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Rural and Regional Affairs and Transport Legislation Committee
23/05/2012
Estimates
INFRASTRUCTURE AND TRANSPORT PORTFOLIO
Department of Infrastructure and Transport

Department of Infrastructure and Transport

[09:03]

CHAIR: I welcome Senator the Hon. Kim Carr, Minister for Human Services representing the Minister for Infrastructure and Transport; Mr Mike Mrdak, Secretary of the Department of Infrastructure and Transport; and officers of the department. Minister, do you or Mr Mrdak wish to make a brief opening statement?

Senator Kim Carr: No.

Mr Mrdak : I might take a moment just to outline for the committee some of the key initiatives set out in this year’s budget for the portfolio. This has been a very strong budget for the portfolio and contains a number of key initiatives. This portfolio budget contains a number of key initiatives which not only continues the government’s strong investment focus in the portfolio but also provides resourcing for a number of regulatory reform initiatives. Just briefly, the budget contains a major initiative in the development of the Moorebank intermodal facility in Sydney. It is a longstanding commitment of governments to provide a long-term facility for intermodal freight in the Sydney region with the relocation of defence facilities from the Moorebank facility. This will enable the development of probably the only last opportunity in Sydney for a major intermodal facility that will provide for freight growth.

The budget also contains a commitment by the government, subject to matching funding by the government of New South Wales, of $3.56 billion to complete the duplication of the Pacific Highway by 2016. That would bring the Commonwealth total investment, if that is matched by New South Wales, to $7.96 billion, making it the largest single road investment in the Commonwealth’s history. The budget also contains a major initiative of a project recommended by Infrastructure Australia of $232 million of Commonwealth funding to upgrade the Goodwood-Torrens junction in Adelaide. This would provide a significant capacity upgrade to both the freight and passenger rail systems in Adelaide and at the same time enable the urban renewal of an inner and northern area of Adelaide which meets the objectives of the national urban policy.

The government has also provided funding in this budget of $20 million to the portfolio to continue to work on high-speed rail and national transport planning. Importantly, this budget also sets out the framework for Nation Building 2. Chair, as you are aware, Nation Building 1 will run until 2013-14. The government has now committed to another five-year infrastructure program. This budget provides the framework for that, including key funding directions and Commonwealth policy settings. The budget has also announced funding for two key programs under Nation Building 2—the continuation of the Black Spot Program funded at $60 million per annum, and the Roads to Recovery Program at $350 million per annum—over the future years.

Importantly, in terms of regulatory reform, the budget provides funding of $34.9 million to establish the national regulators. As has been discussed with this committee over the last few years, this is a significant reform, where on 1 January next year for the first time Australia will have single national regulators and single law and regulators in relation to maritime, heavy vehicles and rail. The government has provided $34.9 million to implement that—$15.6 million for a national heavy vehicle regulator based in Brisbane; $9.2 million for a national rail safety regulator based in Adelaide; and $10.1 million for AMSAR based here in Canberra as the national maritime regulator. Last Friday, Australian transport ministers agreed that the last package of legislation, national maritime law, will be introduced tomorrow into the House to provide for a single national maritime regime.

There are two final initiatives outlined in the budget. Firstly, there is a heavy vehicle safety package funded at $140 million over the next six years to provide for heavy vehicle safety. There is the continuation of the seatbelts on regional school buses program at $1 million per annum. There will be amendments to the regional airports funding program to provide $4.9 million of additional funding for capital works at regional airports to support security initiatives. Finally, the government has recently announced its next steps in relation to addressing Sydney’s aviation capacity needs, including measures to address road and rail access to Sydney (Kingsford Smith) Airport and further work on examining sites for supplementary aviation capacity in Sydney, in particular, an examination of a site at Wilton in New South Wales and further work on looking at the Richmond airbase capacity for sustaining civil operations.

Chair, this is a budget which has been a very strong and positive one for this portfolio. It continues a very strong investment that has been undertaken in this portfolio on Australia’s infrastructure. At the same time, it underpins significant regulatory reform. We look forward to taking questions from the committee. Thank you.

CHAIR: Thank you, Mr Mrdak. Before I go to Senator Joyce, Mr Mrdak, very quickly, tell me about the heavy vehicle safety package. Am I in the right area or should I wait?

Mr Mrdak : I am happy to do it a little here.

CHAIR: I am not renowned for taking up a lot of time in questioning in Senate estimates, so my colleagues can just entertain me for a minute.

Mr Mrdak : The Australian government has in this budget announced its intention to provide $140 million over the next five to seven years for a heavy vehicle safety package. Essentially this will be ongoing funding of $20 million per year beyond this next couple of years, which will provide for a continuation of a very successful program that has provided the heavy vehicle safety package, including rest areas and improvements to physical infrastructure to enable safer operations by heavy vehicles. I will ask Mr Jaggers to give you a little more of the detail of the program.

CHAIR: Rest areas and what?

Mr Mrdak : And infrastructure improvements for the strengthening of pavement and the like, which will enable greater heavy vehicle safety, and measures to enable heavy vehicle safety operations, including driver training and the like.

Mr Jaggers : Senator, as Mr Mrdak outlined, the aim of the program is to improve safety and productivity for the heavy vehicle industry, so it will include construction of the rest stops and technology trials that address speed and fatigue. We expect that we will be consulting with state and territory governments over the next little period and consulting with industry on where that next investment program will be directed. Certainly we expect that the program will have $10 million in the next year and $30 million in the year after. That will enable us to properly work with industry on the best places for those rest stops and extra measures to implement it.

CHAIR: I would be jumping the gun to ask where that is going to happen. That is a work in progress once you have consulted the states?

