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Finance and Public Administration Legislation Committee
Department of Finance

Department of Finance


CHAIR: We will now begin examination of outcome 1 of the Department of Finance. Senator Gallagher.

Senator McALLISTER: Before Senator Gallagher begins, we have had this conversation each time: we have made a request for the documentation around staffing arrangements for personal staff and ministerial staff.

Senator Cormann: It is technically Senator Ryan's area of responsibility—

Senator McALLISTER: Outcome 3. I understand.

Senator Cormann: I will make sure you get this as quickly as possible.

Senator McALLISTER: Thank you, Senator.

Ms Huxtable : We will facilitate that.

Senator McALLISTER: Thank you, Ms Huxtable.

Senator GALLAGHER: I will start with some questions on MYEFO. Could you provide the committee with the difference in aggregate deficits between the PEFO and MYEFO.

Senator Cormann: They are obviously published. Do you want us to go through the published numbers?

Senator GALLAGHER: Yes. I cannot find them in MYEFO.

Senator Cormann: If you go to page 1 of the MYEFO, in the overview, it will tell you precisely.

Senator GALLAGHER: Could you provide that for me?

Senator Cormann: It is literally written on page 1. Do you really want me to read out the table to you that is published?

Senator GALLAGHER: No, I just want the difference in aggregate deficits.

Senator Cormann: I encourage you to deduct what is written on the MYEFO from what is written on the PEFO in the table on page 1 of the Mid-Year Economic and Fiscal Outlook.

Senator GALLAGHER: So you are not going to tell me that?

Senator Cormann: This is not a school class. The information is published very openly and transparently.

Senator GALLAGHER: So would you prefer not to answer that question?

Senator Cormann: I have referred you to where the information is published in black and white.

Senator GALLAGHER: All right. If you step me through it then, we have got MYEFO forecasting a deficit of 36.5.

Senator Cormann: Which is obviously less than the deficit at PEFO, which was 37.1. That is right.

Senator GALLAGHER: Then we go to 28.7 in 2017-18.

Senator Cormann: That is what it says on page 1 of the Mid-year Economic and Fiscal Outlook in the table there. Just to be clear, it is nicely set out in a very good summary table. I think it is very hard to miss the numbers that are written there.

Senator GALLAGHER: I have got the table.

Senator Cormann: Given that you have got the table, why you asking me the numbers that are published in the table on page 1 of the Mid-Year Economic and Fiscal Outlook?

Senator GALLAGHER: What I am trying to get to is the difference between the deficits between the pre-election forecast outcome and the MYEFO in terms of aggregate deficits, the difference between those. Can you give me that number?

Senator Cormann: It is all spelt out on that nice summary table on page 1 of the Mid-Year Economic and Fiscal Outlook.

Senator McALLISTER: This is another one he does not want to say out loud. I would not want to say it out loud either.

Senator GALLAGHER: Can you confirm there has been a deterioration in aggregate deficits between what was forecast in the pre-election outcome and the MYEFO? Will you go that far?

Senator Cormann: The numbers are published. There was an improvement.

Senator GALLAGHER: So you will not?

Senator Cormann: There was an improvement in 2016-17. There was a deterioration—

Senator GALLAGHER: But over the forward estimates—

Senator Cormann: Overall, spending over the forward estimates period is significantly lower than what had been anticipated at the Mid-Year Economic and Fiscal Outlook. If I can also refer you to the very helpful description on page 2, for example, you will see that the combined impact from both policy decisions and variations means nominal payments are lower in each year of the forward estimates. So nominal payments are lower in each year from the forward estimates and total payments are forecast to reduce by $18.5 billion across the forward estimates compared to the 2016 Pre-election Economic and Fiscal Outlook.

Now it is true of course that there have been some further deteriorations on the revenue side, which have also been clearly spelt out. This is all written in black and white in the document. You will be able to see that there expected tax receipts, excluding new policy, have been revised down by around $3.7 billion in 2016-17 and $30.7 billion over the four years to 2019-20 since the 2016 Pre-election Economic and Fiscal Outlook. These are things that happened not as a result of the policy decisions of the government but because of external factors. In any event, given in the lead-up to the election the Labor Party promised to spend $16.5 billion more and promised to deteriorate the deficit by $16.5 billion more over the forward estimates over and above what the situation is under our government, everybody knows that the situation is better than what it would have been under Labor.

Finally, what I would say to you is, in the Mid-Year Economic and Fiscal Outlook, government spending as a share of GDP is well below what was anticipated in the Pre-election Economic and Fiscal Outlook. You would remember that in the 2016 Pre-election Economic and Fiscal Outlook—and all of this is spelt out in some detail in the very comprehensive description provided our Mid-Year Economic and Fiscal Outlook. But given you persist in the question, I thought I would spell it out.

In the Pre-election Economic and Fiscal Outlook the expectation was that spending as a share of GDP would be 25.8 per cent, and in the half-yearly budget update that was down by 0.6 per cent as a share of GDP—which is quite material, down to 25.2 per cent. Indeed, it is expected and projected to remain at 25.2 per cent over the forward estimates period. Average real growth in payments for the forward estimates is expected to be 1.9 per cent, which is below the two per cent that Labor imposed as a forecasting assumption over the medium term on its budget forecasting model without ever explaining how they would reduce the spending growth over the medium term from the 3.7 per cent—that was the result of policy decisions—down to 2 per cent, which they had quite dishonestly imposed on their forecasting model. It essentially deceived the public about the medium-term impact of the policy settings of Labor in government and that is something that this government is still dealing with and working to fix.

Senator GALLAGHER: That is quite a lot of words for someone who will not answer my very simple question.

Senator Cormann: I have directly answered your question.

Senator GALLAGHER: I accept that there are ons and offs, which is essentially what you were saying.

Senator Cormann: What I am saying is that we are spending much less but we are also raising less revenue, not as a result of policy decisions but as a result of external factors. For example: global economic growth and lower profits on the back of lower commodity prices, which are lower than what they have been in the past, even though they have recovered somewhat in recent times. We have made very realistic assumptions on the revenue side, not, of course, pushing our revenue forecasts up on the back of the slight recovery in some key commodity prices for some of the key commodities.

Senator GALLAGHER: Can you confirm that the difference in aggregate deficits between the pre-election forecast outcome and the MYEFO was in the order of $10 billion?

Senator Cormann: The numbers are all published very openly and transparently in the half-yearly budget update. The numbers are there and the table summarises it on page 1.

Senator GALLAGHER: Is that a yes?

Senator Cormann: Again, the numbers are all there in the half-yearly budget update and I have read out to you the fact that we are spending $18.5 billion less but we are also raising about $30.7 billion less in revenue. I think that you can figure out the impact of that.

Senator GALLAGHER: So that is a yes?

Senator Cormann: You can keep going around and around in circles, but I am not going to play your games.

Senator GALLAGHER: You are playing games. That is exactly what you are doing. I am just trying to get a simple answer.

Senator Cormann: The numbers are all printed in the half-yearly budget update quite openly and transparently.

Senator GALLAGHER: I do not know why it is so painful.

Senator McALLISTER: I do.

Senator Cormann: There is nothing painful about it.

Senator Cormann: Labor went to the election promising a $16.5 billion deterioration of the budget bottom line compared to our policy settings, which a respected economist said would threaten Australia's AAA credit rating. That was your record going into the election. You promised too much, even after more than $100 billion in higher taxes under Labor—more than $100 billion of higher taxes under Labor—even after you decided to scrap the tax as a share of GDP cap that is currently enshrined in our budget setting settings.

Our revenue assumptions are based on a rule which says that tax as a share of GDP cannot go above 23.9 per cent. You scrapped that and you promise to increase taxes by more than $100 billion, which would have hurt the economy and killed jobs if you had had the opportunity to implement those settings. Even after $100 billion in higher taxes you still—

Senator GALLAGHER: We are on question 1.

Senator Cormann: went to the election with a $16.5 billion bigger deficit. With the policy settings that we have put forward, we are going to make sure that the budget is in a much stronger position for the future. If you ask me political questions I will give you political answers.

Senator McALLISTER: Chair, on that question, I am conscious that the minister has other commitments this evening and we will do what we can to accommodate those, but it is a little contingent on being able to make our way through—

Senator Cormann: If you want me to read out tables that are published on page 1 of the half-yearly budget update we are going to be here for a very long time.

CHAIR: Thank you, Minister, for your very comprehensive answers so far. Senator Gallagher, why don’t you return to your questions.

Senator GALLAGHER: Can you confirm for me what the budget estimate was for the underlying cash balance in 2017-18 in your first budget?

Senator Cormann: I do not have the 2014-15 budget papers with me, so we will take that on notice.

Senator GALLAGHER: I will come back to that. In terms of the MYEFO outcome, how many of the payment savings when a decision is taken but not yet announced, line—

Senator Cormann: Sorry, which line are you referring to?

Senator GALLAGHER: It is mentioned on, I think, page 4.

Senator Cormann: What are you referring to on page 4? There is obviously a lot of helpful information there.

Senator GALLAGHER: I do not have the actual page number, but you have a line—which most budget documents do—which is decisions taken but not yet announced.

Senator Cormann: The nature of decisions taken but not yet announced is obviously precisely that.

Senator GALLAGHER: So you cannot give us the global figure?

Senator Cormann: The global figure is published. The global figure—which is less than what it has been in the past—for decisions taken but not yet announced is a net spend of $204 million in 2016-17, a slight improvement of $38.3 million in 2017-18. I refer you to page 128. Again, it is all published there in a very helpful table. I can keep reading tables. In 2018-19 it is a net spend of $177.8 million and in 2019-20 it is a net spend of $56.2 million. When the government is in a position—

Senator GALLAGHER: Can you tell me—not specifically the figure within that, but how many programs would be in that figure?

Senator Cormann: No, I cannot. It is decisions taken but not yet announced. In the pre-election economic and fiscal outlook you might recall that all of this gets published. Anything that is in this line is published in the lead-up to an election, but between elections these are obviously decisions—as the name says—taken but not yet announced. When we are in a position to announce them we will announce them; then the information, including the fiscal impact, will be explicitly revealed. There is obviously a provision for it, which is published in the budget papers or in the half-yearly budget update, as appropriate.

Senator GALLAGHER: Can some of those carry through to the budget? This is a genuine question. If a decision is not yet announced between—

Senator Cormann: In theory, they could. It depends. There is a range of reasons why you have decisions taken but not yet announced; you might have made a decision in principle and made a provision for it, but you need to do some further work before you are in a position to make final judgements in relation to it. Ideally you do that as quickly as possible, but sometimes that can take you past a budget cycle.

Ms Huxtable : To be clear, the financial implications are in this statement, in the MYEFO, so if the decision was not announced at budget there would not be a financial implication published, effectively.

Senator GALLAGHER: Yes, it is built into the bottom line.

Senator McALLISTER: We would be interested in understanding what is the quantum of payment savings incorporated into that decisions taken but not yet announced line?

Senator Cormann: Again, that sort of detail will be published when we announce the decisions taken but not yet announced. In the meantime—and this is the same practice under this government as what it was under previous governments of both political persuasions—you publish these measures when you are in a position to announce them. You do not publish them while they are decisions taken but not yet announced.

Senator McALLISTER: I am not looking for information about specifics, I am—

Senator Cormann: I understand exactly what you are looking for.

Senator McALLISTER: asking for the quantum.

Senator Cormann: And the quantum is published in the budget paper. It is in that line on page 128. Incidentally, It is a very low number compared to what it has been in years gone by, including under your government.

Senator McALLISTER: I guess that, as Senator Gallagher observed earlier, there are ons and offs, and what you are providing is netted out. I am interested in understanding—

Senator Cormann: What we are providing is precisely what previous governments of both political persuasions have provided. We are not going to be able to assist you beyond what is published there, because we are not in a position to announce decisions taken but not yet announced until we are in a position to announce them.

Senator GALLAGHER: Are there guidelines around what would fall into that category of decisions taken but not yet announced? I accept that they exist, and they exist for—

Senator Cormann: Good reasons.

Senator GALLAGHER: I get all that, but it is also, separately to this issue, important not to have it as a weakening of transparency measure. Are there guidelines that Finance would look at and say, 'Yes, that reasonably meets a decision taken, not yet announced, criteria'?

Senator Cormann: In the end it is the government that decides whether a decision is taken and not yet announced, but obviously the presentation for budget purposes complies with all of the requirements in the Charter of Budget Honesty and all of the relevant accounting standards. The way we handle this is consistent with the way previous governments have handled this, and the ultimate transparency, of course, is that, before every election, this is entirely opened up and everything is published that has not been announced yet.

Senator GALLAGHER: Can you tell us how many consolidations were undertaken for the MYEFO?

Ms Blewitt : I do not know that off the top of my head. We will have to take that on notice. We generally run anywhere between four and seven—that actually just depends.

Senator GALLAGHER: How long is that process? When would have been the first and when would have been the last?

Ms Blewitt : I am not sure what the month is, but basically after we do what is called a pre-ERC update we run the first consolidate.

Senator GALLAGHER: A pre-ERC?

Senator Cormann: Pre Expenditure Review Committee.

Ms Blewitt : Yes, so it is actually getting estimates adjustments in the system.

Senator GALLAGHER: So the first consolidation goes to the Expenditure Review Committee and then there is a process of others that would then lead to the final document?

Ms Blewitt : Yes. We just work with Treasury to work out what the timetable is in doing that, and it depends.

Senator GALLAGHER: Are you taking that on notice for me?

Ms Blewitt : I will take it on notice to find out exactly how many.

Senator GALLAGHER: In the MYEFO document I think you outline the fiscal strategy, and in the helpful box A on page 23 you confirm that basically the government's fiscal strategy is to have one per cent of GDP as soon as possible, consistent with the medium-term fiscal strategy. Does that remain the case for the government?

Senator Cormann: Could you say that again.

Senator GALLAGHER: I am just confirming that it remains the case for the government to have a one per cent of GDP surplus as soon as possible, consistent with your fiscal strategy.

Senator Cormann: As soon as possible, indeed.

Senator GALLAGHER: Do you have a date for 'as soon as possible'?

Senator Cormann: The projections in the budget and in the half-yearly budget update for 2016-17 show a return to surplus by 2020-21 and show a remaining surplus all the way through to 2026-27. That is the current projection. I can confirm that we remain committed to returning the budget to surplus as soon as possible and to return it to a surplus of one per cent as a share of GDP as soon as possible.

Senator GALLAGHER: One of your tables in the MYEFO document shows that from 2021-22 to 2026-27 it sort of flatlines. It does not show any sign of heading towards that one per cent by the end of that table, which is fiscal year 2026-27. Do you have an idea outside of that time frame when you might see that go towards one per cent? Seriously, it is just flatlining on that table.

Senator Cormann: I can confirm again that our commitment is to return the budget to surplus as a share of GDP of one per cent as soon as possible. The projections are, of course, published openly and transparently in the Mid-Year Economic and Fiscal Outlook, based on the best available information that we have about the economic conditions, as well as the impact of policy decisions, at this point in time. That will be updated again in the next budget, to be delivered on the second Tuesday in May. At this point, given the work that we have undertaken so far, including having implemented more than $250 billion worth of net budget improvement measures over the period to 2026-27, since we have come into government—

Senator GALLAGHER: Can we have a list of those?

Senator Cormann: We have provided that before but I am happy to provide it again.

Senator GALLAGHER: It must be a growing list, because I have not heard $250 billion—since you came into government, in 2013.

Senator Cormann: Since we came to government in 2013. I have mentioned this figure before. I have been asked a question before and I am very happy to provide the information again on notice. Obviously, if we had not made those changes to the policy settings we inherited from the Labor Party the position would be materially worse. If we were to adopt the policy settings that Labor took to the last election the position would be materially worse.

Senator GALLAGHER: We are talking about your government and the decisions you are taking—

CHAIR: Senator Gallagher, can you assist me by letting me know when you are going to move on to the next topic so that I can give the call to Senator Kakoschke-Moore?

Senator GALLAGHER: And then come back?

CHAIR: Yes, of course.

Senator GALLAGHER: It will be soon. It depends on long answers—I can move through really quickly. Based on the MYEFO document, the path that is outlined in the medium-term chart on page 27 does not have you reaching the one per cent of GDP in the medium term.

Senator Cormann: That is a matter of public record, but what it also shows is that we are projected to return to surplus by 2021 and remain in surplus for the whole period to 2026-27, which is much better than what we inherited and is certainly much better than it would be if Labor's policy settings, as per the commitments before the last election, had been implemented instead of ours.

Senator KAKOSCHKE-MOORE: My questions will be focusing on the identification of government waste. Can you tell me how the government monitors waste across departments—for example, be it in procurement, or in other areas?

Ms Huxtable : I think the way in which the finance department does its work in advising government in respect of both spending decisions and new spending, but also the way in which current spending occurs, underpinning that is the idea of getting the best value for spending. I think that happens in a number of ways across many different areas of the department. For example, the decisions that the government has taken to manage coordinated procurement processes has looked to aggregate the buying power of the Commonwealth. That is one example. Across things like software procurement, there was a budget measure in the 2016-17 budget around coordinating property procurement. Similarly, we in Finance look to assist the government to ensure that the Commonwealth lease footprint is as efficient as possible—Operation Tetris, for example—

Senator KAKOSCHKE-MOORE: That sounds to me like setting some frameworks for good practice, in terms of trying to avoid waste, but not so much identifying it, if it is taking place.

Senator Cormann: It is core business for us to always ensure that spending on services as well as government administration is as efficient and as effective as possible. There is a range of strategies and programs that are deployed to ensure that happens. One of them is Operation Tetris, which the secretary has just mentioned. But there are other programs. Our smaller government agenda is spelt out in some detail in previous budget documents—I would refer you to Budget Paper No. 4 for the 2016-17 budget. We spell out in some detail there what we have done to ensure that government is a small and as efficient as possible—

Senator KAKOSCHKE-MOORE: Notwithstanding those efforts, waste could still take place?

Senator Cormann: We have a rolling program of functional and efficiency reviews going right across all portfolios and all government departments to ensure that the functions that are fulfilled by the portfolios and departments are still relevant and that the methodologies and administrative approaches used are still as efficient and as low cost as possible, cutting waste wherever possible. There is of course the standing efficiency dividend, which applies right across government, which forces government departments to focus on improving productivity, on doing more with less. From the government's point of view and from the finance department's point of view, making sure we identify and eliminate waste and be as efficient and effective as possible in the deployment of public resources is core business, but we have a whole range of programs and initiatives that help us achieve that. Dr Helgeby might be able to answer more, because it is very much an area that he take a leadership role in.

Dr Helgeby : As the minister has pointed to there is quite a range of activities. Some of them are framework activities, some of them are initiatives, some are one-off and some are ongoing. They are very well set out in short form in the minister's preface to Budget Paper No.4, which goes through and articulates some of those mechanisms, particularly the efficiency dividend but also a range of measures to drive value for money across the system. All officials, whether they be secretaries or the most junior officials in government have obligations. Those obligations include the ethical, economic and efficient use of public resources.

Senator KAKOSCHKE-MOORE: On that point, if somebody from one department identified what they perceived to be waste, could they make a disclosure to the Department of Finance about those concerns?

Dr Helgeby : Yes, they could. We are always keen to hear where there are opportunities to drive efficiency through the system, and in fact we encourage fora where people raise ideas and generate ideas about where we go next and what we look at next. Often when we are talking about things like this, what we are talking about is how does government keep up with a changing economy and how does it keep up with changing techniques that are available to it. What might be very efficient today in two years time, because of technology, might be considered inefficient. So we have to have dynamic program, not just a set-and-forget model.

Senator KAKOSCHKE-MOORE: If somebody did come forward with concerns about waste, are they protected in any way upon reporting those concerns?

Dr Helgeby : Is that a whistleblower question?


Dr Helgeby : There are whistleblower rules and protections in the system. We do not administer those, but we certainly would practise those.

Senator KAKOSCHKE-MOORE: Can you tell me how much waste the Department of Finance has detected across the government from the last financial year or—

Senator Cormann: We will take that on notice. It is a definitional question, to ask 'what is waste?'. We will take it on notice and see how we can best provide you with a sensible answer to that.

Senator KAKOSCHKE-MOORE: Thank you, and also the definition of 'waste' that you use in bringing those figures together. Finally, what happens—on remediation and accountability—in a situation where waste is identified?

Dr Helgeby : The starting point is that all officials have obligations. Typically, what we expect, and what I think we see, is that if an agency finds that there is something it is doing that it need not do it has an incentive to do something about that. The reason is that there is continual downward pressure on resourcing applied through things like the efficiency dividend and some of those other framework models. In general, if someone finds something they can do something about, the system will allow them, up to a certain point, to extract the benefit of having found that and driven it out of the system.

Senator KAKOSCHKE-MOORE: I return to my question about someone identifying waste. You mentioned there are some whistleblower laws that are in effect that would protect them or offer them some protection. Who within the Department of Finance should they whistleblow, if you like, to?

Dr Helgeby : My area is very interested in these things, but we are not the only part. In fact, other parts of our department are interested in property efficiencies or procurement efficiencies. I would like to think that many of us in Finance care about these things.

Senator KAKOSCHKE-MOORE: Is there a telephone number or a website for a whistleblower to go to to report concerns about waste?

Dr Helgeby : Not established as such. More often people write formally. They might write a letter saying, 'I've seen X, Y, Z,' and it is handled in the normal correspondence path.

Senator KAKOSCHKE-MOORE: But, if somebody felt uncomfortable about perhaps reporting directly to a more senior member, there is not a whistleblower hotline or anything like that where somebody could report their concerns?

Dr Helgeby : No, we do not have a hotline.

Senator KAKOSCHKE-MOORE: Or a website. How would somebody in Finance—just focusing on this department because this is where we are—know who to talk to if they had concerns?

Dr Helgeby : Typically, they would look at our organisational structure, and it is not unusual for people to come in at at least one level in the structure and say, 'You appear to be the person who's responsible for something that I'm interested in. Can I draw this to your attention?' That is not unusual.

Senator KAKOSCHKE-MOORE: Thank you.

Senator GALLAGHER: I would like to ask a few questions about wages growth. The ABS released their wage price index just last week and reported record low wage growth at about 1.9 per cent in 2016.

Senator Cormann: Wages growth? If you want to ask about matters like that, unless you want to talk about public sector wages—this is actually the Treasury portfolio. If you want to ask about ABS statistics and wages growth in the economy, then—

Senator GALLAGHER: Can I ask my question and then you can refer me to Treasury? My question is this. What the ABS are reporting is lower than what is forecast in the MYEFO. I think you had wages growth forecasts at—

Senator Cormann: That is a Treasury question.

Senator GALLAGHER: 2½ per cent. I still have not got to my question yet. It may not be.

Senator Cormann: I know where you are going.

Senator GALLAGHER: My question is: how would this impact? How would that difference impact on the budget, on the expenditure side of the budget?

Senator Cormann: It is a Treasury question because it goes to the economic forecast and the economic parameters underpinning our budget forecasts. It is best to ask the question both in the Fiscal Group of Treasury and also in the Macroeconomic part of Treasury—Macroeconomic if you want to ask questions about the general trend and about wages growth in the economy and the implications for the economy overall—

Senator GALLAGHER: I guess I am asking: what is the impact on the books? You guys put the books together.

Senator Cormann: That is Fiscal Group, Treasury.

Senator GALLAGHER: Surely Finance has some oversight or some view on this.

Senator Cormann: This is very much an issue for Fiscal Group in Treasury, which is meeting tomorrow, so you will have the opportunity to ask these questions.

Senator GALLAGHER: Yes, I will ask them as well. I just would have thought that, if you are seeing a variation like that and you plug it in through the numbers, it would have an impact on the work that Finance does.

Senator Cormann: These sorts of forecasts are very much a matter for the Fiscal Group in Treasury and you will have the opportunity tomorrow.

Senator McALLISTER: May I follow up, Senator Cormann? It is correct, though, isn't it, that Finance checks the expenditure profiles of the programs which are included in the budget? That is the role of Finance.

Senator Cormann: And Finance costs the impact of policy decisions and obviously assesses the way expenditure tracks across a range of areas, and these numbers are updated from budget to budget update. That is right.

Senator McALLISTER: So Finance must have a view about how changing wage profiles impact on those programs. I am not asking for a specific view program by program. I am asking about the broad ways in which changes to wages impact in your models which you use to calculate expenditure associated with programs.

Senator Cormann: Again, you have to assist us. If you are asking about wages growth, then—

Senator McALLISTER: Flat wages growth.

Senator Cormann: If you are asking about wages growth, that is a matter for Treasury. If you want to ask about indexation and individual indexation arrangements and how inflation—general inflation, CPI and so on—impacts on the expenditure profiles of various programs, that is a different question.

Senator McALLISTER: So that is the key mechanism by which wages growth impacts on expenditure profiles. It is through—

Senator Cormann: No, inflation is a separate indicator, like CPI or—in different programs they have different indexation formulas.

Senator McALLISTER: This is exactly my question. In terms of the formulas that you use to assess expenditure and to analyse the costings that are provided by different departments, to what extent is wages growth a factor in assessing—

Senator Cormann: Well, it is not one answer. If you want us to give you, on notice, a list of the different indexation formulas that apply to different programs, we are happy to provide that. But I think that has probably been published on previous occasions. Depending on what the program is, indexation arrangements are quite different.

Senator McALLISTER: So it is the indexation rate that is the key parameter. Are there any other parameters where wages growth impacts?

Ms Huxtable : I think it is probably best to describe the process that we go through as we prepare for a budget or a MYEFO, an economic update. There are a whole range of programs that are, obviously, administered. Many of those are demand-driven programs. They all have different indexation arrangements. There is a process that occurs. You cannot talk about it until it is done and it is published, because it really varies from one program to the other. But there is a process that occurs leading up to a pre-ERC and leading up to a budget and MYEFO where all the programs are basically subject to an estimates variations process. That will take account of changes to the wage cost indexes, CPI and the various other factors that input into indexation of those programs but also will take account of what the actual experience of administering those programs in the previous period has been. For example, there will be assumptions in the forecasts about how many people are using those programs, and then they get adjusted as experience dictates. So the combination of all those things basically results in variations to expenditure forecasts on programs being agreed with the agencies, and they get put through at the next budget update.

So the impact of a change in the wage cost index is going to vary. There will be varying factors that will dictate the impacts on individual programs. It is very hard to talk about it in the abstract, because we rely on the information that we are provided from the Treasury in terms of the input. Then that really gets run through with the information we get from agencies in terms of the numbers. Those two things come together to result in variations to programs.

The other thing that we will often do is keep the cost models that we use under close scrutiny to see if we are seeing continual differences between what was projected and what is actually being spent, to ensure that our models are as accurate as possible. So there is a continual refinement of those models that occurs across the big programs.

Senator GALLAGHER: So what you are saying is that, until Treasury adjust their forecasts—that is the first step—and then it comes to Finance to plug that through the numbers along with whole range of other variables—

Senator Cormann: Along with a whole range of other factors.

Ms Huxtable : Really, we are relying on Treasury providing us with the input data. We engage with agencies in terms of a range of other factors, and the two things come together to result in variations.

Ms Blewitt : Yes. Basically, when Treasury send over the latest parameters, one of the branches actually pulls those together, and we distribute them to the agencies. The agencies then run them through their models. The only time that we would do any modelling ourselves is if the parameters come out late. We do what is called a 'rule of thumb' then, and we put that in the system ourselves. But otherwise the agencies take those parameters and plug it through to their own estimates.

The other thing I would like to confirm is about published disclosure of the wage cost indices. One and six are the only ones disclosed, and they are actually disclosed in the budget paper. There are 10 of them, and the reason we do not disclose them is to avoid any people picking which is the best one to take, because some of them are a mix of wages and some of them are a mix of CPI, mix of wages. So we do not disclose them to avoid that. Agencies do not even know that either.

Senator GALLAGHER: Okay.

Senator McALLISTER: How does this rule of thumb work?

Dr Camilleri : We have detailed models with a large number of indexed programs. Once we get the parameters, we feed them in there and we get an estimate out of the model. That is really very much an estimate. Later on in the process—in the next round—they get updated properly in the estimates by the agencies themselves once they get the parameters. So it is really as Ms Blewitt said: when it is very late in the process, to update the estimates before, say, the budget or before MYEFO, we derive a rough estimate that can go into the bottom line.

Senator Cormann: To be very clear: the data comes from Treasury, and the process would normally work with the data from Treasury getting input into the system across the board. That is why Treasury is the best organisation to ask questions about this. Obviously, at some point you have got to close the books, and estimates are estimates, not facts. They are always based on the best available information at that time. When you reach the finishing line and you need to finalise your best possible estimate of what is likely to happen, you go through the accelerated process in the exceptional circumstances right towards the end that Ms Blewitt mentioned.

Senator GALLAGHER: Minister, what is the impact of lower wages growth than is currently forecast in MYEFO? What impact does that have on the expenditure side in a general sense?

Senator Cormann: It is swings and roundabouts. The numbers will be updated in the budget in May. It is genuinely swings and roundabouts. It has impacts in all sorts of different directions because of its interplay with other factors both in the economy and in terms of actual utilisation.

Senator GALLAGHER: What if we looked at pensions? What would be the impact of lower wages growth on pensions—in a general sense?

Senator Cormann: In a general sense, again, you cannot actually—there are different indices that apply to pension payments, and one or the other comes into play. I think the indexation of pensions is well understood and, depending on what CPI or the development of wages is, one or the other indexation—

Senator GALLAGHER: So it is a combination of CPI and wages?

Senator Cormann: It is not a combination; it is an either/or. One or the other is used.

Dr Camilleri : At present, pensions are driven by the CPI.

Senator GALLAGHER: Okay.

Senator Cormann: So they are driven by CPI, in which case the lower wages inflation does not actually come into play. It does not have an impact at all. That is why I am saying it is very hard to make the blanket statement that you are inviting me to make.

Senator GALLAGHER: You are not part of the discussion—Finance does not determine the parameters. You really—

Senator Cormann: It is ABS data, and Treasury obviously is responsible for the parameters.

CHAIR: Perhaps we will make that the last question given that we have a break now at 10:30.

Senator GALLAGHER: Okay.

CHAIR: Thank you, Minister.

Proceedings suspended from 10:29 to 10:45

CHAIR: It being 10.45, we will resume.

Senator GALLAGHER: I will just go back to something I asked you, Minister, which you took on notice, in relation to your statement that there has been $250 billion worth of savings since the government was elected in 2013. I asked for details of that figure broken down and you said that you had provided it before.

I think this information was sought after your speech at The Sydney Institute last year. A briefing note from Finance was FOIed and the information was not provided through that.

Senator Cormann: I am very confident that I have answered all of the questions taken on notice in previous Senate estimates. In fact, I saw the statistics released by the Clerk's office the other day and verified that.

Senator GALLAGHER: I note in your speech to The Sydney Institute that it was $221 billion—

Senator Cormann: There has been more now. The FOI request was for a briefing note to me. That was not—

Senator GALLAGHER: I think it was about trying to get to the list of the decisions that have been—

Senator Cormann: Well, I can take it on notice. I am quite happy to provide that information on notice.

