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Senate Legislative and General Purpose Standing Committees Consolidated reports on the consideration of bills January-June 2010 Volume 3-Finance and Public Administration; Foreign Affairs Defence and Trade; Legal and Constitutional Affairs


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Australian Senate

Senate Legislation Committees

Reports on the consideration of bills January-June 2010

Volume 3

Australian Senate

Senate Legislation Committees

Reports on the consideration of bills January-June 2010

Volume 3

Environment, Communications and the Arts Committee

Finance and Public Administration Committee

Foreign Affairs, Defence and Trade Committee

© Parliament of the Commonwealth of Australia 2010

ISSN 1834-4062

This document was printed by the Printing Unit, Department of the Senate, Parliament House, Canberra.

TABLE OF CONTENTS

Environment, Communications and the Arts Committee • Broadcasting Legislation Am endm ent (Digital Television) Bill 2010*, dated May 2 0 1 0 ....................................................................................................... 1

• Building Energy Efficiency Disclosure Bill 2010*, dated May 2 0 1 0 ......................................................................................................................................... 51

• Do Not Call Register Legislation Am endm ent Bill 2009, dated February 2 0 1 0 .......................................................................................................................99

• Renewable Energy (Electricity) Am endm ent Bill 2010*, and Renewable Energy (Electricity) (Charge) Am endm ent Bill 2010*, and Renewable Energy (Electricity) (Sm all-scale T echnology Shortfall C harge) Bill 2010*, dated June 2 0 1 0 ...................................135

• Telecom m unications Legislation A m endm ent (Fibre Deploym ent) Bill 2010*, dated May 2 0 1 0 ....................................................................201

Finance and Public Administration Committee • Electoral and Referendum Am endm ent (How-to-Vote Cards and O ther Measures) Bill 2010*, and Electoral and Referendum A m endm ent (M odernisation and Other M easures Bill 2010*,

dated June 20 1 0 .................................................................................................................265

• Freedom of Information A m endm ent (Reform ) Bill 2009*, and Inform ation Com m issioner Bill 2009*, dated March 2 0 1 0 ...................................... 293

• G overnance of Australian G overnm ent Superannuation Schem es Bill 2010*, and C om S uper Bill 2010*, and Superannuation Legislation (C onsequential Am endm ents and Transitional Provisions) Bill 2010*, dated March 2010 [incorporating correction tabled on 17 March 2 0 1 0 ].................................................363

• Preventing the Misuse o f G overnm ent Advertising Bill 2010, dated June 2 0 1 0 ................................................................................................................ 401

Foreign Affairs, Defence and Trade Committee • Defence Am endm ent (Parliam entary Approval of Overseas S ervice) Bill 2008 [No. 2]*, dated February 2 0 1 0 .....................................................435

* Provisions of bill referred to committee.

The Senate

Environment, Communications and the Arts Legislation Committee

Broadcasting Legislation Amendment (Digital Television) Bill 2010 [Provisions]

M ay 2010

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© Commonwealth of Australia 2010 ISBN 978-1-74229-299-1

This document was printed by the Senate Printing Unit, Parliament House, Canberra

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Committee membership

Committee members Senator Anne McEwen (ALP, SA) (Chair) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) Senator Scott Ludlam (AG, WA) Senator Kate Lundy (ALP, ACT) Senator the Hon. Judith Troeth (LP, VIC) Senator Dana Wortley (ALP, SA)

Committee secretariat

Mr Stephen Palethorpe, Secretary Ms Nina Boughey, Senior Research Officer Mrs Dianne Warhurst, Executive Assistant

Committee address PO Box 6100 Parliament House Canberra ACT 2600

Teh 02 6277 3526 Fax: 02 6277 5818 Email·, eca.sen@aph.gov.au

Internet, www.aph.gov.au/senate/committee/eca_ctte/index.htm

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Table of Contents

C om m ittee m e m b e rs h ip .............................................................................................. iii

A b b re v ia tio n s................................................................................................................ vii

C h a p te r 1 - R e fe rra l to the co m m itte e ..................................................................... 1

Report Structure........................................................................................................... 1

Purpose of the B ill.......................................................................................................1

Outline of the B ill....................................................................................................... 4

C h a p te r 2 - K ey is s u e s .................................................................................................17

Cost effectiveness of the proposed black spot solution..........................................17

Copyright issues........................................................................................................19

Narrowcasters' access to the satellite platform....................................................... 23

Costs and impact of the proposed satellite scheme for households......................26

Conclusions............................................................................................................... 30

C oalition S en ato rs' A dditional C o m m e n ts........................................................... 33

Alternative Solutions................................................................................................ 33

Access R egim e..........................................................................................................34

Cost of adoption....................................................................................................... 35

Uncertainty—terrestrial or satellite?.......................................................................35

Concluding Remarks................................................................................................ 36

A u stralian G reen s' A dditional C o m m en ts............................................................37

A ppendix 1 - Subm issions, tab led docum ents, additional inform ation and answ ers to questions taken on n o tic e ......... ...........................39

Submissions...............................................................................................................39

T abled documents..................................................................................................... 39

Additional information.............................................................................................39

Answers to questions taken on n otice.................................................................... 39

Appendix 2 - Public hearings............................................................................... 41

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Abbreviations

ACMA Australian Communications and Media Authority

the Bill Broadcasting Legislation Amendment (Digital Television) Bill 2010

BSA Broadcasting Sendees Act 1992

CEO Chief Executive Officer

the committee Senate Environment, Communications and the Arts Legislation Committee

DBCDE Department of Broadband, Communications and the Digital Economy

the department Department of Broadband, Communications and the Digital Economy

HD High Definition

HDTV High Definition Television

NITV National Indigenous Television

satellite licensee an organisation granted a licence under proposed section 38C of the Broadcasting Services Act 1992 (item 26 of the Bill)

SD Standard Definition

SDTV Standard Definition Television

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Chapter 1

Referral to the committee

1.1 On 18 March 2010 the Senate Selection of Bills Committee referred the provisions of the Broadcasting Legislation Amendment (Digital Television) Bill 2010 (the Bill) to the Senate Environment, Communications and the Arts Legislation Committee for inquiry and report by 12 May 2010.1

1.2 On 24 March 2010, in accordance with usual practice, the committee advertised the inquiry in The Australian, calling for submissions by 6 April 2010. The committee also directly contacted a range o f organisations and invited them to submit to the inquiry. The committee received 10 submissions, listed at Appendix 1.

1.3 The committee held a public hearing in Canberra on 16 April 2010. The participants are listed at Appendix 2.

1.4 The committee thanks those organisations and individuals that made contributions to the committee's inquiry.

Report Structure

1.5 Chapter 1 of this report outlines the main features of the Bill, including its purposes and key provisions.

1.6 Chapter 2 discusses the principal issues that were raised during the committee's inquiry into the provisions of the Bill.

Purpose of the Bill

1.7 The Minister for Broadband, Communications and the Digital Economy, the Hon Senator Stephen Conroy, announce in December 2007 that all free-to-air television broadcasters in Australia will complete the switch from analog transmission to digital-only transmission by the end of 2013.2 The Minister amiounced the timetable for the digital switchover on 19 October 2008.3 The timetable showing

switchover dates for each region in Australia is available at:

www.digitalreadv.gov.au/rolloutmap.aspx. On 30 June 2010, the Mildura Sunraysia region of Victoria will become the first region in Australia to switch to digital TV.

1 Senate Selection of Bills Committee, Report No. 6 o f 2010, 18 March 2010.

2 Senator the Hon Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, Digital Switchover Date Confirmed, Media Release, 18 December 2007, at www.minister.dbcde.gov.au/media/media_releases/2007/003 (accessed 27 April 2010).

3 Senator the Hon Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, Conroy sets digital TV switchover timetable, Media Release, 19 October 2008, at www.minister.dbcde.gov.au/media/media releases/2008/077 (accessed 27 April 2010).

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1.8 The Bill proposes to amend the Broadcasting Services Act 1992 and the Copyright Act 1968. It seeks to address areas of digital television signal deficiency, or 'black spots', that may arise as a result of the digital switchover, by enabling the provision of a satellite free-to-air digital television broadcasting service (the satellite

service).

1.9 Currently, there are a range of ways in which households in black spots are able to view television. There are 698 'self-help' re-transmission sites,4 predominantly owned by local councils, which re-transmit analog television signals terrestrially. The committee was informed that approximately 460 of those sites are in remote areas of Australia.5

1.10 In places not able to be reached by those terrestrial re-transmission signals, the committee was informed that people will often install large antennas and amplifiers to make the most of weak terrestrial signals.6 In those areas where there is no possibility of terrestrial reception, the Remote Area Broadcasting Service currently transmits limited free television services via satellite.7

1.11 To coincide with the switch-over to digital television commercial broadcasters propose to convert some existing self-help sites to digital, subject to negotiation with self-help operators.8 During the inquiry, the committee was provided with a list of 87 sites which commercial broadcasters are offering to convert, and a further list of

4 Under ACMA's self-help re-transmission arrangements, community groups or local councils purchase and maintain the equipment necessary to receive and locally re-transmit a broadcasting service (radio or television) from either a nearby terrestrial transmitter or a satellite. See Department of Broadband, Communications and the Digital Economy, Self-help schemes administered by other bodies, www.dbcde.gov.au/television/self help schemes administered by other bodies (accessed 27 April 2010).

5 Ms Julie Flynn, Chief Executive Officer, Free TV Australia, Committee Hansard, 16 April 2010, p. 33.

6 Mr Giles Tanner, General Manager, Digital Transition Division, Australian Communications and Media Authority, Committee Hansard, 16 April 2010, p. 52.

7 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 60.

8 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, pp 65-6. In a media release on 5 January 2010, the Minister stated that 'broadcasters will upgrade more than 100 existing regional analog 'self-help' transmission facilities to operate in digital'. This figure appears to incorporate both the 87 sites that will be converted and the 44 sites that broadcasters claim will not need to be converted as they will be covered by other terrestrial digital conversions, www.minister.dbcde.gov.au/media/media releases/2010/001

(accessed 27 April 2010).

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44 sites which will not be converted, but whose transmission areas are likely to be covered by other terrestrial digital conversions.9 1 0

1.12 Despite the proposed conversion of 87 self-help re-transmission sites to digital, witnesses agreed that a complementary satellite solution will still be necessary.1 1 1 Mr Andy Townend, Deputy Secretary of Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy

(the department) explained the need for satellite coverage to address digital TV black-spots:

W hy do we need the new satellite service? As you know, m ost Australians receive their television services from the network o f broadcaster owned and operated transmission towers and they will continue to do so after the switch-over to digital...H ow ever it is simply not feasible to use terrestrial

coverage to serve all Australians. This is already acknowledged by the current arrangements, w hich allow viewers in analog black spots to receive remote area broadcasting by satellite.11

1.13 Mr Townend summarised the key objectives of the Bill:

The service w hich was announced by the government on 5 January [2010] sets a new standard o f access and equity for free-to-air television in

Australia. It is an important and significant element in the mix of ways in which A ustralians receive their television and it provides national coverage o f digital television channels. The legislation provides the legal framework for im plem enting a service that will begin in time for switch-over in

M ildura, w hich will take place on 30 June 2010.12

1.14 Although the national broadcasting services (ABC and SBS) will also be included on the satellite platform, the Bill only deals with arrangements for commercial broadcasters as 'no legislative amendments are required to achieve these national broadcaster satellite arrangements'.13

1.15 The main provisions of the Bill seek to:

• establish licensing arrangements for the proposed satellite service;

• set out the conditions of the satellite service;

9 Department of Broadband, Communications and Digital Economy, tabled document. Digital television services for self-help retransmission sites', 16 April 2010, available at: www.digitalreadv.gov.au/media/DTV services for self hel retransmission sites.pdf.

10 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 62. 11 Mr Andy Townend, Committee Hansard, 16 April 2010, pp 55-56.

12 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 55.

13 Explanatory Memorandum, p. 2.

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• set out conditions, authorisations and exemptions for commercial television programming on the satellite service;

• set out local content obligations for commercial television broadcasting licensees in relation to the satellite service;

• provide for the setting of technical standards for the digital transmission and reception of satellite broadcasting services;

• provide for conditional access arrangements for satellite services; and

• alter the licences of existing terrestrial digital television broadcasters to enable the broadcast in regional areas of equivalent commercial services to those available in metropolitan areas.14

1.16 The Bill also deals with copyright aspects of the new licence conditions to be imposed on commercial television broadcasters and the satellite licensee by the Bill.

Outline of the Bill

1.17 Schedule 1 of the Bill outlines amendments proposed to be made to the Broadcasting Services Act 1992 (BSA) and Copyright Act 1968.

Licensing arrangements fo r the proposed satellite service

1.18 Item 26 of the Bill inserts a new section— section 38C— into the BSA. Section 38C sets out three licence areas for commercial television broadcasting licences on the new satellite platform:

• South Eastern Australia, comprising New South Wales, Victoria,

South Australia, Tasmania, the Australian Capital Territory and the Jervis Bay Territory;

• Northern Australia, comprising Queensland and the Northern Territory; and

• Western Australia.15

1.19 The table in subsection 38C(1) also sets out those existing commercial television broadcasting licensees eligible to form joint ventures in each licence area. Subsection 2 provides that two or more of the listed eligible joint venturers may apply to the Australian Communications and Media Authority (ACMA) for a satellite television broadcasting licence in the respective area. If they do so, ACMA must

allocate a commercial television broadcasting licence to the joint-venture company for the relevant satellite television licence area.16

14 Explanatory Memorandum, pp 1-24.

15 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26.

16 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsections 38C(3) and (4).

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1.20 Subsection 6 provides that if eligible joint venturers in any satellite licence area do form a joint venture company, an eligible joint venturer may apply to ACMA to operate the satellite licence as a special purpose company, which would be a wholly owned subsidiary of the joint venturer formed for the purpose of operating the satellite licence.

1.21 If only one joint venturer applies to form a special purpose company, ACMA must allocate the licence to that company.17 However, if ACMA receives applications from more than one special purpose company, subsection 9 provides that:

ACMA m ust allocate a commercial television broadcasting licence to one o f those companies for the licence area in accordance with a price-based system determ ined under subsection (1 1 ).18

1.22 If no eligible company applies for a licence ACMA must advertise for applications for the broadcasting licence.19 Only companies formed within Australia are eligible to be allocated a commercial broadcasting licence.20

1.23 The Bill also sets out timeframes in which the licences must commence.21

1.24 Under the Bill, ACMA will have the power to cancel a licence if a licensee fails to meet any of the proposed standard conditions set out in Schedule 2 to the BSA, and ACMA is satisfied that the contravention was not beyond the licensee's control.22

1.25 The Bill also provides that a licence allocated under section 38C cannot be transferred for two years after its allocation.23

Conditions on the satellite broadcasting service licensee

1.26 The Bill sets out a range of conditions for the new satellite licensee. The 'common conditions' for the satellite licensee are set out in proposed Division 2 of Part 3 of Schedule 2 to the BSA, at item 72 of the Bill. The conditions include that:

17 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsection 38C(8).

18 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsection 38C(9).

19 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsection 38C(17).

20 Broadcasting Services Amendment (Digital Television) Bill 2010, item 12, proposed paragraph 37(l)(a).

21 Broadcasting Services Amendment (Digital Television) Bill 2010, item 29, proposed subsections 41B(2A)-(2E).

22 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsection 38C(15). This provision is subject to a 30 day written notice period.

23 Broadcasting Services Amendment (Digital Television) Bill 2010, item 26, proposed subsection 38C(25).

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• the licensee may only provide commercial television broadcasting services in digital mode;

• the licensee may only provide commercial television broadcasting services via satellite;

• if a conditional access scheme is registered, the licensee will ensure that their systems comply with the scheme; and

• the licensee will comply with any technical standards set by ACMA.24

1.27 Further conditions of the satellite licensee's licence are that it must broadcast a range of commercial digital television services equivalent to that available in metropolitan areas25 and a local news service.26 These conditions are discussed in detail below.

1.28 The Bill also makes amendments to existing captioning27 and anti-siphoning28 requirements to ensure that the satellite licensee is not made subject to conditions which would be difficult or unfair for it to have to meet. The Explanatory Memorandum states that these amendments are to maintain consistency 'across the

satellite and terrestrial transmission platforms' and to 'avoid a situation in which programming provided for transmission on the satellite service...would be required to meet separate regulatory requirements'.29

Content o f proposed satellite services

1.29 According to the Explanatory Memorandum:

The intent o f the Bill is to enable the new commercial satellite services to provide viewers in signal deficient areas with access to an equivalent range o f digital television services to those received by metropolitan viewers. 30

1.30 The Bill sets out a range of conditions, authorisations and exemptions for new satellite licensees and existing commercial terrestrial licensees in order to meet this objective.

1.31 The Explanatory Memorandum summarises the intended effect o f these provisions:

24 Broadcasting Seivices Amendment (Digital Television) Bill 2010, item 72, proposed clause 7A of Schedule 2, Part 2, Division 2.

25 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clauses 7B and 7C of Schedule 2, Part 2, Division 2.

26 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7D of Schedule 2, Part 2, Division 2.

27 Broadcasting Services Amendment (Digital Television) Bill 2010, items 103— 113.

28 Broadcasting Services Amendment (Digital Television) Bill 2010, items 114-130.

29 Explanatory Memorandum, p. 14.

30 Explanatory Memorandum, p. 6.

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The measures in this Bill do not require the satellite broadcasting service licensees to provide digital television services that are identical to the digital television services provided to metropolitan markets. Instead, the licensees o f the satellite services would be authorised to transmit the network-affiliated multi-channelled services provided by remote area commercial broadcasters in the related terrestrial licence area...or, in cases where rem ote commercial services are not available, a replacement multi-channelled service provided by a commercial broadcaster in a m etropolitan licence area.31

1.32 Accordingly, the Bill sets out that satellite licensees are authorised to provide:

• a core Standard Definition (SD) service with the same, or substantially the same program content as the terrestrial services in the related licence area;

• a SD multi-channelled service with the same, or substantially the same, program content as a secondary service provided by a related terrestrial licensee, or provided by a commercial licensee for a metropolitan area;

• a High Definition (HD) multi-channelled service with the same, or

substantially the same, program content as an HD service provided by the terrestrial services in the related licence area or a metropolitan licensee;32 and

• one or more SD multi-channels the program content o f which is wholly or mostly local news.33 3 4

1.33 The satellite licensee is also required, as a condition o f its licence, to provide some of those authorised services. The Explanatory Memorandum summarises the services which must be provided on the satellite platform:

...the satellite broadcasting service licensees in each o f the satellite licence areas m ust provide digital television services equivalent in range to commercial digital terrestrial television services in metropolitan licence 34 areas.

1.34 Proposed clauses 7B and 7C of Schedule 2, Part 2, Division 2 to the BSA contain conditions relating to the number of services which must be provided, which varies according to the number of terrestrial services provided,35 and the channels that must be provided.36 In summary, the satellite service must transmit:

31 Explanatory Memorandum, p. 6.

32 Broadcasting Services Amendment (Digital Television) Bill 2010, item 32, proposed section 41CA.

33 Broadcasting Services Amendment (Digital Television) Bill 2010, item 38, proposed subsection 43A(3A).

34 Explanatory Memorandum, p. 7.

35 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7B of Schedule 2, Part 2, Division 2.

36 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7C of Schedule 2, Part 2, Division 2.

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• three different core digital services from the remote commercial broadcasters in the related terrestrial licence area, where three different services are available terrestrially;

• all SD and HD multi-channels provided by remote commercial broadcasters in the related terrestrial licence area;

• a 'replacement' channel from a metropolitan area if fewer than three remote commercial services are available terrestrially, or fewer multi-channel services are available than in metropolitan markets.

1.35 In addition, satellite licensees will be required to provide a 'local news service',37 which is discussed in further detail below.

1.36 The Bill contains exemptions from these conditions for the satellite licensee, for example from providing services which are not technically feasible.38 3 9

1.37 The Bill also contains corresponding requirements for the holders of terrestrial broadcasting licences in the area covered by each satellite, to ensure that the program content that the satellite licensee is authorised to provide is available to the satellite licensee. The requirements imposed on terrestrial broadcasters by the Bill include that:

• metropolitan commercial television broadcasters must provide the satellite licensee with any program that is broadcast on an HDTV or SDTV multi-channelled commercial television service, or any program requested by the satellite licensee, either simultaneously with the broadcast of the program on the metropolitan service, or as soon as practicable afterwards,

• holders of a remote terrestrial broadcasting licence must provide the satellite licensee in the same region with the program material from any HDTV or SDTV multi-channelled service that the remote terrestrial broadcaster broadcasts either simultaneously with the terrestrial broadcast, or as soon as practicable thereafter;40 and

• commercial terrestrial broadcasters in regional licence areas must provide material for a local news channel (discussed in detail below).41

1.38 Certain exemptions to these conditions are also set out in the Bill for practical reasons. For example, if a terrestrial commercial broadcaster provides a service with

37 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7D of Schedule 2, Part 2, Division 2.

38 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7E of Schedule 2, Part 2, Division 2.

39 Broadcasting Services Amendment (Digital Television) Bill 2010, item 41, proposed section 43AB.

40 Broadcasting Services Amendment (Digital Television) Bill 2010, item 41, proposed section 43 AC.

41 Broadcasting Services Amendment (Digital Television) Bill 2010, item 41, proposed section 43AA.

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the same, or substantially the same, content as another service which is required to be provided to the satellite licensee, the Minister may determine that the terrestrial broadcaster is not required to provide both services to the satellite licensee.42

Local content obligations

1.39 Item 38 of the Bill proposes to insert subsections 43A(3A)-(3C) which would require holders of regional commercial broadcasting licences to provide the satellite licensee with 'any material o f local significance' that they broadcast in the area covered by the satellite licensee. Local programs must be provided simultaneously with the broadcast of the material by the regional terrestrial broadcaster, or as soon as practicable after broadcast.43

1.40 The Explanatory Memorandum describes the resulting broadcast as a 'local news and information' channel,44 and explains that:

To ensure the supply o f local news and information to satellite viewers, regional broadcasting licensees would be required to provide unique local news and information which they deliver terrestrially to viewers in each o f their licence areas either sim ultaneously or as soon as practicable to the relevant satellite licensees for transmission by satellite in the relevant

satellite licence area.45

1.41 Free TV Australia raised concerns about the wording of the proposed local content provisions, submitting that:

...the provisions in the Bill do not appear to capture the parameters o f the proposed satellite news service...the satellite news service has been developed to deliver the evening news bulletin, or shorter multiple bulletins, that would otherwise have been available to viewers from their

local terrestrial news service... On our reading, the provisions o f the Bill go further than this, requiring the carriage o f any material which meets the (much broader) local content licence conditions.46

1.42 Ms Flynn, Chief Executive Officer, Free TV Australia, explained that 'material of local significance' may be interpreted as programs such as Underbelly in Victoria.47

42 Broadcasting Services Amendment (Digital Television) Bill 2010, item 72, proposed clause 7F of Schedule 2, Part 2, Division 2.

43 Broadcasting Services Amendment (Digital Television) Bill 2010, item 38, proposed paragraph 43A(3A)(b).

44 Explanatory Memorandum, p. 10.

45 Explanatory Memorandum, p. 11.

46 Free TV Australia, Submission 7, p. 4.

47 Ms Julie Flynn, Chief Executive Officer, Free TV Australia, Committee Hansard, 16 April 2010, p. 38.

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1.43 Free TV suggested amendments to the Bill to ensure that only long-form local news programs or multiple short-form news programs (if no long-form local news program is produced) be required to be broadcast by the satellite licensee. Free TV suggested that the Bill specifically exclude from the requirements:

• short segments or headline updates that have the purpose of promoting an upcoming local news program;

• short segments or headline updates that repeat news content that has

previously been broadcast; and

• any other material of local significance or local content or local information that is not a news program.48

1.44 In response to Free TV's concern, the Department of Broadband, Communications and the Digital Economy stated:

The Government is consulting with broadcasters on this m atter and is considering the amendments suggested by Free TV A ustralia.49

Technical standards fo r transmission and reception o f satellite services

1.45 Item 62 of the Bill inserts section 130AC into the BSA, subsection (1) of which provides that:

ACMA may, by legislative instrument, determine technical standards that relate to the transmission in digital mode o f either or both o f the following services:

(a) commercial television broadcasting services provided under a licence allocated under section 38C;

(b) national television broadcasting services provided with the use o f a satellite.

1.46 ACMA will also have the power to determine technical standards for domestic digital satellite reception equipment under proposed section 130BB. Such a determination is expressed in the Bill to be a legislative instmment, and subsection 130BB(2) provides that it is an offence for a person to supply reception equipment that does not comply with any standards set by ACMA.

Conditional access arrangements for satellite services

1.47 Item 64 of the Bill proposes to insert Part 9C into the BCA which would establish a conditional access scheme setting out 'rules relating to access to services' provided by the new satellite service.50

48 Free TV Australia, Submission 7, p. 4.

49 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

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1.48 Proposed section 130ZB sets out the objectives for a conditional access scheme, which include:

• specifying 'category A' reception areas, which are areas in which 'people are unable to receive adequate reception of all the applicable terrestrial digital commercial television services', i.e. known areas of signal deficiency;5 0 51

• specifying 'category B' areas, which are areas 'where adequate reception of one or more services is intermittent';52

• enabling households located in category A and B areas to receive commercial television broadcasting services via satellite;5

• providing that any areas within a satellite licence area which are neither category A nor B, are 'category C' areas;54

• identifying a company to be the scheme administrator,55 and authorising the administrator to issue certificates to persons in category C reception areas 'stating that the person is unable to receive adequate reception of all the applicable terrestrial digital commercial television broadcasting services';56

• enabling households in category C areas with reception certificates to receive commercial broadcasting services via satellite;57

• providing that applications by householders in category C areas to the administrator must be dealt with within 14 days of receipt without requiring payment;58

• enabling the administrator to revoke certificates if a person is no longer eligible;59 and

50 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed section 130ZBA.

51 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed paragraph 130ZB(3)(a).

52 Explanatory Memorandum, p. 42; Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(4).

53 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(5).

54 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(7).

55 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(8).

56 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(9).

57 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(10).

58 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(11).

59 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZB(13).

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• providing that persons not in category A reception areas must not be able to receive satellite services earlier than six months prior to the local television market being converted to digital-only.60

1.49 Proposed section 130ZC establishes a coregulatory framework for the access regime. Under this section, if ACMA 'is satisfied that a body or association represents commercial television broadcasting licensees'61 and that body or association develops a conditional access scheme which 'is consistent with the principle that a person in the licence area should have adequate reception' of all relevant commercial broadcasting services62 then ACMA must register the scheme.63

1.50 If no conditional access scheme is presented by the broadcasting industry, then ACMA may develop a scheme.64

1.51 ACMA is also empowered under the Bill to review reception certificate decisions by the conditional access scheme administrator, and direct the administrator to issue a certificate enabling a person in a category C area to obtain satellite reception.65

1.52 ACMA is also empowered under proposed section 130ZFA to determine by legislative instrument what amounts to 'adequate reception' for the purposes of people being eligible to access the satellite service.66

1.53 Mr Giles Tanner, General Manager, Digital Transition Division at ACMA explained to the committee that:

What is contem plated in the legislation is what I have colloquially called a coregulatory scheme. It is a scheme where industry has a key role in developing the regulatory arrangements and the ACMA has the role o f ensuring that those scmb up and providing some sort o f backup in the event that they fail to provide adequate community safeguards.67

60 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsections 130ZB(14) and (15).

61 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed paragraph 130ZC(l)(a).

62 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed paragraph 130ZC(l)(e).

63 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed subsection 130ZC(2).

64 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed section 130ZCA.

65 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed section 130ZF.

66 Broadcasting Services Amendment (Digital Television) Bill 2010, item 64, proposed section 130ZFA.

67 Mr Giles Tanner, General Manager, Digital Transition Division, ACMA, Committee Hansard, 16 April 2010, p. 47.

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1.54 Mr Tanner explained the benefits o f 'coregulatory schemes':

W e get an industry that takes responsibility and we also get some basic safeguards too. So if it is clearly going o ff the rails, there is a regulator you can turn to ...I think the industry needs to be given the room to take the

directions from the legislature, operationalise them in discussion with the ACMA and for my authority m em bers to then consider if that passes m uster.68

Equivalency between regional and metropolitan licences

1.55 Item 14 of the Bill repeals the current prohibition in the BSA on commercial television licensees in single markets from applying for a commercial television broadcasting licence in a two-station market. The Explanatory Memorandum states:

This am endm ent will enable a broadcaster providing an additional licensed service under section 38A in those sm aller regional markets to apply for an additional licence to provide a third, digital-only, commercial television broadcasting licence in the same licence area.69 7 0 7 1

1.56 Items 28 and 29 propose to insert new subsections 1A, and 2A to 2E into section 41B of the BSA. Together, these amendments will enable broadcasters with commercial television broadcasting licences in single markets and two-station markets to provide the same number of digital commercial television services in those underserved markets as may be available in metropolitan licence areas, in SD mode only. Each licensee will be able to provide up to three digital television services during the simulcast period, one of which may be in HD. "

1.57 Further arrangements are proposed by items 89 to 96, which are intended to recognise the fact that:

In some regional licence areas the establishment o f the new satellite broadcasting service will mean that there will be a more attractive suite o f digital television services available by satellite than terrestrially. 1

1.58 These amendments work in conjunction with item 14, which permits additional commercial broadcasting licences in regional areas, to enable broadcasters in one or two licence areas to 'the benefit of any multi-channelling elections they have made' under item 14.72

68 Mr Giles Tanner, General Manager, Digital Transition Division, ACMA, Committee Hansard, 16 April 2010, p. 48.

69 Explanatory Memorandum, p. 27.

70 Broadcasting Services Amendment (Digital Television) Bill 2010, item 29, proposed subsections 2A-2E.

71 Explanatory Memorandum, p. 61.

72 Explanatory Memorandum, p. 62.

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Copyright arrangements

1.59 The requirement that terrestrial broadcasters provide the satellite licensee with their copyrighted program material necessitates arrangements to compensate terrestrial broadcasters for the acquisition of their intellectual property. The Bill proposes amendments to both the BSA and Copyright Act to achieve this.

1.60 The Explanatory Memorandum explains:

...the satellite broadcasting service licensee would be expected to reach a commercial agreement with metropolitan and regional broadcasters for the provision o f programming and content, including local news and

information, for broadcast on the satellite service.

Where such an agreement cannot be reached, a statutory licensing scheme would be established in order to provide equitable remuneration to copyright holders.73

1.61 The Bill proposes to amend the Copyright Act 1968 to establish a statutory licensing scheme to come into effect if commercial negotiations fail. The scheme is based on the existing re-transmission scheme in Part VC of the Copyright Act which applies to subscription TV services re-transmitting commercial broadcasts.

1.62 Item 141 inserts a new Part VD into the Copyright Act which applies to materia] broadcast by a satellite licensee under proposed sections 43A, 43AA, 43AB or 43 AC of the BSA.

1.63 Proposed section 135ZZZI provides that the re-broadcast of programs by a satellite licensee does not infringe copyright, provided that the re-broadcast complies with the conditions of the satellite licensee's licence, and relevant provisions of the BSA, and:

• a remuneration notice given by the satellite licensee to the relevant collecting society is in force; or

• there is an agreement in force between the satellite licensee and the copyright holder; or

• if there is no agreement, there is a determination of the Copyright Tribunal in place; or

• if there is no agreement or determination, the satellite licensee has given the copyright owner a written undertaking to pay such amount as determined by the Copyright Tribunal.

1.64 Proposed section 135ZZZJ provides that the satellite licensee may give a written remuneration notice to the relevant collecting society undertaking to pay equitable remuneration for its re-broadcast. What amounts to equitable remuneration

73 Explanatory Memorandum, p. 13.

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is determined by either the Copyright Tribunal or an agreement between the satellite licensee and the collecting society.74

1.65 If a satellite licensee decides to use remuneration notices, it has the responsibility to keep records of the programs it re-broadcasts in order to pay the relevant collecting society.75

1.66 The Bill provides that a body may apply to the Minister to be declared a relevant collecting society to administer the above licensing scheme.76

1.67 In addition to this licensing scheme, the Bill contains what the Explanatory Memorandum refers to as a 'constitutional safety net clause'.77 Proposed section 43AD provides that any program material provided to the satellite licences by commercial broadcasters requires the satellite licensee to 'pay a reasonable amount of

compensation' to the copyright holder.78

1.68 In terms of determining what amounts to 'reasonable compensation', the Bill provides that:

I f the licensee and the person [who holds the copyright] do not agree on the amount o f the compensation, the person may institute proceedings in a court o f competent jurisdiction for the recovery from the licensee o f such reasonable am ount o f com pensation as the court determines.79 8 0

1.69 The Explanatory Memorandum states that this arrangement provides 'a constitutional safety net' to prevent the acquisition of property on other than just * ™ 80

terms.

1.70 Item 50 of the Bill also intends to limit the Commonwealth's liability for any acquisition of property on other than just terms from commercial broadcasters required under proposed sections 43AA, 43AB or 43AC, or proposed subsection 43A(3A).81

74 Broadcasting Services Amendment (Digital Television) Bill 2010, item 141, proposed section 135ZZZK.

75 Broadcasting Services Amendment (Digital Television) Bill 2010, item 141, proposed section 135ZZZL.

76 Broadcasting Services Amendment (Digital Television) Bill 2010, item 141, proposed section 135ZZZO.

77 Explanatory Memorandum, p. 13.

78 Broadcasting Services Amendment (Digital Television) Bill 2010, item 41, proposed subsection 43 AD( 1).

79 Broadcasting Services Amendment (Digital Television) Bill 2010, item 41, proposed subsection 43AD(2)

80 Explanatory Memorandum, p. 38.

81 Explanatory Memorandum, p. 39.

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Chapter 2

Key issues

2.1 A range o f issues relating to the Bill was raised during the committee's inquiry. The key issues related to:

• the cost effectiveness of the proposed black spot solution;

• the proposed copyright scheme;

• narrowcasters' access to the satellite platform; and

• the costs and impact o f the proposed satellite scheme for households.

Cost effectiveness of the proposed black spot solution

2.2 Both Broadcast Australia and AUSTAR raised questions relating to whether the government adequately examined the full range o f possible solutions to digital television black spots, and whether it has reached the most cost-effective solution.

2.3 In its submission, AUSTAR argued that it was 'surprised by preliminary funding estimates to support this project'.1 The government has estimated its costs for funding the satellite network to be $40 million per annum, 'for the potential benefit of up to 247,000 households across Australia'.2

2.4 Broadcast Australia, which is a commercial owner and operator of approximately 600 terrestrial broadcast facilities,3 questioned whether the appropriate balance has been reached by the government between the conversion of existing terrestrial sites to digital and the satellite platform. Broadcast Australia's submission argued:

...it is overwhelmingly in TV viewers' interests that digital free to air TV services potentially available to homes from the satellite are made available through local digital terrestrial transmission facilities — unless it can be demonstrated it is simply not cost effective to provide the full range o f terrestrial digital transmission facilities to achieve this.4

2.5 The committee questioned officers from the Department of Broadband, Communications and the Digital Economy about what other solutions to digital TV

1 AUSTAR, Submission 6, p. 4.

2 The Hon Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, Digital television Australia-wide, Media Release, 5 January 2010, at www.minister.dbcde.gov.au/media/media releases/2010/001 (accessed 27 April 2010).

3 Broadcast Australia, Submission 4, p. 2.

4 Broadcast Australia, Submission 4, p. 1.

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black spots had been considered, and the comparative costs and benefits of alternative options. Mr Andy Townend, Deputy Secretary of Broadcasting and Digital Switchover responded:

The government certainly looked at a number o f different ways o f meeting the problem o f signal deficiencies. You have probably heard from most witnesses that any form o f solution for signal deficiencies would require a satellite solution. The satellite solution that has been formulated has been designed to provide the maximum num ber o f services to people in the most cost-efficient w ay.5

2.6 Although the department declined to provide the committee with details of the models considered, Mr Townend highlighted a number of times in his evidence that a satellite system would be required regardless o f which model was chosen.6

2.7 The committee understands that the government has negotiated the rollout of digital television in regional and rural areas through it funding the 'fallback' satellite system, while allowing commercial broadcasters to make commercial decisions about the cost-effectiveness of converting self-help sites to digital. As Mr Townend explained:

...the governm ent has been in negotiation discussions with the commercial broadcasters themselves and not w ith Broadcast Australia. The government has not had negotiations and discussions with service providers...A s 1 mentioned earlier, any solution for signal deficiencies would involve a satellite element. The government has chosen to fund a satellite element— is a fairly minimal satellite element— which provides the appropriate services to the country without incurring any terrestrial costs, because that has been put on the table by the broadcasters.7

2.8 Accordingly, from a cost perspective, Mr Townend explained:

Rolling out additional terrestrial towers would have been incremental to the cost o f any satellite service. So it would not reduce costs; it would actually increase the costs. The satellite service we are providing is almost what you would call a de minimis satellite service, without any cost to government o f terrestrial rollout.8

5 Mr Andy Townend, Committee Hansard, 16 April 2010, p. 62.

6 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 62.

7 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 73.

8 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 63.

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Committee view

2.9 The committee is satisfied that the government has struck an appropriate balance between terrestrial tower conversion and satellite re-transmission. It recognises that in a country with the size and geography of Australia's there will always be a need for complementary re-transmission infrastructure, sourced from both

terrestrial and satellite services.

Copyright issues

2.10 A number o f matters related to the statutory copyright licensing scheme proposed by the Bill were raised by Screenrights and Free TV Australia.

2.11 Screenrights, which is a copyright society that currently administers a number of statutory licensing schemes, including that under Part VC of the Copyright Act 1968, on which the copyright scheme in the Bill is based, raised two main concerns:

• the backdating of remuneration notices; and

• potential issues with the definition of'broadcast' proposed in the Bill.

2.12 Free TV raised more significant concerns regarding whether the statutory licensing scheme proposed in the Bill is the most appropriate means of dealing with copyright issues.

Backdating remuneration licenses

2.13 Proposed paragraph 135ZZZJ(3)(b) permits the backdating of remuneration notices under the statutory licensing scheme, which Screenrights submitted is 'neither desirable nor necessary'.9 Screenrights explained that the backdating of remuneration notices:

...is not desirable because it permits infringing conduct to be made the subject o f a statutory licence retrospectively, at the whim o f the infringer. It is not necessary because - consistent with Part V C - interim arrangements are to be enacted in Part VD, Division 4 . 10

2.14 In his evidence to the committee, Mr James Dickinson, Licensing Executive, Screenrights, explained that he suspects the backdating provision was 'picked up by the draftsman' in applying the provisions in the Part VC licensing scheme to the new Part VD scheme.11 Mr Dickinson argued that the backdating provision in the existing

scheme was intended as an alternative to transitional provisions, to ensure that copyright holders would be remunerated for any period in which there was no

9 Screenrights, Submission 3, p. 3.

10 Screenrights, Submission 3, pp 3— 4.

11 Mr James Dickinson, Committee Hansard, 16 April 2010, p. 15.

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declared collecting society. Ultimately, however, transitional provisions were introduced for the existing scheme so the backdating provision was not required.12

2.15 Accordingly, Screenrights argued that the presence of transitional provisions in the licensing scheme proposed by the Bill make the backdating provision unnecessary:

We see no need for the provision and w e do think, perhaps, it gives an unfair advantage in the hands o f the satellite rebroadcaster.13

2.16 In response to Screenright's concern, the Department of Broadband, Communications and the Digital Economy informed the committee:

The backdating provision in paragraph 135ZZZJ(3)(b) is in the same form as subsection 135ZZL(3) in the statutory licensing scheme for the

re-transmission o f broadcasts under Part VC o f the Copyright Act. The Department is unaware o f any agreem ents made pursuant to subsection 135ZZL(3) o f the Copyright Act that have caused detriment to the interests o f copyright holders.14

2.17 The department also highlighted the fact that:

Under the Copyright Act, a party cannot be forced to agree to a negotiated agreement i f that party would prefer to seek a determination o f the

Copyright T ribunal.15

Definition o f 'broadcast'

2.18 The Bill proposes to amend the definition of 'broadcast' in section 10(1) of the Copyright Act such that the satellite licensees are assumed not to have a conditional access system applied to them. In its submission, Screenrights argued that the amended definition may have the unintended effect of treating the satellite broadcasts as 'free to air' broadcasts for the purposes o f the Act, which would leave them subject to the same re-transmission arrangements as other free to air broadcasts.16

2.19 Mr Simon Lake, Chief Executive of Screenrights explained the practical effect of this:

...w hile the bill precludes the 38C satellite broadcast licensee from

retransmitting, the bill does not prevent the retransmission o f a 38C satellite

12 Mr James Dickinson, Licensing Executive, Screenrights, Committee Hansard, 16 April 2010, p. 15.

13 Mr James Dickinson, Licensing Executive, Screenrights, Committee Hansard, 16 April 2010, p. 15.

14 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

15 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

16 Screenrights, Submission 3, pp 2-3.

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broadcast. Such a retransmission would have the effect o f allowing the 38C broadcast signals to reach far outside the limited access intended by the conditional access requirements. This retransmission could potentially subvert the existing regional commercial broadcast licenses.17

Committee view

2.20 The committee understands that the Bill's intention is not to allow pay TV providers to re-transmit satellite broadcasts. However, the question of whether or not the Bill would inadvertently allow such re-transmission is obviously a complex statutory interpretation matter best resolved between the department and its drafters.