Mr Jaggers : Certainly in the first two rounds of the program there was a lot of consultation with industry and with jurisdictions to make sure we do not just choose the right locations but the right kind of solutions, which is why we are proposing to ramp the program up from $10 million next financial year to $30 million the year after and then to have it continue at $20 million a year after that.

CHAIR: How long has this initiative been going for?

Mr Jaggers : It has been running since 2008.

CHAIR: I want to ask about the amount of funding. Is the $140 million over the next seven years a consistent dollar value or is it increasing year by year?

Mr Jaggers : If you give me a moment, I will give you the answer.

CHAIR: Do it now. Then it saves you the homework when you leave here.

Mr Mrdak : Essentially, Senator, it is $20 million next year, then $30 million and then $20 million per annum continuing on for the further five years.

CHAIR: I get that, Mr Mrdak, but previous from 2011.

Mr Jaggers : It is in the order of the same amount. There was $30 million for the first round and $40 million provided for the second round, Senator.

CHAIR: Very good. That is a secret we have kept. We should get that out. Thank you.

Senator NASH: Before Senator Joyce kicks off, I have some questions on the Moorebank intermodal. Is that best asked later in infrastructure or here in corporate?

Mr Mrdak : It is probably best if we do it in nation building.

Senator JOYCE: I want to quickly touch on a few things that you brought up at your initial presentation. You talked about the Pacific Highway upgrade. How much is actually going to be spent there in the coming years, or is that all completely contingent on New South Wales contributions?

Mr Mrdak : Senator, we have investment in the next two years already in place. I will just get the details of that from our officers. The $3.56 billion is the additional amount over and above the current commitments.

Senator JOYCE: But that is completely contingent on New South Wales contributing?

Mr Mrdak : That $3.56 billion is contingent on New South Wales matching it, yes, Senator.

Senator JOYCE: So what happens if they match you for half of it?

Mr Mrdak : The government’s position at this stage is that the Australian government will only fund what is matched by New South Wales.

Senator JOYCE: So if they put a dollar in, you will put a dollar in? If they put $3.5 billion in, you will put $3.5 billion in?

Mr Mrdak : The outstanding cost estimate is around $7.1 billion to complete the highway by 2016. The government’s position is that they will bring out that money only forward on the basis matched.

Senator JOYCE: Has New South Wales given you any indication whatsoever about what they are liable or whether they are going to contribute?

Mr Mrdak : I have only seen the public statements by New South Wales ministers, which have indicated their view that they do not agree at this stage with a fifty-fifty split of funding. They argue for a model of 80 to 20 or some other variant. I am not aware of any formal position from New South Wales at this point.

Senator JOYCE: Did we ever make any previous recommendations or say in any previous discussions with New South Wales that it was more of a proportionate split and that the Commonwealth would actually wear more of the weighting? Have we changed to a fifty-fifty weighting from something that was more in line with a greater weighting towards the federal government in the past?

Mr Mrdak : The fifty-fifty has been a consistent position by successive Australian governments. It goes back to the AusLink program. However, there have been projects which have been negotiated on different bases. Some projects have been funded more recently, particularly as part of the fiscal stimulus, at 100 per cent by the Commonwealth. Others have been at different varying amounts. But the fifty-fifty funding split underpinned the MOU that was signed firstly on AusLink and then on Nation Building.

Senator JOYCE: So we have never said to the New South Wales government, ‘In completion of the dual carriageway for the Pacific Highway, the Commonwealth will pick up more than 50 per cent?’

Mr Mrdak : We have always maintained a 50 per cent sharing as our position. However, on some individual projects, the Commonwealth has funded more than 50 per cent.

Senator JOYCE: Are any of those individual projects currently incorporated with the amount that would be built under your proposed $3½ billion?

Mr Mrdak : Sorry, Senator, do you mean in—

Senator JOYCE: Are any of those projects which the Commonwealth has indicated in the past that they would pick up more than 50 per cent incorporated in the items for completion to bring about a dual carriageway? Are we changing our funding proportion from what was initially promised in any section of the road that is in front of us?

Mr Mrdak : No, Senator. The fifty-fifty funding split has been a consistent Commonwealth position. But in relation to some individual projects, the Commonwealth has done more.

Senator JOYCE: But that is not in what has to be completed at this point in time?

Mr Mrdak : Yes. In the current programs underway we have a mix of funding across projects. What the government is saying in relation to the $3.56 billion offer is it is based on fifty-fifty funding going forward. I will get for you the figures of the current spend, Senator.

Mr Jaggers : Senator, under the current program from 2008-09 to 2013-14, the Australian government has committed $4.36 billion.

Senator JOYCE: Whereabouts is that being spent? What areas or seats is that being spent in at the moment? We will go on what towns.

Mr Jaggers : Well, it has been spent on the priority 1 and priority 2 sections of the Pacific Highway.

Senator JOYCE: Where are they?

Mr Jaggers : Duplication of the Pacific Highway between Sydney and Port Macquarie is part of the priority 1 sections. Duplication of the highway between Ballina and the Queensland border is also part of priority 1.

Senator JOYCE: Ballina to the border would be the seat of Page, would it?

Mr Jaggers : I do not know, Senator.

Senator JOYCE: Port Macquarie is the seat of Lyne, is it not? What about between Ballina and Port Macquarie?

Mr Jaggers : Between Ballina and Port Macquarie, the priority 2 sections are between Port Macquarie and Coffs Harbour, and Woolgoolga to Ballina are the priority 3 sections. But there are a couple of projects that are occurring in that section for safety reasons.

Senator JOYCE: That would be in the seat of Cowper, which is a coalition seat, is it not?

Mr Jaggers : Senator, I am not aware.

CHAIR: Senator Joyce, in all fairness, I do not think the officers give a fat rat’s backside what seat they are in. They are doing the right thing by the government.

Senator JOYCE: Far be it for me to suggest we might be pork-barrelling seats right at the front end of this.

