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Finance and Public Administration Legislation Committee
20/11/2014
Estimates
FINANCE PORTFOLIO
Department of Finance

Department of Finance

CHAIR: We will resume the Senate Finance and Public Administration Legislation Committee's supplementary budget estimates hearing. We are now on the Department of Finance. I welcome you, Ms Halton.

Ms Halton : Thank you.

CHAIR: I neglected to do so this morning. I welcome the secretary of the Department of Finance and officers of the department.

Senator Cormann: This is her second appearance, of course!

CHAIR: Yes, indeed, but it was not on my running sheet this morning. Officers and senators are familiar with the rules of the Senate governing estimates hearings. If you need assistance, the secretary has copies of the rules. I particularly draw the attention of witnesses to an order of the Senate of 13 May 2009, specifying the process by which a claim of public interest immunity should be raised. Witnesses are specifically reminded that a statement that information or a document is confidential or will consist of advice to government is not a statement that meets the requirements of the 2009 order. Instead, witnesses are required to provide some specific indication of the harm to the public interest that could result from the disclosure of the information or the document.

The extract read as follows—

Public interest immunity claims

That the Senate—

(a) notes that ministers and officers have continued to refuse to provide information to Senate committees without properly raising claims of public interest immunity as required by past resolutions of the Senate;

(b) reaffirms the principles of past resolutions of the Senate by this order, to provide ministers and officers with guidance as to the proper process for raising public interest immunity claims and to consolidate those past resolutions of the Senate;

(c) orders that the following operate as an order of continuing effect:

(1) If:

   (a) a Senate committee, or a senator in the course of proceedings of a committee, requests information or a document from a Commonwealth department or agency; and

   (b) an officer of the department or agency to whom the request is directed believes that it may not be in the public interest to disclose the information or document to the committee, the officer shall state to the committee the ground on which the officer believes that it may not be in the public interest to disclose the information or document to the committee, and specify the harm to the public interest that could result from the disclosure of the information or document.

(2) If, after receiving the officer’s statement under paragraph (1), the committee or the senator requests the officer to refer the question of the disclosure of the information or document to a responsible minister, the officer shall refer that question to the minister.

(3) If a minister, on a reference by an officer under paragraph (2), concludes that it would not be in the public interest to disclose the information or document to the committee, the minister shall provide to the committee a statement of the ground for that conclusion, specifying the harm to the public interest that could result from the disclosure of the information or document.

(4) A minister, in a statement under paragraph (3), shall indicate whether the harm to the public interest that could result from the disclosure of the information or document to the committee could result only from the publication of the information or document by the committee, or could result, equally or in part, from the disclosure of the information or document to the committee as in camera evidence.

(5) If, after considering a statement by a minister provided under paragraph (3), the committee concludes that the statement does not sufficiently justify the withholding of the information or document from the committee, the committee shall report the matter to the Senate.

(6) A decision by a committee not to report a matter to the Senate under paragraph (5) does not prevent a senator from raising the matter in the Senate in accordance with other procedures of the Senate.

(7) A statement that information or a document is not published, or is confidential, or consists of advice to, or internal deliberations of, government, in the absence of specification of the harm to the public interest that could result from the disclosure of the information or document, is not a statement that meets the requirements of paragraph (1) or (4).

(8) If a minister concludes that a statement under paragraph (3) should more appropriately be made by the head of an agency, by reason of the independence of that agency from ministerial direction or control, the minister shall inform the committee of that conclusion and the reason for that conclusion, and shall refer the matter to the head of the agency, who shall then be required to provide a statement in accordance with paragraph (3).

(d) requires the Procedure Committee to review the operation of this order and report to the Senate by 20 August 2009.

(13 May 2009 J.1941)

The committee has set 31 December 2014 as the date by which answers to questions on notice are to be returned. Before I ask if there are any opening statements, I will say that we have agreed to juggle around the outcomes a little bit. Senator Faulkner will be raising something that he has already telegraphed with you, Ms Halton, with my approval. I invite you to make an opening steadily, if you wish.

Ms Halton : No, thank you.

Senator FAULKNER: I thank the committee, the minister and the secretary for enabling me to ask these questions. I have a commitment in Sydney later this afternoon that simply means I just cannot ask these questions at perhaps a more appropriate time in the batting order. I appreciate that very much. I have also flagged with both the minister and the secretary what the nature of this questioning is, which relates to the open government partnership. Perhaps the easiest way of me dealing with this is if I could just asked the secretary, the relevant officials or minister for a status report in relation to Australia's involvement in the OGP.

Senator Cormann: I might just kick off with some general comments and then ask the secretary and others to add to that. Fundamentally, the situation is as it was when we last discussed this in May or June. The government has expressed an interest in joining the open government partnership. We are undertaking the necessary due diligence in order to come to a final decision. A final decision has not been made this point. We have expressed an interest in joining and we are undertaking the relevant due diligence. We have not made a final decision, but in the meantime we are participating in various fora with observer status and I believe that we have participated in various votes that have taken place using that status. I might ask the secretary to expand on it from there.

Ms Halton : Thank you for the question. As the minister says, there is a process we have to go through, which includes the government actually taking a final decision to participate. But what I can tell you is that the actions that would be necessary to enable that decision to be ultimately taken are underway. The way this particular partnerships works, you can be not a full member but an associated member while you are going through the process. So there are now what are called participating countries, and there are 65 participating countries, of which we are one. As the minister has indicated, that means we actually have the right to vote in terms of things like the creation of the bureau, the executive to this committee. Indeed, we did vote for executive members recently—maybe six to eight weeks ago.

To actually finalise our membership we essentially have to do three things. The first is to endorse the declaration. The second is to develop a public consulted national action plan. The third thing is to agree to independent reporting of progress. One and three are binary—yes or no—but it is number two that actually requires some work, as well as seeing how the thing is working, and making sure one is comfortable that the governance is open and transparent, as we would wish. I can tell you that with the national action plan, which would need to be publicly consulted on, we have started doing work on that inside the department. So whilst we are participating as a participating country, we are doing the domestic work that would enable us, should the government choose to participate, to do the public consultation on the National Action Plan, and then ultimately to agree and sign on.

There is quite a lot of work. There are 162 particular recommendations on 19 different topics, I am advised—I concede that I have not gone through all of them line by line. We believe that we are about 75 per cent compliant with all of those things. You know, because I know of your particular and personal interest in openness. You know we have things like data.gov.au and we have about four thousand data sets. Also, we have the AusTender process. So there is a whole series of things we are doing that line up. I think we are going through the steps that we need to take, but we are doing it in an orderly fashion with a view, when we have done all that, of enabling the government to make a decision.

Senator FAULKNER: Thank you for that status report. Is Finance still the lead agency in relation to this matter?

Senator Cormann: Yes.

Ms Halton : Yes.

Senator FAULKNER: Are you engaging with other departments or agencies, and is there any formal process for that to occur?

Senator Cormann: The Prime Minister has given responsibility for this part of government decision making to me—obviously, as appropriate, and as would have been the case, I am sure, under previous governments. I consult with the Prime Minister and also with the Attorney-General. Ms Halton might wish to expand on that as far as departmental interaction is concerned.

Ms Halton : In addition to those obvious corollaries to the people the minister has mentioned, we obviously have a very close relationship with the Department of Communications. So we are working on both the contracting/tendering e-work with agencies across the government. I do not have the specific list of which recommendation we talked to which department about, but I can assure you that there is a process my people are going through that does absolutely include talking to others.

Senator FAULKNER: But it is not formalised to the extent of an IDC?

Ms Halton : No.

Senator FAULKNER: Can you outline to the committee what sort of resources, including staffing resources, are involved from a Department of Finance perspective?

Ms Halton : I would describe this as being very congruent with, lined up with, the work of one of the areas of the department. Regrettably the senior officer in that area, Mr Sheridan, is unavailable today. You will understand that, because this was shuffled around, people then had obligations that were unable to be moved.

Senator FAULKNER: Tell me about it!

Ms Halton : Indeed, hence we are doing these questions now. It is part of his work and it is so congruent with the work we are doing on purchasing and open government et cetera. Because it comes in peaks and troughs I would have to think about how I would quantify it, but it is explicitly part of his brief and his people's brief.

Senator FAULKNER: Can you take that on notice for us?

Ms Halton : Sure.

Senator FAULKNER: Perhaps you might give more consideration to that and perhaps the department could work up a response, obviously with Mr Sheridan's input on that.

Ms Halton : Of course.

Senator FAULKNER: At what level is the due diligence process the minister referred to being undertaken? Obviously that is critical in this.

Ms Halton : The officer who is specifically charged with brining this together is at the division head level. Obviously the deputy secretary is particularly interested. As you can probably tell, I have taken a particular interest in this.

Senator Cormann: Anything you take a particular interest in, both of us take a particular interest in!

Ms Halton : Indeed we do!

Senator FAULKNER: I do not know why that would be!

Ms Halton : Long experience!

Senator Cormann: Perhaps one reason would be that we expect from time to time we will get questions about it at these sorts of get togethers. We run with these things and keep them at the top of our minds, which is why I suspect you are asking the questions.

