Australian Rail Track Corporation

[14:36]

CHAIR: I now call the Australian Rail Track Corporation. Welcome, Mr Fullerton.

Senator RHIANNON: Documents released through the New South Wales upper house as a result of a motion by the Greens detailed monthly meetings between China Shenhua and ARTC about plans to move coal from the Liverpool Plains. What do these meetings cover? How frequently do they occur, and when did they commence?

Mr Fullerton : All the meetings that the ARTC have with all the miners in the Hunter Valley are really commercial meetings to discuss their mining requirements and the capacity they need to deliver through the Port of Newcastle.

Senator RHIANNON: When did these meetings commence, and do you have separate meetings with China Shenhua?

Mr Fullerton : We meet with all the producers in the Hunter Valley on a regular basis to look at future nominations and capacity. I am really not able to go into all the details that they are seeking in terms of volumes that they wish to transport through the port, given that there are 14 miners in the Hunter Valley. There are contracts in place to move coal volumes through the supply chain. There are obviously expanding works that are going on in the Hunter Valley in relation to increasing capacity, and that is a process that we are going through with all the miners. I can say that the volumes that are forecast for the Hunter Valley from 2015 will trigger a T4 terminal to handle those increases in volumes.

Senator RHIANNON: Can I assume from that that you do have meetings with China Shenhua on its own?

Mr Fullerton : We have regular meetings with all the coal producers and potential coal producers in the Hunter Valley.

Senator RHIANNON: Have those meetings also covered the issues of transporting coal to Port Kembla?

Mr Fullerton : We are not aware of any coal producers in the Hunter Valley that transport coal to Port Kembla other than Bluescope, which moves small amounts of coal.

Senator RHIANNON: My question was not about the do but about the possibility of transporting coal through Port Kembla. Is ARTC having meetings with China Shenhua about that possibility?

Mr Fullerton : We are not having any meetings with any coal producers to move coal through Port Kembla.

Senator RHIANNON: When China Shenhua missed out on the August 2010 coal nomination deadline for an allocation to export coal through Newcastle coal loader, did you have discussions with them about helping them solve the problem they then faced?

Mr Fullerton : I cannot comment on the detail of those discussions in relation to contracted volumes through the Hunter Valley. You need to appreciate—

Senator RHIANNON: My question was not about volumes. I have not asked at all about volumes, it is purely about the meetings. Could you inform the committee if those meetings occurred?

Mr Fullerton : We are having confidential meetings with all coal producers in the Hunter Valley. I am not at liberty to give details of specific meetings with various coal producers.

Senator RHIANNON: But I was not asking for the details of what happened but if the meeting occurred. Why would that be commercial-in-confidence?

Mr Fullerton : Because it is capacity and allocations of coal capacity through the Hunter Valley supply chain where you have 14 various mines competing for the capacity, I am not at liberty to relay who we are meeting with and the content of those discussions.

Senator RHIANNON: Has China Shenhua made any payment to your department?

Mr Fullerton : I cannot really comment on any of the details in relation to discussions with those coal producers.

Senator RHIANNON: It was not about discussions at all; that question was, has China Shenhua made any payment to your department?

Mr Fullerton : ARTC has contracts with producers in the Hunter Valley and it is under the terms of those contracts that we receive payment for volumes that are hauled through the Hunter Valley.

Senator RHIANNON: Again, how you have answered the question is talking about current coal producers. As you would be aware, China Shenhua has not actually been given approval for its mine. Have you had meetings with companies that would like to open up a coalmine in New South Wales?

Mr Fullerton : We have many meetings with many potential coal producers in the Hunter Valley, those that are developing mines and those that have operational mines, about future capacity. It is not just in relation to rail capacity. Obviously the capacity of the supply chain has got as much to do with terminal capacity at the port.

Senator RHIANNON: Are you aware if China Shenhua is pursuing the private construction to the north-west of the Port Waratah coal services Carrington coal loader on land owned by Newcastle Port Corporation that is leased to Buildev?

Mr Fullerton : I am not aware of that particular point. I am aware that a number of mines are developing future plans for capacity in the Hunter Valley.

Senator RHIANNON: You said that you could inform the committee that the fourth coal loader will occur. Where is it up to and what is the timeline for its progress, please?

Mr Fullerton : What I can say is that the T4 terminal has been triggered. It was triggered once future forecast volumes exceeded 200 million tonnes per annum. That has now been triggered. That is now a project that is being developed by the terminal organisations in the Hunter Valley.

Senator RHIANNON: When China Shenhua failed to get its nomination in for the port nomination in 2010, did you have discussions with them to facilitate the challenges that they then faced moving their coal?

Mr Fullerton : I cannot comment on discussions with any of the coal producers in the Hunter Valley.

Senator WILLIAMS: Going to the Hunter Valley as well, can you give me an overview of any upgrades ARTC is doing to the Hunter Valley rail network, briefly?

Mr Fullerton : Obviously the growth in the Hunter Valley is challenging us in terms of building capacity. ARTC has invested to date about $700 million in capacity involving triplication of track, crossing loops and so on. There is a further similar amount to invest in the Hunter Valley over the next four to five years which will take current volumes from just above 100 million tonnes per annum to in excess of 200 million tonnes per annum.

Senator WILLIAMS: On that issue, I would like to just refer to places like Corindi, Werris Creek and Willow Tree, where industry estimates that by 2015 coal trains will be travelling through those places every 27 minutes. The trains hauling coal out of the Narrabri, Gunnedah and Boggabri areas will be about 1.5 kilometres long. Residents and councillors are up in arms and say emergency services could be cut off. This is a problem we have seen with the railway crossing there, and I gave an example earlier on to Mr Mrdak about police not being able to get to a motor vehicle accident where a bloke was killed. Have you had any consultations with the councils up in that area, such as Corindi et cetera, about what problems they may face with a 1.5 kilometre train every 27 minutes?

Mr Fullerton : We have detailed conversations with the councils, in particular on the Scone issue. I think that was referred to a bit earlier. I know there is work being done to consider an overpass over the track. We are also doing further work in Scone in terms of increasing the speed of trains through the town to prevent crossings being disrupted for any longer than necessary. But we do work closely with all the councils up there to try and minimise the impact of increasing volumes of freight trains through the Hunter Valley.

Senator WILLIAMS: What are councils' main concerns? Just delays as far as traffic movement goes, or danger?

Mr Fullerton : I think generally the community concerns in the Hunter Valley relate to a whole range of things. It is not just train frequency and trains travelling through towns—it is noise, dust, impacts on their particular areas. We are doing a lot of work with the mining companies and the Hunter Valley supply chain to understand what those issues are and how we can work more closely with them to mitigate them. But through our planning processes and approval processes we have invested significant dollars, for example, in building noise barriers and overpasses to try to mitigate the impact of the increased frequency of trains.

Senator WILLIAMS: With the dust issue with coal, is it actually watered down on top of the coal when each carriage is loaded or is just left in its natural state?