Senator GALLAGHER: Okay—up to the cumulative total of $250 billion. Thank you.

Back to MYEFO again: I have some questions about the childcare variations. In MYEFO there is a variation, a $7.6 billion reduction in childcare payments over the forward estimates. The—

Senator Cormann: After a $7.8 billion increase in previous updates. It is always important to put that into perspective.

Senator GALLAGHER: Yes.

Senator Cormann: Essentially, it is a net $200 million—

Senator GALLAGHER: Sorry? A net—

Senator Cormann: If you look at the up and down—if you look at the down compared to the up—in previous updates, it is broadly neutral.

Senator GALLAGHER: Okay. I have not got to my question yet! Thanks for that. For the variation downward, what were the key changes in that?

Senator Cormann: Obviously, it is based on the assessment, which is done at arm's length from the government—it is done independently by the departments—

Senator GALLAGHER: Sure.

Senator Cormann: In short, it is based on the information available about expected utilisation trend and cost. The secretary might want to give more detail but, as always, these estimates variations are based on the best available information at that point in time.

Over the previous six budget updates since the 2013 Pre-election Economic and Fiscal Outlook, the estimated expenditure was $7.8 billion higher than what was estimated over the relevant estimates period. As you said, in this half-yearly budget update—not as a result of decisions by the government but essentially as the result of expected utilisation and cost—it is $7.6 billion lower over the current forward estimates. And the number of children accessing subsidised child care of course is still anticipated to grow—

Senator GALLAGHER: I know, yes.

Senator Cormann: by almost 300,000 over the forward estimates from 1.72 million—

Senator GALLAGHER: I read that explanation.

Senator Cormann: Well, given that I have been asked to read out various other bits I thought I would read that out as well!

Senator GALLAGHER: You were not so helpful before!

Senator Cormann: But the secretary may want to add to it.

Ms Huxtable : Senator, I spoke before about how we undertake continuous improvement and quality assurance around these models. As the minister said, with the childcare model there were these large upward variations that occurred one budget update after another. So, clearly, the model was not projecting forecast spending very well. There was joint work conducted between us and the education department to look to improve that model, and it was basically re-based, effectively.

As to the types of things that changed, firstly, rather than using a single week of data in terms of childcare attendance, the model moved to a full year of childcare attendance data—so a better dataset effectively. On growth rates, previously there was a single rate for all service types, and the growth rates now in the model reflect the different service types—your family day care, long day care et cetera. There are also different projection methodologies rather than using a 10-year rolling average to better reflect behavioural change.

Senator GALLAGHER: Sorry, what was the first bit before the 10-year rolling average?

Ms Huxtable : Using new projection methodologies for growth in child care. So, rather than the 10-year rolling average which had underpinned the previous model, we are using more up-to-date methodologies around growth in the model. We worked on that with the Department of Education. That work was also validated by an external consulting firm, KPMG. We will obviously continue to keep that model under close scrutiny to ensure that it is more accurately forecasting spending. But they are the types of things that we saw in the model update.

The other element of the variation at MYEFO was also flowing through the impact of the family day care-childcare swapping measure, which was a measure in the 2016-17 budget, I think, which resulted in much reduced growth in family day care than previously anticipated. I think, from recollection—and Mr Bartlett will correct if I am wrong—that the growth rate in family day care would be zero rather than the 37 per cent prior to that. That was a result of the family day care-childcare swapping measure. So there are two things basically.

Senator GALLAGHER: It is a pretty substantial change to—

Senator Cormann: As it was before.

Senator GALLAGHER: Yes.

Senator Cormann: As the secretary has explained, they had a very close look at how the model operated, to ensure that it was better. I mean, estimates are estimates. You do not know what will ultimately happen with 100 per cent certainty, but you do want your model to be as close as possible to what is likely to occur. That is why work was done by the relevant departments to improve the model.

Ms Huxtable : And we have done this work in a number of areas. Child care is one of those areas but, in the time that I have been in Finance, a number of other models have been unpicked and put back together.

Senator GALLAGHER: What led to you thinking that the model was wrong? Was the increasing cost, without explanation?

Ms Huxtable : When we see that from one budget update to the next we are not accurately forecasting spending on a program, we need to look carefully at the models to see if we can improve the accuracy of the forecasts. It is basically our responsibility to ensure that the budget forecasts are as accurate as possible. So we will continue to scrutinise at all times how those models are constructed.

Senator GALLAGHER: So when it was escalating—

Senator Cormann: The projections were escalating, not the actual expenditure.

Senator GALLAGHER: Then you were essentially having underspends, were you, when it came to actual—

Ms Huxtable : Remember that the projections were going out into the forward estimates period.

Senator GALLAGHER: Yes.

Ms Huxtable : I would probably have to take on notice exactly what happened in the current year in terms of forecast versus spending. But this was more about what was in the forecasts going forward.

Senator GALLAGHER: So you had sort of queried those upward variations and that led to—

Ms Huxtable : At every point when we go through the process of updating the estimates, we work with the agencies to validate the estimates that are being provided. These models are very complex. It is complex to re-baseline them or reconstruct them, and it takes some period of time. I think the work on this particular model started some time before it landed before MYEFO. Do you know exactly when? It was over a year or more, wasn't it?

Mr Bartlett : It was a six- to 12-month exercise.

Ms Huxtable : So it takes quite a long time to do this, and obviously you have to gather all the relevant data. The childcare area of Education owns the models. Detailed questions are really better sent to them—just to explain the process that we have been through.

Senator GALLAGHER: Do you have any indication of what the impact of this variation might be in, say, the 2019-20 financial year? Have you done it over the medium term? And, if so, are they available?

Senator Cormann: The relevant numbers will be updated at budget time. Obviously, again, we are not in a position now to provide ad hoc assessments outside of the normal processes on what may or may not be occurring. The next update is at budget time.

Senator GALLAGHER: You must have modelled the medium-term impact of a variation like this. So my question is: is that information available?

Ms Huxtable : We very focus on the forward estimates period. So we do not do—

Senator Cormann: As per the requirement—

Senator GALLAGHER: So you did not model it over the medium—

Ms Huxtable : We do not do medium-term projections.

Senator Cormann: The requirement in the charter of budget honesty, actually, very much is that these sorts of estimates and projections need to be assessed over the budget year and the three out-years. And that is precisely what we do.

Ms Huxtable : The other point to make, Senator—and maybe it is not clear—is that these are programs which are growing. What we are talking about here is the rate at which that growth occurs. So the rate of growth was more than the growth when we unpicked the model and constructed it in a different way. Sorry, did I say 'more than'? I meant 'less than' not 'more than'.

Senator GALLAGHER: It is good news for our Finance department, though. It is good when models turn out that way.

Ms Huxtable : They do not always turn out that way.

Senator GALLAGHER: I know.

Senator Cormann: The important point here is: this is not a cut, even as a result of the estimates variation; this is less growth that what had previously been spat out of the model.

Senator GALLAGHER: Yes. That is what Ms Huxtable just said. I understand that.

Senator Cormann: Can I just ask some questions now around Finance's role in the Centrelink debt recovery program.

CHAIR: Senator Rhiannon, just to clarify: are your questions also in outcome 1?

Senator GALLAGHER: Do you want to go to—

CHAIR: If that is all right.

Senator GALLAGHER: Okay. Yes, sure.

Senator RHIANNON: I will not take that long. Thank you, Chair. I understand that half a million dollars has been allocated for the department to scope a new computer system to manage MPs' allowances.

Senator Cormann: If you talk that MPs allowances, that is in outcome 3 later tonight. So that is after 8 o'clock.

Senator RHIANNON: Even though it is about the allocations of funding?

Senator Cormann: This is very much a matter for outcome 3.

Senator McALLISTER: [Inaudible] in relation to ICT, we have had problems before with diverting people into later stages of the program.

Senator Cormann: Support for members of parliament, if that is what it is about, then that is very much outcome 3.

Senator McALLISTER: Or is it about IT, Senator Rhiannon?

Senator RHIANNON: I thought it was about IT. The thrust of the questions was—

Senator Cormann: But if it is IT that relates to support for parliamentarians and others, as required by the Australian government through the delivery of an advice on entitlements and targeted assistance, that is outcome 3. Senator Ryan is very much the one who is driving all of the aspects of this, including any ICT issues. Given that he is a senator, as well as the Special Minister of State, he is the appropriate minister to answer questions in relation to that.

Senator RHIANNON: Okay. The other one might be similar—to go somewhere else. I was trying to clarify—it is to do with ICT upgrades. But this was about supporting greater transparency with regard to trade procurements. Does that come under the—

Senator Cormann: This would be outcome 2; either program 2.5 or—is that where we are now? Are we now in outcome 2? Have we finished outcome 1?

CHAIR: No. We are still in outcome 1.

Senator RHIANNON: So that would come under outcome 2?

Senator Cormann: That is right.

Senator GALLAGHER: What is Finance's role in the Centrelink debt recovery program? It is a very overarching question to begin with.

Ms Huxtable : Really, our role is in regard to costing these measures, agreeing costs and, obviously, providing advice to government as they consider making decisions in regard to specific proposals in front of them—in the normal way.

Senator GALLAGHER: You were involved in reaching agreement on booking $3.7 billion worth of savings.

Ms Huxtable : Which measure are you referring to?

Senator GALLAGHER: The Better Management of the Social Welfare System program.

Ms Huxtable : That is the MYEFO measure. Right.

Senator Cormann: Generally, our involvement in these sorts of measures is limited to being part of the costings exercise. Any questions other than those raised on costing are, of course, a matter for the specific portfolio concerned.

Senator GALLAGHER: I have no doubt they are being pursued in the other committees as well. I am just trying to understand the level of involvement of Finance in agreeing the savings of $3.7 billion over four years was a reasonable one to book through.

Senator Cormann: To put that into perspective over that forward estimates period, it is well under one per cent of the total expected expenditure over the forward estimates in the social services space.

Senator GALLAGHER: Could you talk me through how that figure was finalised and agreed upon from Finance's point of view? I get that there will be other people involved. Was Finance involved in a working group?

Senator Cormann: We just costed it through.

Ms Huxtable : It was just costing a measure in the normal way.

Senator Cormann: Like we would cost any other measure for environment or health.

Senator GALLAGHER: Okay, so talk me through that.

Mr Hunt : We costed this through the normal costing process. The agency prepares costing estimates and we go through a process of verifying and validating those.

Senator GALLAGHER: So the department comes to you and says, 'This is what we believe a reasonable figure is,' and then what do you do at a point?

Mr Hunt : Then I have a team that goes through those costs and assesses the assumptions that underpins them and agrees to them once we are comfortable with them. In this case, the assumptions were based on DHS's previous experience with various compliance measures.

Senator GALLAGHER: And you agreed with those assumptions?

Mr Hunt : We did, yes.

Senator GALLAGHER: Can you just explain what they were?

Mr Hunt : I do not have those. I would have to take that on notice. You may be able to get more information from human services later in the week. There were a number of different costing models and various components of these measures.

Senator Cormann: The way to think about it is an individual portfolio puts forward a proposal and we are, within government, the independent review of whether what is put forward by the portfolio is reasonable, whether the assumptions are reasonable and whether the estimates that they have come up with are reasonable. From time to time, if they are not, obviously adjustments are made. But Finance is, for the government, the independent arbiter in the system of whether costing assumptions are as accurate as they can be.

Senator GALLAGHER: I understood that. My question is: so Finance has ticked off of $3.7 billion worth of savings for this program and they have agreed with the assumptions that have been put forward. What were the assumptions?

Senator Cormann: Mr Hunt has already taken that on notice and suggested that you might get more detail from the actual portfolio.

Senator GALLAGHER: Yes, they will be pursued separately. I am just trying to get at it from Finance's point of view. Within that model—I do not know if you will have to take this on notice to—was this a conservative costing?

Senator Cormann: All costings, obviously, aim to be as close to what is expected to happen as possible. You base it on the best available information.

Senator GALLAGHER: Okay, so they are not conservative.

Senator Cormann: In the end, an estimate is the best possible prediction of what is likely to happen based on information you have, understanding that something is not necessarily going to be hundred per cent of what actually happens but you keep refining your estimates as you get more data and information about lived experience.

Senator GALLAGHER: Did the model allow for incorrect information?

Ms Huxtable : I think you would really need to ask DHS the detail of this. These—

Senator GALLAGHER: Surely Finance have to understand the details of the measure. If you are going to—

Ms Huxtable : We have already taken that on notice. These engagements are—

Senator GALLAGHER: It is the biggest savings measure announced in MYEFO and—

Senator Cormann: But this is not our portfolio responsibility. We have, obviously, the role that I have already described. If you want us to go into the details of what are measures in other portfolio areas, then the only thing we can do for you is to take it on notice.

Senator GALLAGHER: But this is Finance's role. Finance has to tick off on them. They have to say, 'Yes, we believe those assumptions are real.'

Senator Cormann: Assumptions that other portfolios are responsible for.

Senator GALLAGHER: Yes, but presumably you have just told me that you test them. It is the biggest savings presented in MYEFO, and now you are saying it is someone else's to explain.

Senator Cormann: Because it is the responsibility of another portfolio.

Senator GALLAGHER: Surely, you have got to defend these numbers from a finance point of view.

Senator Cormann: We absolutely stand by the numbers that are published in the budget, and this is a measure in the Social Services portfolio.

Senator GALLAGHER: It is a measure in the Finance portfolio as well.

Senator Cormann: In the Social Services portfolio.

Senator GALLAGHER: I disagree with that.

Senator Cormann: It is a matter of published record that it is in the Social Services portfolio.

Senator GALLAGHER: I know who has portfolio responsibility, but you have portfolio responsibility with presenting MYEFO and financial statements, and surely that involves having some agreement or some visibility on these measures, as they appear in your documents and that you then defend.

Senator Cormann: Indeed. But that does not mean that we provide answers in relation to every single portfolio across government and every single—

Senator GALLAGHER: I am not asking about that. I am asking about the assumptions that led Finance to tick off on this $3.7 billion worth of savings.

Senator Cormann: And the officer has taken that on notice.

Senator GALLAGHER: I am not asking about whether they were right or not to make those decisions. I am just asking what they were.

Senator Cormann: And the officer has taken that on notice.

Senator GALLAGHER: Considering the level of incorrect debt notices that we are now all aware of, do you expect that this figure will reduce?

Senator Cormann: You are now asking us to provide information about estimates variations, which, even as they occur, will of course be appropriately reflected in the budget on the second Tuesday in May. As you would know, between every budget and half-yearly budget update period, estimates across the board are reviewed and reassessed against the lived experience, as I have said before, and updated as appropriate, and the next update will be in the budget.

Senator ABETZ: I have just got a very quick brief topic, a matter that was brought to my attention by a staff member of Finance. What is the protocol with flying flags in the Department of Finance and in the foyer?

Ms Huxtable : I might have to take that on notice, but we would adhere to the government guidelines in that regard. I believe I have someone here who may be able to help you.

Mr Hirschfeld : We follow the protocols set by the flag protocol unit in PM&C.

Senator ABETZ: Flags that are associated with political campaigns or active community campaigns, are they flown in the foyer from time to time?

Mr Hirschfeld : I do not know whether it is my position to determine whether or not something is a political campaign.

Senator ABETZ: That begs the question: what is the protocol about flying flags in government buildings and on this one for the Department of Finance?

Mr Hirschfeld : The PM&C protocol specifies flag protocols for the flags that are flown outside the building.

Senator ABETZ: Outside the building; not inside the building.

Mr Hirschfeld : Not to my knowledge, but we can check that.

Senator ABETZ: Not for the official foyer. So, in that case, if it is not the PM&C guidelines, who determines the guidelines? Can anybody from the public plant a flag in the foyer of Finance? I assume that is not the case, so somebody must have that heavy duty.

Ms Huxtable : I think there are no protocols as such in respect of the inside of the building, but clearly it would be a matter for the executive board in terms of what happens inside the building.

Senator ABETZ: Surely the executive board meet to determine what flag is to be flown in the morning?

Ms Huxtable : The executive board do meet very regularly on a range of issues. I cannot say that I can recall any sort of flag issues ever being raised at board meetings. As is the normal arrangement, we meet fortnightly.

Senator Cormann: And I can say that nobody has ever raised any flag issues with me. I am not aware of any flag issues. If there is any concern in relation to flag issues, it might have been useful for it to have been raised.

Senator ABETZ: The Finance staff member who raised it with me is concerned because they imagine that it would not be the minister making that determination but possibly the head of the department or somebody else within the department. To cut to the chase, the rainbow flag was on display in the lobby, which, believe it or not, some people see as an activist flag for a particular cause in relation to the issue of whether or not we should change the legislation on marriage. Some people support that cause; others do not. I was just wondering what the protocol was within the Department of Finance because if that is allowed then one imagines the Marriage Alliance banner should be flown equally. Ms Huxtable?

Ms Huxtable : I did not say anything.

Senator ABETZ: I know you did not say anything, but I saw the way that you reacted to that. If you allow one side of a debate then you need to allow the other side. That is why I sought to determine up-front who was responsible for making these determinations. It looks as though we do not have anyone. Can you take on notice: who is actually responsible? With whom does the buck stop? Who makes the actual decision as to what flags are flown? For example, when the Israeli Prime Minister was in town, I understand we did not see the need to fly the Israeli flag in the foyer of the finance department. Who makes the determination as to what flags are exhibited or flown in the foyer from time to time?

Ms Huxtable : I think I have already made the point that, in terms of what is inside the foyer, that would be a matter for the executive board. I can certainly raise this issue with the executive board at their next meeting, and we can discuss a way in which we can make this decision in the future.

Senator ABETZ: If you could provide with a copy of the relevant minutes of the executive board that made the determination in relation to the flying of this particular flag, that would be very helpful.

Ms Huxtable : I will seek to do that.

Senator ABETZ: Thank you. For what it is worth, by way of some slight humour on this issue, you realise this particular flag is the flag of the Gay and Lesbian Kingdom of the Coral Sea Islands, which has declared war on Australia. Senator Cormann, you would understand they did the same as Prince Leonard of the Principality of Hutt River and this is now their official flag. It is the flag of a hostile nation, if we are to believe them, having declared war on Australia. I dare say that was not the reason it was flown.

Senator McALLISTER: I think he is no longer king.

Senator Cormann: Last week, it appeared his son had taken over; that is right. Senator Abetz, as the secretary has indicated, there will be a flag inquiry, and we certainly do not like to be—

Senator ABETZ: You have flagged an inquiry?

Senator Cormann: Yes, a flag inquiry. It is certainly not the government's intention to fly the flags of hostile nations in any of our official buildings.

Senator ABETZ: Very good. That is a start.

Senator Cormann: We will make sure that there are no flags of hostile nations anywhere in any government building.

Senator ABETZ: Excellent. The other thing is to ensure that there are no flags that are identified with certain political campaigns that might upset members of the staff of the finance department. Thank you.

Senator McALLISTER: I would like to come back to the NBN Co and the loan that has been announced, provided to the NBN Co on commercial terms.

Senator Cormann: That is in outcome 2, but the witnesses are here, so we can help.

CHAIR: Does that mean we are ready to move on to that?

Senator McALLISTER: No, it doesn't.

Senator Cormann: We might as well deal with these questions.

Senator McALLISTER: Okay. I am interested to understand what credit rating the loan will be provided at.

Senator Cormann: I think we have previously gone through it. You know that it is not something that we have publicly disclosed.

Senator McALLISTER: Why is that? What is the reason for not disclosing?

Senator Cormann: Because it is commercially sensitive, and that is something that we have claimed on the public record as a public interest immunity before.

Senator McALLISTER: Commercially sensitive to whom?

Senator Cormann: It is commercially sensitive to the taxpayer and the taxpayer's interest in NBN Co, among other things. You of course know that it is commercially sensitive for the taxpayer in a range of ways, including the fact that the loan will have to be refinanced at the end of the term. Furthermore, you would know that, with the way the NBN Co was set up by the Labor government, it is actually already provided that it be privatised one day. So there are a whole range of commercial sensitivities in protecting the interests of taxpayers that are at play. I sat for way too many years where you are sitting now, asking these sorts of questions of the then finance minister, Senator Wong. You will find that, if you look through the record, this is precisely the sort of answer that she provided me again and again. I just sat back and said: 'I accept that, Senator Wong. I understand what you are saying.'

Senator GALLAGHER: I find that pretty hard to believe.

Senator McALLISTER: I find that hard to believe also. Minister, what is the interest rate that has been offered on the loan?

Senator Cormann: I think we went through that last time, but I will ask Mr Edge to remind you.

Mr Edge : I think NBN announced with its half-yearly results the interest rate, which is 3.96 per cent per annum.

Senator McALLISTER: How did you go about establishing the terms on which you offered the loan? You said that the loan was offered on commercial terms. What was the process you went through to establish the appropriate terms on which a commercial loan might be offered by government?

Mr Edge : The loan was established on commercial terms, so there were discussions with NBN Co, and the department also sought some external advice about appropriate commercial terms for a loan of this nature.

Senator McALLISTER: What is the nature of that advice? I do not mean its content. I mean what sort of entity might provide you with that advice?

Mr Edge : I think we provided this in evidence at some other point in the past, but Lazard was engaged by Finance to provide some commercial advisory services in respect of the loan.

Senator McALLISTER: Did they then consult with other market participants on your behalf?

Mr Edge : Yes. Part of the expertise they brought to the role was obviously a good understanding of commercial debt markets, so they would have consulted as they needed to about that.

Senator McALLISTER: Separate to the contract with Lazard, did the Department of Finance engage directly with any private sector providers or credit agencies about the terms on which the loan might be offered?

Mr Edge : Not directly. But NBN went through a credit rating process, and we spoke to the rating agencies as part of that.

Senator McALLISTER: As part of that process, did any of the rating agencies or any private financier express to NBN or to the Department of Finance concern about providing finance to NBN Co without the introduction of the regional broadband scheme?

Mr Edge : The conversations with the rating agencies were by their nature confidential, commercial conversations. I am not in a position to go into the ins and outs of what was discussed in those conversations with the agencies.

Senator McALLISTER: Let me put it another way. Does the department consider the introduction or the regional broadband scheme was material in deciding the terms on which the commercial loan to the NBN might be offered?

Mr Edge : I do not recall that being a factor in terms of our consideration of the issue, but I would—

Senator McALLISTER: So your personal recollection is no. Does anyone in the department know other than yourself? Is there anyone else involved in this process who could tell me?

Mr Edge : I think we would need to take that on notice if you are asking for anything beyond my personal recollection. But my personal recollection is no.

Senator McALLISTER: Have the market conditions changed at all since 9 November 2016 in terms of financial markets?

Mr Edge : That is a very broad question.

Senator McALLISTER: It is a broad question. I suppose in the context of the loan, I am interested in understanding how the loan responds to a changing market dynamic if you are a government entity. It is a fixed interest rate?

Mr Edge : Yes.

Senator McALLISTER: So it does not respond flexibly to any change in market conditions over the term of the loan?

Mr Edge : It is not unusual for corporate debt to be on a fixed interest basis, so there is nothing particularly unusual in that.

Senator McALLISTER: Okay.

Senator Cormann: And it is over a short period.

Senator McALLISTER: Just on a process question—in MYEFO on page 256, there is a statement of government loans, I think that is what it is titled. Just from a process perspective, why is the NBN loan not included in the table proper but only included as a footnote?

Senator Cormann: It is only because the NBN loan has not been issued yet. It is a matter of public record that the government is committed to providing $29.5 billion worth of equity. The equity financing is still being used to manage the rollout and the loan is set to be entered into from 1 July 2017 onwards. If you actually look at the note (b) on page 256 at the bottom of the table, there is the estimated loan amounts of the program outstanding as at 30 June 2017 in millions of dollars. The note says:

The Government has committed $29.5 billion in equity to NBN Co Limited (NBN Co), which is expected to be fully utilised by the end of 2016 17. The Government will provide NBN Co with a loan of up to $19.5 billion on commercial terms to complete the rollout of the National Broadband Network. The loan will commence in 2017-18 and is expected to be re financed by NBN Co on external markets in 2020 21.

The loans listed there are those that are expected to be in place until 30 June 2017. But you have, of course, transparently indicated at the bottom in the notes the fact that the government has made a decision to provide a loan on the terms as outlined.

Senator McALLISTER: But you have made the commitment to provide the loan. I am trying to understand the standard that has been applied in documenting this in the budget.

Senator Cormann: But the loan has not been drawn yet in the 2016-17 financial year.

Senator McALLISTER: Right, so the transfer of funds is not taking place?

Senator Cormann: That is right.

Senator McALLISTER: Thank you—that is clear. You mentioned the refinancing of the loan. What will happen if the loan is not able to be refinanced?

Senator Cormann: We are very confident the loan is going to be able to be refinanced. By 2021, the NBN rollout will essentially be substantially complete. Obviously already, NBN is exceeding all of its key targets including its cashflow targets, and by the time we get to 2021, they will have an even better and longer track record. We are very confident that NBN will very comfortably be able to refinance the relevant loan in the timetable as set out in the budget. Mr Edge might give you some more information around the expectations on when NBN is going cashflow positive and all these things.

Mr Edge : I think the expectation is that the NBN will be cash flow positive before the loan matures. I would just need to check the financial year that is expected.

Senator McALLISTER: Someone behind you may have it.

Ms Huxtable : I think we will have to take that on notice.

Senator McALLISTER: No, I think someone has it.

Ms Huxtable : Oh, we do have it.

Mr Edge : No, I think we will need to take that question on notice. We do not have the relevant facts to hand.

Senator McALLISTER: I will turn to something different. I want to ask quickly about the initiative in MYEFO in relation to the Asset Recycling Fund. Previously the fund was expected to hold a series of financial assets which included the proceeds from Medibank Private, the Building Australia Fund and the Education Investment Fund. Just to confirm, is that correct?

Ms Huxtable : Yes, that is correct.

Senator McALLISTER: Where are those funds being held at the moment? I am particularly interested in Medibank Private.

Ms Powell : The Asset Recycling Fund is sitting with the Future Fund, I believe.

Senator McALLISTER: Including the Medibank Private proceeds?

Ms Powell : I need to check that.

Senator Cormann: Senator, you are mixing things up there. Obviously, the various funds are held by the Future Fund—

Senator McALLISTER: The Building Australia Fund and the Education Investment Fund—yes, I understand that. I do not think I am mixing things up.

Senator Cormann: Are you asking about the Medical Research Future Fund?

Senator McALLISTER: No, I am asking about the proceeds from the sale of Medibank Private which were intended to be held in the Asset Recycling Fund.

Senator Cormann: We have gone through this in the past. It is obviously held by government—

Senator McALLISTER: In consolidated revenue?

Senator Cormann: In the consolidated fund—yes.

Senator McALLISTER: Okay. What is the quantum of those funds?

Senator Cormann: It is a matter of public record that it is roughly $5.7 billion.

Senator McALLISTER: Sorry, Minister, you misunderstand me. I am asking what the quantum of funds are that were intended to be placed into the Asset Recycling Fund and that will now be used for other purposes as set out on page 157 of the MYEFO.

Senator Cormann: We will take that on notice.

Senator McALLISTER: Really? You do not know?

Senator Cormann: If you are asking us for a breakdown, that is beyond what is published in the half yearly budget update, and we will take it on notice.

Senator McALLISTER: The budget update expresses it on page 157 in terms of expenses but I am trying to understand what the balance of the fund would have been had the measure not been discontinued.

Senator Cormann: And, as I have indicated to you, that what is published is of course published. The question you are asking is beyond what is published and, given the information you are seeking goes beyond what is published and due to the nature of that information, we are taking it on notice.

Senator McALLISTER: The reason I am asking is that in the same place, at page 157, there is an indication that the decision will reduce gross debt by more than $10 billion by 2019-20.

Senator Cormann: But you are talking about a specific measure.

Ms Powell : The $10 billion measure is returning the balances of the Building Australia Fund, the Education Investment Fund and the sale of Medibank Private to pay down debt.

Senator McALLISTER: Correct. I am looking to clarify what I see as an ambiguity in the descriptor. I am not saying it is deliberately introduced but there is an indication of how the decision will reduce gross debt. It says it will reduce it by more the $10 billion by 2019-20. In the third paragraph it also indicates that it will be credited to the National Disability Insurance Scheme Special Account and used to reduce debt and future borrowing requirements. I am just trying to understand how those two objectives intersect.

Senator Cormann: It is very simple. Given that there is a funding shortfall in the NDIS, if we do not meet—

Senator McALLISTER: That is not the case, Minister.

Senator Cormann: That is absolutely, 100 per cent the case.

Senator McALLISTER: That is not the case.

Senator Cormann: Well, you can repeat that ad nauseam. That assertion is false. I have got all of the information from officials in front of me, and the Expenditure Review Committee have all the information in front of us, which very clearly shows a funding gap when it comes to the NDIS, which we are working to fill. If we are not able to fill it through these methods then obviously we have got to fill it through additional borrowings, because the expected expenditure on the NDIS is higher than the funding that is otherwise available. As such, if we are not able to draw on those sources through the National Disability Insurance Scheme Special Account then we will have to incur additional debt in order to pay for it, compared to the alternative. It means additional public debt interest and it means additional gross debt.

Senator McALLISTER: Minister, it does not really matter if the NDIS is accommodated in consolidated fund or in your special account. It is an impact on the budget, we all understand that, and it was provided for under the Labor government.

Senator Cormann: It was not provided for under the Labor government. That is the problem. You conned the Australian people—

Senator McALLISTER: I suppose what I am trying to clarify—

Senator Cormann: I said this in my introduction at the beginning. One of the very dishonest things that the Labor government did, as they were piling up and locking into legislation additional expenditure growth, was to impose an assumption on the medium-term forecasting model of a two per cent cap in annual spending growth, year on year, when the policy decisions that you had taken were actually increasing expenditure by 3.7 per cent in real terms, year on year.

Senator McALLISTER: Minister—

Senator Cormann: You say it was fully funded. You imposed a forecasting assumption on the expenditure model that was not connected to reality, that was not connected to the actual effect of policy decisions; it was just an assumption. And you imposed that assumption on the basis that you said, 'It will be our intention down the track to clarify how we will meet—'

Senator McALLISTER: Minister, it was a policy decision that we intended to observe. The constraint placed on our—

Senator Cormann: Yes, but hang on. It was a policy decision that you intended to observe. So you made a decision to limit spending growth in real terms, year on year, at two per cent without telling anyone how you would actually achieve that.

Senator GALLAGHER: None of that is true.

Senator Cormann: With all of the spending reductions in our 2014-15 budget and subsequently—

Senator McALLISTER: Minister, I think, given your record on expenditure—

Senator Cormann: Let me finish, because that is a very important point. With everything that we did in our initial budget, all we were able to achieve was to reduce spending growth over the medium term from 3.7 to 2.7 per cent in our first budget. You, without telling anyone how you would get there, said that you would control expenditure growth to no more than two per cent in real terms, year on year. You did not tell anyone how it would be done.

Senator McALLISTER: Minister—

Senator Cormann: There was not a single saving identified in order to get you from 3.7 per cent spending growth in real terms, year on year, to two per cent. Let me tell you, 1.7 per cent, year on year, in cuts is a very steep amount; it is a very difficult amount. You never even showed any Australian how you would get there.