Senator FAULKNER: I hope they are clear and straightforward questions about internal processes within the department you administer.

Senator Cormann: It is perfect.

Ms Halton : It is a deliverable for a division head, but I am very much involved in what is going on there.

Senator FAULKNER: Nevertheless, as you indicated in earlier statements, a decision has been made for Australia to participate in various OGP forums, including voting?

Ms Halton : Correct. That was a conscious decision to decide to participate, including by voting.

Senator FAULKNER: At what level was that decision made?

Ms Halton : The minister, I think, decided we should participate—

Senator Cormann: After consultation with the Prime Minister.

Senator FAULKNER: So that is a ministerial decision?

Ms Halton : Yes.

Senator FAULKNER: Can you say when that decision was taken? If not, could you take it on notice.

Senator Cormann: I can take that on notice.

Ms Halton : Sure.

Senator Cormann: I cannot specifically recollect, but I will check that out.

Senator FAULKNER: I appreciate that. So, as you mentioned, the development of the National Action Plan is in the three areas of engagement. The area that requires the greatest level of tasking for the Department of Finance obviously is the development of a National Action Plan. I think you would acknowledge that that is the case.

Ms Halton : Yes.

Senator FAULKNER: And you said that that work was underway.

Ms Halton : Correct.

Senator FAULKNER: I would be interested to understand that. On what basis did work commence on the development of the National Action Plan?

Ms Halton : I think on the basis that, as we have indicated, we are taking these orderly steps. The government had decided we would participate by voting. We are moving forward in the process. There has been no decision to stop that moving forward, if I could turn it around the other way. Because, moving forward in the process, we are required to do this, we are doing this. The minister is aware we are doing it. When it is done it will go to the minister and to the government for their consideration.

Senator FAULKNER: There have obviously been some higher levels of the OGP where Australia has not been represented. I think you would acknowledge that. President Yudhoyono, I think, invited the Prime Minister to attend a high-level meeting in New York when I think the Prime Minister was in New York.

Ms Halton : I think it was just before he arrived. We actually did look at it at that time. I could be corrected on that. My memory is that it did not quite work, which is why I think we had the representation we did, in terms of who was there.

Senator FAULKNER: Have there been any other high-level meetings where Australia has received an invitation to attend, that you are aware of?

Ms Halton : Not that I am aware of.

Senator FAULKNER: That was the last one?

Ms Halton : That is my understanding.

Senator FAULKNER: How is the international engagement, which obviously is critical, in relation to the OGP being coordinated? I assume there is an engagement with DFAT.

Ms Halton : Correct.

Senator FAULKNER: Can you very briefly explain how this works?

Ms Halton : As you would understand, our department does not have an overseas footprint—not many do—and, in this particular instance, we have been tasking people in the mission quite specifically when necessary. Obviously the officers can and do liaise directly with the relevant individuals offshore. But, when we need someone to go to a meeting for us or we need particular representations to be made or indeed if we need information sought that is not immediately practicable for us to do via email, telephone or what have you, we have been tasking DFAT from the mission.

Senator FAULKNER: So you are just tasking them effectively?

Ms Halton : Yes, we are using them as our extension. You understand how those processes work.

Senator FAULKNER: Not always, but I think I generally get the message. Chair, I appreciate the courtesy of the committee to enable me to do this now, and I will perhaps make this my last question and put other questions on notice. At the last estimates round this issue was canvassed in some detail and—

Ms Halton : Which I of course was not here for. So I will be relying on the minister's memory.

Senator FAULKNER: I think you were here but with another department.

Ms Halton : Indeed, but I was not here in this committee. That was merely my point.

Senator FAULKNER: You were not at the table in this committee or other committees where other departments had a role when that issue was raised. In that round we heard of formal communications from senior ministers in both the UK and of course also in the US administration. Have there been in the last couple of months any other government—

Ms Halton : Representations?

Senator FAULKNER: Other government to Australian government representations that you are aware of and you are able to inform the committee about?

Ms Halton : None that I am aware of. I am happy to check.

Senator FAULKNER: Would you mind taking that on notice?

Ms Halton : Sure.

Senator FAULKNER: And that might mean in relation to Finance, so you might need to check that with the Department of Foreign Affairs and Trade.

Ms Halton : I cannot guarantee that we can check every, single source, but we are very happy to make inquiries.

Senator FAULKNER: I appreciate that. But, given the respective responsibilities of other agencies, if your officials could also undertake to check with DFAT and respond on notice, I would appreciate that.

Ms Halton : We would be very happy to do that.

Senator LUDWIG: Ms Halton, I was just wondering whether you would clear something up for me. I had a look at some clips yesterday and earlier about whether you are professor or not.

Ms Halton : I have been looking forward to this question, Senator.

Senator LUDWIG: I was more interested in whether you had actually let us know in advance. I did not think I would really need to ask a question.

Senator Cormann: The one thing I can say is that Ms Halton is an outstanding secretary of the Department of Finance, the best department in the Commonwealth.

Senator LUDWIG: I do not think anyone disputes that.

Senator Cormann: Thank you. I am pleased that there is a level of bipartisanship around that proposition.

Senator FAULKNER: Would you like to comment, Minister, about how terrific the minister is?

Senator Cormann: I will leave those comments to others.

Ms Halton : Senator, do let me answer this question. Yes, indeed, I hold two adjunct professorships and it is the case that a journalist—

Senator Cormann: Promoted you.

Ms Halton : Yes. A journalist has decided to spend three days of his time creating a story where none existed, including harassing not only my office but also several universities in relation to this. I will say, Senator, that, due to an editorial issue, sometimes what has happened in the past is: the adjunct process has been dropped off. That is an administrative error, which is freely conceded. I actually do not use the title in my signature block. The minister can verify this. He sees my signature block relatively regularly, and he can tell you: I do not use it at all.

Senator Cormann: Not on her text messages either!

Ms Halton : No, not on my text messages either. So—

Senator LUDWIG: I do not need to go to that level of intimacy, Senator Cormann!

Senator Cormann: I am just being helpful.

Ms Halton : So what has motivated this journalist is completely unclear to me. In fact, when the journalist came to us about this, we actually went to the universities to tell them that a journalist was pursuing the issue. I am not intending to give up those appointments; I see no reason why I should. I find it fascinating that he wants to draw connections between me and Clive Palmer. Who would know? But that is the reality.

Senator LUDWIG: I was not so much interested in Clive Palmer, but I went to the annual report, because I thought I should do some due diligence myself—

Ms Halton : Yes, indeed.

Senator LUDWIG: and—

Ms Halton : And that is true—there is an error in that.

Senator LUDWIG: it says: 'The secretary, Professor Jane Halton'. So didn't you read it?

Ms Halton : There is a contraction. Look, I will concede that I read the text—the actual text—and what has happened is that the electronic signature has been used. We have conceded—and we said this yesterday, and we said it to the journalists—that there are a small number of administrative errors, particularly in moving portfolios. It is regrettable. I hardly think that this qualifies as anything more than a storm in a teacup.

Senator Cormann: And I would say that, given the serious challenges that our country is facing when it comes to repairing the budget and making sure that Australia is on the strongest possible fiscal and economic foundation for the future, this is not a matter that we should spend a lot of time on in these Senate estimates. If this is the opening line of questioning from Her Majesty's most loyal opposition in holding the government to account, then I really believe that the Labor Party has lost a sense of priority.

Senator LUDWIG: I guess you can have your view—

Senator Cormann: That is my view.

Senator LUDWIG: but what I am more concerned about is how it occurred, and I think that the background—

Senator Cormann: It was an administrative error.

Ms Halton : Yes.

Senator LUDWIG: Well, that is what I have heard, and I wanted to explore that just a little bit more.

Senator Cormann: Really?

Ms Halton : Certainly, and there are three letters that should be in front of that title. It is conceded that it is an error that they are not there. It is also conceded that I do not use the title in my signature block. I will say to you that it is absolutely reasonable to say that on a couple of occasions things have been stuck in front of me which are urgent, and they have not been edited as they might. That is not one of them. That is not the point. So it is an error; it has been conceded; it has been rectified.

Senator LUDWIG: So when you say that it is not on your signature block, when—

Ms Halton : My official signature block, which is actually promulgated around the department, does not include it at all.

Senator LUDWIG: So, when you signed off on the—

Ms Halton : The content?

Senator LUDWIG: chief executive certification for government advertising campaign—

Ms Halton : Yes, and that is the one I should have edited—

Senator LUDWIG: which is the certification statement; Medibank Private, initial public—that is the signature block—

Ms Halton : Yes, and it did not use my official signature block, and I should have edited it. I concede: I should have. And I did not, because it was rushed.

Senator LUDWIG: So why was it rushed?

Ms Halton : Because we were trying to actually get this advertising out—this is Medibank Private.

Senator LUDWIG: So you did not cross it out or correct it?

Ms Halton : No, and that was an error.

Senator LUDWIG: You said it is not on your signature block—

Ms Halton : It is not.