Mr Fullerton : No, it is not. The Hunter Valley coal is quite moist. At the moment we are doing some trials to measure both airborne dust from coal trains. But that Hunter Valley coal is quite moist; it is different to Queensland coal, which is wetted down. But at this stage we are trying to measure some of those environmental issues related to dust. We are doing that in conjunction with—

Senator WILLIAMS: No doubt you will have a few to work through with local residents and their concerns about, as I said, dust, noise, constant travel, getting across the train line et cetera.

Mr Fullerton : Absolutely.

Senator WILLIAMS: Earlier this year you released the 2011-2020 Hunter Valley Corridor Capacity Strategy Consultation document. That is a mouthful! Can you give me a brief overview of how you are enacting some of the recommended projects in that report?

Mr Fullerton : We put that report together, which was released in about March this year, for consultation and also to the industry. We work within the Hunter Valley Coal Chain Coordinating group, which is an organisation that was set up two years ago to represent the interests of all the coal producers, the terminals in Newcastle, the operators and the ARTC. Through that mechanism, understanding the future volumes of coal in the various corridors within the Hunter Valley, we then work with them to determine what capacity needs to be built, where it needs to be built, what to build. That whole Hunter Valley strategy is aimed at identifying the future volumes and the infrastructure from a rail perspective that is needed to handle those volumes right up until T4. The strategy does not include T4 but includes the volumes just above the 200 million tonnes per annum of coal.

Senator WILLIAMS: And T4 will be a whole new construction at the port of Newcastle, will it?

Mr Fullerton : T4 is a fourth terminal which will be built in between the current NCIG terminal and—

Senator WILLIAMS: So there is three there now?

Mr Fullerton : There is three there now: the original Carrington—

Senator WILLIAMS: Handling about 100 million tonnes a year?

Mr Fullerton : All three terminals are currently being expanded themselves, but they will reach their peak capacity in about 2015, once volumes exceed the 200 million tonnes per annum.

Senator WILLIAMS: I want to look at the grain effort. Of those three terminals at Newcastle now, how many handle grain? They all handle coal.

Mr Fullerton : It is all coal.

Senator WILLIAMS: What about the grain terminal?

Mr Fullerton : The grain runs through the existing grain terminal at the port. It runs through the Carrington-Port Waratah area and through those coal terminals into the grain terminal on the wharf.

Senator WILLIAMS: In a bumper crop, a lot of the grain from up in the north-west—Gunnedah, Narrabri, great wheat-growing country—would be railed to Newcastle. Is that correct?

Mr Fullerton : That is right.

Senator WILLIAMS: How are you going to go with the congestion of a bumper wheat crop competing against all the coal movements, when coal is forecast to be 200 million tonnes and more a year by 2015? Have you done any research or modelling or whatever to see how the grain and the coal would conflict as far as actual use of the line, the room?

Mr Fullerton : It is not just coal either. There are concentrates that come through the Cobar area. There are passenger services, obviously, that run through that Hunter Valley network. All of the demands of all our customers are taken into account when we do our future capacity planning. So not only do we accommodate the growth in the coal business but we also ensure that there is sufficient capacity for the other products that move through that supply chain.

Senator WILLIAMS: Do you know offhand the number of coal and non-coal movements on that Hunter Valley line? Is that difficult to find out?

Mr Fullerton : I could get that for you. Obviously it is dominated by coal, both domestic and, primarily, export.

Senator WILLIAMS: Could you take that on notice and give us a break-up of the coal and non-coal movements on the Hunter Valley line? Could you also give me the excess capacity currently of the line? In other words, there is so much coal being moved and so many non-coal movements; is there any capacity there for more? As I say, hopefully it will be a bumper wheat crop where there will be a lot of grain shifted. I just have some concerns about the Hunter line being able to manage not only the coal but the grain and the other things as well, as you mentioned.

Mr Fullerton : I will just make one comment about that. The declared capacity for coal is about 135 million tonnes per annum, and we are currently running at just above 100 million tonnes per annum actual.

Senator WILLIAMS: The train line is good for 135 million tonnes?

Mr Fullerton : Declared capacity that can be delivered. Obviously if the mines do not produce that you are not using it, but that is the current declared capacity for the supply chain. We are continuing to invest to build that capacity up above the 200 million tonnes per annum.

Senator WILLIAMS: By 2015?

Mr Fullerton : By 2015. That is what is driving our capital program in the Hunter Valley of around $700 million for the rest of the project work.

Senator WILLIAMS: Are you concerned about the Hunter Valley line becoming a bottleneck?

Mr Fullerton : A lot of work is going into the planning with the miners and the rail operators and the terminals to understand how we can model the capacity and model the volumes through it, to ensure that, as those volumes increase, we are not suffering from congestion and the inability to move those coal volumes through the supply chain.

Senator WILLIAMS: Chair, I do have other questions but I think I had better hand to someone else in the interests of time.

Senator BACK: Mr Fullerton, can you give me an update as to what the progress is with the intermodal transport hub at Kalgoorlie?

Mr Fullerton : That is not on our network, sorry.

Mr Mrdak : That is one of mine. There is a commitment of, I think, $3 million under the Nation Building Program for that facility. At the moment, we are awaiting further details from the Western Australian government and the local council in relation to that project proceeding, in the light of the WA government freight strategy for that region, which has proposed an alternative development of how that should proceed. At this stage, the commitment remains in our Nation Building Program but—

Senator BACK: In this financial year?

Mr Mrdak : It is over the next couple of years, out to 2013-14. The funds have actually been paid to the local government for that project, but the project is yet to proceed.

Senator BACK: So you are waiting at the moment for state and local government?

Mr Mrdak : That is right, and some advice on what the council proposes to do with that project.

Senator BACK: Before going to the annual report, can I ask a question or two with regard to the Melbourne to Sydney track rectification. The resleepering issues and the mud hole issue seem to have occupied time at various estimates. Can you give us an update on where we are with that?

Mr Fullerton : As I recorded at the last Senate estimates, at that stage we were heavily involved in what I call the initial remediation plan, which is simply using various techniques to remove the fouled ballast from the track. That program is virtually complete and we are now in the process of putting together a five-year program of works which will be heavily orientated towards the first two years to continue the remediation of that ballast, which has involved processes called sledding, where we take out the fouled ballast and replace it with clean ballast. We use undercutting and shoulder ballast cleaning. That range of programs will continue over the next two years with a fair amount of intensity to really get that track to a far more stable position and allow us to remove some of the speed restrictions that are currently on that track.

Senator BACK: I come to that as the obvious outcome of this whole process. Have you been able to release or reduce these speed restrictions since the last time you reported at estimates in June?

Mr Fullerton : No, we have not. We have taken a very prudent approach to speed restriction. About six per cent of the track over that whole network is under speed restriction.

Senator BACK: And that is about the percentage—

Mr Fullerton : The speed restrictions are slightly higher than the percentage of track affected by fouled ballast. Some of the speed restrictions relate to other issues. There is some rerailing work that is still being carried out and obviously there is some maintenance work being carried out that affects speed restriction. We currently have about six per cent of the track under speed restriction. About 80 kilometres of mud holes have been identified and that is where we are focusing our work to restore the ballast condition.