The committee recommends that the department consider this issue and, if necessary, amend the Bill accordingly.

Appropriateness o f statutory licensing scheme

2.21 Ms Julie Flynn, CEO of Free TV Australia argued that there are more fundamental problems with the proposed statutory licensing scheme. Ms Flynn argued that the statutory licensing scheme is an inappropriate mechanism for managing copyright issues should commercial negotiations fail:

The ffee-to-air broadcasters hate the retransmission scheme. W e do not like it in the pay TV environment and we certainly do not think it is appropriate in this environm ent.18

2.22 Instead of the statutory licensing scheme, Ms Flynn continued:

What we w ould like to see is a dispute resolution m echanism ...The sort of thing we are looking at is something that would say the metropolitan licensees m ust provide program m ing content to the satellite licensee upon request. The content will be provided in return for fair and equitable remuneration on reasonable terms as agreed by the parties. I f no agreement can be reached, then someone like the Attorney-General, for instance, may appoint an independent arbitrator to determine reasonable terms having reference to all the relevant factors, including existing affiliation

agreements and other comparable commercial agreem ents.19 2 0

2.23 In its submission, Free TV Australia also commented that one of the key problems with the proposed scheme is that it is 'unnecessarily complex'/0 Screenrights disagreed with that assessment, and stated that it supports:

...the current mechanism o f having the Copyright Tribunal, which is a division o f the Federal Court, w hich is able to hear evidence on any matter

17 Mr Simon Lake, Chief Executive, Screenrights, Committee Hansard, 16 April 2010, p. 11.

18 Ms Julie Flynn, Committee Hansard, 16 April 2010, p. 28.

19 Ms Julie Flynn, Chief Executive Officer, Free TV Australia, Committee Hansard, 16 April 2010, p. 28.

20 Free TV Australia, Submission 7, p. 2.

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with regard to valuation. It has proven to be a mechanism w hich is able to make determinations between parties as to the value o f things.21

2.24 However, Ms Flynn argued that:

...the Copyright Tribunal is very slow and does not, we think, recognise the value o f our services. W e do not think that this is a matter for

retransmission. This is no different to any affiliation agreement that currently exists.22

2.25 In response to this issue, the department agreed with Free TV's assessment that:

Commercial negotiation is the m ost appropriate and efficient means o f securing equitable remuneration for the supply o f program content.23

2.26 The department also stated that it 'expects' commercial broadcasters to come to an agreement regarding the supply o f content to the satellite licensee. However, in respect of the method o f resolving disputes between commercial broadcasters and the satellite licensee when commercial agreement cannot be reached, the department contended:

...the Copyright Tribunal, with its expertise and experience in determining the value o f the use o f copyright material, is the m ost appropriate

independent body to adjudicate disputes between broadcasters where a commercial agreement cannot be reached. The Attorney-General's Department has also advised the Department that it is not aware o f any precedent in Australian copyright regulation for appointing an independent

arbitrator that is not the Copyright Tribunal.24 2 5

2.27 Furthermore, the department pointed out that:

...parties are not obliged to use the Copyright Tribunal. They are free to nominate and appoint their own independent commercial arbiter if they wish to do so.23

21 Mr Simon Lake, Chief Executive, Screenrights, Committee Hansard, 16 April 2010, p. 15.

22 Ms Julie Flynn, Chief Executive Officer, Free TV Australia, Committee Hansard, 16 April 2010, p. 32.

23 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

24 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

25 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

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Committee view

2.28 The committee is satisfied that the model set out in the Bill for determining the remuneration for the satellite licensees' use of content is appropriate and fair. The model clearly prefers commercial agreement to be reached between the satellite

licensee and the relevant copyright holder. However, in the absence of such agreement, the committee agrees with the department's view that the Copyright Tribunal is the most experienced and appropriate body to be appointed as an independent arbiter. There appears to be no reason to divert from this established method of resolving disputes between copyright holders and re-broadcasters.

Narrowcasters' access to the satellite platform

2.29 One o f the principal concerns raised during the inquiry by a number of submitters and witnesses, was the availability of the proposed new satellite platform to narrowcasters including National Indigenous Television (NITV), Westlink and the Rural Health Education Foundation. The operators o f each o f those services expressed

their concerns to the committee regarding the government's lack of consultation with, and consideration of, narrowcasters in the development of the Bill and its underlying policies/6 For example, NITV submitted that:

Despite this scale o f change, the Bill before the Parliament is largely a construct developed by regional and remote commercial TV free to air broadcasters, DBCDE and the government.

It has not derived from an open consultative process. The Bill has not been guided in any way by the prom ised Discussion Paper and the range o f community and other broadcaster views and ideas such an open process would have engendered.2 6 27

2.30 Mr Ian McGarrity, Professional Adviser to NITV, explained that NITV's principal concern is the fact that the Bill makes no provision for open narrowcast services to be available on the new satellite platform:

It [the Bill] says not one word about TV open narrowcast

serv ices...[G enerally speaking at this stage there is no clarity from the bill or the explanatory mem orandum as to whether NITV could be on the satellite, could get transponder capacity, at what cost and on what terms it could get transponder capacity, w hether the regional commercial entity set

up to manage this would allow us to be on the electronic program guide and therefore w hether N ITV could be received through the same set-top b o x ...28

26 See National Indigenous Television, Submission 1; Rural Health Education Foundation, Submission 8; and Government of Western Australia Department of Regional Development and Lands, Submission 10.

27 National Indigenous Television, Submission 1, p. 1.

28 Mr Ian McGarrity, Professional Adviser, NITV, Committee Hansard, 16 April 2010, p. 4.

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2.31 The committee recognises that many open narrowcast services provide valuable services to remote and rural communities. For example, NITV 'provides a nationwide Indigenous television service by cable, satellite and terrestrial transmission means'.29 Ms Turner explained the importance to Indigenous and non-Indigenous Australians of the service NITV provides:

I honestly believe that we have a significant role to play in reconciliation through the education role that w e play, in a way that is probably more powerful than we have ever had in terms o f a medium previously, to

influence the m inds o f Australians generally to grow the respect for an understanding o f our cultural heritage.30

2.32 Similarly, the committee received evidence about the importance of the satellite services provided by the Rural Health Education Foundation. The Foundation produces:

...a num ber o f satellite broadcasts each month, reaching m any thousands o f rural and rem ote health professionals and their community members each year, providing them with essential health and medical education, updates and inform ation.31

2.33 These and other open narrowcast services are currently available on the Optus Aurora platform, which provides a free-to-air satellite service for homes in television black spots. The committee understands that Optus has indicated that the Aurora network will be shut down in 2013.32

2.34 Mr Townend, Deputy Secretary of Broadcasting and Digital Switchover, Department o f Broadband, Communications and the Digital Economy, suggested that the likely shutdown o f Aurora in 2013 means that there is plenty of time for narrowcasters to explore alternative broadcasting options.33

2.35 NITV argued that it is important that narrowcast services be included in the new satellite platform prior to 2013 because otherwise NITV will be 'left like a shag on a rock on the Aurora platform' between now and 2013 as:

...if you wanted to access N ITV under this new arrangement you would have to buy a separate set o f cables and equipment in order to access one channel.34

29 National Indigenous Television, Submission 1, p. 2.

30 Ms Patricia Turner, CEO, NITV, Committee Hansard, 16 April 2010, p. 8.

31 Rural Health Education Foundation, Submission 8, p. 1.

32 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 59.

33 Mr Andy Townend, Committee Hansard, 16 April 2010, p. 74.

34 Ms Patricia Turner, Chief Executive Officer, National Indigenous Television, Committee Hansard, 16 April 2010, p. 5.

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2.36 The Rural Health Education Foundation expressed similar concerns:

It is clear that once the new digital satellite is launched and operational, Aurora users w ill start to migrate to the new service, m aking Aurora less and less attractive to users and viewers. Although it will not disappear

immediately, it will effectively becom e a very "lonely" place as Australia's digital television switchover gathers pace. It is very unlikely that many satellite consumers (homes or institutions) will w ish to utilise two different set top boxes, even if it is technically possible to do so with the same

satellite dish.35

2.37 Ms Turner argued that:

If this bill goes through the H ouse unam ended and w ithout taking into account the matters we have raised, then we are left out o f the game. NITV cannot and w ill not be a part o f the new arrangements w ithout difficulty.36

2.38 However, officers from the Department of Broadband, Communications and the Digital Economy argued that the concerns of narrowcasters are unfounded as 'there is nothing under the legislation that prevents NITV broadcasting on the platform'.37 Dr Felling also highlighted that:

Narrowcast licences...have a m uch greater degree o f flexibility than commercial licences in terms o f w here they can be provided and so on, and those types o f services are already provided as narrowcast services. As we said, there is nothing in that bill [that] w ill stop narrowcasters.38

2.39 Mr Townend also clarified that the design of the satellite platform would not preclude narrowcasters:

It is also worth adding that there are currently no physical constraints on the satellite platform for the carriage o f [narrowcasters] either. A deal has not been struck which would preclude NITV or other narrowcasters being carried.39

2.40 Mr Townend emphasised that, therefore, the decision by narrowcasters to utilise the new satellite platform, as opposed to Aurora or any other satellite platform,

35 Rural Health Education Foundation, Submission 8, p. 3.

36 Ms Patricia Turner, Chief Executive Officer, National Indigenous Television, Committee Hansard, 16 April 2010, p. 3.

37 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 59. 38 Dr Simon Felling, First Assistant Secretary, Broadcasting and Digital Switchover, Department

of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 75. 39 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010,

p. 75.

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is a commercial consideration for each organisation.40 In the case of NITV, its funding level is an issue for the Department of Environment, Water, Heritage and the Arts.

2.41 In this respect, NITV was advised on 16 April 2010 that it would receive an additional $15.2 million in funding for 2010-11. The government also announced that it would conduct a review of NITV's funding, which would:

...explore options for the carriage o f Indigenous broadcasting content on new digital broadcasting platform s, including the Government funded Viewer Access Satellite Television (VAST) service.41

2.42 Ms Turner commented that:

I welcome the review from the point o f view that there needs to be a

properly integrated policy fram ework for Indigenous broadcasting in this country and I believe that that is what the review outcome should deliver, including a robust future for N ational Indigenous Television.42

Committee view

2.43 The committee is satisfied that, as the bill deals only with arrangements regarding licensed commercial broadcasters, it neither directly deals with narrowcasters' access to, nor prevents narrowcasters from utilising, the new satellite platform. The committee is of the view that it is appropriate for narrowcasters to negotiate commercial access arrangements with the satellite licence owner.

2.44 The committee urges the Department of Environment, Water, Heritage and the Arts to consider in its review o f NITV's future funding, the issues raised by NITV regarding its importance to Indigenous Australians and the broader Australian

community, and also any difficulties that NITV accessing the new satellite network.

Costs and impact of the proposed satellite scheme for households

2.45 Among the main concerns raised with the committee regarding the proposed new satellite network was the cost of installing satellite receiving equipment for households in regional and remote Australia. The three key issues relating to households that the committee identified were:

• the cost of installation;

40 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 75.

41 The Hon Peter Garrett MP, Minister for Environment Protection, Heritage and the Arts, the Hon Jenny Macklin MP, Minister for Families, Housing, Community Services and Indigenous Affairs and the Hon Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, $15 million investment fo r the continuation o f NITV, Media Release,

16 April 2010, available at: www.environment. gov.au/minister/garrett/2010/mr20100416.html.

42 Ms Patricia Turner, Chief Executive Officer, National Indigenous Television, Committee Hansard, 16 April 2010, p. 3.

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• the amount o f equipment required; and

• how and when people will know if they require satellite equipment.

Cost o f equipment and installation

2.46 The department advised the committee that:

...the governm ent will provide a $400 satellite conversion subsidy to eligible households, that is, those households currently served by self-help transmission sites which are not to be upgraded by the digital broadcasters. Details o f the way in which this subsidy will be administered will be

announced in due course.43

2.47 The amount o f the subsidy was determined on the basis that:

• 'We would not expect...the cost of the set-top box and the card to be more than $270'; 44 4 5

• 'The satellite dish of 65 centimetres in diameter...would not be expected to cost more than SlOO';43 and

• 'The figures that we provided [to the minister] contain the best estimates we can of what that kind of installation might cost', which amounts to approximately $280 for installation.46

2.48 Accordingly households requiring satellites are expected on average to pay $650 for equipment and installation, of which $400 will be subsidised by government.47

2.49 Ms Rebecca Heap, General Manager, Strategy and Programming, from AUSTAR commented that this estimate:

...is obviously in the right ballpark. Everything depends on the particular vendor and the particular relationships that you have, but this is certainly a cost that feels right to us.48

43 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 56.

44 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 61. 45 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of

Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 61. 46 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010,

p. 61.

47 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 61.

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2.50 In addition, the committee was informed that the government is intending to provide satellite equipment free of charge to 'age pensioners and other groups'.4 8 49 When asked about whether a larger subsidy would also be available to more remote households where the cost of installation might greatly exceed $280, the committee was told:

One o f the m atters that remain subject to consideration is the level o f subsidy in more remote areas and, in particular, in remote Indigenous communities. The government is currently considering the size o f the subsidy in those areas.50

Amount o f equipment required

2.51 The committee also heard concerns that households with existing satellites connected to subscription TV services, such as AUSTAR, which also wish to receive free TV via the new satellite service, will require an additional satellite dish and set-top box. This issue was raised by Ms Heap from AUSTAR, who commented:

We do not w ant to inconvenience [AUSTAR's existing customers by them] having to pay for a second satellite dish and set-top box, when our set-top box should be completely capable o f delivering that to them today.51

2.52 Mr Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, agreed that the new satellite service would create a situation where householders who wished to receive both the full range of services available on the new satellite network in addition to subscription TV, would require two satellite dishes and two set-top boxes. However, Mr Townend argued that 'that would be their choice, and that would be a

completely separate matter'.52

Notifying households o f the need to purchase a satellite receiver

2.53 The third and final issue of concern raised with the committee relating to the impact of the scheme on householders was how and when householders would be made aware that they reside in a digital TV black spot and will need to install a satellite receiver.

48 Ms Rebecca Heap, AUSTAR United Communications Ltd, Committee Hansard, 16 April 2010, p. 24.

49 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 56.

50 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 63.

51 Ms Rebecca Heap, General Manager, Strategy and Programming, AUSTAR United Communications Ltd, Committee Hansard, 16 April 2010, p. 20.

52 Mr Andy Townend, Committee Hansard, 16 April 2010, p. 59.

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2.54 During its evidence to the committee, the department discussed at length the steps it is taking to inform households about the digital switchover, and to assist them in installing the appropriate equipment. Mr Townend, Deputy Secretary Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy explained that the department:

W e have a team of people on the ground in Ouyen and Underbool from 27 April who will be working w ith the local community to explain to them that their new transmitters will be switching on during M ay.53

2.55 The committee was told that the work being done by the department in Ouyen and Underbool involves:

...local advertising, information campaigns and, more importantly, community outreach activities...

Prior to the switch-over date, task force officers, beginning in about [the beginning o f M ay 2010], and staff from the Australian Communications and M edia Authority, supported by broadcasters, will be visiting the Mildura Sunraysia area to run a series o f information sessions and will be

working closely with local community organisations and antenna installers.54

2.56 Furthermore Mr Townend indicated that:

Detailed advice will be provided to householders, business owners, charities, antenna installers and retailers, with a focus on the last few, who may have remaining difficulties switching over to digital reception.55

2.57 Mr Townend commented that during his experience with the United Kingdom's digital switchover, he learned that these issues are 'possible to manage with adequate notice'.56

2.58 Mr Townend informed the committee that, with the exception o f the Sunraysia region, the government anticipates being able to give 'plenty' of notice to

53 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 71. 54 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of

Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 57. 55 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010,

p. 57.

56 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, pp 71-2.

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affected communities as 'the first area to be affected by this would be regional Victoria, which is not switching until the first half of next year'.57

2.59 In response to a question on notice, the department indicated that:

It is anticipated that six months notice o f conversion will be provided to viewers who w ill receive their services from a converted self-help facility at switchover.

It has not been possible to provide six months notice to viewers that are reliant on the self-help facility in Underbool as switchover is to occur in M ildura/Sunraysia on 30 June 2010 and broadcasters only agreed to convert the facility early in 2010.

However, w hether a self-help facility is to be converted to digital, and the date on which the conversion is to occur, is dependent on decisions made independently by broadcasters and self-help licensees. The Department is working closely with broadcasters and once broadcasters and self-help licensees have determined to convert a self-help facility will seek to advise viewers as early as possible about their switchover options.58

Committee view

2.60 The committee is of the view that the subsidy offered by the government is adequate, noting the special arrangements planned for pensioners and those in remote areas; that the existing satellite pay TV consumers will be able to choose whether or not to install a second satellite dish and set-top box to access the new satellite service; and that the department's, ACMA's and broadcasters' plans to inform consumers of the approaching digital switchover appears to be sufficient.

2.61 The committee encourages the department to continually monitor the level of information and engagement in the Mildura region to ensure that communities are fully informed both during this initial switchover, and that any learnings from Mildura can be utilised in future switchovers in other areas.

Conclusions

2.62 The committee notes the enormous importance of the satellite service enabled by the Bill to rural and regional Australia. All witnesses and submitters were ultimately in agreement on this issue. The satellite platform will, for the first time

ensure that there is equity between regional and metropolitan Australia in terms of the free-to-air television services available.

57 Mr Andy Townend, Deputy Secretary, Broadcasting and Digital Switchover, Department of Broadcasting, Communications and the Digital Economy, Committee Hansard, 16 April 2010, p. 71.

58 Department of Broadband, Communications and the Digital Economy, answer to question on notice, 16 April 2010 (received 23 April 2010).

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2.63 The committee notes that it is simply not feasible to provide all Australians with terrestrial digital television, and commends the government for developing an equitable satellite solution, which is also cost-effective to taxpayers as a result o f the government's negotiations with commercial broadcasters to fund the conversion of terrestrial broadcasting facilities.

Recommendation 1

2.64 The committee recommends that the Senate pass the Broadcasting Legislation Amendment (Digital Television) Bill 2010.

Senator Anne McEwen Chair

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Coalition Senators’ Additional Comments Coalition Senators participating in the inquiry question the implications of the Broadcasting Legislation Amendment (Digital Television) Bill 2010 for households, notably those in rural and regional Australia.

Coalition Senators are concerned that the Department of Broadband, Communications and the Digital Economy could not provide any data to show satellite broadcasting is the most appropriate and cost-effective means to deliver digital television services in black spot areas.

Costs incurred by households to purchase and install satellite receiving equipment and persistent uncertainty surrounding the reach o f upgraded digital self-help retransmission towers remain o f concern to Coalition Senators.

Alternative Solutions

Coalition Senators note the concerns o f Broadcast Australia and AUSTAR who questioned whether the government adequately examined the full range o f solutions to digital television black spots.

Coalition Senators are concerned at the apparent lack o f cost-benefit analysis underpinning the Government's policy. As Broadcast Australia noted:

Broadcast Australia is unaware o f... any cost benefit study that has

underpinned the decision by governm ent to spend $40 million per annum in 2010 dollar term s for each o f the next 4 years (while this is an ongoing commitment the actual future am ount has not yet been disclosed) to provide the full range o f so called Freeview services from the new satellite platform,

compared w ith rolling out a greater num ber o f digital terrestrial

transmission TV facilities.1

Broadcast Australia also stated:

The second point I would like to em phasise is that w e are not aware o f how the balance between terrestrial and satellite has been arrived at by the government.2

Austar noted similar concerns:

It seems prudent, however, to ensure that the chosen solution is as cost effective as possible, particularly given the potentially small number o f homes likely to benefit from the application. AUSTAR strongly encourages further scrutiny and transparency o f the funding arrangements prior to the

1 Broadcast Australia, Submission 4, pp 1-2.

2 Mr Stephen Farmgia, Director of Technology, Broadcast Australia, Committee Hansard, 16 April 2010, p. 27.

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passage o f the Bill to ensure that the most cost effective and appropriate solution is implemented.3

In the absence of evidence to the contrary, Coalition Senators are not convinced that the government has chosen the most cost-effective or appropriate solution to meet its objective.

Access Regime

Coalition members of the committee remain concerned about the lack of a framework to govern network access for non-commercial broadcasters (such as NITV, Westlink and the Rural Health Education Fund, as outlined in chapter two of the committee report).

In response to a question on notice, the Department stated:

...it is a condition of the grant deed entered into with commercial

broadcasters to deliver the satellite service that the broadcasters must not do anything that would restrict any providers... from negotiating with the satellite platform provider to achieve access to the satellite service.4

Coalition Senators are not satisfied that providing that broadcasters 'must not do anything' to restrict access negotiations will guarantee 'access to the satellite service’. Even more remote is any guaranteed access to ancillary equipment, such as the electronic program guide and subscriber management systems.

In a further response to questions on notice, the Department suggested:

The Broadcasting Services Act 1992 does not provide for the guaranteed access o f free to air broadcasters, such as narrowcasters or community television, to the Aurora platform. Similarly, there are no provisions in the Bill relating to access for such parties to the satellite transmission

platform .5

Coalition Senators do not believe the provisions of the Broadcasting Services Act 1992 should be held out as reason for not providing an access regime to the proposed VAST network.

Coalition Senators question whether an access regime for the publicly funded satellite network (VAST) should be guided by previous considerations for regulation of the privately owned Aurora platform, operated by Optus, a private telecommunications carrier.

3 Austar, Submission 6, p. 5. 4 Department of Broadband, Communications and the Digital Economy, answer to question on notice, (received 23 April 2010), Question No 1 — 10 from Senator Ludlam. 5 Department of Broadband, Communications and the Digital Economy, answer to question on notice,

(received 23 April 2010) Question No 1-10 from Senator Ludlam.

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Cost of adoption

Coalition Senators are concerned at the unclear and potentially significant out-of-pocket expenses that may be faced by households seeking access to the satellite network.

Rural and regional communities may incur higher installation and supply charges for satellite-related equipment, due in part to a lack of competing retailers in rural areas.

A number of factors may further inflate the cost of installation for rural households. Factors like the availability of appropriately skilled technicians, obstructions to reception, travel time and the state of existing cabling may inflate costs in remote locations where black spots are more likely prevalent.

Uncertainty— terrestrial or satellite?

Coalition Senators are concerned at the lack of certainty for mral and regional households who may not know which methods of digital reception will be available prior to switchover.

This will be of particular concern to residents in the vicinity o f the forty four self-help towers identified as likely to be made redundant by the extended footprint of other upgraded towers nearby.

As Broadcast Australia told the committee, residents cannot be certain they will be within the new digital coverage footprint:

A more difficult scenario is where you are an existing self-help viewer or you are on the edge o f analogue coverage. Until the full suite o f digital services are available at those sites, you cannot make an informed decision

as to w hether you are going to have digital terrestrial or you will need to buy, at a significantly higher cost, digital direct-to-home satellite services.

For example, if you live in an area, say Clare, where the ABC is not there at the moment and the ABC is your first choice viewing channel, you may at the moment feel you need to buy a direct to home satellite receive system. Until the decision is made and the service is established you cannot confirm

that you have reliable ABC reception.6

Coalition Senators are concerned that while metropolitan viewers have received a period of simultaneous analogue and digital broadcast, certain rural areas currently serviced by self-help towers must wait for the analog switch-off to see whether a

terrestrial digital signal will be available.

__________________________________________________________________________________ 35_

6 Mr Stephen Farrguia, Director of Technology, Broadcast Australia, Committee Hansard, Canberra, 16 April 2010, p. 27.

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Coalition Senators fear this will result in a 'hot-switch' situation, where households will receive an analog signal until switch-off but no digital signal at switch-on.

Coalition Senators are concerned that rural and regional households don’t have the certainty required to make educated, informed and cost-effective decisions about how to best prepare to receive digital television, ahead of the switch-off.

Accordingly, some residents will be unable to plan with certainty for the purchase of a new television set or the purchase and installation of satellite reception equipment.

Concluding Remarks

In the absence of sufficient evidence or cost-benefit analysis, Coalition Senators remain concerned that the use of a satellite broadcasting service may not be the most satisfactory or appropriate or cost-efficient means to address the issue of digital television black spots.

We worry about potentially significant out-of-pocket preparatory expenses for rural and regional digital reception, exacerbated by uncertainty about whether they will access digital TV from terrestrial or satellite means.

Coalition Senators consider that television viewers in remote, rural and outer-metropolitan areas deserve equivalent access to equivalent television services as their city counterparts, ideally through upgraded terrestrial services where practicable.

Senator Mary Jo Fisher Senator the Hon Judith Troeth Deputy Chair

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Australian Greens’ Additional Comments The Australian Greens support the effort to ensure that up to 247,000 households in remote areas have access to a similar variety of television programming as their counterparts in metropolitan areas. It is always more difficult to provide equitable access to services in the more distant comers of our country, and it is good to see that this has been given due attention in the context of the switchover to digital television.

Unfortunately, unlike the Senators in the majority, we are not reassured that the concerns of National Indigenous Television (NITV), the Rural Health Education Foundation (RHEF), The Western Australian Government's Westlink service, and other narrowcasters and community broadcasters in a similar position, have been adequately addressed. As reflected in the majority report, the primary concern of these organisations is that the Bill does not make any provision for them to have access on non-discriminatory terms to the new satellite service, and hence to the set top boxes that will be used to receive the commercial and national free to air television services, nor does it provide for open access such that any who seek it may secure access subject only to capacity constraints.

The Department of Broadband, Communication and the Digital Economy (DBCDE) does not quite put the issue to rest by pointing out that the Bill does not exclude narrowcasters and community broadcasters. By leaving their fate to the vagaries of commercial negotiations with the licensees, the Bill leaves open the possibility that they may ultimately be excluded, or they may have to pay for access on terms and conditions which are not equivalent to those applying to commercial and national free- to-air television services. This would be a very peculiar state of affairs—publicly-

funded narrowcasters unable to get fair access to publicly-funded satellite transmission so that they can be received for free by the public.

DBCDE points out that the Bill leaves the narrowcasters and community broadcasters in the same situation that they are presently in with respect to their transmission on the Aurora platform. That is, they must negotiate access independently on a commercial basis. However, this response overlooks some important differences between Aurora

and the new platform. Namely:

• The new platform is being funded by the public to the tune of $40 million per year, so the government is perfectly justified dictating a few terms to guarantee access by the narrowcasters it has funded to provide important services to the community. Aurora, on the other hand, is a private business owned and paid for by Optus.

• Optus is in the business of selling access to Aurora, so it has a clear

commercial imperative to grant access to whoever can pay. The commercial incentives of the licensees of the new platform are not so straightforward, especially given that they will themselves often be affiliated with broadcasters that may see some current or future access seekers as competition.

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As acknowledged in the majority report, the fact that Optus will continue to operate Aurora until 2013 also provides scant comfort to NITV, Westlink and others in their position. With at least four times more commercial and national free-to-air television services available on the new platform than on Aurora, and a need to establish duplicated direct to home satellite reception facilities to all TV sets and recording devices from the satellite dish onwards to view the few channels remaining on Aurora, it is reasonable to assume that NITV et al will lose a significant share of their audiences.

DBCDE advised that:

...it is a condition o f the grant deed entered into with commercial

broadcasters to deliver the satellite service that the broadcasters must not do anything that would restrict any providers of: national broadcasting services; commercial radio broadcasting services; community broadcasting

services; or open narrowcasting broadcasting services from negotiating with the satellite platform provider to achieve access to the satellite service.1

This is welcome, but an obligation not to do anything that restricts negotiation leaves open the possibility that negotiation will involve the licensee setting unreasonable terms to prevent the access seeker from gaining access or to exploit its gatekeeper role to extract undue profits.

Further, if it is considered a wise precaution to put the above provision into the grant deed with the licensee, why not put an equivalent provision into the Bill? The grant deed is a confidential, commercial document, it is time-limited, and it only applies to one licensee. By contrast, addressing this issue in the Bill itself would promote greater transparency, reassure the sector, and settle the issue in a more comprehensive and enduring manner.

There is no reason to believe that the government has any interest in precluding narrowcasters or community broadcasters from gaining access to the new satellite platform. They simply appear not to have been considered. This may be due to deficiencies in the consultation process, as suggested by NITV, Westlink and others.2 Whatever the case, their concerns seem reasonable and the Australian Greens urge the government to look at amendments to ensure that publicly-funded narrowcasters and community broadcasters are able to gain access to the new platform, subject only to

satellite capacity constraints.

Senator Scott Ludlam Australian Greens

1 Department of Broadband, Communications and the Digital Economy, answers to questions on notice (final page of response to Senator Ludlam's questions on notice).

2 NITV, Submission 1, p. 1; Department of Regional Development and Lands, Government of Western Australia, Submission 10, p. 1.

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Appendix 1

Submissions, tabled documents, additional information and answers to questions taken on notice

Submissions

1 National Indigenous TV Ltd

2 Special Broadcasting Service Corporation (SBS)

3 Screenrights

4 Broadcast Australia

5 Australian Subscription Television and Radio Association Inc (ASTRA)

6 Austar

7 Free TV Australia

8 Rural Health Education Foundation

9 Western Australian Local Government Association

10 Department o f Regional Development and Lands, Government of Western Australia

Tabled documents

Digital television services for self-help retransmission sites, tabled by the Department of Broadband, Communications and the Digital Economy (public hearing, 16 April 2010, Canberra)

Additional information

Department of Broadband, Communications and Digital Economy - Correction of evidence received 23 April 2010

Answers to questions taken on notice

Department of Broadband, Communications and the Digital Economy (from public hearing, 16 April 2010, Canberra)

Free TV Australia (from public hearing, 16 April 2010, Canberra)

40

Austar (from public hearing, 16 April 2010, Canberra)

Broadcast Australia (from public hearing, 16 April 2010, Canberra)

National Indigenous Television (from public hearing, 16 April 2010, Canberra)

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Appendix 2

Public hearings

Friday, 16 April 2010 - Canberra

National Indigenous Television

Ms Patricia Turner, Chief Executive Officer

Mr Paulo Remati, Deputy Chief Executive Officer/Director of Content

Mr Ian McGarrity, Professional Advisor

Screenrights

Mr Simon Lake, Chief Executive

Mr James Dickinson, Licensing Executive

Austar

Ms Rebecca Heap, General Manager, Strategy and Programming

Ms Emma Shackley, Group Manager, Corporate Affairs

Free TV

Ms Julie Flynn, Chief Executive Officer

Broadcast Australia

Mr Stephen Farrugia, Director o f Technology

Mr Clive Morton, Engineering and Field Services Director

Australian Communications and Media Authority

Mr Giles Tanner, General Manager, Digital Transition

Mr David Brumfield, Executive Manager, Allocation Coordination and Policy Branch, Digital Transition Division

Mr Christopher Hose, Executive Manager, Technical Planning and Evaluation Branch

42

Department of Broadband, Communications and the Digital Economy

Mr Andrew Townend, Deputy Secretary, Broadcasting and Digital Switchover Division

Dr Simon Felling, First Assistant Secretary, Broadcasting and Digital Switchover Division

Ms Ann Campton, Assistant Secretary, Broadcasting and Switchover Policy Branch

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The Senate

Environment, Communications and the Arts Legislation Committee

Building Energy Efficiency Disclosure Bill 2010 [Provisions]

M ay 2010

© Commonwealth of Australia 2010 ISBN 978-1-74229-300-4

This document was printed by the Senate Printing Unit, Parliament House, Canberra

Committee membership

Committee members Senator Anne McEwen (ALP, SA) (Chair) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) Senator Scott Ludlam (AG, WA) Senator Kate Lundy (ALP, ACT) Senator the Hon. Judith Troeth (LP, VIC) Senator Dana Wortley (ALP, SA)

Committee secretariat

Mr Stephen Palethorpe, Secretary Ms Nina Boughey, Senior Research Officer Mrs Dianne Warhurst, Executive Assistant

Committee address PO Box 6100 Parliament House Canberra ACT 2600

Tel·. 02 6277 3526 Fax: 02 6277 5818 Email·, eca.sen@aph.gov.au

Internet, www.aph.gov.au/senate/committee/eca_ctte/index.htm

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Table of Contents

Committee m em bership......................................................................................... iii

Recommendations...................................................................................................vii

Abbreviations............................................................................................................ix

Chapter 1 - Referral to the com m ittee..................................................................1

Purpose of the B ill....................................................................................................... 1

Outline of the B ill........................................................................................................ 8

Chapter 2 - Key issu es............................................................................................ 15

Widespread support................................................................................................... 15

NABERS as the appropriate rating to o l.................................................................. 16

Development of tenancy lighting to o l..................................................................... 21

Penalties......................................................................................................................22

Assessors....................................................................................................................23

Conclusions............................................................................................................... 24

Coalition Senators’ Additional Comments........................................................ 27

Appendix 1 - Submissions and Answers to questions taken on notice.........35

Submissions............................................................................................................... 35

Answers to questions taken on notice.....................................................................35

Appendix 2 - Public hearings................................................................................37

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Recommendations

Recommendation 1

2.28 The committee recommends that the Department of Climate Change and Energy Efficiency continue to work with the relevant industry sectors and state authorities to ensure that the Building Energy Efficiency Certificates issued under the scheme contain information about a building's greenhouse gas emissions which is consistent with relevant commonwealth schemes, including the National Greenhouse and Energy Reporting Scheme.

Recommendation 2

2.35 The committee recommends that the government consider delaying the lighting measurement component of Building Energy Efficiency Certificates until the Department of Climate Change and Energy Efficiency has had sufficient time to develop, test and consult on the appropriate tool for measuring the efficiency of lighting.

Recommendation 3

2.41 The committee recommends that the government give consideration to whether the penalties proposed to be imposed by the Bill are appropriate.

Recommendation 4

2.54 The committee recommends that, subject to the recommendations contained in this report, the Senate pass the Building Energy Efficiency Disclosure Bill 2010.

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viii 58

Abbreviations

ABARE Australian Bureau of Agriculture and Resource Economics

ABGR Australian Building Greenhouse Rating

BEECs Building Energy Efficiency Certificates

the Bill Building Energy Efficiency Disclosure Bill 2010

CEO Chief Executive Officer

COAG Council of Australian Governments

the committee Senate Enviromnent, Communications and the Arts Legislation Committee

C 02 Carbon Dioxide

CPRS Carbon Pollution Reduction Scheme

the department Department of Climate Change and Energy Efficiency

EEC Energy Efficiency Council

EEO Energy Efficiency Opportunities program

MCE Ministerial Council on Energy

the Minister Minister for Climate Change, Energy Efficiency and Water

NABERS National Australian Built Environment Rating System

NGERS National Greenhouse and Energy Reporting Scheme

RIS Regulation Impact Statement

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Chapter 1

Referral to the committee

1.1 On 18 March 2010 the Senate Selection of Bills Committee referred the provisions of the Building Energy Efficiency Disclosure Bill 2010 (the Bill) to the Senate Environment, Communications and the Arts Legislation Committee (the committee) for inquiry and report by 11 May 2010.1

1.2 On 24 March 2010, in accordance with usual practice, the committee advertised the inquiry in The Australian, calling for submissions by 6 April 2010. The committee also directly contacted a range of organisations inviting them to submit to the inquiry. The committee received five submissions, listed at Appendix 1.

1.3 The committee held a public hearing in Canberra on 12 April 2010. The participants are listed at Appendix 2.

1.4 The committee thanks those organisations and individuals that made contributions to the committee's inquiry.

Purpose of the Bill

1.5 The Bill proposes to require owners of large commercial office buildings to supply energy efficiency information about their buildings to potential lessees or purchasers. The driver behind the Bill is to provide commercial office market participants with credible energy efficiency information in order to:

...help these parties to make better informed decisions and take full account o f the economic costs and environmental impacts associated with operating the buildings they are intending to purchase or lease.2

1.6 The policy was originally proposed in December 2004 under stage one of the National Framework for Energy Efficiency—a joint initiative of the Commonwealth, State and Territory governments under the Ministerial Council on Energy (MCE).3 Specifically, the MCE agreed that there should be:

...a nationally consistent legislated regime for mandatory disclosure o f energy perfonnance of...com m ercial buildings...4

1 Senate Selection of Bills Committee, Report No. 6 o f 2010, 18 March 2010.

2 The Hon Greg Combet MP, Minister Assisting the Minister for Climate Change, Second Reading Speech, House o f Representatives Hansard, 18 March 2010, p. 2928.

3 Regulation Impact Statement, p. ill.

4 Ministerial Council on Energy, Statement on National Framework fo r Energy Efficiency: Ovendew Plan o f State One Measures 2005-2007, December 2004, at: www.ret.gov.au/Documents/mce/ documents/FINALFINAL0Dec04MCEStatementonNFEEQ verview20050926160618.pdf (accessed 27 April 2010).

2

1.7 In July 2009, as part of the National Partnership Agreement on Energy Efficiency, the Council of Australian Governments (COAG) agreed to the implementation of national mandatory disclosure requirements for commercial buildings.5 COAG decided that phase one of the agreement should apply to

commercial office buildings over 2000 square metres in area and also cover commercial office buildings owned or leased by the Commonwealth, state and territory governments.6

1.8 In its submission the Energy Efficiency Council (EEC) highlighted the fact that the mandatory disclosure of commercial building energy efficiency also has support across the political spectrum:

There is a strong justification for the Bill, and the Australian Labor Party, the Liberal Party and the Australian Greens have all committed to support the introduction o f this type o f schem e.7

1.9 Most o f the witnesses that appeared before the committee commented on the significant economic and environmental benefits of improving the energy efficiency of commercial buildings. These benefits are discussed in detail below.

1.10 Ms Clare Walsh, Acting First Assistant Secretary, Renewables and Energy Efficiency Division, Department of Climate Change and Energy Efficiency, explained that government involvement is needed to encourage energy efficiency improvements in commercial office space because:

...it is well recognised that there are market failures that prevent a carbon price flowing through to real action in some instances. In the building sector, the m arket failure is inform ation asymmetry. There is a failure in the provision o f information and in the split incentives between those who

make decisions about energy efficiency o f a building or its appliances and those who m ay or may not benefit as a result o f those decisions. This measure complements the [Carbon Pollution Reduction Scheme] as it better ensures that price signals flow through clearly and directly to the market.8

5 COAG, National Partnership Agreement on Energy Efficiency, www.coag.gov.au/coag meeting outcomes/2009-07-02/docs/NP energy efficiencv.pdf (accessed 30 April 2010).

6 COAG, National Partnership Agreement on Energy Efficiency, Attachment A, National Strategy on Energy Efficiency (Measures Table), p. 25, www.coag.gov.au/coag meeting outcomes/2009-07-02/docs/Energv efficiency measures table.pdf (accessed 30 April 2010).

7 Energy Efficiency Council, Submission 5, p. 1.

8 Ms Clare Walsh, Acting First Assistant Secretary, Renewables and Energy Efficiency Division, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p. 22.

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1.11 The EEC corroborated Ms Walsh's comments regarding market distortions and failures which 'impede energy efficiency' making government intervention necessary.9 According to the EEC these market distortions and failures include:

• the fact that the incentives facing landlords, tenants and building managers with respect to energy efficiency 'are frequently not aligned, resulting in sub-optimal outcomes';

• the lack of information available to homeowners, companies and specialists which can 'entirely impede otherwise cost-effective energy efficiency';

• existing national electricity market rules and regulations which favour supply-side options (expansion of energy generation and infrastructure) over demand-side options (energy efficiency and distributed generation), and fail to reward energy efficiency;

• the cost of research and development minimising the financial benefits for early movers; and

• the failure to internalise the cost of carbon in the cost of energy.10

1.12 With respect to market failures, the Regulation Impact Statement (RIS) on the policy underpinning the Bill states that:

Existing measures do not currently address these problems. The Carbon Pollution Reduction Scheme will assist in reflecting environmental costs of energy use, but will not necessarily address information failures and split incentives in the m arket.11

1.13 The RIS explored three options for addressing these market failures:

(a) mandatory disclosure of energy efficiency at the point of sale and lease;

(b) the development of an voluntary industry code of practice; or

(c) mandating minimum energy efficiency standards.12

1.14 The RIS ultimately recommended the first approach, concluding that it is the most cost effective option for addressing market failures.13

Australia's commercial office property market

1.15 While '[njobody knows exactly how much [office] space there is in Australia’14 the Property Council of Australia has estimated that there are

9 Energy Efficiency Council. Submission 5, p. 4.

10 Energy Efficiency Council, Submission 5, pp 4-5.

11 Regulation Impact Statement, p. iii.

12 Regulation Impact Statement, p. iv.

13 Regulation Impact Statement, p. iv. 14 Mr Peter Verwer, Chief Executive Officer, Property Council of Australia, Committee Hansard, 12 April 2010, p. 6.

