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Rural and Regional Affairs and Transport Legislation Committee
18/10/2016
Estimates
AGRICULTURE AND WATER RESOURCES PORTFOLIO
Department of Agriculture and Water Resources

Department of Agriculture and Water Resources

[17:08]

CHAIR: We will now go to corporate matters.

Senator CAROL BROWN: I want to first go to the issue of Dr Grimes's letter. I understand—and you can correct me if I am wrong, Mr Quinlivan—that there is an Administrative Appeals Tribunal hearing on this matter?

Mr Quinlivan : Yes, I think it is scheduled for a mid-November.

Senator CAROL BROWN: I understand it is Friday, 18 November, at 9:30, where you are the applicant?

Mr Quinlivan : That is correct.

Senator CAROL BROWN: Can you tell the committee what the costs are thus far that have been associated with the defending of keeping the letter from Mr Fitzgibbon?

Mr Quinlivan : Regarding the costs of the application to the AAT, the only information I have is that it was less than $35,000, and there have been some legal expenses. But I do not have precise number. Most of the work has been done internally—

Senator CAROL BROWN: But there has been some external legal advice sought?

Mr Quinlivan : Yes.

Senator CAROL BROWN: Any from the Solicitor-General!

Mr Quinlivan : No!

Senator STERLE: That was cheeky!

Senator CAROL BROWN: Will you be able to provide on notice the exact costs that you have had to pay in terms of keeping the letter secret?

Mr Quinlivan : I think 'not disclosing the letter'—

Senator CAROL BROWN: Okay, I am happy to use 'not disclosing'.

Mr Quinlivan : I do not think it is so much secret, as there are reasons not to disclose it.

Senator CAROL BROWN: The request for the letter was denied. Was that through freedom of information?

Mr Quinlivan : That is correct.

Senator CAROL BROWN: That was denied, and what was the next step? Sorry, let me go back. Was the freedom of information application successful? Was it indicated that the letter should be released?

Mr Quinlivan : There were two applications to the department—one from a journalist and one from a member of parliament. The decision-maker in the department did not agree to provide the document. The next step was an internal review, which was then done within the department, which is the normal process.

Senator CAROL BROWN: Did both the applicants ask for a review?

Mr Quinlivan : I am not sure about that. I think they did. In any case, the arguments were the same. The outcome of the internal review was to reaffirm the original decision. The applicants then sought a review by the Information Commissioner, who then, from memory, decided that the public interest test had not been fully satisfied and the document should be provided. The department has appealed that decision to the AAT, so that is the decision that is being considered by the AAT.

Senator CAROL BROWN: So, essentially, two internal examinations agreed not to release it, but the external examination by the Australian Information Commissioner determined that the letter should indeed be released?

Mr Quinlivan : That is correct.

Senator CAROL BROWN: So now we are at the AAT?

Mr Quinlivan : That is correct.

Senator CAROL BROWN: In terms of that external legal advice that your sought, could you indicate on notice the cost—you said you do not think you have it here—of that?

Mr Quinlivan : Yes.

Senator CAROL BROWN: Can you tell me who gave the advice?

Mr Quinlivan : It would have been the Australian Government Solicitor.

Senator CAROL BROWN: That is all I have on Dr Grimes's letter—unless you want to give it to me now!

Senator STERLE: Along with the cost-benefit analysis for moving the APVMA! That would be good! I just thought I would throw that in in case you were feeling generous!

Senator BACK: The changes in the department's budget estimates for this current year, in contrast to 2014-15 budget, please.

Ms Canning : There have been changes to the department since 2013-14 in terms of machinery-of-government changes, with the water programs coming in last year. So there would be a significant differences in how our budget estimates must look for the current financial year, compared with 2013-14. If you have a specific question I can try to answer it.

Senator BACK: What was the department's budget in 2013-14, and I want to know what the department's budget is in 2016-17. I then will be very interested in learning some of the explanations for that.

Ms Canning : The department's budget for 2016-17, including administered funding is $2.75 billion. If you want just the departmental for 2016-17, it is $381.5 million.

Senator BACK: Do you have the 2013-14 figure there?

Ms Canning : I will have to confirm that.

Senator BACK: Perhaps someone else can do so while I continue with my questions.

Ms Canning : Yes.

Senator BACK: You mentioned the national water infrastructure. Would the loan facility be included in that figure of $2.75 billion? It would not be, would it?

Ms Canning : It would not be, in the sense that it is equity funding for the department. It comes through our balance sheet, but the changes in the resourcing overall for the staff—the FTEs associated with the programs—would be included in that number.

Senator BACK: What I am keen to know, Mr Quinlivan, particularly, is the additional funding the department has been given. Where is it being allocated to deliver on our commitments in both agriculture and water resources? Can you summarise that for us?

Mr Quinlivan : I think the chief finance officer has just done that. That is the main answer to the question.

Senator BACK: Water?

Mr Quinlivan : No, it is—

Ms Canning : In the last 12 months the main changes in our resourcing has been the water programs coming on board, in September last year, and the additional funding last year as a result of the Agricultural Competitiveness White Paper.

Mr Quinlivan : Were you seeking a break-down between those?

Senator BACK: Even if I could get them on notice, it would be very useful.

Mr Quinlivan : We can certainly do that.

Senator BACK: Time does not permit now to go into it in detail, but I would like to see where, particularly in regard to election commitments, these fundings have been allocated.

Ms Canning : I can take that on notice.

Senator McCARTHY: I would like to have a look at the Rural Research and Development Legislation Amendment Bill 2014.

Mr Quinlivan : Again, that is item 17.

Senator McCARTHY: Okay. We will move that one down. That would be 11 now.

Mr Quinlivan : Sorry, just let me clarify. You are not talking about the levy payer register bill; you are talking about—

Senator McCARTHY: The Rural Research and Development Legislation Amendment Bill, which—

Senator STERLE: International forums and exchanges of intelligence.

Mr Quinlivan : I think we can deal with that here. That is a bill that has not passed the Senate. That is about all we can say about it.

Senator STERLE: Who do we blame?

CHAIR: Is it before the Senate?

Senator McCARTHY: It lapsed at the prorogation of the 44th Parliament.

Mr Quinlivan : So it is a lapsed bill that did not pass the parliament—

Senator McCARTHY: No, a lapsed bill.

Mr Quinlivan : A bill that did not pass the parliament and then lapsed, I think would be the correct description of its history.

Senator STERLE: Let us ask the minister. She is in the Senate. Come on, Minister, where is it?

Mr Quinlivan : I am not aware of any intention to reintroduce the bill.

Senator STERLE: Well that was a win for that mob—for the RDC.

Senator CAROL BROWN: Minister, has the government changed its position on this legislation?

Senator Ruston: I would have to take on notice the prioritisation of this current government's bills. As you would be aware, there is a process that is undertaken to prioritise. I will have a look and see where this particular bill that has lapsed is on that list. It may have been not reintroduced on the belief that it had been not passed and that it was not seen as a high priority for reintroduction. I am not aware of the specifics, so I will take that on notice to give you some information.

Senator McCARTHY: I have two questions for you, Minister, to take on notice. Has the department commenced recovering the cost of memberships of international commodity organisations from the matching funding it contributes to relevant RDCs—

Mr Quinlivan : No.

Senator McCARTHY: You can answer that now?

Mr Quinlivan : Yes.

Senator McCARTHY: Will the Rural Research and Development Legislation Amendment Bill be reintroduced in the 45th Parliament? That is the question on notice.

Senator Ruston: We will take that on notice.

Senator McCARTHY: I want to turn to the coalition's election policy commitments. Can you provide an update on the implementation of the white paper? Do you want me to put this question on notice?

Mr Smalley : In general, the Agricultural competitiveness white paper remains a priority for the department. Twenty-two of the 31 measures are considered to be now in a state of business as usual and another five of the submeasures—

Senator McCARTHY: So that was 22 of the 31?

Mr Smalley : That is correct and another five of the submeasures. Those in effect have become business as usual for the department. The other measures are either longer run issues that are still ongoing in terms of their implementation but are not yet in that status of business as usual.

Senator McCARTHY: Can you tell us about the 22 measures?

Mr Smalley : Yes. I could name them, should you wish.

Senator McCARTHY: If you have got them there.

Mr Smalley : The Productivity Commission's inquiries into regulations affecting agriculture; the Productivity Commission's inquiries into regulations affecting fisheries; the cooperatives and innovative business model knowledge; the Australian Competition and Consumer Commission's engagement with the agriculture sector; increasing the deposit limit for farm management deposits to $800,000; allowing farm management deposits to be used as farm business loan offsets; a more simplified accelerated depreciation regime for fencing; better seasonal forecasting through the Bureau of Meteorology; tax arrangements for new water facilities and fodder storage; the Managing Farm Risk Program; the transitional drought and drought recovery concessional loans; the early access to farm management deposits in times of drought; increased farm household allowance case management and activity supplement; the Australian Taxation Office's advice and assistance in drought affected communities; the additional resources to Rural Financial Counselling Service providers; the enhanced social and community support; the Drought Communities Program; the pest, animals and weeds management in drought affected areas; the expansion of CSIRO's freight modelling for agriculture; the development of clear, farmer-oriented priorities to target research development and extension funding; the extension of the Rural Research and Development for Profit program; improving the efficiency of the research and development corporations by improving governance; the additional funding to the Rural Industries Research and Development Corporation for small industries; the levies for export fodder; the emergency pest and disease eradication and national response capability; reducing technical barriers to trade, including the five new counsellors; and the communications campaign. All of those are considered to be implemented and have become business as usual.

Senator McCARTHY: So that is 22 of the 31. What is outstanding?

Mr Smalley : I can, again, read you that list of the ones that are still currently in progress.

Senator McCARTHY: Please do.

Mr Smalley : They are: the reforms to country of origin labelling regulations; the streamlining of the regulation of agricultural and veterinary chemicals; the primary producer income tax averaging; the drought concessional loan scheme for ongoing arrangements; the National Water Infrastructure Development Fund—

Senator STERLE: I do not want to be rude, but I am starting to doze off. Sorry, is there a lot there?

CHAIR: Senator McCarthy asked a question and the—

Mr Smalley : There is another half-dozen.

CHAIR: Do you want him to continue on them, Senator McCarthy?

Senator McCARTHY: Yes.

Senator STERLE: Ah, geez! Put some life into, please, will you?

Senator McCARTHY: Keep going.

CHAIR: You are starting to treat Senator McCarthy like she is in the government, Senator Sterle!

Senator STERLE: I think I need to go for a walk and take up smoking!

Mr Smalley : There is also: the levies for the tea-tree oil; the management of established pests, animals and weeds; a range of subelements around strengthening Australia's biosecurity, including in surveillance, community action, scientific capability and information system development; and enhancing our traceability systems. That is the list for the agriculture competitiveness in this white paper.

CHAIR: You must not have got our letterbox drops during the election, Senator!

Senator McCARTHY: We just want to tick them off and say, 'Check, check, check.'

Mr Quinlivan : Just for clarity on that second lot: I think we regard them as on track but not yet implemented.

Senator McCARTHY: So you are not saying they are outstanding? They are on track?

Mr Quinlivan : Yes, we are on track. They are proceeding along the timetable that we anticipated; they are just not finished yet.

Senator McCARTHY: What is the time frame that you are—

Mr Quinlivan : It varies between individual items.

Senator Ruston: Would you like us to go through that list?

Mr Quinlivan : Perhaps we can give you something on notice there.

Senator McCARTHY: No, that is fine.

CHAIR: If there is a chance to exhaust it while we are here, Mr Secretary, let's do it. Are you able to answer Senator McCarthy's time frame questions on the balance of these?

Mr Smalley : I would need to go through each one of those individually.

CHAIR: Please feel free.

Senator McCARTHY: No, that is fine. You can give us that on notice. Thank you. Could you provide an update on the implementation of the policy—$8.3 million to complete implementation of the Livestock Global Assurance Program. How will this program work with ESCAS? And what elements of LGAP have already been implemented? And will there be ongoing costs for LGAP to be administered?

Mr Quinlivan : That is a good question. That is an election commitment. The implementation is being managed by our export group, which is in outcome 2. But the short course is that we have been talking to the export industry about the implementation of LGAP, and effectively the government is waiting for the livestock industry to provide us with a concrete proposal to implement that scheme arrangement.

Senator McCARTHY: How long will that take?

Mr Quinlivan : That is really in their hands. As soon as we have the proposal we will have something concrete that we can then consider.

Senator CAROL BROWN: What does that mean—that it is in their hands?

Mr Quinlivan : Well, we do not have a concrete proposal. The government has committed $8.3 million to assist the development and implementation of that scheme. The industry's current figuring has a cost that is higher than $8.3 million, so they are having to work out what sort of contribution they are willing to make or what adjustments they will make to the scheme to fit within the $8.3 million. And at the point that the industry has reached a conclusion on that then they will be submitting a proposal to the government.

Senator CAROL BROWN: What costs have they put on it?

Mr Quinlivan : I am not sure, but I know it is in excess of $8.3 million.

Senator McCARTHY: Can you take that on notice?

Mr Quinlivan : Well, I do not think we can answer the question. I am just saying that I know the industry's current thinking about LGAP has a price tag that is north of $8.3 million. How far I do not know. They are developing the proposal, so they are going to have to adjust to the budget or find some additional funds internally to fund it. So, it is not really a question that we can answer. It is not our proposal.

Senator CAROL BROWN: Do you know whether those costs that they have come up with include ongoing costs?

Mr Quinlivan : I do not know. But, again, I would have to wait until they have given us a proposal that has concrete, reliable figures to answer that question, and we are not at that point yet.

Senator CAROL BROWN: But there are no deadlines for them to meet?

Mr Quinlivan : Well, we would like it to be done quickly, obviously. It is an election commitment, and the funds are being provided with a specific time frame, so we would like it to happen as soon as possible.

Senator CAROL BROWN: What is the time frame for the funds?

Mr Quinlivan : We are just having a look here, but I suspect that will be confirmed in MYEFO when most of these smaller election commitments will be considered and the funding profile settled by the government and then announced in MYEFO. That would be my expectation.

Senator CAROL BROWN: So, you are not able to answer the question about how long the funds will be available to implement this?

Mr Quinlivan : I do not think the matter has been settled. My understanding it that that particular group of election commitments has not been considered by the ERC yet.

Senator McCARTHY: We will keep an eye on that one. Mr Quinlivan, $1.2 million to boost research and development for the thoroughbred breeders: how will this measure be implemented, and will funding continue once the $1.2 million is fully allocated?

Mr Quinlivan : Somebody who knows more about this than me is coming to the table, but that is essentially to implement an R&D arrangement for the thoroughbred horse industry of the kind that we have for other industries. So, we are effectively creating a levy and a matching funding system for the thoroughbred industry.

Ms Freeman : As part of its election commitments the government committed to establishing a statutory R&D levy for the industry by 1 July 2017. As part of that, the industry is expected to raise approximately $400,000 each year, which would then be matched by government funding. So the number you are actually referring to refers to the period over the forward estimates. How it would work is that RIRDC, who were here before—the Rural Industries Research and Development Corporation—would be managing that with that industry. They would administer the R&D projects that that industry would like to have brought forward. Where it is up to now, off the back of the election, is that the department is liaising with the thoroughbred industry on how they want to do that. So that is on track regarding how they want to collect and distribute the levy. It is kind of like once you kick off the batting to say that the government wants to organise an R&D levy then industry goes away and consults heavily on how they want to do it. At the moment the ball is in their court, and they will come back to us to say how they want to do it.

Senator McCARTHY: Just to be clear, though, is the $1.2 million to establish that? Or is that over a period of time plus the—

Ms Freeman : That is over the period of the forward estimates. The government has agreed to have a matching R&D levy for the thoroughbred horse industry, and how that works is that industry will raise a levy from their levy payers. As I said, it will be managed through RIRDC and then the Commonwealth government actually matches up to 0.5 per cent of the gross value of production of that industry, and the amount that is referred to there is the estimate of what that will cost over the period of the forward estimates.

Senator McCARTHY: Thank you. Mr Quinlivan, establishing a regional investment corporation: how will this measure be implemented and over what time frame? And what safeguards will be implemented to ensure that the department will be able to administer the new financing and concessional loans scheme?

Mr Quinlivan : Again, this is a big program of work which will be going to cabinet quite soon to have the arrangements settled. We have a task force set up in the department that is preparing the work, and we are hoping that the submission will be considered by the cabinet before the end of this year. There are a lot of judgements that will need to be made before the corporation is created, so we are exploring all of those, and that will be part of the cabinet advice. I do not know that there is an awful lot more that we can talk about at this stage, other than to say that we are expecting that a decision will be made and announced before the end of this calendar year. If you have more specific questions, we have people here who may be able to field them, provided that they do not stray into that material that is in the cabinet process.

Senator McCARTHY: It is very general—simply to be able to start the conversation: how will this measure be implemented? I think that is quite a straightforward question. Over what time frame? And what safeguards?

Mr Quinlivan : I effectively answered that, yes.

Senator McCARTHY: Yes. So, clearly if you are establishing or building up a cabinet submission, the question is, how much do you want to reveal here in relation to that?

Mr Quinlivan : I am expecting that the decision will be made and announced within the next month or so. That will answer all those questions. At the moment I cannot really speculate.

Senator McCARTHY: Can you provide an update on all other election commitment policies that will be administered by the department? And by all means take this as a question on notice.

Mr Quinlivan : I think that would be the best idea, yes.

Senator CAROL BROWN: Mr Quinlivan, you talked about the costs thus far—about the Dr Grimes letter being less than $35,000. Is there any chance you can be a bit more specific?

Mr Quinlivan : I was giving you the information that is in my brief. I would interpret that to mean it is not much less, but somewhat less.

Senator CAROL BROWN: You could just table that brief, if you like.

Mr Quinlivan : In any case, I will take it on notice to provide you with the legal expenses.

Senator CAROL BROWN: Yes, the legal expenses and, if you can, the exact figure.

Mr Quinlivan : For the application to the AAT?

Senator CAROL BROWN: Yes.

Mr Quinlivan : Sure.

[17:41]

CHAIR: We will now go to outcome 1: Sustaining natural resources for longer-term productive primary industries.

Senator BACK: Mr Quinlivan, on the backpacker tax review, can you tell us what changes the government is proposing to the backpacker visa programs 417 and 462?

Mr Quinlivan : Yes, we can, and I might ask Mr McDonald to go through this.

Mr McDonald : The package announced by the government involves from 1 January 2017 an income tax rate for all working holiday-makers at 19 per cent from the first dollar earned up to $37,000, with marginal tax rates applied thereafter. From 1 July 2017, working holiday-maker visa application charges would be reduced by $50, bringing that down to $390. Ten million dollars will be provided to Tourism Australia for a global youth-targeted advertising campaign. The government will also allow working holiday-makers to stay with one employer for up to 12 months so long as the second six months of that period of employment is worked in a different region. The government has also announced that the age limit for 417 and 462 visas would be increased from 30 to 35 years.

There are also a range of other measures which require employers of working holiday-makers to register with the Australian Taxation Office and that registration would enable them to withhold the 19 per cent tax rate that the government has put forward. Employers of working holiday-makers who do not register with the ATO will be required to withhold at the 32.5 per cent tax rate and may be subject to ATO penalties for noncompliance if they fail to do so. If an employer withholds at the 32.5 per cent tax rate, working holiday-makers will still have access to the 19 per cent tax rate but they will have to access that on lodgement of an end-of-year tax return. An important initiative also is that an additional $10 million will be provided both to the ATO and the Fair Work Ombudsman to establish the employer register and to assist with compliance activities related to exploitation of working holiday-makers. The register will be made public so that working holiday-makers and other employees can identify if an employer is registered.

Finally, the government has met this with a range of offsetting savings, and this includes, from 1 July 2017, a one-off increase to the passenger movement charge of $5 and an increase in the departing Australia superannuation payment for working holiday-makers specifically to 95 per cent, effective 1 July 2017.

Senator BACK: What is the difference between a 417 and a 462 visa?

Mr McDonald : Visa policy is the responsibility of the Department of Immigration and Border Protection but, broadly, the difference between the two is that the 417 is a range of agreements with countries where the participant numbers are uncapped. Under the 462 visa Australia has capped arrangements with participant numbers, except for the United States of America. I can find that detail should you wish.

Senator BACK: You might just provide it on notice. You spoke of being able to work for the one employer so long as six months is in a different region. What defines a different region?

Mr McDonald : That will be subject to decisions taken by the Department of Immigration and Border Protection. They are responsible for the implementation of that policy. How that is designed in practice I think is still being determined by that department and is best referred to them.