Senator BACK: Are you where you want to be with on-time train movements along the overall length of the line?

Mr Fullerton : No, I still think it will be another two years before we can get that to a level that we are going to be satisfied with and where it will be something our customers will be satisfied with.

Senator BACK: How far from your desired position are you at the moment? Are you 85 per cent towards it?

Mr Fullerton : I think we are probably only 40 per cent through the program. We have completed the initial works, which were targeted at the important areas first. We really want to get the job done properly. We are now very sure about what we need to do to complete the work and we are implementing the ballast remediation plan. It is a five-year plan but, as I said, it will be front-ended in terms of doing the bulk of the work over the next two years.

Senator BACK: Can you give us a figure as to how much has been expended to date on the total cost of the line upgrades and what you anticipate will be the final figure?

Mr Fullerton : If you are just looking at the Sydney to Melbourne line, in terms of how much money we have spent on upgrading that track since we took it over in 2004, we have spent a bit over $800 million.

Senator BACK: To date?

Mr Fullerton : There was the initial $600 million that was funded out of the grant funds from 2004 to 2006 and $200 million of those funds on that section of track were allocated to concrete resleepering.

Senator BACK: So there is still another $200 million—

Mr Fullerton : No, in terms of the work that has been done on the line to date—that initial $600 million from the grant funding—about $200 million was allocated to the concrete resleepering project that occurred from 2007 to 2009. More recently obviously we have been rolling out the nation building works, in 2008, and the productivity works for the rerailing of that corridor. That work will be completed sometime next year. It is nothing to do with our remediation program; it is the upgrade of the track. That work will be finished midway through 2012 for a total cost of a bit over $800 million.

Senator BACK: With the time left, I want to go to the annual report, page 43, which is the consolidated income statement for the year ended 30 June. Expenses have gone out from $590 million in the year to 30 June 2010 to $972 million. It seems to me that the matter referred to as 'recognition of impairment loss' would have contributed the most significant component of that, going from $55.7 million in the previous year to $434 million. Can you explain what is meant by 'recognition of impairment loss'?

Mr Fullerton : That impairment related entirely to the investment in the north-south track between Melbourne and Brisbane. It relates to the fact that we have invested significant equity in that track, over $2 billion, and still have not generated the future revenue. So this year there was a recalculation of future revenues to flow from that investment, which resulted in that impairment. It relates to the fact that you have to spend money to upgrade the track, but it takes time for those revenues to flow in terms of getting freight onto rail, off the road network.

Senator BACK: Is it the case that, in preparing the financials for the previous financial year, your office simply had not taken that into account?

Mr Fullerton : No, I think there were two—

Senator BACK: Why has it been such a hit on the financials just in this last financial year?

Mr Fullerton : There are two reasons for that. One is that we continue to invest in that corridor, so there has been further capital investment during the year. If you do not generate the future revenues, you will have an impairment loss. Secondly, this year we did a recalculation of the future forecast revenues. That resulted in the readjustment of the impairment. I might add that in future years, when those volumes increase, there will be a write-back for that impairment.

Senator BACK: That was to be my next question. Looking boldly to the future, where do you see the negative $434 million this time next year—downward?

Mr Fullerton : I would expect it to go downward, but bear in mind we still have future investments on the corridor to roll out, with the southern Sydney freight line and completing the productivity works up on the North Coast. Until we redo that calculation next year, I would not like to estimate it. The important thing to understand from all of this, I think, is that those investments will bring that track up to a competitive standard so that we can attract those revenues onto the rail system, getting freight off the road. That is important, but it does expose us to impairment. I would expect that to be wound back out of the financials once those volumes begin to move.

Senator BACK: So it reversed your position on $94 million profit the previous year to a $50 million loss this year, finishing 2011. We can look forward to something closer to parity in 2011-12?

Mr Fullerton : If we are looking at profitability, I would like to draw your attention to a bit earlier in the report. In the financial year just completed we generated operating earnings before interest, tax and depreciation of $221 million, which was up from $140 million the year before.

Senator BACK: I see that.

Mr Fullerton : That is a substantial increase, and that is the true measure of the improved performance of the business.

Senator BACK: Well, it is one important measure. Obviously, containing expenditure is the other one.

Mr Fullerton : I think we do say in the report that there has been a containment of expenditures within that. So I think that is the true indication of performance, and we expect that performance to continue this financial year, driven by growth on our interstate network and the continued growth in the Hunter Valley. So I think it is a very positive story in terms of the operating profits that this business is generating.

Senator BACK: I have one other question. It goes to net finance costs or income. It is addressed in note 5 on page 71. It relates to the fact that in the previous financial year there was a $78.4 million surplus, whereas in the financial year ending 30 June 2011 it reversed to a $11.7 million loss. The explanation refers to:

Finance Costs comprised: interest remitted by/(payable) to ATO applicable to grants related income tax assessments …

Can somebody just give me an explanation as to how that position went from an $81 million, I imagine, interest remitted by the ATO in the previous year to a nil figure in the year-end report. Can you just explain to me the significance of that and what it means.

Mr Fullerton : I might need to take that question on notice. But I think I can answer your earlier question related to interest revenues. In relation to the previous year, we had funds invested. Those funds were coming through the various projects that we were earning interest on, whereas this year we have been drawing against our debt facility to fund some of our capital investment programs. In the year ending June 2010 we were earning interest from moneys at the bank, whereas this year we were paying interest on our debt facilities. In terms of the ATO question, I will need to take that on notice.

Senator BACK: If you would do so, please. Otherwise, I thank you for your responses.

CHAIR: If there are no further questions for the Australian Rail Track Corporation, I will thank Mr Fullerton and call officers from surface transport policy.

Ms O'Connell : There were a couple of questions earlier that we are now in a position to give answers to.

CHAIR: Fantastic. Fire away while we wait for the next witnesses.

Ms O'Connell : One of them was asked by Senator Macdonald, and that was in relation to the Burdekin Road safety audit project. I can now report and advise that planning has been finalised by the Queensland Department of Transport and Main Roads and the project proposal report has been received and is being currently reviewed. Construction is expected to commence in late 2011 and be completed in late 2012.

The other one was a question from Senator Ludlam on the road versus rail funding split. I can advise that for the 2011-12 financial year that road investment is $4.95 billion and the rail investment is $1.5 billion. For the full Nation Building Program over the six years from 2008-09 to 2013-14 the road investment is $28 billion and the rail investment is $7.9 billion.

[15:08]

CHAIR: I welcome officers from Surface Transport Policy.

Senator WILLIAMS: Back to my favourite issue. On 1 July next year the national scheme will be introduced. How is it all going?

Mr Mrdak : Very well, but there is a lot of hard work to come. As you would be aware, since we last appeared before the committee the Council of Australian Governments has signed intergovernmental agreements. All jurisdictions apart from Western Australia have signed the intergovernmental agreement on heavy vehicles, and Western Australia has indicated its disposition to do so, provided it is satisfied that it meets WA's requirements.