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over 21 million square metres of commercial office property15 in major Australian business centres, in 3980 buildings.16 O f this, around 19 million square metres are accounted for by 2170 buildings with net lettable areas greater than 2000 square metres.17

1.16 In other words, the scheme will achieve over 90 per cent coverage of commercial office space by area, but only apply to approximately 55 per cent of the total number of office buildings of greater than 2000 square metres.

1.17 The EEC estimates that commercial buildings (which includes commercial offices in addition to other commercial property such as retail and warehousing space) account for around 10 per cent of Australia's total greenhouse gas emissions.18 The Department of Climate Change and Energy Efficiency (the department) informed the committee that:

Research undertaken in 1999 found that offices were responsible for the largest proportion o f greenhouse gas emissions from Australia's commercial building sector, accounting for approximately 27 per cent o f em issions.19

1.18 This suggests that commercial office buildings contribute approximately 2.7 per cent of Australia's greenhouse gas emissions.

1.19 The RIS indicates that the commercial building energy use has 'experienced sustained growth in energy use in the 15 years to 2006', growing by 87 per cent during that period.20 According to the National Australian Built Environment Rating System (NABERS) website, greenhouse gas emissions from Australia’s commercial building sector are growing by 3-4 per cent per annum.21

Current energy efficiency information and performance

1.20 The RIS explains that there is scope for a greater number of office buildings to be rated for their energy efficiency performance:

15 Office property' is as defined by the NABERS Energy Protocol—a place in which business, clerical or professional activities are conducted. The spaces quoted also include spaces that support those working in an office such as meeting rooms, kitchens, storage and specialty areas such as child minding.

16 Property Council of Australia, Office Market Report, 2008, cited in Regulation Impact Statement, p. 2.

17 Property Council of Australia, Office Market Report, 2008, cited in Regulation Impact Statement, p. 2.

18 Energy Efficiency Council, Submission 5, p. 3.

19 Department of Climate Change and Energy Efficiency, answer to question on notice, question 8, 12 April 2010 (received 23 April 2010).

20 Regulation Impact Statement, p. 2.

21 NABERS website at: www.nabers.com.au/page.aspx?cid=533&site=2 (accessed 3 May 2010).

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...in A ustralia, while the proportion o f rated stock is growing each year, a majority o f buildings are currently not rated for energy efficiency. Those that are rated, are predom inantly large and higher grade quality buildings (that is, Premium, A or B grade buildings)...22

1.21 The RIS states that approximately 13 per cent of properties between 2000 square meters and 5000 square metres, and 30 per cent of properties over 5000 square metres have had a NABERS assessment.23

1.22 However, even based on this limited information biased towards high end buildings, the RIS concluded that there is significant room for improvement in the energy efficiency of commercial office buildings in Australia:

A ssessm ent o f a sample o f reported NABERS Energy star ratings

conducted between 2004 and 2008 found an average rating from 2.8 stars (without adjustments for green pow er) for a first assessment, and 3 stars for a second assessment [out o f a possible 5 stars]. These figures were derived from averaging data from buildings which have been voluntarily rated under N ABERS Energy. Industry best practice is currently defined as a

rating o f 3 stars under NABERS Energy. This was determined in 1999 when the scheme was established. However, a more recent survey o f ratings indicates that a performance o f 4 to 4.5 NABERS stars is a more accurate indication o f 'best practice’, with several buildings achieving this

perform ance level. It is reasonable to estimate that industry (on average) is lagging at least one to one and a h alf stars behind current best practice - this equates to a 20 to 30 per cent lag in energy efficiency between the average building and industry best practice.24

Benefits o f improved energy efficiency

1.23 As noted above, submitters and witnesses agreed that there are numerous benefits to improving the energy of commercial and other buildings. The committee heard that improving the energy efficiency of commercial buildings not only delivers environmental benefits, but can also result in significant financial savings for building

owners and tenants.

Environmental benefits

1.24 Numerous witnesses expressed the view that improving energy efficiency is 'one o f the fastest, most efficient and cost-effective ways of abating greenhouse gas emissions'.25

22 Regulation Impact Statement, p. 3.

23 Regulation Impact Statement, p. 3.

24 Regulation Impact Statement, p. 3.

25 Mr Robin Mellon, Green Star Executive Director, Green Building Council of Australia, Committee Hansard, 12 April 2010, p. 2.

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1.25 Mr Robert Murray-Leach, CEO o f the EEC described the huge potential for energy efficiency to contribute to greenhouse gas reductions:

Energy efficiency is the single biggest source of greenhouse gas abatement to 2020. That is often overlooked by a range of sources because, I suppose, it is not really the world's sexiest form of abatement; it does not involve cutting ribbons on major projects. But what it does deliver is major cost-effective greenhouse gas emission reductions.26

1.26 Mr Murray-Leach continued:

[The Australia Bureau of Agriculture and Resource Economics] and the International Energy Agency believe that energy efficiency is the biggest opportunity to cut emissions in the energy sector to 2020, with the International Energy Agency estimating that 65 per cent of global cuts in emissions to 2020 will come from energy efficiency.27

1.27 Mr Che Wall, Managing Director, WSP Lincolne Scott, co-founder of the Green Building Council of Australia, argued that:

Australia should be at the forefront of global action to mitigate greenhouse gas emissions from the built environment through smart legislation as we already are through new green building design. Australia should have robust disclosure legislation which establishes a set of credible and meaningful year-on-year energy performance data by building type and

open centre.28

Financial benefits

1.28 In addition to being a cost-effective means of reducing Australia's emissions, the committee also received evidence that improving the energy efficiency of commercial buildings can have financial benefits for building owners and tenants.

1.29 In terms o f the size of possible savings, Mr Murray-Leach of the EEC told the committee that:

We know that building owners can easily find savings of 20 to 40 per cent through energy efficiency investments and, in some cases, we have examples of buildings saving between 50 and 60 per cent through energy efficiency retrofit...The estimate from the Centre for International Economics is that energy efficiency in the building space would save the

economy $38 billion per year by 2050. That is a combination of both direct

26 Mr Robert Murray-Leach, Chief Executive Officer, Energy Efficiency Council, Committee Hansard, 12 April 2010, p. 33.

27 Mr Robert Murray-Leach, Chief Executive Officer, Energy Efficiency Council, Committee Hansard, 12 April 2010, p. 33.

28 Mr Che Wall, Managing Director, WSP Lincolne Scott. Committee Hansard, 12 April 2010, p. 14.

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savings from reduced energy use and displacing more expensive ways o f cutting em issions.29

1.30 Mr Murray-Leach also summarised that 'in the commercial building space, for every tonne of emissions that we cut in the building sector we save $90.'30

1.31 Furthermore, the EEC provided evidence that '[i]n addition to being the largest source o f emission abatement, energy efficiency is widely acknowledged as the most cost-effective form of abatement'.31 This is demonstrated by the 'McKinsey curve’, reproduced in the EEC's submission.32 The curve shows the relative cost-effectiveness of carbon abatement measures, measuring the cost of each measure against potential reductions in emissions. Various methods of retrofitting existing commercial buildings to improve energy efficiency are found to have a negative

financial cost (in other words a positive financial benefit) of between approximately $50 to $140 per tonne of C 0 2 equivalent emission saved.33 Therefore improving energy efficiency is shown to be either a low or negative cost option for carbon abatement.

1.32 Chapter 4 o f the RIS contains an 'impact analysis', or cost-benefit analysis, of the proposed scheme, which compares the scheme's various costs to building owners and tenants to the direct and indirect benefits that may be achieved. The impact analysis found that the scheme would cost $18.7 million over 10 years,34 and provide the following benefits:

...direct benefits o f the scheme are to those tenants and/or prospective buyers who are able to use the disclosed ratings to choose a premise with a higher energy efficiency rating — the benefits achieved are through savings for these parties o f occupying higher rated premises.

...indirect benefits of the scheme can be achieved through voluntary energy efficiency improvements, and associated greenhouse gas abatement, that may occur w ith a better informed m arketplace.35

1.33 The impact analysis used a 'break-even analysis' and identified that the minimum amount o f benefit required of the scheme to at least cover its total costs would be achieved if 3.9 per cent o f transactions per year were influenced by mandatory disclosure.36

29 Mr Robert Murray-Leach, Committee Hansard, 12 April 2010, p. 34.

30 Mr Robert Murray-Leach, Chief Executive Officer, Energy Efficiency Council, Committee Hansard, 12 April 2010, p. 33.

31 Energy Efficiency Council, Submission 5, p. 2.

32 Energy Efficiency Council, Submission 5, p. 3.

33 Energy Efficiency Council, Submission 5, p. 3. For example retrofitting improved HVAC, lighting, elevators and appliances, and insulation.

34 Regulation Impact Statement, p. 33.

35 Regulation Impact Statement, p. v.

36 Regulation Impact Statement, p. 39.

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Outline of the Bill

1.34 The Bill proposes to create a legal requirement for owners of commercial office buildings with net lettable areas o f over 2000 square metres to obtain certain energy performance information about the building, and disclose that information to prospective purchasers and tenants.

1.35 The key provisions of the Bill set out:

• its scope and application;

• details of the 'building energy efficiency certificates', which are the manner in which information is to be given to prospective purchasers and lessees; and

• assessment standards and the accreditation and audit of assessors.

Scope and application

1.36 Subclause 10(1) provides that:

The M inister may, by legislative instrument, determine that a specified kind o f building is disclosure affected.37

1.37 'Disclosure affected building' is defined in clause 3 to be restricted to buildings that are 'used or capable of being used as an office'.38

1.38 The Explanatory Memorandum states that it is expected that the Minister's legislative instrument will determine that 'buildings and areas o f buildings will be disclosure affected if they exceed the minimum size threshold o f 2000 square metres in net lettable area.'39

1.39 The department also informed the committee that the scheme will apply to government buildings whenever government is transacting with a constitutional corporation, which is the majority of government transactions.40

1.40 The Explanatory Memorandum also notes that the Minister's instrument will detail the type of buildings affected by the legislation. Officers from the department explained that the Minister needs the power to exclude certain offices that cannot be rated by the methodology set out in the scheme—such as strata titled offices.41

1.41 Mr Verwer, CEO of the Property Council of Australia pointed out that 'the Bill leaves a lot to subordinate legislation', and also expressed concern about the lack

37 Building Energy Efficiency Disclosure Bill 2010, subclause 10(1).

38 Building Energy Efficiency Disclosure Bill 2010, subclause 3(1).

39 Explanatory Memorandum, p. 76.

40 Department of Climate Change and Energy Efficiency, answer to question on notice, question 14, 12 April 2010 (received 23 April 2010).

41 Mr Mark Davis, Director, Commercial Building Performance Team, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p. 23.

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of definition o f 'office building' in the Bill.42 Mr Verwer argued that 'there is a definition of "office" under the building code and that is the one that should be used'.43

1.42 The Explanatory Memorandum explains that:

...there are several definitions for office buildings used by government and industry. One o f the m ost com m on is the definition in the Building Code of Australia, w hich is used to identify the design and constm ction standards applying to that particular building type. However, none o f the existing definitions are universally applied and directly correlate to the requirements o f the schem e.44 4 5

1.43 Accordingly:

...further details are required within a legislative instrument to ensure that the scheme is applied to specific building types for which a building energy efficiency rating can be assessed.43

1.44 The Explanatory Memorandum states that it is necessary to leave much of the detail of the scheme to subordinate instruments because:

Use o f a legislative instrument provides some flexibility where there is a need to make changes to this definition to account for technical issues.46 4 7

1.45 On this issue, Ms Clare Walsh, Acting First Assistant Secretary, Renewables and Energy Efficiency Division, Department o f Climate Change and Energy Efficiency, informed the committee that:

It provides administrative sim plicity for the legislation, but any changes would not be taken arbitrarily by the secretary or the department. It would be undertaken as part o f an ongoing consultation process. So there would not be ju st an arbitrary change w ithout consultation.

Building Energy; Efficiency Certificates

1.46 Part 2 of the Bill establishes the requirement for, and contents of Building Energy Efficiency Certificates (BEECs).

1.47 Clause 11 provides that it is an offence to sell or lease a 'disclosure affected building' without a BEEC. Clause 12 provides that a prospective purchaser, lessee or sublessee has the right to request a BEEC from the building owner. Under Clause 15,

42 Mr Peter Verwer, Committee Hansard, 12 April 2010, p. 9.

43 Mr Peter Verwer, Committee Hansard, 12 April 2010, p. 9.

44 Explanatory Memorandum, p. 76.

45 Explanatory Memorandum, p. 76.

46 Explanatory Memorandum, p. 76.

47 Ms Clare Walsh, Committee Hansard, 12 April 2010, p. 28.

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advertisements for the sale or lease o f a building must include the building's energy efficiency rating (which is one component of the BEEC).

1.48 Subclause 13(1) proposes that BEECs will contain three parts, respectively detailing:

• the energy efficiency rating for the building;

• an assessment of the energy efficiency of the lighting for the building that might reasonably be expected to remain if the building is sold, let or sublet; and

• guidance on how energy efficiency might be improved.48

1.49 Clause 21 provides that the secretary of the department has the power to determine the specific methods and standards that will apply to each part of an assessment.

Energy efficiency rating

1.50 The base energy efficiency rating of the building is proposed to indicate the 'core components' of the building.49 This includes factors within a landlord's control, such as heating and cooling, lifts and insulation.50

1.51 The Explanatory Memorandum states:

The assessm ent methods and standards will apply the protocols of the National Australian Built Environment Rating System for energy efficiency, also known as NABERS Energy.51

1.52 The NABERS Energy rating system, which is one part of the NABERS rating system, encompasses the former industry standard Australian Building Greenhouse Rating (ABGR) scheme for energy and greenhouse efficiency. The NABERS tool was developed by the (then) Commonwealth Department of Environment and Heritage. However it is administered and managed by the New South Wales Department of Environment, Climate Change and Water.52

1.53 The operation and development of the NABERS rating system is overseen by the NABERS National Steering Committee which is comprised of representatives from Commonwealth, state and territory governments, with the Australian Sustainable

48 Building Energy Efficiency Disclosure Bill 2010, subclause 13(1).

49 Mr Gene McGlynn, Assistant Secretary, Building and Government Energy Efficiency Branch, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p. 28.

50 NABERS, ‘About NABERS for Offices’, www.nabers.com.au/page.aspx?code=ABOUTUS&site=2 (accessed 29 April 2010).

51 Explanatory Memorandum, p. 78.

52 NABERS, ‘Frequently Asked Questions’, www.nahers.com.au/faas.asnx7siteH (accessed 29 April 2010).

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Built Environment Council as an observer. The NABERS system is available accross Australia, with accredited assessors in every state and territory.53

1.54 The NABERS website describes the benefits of the NABERS rating system:

[NABERS] is specifically tailored for existing buildings, and...m easures relevant impacts during the operational phase o f buildings. This approach has a num ber o f benefits, including:

• N ABERS provides a rating o f the things that a building owner/operator can reasonably assume responsibility for, rather than items that were decided possibly by another party m any years ago and cannot be easily changed; and

• As NABERS is based on actual m easured performance rather than on

prescriptive design param eters, it is com plementary to expert design tools and design-based ratings sy stem s.54

1.55 One of the key issues raised during the committee’s inquiry was whether the NABERS rating system is the most appropriate tool for the scheme. This issue is discussed in chapter 2.

Lighting

1.56 The second part of a BEEC relates to lighting. Officers from the department explained that after the base energy efficiency of the building, lighting is the 'next most important element' in terms of energy usage.55 5 6 Mr Mark Davis, Director, Commercial Building Performance Team, Department of Climate Change and Energy

Efficiency, stated:

In terms o f total energy used by a building, you can basically split it

fifty-fifty betw een the base building and the tenancy. We are capturing the base building through the star rating; that is the first component o f the Building Energy Efficiency Certificate. As to the second component, the

tenancy: o f the total energy use, the lighting is the predominant factor.3

1.57 At the time of the committee's public hearing, the precise tool for determining the energy efficiency of a building's lighting had not been resolved.57 The committee understands that the government was, at that stage, in the process of consulting with industry on the proposed lighting tool. During the public hearing, Mr Peter Verwer,

53 NABERS, ‘Frequently Asked Questions’, www.nabers.com.au/faqs.aspx7siteM (accessed 29 April 2010).

54 NABERS, ‘Frequently Asked Questions’, www.nabers.com.au/faqs.aspx7siteM (accessed 29 April 2010). 55 Mr Gene McGlynn, Assistant Secretary, Building and Government Energy Efficiency Branch, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p.

29.

56 Mr Mark Davis, Committee Hansard, 12 April 2010, p. 29.

57 Mr Peter Verwer, CEO, Property Council of Australia, Committee Hansard, 12 April 2010, p. 8.

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CEO of the Property Council of Australia, expressed concerns about the government's proposed system for measuring lighting.58 These concerns are discussed in chapter 2.

Guidance on improvements

1.58 The third aspect of a BEEC is proposed to be guidance on how the energy efficiency performance of a building might be improved. The Bill specifies that the kind of guidance included in a BEEC will be 'determined by the secretary by legislative instrument.'59

1.59 The Explanatory Memorandum states:

It is expected that the guidance will be generic and designed to initiate investigation o f specific improvements that m ay be carried out on a particular area o f a building.60

Assessments and assessors

1.60 Only accredited assessors may perform assessments of a building’s energy efficiency under the scheme. Part 3 of the Bill sets out how assessors may apply to the department to become accredited for the purposes of the scheme, and those persons who are not eligible to become assessors.61 Clause 27 provides that the regulations may prescribe conditions of accreditation.

1.61 Assessors may be suspended for failing to carry out proper assessments,62 and it is an offence for a person to falsely hold themselves out to be an accredited 63 assessor.

1.62 The Bill also provides for the auditing of assessors by an 'auditing authority', which is appointed by the secretary of the department. The auditing authority will be responsible for ensuring that:

(a) accredited assessors properly apply the assessment methods and standards determined by the Secretary; and

(b) assessments are not influenced by any conflict of interest.64 6 5

1.63 Auditors are required to have relevant skills and experience, and to carry identity cards issued by the department.63 Auditors have the power to enter premises

58 Mr Peter Verwer, CEO, Property Council of Australia, Committee Hansard, 12 April 2010, p. 8.

59 Building Energy Efficiency Disclosure Bill 2010, paragraph 13(1 )(c).

60 Explanatory Memorandum, p. 78.

61 Building Energy Efficiency Disclosure Bill 2010, clauses 24 and 25.

62 Building Energy Efficiency Disclosure Bill 2010, Part 2, Division 2.

63 Building Energy Efficiency Disclosure Bill 2010, clause 32.

64 Building Energy Efficiency Disclosure Bill, clause 33.

65 Building Energy Efficiency Disclosure Bill, clauses 34 and 35.

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with consent, or a warrant, observe activities carried out in the building, monitor accredited assessors and require assessors to produce documents.66

1.64 Auditors also have certain obligations, such as informing building owners and seeking their consent. These are set out in Division 3 of Part 4 of the Bill.

66 Building Energy Efficiency Disclosure Bill, Part 4, Division 2.

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Chapter 2

Key issues

2.1 Throughout the inquiry it was evident that the mandatory disclosure of commercial building energy efficiency information is a policy that enjoys widespread support. Despite raising reservations with specific aspects of the scheme, all witnesses expressed their in-principle support. The key concerns with the Bill related to:

• the use o f the NABERS rating system;

• development of the tenancy lighting tool;

• penalties; and

• the training of assessors.

Widespread support

2.2 As noted above, the scheme has the support of the Federal, state and territory governments, as indicated by the July 2009 COAG agreement underpinning the proposed scheme. The scheme also has support across the political spectrum.

2.3 Mandatory disclosure is widely considered to be an appropriate method of addressing existing information asymmetry between building owners and prospective buyers and lessees within the industry. Even critics of the Bill supported the concept of mandatory disclosure. For example, Mr Peter Verwer, CEO o f the Property Council

of Australia, who was perhaps the scheme's harshest critic, commented:

...w e agree with the virtues o f creating a more informed marketplace and that m andatory disclosure has a role in achieving this goal.1

2.4 Mr Che Wall, Managing Director of WSP Lincolne Scott, agreed:

Australia should have a robust disclosure scheme that will complement existing policies and schemes, improve market information and inform future policy-making. It should be a fair, simple and efficient scheme. Ultimately it will provide a meaningful incentive for business to operate buildings efficiently and help to transition the market to a low-carbon

future.2

2.5 And Mr Robert Murray-Leach, CEO of the EEC, stated that '[mandatory disclosure is one of a number of key [energy efficiency] policies'.3

1 Mr Peter Verwer, Committee Hansard, 12 April 2010, p. 6.

2 Mr Che Wall, Committee Hansard, 12 April 2010, p. 14.

3 Mr Robert Murray-Leach, Committee Hansard, 12 April 2010, p. 34.

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2.6 The second reading speech by the Minister Assisting the Minister for Climate Change, the Hon Greg Combet MP, indicates a 'broad level of support for the scheme.'4 5 The department echoed this sentiment, stating:

O f the 41 written submissions m ade during the consultation process...five expressed opposition to the schem e...three expressed neutrality towards the scheme and the remainder expressed qualified support for the scheme...

Submissions supporting the scheme generally recognise its value in raising awareness o f energy efficiency and providing information at a salient time.3

NABERS as the appropriate rating tool

2.7 Several submissions questioned whether the NABERS tool (described in chapter 1) is the most appropriate mechanism to use to rate buildings under the scheme.

2.8 While clause 21 of the Bill does not prescribe the use of the NABERS tool, the Explanatory Memorandum and evidence from the department make it clear that the NABERS Energy tool will be used to determine the base energy rating in the first section of BEECs:

In practice, and for the foreseeable future, it is anticipated that the

legislative instrument would state the energy efficiency rating o f a building as the energy efficiency rating o f a base building that is determined by NABERS Energy.6

2.9 Concerns about the use of NABERS were raised primarily by the Property Council of Australia7 and in the joint submission from Lend Lease, WSP Lincolne Scott and Built Ecology (hereafter referred to as 'Lend Lease').8

2.10 Mr Peter Verwer, CEO of the Property Council of Australia, whilst recognising that NABERS is currently under review, argued that NABERS needs to be 'overhauled'.9 The Property Council's submission cited inconsistent allocation of ratings between different states as one area where the current NABERS tool could be improved:

Victorian buildings suffer an effective penalty o f up to one Star compared to NSW — this means that a 3 Star building in Sydney may only achieve a 2 Star NABERS rating in M elbourne.

4 The Hon Greg Combet MP, Minister Assisting the Minister for Climate Change, Second Reading Speech, House o f Representatives Hansard, 18 March 2010, p. 2928.

5 Department of Climate Change and Energy Efficiency, answer to question on notice, question 6, 12 April 2010 (received 23 April 2010).

6 Explanatory Memorandum, p. 86.

7 Property Council of Australia, Submission 4, p. 2.

8 Lend Lease, WSP Lincolne Scott and Built Ecology, Submission 3, pp 11-12.

9 Mr Peter Verwer, CEO, Property Council of Australia, Committee Hansard, 12 April 2010, p. 6.

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While this flaw might be overlooked if investors only compared

homogenous markets, the reality is that multiple geographical markets are often considered before investment decisions are m ade.10

2.11 While giving evidence Mr Verwer acknowledged that:

I f we could be confident that the NABERS methodology had been fixed up, we would be relatively happy [with the Bill].11

2.12 The NABERS Energy rating system for offices was originally launched in 1999, as the Australian Building Greenhouse Rating Scheme. The committee understands that the NABERS Energy rating system is currently under review with a view to addressing technical flaws and stakeholder concerns with the system. While the review is confidential at this stage, the committee understands that the proposed changes to NABERS are intended to be released for consultation over the coming months.

2.13 Lend Lease's principal concern with NABERS related to its incompatibility with other mechanisms to report energy and greenhouse performance. Lend Lease argued that the use of the NABERS scheme will not provide meaningful information to contribute to existing policies and schemes, such as the National Greenhouse and

Energy Reporting Scheme (NGERS) and the Energy Efficiency Opportunities (EEO) program, as the information it gathers is not complementary with those schemes.12

2.14 The department informed the committee that contrary to the concerns expressed by Lend Lease:

The inform ation provided for disclosure is aimed at allowing meaningful comparisons o f building energy efficiency performance. Data required under the Bill can be used to calculate information for NGERS, EEO or other purposes. This information could also be o f value in a trading

schem e.13

2.15 Mr Mark Davis, Director, Commercial Building Performance Team, Department of Climate Change and Energy Efficiency, pointed out that there is scope within the scheme for improving the NABERS tool, as NABERS is not set out as the

required tool within the Bill itself.14

2.16 The Explanatory Memorandum confirms the possibility of the scheme adopting other appropriate methods and standards:

10 Property Council o f Australia, Submission 4, p. 2.

11 Mr Peter Verwer, CEO, Property Council of Australia, Committee Hansard, 12 April 2010, p. 8 .

12 Lend Lease, WSP Lincolne Scott and Built Ecology, Submission 3, p. 12.

13 Department of Climate Change and Energy Efficiency, answer to question on notice, question 3, 12 April 2010 (received 23 April 2010).

14 Mr Mark Davis, Committee Hansard, 12 April 2010, p. 23.

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It should be noted that the recognition of the use of the NABERS Energy tool in the legislative instrument enables the scheme to recognise other appropriate methods and standards in the future. This approach was recommended by industry during the consultation process as a means of promoting greater innovation and competition among building rating tools.,.[T]he decision to recognise other methods and standards will be based on rigorous analysis, and will be subject to further industry and government consultation.15

2.17 Other organisations were supportive of the adoption o f the NABERS tool. The EEC, for example, expressed strong support for the use of NABERS. Mr Murray-Leach, the CEO of the EEC argued that this support reflected industry acceptance of the tool:

We are very strongly supportive as an industry of NABERS as a rating technology... We certainly think there is room for ongoing improvement of the rating tool. But that can be captured within the NABERS tool itself...

NABERS is very well accepted by the rating industry and by the energy efficiency industry. We do not, as an industry, focus too heavily on the actual rating; we are more interested in improving the performance of buildings. But it is a relatively accurate method. It is relatively

cost-effective. It is well accepted by building owners, and it is well accepted by energy efficiency experts.16

2.18 Mr Verwer, CEO of the Property Council of Australia, also told the committee of significant uptake of the NABERS assessment tool:

...we believe there has been a strong take-up. This is where we do disagree slightly with Bovis Lend Lease and WSP Lincolne Scott, despite the fact that they are world leaders in this area. There are something like 9 million square metres on the NABERS database of buildings which do have a rating, and that is a big chunk of space.17

2.19 In this regard the department noted that:

The Bill will ensure a growing, publicly available database of NABERS ratings. The current NABERS Energy ratings database is the most comprehensive set of non-residential building energy use information in Australia and is widely used for research and policy development purposes.18

15 Explanatory Memorandum, p. 86.

16 Mr Robert Murray-Leach, Chief Executive Officer, Energy Efficiency Council, Committee Hansard, 12 April 2010, p. 36.

17 Mr Peter Verwer, CEO, Property Council of Australia, Committee Hansard, 12 April 2010, p. 7.

18 Department of Climate Change and Energy Efficiency, answer to question on notice, question 3, 12 April 2010 (received 23 April 2010).

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2.20 The widespread acceptance and use of NABERS within the commercial building sector is supported by information contained in the RIS:

The N A BERS Energy assessment tool is the most extensively used rating tool in the commercial office property market in Australia...

Among office tenants, research suggests that 61 per cent have some level o f awareness o f NABERS (Colliers International 2008). A recent survey o f building owners found that 26 per cent o f organisations were reporting using N A BERS (then ABGR) ratings (Jones Lang LaSalle 2008).19

2.21 Further, the RIS explains that the Commonwealth, New South Wales, Victorian, Western Australian, South Australian and Australian Capital Territory governments have adopted NABERS Energy targets in their procurement policies for office accommodation.20

Committee view

2.22 The committee acknowledges the criticisms of certain stakeholders of NABERS tool including its incompatibility with the NGERS framework and the 'room for ongoing improvement'. However, given its broad level of acceptance within the sector and its ability to compare actual 'base building' energy performance, the

committee is o f the view that NABERS Energy should be adopted as the energy efficiency star rating tool for the mandatory disclosure scheme. The committee notes that the Bill has inbuilt mechanisms to enable improvements to be made to the NABERS tool based on consultation with industry. The committee also notes the NABERS review currently underway, which intends to address many of the issues with the scheme raised by the industry prior to the introduction of the Bill.

2.23 The NABERS ratings tool allows potential purchasers or lessees to make comparisons between measured building performance, without the influence of the particular operational traits of the most recent occupant. NGERS data, on the other hand, would give information on the carbon footprint of a building but with the behavioural and operational characteristics of most recent occupant embedded in the

data. The inclusion of NGERS consistent data would therefore provide a direct link into the national emissions reporting scheme and also into a future carbon trading scheme.

2.24 The committee is of the view that the government should consider including both the NABERS star rating and some level of NGERS consistent data in the Building Energy Efficiency Certificate.

2.25 The committee understands that there will be little or no cost involved in this approach. Many potential vendors and lessors are already, or soon will be, subject to

19 Regulation Impact Statement, pp 2-3.

20 Regulation Impact Statement, p. 2.

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the NGERS reporting requirements.21 The committee notes that many of the leading players in the commercial building sector, such as Lend Lease, Mirvac and Centro, are already listed on the National Greenhouse and Energy Register.22 These organisations are therefore likely to have NGERS compliant information available for inclusion in a BEEC for a particular office building. For organisations that currently are not required to, or do not of their own volition collect emissions information, the committee notes evidence from Lend Lease that '[t]he collection and reporting of credible and meaningful energy efficiency information is possible for all non-residential buildings and at very low cost.'23

2.26 The potential benefits that would flow from including NGERS-consistent information in a BEEC are two fold. First, it would inform potential purchasers and lessees of the carbon footprint of an office space, albeit with the operational impacts of the most recent occupant embedded in the data. Second, it would prepare the broader commercial market for the future introduction of a carbon trading scheme and help to transition the market to a low carbon future.

2.27 The committee notes that there are several provisions in the Bill under which the government could require or permit NGERS data to be included in a BEEC.24 The Explanatory Memorandum expressly recognises that it may be desirable for additional information to be included in BEECs, and lists the examples of on-site renewable or low-emissions energy sources, green power usage, and past years' energy efficiency ratings.25 As a result, the Bill already contains sufficient flexibility to enable BEECs to include NGERS-consistent information about a building's greenhouse gas emissions, and would not require amendment to achieve consistency with NGERS.

21 Information about the NGERS corporate group and facility thresholds can be found at www.climatechange.gov.au/en/government/initiatives/national-a-eenhouse-energy- reDorting/business-need-to-report.aspx (accessed 3 May 2010). The NGERS corporate group threshold will decrease from 125 kilo tonnes (kt) of greenhouse gas emissions for the 2008-09 reporting period, to 87.5kt and then 50kt for the 2009-10 and 2010-11 reporting periods respectively (all expressed on C 02 equivalent basis).

22 See www.climatechange.gov.au/goveroroent/initiatives/national-greenhouse-energy- reporting/~/media/publications/greenhouse-report/national-greenhouse-energv-register-pdf.ashx (accessed 3 May 2010).

23 Lend Lease, WSP Lincolne Scott and Built Ecology, Submission 3, p. 5.

24 See for example Building Energy Efficiency Disclosure Bill, paragraph 21(l)(a); and subclause 13(3).

25 Explanatory Memorandum, p. 79.

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Recommendation 1

2.28 The committee recommends that the Department of Climate Change and Energy Efficiency continue to work with the relevant industry sectors and state authorities to ensure that the Building Energy Efficiency Certificates issued under the scheme contain information about a building's greenhouse gas emissions which is consistent with relevant commonwealth schemes, including the National Greenhouse and Energy Reporting Scheme.

Development of tenancy lighting tool

2.29 During the committee’s public hearing, the Property Council of Australia expressed concern regarding the stage of development of part two of BEECs—which relates to measuring the efficiency of a building's lighting systems. Mr Peter Verwer, CEO of the Property Council of Australia, commented that the tool for measuring the efficiency of lighting under the scheme has not yet been finalised or tested.26

2.30 In answers to questions on notice, the Property Council reiterated its concerns regarding the lighting tool:

Above all, the marketplace holds grave concerns about the practicality of the draft [lighting] tool, which will involve physical inspections of floors... In short, the [lighting] tool will involve greater cost and effort than

NABERS itself.

This will inevitably impede the industry’s logistical capacity to comply with the Bill’s disclosure requirem ents.27

2.31 The Property Council also highlighted that the cost-benefit analysis of the scheme included in the RIS did not include the costs of industry compliance with the proposed lighting tool, as the tool has not yet been finalised.28

2.32 The department responded to the Property Council’s concerns regarding the timing of the release of the lighting tool:

Finalisation o f the tenancy lighting assessment, including on-site testing, is due to be completed in May [2010]. Training is scheduled to be provided from July [2010], This allows sufficient time for tenancy lighting

assessments to be carried out prior to the commencement date o f disclosure obligations (anticipated to be around October 2010).29

26 Mr Peter Verwer, Chief Executive Officer, Property Council of Australia, Committee Hansard, 12 April 2010, p. 8.

27 Property Council o f Australia, answer to question on notice, 12 April 2010 (received 29 April 2010) p. 2.

28 Property Council o f Australia, answer to question on notice, 12 April 2010 (received 29 April 2010) p. 2.

29 Department of Climate Change and Energy Efficiency, answer to question on notice, question 3, 12 April 2010 (received 23 April 2010).

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Committee view

2.33 Given the importance of measuring lighting efficiency (see discussion at paragraph 1.56 in chapter 1), the committee considers that this should remain a central element of BEECs.

2.34 In order for the tenancy lighting aspect of scheme to operate effectively, the tool used to measure lighting must be one that has been properly tested and developed in consultation with stakeholders. The committee further highlights the importance of assessors having adequate time to be trained in using the new lighting tool, and the government having time to respond to feedback from stakeholders and assessors on

initial use of the tool.

Recommendation 2

2.35 The committee recommends that the government consider delaying the lighting measurement component of Building Energy Efficiency Certificates until the Department of Climate Change and Energy Efficiency has had sufficient time to develop, test and consult on the appropriate tool for measuring the efficiency of lighting.

Penalties

2.36 The Property Council of Australia also expressed concern with the penalties that the Bill proposes to impose on building owners who fail to comply with the disclosure provisions o f the Bill.

2.37 Clauses 11 and 12 provide that a building owner who offers to sell or lease a disclosure affected building without a registered BEEC will be liable for a civil penalty of up to 1000 penalty units. Subclause 11(5) specified that:

A constitutional corporation that contravenes a requirement o f this section in relation to a continuing offer or a continuing invitation commits a separate contravention in respect o f each day during which the person fails to comply with that requirem ent...

2.38 This equates to a penalty of up to $110 OOO30 per day for a building owner advertising a disclosure affected building without a registered BEEC.

2.39 The Property Council of Australia submitted that these penalties 'are utterly inconsistent with the nature of the offences'.31

To put this in perspective, other offences with the same penalty level include passport forgery and m ajor pollution incidents.32

30 Attorney-General's Department, Penalty Unit Conversion Table, at: www.ag.gov.au/www/agd/agd.nsf/page/Publications FramingCommonwealthoffences.civilpen altiesandenforcementPQwers-Penaltyunitconversiontable (accessed 4 May 2010).

31 Property Council of Australia, Submission 4, p. 3.

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2.40 The committee urges the government to examine the penalties proposed to be imposed by the Bill, and consider whether the level o f the penalties is appropriate.

Recommendation 3

2.41 The committee recommends that the government give consideration to whether the penalties proposed to be imposed by the Bill are appropriate.

Assessors

2.42 Witnesses raised concerns about of the expertise and number of assessors required under the scheme.

Assessor expertise

2.43 Mr Che Wall, Managing Director, WSP Lincolne Scott, noted:

Any form o f energy efficiency reporting on upgrades on behalf o f the assessors I would also be concerned about, given the technical skill level they are aim ing at for the assessors in this program .3 2 33

2.44 Mr Wall argued that there is potential within the scheme for assessors to make subjective assessments. He further argued that the varying degrees of quality amongst assessors could lead to an inconsistent standard o f assessments, thereby creating distortions in the market.34 Mr Wall commented:

My experience— and I speak on behalf o f W SP Lincolne Scott— is that when we have had assessments under the scheme before we have had some very different subjective advice from different assessors which has materially impacted on the ratings, so one w ould expect that there needs to be a significant improvement in process there too.35

2.45 The department informed the committee that:

Assessors w ill be required to undertake the existing NABERS training in addition to modules on tenancy lighting assessments and the legislative requirements o f the building energy efficiency disclosure scheme.36

2.46 The committee understands that the NABERS training program is a well-established training program mn through the NSW Department of Environment,

32 Property Council o f Australia, Submission 4, p. 4.

33 Mr Che Wall, Managing Director, WSP Lincolne Scott, Committee Hansard, 12 April 2010, p. 16.

34 Mr Che Wall, Managing Director, WSP Lincolne Scott, Committee Hansard, 12 April 2010, p. 20 . 35 Mr Che Wall. Managing Director, WSP Lincolne Scott, Committee Hansard, 12 April 2010, p. 20.

36 Department of Climate Change and Energy Efficiency, answer to question on notice, question 31, 12 April 2010 (received 23 April 2010).

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Climate Change and Water.37 Notwithstanding this, the committee urges the government to proactively ensure that the training received by assessors under the scheme is consistent, high quality and thorough.

Number o f assessors required

2.47 Mr Peter Verwer, CEO of the Property Council of Australia, also questioned whether the demand for assessments created by the scheme could be fulfilled by the number of assessors proposed to be accredited.38

2.48 The department informed the committee that there are presently 585 accredited NABERS assessors. Based on the RIS, the department concluded that this pool of assessors would be adequate:

The Regulation Impact Statement estimates that around 300 to 350 offices will be required to disclose their energy efficiency in the first year o f the scheme. On this basis, there would appear to be a sufficient number o f existing accredited NABERS assessors.39

2.49 Based on the Property Council of Australia’s estimate that 14 per cent of commercial office property over 2000 square metres in area are sold or leased each year,40 combined with its estimate that there are approximately 2170 buildings in Australian major centres with lettable areas of over 2000 square metres,41 the

department’s figure seems to be a reasonable reflection of the number of offices that will be impacted by the Bill annually. Accordingly, the committee does not at this stage share the Property Council's concerns. However, the committee considers it would be prudent for the government to monitor the situation closely and to act quickly if a shortage of assessors becomes apparent.

Conclusions

2.50 The mandatory energy reporting scheme for commercial office buildings proposed by the Building Energy Efficiency Bill 2010 is the result of substantial consultation with the commercial property and energy efficiency industries. The Bill implements the Commonwealth's obligations under agreements between the

Commonwealth, states and territories, and has widespread support.

2.51 The committee is of the view that the Bill contains sufficient flexibility for any issues with rating systems and BEECs to be addressed as necessary, and urges the

37 NABERS, ‘Frequently Asked Questions’, www.nabers.com.au/faas.asnx?site=l (accessed 29 April 2010).

38 Mr Peter Verwer, Committee Hansard, 12 April 2010, p. 8.

39 Department of Climate Change and Energy Efficiency, answer to question on notice, question 29, 12 April 2010 (received 23 April 2010).

40 Property Council of Australia, Submission 4a, p. 4.

41 Regulation Impact Statement, p. 2, quoting Property Council of Australia, Office Market Report, 2008.

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government to engage in ongoing consultations with industry to ensure the needs of property owners, tenants and purchasers are being adequately met by the scheme.

2.52 The committee also urges the government to consider including a measure of greenhouse gas emissions per square metre of office space in BEECs, which is consistent with the NGERS.

2.53 The committee further advises the government to monitor the training and numbers of assessors on an ongoing basis to ensure that assessors are suitably qualified and experienced to produce meaningful and accurate assessments.

Recommendation 4

2.54 The committee recommends that, subject to the recommendations contained in this report, the Senate pass the Building Energy Efficiency Disclosure Bill 2010.

Senator Anne McEwen Chair

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Coalition Senators’ Additional Comments There is widespread support for encouraging energy efficient buildings. To that end, there is also support for mandatory disclosure of information about commercial building energy efficiency.

Coalition Senators note that mandatory disclosure of commercial building energy efficiency was proposed by the Coalition in December 2004 under the Stage One implementation plan of the National Framework for Energy Efficiency—a joint initiative of the Commonwealth, State and Territory governments under the

Ministerial Council on Energy.

Submissions to the Senate inquiry supported the principle of mandatory disclosure. However stakeholders are sceptical about the Bill’s ability to meet its principle of increasing energy efficient buildings through creating a more informed marketplace.

Coalition Senators have concerns about: the lack of industry consultation, technical flaws in the National Australian Built Environment Rating System (NABERS); the inclusion of a tenancy lighting tool; the development of supporting technical tools and availability of assessors; timeframes and the extent of details of the regime to be

specified by Regulation.

Scope of the Bill— Threshold

The Bill imposes mandatory reporting obligations on properties with a net lettable area (NLA) of greater than 2000 square metres, rather than the 5000 square metres threshold announced in Labor’s election policy. This change extends to and imposes a mandatory reporting burden on second tier and smaller property owners, who would have been exempt had Labor kept its election promise.

