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Rural and Regional Affairs and Transport Legislation Committee
Infrastructure Australia

Infrastructure Australia


CHAIR: Do you have a question, Senator Sterle?

Senator STERLE: Yes. Chair, I am keen to work with you as efficiently as we can to get through a lot of questions, because there will be a fair bit around CASA and AMSA later on.

CHAIR: Thank you.

Senator STERLE: I have to apologise—and I say this every round of estimates—that I do not have any glasses on.

CHAIR: We are now moving on to Senator Sterle. Are you asking questions?

Senator STERLE: I am. I just want to get through a bit of preamble. Let us get moving and see how we go. Mr Davies, the ANAO report states the following of IA's role in the assessment of the East West project:

The ANAO has not made any recommendations in relation to entity advisory processes given the audit found that the funding decisions had been informed by well considered departmental advice and that Infrastructure Australia's assessment processes had been bypassed.

It also goes on to state in its response to the ANAO report:

Infrastructure Australia notes the report and believes that it accurately reflects Infrastructure Australia's role in the analysis of the East West Link project.

So, on that then, Mr Davies, I ask: did IA express concerns to the government about being bypassed?

Mr Davies : To answer your question, IA was asked to provide factual information on the process that we followed, which was our usual process in assessing projects. Basically it was a factual statement on how we assessed that project, and so we did not express any opinion.

Senator STERLE: You did not have a conversation with government at all?

Mr Davies : No.

Senator STERLE: That is easy. You can say, no. There is not a set of handcuffs waiting to be slapped on you to run you off in the back of an old Ford or anything. I do not bite. Does IA consider that when the previous Prime Minister, Mr Abbott, referred to analysis paralysis on infrastructure decisions he was referring to IA or do you know if he was referring to IA?

Mr Davies : I would not know.

Senator STERLE: Have you had any discussions with your colleagues or your board in relation to that?

Mr Davies : No.

Senator STERLE: I would like to go to the WestConnex project analysis if we can. Is Infrastructure Australia satisfied with the inclusion of induced demand in the new WestConnex business case?

Mr Davies : We are currently in the process of assessing that business case.

Senator STERLE: I am having real trouble hearing.

Mr Davies : I am a bit short. We are currently in the process of assessing that business case.

Senator STERLE: So, you have not completed that yet?

Mr Davies : We have not completed that assessment.

Senator STERLE: How long before you reckon you will have completed it?

Mr Davies : That is a hard question to answer. It is a to and fro process where we go back to the proponent with questions; they come back with answers; we assess those. It would be hard to make an exact date.

Senator STERLE: How long has the conversation been a two-way street between you guys and WestConnex?

Mr Davies : I might ask Mr Parkinson to comment on that.

Mr Parkinson : We received the WestConnex business case in late November.

Senator STERLE: Just gone?

Mr Parkinson : Yes.

Senator STERLE: How many meetings or conversations have you had?

Mr Parkinson : We have had several conversations with the proponents.

Senator STERLE: Obviously we all knocked off at Christmas and New Year, but are we back at conversation levels again? How regularly, weekly or fortnightly?

Mr Parkinson : We certainly are.

Senator STERLE: Are you satisfied that 0.39 per cent is an accurate measure of the induced demand?

Mr Parkinson : We have not made any comment on that particular aspect of it at this stage.

Senator STERLE: Am I close with that figure of 0.39? Did I make that up or is that pretty well around the mark?

Mr Parkinson : I would not want to comment on the specifics of the business case.

Senator STERLE: You can; I will not tell anyone. You can tell just me.

Mr Parkinson : We do not have a comment on that at this stage.

Senator STERLE: We have seen a wealth of evidence from road projects overseas that tells us that expanding road capacity does not decrease travel time as induced demand on the new capacity brings travel times back to equilibrium. What is IA's perspective on induced demand? Can you tell me that?

Mr Parkinson : We certainly do expect induced demand to be considered in the development of a business case.

Senator STERLE: Good. Do you accept the promises that travel time savings are often not achieved?

Mr Parkinson : Again, I would not want to comment on the specifics of a business case which is currently under assessment.

Senator STERLE: When do you think it will be ready? I know I asked Mr Davies that.

Mr Parkinson : As Mr Davies said—

Senator STERLE: You two are in lock step?

Mr Parkinson : Yes.

Senator STERLE: Have you got any ideas? Would it be this year?

Mr Parkinson : I would certainly expect it to be this year, yes.

Senator STERLE: Next month? Come on, have a shot. A majority of the benefit claimed by WestConnex Project is in the form of travel time reductions; am I right?

Mr Parkinson : I believe that is correct, without wanting to comment on the specifics of a business case.

Senator STERLE: One would hope that it would. Why would we spend so much money if we do not?

Mr Parkinson : Yes.

Senator STERLE: Is that a fair question?

Mr Parkinson : Yes.

Senator STERLE: No matter what state it is in, and I mean physical, geographical state. If this does not occur because of induced demand, how viable is this project from a cost-benefit perspective?

Mr Parkinson : These are precisely the questions that we are exploring with the proponent in undertaking our assessment of the business case.

Senator STERLE: So, hopefully by the May budget round of estimates we may be able to explore this further.

Mr Parkinson : I think that is reasonable.

Senator STERLE: So, you reckon it will be finished by May?

Mr Parkinson : I am not in a position to put a date on it.

Senator STERLE: I should have got you at 11 o'clock tonight. From your own perspective, what are the strategic reasons for the WestConnex project?

Mr Parkinson : Infrastructure Australia looks primarily at the need for the project in the sense of the priority, the scale of the problem, and the value of the project, which is the value that the business case delivers. We recognise that there is a challenge in growing congestion in the inner part of Sydney. We recognise that this proposal is designed to address some of that congestion.

Senator STERLE: I am loathe to ask all over again: how would you characterise the evaluation process of the WestConnex project?

Mr Parkinson : It is a very similar process to that which we undertake for every project proposal coming to Infrastructure Australia.

Senator STERLE: Let us move on. On Friday, IA posted an update of its assessment framework. Can you indicate what the main changes are?

Mr Davies : Yes. As you quite rightly said, we completed a review of the assessment process. That was somewhat of continuous improvement of the process that was originally established in 2008. Most of the focus was on aligning the framework with the latest national transport guidelines. We also endeavoured to simplify the templates that we use and actually get greater focus on defining the problem that we were seeking to solve with the project. We have also simplified the process in identifying two stages to a project: an initiative, which is an early stage problem or partially defined solution, and then the full project, which is defined as having a positively assessed business case. We are trying to simplify the process.

We have also endeavoured to align the process with what each state and territory government does within its own jurisdiction, because we have had a lot of feedback that certain jurisdictions were being asked to cut the same information a number of ways. We have tried to align that as far as possible and really just simplify the documentation. There was a big focus on simplifying the documentation to make it easier to use so that we get better submissions, which was our aim.

Senator STERLE: That makes sense. The Infrastructure Priority List will list initiatives and projectives, given that the definition of project is:

Projects are potential infrastructure solutions for which a full business case has been completed and positively assessed by the IA board. Most projects are first identified as initiatives, and subsequently developed into full business cases.

At this point in time, Mr Davies, how many projects meet that definition?

Mr Davies : We are going through the process of reviewing a number of business cases. In response to our audit, we received a number of submissions for assessment for inclusion on the Infrastructure Priority List and we are in the process of reviewing a number of business cases.

Senator STERLE: Can you tell me how many projects actually meet that assessment?

Mr Davies : That work is still underway. We will be making that available when we publish the updated Infrastructure Priority List.

Senator STERLE: Before you started updating the Infrastructure Priority List there must have been a list of projects that were floating around and waiting for your approval or your tick-off, or was there nothing?

Mr Davies : That is part of the process. We are just finishing off reviewing those projects.

Senator STERLE: What is?

Mr Davies : We are just finishing reviewing those projects currently.

Senator STERLE: Do we know what they are?

Mr Davies : Yes, they will be published online.

Senator STERLE: Are they secretive? I am not trying to ambush you, I just want to know. Is there nothing going on?

Mr Davies : Yes, there is a lot going on. I would not wish to disclose those details publicly as we have a commitment to our state and territory colleagues. We will discuss details with them before we publish anything.

Senator STERLE: At the end of the day we are all taxpayers; that is fine. As long as we get value for money; and that is always questionable. As I said, at this point in time how many projects meet the definition? You do not have to tell me what they are.

Mr Davies : Again, we are still reviewing those projects.

Senator STERLE: So, there are projects out there but can you not tell us how many meet that standard?

Mr Davies : Not at this point.

Senator STERLE: Is this because they are brand new?

Mr Davies : Some are new to us, yes.

Senator STERLE: What about the ones that are not new to you? How do you define that? I am at a loss.

Mr Davies : Those details will be made available when we publish our updated lists.

Senator STERLE: What is the secret? If you have got a standard there, and I have quoted the standard. We want to meet some certain—

Senator BULLOCK: Just ask them how many.

Senator STERLE: Not yet, but that might come. Not that you were going to answer it.

Mr Davies : We are currently actively reviewing 14 projects.

Senator STERLE: So, you are reviewing 14. What I would ask, you said there a couple of these that are new?

Mr Davies : Yes.

Senator STERLE: How many of the 14 are new ones?

Mr Davies : I think we have seen most of those projects in some form previously. It depends how you define 'new'.

Senator STERLE: I am not defining it.

Mr Davies : We have seen most of those projects previously.

Senator STERLE: Can you tell me: of the 14, do they meet the definition that I read out?

Mr Davies : Those assessments are still underway, so it is hard to answer the question. We are still assessing those projects.

Senator STERLE: How long does it take you to assess a project?

Mr Davies : That also depends on the complexity of the project. It depends on how well the business cases have been put together. This is something we have been encouraging; it depends on how early we have been involved in the process so we can provide guidance in putting the business case together. It then depends on the responsiveness of the project proponent in providing answers to our questions. It is very hard to put a time scale on it.

Senator LUDLAM: You explained to us last time the distinction between initiative submission and project proposal. Do the 14 that you will not identify to Senator Sterle take in both of those categories or are they just the project proposals?

Mr Davies : Some of those would probably meet the category of initiative at this stage, but some of them are project proposals that have not been assessed at this point.

Senator LUDLAM: So, it is both?

Mr Davies : Yes.

Senator URQUHART: I have a few questions on a few different topics. The first one I want to start about is Hobart airport and the tender. There were some comments regarding the Hobart airport runway extension in 2015 from Senator Abetz that the extended runway could be operational in early 2016. It is now 2016 and we are no closer to a sod turning, let alone the thing being operational. When can we expect some actual progress on the project?

Mr Mrdak : We might have to ask the department. My understanding is that the airport is currently going through the finalising of its planning and tender process. We anticipate the next milestone payments will be made in the coming months to enable that to occur. We anticipate the work will probably commence this year, 2016.

Senator URQUHART: Will it be operational in 2016?

Mr Mrdak : The major development plan is out for public comment. It has just closed. There is then a period by which the Deputy Prime Minister has got to approve it. We anticipate work starting this year but at this stage it is unlikely that physical construction will be completed this year.

Senator URQUHART: Previously at estimates the department advised that just over a million dollars of the $38 million had been provided to the airport corporation. Can you now tell me how much has been spent and when you expect the project will be complete? Has there been any more than that million?

Mr Mrdak : Not to this point; we expect to make a milestone payment shortly.

Senator URQUHART: How much is that?

Mr Wilson : If you will just hold with me, I will get there. It will take me just a little while to find it.

Senator URQUHART: You just find it and I will keep going if you want to come back. I now want to ask some questions about the Summerleas Road and Huon Highway intersection, or the agreement there.

Mr Mrdak : We will get the right officer back at the table.

Senator URQUHART: During the estimates hearings in October 2014, the government said that they were hopeful of a start in 2015. I am assuming that, given now it is 2016 and nothing has occurred, the government is no longer hopeful. What is happening with that?

Mr Foulds : We are expecting that that project will start this year. The most recent advice from Tasmania is September this year.

Senator URQUHART: So, it will begin in September this year?

Mr Foulds : September this year. There are a couple of reasons for that. Mostly it is the completion of the pre-concept design has now occurred; noise modelling has been done; stakeholder engagement has been completed, and that took quite a long time and there was a lot of interest amongst stakeholders; and the other thing is climate. The earthworks for that project are quite significant, and they could not really be undertaken in the Tasmanian winter and the wet. September is when that is likely to happen.

