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Environment and Communications Legislation Committee
28/05/2014
Estimates
COMMUNICATIONS PORTFOLIO
Australian Broadcasting Corporation

Australian Broadcasting Corporation

CHAIR: We will now move to the Australian Broadcasting Corporation. I welcome Mr Scott. Mr Scott, would you like to make a brief—underlined 'brief'—opening statement?

Mr Scott : I will make no opening statement at all, Senator.

CHAIR: That is very brief. I am going to start with some questions. Mr Scott, at the recent budget estimates, I asked you about the legal action that was being taken by Mr Chris Kenny against the Chaser. You indicated that it was in the hands of the lawyers.

Mr Scott : Yes.

CHAIR: Seven months later you apologised. It took you seven months to come to a conclusion that everyone who saw that disgraceful skit had come to the next day. What prompted you to suddenly realise an apology might be in order?

Mr Scott : Senator, that program went to air. Shortly after it went to air, I indicated that I thought it was in bad taste. I made some public statements on that. I also indicated that there was a significant review underway from the ABC's internal processes that subsequently went to the ACMA. The questions that they were looking at were the nature of satire.

CHAIR: I just asked a simple question.

Mr Scott : Yes, I know. But I am giving you an answer, Senator, because you are asking about the chronology and the time frame and I want to be thorough in my answer with you. There was some significant debate that emerged on the nature of comedians, the nature of comics, the nature of satire, and so a detailed review was underway from the ACMA. What I said at the time was I would wait for the ACMA report to come out before issuing a statement. We subsequently reviewed it internally. I still have not seen the ACMA report on it. But we felt, and I felt, that it was appropriate to come out and make a statement of apology. The director of television and I discussed it. We felt that the skit fell short of the quality demanded by ABC audiences, and so on I went—

CHAIR: After seven months?

Mr Scott : Yes. But, Senator, as I indicated at the time of the skit, we were waiting for those review processes. Those review processes clearly took a long time. I still have not seen the ACMA report. So I made a statement. I called Mr Kenny and I apologised to him. Mr Kenny had said publicly he had sought an apology. We granted him that apology. I reiterate what I said at the time. I thought the skit fell short of the quality demanded by ABC audiences. The ABC's processes should have reviewed that in advance of it going to air. The apology received very wide coverage, Senator, through broadcast mediums on not only the ABC but also elsewhere. It was posted on our website and our corrections page.

CHAIR: You were quoted in an article saying that the delayed response was a mistake. Was it a mistake?

Mr Scott : What I think on reflection is that waiting for these processes to work their way through that clearly took a long time. They are still ongoing. I think in hindsight we should have responded more quickly. I said that to Mr Kenny. It was one of the things I apologised to him for.

CHAIR: Do you realise that all these legal bills that you would have faced would have been saved with a simple apology? Mr Kenny is on record as saying he filed the case only because the ABC did not apologise. So if you apologised earlier, you would not have this legal fight.

Mr Scott : Well, perhaps, Senator. I do not want to provide commentary on Mr Kenny's motives. As you know, legal action is continuing. The ABC is in negotiation with Mr Kenny. I do not want to provide further detail on that at this point.

Senator RUSTON: In terms of the legal representation that the ABC would obviously have to have on its own behalf in relation to this matter, is that something that you deal with internally?

Mr Scott : In the main, Senator. We sometimes get some external advice around matters as well.

Senator RUSTON: Have you sought external advice?

Mr Scott : Yes, we have on this matter.

Senator RUSTON: Has that been paid for within the ABC budget?

Mr Scott : Yes. It would be in the ABC legal budget.

Senator RUSTON: Do you have an idea what both the internal and the external legal costs would be?

Mr Scott : I do not have that on me. I can take some of that on notice. The matter of costs and the resolution of the case is all a matter that is still working its way through. There has been some reporting on that. I do not think this has been particularly precise. There have been ongoing discussions around this case since I made my statement. Mr Kenny said at the time he was keen to quickly resolve it. We are keen to resolve it as well. There have been ongoing negotiations from that point.

Senator RUSTON: My point is made only on the basis that we have just had a lot of discussions this morning about the ABC and about efficiency dividends and cutting frontline services et cetera. I draw to your attention that we are using resources here to defend a case which I believe is completely indefensible, but that is my opinion—

Mr Scott : Yes, sure.

Senator RUSTON: And you are entitled to yours. Which are actually taxpayers' funds.

Mr Scott : Yes, well, exactly. I—

Senator RUSTON: Can I just finish. So you are actually using taxpayers' funds to defend something in the public domain that any other normal organisation would have to justify. So you are using taxpayers' funds to defend something that you could have quite easily resolved. So how do you reconcile that in your mind as an efficient and effective use of the funds that are given to you to meet your charter at the ABC when I believe you are just wasting them on a defence of a case that is indefensible?

Mr Scott : Senator, I would encourage you not to leap to judgement on these matters in this process depending on some media reports that have been written about it. We are very conscious of taxpayer payments. We are very conscious of how we are funded. I would say to you that we receive many threats of defamation and legal letters around parts of our content. We manage those matters as appropriately as we can. One of the things we do not do is we do not arbitrarily make payouts when we have legal advice that is pretty careful about what is the appropriate level of payment that should be made. I do not want to get into the specifics of this, but we have sought to resolve this matter. We have taken legal advice on it. We are conscious of our responsibility to the taxpayer in doing so. We are keen to bring this matter to a close, as I understand Mr Kenny is as well.

CHAIR: Very good. Thank you, Mr Scott. Perhaps out of this whole sorry affair, this is the worst. Following your apology on 14 April, Julian Morrow, who is the executive producer of the Chaser, tweeted an image of you in a compromising position with a Hamster and the words 'We respectfully disagree with the ABC managing director's decision and statement today'. The article continues:

Far from being offended by the tweet, an ABC spokesman said Mark laughed it off.

There is the particular picture that I am very sure you are familiar with. Mr Scott, did you really find that funny? Is an image of you, the managing director of the national broadcaster, having sex with a Hamster on page 3 of the Telegraph and being tweeted really funny?

Mr Scott : Senator, as I indicated earlier, on these matters—it is in my experience now at the public broadcaster and my experience in media before that—there will be robust debate over the nature of satire and the freedom given to comics and cartoonists. There will be what is appropriate and what is not appropriate. There have been numerous examples of this, including one where there has been a vigorous contest between the Press Council and the Australian about cartoons run in the Australian. There is debate and conjecture around this. Mr Morrow may not have been happy with the statement that was made by the ABC. I was very happy with it. Finally, I have to take responsibility for what is put to air. I did take responsibility. I did make the apology. I thought that was just a passing trifle acknowledging that they were not happy about it. I had bigger issues to worry about.

CHAIR: Did you have words with Mr Morrow about it?

Mr Scott : I have not spoken to Mr Morrow about it. The director of television spoke with him about it.

CHAIR: You never spoke to him about it?

Mr Scott : No. There are more issues in play than a tweet, seriously.

CHAIR: The point I make is you describe a sketch about Chris Kenny having sex with a dog as tasteless and undergraduate.

Mr Scott : Yes.

CHAIR: Yet a similar description of you is funny?

Mr Scott : No. I did not say it was funny. I laughed it off. I thought it was tasteless and undergraduate also, Senator.

CHAIR: You laughed it off?

Mr Scott : Yes. Seriously, Senator—

Senator PRATT: There are lots of things that were insensitive.

CHAIR: Order! Senator Pratt.

Senator LUDLAM: Maybe he has a more thick skin than Mr Kenny.

CHAIR: Well, I hope the standards are raised.

Mr Scott : I note your comments.

CHAIR: And I am sure you have the message. I want to go to protests on Q&A. Mr Squat—Mr Scott, sorry. Not Mr Squat.

Mr Scott : I appreciate that, Senator. We will move on.

An honourable senator interjecting—

CHAIR: Mr Scott.

Mr Scott : Yes.

CHAIR: Interjections are disorderly on my right. Was the student protest on Q&A embarrassing for the national broadcaster?

Mr Scott : Such are the joys of live television, Senator. As I understand, nearly 240 broadcasts of Q&A have gone to air. Part of the drama of television is that it is live and unpredictable. There have been, in my recollection, now two events in nearly 240 broadcasts that go to matters of security and disruptions to the program.

CHAIR: Which are?

Senator PRATT: The famous shoe episode.

CHAIR: Senator Pratt, will you please listen to the witness.

Senator PRATT: Thank you, Chair.

CHAIR: Thank you.

Mr Scott : I would reference the famous shoe episode, where former Prime Minister Mr Howard was promoting his book on the program and a shoe was thrown in his direction, and then this event the other day. In a way, to run a live program like Q&A, another option for us would be to prerecord it. We did a previous program before Q&A that we pre-recorded. There is something about it being live. It makes the audience participate and tweet and be involved. We had the biggest single audience response ever as far as social media was concerned to the Q&A we did with the Treasurer a week or so ago. There is something about live television. But from time to time it can be unpredictable. I want to compliment how Tony Jones handled that moment. We do appeal to our audience members to respect the conventions of the live program and to respect the audience that is actually watching—a big audience; effectively a million people—who want to be involved in the conversation. So these things happen from time to time. We have reviewed our security measures in light of this. There will always be a point of vulnerability around a live broadcast. But, all in all, we think the benefits that come from a live Q&A make the risk worthwhile.

CHAIR: I want to talk about the shoe throwing incident from Mr Gray. He had been involved in a number of direct actions, including climbing on the then New South Wales Premier Morris Iemma's car during a climate protest in 2007; disrupting a New South Wales business lunch with then Premier Iemma present; and having confronted and disrupted a speech by the then US Secretary of State Condoleezza Rice when she was in Sydney over the Iraq war. How do you vet these people from disrupting your program?

Mr Scott : Well, it is a challenge. As you will understand, we are not putting every face through a detailed database before they enter the show. We rely on some trust and goodwill. We have some quite experienced security people here. We are alert to the dangers as best we can and we try and manage it. But you do rely on your audience members being sensible. There is no program like Q&A that creates an opportunity for cogent arguments to be made and vigorous discussion to take place. If people have dissenting views or they have questions they want to raise, that is what the show is all about. We encourage our audience members to participate in the spirit of the program.

CHAIR: Well, on 5 May this year, Q&A was disrupted by a half a dozen protesters, who jeered the education minister, Christopher Pyne. I am wondering why the ABC did not see this coming. Let me expand. A simple social media check would have revealed these activists belong to the so-called Education Action Group of Sydney university. One of their posts advertising another meeting prior to their Q&A protest said, 'Be there. It's time to fight.' Another says, 'Tony Abbott dares to show his face in Sydney' and 'Abbott is the enemy of the progressive people everywhere and there should be protests every time he steps forward in the city.' These activists even posted a picture of themselves in the Q&A audience egging on their supporters while waiting for the show. There is a picture there. The intention of this group could easily have been inferred by checking protesters like Eleanor Morley, who wrote this for the Red Flag, the socialist alternative newspaper:

I became a politically active a little over a year ago at Sydney University with the grassroots left. Our capitalist system creates inherent and vast economic inequality, is a driving force of oppression and subsequently needs to be overthrown by those who hold the greatest power in society—the workers or the others who are young Greens and socialist alternative activists.

Are you surprised by this lot and how they carried on in your program?

Mr Scott : I am not a reader of the Red Flag myself, Senator.

CHAIR: I do not even view Q&A.

Mr Scott : In fairness, Senator, in summary, we encourage our audience members to comply with the conventions of the program. We have had nearly 240 programs go to air. There have only been two incidents in that time. We are reviewing our security measures. We urge people not to disrupt in that way. We will continue to finetune our security measures as the program goes to air. There was a very big crowd at Penrith for the Treasurer the Monday before last and a vigorous engagement and debate ensued. That is what we want to happen. But we do not have teams of people scouring social network sites in advance of the Q&A program, no, Senator. If that is a vulnerability, that is a vulnerability we are going to need to manage over time. We just have to be sensible about it. We have to keep in mind that effectively a million Australians want to join the conversation and be involved in the debate. Creating the best program that we can for them is our priority.

CHAIR: I want to move to another issue now—the Labor in Power series. The ABC announced in September 2013 that journalist Chris Uhlmann wanted you to bring back the Labor in Power series that first covered the Hawke-Keating years in 1993 to encapsulate the chaotic years of the Rudd-Gillard-Rudd government. That was the plan. Mr Scott, I am wondering where we are at in the time line of the production of this series.

Mr Scott : I know you are waiting for it.

CHAIR: I cannot wait.

Mr Scott : It is going to be terrific. We have two series in production. One is to document Labor's years in power—a new series. Mr Uhlmann subsequently got a new job at the ABC. As you know, he is host of AM. He is not directly involved. We have a production team involved.

CHAIR: I listen to him every morning.

Mr Scott : Absolutely. A great way to start the day. The second series we have in production is on the National Party.

CHAIR: Good.

Mr Scott : We are documenting the history of the Nationals.

Senator Fifield: We have to draw the line.

CHAIR: That would be worth watching.

Mr Scott : Have they contacted you, Senator? This could be your moment.

CHAIR: I doubt it.

Mr Scott : Both of these television series are in planning and production. Some early interviews are underway. We will see them on our screens within the next 12 months or so. This continues the terrific work that the ABC has done to document our history—Labor in Power, the Howard Years, the interviews with former Prime Minister Keating last year. We continue to look at how we can document recent political history.

CHAIR: I look forward to it. I imagine there will not be the division in the National Party as there has been under Rudd.

Mr Scott : Some of the early footage is interesting, I am told.

CHAIR: But let me make this point: is it true the ABC and Mr Uhlmann have had some difficulty in trying to get Mr Rudd to cooperate?

Mr Scott : Senator, I cannot talk about that. I am expecting full cooperation with the series. I am expecting, and it is my hope and expectation, that all key players will be interviewed, as has been the tradition of these series in the past.

CHAIR: Did you talk to Mr Rudd about it?

Mr Scott : I have been in conversation with Mr Rudd from time to time.

CHAIR: So I believe, yes. Did Mr Rudd give you a reason for not wanting to participate?

Mr Scott : This production, I believe, is on schedule and on track. We are expecting all key parties to be involved in it.

CHAIR: Interesting. Chris Uhlmann's book, the Marmalade Files, was nothing but a thinly veiled attack on him, some say. So we look forward to that.

Mr Scott : It is a work of fiction, I understand.

CHAIR: If you can get Mr Rudd involved, we look forward to what is going on. Now, there is the Australia Network.

Mr Scott : Yes, Senator. Let's talk about that.

CHAIR: It is very interesting, yes. Mr Scott, why did the ABC announce on 17 April that a deal had been struck between the ABC and Shanghai Media Group when a deal in fact had not been signed?

Mr Scott : Well, again, you have to be very careful at what reports you are reading about this. I have been to Shanghai twice in recent months.

CHAIR: That is two more times than me.

Mr Scott : You should go there. It is a remarkable city. We have been in discussions with the Shanghai Media Group. I can tell you that an offer was made to us to enter a partnership with the Shanghai Media Group to create a portal within the internet system as it operates in China. We have broadcasting windows for Australian content in China now and Chinese content back in Australia. I had discussions with the local regulatory authorities and the head of the Shanghai Media Group when I was in China. So in principle an agreement was reached. You will find further information about this in coming weeks. There was no difficulty about the statement that the ABC made about that at all.

CHAIR: When the statement was made, had the ABC and the Shanghai Media Group lodged applications with the Shanghai Municipal Culture Radio Broadcasting, Film and Television Administration at the time of the announced deal?

Mr Scott : I can tell you that I had meetings with the head of that agency.

CHAIR: Had you lodged your application?

Mr Scott : Agreements in principle have been reached with the head of that agency.

CHAIR: Had you lodged the applications by then?

Mr Scott : The agreements in principle had been reached on it. I am not quite sure of the paperwork and the timing. But the offer came from Shanghai to me when I was in meetings there. I accepted that invitation. The statements that the ABC made at that time were made with the agreement of the authorities in Shanghai.

CHAIR: Can you explain a report that the Chinese industry supervisory agency—as I said, the Shanghai Municipal Culture Radio Broadcasting, Film and Television Administration—was unaware of the proposed deal despite the ABC's announcement last week that it would be formalised and signed in Shanghai on 4 May?

Mr Scott : I think the person who was contacted in the ABC was not aware of it. But when I spoke to the head of that agency some weeks before, he absolutely was aware of it. We are all on track. Further details will be released shortly.

CHAIR: Well, what do you say to claims that the ABC's announcement of a deal prior to anything being signed was a stunt designed to affect the budget consideration of the Australia Network?

Mr Scott : Not true.

CHAIR: Not true?

Mr Scott : I had made multiple trips to China.

CHAIR: So you were very involved in all of these manoeuvres?

Mr Scott : As I said, the offer was made to me when I was in Shanghai. I have been visiting China now for a number of years. Australian broadcasters have looked for opportunities to take Australian content into China for numbers of years. We have sought landing rights for Australia Network, but very few landing rights have been handed out. There was some erroneous reporting on this which said we had received landing rights for Australia Network. That was never said by the ABC and it was never said by the Chinese authorities. But the offer that we were made, that provided a window for Australian content to be shown regularly within China by the Shanghai Media Group, the prospect for us to create a portal within China with a dot cn website to allow us to distribute our content and possibly commercialised content there—this was unprecedented for Australian broadcasters. It was tremendous news. Of course it was good news. Of course it was an important statement of validation for the work that had been done over many years to build the relationship and to build mutual understanding with the Chinese media authorities.

CHAIR: Before I go to questions with colleagues on my right, how are you handling the censorship regulations in China? Surely they are much stricter than here.

Mr Scott : Yes, they are.

CHAIR: Perhaps they may not view the Chaser over there?

Mr Scott : Well, this is not different fundamentally to some of the issues that we have faced with other broadcasting in the region. Basically, there have been no substantive discussions with the Chinese authorities on what we can and what we cannot post over there. We will be posting news stories over there and factual broadcasting. We will manage these issues if issues emerge from time to time.

Senator EGGLESTON: I want to ask about the ABC's access to the Chinese market. I went to a seminar on China a couple of years ago, or last year perhaps—time blurs a bit—with SevenWest talking about their activities in China. Can you give us some understanding of what other Australian television companies are operating in China, including providing internet services?

Mr Scott : Our understanding is that when we launch the dot cn site, that will be the first Australian broadcaster to have that kind of access of a site within the Chinese wall of internet activity. SevenWest has significant business interests in China, particularly through Caterpillar, as I understand, but I am not sure it is a substantive media engagement. News Corporation has long tried to have a media presence in China and has struggled to get the kind of relationships that open the doors. They have retreated, I understand, back in recent times. I am not aware of too much other activity. For the ABC to reach this arrangement is a very positive thing. I think the relationship we have established with the Shanghai Media Group is very positive. It is a very dynamic and innovative media organisation. For them to take programming that we are making and to show it to a broader audience in China and for us to be able to reciprocate that by showing some of their programming here we think is a very positive thing. The other thing about our China strategy is to be able to place more of our content on Chinese social media websites. So there are big internet sites—Weibo, Tencent and others. We have struck deals with them that allow us to provide them with content that they put out on social media in China. So these are all very positive moves.

Senator EGGLESTON: I think that is the sort of thing SevenWest was talking about—Kerry Stokes—and using social media.

Mr Scott : Yes. That might be right, yes.

Senator URQUHART: Mr Scott, you have said the previous efficiency gains made by the ABC have been reinvested in new services. Can you remind us of some of those services are that you have reinvested in?

Mr Scott : Absolutely. We have made savings in the vicinity of $40 million around efficiency in the last five years. We did a major review into revamping television production, which involved us implementing new technology and changing work practices in all our newsrooms around the country. As a result of that, we have far fewer people, say, in the control rooms of our television newsrooms now when we are putting our news bulletins to air. We have made very significant savings there and reinvested that money to create ABC News 24. In any given week, nearly four million Australians are watching ABC News 24. That was funded without an additional dollar of government funding. It came through efficiencies realised by reviews at the ABC and the reinvestment of that money for services for our audiences. Another example is iview. We did not receive any additional funding for iview. We found the ability to fund iview through efficiencies made by the ABC. Now in any given month, about 20 million programs are played out around iview. It is clearly Australia's leading catch-up television service. Yesterday Google Chromecast was launched in Australia.

Senator URQUHART: Sorry, what is that called?

Mr Scott : Google Chromecast. It is a new device that Google has launched which allows you to look at computer video content, internet video content, on your television screen. Iview is one of the first apps that has been involved in that. Again, for the millions of Australians using iview every month, this was an example of efficiencies realised by the ABC reinvested in new content. So we have had a major review into television production. We have had a major review into our support services. Every year we have to find efficiencies because the amount of money that we are indexed does not equal the inflation rate that we have to deal with. But we have taken that money and we have reinvested it for our audiences. I think it has been a terrific dividend for our shareholders, the Australian people. All our online activity has really been funded by that as well. I think what we can say is that efficiencies we have found we have reinvested that in content. Our audiences have benefitted, and the ABC has benefitted as well.

Senator URQUHART: I know that I have benefitted and a lot of us do who travel a lot, particularly with iView. It is a fantastic product. Does funding for Ramp Up, the ABC's online destination for news discussion, debate and humour for everyone in Australia's disability community, end with this budget?

Mr Scott : Let me talk a bit about that. I heard the remarks from the honourable senator earlier. I thought I might add a bit more context from the ABC perspective as well. The ABC was approached to create Ramp Up by the old FaHCSIA department. I think the feeling was it would be good to create a website. Clearly, it was not a commercial opportunity. The ABC was approached about creating Ramp Up, and funding was provided for that. My recollection of that initial funding was that it was not indicated at that time that there was an expectation that the ABC would be able to provide the funding for this when the grant expired. When I was at the launch that was not my recollection of what was communicated to us at the time.

Subsequently, a second grant was provided by the previous government. At that point, once the site had been established, the suggestion was made on the expiry of that second grant that the ABC could take over the funding of Ramp Up. This was reinforced by the honourable minister, when he became responsible for the portfolio, in his correspondence with me earlier in the year. He referenced, I think, the second period of correspondence that we received. So the chronology is the ABC was asked to establish Ramp Up. A grant was provided. A continuation of that grant was then provided with the suggestion that perhaps the ABC could take it up at the expiry of that grant. That was reinforced by the minister. It is kind of an interesting situation for us, frankly.