The government claims that COAG ‘pressured’ it into this change, under the threat of states pursuing their own schemes.

The Property Council estimates there are 1174 buildings with NLA of greater than 5000 square metres, accounting for 16 million square metres of floor space. 2170 buildings have a NLA of greater than 2000 square meters, accounting for a further 19 million square metres.

Reducing the threshold area from 5000 square metres to 2000 square metres subjects a further 996 buildings (or 84 per cent more buildings) to the Bill.

Asked how the 2,000 square metres threshold was determined, the Department stated:

The Regulation Impact Statement (RIS) examined both a 2,000 and 5,000 square metre threshold. It was determined that the additional benefits o f

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applying a 2,000 square m etre threshold would likely outweigh the additional costs.1

Coalition Senators remain to be convinced.

The Property Council of Australia argues there will be extensive compliance costs for building owners.

But what is clear from this m ethodology which is going to be used to determine the information to be disclosed in advertising for tenancies, for leasing practices, is that the w ork required to comply with this is bigger than getting a NABERS rating, because every floor o f every building is going to require an assessm ent which involves somebody physically inspecting each one o f those floors and making an assessment about what sort o f lighting it is—not just the light but the ballasts as well— recording all o f that and then making calculations as to what the energy intensity is, adding it all up and revealing it in the advertisement as well as putting it onto the m aster database.2

Coalition Senators note that there will be significant compliance costs for building owners in completing a BEEC.

Estimates indicate that for an average sized disclosure affected building a Building Energy Efficiency Certificate will cost around $6,000. For larger and more complex buildings, the cost may be over $10,000.3

National Australian Built Environment Rating System (NABERS)

The Regulation Impact Statement is premised in the use of NABERS as the building evaluation tool.

The NABERS tool was originally developed by the Australian Department of Environment and Heritage (DEH). The NSW Department o f Environment, Climate Change and Water (formerly Department of Energy, Utilities and Sustainability) was selected by DEH as the successful tenderer to proceed with the commercialisation of NABERS, with the contract for NABERS commercialisation signed in March 2005.4

Under the management of the NSW government, the development and application of the NABERS tool has been primarily undertaken through the prism of NSW conditions, with assumption-based adaptations for other states, territories and regions.

1 Department of Climate Change and Energy Efficiency, answer to question on notice, 12 April 2010, question 10 (received 23 April 2010).

2 Mr Peter Verwer, Property Council of Australia, Committee Hansard, 12 April 2010, p. 6.

3 Department of Climate Change and Energy Efficiency, answer to question on notice, 12 April 2010, question 26 (received 23 April 2010).

4 NABERS website: www.nabers.com.au.

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Adaptations included to enable the national use of the NABERS tool remain contentious, with known deficiencies that result in properties in different states being assessed differently and unreliable assessments.

The government undertook to have these flaws addressed prior to mandating the use of NABERS but this hasn’t occurred. There are other market-recognised tools that can provide meaningful information but the Bill does not provide for the use of approved ‘equivalent’ tools.

If NABERS is to be the Bill’s energy efficiency star rating tool, the Bill should not proceed until the government consults with industry, to fix NABERS’ flaws.

Beyond NABERS, there are other market-recognised tools that can provide meaningful information to prospective purchasers and lessees that are not accommodated as the Bill does not provide for the use of approved ‘equivalent’ tools. Nor does the Bill align with self assessment and disclosure duties under current

related government programs like NGERS (National Greenhouse and Energy Reporting Scheme) and EEO (Energy Efficiency Opportunities).

Coalition Senators believe that greater effort is required in better aligning the BEEC scheme with existing market-recognised and government reporting tools so as to avoid unnecessary and costly additional data collection and reporting regulatory obligations where policy objectives can be meet via existing systems and effort. Improved and meaningful consultation with industry will identify opportunities for harmonising BEEC requirements will current and related reporting systems.

Tenancy Lighting Tool

Coalition Senators note paragraphs 2.29-2.34 of the Chair's report. Based upon the concerns reflected therein, Coalition Senators consider that any lighting measurement component should be abandoned, unless and until it has been developed and tested so as to gamer sufficient industry confidence.

Content of BEECs - Guidance as to how to improve efficiency

The Bill enables the Departmental Secretary, by legislative instrument to issue energy efficiency guidelines which will form part of every BEEC. A generic, ‘one size fits all' set of suggestions about how to improve a building’s efficiency could expect market forces on sellers to undertake 'efficiency upgrades' on buildings, which may not be required. It risks distorting the market, resulting in unnecessary or

counterproductive building 'efficiency upgrades'.

Mr Davis— This is the generic guidance that forms part o f every building energy efficiency certificate.

Senator FISHER— How generic will that be? Exactly that?

Mr Davis— That is correct. It could be useful to all buildings.

Senator FISHER— What is the point of having that as part of each and every certificate if it is proposed to be generic— a one size fits all and you

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pick from it the bits you reckon suit your building? Why bother having that in every certificate to be issued each and every time a subject building is sold or leased?

Mr Davis— The purpose is to provide generic guidance to the building owner or purchaser. It initiates consideration o f how the building could be upgraded and, hopefully, it would instigate further investigation.5

Coalition Senators are not convinced that generic energy efficiency guidelines should form part of every BEEC.

Regulations and subordinate instruments

The Senate inquiry has identified stakeholder concerns about terms and language used in that Bill that require clarification to make them meaningful and relevant to established industry terminology.

Uncertainty about details of the scheme yet to be finalised through regulations and subordinate instruments adds to stakeholder concerns about the significant and cumulative penalties for non-compliance, even where third party action or inaction may give rise to the risk of penalties.

Witnesses expressed concerns that the Bill only provides a broad frame work for the scheme and leaves much of the important detail to be developed through regulations and subordinate instruments.

For example, the Bill fails to clearly identify which buildings will be captured by the new scheme. It also fails to identify the specific information to be disclosed in a BEEC, how and on what basis exemptions will be granted and the manner of accrediting assessors.

At the time of writing, regulations are not complete and the Department is not in a position to provide the estimated 20-30 pages of regulations and subordinate instruments that will be required.

The Department gave evidence about what would be contained within the regulations:

Mr Davis— There will be information to be contained in applications for exemptions under clauses 17 and 18 o f the bill, prescribed fees for

exemptions under clauses 17 and 18, classes o f exemption categories under subclause 17(3)(c), information contained in an application for accreditation under subclause 24(2)—

Senator FISHER— And that is accreditation for what?

30__________________________________________________________________________________

5 Mr Mark Davis, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p. 26.

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Mr Davis— To be an accredited assessor under the scheme. There will also be the prescribed fee for accreditation under subclause 24(2), the prescribed form o f identity cards under subclause 35(2)—

Senator FISHER— Is that for assessors’ ID cards?

Mr Davis— No, that is for auditors. There will also be additional matters that relate to infringement notices under subclause 59(l)(p) and clause 64.

Senator FISHER— And what sort o f information is that?

Mr Davis— I would have to look up the bill to see.

Senator FISHER— Mr McGlynn m ight assist with that while you move on to the next bit.

Mr Davis— There will also be additional matters that relate to the bill under clause 72.

Senator FISHER— Mr M cGlynn, do you have the information about the additional information for exemption.

Mr McGlynn— Subclause 59(1 )(p) is:

such other matters ... as are specified by the regulations— in relation to infringement notices.6

And:

Mr Davis— There is detennination o f conditions o f accreditation under subclause 27(1).

Senator FISHER— And that is accreditation o f what or whom?

Mr Davis— Accredited assessors.7

In addition in an answer to a question on notice:

The Regulations, under subclause 25(e) o f the Bill, are to prescribe the training to be undertaken by accredited assessors.8

Legislative Instrument

In addition to the regulations, a legislative instrument is to be made by the secretary.

Mr Davis— It includes the methods and standards for assessment under clause 21, including the NABERS energy matrix, base building ratings, whole building ratings and tenancy lighting assessment guidelines.

Senator FISHER—What else?

6 Mr Mark Davis and Mr Gene McGlynn, Department of Climate Change and Energy Efficiency, Com m ittee H ansard, 12 April 2010, p. 25.

7 Mr Mark Davis, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2011, p. 25. 8 Department of Climate Change and Energy Efficiency, answer to question on notice, 12 April 2010, question 2 (received 23 April 2010).

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Mr Davis— It includes determination o f the m anner and display standards o f energy efficiency ratings in advertisements under clause 15. It includes guidance on how to improve energy efficiency o f buildings under

subclauses 13(1 )(c) and 13(2)(c).9

The Department of Climate Change and Energy Efficiency said:

The Regulation and subordinate instruments are intended to be finalised prior to the Bill being considered by the Parliament during the Winter 2010 sitting period. 10

Consultation

Coalition Senators are concerned about allegations of inadequate stakeholder consultation on this Bill.

In its supplementary submission, the Property Council o f Australia stated:

We believe that government officers involved in the development o f the scheme have acted in good faith.

However the consultation processes carried out have been sub optim al.11

The submission provided several examples of how consultation was below the standard they expected.

• the Property Council has been given access to m any documents on a limited circulation basis, m eaning they could not be widely tested by members - the draft tenant lighting tool is the latest example;

• a critical meeting regarding the development o f the enabling legislation was confidential, so the proceedings could not be related to members;

• some documents have been provided with very little time for

consultation: in one case a docum ent relating to the energy efficiency guidance material was released on a Monday afternoon, with a Friday deadline for feedback; and

• the delay in finalising the tenancy rating tool is an example o f a sub optimal engagement process.12

9 Mr Mark Davis, Department of Climate Change and Energy Efficiency, Committee Hansard, 12 April 2010, p. 26.

10 Department of Climate Change and Energy Efficiency, answer to question on notice, 12 April 2010, question 37 (received 23 April 2010).

11 Property Council o f Australia, answer to question on notice, 12 April 2010 (received 29 April 2010), p. 5.

12 Property Council of Australia, answer to question on notice, 12 April 2010 (received 29 April 2010), p. 6.

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WSP Lincolne Scott Managing Director was questioned about what consultation with his company:

Senator FISHER—To what extent have you been consulted about the bill?

Mr Wall—We have not been directly consulted at all.13

This is concerning, given the legitimate concerns about fundamental provisions of the Bill.

Timeframes

Coalition Senators are troubled by the time frames for the commencement of the scheme.

To be able to benefit from the ‘transition period’, building owners must obtain a NABERS rating. There is considerable industry concern about the availability of adequately trained assessors and departmental resources to support the scheme’s

ambition of the industry being ‘disclosure ready’ by October 2010.

Delays in remedying flaws with NABERS and discomfort over the proposed tenancy lighting tool exacerbate these concerns.

The Department o f Climate Change and Energy Efficiency is confident that time frames will enable accreditation of sufficient assessors for the scheme.

However in its supplementary submission, the Property Council of Australia stated:

it is logistically impossible to achieve such goals within the proposed timeframe. 14

Further stating:

• there are not enough assessors to deal with the current level of demand, let alone a new mandated scheme;

• all assessors will need to be reaccredited under the new scheme;

• zero assessors have any experience with the new tenant lighting tool — it cannot be used until assessors are appropriately trained; and

• the current backlog of assessments will only get worse as building owners try to refresh their ratings in time for the transition period.

13 Mr Che Wall, Managing Director, WSP Lincolne Scott, Com m ittee Hansard, 12 April 2010, p. 16. 14 Property Council o f Australia, answer to question on notice, 12 April 2010 (received 29 April 2010), p. 1.

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Conclusion

The Coalition instigated policy action on mandatory reporting of commercial building energy efficiency and the Rudd government promised to follow the Coalition’s lead.

Coalition Senators have concerns about the lack of industry consultation, technical flaws in the National Australian Built Environment Rating System (NABERS); the inclusion of a tenancy lighting tool; the development of supporting technical tools and availability o f assessors; timeframes and the extent of details o f the regime to be specified by Regulation.

In summary, Coalition Senators conclude that the BEEC scheme is simply not ready to be rolled out and that the Department and industry is inadequately prepared to support the successful deployment of the flawed scheme in the timeframes proposed. The haste with which the BEEC scheme is being brought into the parliament seems to be driven by political timeframes rather than sound policy and program development

considerations that would support the efficient and effective mandatory disclosure of information about commercial building energy efficiency.

Recommendation 1

The Coalition recommends that the government reconsider the Bill and engage in further consultation to address issues raised in this report.

Senator Mary Jo Fisher Senator the Hon. Judith Troeth Deputy Chair

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Appendix 1

Submissions and Answers to questions taken on notice

Submissions

1 Green Building Council of Australia

2 Napier & Blakeley

3 Lend Lease Corporation, WPS Lincolne Scott & Built Ecology

4 Property Council o f Australia

5 Energy Efficiency Council

Answers to questions taken on notice

Energy Efficiency Council (from public hearing, 12 April 2010, Canberra)

Property Council of Australia (from public hearing, 12 April 2010, Canberra)

Department of Climate Change and Energy Efficiency (from public hearing, 12 April 2010, Canberra)

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Appendix 2

Public hearings

Monday, 12 A p r il 2010 - Canberra

Green Building Council of Australia

Mr Robin Mellon, Green Star Executive Director

Property Council of Australia

Mr Peter Verwer, Chief Executive Officer

LendLease, WSP Lincolne Scott and Built Ecology

Mr Che Wall, Managing Director, WSP Lincolne Scott

Department of Climate Change and Energy Efficiency

Ms Clare Walsh, A/g First Assistant Secretary, Renewables and Energy Efficiency Division

Mr Gene McGlynn, Assistant Secretary, Building & Government Energy Efficiency Branch

Mr Mark Davis, Director, Commercial Building Performance Team

Energy Efficiency Council

Mr Robert Murray-Leach, Chief Executive Officer

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The Senate

Environment, Communications and the Arts Legislation Committee

Do Not Call Register Legislation Amendment Bill 2009

February 2010

© Commonwealth o f Australia 2010 ISBN 978-1-74229-269-4

This document was printed by the Senate Printing Unit, Parliament House, Canberra

Committee membership

Committee members Senator Anne McEwen (ALP, SA) (Chair) Senator Simon Birmingham (LP, SA) (Deputy Chair) (to 2 February 2010) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) (from 2 February 2010) Senator Scott Ludlam (AG, WA) Senator Kate Lundy (ALP, ACT) Senator the Hon. Judith Troeth (LP, VIC) Senator Dana Wortley (ALP, SA)

Committee secretariat

Dr Ian Holland, Secretary (to 1 February 2010) Mr Stephen Palethorpe, Secretary (from 1 February 2010) Ms Sophie Dunstone, Senior Research Officer Mrs Dianne Warhurst, Executive Assistant

Committee address PO Box 6100 Parliament House Canberra ACT 2600

Tel·. 02 6277 3526 Fax·. 02 6277 5818 Email·, eca.sen@aph.gov.au

Internet, www.aph.gov.au/senate/committee/eca_ctte/index.htm

iii 101

iv 102

Table of Contents

Committee m em bership......................................................................................... iii

Abbreviations.......................................................................................................... vii

Chapter 1 - Referral to the com m ittee..................................................................1

Purpose of the bill........................................................................................................ 1

Outline of the bill......................................................................................................... 2

Issues raised during the inquiry..................................................................................4

Committee view......................................................................................................... 15

Coalition Senators' Additional Comments........................................................ 17

Appendix 1 - Submissions, tabled documents and answers to questions taken on notice....................................................................................... 25

Submissions............................................................................................................... 25

Tabled documents......................................................................................................26

Answers to questions taken on n otice.....................................................................26

Appendix 2 - Public hearings................................................................................27

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vi 104

Abbreviations

AANA Australian Association of National Advertisers

ACCAN Australian Communications Consumer Action Network

ACMA Australian Communications and Media Authority

ADMA Australian Direct Marketing Association

B2B business-to-business

DBCDE Department of Broadband, Communications and the Digital Economy

DNC Register Do Not Call Register

vii 105

viii 106

Chapter 1

Referral to the committee

1.1 On 30 November 2009, the Senate referred the Do Not Call Register Legislation Amendment Bill 2009 to the Senate Environment, Communications and the Arts Legislation Committee for inquiry and report by 24 February 2010.

1.2 On 9 December 2009, in accordance with usual practice, the committee advertised the inquiry in The Australian, calling for submissions by 22 January 2010. The committee also directly contacted a range o f individuals and organisations to invite submissions.

1.3 The committee received 35 submissions, listed at Appendix 1.

1.4 The committee held a public hearing in Canberra on 5 February 2010. The participants are listed at Appendix 2.

1.5 The committee thanks those organisations and individuals that made contributions to the committee's inquiry.

Purpose of the bill

1.6 The Do Not Call Register Legislation Amendment Bill 2009 seeks to extend the existing Do Not Call Register, which is currently limited to the registration of residential phone numbers, to allow the registration of all Australian telephone and fax numbers, including business, government and emergency service operator numbers.

1.7 The bill proposes to amend the Do Not Call Register Act 2006 and the Telecommunications Act 1997.

1.8 The Department of Broadband, Communications and the Digital Economy explained that the bill is intended to address, amongst other issues, costs associated with unsolicited telemarketing calls and marketing faxes incurred by the recipient, and in particular costs to businesses:

Since the introduction o f the Register there have been wide-ranging concerns raised by businesses and other organisations about the impact of unsolicited telemarketing calls and marketing faxes on their time and productivity. As a consequence o f not being able to register a number, businesses, particularly small businesses, have stated they have experienced

losses in productivity caused by responding to unsolicited telemarketing calls and marketing faxes...

Much o f the ‘cost’ o f a telemarketing call is transferred from the

telem arketer making the call to the call’s recipient, mainly in terms o f lost time, productivity and the tying up o f telecommunications equipment.

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These costs apply equally to unsolicited marketing faxes, and there are additional costs through wasted toner and paper.1

1.9 The main provisions of the bill seek to:

• Make all Australian telephone and fax numbers (including business, government and emergency service operators numbers) eligible to register on the Do Not Call Register;

• Prohibit unsolicited marketing faxes to an Australian number registered on the Do Not Call Register;

• Impose civil penalties for breaches of the new provisions;

• Introduce 'registered consent' enabling new registrants the option of

consenting to receive telemarketing calls or marketing faxes relating to particular industry classifications; and

• Confer powers on the Australian Communications and Media Authority (ACMA) regarding the industry classifications above.2

Outline of the bill

1.10 Schedule 1 o f the bill outlines amendments proposed to be made to the Do Not Call Register Act 2006 and consequential amendments to the Telecommunications Act 1997.

Business numbers

1.11 Item 4 inserts a definition o f a 'business number' as 'an Australian number other than a number that is used, or maintained, exclusively or primarily for private or domestic purposes'.3

Fax numbers

1.12 Item 9 inserts the new term 'designated marketing fax', defined in schedule 1A as:

For the purposes o f this Act, a m arketing fax is a designated marketing fax if:

(a) the sending o f the fax is authorised by any o f the following bodies;

(i) a government body;

(ii) a religious organisation;

(iii) a charity or charitable institution; and

1 DBCDE, Subm ission 23, pp 3-4.

2 Explanatory Memorandum, pp 1-2.

3 Do Not Call Register Legislation Amendment Bill 2009, clause 4.

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(b) if the fax relates to goods or services—the body is the supplier, or prospective supplier, of the goods or services; and

(c) the fax is not of a kind specified in the regulations.4

1.13 Designated marketing faxes are exempt from certain rules relating to the sending of marketing faxes. 5

1.14 The bill defines marketing faxes as a fax sent to an Australian number where taking into consideration the content and presentation of the fax it would be concluded that the purpose, or one of the purposes of the fax, was:

• To offer to supply, advertise or promote goods or services, or a supplier, or a prospective supplier, of goods or services;

• To offer to supply, advertise or promote land or an interest in land or a

supplier, or prospective supplier, of land or an interest in land;

• To offer to provide, advertise or promote a business opportunity or investment opportunity or a provider or prospective provider, of a business opportunity or investment opportunity;

• To solicit donations; or

• A purpose specified in the regulations.6

Registered consent

1.15 Item 16 introduces a new type of consent, 'registered consent', in addition to the two existing types of consent (express and inferred).7 Section 4 of the bill defines registered consent as 'consent entered on the Do Not Call Register'.8

1.16 Registered consent applies where a registrant has chosen, at the time of registering their number, particular industry classifications about which they wish to receive telemarketing calls or marketing faxes.9

1.17 Proposed new section 5C introduces the industry classifications for the purposes of registered consent and enables the ACMA, by legislative instrument, to 'determine that an activity is ascertained in accordance with the determination is an industry classification'.10

4 Do Not Call Register Legislation Amendment Bill 2009, clause 4.

5 Explanatory Memorandum, pp 22-23.

6 Explanatory Memorandum, pp 11-12.

Do Not Call Register Legislation Amendment Bill 2009, clause 4.

8 Explanatory Memorandum, p. 8.

9 Explanatory Memorandum, p. 8.

10 Do Not Call Register Legislation Amendment Bill 2009, subclause 5C(1).

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1.18 Item 26 inserts new subsection (3A) which provides an exception to the general prohibition, in section 11(1) o f the Act, against unsolicited telemarketing calls to numbers registered on the Do Not Call Register:

The exception covers circumstances where the number was included on a list that was submitted by the telem arketer...and consent for that number was registered in relation to receiving telemarketing calls made about an activity covered by a particular industry classification and the actual call fell into an industry classification that had been registered in respect o f the num ber.11

1.19 Part 2 of the bill outlines amendments to the Telecommunications Act 1997. It is intended that these amendments will 'enable the fax marketing industry...to develop codes relating to fax marketing activities'.12

Issues raised during the inquiry

1.20 There was general support for the addition o f emergency service operators to the Do Not Call Register and the prohibition of unsolicited marketing faxes to numbers on the register. The committee is supportive of these aspects of the bill.

1.21 The committee heard support for the extension of the DNC Register from consumer organisations and privacy advocates such as the Australian Communications Consumer Action Network (ACCAN) and the Australian Privacy Foundation.13 ACCAN, however, felt that the bill should go further and recommended that exemptions under the bill be removed and the provisions for express consent be

strengthened.14

1.22 Opposition to the bill was expressed by companies currently involved in telemarketing and advertising, small businesses and industry associations such as the Australian Direct Marketing Association (ADMA), Australian Association of National Advertisers (AANA) and the Australian Information Industry Association (AHA).15 The concerns raised focussed on the impact of the bill on telemarketing businesses, including the costs of implementation and compliance, and the potential impact on B2B activities.

1.23 This report concentrates on the two key issues raised by numerous submitters relating to telemarketing businesses and business-to-business (B2B) activities; and the three year registration period for numbers enrolled on the Do Not Call Register.

11 Explanatory Memorandum, p. 12.

12 Explanatory Memorandum, p. 34.

13 See ACCAN, Submission 12 and Australian Privacy Foundation, Submission 24.

14 ACCAN, Submission 12, p. 2.

15 See ADMA, Submission 20; AANA, Submission 8; AHA, Submission 22.

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Impact on businesses

1.24 Submitters opposed to the bill claimed that the provisions of the bill enabling businesses to register their number(s) on the Do Not Call Register (DNC Register) would have negative impacts on many businesses. These concerns were said to include the costs associated with companies implementing and complying with the bill

and the impact of the bill on B2B activities.

1.25 For example the AHA told the committee:

Added compliance and checking requirements for SMEs will make the proposed extension to all businesses a genuine burden and it may well be that business self-management or self-regulation could be sufficient to deal with the alleged nuisance value o f telemarketing or cold calling. This is because commercial relationships developed between businesses through

telem arketing rely for their long-term sustainability on responsible m anagem ent o f a customer relationship and their expectations. If a business does not manage its contact, such relationships and the ability to make such calls will fall or be discontinued completely. This would have such a negative impact on the businesses that they would often not be able to

continue to succeed.16

1.26 Along similar lines, Fairfax Media submitted:

We note that one o f the justifications for the Bill is the protection o f privacy and in particular, to m inimize the intmsions relating to telemarketing activity. W hilst Fairfax supports these objectives in the context o f private individuals, it remains very concerned about the impact o f the Bill on legitimate business to business interaction, including telemarketing activities.17

Implementation and compliance

M l Numerous submitters to the inquiry claimed that the costs to business of implementing and complying with the bill would be significant. Further, the committee heard that these costs would be borne both by businesses currently engaged in telemarketing and those that will be captured for the first time by extensions to the DNC Register under the bill.

1.28 ADMA suggested that the total compliance cost incurred by business in the first year following introduction of the bill would be $23.7 million, with an ongoing

___________________________________________________________________________________ 5_

16 Mr Phil Sloper, Chair (ACT Branch), Australian Information Industry Association, C om m ittee H ansard, 5 February 2010, p. 2.

17 Fairfax Media Ltd, Subm ission 7, p. 1.

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cost of $46 to $82 million per annum.18 In addition, ADMA calculated the total cost to business of'call washing' under the bill to be $1.4 to $2.2 million.19

1.29 ADMA also argued that there would be reduced employment and 'unquantifiable costs' associated with a '[d]ecline in market efficiency due to reduction of competition, information and innovation' and '[l]oss of revenues via flow-on effects to end-users of products sold through telemarketing' if the bill were enacted.20

1.30 The AIIA indicated that enactment of the bill would result in significantly increased marketing costs for small and medium enterprises, adding '25 per cent cost to their marketing efforts'.21 The AIIA further stated that some businesses may spend up to $25 000 engaging a third party to wash telephone numbers on their behalf but that this cost could be as low as $5000 to $6000 if conducted in-house.22 2 3

1.31 On an individual business scale, companies currently engaged in telemarketing activities, such as Accor Advantage Plus and Singtel Optus Pty Ltd, indicated that complying with the bill would adversely affect their commercial operations.-3 Singtel Optus Pty Ltd stated:

The proposed legislation will impose substantial costs and requirements on Optus as a commercial entity in its day-to-day commercial dealings with other businesses, both as a supplier and as a customer. Optus will need to implement new administrative processes, record keeping and internal education and training. This is in addition to the implementation costs, IT changes, lost marketing opportunities and associated potential job losses relative to a diminished marketing pool.24

1.32 Galexia refuted claims that the bill would have a substantial impact on telemarketing activity and therefore employment:

...only eight per cent o f call centre activity is outgoing or outbound cold calls...E ight per cent is very low. The industry has submitted to you that only 20 per cent o f marketing activity is business to business. So we are down to 20 per cent o f eight per cent, which means that we are down to just

1.6 per cent o f all call centre activity. Then we expect that to reduce by around 30 to 50 per cent because that is how many businesses will register.

18 Mrs Melina Rohan, Director, Corporate and Regulatory Affairs, Australian Direct Marketing Association, Committee Hansard, 5 February 2010, p. 17.

19 ADMA, Submission 20, Attachment 1, p. ii.

20 ADMA, Submission 20, Attachment 1, p. ii.

21 Mr Phil Sloper, Chair (ACT Branch), Australian Information Industry Association, Committee Hansard, 5 February 2010, p. 4.

22 Mr Phil Sloper, Chair (ACT Branch), Australian Information Industry Association, Committee Hansard, 5 February 2010, p. 6.

23 See Accor Advantage Plus, Submission 1 & Singtel Optus Pty Ltd, Submission 5.

24 Singtel Optus Pty Ltd, Submission 5, p. 2.

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So, overall, the reduction in call centre activity and, therefore employment, could be as low as 0.05 per cent. That is a tiny reduction in activity in

exchange for quite a big benefit to small business in not having to receive the nuisance calls.25 2 6 2 7

1.33 The Department of Broadband, Communications and the Digital Economy (DBCDE) advised the committee that it did not believe the costs of compliance would be high. The department stated:

There will be some com pliance costs for businesses undertaking

telem arketing or fax m arketing. These costs are expected to be in line with the costs associated with the current form o f the Register, which are

estimated at an average $3000 per year based on a low er level subscription, staff training costs and record keeping flowing from compliance with the legislation.

The existing subscription levels provide for a telem arketer to call up to 500 num bers a year w ithout incurring a fee. In 2009-10 a marketer can check up to 20 000 numbers a year against the Register for only $78. The ACM A w ill undertake a review o f the subscription fees, in consultation with industry, to determine the fees for 2010—11.

M arketers m ay need to set up internal systems to ensure that they are complying w ith the legislation. The complexity o f these systems will depend on the number o f telem arketing calls made by the business. It is likely that larger businesses already have systems in place to manage their telem arketing calls, including record keeping. Small businesses are also

likely to keep records o f their current customers.

1.34 The committee acknowledges that businesses are likely to face varying costs for implementing and complying with the bill. These costs will largely depend upon the size of the business, and therefore the resources available to it, and whether or not the business currently has systems in place to meet the requirements of the DNC Register Act.

1.35 The committee notes that prior to the introduction o f the DNC Register Act 2006, similar claims were made by industry that 'armageddon would befall the telemarketing industry, and that in fact has not happened' and that this has since been acknowledged by the telemarketing industry.'

1.36 On balance, the committee does not believe that the costs of complying with the bill will be excessive or prohibitive. The committee believes that the costs outlined by the DBCDE are likely to be representative of the costs businesses can expect to incur implementing and complying with the bill.

25 Mr Chris Connolly, Director, Galexia, C om m ittee H ansard, 5 February 2010, pp 41-42.

26 DBCDE, Subm ission 23. pp 6-7.

27 Mr Rob Edwards, Chief Executive Officer, Australian Direct Marketing Association, C om m ittee H ansard, 5 February 2010, p. 16.

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1.37 The committee also notes that compliance costs for businesses making calls captured by the extension of the DNC Register need to be balanced against the benefits to businesses that will no longer received unsolicited telemarketing calls.

Impact on business-to-business activities

1.38 The Do Not Call Register Act 2006 prohibits unsolicited telemarketing calls being made to telephone numbers registered on the DNC Register.28 Under the Act, only Australian telephone numbers used exclusively or primarily for private or domestic purposes can be registered on the DNC Register.29

1.39 The act defines a telemarketing call as one where:

... it would be concluded that the purpose, or one o f the purposes, of

the call is:

(e) to offer to supply goods or services; or

(f) to advertise or promote goods or services; or

(g) to advertise or promote a supplier, or prospective supplier, o f goods or services; or

(h) to offer to supply land or an interest in land; or

(i) to advertise or promote land or an interest in land; or

(j) to advertise or promote a supplier, or prospective supplier, o f land or an interest in land; or

(k) to offer to provide a business opportunity or investment opportunity; or

(l) to advertise or prom ote a business opportunity or investment

opportunity; or

(m) to advertise or promote a provider, or prospective provider, o f a business opportunity or investment opportunity; or

(n) to solicit donations; or

(o) a purpose specified in the regulations.30

1.40 To date, the DNC Register Act has been applicable mostly to the activity of companies actively engaged in the business of telemarketing.

1.41 Concerns were raised during the inquiry that expansion of the DNC Register to include business numbers would extend the reach of the DNC Register beyond companies actively engaged in telemarketing to virtually every business in Australia. It was suggested to the committee that most telephone communication between businesses contained elements of a telemarketing call as defined under the Act but that

28 Do Not Call Register Act 2006, s. 11.

29 Do Not Call Register Act 2006, s. 14.

30 Do Not Call Register Act 2006, s. 5.

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many businesses were unaware that the Act would apply to them if the bill was enacted, as they did not consider themselves to be involved in telemarketing:

You m ight note from our subm ission that w e found that there is actually a very low awareness w ithin the business community that the Do Not Call Register legislation would actually even apply to them. There seems to be a view that the telemarketing call is something which you get from a call

centre and that is it.

In actual fact I think we need to point to this because it w as a significant issue for the business-to-consum er register which in fact lead to the introduction o f Do Not Call R egister regulations... I will not quote it exactly but if you look at the definition o f a telem arketing call it actually is any call by any individual or organisation to prom ote or advertise or propose to

supply or supply any good or service or supplier or business opportunity or investment opportunity, any land, or any interest in land whether real or not. So it is a very, very broad definition. I think particularly in relation to small businesses, because large businesses are hopefully more likely to be

made aware through the work industry associations do, that it even applies to the phone calls that they are m aking now w hich they consider just to be normal business-to-business calls.31 3 2

1.42 The AANA agreed stating:

The obligation once the bill is enacted is on virtually all businesses, if they are m aking any type o f business call within the definition o f a telemarketing call, to ensure that the num ber they are calling is not on the list.

1.43 Other witnesses such as Galexia felt that this was an issue easily overcome and that once businesses were aware that the bill applied to them and understood the definition of a telemarketing call, businesses could easily comply:

I think that the definition provides certainty. It says that, if there is a sales element to the call, if the reason I am calling is to sell you something, I have to wash the number. Once that definition is known and used regularly a few times by businesses, it w ill become simple. I will be making a call

and I will think, ‘Well, is this a sales call that is caught or is it something else?’ The bill only applies to cold calling. We are not talking about warm calls and follow-up calls et cetera; it is just the cold call.

I can see that the industry has m ade a strong argument that there might be unintended consequences, but they are actually saying that their members, the people w ho make the m arketing calls, somehow cannot distinguish between a sales call and other calls. I just do not think that is true,

especially w hen a lot o f people w ho work in this industry are on sales commission and are only going to be remunerated if they get a lead or make

31 Mrs Melina Rohan, Director, Corporate and Regulatory Affairs, Australian Direct Marketing Association, C om m ittee H ansard, 5 February 2010, p. 18.

32 Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, C om m ittee H ansard, 5 February 2010, p. 31.

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a sale. So they know exactly w hat types o f calls are sales calls and what types o f calls are for general business.

1.44 The DBCDE informed the committee that should the bill be enacted, an education campaign would be undertaken to ensure that the business community was aware of the bill and their obligations under it:

There was a similar process [education campaign] when the original legislation was enacted. The A CM A has been appropriated funds as part o f the bill. One o f the purposes o f that appropriation is to undertake an

education campaign to ensure that people are aware o f the changed provisions in the register and to educate them about how these new

provisions will operate.3 3 34

1.45 In relation to how the education campaign will be rolled out, officials explained that it:

...will be a m atter for the A CM A to determine how it will go about doing that. But, when the original register was put into place, m y understanding is that there was some advertising in the press, there were press releases and the ACM A did interviews and also provided information in a variety o f targeted forms. So, while it w ould be a matter for the ACM A to decide how to target that to have the greatest effect, they are the kinds o f activities that we would expect them to undertake.35

1.46 Since the inception of the DNC Register in 2007, ACMA has had to take very few actions to enforce compliance. For example, during 2008-09, the ACMA issued seven infringement notices; accepted eight enforceable undertakings and issued six formal warnings.36 This tends to suggest that there is a high degree of understanding and appreciation amongst telemarketers o f the operation of the DNC Register.

1.47 The committee is confident, given its earlier track record in this regard, that adequate education o f those affected by the bill will be undertaken by the ACMA and notes that budget funding has been specifically allocated for this purpose.

1.48 The committee does feel that care must be taken to ensure that businesses that may not be currently aware of the bill are informed o f the bill's applicability to them and their obligations under the bill. This will help to ensure a smoother transition to the new arrangements proposed by the bill and greater compliance.

33 Mr Chris Connolly, Director, Galexia, C om m ittee H ansard, 5 February 2010, p. 43.

34 Mr Duncan McIntyre, Assistant Secretary, Consumer Policy and Post Branch, Department of Broadband, Communications and the Digital Economy, C om m ittee H ansard, 5 February 2010, p. 50.

35 Mr Duncan McIntyre, Assistant Secretary, Consumer Policy and Post Branch, Department of Broadband, Communications and the Digital Economy, C om m ittee H ansard, 5 February 2010, p. 50.

36 ADM A, Subm ission 20, pp 20-21.

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Consent provisions

1.49 Some witnesses expressed concern about the consent provisions o f the bill. In particular, witnesses took issue with the opt-in registered consent provisions, and the impact this would have on the ability of businesses to forge new commercial relationships.

1.50 The issues raised by the Printing Industries Association of Australia were representative of these concerns:

By allowing businesses to opt-in into the “Do Not Call Register” the printing industry will be affected directly and indirectly.

• The direct impact will arise from an inability o f printing businesses to market to businesses that are listed on the “Do N ot Call Register” ...

• Any measure to provide business to business exem ption enabling a business to contact other businesses where the content o f the call is significantly related to the core activity o f the operation o f the recipient business will not be helpful to the printing industry. The reason is that printing businesses are not

significantly related to the core activity o f their clients. This means printing businesses will not be able to call businesses or potential clients that are on the “Do N ot Call Register” as they will fail to satisfy the “significantly related” provision.37

1.51 Witnesses were concerned about the scope of industry classifications and were keen to ensure:

...that ACM A determines the industry groupings on a narrow basis so that businesses are given a proper opportunity to opt in to receiving

telemarketing calls where relevant and appropriate.38 3 9

1.52 This was particularly true for businesses that supplied goods and/or services to other businesses across a wide range of industries. These businesses were concerned that they would fail to meet the 'significantly-related' exemption test. This exemption allows a number on the Do Not Call Register to be contacted for the

purposes of telemarketing where the registrant consented to receive telemarketing calls made about an activity covered by a particular industry classification and the actual call fell within an industry classification registered for the number, that is 'the content or purpose of the call must fall within the particular industry classification which the registrant selected'.40

37 Printing Industries Association of Australia, Subm ission 4, pp 2-3.

38 Fairfax Media Ltd, Submission 7, p. 5.

39 See for example Printing Industries Association of Australia, Subm ission 4, pp 2— 3 and AHA, Subm ission 22, p. 2.

40 Explanatory Memorandum, p. 12.

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1.53 Some submitters also raised concerns about the bill's inferred consent arrangements.41 DBCDE officials told the committee the inferred consent arrangements would be the same as those for the existing register which' seemed to be working quite well'.42Officials explained that:

It would be a matter for a business to make a judgem ent as to whether it would be reasonable to assume that there was inferred consent based on the previous relationship that they had had. If their judgem ent was that it was reasonable for them to make that assumption, they could make those calls.

So, if an advertiser had previously advertised [their product or services], they would have to make a judgem ent regarding the strength o f that business relationship and w hether it was reasonable for them to infer consent...43

Committee view

1.54 Whilst acknowledging the concern of various submitters, the committee is of the view that the bill strikes an appropriate balance between the interests of those businesses that object to unsolicited telemarketing calls and faxes, and the interests other businesses that conduct telemarketing and fax marketing activities.

1.55 The committee notes that the bill 'is not intended to impinge on business-to- business communications which are an important part of everyday business activity.'44 Businesses will still be able to contact other businesses with whom they have a relationship under the current inferred consent provisions or where express consent to receive calls or faxes is given. However, the bill will prevent the use of 'cold calls' and marketing faxes to businesses that have opted-in, in instances where the express or inferred consent provisions do not apply.

1.56 This will enable businesses that utilise telemarketing and fax marketing as a legitimate method o f business engagement, to continue to contact any business that does not opt-in to the DNC Register or where the express or inferred consent provisions apply.

1.57 The committee further notes that businesses that choose to register their number(s) under the extension to the DNC Register clearly do not wish to receive unsolicited telemarketing calls and therefore are unlikely to respond favourably to

41 For example Fairfax Media Ltd, Submission 7, p. 4.

42 Mr Duncan McIntyre, Assistant Secretary, Consumer Policy and Post Branch, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 5 February 2010, p. 51.

43 Mr Duncan McIntyre, Assistant Secretary, Consumer Policy and Post Branch, Department of Broadband, Communications and the Digital Economy, Committee Hansard, 5 February 2010, p. 51.

44 The Hon. Anthony Albanese MP, Minister for Infrastructure, Transport, Regional Development and Local Government, House o f Representatives Hansard, 26 November 2009, p. 12976.

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these unsolicited calls in the current environment. By including themselves on the DNC Register, businesses that do not wish to receive unsolicited telemarketing calls will decrease the size of the pool of businesses which could be contacted. Consequently, the number of businesses in that pool which are likely to respond

favourably to unsolicited telemarketing calls will increase, which is likely to lead to a increase in the success rate of those engaged in telemarketing.

1.58 Overall therefore, the committee is of the opinion that the bill should be supported.

Recommendation 1

1.59 The committee recommends that the bill be passed.

Three year registration period

1.60 Various submitters both in support o f and in opposition to the bill

recommended changes to the three year registration period for numbers enrolled on the Do Not Call Register.45

1.61 At present, telephone numbers enrolled on the DNC Register are registered for a period of three years.46 The bill intends that this registration period will also apply to fax, business and government numbers when registered.

1.62 Various submitters to the inquiry suggested that this registration period be changed. Some witnesses felt the registration period should be removed entirely so that numbers remain on the register indefinitely, whilst other witnesses argued that the registration period be shortened.

1.63 May 2010 marks the three year anniversary of the Do Not Call Register and as such, also the time at which large volumes of private telephone numbers will be de-registered. ACC AN indicated that from May, the ACMA would be required 'to get up to 4.2 million numbers back on the system' and that re-registering would a 'huge

annoyance' for those having to do so.47 ACCAN also alerted the committee to ACMA research that shows that only 25 percent of registrants know that registration is valid for only 3 years.48

1.64 ACCAN argued that the current three year registration period should be revoked on the basis that it:

45 See for example ACCAN, Subm ission 12, pp 3M & Fairfax Media Ltd. Submission 7, p. 4.

46 Do N ot Call R egister A ct 2006, s. 17.

47 Mr Allan Asher, Chief Executive Officer, Australian Communications Consumer Action Network, C om m ittee H ansard, 5 February 2010, pp 9 & 13.