CHAIR: The words ‘Nationals’ and ‘pork-barrelling’ are synonymous. It would be silly of me to start a fight at this time of day. Senator Joyce, I suggest you use your time to the best that you can and ask officers direct questions in relation to the budget.

Mr Mrdak : Perhaps I can just explain the priorities. As Mr Jaggers indicated, there are three priority areas. They have been subject to negotiation over several years with New South Wales. Priority 1, which is work which is underway, as Mr Jaggers indicated, is on the Pacific Highway between Sydney and Port Macquarie; Pacific Highway, Ballina to Queensland; and duplication between north and south of Coffs Harbour, which is identified as a major area of activity. Priority 2, as Mr Jaggers indicated, is Port Macquarie to Coffs Harbour, which includes Warrell Creek to Urunga; Oxley Highway to Kempsey, Frederickton and Eungai. Priority 3 areas are the remaining areas between Woolgoolga and Ballina. That has been driven by traffic density and safety by the way in which the program has been structured with New South Wales. Essentially, the completion of the current program will have nearly 67 per cent of the highway duplicated. That has been done on a priority ranking with New South Wales based on traffic and safety issues.

Senator JOYCE: What about the New England Highway? Have you been doing any upgrading on that?

Mr Mrdak : There has been money allocated in this program to the New England Highway. I can get you—

Senator JOYCE: What parts, what sections?

Mr Mrdak : I will get that detail for you, Senator.

Senator JOYCE: If you can get it straightaway, I will go straight to it. Otherwise I will go to another question.

Mr Mrdak : I will just see if we have that information with us.

Mr Foulds : At the moment, the level crossing study for the bridge over the railway at Scone on the New England Highway is ongoing. That is at a cost of $1.4 million from the Australian government. Planning is being undertaken into a bypass or reconstruction of the Bolivia Hill section of the New England Highway.

Senator JOYCE: I must say that that is an absolute death trap.

Mr Foulds : The Tenterfield heavy vehicle bypass will get $3.3 million of Australian government funding. That is going towards planning for the Tenterfield heavy vehicle bypass at the moment. There have been other activities. The most recent one is the announcement that late next month Aberdeen Bridge will be reconstructed, which will be the last HML bridge on the New England Highway. When that is finished—

Senator JOYCE: I acknowledge that Bolivia Hill is an absolute death trap. It is two lanes up to 1,400 metres above sea level. It is a real problem. When are we actually going to start that? When is somebody going to start moving some dirt there?

Mr Foulds : Senator, the announcement of the preferred upgrade option will be available in late 2013 for Bolivia Hill and mid-2014 for the Tenterfield bypass study, so the detailed costs will be available at that time and a decision for government on when construction occurs.

Senator JOYCE: Is there anywhere on the New England Highway where we are actually moving dirt and building stuff rather than doing plans?

Mr Foulds : Tenders were called for the Aberdeen Bridge project, as I mentioned earlier, in April. The Scone planning is already underway.

Senator JOYCE: The Scone thing is only a $1½ million project, is it not?

Mr Foulds : The planning of it is, but if it subsequently moves to a construction, it will be significantly more than that.

Senator JOYCE: So are we actually building anything anywhere on the New England Highway?

Mr Foulds : At the moment, no, but in this program we have completed the Halkin Hill—

Senator JOYCE: So the answer is we are not building anything at the moment but we are planning that we might in the future?

Mr Foulds : Actually, construction tenders have been called for the Aberdeen Bridge project, Senator.

Senator JOYCE: Aberdeen Bridge?

Mr Foulds : Yes. It is $26.2 million.

Senator JOYCE: Apart from the Aberdeen Bridge, nothing else?

Mr Mrdak : Senator, they are major projects. There is also obviously maintenance and that type of money going into the New England, which we fund as part of the maintenance spending in New South Wales. And there are obviously safety programs being initiated under Black Spot and other measures.

Senator JOYCE: You were saying that the feds have said that they will spend $4.1 billion between 2008-09 and 2013-14. How much has the state government spent over that period?

Mr Mrdak : The New South Wales government has contributed $500 million in that period 2008-09 to 2013-14.

Senator JOYCE: So they have spent $500 million and we have spent $4 billion. That almost looks more like an 80 to 20 split. Maybe that is why they are upset about the fifty-fifty split.

Mr Mrdak : As I said, Senator, that reflects the most recent period of work. But if you look at the total program since 1995 when the Commonwealth first started investing in this program, you will see it is quite a different picture. As I said, it has been a longstanding Commonwealth position that there be shared funding.

Senator JOYCE: But the reality is, on your own figures, between 2008-09 to 2013-14 the federal government has spent a bit over $4 billion and the states have spent a bit over $500 million. It is more in the realms of 80 per cent for the Commonwealth and 20 per cent for the state governments. Yet what we are asking now is for the state governments to match us fifty-fifty. The states governments are saying, ‘Well, that is a completely different deal to what you’ve suggested in the past.’

Mr Mrdak : Well, the Australian government’s position is that it is not a completely different deal, Senator. It has been a very consistent position of successful governments to seek funding with 50 per cent shared funding.

Senator JOYCE: You talked about high speed rail in your introduction. How is that going? Where is high speed rail up to at the moment? Where is the fast train? Have you got one on the line and is it going anywhere?

Mr Mrdak : Stage 2 of the study is now underway. The department has contracted work on that. We expect the final report will be available in December this year.

Senator JOYCE: How much will it cost to actually build this? Where is the high speed rail going from and how much is it going to cost?

Mr Mrdak : The work we are doing is from the Brisbane CBD down through to the Sydney CBD, Canberra and the Melbourne CBD. So it is an east coast network that is being costed.

Senator JOYCE: How do we pay for that? Sell Tasmania?