Senator WILLIAMS: Does the intergovernmental agreement on heavy vehicles include weights per axle, driving hours and volumetric loading? When you say they have signed an intergovernmental agreement, has all the criteria being laid out on all those regulations?

Mr Mrdak : Not on the regulations specifically. The intergovernmental agreement agrees to establish a single national regulator and a way in which a single national set of laws will be legislated in the Queensland parliament and then applied nationally. The detail of the actual laws and regulations are about to be dealt with. So the intergovernmental agreement has been signed and, similarly, an intergovernmental agreement has been signed for rail and for a single maritime regulator. The Council of Australian Governments did that in August. The next stage is that transport ministers will meet on 4 November, where they will be asked to vote on the heavy vehicle law—the first bill is the heavy vehicle law—and also on the national rail law. Subject to those votes proceeding, the process will start of introducing that legislation into the respective Queensland and South Australian parliaments, and the relevant legislation needs to then happen across all of the other parliaments to bring it into effect from next year.

Ms O'Connell : In terms of bringing the intergovernmental agreement into effect, the agreement has always been that those national regulators will come into force from January 2013. With the agreement that the heavy vehicle regulator would be appointed by mid-2012—

Senator WILLIAMS: On 1 July.

Ms O'Connell : That's right. They will be appointed but the full system—

Senator WILLIAMS: Though they won't come into practice by mid-2012; it will be longer than that.

Mr Mrdak : On 1 January 2013.

Ms O'Connell : That's right. Everything will come into effect on 1 January 2013.

Senator WILLIAMS: Has there been any agreement on tonnes per axle and work diary hours? Do those things still have to be worked out between the states? Has there been some agreement? Are they going to agree with the Queensland model as it is now?

Mr Mrdak : There has been a lot of agreement to remove a lot of the inconsistencies. The national laws which will be voted on in a couple of weeks will set out, essentially, the model law provisions that will apply. They will largely get rid of most of the inconsistencies around axle loads and the like.

Ms O'Connell : Those laws will outline exactly the detail of that. An expert panel has provided advice to all ministers on the varying different standards and on what should be in those particular laws. If there are specific areas you would like to address we can do so.

Senator WILLIAMS: I am concerned about volumetric loading for livestock. Queensland has it now; is it going to be very yardstick for the rest of the country—will the other states go with Queensland? I am very interested in this area, because in Inverell, where I live, we have an abattoir. A lot of cattle trucks come down from Queensland, but when they get to the border they have to unload probably 10 per cent of their load or they will be overweight when they get into New South Wales. That is one area I am very interested in. Driver working hours and the crazy situation in South Australia is an issue I have raised with you before. There are different work diary hours around the country; which one you going to adopt? That would be very interesting. I will go into another question in a minute.

Ms O'Connell : I just need to put a caveat by saying that, as Mr Mrdak said, ministers will have an opportunity on 4 November to vote on the laws, so this predicates their vote. But the intergovernmental agreements and the idea of having a single regulator is to have a single, national set of standards and a system under which these will operate.

Ms Wieland : The national law is going to contain maximum loading limits for vehicles under what we call a general mass limit. These will be agreed and be consistent across the country. I think what you are referring to around livestock is the concessional limits and higher mass limits that are available in particular scenarios on particular roads under access permits or gazette notices.

Senator WILLIAMS: No. In Queensland, for livestock, if you have a 40-foot double-deck cattle truck you can just fill it up, regardless of the weight. You might be allowed 22 tonnes on a tri-axle in New South Wales, but in Queensland you can just fill it up, so long as the vehicle is within regulations on volume—the length, the height and width of the truck. One of the concerns I had was whether they would adopt a tonne-per-axle standard, as far as livestock is concerned, or would they allow the Queensland model to proceed around Australia.

Ms Wieland : The intention of the work with states and territories has been to try to lift the standards and lift the level of productivity, not to reduce those which currently have higher concessional limits.

Mr Mrdak : We can get you some further details on the particular issue of volumetric loading and on the other one you raised, if you would like.

Senator WILLIAMS: I am very sympathetic for our local biggest employer in the New England area. If you have to run another truck up to the border because a B-double road train has come down and has to unload 10 per cent of its load, it is costly and there is a loss of production. These abattoirs are competing against American abattoirs et cetera. These are things that add up to the cost of production, and which ultimately go back to the cow cockie, the beef producer. They are paid less because this is part of the structure of getting them there.

Ms O'Connell : In terms of livestock issues, throughout this whole process we have been consulting quite extensively with ALTA, the Australian Livestock Transport Association.

Senator WILLIAMS: Now that you mention the trucking bodies, how are they going in accepting what is proposed by the uniform Australia-wide regulations?

Mr Mrdak : I think they are very supportive of the process. Obviously there are some areas, particularly access in certain jurisdictions to certain roads, which they would like to see progressed further, but I think they understand just how important it is to get the national laws in place and then use that as the basis, with the single regulator, to press for greater access. The way I would summarise it is that the heavy vehicle industry is very supportive of moving to a national regulator and very supportive of the process, albeit that I think there are a whole range of things they would like to see dealt with first up in the legislation, but they recognise that they may not get all that they want in terms of access through the initial legislation and that at least this starts a process of getting much more uniform access across the country.

Senator WILLIAMS: No state government has actually passed legislation yet—or have they, on the agreement side of it?

Mr Mrdak : They have signed the agreement. The next stage is the vote on the laws on 4 November, and then legislation will start to be introduced. Our intention is to have the heavy vehicle laws introduced into the Queensland parliament, if at all possible, before the end of this year.

Ms O'Connell : In two tranches, one before the end of this year and one next year.

Senator WILLIAMS: I would think it would get bipartisan support anyway. It should not have a problem going through the Queensland parliament, you would not think.

Mr Mrdak : It has high-level support, as I say, particularly from the heavy vehicle industry.

Senator WILLIAMS: How come Western Australia have not signed up? Are there any reasons?

Mr Mrdak : I think that at this stage, in Western Australia, the position that has been publicly put by the Premier and the transport minister is that they want to have a look at the legislation to ensure that it has some benefit for Western Australia. We have been particularly anxious to make sure that local productivity variations in WA are protected, and they are, under the terms of the intergovernmental agreement. We believe the protections are there, and we hope that WA will sign the agreement shortly.

Senator WILLIAMS: I refer to the carting of hay and wool in New South Wales. The new government, under Minister for Roads and Ports Duncan Gay, has increased the width from 2.5 to 2.7 metres. Would you be aware of why wool bales are always overwidth when you cart them on a flat-top truck?

Mr Mrdak : I am not aware of that.

Senator WILLIAMS: On a wide trailer, when you put the wool bales in two longways, the bale of wool bulges at the end and that takes you out a bit. They have been carting wool probably illegally for 120 years or however long they have had trucks! That has been now widened to 2.7 metres, so you can actually put a load of wool on and cart it legally. I would hope that would be adopted nationwide as well because I know many bringing hay from interstate, from South Australia through to Queensland, are getting booked regularly because they have the bales of hay stood up on a coaming rail to give it at any length a more secure loading. I hope these things are adopted so that a bit of common sense and fairness is there in the transport industry.