Senator BACK: I take it, then, that these people are eligible to work in agriculture, horticulture, hospitality and tourism. Is there anything they cannot work in?

Mr McDonald : Working holiday-makers are not restricted from working in any specific sector—in fact, they work in a high variety of sectors. The thing you might be alluding to is that to be eligible for a second year visa under the 417 program there are three industries that are eligible, and that is agriculture, mining and construction. If you work in regional areas identified by the Department of Immigration and Border Protection through a series of postcodes that they release, you are eligible to apply for a second-year visa under the 417 program.

Senator BACK: I am not sure whether you can answer this, but you might be able to, Mr McDonald. Hopefully someone in the room can. What is the tax-free threshold currently for Australians who are working?

Mr McDonald : For Australians the tax-free threshold is $18,200, but there is also a low income offset amount which takes it up to a higher amount as well, above that.

Senator BACK: What was it raised from?

Mr McDonald : My understanding is it was $6,000 previously, or thereabouts.

Senator BACK: About $6,000. We can compare notes, I suppose. Why is it important, for rural and regional Australia particularly, that these programs be introduced?

Mr McDonald : The visa program?

Senator BACK: The changes to the backpacker tax as proposed.

Mr McDonald : I would explain that by saying that the current law for most working holiday-makers in Australia is that they should already be declaring themselves as non-residents for tax purposes, which is legislated at 32.5 per cent. This follows a ruling by the Administrative Appeals Tribunal in March 2015 to this effect. The importance of this program is that both the agriculture and tourism sectors have expressed that they see working holiday-makers as a key part of their temporary and seasonal labour workforce, and therefore they hold concerns that should there be enforcement of the 32.5 per cent tax rate it would have a dampening effect on their participation in Australia.

Senator BACK: Comparisons or contrasts have been drawn with Canada and New Zealand, in terms of different locations that backpackers may go to. Do you know what the equivalent tax rate is for backpackers working in New Zealand?

Mr McDonald : I will come to it in a moment. There are differences between what are headline tax rates and what would be someone's take-home pay and in their pocket. That is some of the analysis that the government has looked at. The headline rate in New Zealand for up to $14,000—I think, but I will confirm that—is 10.5 per cent.

Senator BACK: Do we know what the average wage is that backpackers would be paid in New Zealand, in New Zealand dollars, which would be about 6c weaker than ours? And do you know what the figure would be for the average wage that a backpacker would expect to be paid working in Australia?

Mr McDonald : I might tackle that from the perspective of the work that the government has announced by saying that a 19 per cent tax rate delivers a higher after-tax income for working holiday-makers in Australia.

Senator BACK: It does?

Mr McDonald : When we look at that from a detailed perspective, that produces an after-tax income in Australia of $10,530 on a range of assumptions that we have drawn upon. In New Zealand, when you take into account exchange rates and cost of living expenses and look at that from an equivalent perspective, a working holiday-maker doing the same hours over a six-month period comes out at $10,125, which is a difference of $405 over an equivalent period of time, working the same hours.

Senator BACK: Both adjusted to the Australian currency?

Mr McDonald : Yes.

Senator BACK: What is the scenario in New Zealand with superannuation?

Mr McDonald : New Zealand does not afford temporary residents superannuation.

Senator BACK: So there is no disadvantage when comparing between the Australian and New Zealand situations on that front. It is not for me to ask you why it is 95 per cent and not 100 per cent.

Mr Quinlivan : I think we can answer that. There is a constitutional issue about acquisition of property that might be created with a 100 per cent tax.

CHAIR: 'On just terms'.

Senator CAROL BROWN: Given what you have just said, Mr McDonald, why are growers and the industry up in arms about firstly the 32.5 per cent and now the 19 per cent? If everything is as you have just indicated, why is there such a kerfuffle?

Mr Quinlivan : I do not think that is the feedback we have had.

Senator CAROL BROWN: Mr McDonald, when asked, did indicate there were some concerns.

Mr Quinlivan : There were certainly concerns about 32 per cent, but your question included an assumption that there was unhappiness at the 19 per cent. I think there is unhappiness about the timing, but the feedback we are getting is that 19 per cent is a satisfactory outcome.

Senator STERLE: Start with the 32 per cent, as Senator Brown said. Why was the industry swamping this joint and going berserk. We had hospitality and agriculture saying: 'My God, we cannot find people. There is no certainty.' What started all that if everything is tickety-boo?

CHAIR: With respect—

Senator STERLE: That is a fair question.

CHAIR: It is, but you can either have one question or the other—

Senator STERLE: Senator Brown asked that.

CHAIR: No, she included the 19 per cent and asked why is it contentious. I recommend, just to assist you, that you separate them.

Senator CAROL BROWN: It is still contentious, the 19 per cent. The current government's position of 19 per cent, 95 per cent clawback of the superannuation, the $5 travel fee increase—that is still contentious. You do not agree?

Mr McDonald : A lot of this relates to the Administrative Appeals Tribunal ruling in March 2015. There is some confusion about this, but what the Administrative Appeals Tribunal upheld was that most working holiday-makers should be considered nonresidents for tax purposes. Australia relies on a self-declaration process for tax rates. My understanding is—based on correspondence with the ATO and others—that a high number of working holiday-makers were declaring themselves as Australian residents for tax purposes. The AAT ruling changed that situation—or confirmed that that was not a correct interpretation of what was intended by the law.

Senator STERLE: When a backpacker comes out to work, who gives them the form to tick whether they are an Australian resident or a temporary visa worker.

Mr McDonald : Normally that is an arrangement between the employer and the employee.

Senator CAROL BROWN: My question stands. In feedback, have concerns been expressed about the current government position?

Mr McDonald : I refer to the work that the department commissioned through Deloitte. Deloitte's conclusion was that, whilst a number of people put forward that they would like the tax rate to be at zero per cent, of tax rates put forward above zero per cent, 15 per cent and 19 per cent were the most common tax rates supported by stakeholders.

Senator CAROL BROWN: You are obviously aware of the assumptions that were applied for the economic modelling on the 32.5 per cent tax rate?

Mr McDonald : No, that is the Department of the Treasury, which does the costings of revenue in the Commonwealth.

Senator CAROL BROWN: So they did not share any of those assumptions on 32.5 per cent or 19 per cent?

Mr McDonald : Costing assumptions are handled by the Department of the Treasury. It is not unusual they do not routinely share that with others.

Senator CAROL BROWN: I just asked whether they shared that advice, or were you indeed aware of the assumptions? That is my question.

Mr McDonald : I am not aware of and have not been made privy to the detailed costings assumptions by the Treasury.

Senator CAROL BROWN: What about the department?

Mr Quinlivan : Mr McDonald is speaking for the department.

Senator CAROL BROWN: Okay. So you do not know if there were different assumptions applied to the 19 per cent versus the 32.5 per cent?

Mr McDonald : That would have to be answered by the Treasury because I am not privy to the detail. I am not privy, so I do not—

Senator CAROL BROWN: So you do not know whether the assumptions were the same?

Mr McDonald : I am not sure whether they made any adjustments or not, Senator, so, no.

Senator CAROL BROWN: Are you aware that Treasury briefed the Labor opposition that backpacker numbers will continue to decline at the 19 per cent rate?

Mr McDonald : I am aware of that meeting. I cannot recall the date off the top of my head, but my understanding, and again this would have to be confirmed with the Treasury, is that those numbers that you refer to are about their costings methodology, not about behavioural assumptions around what may or may not happen under different tax rates.

Senator CAROL BROWN: I can assure you that is not the indication from the shadow minister. Have you sought a formal briefing on the revised tax rate?

Mr McDonald : I do not quite understand, Senator. From the Treasury?

Senator CAROL BROWN: Yes.

Mr McDonald : As part of normal government processes, we engage with Treasury and a range of other departments, but I have not sought any formal briefings.

Senator CAROL BROWN: So in your response to Senator Back's questions, when you talked about scenarios—you talked about using assumptions there. Whose assumptions are they? Where did you get them from?

Mr McDonald : The government, as part of its election, committed to a review of the tax rate. This department had responsibility for leading that review. The review, which in practice was a number of officials across relevant departments, looked at what would be a comparable or better after-tax rate for working holidaymakers against comparable countries that Australia competes with.

Senator CAROL BROWN: So your assumptions that you were talking about were done at the 19 per cent tax rate?

Mr McDonald : That is right, yes.

Senator CAROL BROWN: And obviously you had a look at the 32.5 per cent tax rate too?

Mr McDonald : The modelling and analysis that the review conducted was about what tax rate would deliver a comparable or better after-tax income rate for Australia relative to—

Senator CAROL BROWN: Other countries?

Mr McDonald : key other countries, those being Canada, New Zealand and the UK.

Senator CAROL BROWN: You talked about New Zealand. Do you have the information about the other two countries?

Mr McDonald : Yes.

Senator CAROL BROWN: Can you table that information?

Mr McDonald : I can take it on notice.

Senator STERLE: Is it on a website or anything?

Mr McDonald : When the Treasurer issued his media release around all of this—there is a hyperlink at the bottom of the Treasurer's media release that goes to a fact sheet around these matters.

Senator STERLE: On what you are talking about—what you are quoting, what you are using?

Mr McDonald : It provides a bar chart which those numbers were derived from.

Senator STERLE: So it is no different from what you are telling us; that is what you have based your assumptions on?

Mr McDonald : The bar chart is not different.

Senator STERLE: So why do you have to take it on notice? Is there something secretive?

Mr Quinlivan : I hesitate to mention this, given the previous conversations, but the review that was done in this area, which was led by Mr McDonald—the final product was a cabinet submission. That was the basis of the decision. What he is saying is that he is not sure what it is that we can release. Given that the decision has been made, it should be okay. We will endeavour to do that.

Senator STERLE: Groovy.

Senator CAROL BROWN: Have you briefed the minister on the economic modelling, or the work that you have carried out?

Mr McDonald : Yes. We have done a range of things with the minister around these matters.

Senator CAROL BROWN: Did the work that you carried out go to whether 19 per cent would act as an incentive for backpackers to come here, or was it just about whether we can offer a product that is just as good or a bit better or whatever than those three countries that you mentioned?

Mr McDonald : The review was focused on the tax rate that would make Australia internationally competitive against those competitor countries rather than looking at being something else around driving additional demand or arrivals, as you indicated. Importantly, that was to ensure that working holidaymakers did not have an incentive to choose those competitor countries if they took into account the tax rate in its own right. But importantly a range of other things go to Australia's attractiveness. They are some of the things that I raised with Senator Back before, around lowering the application fee for visas, expanding the age cap up to 35 years, and the Tourism Australia $10 million advertising campaign. Those measures together certainly make Australia comparable if not better, and certainly increase our attractiveness. I do flag that behaviour in arrivals is not just driven by respective tax rates, as well.

Senator CAROL BROWN: Who analysed the impact of the 19 per cent compared to the 32.5 per cent and the impact on competitiveness?

Mr McDonald : A group of officials situated in the Department of Agriculture, but we had a range of secondees from other departments. Most notably on this we had secondees from the Department of the Treasury and the ATO.

Senator CAROL BROWN: Treasury and the ATO—is that all?

Mr McDonald : No, that is not all. I can tell you the other secondees.

Senator CAROL BROWN: They did the analysis. Is that available?

Mr McDonald : As I just indicated before to Senator Sterle, I will take on notice whether that can be tabled.

Senator CAROL BROWN: Is that part of a cabinet document?

Mr Quinlivan : Yes. That is the same question we were addressing a few minutes ago.

Mr McDonald : Just to complete the answer to an earlier question, the department had secondees from Austrade, the Australian Taxation Office and the departments of the Treasury, employment, immigration and border protection, and Prime Minister and cabinet as part of our team. A number of them made part-time contributions. On and off a number of people were part of the work over the last few months.

Senator CAROL BROWN: What was the objective this team was given?

Mr McDonald : The team was looking at the election commitment, as put out by the government earlier in the year.

Senator CAROL BROWN: Was it an election commitment?

Mr McDonald : Yes, that's right. I am happy to table the election commitment.

Senator CAROL BROWN: No, that is all right. Was it an election commitment originally—in what, 2014?

Mr D Williamson : It came out of the 2014 budget.

Senator CAROL BROWN: It came out of the 2014 budget originally.

Mr D Williamson : The election commitment was the review that Mr McDonald referred to.

Senator CAROL BROWN: Yes, okay; sorry. But originally, I am pretty sure the—

Senator Ruston: 2015. It was a determination.

Mr McDonald : It was the 2015-16 budget—

Senator CAROL BROWN: My apologies, that is right: the 2015 budget.

Mr McDonald : where it was clarified and announced as a revenue measure.

Senator CAROL BROWN: That is right. So what was the objective that your team was given? Was it to implement—was it supposed to be a cost-neutral solution?

Mr McDonald : Normal government budget objectives and processes require offsetting savings for new spending or revenue forgone. That is nothing new, it is very public. That is just normal.

Senator CAROL BROWN: Sorry to interrupt, but were they the parameters that you are working within? That it was essentially to be a cost-neutral solution—I should not say 'solution,' really.

Mr McDonald : The government's announcement is fully offset, and that is consistent with broader government budget requirements.

Senator CAROL BROWN: Can you remind me what the total savings were

Mr McDonald : It involved a five-dollar increase to the—

Senator CAROL BROWN: No, sorry: the total savings with all the measures—was it five hundred and something million?

Mr McDonald : Over the forward estimates, spending under the government's package totalled $350 million. The savings from those two measures that I identified earlier account to 365 million, over the forward estimates.

Senator CAROL BROWN: We will probably come back to this after lunch, but just going back to that election commitment: obviously, this was not the first review into the backpacker tax. Were you involved in the other reviews?

Mr McDonald : Our department was part of an interdepartmental committee that was part of that, and I was the representative.

Senator CAROL BROWN: How many reviews did we have in the end? Were there three?

Mr McDonald : There was a visa process led by the former senator Mr Colbeck. That was run out of his portfolio agency, Austrade—

Senator CAROL BROWN: Sorry; and was this department involved in that as well?

Mr McDonald : The department was part of an interdepartmental committee. But the analysis and work was led to principally by the Austrade agency.

Senator CAROL BROWN: And those options were put forward but went nowhere. Is that correct?

Mr McDonald : Well, the government did not make an announcement.

Senator CAROL BROWN: So that was the first review, is that correct?

Mr McDonald : If that is how you wish to term it, Senator, yes.

Senator CAROL BROWN: I do not want to put words into Senator Colbeck's mouth, but I think that is how he—

Mr Quinlivan : Certainly in recent times, that is correct.

Senator CAROL BROWN: Yes. From memory, he was charged with having a look at it but he was told it had to be to on a cost-neutral basis. I am happy to stand corrected.

Mr McDonald : Which is just normal government budgetary requirements.

Senator CAROL BROWN: That was the first review. I think there was another one. Was there another one?

Mr McDonald : Not that I am privy to—

Senator STERLE: I think it might be the case, Senator, that when the election was called and we left here, Mr Joyce said, 'watch this space'—but I don’t think that is a review, is it?

Mr Quinlivan : You may also have in mind the AAT proceedings and decisions which actually created that interpretation that is now being changed.

Senator CAROL BROWN: That created the budget measure, yes. Senator Colbeck's review was second, and there was a review that resulted in the 2015 budget measures. That is right, isn't it?

Mr Quinlivan : I do not think we can call the AAT hearings a review, but I am just trying to—

Senator CAROL BROWN: Yes, I think that is what I was—

Senator Ruston: It was a determination.

Senator CAROL BROWN: A determination.

Proceedings suspended from 18 : 15 to 19 : 14

CHAIR: We will resume. Mr Quinlivan, you can direct these questions wherever you want. I want to tighten up some things around this backpacker tax at 32.5 per cent, which is how it is being dealt with publicly. Are you aware when that tax threshold was set?

Senator Ruston: Do you mean when the 32.5 per cent was determined by the —

CHAIR: The government of the day.

Senator Ruston: When the 32 per cent was first—

CHAIR: Correct. I know the answer to my own question.

Mr Quinlivan : I think it was the 1980s.

CHAIR: There we are; how alert is he after dinner. It came in in 2012 under a Labor government. So our backpacker tax that we are dealing with is Labor's backpacker tax.

Mr McDonald : I might just clarify those points. The tax-free threshold was removed and my understanding is the nonresident tax tables were introduced was 1982. So there has been a nonresident tax rate since 1982 and then the most recent increase to the nonresident tax rate was from 29 per cent to 32.5 per cent, which occurred in 2012-13 budget.

CHAIR: That is right. I am going to call the 32 per cent the Labor backpacker tax, just to keep Senator Sterle on his toes. This was not a tax created by this government; this was a pre-existing tax that came into focus again with a ruling by the Australian tax office, or a clarification by the tax office?

Mr McDonald : In March 2015, the Administrative Appeals Tribunal had the ruling that clarified that most working holiday-makers would struggle to meet the ATO's residency test to be eligible as a resident for tax purposes; therefore, most working holiday-makers would be deemed to be nonresidents for tax purposes.

CHAIR: So still no activity by the current government; this is the Administrative Appeals Tribunal.

Mr McDonald : That is right.

CHAIR: Then the tax office does whatever it does to see that this is introduced. Is it not the case that, at that point, due to activity from industry—and I can attest to activity within the government itself—the government started to look at trying to deal with the reaction of industry, particularly agriculture and tourism, to create an environment where this tax element and a number of things that were being dealt with was not a disincentive? It was not a case of trying to create an incentive; that it was not a disincentive to the continued attraction for this foreign labour force within agriculture and tourism.

Mr McDonald : That is certainly reflected in the government's election commitment that was released on 17 May 2016 and that was where the government set aside the enforcement of the 32½ per cent tax rate for working holiday-makers and committed to the review that we spoke about earlier.

CHAIR: So at every measure, the government has endeavoured—and we may all have a view about timing—to resolve an issue that was of serious concern to agriculture and tourism. In any event, that is a given statement, so I do not need you to comment on it. Let us refer to the last inquiry where government has endeavoured to engage with industry and all stakeholders through the inquiry conducted by the minister assisting the Deputy Prime Minister. Are you familiar with that inquiry?

Mr McDonald : If you are referring to the—

CHAIR: The Hartsuyker inquiry.

Mr McDonald : Yes, that is something I was—

CHAIR: Do you know how many submissions were made to the Hartsuyker inquiry.

Mr McDonald : Precisely—

CHAIR: 763, but if you have another figure, it will be higher than that.

Mr McDonald : I was going to say, more than 1,700. I was going to look for the precise figure.

CHAIR: Amongst mates, we will live with 1,700 submissions. Are you familiar with the submissions, start to finish?

Mr McDonald : The team that I led managed the submissions' process in terms of the department's website and the portal which accepted those submissions. Throughout the review, we published those that gave approval to be published on the department's website; they are freely available, a selection of those who gave approval. Moreover, we shared the submissions with Deloitte, who we engaged as the consultancy to do the independent consultation for the review.

CHAIR: Was there a submission there from the National Farmers Federation, who represented, one could argue, all of the stakeholders in agriculture?

Mr McDonald : There was a submission from the National Farmers Federation.

CHAIR: Do you remember what tax rate they recommended in their submission?

Mr McDonald : I cannot be precise about the tax rate that they recommended, but they have on a number of occasions put forward that they would be comfortable with a 19 per cent tax rate.

CHAIR: Where did the government settle in relation to this tax rate in the legislation it has introduced?

Mr McDonald : 19 per cent.

CHAIR: 19 per cent. I am struggling here. We have got a circumstance set by another government in terms of the rate of taxation; a trigger, or a focus, or a reintroduction by the Administrative Appeals Tribunal—nowhere for government to be seen yet. Then, government engages, takes 1,700-plus submissions across all of the industries and, as far as agriculture is concerned, has settled on the one of the major peak body. Does that capture it, Mr McDonald? You do not need to elaborate; I am asking you, do you need to correct any aspect of the statement that I have just made.

Mr McDonald : No, Chair.

CHAIR: Government, once it had settled on that after the inquiry, would it be fair to say within weeks introduced legislation to the House of Representatives?

Mr McDonald : That is correct.

CHAIR: We are not going to go to the body of the bill, because it is before a committee, but had that bill been given prompt passage, it would now be law—is that correct? It was resisted by the Labor Party, and was sent to an inquiry for 17 November.

Senator CAROL BROWN: It has not even been to the Senate; it has not even reached the Senate!

Mr McDonald : I am not sure that is for me to—

CHAIR: Anyway, my point is made.

Senator Ruston: Senator O'Sullivan, when the bill comes to the Senate, should it be passed, the change in tax rate will come into effect—

CHAIR: An immediate effect.