Senator URQUHART: What was the amount of that grant? You can take that on notice.

Mr Scott : We will have to take that on notice. It is an interesting proposition for us, frankly. I think Ramp Up has been a positive. I am a fan and supporter of the work that Stella Young has done. But the ABC board did not independently decide out of our appropriation that we needed to create that website. We were approached by the government of the day to create it to help the government of the day solve an issue that they saw. We took that on board and we did that. If that funding is not going to continue, clearly, it is an issue for the ABC board to work out what we do. But I think it is a trend that we need to watch.

There is other funding that has been appropriated to us to create a website that, again, was an appropriation to meet a community need. That is the Splash website, which has proven to be very popular with students and teachers and parents. It takes ABC archive. It digitises that. It links it to the national curriculum. We have had some terrific events about that. There has been some significant funding for Splash. But if the funding for Splash is not continued, then we need to work out whether we can afford the millions of dollars to continue to fund that program. I suspect that the ABC board in future might be a little reluctant to help government solve policy matters—

Senator Fifield: I cannot believe that.

Mr Scott : If in fact the funding is going to be dropped on the doorstep but not going to be continued. So I believe—and I think the minister would agree with me—that Ramp Up has been a good initiative. We have not quite seen eye to eye on how the funding for that needs to be continued. That finally will be a matter for the ABC board to resolve over time.

Senator Fifield: Chair, I might just add to assist the committee. The numbers that I have—Senator Urquhart asked about funding—was that in 2009-10, the ABC received around $506,000 over three years from the former FaHCSIA. In 2012-13, the ABC received a further $507,000 for two years. The total cost of the initiative to date has been of the order of about a million dollars. I think from memory, Senator McLucas, the then parliamentary secretary for disabilities, wrote to the ABC in September 2012 outlining the expectation of the former government that the ABC might be able to incorporate the work of Ramp Up into their core business. It was made clear that that funding was concluding at the middle of this year. I should take the opportunity to add my thoughts in relation to Stella Young, who is the editor of ABC Ramp Up, who I think does an absolutely sensational job in raising issues of Australians with disability. She and the other staff at the ABC have put in a remarkable effort in that regard.

Mr Scott : As we consider it, I have spoken to Stella Young. Her career is blossoming in many directions. We are looking to keep a relationship with Stella. I think clearly disability issues are important issues for us to cover as a broadcaster and as a news and information organisation. Whether in fact they need to be covered by a standalone website I think is an interesting question. One of the issues that we are asking from the organisation as a whole is whether we have too many standalone websites and whether, in the interests of efficiency and audience service but also to drive bigger numbers, we need fewer websites which have richer levels of information in them. In fact, in some examples that we have developed in recent months, we have put more content on our news page. That has actually driven up the audience members for some content that we have developed. So this is not an area that we want to walk away from. We want to continue working with Stella, but quite how we afford to do that and how we best do that is a matter that is still up for consideration.

Senator URQUHART: So is Ramp Up an example of a service that you would normally have continued to provide through efficiency improvements if you had the budget there?

Mr Scott : I think that finally questions around prioritisation and resource allocation are issues for the board. But as I have said in recent weeks, since the budget and statements made around the budget, it is vital for the future for the ABC that we can continue to pursue efficiencies. I heard Senator Ruston earlier reference comments that I made. I do not think I have ever said that the ABC cannot find efficiencies. We have found a lot of efficiencies. We want to continue to pursue to find efficiencies. I welcomed the Lewis review when it was set up. I think the critical question is whether we can continue to use those efficiencies to reinvest in services for our audiences, particularly in a very dynamic media environment. If the ABC had not created News 24, if the ABC had not created iview, if we had not created the apps that we have rolled out for tablets and phones, millions of Australians would have missed out on those services that we have provided. I think the ABC would have been less relevant and less compelling as a digital broadcaster. So we continue to systematically pursue efficiencies.

What we need to be able to do is invest those efficiencies in the future of the organisation. If whoever is in government makes a decision that we cannot do that, I think you are really saying that the ABC should not be innovative, when clearly I think we should be innovative; and that we should not be creating new content to engage new audiences, which is clearly what we have done in recent times. That strategy has been very successful. I think that leads to a weaker ABC over time. I do not think the public supports any move to make the ABC weaker over time.

Senator URQUHART: So I guess the services you provide have been funded by previous efficiency gains. That is what I glean out of what you are saying?

Mr Scott : Yes. I think there are two kinds. I think we need to be fair on this. If you look at the ABC over the last seven or eight years, there certainly are new services that have been funded directly by government. The ABC children's channel—ABC 3—is an example of that. There is a very significant increase in drama that we put to air. It was funded directly by government. So government can decide to make appropriations that help the ABC provide a rich array of services. They have been very successful initiatives. But there have been other efficiencies that we have found to fund other initiatives that have been very popular with the public. News 24 and iview and our host of online services are examples of that.

Senator URQUHART: Thank you. I have a couple more questions and then I will pass on to Senator Pratt. In the earlier session—I am not sure whether you were watching—Mr Clarke told the committee that the efficiency review has been excellent and that he is very pleased by Mr Lewis's engagement. Do you share Mr Clarke's view of Mr Lewis and that review?

Mr Scott : Well, look, I suppose I have a couple of comments. I welcome the review. I want to thank Mr Lewis for his contribution. It is finally not the ABC's review. It is a departmental review. Whilst there were some, I suppose, factual questions that we had that we provided some commentary on which made some changes from an earlier draft we saw, fundamentally this is the department's review. I have been provided with a draft of it. The board has seen a draft. I think it has value for us. As we continue to pursue efficiencies, someone like Mr Lewis, who is a commercial broadcaster of great renown, provides us with areas to go and look at. He provides some examples from his experience, particularly at Channel Seven and Channel Ten. We engage with the report as providing some point of direction. I think it would be fair to say we do not agree with all of it, but we have had numbers of reviews like this in the past, and you never agree with all of it. A previous review was done into the ABC by KPMG. They found that the ABC was very efficient and well managed and, in fact, needed additional funding. We have done a support services review that, again, found areas for us to look at.

I think one of the interesting debates is around the definition of 'efficiency'. One of the things I would say about broadcasting is that I am not sure you can always just separate out that that is to do with efficiency and that is to do with content. Choices you make around efficiency have an impact on the content choices you can make. It is one thing to outsource your payroll, for example. But if in fact you outsource your production studios or you get rid of your OB vans or you sell off some of your property, that does have an impact on the choices that you can make. So we will engage with Mr Lewis's report and we will factor that in as we continue to pursue efficiencies.

I think part of our challenge around efficiencies and the debate we will continue to have with government is around our ability to reinvest within the funding envelope that we have for our audiences to ensure that the ABC remains relevant and robust and compelling. I think this is the conversation that we had prior to the election and after the election. I know that in previous budgets the ABC did receive some additional funding. I know it is a very tough funding environment we are operating in now. It is a tough budgetary environment. The ABC is not there seeking additional funding from government. We are not putting up lots of proposals for new funding grants. What we are really asking for is the ability to live within the funding envelope that we have been given and the ability to live within the funding envelope that was committed in the budget before last to the ABC for a three-year period. That is what we think is in the interests of our audiences and the interests of the public broadcaster.

Senator URQUHART: Thank you. What percentage of total ABC costs are back office costs?

Mr Scott : It depends how you calculate it. Somewhere around 20 per cent, I think, is a fair figure.

Senator URQUHART: So effectively 80 per cent—

Mr Scott : Fifteen to 20 per cent. It depends a little. As I said, it is all interconnected. Are our studio capacities content charges or back office charges? It depends where you count them.

Senator URQUHART: Thanks. I will hand over to Senator Pratt.

Senator PRATT: Mr Scott, the government has described the cut to the ABC's funding in the current budget as a down payment on further efficiency dividends. Have you been given any indication of what further dividends are expected?

Mr Scott : No. I note the language. There has been quite a bit of language, I suppose, around the ABC and the ABC's funding and quite a bit of debate around that. Our rounded assessment of the budget impact on the ABC is a loss of $120 million over four years. The bulk of that is the cutting of the funding for Australia Network, but there is another one per cent operational cut as well. So I note the comment in the minister's statement that it is a down payment, but a down payment on what, we do not know.

Senator PRATT: Further efficiency dividends, I guess.

Senator Fifield: It is a downpayment in relation to the efficiency study and some of the anticipated back office savings that might be made. That is to provide some context.

Senator PRATT: That are usually reinvested in content. The committee asked the department in writing whether the report of the review being conducted by Mr Lewis would be made public. They advised that this would depend on the minister, ABC and SBS. Is the ABC agreeable to the report's release?

Mr Scott : It is a matter for the department and the minister. It is their report. It is not the ABC's report. There was some commentary, I think, in earlier discussions today about the ABC's involvement. I want to be clear on that. We had two staff members seconded to work on the review. I want to thank them. They carried a remarkable workload in a very intense period of time to get the review done in the timetables that were set out. However, there were some rules and protocols that were brought in place on that. In a sense, Chinese walls are created. They operated somewhat in isolation. They took data from the ABC into the review. But it was not their findings. They were basically providing data and analysis.

Senator PRATT: Yes. It is not the ABC having input into the review, is it?

Mr Scott : No. It is not. So fundamentally it is the department's review. It is the minister's review. It is up to the department and the minister to decide if they want to release it or not.

Senator PRATT: So we have a good indication that further efficiency dividends are expected as a result of that report and that the ABC is not expecting any input into that?

Mr Scott : That is a debate we still need to have. I want to make it very clear that the ABC board and the ABC management team will continue to pursue efficiencies. It is part of our responsibility.

Senator PRATT: You have done some great things with those efficiencies in the past.

Mr Scott : We will continue to pursue them. There are some quite interesting choices. You get to a point where there are some interesting choices that you need to make to continue to pursue efficiencies. Just to foreshadow some, things will be discussed around OB vans, around the level of internal production and around the property assets involved. As we move, though, in that direction, I think it is a very significant debate around what happens to funding. Newspoll does an annual survey on the ABC's funding. Effectively, it shows that nine in 10 Australians believe that the ABC provides a valuable service. The question is whether in fact that money should be kept within the funding envelope and reinvested in content for our audiences or whether in fact it should be taken away from the ABC. I think they are very good debates to have. I think they are debates in which the public has a strong view.

Senator PRATT: To my mind, policies like that do not necessarily encourage efficiency in the Public Service. You need to be able to look for these things constantly so that you can return reward to your own organisation.

Mr Scott : I think it is a particularly interesting case study in media. What other media organisations will do is they will create new outlets for audiences and they will have revenue streams on the back of it. So I think we can expect to see with commercial free-to-air television in coming years the possibility of some subscription video on demand services and new channels that emerge that create new advertising opportunities. The ABC has no other revenue opportunity, in effect, apart from the government appropriation. So how are we expected to fund the new if the government is not going to give us any more funding unless we can reinvest our priorities and reprioritise? That is the debate we need to continue to have. We have no other revenue streams under our act, effectively, apart from government appropriation.

Senator PRATT: No. Absolutely.

Mr Scott : So we are saying that to operate within our funding envelope and to be able to reinvest and reprioritise is very, very important to the future of the ABC.

Senator PRATT: I want to ask you about the feasibility of the efficiency dividend that you have been asked for. It is a budget cut of one per cent for the back office. The back office is 20 per cent of your costs, as I understand it. So what that amounts to is like a five per cent budget cut for your back office?

Mr Scott : No. It is one per cent across the board. But it is more than that because it is Australia Network as well. This was absolutely agreed with DFAT; it was all quite transparent in our engagement with them. We have funded positions in foreign newsrooms on the back of Australia Network. We have funded programs that have been shown domestically as well as internationally with Australia Network funding. I anticipate that there will need to be dozens of redundancies on the back of the Australia Network decision. Then we will need to find the other saving as well on top of that. So it is not just a case of nine per cent. As I said, as we calculated, it is effectively $120 million over four years. That is not trivial. There will need to be staff cuts and programming adjustments on the back of that.

Senator PRATT: So staff cuts and programming adjustments. So making television for less by reducing quality is not really an efficiency gain, is it? They are budget cuts.

Mr Scott : Well, I think we will be making fewer news programs with the cut of Australia Network and we will be losing journalists. There is no doubt about that. But that is directly linked to the Australia Network decision. Again, we will look to try to find efficiencies where we can, but this has been long our principle. Mr Pendleton is our chief operating officer. He will testify that in our budget meetings every year we look to try and save money from our support services where we can to protect content as best we can. I think it goes to the line on down payment. Your ability to protect content depends on what is in the future and a down payment on what in particular. And we actually still do not know.

Senator PRATT: Are shows like Today Tonight or A Current Affair cheaper than 7.30?

Mr Scott : It depends on what they are paying for the interviews, Senator. Let me take another example.

Senator PRATT: Please do.

Mr Scott : It may be an example that we have used here in these discussions in the past. I believe that if the ABC was not broadcasting Four Corners in prime time, no commercial network would make the investment necessary to create Four Corners. Four Corners is a very staff intensive program. Those journalists doing that investigative reporting spend weeks pulling those stories together. There are researchers and crews assigned to those stories. It is expensive. I think if a commercial broadcaster is seeking to maximise their profits and their returns to shareholders, that is not the investment they make in journalism. I think it is a very important point to make in the context of the future funding of the ABC. If the ABC's funding is diminished, there is no guarantee at all that the commercial sector will come and meet the gap that is created by the ABC being weaker. The commercial networks are not interested in filling qualitative gaps. They are interested in maximising the return to—

Senator PRATT: And many of them are important for the public interest?

Mr Scott : Yes. The commercial broadcaster is interested in maximising the return to their shareholders. If you are a shareholder in those companies, that is exactly how you would want it to be. We exercise in the public interest to fulfil our charter. Some of that programming is expensive. If we were not doing it, there is no guarantee that commercial broadcasters would fill that gap.

Senator PRATT: How confident are you, Mr Scott, that any benchmarking that has been carried out as part of the efficiency study has actually been judged against output of comparable quality?

Mr Scott : I do not want to go too much into the detail of the report because it is not the ABC's report. I think there is some high-level benchmarking that is done there. Some of the benchmarking is done between the ABC and SBS. Some of the benchmarking I think is done with commercial networks. I think before we make decisions on any of that, we would really need to do a lot more detailed and substantive work on the real impact of cuts according to the quality and the standards of the content that we want to create.

Senator PRATT: So you have been undertaking internal work to prepare for budget cuts. Is that right?

Mr Scott : Senator, every year we have to do work in anticipation of budgets because basically we do not receive indexation that keeps up with inflation. This year, of course, we continue to do quite detailed work about different scenarios. I must say it has been a quite—

Senator PRATT: But this is a different scenario in terms of not having those efficiency dividends available to you to reinvest?

Mr Scott : Well, we finally became fully aware of all the detail in the budget on budget night. You do prepare for some contingencies. There had been some commitments made around ABC funding that we were conscious of. There had also been reports around those commitments to the commitments as well.

Senator PRATT: You might have taken those election commitments at face value like the rest of us did.

CHAIR: Order! Continue, Mr Scott.

Mr Scott : Thanks. Finally, we need to be agile and we need to be prepared for all circumstances. But the argument I continue to make in government is if the ABC can find efficiencies, we reinvest. There is another thing I would say that I think is significant. Efficiencies or no efficiencies, of course, the ABC will need to make changes to programming and priorities over time. This is what we have done in the past. Some programs end and new programs begin. We need to have new initiatives. So we continue to look and ask questions about the future of television and the future of news and the future of our radio services. We continue to ask those questions. What are our priorities for investment? Are there some audience members who we are overservicing and other audience members that we are underservicing? That work goes on at the ABC. We continue to have teams addressing those issues. That will continue into the future.

Senator PRATT: I think the Financial Review quoted you last Friday, Mr Scott, in a speech to the Israel Chamber of Commerce in Brisbane saying that government cuts to the national broadcaster could only go so far before they impact on the quality of programs and its media footprint, especially in regional areas. At estimates last February, you said that you could not guarantee that funding cuts would not see cuts to services, especially radio, in regional areas. Is this still the case—that you cannot guarantee against cuts to services, including radio, in regional Australia?

Mr Scott : I suppose it goes back to your question earlier. I noted the statement around the budget allocation this year about the budget saving being a down payment. You asked me whether I had further detail on that. I do not. So a down payment on what? Depending on how much funding return the government is seeking, depending on how much we can hold on to efficiencies we make and not return them, that will be pivotal in working out what we can afford to do. But we have found $40 million of efficiencies and we have reinvested it to the public benefit. We will seek to find more efficiencies. But sooner or later you reach the end of the efficiency road. The easiest levers to pull in budget cuts are programming cuts and outlets. To cut a drama series, you save millions of dollars with one decision. They are the easiest decisions to make. I do not want to do that. We want to try to make an investment of efficiencies and to drive the efficiency of our back office. But fundamentally I cannot give any guarantees until I have some appreciation of what it is that people might be speaking of when they speak of a down payment.

Senator PRATT: I think Senator O'Neill had a question about regional radio.

Senator O'NEILL: I do. Thank you, Mr Scott. I am very heartened by your deep understanding and articulation of the role of the ABC in reflecting back to communities their own stories and, critically, in terms of emergency as well. I am a senator for New South Wales. My home base is the Central Coast. You would be well aware by now of the concerns that we might lose our very much loved Central Coast ABC outlet, which services over 300,000 people. I am mindful that the lease that you have on the current property at Erina Fair is coming to a close and that there have been some negotiations about relocating into the heart of Gosford. That is keeping our community somewhat heartened. But I have to say in light of your comments in response to the question that Senator Pratt asked, I have grave concerns about the footprint—I think that is the word you used to describe it—for what is in store for the Central Coast. I am seeking your reassurance today on behalf of those 300,000 people that the Central Coast ABC will remain. It has been a vital part of our regional identity and critical at times in times of need.

Mr Scott : Thanks for your comments, Senator. I can tell you that no proposal has come to me to close the Central Coast studio and the satellite service it offers to 702 Sydney. I think there have been questions raised about its current location in the shopping centre there—whether that is the right location, whether that represents a good investment or whether in fact there are other better locations for that studio on the Central Coast. That is where I understand the debate is up to at the moment. As you know, it does not provide a full local radio service. It is a retransmitter for some of the day. But there is some local programming that comes there in the early afternoons.

Senator O'NEILL: We would love you to increase the amount of time.

Mr Scott : Thank you. That will very much depend on the funding envelope that we can operate out of. There is often debate about this. We have seen this in other parts of the country as well. People like some local content but they also like the metropolitan content as well. This was an issue in Western Australia, where people still wanted the broadcast out of Perth as well as the other local content. So that is how we try to work it through. But no decision has been made to close it. When I last heard, we were looking for alternative studios. The size of our regional footprint, the number of local radio services that we can afford to keep open and the most efficient use of that will finally depend on the funding envelope in which we are operating. But that is how we are proceeding at the moment.

Senator O'NEILL: So can I take back to the Central Coast a commitment that the ABC will retain its regional radio presence on the Central Coast?

Mr Scott : What you can say, Senator, is that I understand that we are currently looking for other premises for local radio on the Central Coast. I have not received a proposal to walk away from the Central Coast funding for the provision on the Central Coast. Finally, the decision around all our local radio footprint will depend on the funding envelope in which we are operating.

Senator O'NEILL: And the Central Coast could be in the mix if a decision is made to cut?

Mr Scott : It goes very much to the questions of Senator Pratt. It would depend on how much money is available to offer the ABC's services. If there were a significant cut to that, we would have to look at everything. That would include where we run local radio from. I must say I am still very much committed. I think local radio is the spine of what we do. I think you referenced emergency broadcasting. I think it has been terribly important. The ABC's role in emergency broadcasting has grown significantly over the years. I also see it as being important—it might not be as significant on the Central Coast, but you can look at other places in regional and rural Australia—where commercial television and radio broadcasters and now, increasingly, newspapers are finding it hard to bring the revenue in that justifies their investment. So I would argue—and the minister has argued this on occasion too—that, in this era, the ABC is more important than ever. I think what we offer in regional and rural Australia is more important than ever. So we will fight hard to protect the services that we have, but we need to be focused and sensible to be able to deliver that appropriately within the funding envelope that we are given.

Senator O'NEILL: Can I put on the record that the Central Coast is too often considered an extension of Sydney or an extension of Newcastle and it is neither of those things. It is geographically isolated. The support that has been given to the community in times of crisis is absolutely critical. So, from your answer, we should stay tuned?

Mr Scott : Stay tuned.

Senator O'NEILL: In a number of ways?

Mr Scott : Yes, indeed.

Senator PRATT: Can I ask in that context whether you can guarantee that funding cuts will not see cuts to the ABC's capacity as our nation's emergency broadcaster?

Mr Scott : Well, we look to be responsible stewards as emergency broadcasters. We take the role very seriously. I think in any circumstances we would look to deliver the best possible service that we can. But it is expensive and we continue to try to prioritise funding for it.

Senator PRATT: I note in the AFR article that quoted you that you said that iview was a success but becoming increasingly costly to provide because of the bandwidth for the service. Can you guarantee that funding cuts will not see iview and other digital offerings limited or cut?

Mr Scott : We have received some additional funding for iview digital services. This was funding provided in the last tri funding. Again, there is not funding for that in the forward estimates beyond the three years of this triennium. So I think in the short term, assuming our funding envelope continues as it is, we would look to continue to expand iview. The support we are receiving for iview, the growth we are seeing in the traffic and the important role that it has in many Australians' lives I think is self-evident through the data. So we look to continue to support iview. But it is a challenge.

One of the things I think people do not really understand is that old style distribution methodology through transmission towers to aerials was wonderfully scalable. It did not matter if one person was watching or a million people were watching; it was the same cost. Well, that is certainly not the case with iview. The more demand there is on it, the greater server capacity and other infrastructure that we need to be able to deliver it. So the more successful iview is, the more it costs us. That is something that we are carefully monitoring over time. The content distribution network costs of delivering iview services in Australia are remarkably higher than elsewhere in the world. That is partly because of the geography in Australia and the size of the market in Australia. That is something that we are conscious of.

