : Senator, the calculation is based on a number of assumptions. Through the Tetris process, as the minister has identified, there was obviously quite a lot of surplus space in the ACT market—and there is also the costs of agencies, effectively, not taking up that space. So, if an agency looking at new accommodation chose not to take up the surplus space, then there would be additional lease commitments involved. So the $200 million is a calculation that is based on the costs saved by occupying the surplus space. There are assumptions in there about average rents per square metre and there are a variety of other assumptions that we can detail for you in our response.

Senator Cormann: There were a number of agencies that had long-term leases where they were not occupying a significant part of the whole available lease. To give you a real-life example, the ATO had half of its Gnabra building empty, which is almost the whole south tower. So the government moved the Department of Veterans' Affairs into that space, which means that Veterans' Affairs did not have to renew its old, pre-existing lease, which means a tangible saving for the Commonwealth. Instead of having all that empty space at the ATO and a new lease entered into for Vet Affairs, moving the Department of Veterans' Affairs into that vacant space that was available in what was previously tax office accommodation was a good deal for taxpayers.

Senator McALLISTER: Thank you, Minister. I think, Mr Edge, you mentioned you would be willing to provide the methodology and assumptions that sit behind that.

Mr Edge : Yes, sure.

Senator McALLISTER: I am, as I indicated, pursuing a reasonably technical line of questioning, so that would be quite helpful. The minister's press release mentions that there are 'a further 18,000 square metres of office space' available—

Senator Cormann: That will become available in 2016.

Senator McALLISTER: that will become available in 2016—that you are working to fill.

Senator Cormann: We are looking ahead now.

Senator McALLISTER: Very good. I am just wondering if it is possible, again on notice, to provide me with information on where this office space is, listing each property and the square meterage available at that place.

Senator Cormann: So you want a more detailed breakdown in respect of the 18,000 square metres?

Senator McALLISTER: Yes.

Senator Cormann: We can help with that.

Senator McALLISTER: And, if you are able to provide a list of government leases that are set to expire or have already expired that provide the opportunity to take up this spare 18,000 square metres—

Senator Cormann: Sure.

Senator McALLISTER: and the entities that they relate to, that information would be useful also.

Ms Halton : We will give you what we can, Senator, on notice.

Senator McALLISTER: That would be terrific, Ms Halton. Since you are being so helpful, noting that this initiative is to be rolled out nationally, are you able to provide some data about the vacant office space for Commonwealth properties currently existing outside of Canberra or the ACT and, similarly, a list of those properties which includes their location as well as the available square meterage?

Senator Cormann: The short answer is yes. Just by way of context, given how successful we have been with Operation Tetris in the ACT and in and around Canberra, we do believe that there is an opportunity to expand this program nationally. The advice that I have in front of me is that about 55 per cent of government leases nationally are scheduled to end over the next three years, so we do believe that there is an opportunity there for rationalisation of the Commonwealth's rental footprint, if you like.

Senator McALLISTER: Okay. Similar to the question about the ACT, is it possible to have that information on a national basis? Where are the relevant leases where you might look to achieve efficiencies by utilising other space?

Mr Edge : Yes, sure.

Senator McALLISTER: That would be helpful.

Obviously, particularly nationally, where you have government tenancies in regional communities or in particular communities, there is the potential for change there to have some impact on a community, particularly if it is a small community. Is there any intention to conduct any public consultation or targeted consultation in those communities?

Mr Edge : In looking at opportunities for lease consolidation and more efficient use of leases nationally, we have obviously started in the ACT, and our next area of focus, probably with the biggest gains, is the other capital city markets. So, while there will be some opportunities in regional Australia, they are probably a bit further down the list in terms of areas to focus on.

Senator McALLISTER: Am I correct in understanding that the occupational density target is 14 square metres?

Mr Edge : That is correct.

Senator McALLISTER: In the government occupancy report published in 2015, on page 9, there is a table that lists the largest 10 entities. All of them are above that target of 14, and the average across all agencies is 19.2 square metres. Is there some process going on to address the fact that there is such a divergence between the occupational density for these entities and the target?