Senator URQUHART: When do you expect completion?

Mr Foulds : Mid-2017, a little bit later.

Senator URQUHART: I just want to move onto the Brooker Highway junction upgrades—

Mr Wilson : If I can, before you move onto that—

Senator URQUHART: Yes.

Mr Wilson : We are currently assessing a payment in the order of $300,000 to $400,000 at the moment. We are anticipating that we will complete the assessment of that in the foreseeable future, probably by the end of this month. The payment will be made at that point.

Senator Colbeck: The project is running to their program.

Senator URQUHART: Their program or your program?

Senator Colbeck: Their program.

Senator URQUHART: The Brooker Highway junction upgrades are at Goodwood and Howard Roads. Can you give me an update on that and when you expect that project to be completed?

Mr Foulds : Construction commenced on 21 January and it is expected to be completed in 2017—probably mid-2017 at this stage.

Senator URQUHART: The Brooker Highway junction upgrades at Elwick-Goodwood?

Mr Foulds : Yes. Construction actually commenced on 21 January.

Senator URQUHART: In answer to question on notice 18 in response to myself, the department provided a list of projects on the Midland Highway and the funding in each year as requested. It says that $320 million is currently unallocated to specific projects. Can I confirm that amount is still correct?

Mr Foulds : Yes, I think that is the case, because the number of projects remains the same that have been approved and are either in planning, complete or under construction.

Senator URQUHART: When is it expected that this funding will be allocated to projects?

Mr Foulds : We are really in the hands of Infrastructure Tasmania and the Department of State Growth. They will put their proposals forward for the expenditure of that money. You know that Perth to Breadalbane has now gone forward and the contract has now been awarded for that one, so construction should commence reasonably soon. It really depends on State Growth putting the proposal forward.

Senator URQUHART: So, it is up to them to allocate that funding?

Mr Foulds : It is up to them to put proposals forward and then go—

Senator STERLE: It is the state's priorities.

Mr Foulds : Correct.

Senator URQUHART: In its agreed 10-year plan with the Tasmanian government, can the department advise what the next priority for the Midland will be after those listed?

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

Senator URQUHART: You just mentioned about the Perth-Breadalbane bypass.

Mr Foulds : Yes.

Senator URQUHART: Has any work been done on the concept, detail, design or planning work yet for the Bridgewater Bridge replacement or any other land acquisitions?

Mr Foulds : The Bridgewater Bridge development land acquisitions were completed in December 2015. As you know, there was $6.4 million allocated to that. The Department of State Growth is currently conducting a review of the work done to date on a replacement for the Bridgewater Bridge, with a view to developing a viable project. Again, it is in their hands to come forward with a proposal.

Senator URQUHART: Will Infrastructure Australia need to assess that project?

Mr Foulds : That would be a question for Infrastructure Australia, but I imagine it would because I can confidently predict the value of such a bridge will definitely be over $100 million.

Senator URQUHART: Is that a nod, Mr Davies?

Mr Davies : Yes, we are required to review any projects over $100 million.

Senator URQUHART: I have got three more questions. The first one is on the Tasmanian Freight Equalisation Scheme. Has there been any issue with the rollout of the new scheme since 1 January 2016?

Ms Zielke : No, although it is still early days. We expect that a number of the companies that would have been applicants would have taken leave over the January area. At this stage, we have not actually received any new applications. That was my most recent advice under the new part of the scheme.

Senator URQUHART: Have you had any concerns raised from any of the companies since it commenced?

Ms Zielke : No.

Senator URQUHART: My last question is about Australian Federal Police at Hobart airport. Is the department aware of any incidents that have occurred at Hobart since the removal of AFP officers from Hobart airport.

Mr Wilson : Yes, there have been a couple of incidents which have been responded to by Tasmania police in accordance with—

Senator URQUHART: Can you just outline what they are?

Mr Wilson : Off the top of my head I do not know the incidents. I have monitored the incidents that have been reported in the newspapers in the last six months, and at least since the last time we had a conversation there has been one, which from memory was a backpack in the back of a car that had been left. Tasmanian police responded within the arrangements that they have with Hobart airport and the issue was satisfactorily resolved.

Senator URQUHART: So, there have been two incidents?

Mr Wilson : My recollection is that there have been at least two incidents since the AFP have been no longer provided there.

Senator URQUHART: Thank you.

CHAIR: We will be back at 4.35.

Proceedings suspended from 16:20 to 16:34

CHAIR: We will continue with Senator Sterle?

Senator STERLE: I will not take long. I just wanted to follow on with my questions to IA. We were talking about 14 companies where you are conducting a business case review, being the thing that you do at IA. For reasons that I do not understand, but which I accept, at this stage you have not completed it so you cannot tell us who they are, which is fine, but we will hopefully know by May. Of the 14, was one of the projects WestConnex?

Mr Davies : We previously reviewed WestConnex and, as my colleague mentioned, we are reviewing the latest business case for WestConnex.

Senator STERLE: So is there a completed business case review for WestConnex?

Mr Davies : We had reviewed it previously but we are reviewing the current business case. It is underway.

Senator STERLE: So you have not done it yet?

Mr Davies : We have not finished it yet.

Senator STERLE: So if it has not been done or if you are still assessing it, am I wrong to assume that it cannot be on the IPL unless IA has reviewed the business case?

Mr Davies : We have two categories on the IPL. We have initiatives and projects.

Senator STERLE: You have what?

Mr Davies : Initiatives and projects.

Senator STERLE: Initiatives?

Mr Davies : Yes.

Senator STERLE: So which column is the WestConnex in?

Mr Davies : We have not published that document yet. We are just updating the IPL at the moment, so it is not published.

Senator STERLE: So it is not under initiatives?

Mr Davies : No. IA previously assessed WestConnex and that assessment is on our website.

Senator STERLE: But are you reassessing the business case?

Mr Davies : Yes.

Senator STERLE: Can you help me out? Why would you reassess the business case?

Mr Davies : Because the project is more mature now—

Senator STERLE: So the costing could be different?

Mr Davies : There is business case costing, benefits assessment. It is a more mature business case.

Senator STERLE: So it is not on the IPL yet?

Mr Davies : No, we have not published the IPL.

Senator STERLE: Like I said, I am not going to spring out of a box and arrest you or anything. If I had those powers half this lot here would not be here. What about the Perth Freight Link? Have you done the BCR?

Mr Davies : We assessed the Perth Freight Link in May last year and that assessment, again, is published on our website.

Senator STERLE: Which column is that in? Is it in Initiatives or Projects?

Mr Davies : Again, we have not published the infrastructure priority list yet, but that assessment is on our website.

Senator STERLE: So now because of the kafuffle over in the west with the sloppiness or whatever it was—no fault of you guys—will IA have to reassess the business case review in 12 months time?

Mr Davies : That will depend on how the Western Australian government proceeds with that project.

Senator STERLE: What does that mean?

Mr Davies : If they change the project, then I would assume they will send us a new business case.

Senator STERLE: And anything could happen in the west. Every time I pick up the local paper something else has changed but if they do not change anything, whatever the business case review was of late last year or whatever it was—

Mr Davies : May last year. So our assessment for the current project stems from May last year.

Senator STERLE: It was May last year, but now we think there is a 12-month delay—we have heard that from the department and that is out of the hands of you guys—so am I right to assume that as long as there is not one extra inch of kerbing or it does not move around a tree or whatever it may be, that the same business case review will apply so you will not have to reassess it or will you have to reassess it?

Mr Davies : We assessed the business case that was provided to us in late 2014. That assessment was done in May and that is the assessment that currently stands. We have not seen any other business cases to this point.

Senator STERLE: Unless the state government changes some of it?

Mr Davies : Yes.

Senator STERLE: How much would they need to change before you have to reassess it? Is it significant, such as putting another runoff in or a lane?

Mr Davies : Any substantive change.

Senator STERLE: I understand that but just out of curiosity what is 'substantive'? Is it rerouting or is it an extension? What would be 'substantive'?

Mr Davies : Our assessment is largely of the cost and the benefit, so if there was a major change to the cost or the benefit then we would expect to see it.

Senator STERLE: Do you mean like putting on a toll road or something like that?

Mr Davies : Tolling was part of the original—

Senator STERLE: Tolling was part of the original I believe up to the top near Midland and all of that but I did not believe—in case I have got this wrong—tolling extended to Roe 8. Does tolling apply to Roe 8 as well? I thought it was further up the Swan Valley.

Mr Davies : Yes. If there was a substantial change to the cost or the benefit then we would expect to see the business case.

Senator STERLE: So, if the West Australian government were to say, 'We are going to toll this now', they would have to come back with a new business case review for you to go through. Is that right?

Mr Davies : Really the tolling element is part of the funding mechanism.

Senator STERLE: I might let you have a chat to Mr Parkinson and then you can rethink. He is dying to get in your ear; I can see him.

Mr Davies : If the tolling regime had an impact on the benefit of the scheme then—

Senator STERLE: Would it? If it is not tolled now and all of a sudden it does toll, then it has surely got to change the impact on the benefit.

Mr Davies : Depending on what the—

Senator STERLE: I can look stupid because we do not have toll roads in Western Australia and everyone said that they are not going to have toll roads, but now the premier has changed his mind. I do not know how they work so I will ask you one more time. No, I will ask you a couple of times. As part of your business case review now for the Perth Freight Link is Roe 8 going to be a toll road? Am I missing something?

Mr Parkinson : I understand there is a tolling arrangement applicable to heavy vehicles.

Senator STERLE: I am sorry, but I am really struggling to hear.

Mr Parkinson : I can certainly speak louder as well. There is a tolling arrangement applicable to heavy vehicles. That is the extent of our understanding of it.

Senator STERLE: On the actual Roe 8 that has not been built yet?

Mr Parkinson : We would have to take that on notice.

Senator STERLE: You can take it on notice. So, if it is not and there is now, or there will be, then the business case review would have to be reviewed. Is that right?

Mr Davies : If there was any significant change to the business case, yes, we would expect to review it.

Senator BULLOCK: If someone put a bridge on the end of it you would have to reassess it.

Mr Davies : That would be a significant change.

Senator STERLE: So, if they stick a toll on it or sticking tolls on cars; that has answered it for me. You do not know how warm and fuzzy that just made me feel in getting that answer.

Would it be possible for IA to table changes to its assessment methodology a fair bit earlier than the business day before an estimates hearing in future? Is that possible if you could do that for us?

Mr Davies : That review was done in collaboration with state and territory governments and it was unfortunate timing. It was not timed to be so near to the committee. We apologise for that.

Senator STERLE: How does the detailed technical guidance change from the previous version?

Mr Davies : The technical component of it is largely regarding the cost-benefit analysis. That is a pretty standard approach.

Senator STERLE: So nothing has changed?

Mr Davies : As I mentioned earlier the improvements there are largely around the documentation and the templates that we are providing to get better presentation of the information from the jurisdictions and also attempt to streamline that process for them as well as us to make life easier. I think one of the other additions was providing a spreadsheet which just makes our life easier in terms of analysing some of the numbers they provide, so it was fairly mechanical stuff. The documents, themselves, are being simplified to, again, try to get a better product.

Senator STERLE: How does the guidance evaluate land value uplift from proximity to transport infrastructure when considering project benefits?

Mr Davies : That is one of the elements that we would look at in terms of the benefits of the project.

Senator STERLE: Can you tell us how it differentiates between roads, dedicated bus lanes, light rail and heavy rail?

Mr Davies : The evaluation of the benefits for transport projects is determined by the national transport guidelines, and we are closely aligned with those. They were updated last year and, again, that has been done as a collaboration with the department and the infrastructure working group. It is a national effort to actually update those guidelines.

Senator STERLE: So we are all on board. Has IA received any section 6 directions from the minister in the past year?

Mr Davies : No.

Senator STERLE: None?

Mr Davies : No.

Senator STERLE: Now, in just wrapping up, can you tell us where the 15-year plan and priority list is at?

Mr Davies : Yes. We are in the process of finalising the 15-year plan and the priority list and we hope to be able to publish that shortly.

Senator STERLE: Shortly, so there is no finite date set?

Mr Davies : No. We are finalising that as we speak.

Senator STERLE: So it will be done shortly?