48 ACCAN, Subm ission 12, p. 2.

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...achieves no public benefit objective or goal. It does, however, represent a significant risk to the efficiency and popularity o f the Register. It should be revoked before significant resources are spent on renewal procedures.49

1.65 ACCAN believed that industry concerns about disused or deactivated numbers remaining on the register could be addressed, and described the situation in the United States of America and the United Kingdom where:

I f the num ber is deactivated (for example when a person moves house) then the Register is notified and updated, meaning that new number owners won't be registered without their knowledge. There is no evidence o f any problems with this system in other jurisdictions.50

1.66 In its supplementary submission ACCAN provided further details on how this arrangement could operate in practice:

The Telecommunications N um bering Plan 1997 (mandated in Section 455 o f the Telecommunications A c t 1997) requires that numbers disconnected from their owner go into quarantine for 6 months (12 months if this is due to nuisance calls) before they can be re-allocated to another customer (see Part 4). This number is returned to the telco that initially allocated the number to a customer.

A requirement that quarantined numbers be supplied to the DNCR operator and removed from the Register would be a highly efficient way o f ensuring the DNCR remains up to date without creating any additional burden (this information m ust already exist due to the requirements o f the Numbering

Plan). It’s a simple and straightforward solution that will help ensure the Register remains accurate, in the same way as other jurisdictions address the issue.51

1.67 Conversely, Fairfax Media Ltd suggested that the three year registration period be reduced to one year for business numbers. Fairfax Media Ltd claimed

...th at [three years] may be too long in a business context, given the

turnover o f employees and the evolving nature o f many business’ size, scale and strategic drivers.52

1.68 Fairfax Media Ltd suggested that reducing the registration period to one year would improve their ability to contact other businesses and mitigate some of the company's concerns about the inclusion of business numbers on the register:

We are saying that one year is better than three years because o f the pace o f change in m ost businesses. It m ay be a well intentioned decision to go for a three-year listing on the Do N ot Call Register, but that industry may be

49 ACCAN, Subm ission 12, p. 3.

50 ACCAN, Subm ission 12, p. 3.

51 ACCAN, Supplem entary Subm ission 12, p. 1.

52 Fairfax Media Ltd, Submission 7, p. 4.

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impacted rapidly. The pace of change is faster—which we are all experiencing, and media is experiencing it faster than many—and you have less time to worn/ about, "Did I register for something a little while ago and is it on my list?’ 3

1.69 The committee also notes that the DBCDE is currently conducting a statutory review of the DNC Register Act and relevant provisions of the Telecommunications Act."4 The Act requires this review to be conducted before, or as soon as possible after, May 2010. Following the review, a report must be tabled in Parliament within

15 sitting days of the completion of the report.5 3 5 4 55

C om m ittee view

1.70 In the committee's view the current DNC Register is operating effectively in protecting registered householders from unsolicited telemarketing calls. The committee sees merit in ACCAN's proposal to move to a permanent or longer tenn registration arrangement, particularly for residential registrants, provided other practical difficulties of keeping the register accurate can be overcome.

1.71 As part of its statutory review, the committee believes that the DBCDE should specifically consider ACCAN's proposal to use the Telecommunications Numbering Plan 1997 in order to remove 'quarantined' numbers from the DNC Register.

Recommendation 2

1.72 The committee recommends that in its statutory' review of the D o N o t C all R eg ister A c t 2 0 0 6 , the Department of Broadband, Communications and the Digital Economy specifically consider extending the period of registration provided the practical difficulties of keeping the Register accurate can be

overcome. The department should give consideration to ACCAN's proposal to use the Telecommunications Numbering Plan 1997 in order to remove 'quarantined' numbers from the Do Not Call Register.

Senator Anne McEwen Chair

53 Mr Robert Whitehead, Director, Marketing and Newspaper Sales, and Director, Fairfax Enterprises, Fairfax Media Ltd, Committee Hansard, 5 February 2010, p. 37.

54 As required under section 45 of the Do Not Call Register Act 2006.

55 DBCDE, Do Not Call Register, available: www.dbcde.gov.au/telephone services/do not call (accessed 19 February 2010).

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Coalition Senators’ Additional Comments Coalition Senators participating in the inquiry have serious concerns about the impact oi the Do Not Call Legislation Amendment Bill 2009 on businesses, particularly on compliance costs and legitimate business-to-business activities.

The Department o f Broadband, Communications and the Digital Economy could not provide critical data by which to assess any demand for extending the Register, and the impact of the extension on business.1

Coalition Senators question the Government's claim that the Bill will 'benefit those organisations that currently experience losses in productivity’2 through unsolicited marketing calls or faxes.

Coalition Senators note that submissions to this inquiry from businesses and industry associations oppose the bill on the basis that the:

Extension o f the do not call to business and government will strike at the very heart o f commerce and put significant lim itations on it.3

S ta k e h o ld e r co n su lta tio n - w ho w a n ts th e B ill a n d w hy?

Coalition Senators were further troubled by the apparent lack of current and representative consultation conducted by the Department:

The D epartm ent has based its answers on research and consultation with Australian consumers and industry stakeholders. This included the 2008 public discussion paper Eligibility Requirements fo r Registration on the Do N ot Call Register from which approxim ately 85% o f the 186 respondents supported the extension o f the Register to

all telephone and fax num bers.4

Coalition Senators do not consider that submissions, now two years old, constitute either current or adequate consultation about the Bill.

The Australian Association of National Advertisers noted:

For example, as to the earlier consultation responses— I note the minister’s second reading speech I think stated that 86 per cent or 76 per cent o f submissions were in

Department of Broadband, Communications and the Digital Economy, Response to Question on Notice, Question No 1-4 Hon Anthony Albanese MP, Minister for Infrastructure, Transport, Regional Development and Local Government, House o f Representatives, Second Reading Speech Hansard, 26 November

2009 Mr Rob Edwards, Chief Executive Officer, Australian Direct Marketing Association, Committee Hansard, 5 February 2010, p. 16.

Department of Broadband, Communications and the Digital Economy, Response to Question on Notice, Question No 4

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support o f the proposal. W hen that is broken down, most o f those were either individuals o r individual small businesses— 120 or so.5

Evidence given by the ACMA Chair, Mr Chris Chapman, during Additional Estimates hearings of the Senate Standing Legislation Committee on Environment, Communications and the Arts verified concerns of Coalition Senators that the Minister had not adequately consulted about the Bill:

Senator FISHER—Who wants the proposed Do Not Call Register, and what percentage of businesses—not numbers—do you expect would register to not be called? Mr Chapman—We simply do not have a view about that.6

When pressed by Coalition Senators, the Minister was unable to deliver any evidence as to who wants the Bill, and why:

Senator FISHER—This bill applies to all business, not just small business. Big business, the likes of Fairfax, told the inquiry last week that they did not like it a lot. Senator Conroy—It has been a particular concern of mine that unwanted and unsolicited calls and faxes are wasting valuable business resources and could potentially affect the operation of emergency service organisations.

Senator FISHER—That is a view of yours. Do you have evidence from business? Senator Conroy—Businesses that choose to register their number clearly want protection against telemarketing calls. If they do not, then they do not have to.7

Coalition Senators are troubled that the motivation behind imposing the Bill on Australian business seems to rest on the basis of 'a particular concern' of the Minister.

Indeed, the Committee heard evidence that a business operator could be derelict in their duty were they to place their business on the Do Not Call Register.

Senator TROETH—As you say, business should be open for business. I would have thought that this—as you have correctly' remarked—went against the Privacy Act by default. Mr Edwards—Looking at my job, if I put ADMA’s number on the Do Not Call Register—which would be a little bit funny—and organisations were trying to sell my organisation products and

services that could improve the productivity I could actually be held in dereliction of duty of my job. The fact is that I am open for business so I expect to receive calls. If I do not want to talk to them I will not talk to them.

Impact on business - net negative

The Government intends that the Bill benefit businesses currently experiencing losses in productivity or incurring additional expenses through unsolicited telemarketing calls and marketing faxes. The Department stated:

Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, Committee Hansard, 5 February 2010, p. 31.

Mr Chris Chapman, Chair, Australian Communications and Media Authority, Committee Hansard, 8 February 2010, p. 57 Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, Committee Hansard, 8 February 2010, pp. 57-58

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...businesses, particularly small businesses, have stated they have experienced losses in productivity caused by responding to unsolicited telemarketing calls and marketing faxes.8

However, Coalition Senators do not believe that the changes to the Do Not Call Register proposed in the bill would provide a net benefit to business. In fact, witnesses suggest the Bill is more likely to lead to productivity and job losses as a result of increased costs, diminished revenues and additional compliance requirements.9

As the Australian Association of National Advertisers explained:

Our concerns are the implications across the board that have not been quantified as a benefit overall for the economy.10

Impact on business — increased costs and red tape

Evidence to the Inquiry noted concern at the ability of business to meet additional costs imposed by the extended reach o f the Register.

Fairfax Media Ltd noted:

We are very concerned about the costs... We are fortunate enough to have a very sophisticated database, probably more sophisticated than those of most companies in Australia. I do not know how it would be handled within a business on infrastructure that was not as automated as ours, not as connected as ours and not as well developed as ours.

That would be a bigger cost to many businesses that are unfortunately not in a position to be able to use automated databases in the way that we can. There is an undeniable cost.11

The Australian Information Industry Association (AIIA) indicated that an individual business would experience a 25 per cent increase in their marketing costs to implement systems to comply with the bill.12

An Access Economics report commissioned by the Australian Direct Marketing Association (ADMA) and provided to the committee calculated that the total

Department of Broadband, Communications and the Digital Economy, Submission 23, pp 3-4.

Mr Robert Whitehead, Director, Marketing and Newspaper Sales and Director, Fairfax Enterprises, Fairfax Media Ltd, Committee Hansard, 5 February 2010, pp 36-40.

Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, C om m ittee Hansard, 5 February 2010, p. 26.

Mr Robert Whitehead, Director, Marketing and Newspaper Sales and Director, Fairfax Enterprises, Fairfax Media Ltd, Committee Hansard, 5 February 2010, pp 37.

Mr Phil Sloper, Chair (ACT Branch), Australian Information Industry Association, Committee Hansard, 5 February 2010, p. 6.

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compliance cost incurred by business in the first year following introduction of the bill would be $23.7 million, with an ongoing cost of $46-82 million per annum.13

Comparison of these costs with the benefits of $34— 47 million per annum as a result of productivity gains due to reduced unsolicited telemarketing calls demonstrates that the costs to business associated with the bill greatly outweigh the potential benefits.

The Department estimated that:

There will be some com pliance costs for businesses undertaking

telemarketing or fax marketing. These costs are expected to be in line with the costs associated with the current fomi o f the Register, which are estimated at an average $3000 per year based on a lower level subscription, staff training costs and record keeping flowing from compliance with the legislation.

Marketers m ay need to set up internal systems to ensure that they are complying with the legislation. The complexity o f these systems will depend on the number o f telem arketing calls made by the business. It is likely that larger businesses already have systems in place to manage their telemarketing calls, including record keeping.14

The Government's figures grossly underestimate the financial impact of the bill on businesses.

This is in part because Government figures are based on the existing "Do Not Call" regime, which imposes obligations to businesses which place calls to private numbers, and assumes those trends can be transferred to this Bill, which potentially imposes obligations on all businesses for 'every day' business calls.

This is particularly evident when unquantifiable costs associated with a reduction in competition, information and innovation; unemployment due to reduced telemarketing business, and

[l]oss o f revenues via flow-on effects to end-users o f products sold through telemarketing 5

are also taken into consideration.

The Australian Association of National Advertisers referred to the possibility of the majority of business bearing the cost o f additional red tape and compliance requirements, for the benefit of the relative few:

I f you have only, say, a thousand or a couple o f thousand businesses wanting to put their name on the register, but two m illion businesses have to have compliance systems in place to ensure that they do not inadvertently capture one o f the 1,000 businesses, I am not sure there would be very many people in business or even among the Australian public who would think that to be a very good balance.16

13 ADMA, Submission 20, Attachment 1, p. 9.

14 Department of Broadband, Communications and the Digital Economy, Submission 23, pp 6-7.

15 ADMA, Submission 20, Attachment 1, p. ii & Singtel Optus Ltd, Submission 5, p. 2.

16 Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, Committee Hansard, 5 February 2010, p. 31.

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Coalition Senators believe the Bill, if enacted, would significantly increase red tape and everyday costs o f doing business.

Coalition Senators are unconvinced by evidence to the Inquiry that any potential benefits of the bill, in terms of neutralising productivity losses, would outweigh the new cost imposts and productivity losses experienced by business.

Impact on business - uncertainty about "telemarketing"

The Bill fails to clarify the difference between "day-to-day" business and telemarketing, potentially applying to "routine" business. The Department was unable to satisfy Coalition Senators to the contrary.

This uncertainty, o f itself, comes at a cost to business.

The Australian Association of National Advertisers explained many businesses would be unaware of the ramifications of the extension:

.. .many businesses across the board do not understand that the bill will apply to them and that telemarketing is what a lot of businesses currently consider just normal business calls. That goes to not just small businesses, but the micro and home based businesses as well, who are very unlikely to have any idea.

Fairfax Media Ltd succinctly explained the issue in evidence to the Committee:

...‘telemarketing’ is a word that means different things to different people...18

Mr Whitehead continued:

What it means in a business context is that most people who accept business calls from other businesses do not regard them as telemarketing calls. When a divisional chief rings someone else who is not currently a business partner and wants to sound

them out about a completely new opportunity that may arise for both companies, neither of those people would ever imagine they would be called telemarketing calls.19

ADMA also agreed that many businesses are unaware that the Bill would apply to them, let alone the impact it would have:

You might note from our submission that we found that there is actually a very low awareness within the business community that the Do Not Call Register legislation would actually even apply to them. There seems to be a

Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, Committee Hansard, 5 February 2010, p. 26.

Mr Robert Whitehead, Director, Marketing and Newspaper Sales and Director, Fairfax Enterprises, Fairfax Media Ltd, Committee Hansard, 5 February 2010, p. 38.

Mr Robert Whitehead, Director, Marketing and Newspaper Sales and Director, Fairfax Enterprises, Fairfax Media Ltd, Committee Hansard, 5 February 2010, pp 38.

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view that the telemarketing call is something which you get from a call centre and that is it...20

In practical terms, the Bill would extend the Do Not Call Register beyond companies which regard themselves as in the business of telemarketing, to potentially every business in Australia.

Businesses contact each other for a multitude of reasons, in the course of day-to-day operations. Coalition Senators are concerned that the Bill will impose upon an unquantified number of Australian businesses an obligation to "wash" phone numbers of those with whom they conduct routine business.

Coalition Senators believe that the Bill would "over-reach", hindering the ability of businesses to conduct "routine" business, and to establish and maintain commercial relationships.

Lack o f empirical analysis

Coalition Senators are concerned at the lack of evidence quantifying the net beneficiaries derived by extending coverage of the Register.

The Australian Association of National Advertisers agreed:

There will be a cost to businesses and to the economy. Is that really outweighed by the benefits that are received by those companies? I do not think there has been any quantification, even in a few o f the scenarios presented, o f what those figures might be overall.21

In particular, Coalition Senators are concerned at the lack of quantitative data about the anticipated take up rate of the "extended" Register:

Question No: 1

Senator Fisher:

How many businesses will register one or more numbers on the ‘do not call’ register, and what percentage o f A ustralian businesses is that/are they?

Answer:

It is difficult to estimate how m any businesses in Australia will choose to put one or more o f their numbers on the Do N ot Call Register, however, submissions to the Department and consultations undertaken with industry associations and small

Ms Melina Rohan, Director, Corporate and Regulatory Affairs, Australian Direct Marketing Association, Committee Hansard, 5 February 2010, p. 16.

Ms Trixi Madon, Manager, Codes and Self-Regulation, Australian Association of National Advertisers, Committee Hansard, 5 February 2010, p. 31.

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business groups, together with the experience o f business registrations in the UK indicate that the numbers could be substantial...22

And the Department was unable to clarify how many businesses would face the additional compliance obligations of 'washing' call lists against the Register:

Question No: 2

Senator Fisher:

How m any businesses will need to access the register to have numbers ‘w ashed’, in order to ensure they do not breach the new provisions, and what percentage of Australian businesses is that/are they?

Answer:

All businesses making unsolicited telemarketing calls or sending unsolicited marketing faxes to Australian telephone or fax numbers w ill be required to comply with the legislation...

As at 30 June 2009 there were 2 948 telemarketers registered to use the service provided by the register operator to wash their numbers against the numbers on the Do N ot Call Register. As there may be businesses that m ake telemarketing calls or send m arketing faxes to businesses only and that therefore are not already registered

to use the washing service, it is likely that this number w ill increase.23

Nor was the Department able to quantify how often a business would face new obligations under the Bill.

Question No: 3

Senator Fisher:

(In respect o f 2 above) how often, and over what period o f time?

Answer:

A ‘w ashed- list remains valid for 30 days. Any organisation that wishes to make telemarketing calls or send marketing faxes on a regular basis will need to wash their list o f num bers against the Register at least every 30 days. However this may vary amongst organisations, as some may undertake telemarketing or fax marketing

activities less than once every 30 days. This will affect how often they would need to ‘w ash’ the numbers against the Register.24

Department of Broadband, Communications and the Digital Economy, Response to Question on Notice, Question No 1 Department of Broadband, Communications and the Digital Economy, Response to Question on Notice, Question No 2

Department of Broadband, Communications and the Digital Economy, Response to Question on Notice, Question No 3

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Coalition Senators are concerned by the lack of evidence substantiating:

a. How many businesses will seek to benefit from the Bill (by registering "do not call" numbers), and, b. How many businesses will carry new obligations from the Bill (by having to "wash" numbers against the register), and how often.

Coalition Senators remain to be convinced that the Bill will do anything other than burden most businesses, yet benefit very few (if any) businesses.

Concluding Remarks

Coalition Senators remain concerned at uncertainty about the scope and impact of the Bill and corresponding ramifications for business, especially the probably majority of businesses which have not previously interacted with the current Do Not Call

Register.

Any difference between day-to-day business calls and "telemarketing" remains unclear. Further, the Department and the Minister have been unable to quantify the businesses which will benefit from, or the businesses to be burdened by, the extended reach of the Register.

Without appropriate data to assess any alleged demand for the extension, Coalition Senators are not convinced the Bill will deliver the stated objective of benefiting those organisations currently experiencing losses in productivity or incurring additional expenses as a result o f unsolicited marketing calls or faxes.

Recommendation 1

1.2 At this stage, for the reasons outlined above, Coalition Senators are yet to be convinced that the Bill should proceed.

Senator Mary Jo Fisher Senator the Hon. Judith Troeth Deputy Chair

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Appendix 1

Submissions, tabled documents and answers to questions taken on notice Submissions

1 Accor Advantage Plus

2 The Hon. Dr Bob Such MP, Member for Fisher

3 Consumer Affairs Victoria

4 Printing Industries Association o f Australia

5 Singtel Optus Pty Ltd

6 Corporate Express Australia Limited

7 Fairfax Media Limited

8 Australian Association of National Advertisers

9 Telstra Corporation

10 Combined Insurance Company of Australia

11 Office of Consumer and Business Affairs, Government of South Australia

12 Australian Communications Consumer Action Network

13 Austar United Communications Ltd

14 Office of the Privacy Commissioner

15 Real Estate Institute o f Australia

16 TrueLocal.com.au and the Council of Small Business Organisations of Australia

17 Salmat

18 Galexia Pty Ltd

19 Consumer Credit Legal Centre (NSW) Inc

20 Australian Direct Marketing Association

21 Consumer Protection, Department of Commerce, Government of Western Australia

22 Australian Information Industry Association

23 Department of Broadband, Communications and the Digital Economy

24 Australian Privacy Foundation

25 Australian Finance Conference

26 The Write Response

27 DirectIT Pty Ltd

28 McCorkell and Associates

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29 Mr Ralph Pirozzo

30 Ms Anna Kollar

31 dLook Pty Ltd

32 Name Withheld

33 Nerida Byron

34 Ms Fiona MacRae

35 Mr Michael Webb

Tabled documents

Concern with Department's approach in assessing whether a net benefit exists from extending the Do Not Call Register to include business and government numbers, tabled by Australian Direct Marketing Association (public hearing, Melbourne, 5 February 2010).

Answers to questions taken on notice

Department of Broadband, Communications and the Digital Economy (from public hearing, 5 February 2010, Canberra)

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Appendix 2

Public hearings

Friday, 5 February 2010 - Canberra

Australian Information Industry Association

Mr Phil Sloper, Chair (ACT Branch)

Mr Rhett Somers, Communications Manager

Australian Communications Consumer Action Network

Mr Allan Asher, Chief Executive Officer

Ms Sarah Wilson, Campaigns and Community Liaison Officer

Australian Direct Marketing Association

Mr Rob Edwards, Chief Executive Officer

Mrs Melina Rohan, Director, Corporate and Regulatory Affairs

Australian Association of National Advertisers

Ms Trixi Madon, Manager, Codes and Self-Regulation

Fairfax Media Ltd

Mr Robert Whitehead, Director, Marketing and Newspaper Sales, and Director, Fairfax Enterprises

Galexia

Mr Chris Connolly, Director

Department of Broadband, Communications and the Digital Economy

Mr Andrew Maurer, Acting First Assistant Secretary, Digital Economy Services Division

Mr Garry Croker, Director, Consumer Policy and Privacy Branch

Mr Duncan McIntyre, Assistant Secretary, Consumer Policy and Post Branch

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The Senate

Environment, Communications and the Arts Legislation Committee

Renewable Energy (Electricity) Amendment Bill 2010 [Provisions]

Renewable Energy (Electricity) (Charge) Amendment Bill 2010 [Provisions]

Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Bill 2010 [Provisions]

June 2010

© Commonwealth o f Australia 2010 ISBN 978-1-74229-315-8

This document was printed by the Senate Printing Unit, Parliament House, Canberra

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Committee membership

C o m m ittee m e m b e rs Senator Anne McEwen (ALP, SA) (Chair) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) Senator Scott Ludlam (AG, WA)

Senator Kate Lundy (ALP, ACT) Senator the Hon. Judith Troeth (LP, VIC) Senator Dana Wortley (ALP, SA)

S u b stitu te m e m b e r f o r th is in q u iry Senator Christine Milne to replace Senator Scott Ludlam

P a rticip a tin g m em b ers p a r tic ip a tin g in th is inqu iry Senator Guy Barnett (LP, TAS) Senator Simon Birmingham (LP, SA) Senator the Hon. Ron Boswell (NATS, QLD)

C om m ittee se c re ta ria t

Mr Stephen Palethorpe, Secretary Mr Terry Brown, Principal Research Officer Mr Bill Bannear, Senior Research Officer Mrs Dianne Warhurst, Executive Assistant

C om m ittee a d d re ss PO Box 6100 Parliament House Canberra ACT 2600

Tel: 02 6277 3526 Fax: 02 6277 5818 Email: eca.sen@aph.gov.au

Internet: www.aph.gov.au/senate/committee/eca_ctte/index.htm

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iv 138

Table of Contents

C h a p te r 1............................................................................................................................ 1

Introduction and conduct of the inquiry...................................................................1

Conduct of the inquiry................................................................................................ 1

Acknowledgment.........................................................................................................1

The Renewable Energy Target scheme.....................................................................1

Purpose of the bills..................................................................................................... 2

Overview of proposed changes................................................................................. 3

CO AG Review.............................................................................................................5

Impact of scheme on electricity prices......................................................................5

Passage during the winter sittings............................................................................. 8

Report stm cture.......................................................................................................... 9

C hapter 2 .................................. ................................................................................... 11

Large-scale Renewable Energy Target....................................................................11

Prices of LRECs........................................................................................................15

C h a p te r 3......................................................................................................................... 19

Small-Scale Renewable Energy Scheme..................................................................19

Introduction............................................................................................................... 19

Operation o f the SRES............................................................................................. 19

Issues......................................................................................................................... 22

C h a p te r 4......................................................................................................................... 37

Emissions-intensive trade-exposed industries........................................................ 37

Effective rate of assistance...................................................................................... 38

Certain ΕΙΤΕ industries............................................................................................38

Committee view........................................................................................................ 39

C oalition S en ato rs' A dditional C o m m en ts........................................................... 41

Uncapped liability under the Small-scale Renewable Energy Scheme (SRES) ..41

Impact of the Solar Credits M ultiplier................................................................... 44

ΕΙΤΕ Assistance.......................................................................................................46

A u stralian G reen s' A dditional C o m m e n ts........................................................... 49

1) Banked Renewable Energy Certificates...........................................................49

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2) Overheating the SRES m arket..........................................................................49

3) Emission intensive trade exposed industries....................................................49

Appendix 1 ............................................................................................................... 51

Submissions, tabled documents and answers to questions taken on notice..... 51

Submissions...............................................................................................................51

Tabled documents..................................................................................................... 53

Answers to questions taken on notice.................................................................... 53

Appendix 2 ............................................................................................................... 55

Public hearings.......................................................................................................55

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Recommendations

Recommendation 1

3.70 The committee recommends that the government consider mechanisms to manage potentially high demand under the Small-scale Renewable Energy Scheme.

Recommendation 2

4.20 The committee recommends that, subject to the recommendation contained elsewhere in this report, the Senate pass the Renewable Energy (Electricity) Amendment Bill 2010 and two related bills during the 2010 winter Parliamentary sittings.

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viii 142

COAG

Abbreviations Council of Australian Governments

CPRS Carbon Pollution Reduction Scheme

DCCEE Department of Climate Change and Energy Efficiency

ΕΙΤΕ Emissions-intensive trade-exposed

GWh Gigawatt-hour

LRECs Large-scale Renewable Energy Certificates

LRET Large-scale Renewable Energy Target

MMA McLennan Magasanik Associates

MRET Mandatory Renewable Energy Target

MWh Megawatt-hour

ORER Office of the Renewable Energy Regulator

PV Photovoltaic

RECs Renewable Energy Certificates

RET Renewable Energy Target

SGU Small Generation Unit

SRES Small-scale Renewable Energy Scheme

STCs Small-scale Technology Certificates

STP Small-scale Technology Percentage

the Act Renewable Energy (Electricity) Act 2000

the bill Renewable Energy (Electricity) Amendment Bill 2010

the committee Senate Environment, Communications and the Arts Legislation Committee

the department Department of Climate Change and Energy Efficiency

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Chapter 1

Introduction and conduct of the inquiry Conduct of the inquiry

1.1 On 13 May 2010 the Senate referred the provisions o f three related bills, the:

• Renewable Energy (Electricity) Amendment Bill 2010;

• Renewable Energy (Electricity) (Charge) Amendment Bill 2010; and

• Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Amendment Bill 2010

to the Environment, Communications and the Arts Legislation Committee for inquiry and report by 10 June 2010.

1.2 The committee advertised the inquiry in the national press and invited submissions by 24 May 2010. Details of the inquiry were published on the committee's website. The committee also wrote to a number of interested parties to inform them of the inquiry. The inquiry attracted 50 submissions. The names of persons and organisations that made submissions to the inquiry may be found in Appendix 1 to this report.

1.3 A public hearing was held in Canberra on 28 May 2010. The names of witnesses that appeared at the hearing may be found in Appendix 2. The Hansard transcript is available through the internet at www.aph.gov.au/hansard.

Acknowledgment

1.4 The committee thanks the organisations and individuals who made submissions and gave evidence at the public hearing.

The Renew able Energy Target scheme1

1.5 The existing Renewable Energy Target (RET) scheme, which was established by the Renewable Energy (Electricity) Act 2000, as amended by the Renewable Energy (Charge) Act 2009, creates a guaranteed market for electricity generated from renewable sources. The target is for 20 per cent of Australia's electricity to be

generated from renewable sources by 2020. The existing RET will be achieved through a series o f increasing annual targets, culminating in 2020 with a target of 45 000 gigawatt-hours (GWh) of eligible renewable generation.

1 Much of this section is drawn from the Explanatory Memorandum.

2

1.6 The Act requires wholesale purchasers of electricity ('liable entities') to meet a share of a renewable energy target in proportion to their share of the national wholesale electricity market. The Act provides for the creation of Renewable Energy Certificates (RECs) by generators o f renewable energy. One REC generally represents one megawatt-hour (MWh) o f electricity from an eligible renewable energy source.

1.7 Generators of renewable energy include large-scale installations such as wind farms, geothermal or biomass power plants and small-scale installations such as solar water heaters, rooftop solar panels, small wind turbines and micro-hydro systems.

1.8 Once registered with the Office of the Renewable Energy Regulator (ORER), the RECs are able to be traded, and are sold to wholesale purchasers of electricity (the 'liable entities') who surrender them to ORER to demonstrate their compliance with their individual targets under the scheme. Liable entities thus avoid paying a shortfall charge which is set by a related Act, the Renewable Energy (Electricityj (Charge) Act 2000.

Purpose of the bills

1.9 The Renewable Energy (Electricity) Amendment Bill 2010 is intended to amend the Renewable Energy (Electricity) Act 2000 to separate the existing RET scheme into two parts - a Small-scale Renewable Energy Scheme (SRES) and a Large-scale Renewable Energy Target (LRET).2 The amendments are intended to encourage additional generation of renewable electricity from large-scale installations while continuing to support generation from small-scale installations. The principal amendments and the significant issues surrounding those proposed amendments are discussed later in this report.

1.10 The policy rationale to split the REC market is a concern 'that the inclusion of small-scale technologies and their impact on the REC market is delaying investment in large-scale renewable energy projects.'3

1.11 Shortly after passage of the RET legislation through Parliament in August 2009, the REC price fell, leading to uncertainty in the market and a deterrence of potential investment in large-scale renewable energy projects. A COAG review of late 2009 identified several factors affecting the REC price, including:

• the increase in the supply o f RECs created by the higher uptake o f solar water heaters and heat pum ps, driven by Commonwealth and state subsidies, and the expectation that this trend may continue;

• domination o f the spot m arket by small industry players, such as solar water heater providers, who regularly sell RECs for liquidity reasons; and

2 The Hon Mr Gary Gray, MP, Parliamentary Secretary for Western and Northern Australia, House o f Representatives Hansard, 12 May 2010, p. 3210.

3 Renewable Energy (Electricity) Amendment Bill 2010, Explanatory Memorandum, p. 6.

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• the perception that there is a large quantity o f banked RECs, and that m ost liable entities will not need to purchase additional RECs to satisfy their obligations for the 2009 calendar year.4

1.12 The proposed changes are said to 'provide greater certainty for households, large-scale renewable energy projects and installers of small-scale renewable energy systems such as solar panels and solar water heaters.'5

1.13 In addition to the Renewable Energy (Electricity) Amendment Bill 2010, which contains the mechanisms to establish the LRET and the SRES, there are two associated bills. The Renewable Energy (Electricity) (Charge) Amendment Bill 2010 would impose a shortfall charge o f $65 per MWh (the large-scale renewable energy shortfall charge) on liable entities to encourage compliance with their legal

obligations to surrender RECs created within the LRET.

1.14 The Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Amendment Bill 2010 would impose a similar shortfall charge of $65 per MWh (the small-scale renewable energy shortfall charge) on liable entities to encourage them to comply with the requirement to surrender RECs created within the

SRES.

Overview of proposed changes

Large-scale Renewable Energy Target

1.15 It is expected that the LRET will provide most of the expansion in the generation of renewable electricity. The LRET has been set at 41 000 GWh in 2020 (see Figure 1 in chapter 2). The apparent reduction of the target, from the current 45 000 GWh, is a recognition that the separate SRES will account for at least 4000 GWh o f generation.

1.16 The large-scale market will operate in much the same way as the existing RET scheme, with large-scale generators receiving Large-scale Generation Certificates (LREC) at a rate of one per MWh generated. Large-scale generators include wind farms, solar arrays, hydroelectricity and other renewable energy

generation over a certain size.

1.17 The obligation of liable entities to purchase LRECs creates demand. As the LRET target increases annually, demand for LRECs will also increase over time. The price of LRECs is flexible and determined by market forces. It is expected that higher demand will result in higher LREC prices, which will encourage investment and

expansion of large-scale renewable generation.

4 Renewable Energy (Electricity) Amendment Bill 2010, Explanatory Memorandum, p. 6.

5 Renewable Energy (Electricity) Amendment Bill 2010, Explanatory Memorandum, p. 2.

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1.18 All existing Renewable Energy Certificates, including existing forward contracts and Small-scale Technology Certificates (STCs) created before 1 January 2011 will be included in the LRET market.

1.19 The LRET, including issues associated with its operation, is described in further detail in chapter 2.

Small-scale Renewable Energy Scheme

1.20 The SRES will operate quite differently. Under the SRES, owners of small-scale technologies, including solar water heaters, household photovoltaic (PV) systems and small-scale wind and hydropower systems are eligible to create Small- scale Technology Certificates (STCs) at a rate of one per MWh of electricity generation equivalent. The existing Solar Credits scheme, described in further detail in Chapter 3, continues to operate, meaning that small-scale wind, solar and hydro systems will attract multiple STCs per MWh until 2015.

1.21 The bill establishes a Clearinghouse that will provide a means to trade STCs at the fixed price o f $40 (exclusive o f GST).6 STCs can also be sold outside the Clearinghouse using private markets.

1.22 The SRES does not include annual targets, and so it will be a demand-driven, uncapped scheme. As the STC price is fixed, the quantity of STCs produced each year will be determined by the market. Liable entities are obliged to purchase all STCs created annually. However, in order to provide some certainty of the SRES liability in the short term, ORER will forecast STC creation and calculate a firm's liability using the projection. This will provide up to a year's forward notice of the SRES liability, with non-binding estimations published a further two years in advance as a guide for

liable entities.

1.23 The SRES, and issues associated with its operation, is described in further detail in chapter 3.

Assistance for emissions-intensive trade-exposed industries

1.24 The existing levels of assistance to Emissions-intensive Trade-Exposed (EITEs) industries will continue unchanged under the proposed legislation. Partial exemptions of 90 per cent for high emissions intensive industries and 60 per cent for medium emissions intensive industries will apply to the portion of the LRET over 9500 GWh and to the liability under the SRES. The 90 or 60 per cent exemption does not apply to the pre-existing MRET (9500 GWh) unless the price of an LREC appreciates above $40. ΕΙΤΕ industries will receive further assistance beyond this price point, however this is contingent upon the passage of the Carbon Pollution Reduction Scheme. Issues associated with assistance measures for EITEIs are described further in chapter 4.

6 Renewable Energy (Electricity) Amendment Bill 2010, Explanatory Memorandum, p. 21.

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COAG Review

1 -25 The committee notes that the Council of Australian Governments (COAG) is currently undertaking a review of specific renewable energy target issues. The review work, conducted by the COAG Renewable Energy Sub Group has included the release of five discussion papers to facilitate consultation. The five papers cover areas of interest including:

• eligibility of new small-scale technologies and heat pumps;

• self-generation provisions under the expanded national RET scheme;

• support for small-scale off-grid renewable generation;

• treatment o f new waste coal mine gas power generation in the RET; and

• treatment o f "Solar Credits’ Renewable Energy Certificates under the RET.

1.26 At the 19-20 April 2010 meeting, COAG noted the Commonwealth government’s announcement of plans to split the RET into separate large-scale and small-scale components.

COAG noted the Com m onw ealth announcement o f 26 Febmary 2010 to make significant changes to the Renewable Energy Target (RET) scheme, involving two separate parts - the Small-scale Renewable Energy Scheme and the Large-scale Renewable Energy Target. These changes are intended to address concerns being considered by the COAG Review o f Specific RET Issues regarding Renew able Energy Certificate (REC) prices and

additional RECs not backed by generation as part o f the Solar Credits mechanism . The remaining m atters within the scope o f the review will be finalised for consideration by COAG at its next m eeting.* 8

Impact of scheme on electricity prices

1.27 The majority of the liability arising from the LRET and SRES will accrue to purchasers of retail electricity, in the form of higher prices for electricity. However, modelling of the effects o f the scheme provided to the committee suggests that the cost impost resulting from the passage of the proposed legislation will be relatively

low (see Table 1). For instance:

Department of Climate Change and Energy Efficiency, Consultation on Additional Renewable Energy Target Issues, www.climatechange.gov.au/en/govemment/submissions/renewable- energy-target/coag-ret-target.asnx (accessed 7 June 2010).

8 Council of Australian Governments, Communique 19-20 April 2010, www.coag.gov.au/coag meeting outcomes/2010-04-19/index.cfm?CFlD=97318&CFTOKEN=96033893#energv (accessed 7 June 2010).

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Table 1—Estimated Impact of the Enhanced RET on Retail Electricity Prices9 2010-15 2016-20 2021-30

Percentage | $/MWh Percentage $/MWh Percentage 1 $/MWh With a 2013 CPRS start date Current RET 4.0 4.69 5.1 7.41 3.3 5.40

Enhanced RET 0.2 0.23 0.2 0.31 0.4 0.64

Total 4.2 4.92 5.3 7.72 3.7 6.04

With a 2014 CPRS start date

Current RET 4.2 4.73 5.2 7.47 3.3 5.42

Enhanced RET 0.2 0.26 0.2 0.31 0.4 0.64

Total 4.4 4.99 5.4 7.78 3.7 6.06

Source: McLennan Magasanik Associates, Impacts o f Changes to the Design o f the Expanded Renewable Energy Target, May 2010.

1.28 The government's commissioned modelling indicates that the proposed changes to the RET scheme would increase retail electricity prices by 23 cents per MWh (or 0.2 per cent) in the period 2010-15, assuming the CPRS is implemented in 2013. This is on top of the price effect of the current RET. Altogether, the amended RET scheme, including the division into the LRET and SRES, is estimated to raise electricity prices by $4.92 per MWh in the period 2010-15, increasing to $6.04 in the period 2021-30.

1.29 Figures provided by the department estimated that this price increase would add approximately $41 to the average household's annual electricity bill in the period 2010-15. O f this amount, only $2 of the increase would be attributable to changes made by the proposed legislation.9 10

1.30 There were differing views about the effect of the Renewable Energy Target on electricity prices. For example, the Australian Aluminium Council disagreed with the department's modelling that indicated declining contract prices for LRECs over the course of the scheme's lifetime:

Looking particularly at the recent changes announced to RET and their impact on electricity costs, we believe the changes unambiguously increase the cost o f the RET policy. The target has been adjusted so that it can only be higher than the previous target; it cannot be lower. The costs per

renewable energy certificate will be higher as a result o f splitting it into two streams. W e are particularly concerned about the difficulty in meeting the large-scale renewable energy target. I f that becomes difficult to meet, we

9 Department of Climate Change and Energy Efficiency, tabled document, 28 May 2010; figures based on the McLennan Magasanik Associates' Report to the Department of Climate Change and Energy Efficiency - Impacts o f Changes to the Design o f the Expanded Renewable Energy Target, May 2010.

10 Department of Climate Change and Energy Efficiency, tabled document, 28 May 2010; figures based on the McLennan Magasanik Associates' Report to the Department of Climate Change and Energy Efficiency - Impacts o f Changes to the Design o f the Expanded Renewable Energy Target, May 2010.

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would expect, as others have indicated, that the LRECS, the certificate price, will rise to the level o f the penalty charge, w hich is in the order o f $90 per certificate.11

1.31 The Energy Supply Association of Australia (ESAA) was also of the opinion that the LREC price would approach the shortfall charge tax-free equivalent of approximately $90.12 Mr Brad Page, ESAA, noted that the following decades would require major investment in the electricity sector for many reasons, of which the LRET was just one:

There will undoubtedly be clear elements where you have to build a new line to hook up to a new wind farm. Okay, you can see that. But for much o f the rest o f the investment it is not easily attributed to any one item or any one change. We are going to need im proved digital operation o f the

networks not just for renewable energy but also to m eet a variety o f new needs on the demand side, to actually engage consumers better, to give them functionality and to actually let us control the system with less installed capacity. All I am trying to say to you is that it is extremely

com plicated to unpick exactly what causes every elem ent.13

1.32 Mr Page referenced electricity price modelling by Port Jackson Partners projecting electricity price increases in excess o f 100 per cent resulting from a range of factors, including the existing RET.14

1.33 The Clean Energy Council provided the committee with modelling it had commissioned from ROAM Consulting. Mr Matthew Warren informed the committee that the modelling indicated the net cost of the entire scheme, including the SRES, to be much smaller than the expected increases that would occur anyway:

We have completed some modelling in M arch and recently in May, which we will table... This is in relation to the small-scale technology, so the uncapped SRES. The costs to households, where the costs are highest initially, are from 0.6 per cent to two per cent o f retail electricity prices.

Even with very aggressive sales behind the SRES, it still only increases household electricity bills by about two per cent, according to our

m odelling...