Senator PRATT: Can you guarantee that funding cuts will not see cuts in news and current affairs or in Australian miniseries and drama?

Mr Scott : Again, it depends on the funding envelope that we operate in. I can tell you there will be cuts to news and current affairs. There will be cuts to news and current affairs on the back of the Australia Network decision. We have a newsroom in Melbourne—the Asia-Pacific News Centre there—that has been funded to a significant degree out of the Australia Network grant. It has provided specialist programming for Australia Network, but also Australia Network funding has funded some positions in some of our foreign bureaus. So I am anticipating in coming weeks we will need to offer redundancies to some of our staff.

Senator PRATT: And that will affect also local news content?

Mr Scott : Well, it will affect in two ways. I expect that we will have some fewer number of people in our international bureaus as a consequence of that. Some of the programming that has been available on ABC News 24 is programming that was fundamentally created for Australia Network and broadcast back here. So, yes, there will be an impact.

Senator PRATT: That will be a real shame.

Senator Fifield: I should just add that the decision in relation to the Australia Network is obviously not related in any way to the one per cent reduction over the forward years—

Senator PRATT: But it might mean that there is less foreign news on live television.

CHAIR: Order!

Senator Fifield: which is the subject of discussion here. Obviously, that is a matter which is in the foreign affairs portfolio. Senator Pratt did make reference to, I think, local news. Clearly, the decision of government in relation to the Australia Network cannot have an effect there.

Senator PRATT: No. I was really referring to local content on our news—foreign news on our television reported by ABC broadcasters.

Mr Scott : The Australia Network impact will have an impact on news that can be seen locally but will not have a direct impact on news that is created in Australia.

Senator PRATT: The news about what is going on in Thailand, for example, or in other places.

Mr Scott : We will lose some reporting positions in foreign bureaus on the back of the Australia Network decision. I suppose as I look at it in framing our budget for the coming year, the government may deconstruct that there is one per cent here and there is Australia Network there. We look at it as a $30 million adjustment to our bottom line that we need to effectively manage. It is $120 million over the forward estimates. Yes, there will be reductions in our news teams on the back of it.

CHAIR: I want to clarify, Mr Scott, the $120 million over the forward estimates. One per cent was about $43 million over the forward estimates, was it not? The $120 million is in relation to?

Mr Scott : That and the Australia Network. We look at them together and that is the impact. Some of the Australia Network payment went to satellite transmission and other matters, but a lot of the other went into newsroom and payments for the ABC to create those services.

Senator SESELJA: Was that not just to provide a particular service? You were not getting a windfall from the Australia Network?

Senator THORP: I am presuming we are able to jump in on your questioning as well because of this?

Mr Scott : I am hearing voices, Senator. Where do you want me to direct my attention?

CHAIR: We will go back to questions on my right.

Senator PRATT: Thank you. Can you guarantee that funding cuts will not see cuts in programming for children, including ABC3?

Mr Scott : Senator, that just depends on the funding—ever thus. The services that we can provide and can continue to deliver and invest in depend on the funding envelope that we are provided with.

Senator PRATT: Finally, before I turn to my colleagues, I want to know if Peppa Pig will be safe from the budget cuts—

CHAIR: The what?

Senator PRATT: particularly from conservatives concerned about her dangerous feminist ideology?

Mr Scott : I am distressed that Senator Williams claims ignorance of Peppa Pig.

CHAIR: I think Senator Pratt should declare her interest in this, please.

Senator Fifield: What about Peppa's brother, George? I think he deserves due recognition too.

Senator URQUHART: Yes. George is great.

Senator PRATT: Is Peppa safe?

Mr Scott : Well, we have contracts to continue to deliver Peppa Pig. But, of course, the services we provide depends on the funding envelope provided. I am disturbed at the chair's lack of recognition of Peppa Pig. I will forward our DVDs to his office for his edification and education.

CHAIR: Mr Scott, my father and I are former pig farmers. I have seen enough pigs in my life over many decades, I can assure you. Let the Chaser photograph them.

Senator THORP: My questions go to some of the implications of the cancellation without explanation of the Australia Network contract. I understood you tried to get some hearings with the Minister for Foreign Affairs about the performance. Is that correct?

Mr Scott : The chairman of the ABC and the CEO of ABC International had a very brief meeting with the minister. She had another appointment at the time.

Senator THORP: What do you call brief?

Mr Scott : It was a 10-minute meeting or something like that. But there were, I must say, numerous discussions with her staff. There were some consultations with the Department of Foreign Affairs and Trade. I had one meeting with the secretary of the department. But, clearly, and disappointingly, I think, for the ABC, and disappointingly, I think, for the audiences of Australia Network, the decision was made to cease funding. I think some context of this is important. I appreciate that there was a difficult tender process and a quite controversial tender process, which we have discussed at this committee before. But when it was resolved and a decision was made by the government to award the ABC the carriage of Australia Network, the ABC then reached an agreement with the Department of Foreign Affairs and Trade that we would take the Australia Network funding, we would take the funding that the ABC had put into Radio Australia and we would create a converged international broadcasting model across television, radio, online and mobile and that we would target in particular the rising middle class of Asia—people who would trade with us and do business with us, people who would travel here, people who would send their students to study here, people who wanted to learn English. We also indicated that we would not only try and do this through broadcasting our content directly but we would increase the partnerships we had with other broadcasters in the region and use social networks to do that.

We were on track to deliver all our KPIs on this. We were fulfilling the strategy that we had agreed with DFAT. We still had nine years to run on the contract. But finally it was up to DFAT to decide whether they wanted to continue with the arrangement. They decided not to. They have given us notice around the cessation of that funding. They argued that they had a very small budget for public diplomacy apart from Australia Network. They wanted to use the money in another way. I am not sure whether the money actually has gone to DFAT or it has gone back to consolidated revenue. But I want to pay tribute to our staff. I think they had worked very hard to deliver on the strategy that had been agreed on. We were on track and on target. We were growing audiences. We were growing reach. We had developed some tremendous partnerships in the region. We were disappointed at the decision that was made.

Senator THORP: It is really hard to tell, going through the minister's comments on this whole issue, as to whether or not it was a decision based on the decision that the Australia Network was the inappropriate vehicle, if you like, for international diplomacy, or whether the ABC was considered inadequate to the task. From your previous answer, it sounds as though the ABC's view is that it was a decision based on whether or not it was the proper vehicle for diplomacy.

Mr Scott : If you look at the data, the potential reach for our services since July last year had grown 53 per cent. Our television reach was up 71 per cent. Our online audiences were up 112 per cent. We created a Facebook page for people who wanted to learn English—the Australia Plus Facebook page. That had 1.7 million likes on it over the last year. Facebook said to us that this was one of the largest English language sites anywhere in the world and was certainly one of the largest Facebook pages coming out of Australia. So on a whole series of criteria, we were meeting the target.

It is an interesting debate to have, I think, on where public diplomacy funding is best spent. The point that I had made—I made it to the minister prior to the election; I had also made it in speeches and the like—is if you look around the world, and if you look at the G20, you see that the G20 countries were significantly investing in international broadcasting as an arm of public diplomacy. The Lowy Institute did a report on this a couple of years ago. They said that Australia was number 16 in the G20 on expenditure on public diplomacy and that the 15 countries above us were spending multiples more than the Australian government was. And why do countries spend money on international broadcasting for public diplomacy? Because broadcasting is deeply effective in reaching out at a person-to-person level. The media has such powerful reach. I noted some of the comments that were made. The desire was to develop a social media strategy as part of Australia's public diplomacy. I would have argued that the ABC had a track record second to none on social media strategies and using social media strategies to engage with audiences. So it is a good debate to have—the role of international broadcasting for public diplomacy. We were disappointed at the decision that was made. We felt that we had been fulfilling our part of the contract. But finally it was a decision for government and a decision for the department.

Senator THORP: So the decision has not been based on the way the ABC has managed to fulfil its obligations?

Mr Scott : Well, Senator, we have reached our—

Senator Fifield: Sorry, Mr Scott. I want to interpose. Questions as to the rationale for the government's decision to conclude the contract for Australia Network are questions for government. They are questions which should be directed at the foreign affairs, defence and trade estimates committee.

CHAIR: Good point, Minister. Senator Thorp, if you could continue with ABC questions instead of foreign affairs and trade questions—

Senator THORP: Absolutely. No problem at all.

CHAIR: that would be good, thank you.

Senator THORP: When you established the Australia Network, what resources did you expend upfront to service the needs of the network over the 10-year term? How much of this is recoverable?

Mr Scott : There are a couple of things. We have a series of contracts around satellites. We have nearly 700 distribution arrangements—rebroadcasting arrangements—with broadcasters in the region. We have contractual arrangements with MediaHub for the distribution of our content out. As I think I said, with satellite, we have content deals. DFAT has allocated some money for exit costs for this. I must say that we are still in consultation with them. We are concerned at the money—

Senator THORP: Can I ask for that amount?

Mr Scott : I think it was in the budget papers. It is a little over $10 million. Partly, that is to operate the service up until September, stipulating the 90 working days notice that they had to give us. That is $4.6 million. There is around $6 million for the termination of the contracts. We are currently reviewing what we believe the cost will be for us to exit. There are consultations that are taking place with the department of foreign affairs. We are concerned that the money they have designated will not meet the requirements for us to exit the contract.

Senator THORP: It makes sense if you have a contract to set up a service and you have a leased facility, I would assume. We have already talked about satellites.

Mr Scott : There will be some of that. When leasing facilities or capabilities like satellite transmission costs, there are capital costs involved in that too.

Senator THORP: So am I right in understanding that a certain amount has been put aside in the budget to go towards covering off the costs of reneging on those contracts?

Mr Scott : Around $6 million.

Senator THORP: But it sounds to me that you have no confidence that that will be a sufficient amount?

Mr Scott : Well, we are currently reviewing it. Our initial indications are that it will not be enough. But that is a matter for consultation with the department.

Senator THORP: And if it is not enough, you have two choices, one would assume—to get extra money from DFAT to cover it or have to cut further into the ABC's core budget?

Mr Scott : We are reviewing our options. But we are hopeful. We had a contract to deliver this service for 10 years. We have rights under that contract. We have legitimate expectations of how DFAT will operate on the termination of that contract. We are pursuing our rights under that contract. There is an expectation that a fair and reasonable result will ensue if this is the decision that DFAT has made.

Senator THORP: So you will be able to demonstrate the costs that you have incurred?

Mr Scott : Absolutely.

Senator THORP: They would be around establishment bureaus, staff?

Mr Scott : Absolutely. One of the significant costs will be redundancy. The entitlements of our staff to redundancies under our industrial agreement—

CHAIR: You can seek further finance for that from the department of finance.

Mr Scott : Senator, we received correspondence from the department of foreign affairs designating two sums. One was for the termination around the contract, and the other was to operate the contract up until September, which was the minimum notice that could be given. So we will pursue that with the department of foreign affairs.

CHAIR: I believe agencies, when going through redundancies, can seek further finance from the department of finance. Is that the case with the ABC?

Mr Scott : I think our understanding is that the money that was designated in the correspondence from the department is the money that has been set aside for this. So our debate is to whether or not in fact that money is significant enough.

CHAIR: Sorry, Senator Thorp.

Senator THORP: It is all right. I will return the favour later.

CHAIR: I am sure you will.

Senator THORP: Senator Williams distracted me there for a moment. I want to make sure I am clear that, with the closure of the Australia Network, significant costs will be incurred by the ABC. There is no guarantee that the funds made available in the budget will going to cover those costs. You will hopefully negotiate with DFAT to get some more money. But there is a strong possibility that you will have to find those funds internally, leading to redundancy et cetera and further cuts to the ABC?

Mr Scott : We hope to be able to resolve it in good spirit with DFAT. But we are concerned that the money that appears to have been allocated will be insufficient for us to meet our requirements around termination of this contract nine years in advance of its termination date.

Senator THORP: Thank you. This leads me to the concerns I have about the nature of the charter under which the ABC runs. Regardless of what goes on with the funding from foreign affairs, that obligation still exists under your charter to provide international services. How on earth are you going to do it?

Mr Scott : Well, that is what we are currently looking at at the moment. You are right; in the charter there is a clear expectation around the ABC being an international broadcaster. Section 6B says that one of the functions of the corporation is to transmit to countries outside Australia, broadcasting programs of news, current affairs, entertainment and cultural enrichment that will encourage awareness of Australia and an international understanding of Australian attitudes in world affairs and enable Australians living or travelling outside Australia to obtain information about Australian affairs and Australian attitudes on world affairs. And to provide digital media services is part of the broad charter too. So I would say that this is a challenge for the ABC management and the ABC board. If you look at where we were in the first week of May to where we are now, we were operating an international broadcasting service, effectively with a budget of $35 million. Twenty million dollars or thereabouts was coming from DFAT and $15 million had been provided by the ABC, fundamentally underpinning the Radio Australia services that we have been operating for 70-plus years. Now we have an international budget of around $15 million. We have to work out what we can do to fulfil the charter within that funding envelope. That is a challenge.

Senator THORP: It is not the first one you have faced either, is it? As a Tasmanian, I am aware that there have been challenges making sure that the obligations around reflecting the regions has been problematic over time.

Mr Scott : The board, in our board papers, whenever we meet, has the key charter obligations presented. We are very conscious of that. The board is conscious of its responsibility. But it is not simply an option for the ABC to say, 'Well, we won't worry about the international broadcasting.'

Senator THORP: You cannot under your charter.

Mr Scott : The ABC board has to look at this section of the ABC Act and look at how we responsibly deliver our responsibility as an international broadcaster. This will now happen apart from DFAT. The deal we had with DFAT was to exercise an agreed strategy around international broadcasting as we both contributed money into this service. DFAT have walked away from that. The ABC board has to work out, through the appropriation that we have been given, how we will deliver our international broadcasting service.

Senator THORP: So just using ABC News 24?

Mr Scott : I do not want to prejudge that. We have been doing extensive work on it. There are complications all around. It is not simply a case of flicking a switch to News 24. There are rights issues and other issues that are involved in that. But there is no doubt that whatever we do will be very much streamlined compared to what we were able to deliver on Australia Network. I do not think we will be able to deliver the footprint that we delivered on Australia Network. We hope to keep the core services of Radio Australia and our online activities going. We are not sure what our opportunities will be in television.

Senator THORP: And this is in a global environment where, amongst the G20 countries, our expenditure was coming in at 16th. Even at 16th, it was many multiples less than what is obviously a trend?

Mr Scott : Yes. If you look at the Lowy report, you will see that over the last decade there has been a dramatic increase in the level of expenditure on international broadcasting by the G20 countries Japan, France and Germany. The United Kingdom, of course, spends 20 times what we spend through the BBC World Service and the BBC worldwide provision. Another thing I would say is that nearly all that focus has been in Asia. There is enormous growth in international broadcasting in Asia, where we have traditionally operated. So a question for the ABC board now is, through the appropriation that comes to us through the communications portfolio, how we are going to use that appropriation to deliver the international responsibilities that are entrusted to us under the ABC Act.

Senator Fifield: Chair, I will interpose. I think it is important for the record to note that the ABC's international charter obligations existed before the Australia Network contract. So that is an obligation that has existed and will exist tomorrow. It is not directly connected to the Australia Network contract, which was a contract between the Department of Foreign Affairs and Trade and the ABC for public diplomacy. It is also important to remember that Radio Australia and the ABC's online platform are available to people overseas.

Mr Scott : The only change that came to the legislation, I believe—I do not quite have the detail here—was it was included in the legislation that if Australia was to run an international broadcasting service, it was to be run by the ABC. But the senator is right; we have been running Radio Australia for more than 70 years now. When we started Radio Australia, there was no television. Life was simpler then. Now, in order to effectively communicate with the region, we need to think through our ability to deliver across a range of different platforms. That is what the board and the management team will be working through in coming weeks.

Senator THORP: This is the last question on this. You did say in your previous answer only the ABC.

Mr Scott : I do not think that is the precise point I was making.

Senator THORP: Have you had any conversations with the government that would suggest that they are seeking to amend the act to allow another service provider in?

Mr Scott : No, I have not.

Senator THORP: Thank you.

Senator Fifield: I assume that the timing of that change was under the previous government. That was the change to the ABC Act.

Senator THORP: I want to clear up whether or not there have been conversations about amending the act.

Senator URQUHART: There have been some recent reports in the tech press about ABC coverage of the NBN. I want to give you a chance to respond. Does the ABC have an editorial policy on coverage in relation to the national broadband network?

Mr Scott : No. We have no specific policy on coverage of the NBN as an issue at all. The editorial policy is that we cover all our stories. So there is no specific NBN. I can tell you that we have done lots of stories on the NBN. I am told that we have produced over 150 NBN stories across radio and television news and current affairs and online since September last year. The bulk of those current affairs stories relate to policy and governance. They are the current affairs stories. The bulk of the news stories relate to the rollout and the construction of the NBN across the country. The minister was interviewed on Lateline in April. As you know, he has turned up on Q&A on a number of different occasions. I believe that many times he has been questioned on the NBN.

Senator URQUHART: The IT website Delimiter reported last Friday, on 23 May:

This week it emerged that the ABC delayed publishing until after the federal election last year an article by Lateline co-host Emma Alberici that was sharply critical of the coalition's alternative national broadband network policy and ended up being one of the broadcaster's most popular pieces of content on the topic. The piece was entitled 'Can the Coalition's NBN keep pace with change?' It appears to have been initially written in August or early September 2013.

Is the claim correct that the content was prepared before the election but not published until after it?

Mr Scott : Let me talk broadly. I am not across the specifics. In my experience in newsrooms and news operations, many times stories are created and then they are often held because there are other more pressing news stories that have to go to air. They run when there is a window to run them. I think it is fair to say—I do not want to verbal the current minister or the previous minister, who had long carriage for NBN—but I think from time to time they have both been sharply critical of the ABC's coverage of the NBN. It is one of those issues that I think we have found hard to keep ministers happy on over time. But we just have to exercise—

Senator URQUHART: I find that really hard to believe.

Mr Scott : our judgement as we see fit. But I want to go back to where I started. There is no overarching policy or direction around coverage of NBN issues. Our editors, our executive producers and our journalists exercise their editorial judgement under the window of our editorial policies on which they operate on all stories.

Senator URQUHART: Thanks. The same online Delimiter claims that an analysis of NBN related coverage on three of the ABC's top flagship current affairs programs over the past 18 months has found that only one—and that was Lateline—covers the issue regularly or in any detail. Has this claim been investigated by the ABC?

Mr Scott : Well, it has been investigated.

Senator URQUHART: Does it have any substance?

Mr Scott : We have said that we have produced over 150 NBN stories across radio and television news and current affairs and online since September last year. It does not sound to me like we are avoiding the topic at all.

Senator URQUHART: So are you suggesting that that does not have any substance?

Mr Scott : I am not a close student of the blog or the website, but I am aware that there are people in the technology press who would like us to cover NBN issues all day every day. Our editors and producers make their editorial judgement. They have no overarching instructions in doing so.

Senator Fifield: Are you a fan of this blog, Senator Urquhart?

Senator URQUHART: Absolutely. Of course I am. I am very tech savvy—not. I am not sure that I clearly understand what you said. Why was the Alberici story held over?

Mr Scott : Well, I do not know the specifics on it. All I am saying is that it is by no means infrequent that a story is completed in newsrooms and is there ready to run but it is held for a period of time. It is usually held for a period of time because there is breaking news, there are more pressing stories or there are issues of the day that bump it out of the way.

Senator URQUHART: I ask you to take up some more detail on notice.

CHAIR: The committee will suspend for lunch until two o'clock.

Proceedings suspended from 13:00 to 14 : 00

Senator URQUHART: On 29 April, Delimiter ran a column under the headline 'ABC actively censors NBN issue on Q&A'. Minister Turnbull and Van Badham had appeared on the previous night's Q&A. Delimiter claims:

Analysis of the questions submitted to the show before the episode went to air and published online on the ABC ' s site showed that as a consequence of the two panellists ' participation, Q&A was inundated with at least many dozens of questions regarding the NBN as a topic, in both text and video form. It is unclear how many NBN-related questions in total were submitted, but it is clear that the issue was one of the most popular ones one in the pre-show questions submitted, with a list of the most recent 200 questions submitted up until yesterday midday showing some 48 mentions of the term "NBN" . A number of video questions were also submitted discussing the NBN.

So none of the questions were asked. Tony Jones explicitly shut down several discussions of the NBN which Van Badham attempted to initiate. Is this a case of the ABC consciously self-censoring?

Mr Scott : No. It is not. As I said earlier, it is live television. We do take lots of questions in. Questions come from the audience. There are questions that are sent in from home. Most of the questions are asked from the audience. A decision is made roughly of the order that they are going to run. But how many questions you can get through and what questions you get to very much depends on the evening as it flows. The suggestion that somehow we are not going to cover the NBN I think just does not stand up under scrutiny. As I said before lunch, 150 NBN stories across radio and TV news and current affairs and online since September. Mr Turnbull has been the guest on Q&A on a number of occasions. On very many of those occasions, he has been questioned about the NBN. I know that there are some technology blogs out there that are somewhat fevered around coverage of the NBN, as is their wont. That is their beat. But there are other questions. There are other matters of public importance. Q&A on that night covered those other matters. There is no greater conspiracy that is lying behind it. It was just an exercise of judgement and the flow of the live programming on the night.

Senator URQUHART: So is there any analysis that was made to references in the Twitter stream that night?

Mr Scott : I am not aware of it. When we look at the Twitter stream, we often look at the volume. But they come in in a flood. I think the number when the Treasurer was on on the Monday before last was close to 70,000 tweets in the hour. They arrive in a torrent. But often when the program is running, someone is there checking what is up on the screen. But basically the program is sent and it is a live event and judgements are being made on the floor. So I am sorry that people did not think we covered the NBN enough on that occasion. On many other occasions we have. I am sure Mr Turnbull will be back on Q&A. I am sure there will be opportunities for him to engage on the NBN again.

Senator URQUHART: I want to turn to Nick Ross. Is Nick Ross the editor of the ABC's technology and games online gateway?