Senator McALLISTER: Minister, we have presented, in successive years, a whole series of measures, in terms of savings, which you have failed to adopt.

Senator Cormann: No; you presented measures which you then voted against. You did worse.

Senator McALLISTER: Minister, I am happy—

Senator Cormann: You went to the election in 2013 with measures you then turned around and opposed.

CHAIR: Order! Senator Cormann and Senator McAllister, perhaps we will just return to questions that will be more productive.

Senator McALLISTER: To be clear: the $10 billion, then, is intended to pay down debt? That is what it says in the budget measure.

Senator Cormann: The effect of the decision is that gross debt will be less—as it says—by more than $10 billion by 2019-20. That is right.

Senator McALLISTER: And can you provide an estimate for the public debt interest of this reduction in debt?

Senator Cormann: We will take that on notice.

Senator McALLISTER: This is quite separate. Can I ask about the role of the Department of Finance in providing advice to government on the WestConnex project in the lead-up to the May 2014 budget? Was advice provided to government about the infrastructure elements in the May 2014 budget?

Senator Cormann: All decisions that are reflected in the budget would, of course, somewhere along the way, have Finance advice attached to them, because Finance provides the costings in the form of the green brief that goes to the Expenditure Review Committee. It provides its assessment of all budget measures that come forward for consideration by the government.

Senator McALLISTER: Are you aware that the Auditor-General has documented the advice that was provided by the Department of Infrastructure and Regional Development in relation to the WestConnex project in his Audit Report No. 38 that was published just recently?

Mr Bartlett : Yes.

Senator McALLISTER: On page 26 of that report the Auditor-General sets out recommendations that DIRD made in relation to the funding profile for WestConnex. He indicates that by that stage DIRD had accepted that funding for WestConnex was an election commitment and would be proceeded with, then they made a series of recommendations about the funding profile to manage risks associated with proceeding with the project. Are you aware of DIRD's advice in that regard?

Mr Bartlett : I am aware that DIRD got a series of independent advices. They worked their way through the issues associated with WestConnex, as is brought out in that audit.

Senator McALLISTER: For example, DIRD's preferred approach was for the funding in that early phase, in 2013-14, to be $46 million. The actual payments were $500 million. Did Finance ever offer any advice about how government ought to treat DIRD's advice?

Mr Bartlett : As has been discussed previously, we had a role in terms of costing assumptions that were made. We were presented with information from DIRD that reflected both their advice and the advice of consultants. We looked at the proposal accordingly.

Senator McALLISTER: Did Finance express any concerns similar to the concerns expressed by DIRD about the risks in proceeding precipitously with funding in this way? DIRD were obviously concerned about pushing a whole lot of money off to this project before the business case had been finalised. Were similar concerns expressed by Finance?

Mr Bartlett : You would have to ask DIRD about their concerns or non-concerns. As I said, we had a costing role.

Senator McALLISTER: Were you aware of their concerns?

Senator Cormann: We have to clarify what our role is. Our role is not to second-guess the desirability of or otherwise of measures.

Senator McALLISTER: Really?

Senator Cormann: As you have said in relation to this measure, it is actually an election commitment. Both the Abbott government at the time and the Turnbull government since then is very steadfast in delivering on our election commitments, including in particular in the infrastructure space. The role of Finance is to ensure that the costings information that is put forward is accurate, credible and has integrity to the extent required, and essentially to require adjustments to the costings of a particular measure if these are necessary. It is not Finance's role to second-guess the desirability or otherwise of government's election commitments or measures put forward by individual portfolios. These are decisions for government. The government takes full responsibility for decisions that we have made to prioritise infrastructure investments, including and in particular when it comes to the WestConnex project. That is not the responsibility of Finance; it is the responsibility of the government and one that we absolutely accept.

Senator McALLISTER: The Auditor-General said:

The WestConnex project had not proceeded fully through the established processes to assess the merits of nationally significant infrastructure investments prior to Australian Government funding being committed. This situation was identified in departmental advice to decision makers prior to decisions being taken.

What I am asking—

Senator Cormann: The government made the decision to allocate the funding. The government made the decision that this was an important project that we are committed to proceed with. That is a matter of public record. The government made that commitment in the lead up to the 2013 election. We have been working very hard since then to give effect to that commitment.

Senator GALLAGHER: Regardless of proper process. That is what you are saying.

Senator Cormann: You can argue that we should spend years and years not doing the things that we promised that we would do. Labor in government did that. That is not a very successful way of approaching these things, in our view. We take a different view. We take the view that when we make commitments to the Australian people in the lead-up to an election we need to do everything we can to give effect to those commitments in a timely fashion. Advice is provided from time to time and governments make the decisions. In relation to WestConnex, the government has made a decisions that are well documented. This is a very important piece of infrastructure and we are committed to ensuring that WestConnex is built as quickly as possible.

Senator McALLISTER: The New South Wales government's preferred profile was to receive no money in 2013-14. Yet the actual payment was $500 million in that same year. Is there a cost associated with providing money for a project before it is actually needed?

Senator Cormann: If you are now talking about the cash flow arrangements in relation to specific infrastructure projects, that is a question for the Department of Infrastructure and Regional Development. That is not a question for Finance. The role of Finance in relation to these measures, as we have said before, is to verify costings information and make sure that it is as accurate as possible.

Senator McALLISTER: So you are not interested in value for money? That is not part of your role?

Senator Cormann: That is not what I said, and that is a completely outrageous verballing of what I said. That is not what I said at all.

Senator McALLISTER: You described the very narrow role for the department and I am trying to understand it.

Senator Cormann: Our involvement in this process is to ensure that costings information put forward to the government as the government makes decisions is verified, is as accurate as it can be given the information is that is available at the time. The execution, implementation, management and making sure that these things are done in the most efficient and cost-effective way is the responsibility of individual portfolios. The specific question that you are asking is very much the responsibility of the infrastructure portfolio.

Senator GALLAGHER: I have some questions about the legislative measures. Finance had responded to a question on notice with a list of unlegislated measures towards the end of last year. I think since that PBO has released another report on blocked measures—unlegislated measures—that had been factored through the budget documents. Was Finance consulted when PBO were pulling that report together?

Senator Cormann: Before somebody answers that question, the short answer would be yes. There is relevant interaction between Finance and the Parliamentary Budget Office, at arms length from the government of course. But there is a difference in the measures listed in the Parliamentary Budget Office report and those that are reflected in MYEFO, because MYEFO captures everything that is unlegislated at this point in time, whereas the PBO report only reflects those unlegislated measures that have already been introduced into the parliament. Some measures remain to be introduced into the parliament, and that of course is because the government introduces measures in a sequential fashion, taking into account things like the date of coming into effect.

Senator GALLAGHER: So the complete list is in the MYEFO?

Senator Cormann: The complete list is in MYEFO and the complete fiscal impact is in MYEFO. The list and the impact in the PBO report is only in relation to those measures currently before the parliament.

Senator GALLAGHER: Is there an update to what Finance provided on 11 November?

Senator Cormann: There should be, because since then, as you know, with the generously received support of the Labor Party, for example the superannuation reform package was legislated. If you are asking us for an update I am happy to provide it.

Senator GALLAGHER: All these measures now cover a number of different budgets and MYEFOs going back to 2014-15—I think those would be some of the first ones.

Senator Cormann: Yes.

Senator GALLAGHER: When they are put through and run through MYEFO are they individually signed off on again or do they just carry through in terms of the government decision making process?

Senator Cormann: You do not make a new decision. The decision has been made, and unless it is changed the decision that was made in the past remains the decision. The fiscal impact of a decision that is not yet legislated does continuously get updated, and that is part of the normal estimates variations process, I guess. Obviously, for budget purposes, the same as you review fluctuations in demand across existing programs you also assess the impact of fluctuations in demand or other factors on the likely value of the saving or the likely cost of an expense measure that has not yet been legislated.

Ms Huxtable : The other element to that is if, for example, there was a measure which was due to start on 1 January 2017 there would be an assessment at MYEFO about the likelihood of that commencing on that date, and also the next likely date that it could commence—for example, 1 July 2017. You will see on page 29 of MYEFO the $1 billion cost that relates to delays in passing legislation. Clearly, if we are talking about legislation in respect of a measure that is not to be commenced until 1 January 2018 there will not be a cost of delay as such. We assess that on an economic-update-by-economic-update basis.

Senator GALLAGHER: So that $1 billion figure is the failure to get those measures through in the time that is originally forecast?

Ms Huxtable : That is right.

Senator Cormann: That is what we have had to write off because it was not coming into effect.

Senator GALLAGHER: Again with the list, if we go back to 11 November, accepting that that will be updated for progress where it has been made over the last few months, the individual program initiatives—the separate programs or savings or whatever you want to call them—that are factored into that have all essentially been agreed by the government.

Senator Cormann: A measure that is reflected in a budget or budget update remains a measure in the policy position of the government unless it is changed. Everything that remains outstanding but is still a policy of the government remains reflected in the budget.

Senator GALLAGHER: And that goes for, say, decisions that were taken under a previous Prime Minister and previous Treasurer?

Senator Cormann: Yes, unless the government changes. That even was the case when we took over from the Labor government. We kept in place various measures that the previous Labor government had decided on even though the Labor opposition then took a different view. They remained reflected in the budget bottom line until such time as they were either legislated, amended or adjusted otherwise.

Senator GALLAGHER: So you will provide the committee with an updated list?

Senator Cormann: Yes.

Ms Huxtable : Yes.

Senator GALLAGHER: Can I ask about public sector staffing levels and contractors here? Would that be appropriate?

Ms Huxtable : If the people are here. I think it is actually in outcome 2, but in the interest of being helpful we can, if the people are here. I am not sure.

Senator GALLAGHER: That is fine. I will go to something else and come back to it. In relation to the omnibus bill that was introduced on 8 February—omnibus bill 2, I guess it would be—this bill has a number of different measures—

Senator Cormann: It has essentially got the outstanding unlegislated savings measures in the Social Services Portfolio and the increased support for families to access child care, in the broad.

Senator GALLAGHER: The savings, I think, are in the order of $3.9 billion? Is that right?

Senator Cormann: If you are asking, this is a social services bill. It is not actually a Finance bill. If you want to ask questions about the specifics—

Senator GALLAGHER: I am not going to ask about the specifics. I am just saying that is what Finance has agreed in terms of the savings.

Senator Cormann: If you are quoting from the explanatory memorandum to the bill then I take your word for it. But Finance co-writes the budget. Finance does not write the social services legislation.

Senator Cormann: Yes I know, but we are going back to this discussion we just had, in relation to the Centrelink stuff, where Finance provides the advice to ERC and, presumably, tests a whole range of assumptions, signs them off that they are true and accurate and reasonable.

Senator Cormann: As accurate as an estimate can be.

Senator GALLAGHER: Yes. And then, whenever we ask a question about that, you say 'that is not us; that is a portfolio agency'. There is a gap here. Finance cannot just wash their hands of it.

Senator Cormann: We do not wash our hands but if you ask me about legislation in specific portfolios, that is core business for that portfolio.

Senator GALLAGHER: Core business for you is agreeing on the savings and booking them through the budget documents.

Senator Cormann: All of the savings that are reflected in budget documents have been verified by Finance in the appropriate fashion, and the advice that was provided to government in relation to those measures involved a process of Finance giving their tick of approval that all of the assumptions and costings information are as accurate as they can be. But beyond that, once it goes into implementing measures through legislation, the content of legislation and the implementation arrangements for specific measures are very much a matter for the individual portfolio.

Senator GALLAGHER: Can I just test this a bit further because I am generally trying to understand here. With, say, Centrelink and the debt recovery issue, they have said these are the savings they think they can generate from pursuing debts, what they believe are debts owed by Centrelink clients. Here are their assumptions. Here is the risk analysis, presumably. This is the work they have done. Finance presumably takes that and runs its own policy view.

Senator Cormann: Not a policy view. That is right.

Senator GALLAGHER: It says in your annual report you assess things for 'accuracy' and 'overall alignment with the policy intent'.

Senator Cormann: That is a very different thing. You suggest that Finance was putting its policy view over it.

Senator GALLAGHER: So you do not have any policy capacity at all?

Senator Cormann: The government makes the policy decisions. Alignment with policy is a more objective test than expressing your own opinion. The value decisions or the decisions on policy are matters for the government and that is what the government takes responsibility for.

Senator GALLAGHER: So Finance has no policy capacity in the sense of this?

Senator Cormann: They give advice but that is a separate issue again. To go back to the Finance involvement in between budgets and budget updates, an individual measure is put forward by an individual portfolio. They put forward their information, their costings, assumptions and the like. They get verified. The next meaningful involvement that Finance has after that is once it has been either in effect or for any subsequent budget update vis a vis, you go back to the last assumptions and, if applicable, you look at the lived experience or you look at whether there have been any other developments that ought to be taken into account to reassess the costings information that you have previously had looking forward. But we do not have a day-to-day role in executing individual budget measures in other portfolios. We only have a day-to-day role in relation to budget measures in our own portfolio.

Senator GALLAGHER: If we can use the Centrelink example again, if they come to you and say, 'We think this the number we can get,' does Finance have any capacity to look at that and go: they have not potentially factored in for incorrect debt amounts being levied as part of that; we do not think that number is going to be real. Can that discussion happen from Finance to the line agency?

Senator Cormann: Yes, sure. That discussion does happen, but it did not happen the way you suggest, because, as the secretary said previously, DHS has a lot of experience in relation to the impact of these sorts of compliance measures, given what they have done in recent years—

Senator GALLAGHER: That has not helped them with this one, has it?

Senator Cormann: That is your assertion.

Senator GALLAGHER: Oh, come on!

Senator Cormann: That is your political, partisan assertion.

CHAIR: Order!

Senator Cormann: The measure that you previously pointed to in this document, incidentally, does not come into effect until 1 July 2017, so I am not quite sure how you can make an assertion that performance is worse than budget, because it has not even started. What I would say in general terms—

Senator GALLAGHER: What are you talking about there?

Senator Cormann: Previously you quoted a compliance figure in the social services space.

Ms Huxtable : You were talking about a measure in the 2016-17 MYEFO, which is not implemented until 1 July 2017.

Senator GALLAGHER: So you have not factored the impact on the budget—

Ms Huxtable : It is factored in but it has not actually been implemented yet, so there has been no testing—

Senator Cormann: As it says, it is coming into effect on 1 July 2017, so you cannot actually make a judgement on how you have performed against estimates until such time as you have some lived experience. You are making an assertion that it is not going to work, before it has actually come into effect. The truth is that we have to always remind ourselves that these are very small numbers out of the overall expenditure on social services. We are talking about less than one per cent of the total expenditure in the social services space. So we are very confident that there are realistic efficiencies that can be achieved on the back of improved compliance, as outlined in the measures that were previously published. But, as is always the case with any measure, once you do have more data and more actual information you can further refine your estimates, and that will be done in the usual way.

Senator GALLAGHER: Is Finance doing that work now in relation to that measure?

Senator Cormann: Not in relation to a measure that does not come into effect until 1 July 2017.

Senator GALLAGHER: But you have been getting plenty of feedback about it?

Senator Cormann: Political feedback. We will look at the data—

Senator GALLAGHER: No, put the politics aside. I think a number of people affected by this have come forward raising concerns with it. It is not just the politics of the day, is it?

Senator Cormann: What happens as a matter of course in relation to all relevant measures is that between every budget and budget update you look at all of the underpinning assumptions and you look at the impact of parameters and utilisation trends and the like and make adjustments as appropriate, which are then reflected, by way of estimates variations, if they are not a function of policy decisions. So there are two broad drivers of changes to the underlying cash balance. One is policy decisions, and you would know that wherever we make a decision to increase spending on a higher priority we more than pay for it with spending reductions in other areas. That is certainly what we did in the last budget and in this most recent budget update. But, in terms of estimates variations, obviously these are processes that run as a matter of course.

Senator GALLAGHER: I am genuinely trying to understand what Finance's role is in, say, having a view on savings ideas that are generated from portfolio agencies that come to it, and how you provide that information to the executive government. If what the minister is saying is that there is no policy view, that it is simply a checking mechanism that occurs, but then it is over to executive government to make the decision. Can you confirm for me—

Senator Cormann: The problem we are having is with your terminology of 'policy view'.

Senator GALLAGHER: It is my problem!

Senator Cormann: That is why it is problematic. It is because the policy view and the policy priorities and the policy direction are set by the government. The department provides policy advice to government, of course. An important part of that policy advice is costings information. But, given the policy parameters and the policy priorities determined by the government, Finance will express a view as appropriate on how certain proposals align with the policy priorities as articulated by the government.

Senator GALLAGHER: But, again, from my experience, it would be quite normal, despite a policy decision of a government, for an agency to raise concerns or disagree or say that the figures cannot be delivered reasonably.

Senator Cormann: If Finance does not agree with the figures, the overall advice on the measure does not come forward. One of the key requirements of anything that comes before the expenditure review committee as a policy proposal is that the costings have to be agreed with Finance. That is an important rigour in the system. An individual portfolio might say, 'We want to do X, Y and Z, and we think it will cost ABC,' but, unless Finance signs off on that and, if there is additional expenditure involved, unless they can point to the offsets in terms of reduced expenditure as well, under the budget process operational rules a particular submission cannot actually come forward.

Senator GALLAGHER: On the green briefs that you mentioned earlier, in terms of the briefs that are provided to ERC, does Finance present a policy view or advice on that policy in a general sense to ministers?

Senator Cormann: I do not like the terminology of 'policy view'. The policy view is taken by the government. But certainly the proposal as put forwarded by the portfolio—and this is the same as was the case under your government, incidentally—is on the left-hand side and the fiscal implications of the portfolio view and the Finance view is summarised in the middle and then on the right-hand side there is advice from Finance to the government on sometimes a better way forward or some alternative options and obviously advice on the fiscal implications of alternative options as appropriate.

Senator GALLAGHER: I feel like we are having a bit of—

Senator Cormann: Incidentally, like the secretary just appropriately reminds me, while Finance manages that process, the other central agencies like PM&C and Treasury of course also provide their advice through that process.

Senator GALLAGHER: Sure. I feel like we are getting a bit caught up on what the word 'policy' is or 'policy view.

Senator Cormann: As the Chair indicated, anything that looks like they are expressing an opinion or policy view is the purview of the government of the day. Advice to government, which then makes the decisions, is a more appropriate way of putting it.

Senator GALLAGHER: For example, could Finance provide advice which says, 'We think there is a better way to do this'?

Senator Cormann: Certainly Finance can provide advice on alternative options for consideration by government.

Senator GALLAGHER: But that is not a policy view?

Senator Cormann: The policy view is taken by the government as to whether we think it is desirable to go this way or that way.

Senator GALLAGHER: On Finance's website, it says that they provide policy advice.

Senator Cormann: Yes, they do provide policy advice. They provide advice to government, but the ultimate direction is set by the government.

Senator GALLAGHER: I hope that is a whole lot clearer for everyone else. I think we have ascertained that Finance does have policy views.

Senator Cormann: No, they provide advice to government. It is very different.

Senator GALLAGHER: To me that is a view on policy, which is a policy view.

Senator Cormann: No, the government takes a view on policy.

Senator GALLAGHER: What if Finance want to say to government, 'Your view on this is wrong and it is going to have this adverse impact'? Surely they are able to—

Senator Cormann: They provide advice; the government takes the view.

Senator GALLAGHER: How did that go?

Senator Cormann: We live in a democracy. There are elected officials. Whoever has the majority and sits in the House of Representatives get the prerogative to have a view. There is a lot of input that goes into determining a view, but the policy view and the policy decisions are determined by the government of the day.

Senator GALLAGHER: I completely agree that policy decisions are determined by the government.

Senator Cormann: Policy advice is provided by Finance and others.

Senator GALLAGHER: We are getting hung up on.

Senator Cormann: You are.

Senator GALLAGHER: One of the fundamental pillars and strengths of our democracy is a fearless, frank Public Service leading into the executive arm of government.

Senator Cormann: Indeed.

Senator GALLAGHER: If what I originally understood you to say was basically that they are not providing policy advice—

Senator Cormann: That is not what I said.

Senator GALLAGHER: I know we are now between the issue of what is a policy view and what is policy advice, but that is how I originally understood what you were saying—

Senator Cormann: That was not what I was saying.

Senator GALLAGHER: and you were trying to pass Finance's job off as essentially tick-and-flick on the bookkeeping, and the costings advice—

Senator Cormann: No, that was in relation to specific measures. On the costings of specific measures, I explained to you what the role of Finance is, as opposed to the role of implementing measures through legislation. That is where this started. It started with the omnibus savings bill in the social services space, and who has responsibility to manage the legislative implementation of that measure, and whatever information is reflected in the explanatory memorandum for that measure.

Senator GALLAGHER: Clear as anything then, isn't it!

Senator McALLISTER: They sound like rather hollow ERC meetings, if that is the case!

Senator GALLAGHER: So, with the omnibus bill, there are $4 billion worth of savings generated through that. Are those savings factored through the bottom line? Are all of them, or some of them, or sort of?

Senator Cormann: What do you mean, 'sort of'?

Senator GALLAGHER: You are negotiating on it now, aren't you?

Senator Cormann: Let me make it very clear again—

Senator GALLAGHER: In plain English!

Senator Cormann: that the most recent budget update is the half-yearly budget update released before Christmas. That update reflected the fiscal effect of policy decisions taken between budget and budget update and the effect of relevant estimates variations as appropriate, including the impact of delays in passing unlegislated measures, as explained by the secretary. The next budget will have a similar update, because by then, of course, we will know what has been able to be implemented in a timely fashion and what has been able to be implemented, either in full, though delayed, or in a slightly amended fashion. There is always, of course, a range of decisions between budgets and budget updates and between budget updates and budgets. And they are reflected in whatever the next economic update is. And the next one is on the second Tuesday in May.

Senator GALLAGHER: Could we get the medium-term impact of the savings measures in the omnibus bill broken down by measure, please?

Senator Cormann: We will take that on notice.

Senator GALLAGHER: That is progress from the last answer that you gave me to a similar question, so I will take that. In terms of the government's policy decision to link the omnibus bill to the NDIS savings special account, was that something that Finance had provided policy advice on?

Senator Cormann: We will take that on notice.

Ms Huxtable : We will have to take that on notice. I am not sure.

Senator GALLAGHER: You cannot recall?

Senator Cormann: Obviously, as you would appreciate, some of these discussions are happening in real time, and the appropriate processes of government were followed, but we will take the specific nature of your question on notice.

Senator GALLAGHER: Minister, in relation to your own involvement in that, do you recall being consulted about that decision?

Senator Cormann: Yes.

Senator GALLAGHER: Did you raise any concerns or did you agree with that?

Senator Cormann: You know what? Under governments of both political persuasions, the confidentiality of cabinet deliberations is always preserved, and I will continue to preserve that in the well-established tradition of governments of both persuasions.

Senator GALLAGHER: Is the cost of the NDIS factored into the medium-term estimates going forward?

Senator Cormann: Yes.

Senator GALLAGHER: I accept that there is still a process around negotiations with colleagues in the Senate, but, under the original government decision to link the savings to the NDIS savings account, is that still current government policy?

Senator Cormann: There were previous savings measures in the Social Services portfolio which were published as measures which would achieve savings that would be delivered to the National Disability Insurance Scheme Special Savings Account. The announcement that the Treasurer and the Minister for Social Services made the other day just added further to that.

Senator GALLAGHER: This may be a question we can ask once the bill has been dealt with but, in terms of what was envisaged with linking the two, would the form of the contribution to the special account be held as capital? Is that a question you could answer, or is that probably something for DHS?

Senator Cormann: It is held in a savings account for recurrent expenditure. What it is, essentially, is quarantining the positive underlying cash balance effect from savings in the Social Services portfolio to guarantee and to sustainably fund over the medium and long term the expenditure expected on the NDIS.

Senator GALLAGHER: Thank you, Minister. Ms Huxtable, is this your first estimates?

Senator Cormann: No.

Ms Huxtable : No, I was acting as secretary at the last estimates.

Senator GALLAGHER: That is right. I did not think it was your first time.

Senator Cormann: It is her first one as a fully-fledged secretary, though.

Senator GALLAGHER: Congratulations. I should have said that at the beginning.

Ms Huxtable : I have been to a number of estimates in my career.

Senator GALLAGHER: I know.

Senator Cormann: One or two.

Ms Huxtable : Too many, some might say.

Senator Cormann: By the way, I would like to place on record my appreciation for the generous public statement made by the shadow minister for finance, Dr Chalmers, on the appointment of Ms Huxtable, who I am very confident is already doing, and will continue to do, an outstanding job in that role.

Senator GALLAGHER: Yes, agreed. My apologies—we should have done that at the beginning. In terms of coming into the department as secretary and looking against the corporate plan and other policy documents of the agencies, in the early months of your new job have you decided on whether there is going to be any change to those priorities? What are your personal priorities? How do you see that from where you are now?

Ms Huxtable : Clearly, our objective is to support the minister and the government of the day in achieving their policy objectives. In regard to the day-to-day work that we are doing across the organisation, we are very much looking to continue to provide high-quality advice to government in that regard, and to manage the various portfolio responsibilities that we have. Clearly, my experience has been in the budget area, and now I have a much broader remit across the whole of the department.

I think Finance as an agency has really been going through a transformation over a number of years. It is about how we structure ourselves to be as efficient and effective as we can be in how we go about our business. I am very committed to continuing the transformation that has been underway, and part of that transformation has been looking to co-locate us. We now have, I think, about 85 per cent of our staff in one building. That is an efficiency because it means that we are not travelling from building to building in order to do our normal business, and it also enables us to work in a much more collaborative way in terms of the workspaces that we have. But that really is only one part of our transformation. Another key element is that we have set up a capacity to more freely move our staff to priority areas, so we have set up a project office—

Senator GALLAGHER: That is the surge?

Ms Huxtable : Surge is part of that, but the project office actually looks at—and you can see it in our organisational chart, which is on our website—identifying that element of our work that is time limited by its nature, and where we can set up project teams to basically conduct that work. Then, when the work is finished, we can reallocate staff to emerging priorities. It just gives us a lot more flexibility. Our graduates are assigned to the project office. I think we have about 250 people now, out of our staffing of around 1,300, who are directly involved in the project office. We are looking to continually review the business to see whether there is more activity that we can manage in a more project-like way. Part of that also is looking at our workforce planning so that we have a really good understanding of what our workforce capability is and how we can support people to have the range of skills that enable them to not only be effective finance officers across the organisation but also be effective across government.

This is partly my background, I suppose, but I very much believe in the value of having a diverse workforce—not one necessarily that has been working in the Department of Finance for forever and a day, but one that has had experience in the private sector, in line agencies and the like and one that is always looking to continually improve on our gender targets and the like. We have done a number of things to actively promote that: one has been setting up a secondment program with line agencies to bring people into the budget area and to basically enable them to experience budget group work for a number of several economic updates. That lifts our knowledge base, because we are bringing in people who have line agency and program experience, and it also lifts the knowledge base of the agencies because they—

Senator GALLAGHER: Are they short-term secondments?

Ms Huxtable : They are around 18 months. The intention is that people get to experience at least two economic updates—a budget and a MYEFO, for example—with the first to learn from and the second to contribute to, I guess. We have done that and we are certainly looking to continue to build that sort of secondment program across the organisation. That is one of the executive board priorities.

Also, you did mention surge. It is part of looking to be able to quickly deploy people, whether it be in the budget area, or often in the ministerial and parliamentary entitlements area, where there are peaks of activity, for example following an election, and we can surge people into that. Our experience with that in the last year or so has been very positive, and the more people who participate in that the more the skills broaden across the organisation, so there are more people who are able to participate.

Certainly my priority with the board—and we have had some strategic discussions within the board quite recently—is really to consolidate our internal transformation, to closely review what we think has gone well in that and where there is capacity to improve so that we have a plan going forward and some performance indicators for ourselves going forward, but also to focus on our external relationships and our relationships with other agencies and how we most effectively work with other agencies in a collaborative way so that we are really lifting the quality of advice across the board regarding policy work and also costings and budget work. I am sure I have missed things, but that gives you a sense.

Senator GALLAGHER: So not huge changes to the direction that was—

Ms Huxtable : We are very much committed to the transformation that we have been undertaking, but I think the board does need to closely scrutinise that and to reflect on what has worked well and what has not worked so well and how we can continue to improve that.

Senator Cormann: Continuous improvement being the key.

Ms Huxtable : We want to bring ourselves to account in terms of our performance against our own expectations. I am talking here about the department as an organisation. Underpinning all this is how we are most effective as a department of state providing advice to the minister and to the government through ERC.

Senator Cormann: Ms Huxtable, of course, did not come from nowhere. She was the very senior deputy secretary for budget group for the previous 3½ years or thereabouts.

Senator GALLAGHER: Yes, I understand that.

Senator Cormann: So it is continuous improvement but improvement in continuity.

Senator GALLAGHER: Which is the same thing.

Senator McALLISTER: Can I ask a follow-on question. I am conscious of the department's role in IT. It has a substantial pool of staff who play a role in administering aspects of the IT agenda. I am also conscious that a similar, although I am always told, distinct function exists in Prime Minister and Cabinet. I wonder if you might reflect a little on what role you see for Finance in managing the digital agenda and the IT agenda for government.

Ms Huxtable : I would say at the outset that we are very much a part of government in this regard. For me, our effectiveness is about how we work effectively with other agencies—with line agencies and with coordinating agencies like PM&C to make sure that the best possible advice is being provided to government. So that is my starting position.

In terms of IT, we have had several roles. The one that I have been most familiar with, really, has been our costing assurance role. This is about new ICT projects presenting themselves to government. We clearly have a role in the budget area and in Dr Helgeby's area about ensuring that the proposals, as they come forward, meet the criteria around first- and second-pass business case, et cetera. We have also had a role in respect of the gateway reviews, which are more about when a program is on foot and being able to provide advice to the senior responsible officer within the relevant department about how that project is progressing at whatever stage it is at, whether it is at its very early stages, or whether it is at implementation stage. The other area of our responsibility has been more in Mr Edge's area, around things like ICT coordinated procurement, so looking to implement measures around how you get the best efficiency for the buy in ICT.

In terms of the Digital Transformation Agency, there was a decision to transfer some functions that had been Finance functions to the DTA, and we have worked very well with them, I think. This was in the period before I became Acting Secretary and then through the early stages of that. One of my colleagues can give the detail, but there is a number of functions that have transferred to the DTA, and the staff have also transferred to the DTA as part of that. I think we have had 34 or 35 staff who have transferred to the DTA. That is consistent with the government's decision to consolidate some of these functions into the Digital Transformation Agency. We continue to have discussions with the DTA about whether there are other elements of our activities that could, and should, be part of a consolidated effort in that regard, and also the timing around which that would occur.

I would say that we will always be in the ICT space because, as the finance department, we need to be very mindful of some of these cost pressures which exist, but also looking to really improve the efficiency and effectiveness of government as to how it interfaces with its citizens. So we will be part of that, very much, and we will continue to have close relationships into the DTA, in terms of the work that they do, to support them also. Dr Helgeby or Rina might be able to provide more information in terms of the MoG changes, if you have the time or inclination.