We calculate the net cost by 2020 o f the entire scheme as being about six per cent o f household power bills, so that will scale up as the scheme scales

11 Mr Miles Prosser, Australian Aluminium Council, Proof Committee Hansard, 28 May 2010, p. 27.

12 Mr Brad Page, Energy Supply Association of Australia, Proof Committee Hansard, 28 May 2010, p. 12.

13 Mr Brad Page, Energy Supply Association of Australia, Proof Committee Hansard, 28 May 2010, p. 11.

14 Mr Brad Page, Energy Supply Association of Australia, Proof Committee Hansard, 28 May 2010, p. 13.

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up. That is m uch smaller than the pow er bill increases o f up to 40 per cent already being proposed as a result o f network and transmission upgrades.15

1.34 AGL Energy noted that their own modelling aligned closely with the results of both the MMA report and the modelling commissioned by the Clean Energy Council.16

Committee view

1.35 On the balance of evidence provided, the committee considers that the proposed legislation is unlikely to significantly alter the price impact of the Renewable Energy Target. Furthermore, the impacts of the existing scheme already agreed to by the Parliament are in the committee's view minimal and represent an acceptable trade-off in delivering the government's commitment for 20 per cent of Australia's electricity to be generated from renewable sources.

Passage during the winter sittings

1.36 The committee endorses the evidence supporting the need for a swift passage of the bill before the winter recess. As Mr Matthew Warren, Clean Energy Council noted:

In a sense, we are right at the edge o f the road. W ithout this passage, it is then deferred until after the political election cycle, and there will be another year before it passes. The collateral damage on the industry alone will be significant. Staff will be lost, expertise will be lost and investment confidence will be lost. We have the support o f all the major retailers, who are the liable parties in Australia— so Origin, TRU and AGL. They see that we need some sort o f investment in new generation capacity in Australia.

So it has a material negative impact both on the energy market and the electricity m arket in Australia and on this industry. It sends a growth industry in reverse if this does not p ass.17

1.37 The committee is aware that large amounts of investment are waiting on the certainty the legislation can provide and notes that there is broad support from a range of stakeholders.

1.38 The committee makes a recommendation in chapter 4 regarding the timing of the passage of the bills.

15 Mr Matthew Warren, Clean Energy Council, Proof Committee Hansard, 28 May 2010, p. 24.

16 Mr Tim Nelson, AGL Energy, Committee Hansard, 28 May 2010, p. 22.

17 Mr Matthew Warren, Clean Energy Council, Committee Hansard, 28 May 2010, p. 25.

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Report structure

1.39 Over the course of the inquiry, a number of issues were raised in evidence and are discussed in detail in this report. Chapter 2 focuses on the LRET, chapter 3 on the SRES and chapter 4 on assistance measures for EITEs.

_____________________________________________________________________________________________________________________________ 9_

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Chapter 2

Large-scale Renewable Energy Target

2.1 As discussed earlier in this report the bills are intended to create a separate market for renewable energy generated by large-scale technologies1 and another market for energy generated by small-scale technologies from 1 January 2011 - the

Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). The committee considers the large-scale market (LRET) in this chapter.

O peration o f th e L R E T

2.2 The government's intention is that the LRET will operate similarly to the existing RET scheme established by the Renewable Energy (Electricity) Act 2000 (the Act).

2.3 Under the LRET, liable entities will be required to surrender certificates created by large-scale accredited generators (LRECs) to meet a share of the LRET. Annual surrender requirements will be calculated by the Regulator based on the liable entities' share of the wholesale electricity market and the total LRET for that year. If liable entities do not surrender the necessary number of LRECs they are required to pay a penalty or 'shortfall charge' o f $65 per MWh.

2.4 The annual LRET targets that are set by the bill start at 10 400 GWh in 2011, increasing to 41 000 in 2020 and remaining at that level until 2030 (see Figure 1). The annual targets and the final target proposed by the bill are lower than the targets currently required by the Act.2 This is to take into account the certificates that will be created under the small-scale renewable energy scheme (STCs). These STCs must

also be taken up by the liable entities. As discussed in Chapter 3, the government expects that the numbers of STCs created will be sufficient to increase the total targets to at least the levels required by the existing Act, which in 2020 is 45 000 GWh.3

1 Large-scale generators include wind farms, solar arrays, hydroelectricity, geothermal facilities and other accredited renewable generators.

2 See new section 40 at Item 123.

3 See, for example, Mr Geoff keeper, Deputy Secretary, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 47.

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Figure 1—Large-scale Renewable Energy Target

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Source: McLennan Magasanik Associates, Impacts of Changes to the Design of the Expanded Renewable Energy Target, May 2010, p. 20.

Certainty

2.5 The LRET is expected to provide certainty for large-scale generators of renewable energy, as explained by Mr Leeper, Deputy Secretary of the Department of Climate Change and Energy Efficiency (DCCEE):

At present there is a perception, certainly in the marketplace, that uncapped growth in the small-scale certificates is crowding out large-scale investment by artificially lowering the price. By separating the two schemes we are

looking to provide investment certainty in the large-scale sector.4

2.6 Some witnesses considered that the establishment of a separate LRET market was necessary due to the large numbers of low value RECs being created by small-scale technologies under the existing RET scheme. This has meant that liable entities were meeting their obligations largely from these RECs which were produced at a lower price than would be required to deploy large-scale generators. Proponents of the bills submitted that this has discouraged investment in the large-scale generation of power.5

4 Mr Geoff Leeper, Proof Committee Hansard, 28 May 2010, p. 49.

5 See, for example, Mr Lane Crockett, General Manager Australia, Pacific Hydro, Proof Committee Hansard, 28 May 2010, p. 1.

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2.7 Large generators of electricity from renewable sources support the establishment of a LRET on the grounds that it will provide certainty and encourage investment in the industry.6 Infigen Energy, for example, submitted that:

We have every confidence that the deployment o f large utility scale, renewable energy projects and small residential scale applications will thrive once these changes are legislated.7

2.8 The Energy Supply Association of Australia (ESAA), which represents more than 40 major energy utilities including generators and retailers, informed the committee that it supports the provisions in the bill that establish the LRET. ESAA submitted that the establishment o f the LRET appears to address the concerns of

investors in large-scale renewable energy generators concerning the collapse of the spot price for RECs in the second half of 2009.8

2.9 Witnesses submitted evidence to indicate the amount of investment and the additional employment that might flow from functional LRET. Pacific Hydro, for example, claimed that if the bills are passed, approximately $25 billion in new investment and 26 000 jobs would not go off-shore.9

2.10 McLennan Magasanik Associates' (MMA) modelling suggests that investment to 2020 under the existing RET scheme will be in the order of $14-16 billion, which will be increased by $2.1 billion under the LRET. Implementation of the LRET is also

expected to bring forward investment, with significant investments being made in the period to 2016.10

2.11 Much of the expected investment and employment will take place in regional areas. Examples were provided by AGL which informed the committee that the Hallet wind farms in South Australia have so far provided 233 construction jobs with a further 15 operations positions.11 1 2 Pacific Hydro's Portland wind farm created 400 jobs,

a large proportion of which were from local contractors. The company sourced its towers from a Portland based engineering firm that employs approximately 150 people solely dedicated to the manufacture of wind turbine towers.1"

6 See, for example, Mr Jonathan Upson, Senior Development Manager, Infigen Energy, Proof Committee Hansard, 28 May 2010, p. 3.

7 Infigen Energy Limited, Submission 12, p. [1],

8 Energy Supply Association of Australia, Submission 41, p. 1.

9 Mr Lane Crockett, General Manager Australia, Pacific Hydro, Proof Committee Hansard, 28 May 2010, p. 1.

10 Impacts o f Changes to the Design o f the Expanded Renewable Energy Target, Report to the Department o f Climate Change and Energy Efficiency, McLennan Magasanik Associates, May 2010, p. 28.

11 AGL energy Limited, Supplementary Submission, 1 June 2010, p. 1.

12 Mr Lane Crockett, General Manager Australia, Pacific Hydro, Proof Committee Hansard, 28 May 2010, p. 1.

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2.12 Although there was general support for the establishment of the LRET, some witnesses were concerned about the provision to allow the use of banked RECs and RECs attaching to pre-existing contacts within the LRET. The possible cost of LRECs was also an issue that was raised in evidence.

Banked Renewable Energy Certificates13

2.13 The bill provides that RECs that have been created under the RET scheme and that have not been surrendered before 1 January 2011 will be able to be acquired by liable entities to meet their LRET obligations in future years.

2.14 Pacific Hydro informed the committee that:

The ability to bank deemed RECs for retirement in the LRET is expected to create an oversupply o f approxim ately 23 million RECs by the end o f 2010. W ith this unprecedented surplus, no new investment in large scale renewable capacity will be required to meet liability before 2014.14

2.15 To diminish the surplus banked RECs sooner, the witness requested that the LRET target be increased in the first two years of the scheme, from 10 400 to 14 200 GWh in 2011 and from 12 300 to 14 200 GWh in 2012. Pacific Hydro considered that the revised targets would reduce the impact of the oversupply of RECs in those years and 'promote immediate investment in large-scale projects'.15

2.16 Pacific Hydro was also concerned about the risk of an oversupply of RECs resulting from pre-existing contracts. (These RECs will be able to be used by liable entities in the new LRET market to demonstrate compliance with their obligations.) The company submitted that increased targets for the first two years of operation of the LRET would reduce that risk. The company also suggested criteria for pre-existing contracts that would limit the numbers of RECs in the LRET market.16

2.17 AGL Energy Limited, which is the major investor in large-scale renewables in Australia, informed the committee that it supported the use o f banked RECs in the LRET, including those that will be created during the remaining months of 2010. The company stated that 'these arrangements will preserve existing investment decisions made under the RET scheme'.17 Origin Energy Limited cautioned against limiting the number of banked RECs that might be created by the end of 2010 and then used in the LRET from 2011.18

13 RECs that have been created but not yet surrendered are referred to as being 'banked'.

14 Pacific Hydro Pty Ltd, Submission 2, p. [1],

15 Pacific Hydro Pty Ltd, Submission 2, p. [2],

16 These criteria may be found in Submission 2, pp [2]— [3].

17 AGL Energy Limited, Submission 7, p. 2.

18 Origin Energy Limited, Submission 30, p. 2.

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2.18 Modelling commissioned by DCCEE of the impacts of the expanded renewable energy target indicates that following the 14 February 2011 surrender period there would be approximately 16.2 million 'excess' RECs in the market.19 The department stated that although the actual numbers of excess RECs had been increasing each year, as a proportion of the following year's target the excess RECs have been declining, 'which means that the liquidity in the market is declining'.20

2.19 Mr Leeper from the department stated that:

Some liquidity is good to help the market function. But liquidity is coming down over time as a proportion o f the following year’s target in trend terms— I will not say in absolute terms— and our modelling suggests that within three or four years the large-scale sector will either have to have brought through a significant am ount o f investm ent that is not currently on

the drawing board or they will be facing shortfall charges.21

2.20 Excess RECs include RECs that have not yet been registered with the Regulator.

Committee view

2.21 The committee appreciates the concerns of some generators about the possible adverse effects that a large number of banked RECs and RECs attaching to pre-existing contracts might have on investment decisions. However, it has also aware of the department's assertion that without a stock of banked RECs there is a risk that

liable entities might choose to pay the shortfall charge rather than support the deployment of new renewable energy capacity.

2.22 The committee has concluded that the balance of the evidence suggests that the bills as drafted will support significant investment and employment in the renewable energy industry.

Prices of LRECs

2.23 The committee heard conflicting evidence about the likely future prices for LRECs.

2.24 The MMA modelling suggests that the contract price of the LRECs will fall over time from around $67 in 2011 to $22 by 2030.22 The model necessarily makes

19 Impacts o f Changes to the Design o f the Expanded Renewable Energy Target, Report to the Department o f Climate Change and Energy Efficiency, McLennan Magasanik Associates, May 2010.

20 Mr Geoff Leeper, Proof Committee Hansard, 28 May 2010, p. 51.

21 Mr Geoff Leeper, Proof Committee Hansard, 28 May 2010, p. 51.

22 Department of Climate Change and Energy Efficiency, Answers to Questions on Notice, May 2010, p. 13.

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certain assumptions about costs and availability of renewable energy in future years and assumes that a CPRS will be implemented in 2013 or 2014. The department observed that the CPRS would reduce REC prices over time as the carbon price increases the price of electricity.23

2.25 Some witnesses suggested that the price of LRECs would increase, perhaps to the after-tax level of the shortfall charge ($92 per MWh). The Australian Aluminium Council stated that:

The costs per renewable energy certificate will be higher as a result of splitting [the RET] into two streams. We are particularly concerned about the difficulty in meeting the large-scale renewable energy target. If that becomes difficult to meet, w e would expect, as others have indicated, that [the LRET certificate price], will rise to the level o f the penalty charge, which is in the order o f $90 per certificate.24

2.26 The ESAA suggested that by 2020 the technologies would demand that the LREC price would approach the shortfall charge,25 while another witness submitted that in the longer-term, RECs will be in short supply and their price will remain around the after-tax price of $90.26

2.27 In the context of LRET market liquidity, Mr keeper stated that modelling suggests that by 2014, without significant as yet untaken investment decisions, there will be a shortfall of RECs in the large-scale market resulting in liable parties paying the shortfall charges.27 Mr Prosser, Executive Director, Australian Aluminium Council, observed that the MMA modelling assumes that a large quantity of

renewable energy from geothermal sources would be available and stated that:

If that was not able to deliver according to the time line in the modelling [coming online in around 2014], then that is a large portion o f the target that will get harder to meet, and will push the price up towards the shortfall charge.28

23 Department of Climate Change and Energy Efficiency, Answers to Questions on Notice, May 2010, p. 13.

24 Mr Miles Prosser, Executive Director, Australian Aluminium Council, Proof Committee Hansard, 28 May 2010, p. 27.

25 Mr Brad Page, Chief Executive Officer, Energy Supply Association of Australia, Proof Committee Hansard, 28 May 2010, p. 12.

26 Ms Fiona OHehir, Chief Executive Officer, Greenbank Environmental Pty Ltd, Submission 15, p. [2].

27 Mr Geoff Leeper, Proof Committee Hansard, 28 May 2010, p. 51.

28 Mr Miles Prosser, Executive Director, Australian Aluminium Council, Proof Committee Hansard, 28 May 2010, p. 31.

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C om m ittee view

2.28 It is obviously not possible to reach firm conclusions about the level of future LREC prices because of the many variables that are involved. The committee notes, however, that the MMA modelling suggests that the LREC price should be significantly less than the shortfall charge of $92.

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162

Chapter 3

Small-Scale Renewable Energy Scheme Introduction

3.1 As described in Chapter 1, the proposed legislation will separate the Renewable Energy Target (RET) market into the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). By comparison with the LRET, the establishment o f the SRES is a more fundamental change to existing arrangements.

Operation of the SRES

D efin itio n o f 'sm all-scale'

3.2 The small-scale technology category includes renewable electricity generation units under a certain size and solar water heaters or air-sourced heat pump water heaters. Under current regulations, small generation units include:

• Hydroelectric systems with a capacity o f 6.4 kW or less and a total annual electricity output of 25 MWh or less;

• Wind systems with a capacity of 10 kW or less and a total annual electricity output of 25 MWh or less; and

• Solar (photovoltaic) systems with a capacity of 100 kW or less and a total annual electricity output of 250 MWh or less.1

3.3 Solar water heaters must meet certain standards and have a capacity o f 700 L or less. However, in certain circumstances larger systems are permitted.2

S m a ll-sca le T ech n ology C ertificates

3.4 The proposed legislation establishes a new class of Renewable Energy Certificate called 'Small-scale Technology Certificates' (STCs).3 Owners or installers of the above-mentioned systems will receive a certain number STCs based on the estimated output of the technology. This estimation uses infomiation such as the model installed, the expected lifespan of the unit and the location of the installation.

1 Renewable Energy (Electricity) Regulations 2001, para. 3(2).

2 Solar Water Heater (SWH) Owners Guide, Fact Sheet, Office of the Renewable Energy Regulator, April 2010, www.orer.gov.au/publications/pubs/swh-owners-guide-0410.pdf (accessed 1 June 2010).

3 See new section 17B and new Part 2A.

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3.5 Deeming arrangements that currently apply under the existing RET will continue under the SRES. This means that owners or installers of small-scale technology systems receive STCs for the unit's expected lifetime generation upfront in order to subsidise the cost of installation. For solar water heating systems, STCs can only be created once, using a deeming period of ten years. Owners or installers of small generation units can opt for STCs to be created in batches one, five or 15 year deeming periods.4

3.6 In principle, one STC is equivalent to one MWh of renewable energy generation. However, the Solar Credits scheme that is currently in operation will continue under the SRES. This means that owners or installers of small generation units will earn multiple STCs per MWh of generated electricity, with the multiplier

reducing over time.

C learing h o u se

3.7 The proposed legislation establishes a clearing house, to be administered by ORER, which will provide a mechanism for the transfer of STCs. Sellers of STCs can apply to sell them through the clearing house at a fixed price of $40 per STC (GST exclusive).5

3.8 When an owner applies to the clearing house to sell an STC, it is added to a list that operates as a queue. The clearing house will then offer the STCs for sale in the order in which they were received. When a buyer requires an STC, the STC at the top of the list (ie the earliest STC registered with the clearing house) is sold and the $40 remitted to the seller.

3.9 If there are no STCs available for sale, the clearing house will be able to create and sell additional STCs (still at the fixed price). The next time an STC is registered for sale, the seller is paid the $40 and the registered STC is cancelled, in lieu of the STC previously created. Conceptually, this simply represents bringing forward future STCs for sale in the present.

3.10 STCs may also be traded outside the clearing house, but the existence of the clearing house will constrain the price to $40 or less.

L ia b ility u n d er th e S R E S

3.11 There is no set target for renewable energy generation under the SRES. Instead collectively, liable entities are obliged to purchase and surrender all STCs created under the scheme, regardless of how many are created.

4 SGU Owners Guide, Fact Sheet, Office of the Renewable Energy Regulator, April 2010, www.orer.gov.au/publications/Dubs/sguowners-guide-0410.Ddf (accessed 1 June 2010)

5 New Part 2A, Item 58; The GST amount would be $4; The $40 fixed price is set in nominal terms and is not indexed for inflation.

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3.12 Calculating a firm's liability under the SRES is more complicated than under the existing RET, as the liability is calculated based on an estimation of how many STCs will be created in the year ahead.

3.13 The liability is calculated using the Small-scale Technology Percentage (STP) which will be published in regulations on or before 31 March of the relevant year. The STP for 2011 for example, would be:

Projection of the number of STCs to be created in 2011 (GWh) Total projected relevant acquisitions in 2011 (GWh)

3.14 The STP would be used to calculate an individual firm's liability based on its usage of electricity, with the liability payable in four instalments. The publication of the STP by March of the relevant year provides liable entities with some forward notice. Furthermore, ORER will publish estimates of the STP for the following two years. While non-binding, these will provide guidance to liable entities.

Q u a rterly S u rre n d e r o f S T C s

3.15 The SRES features quarterly rather than annual STC surrender periods. A discussion paper prepared by the Department of Climate Change and Energy Efficiency noted that quarterly surrender periods would provide more regular demand

for STCs and hence 'clearing of the pool' on a more regular basis.6 The dates for surrender are shown in Figure 2.

Figure 2—Quarterly SRES surrender dates

28-Apr-11 28-Jul-11 28-Oct-11 14-Feb-12

First quarter surrender Second quarter surrender Third quarter surrender Fourth quarter surrender

35% Y 25% X 25%

3? X

X

Feb 11 Marti ' t 1 ' '

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Ajigii Sep 11 Oct 1 Y ' '

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31-Mar-11

Deadline for Regulator to set SPP

Source: Amended version of Figure 5, Enhancing the Renewable Energy Target, Discussion Paper, Department of Climate Change and Energy Efficiency, March 2010.

3.16 Liable entities will need to surrender STCs in four instalments each year to account for their SRES liabilities. This method is similar to the Pay-As-You-Go company tax arrangements. In essence, the liability is calculated with reference to:

6 Department of Climate Change and Energy Efficiency, 'Enhancing the Renewable Energy Target' Discussion Paper, March 2010, p. 15.

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• the STP (estimated using projections of STC creation and total electricity acquisition);

• historical electricity acquisition from the previous year; and

• an adjusted fourth quarter liability that takes into account electricity

acquisition for the current year once it is known.

3.17 An individual firm's liability in the first three quarters of 2011 is calculated based on the firm's electricity acquisition in 2010 and the STP. For instance, if the firm acquired 100 000 MWh of electricity in 2010, and the 2011 STP is 10 per cent, then the 2011 liability is calculated as 10 000 MWh, or 10 000 STCs, payable in

quarterly instalments. As the 2011 STP must be published by 31 March 2011, firms will have at least one month's notice of their first-quarter STC liability, payable on 28 April.

3.18 The quarterly instalments are weighted differently, with 35 per cent of the liability due in the first quarter, 25 per cent in the second quarter and 25 per cent in the third quarter. The fourth quarter features an adjustment taking into account actual electricity acquisitions for that calendar year.

3.19 Rather than using the historical 2010 electricity acquisition data to calculate the 2011 liability (as in the first three quarters), the fourth quarter surrender amount is adjusted to take into account actual 2011 electricity acquisition data. Essentially the fourth quarter becomes a 'true-up' mechanism that ensures the relevant year's liability is calculated using the same year's electricity acquisitions. However, the STP remains unchanged, with any discrepancy between the amount of STCs created in a year versus the number surrendered reflected in the following year's STP.

Issues

U n capped lia b ility u n d er the S R E S

3.20 The explanatory memorandum for the bill notes that the establishment of the SRES represents a:

...possibly open-ended com m itm ent to small-scale generation with cost impacts for the liable entities. The proposed approach attempts to mitigate this risk by monitoring the uptake in the market and reviewing the fixed price in 2014.

3.21 The possible risk associated with establishing an uncapped SRES liability was an issue commonly raised by witnesses and submitters. With no set target under the SRES, liable entities collectively must purchase and surrender all STCs that are created through the scheme.

3.22 The TRET has been set at 41 000 GWh in recognition that the SRES is expected to result in at least 4000 GWh of renewable energy generation. The

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government retains a commitment to delivering at least 45 000 GWh of additional renewable energy generation under the proposed legislation.7 The government has stated that if the SRES does not deliver the 4000 GWh minimum, the LRET will be revised upwards to compensate. However, the LRET will not be revised down if the

SRES exceeds the nominal 4000 GWh target.8

3.23 The MMA report predicted an eventual SRES size of 6000 GWh, while other organisations predicted figures as high as 10 000 GWh.9

3.24 The Department of Climate Change and Energy Efficiency informed the committee that the MMA modelling suggested that the amount of renewable generation in 2020 would be 22 per cent of total electricity generation.10

3.25 Many submissions expressed concern that the uncapped nature of the SRES represents a significant risk to liable entities in the event that household uptake of small generation units and solar water heaters exceeded expectations.

3.26 For example, A3P noted that:

Capping the price but not the quantity o f small-scale renewable electricity certificates introduces uncertainty into the electricity price for consumers. This problem is compounded in the case o f electricity-intensive processes for which electricity makes up a significant proportion o f their operating

costs. The small-scale portion o f the RET should be capped, or removed from the RET altogether.11

3.27 Alcoa noted that the design of the SRES reflected a transfer of risk to the liable entity sector. Previously, the influx of RECs from small-scale installations had reduced REC prices and jeopardised investment in large scale renewable energy generators. Under the proposed scheme, the risk posed by the uptake of small-scale technologies would be transferred to liable entities in the form o f the uncapped

obligation to purchase all STCs that were created.12

3.28 The Australian Industry Greenhouse Network were of a similar opinion, stating:

The effect o f the SRES proposal is to remove all price risk from SRES suppliers and to substantially reduce the price risk faced by LRET

7 Second Reading Speech, p.15.

8 Mr Geoff Leeper, Deputy Secretary, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 50.

9 Australian Industry Greenhouse Network, Submission 43, p. 2.

10 Mr Geoff Leeper, Deputy Secretary, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 47.

11 A3P, Submission 42, p. 2.

12 Alcoa, Submission 18, p. 5.

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suppliers. However, these risks have not been removed from the renewables markets — rather, they have been transferred to liable parties and electricity consum ers.13

3.29 The Energy Supply Association of Australia felt that the scheme could be simplified by the government instead providing a subsidy for small-scale technologies through a budgetary measure:

On the other hand, the resultant Small-scale Renewable Energy Scheme (SRES) has the same effect as an upfront capital subsidy for households, community groups and businesses to install small-scale renewable generators and solar w ater heaters, but with considerable complexity in the administration and delivery due to the Government’s reluctance to take fiscal responsibility for its ow n policy initiatives.1

3.30 Mr Brad Page, CEO of the Energy Supply Association of Australia noted that the risk associated with the uncapped liability of the SRES would add to existing risks in the electricity market:

One o f the issues that the industry I represent faces very substantially, right now, on every front is an enorm ous amount o f risk. It is being put at risk because o f delays, because o f changes and because o f open-ended schemes and, quite frankly, it is very hard to make efficient investment decisions when there is uncontrollable risk .15

3.31 Following consultation with stakeholders by the Department of Climate Change and Energy Efficiency, the proposed model seeks to provide certainty about the SRES liability at least one year in advance, with guidance provided on the liability in the subsequent two years. As noted in the first half of this chapter, a firm's annual liability will be calculated using the STP which will be based on projected STC creation and would be published at least by March of the year in question. This would give liable entities up to a year's forward notice of their SRES liability. In addition, ORER would publish estimates o f the STP for the subsequent two years as a future guide for liable entities.

3.32 Origin Energy noted that the proposed SRES is overly complex, but felt that the inclusion of a projected annual target and the publication of an estimate of the STP in the following two years was useful. Origin Energy was concerned that the notification of the annual STP, permitted to be as late as 31 March, would mean that

liable entities received only one months notice of their first quarter liability. This was compounded by the fact that first quarter liability represented 35 per cent of the annual total.16

13 Australian Industry Greenhouse Network, Submission 43, p. 1.

14 Energy Supply Association o f Australia, Submission 41, p. 1.

15 Mr Brad Page, Energy Supply Association of Australia, Proof Committee Hansard, 28 May 2010, p. 11.

16 Origin Energy, Submission 30, p. 3.

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3.33 Mr Andrew Livingston, the Renewable Energy Regulator, noted that while the deadline for prescribing the STP each year would be 31 March, in practice ORER would endeavour to publish the STP as early as January.

For the very first year o f the system there could be a tight timeframe, but after that with the way it is organised we will give a year in advance as w ell.17

3.34 Greenbank Environmental noted that, in most cases, liable entities would be able to pass any extra costs resulting from high uptake of small-scale technologies to the consumer. The majority of the liability would therefore be borne by consumers of

electricity.18

3.35 The exception to this would be industries that traded goods at world prices and therefore competed with overseas firms not subject to an overall SRES liability. For this reason, Emissions Intensive Trade Exposed (EITEs) industries were particularly concerned about the SRES liability and the degree to which they were

exempt from the scheme. This issue is discussed in chapter 4.

3.36 The Energy Retailers Association o f Australia supported the proposed legislation, but suggested that the number of STCs created each year should be limited to the number forecast by ORER, effectively capping the scheme:

Further certainty could be given to retailers by placing a cap on the number o f STCs produced in any given period, for example the length o f time the [STP] is projected. This could be capped to the projected [STPs] and then this w ould ensure that there will not be the need to reconcile unpurchased

[STCs] into future [STPs].19

3.37 TRUenergy, while generally supportive of the bill, felt that the SRES, including the provision for annual forecasting of the SRES liability was overly complex and inefficient. TRUenergy therefore recommended adopting a fixed target

approach to the SRES.20

3.38 Rio Tinto noted that the risk associated with the open-ended commitment to small-scale technologies could undermine certainty in the operation of the scheme, particularly given the planned 2014 review.21

3.39 The Australian PV Association was concerned that the uncapped nature of the SRES may lead to uncertainty about the scheme's long term viability:

17 Mr Andrew Livingston, Office of the Renewable Energy Regulator, Proof Committee Hansard, 28 May 2010, p. 55.

18 Greenbank Environmental, Submission 15, p. 1.

19 Energy Retailers Association of Australia, Submission 26, p. 1.

20 TRUenergy, Submission 28, p. 2.

21 Rio Tinto, Submission 9, p. 1.

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The SRES market appears likely to very rapidly reach the nominal 4000 GWh by which the RET target has been reduced. Liable parties will strongly oppose any continued requirement to purchase RECs from small-scale generators at that stage. Hence the scene is set for another sudden policy change, and a boom-bust cycle for the industry.22

3.40 The issue o f an overheated SRES market industry is discussed below.

Im p a ct o f sta te a n d territory p o lic ie s

3.41 Many submitters noted that state and territory government policies strongly influence demand for small-scale technologies and hence could significantly impact on the overall size of the liability under the SRES.

3.42 Rheem Australia noted that there was a high likelihood that ORER may underestimate uptake of small-scale technologies and hence set the annual STC liability too low. This was in part because alternate Commonwealth, state and territory policies introduced subsequent to the estimation of the STP may drive demand in unforseen ways:

For example, changes to the Federal Government’s Solar Water Rebate scheme have reduced demand for heat pumps by 70% in the last 9 months. Similarly, the NSW Government’s introduction of a gross feed in tariff for PV installations has substantially increased the uptake of solar PV. Neither of these changes could have been foreseen and therefore could not have been included in the annual target setting.23

3.43 Peter Sachs Industries shared this opinion, stating:

Since September 2009 there have been two Federal Government solar hot water rebate reductions, a NSW Government solar hot water rebate reduction, a QLD Government Solar Hot Water Program scrapped and a new QLD Solar Hot Water Rebate introduced. The NSW Government

introduced a gross feed in tariff for PV installations dramatically increasing uptake of photovoltaic solar panels and the Federal Government Home Insulation Program has been halted. Each one of these program adjustments or policy changes has had, or will have, a profound effect on the solar hot water and solar photovoltaic markets.24

3.44 The Cement Industry Federation (CIF) also noted that state and territory policies concerning renewable energy would operate in concert with the SRES to drive up demand. The CIF was of the opinion that, in the absence of a cap on the size

22 Australian PV Association, Submission 20, p. 2.

23 Rheem Australia, Submission 31, p. 2.

24 Peter Sachs Industries, Submission 46, p. 2.

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of the SRES, there was a need for 'adequate policy levers available to the Australian Government to control a blow out in the uptake of the SRES.'25

S o la r C redits

3.45 The SRES will continue the Solar Credits multiplier arrangements that currently exist under the RET legislation. The Solar Credits scheme will continue to provide multiple certificates per MWh of electricity generation from small generation units. The Solar Credit multiplier operates as follows:

Table 2—Solar Credits Multiplier

Installation Period Multiplier: STC per MWh

9 June 2009-30 June 2012 5

1 July 2012-30 June 2013 4

1 July 2013-30 June 2014 3

1 July 2014-30 June 2015 2

Source: Renewable Energy (Electricity) Regulations 2001, 27 March 2010.

3.46 The multiplier only operates with respect to certificates related to the first 1.5 kW of the rated power output of the unit.26 2 7 2 8

3.47 Mr Adrian Ferraretto, Solar Shop Australia, noted that in practice this limited consumer demand to smaller systems, stating:

If you look back at data from the department o f climate change to see what happened 10 years ago when the governm ent had a 1.5 kilowatt rebate, the average system size installed was 1.5 kilowatts. W hen they changed it in 2003 to a one kilowatt rebate, the average system size installed was around

one kilowatt. The reason for this behaviour is that it goes to the value proposition. When you buy to the cap o f the rebate, I suppose you are getting the best value for money. I f you are buying m ore panels after the rebate has been capped you are pretty m uch buying unsubsidised solar

panels, w hich costs you a lot o f m oney and offers poor value for money, relatively speaking, com pared to getting fully subsidised solar panels.

3.48 In addition to receiving multiple certificates per MWh of generation, owners or installers o f SGUs such as PV and solar hot water, are also able to receive the estimated life-time generation of RECs 'up front' in order to subsidise the cost of

installation through a process called 'deeming'."8

25 Cement Industry Federation, Submission 14, p. 3.

26 Renewable Energy (Electricity) Regulations 2001, para. (3)(c)

27 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, p. 40.

28 Under the deeming arrangements, the expected lifetime generation of RECs is granted up-front. For instance, a rooftop PV system is expected to last 15 years, so 15 years worth of expected generation for each type PV model is provided up front.

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3.49 The resulting subsidy for example, for a Sydney household that installs a 1.5 kW solar panel system in 2011 is an upfront discount o f $6,200 through STCs.29

O verh eatin g the S R E S m arket

3.50 Representatives of six solar photovoltaic (PV) businesses noted that costs of solar PV had declined significantly over time and that the Solar Credits scheme had failed to keep pace with the price of installing a PV system.30 For example Mr Adrian Ferraretto of Solar Shop Australia told the committee:

In the past 18 months, we have witnessed a dramatic drop of more than 50 per cent in the price of solar panels. This is because dedicated photovoltaic polysilicon plants have become extensively commercialised throughout the world following the silicon shortage that we experienced five years ago. Ninety-nine per cent of the world’s solar panels are made from silicon. It is the single biggest cost of goods in the manufacture of solar panels. Even with these record low prices over the past 18 months, solar panel manufacturers are still making good margins—good profits— and they are also forecasting further cost reductions in the price of solar panels.31

3.51 The businesses' joint submission noted that this had led to the emergence of installers offering minimal or no cost PV systems under certain circumstances:

Combining these market changes [lower PV wholesale prices] with the current Solar Credits multiplier, in Zone 3 (Sydney, Perth, Brisbane, Adelaide) the actual cost to the consumer to install a 1.5kW solar power system is minimal. In fact, we are already seeing suppliers offering systems at no cost to the consumer in Zone 2, (Alice Springs, Broken Hill, Broome).

It is unsustainable for the industry to have solar power systems available at no cost to consumers. Solar power systems offered at no or low cost encourage low standards in materials, poor returns on financial and environment investments, and could cause long term damage to the entire industry.32

3.52 Greenbank Environmental noted a similar concern:

As the economies of scale drive future price reductions in the deemed category, it could cause those underlying technologies to become cost

29 Department of Climate Change and Energy Efficiency, 'Enhancing the Renewable Energy Target' Discussion Paper, March 2010, p. 8.

30 Solar Shop Australia, Silex Solar, Sunpower Corporation Australia, Suntech Power Australia, Conergy Australia and SMA Australia, Submission 24, p. 1.

31 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, pp 40­ 41.

32 SolarShop Australia et. al, Submission 24, p. 1.

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neutral in a short space o f time, especially if the deem ed sector is to be uncapped.33

3.53 The Department of Climate Change and Energy Efficiency informed the committee that it was not aware o f offers of 'free' solar PV systems in the industry. Ms Shayleen Thompson informed the committee that:

...claim s o f solar panels being installed for free have been made from time to time over the last year or so. The department has repeatedly sought evidence that these claims are in fact correct, and to m y knowledge we have not been provided with any evidence that dem onstrates the veracity o f those

claim s.34

3.54 Ms Thompson noted that the department's own modelling indicated that the uptake of small-scale technologies would most likely decline over time:

We understand and talk to those in the industry that feel that other scenarios may unfold, but as I said, the m odelling examines the forms o f support that are around for these systems and draws the conclusion that those forms o f support are winding back. A s M r Leeper has said, the outcome o f that in the m odelling report is that the num ber o f certificates created by the small-scale units declines quite significantly from its height in the early years o f the schem e.35

3.55 During the course of the inquiry, the committee became aware of current advertisements for 'free' rooftop PV systems, but was unable to assess how widespread the offers were or how stringent were the conditions attached to the offer.36 Nevertheless, given the available evidence, the committee considers that declining PV

costs combined with existing state and territory rebates and current Solar Credits arrangements could feasibly result in free or extremely low-cost PV systems to households.

3.56 Several businesses that appeared at the public hearing were concerned that the availability o f free systems and an associated spike in demand could result in significant risks to the industry. Mr Ferraretto noted that such a spike in demand had already occurred under the former Solar Homes and Communities Plan (SHCP) rebate:

33 Greenbank Environmental, Submission 15, p. 1.

34 Ms Shayleen Thompson, First Assistant Secretary, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 50.

35 Ms Shayleen Thompson, First Assistant Secretary, Department o f Climate Change and Energy Efficiency, P roof Committee Hansard, 28 May 2010, p. 50.

36 Solar Shop Australia, response to question on notice, 28 May 2010 (received 1 June 2010) and Greenbank Environmental, Supplementary submission to Submission 14.

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In the dying days of the old $8,000 rebate, or the SHCP, we saw 60,000 systems given away for free in just a few weeks at a cost of $480 million to the taxpayer.37

3.57 Mr Ferraretto informed the committee that 60 000 of these systems could generate up to 11 million certificates, of which 80 per cent would be as a result of the 5-times Solar Credits multiplier.38 The committee notes that this would be close to the total number of certificates required for surrender in 2010 under the existing RET scheme.

3.58 PV businesses that appeared before the committee were concerned that an overheated market may result in a decline in quality, harming the long-term reputation of the industry:

The only way to offer a free system is by using really cheap products and the really cheap installation and maybe frames that are made out of galvanised steel instead of aluminium, that will not last as long as what the solar panel guarantee is and things like that. To offer a free system you have to cut comers.39

3.59 Mr David McCallum from Conenergy, was o f the opinion that if PV installation was provided for free, the subsequent swift upswing in demand could lead to a greater use of unskilled or poorly trained labour:

...when the system is free, [with] installation capacity where they may be installing a couple of hundred systems a week in suburbs and towns, you have mass deployment of unskilled labour carrying out the vast majority of those installations, with the electrician connecting the system to the grid. So, the electrician turns up at the end of the day.40

3.60 Industry participants noted that currently the sector was well regulated, including accreditation requirements for both equipment and installers:

There is a lot more rigour in the installation of solar panels. You need to not just be an electrician to receive the solar credits multiplied but also do an extra course on top of that to receive Clean Energy Council accreditation.41

3.61 As the Department of Climate Change and Energy Efficiency noted, despite a spike in solar panel installations in 2009, they were not aware of any resulting safety concerns.

One of the things that should be observed about solar panel installations is that, even though we had 50,000 installations in the last year, there have

37 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, p. 40.

38 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, p. 45.

39 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, p. 44.

40 Mr David McCallum, Conenergy Australia, Proof Committee Hansard, 28 May 2010, p. 45.

41 Mr Adrian Ferraretto, Solar Shop Australia, Proof Committee Hansard, 28 May 2010, p. 43.

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been no reports o f serious safety outcomes. As far as w e are aware, there have been no reports o f fire or electrocution resulting from those

installations, despite the very significant increase. You would have to say, from any perspective, that the incidence o f very adverse outcomes from solar panels in Australia is very low .42

3.62 The department noted that it was seeking to further improve the already robust safety regulations. Ms Thompson stated:

The current regulatory fram ework requires that installers o f solar panels are in fact accredited through appropriate TAPE-type training arrangements. The CEC accreditation m les require that they be licensed electricians, and the CEC accreditation arrangem ent also requires that they use panels that meet Australian and international standards, both for the panels themselves,

other modules of equipment that go on the ro o f and also with respect to the panel design or layout on the ro o f...

In addition, as well as extending, the deeming arrangement will also be extending the scope to cover other small-scale technologies, so we will be extending those arrangements to cover small-scale hydro and micro wind. We are also preparing regulations that will directly require that the installer be a licensed electrician. We are strengthening those arrangements through

the regulatory framework43

3.63 Mr Ferraretto, Solar Shop Australia, recommended that the Solar Credits multiplier should be reduced but cover larger capacity and more expensive systems. In the opinion of small-scale PV installers that appeared before the committee, this would ensure that systems would not be offered for free, but would provide a reasonable subsidy for a greater range o f systems.44 4 5

3.64 Mr David McCallum, ConEnergy, noted that by ensuring consumers had to spend some of their own money in order to purchase a solar PV system, they would have an incentive to pursue quality:

As soon as you can convert the consumer from a free system and they now have to p u t their hand in their pocket to acquire a product, their motives change. They start looking for the quality o f the supplier, the quality o f product and the performance o f the system rather than the issue of, "It

doesn’t matter. I don’t care because I am not paying for it.’

3.65 Subsequent to the hearing, another solar PV market participant, Nu Energy, provided a submission to the committee that disagreed with the views of the PV

42 Ms Shayleen Thompson, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 54.

43 Ms Shayleen Thompson, Department of Climate Change and Energy Efficiency, Proof Committee Hansard, 28 May 2010, p. 53.

44 SolarShop Australia et. al, Submission 24, p. 2.

45 Mr David McCallum, Conenergy Australia, Proof Committee Hansard, 28 May 2010, p. 43.

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installers that were present at the committee hearing. Nu Energy noted that the average price of a 1.5 kW system across Australia after rebates was approximately $2500.46 Nu Energy were of the view that exchange rate volatility, equipment availability and the phase out of Solar Credits and other rebates may act to increase this price. It therefore did not support the proposal outlined by Solar Shop Australia to reduce the Solar Credits multiplier and increase the system size to which it applied, on the grounds that it would raise the price of a 1.5 kW system and 'disadvantage working families, the elderly and rural communities.'47

C om m ittee view

3.66 The committee is concerned by the potential risks posed by demand in the household solar PV market. Notwithstanding the strength of the existing accreditation process, the regulatory improvements foreshadowed by the Department of Climate Change and Energy Efficiency, and claims that risks will be mitigated 'by monitoring the uptake in the market and reviewing the fixed price in 2014'48 the committee is of the view that additional mechanisms could be considered for the SRES.