Mr Mrdak : I think all the states have been trying to move, as Ms Wieland said, to the best productivity outcome. You are right: hay bales and wool bales between New South Wales and Victoria have been highly contentious and a real problem. We think we have a package now which will move to the Victorian system.

Senator WILLIAMS: That sounds great. I think most would welcome the national regulations. We will not have to worry about going from border to border and breaking laws in this state and not in that state. During the transition period, will the states be retaining some of their old laws? Queensland will legislate. You said that on 1 January 2013 the new laws come in Australia wide.

Ms O'Connell : That is right.

Mr Mrdak : That is the intention.

Senator WILLIAMS: In the six-month period from 1 July 2012, they just all go on their old regulations in each state? After 1 January 2013, will there be other by-laws, if I can call them that, in various states? Will they have different things or are they all going to adopt the one whole package?

Mr Mrdak : Our intention is that they will adopt one single set of national laws and regulations.

Senator WILLIAMS: It will be great, Sterlo, won't it?

Mr Mrdak : This is a big challenge for next year. We have to get all of the parliaments to pass them. Once Queensland passes the laws to set up the national regulator and the single law, we then have to get all of the other jurisdictions to legislate in their own jurisdiction to effectively apply the Queensland law as their law in their jurisdiction. What we have to make happen next year is that all of the jurisdictions get the bills through their parliaments to apply the Queensland law in their jurisdiction as, effectively, New South Wales law or Victorian law, for example. That is the challenge we face next year: to get all of the various parliaments to do that. The governments have signed the IGA to do that, but there is a big challenge to do that. So our intent is to have everyone applying the national law from 1 January 2013.

Senator WILLIAMS: Hopefully, next October when we discuss this issue again, we will have regular laws, red tape will have been removed and productivity will have been increased with the new law.

Mr Mrdak : That is our objective, and a better safety regime by the effect of having what we would hope to be a better fatigue regime, a more sensible fatigue and log regime and, we would hope, the most productive regime we can in terms of getting rid of the distortions you have talked about. But I will not underestimate how difficult the next 12 months are going to be to get that through.

Senator WILLIAMS: Good on you.

Senator GALLACHER: I am just curious about the remote areas livestock transport options, particularly if you take into account the Northern Territory or more particularly the stuff that is going out of our northern ports as livestock exports. There are no facilities, the roads are not of the same standard as national highways and the life of a beast on a truck is probably about 18 hours before it starts getting detriment in terms of health and welfare. It is quite common for those people to actually operate those 18 hours. Is there anything in these national heavy vehicle regulations that recognises that in any way, shape or form, or are we just going to apply national standards if we have got good roads, rest houses, places to stop and facilities?

Mr Mrdak : No, the national laws will apply for the productivity and local variations. We are conscious of the fact that in some jurisdictions, particularly Western Australia, the Northern Territory and Queensland, livestock transporters require that flexibility you have talked about provided they stay within the fatigue laws. So I think the intent is that the national laws will actually provide a lock-in to the current arrangements, essentially.

Senator GALLACHER: Introduction of B-triples is causing some media comment. Obviously it is a great productivity initiative but, for argument's sake, in South Australia if we bring it back from 110 or 100 and we have B-triples which increase the length of heavy vehicles, we then have a potential road safety issue. Has there been any discussion or work done on that?

Mr Mrdak : There is quite a bit of work being done. The National Transport Commission has recently put out a paper in relation to configurations of B-triple combinations which could be utilised which we think bring good productivity benefits and importantly road safety benefits by virtue of how they operate in comparison to, say, road train commendations and trailer combinations. I think that is still at the discussion paper stage. I will just check. The discussion paper is out from the National Transport Commission. The next step would be to see what the submissions are. Clearly the government's perspective is that wherever those high productivity vehicles can be used it must be done safely and ensuring that they are on routes where they can operate safely because of pavement and also traffic conditions. We are now awaiting the closure of that consultation process and then transport ministers will have a look at that in terms of what further extension of the B-triple network should take place. As you know, at the moment there is a B-triple network across the country which provides access for the combinations. It is a question of whether we can extend that network safely by using some of the combinations which the National Transport Commission is now proposing.

Senator BACK: I know Senator Edwards has got some more questions on safe rates but can I go to the shipping reform package, if I may. With regard to the fact that obviously extensive taxation changes are announced in the package, can you tell us what will be the cost impact on the budget of these reforms?

Mr Wilson : The cost impacts will be announced in the midyear financial economic outlook. I am not in a position to outline those until the government announces those details.

Senator BACK: They have been calculated?

Mr Wilson : They have been calculated and they will be reflected in the midyear financial outlook.

Senator BACK: When do we expect the midyear financial outlook statement?

Mr Mrdak : Normally the midyear financial outlook takes place around the early part of December.

Senator BACK: And included in that I imagine would be the impact on the budget of Australian flag companies going from those which pay company tax to those which will be exempt.

Mr Wilson : Correct.

Senator BACK: Will savings to be made be identified in the midyear statement? Are there any savings?

Mr Wilson : It is a fully offset package.

Senator BACK: You cannot yet advise us as to where those will be. A number of reference groups were set up to develop the policies, I understand: a regulatory reference group, taxation, work skills and training reference group. Were those reports prepared by the department?

Mr Wilson : No. The reference groups were established by the minister to provide advice on the implementation of the package that the minister announced in the election campaign of 2010. Two of the reference groups provided a written report to the minister. The third, which I chaired, provided advice under signature of a briefing.

Senator BACK: Which one did you chair, Mr Wilson?

Mr Wilson : I chaired the regulatory reform group.

Senator BACK: That prepared a written report, or was yours the one that appeared under signature?

Mr Wilson : I provided a brief under separate cover.

Senator BACK: So the other two, the taxation reference and the works for skills reference, were both prepared as written reports to the minister?

Mr Wilson : Correct.

Senator BACK: Are they to be made public or have they been made public?

Mr Wilson : I do not believe they have been made public.

Senator BACK: Right. Minister, do you know whether they are to be made public?

Senator Carr: No, I do not know that.

Mr Wilson : I do not believe there is an intention to make them public. They have been provided to all members of the reference groups, however.

Senator BACK: Sure. You would know the membership of your committee: is treasury represented on your committee?

Mr Wilson : Treasury was. If you like I can go through the—

Senator BACK: Would it be possible on notice.

Ms Gosling : I actually recall that in the questions on notice from the last hearings we actually provided the details of the membership of each of the reference groups, but we can certainly provide the full membership again if that is helpful. Just to come back to your issue in terms of whether the department was involved, obviously in terms of just providing normal secretariat support to the reference groups that was our involvement. We would have provided some sort of drafting assistance with the reports that were prepared.

Senator BACK: Certainly. There will be a Maritime Workforce Development Forum that has been announced by the Minister, hasn't it?

Ms Gosling : Yes.

Senator BACK: Again, can you advise me, since I do not have the questions on notice, whether or not the membership of that forum has been made public or will be made public?

