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Wednesday, 1 November 2000
Page: 21864

Ms KERNOT (3:27 PM) —Another day, another scandal, and this time a scandal worth 1,840 Reith telecard bills, another scandal which the Minister for Finance and Administration, Mr Fahey, continues to dismiss. It goes to the heart of this government's escalating examples of economic mismanagement and administrative incompetence. 1,840 Reith telecard bills is the equivalent of the $92 million loss sustained by Employment National in the last financial year. The annual report shows us that the company went from making a profit of $72 million in the 1998-99 financial year to recording a massive loss of $92 million this year. That is a $164 million turnaround.

Ms KERNOT —Massive competence, Minister, massive! But what makes this even more appalling is that I believe the evidence is there that this was as a direct result of the deliberate actions of Ministers Abbott and Fahey. We believe that Ministers Abbott and Fahey knew exactly what they were doing when they conspired to take away Employment National's business and to make it unprofitable. The $79 million that Minister Fahey cites as the write-down costs from scaling down Employment National from a large to a small company are the direct consequences of Minister Fahey's decisions.

But it goes back earlier than that, and we should ask: why would a government deliberately want to destroy a public provider of employment services? I put it to you, Mr Deputy Speaker, that it is because these two ministers are the agents of one of the most ideologically obsessed governments we have had to endure in this country, not in the tradition of robust debate but in the tradition of the `gleam in the eyes, zealous obsession with destroying and nobbling all things public'. Instead of the `four legs good, two legs bad' mantra of Animal Farm, I have this really vivid picture of Minister Abbott saying every night before he goes to bed, 10 times before he closes his eyes, `All private is good, all public is bad; and the CES is very bad and the AEU is even badder.'

We have heard about Minister Reith's manual. Here is the Fahey-Abbott manual on how to destroy public providers. First of all, you very carefully and as secretly as possible pervert the process. This is what Minister Abbott did when he oversaw the construction of the tender process that led to Employment National missing out on virtually all of the lucrative intensive assistance contracts in the second tender round for the Job Network. What is important here is how that process was constructed. The criteria were put in place in such a manner that Employment National and Drake Employment, for that matter, were automatically and unfairly excluded from keeping their share of intensive assistance contracts in round 2. So you can just see the minister sitting there with the gleam in the eye—`I wonder what would happen if I constructed the tender so that we average the performance of the large round 1 providers like Employment National and Drake.'

What that means is that you might have had two Employment National offices in a certain region and within that region one of the Employment National offices is in an area of very high unemployment and very few job opportunities. The other Employment National office might have been in an area of low unemployment with lots of job opportunities. But what Minister Abbott's construction of the tender criteria did was to compare the average result of those two offices and then compare this with the result of a rival provider, usually a private provider, that was operating just in the area with low unemployment. You do not have to be a genius to work out the end result of doing that. What it means is that, even if in the area of low unemployment Employment National are doing better than their rival in that region, they still lost the contracts because their result included their other office in the higher unemployment area. So you do not just tilt the playing field, you absolutely up-end it.

Employment National was actually penalised for doing its job as a public provider, for making the effort, getting out there, providing a national service and looking after regions that had high unemployment. If the process had been fair, results would have been compared on an office by office basis to start with. But Minister Abbott did not do this. He nobbled it from the very beginning. So for step 1 the agenda is nobble the public provider and pervert the tender process. I mention this because Minister Abbott has been able to evade a fair share of responsibility for this because, unlike Minister Fahey, he is not the shareholding minister. But make no mistake about it: he was there at the conception. On top of this perverting of the tender process we have Minister Abbott further muddying the waters by at the very last minute, just a few weeks before the tenderers were due to submit their bids, asking all of them—and we are talking about multimillion dollar employment contracts here—to take in the GST. They got this last-minute letter saying, `Don't forget to take into account the GST in the price.'

Mr Crean —At the last minute?

Ms KERNOT —Yes. These were huge contracts—lots of work—and for quite legitimate reasons some companies were unable to meet that.

Mr Crean —Dudded them twice!

Ms KERNOT —Employment National was one of those companies and, as the Deputy Leader of the Opposition says, they dudded them twice. So you have up-ended the playing field and you have perverted the tender process. What do you do then?

Mr Crean —You sack the board.