3.67 The explanatory memoranda notes that a full statutory review of the RET scheme is planned for 2014. The government will also commission a review in 2012 including possible mechanisms for setting the fixed price for small-scale RECs under the scheme that could apply from 1 January 2014.49 5 0 In particular, the 2012 STC pricing review would be an opportunity to review the fixed price of STCs including considerations such as:

• the development of a framework in which REC prices in the future are set by an independent regulator;

• options to ensure consistent national assistance by incorporating consideration of state and territory assistance in setting small-scale REC prices;

• changes in the costs of the technologies; and

• the impact of the small-scale REC price and levels of small-scale technology deployment on the electricity market, including electricity prices.70

3.68 The committee notes that this review may not occur in time to prevent a possible upsurge in demand under the SRES, particularly in relation to household PV systems.

3.69 The SRES component of the enhanced RET is uncapped and set at a fixed price in order to deliver certainty to both householders seeking to install solar panels

46 Nu Energy, Submission 51, p. 2.

47 Nu Energy, Submission 51, pp 2-3.

48 Explanatory Memorandum, p. 8.

49 Explanatory Memorandum, p. 8.

50 Explanatory Memorandum, p. 8.

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and other renewable technologies, and to the installers of such systems. However, it is also the case that state and territory policies such as preferential feed-in tariffs are an important driver o f demand for such systems and these policies are beyond the control of the Commonwealth.

Recommendation 1

3.70 The committee recommends that the government consider mechanisms to manage potentially high demand under the Small-scale Renewable Energy Scheme.

Cost-of-carry and cash-flow implications fo r small-scale installers

3.71 The operation of the clearing house and the method by which STC liability is calculated is described above. The main concern raised by solar hot water manufacturers and installers relates to length o f time it may take to redeem the value

of STCs through the clearing house.51 5 2 This was said to be important as it impacted on the ability of an installer to maintain adequate cash flow and the price it would receive for STCs if it chose to sell them through the private market instead.

3.72 The length of time it would take for an STC to sell through the clearing house relates directly to the STP, which is calculated based on (amongst other things) the expected uptake o f small-scale technologies in that year.

3.73 Peter Sachs Industries, a manufacturer of solar water heating systems, noted the difficulty the Renewable Energy Regulator would likely have in estimating the STP accurately:

It is impossible for any m anufacturer to forecast 12 m onth demand in the current m arket and we believe that the regulator would have an impossible job estim ating demand across all deemed technology types.

3.74 Rheem Australia was concerned that in the event that uptake of small-scale technologies exceeded ORER's expectations, and hence led to an underestimate of the STP, there would be a surplus of STCs created relative to the amount required each quarter. This would mean that the clearing house may take longer than a quarter to sell

an STC. This was an issue because of the 'cost-of-carry' associated with holding STCs.53

3.75 The cost-of-carry refers to the time value of money. Put simply, $40 in the future is worth less than $40 today in real temis due to inflation. Similarly, holding an STC incurs an opportunity cost, as the funds used to purchase or acquire an STC could

51 See for example submissions by Rheem Australia, GWA Heating and Cooling and Peter Sachs Industries.

52 Peter Sachs Industries, Submission 46, p. 2.

53 Rheem Australia, Submission 31, p. 3.

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have been invested in assets that appreciate in value or provide return on the investment. This means that STCs lose relative value over time.

3.76 Because STCs lose value over time, liable entities are likely to wait until STCs are required for surrender before purchasing them at the fixed price through the clearing house. In order to induce a sale prior to this time, small-scale installers would

need to offer a discounted price reflecting the cost-of-carry. The committee was informed that, assuming an interest rate o f seven per cent and an average time of six weeks for an STC to sell through the clearing house, the cost-of-carry would be approximately 30 cents per S I C. 4 This would suggest a market value for STCs of $39.70.

3.77 However, as the cost-of-carry would be directly related to the length of time it took for an STC to sell through the clearing house, any delay caused by an underestimated STP would result in a lower spot market price.

3.78 Rheem Australia noted the need for small-scale installers to maintain sufficient cash flow would necessitate them to sell STCs in the private market rather than waiting for a sale through the clearing house. As small-scale installers tended to offer discounted systems in return for receiving STCs from an installation, they held a large proportion of their revenue from installations in the form of STCs. 53

3.79 Similarly, Mr Michael Sachs of Peter Sachs Industries provided an illustration of the cash flow issue for small-sized businesses that install small-scale systems:

What would happen is you have a small operation like that installing, say, 40 water heaters a month and they are going to generate $50,000 or $60,000 worth of [STCs] resulting from those...

...just in a business that size you are going to have $50,000 to $60,000 a month accming in money that is going to be taken out of circulation because those businesses have given those as point-of-sale discounts. So at the end of your three-month period you are going to have $150,000 to

$180,000, which for any business, but particularly for a small business like that, is a significant amount of money. Add on to that the fact that, if you then have the risk that those certificates, or a portion of them may not be, may not actually be paid back out by the clearing house to that business at

the end of that quarter and they may carry over, I think you have a system there that a lot of people will avoid, because there is not enough certainty involved in getting payment from it...5 4 5 5 56

54 Department of Climate Change and Energy Efficiency, answer to question on notice, 28 May 2010 (received 2 June 2010).

55 Rheem Australia, Submission 31, p. 3.

56 Mr Michael Sachs, Peter Sachs Industries, Proof Committee Hansard, 28 May 2010, p. 16.

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3.80 As such, many small-scale installers would be forced to sell STCs at less than the fixed price to reflect the cost-of-carry. GWA Heating and Cooling expressed a similar concern, stating:

We believe setting an annual target [through the estimation o f the STP] could lead to a situation that if m ore [STCs] are generated than is estimated for the target to be taken up by the liable parties, it will result in a collapse o f the [STC] value as smaller operators in the market will not be able to deal with the delay in their cash flow and sell [STCs] at unsustainable

values.57

3.81 Mr Matthew Sexton of Rheem Australia, noted that the solar water heater market was volatile, making accurate estimation o f the STP difficult.

We believe there is a very high likelihood that there would be an

underestimation o f the [STCs] that would be created, given very frequent changes to federal and state policies on rebates and incentives...

...in 2009 the peak monthly volume o f certificates generated for water heaters was just over one million in July, down to a low o f about 300,000, most recently, in April [2010]. So there has been a great deal o f volatility and the acceleration o f demand for certificates we believe will conflict with the target setting on an annual basis. So, w hat we would recommend is that the regulator be given discretion to amend [the STP] on a much more

frequent basis, and that should be at least quarterly.58

3.82 The Department o f Climate Change and Energy Efficiency recognised the issue raised by the small-scale installers, noting that it had been considered in the department's March 2010 discussion paper.

3.83 The department noted that the scheme incorporated a number of mechanisms to minimise the possibility of delays in selling STCs through the clearing house. These include:

• allowing system installers to continue to give householders an upfront discount at the point of sale;

• ensuring the clearing house transfers STCs on a 'first in, first out' basis;

• front-end loading (35 per cent in the first period) the required small-scale REC liability to encourage purchase of STCs by liable parties early each year; and

. ensuring the STC projection each year takes account of any excess STCs from the previous year.59

57 GWA Heating and Cooling, Subm ission 23, p. 2.

58 Mr Matthew Sexton, Rheem Australia, P r o o f C om m ittee H ansard, 28 May 2010, p. 15.

59 Department of Climate Change and Energy Efficiency, Answer to question on notice, 28 May 2010 (received 1 June 2010).

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3.84 While recognising that STCs will trade slightly below the fixed $40 figure in the spot market, the committee is o f the opinion that the arrangements for transferring STCs through the clearing house are adequate. While presenting some risk to small-scale installers in terms of the cost-of-carry, the scheme also represents an open-ended commitment supporting small-scale technologies at a relatively stable price.

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Chapter 4

Emissions-intensive trade-exposed industries 4.1 Provision is made in the bills for partial exemptions from the costs of the RET schemes for industries that are both emissions-intensive and trade-exposed (ΕΙΤΕ).

4.2 As discussed earlier in this report, ΕΙΤΕ industries are granted partial exemptions from the RET scheme depending on the level of their emissions intensity. The exemption is either 90 per cent for the most emissions-intensive activities (such as aluminium smelting and zinc smelting) or 60 per cent for industries that are less

emissions-intensive (such as ethanol production).

4.3 The primary exemption applies to renewable electricity generation that is additional to that required under the original Mandatory Renewable Energy Target of 9500 GWh. This means that EITEs firms must surrender 10 per cent or 40 per cent of

RECs needed to meet the additional targets set by the enhanced RET.1

4.4 The bill would make only one change to the sections of the Act granting the partial EITEs exemptions. The bill specifies that the exemptions apply to both large and small scale liabilities.2 That is, an ΕΙΤΕ firm (or its supplier) will need to surrender only 10 or 40 per cent of the additional STCs and LRECs needed to meet its new target.

4.5 A secondary exemption applies to the 9500 GWh liability under the original MRET, under circumstances where the REC price increases above $40. This second component of assistance is conditional upon passage of the Carbon Pollution Reduction Scheme (CPRS), recognising the cumulative cost impact of the CPRS and the RET.3

4.6 A more detailed explanation o f the partial exemption arrangements for ΕΙΤΕ activities is provided by the government's Commentary on the draft regulations relating to partial exemptions under the Renewable Energy (Electricity) Act 2000, of December 2009.4

1 For example in 2020, the main exemption applies to the difference between the 41 000 GWh LRET and the 9500 GWh MRET.

2 Explanatory Memorandum, pp 10 and 29.

3 This second component is known in the Renewable Energy (Electricity) Regulations 2001 as the 'additional assistance percentage', regulation 22ZA.

4 Australian Government, Commentary on the draft regulations relating to partial exemptions under the Renewable Energy (Electricity) Act 2000, December 2009, www.climatechange.gov.au/goverament/submissions/~/media/pub1ications/renewable- energy/RET-regs-commentarv-pdf.ashx. (accessed 4 June 2010).

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Effective rate of assistance

4.7 In its Discussion Paper on Enhancing the Renewable Energy Target, DCCEE stated that it is the government's intention to preserve the effective rate of assistance in respect of ΕΙΤΕ activities provided for under the current RET.5

4.8 The Australian Industry Greenhouse Network (AIGN) submitted that proposing to retain an uncapped SRES and proposing that the LRET be increased to take up any shortfall in the SRES are inconsistent with that commitment.6 AIGN

argued that, taken together, these changes will increase the total cost of electricity for industry. In AIGN's view the levels of the exemptions in the Act would need to be increased to 94.5 per cent and 66 per cent to preserve the effective rate of assistance.7

4.9 The Australian Aluminium Council submitted that ΕΙΤΕ industries should receive a 'true' 90 per cent exemption, (ie 90 per cent of an industry's total liability) stating that the exemption in its proposed form would amount to assistance of only 55 per cent.8

4.10 The Cement Industry Federation informed the committee that it supported the proposition that ΕΙΤΕ assistance should be simplified by providing a uniform rate of assistance across all components o f the RET, including the original MRET target.9

4.11 WWF-Australia expressed its concerns over the continuing exemption granted to the ΕΙΤΕ industries. It submitted that the exemptions may impede the early establishment o f transfomiational clean energy industries and long-term sustainable jobs in Australia.10 WWF-Australia requested that the bill should be amended to

require that this issue should be made the subject o f particular inquiry into the scheme proposed for 2012.11

Certain ΕΙΤΕ industries

4.12 The aluminium production and alumina refining activities are eligible for the partial exemptions. The industry was represented at the committee's public hearing by the Australian Aluminium Council and a representative of Rio Tinto Alcan.

4.13 The Australian Aluminium Council stated that in its current form the bill would cost the industry in the range o f $0.7-1.4 billion over the next ten years and

5 Enhancing the Renewable Energy Target: Discussion Paper, Commonwealth of Australia, March 2010, p. 20.

6 Australian Industry Green House Network, Submission 43, p. [3],

Australian Industry Green House Network, Submission 43, p. [4], (The 94.5 and the 66 per cent figures refer to the government's announcement in May 2009 of an additional 'Global Recession Buffer' which will provide additional exemptions for ΕΙΤΕ industries for the first five years of the CPRS.)

8 Australian Aluminium Council Ltd, Submission 21, p.l.

9 The Cement Industry Federation Limited, Submission 14, p. 3.

10 WWF-Australia, Submission 13, p. 2.

11 WWF-Australia, Submission 13, p. 2.

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that that is a significant cost exposure for an industry that sells into competitive international markets where it is a price taker.12

4.14 The committee asked the department to comment on the figures given by the Council. It did so, as follows:

The Australian Aluminium Council cost estimate o f between $0.7 billion and $ 1.4 billion in the ten years to 2020 appears to include the cost impact o f the existing 9,500 gigaw att-hour M andatory Renewable Energy T arget..., the expanded RET passed by Parliament in 2009 and the

enhanced RET changes. The $0.7 billion estimate is a reasonable measure o f the total cost o f the RET but not the policy changes for the enhanced R E T .13

4.15 The Cement Industry Federation informed the committee that it had a particular concern that cement milling was excluded from the proposed ΕΙΤΕ definition which covers only clinker production. It submitted that 48 per cent of its power consumption was for cement milling with 47 per cent for clinker production.14

Committee view

4.16 ΕΙΤΕ industries were not exempt under the MRET, but they were granted partial exemptions of 60 or 90 per cent of their additional liability when the expanded RET was legislated in 2009. The bill before the committee does not propose any change to the exemptions provided for in the Act.

4.17 The committee considers that there are no pressing reasons why ΕΙΤΕ activities should receive additional assistance under the bill. In relation to the proposition that ΕΙΤΕ activities should receive exemption for their liabilities under the former MRET, there was no evidence presented to the inquiry that the industries were

significantly or disproportionately disadvantaged under that scheme. On that basis, there would seem to be no particular reason why they should now be exempted from liability for their share of the former target.

4.18 There was no evidence before the committee that ΕΙΤΕ activities had suffered damage under the current RET scheme. The committee notes also that the bills establishing the RET were passed with the support of all parties as recently as

August 2009.

4.19 However, given the concerns expressed by the aluminium and cement industries and the emissions intensity and export oriented nature of the aluminium industry in particular, the committee would expect that the matter of the exemptions for ΕΙΤΕ activities will be covered in the 2014 statutory review of the scheme.

12 Mr Miles Prosser, Executive Director, Australian Aluminium Council, Proof Committee Hansard, p. 27.

13 Department of Climate Change and Energy Efficiency, Answers to Questions on Notice, May 2010, p. 10.

14 Cement Industry Federation, Submission 14, pp 1-2.

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Recommendation 2

4.20 The committee recommends that, subject to the recommendation contained elsewhere in this report, the Senate pass the Renewable Energy (Electricity) Amendment Bill 2010 and two related bills during the 2010 winter Parliamentary sittings.

Senator Anne McEwen Chair

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Coalition Senators’ Additional Comments Coalition Senators accept the intent of this legislation and are sympathetic to the calls for it to be dealt with during the remaining sittings of the winter session. We appreciate the need to provide greater investment certainty to the renewable energy

sectors targeted.

However, we are also mindful of warnings that have been made in this sector previously and wish to see risks that still exist under these Bills addressed prior to their passage. We remember the risk of investment uncertainty for some major projects being raised at the time these issues were last considered, just last year. And we recall the problems of boom-bust cycles for some renewable sectors, especially

solar photovoltaics, which have flowed from various government incentives. We have since seen the troubles caused by mismanagement of a demand driven scheme, in home insulation.

It is important that the opportunity presented by the debate of these Bills to heed warning calls from industry and others is taken, so that mistakes of the past are not repeated in this legislation.

Uncapped liability under the Small-scale Renewable Energy Scheme (SRES)

The majority report notes that the possible risk associated with establishing an uncapped SRES liability was an issue commonly raised by witnesses and submitters. Coalition Senators once again highlight the extent of concerns about this uncapped

liability, as demonstrated by the many companies and industry groups who provided evidence to the inquiry.

A3P:

Capping the price but not the quantity o f small-scale renewable electricity certificates introduces uncertainty into the electricity price for consumers. This problem is compounded in the case o f electricity-intensive processes for w hich electricity makes up a significant proportion o f their operating costs. The small-scale portion o f the RET should be capped, or removed

from the RET altogether.1

Alcoa:

... the SRES portion is an uncapped volume which is a risk placed entirely on large energy users in favour o f small scale renewable generators.

Transferring this risk to liable entities significantly reduces their ability to predict R ET cost impacts over the life o f an investment and therefore may dampen investment activity in electricity intensive activities. This uncapped

1 A3P, Submission 42, p. 2.

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impact can be avoided by capping the SRES pool or limiting the exposure of highly electricity intensive ΕΙΤΕ activities to the SRES.2

The Australian Industry Greenhouse Network:

The effect of the SRES proposal is to remove all price risk from SRES suppliers and to substantially reduce the price risk faced by LRET suppliers. However, these risks have not been removed from the renewables markets - rather, they have been transferred to liable parties and electricity consumers.3

The Energy Supply Association o f Australia noted that the risk associated with the uncapped liability o f the SRES would add to existing risks in the electricity market:

One of the issues that the industry I represent faces very substantially, right now, on every front is an enormous amount of risk. It is being put at risk because of delays, because of changes and because of open-ended schemes and, quite frankly, it is very hard to make efficient investment decisions when there is uncontrollable risk.4

Hydro Aluminium:

Key areas that need to be considered in order to ensure the viability of electricity-intense industries such as our aluminium smelter include...A cap on the quantity of SRECs that can be generated or limit the exposure of ΕΙΤΕ industries - thus providing certainty to all investors (small-scale renewable, large-scale renewable and electricity users).5

TRUenergy:

Much of the convoluted and complex regulatory mechanics are only necessary to cap the SRES volume/liability each year while avoiding an overall scheme cap. It is understood that this is an attempt to provide liable parties with a degree of certainty over their liability while maintaining a

guaranteed subsidy level to suppliers of small renewable technology.

However, this approach fails to achieve either of these objectives, and does so at the expense of simplicity and administrative efficiency.6

Coalition Senators are concerned that the risks associated with inaccuracy in estimating the uptake of SRES, driven by a variety of cost factors, impact of subsidies and changes in consumer sentiment, are ultimately borne by electricity consumers. We believe that for the liable entities responsible for purchasing the Small-scale

2 Alcoa, Submission 18, p. 5.

3 Australian Industry Greenhouse Network, Submission 43, p. 1.

4 Mr Brad Page, Energy Supply Association of Australia, Committee Hansard, 28 May 2010, p. 11.

5 Hydro Aluminium Kurri Kurri Pty Ltd, Submission 1, p. 1.

6 TRUenergy, Submission 28, p. 1.

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Technology Certificates (STCs) created by the SRES the proposed forecasting mechanisms for setting annual responsibilities fail to provide reasonable levels of certainty.

A particular concern for Coalition Senators is that these unlimited liabilities, imposed by the Commonwealth, are actually significantly influenced by the impact of State and Territory policies, as highlighted for example by the Cement Industry Federation:

Many o f the drivers that created falling REC prices w ithin the RET are now likely to put upward pressure on electricity prices for electricity consumers. These drivers include the seem ingly endless addition o f rebates and feed-in­

tariffs offered by m ultiple Governm ents in effect competing to support small scale renewable energy generation.

The uncertainty on price caused by this change needs to be addressed through adequate m echanism s that ensure the size o f the SRES does not greatly exceed the 4000 GW H target o f the SRES. The committee should be m indful o f the fact that state governm ent incentives combined with the

SRES will as a combined incentive drive the uptake o f the SRES.

The GIF has previously recom m ended to the Australian Government, capping the size o f the SRES and note this suggestion has not flowed through to the legislation. In the absence o f an actual cap, it will be

important to ensure there are adequate policy levers available to the Australian Government to control a blow out in the uptake o f the SRES.7 8

Even the Minister for Climate Change, Energy Efficiency and Water, Senator the Hon Penny Wong, acknowledged this problem under questioning in Senate Budget Estimates hearings:

W hat you are alluding to is actually a real policy issue, which is that this market is not only guided by what occurs through Commonwealth

legislation and market responses; there are a range o f other policies that impact upon the market which state or local governm ent can put in place. In an ideal world, you would have simply one policy framework which applied across the country, but the reality is that state governments— and possibly local governments— will have their own views about what additional assistance they want to provide to renewable energy.

While the "ideal world" referred to by Minister Wong may not exist, Coalition Senators are disappointed that more concrete steps have not been taken by this Government to align and coordinate state initiatives and incentives in this policy area. This lack of coordination further exposes all parties, both those creating STCs and those liable for them, to uncertainty. More so, it exposes the scheme to pressure from unpredicted demand levels as a result of state initiatives which either encourage or

7 Cement Industry Federation, Subm ission 14, p. 3.

8 Senator the Hon Penny Wong, Senate Budget Estimates, Com m ittee Hansard, 27 May 2010, p. 14.

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discourage participation in the scheme. This compromises the scheme’s effectiveness and could lead to a range of undesirable and unanticipated consequences.

Regrettably, there appears to be no easy way to change the proposals in these Bills without shifting the balance of uncertainty from one party to another. Fixed annual caps on the number of STCs that can be generated will, of course, establish a level of uncertainty for those companies creating STCs, with the risk that reaching the cap prior to the end o f the year would create a price spike and presumed demand slump until a new year, with a new quota o f STCs, commenced.

However, Coalition Senators are nonetheless attracted to the certainty for liable entities that concrete annual caps would establish. Caps would help to limit the extend of undesirable consequences which could otherwise flow from actual demand diverging widely from predicted demand. We also believe that the establishment of such caps would place greater responsibility on the Commonwealth, state and local governments to avoid new policy measures that could create either spikes or slumps in demand in future.

Recommendation 1

That the Government consider a model to release fixed, annual quotas for the next two years capping the size of STCs, with the quota to be announced before the commencement of each year.

Recommendation 2

That these annual quotas be set at levels consistent with an overall generation target for the SRES of achieving 4000 GWh by 2020.

Impact of the Solar Credits Multiplier

Coalition Senators noted the evidence provided concerning the impact of the Solar Credits Multiplier, which is also canvassed in the majority report. Several companies raised concerns that the current impact of the multiplier risked creating an unsustainable boom, which could hurt industry standards and fail to optimise environmental outcomes.

Greenbank Environmental highlighted the impact of past incentives, as well as the emerging impact of the current multiplier:

Last year, we had 65,000 rebates o f $8,000 each through the department of climate change. Do the m aths on that and it is quite significant. There is a real possibility that the SRET, being uncapped, will again deliver 65,000 systems into the nation. That will be another pass through to Mr and Mrs Jones and will again drive the price o f electricity up.

Currently, in New South W ales, as I said in my submission, there are companies giving away 1.5 kilow att systems for free. If it continues at this

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rate, w e w ill soon end up w ith a situation along the lines o f the insulation program, which would be a disaster for the renewable energy industry, as it has been for the insulation industry.9

The Solar Shop, a potential generator of STCs, emphasised this message that due to the decreasing costs of solar photovoltaic (PV) systems the multiplier was now exposed as being too generous:

It is unsustainable for the industry to have solar power systems available at no cost to consumers. Solar pow er systems offered at no or low cost

encourage low standards in materials, poor returns on financial and environm ent investments, and could cause long term damage to the entire industry.

Under the recent Enhanced Renewable Energy Target discussion paper, mem bers o f the domestic solar pow er industry called for a change to the Solar Credits Scheme to ensure the longevity and stability o f the industry.10

A number o f companies joined together to propose to the committee changes to the multiplier, specifically suggesting that there be an increase in the maximum allowable system size from 1,5kW to 3kW, with a commensurate reduction in the size of the multiplier from five to three. Strong evidence was provided to support this proposition.

Conergy:

And in support o f that, Conergy AG is a m anufacturer o f photovoltaic modules. The price point o f production is almost at its lowest position and going forward even in increased volumes you would not see significant price reductions that would allow a three-by m ultiplier for a three-kilowatt to m eet the price point o f the system to end up with a free system in that category. It would not happen.11 1 2

Solar Shop:

Our proposed change to the m ultiplier is likely to see an appropriate num ber o f RECs (be it phantom or real) on the market produced from Small Scale Renewable Energy Systems, but see a higher percentage o f RECs that are attributed to actual renewable energy. It also has the potential to see larger systems installed which is a better outcome for the consumer and better outcome for the environment. M ost im portantly it will remove

systems being offered at low or no cost to the consumer. This will ensure that the installation standards rem ain optimised and that the industry can m ove aw ay from boom -bust cycle, securing the industry, securing jobs and increasing Australia’s renewable energy capacity.

9 M s F io n a O 'H e h ir , G r e e n b a n k E n v ir o n m e n ta l, Committee Hansard, 2 8 M a y 2 0 1 0 , p. 4 6 .

10 S o la r S h o p A u s tr a lia , Submission 24, p . 1.

11 M r D a v id M c C a llu m , C o n e r g y A u s tr a lia , Committee Hansard, 2 8 M a y 2 0 1 0 , p. 46 .

12 M r L ia m H u n t, S o la rS h o p A u s tr a lia , A n s w e r to Q u e s tio n o n N o tic e .

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The Solar Shop further argued that such changes were about sustainability and self sufficiency, not just of an environmental nature, but of the renewables industry overall:

Our ultimate aim as an industry is to be self-sufficient, so we are not relying on a mechanism from the federal government to encourage people to purchase solar. That is w hy we think the solar credit scheme is a good one

and the proposed changes we have put forward will enable us, as an industry, to grow to a level where we will be self-sustaining.13

Coalition Senators note Recommendation 1 of the majority report, largely driven by this evidence, that mechanisms to manage high demand be considered. However, Coalition Senators strongly believe that the risks identified by industiy in the course of this inquiry warrant more immediate changes to avoid yet another unsustainable boom in the solar PV sector.

Under existing conditions, Coalition Senators believe there is too great a risk of unsustainable overheating of the small-scale market and accept the arguments of solar PV businesses that longer term sustainability for the renewable energy industry would be better achieved through a lower Solar Credits Multiplier, but available to larger generation capacity units.

Recommendation 3

That the Government consider amending the Solar Credits Multiplier to increase the maximum allowable system size and decrease the size of the multiplier.

ΕΙΤΕ Assistance

Coalition Senators note concerns expressed by some representatives of emissions- intensive, trade-exposed (ΕΙΤΕ) activities about the adequacy of assistance under the Renewable Energy Target (RET) and the linkage of some changes to passage of legislation enabling the Carbon Pollution Reduction Scheme (CPRS). Particular concerns were expressed from the aluminium and alumina industries, some of which are canvassed in the majority report.

Rio Tinto highlighted remaining links between ΕΙΤΕ assistance under the RET and the CPRS, specifically pointing to the uncertainty that now exists around the CPRS given the Government's announced deferral o f its implementation:

For the electricity intensive industries, such as aluminium smelting, where internationally competitive electricity prices are vital, the proposed ΕΙΤΕ partial exemption will becom e even more inadequate. The pre-condition o f passage o f the CPRS legislation before activities become eligible for partial

exemption should be rem oved given the announcement on 27 April 2010 o f

13 M r L ia m H u n t, S o la rS h o p A u s tr a lia , Committee Hansard, 2 8 M a y 2 0 1 0 , p. 44.

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the delay o f the CPRS until "after the end o f the current commitment period o f the K yoto Protocol and only when there is greater clarity on the actions o f m ajor economies including the US, China and India." 14

The partial exemptions granted to ΕΙΤΕ industries that are proposed appear overly complex to Coalition Senators and unreasonably reliant on the uncertain passage of the CPRS sometime in the future. The different exemptions for energy generated under the new Renewable Energy Target as against the original Mandatory Renewable Energy Target are a recipe for uncertainty for these industries.

Recommendation 4

That the Government consider measures to remove any linkage of ΕΙΤΕ exemptions under the RET to the passage of the CPRS and simplify the operation of such exemptions.

Senator Mary Jo Fisher Senator the Hon. Judith Troeth

Deputy Chair

Senator Guy Barnett Senator Simon Birmingham

14 Rio Tinto, Subm ission 9, p. 3.

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192

Australian Greens’ Additional Comments The Greens believe that the Bill should be passed during the current sitting fortnight but that it could be improved.

These additional comments respond only to the Committee's report. Further detail about the Greens position on the Bill and general criticism of the Government's lack of support for the renewable energy sector will be included in my second reading

speech.

1) Banked Renewable Energy Certificates

The Committee dismisses industry concerns about the level of banked Renewable Energy Certificates and instead relies solely on the Department's commissioned modelling (conducted by MMA) to form the conclusion that banked RECs will not unduly crowd out investment in the near term. The Greens believe that this is a risky conclusion, especially given the Department's poor record in forecasting the industry's growth and REC prices. It also demonstrates that the Government would not be overly concerned by further delays in investment in renewables.

The Greens will endeavour to move an amendment to mitigate this risk.

2) Overheating the SRES market

The Greens welcome the Committee's concern that the SRES market may overheat if the cost of installing PV systems falls too low, but we are disappointed that the committee had no specific recommendation as to how to rectify this problem. Again, the Greens will move an amendment to address this concern.

3) Emission intensive trade exposed industries

The Greens do not support the partial exemptions provided to the emission intensive trade exposed industries because a) many other nations have similar (often stronger) renewable energy support policies, yet virtually none provide any exemptions to their

EITE's and b) even with the cost of the RET, Australian electricity prices will remain very competitive.

Senator Christine Milne

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Appendix 1

Submissions, tabled documents and answers to questions taken on notice Submissions

1 Hydro Aluminium Kurri Kurri Pty Ltd

2 Pacific Hydro

3 National Association of Forest Industries

4 Gove Aluminium Finance Limited

5 Sucrogen

6 Roaring 40s

7 AGL Energy Limited

8 GE Energy

9 Rio Tinto

10 LMS Generation Pty Ltd

11 Hydro Tasmania

12 Infigen Energy

13 WWF-Australia

14 Cement Industry Foundation

15 Greenbank Environmental

16 wellbeinggreen

17 Mr Grant McDowell, The Solar Farming Company Pty Ltd trading as SolarFarm

18 Alcoa o f Australia

19 Alumina Limited

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20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

Australian PV Association

Australian Aluminium Council

Vestas

GWA Heating and Cooling

Solar Shop Australia Pty Ltd

Visy

Energy Retailers Association o f Australia (ERAA)

Moreland Energy Foundation and Alternative Technology Association

TRUenergy

Energy Developments Limited, Envirogen Pty Ltd and Clarke Energy

Origin

Rheem Australia Pty Ltd

Mr Geoffrey Blatch

Sustainable Energy Now Inc.

Union Fenosa Wind Australia

Mr Alexander Fullarton

Confidential

Australian Sugar Milling Council (ASMC)

Clean Energy Council

REpower Australia

Mr Angus King

Energy Supply Association of Australia

a3p

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43 Australian Industry Greenhouse Network

44 Australian Geothermal Energy Association

53

45 Australian Petroleum Production And Exploration Association Limited

46 Peter Sachs Industries Pty Ltd

47 WA Sustainable Energy Association Inc (WA SEA)

48 Australian Bankers' Association Inc

49 The Wind Turbine Company

50 Mr Des Wyatt, Wyatt & Associates

51 NU Energy

52 DCM Solar Pty Ltd

53 Northern Territory Government

54 Confidential

Tabled documents

The true costs and benefits o f the enhanced RET, 25 May 2010, tabled by the Clean Energy Council (public hearing, 28 May 2010, Canberra)

A copy of: Contract for Spot Purchase/Sale of Environmental Products Contract Details; Environmental Products Spot Physical Terms and Conditions (March 2009 edition); Explanatory Notes, Environmental Products Spot Physical Contract; List of Registered Agents, tabled by Greenbank Environmental (public hearing,

28 May 2010, Canberra)

Chart of estimated impact of the enhanced RET on retail electricity prices, tabled by the Department o f Climate Change and Energy Efficiency (public hearing, 28 May 2010, Canberra)

Answers to questions taken on notice

AGL Energy Limited - Answers to questions taken on notice (from public hearing of 28 May 2010, Canberra)

Rheem Australia Pty Ltd - Answers to questions taken on notice (from public hearing of 28 May 2010, Canberra)

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Department of Climate Change and Energy Efficiency - Answers to questions taken on notice (from public hearing of 28 May 2010, Canberra)

Solar Shop Australia Pty Ltd - Answers to questions taken on notice (from public hearing of 28 May 2010, Canberra)

Energy Supply Association of Australia - Answers to questions taken on notice (from public hearing of 28 May 2010, Canberra)

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Appendix 2

Public hearings

Friday, 28 May 2010, Canberra

Pacific Hydro

Mr Lane Crockett, General Manager, Australia

Ms Clare Maries, Project Manager

Vestas

Mr Ken McAlpine, Policy and Government Relations Manager

Infigen

Mr Jonathan Upson, Senior Development Manager

Energy Supply Association of Australia

Mr Brad Page, Chief Executive Officer

Rheem Australia

Mr Matthew Sexton, Chief Executive Officer

Mr Chris Mundy, General Manager, Renewable Energy Group

GW A Heating and Cooling

Mr Len Place, Corporate Affairs Manager

Peter Sachs Industries Pty Ltd (Saxon)

Mr Michael Sachs, Director

AGL Energy Limited

Mr Tim Nelson, Head of Economic Policy and Sustainability

Mr Simon Kelley, Manager, Energy Policy and Regulation

Clean Energy Council

Mr Matthew Warren, Chief Executive Officer

Mr Robert Jackson, Deputy Director

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Australian Aluminium Council

Mr Miles Prosser, Executive Director

Greenbank Environmental

Ms Fiona O'Hehir, Chief Executive Officer

SolarShop Australia

Mr Adrian Ferraretto, Managing Director

Mr Liam Hunt, Communications Manager

Kyocera Solar

Mr Mark Shakeshaft

Conergy Australia

Mr David McCallum

Department of Climate Change and Energy Efficiency

Mr Geoff Leeper, Deputy Secretary

Ms Shayleen Thompson, First Assistant Secretary, Strategies and Coordination Branch

Mr Robert Raether, Assistant Secretary, Renewables and Reporting Branch

Office of the Renewable Energy Regulator

Mr Andrew Livingston, Renewable Energy Regulator

Mr Amarjot Singh, Deputy Renewable Energy Regulator, Market Operations

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The Senate

Environment, Communications and the Arts Legislation Committee

Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 [Provisions]

M ay 2010

201

© Commonwealth o f Australia 2010 ISBN 978-1-74229-301-1

This document was printed by the Senate Printing Unit, Parliament House, Canberra

202

Committee membership

Committee members Senator Anne McEwen (ALP, SA) (Chair) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) Senator Scott Ludlam (AG, WA) Senator Kate Lundy (ALP, ACT) Senator the Hon. Judith Troeth (LP, VIC) Senator Dana Wortley (ALP, SA)

Participating members participating in this inquiry Senator the Hon. Ian Macdonald (LP, QLD)

Committee secretariat

Mr Stephen Palethorpe, Secretary Ms Fiona Roughley, Principal Research Officer Mrs Dianne Warhurst, Executive Assistant

Committee address PO Box 6100 Parliament House Canberra ACT 2600

Tel·. 02 6277 3526 Fax: 02 6277 5818 Email: eca.sen@aph.gov.au

Internet: www.aph.gov.au/senate/committee/eca_ctte/index.htm

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Table of Contents

Committee membership.........................................................................................iii

Recommendations..................................................................................................vii

Abbreviations...........................................................................................................ix

Chapter 1 - Introduction......................................................................................... 1

Referral to the committee........................................................................................... 1

Acknowledgment.........................................................................................................1

Report structure.......................................................................................................... 1

Purpose of the Bill...................................................................................................... 2

Background to the Bill: the consultation process.................................................... 2

Chapter 2 - Overview of the B ill................................ 5

Outline of the Bill....................................................................................................... 5

Key provisions............................................................................................................ 6

Proposed Division 2—Deployment of optical fibre.................................................6

Proposed Division 3— Installation of fibre-ready facilities.................................... 8

Proposed Division 4—Miscellaneous provisions (definitions)............................. 11

Chapter 3 - The importance of promoting fibre in new developments.......13

Introduction...............................................................................................................13

The importance of fibre in new developments....................................................... 13

Chapter 4 - Application and operation of the B ill........................................... 21

Introduction.............................................................................................................. 21

Key matters raised....................................................................................................21

The scope of the Bill's application..........................................................................22

Content and implications of the fibre / fibre-ready requirements.........................31

Ownership, access arrangements, and integration with the NBN.........................35

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Coalition Senators' Additional Comments........................................................ 43

Appendix 1 - Submissions, answers to questions taken on notice and additional information................................................................................... 49

Appendix 2 - Public hearings................................................................................ 51

Appendix 3 ................................................................................................................ 53

Table 1: DBCDE Summary of Six Stage Generic Development Pipeline for Greenfield Development and Major Brownfield Redevelopment.....................53

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Recommendation 1

Recommendations

4.47 The committee recommends that the government continue its work with state and local government planning authorities to ensure a nationally integrated and consistent approach to requirements for telecommunications infrastructure in new developments.

Recommendation 2

4.49 The committee recommends that the government clarify, as soon as possible, the role of NBN Co in servicing new development projects.

Recommendation 3

4.55 The committee recommends that the Department of Broadband, Communications and the Digital Economy give consideration to the variety of ownership arrangements that exist, or might arise, and whether there are good reasons for the government to intervene in these arrangements.

Recommendation 4

4.62 The committee recommends that the government ensure that access arrangements, including the genuine equivalence of access of a kind contemplated for the NBN, operate in new developments consistently with those in the rest of the country.

Recommendation 5

4.73 The committee recommends that the minister, by legislative instrument, specify that a condition of installation of a line or fibre-ready facility in a project area is that the installation be undertaken in compliance with nationally consistent network safety and training standards.

Recommendation 6

4.74 The committee recommends that the Bill be passed.

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Abbreviations

ACCC Australian Competition and Consumer Commission

ACMA Australian Communications and Media Authority

the Act Telecommunications Act 1997

the Bill Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010

CEO Chief Executive Officer

the committee Senate Environment, Communications and the Arts Legislation Committee

DBCDE Department of Broadband, Communications and the Digital Economy

DSL Digital Subscriber Line

the department Department of Broadband, Communications and the Digital Economy

EM Explanatory Memorandum

FTTH/ FTTP Fibre to the Home / Fibre to the Premises

Mbps Megabits per second

NBN National Broadband Network

NBN Co Ltd National Broadband Network Co Ltd

Position Paper Proposed positions on the subordinate legislation to give effect to fibre in new developments (circulated by the Department on 16 April 2010)

USO Universal Service Obligation

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Chapter 1

Introduction

Referral to the committee

1.1 On 18 March 2010 the Senate referred the provisions of the

Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 (the Bill) for inquiry and report by 12 May 2010.

1.2 On 24 March 2010, in accordance with usual practice, the committee advertised the inquiry in The Australian, calling for submissions by 6 April 2010. The committee also directly contacted a range of organisations and invited them to submit to the inquiry. Details of the inquiry, the Bill and associated documents were placed

on the committee's website.

1.3 The committee received 15 submissions, listed at Appendix 1.

1.4 The committee held a public hearing in Sydney on 19 April 2010. Witnesses who appeared at the hearing are listed at Appendix 2. The Hansard transcript is available through the internet at www.aph.gov.au/hansard.

Acknowledgment

1.5 The committee thanks the organisations and individuals who made submissions and gave evidence at the public hearing.

Report structure

1.6 The remainder of this chapter outlines the purpose of the Bill and the consultation process which preceded it.

1.7 Chapter 2 outlines the main provisions of the Bill.

1.8 Chapter 3 outlines the background to the Bill, including the current arrangements that exist for the deployment of telecommunications lines and infrastructure to new developments, and the importance of fibre in new developments.

1.9 Chapter 4 discusses the key issues that were raised in relation to the application and operation of the Bill.

2

Purpose of the Bill

1.10 The Bill is intended to complement the government's announcement, on 7 April 2009,1 2 that it will establish a company to build and operate a National Broadband Network (the 'NBN') which will deliver super-fast broadband to all Australian homes and workplaces. The NBN will service 90 per cent of existing Australian premises with Fibre To The Premises (FTTP), providing broadband

services at speeds o f up to 100 Megabits per second (Mbps). The remaining 10 per cent of existing premises will be connected with wireless and satellite technologies that will deliver broadband services at speeds of up to 12 Mbps."

1.11 The Bill seeks to amend the Telecommunications Act 1997 (the Act), inserting a new Part 20A. The purpose o f the Bill is to ensure that new greenfield and brownfield (urban infill and urban renewal) developments are not serviced by old telecommunications technology, specifically copper lines. In broad terms the Bill will require that where specified new developments, or developments within an identified class, are fitted with telecommunications lines or facilities, they will be fitted with optical-fibre lines or fibre-ready facilities.