Senator Ruston: on 1 January.

CHAIR: On 1 January.

Senator STERLE: That was an oops.

CHAIR: Which was an oops?

Senator STERLE: The timing.

CHAIR: No, look, my point is made. To you, Senator Sterle.

Senator STERLE: Thanks, Chair. I have no argument with your line of questioning at all. The argument that the opposition has, Chair, and for those listening, is this was raised in May 2015. It was the uncertainty that has been created within the industries of agriculture and tourism where they were left struggling for 15 months before a decision was made. The sad part about this that is the man who came out with the wonderful announcements, who could not sell a cupcake at a school fete, has been rewarded with the ambassadorship in the US.

CHAIR: Senator Sterle, do as I do to make a point, and ask some questions of the witnesses.

Senator STERLE: You are helping my argument, Chair.

CHAIR: Sorry, I forgot one.

Senator STERLE: This is the kicker, this one.

CHAIR: I had forgot it, genuinely. Within the scope and knowledge of anyone at the table, are you aware that the 32.5 per cent tax threshold remains in the Labor Party's budget papers today, at 32.5 per cent?

Senator STERLE: So, you do not want us to negotiate so you can get it through the Senate? I should tell Chris Bowen that.

CHAIR: Let's hope that everyone is listening to that.

Senator STERLE: If it is the position of the government now, that is contradictory to what your Treasurer has been saying to your Prime Minister.

CHAIR: It is not useful to debate this. You have the call, Senator Sterle.

Senator STERLE: This is typical of the confusion and chaos in this government. I feel sorry for you, Senator, because they could not even set you up right for the right questions.

Senator Ruston: Senator O'Sullivan, in response to some commentary that is going on behind the scenes, the 32.5 per cent tax rate savings are booked to the opposition's budget figures and, until very recently, remained on shadow minister Bowen's website.

CHAIR: I thought that was the case. Thank you, Minister.

Senator CAROL BROWN: Has the Treasury discussed the increase in the Passenger Movement Charge with the Department of Agriculture?

Mr McDonald : The government's announced package was taken forward through normal cabinet processes. All the measures announced were made available to the Department of Agriculture though that cabinet process.

Senator CAROL BROWN: Is that a yes?

Mr McDonald : We are aware of it, yes.

Senator CAROL BROWN: I am not asking, 'Are you aware of it?', 'Did you get a copy of the Cabinet brief?' or whatever; I am asking: was it discussed?

Mr McDonald : Through normal cabinet deliberations, the package announced—

Senator CAROL BROWN: So, you had a discussion with—

Mr McDonald : Yes.

Senator CAROL BROWN: Through what avenue was that?

Mr McDonald : Through normal cabinet processes.

Senator CAROL BROWN: What does that mean?

Mr McDonald : When governments put together proposals for consideration, departments work up options, and we were a part of that.

Senator CAROL BROWN: So, it was not a matter of being advised; you were actively participating in the discussion?

Mr McDonald : I would not characterise it like that. I would say that this department, along with the Treasury, were part of supporting the government's cabinet process, and that was one of the measures that the government has agreed and announced.

Senator CAROL BROWN: So that was the first time the department, through that cabinet process, knew were the government had landed in terms of the backpacker tax?

Mr McDonald : The government landed with the announced package. It was not predetermined or anything like that.

Senator CAROL BROWN: I was not trying to suggest that. So the announcement was first and cabinet was second?

Mr McDonald : No.

Senator CAROL BROWN: That is what I am asking.

Mr McDonald : There was a cabinet process and the announcement made by the government—

Senator CAROL BROWN: So the first time you knew about the decision of the government was when the cabinet submission was being put together, which you were involved in. Was that the first time you knew about the decision of the government?

Mr McDonald : No. The decision of government was reflected in the announcement made by the Treasurer. I was aware when the Treasurer made his announcement about what the package was. As I said, though, a range of options were put forward in terms of normal cabinet deliberative processes. I can talk about this one because it was announced by the government. It just followed normal government budgetary processes.

Senator CAROL BROWN: You received 1,700 submissions, which obviously indicates there is a lot of interest out there.

Mr McDonald : Yes.

Senator CAROL BROWN: Were they all from organisations and businesses?

Mr McDonald : They were from a range of people in the community. Broadly speaking, it involved employers of working holiday makers, principally across tourism and agriculture. There were representations made by union organisations, hostel operators, other peak industry bodies from respective groups and, of course, individual working holiday makers as well.

Senator CAROL BROWN: Once the decision was announced, they were putting in a submission in terms of the 32.5 per cent, weren’t they—in terms of what they thought it was and they were putting an alternative position forward; is that right?

Mr McDonald : Broadly speaking, yes.

Senator CAROL BROWN: There has been no consultation on what the new measures are?

Mr McDonald : No, I would not put it that way.

Senator CAROL BROWN: Which way?

Mr McDonald : There was a very significant consultation process. As I said before, the department engaged Deloitte to lead that process. The Deloitte process essentially involved a series of face-to-face consultations in every state and territory across Australia, and also an online written submission process as well.

Senator CAROL BROWN: How long did the consultation take from the closing of submissions to announcement?

Mr McDonald : I should have this off the top of my head, but I will try and find it for and come back to you. If not, I will take that on notice. The Deputy Prime Minister opened the submissions on—it has come to me now—on 15 August with the launch of the review and the submission process closed on Friday, 2 September.

Senator CAROL BROWN: And the announcement was made—can you refresh my memory, please, Mr McDonald?

Mr McDonald : It was made on 27 September.

Senator CAROL BROWN: I am just trying to get my head around where people put in a submission, which closed on 2 September. You had face-to-face consultations around the country in every state and territory capital?

Mr McDonald : Yes, Senator.

Senator CAROL BROWN: It was a whirlwind tour. It was quick.

Mr McDonald : It is one of the reasons we engaged a third-party consultant to assist us with this to bring the resourcing effort to what was a quite an intense process.

Senator CAROL BROWN: I am just saying it was a quick review, or whatever you want to call it. My question before was that the submissions were based on the budget measure of May 2015—yes?

Mr Quinlivan : Wouldn't it be more correct to say that the submissions were based on the terms of references for the review?

Mr McDonald : Yes.

Mr Quinlivan : One of which was—

Senator CAROL BROWN: The thinking of those people obviously was about what the May 2015 measure was.

Senator Ruston: I am not sure that we can actually assume anything of what people were thinking when they put a submission in. They probably came from myriad of different positions.

Senator CAROL BROWN: What I am saying is that—

Senator Ruston: Senator Brown, could I finish?

Senator CAROL BROWN: Sure, sorry, Senator Ruston.

Senator Ruston: I was just going to say, as you rightly pointed out before we broke for dinner, there was a preceding inquiry that was run by Senator Colbeck, and I would imagine that a number of the people who were putting submissions would have been making reference to that inquiry, some would have been making reference back to the 32 and some would have been making reference to their own previous statements. So I think it is a little bit hard for us to be judging what people were assuming they were making their submissions on, outside of what Mr Quinlivan said, and those were the terms of reference of the inquiry.

Mr McDonald : I can further say that the website portal for where public submissions could be submitted had information about the terms of reference as contained in the government's election commitment. That was made available and the Deputy Prime Minister's media release, when he called for submissions, alluded to the election commitment's terms of reference.

Senator CAROL BROWN: Right. I am pretty sure that most people were still thinking about the 32.5 per cent regardless. Are you aware that the Fruit Growers Tasmania have asked for a moratorium on the implementation of the 19 per cent?

Mr McDonald : I have seen media on that, but I have seen no request beyond that media commentary.

Senator CAROL BROWN: What media have you seen?

Mr McDonald : I think either today or yesterday I saw that Fruit Growers Tasmania were putting forward that view.

Senator CAROL BROWN: Fruit Growers Tasmania are essentially asking—and they have, I understand, written to senators and members of the House of Representatives—for a 6- to 12-month moratorium on any taxes being charged. They are saying that this is a mess.

Mr McDonald : The government's election commitment was very clear that the review would be conducted in this half of the calendar year, with a view to implementing any changed arrangements from 1 January 2017. The consultation process and all the activity up until this point has been working towards a 1 January implementation date. That is, in a sense, a new position being put forward.

Senator Ruston: It was at the request of industry that this inquiry was conducted with the speed that it was. They wanted to get some certainty as quickly as possible about the taxation rate.

Senator CAROL BROWN: Why then do you think a significant group within Tasmania—Fruit Growers Tasmania—are calling for a moratorium to allow for a proper process to be conducted?

Senator Ruston: The Tasmanian fruit growers are obviously totally entitled to their opinion. However, given the response we have received from the overwhelming number of people involved in this inquiry, I suggest that those people think that a proper process has been undertaken and that they are satisfied that they now have certainty back about the taxation rate—so they can now proceed to get on with their business.

Senator CAROL BROWN: Prior to the call from Fruit Growers Tasmania, you would probably have suggested that they were supportive of the position that was announced. My point is that when people—the agricultural industry, the tourism industry—look at this whole package, they are not happy with what the government has put forward. I suggest that they do not believe that it is any different in reality from the 32.5 per cent.

Senator Ruston: I think you are possibly verballing the people that you are purporting to represent. I have certainly not heard Fruit Growers Tasmania suggesting that 32.5 per cent and 19 per cent taxation rates would have the same impact on their industry. I can confirm that I met with the fruit growers from Tasmania prior to the inquiry bringing down its findings. They were quite clear that they wanted a reduction in the taxation rate. I am sure everybody out there who employs this sort of labour would quite like to have it remain at zero. But that was not a practical option from the perspective of the overall Australian economy—having people who are not residents of this country not paying any tax.

Senator CAROL BROWN: What Fruit Growers Tasmania are suggesting is that, when you put the package together, the overall tax rate—this is from the fruit growers themselves; it is not from me—is equivalent to 28 per cent, not 19 per cent. They have a number of recommendations. One of course is a moratorium of six to 12 months. They also indicate that there should be a proper review.

Mr Quinlivan : I think we might be getting into questions of superannuation policy here—and possibly some confusion between the cost to employers, which includes the superannuation cost, and the take-home income of the visiting worker. That was the competitiveness issue that the review was endeavouring to address. That might be the difference between the two perspectives.

Senator CAROL BROWN: As I said, Mr Quinlivan, their concern is for the overall package. They say, 'Based on the government's ongoing mismanagement of this matter and the need to have a deep review into not just the taxation but also systemic labour issues within the broader agricultural and tourism sectors, Fruit Growers Tasmania is calling for a six- to 12-month moratorium on any taxes or changes being implemented.'

CHAIR: Can I just encourage all of us, myself included, to capture the thrust of our thinking into a question so that one of the officers can respond.

Senator CAROL BROWN: We were having—

CHAIR: If we—

Senator CAROL BROWN: Chair, we were having a discussion and I was just putting into context what Fruit Growers Tasmania—

CHAIR: I have sat here and allowed that to go on for quite a period of time. I am just saying that we have been very liberal with our editorialising. I am asking you to revert to a question, like, 'Do you know?' It is just a suggestion for you.

Senator CAROL BROWN: I am just reading from Fruit Growers Tasmania correspondence.

CHAIR: But it must end in a question. It cannot be left just for you to make a continuous statement.

Senator CAROL BROWN: They were making that statement. I was letting the department know exactly where Fruit Growers Tasmania were coming from, which I would have thought would have been helpful.

Mr Quinlivan : I think that all we would say in response is that it is very much the exception in terms of the feedback we have had. Essentially, that is arguing to retain the 32 per cent for a further period and I think that pretty much all the other stakeholders that we have had feedback from would be strongly opposed to that.

Senator CAROL BROWN: What I was trying to ask before was that the review was around the terms of reference and what people thought the May 2015 position was. So, there was no further consultation on where the government actually landed?

Mr McDonald : Senator, I think that I said this before—but if I did not, please excuse me. Deloitte provided the stakeholder engagement for the review and they were very clear in what they found amongst all the stakeholders that they engaged with. That was that while there was some preference for a zero rate of tax, the overwhelming preference of stakeholders was for a tax rate that places Australia at no disadvantage relative to competitor countries, and that of the tax rates recommended by stakeholders the most common rates put forward were for either a 15 per cent or 19 per cent tax rate.

Senator CAROL BROWN: Okay. Did they talk about the 95 per cent superannuation grab?

Mr McDonald : There were a number of views put forward by stakeholders on the relative merits of superannuation and if that should be paid to foreign residents.

Senator CAROL BROWN: And what was—

Senator BACK: If I may interrupt, Senator Brown? You told us that Australia's 19 per cent is competitive against New Zealand, Canada and the United Kingdom. You told us that at least New Zealand does not have a superannuation arrangement for itinerants.

Mr McDonald : That is right.

Senator BACK: What about Canada and the UK?

Mr McDonald : I would have to check on superannuation—

Senator CAROL BROWN: I thought that—

Senator BACK: Sorry, Senator Brown—I just thought that—

Senator CAROL BROWN: Sorry, I just want to go back to my question about superannuation.

Mr McDonald : Sorry, would you mind repeating it? I have just lost my—

Senator CAROL BROWN: I was asking about their comments on the government's position with the 95 per cent superannuation grab.

Mr McDonald : Deloitte reported that some stakeholders suggested that superannuation could go straight to government, to allow for a lower tax rate, because they were aware of the normal government budget processes around offsetting savings needed. However, the general consensus that stakeholders put forward was that superannuation going to foreign residents—because of their ability to claim it back when they return overseas—was not meeting its intended purpose. One of the comments made by the Treasurer when he announced the package was that superannuation is intended for Australian residents for savings for their retirement. Under the departing Australia superannuation payment, I note that when foreign residents return overseas they can claim back their super contributions. I further note that the current tax rate on those claims is 38 per cent. It is not going from zero to 95 per cent; it is going from 38 per cent to 95 per cent.

Senator CAROL BROWN: How many people actually went to these face-to-face consultations? Not 1,700 across the nation.

Mr McDonald : No. There were a total of 88. I will just check my details to make sure that is the correct figure.

Senator CAROL BROWN: Are they 88 organisations? Did politicians attend?

Mr McDonald : I was not present. I would have to take that on notice.

Senator CAROL BROWN: Sure. That is fine.

Mr McDonald : Yes, 88 participants attended the face-to-face consultations either in person or by teleconference.

Senator CAROL BROWN: Of those, I am assuming—and please correct me if I am wrong——that that was where those in-depth discussions about superannuation and what might form the overall package were held with the stakeholders.

Mr McDonald : Our evidence earlier was that Deloitte conducted stakeholder engagement on the election commitments terms of reference and that one of the issues put forward by stakeholders was the relative merits, from their perspective, of superannuation for foreign residents.

Senator CAROL BROWN: From those face-to-face meetings was there an overall consensus about the superannuation or was it just—

Mr McDonald : I think I—

Senator CAROL BROWN: You mentioned one.

Mr McDonald : There was a general consensus that stakeholders believed that superannuation should not be paid when it was not meeting its intended purpose, which is retirement savings, because of the ability of foreign residents to claim it back.

Senator CAROL BROWN: But was this measure that was announced a measure that was supported within the consultation?

Mr McDonald : As I said, one of the ideas put forward by stakeholders, detailed in a Deloitte report, was that superannuation contributions could go to government to allow for a lower tax rate.

Senator CAROL BROWN: But essentially what you are saying to me is that these consultations did not necessarily support the announcements.

Mr McDonald : The consultations did not talk about mechanics or delivery mechanisms because that is normally a role and matter for government. You just do not get into those precise details in such a process.

Senator CAROL BROWN: That is exactly what I thought and that was what I was alluding to earlier. Have you had discussions with Treasury over the announced superannuation changes?

Mr McDonald : My answer is the same as previously, Senator. We had discussions around all the announced measures.

Senator CAROL BROWN: How was the package of announcements announced? How did the minister announce them—press conference, media release? Was it a joint press conference? What happened?

Mr McDonald : The Treasurer made the initial announcement by way of a press conference and a press release.

Senator CAROL BROWN: What date was that?

Mr McDonald : On 27 September.

Senator CAROL BROWN: How about your minister?

Mr McDonald : The Deputy Prime Minister held a press conference and had a media release on the same day.

Senator CAROL BROWN: Together?

Mr McDonald : No.

Senator CAROL BROWN: Why was that?

Mr McDonald : As we have been discussing—

Senator Ruston: I am not necessarily sure it is appropriate to be asking a departmental official why—

Senator CAROL BROWN: I will ask you then.

Senator Ruston: Even I would not know what the Deputy Prime Minister's decision-making process was. But it certainly is not appropriate to be asking the department.

Senator STERLE: How dare you think that he has a process, Senator Brown.

Senator CAROL BROWN: Whereabouts—

CHAIR: Senator Brown—

Senator CAROL BROWN: I apologise. I am just asking—

CHAIR: We need to exchange our expressions civilly, if we can. Senator Brown, your question to the official ought to be, if you want, 'Has the minister told you what motivated him or her to do something?'. You cannot just seek their expression of opinion.

Senator CAROL BROWN: That is my question then. The chair has helped me. Do you know where the Treasurer was when he made the announcement? Was he in New South Wales, or Canberra?

Mr McDonald : Canberra.

Senator CAROL BROWN: And what about the Deputy Prime Minister—where was he?

Mr McDonald : Canberra.

Senator CAROL BROWN: I could ask what time they gave the press conference.

CHAIR: I am going to. What time was that, and does anyone here have an idea what the minister was wearing?

Senator BACK: Let us get back to the proper line of questioning.

CHAIR: I am trying to make a point here, Senator Back. This is going on forever.

Senator CAROL BROWN: Your job is to chair; it is not to interfere with my questioning.

CHAIR: That is exactly what I will do. There will be no more editorials, no more questions of opinion, no more hypotheticals—I will chair.

Senator CAROL BROWN: That would be handy, actually. I was not going to ask what time they were held at all—if not for the interference by the chair for no good reason other than to hear himself talk. That finishes my questions.

Senator BACK: Mr McDonald, are you aware of a statement by Mr Pyke of Fruit Growers Tasmania this time last week in Hobart in which he said, 'It's time Labor, the Greens and the crossbenchers stopped trying to score points on tax policy so that everyone, including the 10,000 workers Tasmania needs in orchards and paddocks this season, knows where they stand.' Are you aware of this statement he made? He said, 'Tasmanian growers want politicians to back off. We have reached an agreeable point and ask the crossbenchers and Labor to move on.' Are you aware of those comments from Mr Pyke of the Tasmanian fruit growers association?

Mr McDonald : We are aware of a lot of commentary following the announcement. I cannot specifically recall that one but I take your word that it occurred.

Senator BACK: NSW Farmers stated on 15 October, three days ago, that they want bipartisan support for the proposed measures, including taxing backpackers at 19 per cent, saying further reviews and delays will be detrimental. The association's president stated that the Labor Party's decision to refer the compromise bills to the Senate Economics Committee would prolong uncertainty for farmers. He said, 'The 19% tax rate means that on average, backpackers will be $2000 better off.' Are you aware of those statements?

Mr McDonald : I am aware of them.

Senator BACK: Certainly I can add to that from the Western Australian point of view, having been chewed out for several weeks and months by individuals, not by major farming groups—thank you very much to someone who made that criticism of me. This is at all levels.

Senator RICE: There is something I am not certain about. On why all these backpacker tax changes are required, Mr McDonald, you were saying before that it is because essentially there was the AAT ruling that people on working holiday visas were not actually residents. Is that the case?

Mr McDonald : That is right.

Senator RICE: I am trying to clarify that. Has there been an ATO tax ruling to confirm or reinforce that since it occurred? When did that AAT ruling occur?

CHAIR: Senator Rice, you may not have been present but this has been covered very thoroughly.

Senator RICE: Yes, I know that it has been covered. I just wanted to set the ground—

Mr McDonald : The Administrative Appeals Tribunal handed down three rulings on the tax residency status of working holiday makers on 6 March 2015.

Senator RICE: The reason I am asking is that we sought advice from the Parliamentary Library about the government's options and there was no mention of that AAT ruling in the advice. Basically, it outlined that there were two ways for the government to achieve its aims. It could either have legislative change or there could be an ATO tax ruling. Has the department been consulted about the potential of having an ATO tax ruling rather than legislative change, which would essentially be reinforcing that AAT decision?

Mr McDonald : The department has had a lot of discussions about this through the course of the review process. Questions as to the mechanics and how the relevant regulator, the Australian Taxation Office, would go about it would be best directed to the hearings involving the Treasury and the ATO portfolio.

Senator RICE: Yes, but have you been consulted about that as being one option as a way of consolidating or reinforcing this change?