Ms KERNOT —No, you appoint your own board.

Mr Crean —I see.

Ms KERNOT —You say, `Labor didn't know how to do this so we're going to appoint a board with unquestioned business expertise because out there in the private sector they always know it all.' But what happens when that business expertise board then gives you financial advice contrary to your ideological objective? You sack it. Minister Fahey did this in two ways. First of all, on 3 December he directed the board of Employment National to accept job matching contracts in the second round, even though they had received virtually no intensive assistance contracts. Usually, Job Network providers need to cross-subsidise by taking the lucrative intensive assistance contracts to prop up what they are doing with the less lucrative job matching contracts. On 14 December last year the board of Employment National refused to take the minister's direction, stating that the contracts were not commercially viable. This is the business expertise board telling the minister, `We don't want to do this. This is taxpayers' money. This is not a commercially viable thing to be asked to do.' Minister Fahey's response was to sack the board on the very same day. So, Minister, I do put it to you—through you, Mr Deputy Speaker—that the loss of $92 million was an inevitable consequence of Minister Abbott's first actions and of those two specific directions to the old board and the new board.

Secondly, I want to point out to the minister, who talks about writedown costs being the main reason for the loss, that he should look at the cost of handing back 79,000 intensive assistance contracts. Do you know how much each of these is worth? They range from $2½ thousand to $9,000 each, and there are 79,000 of them. What did Minister Fahey think it was viable to replace them with? Job matching contracts, which work out at around $350 each. So we have $2½ thousand to $9,000 traded off for around $350, but somehow Employment National was supposed to accept that and become viable. Minister Fahey did this without even undertaking a full financial analysis of the cost to the company. I think that he has further shown some of his administrative incompetence with the IT outsourcing debacle.

Minister Fahey is the sole shareholder in Employment National. These shares are kept by him on behalf of the Australian people and it is his responsibility to represent the taxpayers' interests in the management of Employment National. I put it to the minister that those interests include the collective responsibility that we all owe to assistance for the unemployed, particularly in areas of high unemployment. For the $92 million that was lost, here is what you could get just in the narrow area of intensive assistance. For $92 million, you can get 25,500 long-term unemployed intensive assistance contracts. That is 25,500 people who could be given meaningful assistance on the way to employability. So it is really the unemployed of Australia who will share in the consequences of Minister Fahey's and Minister Abbott's ideological obsessions.

Let me finish by pointing to why Labor believes we need a public provider. I do not think it would have been recorded, but I heard the Prime Minister say by way of interjection when Minister Fahey was answering, `The government should have withdrawn from Employment National earlier.' So that is the real agenda of this government. That is what has motivated the decisions that have been taken to take away the contracts and to sack the board. Why do we need a public provider? Because we are a country that is divided along geographical and economic fault lines. We do have our centres in our major cities where unemployment is not as much of a problem at the moment as it is in our regional areas, but there are 235 regional areas in this country which have unemployment of over 10 per cent. This is where competition from Job Network providers is virtually non-existent. Why? Because there is no profit to be made there. That is why we need a public provider to do the job of government, to make sure that there is equity of access for all unemployed in this country.

Today in question time we had several questions to Minister Fahey—

Mr Crean —But no answers.

Ms KERNOT —I thank the Deputy Leader of the Opposition. But one of the major parts of this matter of public importance is about Minister Fahey's administrative incompetence and the government's failure to manage properly the affairs of Employment National. On top of mismanagement of foreign exchange arrangements that have cost taxpayers nearly $3 billion in the Department of Defence alone, there have been massively inflated fees and artificially low prices in the first Telstra share float, IT outsourcing that is seriously behind schedule and the management of which has cost taxpayers nearly three times the $13 million original budget, breaches by his department of the government's protocol for acting on allegations of misuse of Minister Reith's telecard to the tune of $50,000 and yesterday's revelation that he has turned an Employment National profit of $72 million into a loss of $92 million this year. I say it may have taken a while, it may have been a little esoteric to begin with and Employment National's difficult future may have been temporarily secured only as a result of public outrage, but the evidence is there. Ministers Fahey and Abbott have completely failed to manage the administration of Employment National in the interests of Australian taxpayers. What is more, they have deliberately mismanaged it in their own narrow ideological interests.