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Tuesday, 16 November 1993
Page: 2899

Senator COLLINS (Minister for Transport and Communications) (5.17 p.m.) —I move:

  That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

  Leave granted.

  The speech read as follows

The purpose of this Bill is to provide for a per premises charge to be levied on domestic meat establishments in those States and Territories where the Commonwealth's meat inspection agency the Australian Quarantine and Inspection Service or AQIS for short, is responsible for inspecting domestic meat.

Since the Bill is the first part of a package of legislation to be introduced, the Minister for Primary Industries and Energy has asked me to spend some time on the context, objectives and impacts of the whole package before returning to the details of this particular Bill. You will also see that the Senate's imposed deadlines for the passage of legislation through the House of Representatives, impact on the package of measures and the timing of their introduction.

In the 1993 Budget, the Government announced a major program of reform of AQIS to reduce its cost to Australian industry while retaining the integrity of Australia's inspection functions. The Government wants to make it clear that AQIS fulfils an essential role in protecting Australia against the importation of exotic pests and diseases and inspecting food for safety and overseas country requirements.

This role must continue but the Minister for Primary Industries and Energy believes it can be done more efficiently at lower cost to Australian industry.

The program of reform of AQIS which is designed to give the organisation a much stronger business orientation, has three major elements.

First AQIS will be reflecting the Government's intention to actively encourage Australian industry to take more responsibility for quality assurance from production, through processing and distribution, to consumption. Industry will benefit from quality assurance by adopting modern technology, and processing systems giving much better control of their products.

Second, to improve the efficiency of service delivery to industry and to cap and reduce inspection costs, AQIS will be restructured over the next three to four years with a projected decline of 650 Commonwealth and 100 State AQIS personnel via retrenchments on a voluntary basis wherever possible. To place this in perspective AQIS currently employs around 2,000 Commonwealth and 600 State permanent staff.

Third, a package of new charging legislation will be introduced to provide for a uniform, three tiered charging regime for AQIS services.

To implement this new charging regime across all AQIS services to export, import and domestic industries, a considerable package of new legislation is expected to be introduced to the House of Representatives late in the Budget session with passage through the Senate in the autumn session. With the exception of the meat industry, implementation of the new three tiered charge regime across the industries AQIS services will be on or after 1 July 1994.

Introduction of the three tiered charging regime is essential if charges are to be acceptable and equitable across all users whether their inspection services are based on quality assurance methods or traditional end point inspection.

The three tiers of the new charge structure comprise:

first tier, a fixed annual charge per premises at which activity is conducted,

second tier, a throughput or volume charge on relevant products,

third tier, a charge per inspector per unit of time, or a charge per inspection.

The third tier inspection charge aims to recover the variable costs of AQIS field inspection activities.

The first and second tier charges between them aim to recover the balance of AQIS chargeable costs which tend by their nature to be fixed in the short to medium term.

The three tiered charging regime allows for the separation and identification of AQIS field and other costs. It contrasts sharply with present AQIS charges the bulk of which are set on an average, per inspector per unit of time basis.

The objectives of the three tiered approach to the pricing of AQIS services are efficiency, equity, consistency, transparency and simplicity.

To meet the efficiency objective, economic theory suggests that the marginal cost of additional inspection resources equates with the price industry pays to deploy them as it will with third tier charges.

For equity, the three tiered cost recovery regime provides a fairer allocation of the costs to be recovered from firms participating in the industry particularly when quality assurance methods become more widespread.

AQIS costs will be measured and applied consistently across industries with the application of the three tiered regime which is based on common principles.

As a public monopoly providing regulatory services, AQIS needs to be able to justify its pricing policies to its clients. It also needs to make its costs and recoveries visible to them. Taken together these imply transparency and simplicity to which the three tiered charging regime contributes.

However due to the shortness of time made available by the Senate for the drafting and introduction of Budget bills and to ensure that the Government's reform plans for the domestic and export meat industries and their associated charging structures are introduced progressively from 1 January 1994 as planned, the Government is currently introducing two Bills for passage of both the House and the Senate in the Budget sittings relating solely to the domestic and export meat industry charging arrangements.

As I stated initially the purpose of the Bill before us is to provide for a first tier, per premises charge to be levied on domestic meat establishments. The second Bill whose introduction will follow immediately, makes consequential changes to the name and coverage of the collection act.

Other changes to domestic and export meat charges including an export meat premises charge to be made on 1 January 1994, can be made by amending the relevant subordinate legislation of other Acts.

The second tier, throughput charge for export and domestic meat is not proposed for introduction until 1 July 1994 so its imposition has been included in the full package of AQIS charging legislation due to be introduced late in these Budget sittings.

Turning now to the financial impact of the three tiered charge regime and the other changes proposed on the meat industry, the estimated revenues I will discuss are all expressed in today's dollars and using accrual accounting concepts.

In 1994-95 the first full year of the three tiered charging system, AQIS revenue from the domestic and export meat industry is expected to be around $78.2 million which will include a maximum of $13.2 million in premises charges. This compares with meat inspection revenue of $80.6 million in both 1992-93 and 1993-94. Revenue is expected to fall in subsequent years reaching $70.5 million in 1996-97.

When the premises charges are introduced on 1 January 1994, the annual cost of meat inspection staff is expected to fall from a base rate of $69,169 to $65,164. The base rate is expected to fall further to $59,164 on 1 July 1994. This will honour the Government's dual pledges not to increase the costs of inspection staff and to reduce the total costs of inspection services by AQIS to the meat industry by $10 million over the next four years.

Revenue from first tier premises charges on domestic meat establishments is estimated by AQIS to total $1.1 million in 1993-94 and $2.2 million in 1994-95 the first full year of its operation. As previously explained, the revenue collected from the premises charge will be offset by a reduction in the revenue from the third tier inspection charge.

Senators this Bill and the foreshadowed amendment Bill are part of major and worthwhile reforms to AQIS and the charging regime for its services. The reform of AQIS charging regimes will be completed when the full package of legislation is introduced late in the Budget sittings.

I commend the Bill to Honourable Senators and I present the explanatory memorandum.