Mr Davies : Yes.

Senator STERLE: How much has the plan cost to produce so far?

Mr Davies : Let me get the number exactly right. The plan has cost in the region of $1.3 million.

Senator STERLE: $1.3 million?

Mr Davies : Yes.

Senator STERLE: That is where we stand at the moment?

Mr Davies : Just for completeness, we spent about $1.5 million updating the infrastructure priority list.

Senator STERLE: Updating the infrastructure list?

Mr Davies : The priority list.

Senator STERLE: That is on top of the $1.3 million so far?

Mr Davies : It is.

Senator STERLE: Can you tell me what is the split between in-house costs and outsourced costs of the plan and list to date?

Mr Davies : Our staff of 16 have largely done the work on the plan in terms of the update to the priority list that I just mentioned and before that it was substantially supported by using external contractors and consultants.

Senator STERLE: Are you able to break those costs up for us at this stage? You can take that on notice.

Mr Davies : I would not be able to do that today but I am happy to take it on notice.

Senator STERLE: I know it is not far away. You are only down the road.

Mr Davies : Yes.

Senator STERLE: Thank you.

Senator KETTER: I was just wondering if you are able to give us a high-level indication of what sorts of areas the plan is covering. Where are the gaps that we need to look at? I particularly have a selfish interest in the state of Queensland, if you are able to shed some light on that.

Mr Davies : The plan is a response to the audit which we released last May. That identified a number of challenges that we are going to face with increased population, particularly in the four capital cities of Brisbane, Sydney, Melbourne and Perth. The transport modelling that was done alongside the audit identified that if we do not take action with further investment we could see costs of congestion of $53 billion by 2031. It is off the back of a population projection of 30.5 million people by 2031, so necessarily many of the gaps that were identified were through that transport modelling and that is what we are responding to with our plan that we are just finalising.

CHAIR: What do you say about 30.5 million? Where is that?

Mr Davies : The population forecast of 30.5 million comes from the ABS projections to 2031.

CHAIR: For which city?

Mr Davies : That is for Australia as a whole.

Mr Mrdak : It is 30½.

Mr Davies : Thirty and a half.

CHAIR: I thought you said 13.

Mr Mrdak : No. The ABS projection is 30½ million Australians by 2030.

CHAIR: Barring a human catastrophe. Between 2050 and 2070 China will be 1.8 billion and having--

Senator STERLE: It is three billion.

CHAIR: By 2070?

Senator STERLE: No, it would be more than that because of the two-kid policy.

CHAIR: Yes, and this huge demography problem and having to find half its tucker from somewhere else. It is a big problem for everyone.

Senator RICE: I wanted to start with the list of 14 projects, both initiatives or full projects. Are you able to share with us what that list is?

Mr Davies : We are just finalising that list. I was just referring to projects that we are currently evaluating there.

Senator RICE: On what grounds are you not able to share that list with us?

Mr Davies : That information is confidential between us and the state and territory governments and we committed to advise them before we make that information public, which is normal when we make an assessment. We advise before we publish the information.

Senator RICE: Even just the names of the projects?

Mr Davies : Yes.

Senator RICE: You cannot share just the names of those 14 projects with us on the grounds that that is confidential information?

Mr Davies : In terms of the project assessments we are doing some of those are already in the public domain, but not all of them.

Senator RICE: Can you go through them all so we can have the 14 on the list. We have got a couple. We have got WestConnex. We have got the Perth Freight Link. Can you name the other 12 and their status, whether they are an initiative or a full proposal?

Mr Parkinson : This list relates to proposed projects; that is, projects which have been submitted with a full business case which are currently under assessment. Because they are currently under assessment there is no decision as yet on whether they are projects.

Senator RICE: But this is the list of the 14 that you previously mentioned?

Mr Parkinson : These are from the list of the 14 that are in the public domain. Of those there is the inland rail proposal; the Smart Motorways M4 Upgrade proposal; WestConnex; the upgrade for Tanami Road; the Ipswich Motorway, Rocklea to Darra section; the Pacific Motorway upgrade, Mudgeeraba to Varsity Lakes; the Western Distributor; Murray Basin Rail project; Forrestfield-Airport Rail Link; Maldon to Dombarton Rail Link.

Senator RICE: So that is 10.

Mr Parkinson : We also have a draft in progress of the western Sydney airport business case.

Senator BULLOCK: Congratulations, Senator Rice. Senator Sterle asked that question about 10 times and could not get an answer, so well done.

Senator RICE: Is the draft of your western Sydney airport case currently classed as an initiative rather than a full project?

Mr Parkinson : It has been submitted as a project proposal and we are working with the proponent to finalise that business case.

Senator RICE: So is it the case that there are another three that you are not willing to share with us at the moment?

Mr Parkinson : There are others which are not in the public domain; that is correct.

Senator RICE: Is it another three? We were told before that there were 14.

Mr Parkinson : That would be correct.

Senator RICE: So it would be correct that there are another three that are not in the public domain.

CHAIR: Can you just confirm that the Junee roundabout is not on the list?

Mr Parkinson : Yes, I can confirm that.

CHAIR: I was just checking.

Senator RICE: So is the ground for not sharing those other three with us that you are claiming public interest immunity, essentially?

Mr Davies : As part of the consultation that we did following the release of the audit we have received over 200 submissions from state and territory governments, industry bodies, associations and individuals, but we have assessed all of those submissions. A number of those are more advanced in their development than others, but at this stage we have committed to all those entities that have submitted, including state and territory governments, that before we discuss any of those in detail we advise them of our intention to do so, so that they can manage their end.

Senator RICE: Is the Melbourne Metro Rail Link one of those three?

Mr Davies : At this stage we have not received a business case for Melbourne Metro.

Senator RICE: You have not received the business case so it cannot be a full proposal. Is it included in that list of those three initiatives?

Mr Davies : No. We have not received the business case for Melbourne.

Senator RICE: So it is not even on your list as one of those 14?

Mr Davies : No.

Senator RICE: Whether they are a full project or an initiative?

Mr Davies : No.

Senator RICE: Can you tell us what stage you are up to with your assessment of the Western Distributor, which is one of your projects?

Mr Davies : It is hard to describe the stage. We are in the middle of our review of that project and we are having ongoing conversations with the Victorian government, so it is underway. Again, it is a similar answer to my previous one, that how long the conversation takes and the toing and froing depends on both sides being quick with their answers to questions and providing additional information, so it is hard to put a time frame on it.

Senator RICE: We were told earlier this morning that the federal government's Infrastructure Investment Division hopes to complete its assessment of whether the Western Distributor should be eligible for money by the end of the calendar year, so what is your time frame in terms of relationship with that time frame?

Mr Davies : I am hopeful we will complete our assessment way within that time period.

Mr Mrdak : We were talking about this financial year.

Senator RICE: This financial year?

Mr Mrdak : Yes, 2015-16.

Senator RICE: So Infrastructure Investment wants to finish its assessment as to whether the Western Distributor should get federal funding by the end of this financial year?

Mr Mrdak : Based on the information we have Victoria still has a number of stages of its own assessment process to go but I think my officers, when we were referring to this year, we tend to talk in financial years.

Senator RICE: I thought they specifically said this calendar year but if it is this financial year then that is even—

Mr Mrdak : It may take longer. That will depend on the quality of the information and the processes with Victoria, but we would look to expedite the assessment as quickly as possible.

Senator RICE: So, if we are looking at the federal government finishing its assessment by the end of the financial year, you would be looking at finishing the Infrastructure Australia assessment before then—it would have to be. Do you have any sense of when it will be done in terms of your negotiations with the Victorian government?

Mr Davies : We have a good working relationship with the Victorian government and I am hopeful they will provide the additional information that we are currently asking for quickly and allow us to do our job.

Senator RICE: So the ball is currently in their court?

Mr Davies : Yes.

Senator RICE: I am interested in how Infrastructure Australia is going about its assessment of individual projects in light of your work on the development of the 15-year priority infrastructure plan. How can you tell whether one project stacks up compared to what might be better, cheaper or more sustainable ways of achieving the same transport outcomes?

Mr Davies : As I mentioned earlier, we have had a review of the process for developing projects and have endeavoured to strengthen the definition of the problem as part of that process, which is an area we saw for improvement. That has been a big part of the work that we have been doing with the jurisdictions over the last eight or nine months. That provides the basis for looking at a broad range of solutions. They are the solutions that will ultimately be assessed as part of an options assessment in the business case development process and our aim is to provide input through that process so that we can actually make sure that we get a fully rounded business case at the end of that process.

Senator RICE: What you are saying is that the business case for each individual project has to include an assessment of all the other projects?

Mr Davies : An assessment of the options considered, yes.

Senator RICE: What level of assessment would need to occur for all of the other possible solutions, the other ways of fixing that transport problem?

Mr Davies : It would very much depend on the problem.

CHAIR: Do you include in your calculations the predictions of the future for climate and weather?

Mr Davies : As part of the project assessment there is an environmental assessment.

CHAIR: I bet you do not. Do you look to the growth areas? I mean the science is probably 50 or 60 per cent right on the anticlockwise movement of the weather—and you probably know nothing about this stuff—and some of the pastoral country in the top end of Western Australia and so on becomes dry land farming; it becomes agricultural country, like Fitzroy Crossing, for instance, and the potential increase in productivity. Do you include that?

Mr Davies : Again, it depends on the project. That would certainly be part of the assessment of the project.

CHAIR: Does someone give you say a map that says, 'This is what Australia could look like in another 30 or 40 years'?

Mr Davies : Maybe not 30 or 40 years but certainly we would expect to see projections with any business case that we were assessing.

Senator RICE: Can I go back to my questions please, Chair.

CHAIR: Maybe.

Senator RICE: I can think of three other projects that would need to be looked at in the context of the Western Distributor, Metro Rail being one of them. From what we know, from the very reduced amount of business case that has been made available by the Victorian government, consideration of the Port Rail Shuttle is not included in it. Comparing then the Western Distributor with the much more cost-effective West Gate Distributor, which does the same thing for getting truck traffic off the streets of Yarraville and Footscray for about a fifth of the cost, would you be requiring all of those projects to be properly assessed as part of the Western Distributor business case?

Mr Davies : As part of our assessment of the business case we are looking at the strategic fit of that particular solution within the jurisdiction's broader transport solution in that example. We would expect to have that described as part of the business case so that we can understand the strategic fit. The selection of projects is a job for the state government. Subsequently, part of our role is to assess their chosen solution and test the strategic merit of that solution, but also look at the viability of the business case in terms of the cost and benefit.

Senator RICE: The Port Rail Shuttle, as a case in point which has already got $37 million of federal funding, has not been included in the traffic modelling for the Western Distributor. Would it be acceptable to Infrastructure Australia for that omission to continue to be there?

Mr Davies : That is not a project that we have looked at.

Senator RICE: Are you saying that in order to assess the business case of the Western Distributor you need then to look at all of these other potential options for meeting the transport problem that they are proposing a solution for?

Mr Davies : Typically, the broader network development options would be something tested through scenario testing and the modelling for that specific project. That is certainly something we are looking into at the moment.

Senator RICE: In this case we have got the Port Rail Shuttle that is not included in their transport modelling, at least that is what their publically available information indicates. Is it acceptable to you if the modelling does not include projects? It seems to me it is a big gap in looking at the broader potential transport solution.

Mr Davies : I cannot speak of the specifics of that example, but certainly as part of our assessment we look at the broader system modelling for transport solutions. That is one of the areas we typically ask for scenario testing to be undertaken.

Senator RICE: Will you be insisting on a comparison of the effectiveness of the Western Distributor with the other option that was proposed up until 12 months ago of the West Gate Distributor, which is a much less expansive project but would serve the same purpose in terms of getting trucks to the port?

Mr Davies : We are currently assessing that business case. We will make our assessment public once that is completed.

Senator RICE: Thank you.

CHAIR: I take it that refers to Melbourne. I am not too sure why we need a central business district anymore. You can do a lot of things on the kitchen table at home these days that you used to have to go into the office to do. Do you think through what business is going to look like in another 20 years? Why do we need a central business district? People go to an office now and they send an email to the person. They do not even talk to them. The body corporate I am involved in down here in Reid drive me insane with emails, but they will not talk to you.