Senator McALLISTER: That would actually be helpful, Dr Helgeby.

Dr Helgeby : We transferred about 34 staff across to the DTA.

Senator McALLISTER: When was that?

Dr Helgeby : That was late last year. It took effect in December, but we had the discussions around settling what these things were post-October. The areas covered were ICT policy, which is really the policy framework that applies to ICT specifications, if you like; ICT benchmarking, which is some of the data that goes towards utilisation of ICT across government; an ICT projects dashboard, which is a list, and the DTA has subsequently released something under that heading; ICT skills programs, which is the development of the cohorts of talented ICT individuals in the Commonwealth Public Service; ICT awards, which are mechanisms that recognise achievement; some aspects of cybersecurity; the Style Manual; and some P3M, which is an acronym for policy, projects—and I forget the third one—

Ms Huxtable : Performance?

Dr Helgeby : Yes, that is right. It includes some aspects of that, which is, if you like, a tool to assess maturity of people's ICT performance. And, as the Secretary said, we retain our roles in ICT investment approval through the budget process, and we also retain our role in relation to assurance reviews.

Senator McALLISTER: I have another question for Dr Helgeby.

CHAIR: Are we getting close to the end of opposition questions for outcome 1, or are we going to return to them after lunch?

Senator McALLISTER: We have a little bit to do, which we may not be able to get down between now and half past 12.

CHAIR: We will continue with outcome 1 after the lunchbreak, but not for too long, and then we will move to outcome 2.

Senator McALLISTER: Dr Helgeby, you have a role in governance in APS transformation, and I assume, given the Secretary's focus on collaboration and supporting transformation in other parts of government, you will be working very closely with her on those questions. Have you had any documentation or a framework or any sort of way of thinking about the task in front of us in terms of transformation? I am deeply committed to a quality public sector, and I am genuinely interested in how the department is thinking about that proposition.

Dr Helgeby : I could not point you to a single document, but I could point you to our website for a couple of things that are relevant here. We have an extensive section on our website covering contestability and efficiency reviews. In many ways some of the issues that go to transformation are pursued through those mechanisms, and the framework that is articulated for those processes is relevant to a large swathe of what we do. That is one thing I can point you to. I can also point you to the fact that we have released a couple of documents on other areas like shared services—shared common back office functions. We have released a public discussion paper and also a summary of feedback on that, and I think we have a range of other guidance around things like assurance reviews and other things like that. But there would not be a single document on our website like that. However, as discussed earlier, the minister's preface to budget paper 4 is a very useful and strong statement of how the business of transforming government hangs together and what its key elements are, so there is a section there. In fact, the whole theme of the preface for last year is about transforming government.

Senator McALLISTER: I can go to the budget papers, but there is no integrated document from the department—a flowchart or a diagram or a way for us to understand.

Dr Helgeby : At this point, we have not put out something like that.

Senator McALLISTER: Reflect on this and if there is anything you can provide we would appreciate it.

Ms Huxtable : One of the things I was going to add is that I also chair the Secretary's Committee on Transformation, which Dr Helgeby provides essential support to. Some of these things that we have been talking about, like shared and common services, are the outcome of contestability reviews. That is a really effective forum in which we can talk about the sorts of learnings out of these processes and also, with shared and common services in particular, look at the implementation trajectory. We are now, I think, in a stronger position, as Finance, because we have not only the policy for that but also the responsibility for the service delivery office, previously the shared service centre, which was in Employment and Education. We picked that up from, I think, 1 December. The benefit of that is that we have got both the theory and the practice, so we have got our own feedback loop as to how we continue to refine policy in this area. I am very pleased with that, and that is certainly a key area the secretaries are engaged and interested in.

CHAIR: On that note, we will suspend for lunch. We will return at 1.30.

Proceedings suspended from 12:30 to 13:31

CHAIR: It now being 1.30 pm, the committee will resume with an examination of outcome 1. We will then be moving to outcome 2.

Senator GALLAGHER: I have a couple of questions on finances relating to some information from the annual report on consultancies. I noticed that there is a table there—table 9, expenditure on consultancy contracts. It shows a big increase between 2013-14 and 2014-15 and then sort of flattens out in 2015-16.

Senator Cormann: We managed the biggest privatisation in the world in 2014-15—namely, the privatisation of Medibank Private.

Senator GALLAGHER: So that is what that lumpy kind of—

Senator Cormann: That would be a significant part of it. If you want us to get the breakdown, I am happy to get that for you.

Senator GALLAGHER: I knew there would be some explanation for that. So you think that—

Senator Cormann: Well, I know. It was a $5.7 billion transaction. We have previously released the costs of managing that transaction. Obviously, with a $5.7 billion transaction you would expect some costs in managing that.

Senator GALLAGHER: Yes, sure. If you could give me a breakdown, that would be fantastic because then we can see what that is. We may have further questions on that at another time. In relation to credit cards—I think there were corporate credit cards—there was an answer to a question on notice No. 53 where finance has provided a breakdown of expenditure by card type. I think in that it shows a larger amount of airfares and accommodation in 2014-15. Is there a reason for this?

Ms Huxtable : I will have to take that on notice. It is something that is not immediately apparent. Can you repeat the question, please?

Senator GALLAGHER: This is about question on notice 53.

Ms Huxtable : Yes. I have that here.

Senator GALLAGHER: A larger amount of airfares and accommodation in 2014-15.

Ms Huxtable : I would have to take on notice exactly what made that up. But, as the minister said, depending on the activity we are involved in, obviously there can be an impact in terms of the travel requirements. Unless one of my colleagues can help.

Mr Fredericks : One of my colleagues advises me that it may be the case that that added expenditure is because of the travel required at that time by the Medibank Private sale taskforce. You would see the correlation between the two. But I would prefer to take that on notice, if I could.

Senator GALLAGHER: Yes. All right. It might be good if we can then get a comparison.

Ms Huxtable : We could update this?

Senator GALLAGHER: Yes. Exactly.

Ms Huxtable : This is our financial year so we could not really update it, obviously. We can only give you the year to date for 2016-17.

Senator GALLAGHER: I want to ask you a couple of questions on the central budget management system redevelopment project. This has been going now for a number of years, has it not?

Ms Huxtable : Correct.

Senator GALLAGHER: It is expected to be in operation in mid-2017. Is that right?

Ms Huxtable : Yes. Correct.

Senator GALLAGHER: What have been the major reasons for the delays in the project?

Ms Huxtable : Mr Sheridan can go into the detail of this, but we had a significant review of the project. It must have been in mid to late 2014.

Mr Sheridan : Starting in 2014.

Ms Huxtable : Starting in 2014.

Senator GALLAGHER: The gateway?

Ms Huxtable : No. We did our own internal departmental review. We were aware at that time that there were issues emerging with the project. Mr Sheridan was actually involved in that review. It also included another one of our officers and an external person, who had a good look at it. It was commissioned by the executive board and the then secretary. John might wish to speak to that. Basically, at that time—

Senator GALLAGHER: Were they around cost and deliverables?

Ms Huxtable : Well, it was cost, specification and deliverables and certainly some of the underlying assumptions, if I go back in my memory banks, around the initial procurement in terms of the degree to which the solution could be a commercial off-the-shelf solution and the degree to which it would require customisation. Those assumptions had not proved to be correct. There was a greater deal of customisation than had been anticipated, so that impacted on the project itself. But I probably should leave it to John to provide more detail.

Mr Sheridan : When Secretary Halton arrived in mid-2014, she was concerned about the project, which was then somewhat delayed. As the secretary said, she established a quick review to see whether there was a possibility of continuing. That quick review took place over, I think, a period of about two months and found that, yes, there was work that could be done to make the project continue. With the support of the executive board, a pause in the project was created between September 2014 and March 2015, where we undertook a major review of every aspect of the project and determined that, yes, it could continue. It was likely to deliver the result. But more work was required in order to do that. The project restarted on 1 April 2015 and continues now with a view to delivering mid-2017.

Senator GALLAGHER: And has it had to have an adjustment because of those delays?

Mr Sheridan : Yes.

Ms Huxtable : So there was further provision for funding that was made in the 2015-16 budget. It was announced at that time.

Senator GALLAGHER: I do not think I have sat on this. Penny probably was doing this back in those hearings.

Ms Huxtable : It is a longstanding project.

Senator Cormann: She actually started it, believe it or not.

Senator GALLAGHER: I know.

Senator Cormann: She did.

Senator GALLAGHER: I know, yes. Got that.

Senator Cormann: She got the funding for that.

Ms Huxtable : It was initially funded in the 2010-11 budget.

Senator GALLAGHER: Yes. And so—

Senator Cormann: I am just advised that system testing, which commenced under the previous government, found over 2,000 defects. Obviously, a lot of work had to be done to put the project back on track. But it is now on track and in no small part because of the very good work done by Mr Sheridan.

Senator GALLAGHER: Can you tell me in a very short way what you are expecting? Once it is operational, it is meant to streamline a whole range of processes, is it, in terms of enabling you to do your work?

Ms Huxtable : Basically, it would replace the current CBMS, the central budget management system, which is the system by which departments enter information with regard to the budget and basically all the various tools of the budget that go into producing the budget books from the finance side. That is probably a very poor explanation, but one of my colleagues, I am sure, can give more information. So it is what it says—the central budget management system. That is exactly what it is.

Senator Cormann: So it is obviously a core platform for the management of the budget.

Senator GALLAGHER: Yes. But better than the one you have now?

Senator Cormann: Well, the one that we have now is pretty old.

Ms Huxtable : One of the issues with the one we have now is that it is built on ageing technology where we cannot actually get support for the technology that is built on. It is very clunky; that is my technical term. It has to be replaced. There is no choice but to replace it. Currently we are managing to support the existing CBMS, but that capacity declines over time, clearly.

Senator GALLAGHER: So it is more customised than you had expected at the beginning than a combination of off-the-shelf and customisation? I do not know what the correct language is for that. A hybrid.

Mr Sheridan : It is based on SAP software. It uses a couple of modules of SAP software, one of which at the time was relatively new—a public budgeting framework. That is where we have done most of the customisation to meet the essentially unique characteristics of the Australian government budget system. It has taken a lot of work to get that working correctly.

Senator GALLAGHER: Have you got a final budget for it?

Senator Cormann: We might have to take that on notice.

Ms Huxtable : Some of these elements have been not for publication because they relate to commercial arrangements.

Senator GALLAGHER: But presumably once it is operational, you will have a total project cost.

Senator Cormann: And we will be able to provide information once the project is complete. While there are live ongoing commercial implications, we will provide as much as we can.

Senator GALLAGHER: And at the end of the day, when it is operational, you would have a total project cost?

Senator Cormann: Yes.

Senator GALLAGHER: In terms of the government's policy on pay on time or pay interest policy, which requires payment no longer than 30 days for contracts after the date of receipt of contracts up to $1 million, do you report performance against this pay on time policy?

Mr Sheridan : Agencies report performance against it. It is surveyed, I think, annually by the department of industry—the small business function. They provide that report each year.

Senator GALLAGHER: I am not sure it has been published for a few years.

Senator Cormann: That would be a matter for the department.

Senator GALLAGHER: That is fine. But you report your information to, I think, Treasury.

Mr Sheridan : We are responsible for making sure that policy exists and is included in the procurement rules and the guidance that we provide as a consequence of that. Industry oversees the reporting of that. So to the extent that finance reports, it is my colleagues in the business enabling services area that report finance's outcomes.

Senator Cormann: But the answer is yes, we comply with those requirements. That is the answer to your question.

Senator GALLAGHER: Can you tell me what you achieved in relation to that?

Senator Cormann: That is probably somebody else's.

Mr Fredericks : That is my responsibility, but I do not have that number with me. If I can, I will take that on notice.

Senator GALLAGHER: All right. And if you are taking that on notice, whether or not you have had to pay interest on any that you have failed to. I presume as part of that that you would also give an explanation about why you did not meet that.

Mr Fredericks : Yes. We will give you as much as we can.

Senator McALLISTER: I want to ask about school funding and the way that that is being treated in MYEFO. I am conscious that school funding is in transition. There was an earlier commitment to having it indexed by CPI. That has been subsequently changed to a fixed indexation rate, which I understand is 3.56 per cent across the forward estimates plus enrolment growth. So it is in that context just around the indexation rate, noting that growth is additive.

Senator Cormann: It is 3.56 per cent plus enrolment growth, yes.

Senator McALLISTER: In the MYEFO, that indexation rate is applied across the entire forward estimates?

Senator Cormann: Yes.

Ms Huxtable : As at MYEFO.

Senator McALLISTER: As at MYEFO?

Ms Huxtable : So that goes to 2019-20. The MYEFO forward estimates go to 2019-20.

Senator McALLISTER: Right. Okay.

Senator Cormann: But the government provided an additional $1.2 billion across the 2018-20 calendar years, so 2018, 2019 and 2020, which came on top of, of course, having maintained the same funding and, in fact, having put in a $1.2 billion addition, which Bill Shorten as education minister took away from schools in Queensland, Western Australia and the Northern Territory.

Senator McALLISTER: Honestly, Minister, I really am just trying to get some facts.

Senator Cormann: No. This is important. We actually put more money into schools over the initial forward estimates when we came into government because Labor had taken $1.2 billion out in particular from schools in Western Australia and Queensland. But before the election we made an additional $1.2 billion investment for the calendar years 2018 to 2020.

Senator McALLISTER: So it is correct that from 2018 the change in the arrangements around school funding will require legislation. Is that correct?

Senator Cormann: That is correct, yes.

Senator McALLISTER: So that is the process that is currently being discussed with the states. Is that correct?

Senator Cormann: Well, there are discussions with the states which are not discussions that finance is involved in in any way, shape or form. That is entirely a matter for the education portfolio.

Senator McALLISTER: Understood. Has finance been consulted about negotiations with the states given your role in examining expenditure and costings?

Senator Cormann: Well, obviously the engagement of the Commonwealth in discussions with the states and territories on anything that costs money to the federal budget goes through a process. That process includes in the ordinary course of events consideration of various options with the Expenditure Review Committee. As part of that process, of course the finance department provides advice as appropriate.

Senator McALLISTER: So where is the process up to in terms of consideration by the Expenditure Review Committee? Have detailed options been presented? I am not asking what those options are. I am asking whether the Expenditure Review Committee has considered options for school funding.

Senator Cormann: Well, as you have already indicated, the government made a decision to increase school funding by $1.2 billion, particularly over the current forward estimates period. The current forward estimates period, of course, finishes in 2019-20. I cannot speculate on what future decisions may or may not be made, but obviously the government has made certain decisions in the past when it comes to schools funding which are reflected in the budget.

Senator McALLISTER: The government says publicly that it is going through a process of consultation with states and territories about what those future arrangements might be. I am asking you whether in support of those negotiations finance has provided advice to the ERC in relation to one or more options for consideration in those negotiations.

Senator Cormann: The decisions in relation to the funding envelope have already been made. They are reflected in the budget. They have been publicly announced. Of course, the additional Commonwealth funding from 2018, which we have made available, is contingent on state and territory governments undertaking steps to implement reforms to improve student outcomes, including student literacy and numeracy, teaching and school leadership and accountability. That is because we are concerned about the fact that more and more money is pumped into schools, in particular by the federal government, for worse and worse outcomes, which proves that they are just putting more and more money into it without getting the states to do what needs to be done to improve performance. It is not what Australia needs.

I encourage you to consider that a number of other countries spending less per student have got much better outcomes whereas other countries spending more actually have worse outcomes. So it is true that there is a consultation process and an engagement process with the states and territories. That is currently underway. It is managed by the minister for education, as you would expect. It is very much focussed on making sure that we get better outcomes from the significant investment that is being made. Of course, as publicly announced, the Commonwealth has put an additional $1.2 billion into the schools budget over the period to 2020.

Senator McALLISTER: So the negotiations being conducted with the states are within a fixed funding envelope up until that 2020 point?

Senator Cormann: Well, the funding arrangements for schools are as they are reflected in the budget. The position of the government in relation to schools funding is as reflected in the budget.

Senator McALLISTER: Interesting. There has been some discussion by the minister about overfunding of schools. Has the Department of Finance costed options to change the indexation of overfunded schools?

Senator Cormann: You are now well and truly going into the needs of another portfolio.

Senator McALLISTER: That is true, Minister, but you have provided quite a lot of detailed information about your views about—

CHAIR: There is a line, Senator.

Senator Cormann: I am not going to speculate on what another minister may or may not want to do at some point in the future. I am not going to go into the pre-budget process that may or may not be occurring. What I would say to you is that the additional funding that we have provided to schools is reflected in the budget. Of course, that will take total schools funding from the federal government from $17.1 billion in 2016-17 to just under $20 billion in 2019-20.

Senator McALLISTER: Education policy has been hotly contested for some time. I think people are hoping to have it settled. Is this something that you are hoping to see settled by the time we reach the budget this year?

Senator Cormann: Well, hotly contested is your characterisation. You might be contesting it. The government's position is as reflected in the budget.

Senator McALLISTER: Are you aiming to settle this in the budget this year? I was really trying to say that we are interested in this answer, Minister.

Senator Cormann: We already have settled it is my point. I do not know what you are expecting. I do not know what you want me to say other than we have already settled. The position in relation to schools funding is settled.

Senator McALLISTER: So this year when the budget estimates period extends for another year, you will be applying that 3.56 per cent into that forward estimates period as well?

Senator Cormann: Well, as I have indicated—

Senator McALLISTER: It is an ongoing and permanent indexation rate?

Senator Cormann: No. What I have indicated to you is that the decision that the government made in last year's budget is to provide an additional $1.2 billion across the 2018 to 2020 calendar years by applying a fixed education sector specific index of 3.56 per cent plus enrolment growth. That is, of course, reflected in the specific measure in the 2016-17 budget.

Senator McALLISTER: I want to ask this in a similar vein. You can provide policy commentary if you like, but I am really looking for the financials on this. The PBO unlegislated measures list covers a number of higher education changes. That comes up to about $2.4 billion. Is that roughly what is currently budgeted for in the estimates?

Senator Cormann: Well, I do not provide rough numbers. If you are asking me to provide—

Senator McALLISTER: The unlegislated measures associated with higher education.

Senator Cormann: Well, we have already taken on notice previously from Senator Gallagher to provide the list of unlegislated measures and the value against them. So that is coming. If you are asking me about whether the government continues to be committed to the higher education measures in the budget, well, the government remains committed to all measures in the budget unless or until they are changed at some point. The only way, of course, that budget measures can be changed in a way that has a negative underlying cash balance impact is if the relevant minister is able to identify savings or spending reductions or other budget improvements that pay for it.

Senator McALLISTER: On that, has the department been consulted on new options to deliver savings in universities?

Senator Cormann: That is a matter of the deliberative processes of government that I am not going to go to.

Senator McALLISTER: Well, I think you are able to tell us whether you are working on anything for ERC or cabinet and whether you have provided advice. I am not asking for the content of the advice.

Senator Cormann: The government's policy position is as reflected in the budget. If that were to change at any one point in time, that would be announced in any future budgets or budget updates.

Senator McALLISTER: I want to ask about something which has been announced, which are the changes to the child and adult public dental scheme.

Senator Cormann: That has not just been announced. It has actually been implemented with relevant regulations.

Senator McALLISTER: There was a decision on 8 February to reverse the earlier decision, which was to reduce the child dental benefit scheme cap.

Senator Cormann: That is not quite right. The earlier decision as reflected in the budget was that instead of the Commonwealth running a child dental benefits schedule at the federal level, a more efficient and more effective arrangement where the taxpayer would get better bang for their buck would be for the states to manage not just the adult dental scheme arrangements but both the adult and child dental benefit arrangements. By merging them and by not having the administration of the CDBS at the federal level as well, we were able to make an administrative saving. There was no proposition to take money out of the overall dental benefit arrangements but have all of it administered at a state level through a national partnership agreement. That was actually one of the measures in the lead-up to the last election Labor had included in their costings. But in the context of negotiations in the initial omnibus savings bill, we were able to reach agreement on alternative measures. We did not proceed with that particular measure in the omnibus savings bill. Subsequently, the government has decided to reverse the proposed merger. We have kept the CDBS in place at the federal level with the $1,000 cap instead of what we initially intended to do, which was to apply a $700 cap over two years.

Senator McALLISTER: What is the cost of that reversal—the decision to leave the cap at $1,000 instead of to reduce it to $700?

Senator Cormann: These sorts of costings are finalised for publication in the budget. The budget is on the second Tuesday in May.

Senator McALLISTER: The MYEFO imagined that the merger was proceeding. Correct?

Senator Cormann: No. Actually, by the time of the half-yearly budget update, we had already conceded that we would now merge the child dental benefits schedule with the adult dental arrangements through a national partnership at a state level. So the measure at MYEFO assumes a cap of $700 over two years whereas the measure as implemented applies a cap of $1,000 over two years.

Senator McALLISTER: Thank you. My final question—

Senator Cormann: Sorry, this is helpful. This is a program, not because of any policy decisions but because of the way demand is tracking in the market, that was quite significantly underspent. That is why there was the opportunity to make some sensible changes that would have also facilitated more efficient and more effective management of this at a state level rather than to have the double-up that is now still in place.

Senator McALLISTER: Have the estimates for the adult dental national partnership agreement been amended or will be amended, or are they maintained at the MYEFO level? I am just trying to understand what the status of the adult program is.

Senator Cormann: Well, they are being amended at the MYEFO level, but it is less than it was in the past.

Senator McALLISTER: I am sorry. MYEFO sets out a number for a national partnership agreement on adult dental. Are there any changes to that?

Senator Cormann: Well, we are sticking to the MYEFO number for adult dental because relevant agreements we are in the process of are either already finalised or in the process of being finalised. Again, I am being way too helpful in other people's portfolios. This is very much a matter for the health portfolio. I am aware of the issue because I was involved in some specific conversations in relation to it. But I am not day-to-day aware of where the implementation process is at right now. The government has not made any decisions that would change the fiscal impact of the arrangements for adult dental since MYEFO.

Senator McALLISTER: Thank you. Chair, that is all for me.

CHAIR: Great. Is that all for outcome 1?

Senator McALLISTER: And, in fact, all for outcome 1.

CHAIR: Great. Thank you very much. Any relevant officers for outcome 1 who are not needed for outcome 2 are free to go. We will now move to outcome 2. For the benefit of other committee members, my hope is that we are able to proceed program by program. With the agreement of the committee when each program is finished, we will strike that off rather than continuing backtracking through programs. We will begin with program 2. 1, public sector governance.

Senator KITCHING: Minister, how does the government establish who is appointed to board positions for government business enterprises?

Senator Cormann: These are decisions of cabinet, by and large. These are cabinet decisions.

Senator KITCHING: They are government decisions?

Senator Cormann: Yes. As they were under your government.

Senator KITCHING: When you say government—

Senator Cormann: Well, the way it works is it is 100 per cent the same process as it was under your government. Recommendations are made by the relevant portfolio minister to the cabinet. Cabinet makes a decision one way or the other. Sometimes the appointments have to be formally made by the Governor-General. If that applies, that is the way the process is managed. Sometimes they can just be made by the minister, having had the endorsement of cabinet.

Senator KITCHING: So some go to cabinet?

Senator Cormann: Well, they all would go. Board appointments of government business enterprises would all go through the cabinet.

Senator KITCHING: Thank you. I will move from the general to the specific. What was the procedure when appointing Jamie Briggs as a non-executive director to Moorebank?

Senator Cormann: I recommended his appointment to the cabinet.

Senator KITCHING: How many others did you consider?

Senator Cormann: Well, for that position, I recommended Jamie Briggs as a suitably qualified former minister in the infrastructure portfolio to represent me as shareholder minister on the Moorebank Intermodal Company, which previously, incidentally, had honoured Andrew Fraser, a former Labor Treasurer from Queensland. When I came into government, I appointed various high quality former members of parliament, including Anna Bligh as the director on the Medibank board. I myself appointed Gary Gray as a former Labor member of parliament to the ASC board. I take the view—and I had this conversation with Senator Dastyari shortly after he started, like you now—that members of parliament of both political persuasions after they leave this place still have a contribution to make. They contribute experiences and background that they have acquired during their careers in parliament. There is still opportunity for them to contribute those experiences and skills for the public benefit. In relation to the appointment of Jamie Briggs, that was my recommendation and I take full responsibility for it.

Senator KITCHING: So did the department have any recommendations themselves?

Senator Cormann: I have already indicated to you that it is my recommendation.

Senator KITCHING: I know. I understand. But when you are maybe having a chat and say—

Senator Cormann: I did not seek to.

Senator KITCHING: 'Oh, this director's position has come up at Moorebank.'

Senator Cormann: I did not seek advice.

Senator KITCHING: Someone in the department you might be speaking to might say, 'Oh, well, there is this fantastic person who is very well qualified' blah, blah, blah.

Senator Cormann: When we came into government, Moorebank had a very large and very unwieldy board. At the request of the chair, Dr Kerry Schott, after coming into government, we did not fill all of the positions that had been made available on the board. I can provide on notice how many people were on the board when we came in. I think it went down to about five or six. So there were a number of vacant positions. Towards the end of last year, I decided to recommend to the cabinet that we appoint Jamie Briggs to one of the vacancies.

Senator KITCHING: Was he was the last appointment of those vacant positions?

Senator Cormann: There are still more vacant positions, but we are not currently planning to fill any further vacancies because we are being mindful of the chair's wishes to have a board that is appropriately large but not too large and unwieldy. From my point of view, I made the judgement that Jamie Briggs would be able to deliver good value by being part of that board moving forward.

Senator KITCHING: So in the constitution of that entity, you do not have to fill every position, for example?

Senator Cormann: We do not have to fill every position. We have to have a quorum, and we do have a quorum.

Senator KITCHING: Of course. Did Mr Briggs approach you? He would have known you were the decision-maker. Did he approach you for the role, or was he approached?

Senator Cormann: No. I approached him.

Senator KITCHING: When did you do that?

Senator Cormann: I have to take that on notice.

Senator KITCHING: Was it a long lead-up period?

Senator Cormann: It went through the normal process. This is quite routine. Again, it is quite routine under governments of both political persuasions. Obviously, in my portfolio I have involvement in a range of boards. I have joint responsibility in many and sole responsibility in the ASC. In relation to the future fund, it is together with the Treasurer. In relation to Moorebank Intermodal, it is together with the minister for infrastructure. In relation to the NBN, it is with the minister for communications. And so on and so on. So in relation to Moorebank Intermodal, I made the judgement, as one of the two shareholder ministers, that Jamie Briggs would be a very appropriate appointment given his experience and background as a former minister in the infrastructure portfolio.

Senator KITCHING: Was that the selection process—that you decided that he had the necessary skill set to carry out the role of a director of Moorebank? Is that the process?

Senator Cormann: Well, the process is that I consulted with the chair and obviously spoke to the chair about my intentions. Having spoken to the chair, I obviously spoke to my fellow shareholder minister and then decided to make a recommendation to the cabinet; it is cabinet approved. That is the process. It is a similar process to when my predecessor Senator Wong appointed Andrew Fraser, the former Labor Treasurer from Queensland; a similar process that was followed when Anna Bligh was appointed as the board member on the Medibank Private board; and various other people from around Australia that had served in Labor state and federal governments were appointed to various roles appropriately. I am not criticising any of those appointments. Appropriately, the judgement was made by my predecessors that they still had a contribution to make.

Senator KITCHING: Obviously, for some board positions, there is a process where you might furnish a CV to the decision-maker. Mr Briggs did not go through that process?

Senator Cormann: You are making a very inaccurate assertion there. I did say, and that is accurate, that I initiated the approach to Mr Briggs. But, of course, he had to supply the necessary paperwork. He had to sign the necessary forms. That was not managed by me, I have to say. That was managed, as you would expect, through a departmental process. The appropriate paperwork and the appropriate checks and balances were gone through as this was put to the cabinet.

Senator KITCHING: I will ask you, or perhaps one of the deputy secretaries may know, for a full list. What other paperwork did he have to be aware of? I am thinking of codes of conduct, policy documents et cetera.

Senator Cormann: If you are now going to his induction as a director on a government business enterprise, I am very happy to provide you on notice with the induction material for directors both as they apply generally to directors on government business enterprises—

Senator KITCHING: That would be great. Thank you.

Senator Cormann: As well as specifically applied in relation to Moorebank Intermodal.

Senator KITCHING: Moorebank has large projects et cetera.

Senator Cormann: It has one large project.

Senator KITCHING: Yes. Do you feel that taxpayers would be happy? I am not sure what his directors fee would be. I think it is about $50,000 or $60,000. Do you think taxpayers feel they are getting value for money?

Senator Cormann: Absolutely.

Senator KITCHING: Did the incident in Hong Kong in 2015 have any impact on the appointment?

Senator Cormann: No.

Senator KITCHING: Is the director's fee $60,000?

Senator Cormann: I will take that on notice. It is published on the Remuneration Tribunal website, so it is a matter of public record. Whatever is listed there is what it is.

Senator KITCHING: Did you seek any advice on appointing him other than you went to your shareholder minister?

Senator Cormann: What I have already indicated to you. I made the recommendation to the cabinet. I take full responsibility for that recommendation. He did go through all of the normal processes that anyone who is nominated as a potential candidate for board appointment in a government business enterprise has to go through. He had to fill the same forms. He had to provide the CV. It is essentially the same process as would have been used by your government when the various appointments were made by your government, including that of Andrew Fraser to the Moorebank Intermodal Company board and Anna Bligh to the Medibank Private board.

Senator KITCHING: Well, of course, Andrew Fraser did not have the incident similar to Hong Kong. How long was it between when he accepted the role and when the announcement was made?

Senator Cormann: The announcement would have been made on the spot because he could only accept the role after the cabinet decided. I can get you the exact dates. It would be pretty well about the same time because he can only accept the position after the cabinet has decided to offer it to him.

Senator KITCHING: Was there a media strategy surrounding the announcement?

Senator Cormann: A what?

Senator KITCHING: A media strategy? Did your office come up with a strategy, because there might have been a little bit of—

Senator Cormann: Obviously the appointment was made and the appointment was announced and it was reported, incidentally.

Senator KITCHING: So no media strategy?

Senator Cormann: Well, I do not know what you are referring to in terms of media strategy.

Senator KITCHING: Did your office say, 'Look, we're going to appoint him. He's had a little bit of bad publicity, so we'll have to think about that?'

Senator Cormann: These questions, with all due respect, are quite naive. Should I start asking you about your internal office arrangements?

Senator KITCHING: I am not the minister. I am asking you whether your office thought, 'Well, we're going to appoint him. There could be a little bit of disquietude around this. Therefore, we'll think about how we might best frame this appointment.'

Senator Cormann: I recommended the appointment. I take full responsibility for it.

Senator KITCHING: Was the department involved with the announcement? Did you go to the media unit in the department?

Senator Cormann: All of these things are a matter for me, and I take responsibility for having recommended the announcement and for the appointment having been made.

Senator KITCHING: Was there a reason the announcement was made on 16 December?