Mr Scott : Yes. He is.

Senator URQUHART: Did Mr Ross publish two long articles analysing broadband policies in February 2013?

Mr Scott : He may well have. I do not have copies of them here. I am not particularly aware of them.

Senator URQUHART: Can you take that on notice?

Mr Scott : Yes.

Senator URQUHART: So do you know if this was the subject of a segment of Media Watch on 11 March 2013, which was critical of Mr Ross?

Mr Scott : Again, Senator, I will have to take that on notice.

Senator URQUHART: So at the time there were sharply different views of Mr Ross's original piece. Tech writer Rene Lemay said that Mr Ross represents fantastic value for the ABC's audience while the publisher of CommsDay Grahame Lynch said it was unbecoming of acceptable editorial standards. Media Watch said that the reports that Mr Ross had been disciplined were incorrect. Is that the case?

Mr Scott : I will have to take that on notice. This is over a year ago now. The coverage of the NBN has created some fevered commentary on all sides.

Senator URQUHART: But would you not be aware, Mr Scott, if someone was disciplined over a matter?

Mr Scott : Not necessarily. It was over a year ago. I do remember some controversy around the blog and NBN coverage, but the specifics of it are not at the top of my mind at the moment.

Senator URQUHART: You will take that on notice?

Mr Scott : Yes. I will take that on notice.

Senator URQUHART: There were no more substantial posts by Mr Ross on the NBN until 20 September. On the day after the election, he published a widely cited article that demonstrated the benefits from telehealth that would be enabled by the NBN. Was Mr Ross being prohibited on writing about the NBN before the election?

Mr Scott : No. Fundamentally, he is there to edit a website. That is his role. I will have to take that on notice.

Senator URQUHART: So you do not know whether he was prohibited?

Mr Scott : I think there has been some debate as to his role with the website. As I said earlier, we are having ongoing reviews on specialist websites. I think the ABC runs a lot of websites. I think our feeling is that we should be channelling more traffic to main websites and have more subsections of websites rather than standalone websites. So there has been some debate and discussion around those sorts of things. But on the specifics of Mr Ross, I will have to take that on notice.

Senator URQUHART: Does the ABC have any process to ensure that the organisation does not self-censor—that is, that various levels of management do not make decisions that they think are in the interests of the organisation rather than the charter?

Mr Scott : Well, that is a very big question. Finally, editorial responsibility for the ABC rests with the board and the senior management team. Editorial policy is presented. They are the expectations which our journalists need to operate under. So when you talk about self-censoring, if self-censoring is exercising editorial judgement to ensure that we adhere to our editorial guidelines, yes, we do. We exercise that editorial judgement—

Senator URQUHART: Is that how you see it?

Mr Scott : Absolutely. These editorial policies and these editorial guidelines are the rules under which our broadcasters broadcast and that we present and create content. If we did not have those editorial policies, everyone could make up their own rules and expectations. They set our standards. They set out clearly what the expectation is. Journalists, broadcasters and executive producers need to comply within those editorial policies. So, yes, there is a constant engagement of EPs and of managers and of editors to ensure that our content reaches the standards that have been set by the board to fulfil our responsibilities under the charter. So there is no, to my mind, disconnect between the responsibilities of the charter and our editors or our managers exercising editorial judgement. In a way, I think one of the interesting issues we have to deal with is that in a sense the ABC would want to host a conversation. We want to create a forum where there are a range of views and there are a range of perspectives. Our journalists and reporters can from time to time provide analysis around issues, but they are not to be opinionated in how they execute their work. They are to host the conversation. So that is where we expect our managers and our editorial teams to exercise editorial judgement.

Senator URQUHART: Thanks. The ABC seemed to be the only media outlet that did not report the Commission of Audit recommendations on the public broadcasters and the budget cuts. Is there an editorial policy of the ABC?

Mr Scott : I am not sure I understand that. I did numbers of interviews the day after the budget on the outcome for the ABC in the budget. I was on Radio National. I was on local radio. I was on News 24. I was on Australia Network talking about it. So the sense that the ABC has not covered budget decisions made around the ABC is factually incorrect.

Senator URQUHART: Thanks very much. I will pass over to Lin.

CHAIR: You have about five minutes, Senator Thorp. We can come back to you later on.

Senator THORP: I am fine.

CHAIR: Senator Ludlam has been very patient here.

Senator THORP: He has.

CHAIR: He has not even been interjecting. He has been very good.

Senator LUDLAM: Pat on the head.

CHAIR: Perhaps I spoke a bit soon.

Senator THORP: As chief executive officer, how important is staff morale in yours or any other organisation, for that matter?

Mr Scott : Well, it is very important, Senator. I have often said that the thing that really provides the ABC with its competitive advantage is its people. We have a wonderful brand and great reputation. Of course, brands can be diminished and you can lose reputation through bad judgement and bad decision-making. We have some great facilities, but others have great facilities. What we really have going for us is our people—our staff. Many of those staff could earn more money outside. They are the very best in the industry, they are very creative, and I think they work hard. So we try to create an environment where our staff can do their best work. In a sense, staff morale is very important, although to make the right decisions around the management of the organisation at times, you are going to do things that are going to challenge people and upset people. But they are the judgement calls that you need to make as the chief executive.

Senator THORP: When you have doubt or lack of certainty about an organisation's future, is it fair to say that that has a negative impact on staff morale?

Mr Scott : It is a good question, Senator. I think change is challenging for people. We know that if a division is undergoing change, if there is restructuring going on, if there is a change in staffing level, these things create uncertainty. But one of the things I have said to our staff is that if you are working in a media organisation, you are going to be undergoing a lot of change. It is going to be constant change. One of the lines I sometimes cite is from Gary Hamel, who writes quite a bit about management. He asks whether your organisation is changing as quickly as the world outside is changing. When you look at media, when you look at technology and all that is going on in the sector, that world is changing very quickly and we need to change a lot as well. So, yes, there will be change, but change can be challenging for staff and challenging for the staff's managers as well.

Senator THORP: I suppose it comes down to degree.

Mr Scott : Yes.

Senator THORP: I note that the board has had a vacancy since March.

Mr Scott : That is right.

Senator THORP: Can you tell us where that is at?

Mr Scott : Well, the board appointments are made by the government, so it is a matter for the government. But Dr Schultz left us. She was on the board for five years. Her term expired. Now we await for word from the government on filling that vacancy.

Senator THORP: Have you made inquiries?

Mr Scott : Yes. I understand—and I think this was raised in discussions with the department this morning—there is a process that needs to be gone through to fill that vacancy, including a reference panel or an advisory panel. I think there are vacancies on the advisory panel, so they need to be filled for the advisory panel to meet and do its work and for a nomination to come forward. But the ABC really has no direct involvement in the selection of board directors apart from the managing director. The managing director is appointed by the board. The other directors are appointed by the government. So we wait on word from government as to who the director will be.

Senator THORP: I appreciate that it probably does not affect the bulk of ABC staff, but does the absence of a board member have an effect on senior staff?

Mr Scott : I speak, I suppose, as a director. What you want around the table is a plurality of views and life experience and insight. Dr Schultz was a very valued member of the board. We look forward to whoever Dr Schultz’s replacement will be. But we are meeting our quorum. We have a strong board now. We look forward to news of the replacement, but finally that is a matter for government.

Senator THORP: And how are phrases being bandied about at the moment, such as a down payment on future efficiencies, affecting morale?

Mr Scott : I think it is a somewhat uncertain time. As has been well documented, there were commitments around funding security that were made. Now the language is different around down payment. But as I indicated in my statements this morning, because we do not have a sense of that scale or the time frame around that, of course it does lead to a bit of uncertainty. I would say that our staff are overwhelmingly hardworking and professional. They have work to do. There is an audience expectation around performance, and our staff are really getting on with their jobs.

Senator Fifield: Chair, it might assist the committee, for context, if I just share a previous extract from Minister Turnbull's budget night announcement—

CHAIR: Please, Minister.

Senator Fifield: where he said:

The 2014-15 Commonwealth budget includes a one per cent saving on base funding as a downpayment on back office savings identified and being considered by the government and the public broadcasters over coming months. The budget measure does not constitute an ongoing efficiency dividend on the ABC and SBS. The exact implementation of the savings arising from the measure will be determined by the boards and executives of the national broadcasters. The government is determined to repair the budget. By sharing the load, we lighten the load. The government is confident that the broadcasters can improve work practices and operate more efficiently in their day-to-day operations.

Most importantly, Chair, Mr Turnbull said:

Critically, the government expects those efficiencies can be achieved without cutting their diverse range of programs and services or affecting their editorial independence.

CHAIR: Thank you for putting that on record, Minister.

Senator THORP: I have a summary question.

CHAIR: One more before we go to Senator Ludlam.

Senator THORP: Certainly. So in summary, then, it is fair to say that despite the robustness of the people you have working in the ABC, we have a climate of uncertainty brought on by the axing of significant contracts, which mean that you cannot really say which programs are going to go on into the future. We have board vacancies that have not been filled. So despite the robustness of the people working in the ABC, the uncertainty created by the government is having a negative effect on morale?

Mr Scott : To get into some specifics, I think it is a tough time for the people who work in ABC International. I went and addressed them in both Melbourne and Sydney the day after the budget. I explained to them that we had to now rethink what our international offering would look like and that there would be redundancies but that we needed to do work and they await for us to complete that work. We will be working to complete that work in coming weeks. I think the language around down payment creates some uncertainty, of course. I do not think the staff are directly affected by the board vacancy. But we look to get on with our work, and that is what we are trying to do.

Senator Fifield: Chair, I should just add that certainty is a relative concept. I use as a comparison the commercial television networks. I will leave you to draw your own conclusions as to where there might be greater certainty or which organisation might enjoy greater certainty. I would suggest it is the ABC.

Senator URQUHART: Can you guarantee no budget cuts to the ABC next year, just like Mr Abbott did last year?

Senator Fifield: Chair, it has been announced that there will be a one per cent reduction in funding over four years. That is the budget announcement.

CHAIR: That is right. It is about $10 million a year.

Senator Fifield: Thereabouts. It is around $9 million or so.

Senator THORP: That is not including the axing of the Australia Network.

Senator Fifield: Well, as I think we have canvassed, that was a contract between the Department of Foreign Affairs and Trade and the ABC which is being concluded.

Senator THORP: Has not been honoured.

CHAIR: Minister, you know that we inherited a financial mess and something has to be done about it. Senator Ludlam, you have the call.

Senator LUDLAM: I will carry on with that line, which is probably where Senator Thorp would have been heading if there were more time. That one per cent cut plus the Australia Network axing is the so-called down payment that has been referred to earlier in the session. Are you expecting other cuts?

Senator Fifield: On a point of correction: the Australia Network decision is separate to that relating to the one per cent reduction over four years.

Senator LUDLAM: No, you have clarified that. Mr Scott has also clarified that it hits his budget. It means sacking staff and cutting production capacity, so we will consider it as a whole, although I take your advice from earlier that we can take it up in Foreign Affairs because they were responsible for that amount of money. But just to be clear, either Senator Fifield, if you want, or Mr Scott: this has been referred to so far as a down payment. Are you anticipating additional cuts?

Mr Scott : Well, the one per cent was referred to as a down payment in the minister's statement. I think the question remains, as I said this morning, a down payment of what? We do not know that yet. The Lewis review, which we discussed this morning, was commissioned to look at efficiencies across the ABC. There are some interesting areas to look at there. I welcome the commissioning of the Lewis report. I have valued my conversations with Mr Lewis, who is a broadcaster of some experience who brings some interesting insights. The critical question I think we need to look at in the context of the ABC as a whole is that if you look at our performance in recent years, we have found efficiencies. We continue to pursue efficiencies. We have found $40 million over the last five years. But we reinvested it. We reinvested it in services like iView. We reinvested it in services like News 24, a host of online apps and websites, none of which attracted additional government funding. But it was the use of that efficiency money that allowed us to create services that are used by millions of Australians every week.

I think my concern would be that, in our pursuit of further efficiencies, if that money is not kept in the public broadcaster, how do we innovate? How do we renew our services? How do we continue to meet the demands of the Australian public? Other broadcasters can innovate and attract revenue streams on the back of that. We are not in the position of attracting new revenue streams. So what we ask is not for additional funding but to be able to keep the funding envelope we have now so that we can continue to invest anew in the public broadcaster for the digital era.

Senator LUDLAM: Understood. Another revenue stream that might be available to the ABC would be if you started advertising on your various platforms. Was that canvassed in the efficiency review?

Mr Scott : No. I think it was specifically out of scope of the efficiency review. So it is a question for the department, Senator. But I believe it was not in the scope of the efficiency review.

Senator LUDLAM: I understand that the government—correct me if I am wrong, Senator Fifield—does not get to make these decisions for you. These are decisions for the board as to where these cuts come from?

Mr Scott : Yes. That is right.

Senator LUDLAM: Is the efficiency review being delivered to you or to the minister, because the minister is not going to be able to do anything about it?

Mr Scott : The minister absolutely understands—and I think it is reinforced by the department in their evidence this morning—that the ABC is an independent public broadcaster funded by government. The board members of the ABC are trustees of the organisation. They are empowered with the decision-making around the prioritisation of the ABC and how the budget is used to fulfil its charter. So finally these decisions will be made by the ABC board. The board has received a draft of this paper that Mr Lewis had input into that has come from the department. It provides advice to us. As I said this morning, I think part of the advice in it is valuable. There are other areas in it that we would want to test robustly. But fundamentally the decisions about where the ABC spends its money lie with the ABC board. But we have a funding envelope which we have to deliver the charter within.

Senator LUDLAM: So, coming to your charter, 61B, I guess, is the most relevant part; you probably know this off by heart. That is your transmission obligations to countries outside Australia broadcasting news, current affairs, entertainment and so on. There is a bit of detail there. You have just had that funding withdrawn, although obviously it will be up to the Senate to establish whether that funding line remains or not.

Mr Scott : It is a contract that we have had with DFAT. DFAT have given us notice on the termination of that contract.

Senator LUDLAM: We will follow that up later in this estimates fortnight. But I think you are fairly clear in evidence this morning that it is a charter obligation. You have to continue broadcasting to countries outside Australia. So how do you propose to do that in the absence of that contract with DFAT?

Mr Scott : Senator, as I said this morning, that is a matter under active consideration now by the ABC management and will be considered by the ABC board. At the beginning of May, we were exercising our international obligations under that aspect of the charter with $35 million. In rounding terms, $20 million goes away from the DFAT contract. We have $15 million. So now we are seeking to work out what we can do to fulfil the international obligation with that $15 million budget.

Senator LUDLAM: How much is tied up in fixed transmission costs and stuff that you cannot really trim?

Mr Scott : Well, most of those contracts can be terminated, but there are termination costs and charges involved with that. But a lot of the funding went into staffing. We do have distribution arrangements, nearly 700 of them in the region. These are arrangements that have been created over a decade or more, so we have to work out whether there is a way of still using that footprint and what kind of service we could broadcast on television over time. One of the things I suppose we are conscious of is that if you look across the G20 countries, as I have said earlier and as the Lowy report confirms, 15 of those countries are investing very heavily in international broadcasting. To the best of my knowledge, none of them are pulling out of television at this time. There might well be an argument down the track when broadband is ubiquitous and when portable devices are widely available that you could cut back on television. But none of them are doing so now. I think one of our tests is how credible you can be as an international broadcaster in this era if you do not have television as part of the suite of offerings that you are delivering.

Senator LUDLAM: I agree. You cannot even really do ubiquitous streaming of TV content in Australia given the state of the NBN, so I do not know that you are going to have much luck broadcasting in the Philippines and some of the other countries in the region.

Mr Scott : Clearly, there are some Asian capitals which have very significant broadband speeds and penetration but do not cover entire countries of the region, of course, so television is important. I would also say that a lot of our online activity has been derivative of our television presence. To say you just want to narrowly focus on online and mobile without a television platform is a lot harder; there is no doubt about that.

Senator LUDLAM: So you have not yet given up on continuing TV broadcasts into some places?

Mr Scott : It is unknown at this point. We have not come to a decision about what we are able to afford to do.

Senator LUDLAM: Is it the case, though, that the government—maybe again I need to take this conversation to the foreign affairs portfolio—does not want you broadcasting into the region? Some of the polemic surrounding this announcement was that we would rather you did not.

Senator Fifield: A lot of this material we did canvass and has been canvassed earlier in the day.

Senator LUDLAM: I have been here all day, Senator Fifield.

Senator Fifield: I am pleased for your company.

Senator LUDLAM: Aren’t we all?

Senator Fifield: But we have traversed some of this ground before. Chair, I just draw your attention to the fact that Senator Ludlam is now getting to matters which are more appropriately asked in the foreign affairs committee that go to the rationale of the government in the decision to conclude the Australia Network contract.

CHAIR: Senator Ludlam, specifically ask questions that refer to Mr Scott.

Senator LUDLAM: It is somewhat frustrating that we will not have Mr Scott sitting at the table.

CHAIR: Your clock is ticking.

Senator LUDLAM: That clock is indeed ticking on all of us. You said dozens of redundancies before, Mr Scott. Do you want to be a little more precise? How many people does this affect?

Mr Scott : It will finally depend on the model that we embrace to deliver our international services. ABC International currently employs 108 full-time and part-time staff. The Asia-Pacific News Centre, which provides content for international news, employs 43 staff. So clearly we all have an international service. We will still be fulfilling our charter. But the staffing configuration and the number of staff we can afford to keep will depend a little on the model that we decide to embrace. I said to the staff when I met with them that we are working hard to come up with a new model. I suppose it is still a couple of weeks away until we will be able to be clear on what that is.

Senator LUDLAM: A couple of weeks. In the meantime, I think you were number 45 on the Institute of Public Affairs hitlist for bowling over, so congratulations.

Senator Fifield: Not Mr Scott personally.

CHAIR: Are you talking about who is the highest paid here, Senator Ludlam?

Senator LUDLAM: And number 50 was breaking up the ABC altogether. Are you in discussions with your minister about breaking up the ABC altogether?

Mr Scott : No, I am not. The minister is a strong supporter of the ABC.

Senator Fifield: Mr Turnbull loves the ABC.

Senator LUDLAM: He loves it so much, he cut it after the government promised not to. That is tough love, really, is it not?

Senator CONROY: There is just not enough Doctor Who on the ABC.

Mr Scott : August, Senator. I will come back to that.

CHAIR: Senator Conroy, this committee was running very smoothly until you entered the room. Continue, Senator Ludlam.

Senator LUDLAM: I am keen to know the secondary impacts. So the primary impact means that that broadcasting presence into the region is degraded or possibly disappears entirely. I am interested to know how much it is going to degrade foreign affairs reporting into this country given that you lose the bureau staff. How many people?

Mr Scott : There are a few bureaus in the region where we have more than one reporter. Often the second reporter is funded by Australia Network. There have been some programs commissioned for Australia Network that have also gone out on ABC News 24. Clearly, the funding for them is no longer available. I do think that our foreign bureaus and our coverage by our foreign correspondents is vital in the Australian media landscape. If you look at what has happened with commercial media, newspapers and broadcasters, you will see that there has been a contribution in the investment in foreign reporters over time. The ABC—I say this without contradiction, I think—has more foreign reporters than the rest of the Australian media combined, certainly the rest of broadcasters combined, so we are very keen to keep that strong regional footprint. We think it really adds something to the media diet in Australia. Yes, some positions are currently funded by Australia Network, and we will need to work out how we deal with it.

Senator LUDLAM: Is it inevitable, though, that foreign affairs reporting into this country will be degraded by this decision?

Mr Scott : We will not be in a position to be able to replace the positions in foreign bureaus that have been funded by Australia Network.

Senator LUDLAM: I best just correct the record. You are 47, not 45, on the IPA hitlist as far as the Australia Network is concerned. What kind of feedback internationally have you received about the decision to have this network shut down?

Mr Scott : Well, look, as is not surprising, there has been a steady flow of correspondence from the region from people who watch the network and are engaged with the network. They are pretty surprised. I was meeting with Australians in Shanghai a week before the budget. They were business leaders there who were very surprised at any suggestion that Australia Network could be cut. These are Australian representatives of Australian industries who employ plenty of people and have a big presence in China. So I think there has been a strong expat voice. But we still are on air, of course. The real impact will not be known until Australia Network stops being on air, and that will be in September.

Senator LUDLAM: Indeed.

Senator Fifield: Chair, I just think it is important to recognise with the contract that the purpose of it was for public diplomacy in the region. It was not necessarily or particularly to provide content or reporters filing back into Australia. Its focus was external. There may have been by-products, but I think we had better come back to what the purpose of the contract was.

Senator LUDLAM: So we will call that collateral damage. I think that is what you refer to as an efficiency when you share those resources so they provide services to Australians as well. So congratulations.

Senator Fifield: I just think it is important to recognise what the purpose of the contract between the Department of Foreign Affairs and Trade and the ABC was. The fact that it may have been used to support other purposes we acknowledge, but I think it is important to recognise what the intent of the contract was.

Senator LUDLAM: That is what you would refer to as an efficiency.

Senator Fifield: The ABC, before the Australia Network, had a significant presence overseas. The ABC, before the Australia Network, had certain obligations to report foreign news into Australia. That has been the case, and I have no doubt that that will continue to be the case.

Senator PRATT: Well, how can it find those resources now that you have lumped on this extra efficiency?

CHAIR: Disregard Senator Pratt.

Senator Fifield: I just thought that context might be helpful for the committee.

CHAIR: Senator Ludlam, you have the call.

Senator LUDLAM: Thanks, Chair. I want to draw your attention to comments that Ms Bishop told ABC radio on 14 January.

CHAIR: Which Ms Bishop?

Senator LUDLAM: I beg your pardon—the foreign minister. On 14 January 2014, when she confirmed that she was reviewing the contract, she said:

It’s part of my job to ensure taxpayers' money is being used efficiently.

blah, blah, blah—

I'm concerned, given the number of complaints I've received, that while the content and program selection is obviously up to the ABC, that it's not meeting its charter and codes of practice.

Do you have any idea what complaints she was talking about? Were they raised with you?