CHAIR: I am listening intently. Senator Joyce, you asked two questions in the previous breath. Only one was answered. I would like to hear Mr Mrdak’s answer to the second part of your question before you go to the next one.

Mr Mrdak : The first stage of the report which was released publicly last year included some preliminary cost estimates for a network based on a number of alternative corridors. We are now finalising a preferred corridor which is enabling us to get a more exact costing undertaken. The range of estimates is from P50 to P90, which is degree of probability and, therefore, the risk of construction cost changes ranges from $68 billion to $108 billion without some of the additional costs in relation to, obviously, contingencies and the like.

Senator JOYCE: That gets us from Brisbane down to where?

Mr Mrdak : To Melbourne.

Senator JOYCE: So $180 billion?

Mr Mrdak : It is $68 billion to $108 billion plus contingencies.

Senator JOYCE: Would it pay for itself when people start paying? How much is a ticket on this train going to cost—$1,000?

Mr Mrdak : The work we are currently doing in stage 2 is to do that more detailed evaluation. Generally fare levels equivalent to airfare levels would be required for the train. But we are now doing the more detailed evaluation as to whether it would meet its operating costs. High speed rail around the world does not recover capital cost. Hence we have made it clear in our first stage report that essentially the capital cost would be a matter for government. High speed rail can cover its operating costs and some portion of capital costs. But we are working on the basis that it will require significant public investment.

Senator JOYCE: Where are we going to get $108 billion from?

Mr Mrdak : Senator, that is a matter for future government decisions if governments decide to proceed with a high speed rail network.

Senator JOYCE: Do we sell a few national parks or something? How do we get the money for this?

Mr Mrdak : As I said, Senator, if governments decide to proceed with high speed rail in Australia, we have made clear in our work, which is consistent with international practice, that it will require a level of public investment. If governments decide to proceed with that and how they decide to proceed with that—

Senator JOYCE: It would make sense if it actually paid for itself. But you would have to admit we cannot cover the capital costs and it is unusual in the history of high speed rail where they actually even cover the operating costs.

CHAIR: Senator Joyce, I think you are going into a matter of opinion.

Senator JOYCE: Can you tell me one high speed rail network in the world that actually covers its operating costs? There might be one, but where is it?

Mr Mrdak : I think certainly some of the systems in Europe are covering operating costs. I am not sure how much contribution they are making to capital. I can find that out for you.

Senator JOYCE: What sort of populations are they going between? Give me an example. Paris to—

Mr Mrdak : The French system is serving a number of cities now and is serving certainly cities of the size of Australian areas.

Senator JOYCE: How far apart are they? I can understand something 100 or 200 kilometres making sense because it is more convenient than a plane, but why would someone buy a ticket on a high speed rail from Brisbane to Melbourne if they can fly there quicker and cheaper?

Mr Mrdak : Well, that will be one of the areas we are looking at. Obviously we do not anticipate that high speed rail would be competitive in an environment between Brisbane and Melbourne for someone travelling in comparison to air. But for shorter segments of the journey, it may well be competitive. We are working on a design basis that Sydney-Melbourne and Sydney-Brisbane would be under three hours to be competitive with air. So all of our technical design has been based on that type of parameter. CBD to CBD in under three hours is what we are working on to be feasible to attract a significant proportion of air travel.

Senator JOYCE: To be honest, even if you did go forward, how long would it take to build this thing? You would have to completely upgrade all the track. How long are we talking about?

Mr Mrdak : It would require essentially a new track.

Senator JOYCE: So how many years are we looking at?

Mr Mrdak : It would depend on decisions of funding, Senator, and which parts of the network you do and over what stages. We have worked on the basis that it would be a project over at least one to two decades before you would have a complete east coast network.

Senator NASH: I want to clarify the cost of the planning stage that you are at now.

Mr Mrdak : The Australian government provided $20 million to the portfolio for the first two stages of the planning work.

Senator JOYCE: Have you done any planning on something that is probably not high speed rail and vastly cheaper and actually would pay for itself, which is the inland rail?

Mr Mrdak : Yes. The inland rail work—the design work and studies—were completed. That study was funded a couple of years ago at a cost in the order of $15 million.

Senator JOYCE: Does long haul freight transport pay for itself?

Mr Mrdak : Yes. We certainly see a strong future for rail freight. That is one area which has been particularly targeted by the Australian government in terms of our investment program in interstate rail freight.

Senator JOYCE: And it would be vastly cheaper than building high speed rail?

Mr Mrdak : The order of cost magnitude for the inland rail is around $3.9 billion to $4.1 billion.

Senator JOYCE: It is $3.9 billion to $4.1 billion as opposed to $108 billion. The inland rail could actually pay for itself. The high speed rail will not. One will take up to 20 years to build, and for one most of the track is already there.

Mr Mrdak : Certainly the studies on inland rail have indicated that its benefit-cost analysis, the BCR, is very low and that it is not commercially viable for at least another two decades because of the amount of freight volume travelling down the Brisbane-Melbourne corridor. Having said that, we do see a strong future for rail freight growth. It is a question of timing as to when you would bring the inland rail project into the market.

Senator JOYCE: And how much freight is going down the Newell Highway at the moment?

Mr Mrdak : Significant amounts of freight. I do not have the detail of the volumes.

Senator JOYCE: We have a de facto inland rail system. The trouble is it is on the road. We have 6,000 trucks a day going through Moree or something, have we not?

Mr Mrdak : Certainly. But the question is how much of that freight is doing the full length from Brisbane to Melbourne and how much of it is serving intermediate points along the way. So those sorts of things come into play.

Senator NASH: Could you actually take that on notice for us and provide it by freight task and the various legs of that route?

Mr Mrdak : Certainly. We will see what data we have.

Senator NASH: That would be useful, thanks.