Mr Edge : Yes. There are a couple of things that are relevant here. One is that this data is actually data from 2014 that has been published recently. The data is 2014 data, and it is not a measure that can be adjusted quickly, as agencies have particular square metres under lease. As that changes and the number of people working there changes, there is a bit of a time lag between the changes in agency staffing numbers and requirements in a particular location and the ability to adjust the lease and shrink the lease, because that is one of the factors in achieving the occupational density targets.

Ms Halton : My memory—and this is from when I was running a line agency as opposed to Finance—is that all of our budgets were adjusted to reflect that target, which was to provide us with incentive.

CHAIR: Have we concluded questions on property? We can come back to it anyway; it is up to you.

Senator Cormann: Can we send the property people home or not? That is the question.

CHAIR: That is a fair question.

Senator LUDWIG: If we raise it again, you can just take it on notice.

CHAIR: Property can be excused.

Senator McALLISTER: We might have some questions, I think, about program 2.1 and some of the government business enterprises. Can I start with MYEFO and the information that appears there about the NBN and allocations to the NBN company. In the budget papers there was an NBN investment in 2015-16 and 2016-17 that totalled $16.165 billion in the original budget. In the MYEFO that figure has increased over that same period and is up $148 million. I was hoping you could provide an explanation for the additional equity being provided to the NBN there.

Mr Edge : Senator, we would have to take on notice the exact reasons for that $148 million variation. Although that sounds like a lot it is a relatively immaterial variation in terms of the equity profiles for the NBN. But we can certainly take on notice the reasons why it is varied in the MYEFO numbers.

Senator McALLISTER: So no-one knows tonight.

Senator Cormann: But the thing is: in the context of a $29.5 billion overall equity injection, I suspect it will be a timing issue. But why don't we take it on notice. As Mr Edge says, when taken out of context it sounds like a high number but in the context of a $29.5 billion equity injection it is obviously a comparatively low number.

Senator McALLISTER: Okay. I suspect they are having a much more vigorous debate about that next door, so we will accept that. I wonder if you could provide an update on where we are at with Defence Housing Australia. I understand there is a reform underway in relation to Defence Housing Australia.

Senator Cormann: The government initiated, in the context of the 2014-15 budget, a scoping study into Defence Housing Australia. That reported and was considered as part of the 2015-16 budget process, and the government in the context of the 2015-16 budget made an announcement on next steps. I am quickly now going back through my relevant press release at the time, which laid it out. In relation to Defence Housing we did announce in May last year that the government would not be proceeding with the sale of Defence Housing Australia at this time; however, the government would review Defence Housing Australia's accounting information, technology and business reporting systems to improve the transparency of the cost of providing relevant services but that there would be no change to the entitlements of Australian Defence Force members. That review has taken place. It was conducted by KordaMentha and I might get Mr Edge to provide you with an update on where all of that is at.

Mr Edge : As the minister said, the forensic review work is being undertaken by KordaMentha, working closely with Finance and Defence. That work is well progressed and virtually complete.

Senator McALLISTER: What are the findings?

Senator Cormann: Obviously the findings have not been finalised, given that review has not yet reported to government. Once the review does report to government, obviously government will consider the findings in appropriate fashion and, if required and appropriate, will make relevant announcements in relation to any actions the government proposes to take in that context at that time.

Senator McALLISTER: Thank you, Minister. I understand that $3.5 million was provided to Finance this financial year for this work.

Senator Cormann: Obviously there was a budget measure in relation to this. The specific number Mr Edge may be able to confirm. It is reported on AusTender whatever was allocated for this review process. The number is broadly right and it was outlined in the 2015-16 budget papers, so it was publicly announced at that time. This includes works on improvements to the DHA business plans. Of course, as I have indicated, this is all about improving the transparency of the cost of providing certain services and ensuring the sustainable delivery of high-quality and accessible housing services to our Defence personnel.

Mr Edge : The $4 million number is right. That was the number that was provided.

Senator McALLISTER: Four million, is it?

Senator Cormann: Four million was the number provided in the budget. We will take on notice how much has actually been allocated.

Senator McALLISTER: I think that would be great. Just so I understand, is it predominantly associated with this review that has been undertaken by KordaMentha, or are there other items associated with the review that would require—

Senator Cormann: I will take on notice the specific contract value of the work that is undertaken by KordaMentha, but overall the allocation to Finance, through the 2015-16 budget process, to conduct this work is $4 million—that was reflected on page 91 of Budget Paper No. 2—and $3.5 million of that is in 2015-16. I think that is what you are referring to there, and there is another half a million in 2016-17, which of course has not yet started. That brings us to the $4 million all up.