Mr McDonald : I would not characterise it as consultation, but would say that implementation options around how this would come about was part of the review process.

Senator RICE: So having an ATO ruling has been canvassed as part of the review process?

Mr McDonald : I would have to check specifically on that.

Mr Quinlivan : I think that really is a matter for the Treasury estimates. I think what you are suggesting is that the tax commissioner can make a ruling that is at variance with the law, and I do not think that is right. He can interpret the law but I do not think he can make a ruling that is at variance with the law, which is essentially what you are proposing or saying.

Senator RICE: No; basically it seems like the AAT decision changed the understanding of what the law was. The current tax ruling, the most recent tax ruling, is at variance if what we are told is the law now after the AAT hearing. I understand that the current tax ruling, which was in 1998, says that working holiday visa holders are residents.

Mr McDonald : Again, that is best directed to the hearings involving the Australian Taxation Office. The Australian Taxation Office has a set of four criteria around establishing residency for tax purposes. The AAT decision clarified the intended interpretation of how those residency tests should be applied. In the case of working holiday makers, my understanding is that a number of working holiday makers were relying on what is called the resides test, which is that they have spent at least—

Senator RICE: 183 days.

Mr McDonald : 183 days in Australia. That is only one of four tests. The AAT ruling said that case-by-case decisions have to be made but the general reliance of individuals around that single resides test was not the intended purpose of the existing law.

Senator RICE: I obviously need to take it up further with Treasury.

Mr McDonald : Correct.

Senator LEYONHJELM: Mr Quinlivan, I admire your fortitude—still here at the end of the day. I have been trying to get back to ask some of the agencies about the Primary Industries Levies and Charges Collection Act. You mentioned this morning, when I raised it with the first agency, that you would be able to tell me where you were up to in terms of implementing that legislation. Please go ahead.

Mr Quinlivan : We are able to do that now.

Senator LEYONHJELM: Good.

Ms Freeman : The Primary Industries Levies and Charges Collection Amendment Bill 2016 was passed by both houses on 12 September this year and it got royal assent on 16 September.

Senator LEYONHJELM: Indeed, I was there.

Ms Freeman : That is basically the first step in the process of RDCs developing and establishing their own levy payer registers. My colleague, Mr Ryan, if he is here, might be able to go into detail on where they are up to with consulting with industry on setting up registers. There is a lot of working going on at that end of the organisation. We are also developing guidance material on setting out expectations regarding appropriate use of the data, so there is a fair bit of work going on behind that, including disclosure by an RDC for a third-party, as an example. So some of that work is now going on, but my colleague Mr Ryan can actually touch on the work they are doing on the specifics of the register development.

Mr Ryan : At this stage we have commenced talking with the different agents that collect the levy on the levy pay register. We commissioned a consulting firm to help us with that. We have conducted a series of initial workshops around the country to gather what will form the business requirements for construction of the levy pay register.

Senator LEYONHJELM: Yes, though the inquiry into levies discovered a reasonable amount of information about the collectors of levies and some of the issues relating to that. I am assuming that that has helped to inform your consultation.

Mr Ryan : Certainly the work that had been done by the committee informed the work we had been doing. In a lot of cases this data exists with the agent and it is just a matter of us working out the most effective and efficient way of getting that data captured.

Senator LEYONHJELM: I know some of these RDCs quite well, and there is an attitude amongst some of them that consulting with their levy payers is only justified if they are reasonably comfortable that they will get the answer that they want. Do you have any sense of how the RDCs are likely to use this data? Is there a uniform view? Are you pushing them, or is it all over the place?

Ms Freeman : I would not have a view on each and every RDC, but we have certainly been talking actively with them in the context of both the levy payer register and also the broader levies reform off the back of the government's response to the Senate inquiry. I think you have got a number of them. Sugar Research Australia, for example, want very much to be one of the pilot RDCs out of the gate to develop the register. My colleagues have been talking with them. So some of those actually do want to know. We have got a number of others who actually already do know, and so they are obviously in a different state of play. You also have got some industry groups who want to potentially have access to the data as well, and so there again I think the point is really about each RDC working out with their levy payers what they want and on what basis. We have got a job to do which Mr Ryan and the team are doing. The mechanics of it, particularly in a digital platform, has a lot of work to be done with the agents, but industry and RDCs also have to work out amongst themselves what they want and what they are willing to pay for it. I have got to say it does vary with some of them; there is no doubt about it.

Senator LEYONHJELM: Understood. One of the issues that came up in the inquiry was this question about whether or not they should seek periodic agreement of levy payers to continue paying levies either at all or at their current level or increasing it. We have actually seen that, I think, go backwards since that inquiry was conducted, with the dairy industry abandoning its five-yearly dairy poll, so now only the wool industry conducts a regular poll along those lines. I am wondering if you envisage that changing at all.

Ms Freeman : Two things. I can potentially get my colleague to clarify, but, in relation to the dairy industry, they still have the ability to do a poll; they have just changed the automatic frequency of it.

Senator LEYONHJELM: They almost have to do a poll to do a poll, though.

Ms Freeman : The legislation is still to go in terms of amending the regulation, but they certainly have the provision now to do one should the industry wish to have one.

In relation to the other industries, my comment would be that I think they are watching with interest but no firm decisions have been made. I think the other comment I would make is that some wish to have the information for different reasons, and so that is a slightly different driver as well.

Senator LEYONHJELM: Understood. What we detected in the committee was, as I said, a distinct attitude amongst at least some of them that it is better not to ask the question, because you might not like the answer. To my way of thinking, that is a fairly unhealthy attitude, so I wondered if you had picked up on that.

Ms Freeman : I think there is also for some of the bigger RDCs—we do talk to them regularly and frequently—the issue where they have very long tails of levy payers who are relatively small levy payers but are levy payers nonetheless.

Senator LEYONHJELM: The numerous, yes.

Ms Freeman : And the question is whether they really want to be bothered with it and/or their willingness to pay for something that really does not have a big impact on them. It is quite hard when you have such a big distribution of the amounts of levy paid by levy payers. That is actually quite an issue. Equally, if you went to AWI, they have a similar issue where you have got quite small levy payers who resent the fact that a wool poll is conducted and that they have to contribute to its cost.

Senator LEYONHJELM: Yes, although we talked to WoolPoll about that. Most of the cost of WoolPoll—and it also was the case with the dairy poll—is basically campaigning, if you like, rather than conducting the poll itself. It is not that expensive to do a mail based poll and even less expensive to do an online poll. Certainly in my case I envisaged a situation where the databases would be established that would allow those polls and then the campaign costs—'Vote for Fred', 'Vote for an increase in the levy' or something—would be incurred by the proponents of those cases and not seen as inherent.

Ms Freeman : The other comment I would make is that I suspect that will evolve. The department has undertaken a program of work more broadly off the back of the Senate inquiry to actually look at what we can do to the system itself—efforts to streamline, efforts to get efficiencies, some of the recommendations like looking at the levy principles and guidelines et cetera. There are a lot of conversations going on with industry and, I think, amongst themselves as well. I think some of that might evolve a fair bit. I also think the technology angle might also see the methods of engagement and the costs of engaging change quite dramatically. The obvious one is the use of apps on smartphones, where you are seeing quite active engagement. You did see that with the most recent wool poll that was undertaken.

Senator LEYONHJELM: Okay. This is a matter of some interest—

Ms Freeman : Noted.

Senator LEYONHJELM: so I might talk to you on this again at future estimates just to see how things are going.

Ms Freeman : Certainly.

Senator LEYONHJELM: Thank you very much.

CHAIR: Senator Sterle—through you to Senator Brown?

Senator CAROL BROWN: Thank you. Mr McDonald, are you aware of the comments of AUSVEG SA with regard to the backpacker tax in the last 24 to 36 hours?

Mr McDonald : I recall reading media commentary attributed to them, but I cannot recall exactly what it said off the top of my head.

Senator CAROL BROWN: So you are not aware that they are also looking at the January date for the new tax arrangements to be put back by six months to a year? Does that sound familiar?

Mr McDonald : It may do, but my exposure to this is through examination of media commentary.

Senator CAROL BROWN: So they have not contacted the department?

Mr McDonald : Not that I am aware of.

Senator CAROL BROWN: It is only through media reports that they are now asking for a deferral of the January date, so to speak.

Mr McDonald : To my knowledge.

Senator CAROL BROWN: In terms of Fruit Growers Tasmania, as of Tuesday, 18 October—this afternoon—you are not aware that they have written to a number of MPs and Senators, asking, again, for a deferral of the implementation date?

Mr McDonald : This is the first I have heard of such a letter.

[20:11]

CHAIR: We will now move on to drought and farmer assistance.

Senator STERLE: Can you provide an update on how many farmers are currently accessing the farm household allowance, or FHA?

Mr Quinlivan : Do you mean how many are in receipt of it, or how many applicants there have been?

Senator STERLE: Chuck everything at me, everything you have: who is on, who has applied for it, who got told to go to heck. Have a crack.

Mr Pak Poy : The government is currently paying, on average, $1.11 million per week to farm families in FHA assistance. That figure is based on data from 1 April 2016 to 30 September 2016. For the period 1 July 2014 to 30 September 2016, total gross payments for FHA were approximately $126.9 million. This includes supplementary payments and income support as well as funding to prescribed advisers for completion of farm financial assessments.

Senator STERLE: Are there any outstanding applications?

Mr Pak Poy : The advice I have from the Department of Human Services from 14 October 2016 is that 487 claims were on hand.

Senator STERLE: What does that mean?

Mr Pak Poy : That means the claim has been submitted and the Department of Human Services is assessing it.

Senator STERLE: How long have they been sitting 'on hand'?

Mr Pak Poy : I do not have that information from the Department of Human Services. The claim process is not one where I can say what the average time those claims have been sitting there is. I do not have that information.

Senator STERLE: I appreciate that, Mr Pak Poy, but can anyone in the department tell me whether the applicants get frustrated for six months, 12 months or 18 months? Is there any indication? Or are these things dealt with rapidly? I am sure there would be a lot of angst and heartache a lot of the applications, and we understand that with taxpayers' money you want to do the right thing. But do we have any indication? Is there any target set that we have to deal with the applications from these poor devils seeking assistance within a set time?

Mr Pak Poy : The advice that the Department of Human Services gives us is that the claim period can take from a number of weeks to a number of months, depending on the complexity of the claim. The period of time it takes to assess a claim is also affected by whether the claimant has submitted the correct information. Often there is a process of going backwards and forwards to ensure that DHS has that information available.

Senator STERLE: We are not talking about people still waiting after 12 months, I hope—to the best of your knowledge?

Mr Pak Poy : As far as I know, no.

Senator STERLE: Can you break the 487 up by state? If you have that available it would be handy, but if you do not have it then you can take it on notice.

Mr Pak Poy : I do have it, if I can find it.

Mr D Williamson : While he is doing that, just for context, I think we did not mention before that there are 4,626 customers receiving a household allowance at the moment.

Senator STERLE: Is there really? Isn't that sad?

Mr G Williamson : We are also advised by the Department of Human Services that FHA claims are normally finalised within 28 calendar days.

Senator STERLE: Good.

Mr G Williamson : Claims can take up to 42 calendar days. There are instances where it takes longer than that, but they are much rarer.

Senator STERLE: Thank you, Mr Williamson.

Mr Pak Poy : I have found the breakdown by state. In the ACT, the Northern Territory and Western Australia it is currently fewer than 20 claims. The information that has been provided to us is that where we have numbers fewer than 20 we just report it as fewer than 20 for privacy reasons. In New South Wales there are 43 claims on hand, in Queensland there are 23, in South Australia there are 48, in Tasmania there are 20 and in Victoria there are 348 claims as at 14 October 2016.

Senator STERLE: Thank you. Is the department aware of any other problems that farmers are experiencing in accessing the FHA, or is it just having to wait for their assessment period? Are there any other problems that get in their way?

Mr Pak Poy : In terms of access to the FHA?

Senator STERLE: Yes. In terms of accessing it.

Mr Pak Poy : No, I do not think I would say that we are aware of any other problems.

Senator STERLE: Is the Centrelink IT system working okay? Have you heard any complaints?

Mr Pak Poy : I have heard of complaints; I have not had any complaints being conveyed to me directly. That is information provided to us by DHS.

Senator STERLE: And is that state based or is it around the nation that there have been problems? I am just trying to figure out how we get such a high number in Victoria.

Mr Pak Poy : The information that was provided to me was by way of anecdote. One of the things that they deal with is people complaining about their IT system.

Senator STERLE: Sure. Can you provide an update on how many farmers are accessing both the Drought Concessional Loans Scheme and the Drought Recovery Loans Scheme?

Mr Pak Poy : That is not my area, but my colleague will be able to assist.

Senator STERLE: Come on! I am joking—it is all right! Take your time.

Mr Hutchinson : I am the last of the fast movers! Just to clarify: it was the Drought Concessional Loans and Drought Recovery Concessional Loans schemes?

Senator STERLE: Yes.

Mr Hutchinson : Since the Drought Concessional Loans Scheme began across the country, 461 businesses have been approved for loans for a total of $267.455 million as at 31 August this year. In states where the Drought Recovery Concessional Loans Scheme is open a total of 81 farm businesses have been approved as at 31 August 2016.

Senator STERLE: How many, sorry?

Mr Hutchinson : There were 81 farm businesses approved for loans totalling $35.927 million.

Senator STERLE: Thank you. How many are accessing both those loans?

Mr Hutchinson : I would have to take that on notice. We do not have that information readily available. That would be something that we would need to test with our state delivery agencies. It would be a guess.

Senator STERLE: That is all right. I am told the government has extended the application period of the 2015-2016 drought related concessional loans to 31 October this year. Is that correct?

Mr Hutchinson : That is correct.

Senator STERLE: And could you tell us why?

Mr Hutchinson : The government extended the application period to 31 October while the arrangements for the next scheme are being put in place. We are currently working with the states and territories to roll out the next iteration of the scheme, which was established through the Agricultural Competitiveness white paper. There was that commitment of funding for the concessional loans there.

Senator STERLE: Just remind me what that package was?

Mr Hutchinson : There was $2.5 billion over 10 years put forward for concessional loans.

Senator STERLE: Thank you very much; that did not hurt a bit, did it? Now I just want to ask some questions about the dairy support package. Could someone please provide an update on the uptake of concessional loans by dairy farmers.

Mr Hutchinson : That is one for me, again. As at 12 October, across the country, we have 44 loans approved to a value of $24,000,000.

Senator STERLE: Very good. Can you tell us when the ACCC's report into the Murray Goulburn dairy crisis will be released?

Ms Freeman : That is one for me, Senator. That is really a question for the ACCC, but my understanding is it is a matter of weeks; I have not been formally told.

Senator STERLE: Thanks, Ms Freeman. We say 'a matter of weeks'. The date in a matter of weeks; has that been the set date?

Ms Freeman : That would be a matter for them; I genuinely do not know.

Senator STERLE: All right, that is fair enough. Does anyone else know? No, okay. Can you tell us when the ASIC report in the Murray Goulburn dairy crisis will be released?

Ms Freeman : I am sorry, Senator, that would be a matter for ASIC. I genuinely do not know the answer to that.

Senator STERLE: Thank you. There are 44 concessional loans—are there not?

Mr Hutchison : That is correct.

Senator STERLE: Are there 348 dairy farmers concerned in this action—is that right? In this Murray Goulburn fiasco, can you tell us how many dairy farmers are affected?

Ms Freeman : Thousands, I would have thought.

Senator STERLE: How many?

Ms Freeman : I would have to take on notice the exact number of Murray Goulburn suppliers, but it would be in the thousands.

Senator STERLE: Geez, it is getting worse. Can you provide an update on the full range of assistance measures to dairy farmers?

Ms Freeman : In addition to the loan arrangements, there are a number of works going ahead. There is $900,000 that was allocated for Dairy Australia, as Mr McElhone said from Dairy Australia earlier, to augment their existing programs of taking stock, and tactics for tight times.

Senator STERLE: Geez, you blokes turn that paper noisily! Try again, Ms Freeman.

Ms Freeman : Part of the government's assistance package was providing $900,000 to Dairy Australia to augment their existing programs' tactics for tight times and taking stock. We are working with Dairy Australia on the timing of the payment for that.

Senator STERLE: They had $900,000 for this?

Ms Freeman : The Commonwealth government is topping up their existing programs, those two programs, to the tune of $900,000.

Senator STERLE: What was the $92,000.

Ms Freeman : It might have been a paper rustling thing, Senator.

Senator STERLE: Okay. When I heard the mob from Dairy Australia earlier on talking about their wives and things, everyone thinks it is all roses and sunshine down there; it is far from it.

Ms Freeman : There are a range of other—

Senator STERLE: Fill us in; the other Mr Williamson.

Mr G Williamson : There was $905,000 provided to the Rural Financial Counselling Service; that has been paid. In addition to that, a further $865,000 has been paid as well in this financial year and, on top of that, again, another $800,000 in—

Senator STERLE: The first $865,000, where did that go to? There was $905,000 to the Rural Financial—

Mr G Williamson : Rural Financial Counselling Service; that was up to 31 December this year, and from 1 January to 30 June this financial year, a further $865,000 will be paid to the Rural Financial Counselling Service as well.

Senator STERLE: Is that on top of the $905,000?

Mr G Williamson : That is right. Then from 1 July to 31 December, $800,000 will be paid, again, to the Rural Financial Counselling Service to support their efforts in assisting with the dairy industry crisis.

Senator STERLE: As important as that is, without any argument, is any money landing actually in the farmers' pockets directly or is it all going to Dairy Australia and the RFCS?

Mr G Williamson : Certainly, there is farm household allowance. That has increased. The numbers have gone up quite significantly there.

Mr Pak Poy : From the period 2 May 2016 to 14 October 2016, 215 recipients in Victoria identified themselves as being part of the dairy industry—that is, new recipients.

Senator STERLE: That is 216.

Mr Pak Poy : No, that is 215.

Senator STERLE: So that is 215 out of how many? How many are down there?

Ms Freeman : The number of Murray-Goulburn suppliers is approximately 2,400. That is across a number of states.

Senator STERLE: I have seen on Twitter that milk is being poured down the drain in Harvey today. I am actually depressed now.

Mr G Williamson : Just to add further, you asked whether they were actually getting money in their pockets. Mr Hutchison actually said they had been provided so far with $24.045 million in concessional loans. That is money in their pockets in concessional interest rates.

Senator STERLE: Sure. I am not go to politicise this and, Chair, if anyone wants to, you can pull them up—and no-one will on this committee. They still have to pay the money back. It has always been a contentious issue that—I am going to say this clearly as apolitical. I do not see it as help. That is my personal opinion. What about actual assistance in their pocket that they do not have to pay back? Is there anything going on there?

Mr G Williamson : Just on the concessional loans, it is a concessional interest rate, so that still does provide—

Senator STERLE: I get it, but they still have to pay it back. I understand. I am not having a blue with you, Mr Williamson.

Mr G Williamson : In terms of other assistance, yes, farm household allowance—we talked about that.

Senator STERLE: Of the $240 million, how much does that equate to each person, roughly—or are their circumstances all different? We all talk in millions in this building; we are good at it. But what does it actually mean in the hand, in the pocket, in the bank account—

Mr Pak Poy : I am not sure which figures you are referring to.

Senator STERLE: Anything. Look at the concessional loan—that does not matter because they have to pay it back.

Mr D Williamson : We can explain farm household allowance and what that involves.

CHAIR: Some of those concessional loans are used to displace pre-existing financial relationships with the bank. For example, does a farmer qualify to say: 'Look, I owe the Rabobank $500,000. I'll take a concessional loan and settle my $500,000 with Rabobank'?

Mr G Williamson : Yes, you are able to refinance.

CHAIR: To assist Senator Sterle, if there is a gap between the interest you are paying with that bank and the lower interest rate by the government, would that not qualify as money in the pocket?

Mr G Williamson : That is correct. You are allowed to refinance up to 50 per cent of eligible debt—just to be clear.

CHAIR: Have you got that one, Senator Sterle? Did you pick up on that? It is money in the pocket.

Senator STERLE: It is on the record. I am happy.

Senator RICE: I want to talk about forestry related issues. Can I get an outline of the scale and the extent of the work that is currently being undertaken by the department on forest and forest related issues?

Mr Thompson : There is a range of activities. I think you are aware we have reviews of regional forestry agreements underway in Tasmania, commencing in Victoria, commencing in New South Wales and underway in Western Australia.