Senator JOYCE: I read on the front page of the Canberra Times that they are talking about moving departments to regional areas. I think that is a splendid idea. How much of your department could we move out to regional areas and whereabouts could they go? What are your leases like at the moment? Have you got any expiring leases? Have you looked at alternative venues for where you could set up sections of your department?

Mr Mrdak : I do not think we have any expiring leases in the next few years. We are predominantly based here in Canberra. We have offices in a number of state capitals, which are essentially our transport security offices, which are the major regulators of transport security in ports and airports. I will just check with Mr Banham, but I do not think we have any leases expiring soon. Certainly the bulk of our workforce is located here. We have a workforce around 990 people.

Senator JOYCE: That is the total number of staff in the department?

Mr Mrdak : Yes. Of them, about 830 or so are here in Canberra.

Senator JOYCE: With the joys of the NBN which the government lauds to us all the time, is there any reason that we could not have these staff members, instead of being in Canberra or Sydney, in Dubbo, Longreach, Bendigo or Young?

Mr Mrdak : It would depend on whether it made operational sense for the organisation having our offices located elsewhere and the costs involved.

Senator JOYCE: Rent would be cheaper. If you have this multiple billion dollar NBN that is bringing everybody online so everybody can do business from anywhere, surely it would make sense, therefore, to capitalise on the benefits of that and start moving some of your department out to some regional areas.

Mr Mrdak : We have not given it consideration at this point.

Senator JOYCE: Has anybody ever discussed it with you at all? Is there a possibility to move some of this department out to the regional areas? It might even give you more empathy towards infrastructure if you are having to drive along it every day.

Mr Mrdak : I think it would be very much dependent, again, on the operational needs and the ability to recruit and retain staff in certain locations. When the portfolio included the Regional Australia portfolio, we certainly had some regional offices at that time.

Senator JOYCE: What happened to them?

Mr Mrdak : They are now with the Department of Regional Australia Local Government, Arts and Sport.

Senator JOYCE: And where is that department? Where is the location of that department?

Mr Mrdak : It has regional offices throughout Australia, but its principal head office is in Canberra.

Senator JOYCE: That is a good spot for a regional department office!

Senator NASH: You refer to the operational issues which would be a factor in the consideration of whether there was movement from a city area out to the regions. What are those operational issues that require a departmental staffer to be working in, say, Canberra rather than somewhere like Orange? What is the actual operational issue?

Mr Mrdak : For us, obviously contact with the parliament is important, certainly for senior officers who are working closely on parliamentary matters. Obviously the ability to deal with—

Senator NASH: Sorry to interrupt. What percentage of the overall staffing are those senior officers that you are talking about who have contact with parliament? Just a rough ballpark.

Mr Mrdak : Our estimate is we have 45 senior executive service officers in the department. That is our SES group. But obviously other officers through the course of their working day deal with the minister’s office and the parliament.

Senator NASH: Because I do not know the numbers, what is that roughly as a percentage? Is it 50 per cent, 20 per cent or 10 per cent?

Mr Mrdak : It is 45 out of 990, so it is a very small number.

Senator NASH: So half a per cent. I can understand the operational issues there. That would be important. But for the rest of staff?

Mr Mrdak : But also for existing staff it is obviously retention in moving to other locations.

Senator NASH: So it just comes down to the fact that people might not want to move out of Canberra to go somewhere else?

Mr Mrdak : They may not want to move and there is the ability to recruit staff to certain locations. There may also be higher costs in communications, travel and the like to do our business.

Senator JOYCE: Those 45 staff can stay in Canberra, so you can all come and visit us.

Senator Kim Carr: They manage bigger groups of staff.

Senator JOYCE: They can visit us every day. I do not think I could get through the day without having some bureaucrat visit me. For the rest of them, what are the sort of problems that you could foresee for someone working, for instance, at one of those really remote towns, such as Dubbo?

Mr Mrdak : I do not think I would agree that Dubbo is remote.

Senator JOYCE: I do not either.

CHAIR: That was a bit tongue in cheek.

Senator JOYCE: I do not think Dubbo is remote. It would obviously be cheaper. The people in Dubbo seem to walk upright like they do everywhere else. I am sure there are capable people there. If we can do it over the internet, why can we not have cells of staff working at Dubbo?

Mr Mrdak : Certainly, if it met the operational needs of the department in being able to recruit and train staff. You also have to balance the cost of leases and buildings as against any travel and other operational costs you need to stay connected with them. People obviously work with other agencies. The ability to work across agencies in a location like Canberra is obviously one of the great advantages of being centrally located. We have found it very successful. As I said, we have all of our operational transport security people at various locations across the country, as they should be. Where they are performing operational roles with industry, they are located in those locations. But given that predominantly the large number of our staff are engaged in policy and regulatory tasks rather than operational tasks, the nucleus of the department is based here in Canberra.

Senator JOYCE: You have said there are how many staff?

Mr Mrdak : There are 990.

Senator JOYCE: So 1,000 staff. How does this compare to this time at budget estimates in 2011?

Mr Mrdak : We have about 10 staff fewer.

Senator JOYCE: Did you have an efficiency dividend placed on you last year?

Mr Mrdak : Yes. Like all agencies, we had the efficiency dividend. The efficiency dividend in 2011-12 was $2.7 million. For 2012-13, it is $10.1 million.

Senator JOYCE: Did you reach that?

Mr Mrdak : Yes.

Senator JOYCE: How did you reach it?

Mr Mrdak : We made a small reduction in staff but also, largely, we have done it through reducing expenditure in areas like consultancies, travel, corporate expenses and reducing some of our areas of work.

Senator JOYCE: So do you expect your staff to increase or decrease over the next 12 months?