Senator McALLISTER: Great. Okay. I am just interested—and I think you have agreed to do this—in understanding what has been spent of that so far—what components of the expenditure for that review.

Senator Cormann: Yes.

Senator McALLISTER: Can I now ask you about the scoping study in relation to the Australian Rail Track Corporation.

Senator Cormann: Sure.

Senator McALLISTER: I understand that last year it was announced that the process was to be delayed to take into account Inland Rail.

Senator Cormann: That is right.

Senator McALLISTER: Can you just give us an update on what is happening since this was last discussed in this committee.

Senator Cormann: Since we last spoke, the business and legal advisers to conduct that work have been appointed. I refer you there to my media statement of 14 December 2015, which is when I announced:

Following a competitive procurement process, Macquarie Capital has been appointed as business adviser and Herbert Smith Freehills as legal adviser for the ARTC scoping study.

As previously announced—

and you have referenced this—

the scoping study will also consider the implications of the Inland Rail project between Melbourne and Brisbane for the ARTC. In particular, it will consider the possible opportunity for ARTC to participate in any private sector financing, delivery and operation of the Inland Rail project.

It is the intention of the government for that work by Macquarie and Herbert Smith Freehills to be available to government for consideration in the 2016-17 budget process so that we hopefully are in a position to make a good, well-informed decision for the purposes of the 2016-17 budget.

Senator McALLISTER: So your anticipation is that that work, or at least a good part of it, will be completed so you can signal a direction in the budget. Is that a correct understanding of it?

Senator Cormann: As I said in my statement back in the middle of December:

The Government will consider the scoping study in the context of the 2016-17 Budget.

That is certainly the timetable that we are currently working on, and that is the timetable that I have asked Finance to work towards to help facilitate sound decision making by government in the context of the 2016-17 budget.

Senator McALLISTER: Just to assist me, ARTC is being considered alongside the options for Inland Rail to look at the interrelationship between those two in any future arrangements? Is that correct?

Senator Cormann: If a decision were made to proceed with the construction of an Inland Rail project between Melbourne and Brisbane—and a lot of work has been done in relation to this by former Deputy Prime Minister John Anderson, working closely with the current Deputy Prime Minister, Warren Truss, and his department—there would obviously be a significant capital cost. What we are exploring in the context of the scoping study into the ARTC is whether there is any opportunity to, I guess, consider both of these things together and to see to what extent ARTC might be able to participate and help facilitate private sector financing of that Inland Rail project so that we do not have to fund that project from taxpayers' money—from public funds.

Senator McALLISTER: I think we will probably have to wait.

Senator Cormann: I think we might have to wait for the 2016-17 budget and the Senate estimates immediately thereafter in May-June. I am sure we will have a very good conversation about it then.

Senator McALLISTER: In a similar vein, I want to get an update on Australian Hearing. Where are we up to with that process? In another context that I have been involved with on other committee hearings around Australian Hearing there is a lot of stakeholder anxiety about what is going on there. Could you give me an update on that?

Senator Cormann: As we have been saying for some time now, in relation to Australian Hearing, the government's only interest is to ensure that Australian Hearing has the strongest possible future as an organisation, bearing in mind that the environment in which they operate will continue to change quite substantially as the result of decisions made by the previous government to make relevant funding provided under the NDIS fully contestable. Right now Australian Hearing competes in a reasonably competitive market for some of the services it provides, but as the NDIS rollout progressively ramps up Australian Hearing will have to compete with other providers in relation to all of the services it provides to Australians with hearing impairment. In that context, we are considering—

Senator McALLISTER: Excuse me, Minister.

Senator Cormann: the appropriate ownership arrangements for Australian Hearing moving forward.

Senator McALLISTER: I am probably more interested in the process and the timetable for decision making. I had understood that there was an intention to have a decision around this by Christmas.

Senator Cormann: Yes.

Senator McALLISTER: When do you think we will be in a position to provide some clarity to people about what is going on with the future Australian Hearing?

Senator Cormann: I believe that I will be in a position to make an announcement on the next steps very soon.