Mr Scott : Picking up some of the lines that Senator Fifield was saying a moment ago, and as I suggested this morning, the target of Australia Network was the rising middle class of Asia—people who would do business with us, trade with us, send their kids to study here, people who wanted to learn English. These were the targets of Australia Network. Sometimes I think there was some feedback from expats or from travellers in the region who would be surprised to see children's content, for example, or English language learning. That was not the service that they were necessarily wanting. But the targets we had agreed with DFAT were really quite clear. As far as our performance on those KPIs, on those targets, about growing our audience, growing our partnership and growing the programming that we were making, we were on track and on target with those KPIs. So we were happy with our performance and we were meeting the requirements that were set with DFAT in our contract with them.

Senator LUDLAM: So does that specifically go to the numerous complaints that apparently Ms Bishop had been receiving?

Mr Scott : I think from time to time, as is the case with any broadcaster—

CHAIR: Minister?

Senator Fifield: Again, if the questions relate to Minister Bishop, they should be more appropriately in the foreign affairs, defence and trade committee.

Senator LUDLAM: It is a funding appropriation that directly affects Mr Scott in carrying out his duties. I do not think it is completely out of line. I will certainly take it up in the foreign affairs estimates because I think what is happening here is an absolute disgrace. Have you begun the process, then, of winding those contracts up? Is this a fait accompli as far as you are concerned?

Mr Scott : At 9.30 or 10 o'clock on the night of the budget, we received a letter from the department of foreign affairs giving us formal notice on the termination of the budget 90 working days from that date. So we are at work on that. That is the deadline that we are working through. We are negotiating with DFAT around the appropriate settlement of the contractual obligations that were set out in the contract.

Senator LUDLAM: Do you think maybe it is possible people were complaining about our foreign minister rather than about your coverage of foreign affairs?

Senator Fifield: It is not fair to pose that question. It is a rhetorical question.

CHAIR: I give the call to Senator Whish-Wilson.

Mr Scott : Just to make it clear, the contract was terminated for convenience. There is no suggestion at all that the ABC was in breach of its contractual obligations. We were meeting our KPIs; there is no doubt around that. The department decided to go another way on this investment. They talked about finding more money for public diplomacy and using this, as I understand it, though I think this money did not go back to the department but went into consolidated revenue. But there is no suggestion really that we were in breach of any aspect of this contract at all.

Senator LUDLAM: No. I was not trying to propose that you were. Who do you think would be best placed to increase our social media presence in the region, if that is what the alternative is? I would have thought that would be—

CHAIR: That is seeking an opinion, perhaps, but you are welcome to answer.

Mr Scott : Thank you. I would simply say that the ABC has a track record second to none in establishing viable connections with audiences using social media. Effectively over a year we got 1.7 million likes on Facebook for our Australia Plus English language learning page. And look at our track record with Triple J, local radio and Q&A. We really have been leaders around social media. I think we had great expertise to bring to bear in the region. Some of the partnerships that we were starting with Tencent, Weibo, MNC and other media organisations in the region validated that as well. I think one of the reasons they wanted to work with us is that we were a broadcaster and that we had a credible track record in these areas.

Senator LUDLAM: Finally—the chair has been very patient—who owns the brand? Who owns the Australia Network name? Are there any restrictions on carrying on your services in some form?

Mr Scott : DFAT.

Senator LUDLAM: So what is your understanding of its status?

Mr Scott : All I know is that our future international activities will not be using the branding Australia Network.

Senator LUDLAM: They will not?

Mr Scott : No.

CHAIR: Thank you, Senator Whish-Wilson.

Senator WHISH-WILSON: I have one very quick question. It may or may not relate to questions you have just been discussing around DFAT. Mr Scott, you are probably familiar with the trans-Pacific partnership agreement, a very large trade negotiation that we are in with 12 other countries. We know two contentious issues in that agreement are local media content and state owned enterprises. Have you had any input into Australia's negotiations?

Mr Scott : No. Those local content requirements are not requirements that fall on us as the public broadcaster. They have impact on the commercial broadcasters.

Senator WHISH-WILSON: And what about state owned enterprises?

Mr Scott : No. There has been no discussion or negotiation with the ABC around that at all.

CHAIR: Senator Seselja, you have been waiting here for hours, literally.

Senator SESELJA: Thank you very much, Chair. I want to come back to some questions around the defamation action from Chris Kenny. Just before I do, I want to clarify an earlier question. The chair was asking some questions about the Labor years program. I want to confirm whether Chris Uhlmann was removed from the Labor years program because Mr Rudd refused to work with him.

Mr Scott : No. Mr Uhlmann took up the appointment as the host of AM. That is a full-time job that demands all his time and attention. That was the sole reason why he was not on it.

Senator SESELJA: I go back to the Chris Kenny defamation action. Have the producers of the Hamster Decides been indemnified by the ABC?

Mr Scott : I will have to check that. There are a series of contractual relationships that go with the production of comedies like that. I will need to check that and get that.

Senator SESELJA: Would it be your expectation that they would be?

Mr Scott : Yes. I suspect so. That would be a fairly standard term in most of our contractual arrangements, because fundamentally it is the ABC that makes the decision to put these things to air. The ABC has the responsibility to approve or not approve content and so finally we wear that responsibility.

Senator SESELJA: One of the concerning things was you went out after several months and made an apology. Then, as the chair has noted, immediately the producers of Hamster Decides came out and effectively undermined that apology, some would say, by effectively saying they do not agree with the apology. That was their message, in pretty crude terms. But, however you interpret that, they were saying that they do not think you should apologise. Presumably, from what you are saying, it is likely that they have been indemnified. Are they then potentially exposing the taxpayer, through the ABC, to greater damages or a greater likelihood of findings against the ABC by going out there and publicly undermining your statement, where you apologise? You do not think that that is the case?

Mr Scott : Mr Kenny sought an apology. I am the chief executive of the ABC. I am the one who is finally responsible for that going to air. I said that I felt that the skit fell short of the quality that was demanded by an ABC audience and that we should not have put it to air. Finally, that was our decision. We should not have done it. I apologised to Mr Kenny personally and I apologised to him publicly in a way that received very, very wide and very, very comprehensive coverage.

Senator SESELJA: Sure. But does that not undermine that apology when you have the managing director of the ABC saying, 'I apologise' and then you have the producer of the program of an ABC program turning around immediately and effectively thumbing their noses at that apology?

Mr Scott : I think it frames that—and there is no surprise in this—there are significant debates that go on around the role of comics, the role of cartoonists, the role of comedian where the line is drawn, what is prohibited, and what is not prohibited. Finally, the question—as has been the case in the past—is not the content that our comedians write scripts on or even record. The question is about what we put to air. Finally, that decision was made by the ABC and it was up to the ABC to apologise. I did provide that apology in a way that everyone heard it and understood it.

Senator SESELJA: But as editor-in-chief and as managing director, when there is a producer of one of your programs going out there and effectively taking a completely different line to what you are taking on this issue, is there no control? Is there no organisational control? Is it just every person for themselves? There is one view from the managing director and is there then a whole range of other views of the ABC? Who is to know what is the ABC's view here?

Mr Scott : Well, I do not think there is any doubt what the ABC's view is because I am the managing director. I made the statement. We put it up on our website. We ran it on the corrections page. The Australian media gave it very, very comprehensive coverage. I do not think anyone is in any doubt at all. Mr Morrow is contracted to the ABC. He is not an employee of the ABC. He is a contractor who is delivering this kind of program. He had a different view. People will have different views. The final responsibility falls with the ABC. It fell with me. I made the apology, and I communicated that personally to Mr Kenny. Part of my apology was that it had taken too long for that apology to be made.

Senator SESELJA: Is this partly about silencing critics of the ABC? Chris Kenny has been an outspoken critic of the ABC. He has been an outspoken critic. I think you said in an article to the Age in October:

Chris Kenny is saying the ABC is out of control and needs to be cut back and the ABC is saying, 'If you think we're out of control, take a look at this.'

And I think there have been other comments where you have mentioned the fact that he is a critic of the ABC. Does that make it more reasonable, the fact that he is a critic of the ABC?

Mr Scott : Let us not lose sight of a few things here. Firstly, it was an attempt at a joke. It may have been misguided. It may not have been very funny. But it was an attempt at a joke. The joke was, of course, predicated around the fact that Mr Kenny had been a critic and was suggesting the ABC could be even more outrageous than the things he had been critical of. That was the attempt. If it was an attempt to silence critics of the ABC, it has been assiduously unsuccessful, I think one could suggest. There is no shortage of critics of the ABC. It certainly was not an attempt to silence critics of the ABC. It was a miscued joke that was not terribly funny that clearly caused him some offence. I apologised for that. I did not think it was particularly funny and it certainly was not very tasteful. I think we did not exercise great judgement in putting it to air. But I would not read anything more into it than that.

Senator SESELJA: There was the release of a legal letter between the ABC's lawyers and Mr Kenny. Why was that released to the media?

Mr Scott : I do not think you were in the session this morning. I urged another senator to please not take your authority on all matters relating to this matter as what you read in the newspapers, particularly one particular newspaper that covers it with great interest.

Senator SESELJA: Well, that is why we are here—to get to the facts.

Mr Scott : Well, I am delighted.

Senator SESELJA: We have got the opportunity.

Mr Scott : Let me simply say that from the time we made that apology—and in my discussion with Mr Kenny and what Mr Kenny said at the time, he said he looked to quickly resolve this matter—we have sought to resolve this matter. There have been a range of discussions and consultations around that. Those legal processes are working their way out. Many of those processes are in confidence and in camera. Others are not. Others are public. This is a standard negotiating kind of process.

Senator SESELJA: Sure. But the letter was released to the media. What is the purpose of releasing the letter to the media?

Mr Scott : No. Some negotiations in this legal process, as I understand it, Senator, take place in camera and are not for disclosure. There are other parts at other times of the negotiation where these are public documents on the public record. This is at that stage of the negotiation.

Senator SESELJA: This is an exchange of letters. Mr Kenny sees it as bullying, and it looks a little like that. I want to ask specifically this question: did the media receive it before Mr Kenny received it?

Mr Scott : I can assure you that the media did not receive it before Mr Kenny's lawyers received it.

Senator SESELJA: Well, how soon after it was sent to his lawyers was it sent to the media?

Mr Scott : I understand it was a couple of hours. I am not quite across the detail of that. But let me say that we had been dealing with Mr Kenny's lawyers. That is who our consultation was with. I need to make it clear that I cannot reveal other aspects of the negotiation with Mr Kenny's lawyers over a period of time from when we made our apology. But suffice it to say that processes were taking place, and this was a different stage of that process.

Senator SESELJA: But what is the purpose of releasing the letter to the media? I do not quite understand. What was the public purpose?

Mr Scott : I think my understanding is that there had been other negotiations that were in camera that were confidential and that this offer was not. We had moved to a different point or stage of the negotiation because we had been unable to close the negotiation to that point.

Senator SESELJA: Sure. But you are in a legal negotiation. What is the purpose of then making that letter public immediately? Why go send that to the media?

Mr Scott : All I can say is that there are confidential discussions and confidential offers and processes and there are other processes that are not confidential.

Senator SESELJA: It does not quite answer the question as to the purpose of this going public.

Mr Scott : I must say I was not aware of it. I can give you no further detail than I have now. All I know is that this offer was not an offer that was cast in terms of being confidential. We had actually gone down a road of confidential negotiation for a matter of some weeks and we were keen to bring this matter to a close.

Senator SESELJA: On another issue, the Australian has raised some concerns over time about Paul Barry as the host of Media Watch. I want to get your views on that. Obviously he has been a pretty savage critic of Rupert Murdoch and News Corporation, one of the biggest media players in Australia. He is also the guy who—

CHAIR: Rupert Murdoch is not a critic.

Senator SESELJA: Well, indeed he is.

Senator WHISH-WILSON: I am glad that someone is giving it back.

CHAIR: Order!

Senator SESELJA: I am not quite sure what the point is, Senator Whish-Wilson, but I will move on with it. So you have this pretty large critic of one media organisation. The concerns that have been expressed by the Australian is that he is hosting a taxpayer funded program that is about keeping the media honest. It is about not just saying, 'Well, we'll keep News Corp honest or Fairfax or any of them.' It is all media, including the ABC. Do you see a problem with the fact that we have someone who does seem to have a very strong interest in News Corp and in Rupert Murdoch and in being a very high-profile critic of that organisation also being seen as the umpire, because that is effectively what Media Watch sets itself up as? It is the umpire. It is the umpire that is meant to look dispassionately at how the media operates. Do you see any sort of conflict there?

Mr Scott : Well, I think we need to look at it in context. Mr Barry is a very experienced journalist. Usually it has been experienced journalists who are the host of Media Watch. He has an added advantage, though. He has a track record as a media critic—a critic around media behaviour and performance. He has written two bestselling books about the Australian media—one on Rupert Murdoch and one on Kerry Packer. So he brings some expertise and insight to that role. The focus, of course, of his book Breaking News: Sex, Lies and the Murdoch Succession overwhelmingly was on the phone hacking scandal. If anyone wants to run a defence of the behaviour of News Corporation around that issue, I would like to hear it. It was clearly a very important media issue. He wrote a forensic, detailed and important book on that matter. So he brings expertise to the table.

The real test, Senator, is whether, in exercising media criticism, Mr Barry is fair and dispassionate. I think he passes all those tests. Yes, he is tough on News Corporation, but he is also tough on the ABC. He was very critical of the ABC on the Chris Kenny matter that you just questioned us on. He has been critical of the ABC on numerous occasions and critical of other broadcasters as well. This is what a Media Watch host does. The other fact that we need to bring into perspective is: will a Media Watch host focus on News Corporation? Well, you could expect that they might. News Corporation represents 70 per cent of the newspapers sold in this country. They represent a 50 per cent share of the monopoly pay television service in this country. There is speculation that they may take an ownership position of Channel Ten. Of course there is a focus on News Corporation. But there is a focus on other media corporations as well and the ABC.

CHAIR: Mr Scott, we are really getting short of time. I am sure you have answered the question.

Senator SESELJA: I will just put another. The Australian's editorial touches on this. It points to analysis by iSentia reviewing Mr Barry's Twitter feed. It found more than half his tweets in that month—38 out of 54—related to News Corp and were frequently hostile.

Mr Scott : But many of those tweets, I think, might be referencing, firstly, the phone hacking trial, which he wrote a book about, which is currently underway in the UK, and updating people around that. But also look at the performance of News Corporation's newspapers in Australia—the editorial positions taken by the Daily Telegraphand editorial positions taken by the Australian. Of course for a media critic they are newsworthy, they are interesting and they are worthy of coverage. And it does not surprise me that a focus of Media Watch will be News Corporation. But it is also on the performance of the ABC, on the performance of Fairfax, on the performance of Channel Ten. He does the job that he is employed to do.

Senator SESELJA: Do you think that some of his criticism is perhaps stronger than it might otherwise be? There has been a lot of commentary from, let us say, conservatives in the media—someone like Gerard Henderson and others—who say when it comes to, say, a Media Watch host, they would say that there has never been a Media Watch host who would be considered a conservative?

Mr Scott : Well, I just reference Mr Barry's own comments on Media Watch. Perhaps you did not see them. In facing some of that criticism—

Senator SESELJA: I did.

Mr Scott : he indicated that he voted for the coalition at the last election. So Mr Henderson's remarkable insight into the voting habits of every Media Watch host at every election for the last 20 plus years is a level of prescience that alone exists with him.

Senator SESELJA: Well, I do not think it is just Gerard Henderson, to be fair. I think that is a bit dismissive of the issue.

Mr Scott : Well, he was the one you referenced. He is the one I responded to.

Senator SESELJA: I referenced him, and he has been high profile, but there would be many others who would draw that conclusion.

Mr Scott : But let me say that Mr Barry has the complete support of the ABC management.

Senator WHISH-WILSON: Chair, I raise a point of order.

CHAIR: Order! A point of order, Senator Whish-Wilson.

Senator WHISH-WILSON: Senator Seselja is using this committee to be an umpire of the umpire. It is not what we are supposed to be here to do.

CHAIR: There is no point of order. Continue, Mr Scott.

Mr Scott : I simply say that I think Mr Barry does a good job. The host of Media Watch has always been a position that has generated some criticism. Nobody likes being criticised on Media Watch. I do not always like it when Mr Barry criticises the performance of the ABC. That is the job that he is employed to do. I believe he is very well qualified to do it. I believe he is executing that role in a fair and dispassionate way. Some people do not like his criticism—well, people do not like criticism—but I think he is doing a good job.

Senator SESELJA: So you would, I guess, dispute the view—it is not just about Media Watch; it is about more broadly the flagship programs, be it Q&A or Lateline—that we have not seen someone who would be obviously a conservative hosting any of those programs?

Mr Scott : You have to understand, Senator. Let us look at what we ask our journalists to do. We do not run a network like Fox News or even what Sky does now, where they deliberately put people up who are strongly identified with one side of politics or another. What we do is we put up journalists in these key roles. We ask them to host a conversation with a range of views and perspectives that come to bear. I do not agree, and I have not agreed, with the analysis of Mr Henderson or others who seem to want to put a label or a badge on everyone. The test is not how people vote. The test is how they do their job. Can they exercise that responsibility as a journalist with fairness, balance and impartiality? If there are some specifics of where they have not, then we have independent review mechanisms that can check that. If people are unhappy with that outcome, they can go outside the ABC to ACMA to have that assessed. But to simply put labels on people—

CHAIR: Mr Scott, please stop. You have made your point. Time is running out. I am going to go to Senator Ruston. I am going to ask her to be brief with the questions. I want you to be brief with your answers, please.

Mr Scott : I will see if I can.

Senator RUSTON: I will now move back to the discussion in relation to the budget and efficiencies and the efficiency report. We have had a lot of discussion today about the efficiency dividends and the back-of-house savings that you have achieved and what happens to them in terms of going back into the organisation. My question to you is: given that the government has made it very clear that we have some debt and deficit issues and that we need to reduce the level of debt and deficit, do you believe that the ABC should be quarantined from participating in playing its role in providing these efficiency dividends back to government instead of back into your organisation?

Mr Scott : Well, what is my expectation of what should be the case? I have been partly guided by the comments that were made by the government before the election and after the election about funding for the ABC. But I do think that we are in a somewhat different situation. We are in a different situation, and our structure reflects that. Why are we not a government department? We are an independent broadcaster. We operate in a highly competitive environment. We operate against some of the most commercial organisations. So the question for us is—

Senator RUSTON: Do you believe that you should be quarantined as an organisation from providing your contribution to the very clearly stated position of the government that we had to deal with a debt and deficit issue? Every other department and every other agency has been requested to lift its weight and yet the discussion today has been almost solely targeted to the fact that for your efficiency dividends, which you have in the past been able to reinvest back into front-end services, that is not going to be the case anymore. I may be verballing you, but it sounds awfully like you think that you should be quarantined from having any contribution to this because you think that your savings should be reinvested back into your organisation.

Mr Scott : Let me frame it this way. Finally, the funding level of the ABC is a matter for government, not a matter for the public broadcaster. An appropriation is made to us and we will spend that appropriation. So the question is not for the ABC. The question is for the government. Does the government believe that the ABC should be relevant and compelling and that we should be investing in new content and finding new ways to invest with audiences—

Senator RUSTON: Efficiently.

Mr Scott : Efficiently? Absolutely, Senator. And so what I have demonstrated today is that when we have found efficiencies, we have an excellent track record of investing them in ways that attract millions of Australians to our content each week. I was concerned at a comment you made before I appeared here this morning, when you said you did not believe that we were interested in efficiencies or that we did not believe there were efficiencies. What I have repeatedly said is that we have found efficiencies and we will continue to pursue efficiencies. I think there is a compelling argument about us being able to invest those efficiencies in the future of a public broadcaster that has very strong support from the Australian people. But fundamentally how much of those efficiencies we can retain and what our appropriation is is not a question for the ABC. It never has been. It is a question for government.

Senator RUSTON: Not at all. Not at all, Mr Scott, but it has been the subject of many comments over the last three hours by you in discussion with senators on my right that you are making a judgement about the investment of those back into your organisation. I am not going to argue the point. I have made the point and you have provided your answer and I am happy to move on. Could you let me know what happens if the ABC does not meet a budget KPI via a program or budget outcome?

Mr Scott : In my time here, I cannot remember us not meeting a budget KPI. We have always delivered within budget. Finally, the responsibility of delivering within budget is a responsibility of the board.

CHAIR: Mr Scott, the question is what happens if you do not. I am getting frustrated at the time that is going by with answers. The specific question is: what happens if you cannot meet it?

Mr Scott : Well, finally it is a matter for the ABC board.

Senator RUSTON: When was the last time you did not meet one? You are saying it has not occurred in your time. Maybe Mr Pendleton might remember.

Mr Pendleton : Off the top of my head, I cannot think of a budget KPI that we have not achieved. But I would have to check.

Senator RUSTON: That is great. That is fantastic. Obviously, Mr Scott, you have the efficiency study?

Mr Scott : I have a draft.

Senator RUSTON: The draft of the efficiency study. When does that go before your board?

Mr Scott : A copy has been sent to the chairman of the board. The board will consider it at its next board meeting in June. Then, I understand, there might be some discussions with the minister about it.

Senator RUSTON: So in terms of that efficiency study, I am interested that there has been additional money allocated—$79.4 million—in 2013 for enhanced news services and enhanced current affairs programming. Can you let us know what has happened to that money? Has it all been allocated?

Mr Scott : Yes, it has been. We have established new units. We have employed more reporters. We have put more facilities into the regions. We have invested in technology. We have expanded our current affairs programs. I am able to provide you with more detail on that on notice if you would like.

Senator RUSTON: That would be great. I would be interested in the number of staff and what the ongoing cost of those salaries are now and over the next five years.

Mr Scott : Sure.

Senator RUSTON: Can we assume that, in terms of setting up the increase in current affairs programming, a lot of the money that has been spent to date would have actually been spent setting up these new services? Have you purchased new equipment and the like?