Mr Mrdak : I expect the department staff to stay about where we are. We will have an efficiency dividend which we are required to meet of $10.1 million next year. We will meet that. There will be some reductions in staff in certain areas of the department. In other areas of the department we will add some staff because of changing priorities. Overall, I expect our staffing level to stay about where we are.

Senator JOYCE: Can you tell me what your staffing levels are in each state and territory?

Mr Mrdak : I can get that for you. We will get that for you this morning.

Senator JOYCE: As soon as you get that, break into the conversation and tell me. What about staff that are currently on secondment to other departments?

Mr Mrdak : I do not believe we have staff seconded to other departments. I will take that on notice, but I do not think we have any staff seconded at the moment.

Senator JOYCE: Are you on track to meet your efficiency dividend for 2011-12?

Mr Mrdak : Yes. We operate within our budget.

Senator JOYCE: How will it be done? It is not going to be done through staff, so it is going to be done through other operational efficiencies.

Mr Mrdak : We have made reductions in all of our divisional budgets over the course of the year. That has been met, as I said, largely through reductions in supplier expenditure.

Senator JOYCE: Can you give me an example. Your current main premises of operation is where in Canberra?

Mr Mrdak : It is here in the city in Canberra on Northbourne Avenue.

Senator JOYCE: And how much does that cost us a month to lease?

Mr Mrdak : I will get that information for you. I will see if the chief operating officer has it. We have two buildings here in Canberra city.

Mr Banham : The lease for Alinga Street is $6.3 million per year. For 62 Northbourne, which is the adjacent building, it is $3.9 million per year.

Senator JOYCE: So over $10 million a year in leases?

Mr Banham : That is correct.

Senator JOYCE: Do you reckon you might be able to get a better deal than that in Tamworth or Dubbo? That is a lot of money. You could almost buy some of the towns for that price. Have you ever looked at saying, ‘Well, I think there might be a better deal out there for us somewhere and we can downsize here and start moving this out to save ourselves some money?’

Mr Banham : I have not done any work on that.

Mr Mrdak : We have not examined that, Senator.

Senator JOYCE: Because the NBN is going to be great. We will be able to move these people to all different parts of the countryside and they will all be able to work splendidly well. I listen to Minister Conroy. He tells me about this all the time.

Mr Mrdak : As I said, we have not looked at lease costs for any location outside Canberra.

Senator JOYCE: Is that a competitive lease? What sort of area do you get for that sort of price?

Mr Banham : The Alinga Street premise is 16,200 square metres and 62 Northbourne is 10,200 square metres.

Senator JOYCE: And when do those leases expire?

Mr Banham : In 2017.

Senator JOYCE: Do they have incremental increases for CPI?

Mr Banham : They do, although not necessarily CPI. There is an independent rent review undertaken each time.

Senator JOYCE: What about the rent review from last year to this year? Has the rent gone up or down?

Mr Banham : It would have gone up.

Senator JOYCE: How much did it go up by?

Mr Banham : I do not know the figures.

Senator JOYCE: And the year before that? Did it go up or down?

Mr Banham : It has always gone up.

Senator JOYCE: It is pretty expensive real estate. Who actually owns the buildings?

Mr Banham : I do not know the current owners.

Senator JOYCE: Mr and Mrs Lucky.

Senator NASH: Do you have a value of the actual buildings themselves?

Mr Banham : No. I would not know the value.

Senator NASH: Could you take it on notice to give us a reasonable estimate of the value of the buildings themselves, thank you.

Senator JOYCE: The arguments about having staff move to other areas are exactly the same arguments that were initially given as to why staff could not go to Canberra. Have we ever looked at alternatives? What about leases in Sydney or Brisbane? Do we have leases there as well?

Mr Mrdak : We do, for our operational areas.

Mr Banham : We have premises at Rosebery in Sydney.

Senator JOYCE: How much does that cost us a year?

Mr Banham : I do not have that figure with me. I will get it to you.

Senator JOYCE: Do we have any other premises that we are leasing anywhere else?

Mr Banham : We would have premises in Brisbane.

Senator JOYCE: Whereabouts?

Mr Banham : In Turbot Street.

Senator JOYCE: Right smack bang in the middle of town. Good luck to you. How much does that cost us?

Mr Banham : It is $742,000 a year rent.

Senator JOYCE: How much space do we get for that?

Mr Banham : We get 1,400 square metres.

Senator JOYCE: There would be some towns where you could actually buy a building for that price, could you not?

Senator NASH: Others in Sydneythe major cities unit?

Mr Banham : We have offices in Perth, Adelaide, Darwin and Hobart.

Senator NASH: What about the major cities unit? That is in Sydney, though, is it not?

Mr Banham : The major cities unit is predominantly here in Canberra. There are a number of staff located in a small part of a premises which we sublease from FaHCSIA in Elizabeth Street in Sydney.

Senator NASH: And that is it?

Mr Banham : The department provides accommodation for Infrastructure Australia.

Senator NASH: And where is that?

Mr Banham : It is in the Deutsch Bank building in Phillips Street in Sydney.

Senator JOYCE: Gosh. How much does that cost?

Senator NASH: And how much are we spending on that now?

Mr Banham : It is $1 million and—

Senator JOYCE: How much?

Mr Banham : It is $1,060,000 a year.

Senator JOYCE: One million for a floor?

Mr Banham : For a chunk of a floor.

Senator NASH: Is it still correct, if I am correct, that we are spending that much money because we are trying to send a message to the big end of town? I think that was the evidence given before.

CHAIR: Senator Nash.

Senator NASH: That is a direct quote. I am just checking.

CHAIR: That is a matter of opinion.

Senator NASH: No. It is a direct quote, Chair.

CHAIR: It is out of order.

Senator NASH: No, it is not. It is a direct quote from the evidence that Mr Deegan gave us some time ago. I am merely seeing if that is the same intent for spending the million dollars a year.