Ms Gosling : The membership of that group has not yet been announced by the government. That is under consideration.

Senator BACK: The department would presumably have some involvement, be it secretariat or professional input into that forum.

Ms Gosling : We would provide some sort of support to the forum. The minister has announced that he would like to have that group commence from 1 January 2012.

Senator BACK: Can I just go to cabotage. Can you provide us yet with any further detail on what will be the requirements for the new licensing system, which I understand is a three-tiered licensing system.

Ms Gosling : That is correct. The three-tiered licensing system will involve a general licence that will provide general access to the coast.

Senator BACK: That is for Australian flag ships?

Ms Gosling : That will be for Australian flag ships. As a transitional arrangement for foreign flag vessels that currently operate, they will have a transition of five years to transition across into Australian flagged registration arrangements.

Senator BACK: For my clarity, are those foreign flag ships that are plying between our ports or do they include foreign flag ships, for example, that come into Port Hedland or Dampier and go straight away from the Australian coast?

Mr Wilson : No, ships that would be undertaking trade within Australian waters. An international ship that comes into Port Hedland and then exits Australia would remain as an international ship.

Senator BACK: Away from this. What if a livestock carrier came into Portland and picked up stock, then went to Adelaide and picked up stock, then went to Fremantle and picked up stock and left. In other words it has not traded between our ports but it has visited more than one port. Where does it find itself in these arrangements?

Mr Wilson : If it is carrying international cargo and international cargo only and it is not partaking within the Australian economy, it would be able to retain international trading. So an international flag ship.

Senator BACK: Right. Thank you. Sorry, Ms Gosling, I did not want to interrupt you; I just wanted to be clear on both of those. So we are now back to a foreign flag ship that is actually plying and trading between Australian ports.

Ms Gosling : That is correct, Senator. That is a general licence category; that is the first licence. There are two components to that: the Australian flagged and the foreign flagged vessels we have just discussed. The second tier of the regulatory system will be temporary licences and those temporary licences will replace all existing voyage permits that are currently issued. A temporary licence will be available for up to 12 months. The third tier—

Senator BACK: Again, are they for both foreign flagged and Australian flagged or just the foreign flagged?

Ms Gosling : In essence an Australian flagged vessel will have a general licence.

Senator BACK: It will have a general licence almost automatically, won't it?

Ms Gosling : That is right.

Senator BACK: This is now the change for foreign flagged vessels that are competing with Australian flagged ships in our ports?

Ms Gosling : That is right. They would have access to a temporary licence for up to 12 months. The third tier of the licensing system is emergency licences for genuine emergencies or natural disasters, where cargo has to be moved on a one-off basis.

Senator BACK: Can you go back to the second one? What is the reason for the 12-month limit for those temporary licences for foreign flagged vessels? Is it the expectation that they will either want to move to be registered under the Australian flag or not come back into Australian waters to trade? Can you explain that?

Ms Gosling : The policy is underpinned on the basis that it is envisaged that they would transition to a general licence if they wanted to continue to have access to the coast.

Senator BACK: So their decision is either to continue if it is commercially viable or, if conditions are restrictive, not to see Australia as a location where they can undertake port-to-port coastal trade—

Ms Gosling : Or to demonstrate a case as to why they would continue to have access. I have also been reminded of the requirements of Customs in accessing that ship for the purposes of bringing it into the Australian system under their rules.

Senator BACK: How many Australian flagged vessels do we have at the moment on the Australian coastline?

Mr Wilson : We have 22 major trading ships flagged on the Australian coastline.

Senator BACK: Represented by how many companies?

Ms Gosling : We might have to take that on notice.

Mr Wilson : That is a good question, Senator. I do not think I have that number with me.

Senator BACK: One of the key objectives of this whole exercise is to increase the opportunity for the movement of freight from road to sea surface. Are you bold enough to predict the likely outcome after, say, five years? Do you expect that this will be an attractive proposition for foreign flagged vessels to seek Australian registration and remain substantially on our coastline?

Mr Wilson : All the indications are that the package has been well received by the Australian shipping industry and the international shipping industry. International coverage has been very positive. I guess the best example of a positive reform package is the UK shipping reform package, which has seen a significant increase in the number of ships on the UK register. We would envisage that the package, as it is designed and that the government intends to deliver, will deliver additional ships flagged on the Australian shipping register.

Senator BACK: Is it still premature for you to be able to advise us of some of the conditions pertaining to the new registration: the numbers of Australian crew et cetera. Is that something that will emerge over time or is it information that is known now and can be made available to the committee?

Mr Wilson : To operate within the Australian economy an Australian flagged ship—not one operating under the transitional arrangements—will be required to have Australian crew. That is not a condition; it is just a fact of life that—

Senator BACK: All of the crew, from the captain to the cabin boy?

Mr Wilson : An Australian registered, Australian flagged ship that is not operating within the transitional period—a foreign flagged vessel has five years to work its way from international registration through to Australian registration—will have Australian crew. So we would envisage that the 22 ships that are currently licensed to operate within the Australian system will transfer across into the new registration scheme, they will be flagged and they will have Australian based crew.

Senator BACK: Can you tell me what role the department played in the development of the productivity compact which has now been negotiated between the shipping companies and the unions—or is it under negotiation?

Mr Wilson : The productivity compact is currently being negotiated between the unions involved in the shipping industry and the shipowners themselves.

Senator BACK: Is the department playing a role in that process?

Mr Wilson : The department is monitoring, through conversations between ourselves and the parties involved, but it is not playing a direct role at this stage.

Senator BACK: Can you tell us when the draft legislation will be available for scrutiny?

Ms Gosling : We are working through the drafting instructions now and we are continuing to talk to all stakeholders in that process. It is envisaged at this stage that we would have the legislation out early in the first part of 2012. We are aiming for February but there is a lot of work to do and there will be a number of bills in the package. That is our expectation.

Senator BACK: That concludes the questions I had on the shipping side. The answer to one of the questions is as yet unresolved but it will be announced in the mid-year financial statement by the Treasurer, as I understand. Is that correct?

Mr Wilson : That is correct.

Senator COLBECK: Has any analysis been done on the cost to industry?

Mr Wilson : We released a regulation impact statement document yesterday, I believe. It was registered on our website.

Senator COLBECK: One business told me that it is going to cost them $7 million and it is already costing them—

CHAIR: Sorry, Senator Colbeck, but Senator Milne has been waiting patiently.

Senator MILNE: Under surface transport policy, on vehicle emissions, I am interested in the discussion paper that is out at the moment in relation to CO2 emissions. Is that something you can deal with?

Mr Mrdak : Yes, this is the right group.

Senator MILNE: I note with interest that the government has now released a discussion paper. I wanted to start by asking how you came up with the six scenarios in the discussion paper for light vehicle CO2 standards in Australia, because there does not seem to be any rationale for them. I would like to know how you came up with those six scenarios, what they are based on and what rationale there is for them.