Mr Scott : Certainly one of our commitments was to increase the ability to bring stories in from regional centres. We have actually kitted out 18 locations around the country with new staff and gear or facilities to allow us to bring stories in. So there has been some capital upfront. But most of the cost or expenditure is around staff—specialist reporters, a national reporting team and a range of other units that we have employed. So we have employed people, and that was part of the undertaking that we gave.

Senator RUSTON: What I want in not a lot of detail from one of you is how much of that is one-off capital expenditures and how much would be in the staffing and the ongoing recurrent costing.

Mr Scott : We can give you that detail. But in the appropriation that was given, there was recognition that there was some capital cost upfront of about $1.8 million. Now the rest of it is recurrent. But we can give you a breakdown of that.

Senator RUSTON: I want you to tell me or take on notice what steps have been taken to ensure the board is complying with section 8(1) of the ABC's act, which I will read out to you:

…   …   …

(c) to ensure that the functions of the corporation are performed efficiently and with the maximum benefit to the Australian people.

Mr Scott : The key elements of the charter are put in the board papers at every meeting. We have finance committee meetings. We have audit and risk committee meetings. We review our editorial policies. The focus of all the board's activities is around fulfilment of its charter obligations. As a director, I can tell you that with my fellow directors we take those responsibilities very seriously.

Senator RUSTON: Have you conducted in recent times any reviews in the non-programming areas in relation to this obligation?

Mr Scott : Well, we have. A couple of years ago, we did a support services review. We had a consultancy firm engaged in that. It reported back to the board on its findings on what we were doing on those recommendations. But regularly our finance committee of the board will take a look at one division or other and do quite a deep dive into their finances—their level of expenditure, their KPIs—and what it is that we are trying to achieve. We have an audit and risk committee of the board. We have a finance committee of the board. This is a real focus of their activities.

Senator RUSTON: Is it possible to release the findings of this review that you are referring to that you said you undertook a couple of years ago?

Mr Scott : There are a few. The main one that was done was the KPMG review, which I believe is sealed by the previous Howard government and is not available. In my experience, that has been the most valuable review that has been done. As to other material, I will take that on notice and see what the status of those reviews are.

Senator XENOPHON: Is that still sealed, that review?

Mr Scott : Yes, it is.

Senator XENOPHON: How many years?

Mr Scott : Since 2007. But it has held up very well over time. I was reviewing it the other day myself.

Senator XENOPHON: But you cannot tell us about it?

Mr Scott : I cannot tell you about it.

Senator RUSTON: I will move on to your preparations, particularly in relation to the one per cent budget cut that we have just had. Bear in mind that it was no secret coming into the election that if there was a change of government, the budget was going to be something that was strongly focused on.

Senator THORP: Is that the same bloke that gave us the promises?

Senator RUSTON: I do not think I interjected once when you were speaking. A one per cent cut is in substance what you have had here. We will not go into the Australia Network because we have already debated that ad nauseam. I would have thought that you would have perhaps expected a larger cut than one per cent. Would that be fair?

Mr Scott : You put me in a difficult position. I can read speculation in the newspaper. I can look at clear commitments made before or after the election. You talk about a one per cent cut. I am looking at a $120 million cut over four years. I simply cannot quarantine the Australia Network decision from the rest of it. It is going to mean redundancies. It is going to mean jobs to go. It is going to mean jobs to go in content areas. So we—

CHAIR: Mr Scott, I want to clarify something. Senator Ruston asked you to exclude the Australia Network. Excluding that, you are not looking at a $120 million cut over four years, are you?

Mr Scott : No. But—

CHAIR: Hear me out. You are looking at about $43 million. Is that correct?

Mr Scott : Yes. That is about right.

CHAIR: So that is the issue that Senator Ruston is speaking about.

Mr Scott : Yes.

CHAIR: She asked you to sideline the Australia Network. Continue, please.

Mr Scott : We will look to manage that one per cent cut. We will look to manage it in a way of finding efficiencies and delivering those efficiencies. Every year the appropriation that we get is less than CPI, so we have a long habit of finding efficiencies and using those efficiencies as we can to meet our budget requirements. That is what we will be doing again this year.

Senator RUSTON: So—

Senator WHISH-WILSON: Mr Scott might have been surprised, like lots of Australians, on a promise before an election that has now been broken.

CHAIR: Continue, Senator Ruston.

Senator McKENZIE: Thank you for the comment.

Senator RUSTON: When we were at the estimates last time, we were having a discussion about apologies and putting corrections. At the time, you told me that you were going to have a place on your ABC website where corrections and apologies were able to be printed.

Mr Scott : Yes, published.

Senator RUSTON: Published, yes. How is that progressing?

Mr Scott : The page—www.abc.net.au/news/corrections—was launched in April. What it really means is we used to have corrections that would appear on different program websites and social websites. It is now there in one place.

Senator RUSTON: In terms of your information and the research you do, do people who read online, people who watch the television and people who listen to your radio and all the other myriad of services that the ABC provides all go to your website?

Mr Scott : No, they do not. I think we discussed this previously. My background is in newspapers. One of the advantages of newspapers is often the person who buys the paper one day buys it the next and they—

Senator RUSTON: Absolutely.

Mr Scott : know often that corrections will be found in the one place. That is not the case with broadcasting as much. People bounce in and out around program to program. We are trying to educate our audience where to find these corrections. Often the corrections will be in more than one place.

CHAIR: Senator Ruston has one last question. Then there is Senator Xenophon.

Senator RUSTON: I go back to the comments in the media following the budget announcement. You went on to the Australia Network channel and made some negative comments about the cessation of the contract for Australia. I direct this question first to Mr Millett. When you were asked as to whether you thought it was appropriate for your managing director to be on a soft diplomacy network making derogatory comments about a decision of government, you responded: 'You can ask the minister.'

Mr Millett : Yes. I recall the comment. The question was asked of me what I thought of it. I said, 'Well, it is probably a question better directed to the minister for her comment.' I did not see anything wrong in the MD doing anything.

Mr Scott : Let us be clear about what we have always said on Australia Network and the public diplomacy role of that. It allows the debate to happen. Nobody expects that that network is the mouthpiece of government or just chants government lines. This is a contentious public policy decision.

Senator RUSTON: I get that, Mr Scott. I was actually speaking to Mr Millett. I do get that. What I am saying is that there is a specific purpose for this network. The network obviously is to present Australia to our neighbours in a favourable light. Just because you did not like a budget cut to your agency, do you think it was an appropriate medium with which to voice your concerns?

Mr Scott : There are a couple of things on it. The people who are directly affected by this decision—who are going to have the network shut down—are the people watching that network, so to explain the context and the background was not unreasonable. If the minister had wanted to go on that network and defend the decision that she made, I am sure they would have also welcomed that. That is what it is about. It is about allowing debates and a range of views to be heard. If I follow your logic, Minister—Senator, are you saying—

Senator RUSTON: Thank you for the promotion.

Mr Scott : It is only a matter of time. Only my timing is wrong. If you follow your logic, are you saying that we should never let anyone on Australia Network be critical of decisions that have been made?

Senator RUSTON: No. I am not saying that at all.

Mr Scott : Then what is the logic of your question?

Senator RUSTON: No. I am not saying that at all. I am just asking you whether you believe that it was an appropriate forum given the purpose of the network. You just basically went on there and had a whinge about it.

Mr Scott : No. I did not. I explained the background to the decision. I explained the approach that we had made in running Australia Network. I explained the reasons that had been given for the termination of that contract. I said that, as the CEO of the organisation that had been delivering that contract, I was disappointed by that. I did not think it was consistent with what had been happening globally around international broadcasting. Fair-minded commentary.

CHAIR: Okay. You have made the point, Mr Scott. You have made the point. Senator Xenophon, you have the call for five minutes.

Senator XENOPHON: You are very generous, Chair. I will go to the issue of a number of new programs and platforms that have been established over the past 10 years, particularly News 24. All of these are national and are based in Sydney. Is that right? Most are based in Sydney?

Mr Scott : A lot of the children's programming comes out of Melbourne. The five o'clock news program comes out of Perth. We try to use different facilities we have in different time zones as well.

Senator XENOPHON: The question I have relates to access. What access does the ABC provide state bureaus for platforms like News 24? Do you know what I am going on about? It is the issue of whether there is a perception that the ABC, despite the tremendous coverage and the valuable service it provides, does have a particular bias towards the east, particularly Sydney and Melbourne?

Mr Scott : It is an important question, Senator, and one that we are conscious of. I suppose there are a couple of answers. I would say that there is news some weeks more than others. This week in particular, news out of South Australia finds a national audience.

Senator XENOPHON: It is not often that you have a former Liberal leader that defaults to Labor.

Mr Scott : I was not going to go into specifics. More news comes from states outside Sydney and Melbourne and finds a national audience because of News 24. So our newsrooms are really quite busy feeding that News 24 diet. Some of our newsrooms, like the newsroom here at the ACT, have created special programs that have gone out on ABC News 24. When it comes to local production, I think it is important to look not just at the production the ABC is making but the production that we are stimulating and work with the independent production sector. This is something that I am increasingly happy to report on. It is not just programs that we are making in-house but us using our children’s commissioning money, our drama commissioning money and our documentary money. We are commissioning and working with the independent production sector to make programming all around the country.

Senator XENOPHON: There was that Senate inquiry a few years ago—

Mr Scott : There was.

Senator XENOPHON: in respect to that, which I think canvassed that reasonably well. I am not sure Senator Ruston, or Minister Ruston, raised these issues.

CHAIR: But she has bolted, gone in a blue car.

Senator XENOPHON: She has bolted. Motored to glory. What impact will the budget cuts have on state funding in terms of news and current affairs and local content?

Mr Scott : At the moment, we are still pulling our budget together. We are going to try to find the one per cent through efficiencies as best we can. The unknown thing that we have discussed this morning is that the one per cent was described as a down payment. A down payment on what, we do not know. Depending on the scale of any budget cut, if we are not allowed to keep efficiencies and reinvest them in the organisation, we really just do not know. One of the issues that is relevant for Australia Network, though, is that we do have a production team for Australia Network that works in South Australia that has worked on language and other kind of programming. So that is a question that we are going to have to look at too in light of the cut.

Senator XENOPHON: I suppose the Australia Network is a separate issue altogether. I was talking to Senator Whish-Wilson. Will there be Australian content going into Asia, or is that it? I am trying to understand.

Mr Scott : We are just trying to work through how we fulfil our charter now. We do have these partnerships. The ABC has partnerships with some international broadcasters. There should be some opportunities for us to get some material out there. But precisely what it looks like and the scale of it, we do not know.

Senator XENOPHON: But there will not be a dedicated standalone Australian—

Mr Scott : We are still trying to work it out. There will not be the Australia Network as we have done it, ranging all the way from far across the Pacific to India. We will not have that.

Senator XENOPHON: Putting it simplistically, just as people now will go on the channel that was the Australia Network, if they switch on that channel, will they just be getting a test pattern, or will they actually get some content?

Mr Scott : We do not know yet. We are still working to see what we can do. But the budget—

Senator XENOPHON: Will you just be bringing in News 24?

Mr Scott : If we did keep a television network alive in some form, it would have far less programming created for the region in the way the Australia Network did and far more Australian content that is being broadcast into the region.

Senator XENOPHON: So we do not know at this stage whether the channel that people have been switching on to in the Australia Network will continue to exist or whether it will just be—

Mr Scott : Well, it will not be called Australia Network.

Senator XENOPHON: We know that.

Mr Scott : We would not have the distribution footprint, and the content would be quite different, if we can keep a television service alive.

Senator XENOPHON: And you say that the budget cuts do not allow you to do that?

Mr Scott : We are saying that we are still trying to work that through. But the budget we have for international is now more like $15 million rather than $35 million.

Senator XENOPHON: What does China spend?

Mr Scott : Several billion, we think. A massive expansion. The big international broadcasters—China, UK, France, Germany, Italy, Japan, even Singapore—are spending double what Australia is spending on international broadcasting. That was before our recent cut.

Senator XENOPHON: Singapore has about a quarter of our population.

Mr Scott : Yes. They channel News Asia as their big investment in the region.

Senator XENOPHON: Sure. I want to go back to state funding, particularly in my home state of South Australia. What assurances can you give that, in the context of budget cuts, South Australia will not be disproportionately affected, particularly in relation to local news and current affairs?

Mr Scott : As we look ahead, as I have said in answers to numerous questions this morning, the precise shape of the ABC depends on the funding envelope we operate under. We know we value greatly local news and local radio as being very important in state capitals and in regional areas. But precisely what we can afford to deliver depends on how much money we have and how the board decides we can manage and prioritise that budget. There has been a lot of discussion around efficiencies. There is no doubt that if you continue to drive efficiencies, you continue to drive centralisation. That centralisation and efficiency almost seem to go hand in hand. So part of our tension is how you deliver strong localism, strong engagement with local communities, and make programming everywhere while still trying to be as efficient as you can be.

CHAIR: This is your final question, Senator Xenophon.

Senator XENOPHON: You are very cruel, Chair. I will bundle two in one, if you do not mind.

CHAIR: You would be very good at that.

Senator XENOPHON: So what you are saying is that local content is more likely to suffer than not in respect to that?

Mr Scott : I am saying that if in fact your sole criteria is to lower your cost base as much as you can, there is an inevitable force that comes on that back around centralisation. There are other activities we are driving to try to increase local content. You will see a rollout of new local flavour for news online shortly. We are continuing to try and drive our investment in local news. But finally, depending on the budget environment we are operating in, what you can afford to do locally is a question that will be under continuing pressure.

Senator XENOPHON: Finally, supplementary to this, Chair—

CHAIR: Can you not count, Senator Xenophon? Continue quickly.

Senator XENOPHON: No, I cannot count.

CHAIR: Continue quickly.

Senator XENOPHON: I have raised this issue previously. In South Australia, on ABC local radio, on 891, from 11.00 to 12.00—

Mr Scott : Boy, it rates. The ratings have ever increased. When it lands in markets, there are sometimes some questions about it. Then people listen. When they listen, they love it.

Senator XENOPHON: But the counterfactual is we do not know what it is like if we do not—

Mr Scott : Well, we do because we went for many years without it. It is by far the number one rating podcast that we have. It has massive podcasting numbers and increased ratings. Have you ever been on it, Senator?

Senator XENOPHON: I have. But, thankfully, it was not broadcast into South Australia.

Mr Scott : I am sure we can podcast it.

CHAIR: Senator McKenzie, you have the call.

Senator McKENZIE: Thank you so much, Chair. Good to see you again, Mr Scott. I want to follow up on the efficiency dividend conversation. I note in your annual report on page 30 that 86 per cent of people value the ABC and its services to the community. I know that regional Australia particularly has a strong and abiding affection for the service provided by the ABC, particularly local radio. You have made statements yourself about local radio being so valuable. I would disagree with your assertion, though, that efficiency dividends result in greater centralisation, particularly in light of previous evidence before this committee over a number of years about the role of technology allowing the ABC to expand its service operation without a subsequent increase in budgetary matters. Could you explain?

Mr Scott : I will take television as an example for you. Look at the history of the ABC. If you go back about 25 or 30 years—I think there are even some graphs in this—we had about 2,000 more people and $200 million plus extra in real terms. One of the things we ran was big television studios in every state and territory capital. That was partly a legacy of our history, where, before coaxial cables, satellites and the like, local television was done in local capital cities. Now, of course, the most efficient way you can run a studio is to keep it full all day every day. That is the efficient model. Rather than having studios suboptimised around the country, the studio is full and operating. So that is an example of how centralisation reduces cost but keeps the same level of output. Of course, we value the opportunities that technology allows us to bring stories in and to be able to tell those stories around the country. We value the local footprint that we have. But all recommendations around how to make the ABC more purely efficient, if that is the only window you are looking at, are based around centralisation. Even in local radio, should you have fewer local radio centres and should they cover a bigger footprint? That would save you money, but it may not be in the best interests of the organisation.

Senator McKENZIE: Thank you, Mr Scott. Going on to footprints, I want to go to a question on notice—question on notice 12. We discussed at last estimates the tendency of ABC local stations to collapse because of staffing issues. I think you refer to it as increasing our footprint. So in ABC central Victoria, for instance, if the producer goes down, we end up incorporating and going to ABC western Victoria. In your answer to me, you said, 'Well, this is used because of the high cost of backfilling staff, especially in regional areas.' Is that correct?

Mr Scott : That is right. I cannot find the answer here, but that is what I said, I am sure.

Senator McKENZIE: So the high cost of backfilling staff is one of the reasons why that typically happened. I then went on to ask how often that has happened in any given calendar year or period of time, which you decided to take on notice. However, you did take that on notice. The answer is that the ABC does not keep a central record used. Compiling this data would represent an unreasonable diversion of resources. If we are talking about staffing structures that apparently are a high cost in a time when we are seeking savings and efficiencies so that we can reinvest in the great work that the ABC is doing in regional Australia, it seems odd to me, when we are actually looking at the management of costs, that you would not have a central record.

Mr Scott : I accept that.

Senator McKENZIE: Sorry, Mr Scott, but worse than you not having the central record whilst claiming it is a high cost, actually getting the record together would represent an unreasonable diversion of resources. It might actually allow you to find some additional resources if you analyse that data on staffing structures in regional and local radio.

Mr Scott : There is merit in that. One of the things that we are looking at is where we need to invest more in systems that would make efficient operation work better. I think it would be valuable to have that information available at our fingertips, as it is now. To collect that data would require engagement with people at 60 different local radio stations going back to records on the like. We have been doing some work on this at the time. Where can we automate? Where can we invest?

Senator McKENZIE: Just reinvesting in the systems that would allow this sort of resource identification, if you like, and diversions. What sort of work has the ABC been doing over the last 12 months with respect to identifying those opportunities?

Mr Scott : We have been doing more work on it, particularly when it comes to efficiency around support services and where we could invest in systems that would make us more efficient and realise savings for reinvestment. So that is ongoing work. I think it is a theme. We are somewhat capital constrained. Go back to that KPMG report that we talked about some years ago. KPMG said that, by now, the ABC would be requiring an extra $30 million of capital a year to maintain our activities as a digital broadcaster. We now have a significant capital backlog, so the focus on capital often is around staying in business content areas rather than back office administrative areas, even though there would be savings on that. So that is a tension that we manage, and it is a point well made.

Senator McKENZIE: Thank you very much. I would like to go to a table from theaustralian.com.au on 27 May 2014, which lists some high-profile stars of the ABC in addition to obviously corporate areas et cetera and the salary structure. I have not been able to tabulate that table and get a total. I am wondering what one per cent of that table might actually represent in dollar terms.

Mr Scott : I do not have it.

Senator McKENZIE: Could you take that on notice, please, Mr Scott?

Mr Scott : Yes, we can.

Senator McKENZIE: Thank you. Just in recognition of time, on notice, can you provide what proportion of the ABC budget goes to the new initiatives that you have highlighted? As we move forward into the digital world, with ABC Open, ABC 24 and the digital media that you have been so prolific in, what proportion of the budget goes to those areas? I want to go to the process of how the ABC sets its global budget. Could you very quickly outline what that looks like?

Mr Scott : It is a process that we really run through the first half of every year, normally under a tri funding. We are currently in tri funding now. We know how much money we are going to get. Then we look at what inflation is built into our system through contracts and employment agreements and the like. Then we look at areas that we need to invest in and that are priorities for us. Then we try to manage that back and fill that gap. Where we make savings, we will find areas of investment. As I said, each year we need to find efficiency savings because the indexation that we have—WACI 6, the weighted average cost index, whatever it is—is always below CPI and always below media inflation.

Senator McKENZIE: Correct. Absolutely. So you say first half. We are now in May. So the prebudget proposals have been developed?

Mr Scott : For this year. Yes, we are currently working through our budget processes, and these will be matters that will be considered by the board at the next meeting.

Senator McKENZIE: So in your role as managing director of the ABC, you will take those recommendations and that budget to the board. In terms of the one per cent efficiency saving, I am interested to hear how regional local radio will fare within that proposal.

Mr Scott : The budget has to be approved by the board. That matter is currently being developed for the board. Once the board has made its determinations around these matters, I will be able to brief you further.

Senator McKENZIE: What role does the government have in you setting the budget priorities for the ABC?

Mr Scott : As I have said, the budget envelope is provided by government, but the powers around working and how that charter is fulfilled and where that money is spent and those decisions are made by the ABC within the budget envelope that is provided.

Senator McKENZIE: This is the last question. I go to your annual report and the section on radio. I note that we sing the praises of Triple J. We sing the praises of Radio National, Classic FM, News Radio and digital mobile online. Thank you for the app. I use it often. Nowhere in that space is local radio. For the majority of Australians who do back the ABC, who are in regional areas, it is sadly lacking.

Mr Scott : I do not have a copy of the report here. I think we overwhelmingly sing the praises of local radio. I have often described them as the spine that we do not see.

Senator McKENZIE: Well, I hope your budget also sings the praises of regional and local radio.

Mr Scott : I just hope that our budget envelope is one that allows us to continue to be able to invest in the renewal of local radio. It is the lifeblood of what we do. It is a very important connection for millions of Australians every day.

CHAIR: Senator McKenzie, are you finished?

Senator McKENZIE: There will be questions on notice.

Senator BUSHBY: I have a couple of questions about the ABC fact checker. How are topics selected for that?

Mr Scott : It is selected the same way that any story is developed by ABC teams—by the editorial team that is responsible.

Senator BUSHBY: So it is a subjective choice by editorial teams?

Mr Scott : Well, subjective choices are made by our news teams every day when they decide what stories they are going to create and what stories they are going to cover.

Senator BUSHBY: That is fine. I have some questions about the facts check which was published on 26 March regarding a statement made by the Prime Minister on 4 March to the forest works dinner. Do you know which one I am talking about?

Mr Scott : No. I do not.

Senator BUSHBY: It regarded attempts by the government to have part of the boundary adjustment on the Tasmanian World Heritage undertaken. So you are not aware of that?

Mr Scott : I do not have a copy here, Senator. But I am happy to take on notice any questions you have about it.

Senator BUSHBY: I am interested in knowing who made the decision to initiate that Fact Check topic. What was the cost of the investigation? I am interested in knowing the resources that were applied within the ABC and whether there was any cost for the external experts or the so-called independent experts. I would like to know why the fact check was initially published without any government input. It was noted initially when it was first put up that there were comments sought by the government but none received, and yet they went ahead to publish the fact check without any input from the government. I wonder what the sense of urgency was.