Mr Mrdak : That is the rental which is currently being paid on a pre-existing lease we have for that site.

Senator JOYCE: How big is this area that we are paying $1 million a year for to Deutsch Bank?

Mr Banham : It is 750 square metres.

Senator JOYCE: It would seem logical that we would try to find an alternative venue. I am absolutely certain that if you went to Singleton or Tamworth you definitely would be able to buy the whole building and have more of an area for that price and then you would own it forever. Has anyone ever thought about this?

Mr Mrdak : Certainly we do look, as do all agencies, to try to minimise our rent costs as we do to try to meet our budgets. Certainly it had been a longstanding Commonwealth policy under the former government to dispose of Commonwealth buildings and to undertake commercial leases of buildings rather than continue ownership. The former government had a disposal strategy or asset sales of Commonwealth buildings. I think all Commonwealth departments now—I stand to be corrected—lease space rather than own buildings.

Senator JOYCE: How are we stitched into this $1 million a year job at Deutsch Bank?

Mr Mrdak : It was undertaken through a commercial lease arrangement. We looked for an area which would accommodate Infrastructure Australia in a CBD location in Australia. That was the location that became available.

Senator JOYCE: How many staff work in this office?

Mr Mrdak : I think current staffing levels vary. It is around 12 to 14 staff.

Senator JOYCE: Twelve to 14 staff and it costs us a million dollars a year just for—

Mr Mrdak : That also accommodates a large conference area for Infrastructure Australia.

Senator JOYCE: How often do we use that?

Mr Mrdak : Very regularly. It is used not only by the Infrastructure Australia council but by other agencies and Commonwealth bodies which utilise that space as Commonwealth meeting space. It is used quite extensively, including by, at times, New South Wales agencies.

Senator JOYCE: Are we talking once a week?

Mr Mrdak : I think more than that. It is used quite extensively.

Senator JOYCE: And how long do these conferences go for? An hour or a day?

Mr Mrdak : All of that. I think it has hosted a number of long meetings and it also hosts shorter meetings. But it is an important space which is used by a number of Commonwealth agencies.

Senator JOYCE: And how many does this conference area seat?

Mr Mrdak : It is a very large area. I do not know how many it would seat. But it would certainly be capable of handling at least 30 to 40 people at a time.

Senator JOYCE: Have we ever made inquiries about other areas that we possibly do not lease for the whole year that we could just hire for the hour or day we need it?

Mr Mrdak : Certainly having this space available as part of Infrastructure Australia offices was one of the reasons. Where we need to, we use alternative conference facilities if we need alternative space in the Sydney CBD.

Senator JOYCE: How many staff are in this place? Fourteen?

Mr Banham : Somewhere between 12 and 14.

Senator JOYCE: That is pretty handy. That means the cost of the rent for each staff member is about $80,000 a year. Does that ever ring a bell to anybody? Does this place get a view of the harbour? I hope it does.

Mr Mrdak : It is located in the CBD.

Senator JOYCE: Does it get a view of the harbour?

Mr Banham : Yes, from some windows.

Senator JOYCE: A nice view?

Mr Banham : Yes.

CHAIR: It is probably ugly!

Senator JOYCE: It is literally a million dollar view a year.

CHAIR: Senator Joyce, I do not want to cut in on you, but these questions seem to ring true of every round—

Senator JOYCE: This is definitely—

CHAIR: These questions do seem to have a familiar ring about them. Mr Deegan will be here later today to appears in front of us.

Mr Mrdak : I want to correct an answer I gave earlier. Senator Joyce asked about New South Wales expenditure on the Pacific Highway in the current Nation Building program. I was incorrect. New South Wales, in the current Nation Building Program, have committed $968 million. I think I gave you an answer of $500 million. I apologise.

Senator JOYCE: That means it is proportionately less than what we are asking them now as fifty-fifty.

Mr Wilson : I want to correct an answer the secretary provided before. We have, to my knowledge, three officers seconded from a section within the department to other departments at the moment.

Senator JOYCE: Here is my final question before I hand over to my colleagues. For the million dollars a year we pay for our harbour view in the Deutsch Bank building in Sydney, how many regional bridges could we have fixed for that price instead? How much does it cost to fix a regional bridge? Would we be able to fix two a year for that price?

Mr Mrdak : I do not think so, based on current costings. It depends on what you are talking about in—

Senator JOYCE: Just one out on a country road—a little old wooden rattler that the trucks are going to fall through sooner or later?

Mr Mrdak : I think on current cost estimates you are not going to get too many bridges for a million dollars.

Senator JOYCE: So we will just keep on. If we got an office on the other side of that building that did not look over the harbour, would we pay less money for it?

Mr Mrdak : The lease arrangements for that building were set at commercial rates when they were taken up. There was an evaluation done, including independent advice to us, that that represented value for money in the CBD location.

Senator JOYCE: I think I found some of your efficiency dividend.

Senator NASH: I will be very brief. I have some questions on the operation of the contingency reserve. I think the Nation Building Program is due to end in 2014 when it becomes Nation Building 2. Is that correct?

Mr Mrdak : That is correct.

Senator NASH: What projects are expected to be funded out of the contingency reserve?

Mr Mrdak : The contingency reserve is essentially a way the government accounts for money which has been allocated in the budget but not yet allocated to specific projects at this point.

Senator NASH: So it is a bucket of money that has not been allocated?

Mr Mrdak : That is correct. It has been earmarked for future expenditure in that it is available in the appropriation but it has not been drawn down essentially for individual projects or programs at this point.

Senator NASH: Are there any earmarked to go against that contingency fund at this stage?

Mr Jaggers : Yes. There are a number of projects. Would you like me to outline them?

Senator NASH: Yes, if you could run through them briefly. Is it very extensive, because I am happy for you to provide it on notice?