Senator LUDWIG: I saw—

Senator Cormann: Should we call a royal commission to investigate the signature block of the secretary? I just need to put a bit of perspective around this. This is Finance estimates, to look at the performance of the government when it comes to our performance against budget, and you are going to waste time to go through the ins and outs of an administrative error which has been readily conceded and which has been rectified—I mean, really?

CHAIR: Minister, you make a very valid point, but it is not for you or the secretary or anyone else to determine the priorities of Senator Ludwig and the Labor Party.

Ms Halton : Can I go to the signature block issue? If you would like to ask my office about what my official signature block is, I am sure that they would be happy to tell you.

Senator LUDWIG: I also went back and had a look at the Department of Health and Ageing annual report 2011-12. In the covering letter to the minister at the time it still includes, within a signature block, 'Professor Jane Halton PSM'.

Ms Halton : I have already said that this was a mistake, and, at the end of the day, that has been conceded.

Senator LUDWIG: You must have signed above that too.

Senator Cormann: So you understood what? Like—

Senator LUDWIG: So you could not have been rushed when you signed that one, surely? That was the letter to the Hon. Tanya Plibersek MP, in her capacity as Minister for Health.

Ms Halton : At the end of the day, I think there is probably nothing more that I can say, actually.

Senator LUDWIG: You said that it was an administrative error.

Ms Halton : Yes.

Senator Cormann: I am now going to take every other question on this topic on notice because I do not think that we should waste any more time in relation to something that, quite frankly, is trivial.

Senator LUDWIG: It is not your time.

Senator Cormann: I am giving you a heads-up that I have used my ministerial prerogative to take every other question in relation to this topic on notice.

Senator LUDWIG: That is very interesting. You would want to say why and your reasoning, because—

Senator Cormann: Because it is trivial.

Senator LUDWIG: I do not think it is, because I think—

CHAIR: Senator Ludwig, you may ask your questions. The minister may respond by taking them on notice or otherwise, in his capacity as minister. So please, ask your questions. Let us not have the debate. Ask your questions and we will move on.

Senator LUDWIG: That appeared in your signature block.

Senator Cormann: I have taken that on notice.

Senator LUDWIG: And you said that it was not in your signature block, but it does appear there in Health and Ageing.

Senator Cormann: Sorry, these are not the Health and Ageing estimates. As I have indicated, I am taking every further question in relation to these matters on notice.

Senator LUDWIG: The same goes for when I looked at some of your earlier media responses?

Ms Halton : My media responses?

Senator LUDWIG: Yes, media—

Ms Halton : I have not got media responses. What are you referring to?

Senator LUDWIG: The one that caught my eye was a media statement on 2 May 2012: 'Prominent scientist and regulator appointed new head of TGA'. That was issued by yourself.

Senator Cormann: This is not—

Senator LUDWIG: It mentioned the Secretary of the Department of Health and Ageing, Professor Jane Halton. You would have signed off on that, surely?

Senator Cormann: Again, I am taking that question on notice in particular, given that it relates to a period that is not relevant to the Department of Finance, which is the area of estimates that we are currently dealing with.

Senator LUDWIG: I do think that it requires a slightly better explanation than that it is administrative error. It worries me that you then respond by saying that it is an administrative error, when it is in a media statement put out by you as far back as 2012; it is in the Health and Ageing annual report, in a letter block—

Senator Cormann: In the period of the previous government.

Senator LUDWIG: it then continues on into the Department of Finance. I think it goes a little bit deeper than simply brushing it aside as an administrative error. It seems either that you are not particularly diligent—and I do not think that for one moment; I think you are very diligent in all the work that you do. So what I am trying to figure out in my mind is: if you are as particular as you are in how I have always engaged with you in your new role as Secretary of Finance, if you are as diligent with all of that work, then how can it be that this, an oversight, gets perpetuated by a media statement, annual reports, signature block letters and a range of other places for something over two years without anyone correcting it? As soon as it came to your attention, obviously, you did not choose to correct it this morning, so I thought I will wait to see if you were going to make some statement of it.

Senator Cormann: There is nothing to add. Ms Halton has clearly answered the substantive questions that were asked. The period that you refer to relates not only to a different portfolio but also to a different government—indeed, a government that you were party to. I think the issue has been appropriately dealt with. To the extent that you have genuine additional questions, I would invite you to put them on notice.

Senator LUDWIG: 'Professor Jane Halton PSM' also appeared on the Secretary Department of Finance website as well. Underlying my concern, of course, is that I know you to be a diligent person but in all of this there does not seem to be the same amount of care that you have taken throughout those couple of years, even with the website.

What I am trying to clarify is whether it is actually undermining my view of you. You have been diligent—I have taken you to be diligent—and yet this thread that seems to run through has not been corrected. You say it is an administrative error, but look at all of the places it appears and at the documents that you would have had to sight and sign off on. For one of them you say, 'I was hurried and I didn't change it,' but for all of the others—

Senator Cormann: Senator Ludwig, I can offer a thought for you. In my relatively short career in politics—you have had a much longer career in politics—what has often happened to me, and what is a source of immense frustration for me, is that a journalist, in writing a story, may makes a factual error, or one of his sub-editors may correct something in a way that makes it inaccurate. I get the original story corrected, but by the time I get to make the correction others have copied what was an erroneous presentation in the first place. Particularly in this period, when people source their information online or through other means, once you have made an administrative error, sadly, without any additional fault or error it quite easily—this does happen and it has happened to me—snowballs into areas that are not always in your immediate line of sight.

In this circumstance that is what appears to have happened. People, not having been aware that something was an administrative oversight, have copied it thinking that it was genuine. That perpetuated an error, which has been identified and which has since been corrected. I do not think this can really be taken any further.

Senator LUDWIG: I have not heard from Ms Halton, but it does not explain why you would sign off on your own media release; it does not explain why you would sign off on your own executive certification of a government act.

Senator Cormann: Senator Ludwig, I think you have made your political point.

Senator LUDWIG: Simply blaming others in that it is an administrative error, I just wonder about that. Did you want to add anything, Ms Halton, before we move on?

CHAIR: I think Ms Halton has already said she has nothing further to add, and the minister has taken the questions on notice.

Senator LUDWIG: Is it true that the original intention of the government was the abolition of the income support bonus, schoolkids bonus, low income superannuation contribution and a freeze to the superannuation guarantee increasing until 30 June 2016? That was correct, wasn't it? That was your original intention.

Senator Cormann: Sorry; say that again.

Senator LUDWIG: Your original intention was that 'the freeze'—my words—was to go until 30 June 2016 for those? I do not think it is a trick question.

Senator Cormann: I think that is right. Superannuation guarantee matters are matters for the Treasury portfolio; mining tax related matters are matters for the Treasury portfolio. The schoolkids bonus is an expenditure measure, so that would be a matter for us. Anything to do with compulsory superannuation arrangements and the like are not actually matters for the Finance portfolio.

Senator LUDWIG: But in the 2014-15 budget the freeze to the superannuation guarantee was shifted to 30 June 2028. It is a matter of record for the government.

Senator Cormann: Yes, sure, but that particular legislation did not go through the parliament in that form, principally because the Labor Party and the Greens voted against it. After the change in the composition of the Senate on 1 July 2014, we were able to negotiate alternative arrangements with the new Senate. Of course that meant that we, by way of concession, had to agree to abolish certain unfunded measures attached to the mining tax later than we originally would have liked. That meant we had an additional cost, over the forward estimates, of about $6.5 billion, which we are able to offset through additional revenue to the tune of about $6.5 billion to the end of 2023. All of these matters, of course, were part of the formal announcements that we—the Treasurer and I—made at the time. It is a matter of public record.

Senator LUDWIG: So Finance agreed to the costings?

Senator Cormann: I will let Finance answer the question in more detail, but the government, in progressing the amended package, went through all of the usual and ordinary processes, including the usual and ordinary costings processes.

Senator LUDWIG: So Finance costed it and agreed to the costs, but I am happy for Finance to confirm that.

Mr Thomann : Yes.

Senator LUDWIG: And the costs agreed with Finance were prior to the introduction of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014?

Mr Thomann : Costings were conducted under the normal processes.

Senator LUDWIG: Can you confirm whether the measures in the new bill introduced on 1 September 2014 still meant the abolition of the income support bonus, the schoolkids bonus and the low-income superannuation contribution? Were they costed by Finance?

Senator Cormann: Everything was costed through usual, ordinary process. Indeed, if you go through the public record, as is usual in these circumstances, there was an explanatory memorandum provided with the legislation which included all of the relevant information about the fiscal impacts of the amended package. Of course, that was based and drawn from costings, as appropriate, provided by Finance and Treasury.

Senator LUDWIG: When there was a sudden change in, I guess, policy in relation to the mining tax repeal bill, which you negotiated with the Palmer United Party—

Senator Cormann: I would not describe it as a 'sudden change'; I wish it had been more sudden.

Senator LUDWIG: Sudden as far as the Senate is perhaps concerned.

Senator Cormann: It did not feel like 'sudden' within government, I can assure you.