Ms Gosling : Scenario 1 was the indicative starting point and that was nominated in the election commitment that the government released. We have worked on the other scenarios from that starting point in terms of trying to do the modelling. Obviously we have to be realistic about what might be achievable by 2015, and then we have indicated what might be more realistic targets for 2020. The purpose of the discussion paper is really to engage stakeholders and industry in terms of what actually might be realistic and achievable.

Senator MILNE: So the first constraint that you have put on it is that the baseline is the government's election promise. Then the others are what you think are reasonable and achievable in Australia. Yet do you not concede that they are very lax standards compared with what the Europeans are proposing for 2020?

Ms Gosling : It is difficult to make international comparisons in this area in terms of thinking about what the mixture of the fleet is in Australia as opposed to other places around the world, such as Europe. There are a larger percentage of diesel cars, for example, in Europe. The size of vehicles there tends to be smaller than in Australia. We have had some regard to what some of the international benchmarks might be. But making a direct comparison is a complex thing.

Senator MILNE: But isn't the size of vehicles in Australia to a large extent about the price of petrol and diesel? Wherever you have higher prices for your fuel you have smaller and more efficient vehicles.

Mr Mrdak : I do not know if you can make that generalisation. Australian's choice of vehicles is driven by a range of factors. Fuel price is one of them. So is the distance that people are travelling in Australia compared to Europe. There are family requirements. Australians make a range of choices driven by family needs, personal needs, distances travelled and the type of vehicle that suits the roads on which they are travelling. I do not think that you can make the generalisation solely on fuel price.

Senator MILNE: Okay. We know that the majority of people live in cities, so a lot of the issues that you are talking about to do with distance and roads and so on are not relevant to the overwhelming majority. To come back to the fuel efficiency standards, in terms of the European standards I note that you argue that to meet the same standards as the Europeans in 2020 you would need a rate of improvement that is unprecedented. What I do not understand is that, firstly given that the vehicles we will be importing and manufacturing in 2020 have not yet been designed and secondly given that these vehicles will be manufactured by companies that are also manufacturing in or exporting to the European market, why can't we have a step change improvement in Australia's fuel efficiency standards? It seems to me that that is clearly possible, given that we are not talking about companies that are not making a from scratch Australian car.

Ms Gosling : In a sense, that is the purpose of the consultation period and the discussion paper: to generate and to receive submissions by the end of November that will give us some basis to provide further advice to government.

Ms O'Connell : The questions that follow that section directly go to that.

Senator Carr: And a number of the assumptions are open to very serious challenge. The consequences, for instance, for Ford would be quite profound. There are very serious differences between the engineering standards that are applied in Australia and Europe. There are differences in fuel standards—the composition of the fuel is different here. There are differences in atmospheric conditions. There is a whole range of differences between Australia and Europe and we cannot simply apply holus bolus the same arrangements.

Senator MILNE: Nevertheless, the standards that are being discussed have started from a low base and they are based around, as I said, an election commitment rather than an open number of scenarios, which would go from the best to the least. Why haven't we got an ambitious scenario in the six scenarios?

Senator Carr: I would not agree with you about low standards. I would also point to the facts that the structure of the industry in Australia is very different and the size of the market is very different. There are a number of factors that do not readily directly apply. In particular, it should not be assumed that standards in Australia are particularly low.

Senator MILNE: Certainly relative to other countries they are. What about the US? How are these standards relative to those in the US?

Senator Carr: You will find that the standards in the US are based across the fleets. There are some different models in the way that their applications apply. You will find that the size and structure of the US industry are different. The market is different. I would be very interested to see what standards apply to the SUV vehicles or the utilities that the Americans drive in comparison to ours. There is a whole range of factors that do not readily transfer between the continents.

Senator MILNE: But is it true that at the rate that we are going we are not even going to be up with the standards of the United States by 2020 as they have set down, let alone the standards in other countries?

Senator Carr: That would really surprise me, given that theirs is a fleet model.

Senator MILNE: Well, I am asking that question.

Mr Mrdak : No, I do not think you could say that.

Senator MILNE: The European standard is 95 grams per kilometre in 2020. What is the US proposing?

Mr Mrdak : It is a little bit unclear as yet, what the US proposal will end up being. What we have suggested in the discussion paper—and we will weigh comments—is a reasonable balance given the issues the minister has raised.

Senator MILNE: I am asking this question: why is there not an ambitious scenario amongst the six scenarios?

Mr Mrdak : I do not think you can make that point. I think, as Ms Gosling has indicated, that the range of scenarios are ambitious. They reflect, I think, a reasonable drive towards improved CO2 standards and also a good balance in terms of what the Australian market requires. I would not agree with you, Senator, that this is not a very determined effort to reduce levels of CO2.

Senator MILNE: But I put to you the question that, if we are going to be importing and manufacturing cars in 2020 that we have not designed yet, why could we not put in place high aspirational levels? We could design them for that now.

Senator Carr: Senator, you have raised serious questions about the investment levels that occur. It is not simply a question of saying to the manufacturers, 'You will design a vehicle of this particular specification.' Someone has to pay for it. Investment has to be attracted from somewhere.

Senator MILNE: That is right. These companies are already going to be manufacturing cars to meet these standards in Europe, and the US is going to be manufacturing cars to meet its projected standards as well.

Senator Carr: If you want to import the engines entirely—if you want to actually get rid of the engine plants in this country—that might be a policy you could accept. But that would destroy thousands of jobs in this country. It would actually undermine seriously the structure of the companies as it currently exists. It may well be that by 2020 we will have a different circumstance. But our strategy is to actually manufacture in Australia—to get blue-collar jobs in Australia.

Senator MILNE: That is right, and you and I have had this argument before, Minister.

Senator Carr: And no doubt we will have it again.

Senator MILNE: I am arguing that the failure to set ambitious standards means that we lose market share in Australia, which is why we keep having to pay subsidies to car manufacturers, because we are not competitive.

Senator Carr: No, we lose market share because of the price of the dollar. The price of the dollar makes a very big difference. Economies of scale make a very big difference. The unit prices make a very big difference.

Senator MILNE: But if the manufacturers are producing cars in Europe that can meet a certain standard, and these are also being manufactured in Australia, why can they not manufacture to the same standard in the plant here?

Senator Carr: But they do not.

Senator MILNE: Why can we not require them to?

Senator Carr: Why don't we just get rid of the Australian industry? That would be the consequence of that.

Senator MILNE: I am saying we should stick with the Australian industry and set comparable standards.

Senator COLBECK: Are the issues with pilots operating through the Torres Strait here or in AMSA?

Mr Mrdak : That is probably one for AMSA, if that is okay.

Senator COLBECK: That is all right. I just wanted to make sure we are where we are supposed to be. Better to find out early! I have a historical question—and I will be testing memories here, I think. I want to get some context around a clause in the Tasmanian Freight Equalisation Scheme that relates to transport of wool backwards and forwards across Bass Strait. I understand that there is one particular clause in there that relates to wool going to auction. It provides for wool exported from Australia through an auction that is conducted on the mainland to still qualify for the Freight Equalisation Scheme. You may have to take this on notice.