Is there any need in the future for Infrastructure Australia to look at what a modern city will look like? I have had the view for a long time that, for instance, they should have built the fast train from Sydney to Melbourne, which was a $1.4 billion cost back in the 80s, because water is going to be an issue for some of the places, especially Goulburn, Sydney and Melbourne; Sydney is going to have a water problem if it keeps growing.

Places that are on the Murray and on the Murrumbidgee that have got a really reliable water supply could have been half a million people. Do you think of it like that at all or do you just think it will stay the way it is? If you are 50 miles out of Melbourne you have got to go into the CBD to go to the office. Is that not looking back instead of looking forward?

Mr Davies : As mentioned earlier, we are just finalising the 15-year infrastructure plan. The growth of all of our cities is a focus of that plan. We look forward to sharing that plan with you.

CHAIR: Why would you need to go to the 50th floor of an office and sit in an office where everyone else is sitting on their computers, not talking to one another, et cetera, when they could be at home doing it?

Senator RICE: Could I ask just one more question? I just wanted to get a specific response. With those three projects that I have mentioned, the Port Rail Shuttle, the West Gate Distributor and the Metro Rail Tunnel, can you tell me whether they are specifically included as part of the network options that are being included in the business case for the Western Distributor that you are currently assessing?

Mr Davies : As I mentioned earlier, we are in the middle of doing our review of that project.

Senator RICE: But can you tell me specifically: are those three projects included in the network that is being assessed as part of the business case?

Mr Davies : Once we have completed the review of the project we will share that assessment as part of the normal process.

Senator RICE: Are you not willing to tell me whether those projects are included in the business case?

Mr Davies : That information is confidential between ourselves and our colleagues in Victoria. Again, once we have completed our assessment we will make that information available.

Senator RICE: Are you essentially claiming public interest immunity on the grounds of confidentiality between the states?

Mr Davies : We are only partially through the process of making our assessment, so the assessment is not completed.

Senator RICE: For us it is very frustrating in the public because we do not have access to this information. This information is redacted from the business case that is available to us.

Senator BULLOCK: Why is it confidential? She is not asking for the outcome of your report, she is just asking whether certain things form a part of the consideration. You do not have to comment; you might think it is the worst idea anybody ever had. We are not asking about that. We are just asking you whether it is among those things you are considering.

CHAIR: I could think of reasons why. It could affect the market value of things.

Senator RICE: It is just whether assessment of those three other infrastructure projects is included.

CHAIR: You have had your go. It was not that long ago that we had telegrams and you had to have Morse code, and we are now at this, which has got more power than the computers going to the moon. We have come a long way in 20 years? The demand for where you are and what you can do from where you are might be completely different. Do you not figure that?

Mr Davies : As part of the development of the 15-year plan, we have been thinking about some of these opportunities and certainly the role of technology is something that is part of that consideration. We look forward to sharing our plan with you when we launch it shortly.

CHAIR: It would be nice to think that now you are thinking about those sort of things so that when the plan comes out you do not say, 'Oh, we forgot about that.' Where are we going, Senator Sterle?

Senator STERLE: Surface Transport.

CHAIR: Okay. Senator Conroy.

Senator CONROY: I wanted to talk around some issues around the MV Portland licence. Has the department prepared guidance for the minister's delegate that is designed to assist in how he or she should have regard to the object of the act in deciding application for a temporary licence under section 34(2)(f)?

Mr Sutton : We do not have any explicit documentation in that regard, but it is certainly a key factor that we take into account when assessing temporary licence applications.

Senator CONROY: Who is the minister's delegate in this case?

Mr Sutton : Formally, the delegate can be an SES officer in STP division, the executive director and the deputy secretary. It is generally the general manager of the Maritime and Shipping Branch, which makes decisions as the delegate.

Senator CONROY: You used the word 'generally'. Is that the person who made the decision around the MV Portland licence issue? If I was to say to please bring that gentleman to the desk, would you say yes, but it was not him?

Ms Zielke : The delegates for the coastal trading scheme are actually in front of you at the moment.

Senator CONROY: Mr Sutton managed to explain all of that without actually saying it is him. Were you the person?

Mr Sutton : They do change, but I can confirm that it was me that signed off on the temporary licence on 22 October.

Senator CONROY: Did you prepare any advice for yourself?

Mr Sutton : No.

Senator CONROY: What weighting would objects 3(a) to (d) be given, for example, in circumstances where the minister's delegate knows that the decision to grant a temporary licence will result in a general licenced vessel being withdrawn permanently from the Australian coast? I have those subclauses here.

Mr Sutton : Section 34 sets out the requirements of the act for when decisions are made on temporary licence applications. Key factors that are at play relate to—

Senator CONROY: Section 34 does not override the objects of the act, right? Nothing overrides the objects of the act.

Mr Sutton : No. In fact, section 34(2)(f) explicitly says that the object of the act is one of the factors that is taken into account in making a decision on a temporary licence. Key factors which are taken into account in all temporary licence applications are whether there has been a notice in response to the application and whether there have been written comments received from third parties in relation to an application. In relation to the application that you are talking about, there was neither a notice in response received or comments received from interested third parties.

Senator CONROY: They were probably too busy being forcibly marched off from the ship to have time to fill out a form to send to you.

Ms Zielke : Are you interested in who can actually make a notice in response?

Senator CONROY: Okay, help us out, who else—

Ms Zielke : I am just conscious that it is not crew who can make a notice in response.

Senator CONROY: Would the union?

Ms Zielke : The union can provide comments but other general licence holders are those who would make a notice in response for an Australian ship.

Senator CONROY: None of that overrides objectives 1(b), (c) or (d).

Mr Sutton : As I indicated, in section 34 the object of the act is one of the factors which—and to quote the section—'The minister may have regard to the following', and section 34(f) is the object of the act.

Senator CONROY: Just so everyone in the room is clear, the object of the act 1(b) says, 'Facilitates the long term growth of the Australian shipping industry', and (c), 'Enhances the efficiency and reliability of Australian shipping as part of the national transport system', and (d), 'Maximises the use of vessels registered in the Australian General Shipping Register in coastal trading.' Those are the three I am talking about in particular; are you familiar with them?

Mr Sutton : Yes, but I would also point out that the object of the act covers all of the provisions from (a) to (f), including (f), 'Ensures efficient movement of passengers and cargo between Australian ports', and (e), 'Promotes competition in coastal trading.' Certainly when the delegate considers a temporary licence application we look at all aspects of the objective.

Senator CONROY: We will come to that. You have led right into my next question. What weighting is given to the loss of Australian maritime jobs in the coastal freight trade and the replacement of those jobs in coastal freight trade by foreign workers being paid at any rate their employer sees fit to pay, given the ILO minimum rate for seafarers is not enforceable in any jurisdiction?

Mr Sutton : I would point out that in this case, at the time the application was made, what the applicant tells us is that if they want to undertake these voyages using a temporarily licenced ship, we check the notice if there are notices in response. We do not know what the general licence holder is planning to do with its licensed vessel.

Senator CONROY: How then do you make a judgment based on (b), (c) and (d) if you do not know that they are taking the ship out of service on the run in question and replacing it with a foreign ship? How do you inform yourself of the efficiency and reliability of Australian shipping and maximising the use of vessels registered in the Australian General Shipping Register? Do you just pretend that you do not notice that another ship was on its way to replace that run? Did you not know that when you made your decision?

Mr Sutton : We did not know that. When we are considering applications based on the legislation, we are reliant on the notice in response procedures and the opportunity that is given to third parties to provide comments in relation to particular applications.

Senator CONROY: I am talking about what you chose to know or not know, Mr Sutton, as the delegate in this question. Or was it you, Ms Zielke?

Ms Zielke : I am conscious that the process is actually in place to assist with that particular area. That is why, under the process, all general licence holders are informed of all of those voyages and asked whether they would be able to take those goods. In effect, you have checked with industry in relation to whether they can carry those goods.

Senator CONROY: I am sure Senator Williams will have an issue here. You have got a situation where the company says to you they want a temporary licence for a foreign flagged vessel that will permanently replace the Australian flagged vessel and the Australian crew.

Ms Zielke : That is not information that we have received.

Senator CONROY: That is my point. You are choosing not to ask. That is the point. How could the delegate not ask whether or not there was going to be a replacement ship?

Ms Zielke : The legislation that we are currently making these judgments against is the legislation that came into effect midway through 2012.

Senator WILLIAMS: And who was in government then? And it stinks no matter when it came in.

Ms Zielke : We are applying ourselves to those rules. Can I just note that a majority of the goods carried around the coast—

Senator CONROY: It is very clear what the terms of the act are, Senator Williams: The act says you must maximise the use of vessels. Whether the delegate chose to make a phone call to find out whether or not replacing an Australian vessel that is registered with an Australian crew with an overseas vessel, which it clearly was identified as with an overseas crew, maximises the use of vessels. I would have thought it is information that is absolutely germane to you making your decision.

Senator Colbeck: That is why the rest of the industry was advised of the fact that there was going to be a change and the opportunity for them to say, 'We can do it', or to lodge an objection. Your government drafted this legislation and I note Senator Sterle's comments with respect to its quality or otherwise.

Senator CONROY: No, it is pretty straightforward here. It is wilful ignorance if you did not know.

Senator Colbeck: You portrayed us that way, but your government drafted it. Minister Albanese put it into the Parliament and hailed it as something that was going to save the industry.

Senator CONROY: It would not have happened on our watch. You are the one who sold out the Australian workforce in this case.

Senator Colbeck: Not correct. Your legislation, your government; so do not try and put it onto us.

Senator CONROY: Mr Sutton, you must have known an Australian ship would go out of service when you issued that temporary licence.

Mr Mrdak : If I may—

Senator CONROY: Are you going to seriously say that you did not know that?

Mr Mrdak : If I may—

Senator CONROY: No, I am sorry, I would like Mr Sutton to answer the question. He is the delegate. He is the legally responsible person under an act of Parliament. I would like his answer. I do not want dissembling by you, Mr Mrdak. As the decision maker in this instance, Mr Sutton, are you seriously telling this committee that you did not know the Australian ship would go out of service when you issued a temporary licence to a foreign flagged vessel?

Mr Sutton : The government regulates. The entire act relies on commercial decision making by shipping operators. In administering the act, we do not attempt to judge what a shipping operator will do. There is nothing in the act that requires a shipping operator to do things which are not economic, but at the same time we would not want to prejudge what a shipping operator's motivations are or what strategy they have in the future—

Senator CONROY: You are certainly not going to get it if you do not ask them, but you actually have not answered my question, Mr Sutton. You have given me a two or three minute answer there that did not actually address the question that I asked you. My question was very simple: are you putting to this committee that you did not know an Australian ship would go out of service when you issued that temporary licence?

Mr Sutton : The short answer—

Senator STERLE: Just try yes or no. Just be truthful; tell the truth. You cannot get in trouble.

Mr Sutton : I did not know it was going to go out of service. May I add that a key factor in that was not just the absence of notices in response, it was the absence of comments from either shipping associations or the maritime unions in relation to the temporary licence application.

Senator CONROY: Do you not believe that you have to inform yourself about section 1(d)? Do you not need to draw conclusion about maximising the use of vessels registered in the Australian General Shipping Register?

Ms Zielke : That is the purpose of asking industry if they can carry the goods.

Senator CONROY: How would the industry know what a commercial decision of one of its competitors is about? How could they know to tell you what the plans of Alcoa were?

Mr Mrdak : Can I come in here? At the risk of your accusing me of dissembling, let me put some context in this, if I might. Often, Australian operators will seek temporary licences for additional voyages utilising foreign ships. That is to carry ad hoc cargo, it is to carry occasional. It is those circumstances which Mr Sutton as the delegate deals with regularly. It has not been practice for Australian operators to tell us that they are removing a vessel. In this situation, it is my understanding that my department was advised of an application for a temporary licence. We judged that according to the fact that often Australian general licence holders do utilise temporary licences to carry cargo. That is the basis on which my officers as delegates dealt with this matter. With due respect, you are asking whether my officers have wilfully neglected to do—

Senator CONROY: Wilfully ignorant was the word.

Mr Mrdak : What I would say to you is that my officers, in my opinion, have dealt with this as they do other temporary licence applications from general licence holders. If the operator of this company at the time of that had the decision to remove the vessel or subsequently took a decision to remove the vessel, that does not invalidate the fact that my department has acted in accordance with the act.