Mr Jaggers : It is about 20 projects.

Senator NASH: If you could provide that on notice, that would be good. How much money is actually in the contingency fund?

Mr Mrdak : That would be a matter for the department of finance. It is a whole-of-government process.

Senator NASH: So the total of these projects against whatever is in the contingency fund—what is that value?

Mr Mrdak : We will take that on notice and I will get that for you in the course of this morning.

Senator NASH: Does this impact on the budget or does it sit aside from the budget?

Mr Mrdak : No. It is factored into the budget.

Senator IAN MACDONALD: Mr Mrdak, as you know, I have a high regard for your department and its efficiency, amongst all others, so do not take this personally. I say this to all departments. If you can save $10 million this year in your operations, you must have been awfully inefficient last year. I do not know if you have an answer to that.

Mr Mrdak : I think the answer is I certainly do not think we have been inefficient. But we will increasingly find savings to meet our objectives. We will drive harder for efficiency.

Senator IAN MACDONALD: Would you believe that every secretary has said that when I put that to them? It defies common sense that you can cut your budget by $10 million next year without reducing your services to government. It is going to happen again next year, so why not cut it by $20 million this year rather than $10 million this year and $10 million last year if you are going to find next year you can cut another $10 million? Why not save it this year?

Mr Mrdak : Well, we have been doing that this year essentially in that we have been adjusting our budget knowing that in the forward estimates we will have significant reductions in ongoing years. So we have been doing that. The efficiency dividend next year is $10.1 million. The year after it is around $12 million. So our base is diminishing. So we have to find savings ongoing, and we are doing that.

Senator IAN MACDONALD: You also say that you are delivering the same service to government. You must have a reduction. There must be some areas of your department where you are not providing a service you used to. You say, as your colleagues at your level also say, that you are stopping using consultants. Why were you using consultants if you can do without them? If you are now doing without the consultants, it means your own staff are going to have to do the work that the consultant was doing. That means that your services to government are going to be substantially reduced. Either disagree with that logic or, alternatively, tell me where the services of your department to government are going to be reduced because of this efficiency dividend.

Mr Mrdak : There are two things. Firstly, I agree with you that we have, and will continue to have, certain areas where we are no longer able to do work. We have made adjustments in the past to areas like our research program, our areas where, quite clearly, industry and others would like us to be doing more work in certain areas. We are not able to do that. We have made those adjustments. So we have made internal efficiencies in how we operate. At the same time, we have had to say to successive governments that there are areas where we simply do not have the resources and expertise to be able to do further work. In some cases where budgets have been available, we have been able to utilise private consultants and contractors. Where that is not available, we do what we can in-house with the skills we have. But we also have to say to government that there are limitations on what we can do.

Senator IAN MACDONALD: I understand. Thank you for that. My real question was: what are those areas of work that you are now not going to do? Can you identify them either now, if we have time, or on notice if you need to think about it? You use research as a throwaway example, I assume. I would really like to know what research that we have in the past deemed very valuable we are now not going to do. What implication does that have on the advice being given to government if, for example, that research is no longer being done? Does it mean that the advice to government is less than you would like it to be and less useful to governments and that might be why the government makes so many mistakes?

Mr Mrdak : I think we have targeted our research program. We have done that in successive years. This is not something just in this last two years. We have tightened our research program. I do not think we are undertaking any research, or we have not cut any research, which is of high value or critical. But, having said that, most of our reductions are in areas where I think people would like to see us doing more in certain areas. We have had to say to government and industry that we just do not have the resources to extend our activity to those areas. So we are meeting the government’s work program for the portfolio. We will continue to do that.

Senator IAN MACDONALD: Time has escaped me. Could you on notice indicate to me, not in great deal, which areas of service that your department has in the past provided at a high level or at a useful level? Can you give a brief explanation, as you have just given with research? You do not do all the research that you would like to, but you feel that for the government’s immediate programs on the books you can do the research that is necessary. I assume you are not doing research into things that the government might be wanting to look at in two or three years.

Mr Mrdak : We are happy to take that on notice and indicate that what we are also doing as part of this process is looking at all of our processing and the like within the department to get the efficiencies and meet all of the statutory requirements. So there is a series of processes underway. But I am happy to take that question on notice for you.

Senator IAN MACDONALD: I feel for you. All governments ask you to use the efficiency dividend. But it brings back my original comment that if you can be this efficient this year, you must have been bloody inefficient last year. It is not personal. I do not mean to be offensive. It is a matter of common sense.

Mr Mrdak : I would couch it differently. I would couch it as we are very efficient and we are going to be more efficient.

Senator IAN MACDONALD: Indeed. Why were not you more efficient last year? Without writing a book, I am interested in some of the areas, on notice. As I say, do not write a book, because you have more important things to do. Can you give a brief explanation of the areas where, if you had more money, you would put in more money?

Mr Mrdak : Certainly.

Senator McKENZIE: I want to ask something on notice. It goes to the legal fees of the department and the agencies. From my rough calculations to a question on notice, we have over $10 million being spent on legal fees. I would like that broken down. We have $2 million from Airservices Australia. We have $1.7 million from Airservices Australia for another issue. The department has spent $1.2 million with the Australian Government Solicitor. Could I have further detail for the over $1 million in legal bills in the answer to question on notice 25?

Mr Mrdak : Certainly. We obviously have a number of legal actions which we deal with, I think, which are predominantly the areas covered by those larger expenditures. Obviously we appear in a number of corporate processes at a time. But I will get you some more detail in relation to those.

Senator McKENZIE: That would be great, thank you. On the training given to staff, there is one in-house total cost, albeit for 25,000 staff, of over $23 million. The reason was to align the department’s actual workforce and its skills with the skills required to achieve the department’s outcome. I would like a little more detail around that.

Mr Mrdak : I will get you some detail.