Senator McALLISTER: Will those next steps include a consultation process with stakeholders?

Senator Cormann: As you would be aware, there were significant consultation in the context of the scoping study into the future ownership options for Australian Hearing. After—

Senator McALLISTER: To be honest with you, if I can tell you, Minister—

Senator Cormann: Sorry—if I may?

Senator McALLISTER: Okay.

Senator Cormann: After that scoping study reported to government, government made a decision not to proceed with any privatisation at that point in time but to conduct further consultations—I think you have referenced that. So there has been pretty significant consultation. The position we now are in is that the government has to make a decision about where to from here, guided at all times by our desire to ensure that Australian Hearing continues to be in the strongest and best possible position to provide its important and highly valued services to Australians with hearing loss, bearing in mind, and very mindful of the fact, that the market in which they operate will become fully contestable as the NDIS rollout continues to ramp up

Senator McALLISTER: I am concerned about the level of consultation, simply because I have had feedback from quite a large number of stakeholders that they were not happy about it, although this was prior to the completion of the scoping study. Since the scoping study has been completed, who has been involved in the consultation?

Senator Cormann: Finance has conducted the consultations. I am pretty sure that we have gone through the number of meetings and all of the stakeholders invited and who participated in the various meetings in some detail in previous estimates. I think we might have even provided detailed information in relation to this on notice. A summary of the outcome of those consultation sessions and presentations is available online both on the Finance and the Office of Hearing Services websites. Certainly, I have been provided with a detailed report on the outcome of those consultations and they now form part of the government's further deliberation in relation to these matters.

Senator McALLISTER: You said you hoped to be in a position to make a statement or decision about this imminently, or perhaps to announce—

Senator Cormann: I think the words that I used were 'very soon'.

Senator McALLISTER: How soon is very soon?

Senator Cormann: That is a very good question. It is very soon.

Senator McALLISTER: Can I talk about the efficiency reviews that are underway in relation to a range of government departments. I appreciate that Finance may not be in a position to provide detail about the progress of individual reviews, but I want to ask some general questions about how these reviews are being undertaken. Are Finance staff directly involved in the reviews?

Mr Bartlett : No, we are not directly involved in the reviews.

Senator McALLISTER: Are external consultants or contractors involved in the reviews?

Mr Bartlett : The review leader is usually an eminent person who is usually selected by the department concerned, with the agreement of their minister, the finance minister and the Secretary of the Department of Finance.

Senator McALLISTER: Are you able to provide what the costs are associated with external advice to support the reviews?

Mr Bartlett : The cost of each review is funded by the department that is being reviewed. You would have to ask them about the individual costs.

Senator McALLISTER: Are staff in the agencies been consulted as part of the process of reviews?

Mr Bartlett : I cannot comment in detail on each review, but I was in the Department of Health when it had its functional efficiency review. There was certainly a lot of involvement from a lot of staff.

Senator Cormann: I understand why you would be interested in our functional efficiency reviews. They are a very important initiative of the government to ensure that government administration is as efficient and effective as possible and government spending aligns with current government priorities. But to put a bit of a boundary around this, obviously these processes very much feed into the Expenditure Review Committee and cabinet deliberations on possible policy improvements in the fiscal space. So as you frame your questions, be mindful that that is a current boundary.

Senator McALLISTER: Thanks, Minister. Is there an overall time line for the completion of this process?

Mr Bartlett : Not as I understand it. As I think the minister said earlier today, it is a rolling process. It is ongoing.

Senator McALLISTER: What is the role of the Department of Finance? This is an initiative that Finance is central to. If you are not involved in the actual conduct of the reviews, I assume then that you are presently or intending to consider the findings of the reviews. Will you have a role in that process? I am mindful of your cautions, minister.

Senator Cormann: This is very much something that I initiated. Finance is leading the effort across government as part of the central agencies of government. But it is very much managed on a portfolio-by-portfolio basis and ultimately feeds into the expenditure review considerations by government. I think you might need to put your questions slightly differently.