Ms Gosling : I think I will have to take that one on notice.

Senator COLBECK: This may go back away. I am just trying to get a context around that clause being placed in the Freight Equalisation Scheme. It is quite unique, particularly in relation to exports. So perhaps, on notice, you could give me that, if it is available.

Mr Mrdak : Certainly. Perhaps I can just clarify this. You are asking about wool moved from Tasmania to mainland Australia for auction and then exported and whether it would qualify for—

Senator COLBECK: No, it does.

Mr Mrdak : It does.

Senator COLBECK: We know it does. There is a particular clause in the scheme that relates specifically to that. It is probably coming to light more now because there is no international service directly out of Tasmania, so it changes the competitive nature of the market. It has become a bit more of an issue in the last 12 months or so. I am trying to get some sense of the historical context around that and an understanding of how it works, particularly given that no other export product that does the transhipping across Bass Strait actually does qualify.

Mr Mrdak : Gets access. Okay, we will do some work and try to do some research on why that was framed in that way and what the rationalise is for the application of it.

Senator COLBECK: And the rationale around that particular context. Because the two issues together are forming a bit of an issue in Tasmania at the moment.

Mr Mrdak : We will come back to you as quickly as we can on that.

Senator EDWARDS: I refer to a media release by Senator The Hon. Jacinta Collins on 13 October 2011 in relation to the introduction of safe rates. It states that the Safe Rates Advisory Group met on the same day to finalise the government's response into the Safe Rates, Safe Roads Directions Paper. Has the department been consulted?

Ms Gosling : Yes, it is obviously being undertaken by Senator Collins in that portfolio, but we have been involved. Our department has been involved and has been consulted in terms of some of the work that is being undertaken. In terms of the work we are doing on the National Heavy Vehicle Regulator it is important that we are consulted and involved in that work. So, yes, we have been working collaboratively with them.

Senator EDWARDS: In tandem, and right from the start right through?

Ms Gosling : I am not quite sure what you would say was right from the start. We are involved now and in regular consultation with them, and have been for some time.

Senator EDWARDS: Has the department undertaken any economic impact analysis or cost-benefit analysis or indeed any analysis of any kind on the cost impact that the introduction of the safe rates would have?

Ms O'Connell : That would be a question for the employment and workplace relations portfolio, who have the lead on this.

Ms Gosling : As Ms O'Connell said, it is work that is being led by the Department of Education, Employment and Workplace Relations.

Senator EDWARDS: Is that work currently being undertaken?

Ms O'Connell : We understand they are doing the analysis.

Senator EDWARDS: When would you think that analysis would be available and is it likely—

Ms Gosling : You would have to put that to them. We would not be at liberty to say. We would not know.

Senator EDWARDS: I will ask them.

CHAIR: I can understand the confusion, because the previous coalition transport minister did everything he could to block any conversations about safe rates. So I can understand that the current one is just as confused.

Senator GALLACHER: I recently read that several vehicles imported into Australia performed very badly under the safety ratings. Do you have a view on that?

Mr Mrdak : Is this the ANCAP safety ratings?

Senator GALLACHER: Yes. They are very cheap cars coming in that cannot perform safety crash tests. They perform the tests on them and they are abysmal.

Ms O'Connell : I think one was a two-star rating and another a three-star rating. But they were relatively low rating.

Senator GALLACHER: They are probably bought by our most vulnerable road users.

Mr Mrdak : If I may, I will just get Mr Hogan to outline our role, which is the Australian Design Rules, which govern the vehicles that can enter the Australian market—the differences between that and the regime and the ANCAP testing regime. It is important to understand the regulatory basis of the ADRs. I will ask Mr Hogan to outline that and what the ANCAP system does in terms of being on top of the ADR requirements.

Mr Hogan : As Mr Mrdak has indicated, the Australian government sets the base requirements for vehicles entering into the Australian market, through the Australian Design Rules. The Australian Design Rules in turn are largely based on international vehicle standards agreed within the UN system, plus some local rules that have some historic origins. ANCAP is first and foremost an organisation that is devoted to raising consumer awareness of vehicle safety. From that perspective, it complements the regulatory regime that is currently in place. When ANCAP crash-tested those vehicles, as was pointed out, they achieved two-and three-star ratings, but that in no way indicates that they did not meet the regulatory standards that are in place.

Ms O'Connell : The role of ANCAP is really to influence consumer choice about purchasing safer vehicles, hence the crash-testing results and making them publicly available.

Senator GALLACHER: I understand that. Basically people make a decision based on their income and their wishes and their safety standards. But I am saying that we are allowing cars to be imported into Australia with barely recognisable ANCAP features—no ABS, no side curtain airbags—priced to meet the vulnerable user market. Is that a fact or not?

Ms O'Connell : With the Australian design laws, as Mr Hogan pointed out, there are minimum safety standards that must be met, and all cars meet those safety standards. Those safety standards are always being reviewed and increased—for example, new standards around adoption of ABS. Those standards, as minimum standards that are set through the ADR process, are reviewed and increased and stepped over time. Certainly the ANCAP crash test is about trying to promote the highest possible standard in terms of safety when you purchase a car and making that information freely available to consumers.

Senator GALLACHER: Is it true that in Victoria one of those imported models was not allowed to be sold because they had a different regulation?

Mr Hogan : What you are referring to there is the fact that Victoria introduced a state requirement as of 1 January this year that vehicles must have electronic stability control. National requirements are coming into place for electronic stability control as of 1 November this year. So Victoria were some months in advance of the national standard.

Senator GALLACHER: So that is not the tail wagging the dog?

Mr Hogan : No. In fact, the Australian government announced that it was going to mandate electronic stability control before the Victorian government did.

CHAIR: Senator Abetz, you are on the speakers list. We are finishing at four o'clock. Do you have a lot of questions?

Senator ABETZ: No. With a bit of luck, we might be able to sneak that in. I assume this is the area for the Australian International Shipping Register.

Mr Mrdak : Yes.

Senator ABETZ: I will not be subtle in my questioning, given that I have only got three minutes. Will this really be exempting people from falling under the Fair Work Act?

Mr Wilson : As the minister announced on 9 September, the Australian International Shipping Register will require shipping companies to regulate employment conditions in line with the international shipping regulations.

Senator ABETZ: So the question is: does this then exempt workers and operators from the Fair Work Act?

Mr Wilson : To be very blunt, employees on a ship operating under the Australian International Shipping Register will not be, whilst on international voyages, subject to the Fair Work Act.

Senator ABETZ: And they will only be subject to the ILO convention protections?

Mr Wilson : The maritime labour conventions in regard to international shipping.

Senator ABETZ: Thank you. That is the technical term.

Mr Mrdak : The details of those arrangements, of how the shipping register will work, are currently being developed as part of the legislation that is being drafted.

Senator ABETZ: Thank you very much. That has pre-empted another question. Given that I only have 35 seconds, I will put any other questions on notice.

CHAIR: I thank the officers from Surface Transport Policy for their time.

Proceedings suspended from 15:59 to 16:18