Senator Cormann: Because that would have coincided with the cabinet meeting at which the decision was made. From memory, it might have been the last cabinet meeting before we went to the Christmas break, but I will check that. Essentially, as soon as a decision was made, it was announced.

Senator KITCHING: Was the announcement circulated to the media?

Senator Cormann: I would have to take that on notice. I do not get involved in the logistics at that level. You might get involved in logistics at that level. I do not.

Senator KITCHING: There was a suggestion in a newspaper article that the announcement was not circulated.

Senator Cormann: Well, I have read that suggestion. I will take that on notice and see what we can provide you with on notice.

Senator KITCHING: So you will see what you can provide?

Senator Cormann: Yes.

Senator KITCHING: It was published on a Friday afternoon and it was the last week day before MYEFO was handed down. Was there a reason—

Senator Cormann: You are quite right. We were still working very hard the final week before Christmas.

Senator KITCHING: Good. That is good to hear.

Senator Cormann: Indeed.

Senator KITCHING: Was that why it was announced quietly on a Friday afternoon?

Senator Cormann: They are your words. I do not think it was announced quietly. It clearly got publicity. Everybody that is interested in these things knows that Jamie Briggs has been appointed to the Moorebank Intermodal Company. Sadly, my appointment of Gary Gray, which was announced at the same time, did not get nearly as much publicity. I wonder why that is.

Senator KITCHING: In the media release, I am not sure you expressly endorsed Mr Briggs. You said that it was all your decision and all your responsibility.

Senator Cormann: I think that Jamie Briggs is a fine appointment. I do not know what you are trying to read into that. I am very confident that he will do a fine job and make a great contribution to that board.

Senator KITCHING: Thank you, Chair.

CHAIR: Thank you. Further questions on program 2.1?

Senator McALLISTER: I want to come back to the NBN from a GBE perspective rather than a budget perspective. Is the Department of Finance aware that, in response to question on notice 145, the NBN has revealed a revised upwards revenue forecast in the 2017 corporate plan and increased the internal rate of return by 0.4 per cent?

Ms Huxtable : Yes. We would be aware of that. We reviewed their corporate plan.

Senator McALLISTER: If these revisions to revenue forecasts had not been made, what would have been the internal rate of return for the NBN?

Mr Jaggers : The internal rate of return is presented as a range. It was 2.7 to 3.5 per cent as a range. It has been increased to a range of 3.2 to 3.7 per cent. So the IRR has improved as a result of those higher revenue near term forecasts and as a result of essentially higher data usage than originally anticipated.

Senator McALLISTER: In the half yearly results for 2016, the average revenue per user remained constant at $43. Is that consistent with the evidence you have just provided? Can you explain the seeming discrepancy between those two pieces of information?

Mr Jaggers : I am sorry, but I do not have that piece of information in front of me that you have just referred to.

Ms Huxtable : Senator, I know that NBN representatives are appearing this evening in the communications portfolio. Getting into detailed questions around the rate of return and the assumptions sitting under that is probably better directed to them than us.

Senator McALLISTER: I am conscious that the minister is the shareholder minister for the NBN.

Ms Huxtable : Sure. We can take it as best we can.

Senator Cormann: But you are asking me questions that go to the NBN business, and the NBN business is not appearing with us. The NBN business is appearing in the communications estimates. The NBN business will be in the best position to provide answers to the sort of questions that you have just asked.

Senator McALLISTER: I guess that you are managing an investment in the NBN.

Senator Cormann: I am not managing. The board and the management team of NBN is managing. I am one of two shareholders. The NBN managing director will of course appear at estimates, as is appropriate. He will appear at the estimates for communications tonight.

CHAIR: Next door, in fact.

Senator McALLISTER: As the department advising the shareholder minister, have you identified, Mr Jaggers, an internal rate of return threshold at which the NBN would no longer be wholly classified as an investment but would be partially written down?

Senator Cormann: This is not something that actually is determined by the department. It is something that is a function of ABS classifications. Given the improving performance of NBN that Mr Jaggers has put to you, we are actually in an even stronger position now when it comes to the budget treatment of the government's equity contribution. There is no question that the $29.5 billion equity contribution is precisely that—an equity contribution and not a grant. If to the extent that you are concerned, I would say that the position has actually strengthened further since the last corporate plan.

Senator McALLISTER: What are the key metrics that you would rely on in saying that that position has strengthened, Minister?

Senator Cormann: Well, the fact that the range of the internal rate of return has improved further. Obviously, again, the ABS takes that into account when it comes to the classification of how the internal rate of return compares to the CPI.

Senator McALLISTER: So you are comfortable with that increase in the range of the internal rate of return? You are confident, as the shareholder minister?

Senator Cormann: It further increases the confidence. It further increases the level of confidence. It further increases, obviously, the classification of the contribution as an equity contribution.

Senator McALLISTER: And you are confident that that is a factual statement of the company's operations?

Senator Cormann: Well, it is a factual statement. Absolutely, it is a factual statement. This is not a political decision by government. This is an independent decision.

Senator McALLISTER: You probably know that Alan Kohler has asserted in the Australian that the equity in the NBN is only worth $10 billion. I assume you disagree with that?

Senator Cormann: Well, it is very hard to understand on what basis he would make that sort of assertion. The thing about the NBN is it is obviously a project that is still in construction. We inherited a mess when Senator Conroy and his short serving successor left it behind. I will point you to my joint press release with my fellow shareholder minister Senator Fifield on 9 February. You will see in there that the NBN Co Ltd's 2017 half yearly results actually show the strong and strengthening performance of NBN when it comes to rolling out the network connecting users. It confirms that this significant infrastructure project is being delivered on time and on budget.

I will take you to some specifics. In September 2013, fewer than three per cent of Australian premises could obtain a service on the network. Now under the government's multitechnology approach, NBN has more than four million premises ready for service. That is more than one-third of all Australian homes and businesses. Revenue continues to climb from NBN connections, which are increasing by close to 30,000 premises every week. The company earned $403 million for the six months to the end of December, which is almost as much as the total revenue earned in the financial year 2016. So by the time we get to the 2020-21 financial year, when NBN is expected to refinance the $19.5 billion loan, it is expected that NBN will be substantially completed. The rollout is substantially complete by then. The cash flows will continue to improve. It will reach a point at some point where, of course, it becomes profitable. You would be aware that there is a provision in the NBN Act which envisages a future privatisation. Obviously, having inherited a project that was in a mess, we are doing everything we can to ensure it is delivered at the lowest possible cost and as effectively as possible and delivering the best possible value, obviously keeping an eye on the value of the asset.

Senator McALLISTER: What do you think the value of the asset is?

Senator Cormann: Very good try. I used to ask the same question of Senator Wong in relation to Medibank Private. I asked her, 'What is the value of Medibank Private?', and she said, 'I'm not going to tell you.' That is a quote because it is commercially sensitive and it would not be in the interests of taxpayers for us to put that sort of market valuation on that sort of asset, which could be subject to privatisation.

Senator McALLISTER: But you think it is more than $10 billion?

Senator Cormann: I am not going to go into speculation on the value of the asset. In the end, should it be privatised—and the NBN Act as put together by Labor envisages a future privatisation—then the value of the asset ultimately will be determined by the market. I am pointing you to historical experience. When we proceeded with the privatisation of Medibank Private, market expectations were that it was worth around $4 billion. The market actually valued it at $5.7 billion. Your colleagues in Victoria decided to proceed with the sale of the port in Melbourne. I think it is fair to say that market expectations were well and truly exceeded when they were able to achieve a sale price of about $9 billion, from memory. So it is a very tricky thing to try to determine what you are asking me to determine. We certainly will not do it because in the end if it were to be sold at some point, it is important for the market to value the asset and not for the government to put a number on it, which ultimately would damage the interests of taxpayers.

Senator McALLISTER: Does it present a risk that the budget position is incorrectly stated in that there is an assumption that there is something in the order of $29 billion in equity?

Senator Cormann: No. That is not right. The equity contribution is $29.5 billion. That is a fact. We are capping it at $29.5 billion, which is much less than what the previous government, of course, was going to throw into it. Obviously, the equity contribution is one thing, and the returns that are being achieved mean that it continues to be classified as an equity contribution. Beyond that, I am not going to speculate on what the market valuation of the asset would be, as much as you are inviting me in different ways to do that.

Senator McALLISTER: Minister, are you aware of the NBN medical alarm subsidy scheme?

Senator Cormann: The which?

Senator McALLISTER: The NBN's medical alarm subsidy scheme.

Senator Cormann: In general terms. Again, you are now going to something specific that probably should be pursued with the NBN business rather than with the shareholder.

Senator McALLISTER: I am mostly interested in the decision framework here. I am not going to ask you details about the scheme. I want to understand whether the eligibility criteria for this scheme was a decision of government or whether government had input into the decision.

Mr Edge : We would have to take that on notice. I understand that there were some technology issues back a number of years ago around the NBN rollout and whether certain medical alarm devices work on the network. But I think that was a live issue probably several years ago. But if you are after specific details around that scheme and so on, we would need to take that on notice.

Senator McALLISTER: I am not asking for specific details around the scheme. I am asking about whether the minister or the department has played any role in decisions made by the NBN around the scheme.

Senator Cormann: Not me, to my knowledge. It sounds to me like something that would be a matter for the NBN themselves. But I will review my records. If I need to correct the record, I will.

Senator McALLISTER: NBN had indicated that this initiative has a funding envelope of around $100 million. Is that a figure anyone here can confirm?

Ms Huxtable : Not that I am aware of. But we can take that on notice and see if we can find out for you.

Senator McALLISTER: Yes. Would that have been reported in a budget paper anywhere?

Senator Cormann: Any budget measure is published in the budget. If it is reported anywhere, you would have seen it. So if you have not seen it, it has not been published in the budget papers. We have already taken on notice whether we can provide some further information.

Senator McALLISTER: Perhaps you could take this on notice also. The company has indicated that they wrote to you on 5 March 2015. I wonder if you can table any correspondence between yourself and the NBN in relation to this matter.

Senator Cormann: Well, any correspondence would not have been with me on my own. Any correspondence between the government and the NBN is joint correspondence in a general sense between me and the communications minister and NBN. Look, I will take on notice the question you ask and see whether we can add anything to that answer.

Senator McALLISTER: Thank you.

Mr Edge : I want to clarify a point that came up earlier about when NBN Co was expected to be cash flow positive. It is from 2021-22.

Senator McALLISTER: Thank you.

CHAIR: Thank you. Further questions on 2.1?

Senator MARSHALL: Has any work been done on a privatisation proposal for NBN?

Senator Cormann: Not yet. As I have indicated, at the moment we are focussed on rolling out the NBN. But it is envisaged in the legislation that at some point in the future it would be privatised. We are obviously mindful of that.

Senator MARSHALL: So there is no working party?

Senator Cormann: No.

CHAIR: Any further questions on 2.1?

Senator GALLAGHER: I have a series of questions on executive remuneration of a GBE, particularly Australia Post. Has the department since late 2013 had any discussions with Australia Post or the department of communications about executive remuneration?

Mr Edge : Has the department had any conversations with Australia Post about executive remuneration?

Senator GALLAGHER: Yes.

Mr Edge : I have not had any such conversations. I would need to take it on notice as to whether any other officers of the department have had conversations about remuneration.

Senator Cormann: The reason he answers that way is that, of course, he has not been in the role for the whole period that you have been asking about it.

Senator GALLAGHER: Sure.

Senator Cormann: There was a predecessor in the role.

Senator GALLAGHER: But it would normally come to your area in finance?

Mr Edge : Well, shareholder oversight of Australia Post is an area that I am responsible for. It covers many things, obviously, and executive remuneration.

Senator GALLAGHER: And how long have you been in the job, Mr Edge?

Mr Edge : I have been in my current role for about two years.

Senator GALLAGHER: So in the time that you have been in your role, the past two years, you have not had any discussions with either the department of communications or Australia Post about executive remuneration?

Mr Edge : As I said, me personally, no, I have not.

Senator GALLAGHER: But you will take it on notice as to whether there were previously?

Mr Edge : Yes.

Senator Cormann: We do know, of course, when the relevant appointment of the current and retiring Australia Post head was made by the Australia Post board in the period of the previous government, various terms were put in place. I gather that the then minister for communications was appropriately advised. These arrangements have not changed until we changed them recently, when we put the remuneration of the next CEO of Australia Post into the purview of the Remuneration Tribunal under its principal executive officers classification. So under the previous Labor government—and that has continued unchanged under our government until recently—these arrangements were negotiated between the CEO and the board. We have changed that over the past week. That is a matter of public record.

Senator GALLAGHER: Mr Edge, when you say you have not had any discussions, obviously in the last little while you may have had some discussions about new arrangements, or not any discussions at all?

Mr Edge : I will just clarify. Discussions with whom? The board of Australia Post? The management of Australia Post? I am just trying to understand the question.

Senator GALLAGHER: All of that.

Mr Edge : Well, certainly I have had no conversations with the board of Australia Post about executive remuneration. There have been, I think, one or two conversations in the last very recent couple of days with certain management people in Australia Post about executive remuneration.

Senator GALLAGHER: And what has that been around? Has that been around putting in place the new arrangements?

Mr Edge : When you say new arrangements, are you referring to—

Senator GALLAGHER: Well, flowing through what remuneration—

Mr Edge : The remuneration?

Senator GALLAGHER: Yes. The next appointment.

Mr Edge : No. Not specifically related to that.

Senator GALLAGHER: Can you tell me what the conversations have been around?

Mr Edge : Well, Australia Post, in response to a request from shareholders ministers, has published some information about its executive remuneration. Really the conversation was with Australia Post to just understand when they were going to do that.

Senator GALLAGHER: Did you get an answer from them?

Senator Cormann: Well, they have published the information.

Mr Edge : They have published the information.

Senator GALLAGHER: So you gave them the push-along, did you?

Mr Edge : No. Not necessarily. We just wanted to—

Senator Cormann: They were friendly inquiries.

Senator GALLAGHER: As to when it would be published. And then it became published.

Mr Edge : It has been published. It was published yesterday.

Senator Cormann: So friendly inquiries. Yes, it has been published.

Senator GALLAGHER: Friendly inquiries?

Senator Cormann: That is a fact. Whether you want to draw a causal link, that is a matter for you.

Senator GALLAGHER: I will leave that open. My understanding is the remuneration of the CEO was published up to, I think, 2014-15. That information was publicly reported for the financial years 2012-13 and 2013-14. Then it was not released in 2014-15 and 2015-16. Is that directly as a result of the change to the PGPA Act, which reduced disclosure arrangements?

Senator Cormann: Well, that is not quite right.

Senator GALLAGHER: Well, put me on the right path, then.

Senator Cormann: Essentially, as part of sensible and, I would say, bipartisan public governance reforms initiated at the tail end of the previous Labor government—that is when the PGPA Act was—there was an effort, among other things, to align with the Australian accounting standards. The Australian accounting standards, as you would know, are set independently by the independent body. They are not set by the government at a political level. The effect of these PGPA reforms and the efforts to align with Australian accounting standards set by the relevant Australian accounting standards board was that information that previously was disclosed as a matter of course was no longer being disclosed by some organisations, including Australia Post. That was not because anything in the PGPA Act prevented Australia Post from disclosing it. It was because they chose not to do it. We, of course, have fixed that. We have addressed that. But the requirements in the PGPA Act do not prevent obviously the disclosure, consistent with previous arrangements. But the Australian accounting standards, set independently in a nonpartisan and non-political fashion by the Australian Accounting Standards Board, did not have that requirement in it. That was the consequence which has since been fixed. Dr Helgeby is actually the expert. He might want to answer that.

Dr Helgeby : As the minister said, the accounting standard does not prevent any disclosure. It simply says, 'Here is what you must disclose and you must disclose at a particular level.'

Senator GALLAGHER: So you can exceed the standard?

Dr Helgeby : You can exceed the standard.

Senator GALLAGHER: If you choose?

Dr Helgeby : If you choose; that is right. That is a choice—

Senator Cormann: And that is what the government has directed them to do.

Senator GALLAGHER: At the time that those changes came in that allowed Australia Post to lessen the transparency—

Senator Cormann: That is what Australia Post clearly decided.

Senator GALLAGHER: Was the government aware that that would be the result? Was it something that—

Senator Cormann: It was not the intended result. I have to say that I was aware because it has been raised, obviously, in the context of Senate estimates and otherwise. As you know, in recent times, we have taken steps to ensure that the previous disclosure arrangements continue.

Senator GALLAGHER: Whilst it was not the intended result, you were aware of it being the result. Until a month ago, you had been comfortable with that level of reporting?

Senator Cormann: The PGPA Act, of course, replaces the previous financial management act and the Commonwealth Authorities and Companies Act with one act. As I say, this is a very technical process that is not generally very political. It was initiated by Senator Wong as the then finance minister and was continued by me. It was not the aim of either Senator Wong or myself to lessen the level of disclosure. But because of the technical implications of the way the accounting standards, which are set independently, flow through the PGPA Act, that was one of the consequences, which we have since addressed.

Senator GALLAGHER: Where this has arisen previously—I think you are right; this issue has been pursued previously—Minister, you are saying you were aware of it being an issue and being the result of this change through the alignment of the accounting standards?

Senator Cormann: Which incidentally, I have just been advised, applied from 1 July 2014. So while it came into effect under our period of government, it was well and truly initiated before we came into government, with an effective date of 1 July 2014. The relevant financial reporting rule or relevant public governance performance and accountability financial reporting rule brought executive remuneration disclosures into alignment with changes occurring in the Australian accounting standards. As we have said, these changes do not prevent these organisations from reporting executive salaries. We have told them that we expect them to do it.

Senator McALLISTER: Minister, I want to clarify your evidence. My advice is that it may be that the legislation was in operation earlier. You may be able to clarify this. I understood that the rule is the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 and that that is the relevant rule that has created—

Senator Cormann: Which applies the legislation which came into effect in 2013.

Senator McALLISTER: Correct.

Senator Cormann: Before we came into government.

Senator McALLISTER: Right. But the rule was created under your administration, was it?

Senator Cormann: No. The rule is literally just doing what the legislation provides, which is to align relevant arrangements with the Australian accounting standards. It is not a rule that the government sets. It is a rule that an independent body sets. We literally just give effect to the arrangements under the PGPA Act, which came into effect with the previous government. The way the rule then applies is that we have to align arrangements with Australian accounting standards. It sounds intuitively appropriate, I would have thought. I do not think that there was any sinister motive in seeking to comply with the Australian accounting standards. But one of the consequences was that organisations like Australia Post no longer disclosed certain remuneration arrangements the way they have previously disclosed them, and we fixed it.

Senator GALLAGHER: Minister, in terms of the publication of the salary package which had been previously released for the 2012-13 and 2013-14 financial year, did you ever request the unpublished remuneration figures for 2014-15, or was it ever conveyed to you?

Senator Cormann: No.

Senator GALLAGHER: And the same for 2015-16 prior to you being informed, I think, in October 2016, was it?

Senator Cormann: Yes. That is right.

Senator GALLAGHER: So, prior to that, you had not sought that information either?

Senator Cormann: No.

Senator GALLAGHER: So no-one in your office had looked at the annual report and thought, 'That's a lot of money to be giving people?'

Senator Cormann: It has been a lot of money for some time. Obviously Mr Fahour was appointed in the period of the previous government. After the so-called Rudd Bank did not proceed, the arrangements are substantially the same in that they were managed by the board of Australia Post.

Senator GALLAGHER: So in terms of reporting to shareholder ministers, what information are you provided with by GBEs?

Mr Edge : There is a lot of information required of GBEs. It is all set out in some detail in one of the resource management guides that apply to GBEs. In summary, it is corporate plans, quarterly reports and other information that is related to the financial and corporate performance of the entity. So there are quite detailed reporting requirements set out.

Senator GALLAGHER: Does the department have a role in looking at minutes of meetings or being kept up to date with what the board is discussing?

Mr Edge : In terms of minutes of board meetings, we would not ordinarily ever look at minutes of board meetings.

Senator Cormann: You would not expect any other shareholder to have regular access to minutes of board meetings. The arrangements here are similar to the arrangements in any other equivalent company. You would not expect that.

Senator GALLAGHER: I guess it depends, does it not? I have been a shareholder minister and I have certainly sought minutes of board meetings before, particularly when I need more information about what is going on. So I do not think it is that unusual.

Mr Edge : Certainly there is opportunity for conversations to take place with each of the GBEs when they submit reports. We typically engage with them to have a discussion about their quarterly reports and their corporate plans and understand their strategies and their financial performance and other things.

Senator GALLAGHER: Obviously through the annual general meeting and things like that you would get those documents and reports through ahead of meetings with shareholder ministers?

Mr Edge : Yes. Probably the most important document is really the corporate plan, which is produced each year and is provided to shareholder ministers for review. We typically engage extensively with the GBEs around the corporate plans. Then there are quarterly reports which track performance against the corporate plan targets. We normally engage fairly heavily with the government businesses around their reporting and their performance.

Senator GALLAGHER: Do shareholder ministers attend an annual meeting with the GBE?

Senator Cormann: We delegate that responsibility to a relevant officer in the department.

Senator GALLAGHER: Really? Is that the standard?

Senator Cormann: That is the same as would have happened under the previous government.

Senator GALLAGHER: Is that you, Mr Edge?

Mr Edge : Occasionally. Generally the conversation is about how the business is performing. Its strategy and so on in the case of GBEs are really more around the corporate plan than they are around the AGM, which tends to be more procedural.

Senator GALLAGHER: So, at the AGM, my experience would be that you would get a report from the chair. You would get a performance. If there is going to be money provided back to the shareholder ministers, that is where that would be signed off and agreed to. Does that all happen at an annual general meeting, or is that done in another way?

Mr Edge : Typically for a GBE, all the issues of significance in terms of, as I said, how the business is performing and its strategic planning going forward are more dealt with through the corporate planning process than the AGM. The AGM, as I said, is really for a GBE generally a procedural meeting. So it is probably not quite the same as some of the other AGMs that you have experienced.

Senator GALLAGHER: It is different. Do you stay abreast of policies that have been put in place in the GBEs—for example, remuneration policies? Do you get down to that level of detail or, again, is it left to the GBE to manage all of that?

Mr Edge : Generally, in terms of policies and the internal management of the GBE, they are the responsibility of either management or, as relevant, the board. Our primary focus is, as I said, on the financial performance of the entity and how its performance is tracking in the corporate plan and in the quarterly reports.

Senator GALLAGHER: So there is no real oversight of reports to shareholders of individual performance agreements, say, with the chief executive?

Senator Cormann: There is oversight of reports to shareholders, but the reports to shareholders are as Mr Edge has described. Obviously there is advice from finance to me and from the communications department to Senator Fifield in relation to the regular reports that are provided on performance. But the detail and the extent of that reporting is consistent with what it was before.

Senator GALLAGHER: So they are in reports to shareholders that come. Do they come directly from the board to you or through finance to you?

Senator Cormann: They come generally through the department with overlay advice from the department about any information provided to us about financial performance and expected dividend payments et cetera. As I say, the arrangements in place now in relation to these matters are precisely the same as under the previous Labor government.

Senator GALLAGHER: Do you know if when appointing the chief executive or executives within Australia Post they do salary scoping or market testing for certain positions? Do you know if any of that is done and reported through to the board?

Mr Edge : I think that is really a question for Australia Post.

Senator Cormann: Who are appearing as we speak, I believe, in the communications committee.

Senator GALLAGHER: I am referring to arrangements that I am used to; that is all. That is why I am trying to work out how the GBE reports to the minister and what—

Senator Cormann: The GBE reports to the board.

Senator GALLAGHER: To the shareholder?

Senator Cormann: The board reports to the shareholder. The GBE itself actually reports to the board.

Senator GALLAGHER: I am interested in what the board tells the shareholder ministers, and not very much, by the sound of it.

Senator Cormann: I disagree with that characterisation. They tell our shareholder ministers the same amount of information that they told previous shareholder ministers under the previous Labor government.

Senator GALLAGHER: Minister, prior to October 2016, can you just confirm for the record—I think you have said it previously—you did not have any idea what the salary of the Australia Post CEO was?

Senator Cormann: That is obviously again an attempt at verballing. You are verballing me here.

Senator GALLAGHER: No. I am not trying to verbal you.

Senator Cormann: You are verballing me.

Senator GALLAGHER: Can you put on the record what your level of knowledge was?

Senator Cormann: Let me just clarify. There is obviously a base salary and then there are at-risk components. It is impossible for a shareholder on an ongoing basis to be able to track how the at-risk components or the bonus incentive payments apply.

Senator GALLAGHER: So it is the bonuses you were not aware of?

Senator Cormann: Obviously I was aware of the fact that there were bonus arrangements. But how performance against at-risk components of the salary were tracking is not something that a shareholder minister is ordinarily aware of on an ongoing basis. Obviously progressively certain reports were in the public domain and we sought very specific information, which was publicly released at our instruction.

Senator GALLAGHER: Can you just confirm, then, for me what you were aware of?

Senator Cormann: Our awareness was the same awareness as that of Senator Conroy, which was that the salary arrangements were managed by the board of Australia Post. We have changed that by determining that the Remuneration Tribunal under the principal executive officers classification needed to determine the appropriate arrangements for the next CEO. Of course I was aware that there was both a fixed salary and an at-risk component when it came to the remuneration of the current CEO of Australia Post. At various times, there has been public reporting in relation to those remuneration arrangements. Obviously in recent times we have ensured that all of that information was made public in detail.

Senator GALLAGHER: You are speaking a bit in general terms.

Senator Cormann: Necessarily.

Senator GALLAGHER: I have read reports of you saying that you were not aware of the salary of the Australia Post CEO.

Senator Cormann: Where did you read that?

Senator GALLAGHER: You have now told me that you were aware and you were aware there were at-risk or bonus payments.

Senator Cormann: I was not aware of the specific amount, as I have indicated to you, as a shareholder because it depended on performance against certain targets that were part of the contract arrangements set by the board during our period of government. That is the same as they were part of the contract arrangements when he was initially recruited in the period of the previous government when Senator Conroy was the communications minister. The leadership of the day-to-day management of the relationship, of course, is very much in the communications portfolio. But both shareholder ministers do work together in relation to these matters. So I can confirm that I was aware that there was a fixed salary component and that there were certain short-term and longer term at-risk components, the monetary value of which were dependent on performance against targets, which is why I believe it was not possible for me at all times to be aware of what precisely the remuneration would be. But we have, of course, since looking backwards, made relevant information public.

Senator GALLAGHER: So you were aware that the fixed salary was in the order of what? Were you aware what component it was?

Senator Cormann: I was aware of what the fixed salary was in the order of, which was quite consistent with what it was when—

Senator GALLAGHER: So $4.4 million?

Senator Cormann: That is the fixed component. Before we came into government, the fixed component was $1.7 million. So that was in the final year of the previous government. And that was the fixed component of the salary as was put in place under the period of the previous government. The fixed component is now $1.9 million, so it is broadly equivalent. What has been described as excessive remuneration was linked to the various short-term and long-term performance incentive payments, which of course have been publicly articulated now in very specific detail.

Senator GALLAGHER: So $3.7 million in the bonuses, basically. That is what we have ended up with?

Senator Cormann: Well, I think we have publicly released the information. The fixed base salary and fee is $1.9 million. That is broadly in line with the arrangements put in place by the previous government. There were also short-term and longer term incentive arrangements in place under the contract put in place under the previous government. But the value of those short-term and longer term benefits—

Senator GALLAGHER: You were not aware of?

Senator Cormann: I was not aware of the precise value of them; that is right. They of course depend on the performance against targets. That is the whole point. They could have been zero if there had been very bad performance. As it turns out, they are significantly higher than that. But it is not in the purview of a shareholder minister at any one point in time to have a real live awareness of how performance against incentive payment related targets is tracking.

Senator GALLAGHER: But at the end of a financial year, for example, the board does not report in any way to the shareholder ministers on what the final remuneration package actually ended up being? Is that information ever relayed out of Australia Post? 'We have had a very successful'—

Senator Cormann: Well, we have publicly released it.

Senator GALLAGHER: I am talking about in the years that it was not. 'At the end of this year, we have done very well. This is the package that was agreed to.'

Mr Edge : Well, in the previous reporting in the annual report and in the financial statements, executive remuneration was presented and was reported but it was not disaggregated individually.

Senator McALLISTER: I want to ask a follow-up question. Minister, you said you were aware of the quantum of the base salary, which you have said was $1.9 million per annum. You have said you are aware that there was a structure for at-risk payments and bonuses.

Senator Cormann: Which has been in place since Mr Fahour was first recruited.

Senator McALLISTER: And you are aware of that structure. Were you aware of the maximum possible amount available in the at-risk component of the salary?

Senator Cormann: No.

Senator McALLISTER: So you did not know the quantum?

Senator Cormann: Well, I did not know what the maximum was, no.

Senator McALLISTER: Were you aware of the maximum amount available as a bonus?

Senator Cormann: I will have to take that on notice. I would have to take that on notice.

Senator GALLAGHER: In terms of the new arrangements that you have put in place now with the Remuneration Tribunal to determine the package for the new CEO, have you considered doing the same with the NBN?

Senator Cormann: No. The reasons for that are outlined in a letter by Senator Conroy in 2009. We have actually been asked the same question by Senator Dastyari in the environment and communications committee. In fact, Senator Dastyari has written on behalf of the Labor Party to both Senator Fifield and me. Before the letter even arrived in my letterbox, he put a copy of the letter on Twitter.

Senator GALLAGHER: That is handy. In real time.

Senator Cormann: We will be responding to that letter.

Senator GALLAGHER: I am sure he is very flattered that you are following him on Twitter.

CHAIR: Is it even possible to flatter Senator Dastyari?

Senator Cormann: It is always interesting to see a letter to you published before it has even reached your letterbox.

Senator McALLISTER: This is the miracle of modern communications.

Senator Cormann: It looks like a very genuine inquiry by Senator Dastyari.

Senator GALLAGHER: For the purposes of my information, why would there be different arrangements?

Senator Cormann: We will set that out in detail in the letter in response to Senator Dastyari. I am happy to table that letter for the benefit of this committee.

Senator GALLAGHER: Your response?

Senator Cormann: Yes.

Senator GALLAGHER: But you cannot tell us now? You could tweet it early, like now.

Senator Cormann: I will provide the information to you on Twitter.

Senator GALLAGHER: Or you could provide the information now and then we will tweet it.

Senator Cormann: We will be responding in the appropriate fashion. Let me just say at this point that the reasons given by Senator Conroy back in 2009 as to why the remuneration arrangements for the CEO for the NBN were not part of the Remuneration Tribunal arrangements, in our judgement, are still valid and we continue to support them.

CHAIR: Thank you. I have some questions on outcome 2.1, which we will proceed to now. I have one substantive question and one that is of less substance, so I will start with the one that is of less substance. Ms Huxtable, are you familiar with the finance department's graduate recruitment campaign and associated video entitled Game Changers?

Ms Huxtable : I am.

CHAIR: Good. Could you take me through a bit about how that came about?