We are also completing an analysis of the KPMG report into the operation of the illegal logging regulations. We expect to complete that shortly and then we would go through the regulatory impact statement process. While we are doing that, we are also trying to implement that legislation. We are continuing to work on country-specific guidelines. We still have people from our compliance area looking at imports as they come into the country. We are working with the Forest Industry Advisory Council on consultations with industry players around Australia on the report that was released a few months ago on future directions for the forest industry, relating to things like R&D hubs around forestry, higher value-adding to timber products, and those sorts of activities.

There is an election commitment for a national institute for forest research, and we have been holding discussions with the Forest and Wood Products Association, the relevant R&D corporation, and there have been some meetings with industry about how that might be implemented in accordance with the time line of the election commitment, which would see, we hope, new R&D activities in South Australia and Tasmania underway within this financial year.

There is one other, as the Senator has reminded me—the one that I actually think is very important, since I get hay fever too. We are implementing the mechanical fuel reduction trial, which is aimed at reducing fire hazard in closely settled areas where smoke is a human health hazard, and also around sensitive ecological areas. So we are trialling that in New South Wales.

Senator RICE: I might go back to a few things, but where is that one currently at?

Mr Thompson : Michelle Lauder might be able to provide the detail, but I think the trials are about to commence in New South Wales.

Ms Lauder : The contracts have all been let. There are three trials happening across the country. They are being managed by New South Wales government fora. There is a trial on the mid-North Coast of New South Wales, one in East Gippsland in Victoria, and one in the south-west of Western Australia. We also have four consultants collecting data and monitoring some of this work. That includes a study of community acceptance of mechanical fuel reduction which will delivered by the University of Canberra. The cost-benefit analysis will be delivered by GHG. The mechanical feasibility study will be delivered by the University of the Sunshine Coast. And the modelling of the trials' impact on fire risk across a landscape will be delivered by CSIRO.

Senator RICE: How about research into the biological impact of the trial on the forest ecology?

Ms Lauder : Yes, absolutely. All of the three trials will be monitored for a range of things, including the impact on the environmental values as well as the impact on the fire risk.

Senator RICE: But is there a particular study looking at the impact on the ecological values?

Ms Lauder : Yes, that is part of the trial design. Each of the trials will be a minimum of 120 hectares. So they will comprise 10 hectare replicates where we are looking at machine-only trials, fire-only, fire and machine and then a control to be able to compare them all. There will then be pre-treatment and post-treatment assessments of biomass and biodiversity.

Senator RICE: Over what period of time?

Ms Lauder : Over the contract. The trials are starting in spring this year—so in the next month, basically, if they have not already started—and it is planned that they be completed within 18 months, depending on this summer's fire season, because a lot of the staff doing the trials will be fighting fires if we have any big fires this season.

Senator RICE: Thank you. In terms of the overall suite of work that you are doing, I asked Mr Thompson—I think it was in the February estimates—whether there was particular work focused on plantation forestry compared with native forestry and whether there were any programs that the department had particularly focused on facilitating and encouraging plantation forestry. I think at that stage you said there were not any in particular and referred me to Forest and Wood Products Australia. Is that still the case now?

Mr Thompson : That would essentially be the answer. In the particular areas of research related to forestry, I would refer you to the Forest and Wood Products Association, who are undertaking research in the plantations area and the native forest area. But some of the work that is being discussed in the Forest Industry Advisory Council report, which is public, relates to a couple of things. One is that, insofar as it relates to both plantation and native forestry, it is about improving the reporting around forest management and demonstrating their credentials as forest managers. But much of the work related to value-added forest products and bioproducts from forestry material actually relates to plantation. Across laminated timber and that sort of stuff, it is going to be predominantly pine products. So they are focusing work around that.

Senator RICE: How many staff work in forest products?

Mr Thompson : In the department?

Senator RICE: In the department, yes.

Mr Thompson : In the department we currently have 30 people working on forestry.

Ms Lauder : In the branch, including NRM futures.

Mr Thompson : Oh, that includes NRM futures?

Ms Lauder : Yes, so 20.

Mr Thompson : So it would be 20.

Senator RICE: Twenty? Okay.

Mr Thompson : I thought the number was a bit high.

Senator RICE: And what proportion of those would be working predominantly on native forest based issues and what proportion predominantly on plantations—or are they all a mix?

Mr Thompson : They are all a mix. There is a group working on regional forest agreements and those sorts of activities.

Senator RICE: How many are working on the regional forest agreements?

Ms Lauder : Approximately 10.

Senator RICE: So half.

Ms Lauder : But that is a guess off the top of my head.

Senator RICE: So about half the branch, then, are working regional forest agreements.

Ms Lauder : Yes.

Mr Thompson : Then there would be how many on international?

Ms Lauder : Some of them are also working on other things, though. Of those 10, some are working on the RFAs as well as the FIAC report and that consultation, and the national institute.

Mr Thompson : There would be, I think, five people working in the Forestry Branch on the international activity. On plantations work, there are probably some of the same people who are also doing RFA work. It probably amounts to about two FTE.

Senator RICE: Two FTE on the plantations—okay. Thank you. On the regional forest agreements, can you give me an update as to where they are at with regard to each state. You said there is WA now, as well as Victoria and Tasmania.

Ms Lauder : Yes, that is exactly right. In Western Australia, we are undertaking a review of the last five years of the RFA. The scoping agreement has been signed between the two departments. The public consultation document—so we are looking at the implementation over the last five years, what has been achieved and what needs improvement—has been prepared by officials in both departments. We will be providing that to ministers shortly and seeking to go out in public for consultation for between four and six weeks before we hit Christmas.

Senator RICE: And then appointing the independent reviewer after that process?

Ms Lauder : Yes, that is exactly right, and then completing the review.

Senator RICE: So the expectation is that you would have the independent reviewer appointed early next year?

Ms Lauder : That is exactly right, yes.

Senator RICE: And when would you expect that person's review to be completed?

Ms Lauder : My understanding is potentially three to four months after they are appointed.

Senator RICE: It would be very quick if that is the case.

Ms Lauder : It is.

Senator RICE: Compared with previous experience.

Ms Lauder : But it will be impacted on by how many submissions come from the public consultation process and the number of documents.

Senator RICE: I expect you will have a lot.

Ms Lauder : Yes, I think possibly that may be the case.

Senator RICE: Where are things at with the Victorian one?

Ms Lauder : With the Victorian one, we have signed a scoping agreement, again, for the next review of their RFAs, and we have been working with officials to prepare the implementation plan that would be used for the public consultation. There is no timing that has been agreed for the public consultation yet. As you would be aware, the Victorian government are currently working through their Forest Industry Taskforce, so they are being careful not to confuse the public about too many consultations on forest related issues.

Senator RICE: What is the planned timing compared with the task force activities?

Ms Lauder : At the moment, the task force is planning on reporting by November this year. If that goes to plan, we would consult potentially early next year. We are trying to avoid the Christmas and January break if we can, so it could be early next year, but it does depend on the task force reporting in time.

Senator RICE: That would be consulting on the scope again at that stage?

Ms Lauder : The consultation we would be doing would be looking at the last 10 years, because there are 10 years of reviews Victoria needs to deliver. From there we would look at the future and potential extensions.

Senator RICE: Are you looking at all of the Victorian RFAs together or separately?

Ms Lauder : We are doing them one by one in the review, because there are different issues in different regions.

Senator RICE: Are you going to begin the process for all of them or are we just beginning the process with one of them?

Ms Lauder : We have started with East Gippsland because that is the one that terminates the soonest. We have been focusing purely on East Gippsland at this stage. Central Highlands is the next one but that is 13 months beyond the East Gippsland time frame.

Senator RICE: The East Gippsland 20-year timetable is up in February next year, isn't it?

Ms Lauder : Yes.

Senator RICE: You are, obviously, not going to have a new RFA in place by then.

Ms Lauder : No, that is right.

Senator RICE: What is currently considered will happen, given that?

Ms Lauder : The Victorian minister has written to us seeking a short-term extension of the East Gippsland RFA. The extension would be 12 or 13 months, to align it with the Central Highlands RFA with the idea that the extension process could happen for both of them.

Senator RICE: So you would look at both the RFAs—the Central Highlands and the East Gippsland ones—together then?

Ms Lauder : Yes.

Senator RICE: With the aim of completing them by March 2018?

Ms Lauder : That is right, yes.

Senator RICE: Tasmania?

Ms Lauder : For Tasmania the third five-yearly review has been completed. We have had the independent report and the government response. That is all signed, sealed and delivered and it was tabled in parliament, as you would be aware, on 12 September. Now the parties are negotiating to extend the agreement. We are in the process of negotiating what will be in that. We are also planning some further public consultation. In the review public consultation we sought views and feedback on the potential extension, but we are going to do further consultation so that people who did not realise there was an opportunity for consultation on the extension at that time can still have their say. We are meeting with Tasmania early next week and planning on consultation starting in November.

Senator RICE: What will be the time frame for signing a new agreement, given that consultation process you have going?

Ms Lauder : I do not have firm dates, but we are looking to the first quarter of 2017, if we can. But as you can imagine it is not just our decision. Tasmania needs to be in agreement with us. Tasmania's RFA terminates at the end of 2017, so the time is not the thing pressuring us to go forward.

Senator RICE: You expect that even with this consultation process on the new RFA you will have sufficient time to implement a new one by the time the Tasmanian one expires?

Ms Lauder : Absolutely, yes.

Senator RICE: Minister, in February I quoted to you some of the concerns about the Regional Forest Agreements and, in particular, how threatened species, over the last 20 years of the Regional Forest Agreements, have been in decline and sliding towards extinction. In response you said, 'Obviously, the report—that is, the Tasmanian RFA report—informs what the new RFA will look like.' Therefore, the issues that you have raised, you question, will inform what the RFA looks like. I quoted to you from the independent reviewer, including:

Judging the overall success of threatened species management and the broader biodiversity outcomes under the RFA is difficult given the limited monitoring of outcomes

that there is a need for:

…sufficiently powerful assessments that will detect differences that matter in terms of the populations of key species groups.

and:

Assessment of the overall outcomes of the RFA for the conservation of biodiversity requires a greater commitment to appropriate research and assessment in both the CAR reserves and wood production forests…

I am interested to know what you see changing in the new RFAs that is going to make the situation different from the way it has been for the last twenty years—which, demonstrably, has not been a good twenty years for forest species, and, particularly, for many of the species that have become more threatened and critically endangered.

Senator Ruston: The whole process of review is a mechanism by which we work out what has been working and what has not been working. There was quite an amount of advice that was provided through the review process. It made recommendations on things that could be improved in the new RFA. One of the most important things—and the reason that we have gone out for extended consultation—is to give the community of Tasmania, in this particular instance, the opportunity to have their say about the issues that were raised as part of that review. I would also note that the Victorian government's current committee that is looking—

Ms Lauder : The Forest Industry Taskforce.

Senator Ruston: Yes, the Forest Industry Taskforce is actually looking to the future so that they can have a look at what they would like their agreements to look like in the future, as well as taking into account the reviews of issues that have happened in the past. I do not think anything has changed from my answer that I gave to you in February: the issues that are raised as part of these reviews must form the basis of the decision-making process about amendments into the new RFAs to make sure that the RFAs are going to serve the best interests of the community, going forward.

Senator RICE: I am interested in what has been considered in terms of extra mechanisms. The government's response to the independent reviewer's report was pretty wishy-washy and certainly did not give me confidence that things were going to change. Two of the key responses were that:

The State agrees to consider implementing a state-wide forest monitoring information system.

And:

The Parties are committed to protecting and improving the conservation of Tasmania’s threatened species and will continue to work together in the development and implementation of conservation advices and recovery plans.

But in terms of actual concrete measures and mechanisms that were going to mean that we would be in a different era compared to what we have been in for the last 20 years, nothing was committed to in those responses to the independent reviewer. Are there plans for extra funding for research to undertake the monitoring that obviously has not been occurring well enough over the last 20 years? Are there extra programs? Is there a plan for substantially increased reserves? What sort of things are being considered in this new regional forest agreement?

Mr Thompson : Ms Lauder might be able to provide some information there, but regarding the context of the comments made by the reviewer and the government's response, that refers to the whole areas under forests in the RFA areas, not just the production forests. Some of the decisions about where money is going to be spent and where it is going to come from actually relates to expenditures by parks and wildlife services, environment departments as well as forestry departments. Further work has to go on to sort some of that through.

The forestry operations have an impact on threatened species, as do other activities. Fire management becomes one of the important ones, and fires are not just unique to production forests; they also occur in national parks. The track records of things like fires in forests is actually a bit better than the track record in national parks.

Senator RICE: I agree with you, but if you read the threatened species recovery plans, such as the one that has just been finished for the tiger quoll, or the draft plan for the giant Tasmanian lobster, their focus is that the key threatening process is the impact of logging operations. It is identified as a key threatening process. That is also the case for many other forest species. I want to know what is going to change. How can we have any confidence that these species are not just going to continue to slide into extinction? Because that is what is happening at the moment. Swift parrots have gone from being endangered to being critically endangered. Leadbeater's possums have gone from being endangered to being critically endangered. What is going to change so that you have confidence, I have confidence, we all have confidence that these precious animals are going to continue to exist?

Ms Lauder : Part of the extension of the RFA process is reviewing a lot of the documents and reviews that have been done, and looking at data that is out there in other sources. That is one the things we will be consulting on as well. We are working very closely with the Tasmanian government but with the Department of the Environment and Energy in the Commonwealth. One of the things they are looking at is the key threatened species that you were mentioning and how their recovery plans have been implemented or where there have been gaps et cetera, over this period, and then looking at what needs to be done to ensure that they do not slip further or where their populations can be improved in the next 20 years. That is something the department of environment is actively looking at as part of this process.

Senator RICE: The bottom line is: are there plans to protect more areas of forest than we currently have protected? We know that clear-fell logging operations kill these animals, and there are increasingly smaller populations. That is the simple equation.

Senator Ruston: You points are noted, but we are just a little bit too early to give you those definitive answers. There is a process that is still being undertaken and part of that process is consultation. Until we finish that process it would be premature for us to say, 'This is definitively what we are going to do.' I am assuming you have read the government's response to it.

Senator RICE: Yes, I was quoting from it.

Senator Ruston: So you obviously—

Senator RICE: It is the government's response that gives me no confidence whatsoever that anything is going to change. It is full of not just wiggle words it is full of huge—

CHAIR: You should not editorialise.

Senator RICE: I am trying not to.

CHAIR: Ask some questions and everyone will draw their—

Senator RICE: There are huge gaps that you could drive tractors and logging trucks through.

Senator Ruston: Senator Rice, you and I will have to agree to disagree. The government's response, from both the Tasmanian government and the federal government, has shown great consideration for the issues that were raised as part of the review. We will continue to consult and we will not, prematurely, make statements until that consultation is finished. I am very confident that the responses of both the federal government and the Tasmanian government have recognised the issues that you have raised.

Senator RICE: The Tasmanian government announced last week that it is considering opening up logging in the 400,000 hectares of forest that logging was deferred in until 2020. What is the Commonwealth's response to that?

Senator Ruston: That is a statement that was made by the Tasmanian minister. It in no way reflects, one way or the other, on the federal government. You should take that up with the Tasmanian minister.

Senator RICE: It certainly has been taken up. So the federal government does not have a view.

Senator Ruston: We certainly pass no comment on that whatsoever. We are dealing with the RFA and the recommendations of the review.

Senator RICE: Does it impact on your negotiations over the RFA?

Senator Ruston: I am not going to make a statement one way or the other. However, if you have an issue with it—and I am sure you have—take it up with Minister Barnett.

Senator BACK: I want to go through some questions on foreign investment with our agricultural policy division. This process started some years ago with the then Senator Heffernan and myself, and early attempts were a bit rudimentary. I remember asking not your colleagues but others from FIRB and other agencies, 'What about agricultural leased land?' and we were met with blank stares. I also remember the question being asked, in regard to foreign investment, 'What if a foreign investor purchased agricultural land but was not going to use it for agricultural purposes?' and how that fitted into the scheme. So we have progressed over time.

What I want to know from you, if I may, is: what have been the impacts from lowering the thresholds for agricultural land and agribusinesses through FIRB's scrutiny? Can you give us any advice on that?

Mr Quinlivan : Mr Blong can give you the numbers, as we understand them at the moment.

Mr Blong : I would probably need to refer that to Treasury, to work out the total number of applications that FIRB processes in this area and what potential impact changes in thresholds have had. I do not have exact numbers of applications that have gone through FIRB. I will take it on notice.

Ms Freeman : I might add that the number the department has seen has probably increased, easily between threefold and fourfold, in terms of the applications that have come to us since the new arrangements came in place. We saw, last financial year, probably in the order of 250 to 260 applications that we were asked to provide comment on for the FIRB.

Senator BACK: And that was agricultural land and/or agribusinesses?

Ms Freeman : Yes, combined. I would have to take it on notice, the split—

Senator BACK: If you could.

Ms Freeman : but I think there has been a very significant increase. The majority, I think it is safe to say, would be on land over agribusiness.

Senator BACK: In taking that on notice, you might be able to also bear in mind my question with regard to the division between freehold title land and leased land.

Ms Freeman : Yes.

Senator BACK: In the way the program is structured, at the moment, is it possible to identify a circumstance in which somebody might buy a farming property but it not be picked up, simply because the purpose for the purchase was to use that land for something other than farming—mining or whatever?

Mr Blong : The information I have—in terms of the type of land registration forms that the ATO now requires landholders, including foreign landholders, to provide details on—includes any change in status, in relation to the use of that land.

Senator BACK: I will not ask you, as we have all seen the figures, the citizens of which countries are the predominant purchasers of Australian agricultural land. It is interesting, Mr Quinlivan, that Holland, the Dutch, are third behind the UK and the US. Is that right?

Mr Quinlivan : Yes.

Senator BACK: That has an interesting historical connotation, because some of us will journey to Dirk Hartog Island this very weekend to celebrate the 400th anniversary of the landing on Australian soil by the Dutch explorer Dirk Hartog, the first European to land on Australian soil. So the Dutch have not lost that sort of experience. In fact, if he had gone a bit further inland from Dirk Hartog Island we could all be wearing clogs today! That is of no great relevance.

As a result of lowering the threshold, Ms Freeman, is there any evidence that foreign investment has been reduced or turned off this year compared with previous years?

Ms Freeman : I would have to say that would be a matter for Treasury. They would have a much broader view. With the specifics, we have the release of the land register data, which came out in September and which provides some information, but in terms of the specifics on what you have just asked, I think that would be a matter for Treasury.

Senator BACK: Again, in terms of those questions you are going to obtain answers for, I am interested in knowing the proportion of land and/or agribusinesses—but probably land—owned by sovereign wealth funds, if that can be isolated, both in terms of freehold and leasehold land. The figures we have seen to date are based on hectares of land but not on value. Do you know whether or not the value of properties has been captured at the time of declaration by foreign interests?

Mr Blong : I will have to check that, but I believe that the registration details required by the ATO include the market value of the land in Australian dollars. Other than that, in terms of how that data is used and collated by the ATO, that is a matter for them.

Ms Freeman : Certainly, for the purposes of actually going into the process, if you like, it has to meet the relevant minimum values. Beyond that, and beyond what Mr Blong said, I am not sure how much additional data we would have.

Mr Blong : Just to clarify, the ATO form is the registration form that is required by foreign owners of Australian land, not applicants that might be going through the FIRB process.

Senator BACK: Can you repeat that?

Mr Blong : I just wanted to clarify the answer I gave in relation to foreign owners requiring to detail the market value of land in Australian dollars. That relates to the ATO registration form that foreign owners have to submit to the ATO. They are foreign owners of Australian land, not the applicants that might be submitting proposals to purchase land through the FIRB.

Senator BACK: Mr Quinlivan, this is a question that still has not been resolved in my mind. I am not sure whether it is fair to ask you or your officers. Take the scenario of a sovereign wealth fund growing a crop, putting it on a ship, sending it to their home country, turning the grain into flour and bread and giving it to their impoverished citizens free of charge. There is no price on the product, so there is no transfer price so there is no capacity for taxation to be paid back to the Australian government. Is that a fair question to ask you or is that something that should be taken up with the Treasury or tax official?

Mr Quinlivan : It sounds like a question for the tax commissioner, because it has some characteristics that are common to traditional transfer pricing. I think that if that were happening on any meaningful scale the tax commissioner would be quite interested, just as he would be interested in looking at traditional transfer pricing practices.

Senator Ruston: You are not referring to foreign aid, Senator Back?