Senator McALLISTER: It sounds to me as though, having initiated this process, departments are undertaking the reviews with support from external providers, and what you are telling me is that the findings from that process will not be fed back through the Department of Finance, but will go directly—

Senator Cormann: They will be fed through the cabinet, in the form of the Expenditure Review Committee. In the context of specific recommendations and policy proposals to achieve increased efficiencies or to pursue certain forms, the Department of Finance provides advice in the usual way. It is a very comprehensive program of work right across government. What is important to us is that the reviewers are independent of the department or portfolio being reviewed, and that it essentially puts a spotlight on what is currently being done and what might be able to be improved moving forward. It then feeds into a central process through the Expenditure Review Committee.

Ms Halton : And they report to the minister who is responsible for that department. So they give the minister an insight into the operation of their department. In many cases maybe they know all about it. In some cases—

Senator Cormann: We do get them, but I send those review reports to the relevant ministers, and then it forms the basis of government consideration of proposed efficiencies and other improvements.

Senator McALLISTER: So Finance does receive the reports, but then feeds into another cabinet-level process?

Senator Cormann: I receive the report because I am the Minister for Finance, who has responsibility for these matters in government. The relevant portfolio minister receives a copy of the report, and then together, as a team, through the Expenditure Review Committee process, we make relevant decisions on improvements that may be pursued.

Senator McALLISTER: I am aware of the discussion paper that was released late last year about the shared and common services program. You are looking for market testing—or rather market soundings, I think is the phrase.

Mr Bartlett : Yes. We are actually after information; we are not market testing.

Senator McALLISTER: At this stage how many responses or submissions have you received? I understand that it is not yet closed.

Mr Bartlett : The last figure I heard was four, but we have given people until 4 pm tomorrow to respond. There may be a late surge.

Senator McALLISTER: Similar to some of the other initiatives, this measure is receiving just under $4 million over the forward estimates, or roughly that. Is that correct?

Mr Bartlett : There is funding provided in MYEFO, which is largely going to be used to fund the cost of benchmarking agencies so that we can get a benchmark and then accurately measure the outcome of this process.

Senator McALLISTER: You will have to explain that to me a little more. What are you benchmarking?

Mr Bartlett : The costs that agencies are currently incurring in delivering particular services. So, for example, the cost of paying an account, the cost of paying a staff member and a range of other measures of that sort. The work that we have to date indicates that those costs vary highly and there is obviously the potential for greater efficiencies through consolidation.

Senator McALLISTER: That will be put out to an external contractor, I imagine? Will the benchmarking work be contracted out?

Ms Halton : Yes.

Senator McALLISTER: Are there any other costs associated with the benchmarking process aside from engaging external contractors?

Mr Bartlett : There are a range of costs associated with this project. Many of them are being absorbed within the department.

Senator McALLISTER: I am thinking of the $4 million that we were speaking about earlier.

Ms Halton : That is benchmarking.

Senator McALLISTER: And it is largely to do with external contractor consultants.

Ms Halton : It will largely be data collection.

Proceedings suspended from 21:14 to 21:21

Senator McALLISTER: I am on program 2.5, government advertising.

Senator Cormann: Usually campaign advertising is dealt with together with outcome 3. That is what we used to do, isn't it? I remember this from my time in opposition.

Ms Halton : We have streamlined.

Senator LUDWIG: We have changed the—

Senator Cormann: Okay, sorry. I stand corrected.

Senator McALLISTER: We will see how we go. We will see if we can revive the tradition. Is it possible to provide a list of current government advertising campaigns with expenditure of over $250,000?

Senator Cormann: I am sure we can assist with that. Let's provide it on notice.

Senator McALLISTER: Are there that many of them? We must know. There cannot be that many, can there?

Senator Cormann: We will make sure that we provide you with accurate information, and we will give you the full list on notice.

Senator McALLISTER: Okay. In doing so, could you please detail the process of how the campaigns were commissioned.

Senator Cormann: Sure.

Senator McALLISTER: That would be good. Are there any major campaigns currently being developed or about to be launched?

Dr Helgeby : A campaign is not a campaign until it is launched. It has often been the case that departments have done work on certain things and they have not come to fruition; they have never actually hit the media. So we do not classify or track work that does not result in a launched campaign.

Senator McALLISTER: It is tricky as an approach, isn't it?

Senator Cormann: It is an approach that is consistent with that taken by governments of both persuasions.

Senator McALLISTER: I understand. I am new.

Senator Cormann: That is all right.

Senator McALLISTER: Newish.

Senator Cormann: I was going to say 'ish'.