Senator LUDWIG: I guess it was not as sudden as yesterday. The amendments that were negotiated with the Palmer United Party, what that meant was that, instead of the immediate abolition of the income support bonus, the schoolkids bonus and the low-income superannuation contribution, the schoolkids bonus was extended to 2016 ; the low-income superannuation contribution to 30 June 2017; and the superannuation guarantee freeze to 2021. That is what you did?

Senator Cormann: Yes.

Senator LUDWIG: So the amendments were introduced on 2 September 2015.

Senator Cormann: A new bill was introduced essentially. We do not do it by way of amendment. You would remember that a new bill was introduced into the House of Representatives and when it came to the Senate, the Senate supported it.

Senator LUDWIG: Yes, it did. Were those costs agreed with Finance?

Senator Cormann: Yes. Just to give you a bit of flavour of how this works, Senator Ludwig, you see the luxury you had in your period in government is that you had total control of the Senate—

Senator LUDWIG: I do not recall it that way, but, nonetheless.

Senator Cormann: The periods that a Labor government had to negotiate budget measures through the Senate is probably a far distant memory for Labor senators. But the way it works at present and the way it worked in the context of the mining tax repeal bill was that, obviously, as you have a discussion seeking common ground with relevant senators that are required in order to get the majority in the Senate, as you discuss various options that might be able to provide for enough common ground, you seek advice on what the fiscal implications are of those sorts of options. We do that, of course, by relying on the outstanding advice from Treasury and Finance, as would have been the case in the relevant periods in the past.

Senator LUDWIG: Yes, but just to be clear, prior to the bill being introduced, were costs agreed with Finance?

Senator Cormann: Not just prior to the bill being introduced.

Senator LUDWIG: That is the one—

Senator Cormann: Let me just make it very clear. The costs were determined and the costs were agreed before we actually reached an agreement. The government is not going to enter into an agreement without having full visibility of what the fiscal implications of such a deal is going to be. If you ask, 'Were the costs agreed before it was introduced into parliament?' Of course. But they were agreed even earlier than that, because they had to be conclusively settled and identified before we signed on the dotted line, so to speak, and before we finalised the relevant explanatory memorandum which accompanied the legislation in the usual way.

Senator LUDWIG: When were the costings for that bill—amendments to the original bill, but a new bill—agreed?

Senator Cormann: It is a new bill.

Senator LUDWIG: You said they were done earlier. Bear in mind the time line. The bill was introduced at around 12.30 on the Monday, passed the House just before 2 pm on that Monday, and then debate commenced in the Senate just after 12.30 on the Tuesday. Are you able to advise the committee what time Finance received the costings for that bill for Finance's agreement?

Senator Cormann: It was obviously before then. In terms of the specific time, in order to ensure that I get accurate information to the committee I will review my records and I will consult. The reason I cannot really provide a settled answer on this is that it did involve both Treasury and Finance. Obviously there were measures that were relevant to the Treasury portfolio and there were other measures that were more relevant to the Finance portfolio. It was a process where the Treasurer and I worked very closely as a team. It led to a very successful conclusion in that we were able to finally deliver on our commitment to abolish the mining tax, which was a bad tax for Australia. We were also able to deliver on our commitment to repeal various unfunded promises that were attached to it. Some of those unfunded promises—

Senator LUDWIG: We could get through this quicker without the political commentary.

Senator Cormann: Some of these unfunded promises have to be repealed, now, a bit later than we would have liked. There is a cost that comes with that. Because there is a cost that comes with that we had to make an adjustment to the rate of increase of compulsory superannuation. All of that was publicly documented in some detail at the time.

Senator LUDWIG: Did that decision about the agreement with the Palmer United Party go to cabinet? I am not asking about what went to cabinet; I am just asking: did it go to cabinet and what date did it go to cabinet?

Senator Cormann: The decision went through all of the appropriate and established internal processes of government. To the extent that I can add any further detail to that I will take it on notice and see whether we can assist you with any further detail. I can confirm that I was obviously very much involved in conducting the actual negotiations together with the Treasurer. We took a recommendation through the appropriate internal processes of government to get endorsement of the position that we have been able to achieve.

Senator LUDWIG: Just so that we are clear, what you are going to take on notice is: when and at what time Finance received the costings for these amendments for Finance's agreement—

Senator Cormann: Yes.

Senator LUDWIG: and then whether, post that, it went to cabinet and what date that was? The third question is whether or not you met the 10-day rule for that.

Senator Cormann: I can answer that last one very quickly. In the circumstances you will not be surprised that we did not meet the 10-day rule. Our focus was on delivering on an election commitment. We had been frustrated by the Senate since 7 September last year in relation to a matter that was an explicit election commitment. Obviously, we were very anxious to ensure that we would deliver on that commitment that we made to the Australian people in the lead up to the last election, at the earliest possible opportunity. There was an opportunity and we seized that opportunity.

Senator LUDWIG: All right. You will take that on notice. Thank you, Minister.

This question is probably more for Mr Thomann. With respect to the individual funding profiles or amendments made to the income support bonus, the schoolkids bonus, the low income superannuation contribution and the changes to the superannuation guarantee increase, I think the supplementary explanatory memorandum has a table that shows the total changes worth about $6.6 billion over the forward estimates. I was looking for a breakdown of those figures.

Senator Cormann: We will take that on notice.

Senator LUDWIG: Unless you have them here?

Mr Thomann : I am sorry; I have not got those figures with me, and I would be happy to provide them on notice.

Senator LUDWIG: We are going to be here for some time today. I wonder if you could provide them.

Senator Cormann: We will see what we can do.

Senator LUDWIG: Thank you, Minister. You should have the figures. I would be surprised if you did not.

Senator Cormann: To be frank, I did not think that this was still going to be a matter of interest for the opposition, given that this has well and truly been conclusively settled and that all of the questions in relation to it have well and truly been asked and answered. But, to the extent that you are interested in the specific and forensic detail underpinning all of that, we are very happy to assist. It is not a matter of not providing the information; we just need to make sure that we provide you with the accurate information, and we will do so on notice.

Senator LUDWIG: So you will see what you can do?

Senator Cormann: We will see what we can do.

Senator LUDWIG: Did Finance play a role in the Forrest review or the interim McClure review, and what was that?

Mr Thomann : We have been involved in some IDC discussions in relation to the Forrest review. They have been chaired by PM&C, so they would be better able to discuss those processes. I would say we have been on the periphery of those discussions really. In relation to the McClure review, we have certainly been on the periphery of those discussions, and we are waiting for the final report really.

Senator LUDWIG: There was no work done by Finance prior to the release of the Forrest and the interim McClure review about the costings of their recommendations?

Mr Thomann : No, we have done no work on the costing.

Senator LUDWIG: So you have done no work prior to that? Does that also include post the release?

Mr Thomann : We have done no costing work that I can recall in relation to either the Forrest report or the McClure report at this stage.

Senator LUDWIG: When you limit it by saying 'at this stage', are you expecting to be referred those recommendations for costings, or is that just a usual Public Service phrase?

Ms Halton : That is a usual Public Service phrase.

Senator LUDWIG: Did Finance receive any material relating to the Forrest review or the McClure review prior to their public release? You said you were on the IDC. You did not do any work on the recommendations in terms of costing. Did you receive any other material from them prior to their release?

Mr Thomann : We saw some very preliminary drafting as things developed in relation to the Forrest review, but, as I said, we were very much on the periphery of that. Certainly, given that there were no costings involved, we only played a peripheral role in those kinds of considerations.

Ms Halton : This is really largely a matter for Prime Minister and Cabinet. We certainly, in common with a number of other agencies, and indeed I, in common with a number of other secretaries, were receiving verbal updates in relation to progress—that is, is it on time; in which domains is it; et cetera et cetera?—but, as to the micro level of detail, no.

Mr Thomann : If I could just clarify: we take an interest in these matters insofar as there is the potentiality for them to come back in the—

Senator LUDWIG: That is why I am asking the question.

Mr Thomann : Is there a potentiality for any of these matters to come back in the budget process for consideration? That is really up to ministers and government, but, as the Department of Finance, we take an interest in informing ourselves so that, if and when that is the case, we are able to cost them from an informed basis, given the amount of time that we usually have to cost once a formal costing process is initiated, once there are formal new policy proposals put on the table.

Senator LUDWIG: So it is still with PM&C as far as you are aware?

Ms Halton : Correct.

Mr Thomann : And, for the McClure report, it is the Department of Social Services.

Senator LUDWIG: Yes. I should say the home department.

Ms Halton : Yes, that is correct.

Mr Thomann : The home department.

Senator LUDWIG: That is a better way of explaining it. I note that Budget Paper No. 1, in statement 8, states in relation to HELP loan matters that the average duration of Higher Education Loan Program loans was, at June 2013—I will pause there while you change witnesses—8.4 years.

Are you able to advise the committee what this number is projected to be on the basis of all of the government's planned higher education measures, if they are implemented? The preceding question might be: have you done any work on that? But I thought I would cut to the chase in the interest of time. I am happy to repeat that question, as I know you were coming to the table at the time.