Mr Scott : This is a matter of journalism. Quite regularly, if you listen to AM or PM, you will hear that contact was sought but a response was not made.

Senator BUSHBY: There is a difference between running a story and actually coming to a conclusion that a fact is correct or not and the statement is a fact and whether it checks out or not. There is, I would have thought, a higher standard required to actually check the facts.

Mr Scott : I will take it on notice about this process, Senator.

Senator BUSHBY: I am also interested in what assessment was conducted of the independence of the experts that were quoted in the conclusions. Take that on notice as that stands. What effort did the ABC take to check the facts that were presented by the experts in their conclusion, especially given that the experts that were engaged by the ABC were in effect asked to check the veracity of their own work, which was then subsequently challenged by the statement of the PM, which they were checking? What effort was made to seek any other independent expert advice? Were there any other efforts to look at anybody else? Why did the unit not recast its assessment after it actually received advice from the government through the Parliamentary Secretary to the Minister for Agriculture, the Hon. Richard Colbeck, which had quite different facts contained in it to those which the independent experts put to the ABC?

Mr Scott : I will take that on notice.

Senator SESELJA: Are you able to confirm for us—I think there have been some reports; I do not have the reports here—one way or another whether the ABC is considering a new show to be hosted by a prominent right-wing commentator?

Mr Scott : We continue to review our programming and our schedule. There is no information I can provide you on that at the moment. Again, some of the reports I have seen do not exactly correlate with my understanding of some preliminary planning that is being done. But when we are in a position to announce new programs, we will let you know.

Senator SESELJA: So there is some preliminary planning, then?

Mr Scott : We always are looking at our slate. We are always looking at our mix of content. We are interested in exploring new ideas if we think they would be of benefit to our audience.

Senator SESELJA: But it is a pretty specific thing, with respect. You seem to not be ruling it out. If you were not considering such a specific show—

Mr Scott : It is show business. It is very important not to flag our intentions too early. We can have lots of ideas, but there is a long way between original ideas and execution. So when we have news, we will let you know.

Senator SESELJA: Is it something that you are considering for TV or radio?

Mr Scott : You need to wait and let the chefs cook something up for us first and we will see if it passes muster.

Senator SESELJA: So we do not know.

Senator Fifield: Is this a teaser?

Mr Scott : But, as I have said here in the past, audition tapes are always welcome.

Senator SESELJA: No. I am not looking for the gig. Has Mr Tim Blair been invited?

Mr Scott : I could not possibly comment.

Senator SESELJA: Is he being considered?

Mr Scott : I could not possibly comment.

CHAIR: Andrew Bolt?

Senator SESELJA: 'Could not possibly comment' has particular meaning in political circles, so people will read into that what they will. But it does bring me back to where my questioning was just before. You finished saying it does not matter what individuals' views are if they are hosts; it is how they do their jobs. Maybe this is why you are considering the show that we just talked about. If you cannot point to anyone who considers themselves right of centre, it can create a perception, at least in parts of the community, that actually there is a bias. Whether that is true or not, would you accept that that perception can arise in parts of the community?

Mr Scott : I think there are some critics who articulate it, but I often feel that they are judging us on a Fox News left-right, who is carrying a label view rather than the kind of broadcasting that we are trying to do, which says our journalists should be able to exercise their broadcasting with fairness, balance and impartiality. On that in particular, I would simply add that it is not quite right to say that we are looking for a right-wing commentator. But I think we are continuing to look for forums which allow for a vigorous contest of ideas. I sometimes think some of this criticism, though, is very narrowly focused. I do not hear this focus when I go to regional and rural Australia and when I listen to local radio around the country. I think there are one or two programs that over the years have generated a bit of attention. But, by and large, I think our broadcasters do a great job in being fair, balanced and impartial. If people have specific criticisms, they have mechanisms to raise those criticisms.

Senator SESELJA: My question is about the perception. Surely you are not saying in your earlier answers that people always completely leave their views at the door. Everyone brings some bias. We in politics have our biases. They are out there.

Mr Scott : Yes. But you are paid to have your biases. Our journalists are paid to be fair, balanced and impartial.

Senator SESELJA: Sure. I know that for the most part that is the effort that journalists go to. I have no doubt about that. But when we see commentary, surely people are bringing their political views, their ideological views to the table, at least in some part. Would you not accept that you cannot completely dissociate your views of the world?

Mr Scott : Except we ask them to in their broadcasting, as they are hosting debates and hosting conversations. That is what we ask them to do. When they are doing interviews, that is what we ask them to do. That is what we train them to do. Look at the ABC's performance on this. Look at the programming we put to air in the last half a dozen years. A lot of that new programming in news and current affairs has been about creating opportunities for debate and discussion. I get correspondence every week as to why the IPA appears so regularly on ABC programming. Why are they on the Drum? Why are they on Q&A? My answer is because we have opened up the ABC to ensure that there is a full range of views and perspectives and debate, and our audience is smart enough to make up its own mind. So I think to be narrowly focused—I know critics have said this, and you are just articulating the views—on some individual reporters loses sight of the fact of what we have really done, which says we have more programs now for more debate and more plurality of views than we have ever had before, and our audience values that.

Senator SESELJA: But do you accept that that perception is out there? Are you concerned about it?

Mr Scott : Well, I accept it is out there in a few circles, Senator, who have forums where they repeat them regularly. But I do not think it is a widely held view. In fact, go back to the Newspoll survey that Senator McKenzie raised. If you ask your voters whether they think we are fair, balanced and impartial, they overwhelmingly agree that we are. They also think we are the fairest, most trustworthy, most reliable media outlet in the country.

Senator SESELJA: I think there was a slight difference on voting intention. I will just go to that quickly because I am running out of time in terms of the perception. There was that sort of funny example recently in this building in terms of a poll taken in the gym of coalition members and Labor members. It does go to a perception, does it not?

Mr Scott : It does. In this building, I am very happy to circulate the audience numbers for ABC News 24 and Sky News, which demonstrate that four to five times as many people—

CHAIR: Circulate that. It would be good to see. We are running out of time.

Mr Scott : Can I answer quickly? The question is that of course there are some hig- profile columnists who will make these points over and over again. But if you look at what the public think, as shown up in the Newspoll surveys and all other surveys, you see they demonstrate that the public thinks we are overwhelmingly fair, balanced and impartial and more so than any other media outlet in the country. I think—

CHAIR: Bring us those figures. That is fine. You have answered. Senator Seselja, this is the last question.

Senator SESELJA: Very quickly—

CHAIR: Does it take you an hour and a half to watch 60 Minutes?

Senator SESELJA: I want to go to the Q&A program in Shanghai in April this year. I did not watch it, so I do not know if it was any good. Who made the decision? Was that a decision taken by you, or was that taken just by Q&A?

Mr Scott : It was made by me.

Senator SESELJA: What was the rough cost of staging that show?

Mr Scott : I will give it to you on notice.

Senator SESELJA: Just on notice, maybe some detail in terms of a breakdown of obviously travel costs, accommodation and all the production costs.

Mr Scott : I think the Q&As we have done from Jakarta, Delhi and Shanghai have been amongst the best programs we have done. They have brought discussions of those countries into the living rooms of Australians. We have had outstanding panellists. I think they have been a great success.

Senator SESELJA: Given you personally ticked off on it, do you have a ballpark figure? Are we talking $100,000, $500,000 or $1 million? I have no idea.

Mr Scott : Around $200,000, I think.

Senator URQUHART: I want to go back to the Australia Network, which we talked about earlier. In your evidence, you referred to a report by the Lowy Institute. Was this the report from September 2010?

Mr Scott : Yes. I think that would be right.

Senator URQUHART: So, for clarity, this report was just commissioned by the ABC as the Lowy report—Australia's diplomatic deficit. It touched on the important role of public international broadcasters. Is that correct?

Mr Scott : Yes, Senator.

Senator URQUHART: Table 1 of the report lists the international services available in Asia. It lists a whole range, which is the UK's BBC World Service, Germany's Deutsche Welle, Al Jazeera in English, Radio France International, France 24 as well as TV5 aimed at French speakers, China's CCTV, Japan's NHK WORLD, South Korea's Arirang and the US Broadcasting Board Of Governors. All of these provide television services, do they not?

Mr Scott : Yes. I think that is right.

Senator URQUHART: Senator Fifield did note that, prior to 1995, there was no Australian international television service, but one has been continuously available since then?

Mr Scott : Yes. It has been a chequered history. The ABC ran an Asia-Pacific service. Then Channel Seven took it over. Channel Seven could not maintain it. They dropped away. The ABC was asked to pick it up, which we did. We have run it now for more than a decade.

Senator URQUHART: So it has been continuous. Not continuous through the ABC, but at least a continuous network. The Lowy report notes that Australia Network is now the fourth iteration. Is that correct?

Mr Scott : That would be about right, Senator, yes.

Senator URQUHART: So while the contract with foreign affairs was only relatively new, the ABC was the previous provider of those services?

Mr Scott : Yes. That is right. We have been going for more than a decade now in this current incarnation.

Senator URQUHART: So in the absence of any other international broadcasting service, is it credible for the ABC to be fulfilling its international broadcasting obligations without a television service?

Mr Scott : That is a question that the board has to consider now.

Senator URQUHART: So is the board actually considering that?

Mr Scott : The board will consider proposals around the future of our international broadcasting service at coming meetings. We need to make some decisions around that pretty quickly because the deadline on Australia Network shutting down will loom. But, yes, we need to work out in this era with these audiences how you can effectively broadcast if you are not on television. Radio still remains very strong in the Pacific. Radio Australia has played a tremendous role there. Over the last decade or two, what is clear is that radio has nowhere the impact in Asia, but television still has a very significant impact. If you go back 30 years, Radio Australia had a very strong impact in Asia, but radio services and investment in radio services in Asia have declined and investment in television services has grown in that time.

Senator URQUHART: I have travelled into some of those countries where the ABC Australia Network operates. Quite often it is the real contact that people get. For Australians who are living in those countries, it is the real contact that they get with what is happening over here and their contact with day-to-day happenings in Australia. So I know the importance of it. In terms of the board deliberating on that, if you have not got the funding, how do you do it?

Mr Scott : Well, that is exactly the question that we are wrestling with at the moment. We have less funding so we have to work out how far we can stretch that $15 million. If we stay in broadcasting—and I do not think that is guaranteed at all—in television, it will simply mean a smaller footprint and less bespoke programming created for that marketing and more replaying of programming from this market there.

Senator URQUHART: Table 2 of the Lowy report lists the international broadcasting expenditure per capita for selected countries and, notably, those broadcasting into Asia. It is 6.75 for the UK. France is 6.74; Germany is 4.49; Japan is 1.69; USA is 2.34; and Australia is 1.56. So this demonstrates the issue that you mentioned—that the other countries are spending far more than Australia.

Mr Scott : Yes. They are.

Senator URQUHART: Do they have more content, or is it similar? What is the level?

Mr Scott : It depends. Some are running pure plain news channels. Like Australia Network, others have broader general entertainment channels. It is also the number of services that some are running. So it varies. It is interesting. Al Jazeera is an example. Similarly, NHK out of Japan is running English language services as well as services in their home languages. So it is quite an array of different services, but it is very, very significant levels of investment.

Senator URQUHART: Yes, it is. For instance, the UK has 6.75 compared to Australia of 1.56. Does that mean that the UK has five times more?

Mr Scott : Absolutely. The UK spends a massive amount on BBC worldwide and, actually, the BBC World Service.

Senator URQUHART: And the USA is 2.34. Australia is 1.56. Would it be fair to say that they have almost double?

Mr Scott : Yes. They have big international services as well—Voice of America in particular and some other broadcasters are funded by government. Australia has traditionally not been a big spender in international broadcasting, even though I think we would argue that Radio Australia has had a very significant regional impact and that Australia Network, particularly under the latest model that we were implementing, was finding its voice and finding its significant partners in the region to take content that we were creating and sharing on their network. It is not just trying to bring audiences to Australia Network. This month, May, is Australia month on the main television network in Indonesia. They are taking stories that they have done in partnership with us and are showing it to potential audiences of 100 million people. So the kinds of partnerships we have created have proven to be very powerful and significant. It was one of the reasons why we were reaching our targets under the Australia Network contract.

Senator URQUHART: So does the budget for Radio Australia fit into that 1.56?

Mr Scott : I would have to go back and refresh my mind on that. But I imagine it does, yes.

Senator URQUHART: So that is obviously impacted?

Mr Scott : Yes. What we really did is bring Radio Australia and the Australia Network budgets together. Now we have to work out how we continue to deliver a service with the Australia Network budget gone.

Senator URQUHART: I know I quite often listen to ABC radio on a Sunday morning when I am travelling. Australia All Over gets Australians all over the world.

CHAIR: Do not can Macca, will you?

Mr Scott : I note your strong support for him.

CHAIR: You will have civil war interstate.

Senator URQUHART: My final question is: as a consequence of the decision by the Minister for Foreign Affairs to cancel the Australia Network contract, what will Australia's per capita expenditure become?

Mr Scott : I will have to take that on notice.

CHAIR: Thank you, Senator Urquhart. We will now break. The committee will return at 4.05 pm. The ABC is excused. We will be returning with the digital economy and postal services.

Proceedings suspended from 15:50 to 16: 07

CHAIR: I call officers from the department in relation to program 1.2, Digital economy and postal services. Thank you, Mr Clarke. I invite questions on my right.

Senator THORP: Earlier in the day we noted—I think it was today—recommendation 62 of the National Commission of Audit relating to e-Government. It said:

e-Government services are often preferred by citizens, businesses and other government customers because they are more convenient and generally cheaper and more accurate. The Commission recommends that the government accelerate the transition to online service delivery.

Did the department provide detailed advice about how e-Government could be used to improve government efficiency and the current state of e-Government projects?

Mr Clarke : Senator, I made a submission to the commission, but I would not call it detailed advice.

Senator THORP: I do note that there was a response dropped out of a media release on budget night that said e-Government reforms will be considered following the 2014-15 budget. Has a timetable and program for these considerations been developed?

Mr Clarke : I noted the same document with interest. No, I am not aware of any timetable at this stage for that consideration.

Senator THORP: So not a lot of action?

Mr Clarke : Well, no. Not in regard to the commission of audit. Of course, the government has a quite extensive policy in this area that was announced during the campaign. We are deeply involved in the development of implementation options for that policy, which is totally consistent with the NCOA's recommendations about how to move more of the transactions that happen either face to face through call centres or even traditional mail channels and how they can be moved into the online environment.

Senator THORP: I wonder if that is related to the closure of the ATO call centre in Tassie. But that is another topic. I thank you for your answer to question on notice 202. In that, you compare the objectives and timetable for e-Government from the coalition policy with the objectives outlined in Advancing Australia as a digital economy, the update to Labor's NDES. I also note that, in answer to question on notice 203, you advised the departments of communication and finance. You have been working together to implement the policy. Has the department's effort progressed the coalition policy beyond the high-level overview of convenient services any time, anywhere? Has it gone past that stage?

Mr Clarke : Yes, it has. It has moved to the stage where our two departments—finance and communications—have undertaken a detailed analysis of the engagements that government agencies, Commonwealth agencies, do with citizens and with business. It has mapped and analysed those agencies and characterised all of their channels and started forming views about the potential to move more of them online with the ultimate goal of end-to-end digital services wherever possible. So we have gone much past that high level and we are now deeply into the analytical stage.

Senator THORP: Appendix A of Advancing Australia as a digital economy provided a time line for the implementation of Digital First. Is there a comparable time line for the government policy?

Mr Clarke : Having said that we are deep in the analytical stage, at the back of that we will be going back to government through ministers Cormann and Turnbull with recommendations for implementation of their policy. We have not yet settled that, so I am not able to give you advice on that time line at this stage. The departments are still in the analytical stage and advice stage.

Senator THORP: Recommendation 62 of the National Commission of Audit had a specific recommendation that the government should appoint 'a senior minister to champion the digital by default agenda'. Given that this is already the work of the department, is it expected that the Minister for Communications will be appointed to this role?

Mr Clarke : Well, I think that recommendation of the commission also had the same tag of 'to be considered after the budget' in the announcement. My answer is the same consideration of that. I think your characterisation, though, is largely correct. This is a role that this department and this department's ministers, current and previous, have taken as, if you like, advocates for the digital economy in the community.

Senator THORP: The NCOA also had recommendations on how the government should set out:

…an ambitious digital strategy that makes My Government the default means of engaging with government, supported by optout provisions, sets concrete savings targets, removes legislative barriers and strengthens the My Gov online credential.

Are not these exactly the elements that were already being pursued under the Digital First strategy?

Mr Clarke : Broadly, yes. They are continuing to be pursued under the current government strategy and are part of this analytical work that we are currently finalising for advice to the two ministers. So they are consistent with previous and current government policy. That is correct.

Senator THORP: What was already being done? When do you expect that the government will release an ambitious digital strategy?

Mr Clarke : That was my previous answer. We are in the analytical and advisory stage and I cannot speculate as to when the public outcome of that will be available.

Senator THORP: I understand that the report Advancing Australia as a digital economy provided in appendix C a list of 34 separate digital productivity initiatives that had been already funded. Have any of these 34 projects been discontinued?

Mr Rizvi : At the previous estimates, we took on notice to provide an update against where each of those actions were up to. They have been provided in response to the committee. If the committee still requires a further update against those 24 actions, we can provide that.

Senator THORP: Yes, specific, please, particularly whether or not any have been discontinued.

Mr Rizvi : I am not aware of any that have been discontinued. Some were only funded for a specific period, and they are funded for that period.

Senator THORP: So you are undertaking to bring us further up to date with the status of those projects. You will do that on notice, I presume?

Mr Clarke : We can confirm that there were no decisions to terminate the program ahead of its announced timing and budget. But some of those programs are coming to their natural end.

Senator THORP: Are you aware whether or not the government is considering funding further initiatives to demonstrate the value of broadband delivered services?

Mr Clarke : Sorry, could I ask you to repeat the question?

Senator THORP: Certainly. Is the government considering funding further initiatives to demonstrate the value of broadband delivered services?

Mr Clarke : Well, having said that, there is a quite extensive package that is still alive and is out in the market and working through. At this stage, I am not aware of any proposals for additional programs of that nature.

Senator THORP: So if I put it to you that the whole e-Government agenda has stalled, you would refute that statement?

Mr Clarke : Well, do you mean e-Government or the digital economy? The semantics of this are important.

Senator THORP: Are they?

Mr Clarke : Yes. In the way the department administers that and the way in which the policies were produced. For me, e-Government is around getting government services online. As the Commission of Audit noted and as past and current governments have noted, there are enormous efficiency opportunities as well as service quality opportunities available to doing it. Indeed, I think we would all argue it is almost an inevitability that more and more services will be provided online. It is a question of how fast and effectively you can do that. That has not stalled at all. Departments all over Canberra are actively moving services online. The My Gov agenda in Human Services has not stopped as a result of the change of government. Indeed, it is powering on.

Senator THORP: That is something that your branch oversees?

Mr Clarke : The department has an interest across all of those transitions to online e-Government across the APS, yes. As I said earlier, we are just completing an analysis of, I think, over 150 service lines across the Commonwealth and mapping them out as to exactly how much is done online and how much is done using traditional channels. But to say it is stalled would be quite misleading. Departments have all of the incentive in the world to move their services online—for efficiency and service quality reasons. We are looking at the whole-of-government strategy and where we can accelerate it.

Senator PRATT: I want to acknowledge the answers to questions on notice 201 and 203. There was progress outlined on 24 initiatives relating to Advancing Australia as a digital economy. I think we have discussed action 13, which is implementing the Digital First initiative, so I am just going to go through some of the others. For action 15, the department advised that the Digital Enterprise program would be finalised in the first half of this year. We have just five weeks left. Has it been completed yet? If not, when might it be?

Mr Rizvi : The Digital Enterprise program relates to approximately 70 locations around Australia, which are delivering training services to small and medium businesses and not-for-profit organisations to assist them to understand how to get online. Many of those 70 Digital Enterprise services started some time back. A few of them have completed the contracts on which they were operating and, therefore, are no longer continuing as they were before but are continuing on their own volition without Commonwealth funding but possibly funding from other sources. A number of the 70 will continue to operate for another 12 or so months before their contracts progressively expire.

Senator PRATT: Will the evaluation be publicly released?

Mr Rizvi : That will be a matter for the minister.

Senator PRATT: Nine sectors have signed to deliver digital business kits. All are due to be released by July 2014. Can you advise progress on each of these kits and if they will also be delivered on time?

Mr Rizvi : My understanding is that they are all on time for the first phase of the kits to be delivered in July. I would have to take on notice precisely where each of the nine is up to, but I can provide that on notice.

Senator PRATT: Hopefully, with the way answers go, they may well have arrived before then.

Mr Rizvi : The program is on track. We are dealing with each of the nine industry bodies. They are developing their kits. Each of the kits we have seen. They are in pretty good shape. We think it will be July.

Senator PRATT: Take that on notice. If we do not get an answer before July, I guess we will know the answer. Action 18 is proposed video consultation capabilities for the after hours GP helpline and the 24-hour pregnancy, birth and baby helpline. The department advised that firm dates for the launch of the service may be known in May this year. Are the firm service launch dates available?

Mr Rizvi : I would have to take that on notice. Both those programs are run by the Department of Health. We have had no indication that it will not be delivered on time. But I will take on notice and check with the Department of Health.

Senator PRATT: Great. I have some questions in relation to big data. Recommendation 61 of the National Commission of Audit observed that there is untapped potential to use anonymised data and new data analytic techniques to improve the efficiency and effectiveness of government. The commission recommends that government, recognising the need to safeguard privacy, rapidly improve the use of data in policy development, service delivery and fraud reduction. The comment beside action 12 in the department response says:

The government has committed to release an updated big data strategy by the end of 2014.

Given that the action seems to be clearly underway, why does the government response to the National Commission of Audit say for the recommendation that data reforms will be considered following the 2014-15 budget?