Senator CONROY: No, if he chooses not to answer the question, is this ship replacing permanently an Australian vessel; if you do not think that is a question that the delegate who is charged with enforcing the law of Australia about maximising the use of vessels registered in the Australian General Shipping Register in coastal trading should ask and if you do not think they are connected then I cannot help you, Mr Mrdak. It seems fairly obvious to me that one of the questions you would ask Alcoa is, 'Do you intend to permanently replace an Australian flagged vessel?'

Mr Mrdak : The evidence my officers are providing is that there were no grounds to have a suspicion to that effect at the time we processed the application.

Senator CONROY: What about the intention of the government that put in place the current legislation, which this Parliament has chosen to leave in place? I appreciate we tried to repeal. What about enforcing the objectives of what the government which put in place of the act was? Or should we interpret it that when the government changes to the will of the new government—

Mr Mrdak : No. The department operates the act as set out by the Parliament. It is a matter for the Parliament to change the act. The department does not do that. We apply the act as we consistently do. If there are errors in the way of which we have applied the judgment, that is a different matter, but I can assure you—

Senator CONROY: It would not have happened on our watch. It would not have happened if this legislation had been properly enforced.

Senator Colbeck: It did happen on your watch. That is quite clearly demonstrated by the figures around the amount of—

Senator CONROY: For two and a half years—

CHAIR: Order!

Senator Colbeck: That is right. The reduction in the number of vessels and the reduction in the amount of freight and the reduction in the unions all occurred under your watch; they did not all occur under our watch.

Senator CONROY: For two and a half years—

CHAIR: Order! This committee has heard evidence in separate hearings of this matter in great detail. It is obviously a cock-up which both governments, previous and this one, are party to. This government has got to fix up the cock-up from the previous government. It is very messy, but making it into a political thing is not going to solve anything. You are no angel in this, Senator Conroy.

Senator CONROY: Are you asking a question or are you giving us a stream of consciousness?

CHAIR: We are all at fault.

Senator CONROY: No, this would not have happened on our watch.

Senator Colbeck: What did happen on your watch? This is your law, that is the point. You can deny it all you like.

Senator STERLE: It is stitch-up between the minister and—

Senator Colbeck: The reduction in the number of vessels, the reduction in the employment and the reduction in the amount of freight on the Australian coastline all happened on your watch as a result of your—

Senator CONROY: You cannot be serious. You absolutely cannot be serious.

CHAIR: It is very serious.

Senator CONROY: You might want to find—

CHAIR: Order! Senator Conroy, you have the call.

Senator CONROY: Does the minister's delegate take into consideration the financial viability of a company which is dependent on the product to be shipped under licence in the granting of a temporary licence?

Mr Sutton : I am just reminding myself about the terms of the act. Yes, as I say, the decisions on the act are made applying section 34, which specifies the criteria under which the decisions are to be made. The issue of the financial viability—in this case, are you referring to Alcoa?

Senator CONROY: No, it says the financial viability of a company which is dependent on the product to be shipped. I am assuming it is Alcoa that is being referred to.

Mr Sutton : What we did do in this sort of situation is, if there are comments received from third parties, we will consider those comments. I should say, specifically in this case, in relation to this specific application which was issued, we did not look specifically at those factors. If I could add though, when the court action had been commenced, Alcoa put in a subsequent application for a temporary licence to cover the contingency that the Federal Court found against the issue of the licence.

CHAIR: Albo is just catching him up.

Senator STERLE: Can I just clarify something there? So, the temporary licence that you first granted was a one-off voyage was it?

Mr Sutton : No, it was covering 17 voyages.

Senator STERLE: Then what?

Mr Sutton : What happened was, when the Maritime Union of Australia commenced Federal Court action, Alcoa lodged another application to cover the contingency that the Federal Court would find against the—

Senator STERLE: So, from when Alcoa first applied to you until the time when the guys through the MUA took industrial action on the MV Portland, how many trips had it done?

Mr Sutton : I think there had been just one voyage.

Senator STERLE: So, what would happen? The ship was being sold and it was going anyway, so Alcoa can be cute and have one or they could have 30 or they could have 17. There was nothing stopping them being cute, was there, unbeknown to you, although I think if they are asking for 17 they are up to something because ships do not just sort of sit there and do some fishing.

Mr Sutton : When the second application was lodged on this occasion the maritime unions did provide comments on the application. When those comments were received we initiated processes to consider those in the context of the decision on the application. One of those issues which was raised was the financial viability of Alcoa and we undertook consultations to ensure natural justice. We consulted with Alcoa about the arguments that had been raised by the maritime unions and—

Senator STERLE: I am going to cut you off. You know Alcoa did not even have the decency to talk to the guys. You know Alcoa, this wonderful company that you are talking about who you are consulting with, the boys were half way around the voyage. They had taken off from Kwinana and one of the crewmen found out from the local Portland rag that his job was gone, so I would not be blowing too much wind up Alcoa's bum at the moment.

CHAIR: Could I just ask a question? In terms of the viability of Australian coastal shipping, I am concerned not as a politician but about the wellbeing of Australia and its security. The US and other places have had to come to terms with this. Under the arrangements, which as I say were put in place by a previous government, the law, was it that you could do two trips and then you could have a revamp of your wage structure on the ship? Are you across that part of it?

Mr Sutton : Yes. Under the Coastal Trading Act it is linked to the Fair Work Act and the Fair Work Regulations. For a ship undertaking voyages under a temporary licence from the third voyage onwards it is covered by the Fair Work Act and, in particular—

Senator STERLE: Yes, they will police that!

CHAIR: I mean we are all likeable rogues—the human species—so you would never get to the third trip, if the ship has done two and on the next trip has got to pay Australian wages. So, you know, I am the Columbian master of this ship. We do not even know who owns the bloody thing. Correct? We do not know who owns these ships. Correct?

Mr Mrdak : Information on the ownership of the ship is provided to border agencies at the time they enter the—

CHAIR: You do not know.

Ms Zielke : At the flag of convenience hearings we talked about the fact that under this piece of legislation you do not need to know who the owner of the ship is, but that is not to say that information is not easy to establish, and that was the evidence that Mr Kinley from AMSA gave.

Senator STERLE: We know. We have been through this. You cannot tell.

CHAIR: So I am the Columbian master and I could have everything from dynamite to cocaine in the bottom of the ship, but you do not know who owns it. So I say, 'This is the third trip coming up. We'll duck off somewhere else for a trip and then we can go back and do another two.' Is that right?

Mr Sutton : The situation varies depending on the particular market sector and trade that they are engaged in; for example, container ships that are on regular international rotations around Australia will usually exceed the three voyage limit because of the nature of those—

Senator STERLE: Three in a row? Three voyages in a row?

Mr Sutton : Yes. They would do a lot more than three.

Senator STERLE: And they are all paying Australian wages and conditions, are they?

Mr Sutton : That is correct.

Senator STERLE: You can prove that?

Mr Sutton : There are other Australian ships that involve bulk carriers which are involved in regular temporary licence trades and they certainly, again, exceed the three voyage limit regularly.

Senator STERLE: Are you talking about the gas off the North West Shelf, are you, or what?

Mr Sutton : There are LPG tankers that—

Senator STERLE: I know the answer and that is why I threw it in, because it is too cute to answer.

CHAIR: Order!

Senator STERLE: It is far too cute.

CHAIR: That is your judgment.

Senator STERLE: You cannot guarantee that this MV Portland and the work that is being done by MV Portland by these foreign crews are going to do three in a row and pay Australian wages. You know damn well the chair is right. You see them for two and then you will not see them again.

CHAIR: So, in the national interests—

Ms Zielke : That is not—

Senator EDWARDS: I cannot hear.

CHAIR: Order!

Senator EDWARDS: I cannot hear.

CHAIR: In the national interest and take away all the politics; part of the viability of Alcoa was the savings on this of allegedly $5 million or $6 million.

Senator STERLE: Six to eight.

CHAIR: There were savings of six to eight million by getting rid of the ship, or whatever it did, but this is not your problem, Mr Sutton; it is the nation's problem and at the same time Australia misses out on several hundred million dollars in tax from Alcoa. How stupid are we to think that that is a proposition, to save $6 million and, you know, go down in the middle of the night on a ship and cart them all away and at the same time ignore the fact that these bastards do not pay any tax? Pardon my language.

Senator STERLE: That is right.

Ms Zielke : I just note that to put this in proportion as well—and no disrespect to the Australian crew but just for your information—in relation to cargo moved around the coast, we have a situation where less than three per cent of that at the moment is actually moved by Australian ships.

Senator STERLE: No. Hang on.

Ms Zielke : And the rest of it is moved by foreigners.

Senator STERLE: That is disingenuous and you know darn well, Ms Zielke, that the freight movements are measured in millions of tonnes per kilometre.

Ms Zielke : Yes.

Senator STERLE: If you can work out how to float a ship down to Newman, Tom Price, Paraburdoo and whatever, well then you can come back to me with some real figures. Do not try that one.

CHAIR: Senator Conroy, you have got the call.

Senator STERLE: That is the nonsense that comes out of the minister.

Senator CONROY: Has the delegate produced reasons for the decision to grant a temporary licence to Alcoa made in October 2015 for some 17 voyages up to October 2016 for the transportation of alumina from WA ports for MV Portland? Have you produced written reasons?

Mr Sutton : I think the answer to that is yes. It was done in the context of the Federal Court action that was initiated by the Maritime Union of Australia.

Senator CONROY: Are they publicly available? Were they tendered in court or were they an in-camera briefing?

Mr Sutton : They were certainly tendered in court.

Mr Mrdak : We would be happy to take on notice to provide those to you.

Senator CONROY: Why do you need to take that on notice if it was tendered publicly in court?

Mr Mrdak : Well, I do not have them with me. If they have been tendered in court we will provide them to the committee.

Senator CONROY: Surely an email can get them to the committee reasonably quickly.

Mr Mrdak : I will endeavour to do that.

Senator CONROY: Thank you. Has the delegate produced reasons for a decision to grant a temporary licence to Pacific Aluminium Services made in December 2015 for some 30 voyages up to December 2016 for the transportation of alumina from the Port of Gladstone to the Port of Newcastle?

Mr Sutton : For that one the answer is no, other than the documentation that we produce as standard when we consider permit applications.

Senator CONROY: Could you provide the committee with the reasons?

Mr Sutton : We can certainly provide the documentation associated with that.

Senator CONROY: Does that include the reasons?

Mr Sutton : Well, the reasons—

Senator CONROY: Do we need to have a court case for me to get the reasons that you made the decision?

Mr Sutton : The reasons for the decision were, as I have indicated earlier, that—

Senator CONROY: No, this is a different—

Mr Sutton : Yes, I realise that but, again, the criteria in the act which are considered and applied when the delegate makes the decision, the key factors were that there were no notices in response. There were no comments received from interested parties in the application, and the decision was made on that basis.

Senator CONROY: Was the issue of freight rates a consideration in the delegate's decision to grant the temporary licence to Pacific Aluminium?

Mr Sutton : It was not an issue that arose in the context of the application.

Senator CONROY: I am, again, confused by this process and we have discussed this already, but if nobody comments then you do not have to inform yourself of any other facts surrounding the reason for the application?

Mr Sutton : Again, it gets back to the architecture of the act put in place in 2012—

Senator CONROY: No.

Mr Sutton : which was the key mechanism for—

Senator CONROY: I do not accept your interpretation. It is quite clear that one of the objectives talks about maximising. The word 'maximising' is a fairly straightforward word. It does not need a Wikipedia entry to find it. It is maximising but you are not asking questions about whether or not your decision maximises Australian shipping. It is clear that you have sought no information whatsoever. Other than your letters to stakeholders you have not sought to inform yourself. That is the definition, to me, of wilful ignorance, Mr Mrdak.

Mr Sutton : Again, I would comment that the object of the act has six parts.

Senator CONROY: Yes, but—

Mr Sutton : You are focusing on one part of them.

Senator CONROY: If you do not inform yourself of one of those six parts I would put to you that you are failing to carry out your task. I accept that there are six. I totally accept that you have got to weigh the six. My problem here is you have not sought to inform yourself about one of the six. It is clear you have not. You have admitted that you did not bother to find out whether they were seeking to permanently replace something with a foreign flagged vessel, so you cannot have carried out a weighted consideration of the six points if you did not seek any information about one of the points.