Senator McALLISTER: Listening to that answer I am reflecting on this: the principles associated with Commonwealth government advertising would nonetheless be applied before you initiated the expenditure, not only at the point at which the expenditure becomes a campaign, I guess.

Senator Cormann: We do go through a proper process to make relevant decisions, and of course the overall expenditure in the last few years has been below the overall expenditure in the last two years of the previous government. I am happy to provide you with that information and all this too.

Senator McALLISTER: That would actually be very good, and if that can be broken down, because I think we would be interested in understanding expenditure, whether it has been incurred as part of a campaign or as some pre-campaign expenditure associated with either commissioning work, creative work, or any research that has been commissioned in terms of audience research, whether qualitative or quantitative social research associated with campaigns. So a breakdown of that would be terrific.

Senator Cormann: Sure. I am happy to take that on notice.

Senator McALLISTER: Senator Ludwig, did you have any follow-up questions around this question?

Senator LUDWIG: The last time, I think, we spoke about this you still had an interim system in place; you then moved to a more formal system. So you now have a reinstituted committee that oversees it—I do not know what you would call them now.

Senator Cormann: I think you might be referring to the SDCC—the Service Delivery and Coordination Committee.

Senator LUDWIG: Right. No wonder I forgot it! So is that doing the task of looking at each individual request for an advertising campaign?

Senator Cormann: It is ultimately making the decisions on whether a campaign gets launched or does not get launched, yes.

Senator LUDWIG: How many does that have currently sitting on its desk?

Senator Cormann: I would have to take that on notice. That is obviously a committee of the cabinet, and you would appreciate the boundaries that apply to that.

Senator LUDWIG: Can I put it this way: have there been any that have been refused in the last 12 months?

Senator Cormann: I will take that on notice. Again, these are considerations by a cabinet committee.

Senator LUDWIG: Then it might be helpful if, for a couple of minutes, Ms Van Veen were to just take me through what the current process is from start to finish when the department decides on having a campaign or proposes a campaign.

Ms Van Veen : In broad terms, as to the process for the development and launch of a campaign, I cannot take you through the cabinet process, because—

Senator LUDWIG: You can in the sense that it goes to cabinet for approval.

Senator Cormann: No. I can take you through the cabinet process. Obviously there is a subcommittee of the cabinet that considers these issues and makes decisions in a way that is similar to the way these decisions were made when you were a minister. So there is no magic or particular science to this.

Senator LUDWIG: No, but money is allocated and then, for a department to pursue a campaign, that is a cabinet decision.

Senator Cormann: I think you were actually minister for this area at some point—

Senator LUDWIG: Yes. I still think you are using my process, but I will not claim it. You tried to abandon it at one point but came back to it.

Senator Cormann: There you go. You should be pleased—

CHAIR: Having been critical of the process, too—

Senator LUDWIG: I am not sure what I—

Senator Cormann: The secret hand of Senator Ludwig continues!

Senator LUDWIG: Yes. So, Ms Van Veen?

Ms Van Veen : If you look at it in broad terms, the process for the development and launch of a campaign valued at $250,000 or more will generally involve a series of steps around the development of the campaign and, obviously, the compliance review aspects, and if you start with: the minister of the relevant entity agrees to the development and provides the authority for that campaign; the entity informs Finance of the impending advertising campaign and they undertake the developmental research to inform that campaign and develop that communication strategy. They liaise with us to schedule a meeting for the Independent Communications Committee to review the communication strategy and the developmental research, the media strategy and the draft media plan—so, the aspects around the campaign.

The ICC review the campaign and provide compliance advice against principles 1 to 4 of the guidelines, and entities are expected to consider this advice as part of the campaign development process. The entities are then developing briefs for the communications suppliers, if they are looking at securing an advertising agency and the PR suppliers, multicultural and Indigenous communications specialists, and they are starting their procurement processes to get their campaign underway. Once they are appointed they are starting that process of developing their campaign and using their research to refine their campaign, to test it and going through that iterative process of the developing their campaign materials. They are working with the Commonwealth master media agency to develop a media plan and get that in place and, as I said, refining the materials to ensure that they work for target audience.

Senator LUDWIG: Who organises the purchase of media space, such as television space?

Ms Van Veen : It is Dentsu Mitchell who does that.