Mr Weiss : Thank you, Senator.

Senator LUDWIG: Budget Paper No. 1, statement 8, says that the average duration of a higher education loan was about 8.4 years. That is statement 8. I was looking to see whether or not you have projected whether that number will change or remain the same given the government's planned higher education measures when they are implemented.

Mr Weiss : Budget Paper No. 1, which you were referring to, has a number as at June 2013.

Senator LUDWIG: Yes.

Mr Weiss : In the education portfolio budget statement I believe there was a projection that took those numbers forward to the end of the forward estimates period.

Senator LUDWIG: I may have missed that.

Mr Weiss : I may have the paper somewhere handy.

Ms Halton : We may have to take it on notice.

Mr Weiss : I think that information was at least projected forward for the forward estimates period and appeared in the education portfolio budget statement.

Senator LUDWIG: I will have a look at that. Did you do any work on it?

Mr Weiss : No.

Senator LUDWIG: So you would take their number. So where it appears in Budget Paper No.1 that was their number that was plugged in or was it your number?

Mr Weiss : I think the numbers are generated from the Australian Government Actuary.

Senator LUDWIG: Yes; but then it has to be provided either straight to the budget paper or to them.

Mr Weiss : Yes.

Senator LUDWIG: So it was not your generated number?

Mr Weiss : No.

Senator LUDWIG: Are the Commission of Audit recommendations still within the Department of Finance's responsibility?

Senator Cormann: They are actually within the responsibility of the government as a whole, obviously. They are in the responsibility of the cabinet. The matters that relate to Finance related to Finance and the matters that relate to other parts of government relate to other parts of government. The government, at the time of the budget, as you are aware, announced its attitude and its approach to the various recommendations. Just to head off any revisitation that something that we have previously gone through, there was a press release at the time that was released in error that contained some errors in it.

Senator LUDWIG: I was not going to go there.

Senator Cormann: Phew! I just thought I would pre-empt it right upfront given the conversation we had earlier.

Senator LUDWIG: We did that one to death and I am happy to move on.

Senator Cormann: The government will continue to progress as appropriate recommendations that were made by the Commission of Audit in the way that was indicated in our response to the Commission of Audit. In some instances that will be through the federation white paper process, in some instances that will be tax white paper process and in other instances it will be through whatever process was indicated in the government's response to that inquiry.

Senator LUDWIG: I should have prefaced this earlier to avoid revisiting an earlier wound. I had asked a range of questions about each of those, which range from F258, F262 and thereabouts, but the answer to all of them was the same—relatively the same, anyway—which was that 'information on government performance and government programs will be considered following the 2014-15 budget'. So I figured that, as we are now past—

Senator Cormann: I wish we were. If you could help us pass the remaining structural reforms in the budget, we could all get past the 2014-15 budget. You were quite right that we are starting the process of preparing for the 2015-16 budget.

Senator LUDWIG: It is that time of year.

Senator Cormann: That is right. You would remember it well. To that extent we are to a degree in the period post the 2014-15 budget, which is why we are now considering what we might want to progress in the context of the 2015-16 budget. Obviously, you would not be surprised to hear me say that that consideration is very much in its early phase and has not yet reached a stage where there is anything that I can usefully or appropriately share with this committee. As much as I always like to err on the side of being as helpful as possible, that is not yet the position in relation to the matters you have just asked about.

Senator LUDWIG: Just to see where we can go: there are the phase 1 recommendations and the phase 2 recommendations, and then recommendations 2, 5, 61, 49, 50 and so on—I will not go through each individually or in detail unless you need me to. As I indicated, the answer I got on notice was, 'We'll see what happens after the budget in 2014-15'. We are at that place where you now are looking at, from my recollection, what you will and will not include in the next budget.

Senator Cormann: Indeed.

Senator LUDWIG: You are in a position of saying whether or not work is being done in relation to one or any or all of those recommendations.

Senator Cormann: No, I am not in a position to do that because we are very much in the early stages of the process. That means—

Senator LUDWIG: Come now; it is not that early in the process. From my recollection—

Senator Cormann: We actually are in the early stages—

Senator LUDWIG: Unless you, as finance minister, are not as tough as the last one!

Senator Cormann: Sorry?

Senator LUDWIG: Unless you are not as tough as the last one. I cannot imagine you—

Senator Cormann: I am a softie, as you know. We are in the early part of the process and it would not be appropriate for me to speculate on what specific measures might be progressed further at this stage. That is just not a position that we have reached, ready for announcement, at this point.

Senator LUDWIG: So if I was to put the same questions in on notice would I get the same answer?

Senator Cormann: If you put them on notice now with an expectation that we answer them by the end of the week, then, yes. If you put them on notice with—let me put it to you this way: ultimately, the government's announcements of what other measures we may or may not progress in the context of the 2015-16 budget will be announced as part of the 2015-16 budget, which will be on the second Tuesday in May 2015, which is the way it has always been.

Senator LUDWIG: All right, but what I was more interested in—

Senator Cormann: You want the running commentary on the inner thoughts of government. When you were sitting in this chair, I do not remember you sharing those sorts of things as freely as you are now expecting me to do.

Senator Smith interjecting

Senator LUDWIG: So Labor was efficient then? Thank you!

Senator SMITH: No; Labor was definitely not efficient.

Senator LUDWIG: In any event, what I am more interested in is not what the announcements are, but whether or not—

Senator Cormann: Yes, you are; you are just trying to do it in a roundabout way.

Senator LUDWIG: Finance is doing any work on any of the recommendations. Whether you include it in a measure or not is another matter, but I am just looking to see whether or not—

Senator Cormann: In the Finance portfolio—as the Minister for Finance, the Secretary for the finance department, the whole team at Finance—we are always looking for ways to ensure that the services of government are provided in the most efficient and effective way possible so that we can minimise the cost to taxpayers for funding the necessary services of government. That is an ongoing, constant and continuing process.

Now obviously the findings and recommendations of the Commission of Audit have been an important input for government. We provided an initial response at the time of the 2014-15 budget; I think we traversed quite a bit of that ground in our last estimates in relation to those matters. And, obviously, the government is now going through a process of considering what else we can sensibly do in relation to efficiency of administration and other matters right across government in the lead-up to the 2015-16 budget. The challenge for us remains to repair the budget mess that we have inherited, to put ourselves back on a sustainable fiscal foundation for the future so that we can protect our living standards, build opportunity and prosperity for the future and ensure that this generation of Australians does not continue borrowing from future generations of Australians, putting downward pressure on their living standards—with us living at their expense, effectively.

Senator LUDWIG: Did you learn that by rote?

Senator Cormann: Sorry?

Senator LUDWIG: Did you learn that by rote?

Senator Cormann: This is intrinsic to my job.

Senator LUDWIG: I withdraw that. Turning to a question, then, the Final Budget Outcome for the 2013-14 financial year was released on 25 September. I want to refer to page 29 of the 2013-14 Mid-Year Economic and Fiscal Outlook.

Senator Cormann: Not mid-year; you want the Final Budget Outcome, so that is the FBO.

Senator LUDWIG: No, I am going to compare the two.

Senator Cormann: You mean mid-year last year?

Senator LUDWIG: Yes. I am confirming that the Final Budget Outcome was released on 25 September. If I am wrong about that, I withdraw.

Senator Cormann: No, that is right: the Final Budget Outcome was released at the end of September.

Senator LUDWIG: I want to go to page 29 of the 2013-14 Mid-Year Economic and Fiscal Outlook and page 3-21 of Budget Paper No. 1 of the 2014-15 budget. Someone will be following that, or they will come to the table and follow where I am going. But both of these tables show the reconciliation of the underlying cash balance estimates. That is what the tables do: they show a reconciliation of the underlying cash balance estimate. I am not an accountant, but if someone says I am correct about that then we will move to the next piece. So that is correct?

Ms Halton : Sorry, which table?

Ms Huxtable : Can you just repeat that, now that we actually have the documents.

Senator LUDWIG: All right. I think it will take longer than I thought. We have page 29 of the Mid-Year Economic and Fiscal Outlook, and page 3-21 of Budget Paper No. 1 of the 2014-15 budget. Both have tables.

Ms Huxtable : Sorry, what was the second page number?

Senator LUDWIG: Page 3-21 of Budget Paper No. 1 of the 2014-15 budget.

Ms Huxtable : Table 5?

Senator LUDWIG: Yes.

Ms Huxtable : The underlying cash balance?

Senator LUDWIG: Yes. I imagine it is not controversial in the question. Both of these tables show the reconciliation of the underlying cash balance estimates.

Ms Huxtable : Yes.

Senator LUDWIG: These tables show the difference from one budget update to another. That is the purpose of the table, and they break down the components of this difference. That is what they are inherently designed to do. If I were a layperson looking at them—which I am—that is what they do.

Ms Huxtable : What is the question?

Senator LUDWIG: I am pleased, Ms Huxtable, that you are off with me. There are two categories.

Ms Huxtable : I do not think we had a reference to the FBO, did we?

Senator Cormann: Yes, we did.