Mr Sutton : The comment that I would make there is that in terms of the practical administration of an act the delegate has to consider probably four or five applications a day for every day of the year. The act is structured and we designed the administrative processes to make the administration of the act as practical as possible. A key focus of the act, a key element of the act, to decide where there are issues that need to be focused on is the notice in response mechanism and the opportunity that third parties are given to comment on the act. That guides the extent to which the prioritised consideration of the parts of the legislation.

Senator CONROY: You are the delegate. You cannot shift it onto people who might reply to you or not. You are the legal entity. You are the legal authority. You have a legal responsibility to avail yourself of all the facts, and a simple question to the company is: is this temporary licence a replacement for an existing service? It is a really simple question. I would have thought that is a fundamental question for you to ask if you are wanting to inform yourself about one of the criteria. If you do not ask that question you cannot possibly be making the test of, 'I have considered all of the facts to allow me to make a weighting.' It may be that you still would have made the same decision but the fact that you actually have not bothered to inform yourself about one of the key criteria I find astounding. I cannot understand how you can just sit and say, 'No, I didn't know any of the facts about whether it was a permanent replacement.'

Mr Sutton : All I can say is that we had no basis for what, with the benefit of hindsight, was the commercial decision by the general licence holder to withdraw—

Senator CONROY: You could have asked them. You will never have a basis if you do not ask them.

Mr Mrdak : As I went back to—

Senator CONROY: I am happy to move on because I have some questions for you, Mr Mrdak.

Senator Colbeck: If you expect the officer to make that assessment and have that understanding—

Senator CONROY: He is a legal authority.

Senator Colbeck: I have not finished yet. There is an advice process that goes out to all other stakeholders in the sector and no-one else asked the same question, including the MUA, who were advised as part of that process. If the MUA do not ask that question or raise that concern why would you expect the officer to? I mean not even the MUA—

Senator CONROY: The MUA is not in a position to know the thinking of the corporation.

Senator Colbeck: You are talking about—

Senator CONROY: And they have no right to ask.

Senator Colbeck: You are talking about a number of instances of this occurring now; the first time for 17 voyages, the next time for 30-plus voyages. You accused the officer of not asking the question and yet you expect him to understand what is going on and yet someone who is very active in the operations of the sector asks no question themselves so I do not see why you expect the officer to ask the question when the union have not asked the question at all.

Senator CONROY: Because he is actually the legal authority.

Senator Colbeck: The reason that the union is involved is because they are specifically written into the act to be able to ask those sorts of questions. So, you expect something—

Senator CONROY: I expect—

Senator Colbeck: There have been a number of these instances occurring.

Senator CONROY: I will take you to Senator Williams and I will put it to you, Mr Sutton, this way. If, in the future, you get an application so that you can inform yourself around section (d), maximising the use of vessels registered in the Australian General Shipping Register, as you mentioned before in hindsight, so I am saying with foresight now any future applications along these lines, would you consider it relevant for you to ask whether or not this is going to be a permanent replacement?

Mr Sutton : If there are reasonable grounds for having those sorts of concerns, yes, we certainly would; the delegate and the shipping business unit who supports the delegate within the department would ask those questions.

Senator CONROY: I will move on from there. Thank you. Mr Mrdak, when did the decision of ASP Ship Management to remove the ratings and catering crew of the MV Portland, either before the event or afterwards, at approximately 1 am on 13 January 2016 come to your attention?

Mr Mrdak : It was brought to my attention when I returned from leave. I saw the media reporting of the event while I was on leave and then on my return from leave.

Senator CONROY: Without wanting to in any way cast aspersions about well deserved leave, when did you get back after the 13th?

Mr Mrdak : I returned from leave on 23 January.

Senator CONROY: So, who was acting in your capacity in your absence?

Mr Mrdak : My deputy secretary, Mr Wilson.

Senator CONROY: Mr Wilson, would you like to come to the table. You thought you were going to get out with a quiet one, didn't you? Could I put on the record on behalf of myself and I am sure members of the committee that we will miss your presence in the future and thank you for all your many, many years of service for the Commonwealth and for the people of Australia. Now, when did the events come to your attention in Mr Mrdak's absence; before the event or afterwards?

Mr Wilson : After the event.

Senator CONROY: Who notified you and by what means did the action or the proposed action come to your attention?

Mr Wilson : I read it in the news the day after, I believe.

Senator CONROY: And did you then say, 'I had better find out about that'?

Mr Wilson : I left the issue with Mr Sutton and Ms Zielke to manage.

Senator CONROY: Upon the action or the proposed action coming to your attention what action did you take? I think you have answered that question that you left it to Ms Zielke and Mr Sutton. I can then move down the chain to Ms Zielke. Were you notified prior to the event or after the event that this would happen?

Ms Zielke : I became aware when the media reports came through.

Senator CONROY: And what action did you take upon it coming to your attention?

Ms Zielke : I was aware of it and aware that we would receive questions in relation to it.

Senator CONROY: Did you have any communication with the CEO or any other officer of AMSA upon becoming aware of that action, either before it occurred or afterwards?

Ms Zielke : I did ask questions of AMSA. At the time we engaged with AMSA in relation to a current situation.

Senator CONROY: And what questions did you ask AMSA?

Ms Zielke : I just asked about the claims that were being made in the media and what the basis for their decisions were.

Senator CONROY: At a previous committee hearing you self-identified in a discussion with a Mr Milby that he should reflag his cruise ship under the new proposed laws.

Ms Zielke : No, that is not correct.

Senator CONROY: I was there, I am afraid.

Ms Zielke : That is not what I said.

Senator CONROY: It is correct and Mr Sutton made it clear that the two of you did have that discussion.

Ms Zielke : That is not what I said.

Senator CONROY: I was present and I will defer to Hansard.

Ms Zielke : At that same hearing I made it very clear that I have never given that advice to Mr Milby.

CHAIR: Order! Senator Conroy, order!

Senator CONROY: I am going to move on.

CHAIR: Order! Are you accusing a witness of lying?

Senator CONROY: No, I said I was at the hearing. I am aware of what she said.

CHAIR: You accused her of lying. Could you withdraw that.

Senator CONROY: No, I did not. I did not accuse her. Ms Zielke has said that she has a different recollection.

Senator STERLE: It came out very clear.

Senator Colbeck: Senator Sterle, it would be nice if you did not reflect on that.

Senator STERLE: I was—

Senator CONROY: Senator—

CHAIR: Order!

Senator STERLE: Ms Zielke has quite clearly said what her position is and what she said on that.

CHAIR: Order! Senator Conroy, you have the call.

Senator CONROY: Did you have any communication about this action either before it occurred or afterwards with an officer of any other Commonwealth department or agency or with any Victorian state department or agency?

Ms Zielke : I do not recall that I did, no.

Senator CONROY: Can you take that on notice just in case there is any?

Ms Zielke : I am happy to double check, yes.

Senator CONROY: Were you asked at any time, either before the event, or provide any advice to your minister or any other minister or any advisor to your minister or another minister?

Ms Zielke : I will take that on notice given that list, but nothing is coming to mind.

Senator CONROY: The minister or his office or any other minister and his office. You must know whether you gave any advice to your own minister.

Ms Zielke : The advice I think was provided directly from AMSA to the minister as a result of my query, but I will double check that.

Senator CONROY: Thank you for that. What was the subject matter of the advice that went from AMSA?

Ms Zielke : It was regarding the claims in the media about the visa arrangements and the safety arrangements of the vessel, so the number of crew from memory.

Mr Mrdak : Can I just correct an answer of mine. I returned from leave on 20 January.

Senator CONROY: On the 20th?

Mr Mrdak : The 20th.

Senator CONROY: As I said, I am sure it was well deserved.

Senator Colbeck: That was three days less than you thought.

Mr Mrdak : I did get three days less than I planned, yes.

CHAIR: Any more questions?

Senator CONROY: I possibly have one more question but I am happy to defer.

Senator STERLE: I will ask Mr Sutton or Ms Zielke: have you ever knocked back an application for a temporary licence?

Ms Zielke : Yes, we have. We have received notices in response and considered that information and knocked the temporary licence back as a result of it, yes.

Senator STERLE: I do not expect to have it now but if you could just give us a number.

Ms Zielke : Certainly. I will check the briefing now.

Mr Mrdak : If I can just add that there have been a number of court actions, both in terms of our decision to reject applications for temporary licences and also most recently the decisions to grant temporary licences. The Federal Court has made a number of rulings over the last three years in relation to the application of the act and our actions.

Senator STERLE: It would be helpful if you could take that on notice. I am sorry, Ms Zielke is going to answer that for us.

Ms Zielke : I was just going to say that we have not received any notices in response for 2015-16 and I am afraid the briefing does not give the numbers for previous years, so I will come back to you on that, but what Mr Mrdak said in relation to legal precedents is also significant in relation to our decisions.

Senator STERLE: You can come back to us. That is fine.

Senator CONROY: Chair, if I could just jump back in. Is it possible that 100 per cent of Australian coastal trade could ultimately be licensed by temporary licensed vessels under the current law, Mr Sutton, on your definition of maximising the Australian vessels?

Mr Mrdak : It would not—

Senator CONROY: Mr Sutton is the delegate. He has legal authority here. It is Mr Sutton who is applying the law and he has said that he would, with foresight, ask other questions. I appreciate that point but could you get to a circumstance where under a temporary licence issued by yourself or Ms Zielke that 100 per cent of the freight was actually on foreign flagged vessels?

Mr Sutton : There were two situations which could lead to that outcome. One would be if there were no general licensed vessels left because the act is based on temporary licences being issued if there is no general licensed vessels willing to carry a cargo. So, the scenario you are describing could arise in two situations where there are no general licence holders or a situation where there were but for some extraordinary reason they did not offer to carry any cargo.

Senator Colbeck: I think those circumstances would be quite extraordinary, particularly given the Bass Strait trade.

CHAIR: Could I now go to Senator Rice.

Senator STERLE: I just want to clarify this, Chair, if I can.

CHAIR: All right.

Senator STERLE: I will ask Mr Sutton and Ms Zielke: when there is an application for 17 voyages, if you look at them and think, 'Well, hang on, how do Alcoa do it now?' It is not just like a couple of car parts or some wheat that is going off somewhere or a one-off. Did you actually look at them and think, 'Well, why would they want 17? Why 17 when they have got their own ship?' Did that ever enter into an psyche or you do not have to under the act?

Mr Sutton : It is not unusual to get temporary licence applications that specify a lot of voyages on them. They can be lodged for a broad range of reasons and, as I say, we do not attempt to second guess the applicant as to their motivations.

Mr Mrdak : If I can just add to that, the application for 17 voyages, I am advised, was through to October 2016 which is not unusual because, as I said, often general licence holders will, over a period, seek temporary licences to carry ad hoc and where they have additional demand, so 17 over a year did not seem—

Senator STERLE: Mr Mrdak, with the greatest respect, I understand that and we need to be flexible as we have got to move freight around this nation. That is not an argument, but if there is a ship doing it week in or week out would it not send off some alarm if there is a set run every fortnight or however long it takes? Is there not something that we would say to Alcoa, 'Why do you want to do that?'

Senator Colbeck: Your question is a very good one and the answer actually does indicate why the officer would have not seen it as unusual given that there are obviously a number of requests that have come in for that number of voyages, but I will make the point again that I made before: if the officer was expected to see something unusual then surely others of those who were being advised of these voyages and the permit requests and who had the opportunity to lodge comment to them could quite easily have done so, so I am not sure why the officer would see a particular pattern of behaviour where others did not. I am not sure that being mind readers is part of the job description.

Senator BULLOCK: You want to subcontract this job out to the MUA.

Senator Colbeck: The MUA has the opportunity to lodge a comment in respect of this and they are one of the organisations that are advised. That is the point that I was making before. The MUA did not make any comment in any of these circumstances, so why is the officer expected to ask a question when the MUA, themselves, who are running a campaign around this, do not.

Senator BULLOCK: Because it is his job.

CHAIR: Order! Senator Bullock, you do not have the call. You will be pleased to know that Senator Sterle does.

Senator STERLE: It is not uncommon for a number of voyages to be requested on a temporary licence but as you just said it is ad hoc or it is extra work.