Senator BACK: No. It is not foreign aid. I only ask that because it possibly does characterise a slight change, with sovereign wealth funds purchasing Australian agricultural land. We have not seen it in the past with British, Scottish, American or Canadian. Canadian teachers superannuation funds seem to see value in our land these days. As far as I understand it we have not seen it from the Dutch. But nevertheless, we may well be seeing it. Qatar is an example. The Qatari government owns more land in Australia than they own in Qatar. Obviously we know the capacity of the Chinese and others. It would represent, for the first time, a changed circumstance. To date we have seen agricultural production feeding into the Australian agricultural production supply chain and then being traded along with the products of family and corporate-based farms. But the analogy I just gave you is a different one, because it would represent for the first time a case where a sovereign entity would utilise our land, our water et cetera, but there would not be a price upon that product because they never charge for it.

Mr Quinlivan : The entity would presumably have some legal status here in Australia. It would have deductible expenses as a result of the production process. I would be pretty confident that the tax commissioner would be interested in that transaction.

Senator BACK: My final question does lead me to water. When will the register to cover foreign ownership of water rights be established?

Ms Freeman : I understand that there is currently legislation being developed to do that at this very moment. Subject to the passage of that, I presume it will then take place.

CHAIR: We are due for a break. After the break we will hopefully be able to progress through the balance of the stuff quite quickly.

Mr Quinlivan : If I understand the previous conversation correctly, there are more forestry questions.

Senator CAROL BROWN: Yes.

Proceedings suspended from 21:04 to 21:20

Senator McCARTHY: On forestry, I have some questions for Ms Lauder. I just wanted to revisit the Regional Forest Agreements, just to understand those a little bit better. How many do we have across the country?

Ms Lauder : There are 10, in four states.

Senator Ruston: And five in Victoria, one in Tasmania, one in Western Australia and three in New South Wales.

Senator McCARTHY: Regarding the people working in the forestry department, or the division in the department—you said there are 20?

Ms Lauder : In the branch.

Senator McCARTHY: Where is the branch?

Ms Lauder : It is here in Canberra.

Senator McCARTHY: Do you have any staff across the country?

Ms Lauder : Not forestry staff, no.

Senator McCARTHY: So, their interaction with each state and territory takes place here?

Ms Lauder : No. We often travel back and forth. Sometimes they come to Canberra and sometimes we go to their state. There are a lot of teleconferences, phone calls and emails as well. We try to use all ranges of communication. With our consultations, we go to regional areas. We do not restrict it to capital cities.

Mr Thompson : And the forest and wood products R&D corporation is based in Melbourne.

Senator McCARTHY: Do you use Indigenous knowledge in any way within your processes?

Ms Lauder : Yes. It is an important part of the RFA, and that is something that we are consulting on when we do the reviews, as well as looking at the extension. In fact, we were talking just today about the consultation on the extension for the Tasmanian RFA and talking about where we will advertise and how we will make sure that Indigenous stakeholders are aware of it and can input—using the Courier Mail and contacting the relevant Aboriginal organisations to help get the word out.

Senator McCARTHY: Is that just in Tasmania?

Ms Lauder : No. It is just that the Tasmania one has come up first.

Senator McCARTHY: So, there are Indigenous knowledge systems, about caring for country and working in the area of carbon farming, but what you are referring to is the networking. Is that correct?

Ms Lauder : Yes, that is correct.

Senator McCARTHY: The inclusion of Indigenous organisations in that—is that what you are referring to?

Ms Lauder : Yes, that is what I am referring to.

Mr Thompson : That is largely about the involvement of Indigenous knowledge and Indigenous communities as part of the consultation about RFAs in Tasmania, and no doubt it will happen in Victoria and New South Wales as well. More broadly, though, there has been the Forest Industry Advisory Council's report, and the chair of that committee has been having discussions on Cape York and in the Northern Territory about Indigenous involvement in forestry in those areas as part of Indigenous economic programs.

Senator McCARTHY: Who is the chair?

Mr Thompson : The chair of the Forest Industry Advisory Council is Rob de Fegely.

Senator McCARTHY: Why is it important to have those conversations in Cape York and the Northern Territory?

Mr Thompson : There are Indigenous communities there who have been involved in forestry operations. On the Tiwi Islands there have been Indigenous forestry operations. I am not across all the detail, but there is also potential and opportunity on Cape York, as I understand, for Indigenous tropical forestry operations, and it is about working with those communities as to how they can fit into commercial forestry operations as part of a business venture.

Senator McCARTHY: Are you or is anyone else in the department able to expand further on the project in the Tiwi Islands?

Mr Thompson : We would need to take that on notice. I could not expand much more on it than that.

Ms Lauder : I am sorry; I am the same. I know about as much as Mr Thompson does. But we can get more information and provide it to you.

Senator McCARTHY: Do you have an Indigenous unit or an Indigenous employee within your branch?

Ms Lauder : No, we do not.

Senator McCARTHY: Are you aware of the WALFA project up in the Northern Territory—the West Arnhem Land Fire Abatement scheme?

Mr Thompson : Yes.

Senator McCARTHY: What do you know about that?

Mr Thompson : Our involvement in that has been less through forestry but more—and, again, I am not quite familiar with all the details—through some of our Landcare programs and some of our climate change programs and the work they have been doing to trial different fire management regimes and develop processes that could result in carbon farming, better environmental management, better resource management and carbon sequestration in the landscape.

Senator McCARTHY: That is great. With the West Arnhem Land Fire Abatement scheme it is the use of Indigenous knowledge, which is what I was referring to in terms of your processes and the access to Indigenous knowledge, and that program is an incredibly successful one, so I was curious to know whether you had tapped into it.

Ms Lauder : We have, but there are more opportunities that we could take advantage of. I just want to mention, too, that on the Forest Industry Advisory Council we have an Indigenous members, whose name is Karina Coombes, and she represents the Indigenous forest communities in the Northern Territory.

Senator McCARTHY: What was that on?

Ms Lauder : The Forest Industry Advisory Council.

Senator McCARTHY: Will the draft carbon farming initiative methodology for plantation be released for public consultation prior to its finalisation?

Mr Thompson : That is a matter that is part of the Department of the Environment and Energy. The best we could say is that something is expected to be released for public consultation soon.

Senator Ruston: None of these methodologies are implemented without substantial consultation.

Senator McCARTHY: Thank you very much.

Senator STERLE: I want to go to questions of sugar. Has the department assessed the actual and potential impact on Australia's sugar industry of, as it is named, the Real Choice in Marketing legislation enacted in Queensland in 2015?

Ms Freeman : No, that is a matter for the Queensland government, so we have no formal role in reviewing that legislation. Obviously we are keeping an eye on the negotiations that are going on between the different industry players, but the Commonwealth has no formal role there.

Senator STERLE: Do you have a view?

Ms Freeman : It is a Queensland—

Senator STERLE: I understand. I am just asking whether the federal department has, or the minister may want the federal department to have, any view over the way it is working?

Ms Freeman : Well, obviously we have been having conversations with the different players on various negotiations and discussions that are taking place between the players, and we have been told a range of things. But in terms of having a formal view on it, no, that is not the role of the department.

Senator STERLE: The reason I asked is that this committee did do an inquiry into the sugar industry. It looked very closely at the—how can I put this diplomatically?—market power of certain millers up there, and exporters.

CHAIR: Wilmar.

Senator STERLE: Yes, that is it. And we did not hold back. I think we did a couple of inquiries, and a report was put out, and there was a fair bit of action. Another task force was going at the same time with federal members of parliament. I believe the ag minister may have set up the task force. Is that correct?

CHAIR: Yes.

Senator STERLE: So I just thought that you guys would still have—

Ms Freeman : I was referring to the role of the department. Certainly the Deputy Prime Minister and, I understand, the member for Dawson have also made public statements urging the parties to reach agreement. But, as I said, that is not a matter for the department.

CHAIR: The parties being Wilmar and their growers, on cane supply agreements—is that a fair way to sort of broadly characterise it?

Ms Freeman : Yes, and there are a number of negotiations in place, not just with Wilmar but obviously MSF and other major players. For example, MSF and QSL have reached agreement, as I understand. So, some are ongoing.

CHAIR: We have a situation where Mitr Phol now has cane supply agreements with some 428 growers, and it is fair to describe them as international players in the international marketplace. Yet Wilmar say, do they not, that they do not believe they can enter cane supply agreements, because of their contractual obligations elsewhere in the world?

Ms Freeman : As I understand it, there are certainly a number of Wilmar agreements within Australia that are not settled. But I also understand that Wilmar have publicly stated that they have signed a million tonnes of cane under individual agreements in Queensland. So I am just not sure how that—

CHAIR: Let's call an agreement an instrument between a grower and, in this case, Wilmar, the miller. Are you aware that the great majority of Wilmar growers have not entered into cane supply agreements with Wilmar? Forget about the tonnages for a moment.

Ms Freeman : I would have to take the specifics on notice, but I understand there are quite a number that are still outstanding.

CHAIR: Are you up to speed with the issue with STL, with the six sugar hubs, whereby Wilmar is endeavouring to take a second seat on the board?

Ms Freeman : I am not across the specifics of what the company is doing with boards.

CHAIR: How could we promote you to take further interest? This is growing to be a very, very significant issue again in this industry, which has been disrupted quite significantly over the past 36 months. Let me ask the question another way: would you agree that the stability of the sugar industry in Australia is a matter of national interest? I do not want to make too fine a point of it, but it is on a scale where there is a nation interest involved.

Ms Freeman : There is no doubt that the sugar industry is a major contributor to the gross value of production and the exports of Australian agriculture.

CHAIR: You may think I was preaching in the sense of asking questions that draw this out, but is it fair to say that if we find ourselves in a situation in which Wilmar cannot reach cane supply agreements with its growers then that will be a very significant event for that industry with a knock-on effect for the national interest?

Ms Freeman : There will be considerable problems if agreements are not able to be reached between the parties.

CHAIR: Given that Mitr Phol have reached agreements on cane supply—and this will be a difficult question for you, but I am going to pose it—does that prima facie suggest that Wilmar could reach agreement with their growers?

Ms Freeman : I am sorry. I am not trying to be difficult, but I do not think I can comment authoritatively on that. I am aware that Mr Christensen has referred a matter to the ACCC referring Wilmar's actions to be investigated in relation to unconscionable conduct accusations. I understand that the ACCC is investigating that. Beyond that, in terms of the specifics—

CHAIR: I am drawn to your comment that you are in dialogue with some of the parties in sugar in Queensland. Would that include Wilmar?

Ms Freeman : We most recently had a conversation—we are talking of Friday—with the Sugar Milling Council. We will be talking to them about specifics. I would have to take on notice the matter of when I last spoke to anyone from Wilmar. It is been quite some time.

CHAIR: I do not know how to ask the secretary to keep a close eye on what is happening in Queensland, and in fact perhaps an active look at it, because I suspect whatever happens will happen very quickly, and this is causing enormous trauma. Wilmar now has, I think, 51 per cent of the milling capacity and we have 4,500 growers there. I know it is a volume question on what growers produce, but I would urge you to have your department keep a sharp eye on what is happening there for the moment, because I really do think it is going to have a less than happy ending.

Senator STERLE: You have some conversations going, Ms Freeman, but is it clearly that, because it is state legislation—we will call it the 'real choice in marketing' legislation—there is absolutely no role for the federal department anywhere in the sugar supply chain?

Ms Freeman : We deal with the sugar industry on a whole range of issues, not least of which is having a statutory funding agreement with Sugar Research Australia. But in relation to what are commercial matters that are currently within a state jurisdiction, the department is not actually involved in the day-to-day discussions of that.

Mr Quinlivan : I think it is probably more than just the department. Other than potential action under the Competition and Consumer Act for things like unconscionable conduct, in the area of sugar marketing the Commonwealth does not actually have a point of influence or intervention now. I think that is why the Queensland legislation happened, in some ways. It was the only vehicle that the affected parties could find to pursue their ambitions. That is partly why the attention turned quickly to the Queensland parliament rather than to the Commonwealth parliament, even though there were quite a lot of Queensland members who were very interested in matters.

CHAIR: Do you accept that we have a unique situation where the Queensland government does not have their heart in this.

Mr Quinlivan : Yes.

CHAIR: They have publicly indicated that if they could they would unwind the changes to the sugar act.

Mr Quinlivan : Yes, we are well aware of that.

CHAIR: So if we are sitting here thinking that the Queensland government has a keen eye on this and is ready to resolve this, that is not case. Given we have accepted that it potentially can have a national interest effect—I get it—I just urge your department to keep a keen eye on sugar for a minute or two.

Mr Quinlivan : I think a lot of people are keenly observing what is happening, including us. But my point remains that in this area of marketing we do not have a point of intervention any more.

Senator STERLE: Well, it is as clear as it can be.

Senator CAROL BROWN: I want to ask a couple of questions on the Indonesia-Australia Partnership on Food Security. Is the Indonesia-Australia Partnership on Food Security the same thing as the Indonesia-Australia Red Meat Partnership? Are they one and the same?

Ms van Meurs : Yes.

Senator CAROL BROWN: Can you then provide an update on the Indonesia-Australia Partnership on Food Security?

Ms van Meurs : A little bit of background as well?

Senator CAROL BROWN: Yes.

Ms van Meurs : The partnership was formed in 2013. That was with the Labor government of the day. Then, after the election in 2013, it was recommitted or reconfirmed by the new coalition government. The program really is around underpinning Indonesia's food security by improving the long-term sustainability and productivity of the Indonesian cattle sector; strengthening Indonesia's and Australia's bilateral business, investment and trade ties; supporting closer engagement in the red meat and cattle industries, both in Australia and with other government agencies in Indonesia; and supporting bilateral exchange of expertise, capacity building and technical assistance relating to the red meat and cattle sector.

Senator CAROL BROWN: Does that mean we send department officers over to Indonesia?

Ms van Meurs : There is a number of programs under the partnership. For example, there is a skills development program where a lot of up-and-coming Indonesian farmers come to—for example, there is a program up in the north of Australia where we work with them to develop their skills around cattle, cattle logistics, and looking after cattle in stockyards and on the farm. So there is a reasonably big program we undertake as part of that partnership, to develop skills, particularly around Indonesian capabilities.

Senator CAROL BROWN: Is the minister planning any visits to Indonesia?

Ms van Meurs : We are always talking to the Deputy Prime Minister about travel. At the moment we continue to do that and we will continue to talk with his office around travel. He is always keen to travel to places like Indonesia. He did that in 2015. My understanding at the moment is that we are talking with the Deputy Prime Minister's office about, possibly, the G20, early in January, which is in Germany.

Senator STERLE: Did I read that the Indonesian President is visiting Canberra soon?

Mr Quinlivan : [inaudible] there has been a public announcement.

Ms van Meurs : No, there has not.

Mr Quinlivan : We were just wondering about that ourselves. We would like to be able to say something positive about that, but we do not want to pre-empt those who should be making an announcement along those lines.

Senator STERLE: I asked to see if there were any bilateral meetings going on between Minister Joyce and his counterpart, or the Prime Minister?

Mr Quinlivan : If the president were visiting there certainly would be bilateral discussions.

Senator STERLE: What are the big-ticket items are happening between us and Indonesia at this stage?

Mr Quinlivan : I think the principle one, in the trade area at least, is the free trade agreement talks.

Senator STERLE: Can you give us an update on how that is going?

Ms van Meurs : The IA-CEPA—basically a free trade agreement with Indonesia. That has restarted after a little bit of a lapse in time. That has been restarted by Department of Foreign Affairs and Trade. There has been one round of discussions and there is a second round of discussions, in Indonesia, in about two weeks.

Senator STERLE: You said that it has just been reactivated. How long has it been going on? How long to stall for or stop for? Coming from WA, they are our closest neighbour, and they are Queensland's and the Northern Territory's closest neighbour—we do have an interest. There are a lot of people to feed over there.

Ms van Meurs : I will have to take that on notice.

Senator STERLE: Okay. Apart from cattle, are there any other industries that are wanting to grab this with two hands and charge in?

Ms van Meurs : Indonesia is one of our biggest trading partners. We send a significant amount of such things as wheat and horticultural products to Indonesia. It is a very big market. I do not have the exact stats but it is a significant one.

Senator STERLE: While we are on trade and market access, a massive announcement was made in WA a few years back when the Premier came out and talked about the free trade agreement with China and boxed meat and all sorts of stuff and how good it would be for our growers, even though the herd is diminishing. What has happened with the boxed meat export market to China since the free trade agreement?

Ms van Meurs : To China?

Senator STERLE: Yes, China. Senator Back would have an interest here has much as I do.

Senator BACK: Indeed.

Ms van Meurs : I can talk around the China free trade agreement. As you probably know, China is our biggest export market for agriculture. There has been an increase of 40 per cent in four years, to $7 billion.

Senator STERLE: Is this in all agricultural products?

Ms van Meurs : All agricultural products, yes. On the specifics of meat, there have been a number of drops in tariffs. At the moment there will be a total elimination over 10 years for beef and veal into China—it is between 10 and 25 per cent, depending on which type of beef or veal you are talking about.

Senator STERLE: Ten years from when?

Ms van Meurs : From entering into force, which was in December 2015.

Senator STERLE: In terms of the expectation from the big announcement, which got everyone excited—and let's face it, Minderoo have put down there in Harbin, which was a welcome intervention, wasn't it, Senator Back?

Senator BACK: It certainly was—they have spent $82 million.

Senator STERLE: And Mr Burton's new abattoir is coming online up there between Broome and Derby, out there at Yeeda. Has any boxed meat market started, or is it just that in 10 years it will be this figure?

Ms van Meurs : Are you talking about chilled meat?

Senator STERLE: There is a boxed meat market, but has it increased—have we seen this massive rise since the China free trade agreement and all the dancing around and celebrating?

Mr Read : In response to your question there are a number of factors in terms of product being directed towards markets. In the case of beef, as you know, given the wet event, particularly of the last 6 to 12 months, and the herd rebuilding that is occurring in this country at the moment, that is causing the price of cattle to be extremely expensive. That then changes the dynamics of where that product goes around the world. In regard to China, it is our fifth biggest market—it is about a $137 million market. In terms of opportunities for beef exporters, they will just continue to look for those price points across a carcass where it offers best return. At the moment, a bit of that is in China, but equally there is obviously a lot of product that has gone to the US over the last six or 12 months.

Senator STERLE: So we have seen a massive increase in burger meat to the US? Is that what you said?

Mr Read : Yes, certainly over the last two years. Given where that market was positioned in a rebuilding cycle itself, and the prices that were being paid for grinding beef, it certainly attracted a lot of product from the US for that period. They are now changing that cycling, so with the larger herd now occurring in the US that will probably have an impact on the demand from this country. The price points will move again and in another six months we will have more turn-off in terms of the Australian beef industry. That will then make price points, such as those in China and other markets, more attractive.

Senator STERLE: Since the signing of the free trade agreement, have you had a tsunami of exporters kicking your door down to seek assistance for trade and market access to China?

Mr Read : Every day.

Senator STERLE: Good—tell us. Give us some good news.

Mr Read : If the question is, 'Is there an intensive interest in China?' there is. Everyone who walks through the door wants to go to China. It does not matter what—

Senator STERLE: I have been there a couple of times myself and I do not blame them. It is an interesting place to see. There are one billion-odd people that they have to feed and water. So where are the movements and in what areas? Or is it just, 'We'll get back to you'?

Mr Read : No. What needs to be taken in context internationally is that not all markets are on the same plane in terms of difficulty of access and the technical specifications required for access. China is one of the more complex and difficult ones and it needs sophisticated industries to access that market and maintain a sustained trade arrangement into those markets. We have spent a lot of time working across industries—that includes beef, and our dairy is a very sophisticated industry. We have emerging industries such as pork and kangaroo that are very keen to access that market, but equally there is investment occurring within those industries to ensure that they are well positioned at the time when we get that access and will be able to sustain and maintain that access into that market.

Senator STERLE: I am always very mindful not to talk down the Australian agricultural industry. As we have heard earlier today from certain officers, our dairy industry is not in a healthy shape when it comes to its long-term survival prospects. Is there any opportunity for you people to assist our dairy farmers and get milk into China? Or are there some speed humps where they cannot get it in? Tell me what has happening. You just said, and I agree with you, that our dairy industry is very sophisticated, but a lot of it is on its knees.

Mr Read : We do a lot of work with regard to market access for dairy. For example, we are very close into the United States now around a mutual recognition arrangement with the United States Food and Drug Administration. All that is about is simplifying the technical barriers to access into those markets. China will continue to talk, with the listing of new participants, particularly infant formula, into China, which again is very complex and so forth. In some of that environment, and particularly a lot of the environment at the moment with dairy, there is the implication of some of the trade complexities between Russia and Europe and so forth and, again, product moving from that part of the world into China. I would expect that will change over the next several years. That will have a big impact again on the opportunity for supply, and that will impact back to our production sector.