Senator LUDWIG: Page 29. That was the Mid-Year—

Ms Huxtable : You referenced Budget Paper No. 1 and the MYEFO. I did not hear a reference to the FBO.

Senator LUDWIG: The mid-year was page 29.

Senator Cormann: What page was the FBO?

Ms Huxtable : Do you have an FBO page reference?

Senator LUDWIG: The PB was page 3-21.

Ms Halton : No, that is a portfolio budget statement.

Senator LUDWIG: Yes, and the mid-year was page 29.

Ms Halton : Yes, but you mentioned FBO. Which page are you on on FBO?

Senator LUDWIG: I am not on that page yet. That was just confirming that it was released on 25 September. So we have that.

Ms Halton : Yes.

Senator LUDWIG: These two tables show the difference between one budget update and the next. That is, as I understand, how they work when I look at them as a layperson.

Senator Cormann: So what is the question?

Senator LUDWIG: I did not want to surprise you; otherwise we end up not being clear, and then we have to repeat ourselves, but we seem to have suffered that problem anyway. But there are two categories: there are policy decisions and there are parameters and other variations. The table on the 2014-15 Mid-Year Economic and Fiscal Outlook shows the difference between the 2013 PEFO and the 2013-14 MYEFO. That is what they are designed to do. I think that is uncontroversial again.

Senator Cormann: Sure.

Senator LUDWIG: What was the amount for the total policy decisions impacting on the underlying cash balance in 2013-14 between the 2013 PEFO and the 2013-14 MYEFO? As I understand it, that is 10.3.

Senator Cormann: If I can provide a bit of context here, then we might be able to drill down into the specifics. This is important context in direct answer to your question.

Senator LUDWIG: I have not got my question out yet.

Senator Cormann: You did ask a question I am responding to that question. You might recall that at the time the budget was delivered for 2013-14, which is the budget you asking questions about, the projected deficit by the government—and this was Mr Swan's last budget—was $18 billion. By the time of the Pre-Election Economic and Fiscal Outlook, that had deteriorated significantly to $30 billion. In fact, over the forward estimates, in the 11 short weeks between the budget in May 2013 and the economic statement just before the election, the budget position deteriorated by about $3 billion a week or $33 billion.

The problem when we came into government is that that deterioration did not finish. It did not end. That deterioration continued. Furthermore, there were a whole range of areas where we knew that decisions had not been taken by the previous government to deal with actual problems. Also, certain decisions had been made such as $1.2 billion being cut from schools in the Northern Territory, Queensland and Western Australia. They were decisions that were never going to be sustainable.

What we set out to do in the Mid-Year Economic and Fiscal Outlook was to find the bottom of the budget position as it actually was. We wanted to identify what the true state of the budget was at that time. That also included making sure that we were using and relying on more realistic assumptions when it came to estimating likely revenue and estimating the likely expenditure. At the time of the Mid-Year Economic and Fiscal Outlook, the estimate that we came up with for the 2013-14 financial year was about $47 billion. You will see that at budget time that increased slightly to $49.9 billion. But the final budget outcome actually got us to $48.5 billion. That was around about in the middle.

The important point here is that the shadow Treasurer at the time of MYEFO was making assertions that somehow we had tried to make the deficit look artificially bad by using overly pessimistic assumptions on revenue and the like. As it turns out, if you look at what has happened in the market since then—for example, in relation to commodity prices and our terms of trade—it turns that we were, if anything, too optimistic. Indeed, now that is the position that the opposition spokesman in that space is now adopting.

Just by way of context, when we came into government not only did we inherit $123 billion in projected deficits on top of $191 billion of accumulated deficits from Labor's first five budgets but we also inherited deteriorating trajectory. MYEFO was our attempt to find the bottom so that we could engage in budget repair from there. Of course, 2014-15, which was our first budget after Labor's last budget, is our plan to repair the budget for the future.

Senator LUDWIG: If you recall from before you launched into that answer, when I had not quite gotten to my question yet: there was $10.3 billion and there was a further $6.6 billion for parameter and other variations. It is clear on those tables. The difference is due to rounding. $10.3 billion, as distinct from $16.8 billion, is about 60.9 percent, as I understand it. My math is as bad as my accountancy, but you would agree with me up to this point.

Senator Cormann: I agree with you up to that point. The biggest number out of that $10-point-something billion number that you have just mentioned is the $8.8 billion that was used for recapitalising the capital reserves of the Reserve Bank. The previous government, as well as delivering record deficits, always were casting around for more cash from a whole variety of sources. You would remember that they pursued various special dividends from Medibank. They also went for excessive dividend requests from the Reserve Bank. I think that in one year there was a dividend payment in excess of $5 billion. That left the capital reserves of the Reserve Bank irresponsibly low, and one of the spiders that we found under a rock when we turned it over was the fact that Labor had exposed the Reserve Bank to a capital position that was not responsible, and so we took the decision that, in all of the circumstances that Australia was facing at that moment, we needed to correct the bad decision that had been made by the Treasurer, Mr Swan, by allocating $8.8 billion in additional capital reserves to ensure that the Reserve Bank was in the strongest possible position to fulfil its responsibilities in the independent way it does.

Senator LUDWIG: So you are confirming, then, that over half—so, when we look at the $10.3 billion of the $16.8 billion, which is about 60.9 per cent—of the difference in the underlying cash balance was due to the decisions that your government took?

Senator Cormann: That is nothing new. That is a matter of public record.

Senator LUDWIG: No, no—

Senator Cormann: I do not know why—

Senator LUDWIG: As long as you agree with me—

Senator Cormann: The question is framed in a 'gotcha' sort of way. Well, it is a matter of public record that—

Senator LUDWIG: I am not sure I did that.

Senator Cormann: If it is not intended that way then that is great, but that is the way I perceived the question. It is a matter of public record.

Senator LUDWIG: Most people would notice if we had had a 'gotcha' moment.

Senator Cormann: Indeed, it was a matter of public discussion at the time, and ever since, that the government made a decision to correct what we thought was a bad decision by the previous government to take excessive money out of the Reserve Bank—to correct that decision by putting $8.8 billion in capital into the capital reserves provision for the Reserve Bank.

Senator LUDWIG: So I am right? Is that yes?

Senator Cormann: If you want to go to page 35 of the Mid-Year Economic and Fiscal Outlook 2013-14, we actually explain that in some great detail. As I say, that was a matter of public record, discussed in some detail, back in December 2013, but I am quite happy to keep talking about it, because it was one of the very important decisions that the government made, on the recommendation of the Treasurer.

Senator LUDWIG: Similarly, if I turn to Budget Paper No. 1 of the 2014-15 budget, what was the amount for the total policy decisions impacting on the underlying cash balance? We are looking at, in 2013-14, between 2013-14 MYEFO and the 2014-15 budget, as I understand it. So that should be 514—

Ms Huxtable : Those were savings.

Senator Cormann: As you can see, these are savings over the forward estimates.

Senator LUDWIG: Yes, but it is total policy decisions.

Senator Cormann: Saving money—yes, that is right.

Senator LUDWIG: And, for the parameters and other variations, it was $2.4 billion?

Senator Cormann: That is for 2014-15?

Senator LUDWIG: Yes.

Senator Cormann: Just in one year—yes.

Senator LUDWIG: So there was a further $2.9 billion deterioration in the budget for the 2013-14 year.

Senator Cormann: But that is not based on policy decisions of the government.

Senator LUDWIG: So what is it based on?

Ms Huxtable : Later in the document—

Senator LUDWIG: It is $2.9 billion deterioration. We agree with that.

Ms Huxtable : a few pages on, at page 3-25, it goes through what comprises the parameter and other variations; it sets it out both for 2014-15 and over the forwards, and similarly, on the page before, it goes through the policy decisions in some detail.

Senator Cormann: It literally lists all of them. All of what you are currently asking us for is explicitly listed, in dot point form, and, very helpfully, with all of the dollar numbers written next to it; it is really all there, in some great detail.

Ms Huxtable : And remember, these are net figures, so you will find that there is a range of spends and saves that go into those figures to create the net outcomes, and they are all listed from page 3-23 on.

Senator LUDWIG: So these are reasonably factual. I am just trying to get down what has happened—and then, if we agree with all of this—it has just taken longer than I would have imagined; I thought it was—

Senator Cormann: I will assist you. I will explain to you where the parameter and other variations come from. Disability support pension payments I expected to be $325 million higher in 2014-15, $962 million over the four years to 2016-17, largely reflecting higher than expected average payments rates and marginally higher than expected customer numbers. Private health insurance rebate payments are expected to be $300 million higher in 2014-15, $1.2 billion over the four years to 2016-17, which largely reflects stronger than expected growth in the number of people with subsidised private health cover and more people upgrading their level of health insurance. Childcare fee assistance payments are expected to be $298 million higher in 2014 or $1.1 billion over the four years to 2016-17, largely reflecting higher than expected utilisation of childcare services. Payments under the natural disaster relief and recovery arrangements are expected to be $244 million higher in 2014-15, although a reduction in payments of $96 million is expected over the four years to 2016-17, primarily relating to an expected delay in disaster recovery payments to Queensland, which largely reflects a delay in the completion of reconstruction works as a result of drought. Defence payments mainly in relation to capital purchases are expected to be $186 million higher in 2014-15 or $436 billion over the four years to 2016-17, as a result of foreign exchange rate movements. National Disability Insurance Scheme payments are expected to be $176 million higher in 2014-15 or $3.1 billion over the four years to 2016-17, reflecting the recognition of payments made on behalf of the states and territories for the first time. This increase in payments is directly offset by an increase in non-tax receipts reflecting state and territory contributions to the scheme. Do you want me to also go through the major reductions in expected payments in 2014-15, so that we can reconcile?