Mr Mrdak : Well, under the provisions of the act you would have to apply for a minimum of five and generally firms will apply for a number over an extended period to give them the flexibility. They may not use them at particular times but they retain that flexibility which was built in to try and provide ad hoc and where often firms will have additional loads and the like. That was the way in which the act was structured and to which we operate.

CHAIR: Senator Rice, you have the call.

Senator RICE: I want to continue on with the line of questioning from Senator Conroy and Senator Sterle. In the case of the MV Portland and the Federal Court findings, I understand that the Federal Court found that the minister did not follow the requirements of the Coastal Trading Act in that particular instance, despite finding in favour of the minister, so am I correct in characterising the court's findings in that way?

Mr Mrdak : No. My understanding is that the court certainly found that there had been an administrative error by the department in the way in which we placed material on our website, which has subsequently been corrected, but the court found that that did not, of itself, invalidate the issue of the temporary licence.

Senator RICE: Is there anything from the Federal Court's findings that has caused the department to change the way that it deals with temporary licences?

Mr Mrdak : We have made changes to the way in which we publish the application on our website. That was the finding of the court, but in this instance my officers did not correctly publish on the website the application. However, to my knowledge and understanding, on the advice that I have from my officers, all other processes of the act were found to be valid by the court. I will check with Mr Sutton.

Mr Sutton : That is correct.

Senator RICE: So there has been no other review of the way that you consider the temporary licence applications?

Mr Mrdak : We have, as Mr Sutton has indicated, over the last few years there has been a body of Federal Court judgments to which we have amended our processes to make sure that we are always consistent with both the act and the precedent created by those judgments. In this situation the court did find that under section 30(a), the way in which we published the application on the website was not in accordance with the requirements and we have made changes to our internal processes to ensure that happens. The court ruled that that, of itself, did not invalidate the issue of the licence.

Senator RICE: Can you tell me how many temporary licence applications you received in the last year?

Mr Sutton : If you will bear with me I will just check my papers. Since 1 July 2012 we have received, just going through actual temporary licences, 220, under the act.

Senator RICE: Two hundred and twenty applications have been made or you have issued 220?

Mr Sutton : No, 220 applications have been made and 191 have been approved, so that gets back to the earlier question about how many had been refused. There are also variation processes for temporary licences which have been issued, what are called New Matters Applications, which is like adding additional voyages. There have been 674 applications since 1 July 2012; 631 of those have been approved and, with authorised matters, which are changes to approved voyages, there have been 2,491 applications and 2,326 of those applications have been approved. This is correct as of 13 January 2016.

Senator RICE: So that is covering the last three and a half years?

Mr Sutton : Correct, yes.

Senator RICE: What has the trend been in those temporary licence applications? Can you give us the figures for each year? Are we seeing an increase?

Mr Sutton : I might have to take that one on notice, but we can certainly provide that information for you.

Senator RICE: So a small number have been rejected. There are 220, of which 191 have been approved; so nine have been rejected. What grounds have they been rejected on?

Mr Sutton : That would be 29.

Senator RICE: Yes, that is correct.

Mr Sutton : I will have to take that on notice to give you a detailed breakdown of the reasons for rejection. I can point out that, of those 220 applications, 10 notices in response have been received, but I should say that I have been in the job about 15 months now and no notices in response have been received in that period.

Senator EDWARDS: Just a clarification, what is the number of voyages on any application?

Mr Sutton : It varies. It is a minimum of five. The legislation specifies that it is a minimum of five but it can be up to however many. A temporary licence lasts a year and it is not necessarily the same ship that is covered by a TL. We have heard cases of 30-odd on one application. That would not be the norm, but it is of that order of magnitude. You can certainly see significant numbers of those.

CHAIR: So, in the overall application of licences for which you say a minimum of five trips, how many of the trips are made under the system which is the product of this government and the previous government on Australian wages? How many do you get in paying Australian wages? What is the number of trips? Do you know that?

Mr Sutton : I would have to take that on notice. What happens is that a vessel on the third voyage in a year triggers the Fair Work Act provisions which specify that part B wages be paid under the—

CHAIR: What I am really asking is how do you know that happens, because we are dealing with anyone from Columbian cocaine runners to the Middle East? God knows who owns the ships. How will you ever know what they pay the crew. Even though under the act they are obliged to pay after the third trip Australian wages, how do you know that they ever do?

Mr Sutton : The department itself does not have any checking mechanisms associated with the administration of the scheme but certainly AMSA, as part of its port state control regime, one of the issues that it looks at relates to compliance with provisions of the Coastal Trading Act and the Fair Work Act.

CHAIR: My problem is we do not necessarily know who owns the ship. How do you ever see the books of a ship if you do not know who owns the damn thing to see whether they are paying the crew threepence or 300?

Mr Sutton : AMSA, with its port state control responsibilities, when it inspects a vessel it goes through all the documentation associated with the ship and part of that documentation since Australia ratified the Maritime Labor Convention relates to documentation relating to seafarer wages and conditions.

CHAIR: So, they have a set of books where you can say the cook was paid so much?

Mr Sutton : That is correct.

Senator RICE: Can I continue?

CHAIR: Yes, in a moment. So, going back to my original question, you have no idea or do you have an idea how the foreign owners are tricking the system in terms of the third voyage? Are half the voyages around the coast paid on Australian wages or we do not know?

Mr Sutton : As I said, we will take that question on notice.

Senator RICE: Up until what date were those figures with the 220 applications?

Mr Sutton : It is 13 January 2016.

Senator RICE: Can you tell me how many temporary licences have been applied for in the past three months?

Mr Sutton : No. We do not have those specific figures but we can easily get them for you on notice.

Senator RICE: Which companies have made those applications in the past three months? Can you provide that to us as well?

Mr Sutton : Yes, we can provide that information.

Senator RICE: With the increasing number of temporary licences being issued and the discussion we had before about the decreasing number of ships on the general register, you are saying you could see a future where there would not be any general ships so they would just have the trade only being undertaken by temporary licensed vessels. How could that be consistent—

Mr Mrdak : I do not think that is what Mr Sutton indicated. He talked about the scenarios in the event that there were no ships on the general register. He did not, to be accurate from my reading, say that he foresaw a situation where there would not be ships on the general register.

Mr Sutton : In fact, I said that it would be quite extraordinary if it did.

Senator RICE: I want to return to Senator Conroy's point on the increasing number of temporary licences and the decreasing number of ships on the general register and how the issuing of those temporary licences is consistent with the aims of maximising the use of Australian shipping.

Mr Sutton : Again, I will get back to the comment I made to Senator Conroy that the object of the act has six components, six elements. Certainly the component that you have mentioned is one of them but there is another key element relating to ensuring the efficient movement of passengers and cargo between Australian ports and also promoting competition in coastal trading.

Senator RICE: Have any temporary licence applications been rejected on the grounds that it is inconsistent with maximising the use of Australian shipping?

Mr Sutton : The short answer is no, not on that specific criterion. Decisions on temporary licence applications are made in accordance with section 34 of the act.

Senator RICE: So, it is pretty clear that you are ignoring that sixth criterion.

Ms Zielke : It is quite challenging working with the objectives of the act and it has actually been the basis of court challenges previously because the object of the act does not actually give weighting in relation to it. On one hand it is actually saying that you should consider the Australian ships and then an opposing objective is that you need to think about the impact on shippers, those actually trying to get their goods sent around the coast, but it does not tell you which one to give greater weight to, so it can be very complex trying to think about these issues.

Senator RICE: Was consideration given to rejecting the application for temporary licences that replaced the MV Portland and the CSL Melbourne on the basis that it was not maximising the use of Australian shipping, given in both those instances you had ships that were operational and continuing to be operational.

Mr Sutton : The act does not require a general licence holder to use their vessel to carry their cargo if the general licence holder does not consider it is economic to do so. The act relies on commercial decisions by shipping operators whether to use general licensed vessels or temporary licensed vessels and we administer the act in that context. The delegate, or the government, obviously does not provide shipping services; those shipping services are provided by commercial operators.

Senator RICE: When you are considering the economic viability of continuing the use of general licensed ships, do you just take the information that is provided to you on face value or do you do an independent investigation?

Mr Sutton : Is this in terms of whether Alcoa chose to use the MV Portland?

Senator RICE: Yes.

Mr Sutton : As I said, the act relies on commercial decisions. If there is a decision being made by a general licensed operator not to apply to carry a cargo, there is nothing in the act that gives us a power in any way to question why they have made that decision.

Senator RICE: So, you just have to take their information on face value and accept it? Is that your rationale for why you issue a temporary licence?

Mr Sutton : It is not so much their information, it is the fact that they have not sought to carry the cargo which is the critical issue. That is a black and white issue for us. It is not a question of assessing the information; they have made a decision not to put in a notice of response or indeed, in the case of Alcoa, they have made a decision not to use the general licensed vessel, and that is a black and white matter.

Senator RICE: But they do not have to justify that to you; they just made a decision to do it?

Mr Sutton : That is correct. The whole premise of the act is that the act assumes commercial decisions by shipping operators.

Senator RICE: Do you see that you are just going to be overseeing the complete demise of general ships, if that is all you need to do, in a race to the bottom? From the outside it looks like Alcoa, having made that decision, it was certainly a significant factor then in Pacific Aluminium deciding to go down the same way, because if Alcoa could do it then they could do it, too.

Mr Sutton : I do not think it is our job to make commercial decisions on behalf of shipping operators.

Senator RICE: But isn't that the whole purpose of having general licensed shipping, that we are meant to have regulation that says that for coastal trading Australian ships are generally to be used?

Mr Sutton : That is on the basis of commercial decisions by general licensed operators. If a general licence operator chooses not to use their vessel or offer their vessel up or make a notice in response to a temporary licence application, then there is nothing in the act that gives the delegate any power to question that decision.

Senator RICE: Would you agree that we are basically just spiralling down as the people that are using Australian crewed and flagged ships will just take the opportunity to say it is not economic because of course it is not economic when you are paying foreign seafarers so much less than Australian seafarers?

CHAIR: You do not have to give an opinion on policy.

Ms Zielke : I am sorry, I was just going to respond with the issues raised by industry since the legislation came into effect in 2012 which actually led to the review of the legislation.

Mr Mrdak : I think, as my officers have indicated, it is a very difficult one, without straying into opinion about the future of the Australian registered fleet. The reality is government cannot mandate the continuation of unviable operations and certainly as a regulator we have regulatory provisions in the legislation. At the end of the day people will make commercial judgments about maintaining Australian registered vessels.

Senator RICE: But you can only do that by ignoring the criteria that are set out. I acknowledge it is one of six criteria to be maximising the use of Australian shipping.

Mr Mrdak : No.

Senator RICE: By continuing to issue temporary licences you are actually undermining the continuing use of Australian shipping because, of course, it will be cheaper to use a foreign flagged ship with crew being paid $2 an hour.

Mr Mrdak : Some Australian operators—

Senator Colbeck: You make the assumption that wages are the only cost indicator in the context of the cost structure of a vessel that is operating. I think that is a fairly narrow view of the world. It is not just about labour. It is one of the factors, without question, although the crews being paid the right amount according to ILO standards are not significantly under Australian wages, and they should not be.

Senator RICE: We will have to agree to disagree. Thank you.

Senator Colbeck: So, it is not just about the wages. There are other considerations as part of the cost structures and I think that is the part of the conversation that we would want to have. We would like to have an Australian shipping industry. We do want to see the Australian shipping industry fall into demise, but unfortunately the current legislation does not assist with that, and the proof is in the pudding.

CHAIR: Order! We are going to knock off at half past 6 for dinner. Senator Bullock, you have the call until then. I understand, if it all goes to plan, that that will be it for Surface Transport and they can go home.

Senator BULLOCK: I will defer to Senator Bushby.

Senator BUSHBY: I am just interested in an update on where we are at with plans about private importing of new and used vehicles.

Ms Zielke : A review of the Motor Vehicle Standards Act has been underway for about 18 months now and government is, as I understand, considering making an announcement in relation to the outcomes of the review shortly.

Senator BUSHBY: So, no outcomes have been announced yet?

Ms Zielke : No, not as yet.

Senator BUSHBY: A few things have been floated at various times in the media and talked about, but nothing has actually been firmly decided?