Senator STERLE: This may sound simplistic, but it was brought to my attention—and, I am sure, Senator Back's as well—about a month ago that, I think, the operations of about four dairy-farming families in Harvey were ceased. Weren't they, Senator Back?

Senator BACK: Yes, they were threatened to be ceased.

Senator STERLE: That is it—'Walk off the land. We're just not buying your milk.' There was no market for it. Are there any conversations within the department or between the department and the minister or anyone to say, 'Hang on—why are we pouring milk down the drain? Why are we having third-, fourth- or fifth-generation dairy families going into receivership or walking off the land? Can we progress trying to get this milk somewhere else?' Or is it just too easy for me to sit at the front and assume it is not that hard?

Ms Freeman : Obviously, the department is well aware of the arrangements to do with those Western Australian dairy farmers. They have been impacted by the decline in the market conditions—there is absolutely no doubt about that. A number of conversations have gone on. We have been in constant conversation with both the industry and the Western Australian government as well at the department level to try to look at some options in the short term and then over the longer term. There are also a number of measures in place. As I think Mr Williamson referred to earlier this evening, Western Australian dairy farmers are also receiving some assistance off the back of the dairy package.

Senator STERLE: No, no. I am aware of that, and I am not trying to politicise it. I am just trying to cut my way through the diplomatic and bureaucratic system. Is it really that hard to say to overseas export markets: how can we get this thing moving? How can we really start talking about providing a brilliant commodity that we have here in Australia and that can help out your people?

Ms Freeman : There is a couple of things. One of the issues, which Mr Read referred to, is the longer term significant efforts that go on by government and industry to gain and maintain market access. In many cases it takes many technical elements to do that, and there is a vast amount of work that goes on both in relation to trade agreements and in broader negotiations, bilaterally and regionally.

In relation to the Western Australian one, obviously there are issues that are currently being considered about what is actually a response to a current market condition in Western Australia, and what can we do in the short term to assist them. So there is sort of a range of issues in there.

Senator STERLE: So, in other words, it is not just as simple as sending officials over to China and saying, 'Come on—let's speed this up'?

Ms van Meurs : Can I just—

Senator STERLE: I am not being a smarty. I do not know how it all works.

Ms van Meurs : Can I add some stats about the China free trade agreement, particularly for the dairy industry. Because it has been in force for around six months, there have been two separate tariff cuts in quick succession. The dairy exports totalled $396 million in the first six months of 2016—that is a 113 per cent increase compared to the same time in 2015, so there is a growing market there.

Senator STERLE: So that is dairy. Is that milk, cheese, butter, ice cream?

Ms van Meurs : Of the milk powder exports, $122 million, which is up from $55 million.

Senator STERLE: Milk?

Ms van Meurs : That is milk powder.

Senator STERLE: Milk powder, okay.

Ms Freeman : I think I can also say I know that in relation to Western Australia there have been recent discussions about whether it was possible to export liquid milk, and Taiwan was mooted, and Malaysia, as well. The actual quotas are currently fully utilised so, at the moment, it is not going to solve the current problem.

Senator STERLE: No, no. That has answered it.

Ms Freeman : But I think we should register that the department is well aware and is having discussions with industry, but that solving this problem in the short-term is—

Senator STERLE: Just so no-one is confused, when I say milk, I am talking dairy products.

Ms Freeman : Yes.

Senator CAROL BROWN: My question is actually about a risk assessment for the—am I in the wrong area?

Mr Quinlivan : Yes. I guess it is actually that we are moving on to biosecurity now.

Senator STERLE: Through you, Chair, we do not have a lot, so can we bring biosecurity to join us? Oh, hang on—Senator Rhiannon's questions are in the next outcome, aren't they?

CHAIR: Correct.

Senator STERLE: If this is in the next outcome, can we go to the next outcome? Let's finish here and go to the next outcome.

CHAIR: I will declare that outcome 1 is at an end. Outcome 1 divisions are: sustaining natural resources for longer term productive primary industries; farm support; sustainable agriculture; fisheries and forestry; agricultural policy; trade and market access. Your officers who have been involved in this outcome are free to go, with our thanks and best wishes for safe travel to their destinations.

Mr Quinlivan : Can I just note, before she leaves the room, that this is Libby Bie's last appearance at estimates after many years of coming along.

Senator STERLE: Lucky Libby!

CHAIR: Good for you. Thank you for your service over the years. We appreciate it

[21:59]

CHAIR: We will now move to outcome 2 divisions: managing biosecurity and imported food risk.

Mr Quinlivan : Before we get into biosecurity properly, I will ask Ms O'Connell to give you an update on the Varroa issue at Townsville, because there were a couple of things said in that conversation with Horticulture Innovation Australia this morning that I think might be capable of being misunderstood. It is a very important issue, and, obviously, one that we have been very concerned to make sure that any publicity about it is absolutely correct. I will ask Ms O'Connell to set the record straight.

Ms O'Connell : I think the essential point is in terms of the different types of Varroa mite. There was a suggestion earlier that we had a Varroa incursion. I want it to be clear that we remain free from Varroa destructor, which is the far more concerning type of Varroa mite. So for all trade reasons we remain free from Varroa destructor. We have recently had an incursion of Varroa jacobsoni in the Townsville area, which is currently being dealt with.

Senator BACK: Any idea of how it arrived?

Ms O'Connell : Yes, we believe it came in on a shipping container through the port and then moved—

Senator BACK: From?

Ms O'Connell : I would have to ask.

Senator STERLE: That would be a flag-of-convenience ship, not an Aussie one.

Ms O'Connell : Sally Troy will be able to tell us a bit more about it.

Senator BACK: And the obvious question: if V.jacobsoni was able to get here, is V.destructor also able to get here through the same trade route?

Ms O'Connell : It came on a hive of Asian honey bees.

Dr Troy : Was your question regarding where Varroa jacobsoni

Senator BACK: Yes. Do we know the origin of this particular incursion?

Dr Troy : We do not know the specific origin, but Varroa jacobsoni is throughout South-East Asia and into Papua New Guinea. So it could have come on a container from any one of those countries in South-East Asia or to our north.

Senator BACK: And so could V.destructor.

Dr Troy : We are actually the only major land mass in the world that is also a honey producer that does not have destructor.

Senator STERLE: Where is the other place that does not have Varroa destructor?

Dr Troy : Antarctica—not a honey producer!

Senator STERLE: That is why when we saw the map in New Zealand we were the only ones that were not orange—but we did not look Antarctica.

Dr Troy : That is why I said, 'A honey producer.'

Senator BACK: So the obvious question to you both is—and I think it is a Queensland government matter as much as it is yours—what action are we taking at the moment to try to protect the status that we enjoy?

Dr Troy : The actions that we are taking are to keep out both Varroa mites. So I might ask colleagues from the compliance division to come also and talk about some of the prevention activities. We have offshore work that we do in Papua New Guinea and through Torres Strait to make us aware of the movement of pests coming down through there. There are a whole heap of prevention measures that the compliance division can talk about to do with keeping pests offshore.

When they get onshore, we have a surveillance program and national arrangements for eradication. The incursion in Townsville is an example of that, where the pest has been detected and where it is now the subject of an eradication program.

Ms O'Connell : So we have a significant number of sentinel hives around. The importance there is early detection, which assists with a quick eradication and which is a very important response measure.

Senator BACK: The pessimistic view that the gentleman gave us in New Zealand—Senators Sterle, O'Brien, Colbeck and myself—was twofold. First of all, we will get it. And secondly, they were very pleased with themselves that they only had it on the North Island. They were congratulating themselves about that when it was immediately found on the South Island as well. He just said, 'Despite every effort we made.'

I am not being negative, I am just asking: what chance do we have of keeping it out? And if we cannot keep it out, how quickly are we likely to discover it? How long do you think it took to find the current incursion from the time it arrived?

Dr Troy : The current incursion, which is the jacobsoni species, we think was here for about two years before it was detected. At present there have been eight sites in Townsville where it has been found. It has come in on Asian honey bee rather than on European honey bee and that is why it is the less problematic of the Varroa mites because it is predominately a pest of Asian honey bee, which is exotic to Australia. Because it is on Asian honey bee, which is only now established in Far North Queensland around Cairns, it is still relatively exotic around Townsville, so by eradicating Asian honey bee around Townsville then we are eradicating the Varroa mite. The nest that was in the Townsville Port had the mite and one other nest has had the mite, but the other six nests that have been found have been free of the mite.

Senator BACK: Is my recollection correct that the mite does not have much of a pathologic effect on the Asian honey bee but is absolutely destructive to the European honey bee? Is that what we were told?

Dr Troy : That is correct. Both Varroa destructor and Varroa jacobsoni have kind of coevolved with the Asian honey bee through Asia so the Asian honey bee behaviourally deals with it better. It cleans itself more often and the hives are smaller nests and they tend to abscond—they head off and form a new nest—when the pest pressure gets too great, because the mites are feeding on the bees and also on the bees' larvae in the nest. Whereas because the European honey bee has not coevolved with it it is not used to dealing with it. Most of the time the one that we have in Townsville—jacobsoni—actually rarely affects European honey bee but there have been incidences in Papua New Guinea where there has been a cross from Asian honey bee into European honey bee. That is why it has more of an effect on European honey bee than Asian honey bee.

Senator BACK: Thank you. That clears that up.

CHAIR: Is it fair to say that in the banana industry—fingers crossed and toes crossed—there has been no further evidence of Panama race 4 than on the affected farm?

Senator STERLE: Is that the one south of Darwin?

CHAIR: No, near Tully.

Senator STERLE: What did Darwin have?

CHAIR: Darwin is wiped out with Panama race 4.

Dr Troy : Sorry, could you repeat the question.

CHAIR: So other than the infection on the farm in Tully that the department is involved with—and I think you have done a fantastic job to get to where we are in isolating it—have there been any current reports of establishing Panama race 4?

Dr Troy : Panama race 4 is established in the Northern Territory and has been for about 19 years.

CHAIR: No, I am talking specifically in the Queensland population.

Dr Troy : In the Queensland population there is the one property that is confirmed and there was a second property where there were some suspect samples taken. Those samples are currently going through diagnostics and have cleared all of the tests so far. There is one final test that remains to be done. Results of that should be available by the end of the month. So far all the signs are good that there has been no second property in Queensland.

CHAIR: Senator Boswell lives through me so I have to ask the perennial question: at the moment are there any applications for bananas to be imported into this country?

Dr Healy : We have not received any import applications for the importation of fresh bananas.

CHAIR: Senator Boswell thanks you. He would be delighted.

Senator CAROL BROWN: I wanted to ask whether you could provide an update on the risk assessment for—hopefully, I am pronouncing this right—psittacine birds.

Mr Chapman : It is a silent 'p'. We announced the commencement of the review to look at risk management measures for psittacine birds at the beginning of May of this year. It is likely to take us a good 12 months. It is quite a complex area. Australia did not allow the importation of parrots between 1949 and 1990, because there is a range of diseases and not a lot is known about them all, and, obviously, we have a large and unique parrot population ourselves.

In 1990 imports did recommence, and that was partly because there were concerns about ensuring there was a legal pathway, because otherwise people smuggle birds in, and that is a risk. But there were concerns about a number of diseases affecting parrots, so in 1995 imports stopped. We have now put it back on the review agenda, because there is more detailed knowledge about the diseases that might affect parrots. I do not have a date for the finalisation of it. I would expect it would be probably in the first half of next year but I do not want to guarantee that. I should also say that it is just for pet birds and non-commercial birds, which includes those for zoos. The results of that will then determine whether we broaden it for larger consignments.

Senator CAROL BROWN: When you say pet birds, you mean people coming here to Australia and bringing their pets.

Ms O'Connell : Pets owned by people, not for commercial trade in selling pet birds.

Mr Chapman : For instance, people bring in cats and dogs that they own overseas. Parrots can live a long time and people get attached to them. There have been a number of requests made by quite a range of people over the last 10 years or so for us to look again at this issue.

Ms O'Connell : So it is individual imports rather than commercial imports.

Senator CAROL BROWN: So you are undertaking the risk assessment in May of this year. I understand what you are talking about with individuals asking if they can bring their pets to Australia. Was that just a routine issue?

Mr Chapman : At any given time, we have a whole range of requests for us to consider import conditions for a range of commodities. They can be driven by trade issues and market access requests by individuals. This was an issue which, as I said, had been addressed for a number of years by a number of people. It was us deciding that there were good reasons to put it back on the priority list. That was partly because of a need to resolve this issue. We also look at the specialist staff we have who have the technical knowledge which is necessary for these quite complex reviews. We have done reviews on other bird-related issues in the last few years, and now those staff are freed up, so we can devote them to parrots. In the number of technical staff that there are in my division—there is obviously a range of animal diseases and a range of specialities, so it is not like one person can do any thing; we have quite detailed and, in fact, world-class knowledge in these areas. It is really devoting those staff to those issues.

Senator CAROL BROWN: The reason I am asking is that I have been asked to ask about the process about a cockatiel called Budgie that wanted to come home.

Senator STERLE: That is cute.

Senator CAROL BROWN: I am telling you that because my next question is: do you know that case?

Mr Chapman : I am aware of the case but I do not know the specific details—one of my branch heads might have more knowledge. But at the moment, there are not any import conditions that would allow Budgie to be brought into the country. Once the review is concluded and we have some conditions in place—that is, assuming they do say that imports can occur, and we have appropriate risk-management measures—the owners of this cockatiel would be able to bring it into the country in accordance with the definitions developed.

Senator CAROL BROWN: We would have a favourable result—I am not seeking to criticise. But my question is: what processes have changed within the department following the request to have Budgie the cockatiel imported into Australia?

Mr Chapman : There have not been any changes in processes because of this request. We get requests of that sort on a regular basis and our answer is always the same which is that we have a—

Senator CAROL BROWN: Sorry, was there some change to remove ambiguity in the self-assessed clearance in BICON?

Mr Chapman : I will have to get some advice on that.

Ms South : Now that you have made the comment about the change in BICON, I know that we are talking about the same bird so I will tell you what I can. You are correct. I think the owner of Budgie was looking at import conditions on BICON, and BICON is our relatively-knew import-condition database. So we had to transfer all of our conditions from our old system onto our new system and it appears that during that transference process there was some information that suggested that pet birds were eligible, through a particular pathway, when in fact they are not. So that was corrected and the owner was advised, as Mr Chapman has explained, that currently we do not have import conditions—

Senator CAROL BROWN: So it is all cleared up now?

Ms South : Yes.

Senator CAROL BROWN: Thank you for that update.

Senator STERLE: If I could just follow up on that. We bring fruit, vegies and seafood from all over the world and all sorts of stuff. Where does little Budgie live now?

Ms South : My understanding is that this bird is in Malaysia.

CHAIR: [inaudible]

Senator STERLE: I want to be serious, okay?

CHAIR: You cannot be serious—

Senator STERLE: I am composing myself. He has thrown me out.

Senator CAROL BROWN: It is not a budgie; it is a cockatiel.

Senator STERLE: Its name is Budgie but it is a cockatiel—but that is its name. Is the fear of the diseases that Budgie may bring in specific to the breed, to the region or to both? Can you help me out? We can bring dogs and cats and all of this sort of stuff in. Can we not have a little bit of clearing house for cockatiels or something—

Senator CAROL BROWN: We sell parrots commercially in Australia.

Mr Chapman : At the moment, parrots can only be imported into Australia from New Zealand because New Zealand has a similar pest and disease status as Australia as far as parrots are concerned. Other countries have a different pest and disease status from Australia, and I can say that one of the things that prompted the closure of imports for parrots into Australia in 1995 was a bird that was imported that did have exotic diseases. So to put it really simply: until we have done the review, there is too much uncertainty. We do not have clear measures by which we can ensure that imported birds do not present a disease risk to Australia. You can contrast that with cats, dogs and horses where we have very well developed conditions. There are a whole range of things that have to be done before the animal gets imported into Australia. We make sure that that is all aboveboard and then the animal does a period of post quarantine once it arrives in Australia. That is the sort of work we need to do with parrots and, as you would imagine, there is not as much known about parrot diseases as there is known about cat and dog diseases.

Senator STERLE: I have a hypothetical question and I want you, Chair, to back me up on this one because Senator Back will. Okay? What about if Budgie's parents sent Budgie to New Zealand—like China does with strawberries—and then the Kiwis could bring Budgie here. Would we accept him then? Well, that is what we do. This is a serious question.

CHAIR: We are going to be on to Boo Boo and Pistol here in a minute.

Senator STERLE: No, this is a serious question.

Mr Chapman : I do not believe that Budgie would be allowed to go to New Zealand. I am not sure of that, but I do not believe that Budgie would go to New Zealand.

[22:20]

CHAIR: We will now move on to the Exporter Supply Chain Assurance System, or ESCAS.

Senator RHIANNON: The 2014 review of ESCAS found that nearly 13,000 animals had been transported outside approved channels between 2012 and 2014. Can you inform us how many animals have been known to move outside ESCAS since 2014?

Dr Clegg : I do not have that information with me, but I can provide it to you after this.

Senator RHIANNON: You will take that on notice?

Dr Clegg : Yes.

Senator RHIANNON: Can you also tell us which exporters were involved in each case?

Dr Clegg : The information about which exporter is involved in each case is already available on our websites. With the information I am going to get you on the number of animals, I will provide you with a link to that so you can see each of the reports we have done.

Senator RHIANNON: Will that also provide information on the penalties for each of these breaches?

Dr Clegg : Yes, it will.

Senator RHIANNON: Can you describe what those penalties are, please?

Dr Clegg : The penalties depend on the nature of the problem in each of the ESCAS arrangements: the number of animals involved, whether there were significant animal welfare issues, whether any such issues were minor, and whether animals were moved to facilities that were already ESCAS approved or whether they were moved to facilities that were not. Those are the key things we take into account. The types of things we do depend on the actions the exporter takes. For example, an exporter can implement training or provide additional supervision. In those cases we have allowed exporters to continue to use facilities. An example of that is the Dabbah abattoir in Israel, where there were poor animal welfare practices exposed by video from Animals Australia. The two exporters that were using that facility put in place remedial actions—which continue to this day and have seen a lift in the standards in that abattoir. That is an example where the exporter has invested.

There are other examples where the exporter will say, 'I will have it removed from the supply chain.' An example of that is some of the consignments that have gone to Thailand. Exporters have decided to close their supply chains there and not continue to export to those markets. In some cases, facilities are removed from the supply chain for a period, after which time another exporter or that same exporter may say they have invested and made some changes to the infrastructure or that there have been changes in personnel. They may say they have added an animal welfare officer or that they have better traceability systems in place. Then they will continue to use that facility.

Senator RHIANNON: I want to move on to the issue of repeat offenders. That same report stated that a limited number of supply chains were repeat offenders and that penalties to that point had not made any difference. Does that remain your assessment?

Dr Clegg : ESCAS is a work in progress. It depends on the relationship between the exporter and the importer. A good example of that is Kuwait, where there are decades-long relationships between the chief importer there and the exporter that sends most of our sheep to that market. They have implemented many things to try to reduce the leakage of sheep from facilities. They are generally abattoirs in Kuwait and they are taken out of those abattoirs by traders. They have gradually reduced that leakage over time but it has taken time to do that. In this year's Eid, I think the number of animals outside the supply chain in Kuwait was significantly less than in the first few years of ESCAS arrangements. Nothing works instantly. We rarely see that sort of success, other than just eliminating them. It is the ongoing investment and involvement between the importer and the exporter that is actually leading to animal welfare improvements.

Senator RHIANNON: Considering the scandals around the failure of ESCAS continues and the issue of repeat offenders is real, I understand that the report suggested that the department look at imposing fines or enforceable undertakings. Does the department have the power, under the Australian Meat and Live-stock Industry Act, to suspend or cancel a licence in response to an ESCAS breach? Can you cancel licences?

Dr Clegg : We can cancel licences under that act but you would need to meet a very high standard of proof that it was warranted. With ESCAS, in many instances there are some examples where exporters are vertically integrated and are responsible for the management of the facility and in most cases we have exporters that have a contractual arrangement with a third party in another country. It is actually the actions of the third party in another country or staff that are employed there that are breaching the ESCAS arrangement for their personal gain. In those circumstances, it is very difficult to consider that the exporter themselves have actually caused the breach. If there is enough evidence to prove that they are colluding, that they are deliberately flouting ESCAS arrangements, then we have a case to look at their licence.