Senator LUDWIG: I thought we could perhaps do it this way. If you look at the final budget outcome which was released on 25 September, the change—what I am trying to track through is what you are responsible for—between what was estimated in EFO and what the final result, the final budget outcome, that was—I can ask you to look it up but I am sure you can agree that it was $30.1 billion to $48.5 billion.

Senator Cormann: Let us be very clear, though.

Senator LUDWIG: I have not finished the question yet. How much of this change was due to additional policy decisions and it does look like—I have taken you through it as diligently as I can—10.8 billion.

Senator Cormann: We traversed this whole issues, I guess, in the estimates in February 2014 and also in May-June 2014, but I am happy to go through it again. The point here is this. We inherited a budget in a mess. The 2013-14 budget is the previous Labor government's last budget. Now in MYEFO we set out to do a range of things. Firstly, given the rapid deterioration in the budget position between May and August 2013, I think you will appreciate that that sort of deterioration did not, all of a sudden, stop just because there was an election. That deterioration continued and the fundamental reason is that the previous government inevitably used assumptions that overestimated the level of revenue that was likely to be collected or underestimated the level of expenses that were going to be incurred. We sought in MYEFO to use more realistic assumptions. We expected that the deficit in 2014-14 would be about $47 billion when we put out the Mid-Year Economic and Fiscal Outlook for 2013-14. In the budget we said it would be 49.9. It has turned out at about 48.5 or thereabouts. So as you can see, the work that we did in the context of MYEFO was indeed, compared to the effort of the previous government, reasonably accurate.

There were a range of other issues that we had to deal with when we came into government and they were principally unresolved policy issues. For example, the previous government made decisions to impose efficiency dividends and made other decisions in relation to the funding of the Public Service, which would lead to about 14,500 FTE staff reductions but did not make provision to fund the necessary redundancies.

So, in the Mid-Year Economic and Fiscal Outlook in 2013-14, we made the relevant provision to fund the redundancies which the previous government, having made the decisions that led to those staff reductions, had not made. So that needed to be made. That was dealing with a spider under a rock that we had inherited from the previous government. So it was our decision, but it was your responsibility. It was us tidying up a mess that we inherited. Also, when you lost government, you left behind 92 announced but unlegislated tax and superannuation measures. We had to make judgements on which of those measures could successfully be legislated and which ones could not. The decisions that we made in relation to the 92 unlegislated tax and superannuation measures that we inherited involved us looking at the likelihood of being able to progress them. We decided to proceed with 34 measures as announced, not to proceed with 55 measures and to proceed with three measures with amendments.

I might just pause here to say that one of the tax measures that the previous government announced—banked in the budget but did not legislate—was the measure to better target tax incentives to encourage research and development by not providing tax cuts to companies with assessable incomes of more than $20 billion a year. This is a measure that, having initiated and banked it in the budget in government, the Labor Party is now opposing, presumably for political reasons.

We also had to restore funding for schools to the level announced in the 2013-14 budget by providing $1.2 billion in funding across the forward estimates for schools in Queensland, Western Australia and the Northern Territory. That is money that, unbelievably, the then Rudd government, in its economic statement in the shadow of the 2013 election, decided to pinch—to pinch—from Western Australia, Queensland and the Northern Territory.

Senator LUDWIG: Is this about—

Senator Cormann: You are asking me a question about the $10.3 billion and the decisions that we made, so I have to really explain this. The previous Labor government went to the last election trying to make their figures look a little bit less disastrous, and they decided to take $1.2 billion away from schools in Western Australia, Queensland and the Northern Territory—a decision that was never going to be sustainable because the Australian government could never sustain a position where states were treated differently.

Senator SMITH: They took money out of Queensland, your state, Senator Ludwig.

Senator Cormann: Indeed. They took money out of schools in the senator's home state of Queensland.

Senator Smith interjecting

CHAIR: One at a time.

Senator Cormann: I still have more to go. Also, the previous government—and this is the Rudd government that I am talking about in particular—went to the election and they made these big advertisements about how people who come here by boat from overseas are not going to be resettled in Australia. I do not quite remember the slogans that they used, but all these advertisements appeared in newspapers during the election period, incidentally. The previous secretary of Finance, I think in the last estimates, explained his level of discomfort about the partisan nature of those advertisements and the way they came to be funded by taxpayers during the election period. But, leaving that to one side, the previous Labor government asserted that everybody would be processed offshore, but they did not provide the funding to process those people offshore. We provided the funding.

The point I am making here, Senator Ludwig, is that, yes, we did have to make some policy decisions. They were policy decisions to correct and address problems that you left behind for us. I repeat what I said earlier: our objective as a government, in the 2013-14 Mid-Year Economic and Fiscal Outlook, was to identify the true state of the budget, given we inherited a budget that was deteriorating rapidly at that time as a result of estimates variations—as a result of revenue not being at the level that you predicted it would be in the budget and as a result of expenditure not being where you predicted it would be in the budget.

We also had to make policy decisions to address various problems like the ones I have just listed for you. We also made sure that we used more realistic assumptions and that obviously had an effect, because we think it is important for the budget to be based on the most realistic assumptions possible. At the time, of course—inaccurately and inappropriately, in our view—the shadow Treasurer, Mr Bowen, asserted that we were using overly pessimistic assumptions in order to make the numbers look worse than they truly were. He has been proven wrong. Because what the Final Budget Outcome proves and what developments since then have proven is that, if anything, as it has turned out to be, our assumptions were slightly on the optimistic side, even though we made them much more realistic than we had inherited them. Of course, the proof is in the pudding. Having estimated a $47 billion deficit for 2013-14 in the 2014-15 Mid-Year Economic and Fiscal Outlook, having revised that to $49.9 billion in the 2014-15 budget for the 2013-14 financial year, the Final Budget Outcome shows that the actual outcome was a $48.5 billion deficit for 2013-14.

If Mr Swan and Senator Wong had been able to achieve that sort of accuracy in terms of the actuals as compared to the estimates, I think that people across Australia would have been celebrating. They never got anywhere near it. We stand by the decisions that we made to fix the problems that we inherited from Labor. We stand by the decisions we made to adjust assumptions to make sure they were more realistic. We are very happy to be questioned on our performance against forecasts because, so far, we believe that the record shows that we have performed better in this regard than the previous government.

Senator LUDWIG: So have you got that off your chest?

Senator Cormann: Keep asking me questions and I will get some more stuff off my chest.

CHAIR: I think we should just stick to the facts.

Senator LUDWIG: Thank you, Chair. In short, they were you will decisions.

Senator Cormann: They were our decisions to fix your problems, that's right.

Senator LUDWIG: Whoever you want to blame for them, they are your decisions.

Senator Cormann: They are our decisions to fix problems that we have inherited from the previous Labor government. I readily take responsibility for that.

Senator LUDWIG: They were all decisions of this government. I will go to a slightly different area, then, and see how we go.

Are there any decisions that are reflected in the 2014-15FBO that are not reflected in the budget which had an impact on the 2013-14 figure? I understand it might have been the schoolkids bonus, but I just wanted to check whether that was the only one or whether there were others?

Senator Cormann: Obviously adjustments are made. Sorry, I will let Finance explain the process on how we put together the Final Budget Outcome. I could always refer you to the questions that I asked back in opposition in 2012-13, where Finance went through that process in some detail. But, obviously, decisions are reflected in the Mid-Year Economic and Fiscal Outlook and in the 2014-15 budget. To the extent that there are other matters that are relevant, they are honestly taken up as appropriate.

Senator LUDWIG: I am not looking at the minor bits involved.

Ms Halton : So we can be clear, what the FBO actually represents is an auditing of the statements to reconcile effectively against the numbers that were actually published in the budget.

Senator LUDWIG: Yes.

Ms Halton : Mr Greenslade can explain to you exactly how that occurs, if you wish. It is not a decision document, if that makes sense. It does not include decisions.

Senator LUDWIG: If I take out the word 'decision'—that is my loose phrase, I guess. What I was looking at was that which is reflected in the FBO but not reflected in the budget. The schoolkids bonus, as I understand it, was one, but I am happy to be corrected.

Ms Halton : No.

Ms Blewitt : As Ms Halton said, no, it will not have new policy decisions in there. What actually happens is at the budget, we would have had an estimate of what we thought the 2013-14 outcome would be. There would have been estimates adjustments that were made between budget and then FBO, which those statements, as Ms Halton said, were audited. So the Final Budget Outcome does document in there the major payment variations and movements across functions as well.