Mr Rizvi : I think we may be talking about two slightly different things here. The commission of audit talked ostensibly about open data and the benefits of open data and making open data available so more sets of Australian government data are available. Work on that is certainly progressing. Indeed, Mr Clarke chairs a cross-departmental committee that is working on that. The big data strategy is a separate set of work being undertaken by the department of finance. Certainly big data and open data are related, but they are two separate matters being progressed separately.

Senator PRATT: It does not sound like that fits with the government's antiduplication agenda. They would seem more closely related.

Mr Clarke : Open data versus big data? Is that the point of distinction?

Senator PRATT: I appreciate that they are substantively different, but to resolve one, you need to integrate it with the other, surely.

Mr Clarke : They are closely related. I revert back to a discussion in the opening session of this committee this morning, when we were discussing the structure of the department and the way in which it might be aligned to future policy issues. Data issues is certainly one of the things that we are focussed on. In our new structure, we have created a data policy branch. Issues around open data, big data and data analytics will all be brought together in that branch.

Senator PRATT: Part of the recommendation from the National Commission of Audit was extending and accelerating the publication of anonymised administrative data. Is that a reference to putting more data on data.gov?

Mr Clarke : The way I read that, today there is a big data scale data set sitting in governments. Social services would be an example. Unit record data from the Bureau of Statistics would be another example. Clearly, the confidentiality of those data sets at the unit individual level is paramount. The proposition is that rather than having a researcher or some other access seeker ask the question and the department process and deal with the anonymisation and then provide the anonymised data set to the individual, perhaps some of that could be done in bulk in advance along standard anonymised data sets and then published directly on data.gov. In effect, it would be replicating the Bureau of Statistics process—that is their core business—and applying that model into other agencies that also have large valuable data sets for which privacy is the primary obligation.

Senator PRATT: Have you had discussions with NBN Co about providing any of their data, such as the monthly Ready for service report, on data.gov.au?

Mr Clarke : No. But I am happy to undertake to do that.

Senator PRATT: That would be great.

Mr Clarke : I think as a general point there is quite a lot of data locked up inside NBN Co that could be made more accessible. I think we have made good progress towards that in a number of areas. But, yes, I see no reason why those statistical records would not be linked. Remember that data.gov in many cases is simply providing a link to a primary source. It is a good suggestion. I am happy to follow up.

Senator PRATT: It would be very worthwhile, because it has been difficult to get access to that data, as I understand it. Are you familiar with the website My NBN? I want to ask if that is an example of the kind of use of government data that the open data strategy is designed to support?

Mr Clarke : My NBN is one of the department's websites. I am very familiar with it.

Senator PRATT: Good.

Mr Clarke : Indeed, the underlying data sets in it are available on data.gov. We released—I am not going to get the numbers right—tens of thousands of geographies, the areas for which we classified broadband availability and quality. That data we posted on data.gov soon after the release of the website.

Senator PRATT: I refer to estimates question on notice No. 80 from NBN Co. NBN Co has refused to provide the committee with copies of the weekly program summary reports and the monthly Ready for service reports. Clearly, from your remarks, it would not necessarily be consistent with government policy on open data?

Mr Clarke : We would have to go back into exactly the reasons behind NBN Co's position as you have represented it. I do not have the officers with me to assist you on that question, Senator. I am sorry, but I would have to take it on notice.

Senator PRATT: I understand that. You have indicated that, should that data be available, you would like to see it reported. We have had trouble getting hold of it.

Mr Clarke : There is a bias towards transparency. A bias towards transparency does not mean throwing the doors open to absolutely everything. There are often privacy, commercial or operational reasons that get in the way of that. I would have to go back.

Senator PRATT: Or political ones sometimes. NBN Co did not directly answer the question of why NBN Co is less transparent in its data than Telstra is, for example. I would like to know if the department has raised this with NBN Co in relation to NBN Co's approach to data transparency?

Mr Clarke : Did NBN Co accept the proposition that they were less transparent than Telstra?

Senator PRATT: Well, they are not revealing the same information that Telstra is. They just argue the point that they are not going to reveal the data.

Mr Clarke : Again, I think I would need to look very closely at the specific data sets and background of that question. The issue about a government owned monopoly operating in a competitive market is always sensitive. What information the privately owned competitors choose to publish and what information it is appropriate for the government business to publish is a complex question. I would rather not speculate on the background of that.

Senator PRATT: Yes. I guess that there is no reason why government owned enterprises should not have the same obligations as privately owned ones.

Mr Clarke : Well, the privately owned ones do not have an obligation to open data. The government owned ones have an obligation to open data unless there is a good reason not to.

Senator PRATT: Well, will you endeavour to find out if there is a good reason not to?

Mr Clarke : I am happy to take that on notice.

Senator PRATT: Actions 7 to 8 are in relation to innovation. Responses in relation to the employee share scheme considered taxation arrangements that have now become part of the national industry investment and competitiveness agenda. That was announced by the Prime Minister in December 2013. That is right? You are nodding, Mr Rizvi.

Mr Clarke : Yes.

Senator PRATT: Your advice is that the taskforce is expected to make recommendations by the end of June. Are you aware of whether the taskforce is running on time or not?

Mr Rizvi : I cannot say whether the taskforce is running on time or not. That taskforce is run out of the Department of Prime Minister and Cabinet. Our understanding is that the department of the Treasury has done a great deal of work on employee share schemes. It has undertaken extensive consultations with industry. It has developed a number of options on going forward on that. So I think the government is well placed to progress that agenda in conjunction with the way the taskforce in its entirety is progressing.

Senator PRATT: On 20 March, Minister Turnbull uploaded on his personal website a statement under the heading 'Turning Australia into a start-up nation'. In that post, he emphasised the importance of reform for employee share schemes. Has the minister expressed this view to the taskforce?

Mr Rizvi : That view has been consistently expressed to the taskforce through the various agencies that are working to it.

Senator PRATT: Various agencies. Probably including the minister?

Mr Rizvi : We certainly keep the minister briefed on these matters. The minister has taken a close interest in the details of how this matter is progressing.

Senator PRATT: So they may also be various agencies. But you are not able to tell me which various agencies they are because it is, what—under active consideration?

Mr Rizvi : The agencies that have a direct interest in this issue are ourselves, the department of the Treasury, the department of industry and the Department of the Prime Minister and Cabinet.

Senator PRATT: So you would have all taken an active interest in emphasising the importance of employee share schemes?

Mr Rizvi : Yes.

Senator PRATT: When would you expect an outcome on the question of employee share schemes specifically?

Mr Rizvi : I would not be in a position to advise on that. That depends on government processes. That will depend on the examination of the report of this taskforce.

Senator PRATT: In action 8, the department advises that the Corporations and Markets Advisory Committee is looking into opportunities to facilitate crowd sourced equity funding. The government abolished that committee as part of the budget, did it not?

Mr Rizvi : I am not sure whether the committee itself has been abolished. I could not answer that question. I do know the work that that committee was doing has been continuing and that a report on the specific issue in action 8 is imminent.

Senator PRATT: In Budget Paper No. 2 at page 71, that committee is reported as abolished. Who is continuing that work?

Mr Rizvi : That work is being continued by the department of the Treasury.

Senator PRATT: The camac.gov.au website says the reporting date for this review has been extended to today. Has that report been provided as of today?

Mr Rizvi : A draft report is available.

Senator PRATT: Available to whom?

Mr Rizvi : Within government.

Senator PRATT: On Channel Nine's financial review Sunday program last weekend, the founders of Atlassian, one of Australia's most successful technology firms, criticised the government for underinvesting in technology and not implementing tax reform to boost start-ups. Given your evidence on employee share schemes and crowd funding, what is your comment on that significant criticism?

Mr Clarke : Of the two areas you have highlighted—employee share schemes and crowd funding—I think we absolutely would agree that they are at the top of the list for reform in this area. They are being both vigorously pursued.

Senator PRATT: So, in other words, yes, you can understand that criticism.

Mr Clarke : They are not the only body or entity to call for these reforms in recent times.

Senator PRATT: Mr Cannon-Brookes told the program:

The biggest problem with government is that it does not understand technology. Technology is going to be the major driver of change in the next 25 years, as it has been over the last 25.

So how do you respond to Mr Brooke's assertion that government does not understand technology?

Mr Clarke : I think that is delving outside the appropriate question for an official, Senator.

Senator PRATT: Thank you.

Mr Clarke : I would observe, if I may, that I have worked for ministers with deep knowledge of technology in the area. My current minister would certainly fit that category.

Senator PRATT: Probably annoyingly so at times, I am sure. Thank you, Mr Clarke.

Senator Fifield: He is a resource and an asset for the portfolio.

Senator URQUHART: I want to talk about Australia Post. Am I correct that the item in table 3.2.7 of the portfolio budget statements labelled 'dividends' is dividends paid by Australia Post?

Mr Clarke : Can you give me a page number, please, Senator?

Senator URQUHART: Sorry, I cannot. It is table 3.2.7. It is page 109.

Mr Clarke : Page 109 is the ACMA budget statement.

Senator URQUHART: Sorry.

Mr Clarke : The three-point structure is repeated in different parts. It is not universal.

Senator URQUHART: I will put that on notice to you because I cannot put my finger on it at the moment. There is obviously a table in the portfolio budget statements labelled 'dividends'. We have found it, which is good. It is page 41. It is about halfway down that.

Mr Clarke : That shows $142 million in 2013-14 and a $21 million estimate for 2014-15.

Senator URQUHART: Yes.

Mr Clarke : I will try to confirm before this session ends. I think you are right, but I will confirm.

Senator URQUHART: My next question also refers to that, so I will hold that until the CFO turns up. I will keep going. Last year's budget had an estimate for 2013-14 of $110 million and then $149 million, $207 million and, again, $207 million. So I presume the last of them is just a straight line projection, since the corporate plan only runs for three years. Is that correct?

Mr Clarke : Yes. Obviously, you would expect movement across 12 months in revised estimates. But, yes, I believe you are correct.

Senator URQUHART: Can you explain why it has happened so suddenly that the dividends from Post have taken such a dramatic change?

Mr Clarke : I am sure Mr Fahour in the next session will be more than pleased to go into that in great detail.

Senator URQUHART: I am sure he will.

Mr Clarke : At a high level—and we assume that we are reading the Post dividend right—I think you are right. The continuing decline in the regulated mail business is continuing and is unable to be offset by profit in the competitive parcels business.

Senator URQUHART: So specifically, then, does this reflect a lack of foresight by the board and management at Australia Post? Did the shareholder ministers question the submitted plan?

Mr Clarke : I think these trends that are affecting Post have been well understood and signalled for many years. Post has been bringing them to the attention of government over a considerable period. I do not believe it would be appropriate to assert that the board or management have been remiss in this area.

Senator URQUHART: So do you know if the shareholder ministers questioned the submitted plan?

Mr Clarke : In 12 months in this portfolio, I observe a lot of discussion between the shareholder ministers and the management and board of Post on their financial outlook. It is a consistent theme of interaction.

Senator URQUHART: Obviously, there is a lot of interaction, but the detail is whether or not the plan was actually questioned.

Mr Clarke : Yes. Well, if 'questioned' is a high-level term for deep engagement, understanding presentations and discussion, absolutely.

Senator URQUHART: I actually see questions and deep engagement as something different.

Mr Clarke : Well, can you—

Senator URQUHART: Deep engagement could be a conversation that you have, where I think questioning is a different issue.

Mr Clarke : It has been questioned.

Senator Fifield: Chair, I think it is important to note and to emphasise what the secretary said, which is that the position of Australia Post has been deteriorating for a significant period of time, including over the six years of the previous government. It is a situation affecting a lot of postal services—all postal services around the world. So this is not something that has happened overnight or over the last nine months.

CHAIR: Exactly.

Senator URQUHART: Can you explain why, in the face of the sudden deterioration of the business, the dividend for 2013-14 is planned to—

Senator Fifield: Sudden?

Senator URQUHART: Sorry?

Senator Fifield: You said sudden deterioration. I think it has been a trend over time.

Senator URQUHART: Minister, my observation is that it may have been deteriorating, but the level of deterioration has been quite significant over the past at least two years.

CHAIR: Surely we can take that from Mr Fahour when he is with us.

Senator URQUHART: Well, I am sure we can. I am interested in getting the department's take on it as well. I will just go back to—

Mr Clarke : If I may respond?

Senator URQUHART: I have not finished the question. In the face of the sudden deterioration of the business, the dividend for 2013-14 is planned to increase rather than decrease. So what is the explanation?

Mr Clarke : I understand exactly that point. It is counterintuitive. I acknowledge that. To go to the minister's previous remark, though, to put it into context, this structural issue in postal services is a worldwide phenomenon. It is understood that it has been driving in many countries for many years, including Australia. What changes is the rate at which it occurs and the understanding of that rate keeps improving—getting worse, in most cases—every 12 months. There is a cycle. The structural dynamics of it are immutable. The rate is the variable. It now looks like the rate is getting worse. Mr Fahour will elaborate. Why, in the face of that, it is able to offer a dividend above that forecast at the end of the year is a question we had. I recall having that discussion with him at some length. There are particular dynamics in the way he has managed the business and efficiencies and opportunities that mean there is this nominally counterintuitive outcome. But he will give you a detailed explanation as to what is behind that number. It is certainly a number that we asked about because of its apparent anomaly.

Senator URQUHART: So in terms of postal reform, I presume that you have seen the speech that Mr Fahour gave at the American Chamber of Commerce on 9 May?

Mr Clarke : Yes.

Senator URQUHART: In it, he outlines the decline of the letter post business and the growth of the parcels business. Mr Fahour also said:

Without change or reform, Australia Post will not be able to survive and continue to provide the trusted services that we have provided for 205 years without government funding of the community service obligation.

So is it your understanding that Mr Fahour is referring to change and reform that is entirely within Australia Post's control, or does it involve policy changes or even legislative changes?

Mr Clarke : The latter.

Senator URQUHART: So it is legislative changes?

Mr Clarke : The reforms that are necessary to correct this structural decline are beyond the control of the post business itself.

Senator URQUHART: So it is all about legislative changes?

Mr Clarke : It is both. The business can do so much, but it cannot get there on its own. It does need a policy reform package as well.

Senator URQUHART: Earlier today you advised that one of the half million-dollar consulting contracts to BCG was for an analysis of Australia Post and postal services strategy.

Mr Clarke : Correct.

Senator URQUHART: What instigated that assignment? What did it reveal?

Mr Clarke : What instigated it is exactly the conversation that we are having. What is the policy response to structural issues inside the post business? In order to advise the government on that, the department engaged consultants. I must say the primary driver of who we chose to do that work was someone that could put Australia Post's experience in an international context. As the minister and the chair have observed, this is a global phenomenon in postal services. We wanted to understand and be able to advise the minister. Was the experience of Australia Post consistent or different with that of postal services in other relevant countries? What lessons are there in the way other countries have gone about their reform that could be applied to a potential reform package for Australia Post?

Senator URQUHART: And what did that show?

CHAIR: Senator Urquhart, on the question you just asked Mr Clarke, he responded by saying you need business adjustments and legislative adjustments or reform; I think they were the words used. What legislative reforms do you suggest, Mr Clarke?

Mr Clarke : I am not in a position to suggest any reforms.

CHAIR: When you say they are needed, you must have some reason for saying that legislative reforms are needed as far as Australia Post goes.

Mr Clarke : Yes. So my answer, to go back, was that reform is necessary to arrest this financial decline in Australia Post. Some are within the power of Post and some are within the power of government.

CHAIR: That is the answer you gave to Senator Urquhart. Can you expand on what is in the hands of government, please?

Mr Clarke : With respect, no. Which ones or which ones do I recommend?

CHAIR: Which ones do you think are in the hands of government?

Mr Clarke : In that area I must decline because that requires me to speculate on future policy changes.

CHAIR: I was trying to expand on your question.

Senator URQUHART: Nice try.

CHAIR: It was a good try.

Senator URQUHART: Nice try, Senator Williams. Is the analysis of Australia Post and the strategy a public document?

Mr Clarke : No. It is not completed. The analysis is still underway for that project.

Senator URQUHART: What is the time frame for that?

Mr Clarke : I am advised that we have a draft. We are close to completing it.

Senator URQUHART: Would it be fair to say that the analysis is complete but not the final document?

Mr Clarke : Yes. That is probably a fair summary. But the purpose of it is for advising the minister to assist him in judging propositions for reform of Post. While we have been talking, I have double-checked. You are absolutely correct. That is the Australia Post dividend line on page 41.

Senator URQUHART: I have another question after that, but I will come back to that in a minute. I am assuming the draft will have recommendations and details like that in it?

Mr Clarke : It is an analysis of reform options for Post in the context of the global experience of postal services.

Senator URQUHART: So it will not necessarily be recommendations? It will just be comparing what else happens around the globe. We discussed earlier the department's deregulation road map. We also discussed policy areas outside of straight deregulation. Is there a reason why postal service regulation reform was not included on the road map?

Mr Clarke : Because I think the drivers are so different. The drivers are the very numbers that you have highlighted in your opening question. The context and drivers are so different that I think characterising it as deregulation would be inappropriate. It is really postal reform, an element of which is regulatory. But I think that is a different proposition to regulatory reform per se.

Senator URQUHART: I will just go back to those earlier questions. So they are the dividends that are paid by Australia Post. That is correct?

Mr Clarke : Yes.

Senator URQUHART: It states that the final dividend for 2013-14 is expected to be $142 million. It is $21 million in 2014-15 and then nothing after that. Is that correct?

Mr Clarke : That is how I read it.

Senator URQUHART: So that is correct. That is how I read it too, but I just wanted to make sure.

Senator FAWCETT: My background is in defence. I am very aware of spectrum use. I am aware that you are having another review of spectrum. Can you talk to us a bit about the scope of that process and the time frame? I am aware from previous reviews that Defence has come out as the largest user and probably the most varied user of spectrum with different systems. I am just keen to understand not only the scope and process for your overall view but Defence's engagement in that review process.

Mr Clarke : Certainly. The terms of reference have been published, and an issues paper for consultation was also published this month. It is a very broad-ranging first principles review. It is not presuming any particular outcome. It is not driven by, for example, a revenue of imperative, although revenue is an important part of spectrum policy. It is really asking: for such an important public asset that plays an important role in the market for consumers, in the competitive market and for public safety and national interest purposes, have we got the right legislative regulatory operational framework? So it is a very wide-ranging review. The issues are all on the table—root and branch. It has that character. The review will be conducted by officials from this department working with colleagues in the ACMA. As per an earlier discussion, I think with Senator Thorp, it is reasonable to expect that the team will contract out or contract in some expertise along the way. But the department and the authority are only in the process. We are not contracting out the review.

Senator FAWCETT: I will confirm the time frame and when you anticipate closing for public comment on that discussion paper.

Mr Clarke : The paper that is currently out there will not be the end of the public consultation process. It is the beginning of the process. Mr Besgrove might expand on that.

Mr Besgrove : It is our intention that the initial issues paper forms the basis for a series of bilateral conversations with a number of the key stakeholders, some of whom are government and some of whom are in the telco sector. Others are in other sectors of the economy. We would then be looking to follow that up with some additional issues papers as we go along. It is our intention to have at least one workshop of interested stakeholders. Our intention is to have that initial workshop on 9 September, which is the day before the ACMA's annual RadComms conference, which is the major spectrum related conference that takes place each year. The Department of Defence routinely participates in the RadComms conference as well. So there will be multiple opportunities for Defence and other government users of spectrum to participate in the process.

Senator FAWCETT: Are you anticipating that it will have any impact on current processes, such as the restack?

Mr Besgrove : No. It will not have any direct impact on the restack process, which is now well underway.

Mr Clarke : I think that is an important point if there is any concern in the market about changes to processes underway. The restack the spectrum dividend part of it is certainly locked in. The sorts of reforms that might be contemplated out of this review will be post that change.

Senator FAWCETT: Sure. I hear your contention that it is a first principles review. But would you attribute that to changes in technology? Do you see significant economic benefits to Australia by doing this review? What is the underpinning motivation for it?

Mr Besgrove : There are probably a series of them. The first is that it is quite some time since there was any review of spectrum allocation mechanisms in Australia. Secondly, as you point out, there has been quite significant technological change. There is increasing pressure on some elements of spectrum. There are certainly calls for seeing if there are ways in which we can make the spectrum allocation process faster and perhaps a little more flexible than it sometimes proves to be. So it is fair to say that there are a number of different pressures that have come together that suggest that now is a timely opportunity to revisit some of the fundamental elements of how spectrum is governed and how it is allocated in Australia.

Mr Clarke : When the minister announced the review, he drew on all of the things that you have mentioned. He talked about innovation and productivity. He talked about technological change in there. He also talked about the critical public and community services, such as police and emergency services, defence, air and marine safety and weather forecasting, all of whom rely on spectrum. I guess one of the reasons it is so timely to do this review is it is so critical to so many areas of the economy, commercial and public, that it is important to ensure that you have a legislative and regulatory setting that is appropriate. It is really about whether we have the right settings to make best use of this in the Australian economy.

Senator FAWCETT: Clearly, this is one area that, out of all areas, is a global one in terms of communication. I am aware that we have done some work around the configuration of spectrum allocation. Has that been adopted by other people in our region or more globally?

Mr Besgrove : We participate in one of the international telecommunication unions through its WRC committee. That is the fundamental international body which determines broad spectrum allocations. Australia participates quite intensively in that process. The ACMA leads much of that work, but the department is also involved. A number of the band plans that have been adopted in Australia have emerged from Australia's interaction with that ITU region. So our intention wherever possible is to try to adopt common band plans with overseas countries because that then carries with it the advantage of Australia being able to access cheaper and better devices. There is very little benefit in Australia having a band plan which is at odds with the rest of the world because it means that the equipment is much more expensive in those circumstances.

Senator FAWCETT: So the digital dividend spectrum in particular would be one where my sense is that we are leading in some ways and people are adopting. Is that a fair statement?

Mr Besgrove : We are adopting a somewhat common approach with a number of other countries. The process of identifying digital dividend is one which is common to most countries around the world.

CHAIR: There being no further questions, thank you, gentlemen. I will now call officers from Australia Post.

[16.57]