Senator RHIANNON: Is what you are saying that some of that very horrific footage, like Animals Australia has collected, may not be sufficient because you or the exporter would argue, 'Well, it wasn't our fault'?

Dr Clegg : It is not that it was not our fault, it is the responsibility of the parties involved and the efforts the exporter has made to make their system work. It is an assurance system. It is not cast-iron guarantee that if anything at all goes wrong that you will fined or your licence will be cancelled. That would be unreasonable. We could not administer that.

Senator RHIANNON: Can you provide details of any fines or enforceable undertakings that have been imposed on repeat offenders or on anyone?

Dr Clegg : At the moment, the Australian Meat and Live-stock Industry Act and the Export Control Act do not provide us with the powers that you are talking about but we are seeking to have those powers added to the Export Control Act and part of the export legislation review, which is currently underway, is also looking at adding those penalties to the toolbox that we have to manage regulatory breaches.

Senator RHIANNON: Can I just ask for some clarification, I must have misheard: I thought you said that under the Australian Meat and Live-stock Industry Act that you could suspend or cancel licences.

Dr Clegg : Yes I can but that does not mean that it is a fine and it does not mean that it is an enforceable undertaking. That is an actual cancellation or suspension of the licence that was under AMLI.

Senator RHIANNON: Okay. I will split the question up. How many times has a licence been suspended and how many times has it been cancelled?

Dr Clegg : There was one cancellation this year.

Senator RHIANNON: Who was that?

Dr Clegg : That was for Frontier International Agri, which is a company that was not exporting livestock under ESCAS arrangements. That was a breeder issue.

Senator RHIANNON: Right. How many licences have been cancelled?

Dr Clegg : To my knowledge, that is the main one that I can recall.

Senator RHIANNON: I thought you said the first one was a suspension.

Dr Clegg : Sorry, that is a cancellation.

Senator RHIANNON: Is that the only one involving breeding cattle?

Dr Clegg : To my knowledge, no licenses have been suspended because of ESCAS since ESCAS was introduced. The main way we have managed breaches with ESCAS has been my limiting an exporter's supply chain, by suspending the supply chain, so they can no longer export to that market. That is the way we have managed noncompliance with ESCAS.

Senator RHIANNON: The conclusion that you would draw from that is that repeat offenders are getting away with it.

Dr Clegg : I would not say that. I would not say they are getting away with anything, because actions are taken.

Senator RHIANNON: I will ask the question in another way. Do we still have repeat offenders?

Dr Clegg : We still have exporters sending livestock to markets where the ESCAS arrangements do not always perform as they should, that is right.

Senator RHIANNON: So we still have repeat offenders, but we do not have examples of repeat offenders having their licences suspended or cancelled?

Dr Clegg : That is right, we do not.

Senator RHIANNON: I will come back to you later. Thank you.

Senator BACK: I want an update on where you are nationally in terms of the department's involvement with state and/or territory jurisdictions in wild dog management.

Mr Koval : In terms of wild dog management, the department has a number of programs that we use. The one we look after is through our established pest animals and weeds program and there is another one through the drought measures, which is the cluster fencing through Queensland. We can talk about the established pest animals and weeds program. We work with the national wild dog action plan, which is a plan that was set up a number of years ago through some funding from the Australian government. We provide funding for them to work across communities and jurisdictions to set up a national program to control dogs, to train communities and doggers, and to look at control method methods and methodologies to make sure we have an integrated plan across the community. Dogs do not respect fences or state boundaries—so that is the national wild dog action plan. We also have funding through our research and development grant program to look at control methods such as lethal traps and the antidote for PAPP, the new poison. We are going to have a glovebox applicator for the antidote to PAPP so that domestic dogs or working dogs can take it. That is the main spread of programs.

We work very closely with states and territories in implementing the national wild dog action plan and we also work through the group called IPAC, the Invasive Plants and Animal Committee, which is made up of all states and territory agencies, as well as ourselves. The CSIRO and the Invasive Animals CRC are an observer on the group as well. The group looks at wild dog management and integrated management.

Senator BACK: Could you, on notice, give us a breakdown state-by-state as to where the federal funding in the wild dog management program is being expended and also provide us with some figures or some statistics that indicate what the success or otherwise of this reduction program is.

Mr Koval : Certainly, we can provide that on notice.

Senator BACK: Mr Quinlivan, I want to ask some questions about the live export of cattle to Indonesia. We have had some changes in the Indonesian central government's supply policies associated with quotas of live cattle going into Indonesia. Could you tell us what they are and what impact, if any, they are having on Australian producer exports?

Dr Clegg : The main change that has happened recently is a decree by the minister for trade that importers in Indonesia, for every five feeder or slaughter animals they import, must also import one breeder animal. That is to assist Indonesia achieve its goal of self-sufficiency. There are other variations to that. There is talk of—if you provide your breeder to a smallholder farmer then you can bring in 10 feeder or slaughter animals and one breeder animal. The reason it is causing a bit of stress with the Australian exporters and with the Indonesian importers is that if you continue on with that arrangement you will fill up the feedlots in Indonesia with more and more breeder animals, reducing the productive space to hold the feeders so that they are unable to hold the number of feeder animals that they normally would.

Senator BACK: So you meet the guidelines by sending up a heifer for every five steers—is that right?

Dr Clegg : Yes.

Senator BACK: And the heifer then remains in the feedlot?

Dr Clegg : Remains in the feedlot—

Senator BACK: They are not mated heifers; they just have to be females?

Dr Clegg : They have to be potential breeder animals.

Mr Quinlivan : There is not yet a lot of clarity about this new policy, because the legal instrument has not yet been made, but we understand that it is imminent. When that happens there will be more clarity about what the actual policy is and what its practical implications are. But the generic form of it is as Dr Clegg has described.

Senator BACK: When I met with some of their parliamentary officials last year I suggested that the best way they could meet their objectives in terms of owning breeder cattle would be to own them on properties in Australia. They were not averse to that idea, but obviously Widodo's idea of trying to create a breeding herd is continuing to the extent of wanting them—so the heifers sit in a feedlot; they don't get mated but they are there, so the five to one system works. Is that right?

Dr Clegg : I am expecting that they would expect their heifers to be mated at some point in time. Their whole approach is to improve their cattle production within Indonesia. That is their stated goal.

Senator BACK: Their goal is self-sufficiency.

Dr Clegg : Exactly.

Senator BACK: Whilst we are alive on the earth, that will not happen. I want to move to the Biosecurity Act 2015. You would be aware, Ms O'Connell, that there was great excitement a few weeks ago. Some people in Western Australia were very concerned that with the new act coming into force the Western Australian department of agriculture seemed to be losing most if not all of its independence in terms of decision making in consideration of what our producers would regard as uniquely Western Australia. Are you aware of that?

Ms O'Connell : Yes, I am.

Senator BACK: It was in the horticulture space particularly but it was broader.

Ms O'Connell : And we were having some dialogue with the Western Australian department at that time.

Senator BACK: Can you share with us what that dialogue was and can you also advise us as to whether you satisfied the concerns of the people who were raising these issues in Western Australia?

Ms O'Connell : Certainly. We had some good constructive and technical discussions with the officers of the Western Australian department of agriculture in four particular areas. I will ask Mr Koval to speak to those initially.

Senator BACK: Before you do—I do not know whether you saw the transcripts of ABC radio programs that I spoke on, but I defended the federal department valiantly and assured them that they had no cause for concern.

Mr Koval : We are very much aware of the issues you raise, Senator. We had a number of conversations with our Western Australian colleagues on four particular issues around making sure that there is enough justification why we would put different measures in place for Western Australia. We settled three of the four between ourselves, and the fourth one we are continuing to—

Senator BACK: What is the fourth one?

Mr Koval : The fourth one is table grapes.

Senator BACK: It is still Californian table grapes?

Mr Koval : Yes—well, table grapes, yes.

Senator BACK: Remind me again: is it a fungus or something?

Mr Koval : It is a fungus.

Senator BACK: Have we had any further advance on that? Certainly the grapegrowers are very concerned, and we had discussions at one stage, didn't we, about where the fungus was carried: was it carried on the skin? It is coming back to me, Mr Quinlivan.

Mr Quinlivan : Yes, the Western Australian industry and the department are looking to gather further information to provide to us, so we are awaiting further information from the WA side.

Senator BACK: Thank you. In fairness, that is me.

ACTING CHAIR ( Senator Sterle ): I have a couple of questions. The chair is not here, but I will say there seemed to be a confusion, because we had asked for the Water Division and the Murray-Darling Basin Authority to stay, but we have just been told that they have absconded. They got away.

Mr Quinlivan : I think it was more that they were advised that they were not wanted.

ACTING CHAIR: No. I am not blaming them, but not from us. The opposition senators did want them to stay. But, if I were in their shoes and someone gave me a free ticket, I would have been out of here like a shot out of a gun. Hang on. In all the excitement, I have lost my spot. I want to talk about turkey meat from the US. Who did advise them to go?

Ms O'Connell : Turkey meat to the US? That is us, Senator.

ACTING CHAIR: No, who advised Water Policy to go?

Ms O'Connell : The chair did. He read it out.

ACTING CHAIR: Oh, jeez! He's done it again!

Ms O'Connell : No, it was read out in the room, I think.

ACTING CHAIR: No, I had said we wanted them to stay. Anyway, they are gone. They are putting their feet up, they are having a cold bevvy and they are laughing at us.

Senator Ruston: I am sure they are not even watching us.

ACTING CHAIR: Well, I would be. Do not worry about it. Do not spin out. It is okay. It is not a jailable offence in Australia. Okay. Turkeys. Why did you grab your neck? You went like this.

Senator RHIANNON: Senator Sterle, the past four minutes have not been questions, and I would really love to come back in.

ACTING CHAIR: Do not come in here and start bollocking me, Senator Rhiannon.

Senator RHIANNON: No, I am not bollocking you. I am just conscious of time.

ACTING CHAIR: God! I have been sitting here since nine o'clock this morning.

Senator RHIANNON: I am conscious of time.

ACTING CHAIR: You are conscious of time? Well, you should have stayed in the other committee and not come in, and we would give you 10 minutes. Do not start lecturing me.

CHAIR: I have arrived just in time, Senator Sterle.

Senator STERLE: I am just in the mood!

Senator RHIANNON: Thank you. It would be good to move to questions.

Senator BACK: Senator Sterle is just kicking off his account.

Senator STERLE: You are not lecturing me, are you? God!

Senator RHIANNON: I will not go into what happened.

CHAIR: Senator Sterle, you had till 20 to, we had agreed.

Senator STERLE: No, I did not.

Senator BACK: No, I have just finished. I had my 10 minutes.

Senator STERLE: I am asking about—

CHAIR: Not any longer, Senator Sterle.

Senator STERLE: I am tagged between you trying to white-ant me and this one over here telling me off. I just want to ask about the turkey meat importation from the USA. What is happening? Do not keep grabbing your neck. You are putting me off.

Mr Chapman : We have concluded—

Senator STERLE: Scary, isn't it?

Mr Chapman : We have issued a draft report of the risk assessment of turkey meat. That has gone out for industry assessment. The industry has asked us for an extension of time to put together their comments. The extension of that will close on 15 November. So what they will do will provide us with a range of comments on it. They will have other expert advice. We have been working very closely with them. Once we get the comments in, we will consider them and see if that changes the draft outcomes that we have so far.

Senator STERLE: This is the USA coming in, is it? You said 'they'.

Mr Chapman : The US is the country which has sought market access for cooked turkey meat.

Senator STERLE: All right. How long before, do you reckon?

Mr Chapman : 15 November is the date that they need to have their comments in by, and then we will consider them. I cannot really put an absolute time frame on that. It depends what comes up. There are some issues that are still outstanding, so obviously we will need to give them some detailed consideration.

Senator STERLE: And how long has this process been going on for?

Mr Chapman : The entire process has been going on for a long time. The US originally asked for access for cooked turkey meat in 2007. We actually started work on this at the end of 2014.

Senator STERLE: So from our side, the Australian side, it has not been that long, in terms of protocols and this sort of stuff.

Mr Chapman : That is right.

Senator STERLE: What about the process to allow chicken meat from New Zealand? Where is that up to?

Dr Sheridan : Chicken meat from New Zealand was requested some time ago by New Zealand, and an audit was undertaken in accordance with the chicken meat IRA to ascertain whether New Zealand could meet the biosecurity requirements for Australia. It was concluded that it could, and chicken meat can now come into the country under appropriate conditions.

Senator STERLE: It can, so that is all done?

Dr Sheridan : Yes.

Senator STERLE: Is it cooked?

Dr Sheridan : It is cooked and raw, because New Zealand has a very good poultry-health status.

Senator RHIANNON: I am picking up from where we were up to on live export. I think we had agreed that there are repeat offenders and that there are no examples of licences cancelled; therefore it could be concluded that some exporters are willing to risk a breach. Does this mean the financial incentive to break the rules remains the biggest weakness of ESCAS?

Mr Read : We do not, as Dr Clegg talked about, apply the suspension of the licence but the suspension of the supply pathway as one of the measures to create that incentive to ensure higher levels of compliance. We are actually seeing that that is an effective mechanism. Not only is it the suspension of the pathway but the additional conditions that are being applied which have being identified on that website reference that Dr Clegg talked about. For example, from what we have seen occur, particularly in the Middle East recently from countries such as Kuwait and Jordan, we know the level of leakage that is occurring from those systems has decreased markedly. That is complemented by a range of activities that industry is preforming in-country as well. It is a combination of the exporter and the relationship of the importer developing those relationships to the point that they have high degrees of abilities to keep those animals in those pathways. Effectively, the regulatory response we are applying has been demonstrated to be effective through those reduced numbers that are actually getting out of those systems.

Senator RHIANNON: You just spoke of a decrease. Were you talking about a decrease in the number of repeat offenders or a decrease in the number of incidences of breaching the rules?

Dr Clegg : It is about the number of animals that are reported to be leaving the supply chain. What we have found with Kuwait is that we are actually starting to see a decrease in the number of animals that are escaping, particularly in the high-risk period of Eid. The efforts that the exporters have put in with training additional people, closing down some facilities, not providing sales to the public during Eid, carcass-only sales and the phone-app arrangement have all reduced the amount of leakage of Australian sheep out of their supply chain into the markets and into the hands of private sellers. That is through the investment of the exporters and from the industry. They have put in a lot of effort, hours and work to get that result. That is the result we are after: an increase in animal welfare. That is what we are trying to achieve here: greater animal welfare everywhere and to spread Australia's better animal welfare practices to the countries we are going to.

Senator RHIANNON: Thank you for explaining that, but there are repeat offenders and that is what I am trying to understand. Can you run us through how you are handling one of the repeat offenders? Livestock Shipping Services: how many critical and how many major noncompliances does that exporter have on its record?

Dr Clegg : It has several major noncompliances and it has several critical noncompliances. I will have to take a question on notice for that to give you the exact numbers, but the ratings for that company are on our website.

That company has actually improved this year. It has actually taken some risk-reduction measures itself. It did not participate in the Kuwait sales this year. Its performance in Jordan was very good. It is actually starting to turn the corner with its performance, I think. That is through the penalties that have been imposed on it and the additional costs it has had to bear to continue to supply the market, and those things are starting to change that exporter's behaviour in high-risk situations like Eid in markets where it is not the only supplier of livestock.

What we have seen this year is only one exporter actually going to Kuwait. This meant that it was responsible for everything and therefore standards lifted perhaps. We saw a similar incident in Jordan, where there were two exporters—Wellard and LSS—and Wellard decided not to participate in that market anymore. Now LSS is the only one that will be responsible and, again, I think that has changed the behaviour of LSS in that market.

Senator RHIANNON: That is the first time I have heard positive things said about LSS. I was going to develop this further but I will have to come back to it.

Senator BACK: It is very interesting to hear that you are having everything head in the right direction. It is very interesting. Following on from Senator Rhiannon, you mentioned that 13,000 sheep, I think it was—13,000 animals—between 2012 and 2014 were estimated to have leaked out of the system. Is that figure correct?

Dr Clegg : I am going to take Senator Rhiannon's word on that, but the report will have that in it—

Senator BACK: Oh, I see. In validating that, or telling us what the figure is, would you also tell us the total number of animals that were exported during that time? And also, if you are able to do so, for beyond 2014? I would appreciate that.

Dr Clegg : Yes.

Senator BACK: What I need to find out from you is this: when there is leakage, how does the department find out?

Dr Clegg : The department can find out through the exporter themselves reporting that there is leakage. During this year's Eid and last year's Eid, we had reports from exporters. We also had reports from Meat and Livestock Australia and from representatives of LiveCorp. And we had reports from Animals Australia, which had people in the market there—looking and checking.

We are seeing increasing numbers of reports from the exporters themselves as they are getting into understanding what an exporter assurance system is—that they are responsible for checking where their animals are, reporting to the department when things go wrong and telling us what they are doing to fix it. That is what ESCAS is about; it is not about stopping livestock exports, it is about fixing things when they go wrong.

It has taken a little while with some of the exporters. In the first few years of ESCAS there were not many reports of breaches from exporters. But in the last couple of years we have seen an improvement in their reporting of things that are going wrong and addressing the issues as they arise.

Senator BACK: In peak times, like the festival of Eid, does the department have personnel in these countries? When you say that exporters, or MLA, or Animals Australia or whoever are reporting to the department, are they reporting to you back here in Canberra?

Dr Clegg : Yes, they are. We also have people, like our counsellors, who are in the Middle East. They have been involved in the pre-Eid preparation. They work for the department and they are posted to the Middle East. So, for instance, we have a counsellor in Dubai and one in Riyadh. We also have one in Malaysia and one in Vietnam.

Senator BACK: We have seen plenty of examples, especially festival of Eid, where families have the opportunity now to select an animal, watch it being correctly processed and pick it up in a plastic bag to take home. My understanding is that locally bred sheep, or sheep sourced from other markets, are also being handled in the same ways. Do you have evidence of that process continuing, or was that just a one- or two-year only exercise?

Dr Clegg : We have reports from industry that they are seeing that. Those facilities that are processing Australian sheep will not exclusively process Australian sheep; they will have sheep from other countries as well. In some of those cases they will be processing them in exactly the same way as the Australian sheep are processed, because it is more efficient.

Senator BACK: So we are actually seeing evidence of Australian intervention in those markets having a positive effect on animal welfare for other animals that were otherwise not linked to Australia?

Dr Clegg : Yes.

Senator BACK: Lastly, I understand there were some issues with the Malaysian market again. Can you tell us what the issues were? What, if any, was the involvement of exporters in identifying this leakage to the department?

Dr Clegg : In this case this is probably an example of a market that has gone not so well this year. It has gone worse than in past years. There were far more reports this year from Malaysia about sheep and goats being outside supply chains. Animals Australia provided a report which identified 15 different locations where they took ear tags, took pictures or took video footage of animals being poorly treated. The type of treatment that was seen was poor handling and poor animal management in a difficult, stressful environment. Where there are a lot of animals to be slaughtered, you have a lot of people trying to process animals quickly, to drag them up, to quickly slaughter them and then to move them on. What we require under ESCAS is that you check for death, that you have a quiet place to slaughter each animal, and that you make sure they are dead before you move the animals on.

Senator BACK: Finally, I have shown photographic evidence in this committee before of Australian ear tags in Friesian cattle, which we do not export from Australia, which started their lives in the ears of Brahman cross cattle, but ended up in Friesian cattle in a different country. Have you had any evidence of removal of ear tags from cattle in any of our markets?

Dr Clegg : Yes, in Vietnam we have evidence of ear tags being removed so they are Australian cattle. Sometimes we have been able to identify them as our exported cattle just on the brand. You might actually see the brand. But yes, ear tags are being removed in some of the markets to enable them to avoid being traced. They are trying to avoid having an ear tag so people will not be able to trace them if they are photographed.

Senator BACK: Or are they trying to convince a buyer that this really is an Australian animal and therefore it has more market value because it has an Australian ear tag?

Dr Clegg : It may be that. Certainly tag removal is a big feature. With the sheep and goats in Malaysia there were tags and then there were a lot of untagged animals as well that looked to be the same.

CHAIR: Mr Quinlivan, before we close, I just want to make an observation—and colleagues are welcome to do so too—that during the course of the day your people, almost to a person, have been very impressive, very professional and very cooperative with the questioning. I just wanted to make that observation, through you, to your officers. If any of my colleagues want to make a comment, they are welcome to. Otherwise, that concludes today's hearing. I thank you and all the witnesses who appeared, and I thank those who did not make it for their patience. Thanks also to Hansard, Broadcasting and the secretariat.

Committee adjourned at 22:59