Ms Zielke : No. There have been discussions with industry as a result of feedback on the review. We had an initial discussion paper that put forward options. That was basically to get discussion going in relation to the various issues. So the potential idea of having personal new imports as opposed to personal used imports has been a continuing part of our conversation over the last 12 months.

Senator BUSHBY: Is it correct that used imports have been ruled out?

Ms Zielke : Last year in April there was a media release put out by Minister Briggs at the time that noted that government had, at that stage, decided not to consider personal used imports.

Senator BUSHBY: Does that mean that the current regime for personal imports of used vehicles will remain unchanged?

Ms Zielke : Assuming that is the case in relation to what government announces.

Senator BUSHBY: So, basically unlimited rights to import a used vehicle, if it was manufactured, up until 31 December 1988 but post that very limited options?

Ms Zielke : 1989.

Senator BUSHBY: 1989?

Ms Zielke : Yes.

Mr Mrdak : That is correct.

Senator BUSHBY: I do not necessarily agree with that. Thank you.

Senator WILLIAMS: On that very issue, the new vehicles are still under consideration—


Mr Mrdak : That is right.

CHAIR: Senator Bullock.

Senator BULLOCK: Turning to the ministerial forum on motor vehicle emissions, can you let us know the dates on which that forum has met?

Ms Zielke : Certainly. The ministerial forum has met twice to date.

Ms Wieland : The ministerial forum held its first meeting on 24 November last year following the announcement on 31 October by Minister Fletcher to establish the forum. He has also held stakeholder forums on 7 December with a broad range of stakeholders and has subsequently met in recent weeks.

Ms Zielke : On 4 February.

Senator BULLOCK: When is the next meeting?

Ms Zielke : The next meeting will most likely be later in March or early April.

Senator BULLOCK: When do you expect the discussion paper to be released?

Ms Wieland : Very shortly.

Senator BULLOCK: But after March presumably?

Mr Mrdak : The government is currently considering its timing on that.

Ms Zielke : It has noted with industry that it would like to release that discussion paper shortly.

Senator BULLOCK: What role do you expect vehicle emissions to play in reaching the 28 per cent reduction target?

Ms Wieland : The modelling that has been undertaken by the Department of Environment and released to various stakeholders indicates that transport emissions is an area that could provide a significant contribution. In terms of CO2 emissions, transport emissions account for 17 per cent of Australia's emissions, so there are a range of opportunities in that area and that is certainly what the discussion paper will be seeking to explore further with stakeholders.

Senator BULLOCK: Do you want to hazard a figure as to what that would be?

Ms Wieland : That would clearly depend on what options were implemented and I am not, at this point, able to give you that information.

Senator BULLOCK: No. They will get that.

Ms Zielke : A number of the regulatory impact statements that will be undertaken have not commenced as yet and they would be critical to actually arriving at some of those figures.

Senator BULLOCK: So what is the forum considering in terms of reducing those emissions?

Ms Zielke : The terms of reference for the ministerial forum note a range of issues to be considered. They include the implementation of Euro 6 or equivalent standards for new vehicles, fuel efficiency or CO2 measures for new light vehicles, quality fuel standards, emission testing arrangements and then subsequently have a fit-in with other plans that were talked about by Ms Wieland earlier.

Senator BULLOCK: I may have missed this. You may have covered this in answer to a question asked by Senator Bushby but if you did I missed it so I am going to ask the question. Where is the regulatory impact statement up to with regard to the Motor Vehicle Standards Act review?

Ms Zielke : The regulatory impact statement is part of the consideration by government in relation to the review, so that is considered by cabinet at the time that it is looking at proposals in that regard. A RIS needs to also include feedback from industry in relation to certain proposals and at that stage that RIS would most likely be complete and then able to be circulated.

Senator BULLOCK: And where in all of that are we?

Ms Zielke : We are waiting on government's announcement in relation to what decisions it is taking and then that would be the source of consultation with industry prior to being finalised.

Senator BULLOCK: So, really right at the start?

Ms Zielke : No, we are almost at the end. I am sorry, the consultation has been going on for about 18 months now, so that RIS is extremely well developed. There are some aspects of detail that would still need to be consulted with industry and that would need to be finalised before the RIS could be finalised.

Senator BULLOCK: This is my last lot of questions and it certainly will not take five minutes. Are you familiar with the recently produced business case for inland rail?

Mr Mrdak : Yes.

Senator BULLOCK: Can you confirm that this project is seeking $10 billion which the business case itself acknowledges will not be able to be repaid from the proceeds of the project?

Mr Mrdak : Yes. The business case finds that what we call the P90 cost is of the order of over $10 billion to build and complete the rail line from Brisbane to Melbourne as part of the ARTC network. It also finds that while, over time, the line can cover maintenance that it will not be able to cover the capital cost.

Senator BULLOCK: As great as such a railway line might be, it will have a negative impact on the freight carried by road and sea, won't it?

Mr Mrdak : Not necessarily, if you look at the growth projection. In fact, no. I mean if you look at the growth projections for intermodal freight—

Senator BULLOCK: Stop. If it was not there would that freight be carried by other means?

Mr Mrdak : If it is not there it will be, but increasingly the evidence is that we need to have three modes. We need the volume of freight growth with a doubling of freight volumes every 20 years, which is what has been the historical pattern. Even with upgrades to the highway system and even with an expansion of coastal shipping, rail will need to carry a larger share of the trade.

Senator BULLOCK: So, what we have got here is a $10 billion subsidy to rail transport. Does the government have any plans to provide a $10 billion subsidy to coastal shipping?

Senator Colbeck: There are measures within the current act that provide support to the Australian shipping industry including, I think, accelerated depreciation on investments, so there are a range of tax measures that are already in place.

Senator BULLOCK: Thank you for that because I was just about to ask what the full extent of the range of taxpayers' support was for coastal shipping. So, you have made a start, minister, with accelerated depreciation. What other arrangements has the federal government made to support coastal shipping that are comparable with the possibility of a $10 billion shot in the arm to rail?

Mr Mrdak : It would depend on the circumstances of individual firms, but what is available is an income tax exemption for Australian registered flag shipping. They are exempt from company income tax. This was put in place a few years ago. Accelerated depreciation—

Senator BULLOCK: If you have a tax exemption why do you need accelerated depreciation?

Mr Mrdak : Well, the industry has both. They have accelerated deprecation allowing for the vessel to be fully depreciated over 10 years, which is shorter than the effective life of the vessel. There is income tax exemption for shipping activities undertaken by Australian registered shipping operators. There is also rollover relief where there is a balancing adjustment which is made to income as ships are effectively replaced, and there is also royalty withholding tax exemptions available for Australian flag shipping. On top of that there is also a seafarer tax offset still available.

Those taxation measures were put in place to try to ensure, as the minister outlined, that there are incentives to invest in Australian shipping and to overcome some of the disadvantages that Australian shipping companies face with such issues as levels of demand and also wages, but as the minister has indicated, there are a range of other issues involved. So those shipping tax incentives are there. How they are taken up is obviously a matter for individual companies. I could not give you a quantification of how much that is adding at the moment.

Senator BULLOCK: Can you think of anything else we could be doing to give support to coastal shipping?

Mr Mrdak : As I said, the government has been looking and there has been legislation in the parliament looking for alternative structures to enable incentives to invest in Australian shipping.

Senator BULLOCK: That will do, Chair.

Senator STERLE: I have just one question.


Senator STERLE: It does pose the question with these incentives for Australian shipping, but did you say that there is an offset of the vessel after 10 years so that it can depreciate it quicker?

Mr Mrdak : Yes. It has got accelerated depreciation, which means that the vessel can be fully depreciated over 10 years which is far shorter than the effective whole of life for the vessel.

Senator STERLE: So, it is not as though governments of both persuasions previously had done their best to try and keep Australian seafarers on Australian vessels. They have tried everything. It does make you wonder how greedy these so-and-sos are when they just thumb their nose, chuck Aussies off ships and cannot wait to employ or engage foreign seafarers on foreign vessels. I mean what more do the bastards want to squeeze out of us?

Senator Colbeck: I think the answer to that would be everything that they can get.

Senator STERLE: Yes. Well, I will not argue with you there.

CHAIR: In the two trips before you get to the third trip and when you are only being paid threepence anyhow—80 per cent of the people in Bangladesh live on $34 a month—it is a bit hard to compete in that labour market, which China is now trying to take advantage of. If it is good enough for the system to raid a ship at 2 o'clock in the morning and take seven blokes to get the cook out of bed to cart him off the ship, is it good enough then to think about why we do not have random checks on coastal shipping as to the conditions and pay? If it is good enough for the goose then it is good for the gander.

Senator Colbeck: I think you had evidence earlier that actually does happen. That does happen.

Mr Mrdak : The border control does that.

Senator STERLE: So, do we have provisions in place to deal with that?

CHAIR: I recall that ship down the south coast where they had to moor it. It was all pretty scary at sea. Is the government or the parliament not entitled to know who owns the ships? It is alright for you to say that the spies know, or whoever they are. Should we not know? Is that not in the public interest?

Mr Mrdak : As I indicated earlier, border control agencies do give full details—

CHAIR: That is one thing. Tomorrow I am going to have a very interesting time in another room about compromise and entrapment, et cetera. I just think it should not be something that is hidden away.

Senator STERLE: If I could help you out there, Chair, if that is the case then we have entered into an agreement--

Senator Colbeck: You might end up finding out that would hold on a lot of corporate structures.

CHAIR: That guy that is standing at the back of the room that does not exist that is listening to all of this—I think, given that I had to be nearly charged with trespass to discover what was going on with sea importation of those cow hides from Columbia, some of the departmental people wanted to charge me with trespass because I actually had enough guts to go and have a look.

Senator STERLE: Just one very quick question. Someone talked about the Maritime Law Convention and wages, I cannot remember who it was.

Senator Colbeck: It was me, I think.

Senator STERLE: Do we know what the minimum safety net is under the MLC for wages? I am led to believe that it is zero. On saying that, we heard evidence at the flag of convenience inquiry last week that if we had this body that is out there checking the conditions and wages of these poor devils on these Panamanian ships, we would not need the ITF out there running around getting $60 million in back pay from ripping off seafarers in the last couple of years. I am telling you that it is not working.

CHAIR: The challenge to the western world is the globalisation, the redefinition of sovereignty and how can you compete with somewhere where they pay their people a dollar a day. It is the same with the airlines.

Senator Colbeck: I think we can agree it would be very desirable if we did not have to do that, Senator Sterle.

Senator STERLE: What?

Senator Colbeck: It would be very desirable if we did not do what you just had to describe.

CHAIR: We will be back at half past seven. This is done.

Mr Mrdak : Surface Transport is completed, so we will be back at 7.30 with Civil Aviation Safety Authority.

CHAIR: We will be back with Civil Aviation, Airports, ATSB and Air Services Australia. That is where we are going to go.

Proceedings suspended from 18:33 to 19:33

CHAIR: Sorry to do this but there are just a couple of supplementary questions on the Bruce Highway.

Senator McLUCAS: Mr Mrdak, when we were speaking earlier today I asked the question about the potentially delayed projects. You indicated there were going to be some projects that were going to come in under budget—and that is great—but there were some projects that may be delayed. I am interested in knowing what they might be.

Mr Mrdak : I do apologise; I do not have any details. I am advised we are not expecting delays, at this stage, to the program. In fact, we are trying to do the opposite, but I will get the definitive answer for you. In relation to the savings, you asked about the changes to the contingency from $478 million to $752 million. I am advised that savings included: Cooroy to Curra section A, $50 million; Yeppen was completed $100 million under budget; Cooroy to Curra section C early works $192 million; Cabbage Tree Creek, $13 million; Calliope crossroads, $20 million; and the southern approach to Gin Gin, $3 million. They are the sum of the savings, but I will get you a more fulsome answer. My advice thus far is that we anticipate the program continuing as it is.

Senator McLUCAS: I don't think those figures add up to the approximate $300 million increase in the contingency reserve that we talked about earlier today.

Mr Mrdak : My calculation is that that gives you about 270 or so, but I will get you a full answer to those.

Senator McLUCAS: Thank you. I am very interested if there are any delays to the program.

Mr Mrdak : Yes. As I said, I am advised that the program is on schedule, subject to Queensland bringing forward their PPRs. But I will get you a fulsome answer to that.

Senator McLUCAS: Thank you.

CHAIR: Thank you.