Ms Huxtable : I might need some assistance from my colleague here. Basically, Finance has been reviewing its graduate recruitment program—in particular, how we market Finance as a positive place to work so that we have plenty of choice when it comes to people seeking to be employed by Finance. Clearly, our graduate intake is a very important part of renewal and refreshing our organisation. As part of that, we have certainly looked at how we market ourselves. Dare I say that Finance can be sometimes seen as perhaps a dour place.

CHAIR: Never ever.

Ms Huxtable : Even though I try and wear bright colours at all times, Senator, as you know.

CHAIR: Good.

Ms Huxtable : So, as part of what is a multipronged strategy, we have certainly looked to put together some material that might engage young people who are looking at the various graduate opportunities that they have.

CHAIR: I must admit that the video has literally just been drawn to my attention, so I am not intimately familiar with it. But, from a quick look at it, it does look like it might have been a collaborative exercise between perhaps some Finance employees and an external ad agency. Is that right? Or was it wholly done by a private—

Ms Huxtable : Certainly, all the people who appear in that video are Finance employees. It is a mix of our current graduate cohort; the graduates who had been with us for a year; and a number of our staff, including senior staff.

CHAIR: But was it done also in conjunction with an external agency to provide, say, the filming?

Ms Huxtable : Yes. We had assistance with the filming of the video.

CHAIR: And what about the scripting? Was that done in-house or by the external provider?

Mr Fredericks : That was done in a combination of both. So we in the first instance wanted to fully articulate the content that we wanted. We had some assistance in putting that into a script form. It was ultimately settled between both ourselves and the contractor.

CHAIR: Judging by the ownership of the YouTube channel which has posted it, the contractor is a group called Together Creative. Is that right?

Mr Fredericks : I think so. I stand to be corrected, but, yes, I think so.

CHAIR: Sure. Can you tell me anything about them? Are they an ad agency? Are they Canberra based? Are they national?

Mr Fredericks : My understanding is that they are a relatively small outfit. I cannot tell you whether they are Canberra based, but I will very happily take on notice giving you a bit of information about them.

CHAIR: Sure. And what is the nature of their business? Do they do advertising? Are they a creative agency?

Mr Fredericks : That is correct. As I understand it, they are a relatively small advertising agency.

CHAIR: Do you know what the cost was to Finance?

Mr Fredericks : I do not have that number with me now.

CHAIR: Is there perhaps anyone in the room who might have access to that?

Ms Huxtable : We probably could come back to that. We will seek the information from someone who is watching.

CHAIR: Sure. I have one or two more questions. We will see if in the meantime you can come to that. If not, I would be happy for you to take that on notice. Obviously I understand the need for all government departments to attract young talent. But there is one particular exchange in the video that kind of stood out to me and struck me as perhaps a little trivial. I will quote it to you. One graduate says:

Hey, guys. I'm going to go get a paleo pear and banana bread if you'd care to join me.

And another responds:

I'm actually off to an Aboriginal and Torres Strait Islander staff network meeting.

I understand the reasons you would be doing this, but it seems a bit trivial for a serious agency of government like Finance to be joking about paleo pear and banana bread.

Mr Fredericks : I can tell you a small back story on that.

CHAIR: Please.

Mr Fredericks : That was a change made in the script at the time of the filming. It was actually made—

CHAIR: Improv?

Mr Fredericks : Made at the request of the graduate. It was basically accepted because we took the view, and I think the agency took the view, that we are possibly not the best people to know and understand how best to communicate to a young generation of graduates. So this graduate, with a bit of innovation, wanted to change the script. As I understand it, that was allowed.

CHAIR: Right. So you are exonerating the agency for having written that line?

Mr Fredericks : Yes. Well, I am aware of it.

CHAIR: They may be relieved about that. Do you have some extra information there?

Mr Fredericks : It is just confirming that you are quite right, Senator. The agency was Together Creative. That agency is Sydney based.

CHAIR: And you have not yet obtained the cost?

Mr Fredericks : No.

CHAIR: If you could provide that on notice, that would be great. I will now move to my more substantive questions, which are about the size of the Public Service, because there has been some media reporting about this. I would just like to clarify a few things. One recent media report and some commentary associated with it suggested that the size of the Commonwealth government workforce is growing. Is that an accurate characterisation?

Senator Cormann: In general terms, no. If you look at the data, which is reflected in Budget Paper No. 4, you will see that since we have come into government, firstly, we have made significant efforts to reduce the size of the Public Service on an ASL, or average staffing level, basis back to 2006-07 levels. That is where it has essentially remained. We are working to keep it there over the current forward estimates period. Obviously in real terms that is a reduction in the size of the Public Service, given the population growth since 2006-07. I think I read somewhere that the 4,000 people, or the blowout, in the Public Service was based on an inaccurate use of ABS and APSC data for the last year. The reason I say 'inaccurate use' is that in 2016, quite unusually, we had both a federal election and a census. There is, of course, a significant increase in the number of temporary staff. There is a spike, essentially, because of the activities connected to the census and the federal election. That is not an ongoing increase in federal staffing numbers. The most appropriate measure used to track the size of the Public Service in terms of the number of staff that has been used consistently by governments of both political persuasions and which is also reflected in the budget papers is the average staffing level measure, which is appropriately adjusted. You will see that that shows that the federal Public Service, in terms of its staffing numbers, remains smaller than or below the 2006-07 level.

CHAIR: Thank you. That comprehensive answer dealt with a number of my follow-up questions. Just to clarify, can Finance translate the headcount figures for the census and the election into the average staffing level measure to give a better sense of what the cost to taxpayers is?

Ms Huxtable : The average staffing level data will be reported in Budget Paper No. 4 in the 2017-18 budget. So the most recent report with regard to the ASL is the 2016-17 figure. Going to the minister's point, what was reported at that time was an ASL excluding military and reserves, which is normally the number which is used, of 167,155. That compared to the 2006-07 level of 167,596. So, against the government's commitment to retain the ASL at or below 2006-07 levels, that meets that requirement. That figure will be next updated in the 2017-18 budget. We go through a collection process with the agencies to gather that information. It is not about translating one to another. It is more that when you get the proper data collection in respect of average staffing levels on the same basis that has been collected in the past, you report that figure. Clearly, that will include whatever activities occur during the year in respect of all the functions of government, including ABS and census activity and election activity, and all other things that create peaks and troughs in the numbers.

CHAIR: I will look forward to that.

Senator Cormann: I might just give you some more information here. So average staffing levels across the federal Public Service were reduced to an expected 167,411 for 2014-15 and 167,340 for 2015-56 and further down to 167,155 in the 2016-17 budget, which is all below the 2006-07 number of 167,596. Through effective controls applied by the Expenditure Review Committee and the cabinet, the Turnbull government has been able to maintain federal Public Service staffing levels below those 2006-07 levels in the current 2016-17 financial year. We are on track to keep to that reduced level in each year of the current forward estimates. As I have indicated, given population growth during that same period, that is a real reduction in federal public sector staffing levels. In fact, in nominal terms, federal Public Service staffing levels in both 2015-16 and 2016-17 are more than 15,000 ASL below the 182,505 ASL peak under Labor in 2011-12.

Various assertions made that there has been a blowout in public sector numbers are wrong. ABS and APSC public sector employment data is a point-in-time head count which includes temporary, non-ongoing staff. That is why it is misleading to use this data to assert a 4,000-staff blowout. It ignores the fact that in 2016 we had both a census and a federal election in the same year, with the related temporary increase in non-ongoing staff. The fact is that the most appropriate measure of public sector staffing levels over time is the so-called ASL, or average staffing level, measure. That measure tracks the average number of employees receiving wages or salaries over the financial year, with adjustments for casual and part-time staff. Unlike headcount data, the ASL provides a more meaningful full-year estimate, as it is not distorted by temporary spikes in employment. The headcount includes every person employed at 30 June as one person, whereas ASL provides an average full-time equivalent over the entire year. This is a measure previous governments have used and which our government have used consistently since 2013 to track our performance in controlling the size of the public sector over time.

CHAIR: To what extent have the separations been achieved due to natural attrition, compared to redundancies?

Senator Cormann: When we first came into government, our target was to achieve as many separations as possible through natural attrition. But there have been some redundancies. We discussed in previous estimates that we made a budget allocation to manage those redundancies. I will give you some specific information. Since 1 July 2013, 56 per cent of separations were achieved through natural attrition, which has helped to lessen the number of redundancies required across the public sector. We did provide funding to agencies to assist with redundancies since 1 July 2013. According to APSC data, which is headcount data, I have to say, 31,736 separations occurred from 1 July 2013 to 1 July 2016. Of these, 12,000 were redundancies. And 9,759 separations occurred in 2015-16, of which 2,837 were redundancies.

CHAIR: Thank you, Minister. Further questions in 2.1? I might come to Senator Ludlam first, who has been waiting for a bit.

Senator LUDLAM: I do not know that this will take too long. This is probably more for the Finance minister than for the officers at the table, although anybody obviously is welcome to chip in. Minister, can you walk us through your involvement in major funding announcements by the government. I will bring your attention to a specific example in a second. You can probably guess which one. In the meantime, as the chief watchdog of government expenditure, what is your precise role?

Senator Cormann: Well, it is a matter of which public announcements I have become involved in and which ones I have not.

Senator LUDLAM: It is not so much announcements.

Senator Cormann: You said public announcements, I thought. I thought you asked me about my involvement in public announcements.

Senator LUDLAM: Expenditure.

Senator Cormann: In terms of expenditure, my role is to ensure that government expenditure is as efficient and effective as possible and delivers against the priorities of the government.

Senator LUDLAM: That is concise. Another thing I guess I would not mind you explaining to me is at what point the ERC is involved in major spending announcements.

Senator Cormann: Spending announcements? You said announcements then.

Senator LUDLAM: I know that you are probably just as eager to get to the point as I am—announcements and deliberation around what goes ahead and what does not.

Senator Cormann: Any decision to incur expenditure in relation to new policies is considered by the Expenditure Review Committee in the appropriate way.

Senator LUDLAM: Okay.

Senator Cormann: It is based on advice from the relevant department and with costings information verified by my department. A decision is made in the end by the Expenditure Review Committee and by the cabinet.

Senator LUDLAM: And that is right across the whole of government? There is nobody beyond your reach or your remit, is there, within the Commonwealth public sector?

Senator Cormann: Any federal government allocation of expenditure through the budget process is based on a decision by government; that is right. It is based on a decision by government which is informed by advice from the relevant departments and by the central agencies—PM&C, Treasury and Finance.

Senator LUDLAM: Okay, thanks. So it will probably focus this conversation to talk of a specific example. I guess there are no prizes for guessing which one. The Commonwealth made an up to $1.2 billion funding commitment for the Perth Freight Link. We heard from officers in the infrastructure department yesterday that, at the time that funding commitment was given, there was no business case. The project did not have environmental or Aboriginal heritage approval. No cost-benefit analysis had been conducted. The overall route of the project had not been determined. So step me through, from your point of view as minister, that of your department and the ERC, how a decision like that can be made unilaterally. What has to happen after an announcement like that has been made and with all that due diligence having been carried out?

Senator Cormann: Firstly, I disagree with much of what you have said there. It certainly was not a unilateral announcement or unilateral decision. The Perth Freight Link project fundamentally is a combination of the longstanding rollout extension. It was initially a plan by the previous government to make certain upgrades to surfaces of stock roads and other roads that you know in the area. The federal government, when we came into government, decided to support this important project, which incidentally was identified by Infrastructure Australia as a very high infrastructure priority. That is, of course, an independent assessment. We decided to support that project in 2014-15.

At a state level in Western Australia, there were considerations of whether the second stage of that project should be implemented as a surface road upgrade or whether it would be more desirable to do that by way of a tunnel. You would be aware that the decision that was made by the state government in Western Australia was to proceed with a tunnel. Further funding was sought from the federal government. The federal government made a decision to allocate the necessary additional funding to take the total contribution at one point to $2 billion. As I say, this is a very significant project which will help reduce congestion across the south metropolitan region. It will improve safety. It will reduce the cost of moving freight across the metropolitan—

Senator LUDLAM: Minister, with respect—

Senator Cormann: I am answering your question.

Senator LUDLAM: No, you are not. I asked you about the process.

Senator Cormann: It will reduce the cost of moving freight across the metropolitan area. It will improve the amenity for—

CHAIR: The minister will finish his answer soon. He is providing an answer.

Senator Cormann: communities across the south metropolitan area of Perth. As you would be aware, because you live in Western Australia, it is a project which has got very strong public support, which was demonstrated not least by the survey—

Senator LUDLAM: I did not ask that.

Senator Cormann: in TheSunday Times. It was participated in by 9,000 readers of TheSunday Times, 60 per cent of which supported the project. Only 10 per cent did not support the project. Thirty per cent of respondents were undecided.

Senator LUDLAM: You are not going to stop, are you?

Senator Cormann: So it is a very important project. It is a project which has got very strong public support.

Senator LUDLAM: Away you go.

Senator Cormann: And the government stand by the decisions that we have made to make the biggest ever federal investment in a single infrastructure project in Western Australia. It is a significant contribution to economic growth and improved lifestyles in Western Australia and nationally.

Senator LUDLAM: Are you done?

Senator Cormann: I have answered your question to the best of my ability.

Senator LUDLAM: You have answered a dozen questions I did not ask. I am trying to keep it to a process. You just said that it is the largest single infrastructure commitment to the state of Western Australia. Is that—

Senator Cormann: That is right.

Senator LUDLAM: That is how you phrased it?

Senator Cormann: That is right.

Senator LUDLAM: How could you have possibly made such a commitment without a business case or a cost-benefit analysis being conducted? Is it just done on the basis of trust?

Senator Cormann: No. That is not right. We based the decision on all of the relevant and necessary advice.

Senator LUDLAM: In what year did Prime Minister Abbott make that funding commitment?

Senator Cormann: We made the commitment in the 2014-15 budget. The consideration of that budget measure went through the usual process, including advice from the department of infrastructure and the central agencies. The government made a decision. We are very comfortable with the decision we have made. We are totally committed to the project. It is a great project. It is one that is long overdue. It is one that should have been implemented many, many years ago. It is more expensive than it should be because of the outrageous decision that was made by Alannah MacTiernan as the former WA transport minister, when she sold the land for the Fremantle eastern bypass.

Senator LUDLAM: This is a little bit of a waste of the estimates committee's time.

Senator Cormann: That is why it is more expensive than it should have been. It is a very important context.

Senator LUDLAM: It is not.

CHAIR: Order, senators!

Senator Cormann: It is a project which will create more than 10,000—

CHAIR: Order!

Senator Cormann: It is a project which will deliver more than 10,000 direct and indirect jobs. So it is a very important project.

Senator LUDLAM: I am so bitterly familiar with these talking points. If you could just keep your answers to the scope of the questions I am asking, this will go heaps faster. What I am trying to do is square this very orderly process of evaluation that you have described to us with the process for funding and announcing the Perth Freight Link, which was completely arse backwards, as far as I can tell.

Senator Cormann: Well, that is your opinion. I disagree with that opinion.

Senator LUDLAM: When the funding commitment was made, did you or Prime Minister Abbott have a completed business case?

Senator Cormann: The process of assessment went through all of the appropriate channels. It was considered in the appropriate fashion.

Senator LUDLAM: I just asked a really direct question.

Senator Cormann: Of course, you have been pursuing, I think, six or seven orders through the Senate now.

Senator LUDLAM: And you have denied all of those.

Senator Cormann: That is not right. We have provided as much information as we could provide without harming the public interest.

Senator LUDLAM: I am not asking for documents here.

Senator Cormann: And, of course, including that part of the business case which could be publicly released and has been publicly released.

Senator LUDLAM: Yes. I understand that. Did you or the Prime Minister at the time, Mr Abbott, have those documents at the time the funding decision was made?

Senator Cormann: I will take on notice what specific documentation was in front of government.

Senator LUDLAM: How could you not know? Did you have a cost-benefit analysis?

Senator Cormann: You are obviously asking me questions now about 2014. I will take them on notice to make sure the answers I provide are 100 per cent accurate.

Senator LUDLAM: The problem with that, Minister, is that my next question has to be hypothetical because that was a yes/no question. If that funding decision had been made without access to either a cost-benefit analysis study or a business case, would that have violated the normal due processes that you were describing to us before?

Senator Cormann: I do not agree with your assessment. I do not agree with the premise of your question.

Senator LUDLAM: I just asked a simple question.

Senator Cormann: Sure. But, as I have indicated to you, the decision to invest $1.2 billion in this very important infrastructure project for Western Australia went through all of the appropriate processes of government. It is a project which is long overdue. We look forward to it being completed as soon as possible by a re-elected Barnett government.

Senator LUDLAM: I think you might be in for a bit of a disappointment, but that is also outside the scope of this committee, I suppose. Minister, how can it be within the normal processes of evaluation and deliberation when you still do not know how the freight link is going to get to the port? I am struggling to square the description you made of an orderly process of evaluation with the shambles we are witnessing, where the project still does not get all the way to Fremantle.

Senator Cormann: I completely disagree. I have heard you make that very strange argument many times.

Senator LUDLAM: But it does not.

Senator Cormann: You are wrong.

Senator LUDLAM: The Infrastructure officers confirmed that yesterday. They confirmed it.

Senator Cormann: Let me explain this to you. Let me explain it. You have asked a question. I will see if I can answer it for you.

Senator LUDLAM: Just try to stick to the question I asked.

Senator Cormann: I am going to answer the very precise question. Right now, a lot of trucks—thousands and thousands of trucks—that currently are going through the suburbs will be taken off suburban arterial roads and on to a dedicated highway. This means 12½ minutes faster travelling time to the port precinct. It means that trucks do not have to stop at about 14 lights that they currently have to stop at. That means less wear and tear. It also means fewer CO2 emissions, incidentally. It means increased safety. Senator Ludlam is then saying, 'But, hang on. So the faster, better, more efficient highway finishes. That improved road finishes three kilometres out from the Fremantle port.'

Senator LUDLAM: I think it is about two and a half.

Senator Cormann: He is making that argument as if there is no road there at all, as if this highway arrives in the desert. It arrives somewhere where all of a sudden the trucks have got to somehow get wings and fly to the port! No. There are actually existing roads. All of the trucks will be able to use the better, faster, safer, more efficient highway instead of going through the suburbs and stopping at 14 red lights along the way. They will arrive at the same road infrastructure that is currently there. Would it be preferable if we had even better road infrastructure for the final three kilometres? Yes. And I am sure that one day that will happen. Maybe one day the tunnel, which is part of the Perth Freight Link project, will be extended under the river all the way. But the proposition that somehow—

Senator LUDLAM: We still do not even know.

Senator Cormann: The proposition that somehow the Perth Freight Link runs from the end of Kwinana Freeway and then stops in the middle of the desert and then all these trucks do not know how to get to the port is false. That is the proposition the way it is being circulated—

Senator LUDLAM: No. It is not.

Senator Cormann: through the media by the Greens.

Senator LUDLAM: You are just making this stuff up.

Senator Cormann: The truth is that all of these trucks that are currently arriving at this bit of road for the final three kilometres will still arrive at that final three-kilometre bit of road. They will have arrived there 12½ minutes earlier, not having had to stop at 14 traffic lights along the way. That means less wear and tear and fewer CO2 emissions. It means better amenity, better safety, less congestion and more jobs. Of course, this is the perfect time to build this road because construction activity in Western Australia is less than what it has been, given that the mining construction boom has—

Senator LUDLAM: It is just a 'making work' project.

Senator Cormann: come to a close. So this is the perfect time to build the Perth Freight Link. I certainly hope that it will be built as soon as possible after the state election on 11 March.

CHAIR: Are you done, Senator Ludlam?

Senator LUDLAM: So done.

CHAIR: Thank you.

Senator GALLAGHER: I have a couple of questions on staffing and the information that was provided by the minister. Would the government policy of not exceeding 2007-08—

Ms Huxtable : It is 2006-07.

Senator GALLAGHER: It is 2006-07 ASL. Is there a cap for each department?

Senator Cormann: We are currently in the position where we are below 2006-07 levels. The way the government is working—and I think we have had this conversation before—

Senator GALLAGHER: But I have not asked that question.

Senator Cormann: If I may. The way this is managed and controlled by the government to ensure we remain where we currently are is that, if individual portfolios bring forward policy proposals which require additional ASLs, they have got to point to how they would manage this within their current ASL allocation. So it is essentially an addition to the offset rule. If you want to spend more on a higher priority, you have to identify spending reductions in another area in order to pay for it. If you want to reprioritise the work in your portfolio, which means that you have to allocate ASL to a higher priority, you have to be able to identify how you achieve that by reducing the required number of ASL in other areas or by improving productivity more generally. That is a process that is supervised and managed through the Expenditure Review Committee. Based on everything we know at present, we are confident that we will be able to deliver on our overall target to remain at or below 2006-07 levels this year and over the forward estimates.

Senator GALLAGHER: Thank you. I will repeat my question. Are there caps for each department?

Senator Cormann: That is not the way it works. Obviously we have information about where departments are at at present.

Senator GALLAGHER: Are they required to stay there?

Senator Cormann: If they want to do more, they have to explain how they can do that within existing resources, essentially.

Senator GALLAGHER: So there are not caps?

Senator Cormann: There is an overall cap across the government, but we do apply that flexibly. Sometimes in individual portfolios, where there is a genuine demand for increased staffing levels, that can be offset across the broader government if it is a sufficiently high priority. But in the first instance departments are expected to make genuine efforts to be able to deliver what they want to deliver within their existing staffing resources.

Senator GALLAGHER: What is happening with the use of contractor service providers and consultants? Is it going up?

Senator Cormann: In terms of numbers?

Senator GALLAGHER: Numbers and value of contracts.

Senator Cormann: We will have to take specific numbers on notice. Are you interested in trend numbers?

Senator GALLAGHER: Yes, over that time. You were able to give us the ASL numbers.

Senator Cormann: The ASL numbers are published in the budget papers; that is why I can give them to you. That is something that we directly track.

Senator GALLAGHER: But surely Finance keeps an eye on what is happening across the Public Service in relation to the use of consultants and contractors.

Senator Cormann: It does obviously get managed on a portfolio-by-portfolio basis. The efficiency dividend is applied, which means that departmental resources, of course, are kept as efficient as possible. But, in terms of specific numbers, we will take that on notice.

Senator GALLAGHER: Certainly the anecdotal feedback around Canberra in particular is that, whilst ASL numbers may be staying the same, agencies are still having to deliver the work and they are increasingly having to turn to consultants and contractors. I think Dennis Richardson himself was quoted in TheCanberra Times saying that that is the case.

Senator Cormann: Let me just say that that is not a new phenomenon. When we came into government, some portfolios were prolific users of consultants and contractors. I am not going to name any specific names. You have. But let me just say that there are some portfolios that historically have made use of contractors and consultants more than others. I will just make the general point, though, that in many cases it is actually appropriate to rely on contractors and consultants when you have a temporary need for particular expertise or where you have a temporary surge in demand for a particular service, rather than lock yourself into a permanent and ongoing increase in permanent staffing levels. The use of contracting on a time limited basis for specific expertise can be a very cost effective and efficient way of managing taxpayers' money.

Senator GALLAGHER: I do not disagree that there is a use and a time and place for consultants and contractors. I guess what I am interested in is whether, as you are keeping the growth of public servants at a stable level, you are seeing increases in other areas. Some would argue that there are some false savings there. If you provide that on notice, that would be useful. I think that might be us in 2.1.

CHAIR: Thank you. Just to clarify for officers present, the deputy chair and I have had a discussion. We are going to try to stick to the programs and move through them sequentially. But that does not mean that any officers who are excused should leave just in case we do need to revisit any of these things. But we are going to try, if we can, to stick to the program as we go through. So we will move now to 2.2, transforming government.

Senator GALLAGHER: Is this where I can ask some questions about the APVMA executive order? Is that in 2.2?

Senator Cormann: You can.

Senator GALLAGHER: I was not sure how it fits into transforming government.

Senator Cormann: It was in 2.1, but I am quite happy. We are being overly helpful in this committee, as usual.

Senator GALLAGHER: Thank you. Minister, you signed a government policy order on 24 November last year which seems to relate in particular to the APVMA move, specifying that the corporate Commonwealth entity with agricultural policy or regulatory responsibilities is to be located in a regional community and within 10 kilometres by road of the main campus of a regional university that is recognised for research and teaching in the field of agricultural science. Most specifically, 'regional community' means a community that is not within 150 kilometres by road of Canberra or the capital city of a state.

Senator Cormann: It is a very good order.

Senator GALLAGHER: It is a very unusual order.

Senator Cormann: But it is a very effective way of implementing an election commitment that we made before the last election.

Senator GALLAGHER: Are you aware of orders like this being issued in the past?

Senator Cormann: Well, I have not signed any other such order. But it is the way that we were able to swiftly and efficiently implement a firm election commitment we made in the lead-up to the last election. As I said to you previously, implementing our election commitments, of course, is a very high priority for us.

Senator GALLAGHER: I fear this question. What is the process undertaken to establish this policy order?

Senator Cormann: Well, the process was that the very good people in the department drafted it up for me and I signed it.

Senator GALLAGHER: At your request?

Senator Cormann: At the government's request. But I am the minister with the portfolio responsibility and the authority to make that particular order.

Senator GALLAGHER: What does it provide you with, the policy order? Is it some protection from an appeal? What are the reasons behind having to issue it?

Senator Cormann: Well, it gives effect with certainty to the policy intent of the government.

Senator GALLAGHER: What could have made it uncertain?

Senator Cormann: Well, we are very happy that what we did makes it very certain. Dr Helgeby might want to give you some more technical detail.

Senator GALLAGHER: Does it protect you from legal challenge?

Dr Helgeby : As the minister said, it is not so much about protection; it is about giving effect to. In particular, in this case, this is the first general policy order to be issued.

Senator GALLAGHER: Ever?

Dr Helgeby : The first one under this legislation.

Senator GALLAGHER: Which has been in effect since?

Dr Helgeby : Since 2013.

Senator GALLAGHER: But there are other executive orders under other legislation?

Dr Helgeby : Well, under the previous legislation there were general policy orders. But under this legislation, the 2013 legislation, it is the first one. It essentially utilises sections of the PGPA Act—section 22 and section 93—to allow the minister for finance to ensure that a government policy is implemented. That is really all it is. As the minister said, it gets drafted, he signs it and that is it.

Senator GALLAGHER: So does finance draft the order, then?

Senator Cormann: Yes, they have. I did not type it up myself, if that is your question.

Senator GALLAGHER: Stranger things, I guess. Did you have any advice on the order or any concerns with issuing an order like this?

Senator Cormann: You are asking for an opinion now. Going back to the chair's opening remarks, you should not be asking the officer for an opinion.

Senator GALLAGHER: Were any risks identified with proceeding down this path of the executive order to relocate a corporate Commonwealth entity?

Senator Cormann: The government made a decision. It was an election commitment. This was not a proposition of seeking advice on whether or not this was desirable, because that decision had already been made. The request for the department to draft the necessary instrumentation for my signature was on the basis that a decision had been made to give effect to this commitment, and that is what we did. So your question assumes that there was some sort of consideration of whether or not to proceed with this particular proposal. Well, we were well and truly past that stage, given that this was a firm pre-election commitment.

Senator GALLAGHER: So considering the order precludes all capital cities from hosting an agricultural entity, and actually any regional community within 150 kilometres—I think that might have been the clause that excluded Wagga, did it?

Senator Cormann: I did not make—

Senator GALLAGHER: It just seems unusual that you have had to say not only Canberra but actually within 150 kilometres of any capital city.

Senator Cormann: The election commitment was quite specific. The order was drafted in such a way to give effect to the election commitment.

Senator GALLAGHER: So are you considering other relocations? Does this order cover any other Commonwealth entity?

Senator Cormann: Well, at this point, obviously all the announcements and decisions on these things that have been made have been announced. If there are any future announcements, they will be announced when we make such decisions.

Senator GALLAGHER: Was the policy order approved through cabinet processes, or does it not have to be?

Senator Cormann: It was an election commitment which was implemented to the extent of that order under my authority. Of course, the authority itself is in the portfolio of the minister for agriculture, the Deputy Prime Minister.

Senator GALLAGHER: Did you consult with the APVMA or its staff or other stakeholders in creating the policy order?

Senator Cormann: This is entirely a matter for the Deputy Prime Minister and the minister for agriculture. It was an election commitment. My involvement really was just to give administrative effect to a decision that had already been taken.

Mr Suur : Section 22 of the PGPA Act requires the relevant minister to consult with the affected body. The minister for agriculture did that. He advised the minister that he had done that. Based on that, the minister signed the order.

Senator GALLAGHER: So that was managed through the Deputy Prime Minister?

Senator Cormann: It is in his portfolio, so yes.

Senator GALLAGHER: So not only did he say 'I have consulted' but he actually had to report back the result of that consultation, or are we in a discussion about what 'consultation' is?

Senator Cormann: All of the processes that had to be followed were followed. I will say again that this was a very firm, explicit and specific election commitment. After the election period, it was not a matter of making a judgement on whether or not this should happen. It was a matter of giving practical effect to a commitment that the government made before the election.

Senator GALLAGHER: Do you support the move, Minister?

Senator Cormann: Of course.

Senator GALLAGHER: The cost-benefit analysis report, which was done post the decision being taken, showed little or no economic benefit. The vast majority of the regulatory scientists who work there—and they are working in highly specialised areas—are refusing to move. None of the stakeholders who actually fund the work of the APVMA actually wanted to move. Now we find out there is actually nowhere for them to move in Armidale and they are going to have to build a new building in order to do the work that they are currently doing happily and with the support of all stakeholders in Canberra. That does not persuade a finance minister with his eye on the books, cost-benefit rigour and all the other things outlined in the finance annual report about good governance process, cost-benefits—

Senator Cormann: This was an election commitment. We are implementing and giving effect to an election commitment. You might go to an election and make—

Senator GALLAGHER: So regardless of the cost of that?

Senator Cormann: Well, it was costed, of course, as part of our pre-election costings arrangements as appropriate. It was reflected in our pre-election costings arrangements as appropriate. Labor might go to elections and promise certain things and then not do them after the election, but we made a commitment before the election and we are keeping it after the election.

Senator GALLAGHER: I am interested to understand how it fits with finance's broader agenda of actually minimising property being built or leased and their accommodation strategy.

Senator Cormann: In the Canberra footprint? Well, we remain committed—

Senator GALLAGHER: No. Operation Tetris is more broad than Canberra, as we have heard from previous hearings. I am just wondering how—

Senator Cormann: After the success of Canberra, we are looking at expanding it progressively.

Senator GALLAGHER: What—to Armidale, where you are going to build a new building?

Senator Cormann: Well, I know that as a Canberra based senator you do not like the thought that some Public Service departments federally—

Senator GALLAGHER: Well, 60 per cent of the Public Service is outside Canberra. That does not bother anybody.

Senator Cormann: And we made a decision to move one small additional part outside Canberra and to move it into a regional area. That is a decision that has been well articulated in the lead-up to the election. I understand that you and Labor do not like it, but we made a decision. We announced it publicly. It was part of our election platform. On that basis, we are giving effect to it in good faith.

Senator GALLAGHER: And it makes no sense.

Senator Cormann: Well, you are entitled to that view. You can always go to Armidale and promise that you will bring it back to Canberra, should you be successful at a future election.