Senator LUDWIG: So am I incorrect in thinking that there are things reflected in the FBO were not reflected in the budget? If it is an audit of it, then I imagine you capture all of those things to make sure that they were audited and correct.

Ms Halton : Mr Greenslade can explain. There is a distinction here between business going on—and you would recall the general prohibition under decisions being taken after the budget.

Senator LUDWIG: Yes, only too well.

Ms Halton : So what you have here is a statement of actuals as opposed to estimates. What you then do is you report on the actuals, noting that what you had previously was a process of some actuals and some estimates, and now you are basically reconciling those numbers. But Mr Greenslade can explain, if you wish, in more detail.

Mr Greenslade : Essentially, as the secretary said, that is the process at the time of the budget. Obviously, there is some estimation involved; it is six, seven weeks or so—

Ms Halton : Before the end of the year.

Mr Greenslade : until the end of the year. So there is actual information and there is some estimation that goes on. The FBO is a process by which, at the end of the year, there is a very careful accounting and auditing of everything that has happened. Essentially, what you are seeing in the FBO is a difference between the estimate and the outcome. The differences are not policy differences; they are simply how the world turned out compared with what we expected on budget day.

I might draw your attention to table 1 in the Final Budget Outcome, on page 2, which gives a very high level breakdown of the underlying cash balance in terms of receipts and payments, and the difference in outcome. Then there is a listing on page 4 of the main reasons for the difference between the estimate and the final outcome; it covers excise and customs duties receipts, the GST, company tax receipts and so on, and then the payment side as well. So there is an accounting for what happens and an explanation of the key differences between the FBO and the budget.

Senator LUDWIG: So they show the differences for the 2013-14 financial year, and between the 2014-15 budget and the FBO. Have I got that right?

Mr Greenslade : Yes, it shows the difference between what we thought would happen and what happened.

Senator LUDWIG: Yes—what actually happened.

Mr Greenslade : Yes.

Senator LUDWIG: So the differences between in the figures estimated as at 13 May 2014 and those at 30 June 2014—they are correct? You have now corrected for what the variations were.

Mr Greenslade : We have actuals, and we are not predicting the future at that point.

Senator LUDWIG: It is what has happened.

Mr Greenslade : It is, indeed, and it has a process where it is very carefully checked, and the Audit Office are involved in that process.

Senator LUDWIG: Payments were lower by $4.5 billion in the FBO compared to the figure estimated in the 2014 budget. So that is what your actual is?

Mr Greenslade : Yes.

Senator LUDWIG: To take the Department of Defence—if we can just unpack one and see where we go—its spending was $438 million lower 'due to foreign exchange effects and lower than anticipated spending on Defence operations'. That has all been put into one figure. Is there a breakdown of that, or do you just gross it up? Is there a breakdown of that figure into the foreign exchange effect and the lower than anticipated spending on Defence programs? I am trying to understand if they missed out by $437 million on foreign exchange and $1 million on anticipated spending, for instance.

Ms Huxtable : I will respond to that. The Department of Defence is a little unique because it is subject to the no-win no-loss arrangements. Basically, in respect to military operations, the department spends money and has all the costs of that effectively met. I think you will find in regard to that particular one that the lower than expected military operation costs, particularly in Afghanistan, were the lion's share. There was also a hand-back in 2013-14 in respect of the 2012-13 operation. So, with Defence, it is effectively a reconciliation exercise that occurs. In the case of that $438 million, the bulk of that was in relation to military operations expenditure being lower than had been estimated.

Senator LUDWIG: Can you take it on notice to tell me the difference—

Ms Huxtable : The precise detail?

Senator LUDWIG: yes—between the two.

Ms Huxtable : I can. But I can tell you that generally—

Senator LUDWIG: I understand, yes. That is very helpful.

Ms Huxtable : 90 per cent or more of it is the lower expenditure on military operations.

Senator LUDWIG: Was there an estimate of Defence operations spending for 2013-14, and what was the actual amount? Do you estimate the total expenditure?

Ms Huxtable : At budget, as Mr Greenslade said, there is an estimate of what the total expenses are likely to be; but then there is a reconciliation process, and either more money is provided if they exceeded that amount or money is returned if they did not exceed that amount. Mr Clively is the expert. Hopefully, I have not said anything wrong!

Senator LUDWIG: I can go through the tables and find that if I want to?

Ms Huxtable : We can take on notice the specific detail, if you wish.

Senator LUDWIG: The other one I was looking at was the illegal maritime arrivals and the closure of a number of immigration detention network facilities are around $370 million of the decrease. Is there a breakdown between the IMA numbers and the detention network facilities?

Ms Huxtable : In respect of that, with the IMAs we forecast arrivals of 20 per month between the period when the budget came down and when the FBO was released and there were no arrivals in that time. So the costs associated with each of the people who did not arrive meant that there was a reduction in expenditure in that regard. I do not have the breakdown here between the two elements but I am sure we could take that on notice.

Senator LUDWIG: Yes and there have been closures of immigration detention network facilities. Does this relate to the 2014-15 budget measure onshore immigration detention network which is the estimate management plan? I am trying to get a sense of where—

Ms Huxtable : Yes, it does.

Senator LUDWIG: Then would these numbers figure in the 2014-15 budget numbers? Would that not already be in it because you already announced they were closed?

Ms Huxtable : The closure announcements assume a certain rate of closure, a certain scheduling of events, so if there is a variation to that—if work is progressing ahead of schedule or facilities are closing earlier than predicted or they are operating at zero capacity—then that will have an impact in the FBO and I think you will find that is what is reflected here.

Senator LUDWIG: You said you would take on notice the individual components. The other one is the $362 million decrease as a result of demand and cost for a range of demand-driven health programs. So it is the same issue. Presumably you made an estimate, then you did the actuals and because they are demand driven they would have then been less demand, I presume.

Ms Huxtable : Yes, that is right.

Ms Halton : The obvious one to pick on is pharmaceuticals and pharmaceutical services. The reality is, as you know, the price of drugs has been coming down quite significantly. That reduction led to an amount of $244 million out of that amount in reduced expenditure on the PBS. As you know, we have an estimate. At the beginning of the year it gets refined in the budget process but the actual depends on how many scripts are presented for drugs and what price was paid for them.

Ms Huxtable : So in the case of that health figure, as the secretary pointed out, the majority of the change related to the pharmaceutical and pharmaceutical services function. We can provide more detail on the actual breakdowns.

Senator LUDWIG: Perhaps you could take it on notice and provide the variations. It is the same for the national partnership agreement for which there was lower than anticipated payments and the amounts of the lower payments but I am interested particularly in the school education payment. It was $186 million lower than anticipated. Maybe there is a reason for that. It just seems a fair lump of money.

Ms Huxtable : I think, Senator, you will find in regard to national partnership payments that generally where there is a change it relates to milestones not being met. So you will recall that the national partnership triggers payments on the achievement of milestones.

Senator LUDWIG: Yes.

Ms Huxtable : I think you will find in that school education one in particular that there were milestones anticipated for the states—in this case, it was New South Wales and the Northern Territory for 2013-14—

Senator LUDWIG: Yes. That is what I was going to get you to do.

Ms Huxtable : which were not met. So that means that that expenditure does not occur in the financial year in which it was estimated.

Senator LUDWIG: No. So they would have experienced delays in the achievement of the milestones, effectively.

Ms Huxtable : Yes, that is right.

Senator LUDWIG: Perhaps you could take it on notice, then just map out which ones, what the delay was and whether they have met their milestone by now.

CHAIR: There is a schedule to come back to outcome 1.

Senator LUDWIG: Sorry, I took longer than I thought.

CHAIR: That is fine. In the interests of trying to deal with ComSuper and the Commonwealth Superannuation Corporation before the tea break, we might move to that outcome and we will come back to outcome 1 after we have dealt with Medibank as well—so a bit later in the afternoon.

Ms Halton : Medibank?

CHAIR: Medibank Private.

Ms Halton : Remembering that—

CHAIR: I know they are not attending, but we will ask direct questions to—

Senator LUDWIG: There are some questions directly to Finance, hopefully.

Senator Cormann: In relation to Medibank.

CHAIR: Yes, in relation to Medibank. We will pause on outcome 1. We are now going to go to ComSuper and the Commonwealth Superannuation Corporation. We will then move on to any specific questions about Medibank Private and then we will return, if required, to outcome 1 with the Department of Finance and move on through the program.

Ms Halton : Noting, though, that, on Medibank Private, it is not just Medibank Private who are not here; the officials are not here either because they are doing the sale process as we speak.

CHAIR: I understand. Minister, we were advised that you and Ms Halton would be able to assist.

Ms Halton : We are both happy to assist to the extent that we can.

CHAIR: We understand that circumstance.

Senator LUDWIG: I understand that. We will see how we go with Medibank.

CHAIR: I would ask the officers of ComSuper and the Commonwealth Superannuation Corporation to come to the table.