Senator LUDWIG: Is that on a separate contract?

Ms Van Veen : Yes. That is managed by Finance.

Senator Cormann: Let me just say that the overall expenditure in relation to advertising campaigns over the last full financial years of our government was lower than in each of the years of the previous government. In 2012-13 you spent $139 million and in the year before nearly $140 million. We spent $106.5 million in 2013-14 $107.1 million 2014-15. The expenditure under the previous Labor government was higher than that in every single here. That is in nominal terms. Obviously we have been much more targeted.

Senator LUDWIG: You do not know how effective it has all been. Coming back to the ICC, how many are sitting there waiting for approval?

Ms Van Veen : The ICC provide a compliance report.

Senator LUDWIG: 'Approval' is my word, but let us say 'compliance report'. Generally the minister would not continue to pursue the campaign until that report was finalised. The minister could choose to do that, as I understand it, but they tend not to. So I was going to ask a series of questions. First of all, how many are sitting there waiting for the compliance program to be completed?

Senator Cormann: I will take it on notice to see to what extent we can assist.

Senator LUDWIG: Secondly, have there been any campaigns that have gone ahead before the compliance audit has been finalised or even if the compliance audit was not finalised?

Senator Cormann: We might take that on notice.

Senator LUDWIG: And the number, obviously. I think we have asked how many campaigns above the $250,000 level are currently—.

Senator Cormann: You have already asked that and we have already taken it on notice.

Senator LUDWIG: How many current advertising campaigns are there? Have we asked that?

Senator Cormann: Just to make sure, I will take that on notice, too.

Senator LUDWIG: The current ones—the name, the duration—

Senator Cormann: So no longer above $250,000? This is now all current campaigns?

Senator LUDWIG: Just above $250,000. It gets too complex below $250,000.

Senator Cormann: That is what I was worried about. It seemed that you were making a distinction between the two, so I thought I would check.

Senator LUDWIG: Clearly only those above $250,000—the number, the relevant department, the nature of the advertising campaign, the cost of each advertising campaign, together with the duration and the type of media purchased, whether it is TV, radio or print.

Senator Cormann: Sure.

CHAIR: We will move onto outcome 3, which is ministerial and parliamentary services.

Senator McALLISTER: You may wish to take some of these questions on notice. I do not expect you to have this information with you this evening. I am hoping that you will be able to table an updated government staffing profile.

Senator Cormann: We will take that on notice.

Senator McALLISTER: In particular, I am looking for the total number, how many are assigned to each office, the classifications for personnel and any non-standard home or work cases. Minister Cormann, in general are you able to provide any advice about what changes to the government staffing profile have occurred since the change—

Senator Cormann: In general, no.

Senator McALLISTER: I have asked Ms Halton to provide a detailed list. I am interested to know whether the number of staff provided to the government has increased significantly or decreased since the change of prime ministership.

Senator Cormann: In general, I do not believe so, but let me make sure that the answer is right on the specifics. Given that Ms Halton has already taken the question on notice, I think that is probably the best way to deal with that.

Senator LUDWIG: And in that, how many there are in the PMO's office and whether that has changed.

Senator Cormann: If we provide you with the government staffing profile I think that that will cover the PMO.

Ms Halton : We have done that before. That is fine.

Senator McALLISTER: I also want to know if you can give us an update on the MOPS Act enterprise agreement negotiations?

Ms McGregor : As you would probably know, the current enterprise agreement nominally expired on 19 June 2015. Employees' conditions continue to be set by that agreement until a new one is in place. On 15 December a notice of employee representational rights advising employees that they can appoint bargaining representatives was issued. That is probably the most we can say in terms of an update. That is where it is up to.

Senator McALLISTER: Obviously an election year is a challenging time to be undertaking the bargaining with MOPS staff. I wonder what you think the prospects are, what the timetable is and any milestones you may have for moving this process along, given that essentially the agreement expired in the middle of last year.

Ms Halton : To be abundantly clear, the officer cannot speculate. What we can tell you about is what we know. Beyond that, as usual there are no opinions and no speculations.

Ms McGregor : There is a first meeting of bargaining representatives scheduled for 26 February.

Ms Halton : We will see how it goes. It is the usual bargaining process.

Committee adjourned at 21:38