Senator GALLAGHER: Look, for the record, I have no problem with Public Service jobs being out of Canberra. In fact, the vast majority of Public Service jobs are performed out of Canberra. I do have an objection to pork-barrelling for which taxpayers right across Australia pay the price, which is clearly the case here.

Senator Cormann: Well, that is your opinion. We do not agree with it.

Senator GALLAGHER: Come on! The Deputy Prime Minister goes to his own seat during an election campaign and promises to relocate jobs to that seat at a cost of almost $30 million to the taxpayer.

Senator Cormann: Into the proximity of a particular university.

Senator GALLAGHER: It does not stack up on any measure.

Senator Cormann: Into the proximity of a particular university.

Senator GALLAGHER: And you as the finance minister go, 'Oh, no problem here. I'll sign an executive order. That's fine.'

Senator Cormann: We are a strong and united coalition team in the Turnbull government.

Senator GALLAGHER: I would love to have been behind the scenes.

Senator Cormann: We are a strong and united coalition team. It is always a great privilege to work with my good friend and colleague the Deputy Prime Minister to give effect to coalition policies.

CHAIR: We are perilously close to the time to break.

Senator McALLISTER: Chair, I wonder whether Senator Marshall could ask his question.

CHAIR: We have one minute. How long will it take, Senator Marshall?

Senator MARSHALL: I actually have a couple of questions on 2.5. It is only because I have to be somewhere else in another meeting.

Senator Cormann: I am happy to take these questions. Then we might just do the 15 minutes from whenever we finish.

CHAIR: Sounds good. Thank you, Minister.

Senator MARSHALL: I will ask a question about procurement. Other senators may have other questions later.

Senator Cormann: We are here to help.

Senator MARSHALL: Thank you for your indulgence on that. I understand answers given at the last estimates were that the department reported that 0.2 per cent of paper purchased for the 2015-16 year was manufactured in Australia. Do you recall that evidence?

Ms Huxtable : Yes.

Senator MARSHALL: Can you advise what your projections for Australian made paper will be for this coming year?

Ms Huxtable : We do not have it.

Senator Cormann: I do not think we have projections. We have outcomes. We report on outcomes.

Senator MARSHALL: Well, do you have any plans for what percentage of paper you purchase?

Senator Cormann: Why don’t we start off with an update on point-in-time outcomes. We might then take it from there.

Senator MARSHALL: All right. I was hoping to get an answer to a simple question.

Senator Cormann: The thing is that it is not planned on that basis. You do not make a decision, 'We want to source X amount from this particular supplier', because there is obviously more to it.

Senator MARSHALL: Well, take us through where you are.

Mr Sheridan : The majority of the paper in 2015-16 was indeed purchased from Australia—62 per cent by quantity and 59 per cent by value. In the same year, 2015-16, 37 per cent of the paper purchased by volume was 100 per cent recycled and 34 per cent was 50 per cent recycled. I can provide more detail if you would like, Senator.

Senator McKENZIE: Mr Sheridan, have those numbers gone up over time?

Mr Sheridan : They vary over time. Our general paper consumption is falling over time, but the numbers vary between years and suppliers. I do not have an ongoing prediction. I could take it on notice, if you like, but I do not have one with me.

Senator MARSHALL: Just clarify for me. I thought the first question I put to you was really an answer to a question from the last estimates about 0.2 per cent being the amount of paper purchased that was manufactured in Australia. I thought you agreed that that was the case.

Ms Huxtable : I think you might have just been talking about finance department.

Mr Sheridan : Rather than the government.

Ms Huxtable : That is the figure that I recall.

Senator MARSHALL: Yes. I am actually talking about the finance department.

Ms Huxtable : It was the finance department. We do have an updated figure in respect to the finance department.

Senator MARSHALL: Yes. Thank you.

Senator Cormann: We might have to take that on notice. We will provide an update on notice. This is an answer that was obviously provided on notice. We will provide the same information on notice on an updated basis.

Senator MARSHALL: That is based on historical purchasing until now.

Ms Huxtable : So this particular table is in respect of financial year 2015-16. We can provide a year to date figure as best we can. We will provide the most up to date as best we can.

Senator MARSHALL: So do you have a proposal to move to 100 per cent Australian made paper?

Mr Sheridan : Finance is planning, and indeed has already changed, our buying of paper to move to 100 per cent Australian sourced recycled paper purchased through a subcontractor to one of our stationery and office supplies contractors that is an indigenous supplier. It is a company called Nallawilli.

Senator MARSHALL: And when will that take effect?

Mr Sheridan : We have made those directions already. The first delivery of paper occurred yesterday.

Senator MARSHALL: Fantastic. Thank you.

Senator McKENZIE: I will put my question on notice.

CHAIR: Thank you. We will break now and return at 4.05 pm.

Proceedings suspended from 15:49 to 16:06

CHAIR: The committee will now resume. I will invite the minister to make a statement on the NBN in a moment. For the information of the committee and officers, we are hoping to get through the remaining outcome 2 and the Future Fund Management Agency by 6.00 pm. If we are able to do that, we will go to the dinner break half an hour early at 6.00 pm and we will not require any finance department officials or future fund officers or the minister after the dinner break. The dinner break will finish at 7.30 pm. We will resume with—

Senator Cormann: Except finance department officials.

CHAIR: Except for those associated with Senator Ryan, who will be coming at 7.30 pm. So that is contingent on us get through the necessary issues, but that is what we are aiming for.

Senator Cormann: Very quickly, I was asked before by Senator Gallagher why the government had not included NBN in the Remuneration Tribunal arrangements. I refer to the fact that these arrangements are consistent with what had been put in place by the previous government. I table a letter from the then finance minister Lindsay Tanner and the then communications minister Stephen Conroy which sets out the reasons. It has previously been released under FOI. It sets out the reasons which still apply. Specifically, and I will go directly to the relevant quote:

Given that the company has been established with a view to taking on private owners within the next few years, we do not propose to have the position of chief executive officer of the company designated as the principal executive officer to seek Remuneration Tribunal determination in relation to the role.

That situation, of course, has not changed. It continues:

It is also the current government's intention that the company be privatised after project completion. Furthermore, deploying the national broadband network nationwide is the largest and most complex infrastructure project ever undertaken in Australia. It requires the services of a CEO with the skills and experience required for this role.

Given that the company operates commercially at arms length from the government and has always demonstrated transparency of remuneration, we will be continuing with the arrangements put in place by the former Labor government. We have written to Senator Dastyari to that effect.

CHAIR: Thank you. I anticipate that there may be some follow-up questions on that. If not, we will return to 2.2.

Ms Huxtable : Just before we start, I have a minor correction in respect to some evidence previously which Mr Sheridan gave with regard to reporting invoices paid on time by the APS. He indicated at the time that the department of industry reported this information. I want to correct that to say that actually the Treasury conducted reporting on payment.

CHAIR: Which Senator Gallagher already picked up.

Senator GALLAGHER: They do, and they do not report it—

Ms Huxtable : In reference to small business.

Senator GALLAGHER: any more.

Senator KITCHING: Ms Huxtable, we are entering into a brave new world of new procurement rules from 1 March. Did you give any advice regarding the changes to the procurement rules?

Ms Huxtable : We did provide advice on that at the time, yes.

Senator KITCHING: So when did you do that? What dates?

Ms Huxtable : I am happy to take on notice the exact dates.

Senator Cormann: I have it, because I was obviously intimately involved in the negotiation, particularly with Senator Xenophon, in the context of the successful passage of the Australian Building and Construction Commission legislation through the Senate, supporting the outstanding work by Senator Cash.

Senator KITCHING: I am going to go back to—

Senator Cormann: I am just explaining the way the process works to assist you. I was working to support the outstanding work that was being done by Senator Cash in relation to this legislation. In the course of those negotiations with Senator Xenophon, various proposals were put to us by Senator Xenophon. As appropriate, we of course tested and sought advice from Finance and other parts of government.

Senator KITCHING: When did you seek that advice?

Senator Cormann: We have taken that on notice.

Senator KITCHING: In that week when the ABCC bill was before the Senate, was there advice given in that week, or was there advice given previous to that week?

Senator Cormann: Well, there was advice given previous to that week, of course.

Senator KITCHING: When? Was it the week before?

Senator Cormann: We have taken—

Senator KITCHING: Was it a month before? You must have a memory of it. It is not that long ago.

Senator Cormann: We have taken that on notice.

Senator KITCHING: Ms Huxtable?

Ms Huxtable : I am sorry. I do not recollect the exact details. I certainly know that we provided advice, I would say at that time and previous to that time. But I would have to take it on notice. You are asking for the exact dates.

Senator KITCHING: So in your mind, Ms Huxtable, did Finance think, 'We're going to have a look at these procurement rules and we're going to give some advice on them because we think some changes might be good?'

Senator Cormann: This is not the way government processes work. You are essentially asking about Ms Huxtable's frame of mind and an opinion about—

Senator KITCHING: Not really. I am asking about—

Senator Cormann: You asked the question and I will answer it.

Senator KITCHING: Obviously within the Department of Finance—

Senator Cormann: Chair, I will answer the question.

CHAIR: Order! Give the minister an opportunity to answer. Then you can ask.

Senator KITCHING: Chair, this is a Department of Finance question.

CHAIR: Order! Senator Kitching, I am being clear on this. Let the minister answer the question. Then you can ask as many follow-up questions as you like.

Senator KITCHING: Well, that is a question to Ms Huxtable—

CHAIR: Order, order, order!

Senator KITCHING: and the minister has taken it.

CHAIR: As he is entitled to do.

Senator Cormann: I appreciate that you are very new here, Senator Kitching. It is always the prerogative of the minister at the table to take questions on behalf of the government. That is consistent with the longstanding practice of the governments of both political persuasions. This is obviously a process that was managed at the government level. We sought advice from relevant departments, including Finance, as appropriate.

Senator KITCHING: What are the times?

Senator Cormann: We have already taken on notice when. The key departments were Finance and the Department of Foreign Affairs and Trade in relation to matters relating to potential trade implications.

Senator KITCHING: What does Finance understand are the circumstances that led to the change in the procurement rules?

Senator Cormann: Well, I have already indicated to you that this is a matter that was managed by the government. As far as the finance portfolio involvement is concerned, it is something that was directly managed by me. I am responsible for the finance portfolio involvement in this negotiation with the Senate crossbench. I sought and received advice from Finance as appropriate in the course of the negotiations between the government and the Nick Xenophon team.

Senator KITCHING: Which areas of the Department of Finance were consulted?

Senator Cormann: Well, obviously the area that is responsible for procurement was asked for advice in relation to matters that related to procurement. The relevant part of the Department of Foreign Affairs and Trade was asked for questions and advice and feedback in relation to matters related to trade.

Senator KITCHING: Did Finance have any reservations about the way in which the changes were introduced?

Senator Cormann: You are asking for an opinion now.

Senator KITCHING: In the advice received, whether verbal or written, and in an analysis of it—almost like a SWOT analysis—were there any weaknesses perceived in the way the procurement rules were being discussed and negotiated? Did Finance give you any advice where they outlined any potential problems in the changes to those procurement rules?

Senator Cormann: We are talking here about procurement rules which the Labor Party in the Senate actually welcomed. I am hearing from you that you take quite a different view.

Senator KITCHING: I am asking you about the process.

Senator Cormann: Sure.

Senator KITCHING: I am not asking you about that. I am asking you questions.

Senator Cormann: I am interested that Senator Kitching is taking an approach that is quite different to that of Senator Carr in the Senate chamber at the time. Senator Carr very warmly welcomed the announcements that the government made during that debate. The way the process works is that I have—

Senator KITCHING: Chair, could I ask for—

Senator Cormann: The senator keeps talking over me as I am providing answers.

Senator KITCHING: You are not answering the question.

CHAIR: Order!

Senator Cormann: The process is that the government was of course engaged—it is a matter of public record—in the negotiation with Senator Xenophon. In the course of that negotiation, he put various proposals to us. We worked together to achieve a consensus on how the intent that he was pursuing could be appropriately accommodated. The engagement with the department was very much around appropriate drafting and appropriate framing of the intent that had been agreed between the government and Senator Xenophon.

Senator KITCHING: I am going to assume that the department, as a department might normally do, said, 'This is what you can do with this legislation. Here are some problems that we might have. We can draft it this way. We can do this' et cetera. When you looked at the drawbacks of changing the procurement rules in this way, what was your priority? Was your priority to reach an agreement with Senator Xenophon or was your priority to actually change the procurement rules in a way that made sense for all government entities and government agencies and departments to actually be able to effect those procurement rule changes? As I said, your first option was actually the desire to do the deal with Senate Xenophon. Was that of more importance?

Senator Cormann: We actually put all of this on the record in the Senate at the time. I know that Labor is not happy with the fact that a majority of senators supported the re-establishment of the Australian Building and Construction Commission, but it has been re-established. It is true that in the course of the negotiations on the re-establishment of the ABCC we had discussions with Senator Xenophon on how the procurement framework could be improved. We made the announcement of relevant improvements. Senator Kim Carr, on behalf of the Labor Party, very warmly welcomed the improvements we have made. I understand that you do not particularly like Senator Carr, but Senator Carr, on behalf of the Labor Party, was very supportive.

Senator KITCHING: I have known Senator Carr for a long time. I actually think that is totally irrelevant to the answer.

Senator Cormann: Hang on. Your line of questioning implies criticism of the changes in procurement rules, which Senator Carr has warmly welcomed.

Senator KITCHING: It has nothing to do with that. I am asking you about the process. Could you actually concentrate on the question you are being asked?

Senator Cormann: I explained the process.

Senator KITCHING: I am asking you about the process of how you arrived at this decision. I asked you what your priority was—the priority to do the deal with Senator Xenophon or to actually draft some procurement rules which government departments and agencies are going to be able to follow.

Senator Cormann: Well, government departments and agencies would have—

Senator KITCHING: What was your priority?

CHAIR: Order!

Senator KITCHING: What was your priority, Senator?

Senator Cormann: That may be the way you talk to people in the union movement, Senator Kitching, but badgering before I have even got two words out is not the way to deal with this committee.

Senator KITCHING: No. It is what happens in a court of law. Could you please answer the question?

CHAIR: Senator Kitching, for your benefit—

Senator Cormann: We are not in a court of law.

CHAIR: it is appropriate to allow the minister to answer questions.

Senator Cormann: You might apply these sort of union bully tactics with your friends in the Labor Party, but in this sort of committee—

Senator KITCHING: Come on!

Senator Cormann: this is not the way we conduct our affairs.

Senator KITCHING: Given that you are not going to answer the question about the priority—

Senator Cormann: Well, you have not let me answer the question, because every time I get two words out, you interrupt, Senator Kitching.

Senator KITCHING: Please feel free to answer the question. Which was your priority?

Senator Cormann: Our priority at the time was of course to find a good outcome in relation to the Australian Building and Construction Commission and to reach agreement on improvements to the government procurement rules. We were able to achieve both.

Senator KITCHING: So in fact you had dual priorities which actually are in conflict?

Senator Cormann: It is a matter of public record that in the course of negotiations to secure the passage of the Australian Building and Construction Commission legislation, which is a very important piece of legislation, of course, Senator Xenophon raised with us certain improvements that he was seeking to the procurement rules. The government agreed to certain improvements, which we have publicly spelled out. Senator Carr at the time in the Senate chamber was generous enough to be very supportive of the changes that we announced. In fact, tomorrow, 1 March 2017, is when they come into effect. I think my recollection is right. I think Senator Carr may even have said that he was never able to convince his own government—

Senator KIM CARR: No. I do not think I said that at all.

Senator Cormann: of the sort of changes that we made.

Senator KIM CARR: I said I was very pleased with it. It is a remarkable conversion on the road to Damascus.

Senator Cormann: Senator Kitching is very critical of what is in here. Senator Kitching is very critical of the improvements that we made.

Senator KITCHING: Actually, I am merely asking process questions.

Senator KIM CARR: I would have said we had defeated—

CHAIR: Order, order, order! Although this debate is very interesting, let us perhaps stick to questions. Senator Kitching, you have been very helpful.

Senator KITCHING: So, Senator Cormann, even you have actually not answered the question about what was your priority.

CHAIR: I think the minister has.

Senator KITCHING: He actually has not.

Senator Cormann: We can walk and chew gum at the same time.

CHAIR: Order, order!

Senator KITCHING: So I will move on.

Senator Cormann: We can walk and chew gum at the same time—

Senator KITCHING: My next question is: what stakeholders—

Senator Cormann: in this government, Senator Kitching.

Senator KITCHING: What stakeholders did you consult?

Senator Cormann: Obviously over the years we have had many representations in particular from relevant business peak bodies in relation to procurement rules. But it is a matter of public record that the particular improvements that were announced towards the end of last year and which come into effect as of tomorrow are the result of negotiations with Senator Xenophon to secure the successful passage of the Australian Building and Construction Commission.

Senator KITCHING: So given that that is a bit of a non-answer—it is a sort of an answer—I will ask you what ministers were consulted. I am going to step through into little subcategories so that we can perhaps get some precision around your answers.

Senator Cormann: The decisions in relation to the relevant changes of procurement rules went through the normal processes of government consistent with the processes that were followed by the previous government.

Senator KITCHING: Did it go to cabinet? Did you take these changes to cabinet?

Senator Cormann: It went through the proper processes of government with the appropriate authorities. Of course, this was executed in a way that is consistent with the way that it would have been done by a previous Labor government.

Senator KITCHING: Which date did it go to cabinet?

Senator Cormann: I am not going to go into the specifics of the process. We have already taken on notice previously the specific dates when certain conversations and decisions took place.

Senator KITCHING: Was that a conversation with Senator Xenophon, do you mean, not a conversation at cabinet or an agenda item on the cabinet papers?

Senator Cormann: Before the government decided to proceed a particular way, after having reached certain understandings with Senator Xenophon, we followed the proper processes and received the necessary authority as required to make relevant changes. If you want more detail, we will provide that on notice.

Senator KITCHING: The detail I would like, which you have agreed to provide on notice is: what date did it go to cabinet?

Senator Cormann: Well, we will provide on notice whatever we can provide.

Senator KITCHING: You have indicated that it has gone through the normal processes.

Senator Cormann: It has gone through the normal processes of government with the appropriate authorities provided.

Senator KITCHING: So, therefore, that would go to cabinet. So what date did it go to cabinet?

Senator Cormann: Well, you are making all sorts of assumptions. We will provide on notice the answer about what date the appropriate authorities were received to make the changes that we have announced in relation to the procurement arrangements for the Commonwealth.

Senator KITCHING: So you effectively made changes which affect every government department and agency and actually cannot tell me whether it went to cabinet or not?

Senator Cormann: Well, it followed all of the proper decision making processes of government consistent with the way these sorts of decisions were taken by the previous government in the same circumstances.

Senator KITCHING: You have said that parts of departments of DFAT were consulted, or you had a conversation with someone, or someone had a conversation. Did the department assess the changes against Australia's trade obligations?

Senator Cormann: Well, as I have indicated to you before—and that applies to both the way the interaction with finance occurred as well as with relevant officials from the Department of Finance and trade—certain propositions were put to us by Senator Xenophon. We sought to reflect the intentions he was seeking to achieve appropriately in a form of words in the procurement guidelines. It was an appropriately concise and generally appropriate form of words. We sought advice from both finance and relevant officials in the department of foreign affairs and trade.

Senator KITCHING: There were various articles published on or around 30 November last year. One of those had the headline 'New procurement rules in exchange for ABCC'. Is that a fair assessment of the deal?

Senator Cormann: Well, that would not be my assessment, but it is a free world. The media is obviously free to try to characterise these things as they see fit, the same as you are free to characterise these things as you see fit. The truth is that in the course of seeking to achieve a majority in the Senate to support the re-establishment of the Australian Building and Construction Commission, as is a matter of public record, we engaged with Senator Xenophon and his team. They put various propositions in front of us that they would like to see certain improvements to Commonwealth procurement rules. We considered the suggestions and we reached an agreement with the Nick Xenophon team in relation to these matters. We announced that in the chamber at the time. I explained the changes in the chamber at the time. Senator Carr warmly welcomed the changes at the time, and they are coming into effect as of tomorrow.

Senator KITCHING: I am just going to ask you very simply and directly: did the government only table changes to procurement rules in order to secure support for the ABCC?

Senator Cormann: Well, again, the discussion on how the procurement framework for the Commonwealth could be improved was part of the discussions that we had with Senator Xenophon in the context of securing successful passage of the Australian Building and Construction Commission legislation. That is a matter of public record. It is something that we openly and transparently explained to the chamber at the time. There is nothing really further to add.

Senator KITCHING: So you have just now said that they were part of a discussion you had with Senator Xenophon.

Senator Cormann: That is something that I have said consistently.

Senator KITCHING: A few minutes ago you said, as did Ms Huxtable, that in fact you had had previous discussions around the changes to the procurement rules.

Senator Cormann: With Senator Xenophon. The Australian Building and Construction Commission—

Senator KITCHING: So did you or did you not have a previous discussion—

Senator Cormann: If I may finish the answer. I have not even got two words out.

CHAIR: That is fair, Minister.

Senator Cormann: The Australian Building and Construction Commission legislation had been before the Senate for a very long time, well before you arrived in the Senate. It is true that we previously had conversations with Senator Xenophon in relation to securing passage of the Australian Building and Construction Commission legislation. Your initial characterisation was an attempt to suggest that the first conversation we had was in the week when we did successfully secure passage. What I said to you is that, no, that is not correct. The conversation started some time earlier. Of course, in the first instance, these were matters that were raised by Senator Xenophon and Senator Cash. Senator Cash and I had various conversations at various times. I have already undertaken to take on notice the specific dates on which we pursued these matters with Senator Xenophon and the dates on which I sought advice on various aspects from the department. That will make very clear when and what occurred.

Senator KITCHING: Did you and Ms Huxtable have a discussion around changes to the procurement rules prior to that week?

Senator Cormann: I do not believe that Ms Huxtable and I had conversations.

Senator KITCHING: Anyone in the department?

CHAIR: Order! Senator Kitching.

Senator Cormann: I will check. The way this works is that on a day-to-day basis we deal with a lot of issues. As was the case under the previous government, we do have great team members supporting our effort. When we engage with other colleagues in the Senate in relation to specific subject matters and there is follow-up action required, a number of our very outstanding members of our team take the follow-up action and liaise and interact with relevant officials in the department to provide the appropriate advice to me as the minister in order to give effect to relevant decisions in the most appropriate way possible. That is what happened on this occasion. I do not recall a specific conversation with Ms Huxtable in relation to these matters. I see from Ms Huxtable that she does not recall a specific conversation. But that is not in any way unusual in terms of the way the affairs of government generally run.

Senator KITCHING: So it would not be unusual if you were making changes to the procurement rules which affect, I presume, hundreds of departments and agencies and entities et cetera? You might not have a discussion with the secretary of the department?

Senator Cormann: There is nothing unusual about that at all. Appropriately—

Senator KITCHING: Well, Mr Sheridan—

Senator Cormann: Well—

CHAIR: Order! Senator Kitching, I have now instructed you multiple times to let the minister answer the question. In the interests of everyone's shared goal of meeting the target of getting through this business by 6.00 pm, I encourage Senator Kitching to allow the minister to answer and the minister to give answers as brief as possible so that we can move through this issue as quickly as possible and on to other issues.

Senator Cormann: As is always the case in relation these sorts of matters, the appropriate members of my staff interacted with the appropriate expert officers in the department in order to reach an outcome that ultimately is reflected in what I announced in the Senate.

Senator KITCHING: So a member of your staff may have had a discussion with Ms Huxtable?

Senator Cormann: That is not what I am saying at all. I said that a member of my staff, at my request and at my direction, followed up with the relevant officials in the department with the appropriate expertise to ensure that the amendments to the Commonwealth procurement rules appropriately reflected what had been agreed between Senator Xenophon and the government.

Senator KITCHING: What administrative arrangements have been made within the department and among Commonwealth funding entities to give effect to the procurement rules?

Mr Sheridan : We issued the new procurement rules. They were tabled by the minister at the time that we have been referring to. A week or so ago, we issued an updated set of rules to take into account some paragraph numbering changes and a few minor amendments that were required. We have published on our website guidance to agencies in order to help them understand what is required and how to do the work. We have met with the senior procurement officials reference group to advise them accordingly as well. We have also discussed it with the other departments.

Senator KITCHING: What amendments were discussed?

Senator Cormann: The amendments that we have already talked about. They were announced explicitly in the Senate during the debate on the ABCC legislation. I have already taken on notice the commitment to provide specific answers and when specific consultations took place in relation to these matters.

Senator KITCHING: I think that Mr Sheridan indicated that there were other amendments.

Ms Huxtable : They were minor edits. In going through the whole document, there were a few minor edits that were made, but they were not material changes in any way. They were not amendments in that sense. They were just editorial corrections.

Senator KIM CARR: There is a joint house committee to examine the implementation of these new procurement rules. What resources will the department make available to service that committee?

Senator Cormann: Are you talking about a committee of the parliament?

Senator KIM CARR: Yes.

Senator Cormann: The committee of the parliament is resourced—

Senator KIM CARR: Yes, I understand that the parliament will resource the committee. But what resources will the department put towards servicing the work of that committee?

Senator Cormann: Well, the department will obviously comply, as any department of the government would, with any requests to assist that committee in the ordinary course of events. It is part of our core business. We respond to any inquiries in the appropriate way. It is business as usual.

Senator KIM CARR: How many officers have you allocated to this task? Obviously you will need to write a submission. What other officers have you provided for this?

Senator Cormann: Well, the responsibility will be broadly shared among those officers, of course, who have responsibility for this area.

Ms Huxtable : In the normal way, if we are asked to provide a submission to attend a hearing, we will do those things. I think we have been provided with some information in terms of how the committee intends to do its work. I do not have that information in front of me, but we will provide whatever information is requested of us in the normal way and attend, clearly.

Senator KIM CARR: The reason I ask this is that this is quite a significant change in government policy. As the minister indicated, I have welcomed it. These are matters that have been discussed for some time. In my opinion, it is quite a substantial change in the attitude of Commonwealth department officers. You have indicated, Mr Sheridan, that you have issued instructions to departments on new procurement guidelines? Is that the case?

Mr Sheridan : Guidance on the release, yes, Senator.

Senator KIM CARR: What impact do you expect the changes to have?

Mr Sheridan : The changes change some of the way that people evaluate value for money in procurements. So there are changes that we expect will occur as a consequence of what suppliers and tenderers are expected to submit above the threshold that that affects. There will be changes to the way evaluations work. That is why we provided guidance about those things.

Senator KIM CARR: So what is the nature of the information that you are providing to departments, given these changes for procurement officers? What is the nature of the information you have provided?

Mr Sheridan : We have actually provided guidance on each of the changes on our website—how they should be interpreted and what they should do. We have provided to agencies templates that could be used for the submission of tenders that are likely to be above the appropriate thresholds and the evaluation of those things.

Senator KIM CARR: I see. That is the department's website. Are there any memos going out to procurement officers, for instance?

Mr Sheridan : The website and the work we have done with the senior procurement officials reference group would be the normal thing that we would do to cover that. We also send out a newsletter that goes to all the various procurement officials. We think that that will adequately cover the requirement.

Senator KIM CARR: We will assess that. With regard to suppliers, what information are you providing for suppliers?

Mr Sheridan : The guidance is actually on the website. It is publicly available.

Senator KIM CARR: So it is the website again?

Mr Sheridan : Yes. But it is publicly available.

Senator KIM CARR: I understand that it is publicly available. Most government websites I have found somewhat difficult to follow.

Senator Cormann: The finance department website is really user friendly.

Senator KIM CARR: That is a stunning revelation.

Senator Cormann: It is one of the best websites in government, I think.

Senator KIM CARR: It is unique throughout the Commonwealth of Australia. So you are not actually writing to industry groups, for instance? You are not talking to manufacturers, as an example?

Mr Sheridan : We have not planned that at the moment, no.

Senator KIM CARR: Why not?

Senator Cormann: Well, this has been highly publicised as a change in approach. We are very confident that those with an interest in government procurement are very well aware of the improvements that the government has made to the procurement framework.

Senator KIM CARR: So there are no plans to provide any additional information to suppliers?

Senator Cormann: We believe that the industry associations that you reference are well aware of the changes to procurement arrangements.

Senator KITCHING: Do the rules create an obligation on a preferred tenderer to favour Australian sourced or manufactured materials?

Mr Sheridan : No. I would not describe it that way. They are required to report. You would anticipate that because of the discussions of economic benefit and those things that that might change the evaluation of a tenderer who does. But it does not stop someone not offering to do that.

Senator KIM CARR: Let us be clear about this. Your reading of the amendment is that they are required to report, not actually do anything?

Mr Sheridan : No, Senator. That is not what I meant. I meant that it would be possible to submit a tender that did not address economic benefit for Australia and those sorts of things.

Senator Cormann: But obviously that would have a consequence in terms of the evaluation assessment of the proposal. That is what he has put. I am just thinking hypothetically now. There might not be a credible Australian proposal in relation to some procurements, so you would not want to completely exclude the opportunity that, in an appropriate set of circumstances, you source relevant products and services elsewhere.

Senator KIM CARR: So to the officers concerned: was the intention of the amendment to actually source more Australian made goods for government use?

Senator Cormann: The intention was to increase the transparency to improve the evaluation and assessment criteria, I think it is fair to say. The belief is that this will have an impact on behaviour.

Senator KIM CARR: So do you expect a change in behaviour?

Senator Cormann: Well, we will be able to see after these revised guidelines have been in place for a while how they have impacted on behaviour.

Senator KIM CARR: Thanks very much.

CHAIR: Since we are on procurement, are there further questions in 2.5? That being the case, we were on program 2.2. Are there any further questions on 2.2?

Senator GALLACHER: Is leasing office accommodation at 2.3?

CHAIR: We will come to construction very shortly, I think.

Senator McALLISTER: Well, I have some for 2.1.

CHAIR: Okay. That is fine. We will go back to 2.1. Then we will move to 2.3 for Senator Gallacher.


Senator McALLISTER: Great. Has Finance given any advice to the government on the CEFC's investment mandate?

Senator Cormann: Not recently. I might have to take that on notice. There are obviously certain processes being considered, but I am not aware of any recent advice on the investment mandate.

Ms Huxtable : I do not believe so, no. No, not recently.

Senator McALLISTER: Has the government sought advice on the CEFC?

Senator Cormann: The government is obviously considering some options. When we are in a position to expand on that, we will do so.

Senator McALLISTER: Minister, you have recently told ABC AM that you obviously do not agree with Oliver Yates's assessment of investment in coal-powered fire stations. His assessment, to remind people, is:

We, like a commercial investor, are very unlikely to find circumstances in which that would be an appropriate investment to expose taxpayers to

Why do you not agree with his assessment?

Senator Cormann: Because we think that we have to have an open mind. Mr Yates has not—

Senator McALLISTER: Well, what is that based on?

Senator Cormann: It is based on the fact that this government is committed to ensuring that we can have an affordable, reliable, secure supply of energy and in a way that still helps us achieve our emissions reduction targets. In that context, we are a technology agnostic. Of course we support renewable energy as playing a part, but we are mindful of the fact that the policy settings and the general arrangements pursued by government need to ensure that there is a secure, reliable and affordable supply of energy in a way that is as emissions efficient as possible.

Senator McALLISTER: Minister, that view is not informed by advice from your department based on the evidence so far.

Senator Cormann: Well, hang on. Sorry, you are mixing things up. The opening question was in relation to an investment mandate for the CEFC.

Senator McALLISTER: Correct.

Senator Cormann: It is true to say that the government has not yet reached a stage in its deliberations where we are working on specific changes to the investment mandate. We are, through the energy committee of cabinet, considering how we can improve policy settings to ensure a reliable, affordable supply of energy in a way that still helps us meet our emissions reduction targets. We are very mindful of the fact that indiscriminate pursuit of excessive and irresponsible renewable energy targets at a state level to the tune of up to 50 per cent have led to significant increases in the costs of electricity and blackouts. We need to have a better framework to ensure for both families and businesses across Australia that we can have a reliable, affordable supply of energy in a way that is as emissions efficient as possible.

Senator McALLISTER: Minister, the energy subcommittee of cabinet is considering this, you say. Who is advising that committee? If not the Department of Finance, which departments are providing advice?

Senator Cormann: Well, all of the ministers that are represented on the energy subcommittee of cabinet are supported, of course, by their respective departments. What I have said to you, again going back to your opening question—you are mixing up different processes here—is that there is not at this stage a specific piece of advice in front of us executing a change in the investment mandate. That is a very specific process step that comes at the end of a whole series of other process steps that have not been concluded yet. One of the options to consider is an expanded role for CEFC and ARENA. These matters are currently being considered in a policy sense. If and when certain decisions are made, obviously they will be appropriately executed, including, if appropriate, through relevant changes to investment mandates and the like. But you are essentially starting with the end of the process. Because there has not been advice in relation to the end of the process, you are suggesting that there has not been any advice or any support in relation to any aspect of the process, and that is certainly wrong.

Senator McALLISTER: Well, perhaps you can tell me about that. Has there been advice or supporting advice around energy reform since this conversation began in January, Ms Huxtable, to the minister?

Senator Cormann: Well, the short answer to that is yes. Of course, I cannot go to the content of advice. But the energy subcommittee of cabinet has met on several occasions. That is a matter of public record. I believe the media attended the beginning of at least two of those energy subcommittee meetings. As a minister, I am advised by my department in relation to all matters that are considered by any subcommittee of cabinet, whether it is the National Security Committee, the Energy Committee, the National Infrastructure Committee, the Expenditure Review Committee or the cabinet itself. For all matters that go before cabinet or the various committees, I receive advice from my department on matters that are being considered by those bodies.

Senator McALLISTER: Have you sought advice from the CEFC's CEO, Mr Yates?

Senator Cormann: No.

Senator McALLISTER: Why not?

Senator Cormann: Well, because we are not at that stage of the process.

Senator McALLISTER: Mr Yates is in a position to provide expertise to government, surely, at a time when you are contemplating significant reform to the energy market.

Senator Cormann: We have not reached the point in the process where it would be appropriate to seek advice from Mr Yates or his successor after he leaves the organisation.

Senator McALLISTER: Are you aware of any private investors who have signalled an interest in investing in coal-fired generation?

Senator Cormann: Well, that is really not a matter for the Finance portfolio. That is really a matter for the energy portfolio.

Senator McALLISTER: Certainly. But you have been discussing your participation in the energy subcommittee of cabinet, so I thought you might be able to tell me.

Senator Cormann: Well, those deliberations are, of course, cabinet-in-confidence.

Senator McALLISTER: I am not asking about—

Senator Cormann: Well, you are.

Senator McALLISTER: whether the committee has considered it. You have been willing to talk about the committee process. I am asking whether the government—

Senator Cormann: You are asking me for specific information in front—

Senator McALLISTER: You and your colleagues.

Senator Cormann: You are asking me to reveal specific information and advice that is before cabinet as part of a deliberate process—

Senator McALLISTER: No, I am asking you whether you are aware of any investor who wishes to invest in coal-fired power.

Senator Cormann: And I am referring you to the energy portfolio because, as far as my involvement is concerned in this topic, it is exclusively as a member of the energy subcommittee of cabinet. Any information that I am privy to is part of the deliberative processes of that committee. Consistent with the practice of previous governments, it is very important for cabinet and cabinet subcommittee deliberations to be confidential for the provision of good government in Australia.

Senator McALLISTER: Minister, you have suggested on a number of occasions that I am mixing up different issues. I am suggesting to you that on this occasion you are muddling up different issues deliberately. I am asking you whether in the context of cabinet or in any other context the government is aware of any investor who wishes to invest in coal-fired generation.

Senator Cormann: And that is a matter for the energy portfolio.

Senator McALLISTER: Your earlier evidence was that to date there are no concrete plans or no work requested from the Department of Finance in relation to changing the CEFC 's mandate. Can I confirm that that is your evidence?

Senator Cormann: Well, I have already said that if we were to go down the path, which is one of the options being considered, then obviously at the right time certain advice would be sought in relation to the appropriate framing of relevant adjustments to the investment mandate. But that is very much at the tail end execution stage of a process. We are not at the tail end execution stage of the process. We are very much looking holistically across the whole of the government on how the federal government can best help ensure that across Australia families and businesses have access to a secure and reliable supply of energy in the way that is as emissions efficient as possible.

Senator McALLISTER: Minister, this is somewhat disingenuous because your ministers are out there publicly floating a change to the investment mandate of a body that you oversee as part of your portfolio responsibilities. You are telling me you have received no advice about that despite the fact that other ministers are out there talking about it. Is that not a bit odd?

Senator Cormann: Well, I think that that is a very disingenuous characterisation of what my colleagues have actually done. My colleagues are flagging, as I am flagging, that that is one of the options. What I am saying to you—

Senator McALLISTER: But they have had no advice.

Senator Cormann: The government, in its deliberations, has not reached a stage where we have made a decision which would lead us to seek specific advice on amendments to the investment mandate. That is a very specific administrative process and we have not reached that very specific stage in the administrative process just yet. But it is absolutely one of the options before the government available to the government in the context of—

Senator McALLISTER: But you have not talked to the CEFC CEO about it.

Senator Cormann: In the context of an overall approach.


Senator McALLISTER: Chair, my next question relates to program 2.2.

CHAIR: We should move to 2.2, then, because Senator Gallacher has questions on 2.3 and Senator Rhiannon has questions on 2.5.

Senator McALLISTER: There has been public reporting, Minister, that a business case in relation to the platform was submitted for cabinet consideration and then withdrawn at your direction. Is that correct?

Senator Cormann: I am not aware of having withdrawn a cabinet submission, so you will have to be a bit more specific. I am not aware of having withdrawn a cabinet submission on this topic. It looks like you are asking questions in relation to matters that are within the responsibility of the Prime Minister's portfolio and specifically the Digital Transformation Office. So I am not sure what information you are relying on there. I am happy to take on notice and see whether there is anything I can add to that answer, but I am not aware of that proposition that you put to me. I was given advice, which I have just shared with the committee. Senator McAllister, I was directly translating what has been put to me.

Senator McALLISTER: If it is possible, perhaps we can go to Senator Gallacher. I will track down the public report and I will ask you the specifics that were reported there because that is what I am interested in.

Senator GALLACHER: Thank you. I also want to congratulate the government on Operation Tetris, which looks to be filling vacant and surplus office space. In the course of that press release, you have your manual on the Australian government office occupancy report. Interestingly, there it is stated that about 20 per cent of the portfolio is vacant and that is why you—

Senator Cormann: Which is much less than when we came into government, it is fair to say.

Senator GALLACHER: Fair enough. Great work. Another point is that any office accommodation leasing proposal that the department is expecting will exceed $2 million requires evaluation by your department. Is there anyone who can shed some light on the Department of Immigration and Border Protection proposal, which I think is on the public record now as being a leasing proposal of around $2.394 billion?

Senator Cormann: This is substantial. You are talking about a department that is substantially responsible, among other things, for border security. Their initial proposal, which did have—

Senator GALLACHER: I wanted to bring in the department.

Senator Cormann: Sorry, but you have asked me the question. So the initial proposal that the Department of Immigration and Border Protection put to us was to shift the whole department from Belconnen into the proximity of the airport. That is not something that we agreed with. We engaged with them. At the end of that process, the Department of Immigration and Border Protection agreed to keep a substantial presence in the area that they are currently occupying in Belconnen. But some component of that department, it is right, is shifting to the airport. I do not think there is anything unusual about a border protection agency wanting to have some of its resources in close proximity to an international airport.

Senator GALLACHER: I did not ask that question.

Senator Cormann: That is what I gave.

Senator GALLACHER: Minister, the finance section gets proposals over $2 million referred to it for approval.

Senator Cormann: Well, you asked specifically about this department. I can confirm that my department was involved with the Department of Immigration and Border Protection in relation to their leasing arrangements; that is right.

Senator GALLACHER: So did you sign off in April 2016 on this proposal?

Senator Cormann: I have to take on notice the specific dates. But I can certainly confirm that the agreement that was reached in the end, which was better than where we started, involved my department as part of the process.

Senator GALLACHER: This is directly from the Hansard.

Senator Cormann: So what I would have done—and that is the usual process—is I would have endorsed the leasing proposal after we had finalised that process.

Senator GALLACHER: So the public record, Hansard, states this. An officer of the department, a Mr Wright, has stated:

… the cost-benefit analysis that was submitted as part of the finance minister's approval process, in April 2016, only considered the consolidation of the department's six buildings in Belconnen and three buildings in Civic.

That is fine. That is a statement of fact.

Senator Cormann: Yes, sure.

Senator GALLACHER: What I am curious about, Minister, is when the department decided to vary the scope of the proposal. It continues:

However, as the headquarters project progressed, in keeping with the intent of the government's Operation Tetris initiative, a decision was made by the department to investigate the feasibility of incorporating three other departmental properties …

What I am asking is: did they come back to Finance, or is that how it works—they just get it ticked off in a broad scope and then away they go?

Mr Edge : The way that the process works is that a leasing proposal is considered by Finance. Obviously that proposal can shift a bit in the course of refining the requirement. The fact is that it is a little unclear to me what that reference is to in terms of three properties.

Senator GALLACHER: That is the departmental officer's evidence at a public hearing.

Mr Edge : Right.

Senator GALLACHER: That is what I was curious about. On 10 February—

Mr Edge : Well, my colleague Ms Hall might be able to provide some additional clarity as to what those properties are.

Senator GALLACHER: You tick off on a proposal in April 2016. It is subsequently varied by three properties. I would have thought that that was a substantial change, but maybe it is not. But does it not come back to Finance for further approval?

Mr Edge : It would depend on whether it was a material change to what was endorsed. I am not in a position to advise on that.

Ms Hall : I am not aware of the three properties that you are referring to. Immigration's proposal, which was originally endorsed, saw them moving out of 12 properties into five. I understand that the final arrangements that they have brought forward for scrutiny of the Public Works Committee, among other committees of the parliament, is within the parameters of the original approval provided by the finance minister.

Senator GALLACHER: So if it is within the parameters, there is no need for a change? That is why I am asking the question. The officer gave evidence that the goalposts had moved. They are my words, not his words. So the second portion is: is Finance cognisant of the fact that when there are lease incentives advanced or part of leasing proposals, under the Public Works Committee manual, because lease incentives used in Finance projects can lead to hidden ongoing costs to proponent entities, fitout projects utilising lease incentives should provide analysis of the benefits gained by financing the works through lease incentives rather than full financing of the works by the proponent entity? And 2.56 states:

Where lease incentives have been used to finance projects, the Committee expects to be provided with the ongoing lease costs.

Are you aware of that?

Ms Hall : Yes. We are.

Senator GALLACHER: Has that been provided to the department?

Ms Hall : Finance has been provided with a copy of the immigration department's public submission to the Public Works Committee. We have not been provided with the details of the confidential cost information, but I am advised by Immigration officials that the particular data you are referring to was included in the confidential costs of the submission.

Senator GALLACHER: So Finance has no more information than the Public Works Committee? Well, actually you have less, because we have a confidential cost assessment.

Ms Hall : Not entirely or strictly true. Finance has access to another confidential element of information—the cost-benefit analysis.

Senator GALLACHER: So my question to the minister is: how do you assess the probity and value for money of these proposals without actually looking at the lease, the incentive and the fit-out? If you are only provided with one or two of those things, how do you do the work?

Senator Cormann: Well, I firstly do not agree with your characterisation. As Ms Hall just mentioned to you, we do have access to a confidential cost-benefit analysis. I obviously do not make these individual assessments personally. I do not think you are suggesting that we should introduce political discretion into judgements on whether one particular lease should be pursued.

Senator GALLACHER: Certainly not.

Senator Cormann: So I act entirely on advice. I act on advice from my officials, who, I believe, have accessed all the information they need in order to provide me with very good advice. Operation Tetris, of course, has been an outstanding success. We have been able to achieve savings in excess of $250 million since we have rolled out Operation Tetris, which of course requires us to in the first instance backfill existing leased property before considering entering into new lease arrangements elsewhere. I suspect you are not suggesting that we should introduce political discretion into this process and that I should be making these assessments myself personally. I will allow expert advice, and I am very confident that the officials in the department have access to all of the necessary information and expertise.

Senator GALLACHER: Well, what I am saying, Minister, is that the information that is required by the manual which your department controls, the Public Works Act, very specifically says if there are lease incentives, the committee is entitled to look at the lease. It is a collegiate bipartisan committee that scrutinises public works for value for money, public interest and cost effectiveness. Why have we not got the whole information?

Senator Cormann: But the manual that you are talking about is the committee's manual. It is not the department's manual. You are entitled to follow your process and have access to the information that you need for your process. I am very confident that I have access to the information and advice I need in order to be able to make decisions in the public interest in relation to Commonwealth lease arrangements.

Senator GALLACHER: Is there any reason why the committee cannot have access to the same advice that you have?

Senator Cormann: Well, the guidelines for the committee are a matter for the committee. This is not an executive matter.

Senator GALLACHER: I am putting it to you as simply as I possibly can. There is a lease, there is an incentive and there is a fitout cost. There are three simple components. We see the value of the fitout cost, we see the value of the incentive, but we do not see the individual value of the properties in the leasing component. So how do you actually make an assessment when you do not have the information?

Senator Cormann: Well, the difficulty that I am having now is that you are asking me about detail in relation to leasing for a specific department. The interaction with a different committee, the Public Works Committee—

Senator GALLACHER: Do you sign off on this?

Senator Cormann: And in the context of guidelines of that committee, in terms of my decision making and for my role in decision making on Commonwealth lease arrangements, I am satisfied that I have access to the relevant information. I understand—this is not my portfolio—that immigration has provided a copy of the cost-benefit analysis to that other committee, not this committee. This is not a matter that I can assist you with beyond that.

Senator GALLACHER: I accept your answer, Minister. We will review that as we see fit. You would not be an average student of the vacancy market, because you have a whole operation studying the vacancy rate in Canberra and around the country. Only an average student would not realise that a 40 per cent vacancy rate at Canberra airport—the building we are going into has been vacant for eight years—means we are paying almost top market rent for it. It seems to me that we need to examine that.

Senator Cormann: You are making all sorts of assertions here.

Senator GALLACHER: They are the facts.

Senator Cormann: They are your assertions.

Senator GALLACHER: They are on the public record, Minister.

Senator Cormann: I do not think there is anything unusual with the Department of Immigration and Border Protection having some of its operation in close proximity to an international airport. We did engage with that department in relation to the initial proposal. The initial proposal was significantly amended to achieve better value for money for taxpayers and to ensure that we maintained that they did not move the entire department from their current premises in Belconnen. These are all matters of public record. Beyond that, I think you need to pursue these matters with the immigration portfolio.

CHAIR: Just to clarify, do you have much more on this?

Senator GALLACHER: No. I just want to make it very, very clear that when projects do come to the Public Works Committee that have been signed off by the finance department and presumably the minister, we look at them as having been tested against proper governance, due diligence and probity. What you are telling me is that we can have our own manual but you are not going to tell us anything. Is that what you are saying?

Senator Cormann: No. You are again seeking to verbal. Your start was quite right. Your starting proposition that anything that is ultimately decided and ends with your committee has gone by the appropriate scrutiny by Finance and has been scrutinised with a view to maximising value for money for the taxpayer. But we as a government are obviously not responsible for the guidelines and the assessment processes that are pursued by a committee of the parliament. That is a matter for the committee of the parliament.

Senator GALLACHER: But my simple question is: can we see the value for money proposals that you have considered, because we cannot see them at the moment?

Senator Cormann: Again, obviously the Department of Immigration and Border Protection appears before that committee in their own right. My advice is that they have provided the information that you say you are seeking.

Senator GALLACHER: Without wanting to delay this, Chair, this is a very complex approach to market involving three or four departments. It involves the consolidation of 12 footprints down to four. It is an extremely complex proposal for a committee, even one as skilled as the Public Works Committee, to get its head around. What I am simply saying is that Finance could assist that protocol and procedure by giving us further and better particulars of each and every site.

Senator Cormann: I will take on notice what other information finance may be able to provide to assist that committee. I will take that part of it on notice. Of course, the Department of Immigration and Border Protection, like any other department, is directly accountable to that committee in terms of their relevant activities.

Senator RHIANNON: The last budget allocated half a million dollars for the Department of Finance to plan a new computer system to manage MPs allowances.

Senator Cormann: Is this still outcome 3, the same as we said earlier today? Outcome 3 is after the break. We did provide that advice to you earlier.

Senator RHIANNON: I know.

Senator Cormann: In support for parliamentarians and others as required by the Australian government. The minister directly responsible for that part is Senator Ryan, who will appear after the break.

Senator RHIANNON: I thought it was 2.5.

Senator Cormann: No. It is definitely still 3, as we indicated earlier today.

Senator RHIANNON: I will ask the other one. We might have been referring to the other one. I am not sure if this is the Department of Finance. I am trying to track it down where it is. There was another report. First, I want to understand if the department is involved. It has been reported that $12.4 million over four years has been allocated to upgrade IT systems to deliver greater transparency of the Trans-Pacific Partnership.

Senator Cormann: That does not sound like something that we—

Senator RHIANNON: So you are not the through agent that it goes to? I cannot track it down. It was reported last year.

Senator Cormann: It sounds like foreign affairs and defence.

Senator RHIANNON: Even though it is IT?

Senator Cormann: We might be able to assist you. We will ascertain whether we might be able to assist.

Mr Sheridan : I think you might be referring—I am not sure—to money that is put aside to support domestic review legislation or reporting in the context of AusTender for the TPP. So I think it is—

Senator RHIANNON: Yes. It sounds like that.

Mr Sheridan : I think it is either additional reporting that was required under the TPP or perhaps to support domestic review. But I would have to take the detail on notice.

Senator RHIANNON: Okay. If you take that on notice now, I will put more questions in to go with it.

Mr Sheridan : Yes.

Senator McALLISTER: Minister, I return to my earlier questioning about the Fairfax reporting about GOV.AU. The article I am referring to was published on 12 January 2017. It was entitled—

Senator Cormann: Can I have a copy? What is the headline? I might Google it.

Senator McALLISTER: It is 'How the Turnbull government killed off its big website dream'.

Senator Cormann: Do not believe everything you read in the newspaper, of course.

Senator McALLISTER: I am not making a political point. We are trying to be helpful.

Senator Cormann: I have it. One second. The Canberra Times. Noel Towell.

Senator McALLISTER: Noel Towell. So the key piece of information that they report is that the Minister for Digital Innovation Angus Taylor pulled the pin on the program at the urging—

Senator Cormann: But previously you said it was me.

Senator McALLISTER: I did. I made an error, Minister.

Senator Cormann: So that means—and we can be really quick here—it is a matter for the Prime Minister's department. The Digital Transformation Office is in the Department of Prime Minister and Cabinet.

Senator McALLISTER: Did you have any role in the decision to withdraw that minute from cabinet consideration?

Senator Cormann: Not that I am aware of. I do not believe so, but I will check. I do not believe so.

Senator McALLISTER: The article goes on to say that—

Senator Cormann: You are talking about a draft submission which never went to cabinet. You are asking whether I had any involvement in relation to the submission that I was not aware of which never went to cabinet.

Senator McALLISTER: Well, that is your evidence. You could have given other evidence. The proposition is that a minute was prepared. It was pulled at the last minute and you were involved. I am asking if that is the case and you are—

Senator Cormann: It does not say that I was involved. It does not actually say that.

Senator McALLISTER: My question is: were you involved?

Senator Cormann: No. I was not involved.

Senator McALLISTER: Thank you. There is some discussion in the article about the Department of Finance having a strong view about GOV.AU and being unhappy from the start about the Digital Transformation Office's plans for GOV.AU. Is that the case?

Senator Cormann: You are asking now for an opinion. If you ask about the state of happiness or unhappiness in relation to a policy proposal that may or may not have been considered which never went to cabinet, that is in the realm of both hypothetical and opinion.

Senator McALLISTER: Minister, in fact, elements of it must have gone to cabinet because funding was allocated and it was built up to the beta stage. The point at which the project was terminated was when the beta stage of GOV.AU was to be expanded to something much more significant. That was the evidence last night from the DTO. I did pursue it with them.

Senator Cormann: That is good.

Senator McALLISTER: What I am interested in understanding is whether the Department of Finance had any concerns about the GOV.AU project?

Senator Cormann: We will have to take that on notice.

Senator McALLISTER: Can you also take this on notice, then, since you seem unlikely to answer my questions?

Senator Cormann: You did ask me to keep my answers short.

Senator McALLISTER: Was this competing with the finance department's govCMS project?

Mr Sheridan : GovCMS is a platform used as a content management system. GOV.AU is a website. The website was to be based on a content management system. We agreed with the CEO of DTO that it would be govCMS. These two things were not in competition. One used the other.

Senator McALLISTER: Thank you. How much was spent on the GOV.AU project?

Senator Cormann: This is not in our portfolio. That is a matter for the Prime Minister's portfolio.

Senator McALLISTER: Thanks, Minister. That is helpful. I also want to ask you quite separately about the land at Malabar Headland, which has been leased by the New South Wales Rifle Association. Can you just talk me through the process? Who is responsible for the lease with the New South Wales Rifle Association?

Senator Cormann: Me. But it might be useful, because there has been a lot of misinformation in the public domain, for me to provide a bit of background to the committee in relation to this. The Malabar site has been used as a shooting range since the 1850s. The New South Wales Rifle Association as a club has been at those Malabar premises continuously since 1967, so that is for about 50 years, so far. They moved there from a site in Liverpool. It was a condition of their surrender of their Liverpool site at that time—we are talking more than 50 years ago—that they would be granted access and use of the Malabar site in perpetuity. The New South Wales Rifle Association and other clubs have continued to develop and maintain the site since that time and have used it continuously since 1967 for their sport. Since 1999, the New South Wales Rifle Association has been at those Malabar premises under perpetual licence from the Commonwealth, which on 3 May 2016 was converted into a 25-year lease with a further 25-year option on otherwise similar terms.

It is important to remember that the previous Labor government actually sought to remove the New South Wales Rifle Association from those premises but lost the subsequent case in the Supreme Court of New South Wales. Indeed, in 2012, the New South Wales Rifle Association defeated what was found to be an illegal attempt to evict them from that site. That was the decision of the New South Wales Supreme Court.

The arrangement in place now is substantially consistent with the arrangement that has been in place for more than four decades. As has been reported, rent this year is $26,500. But under the terms of the lease now put in place in May this year, rental payments will now be indexed by an annual 3.5 per cent moving forward. In that context, it is important to note that over the period of the previous Labor government, the rent went from $25,942 in 2010 to about $26,170 in both 2011 and 2012. As a result of changing the perpetual licence to a lease on the 25 plus 25 arrangement, there is an annual indexation put in place moving forward.

That is clearly a background that the shadow minister for finance was not aware of when he made certain announcements in relation to this matter. This site has been used as a shooting range for well over 100 years. Current arrangements are consistent with arrangements that have been in place for a very long time, including during Labor's last period in government, except that there is now a more attractive indexation to the lease payments in place courtesy of the lease that we have entered into.

Senator McALLISTER: Minister Cormann, can you just step me through the process for establishing the lease? I appreciate it has a complex history. How was this initiated? Could anyone have established a lease with your department? I assume not. How did you go about establishing these arrangements with this particular organisation?

Senator Cormann: I do not think you listened to what I have just provided in our comprehensive evidence. This particular organisation has had a licence in perpetuity to use these facilities since 1999. They have occupied those premises since 1967. The rental payments now are broadly consistent with the equivalent payments that were made under the perpetual licence except that they are indexed.

Senator McALLISTER: I am really interested just in the—

Senator Cormann: Sure. The way it has been positioned is as if they had nothing and then all of a sudden out of nowhere the government engaged with the New South Wales Rifle Association and decided to give them a lease to the exclusion of all others. That is not the way it worked.

Senator McALLISTER: Minister, what if we make an agreement. I will not pursue the positioning. I will just ask you some basic questions. You tell me the administrative process that was stepped through to reach a point where a perpetual lease was in place. That is all I need.

Senator Cormann: I am sure that you would like to have very specific answers that can be quoted out of context, but the context is actually very relevant here. Given the statements that have been made—

Senator McALLISTER: But you have provided a fair bit.

Senator Cormann: Sure. And it is a very important process.

Senator McALLISTER: Can we move on to the actual administrative process?

Senator Cormann: In terms of changing a perpetual licence giving access in perpetuity to something that is time limited, the process was to finalise the lease arrangement around something that is more time limited than a perpetual licence. I am happy for Ms Hall to provide that information.

Senator McALLISTER: Great. Terrific.

Ms Hall : As you would be aware, the Commonwealth was unsuccessful in previous legal proceedings to remove the New South Wales Rifle Association from the site.

Senator Cormann: This is the previous Labor government.

Ms Hall : Following that decision—and I am not sure on precise timing—the department engaged with the New South Wales Rifle Association to negotiate the terms of the lease that the minister has referred to.

Senator McALLISTER: When you say not precise, was it a quarter of a year or a half of a year later?

Ms Hall : I am happy to take that on notice. I have been in this role for only 18 months. It was certainly underway when I commenced in the role in mid-2015.

Senator Cormann: From memory, there were some announcements made by the minister for the environment in early 2015. Subsequent processes followed from that which ultimately led to the lease. The key features are that the rent is now indexed at a more appropriate level than was the arrangement before. And 25 plus 25 is obviously more time limited than in perpetuity.

Senator McALLISTER: You have made that point three times now. Could Ms Hall just step me through the administrative processes?

Ms Hall : So the lease is a fairly complicated document and includes a number of issues that go to environmental management on the site. It is a very complicated arrangement, so that took some time to work through with legal advisers from both the Commonwealth and the New South Wales Rifle Association. As the minister said, it was finalised in May 2016.

Senator McALLISTER: So it was on foot at the beginning of 2015 when you began in your role?

Ms Hall : September 2015.

Senator McALLISTER: September 2015, when you began in your role, and it was finalised in 2016. It was a direct negotiation with the rifle association, bearing in mind the previous arrangements that had been in place, which Minister Cormann has pointed out to me more than once. So it is an arrangement between the Department of Finance and that organisation?

Ms Hall : The Commonwealth, as represented by the Department of Finance, yes.

Senator McALLISTER: How were the questions of cost addressed by the department in coming to an arrangement with the rifle association about what the rent would be and what the indexation would be?

Senator Cormann: Again, that is where I have to intervene. There is obviously a history there. There were payments that were made by the rifle association previously which went from $25,942 in 2010 and a very small increase of just over $200 to $26,170 in both 2011 and 2012. So there was no increase at all between 2011 and 2012. What we have negotiated as part of the lease is a 3.5 per cent annual indexation, which is more than what was in place under the six years of the previous Labor government.

Senator McALLISTER: Is that benchmarked against any other indexation rate? How did you come up with the indexation rate?

Ms Hall : It largely reflects the arrangements that had been in place under the previous licence.

Senator McALLISTER: So your evidence is that 3.5 per cent reflects the indexation rate?

Ms Hall : No.

Senator Cormann: No. The 3.5 per cent is actually more generous to the taxpayer.

Senator McALLISTER: Well, I am asking how 3.5 per cent was arrived at.

Ms Hall : I will have to take the detail of that on notice.

Senator McALLISTER: The minister cannot advise me?

Senator Cormann: She has taken it on notice. It was not a political decision, if that is your question. It was certainly not a political decision. Obviously it is a better arrangement for taxpayers.

Senator McALLISTER: You have made that point.

Senator Cormann: Well, you have asked me the question again and I have to provide the same answer.

Senator McALLISTER: Well, I did not ask you that question. I asked you how it was arrived at.

Senator Cormann: Well it was not arrived at politically. It was arrived at based on expert advice from relevant officials in the department.

Ms Hall : And as a part of the negotiations with the New South Wales Rifle Association. So it was a negotiated amount that was arrived at.

Senator McALLISTER: What steps were taken by the department to ensure the deal was good value for money for the taxpayer?

Senator Cormann: It is better value than the previous arrangement.

Senator McALLISTER: I am asking what steps were taken or the process that you went through to test this. Of course, we ordinarily do test those processes, so I am asking Ms Hall.

Senator Cormann: But you are ignoring the fact that the status quo was the continuation of a perpetual licence in which there was no minimum—

Senator McALLISTER: You are very defensive about this.

Senator Cormann: No.

Senator McALLISTER: I am just asking a pretty straightforward process question.

Senator Cormann: Well, the reason is that I am making a connection to what was stated by Labor members of parliament in the public domain, which included various accusations and references to the National Audit Office. So what I am saying to you here is that if we had not made any change, there would be no meaningful indexation of relevant payments on an annual basis. Now we have a 3.5 per cent annual indexation. Instead of having an arrangement in perpetuity, we have a lease that goes over 25 years with an option for a 25-year extension.

Senator McALLISTER: Ms Hall, are you able to tell me about value for money or any kind of process you went through to ensure value for money in establishing a negotiating position?

Ms Hall : The department would have followed the relevant requirements with respect to the obligations under the frameworks that govern disposals of interest in land, which this transaction was. I would have to come back to you on notice in relation to the detail of the specific assessments and authorities that were provided as part of that process.

Senator McALLISTER: I would appreciate it if you would. Just now, though, as a final question: in describing that framework associated with the disposal of land, because you just did—

Ms Hall : And interest in land.

Senator McALLISTER: And interest in land, that is a capitalised framework, which is to say that that is the title of the framework, as you just read it out then?

Ms Hall : The framework is the Commonwealth property disposals policy. There are also provisions under the Lands Acquisition Act that govern acquiring and disposing of interests in land that we need to have regard to.

Senator McALLISTER: Thank you, Ms Hall. Chair, I have no further questions.

CHAIR: Are there any further questions in outcome 2? That being the case, I thank officers of the department. We will now welcome the Future Fund Management Agency. Any department officials who are not associated with the Future Fund Management Agency or Senator Ryan's section of the finance portfolio later on this evening are now free to go.