Background to the Bill: the consultation process

1.12 The Bill was introduced following an extensive industry consultation process.

1.13 The government released a detailed consultation paper on 29 May 2009 for public comment,3 followed up by face-to-face presentations to, and meetings with, stakeholders in all mainland states. Stakeholders elsewhere were contacted by phone. More than 80 submissions were received in response to the consultation paper.4 The

consultation process showed 'a general consensus that a nationally consistent approach is preferable...[and] a general preference for Commonwealth legislation, reinforced

1 The Hon. Kevin Rudd MP, Prime Minister, the Hon. Wayne Swan MP, Treasurer, the Hon. Lindsay Tanner MP, Minister for Finance, the Hon. Stephen Conroy MP, Minister for Broadband, Communications and the Digital Economy, New National Broadband Network', Joint press release, 7 April 2009, www.minister.dbcde.gov.au/media/media releases/2009/022

(accessed 27 April 2010).

2 The Hon. Kevin Rudd MP, Prime Minister, the Hon. Wayne Swan MP, Treasurer, the Hon. Lindsay Tanner MP, Minister for Finance, the Hon. Stephen Conroy MP, Minister for Broadband, Communications and the Digital Economy, New National Broadband Network', Joint press release, 7 April 2009, www.minister.dbcde.gov.au/media/media releases/2009/022

(accessed 27 April 2010).

3 Department of Broadband, Communications and the Digital Economy, National Broadband Network: Fibre-to-the-premises in greenfield estates Consultation paper, 29 May 2009, www.dbcde.gov.au/ data/assets/pdf file/0018/112554/Fibre in greenfields consultation nap er.pdf (accessed 27 April 2010).

4 Submissions are available at: www.dbcde.gov.au/broadband/national broadband network/fibre in new developments/fibre to the premises in greenfield estatessubmissions? (accessed 27 April 2010).

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by industry-developed guidelines or standards, over state, territory and local government approaches'.?

1.14 Following that process, the government established a Fibre in Greenfields Stakeholder Reference Group to provide input on implementation issues and to help disseminate information. The EM lists the members of that group.5 6

1.15 In November 2009, an exposure draft of the Bill was sent to the Stakeholder Reference Group, state and territory planning ministers and members of the Online and Communications Council. It was released to the public on 23 December 2009.7

5 EM, p. 20.

6 EM, Attachment A, p. 24.

7 EM,p. 18.

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214

Chapter 2

Overview of the Bill

Outline of the Bill

2.1 The Bill provides for the amendment of the Telecommunications Act 1997 as set out in Schedule 1 to the Bill.

2.2 Schedule 1 has two parts. Part 1 would insert a new Part 20A into the Telecommunications Act 1997. Proposed Part 20A will create a mandatory requirement that optical fibre be deployed, or fibre-ready facilities be installed, in specified real estate development projects, or types of projects. Part 2 of Schedule 1 would make consequential amendments relating to civil penalty provisions.

2.3 Part 1 contains the key provision of the Bill, specifically Item 10, which would insert proposed Part 20A with four main aspects:

• Requirement that optical fibre be deployed. If a real estate development project is specified in a legislative instrument made by the minister, a person is prohibited from installing a telecommunications line in the project area unless the line is an optical fibre line. In effect, the requirement would prohibit the deployment of a copper line to those development projects.

• Requirement that fibre-ready' facilities be installed. If a real estate

development project is specified in a legislative instrument made by the minister, a person is prohibited from installing or constructing a fixed-line facility in the project area unless the facility is a 'fibre-ready1 facility.

• Ministerial power to make legislative instruments. The minister can make legislative instruments necessary to give effect to the above requirements. The minister has power, for example, to specify or identify the developments in which the requirements apply, determine the characteristics of a 'fibre-ready

facility', and set any other conditions that are to apply.

• Exemptions. The minister can also specify, in a legislative instrument, exemptions to the above requirements.

2.4 Clause 2 o f the Bill provides that Schedule 1, Part 1, commences on 1 July 2010.1

1 The commencement of Part 2 is contingent on the passage of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2010, which is yet to be passed by the Senate. Commencement details are specified in cl 2 of the Bill.

6

Key provisions

2.5 As described above, the key provisions are contained in Item 10 of

Schedule 1, which would insert proposed Part 20A into the Telecommunications Act 19972

2.6 Proposed Part 20A has two main divisions. Division 2 deals with the fibre connection requirement, that is, the installation of optical fibre lines as part of 'real estate development projects'. Division 3 deals with the fibre ready infrastructure requirement, that is, the installation o f fibre-ready facilities as part of 'real estate development projects'.

Proposed Division 2— Deployment of optical fibre

2.7 Proposed Division 2 of Part 20A applies to the deployment of optical fibre to building lots (proposed section 372B) and to building units (proposed section 372C).

2.8 Proposed subsections 372B(2) and 372C(2) provide the general rule that where telecommunications lines are installed in specified real estate development projects, those lines must be optical fibre lines.3 Any conditions specified by the minister relating to the deployment o f the line must also be complied with.4 Together, these constitute the 'fibre connection requirement'.

2.9 The fibre connection requirement applies to 'specified' real estate development projects. The cumulative criteria for what is a 'specified real estate development project' is provided by sections 372B(1) and 372C(1). They include that:

• (a) the project involves the subdivision o f land into one or more lots; and

• (b) the project is specified in, or ascertained in accordance with, a legislative instrument made by the minister. The minister would have the option of specifying real estate development projects individually, or by class (see subsection 13(3) of the Legislative Instruments Act 2003, or of nominating characteristics of projects to which the rule is to apply; and

• (c) and (d) the line has a particular intended use of supplying carriage

services to end-users or prospective end-users in one or more building units that have been, are being, or may be, constructed on any of the building lots; and

• (e) the line is not on the customer side o f the boundary o f a

telecommunications network;5 and

2 The following section draws heavily on the EM.

3 Proposed ss. 372B(2)(a), 372C(2)(a).

4 Proposed ss. 372B(2)(b), 372C(2)(b)

5 Section 22 of the Telecommunications Act 1997 defines the ‘boundary o f a telecommunications network". The Bill does not seek to amend that definition.

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• (f) the line is used or for use to supply a carriage service to the public;6and

• (g) the line is installed after the commencement o f this section (1 July 2010) 7

Minister to specify conditions

2.10 The minister may, by legislative instrument, specify conditions for the purposes of the fibre connection requirement.8 The intention is to enable the specification of the characteristics, features, performance requirements, methods of

installation or other matters relating to the optical fibre infrastructure to be installed in a project area, in both general terms (e.g. necessary outcomes) and, if required, to a high degree of specificity. The EM explains that, 'amongst other things, it is envisaged that specified conditions could, if necessary, cover such matters as data speeds, other

service features, quality of service and reliability'.9 The EM also notes that, by virtue of section 589 of the Telecommunications Act 1997, conditions could be specified, if necessary, by reference to external documents such as industry codes and standards.

2.11 Different types of conditions could be specified in relation to different types of real estate development projects, in reliance on subsection 33(3A) of the Acts Interpretation Act 1901 (Cth).

Minister may exempt specified conduct

2.12 The minister may exempt conduct specified in, or ascertained in accordance with, a legislative instmment from the scope of the fibre connection requirements.10 The exemption may be unconditional or subject to such conditions (if any) as are specified in the exemption.11

2.13 The EM gives the following examples of circumstances in which the Minister might exempt the installation of copper lines from the prohibition on installation in proposed subsection 372B(1):

• fibre-ready facilities were installed to prepare the relevant project area for installation of optical fibre lines at a later date; or

• complying optical fibre lines were installed simultaneously; or

6 Proposed section 372J provides what is meant by 'supply to the public' for the purposes of proposed Part 20A. Its effect is that the requirement to deploy optical fibre will not apply to customer cabling nor private networks. Section 20(4) of the Telecommunications Act 1997 defines 'customer cabling'. The Bill does not seek to amend that definition.

7 Clause 2 of the Bill provides that proposed section 372B will commence on 1 July 2010.

8 Proposed ss. 372B(4) and 372C(4).

9 E M , p. 35.

10 Proposed ss. 372B(5) and 372C(5).

11 Proposed ss. 372B(6) and 372C(6).

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. copper infrastructure is required to operate particular customer equipment because of its technical characteristics; or

. the anticipated cost of installing optical fibre lines is above an identified threshold.

Role for ACM A

2.14 The minister may confer functions or powers on the Australian

Communications and Media Authority (ACMA) in a legislative instrument for the purposes of specifying project areas subject to, or exempted from, the fibre connection requirements.12 For example, if an exemption applied where the anticipated cost of installing optical fibre lines is above a certain threshold, ACMA could be given a role

in approving a developer’s estimate o f those costs.

Ancillary provisions

2.15 Proposed subsections 372B(8) and 372C(8) contain ancillary contravention provisions which prohibit the involvement of a person in a contravention of the fibre connection requirement.

Civil penalty provisions

2.16 The fibre connection requirements in sections 372B(2) and 372C(2) and the ancillary provisions in sections 372B(8) and 372C(8) are civil penalty provisions.1' Persons who contravene one of these, would be subject to the pecuniary penalty provisions in Part 31 of the Telecommunications Act 1997.

Proposed Division 3— Installation of fibre-ready facilities

2.17 Proposed Division 3 of Part 20A relates to the installation of fibre-ready fixed-line facilities in real estate development projects that involve building lots and building units.

2.18 The EM explains that it is intended that the fibre-ready connection requirement may be imposed in real estate development projects where it would not be practicable to immediately impose the fibre connection requirement, due, for

example, to the immediate cost of installation of fibre or other considerations.14 In these circumstances, the application o f fibre-ready infrastructure requirement in these projects is intended to ensure that there is appropriate 'passive1 infrastructure installed at the time of the subdivision, so that a carrier, for example NBN Co, will be able to

12 Proposed ss. 372B(7) and 372C(7).

13 Proposed ss. 372B(8) and 372C(8).

14 E M ,p . 37.

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install optical fibre lines at a later date quickly, at low cost and with minimum inconvenience to the community.15

2.19 There is nothing in the Bill which would prevent a developer from installing optical lines in a real estate development project (so long as those lines comply with any relevant industry codes and/or standards) where that project is subject to the fibre-ready requirement but not the fibre connection requirement.

R equ irem en t th a t fib r e -r e a d y fa c ilitie s b e in sta lled in b u ild in g lots a n d b u ild in g units

2.20 Proposed sections 372CA(2) and 372CB(2) provide the general rule that where fixed-line facilities are installed in specified real estate development projects, those facilities must be fibre-ready.16 Any conditions specified by the minister in a legislative instrument for this purpose must also be complied with.17 Together, these

constitute the 'fibre-ready requirement'.

2.21 The fibre-ready requirement applies where a real estate development project meets criteria set out at paragraphs 372CA(l)(a)-(c) and 372CB(l)(a)-(c).18

Definition: 'fixed-line 'facility

2.22 The definition of 'fixed-line facility' is given at proposed section 372HA: a fixed-line facility is a facility19 other than a line, which is used or for use in connection with a line, where the line is used to supply carriage services to the public and is not on the customer side of the boundary of a telecommunications network. Pits, ducts, sub-ducts, conduit and plinths for equipment housings, and poles are examples of fixed-line facilities.

Minister to declare what is a fibre-ready'facility

2.23 The minister may make a legislative instrument declaring that a specified fixed-line facility is a 'fibre-ready facility'.20 The minister may also specify in a legislative instrument conditions that must be met in the installation of fibre-ready facilities.21

15 EM, p. 37.

16 Proposed ss. 372CA(2)(a) and 372CB(2)(a).

17 Proposed ss. 372CA(2)(b) and 372CB(2)(b).

18 Namely, that the project involves the subdivision of one or more areas of land into building lots; the project is specified in, or ascertained in accordance with, a legislative instrument made by the minister; and the installation occurs after the commencement of sections 372CA and 372CB (1 July 2010).

19 A term defined in s. 7 of the Telecommunications Act 1997.

20 Proposed s. 372HB.

21 Proposed ss. 372CA(3) and 372CB(3).

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2.24 The EM explains that the intention of Division 3 is ensuring that the fibre-ready fixed-line facilities that are installed in these developments will permit fibre to be installed at a later time in a quick and efficient manner, at low cost and with minimum inconvenience to the community."" Therefore, it is intended that the

minister would exercise power to:

# specify the types of fixed-line facilities that would be considered to be 'fibre ready’ and therefore permitted to be installed in specified developments;

• describe the attributes that fixed-line facilities that could be used in the deployment of fibre must have in order to be classified as 'fibre-ready' and therefore permitted to be installed in specified developments; and

prevent the installation in those developments of any other types of fixed-line facilities that could inhibit the deployment of fibre.2 2 23

2.25 The EM also provides the following examples of possible required attributes for fixed-line facilities that could be specified by the minister:

• the design o f the passive network (e.g. the location of ducting, plinths and pits and the angle of ducting);

• the characteristics of components (e.g. the minimum internal diameter for ducts and conduits, the size o f pits, the strength and capacity of poles); and

• installation and operational requirements (e.g. ensuring ducts are not blocked, the use of sub-ducting).

Minister may exempt conduct from requirements to install 'fibre-ready facilities'

2.26 The minister may exempt conduct specified in, or ascertained in accordance with, a legislative instrument from the scope of the fibre-ready requirement.24 An exemption may be unconditional or subject to such conditions (if any) as are specified

in the exemption.2'

Role fo r ACMA

2.27 As with the fibre connection requirement described above, the minister may confer, in a legislative instmment, powers or functions on the ACMA for the purposes o f the fibre-ready requirement.26

22 EM,p. 38.

23 EM, p. 38.

24 Proposed ss. 372CA(5) and 372CB(5).

25 Proposed ss. 372CA(6) and 372CB(6).

26 Proposed ss. 372CA(7) and 372CB(7).

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________________________________________________________ n_

Regulations to provide for third party access regime

2.28 To ensure that carriers can gain access to the fibre-ready infrastructure that is installed as a result of the operation of the fibre-ready infrastructure requirement, proposed subsections 372CA(4) and 372CB(4) provide that the regulations may establish a regime for third party access to a fixed-line fibre-ready facility in the project area, or any o f the project areas, for a real estate development project.

2.29 The EM states that the approach o f including the access regime in regulations to be made at a later date, rather than in the Bill, is adopted to permit further consultation to occur in the drafting of the access regime.27 Regulations are subject to Parliamentary scrutiny and disallowance as a matter of course.

2.30 Proposed subsections 372CA(8) and 372CB(8) provide that regulations made for the purposes o f proposed subsections 372CA(4) and 372CB(4) may confer functions or powers on the Australian Competition and Consumer Commission (ACCC). The ACCC would have the discretion to delegate the functions and powers in relation to the access regime to a single member of the ACCC by virtue of an amendment to subsection 25(1) of the Trade Practices Act 1974, which is proposed by item 11 to Schedule 1.

2.31 Proposed subsections 372CA(9) and 372CB(9) provide that regulations establishing the access regime may confer jurisdiction on a court. This could enable the ACCC or other parties to commence action in a court if an owner or occupier o f a

fixed-line facility did not comply with a request for access to the facility in accordance with the access regime.

Ancillaiy provisions

2.32 Proposed subsections 372CA(10) and 372CB(10) contain ancillary contravention provisions which prohibit the involvement of a person in a contravention of the fibre-ready requirement.

Civil penalty provisions

2.33 The fibre-ready requirements in sections 372CA(2) and 372CB(2) and the ancillary provisions in sections 372CA(10) and 372CA(10) are civil penalty provisions.28 If persons contravene these, they would be subject to the pecuniary penalty provisions in Part 31 of the Telecommunications Act 1997.

Proposed Division 4—Miscellaneous provisions (definitions)

2.34 Division 4 contains miscellaneous provisions, including definitions for the following:

27 E M , p . 38.

28 Proposed ss. 372B(8) and 372C(8).

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'Real estate development projects';29

'Building unit';30

'Fixed line facilities';31

'Fibre-ready facilities';32 and

'Installation' of a facility.33

29

30

31

32

33

Proposed s. 372D.

Proposed s. 372F.

Proposed s. 372HA - discussed above at [2.22],

Proposed s. 372HB - discussed above at [2.23],

Proposed s. 372HC.

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Chapter 3

The importance of promoting fibre in new developments

Introduction

3.1 The focus o f this chapter is on the first of the two key areas of debate raised during the committee's consultation process, namely the desirability and importance of promoting fibre in new developments.

3.2 The second key area of debate, namely the application and operation of the Bill's requirements that fibre-related infrastructure be installed in specified developments, is addressed in Chapter Four.

The importance of fibre in new developments

3.3 Overall, there was broad support from submitters for the underlying policy of the Bill of ensuring that new developments will be fitted with high-speed optical fibre lines or fibre-ready technology instead of with outdated copper technology.1

Im petu s: b u ild in g a N a tio n a l B ro a d b a n d N etw o rk

3.4 The Bill forms part of the government's historic plan to build a National Broadband Network (the NBN). Under that plan, a Government Business Enterprise, NBN Co, will build a network to deliver super-fast broadband to all Australian homes and workplaces. Ninety per cent of existing Australian premises will be connected

with Fibre To The Premises (FTTP) services delivering speeds of up to 100 Megabits per second (Mbps), and the remaining 10 per cent of existing premises will receive speeds of at least 12 Mbps delivered using next generation satellite and wireless

technologies.2

3.5 When announcing its plans to build the NBN, the government indicated that it would '[progress legislative changes that will govern the national broadband network company and facilitate the rollout of fibre networks, including requiring greenfield

1 See for example: Universal Communications Group, Submission 6, p. 1; Optus, Submission 7, p. 1; Master Builders Australia Ltd, Submission 10, p. 1; Engineers Australia, Submission 11, p. 2.

2 The Hon. Kevin Rudd MP, Prime Minister, the Hon. Wayne Swan MP, Treasurer, the Hon. Lindsay Tanner MP, Minister for Finance, Senator the Hon. Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, 'New National Broadband Network', Joint press release, 7 April 2009,

www.minister.dbcde.gov.au/media/media releases/2009/022 (accessed 27 April 2010).

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developments to use FTTP technology from 1 July 2010'. The policy intention became known as the government's 'fibre in greenfields' policy.

3.6 The Bill is intended to implement that fibre in greenfields policy. The explanatory memorandum (EM) to the Bill states that it does not make sense to roll-out a fibre network to 90 per cent o f existing Australian premises as part of the NBN roll-out, but leave new developments to be serviced by old technology or subject to more expensive retro-fitting costs down the track.4 Thus the objective is to have

'FTTP installed in new developments to the greatest extent practicable and, where this is not immediately feasible, to have developments made "fibre-ready": that is, to have appropriate ducting and other facilities installed in order to avoid more costly retrofitting later'.5

3.7 Two matters were the subject o f general consensus in evidence to the committee:

. First, that fibre is the fixed-line telecommunications infrastructure of the future, and that the fibre in greenfields policy is therefore an important means of ensuring that new developments are not serviced with outdated technology; and

• Second, that the historical arrangements for the installation of copper telecommunications infrastructure in new developments are no longer suitable, feasible or available alternatives to fibre.

H isto rica l a rra n g em en ts for p r o v id in g teleco m m u n ica tio n s in n e w developm en ts

3.8 Historically, new developments have generally been serviced by copper-based infrastructure. The copper network provides voice services and, more recently, also broadband services using Digital Subscriber Line (DSL) technology.

3.9 Generally, the copper deployment has been undertaken by Telstra, largely reflecting its status as the universal service provider.6 In evidence to the committee, Telstra explained how the arrangements have traditionally worked:

...when approached by developers to install [telecommunications] infrastructure in the past we have, in accordance with the planning

3 The Hon. Kevin Rudd MP, Prime Minister, the Hon. Wayne Swan MP, Treasurer, the Hon. Lindsay Tanner MP, Minister for Finance, Senator the Hon. Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, 'New National Broadband Network', Joint press release, 7 April 2009, www.minister.dbcde.gov.au/media/media releases/2009/022 (accessed 27 April 2010).

4

5

6

EM, p. 1.

EM, p. 7.

EM, p. 4.

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15

arrangements that apply around a development, moved in to install pit and pipe infrastructure and previously we had installed copper.7

3.10 Telstra's previous approach was to install copper based infrastructure for free on the expectation that its high upfront capital costs would be recouped from usage charges over the long lifespan of the infrastructure (some 20 to 30 years).8

F ibre a s the fu tu r e

3.11 Submitters were generally in agreement that fibre is the way of the future. The following exchange between the committee and a representative of Telstra, Mr Paul Granville, captured the overwhelming sentiment of key stakeholders:

CHAIR— So you believe optical fibre is the way to go.

Mr Granville— Definitely. It is the only fixed-line technology that has a long-term future in providing what the community needs.9

3.12 The sentiment flowed from the recognition that copper is not capable of meeting the needs o f the future. As the EM explains:

The capacity o f copper-based networks to deliver high speed broadband services is significantly inferior to FTTP networks. This capacity is affected by such factors as the quality o f the copper, distance from the exchange, the availability o f spare ports and the presence o f network electronics such as

remote integrated multiplexer (RIM) and pair gain systems. The limitations o f copper can lead to poor broadband services or no broadband services at all.10

3.13 Evidence provided to the committee by the Department of Broadband, Communications and the Digital Economy (the Department) also indicated that, in general, purchasers o f building units expect that the premises will be equipped with fixed-line telecommunications infrastructure, and that the deployment of fibre can

make premises more valuable to prospective purchasers:

A survey in Canberra in August 2006 asked respondents to indicate how they would react if a developer who had planned FTTH [Fibre To The Home] rang up prospective buyers to say he had decided not to proceed with FTTH, but was willing to offer a discount on the house and land

package. O ver 60 per cent indicated no offer would be satisfactory; instead

Mr James Shaw, Director, Government Relations, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 2.

8 Telstra Corporation Ltd, Submission 9, p. 4.

9 Mr Paul Granville, Director, Network Standards and Facilities, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 2.

10 EM, p. 4.

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they would buy elsewhere. O f the remainder, 80 per cent indicated they would not proceed without com pensation o f at least $5,000.11

3.14 In recent years there has been a moderate shift to the installation of FTTP in new estates instead of copper. For example, Telstra, which has been offering to deploy fibre lines to new developments since 2004,12 indicated that it has deployed FTTH to

75 project areas to date.13 Universal Communications Group (UCG), a small, relatively new carrier which specialises in niche markets in small communities for the provision of FTTH in brownfield gated communities, also gave evidence of their work developing an 800-home greenfield development on the Gold Coast as well as a

smaller one in Sydney.14 1 5 Finally, LandCorp, the Western Australian Government's primary land developer, also described how:

Where it has made sense to do so, LandCorp has installed pit and pipe on the basis fibre communications infrastructure will in time be reticulated in the region and estate. O ther developers have also done this as a

precautionary measure, while others have contracted with Telstra who rollout fibre to the hom e.13

3.15 The EM describes instances like these as reflecting '[fjorward-looking developers and local councils' recognising that 'FTTP networks provide additional benefits to households, add value to properties and become a selling point as the availability of superfast broadband becomes the expectation for all businesses and

consumers'.16

3.16 However, it was clear from the evidence that the installation of fibre, or fibre-ready infrastmcture has not become the standard practice. The committee did not receive any evidence which cast doubt on a statement by the Department that:

[wjhile fibre infrastmcture has been increasingly installed in new

developments and the governm ent's policy is seeking to build on this trend, the provision o f fibre is not yet w idespread. A key issue is that the benefits o f installing fibre are long term and therefore developers do not necessarily have the incentive to accept the higher cost o f fibre in the short term ...17

j_ 6 ____________________________________________________________________________________________________________________________

11 Cited in R. Eckermann, A urora Fibre to the Home Case Study, Department Infrastmcture Victoria, 2009, and referred to in Department o f Broadband, Communications and the Digital Economy, answer to question on notice 29 April 2010 (received 28 April 2010).

12 Mr Paul Granville, Director, Network Standards and Facilities, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 2.

13 Telstra Corporation Limited, answer to question on notice, 19 April 2010 (received 28 April 2010).

14 Universal Communications Group, Submission 6, pp 1-3.

15 LandCorp, Submission 4, p. 3.

16 E M , p . 4.

17 Department of Broadband, Communications and the Digital Economy, answer to question on notice 19 April 2010 (received 28 April 2010), Attachment B, Item 18, p. 5.

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3.17 The Department went on to state that the need for more wide-spread deployment and installation provided a mandate for legislative intervention:

Requiring the installation o f fibre (or fibre-ready facilities by law) will ensure fibre is more widely deployed to the long term benefit of property owners and the wider com m unity.18

3.18 The sentiment was broadly supported.19 However, there was some dissent expressed by the Urban Taskforce Australia, a non-profit organisation representing prominent Australian developers and equity financiers. Urban Taskforce Australia disputed whether legislative intervention is necessary, arguing instead that market

dynamics are an adequate alternative if indeed there is a need for fibre-related infrastructure:

Developers are sophisticated enough to understand their market. I f the market demands optic fibre technology, a developer does not need legislation for this technology to be provided. In fact, optic fibre has already been provided in many locations without legislation mandating its provision. Therefore, the governm ent’s “future proofing” efforts should be

focused on network provision. In instances where there is an optic fibre network and consumer market to support its provision, developers are already working with service providers to service new developments with

optic fibre technology.20

The co st o f fib re

3.19 The evidence suggested that, in part, the preference to deploy copper as opposed to fibre has resulted from the lower cost o f copper.

3.20 Telstra confirmed to the committee that, unlike its practice of installing copper for free, since it began rolling out fibre in about 2004,21 it has generally required a contribution from developers when installing fibre:

A t the moment where we deploy fibre it is a commercial agreement between us and the developer. There is generally a contribution from the developer towards the additional cost o f deploying fibre, and any remaining costs are recovered through the ongoing usage o f the network from the

resident o f the property.22

18 Department of Broadband, Communications and the Digital Economy, answer to question on notice 19 April 2010 (received 28 April 2010), Attachment B, Item 18, p. 5.

19 See, for example: Universal Communications Group, Submission 6, p. 1; Optus, Submission 7, p. 1; Master Builders Australia Ltd, Submission 10, p. 1; Engineers Australia, Submission 11, p. 2.

20 Urban Taskforce Australia, Submission 12, p. 3.

21 Mr Paul Granville, Director, Network Standards and Facilities, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 2.

22 Mr James Shaw, Director, Government Relations, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 4.

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3.21 Property developers and industry representative organisations also highlighted the importance of this cost-differential when deciding whether to deploy copper or fibre fixed-line infrastructure to new developments. The Housing Industry Association (HIA), Australia's largest residential building organisation whose members include builders, trade contractors, manufacturers and suppliers, said that some of their members:

...have instances in current projects where they have sought to install fibre- ready conduit in projects at their ow n expense, but have been advised by Telstra that a charge o f $1,000 per lot would be applied for the privilege, despite the cost for the appropriate conduit being m inim al.23

3.22 LandCorp also provided evidence of a number of indicative fibre reticulation cost estimates prepared for projects located across Western Australia:

In these estimates there would be a design and 'headworks' fee payable by the developer o f approximately $100,000 per estate (or large stage release) and then a per lot cost o f betw een $2000 and $4000.

For a 'small' 100 subdivision in regional W estern Australia (in a town with a population exceeding the threshold) the additional delivery cost exceed $0.5 million. For other towns in the N orth W est o f the State experiencing rapid growth where a larger scale o f developm ent is needed (e.g. 1000 lots), the additional costs will be substantial and run into millions. These are additional costs to a project, as it w as the case previously that Telstra provided communications infrastructure to owners and occupiers and there was no contribution to be made by the developer.24

T elstra ch an ges p o lic y : co p p er n o lo n g e r a va ila b le

3.23 During the course of the inquiry it became apparent that, even aside from the technological merit or otherwise of copper being deployed, as a result of decisions that have recently been made by Telstra, copper is no longer an available alternative to optical fibre for fixed-line telecommunications infrastructure deployments in new developments.

3.24 Telstra announced at the Urban Development Institute of Australia's annual conference on 9 March 2010 that it would no longer install copper infrastructure in all new developments, except to the extent that it already had a contract in place with the relevant developer to do so.25

3.25 Telstra has stated that it will 'continue to meet [its] obligations' under the Universal Service Obligation (USO) (which requires Telstra to ensure that all people

23 Housing Industry Association, Submission 3, p. 3.

24 LandCorp, Submission 4, p. 6.

25 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 5, 19 April 2010 (received 28 April 2010).

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in Australia have reasonable access to standard telephone services and payphones)26 by deploying what it considers 'the most appropriate technology in individual circumstances'.27 At the committee's hearing, the following further explanation was provided by Telstra:

Where w e have existing obligations to provide copper then we will meet those obligations... [W]hen you look at the planning cycle for new

developments we are talking about several years, so I am not sure how our decision at this point in time is going to immediately flow through to the planning processes that apply to new developments. Where we have committed to put copper in we will meet those commitments, and in the meantime w e are not automatically deploying copper, we will work with

developers to put in a solution that means the customers can get a service.28

3.26 It emerged from further questioning that where arrangements are not made to deploy fibre to the premises, that solution 'could be wireless'.29

C om m ittee view

3.27 The committee welcomes the government's policy objectives and considers that the Bill is an integral part of ensuring that new developments are not left behind as the NBN is rolled out across the country.

3.28 The committee believes that fibre is the fixed-line telecommunications technology of the future. The committee further believes that fibre is therefore the most appropriate telecommunications infrastructure to be deployed in new developments that are, or will be, within the NBN's 'fibre footprint'. The committee

agrees with the government's policy that where fixed-line telecommunications infrastructure is installed in new developments, it should be optical fibre or fibre- ready facilities and not outdated copper infrastmcture.

3.29 The committee also understands that, as a result of Telstra's decision not to deploy copper to any new development, the question of whether fibre or copper should be deployed in new developments is a moot one: fibre will, in the future, be the only alternative regardless. The committee considers that these developments provide even more impetus for the Bill.

26 The supply of standard telephone services includes consumers having access to an efficient and reliable telephone service, good voice reception and responsive fault repair. See the Telecommunications (Consumer Protection and Service Standards) Act 1999.

27 Mr James Shaw, Director, Government Relations, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 10.

28 Mr James Shaw, Director, Government Relations, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 11.

29 Mr James Shaw, Director, Government Relations, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 11.

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3.30 Finally, the committee believes that to date, in the absence of legislative intervention, there has not been sufficient take-up of fibre for new developments. Although the committee notes that there has been an increasing trend towards fibre, the committee believes there is a clear need for legislative mandating of fibre and fibre-ready facilities to ensure higher take-up rates, and more consistent standards for the deployment and installation o f these technologies. The committee can see the clear justification in fibre being deployed at the outset so as to avoid, wherever possible, the

costs that would be associated with retrofitting fibre to new developments after they have been built.30

30 The comparative costs are outlined in the EM at p. 5.

2 3 0

Chapter 4

Application and operation of the Bill Introduction

4.1 The focus of this chapter is on the second of the two key areas of debate raised during the committee's consultation process, namely, the application and operation of the Bill's requirements that fibre-related infrastructure be installed in specified developments.

Key matters raised

4.2 The key matters raised by submitters concerning the application and operation of the Bill were:

• the scope of the Bill, specifically to what types of developments it will apply, and how it will affect projects for which planning, development and/or construction processes have already commenced;

• the content and implications for fixed-line telecommunications service provision generally of the requirements to deploy fibre and/or install fibre-ready facilities; and

• ownership o f the infrastructure, the intended access regime, and integration of the infrastructure with the NBN.

4.3 To some extent, the grounds for discussion shifted between the time at which written submissions were received and the committee's public hearing. The Bill provides that the detail of the application and operation of the Bill's requirements is to

be provided for in subordinate legislation. This includes, but is not limited to, the threshold 'triggers' at which developments will be exempted from requirements to deploy fibre, and the stage of development to which the Bill will apply. The committee's deadline for written submissions was 6 April 2010. On Friday,

16 April 2010, a Position Paper outlining the substantive approach expected to be taken in the subordinate legislation was released by the minister for Broadband, Communications and the Digital Economy (the minister) and circulated by the Department.1 The committee conducted its hearing on the following Monday,

19 April 2010.

1 Senator the Hon. Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, 'Further detail on superfast broadband for greenfields', 16 April 2010, www.minister.dbcde.gov.au/media/media releases/2010/035 (accessed 2 May 2010). See also 'Proposed subordinate legislation to give effect to fibre in new developments',

Position Paper, 16 April 2010, www.dbcde.gov.au/ data/assets/ndf file/0005/127517/Proposed subordinate legislation to g ive effect to fibre in new developments.pdf (accessed 2 May 2010).

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4.4 As a result of the timing of these events, at the public hearing, the committee invited witnesses to subsequently submit additional information outlining their response to the Position Paper.

The scope of the Bill's application

T he role o f su b o rd in a te legislation

4.5 The Bill is drafted broadly as framework legislation. It provides that detailed subordinate legislation will provide for the application and operation of Proposed Part 20A.2 It gives the minister the authority to specify the property developments or classes of developments in which:

• Fixed lines which are installed to building lots and/or units must be optical fibre; and

• fixed-line facilities (e.g. passive infrastructure like conduits and pits) which are installed to building lots and/or units must be fibre-ready facilities.

4.6 For example, the requirement in proposed section 372B(2) that any fixed line deployed to a project area be a fibre line, applies only to projects 'specified in, or ascertained in accordance with, a legislative instrument made by the minister'3 and where no exemption under a legislative instrument provided for in subsection 372B(4) applies.

4.7 At the time of making written submissions, in the absence of the subordinate legislation, many submitters were concerned that the details o f how the Bill would operate in practice were unknown. The Urban Development Institute of Australia, for example, stated that:

...under the current available legislation, it is uncertain which

developments will be required to adhere to the FTTP provision and which are exempt.4

4.8 However it was also clear at the committee's hearing that the attitude of most witnesses was that their concern was not that the detail of the requirements be in the primary Act itself, but that it be contained somewhere. The following statement of Master Builders Australia to this effect was representative o f the attitude of a number of submitters:

W hat we are saying is that we do not m ind where the detail lies so long as it is open, transparent and readily com m unicable to our members... The problem to be solved is getting the detail o f those rules that can be

implemented and having them in a com prehensive form that we can then

2 Proposed Part 20A provides the fibre connection requirement and the fibre-ready requirements for new developments. See Chapter 2, above, for a detailed outline of the Bill.

3 Proposed s. 372B(l)(b).

4 Urban Development Institute of Australia, Submission 15, p. 8.

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distil and then provide to our members in terms o f education. The detail o f how that is achieved in the legislative process— it is always better the more it is transparent, open and upfront, but if the process renders clear rules that our m em bers can follow, that is our credible criterion.5

4.9 Optus indicated that although its policy preference is that all fibre be deployed (or at least its deployment co-ordinated by) NBN Co, if the Bill is to be the mechanism for servicing new developments, then it is sufficient that the detail be contained in subordinate legislation:

[T]he broad principle in our submission... is that logically we think it would be preferable for NBN Co. to deploy fibre, and that in m any senses would obviate the need for these further detailed rules around deployment o f fibre and the characteristics o f that particular fibre. However, if [the detailed rules for new developments] is a path that we need to go down then

certainly the subordinate instruments are an appropriate place for that information to be set out— but we would need to look at the detail.6

4.10 The Department emphasised that in the circumstances of this Bill, extensive use of subordinate legislation to provide the operating detail was in the interests of flexibility and more appropriate targeting of its application:

The bill makes extensive use o f subordinate legislation to have operational effect. The use of subordinate legislation is to ensure requirements can be specified in sufficient detail and to provide flexibility, particularly to allow for the targeting and phasing in o f requirements.7

The co n ten t o f th e p ro p o se d su b o rd in a te legislation

4.11 The Position Paper now sets out the substantive approach to be taken in the subordinate legislation.8 It clarified the geographic application of the Bill, the types of developments to be captured (assessed according to size of development and price of fibre deployment thresholds), the content of exemptions for certain conduct, and the practical date of effect for the Bill to apply to developments already at various stages

of development (the trigger event).

4.12 In summary, the approach outlined in the Position Paper is as follows:

5 Mr Richard Calver, Legal Counsel, Master Builders Australia, Committee Hansard, Sydney, 19 April 2010, p. 52.

6 Mr Andrew Sheridan, General Manager, Interconnect and Regulation, Optus, Committee Hansard, Sydney, 19 April 2010, p. 15.

7 Mr Daryl Quinlivan, Deputy Secretary, Department of Broadband, Communications and the Digital Economy, Committee Hansard, Sydney, 19 April 2010, p. 55.

8 'Proposed subordinate legislation to give effect to fibre in new developments', Position Paper, 16 April 2010, www.dbcde.gov.au/ data/assets/ndf file/0005/127517/Proposed subordinate legislation to g ive effect to fibre in new developments.pdf, (the Position Paper).

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• Geographic application o f Bill: the subordinate legislation will seek to target those parts of Australia where services are expected to be provided over a fibre access network, and to provide for the possible expansion of the fibre footprint over time. To this end, it is proposed that the subordinate legislation apply in areas of Australia where an urban utility such as reticulated water,

sewerage or mains electricity is installed.9

• Application o f fibre-ready requirement: it is envisaged that any development caught by the geographic coverage criteria would be subject to the fibre-ready requirement. That general rule would be subject to certain exemptions. One exemption envisaged is that the rule would not apply if, at the time of installation, the development was in an area specified in a plan published by NBN Co as being a non-fibre area or where NBN Co otherwise gave an explicit exemption in writing prior to the installation o f relevant infrastructure. Consideration is also being given to allowing a party to apply to ACMA to exempt a development, in writing, from the fibre-ready requirement.10 Further qualification of the rule will apply to in-fill and urban renewal developments so that the fibre-ready requirement would generally be limited to facilities within the property boundary and existing passive infrastmcture in the street not otherwise being touched would not need to be replaced.11

• Fibre connection requirement: the requirement to actually deploy fibre will build on the fibre-ready requirement. It will apply where:

• (a) the development meets the fibre-ready threshold criteria, and:

• (b) the development over its life is to be equal to or greater than

200 building lots and/or units (the size threshold); and

• (c) fibre could be installed at a price of $3,000 or less (including GST), which includes the price o f backhaul (the price threshold).12

The Position Paper additionally provides the following clarifications:

• the number of lots or units refers to the whole of the development;13

• the price figure refers to the price payable by the party acquiring the fibre facilities, not to the total cost to the provider of providing the infrastructure and services.14

9 Position Paper, p. 5.

10 Position Paper, p. 5.

11 Position Paper, p. 6.

12 Position Paper, p. 6.

13 Position Paper, p. 6.

14 Position Paper, p. 7.

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• the price figure would cover all relevant equipment and installation for providing FTTP services, including the provision from the network to the property boundary and to the premises of trenches, passive infrastructure, fibre cabling and associated distribution facilities, backhaul capacity, an optical network terminal and cabinet at the premises, and basic internal wiring.15

• Practical date o f effect on the ground: the legislative framework is proposed to commence on 1 July 2010 (proposed clause 2 of the Bill). However, the regulations are to provide that in terms of practical effect on the ground, the fibre and fibre-ready requirements will apply to fixed-line facilities and fixed

lines that are to be installed in relation to a development for which a Stage 3 planning application (infrastructure planning) is lodged on or after 1 July 2010. 'Stage 3' is broadly defined as a stage occurring 3%-8 years prior to premises construction and being one of 'negotiation of infrastructure levies

and detailed stmcture planning' in which 'more detailed site planning, possible determination of developer contributions' occurs, and agencies such as roads, water, electricity, sewer and public transport are involved.16 Appendix 3 reproduces the Department's table of the 'Six Stage Generic Development Pipeline for Greenfield Development and Major Brownfield Redevelopment' which was used in the Position Paper.

A p plication a n d operation o f th e B ill: view s ex p ressed

4.13 The approach taken in the Position Paper had the effect that a number of concerns raised in written submissions about the operation or application of the Bill were not pursued at the hearing. For example, concerns that property developers might be financially disadvantaged by requirements to invest substantial sums deploying

expensive optical fibre lines and backhaul infrastructure to project areas, were largely circumvented by the articulation in the Position Paper of the envisaged $3000 price threshold and 200 lot size threshold. Similarly, previously voiced concerns that the requirements to deploy fibre or install fibre-ready facilities would cause significant

cost blow-outs for projects substantially commenced and constructed, were to a great degree rendered moot by the Position Paper's proposal that the Bill take practical effect on the ground only to projects lodging a Stage 3 application after 1 July 2010.

4.14 At the public hearing, most witnesses did not comment on the financial implications for project developers whose projects will be subject to either a fibre-ready or fibre-deployment requirement.

4.15 To the extent that opinions were expressed at the hearing on the application and operation of the Bill, the primary matter raised related to the policy of new developments being subject to a requirement to pay for, or contribute at all to, the

15 Position Paper, p. 6.

16 Position Paper, pp 9-10.

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installation of fibre-ready facilities or the deployment o f fibre lines.1 This was generally described as the 'inequity' argument and particularly propounded by property developers. The argument was explained by one member of the Urban Development Institute of Australia as follows:

W hat we see as the inequity in this from day one is that, in effect, you are capitalising upfront costs for fibre to the prem ises for a person purchasing and then paying that as a lump sum upfront, because it is built into the cost o f the land that they are purchasing, and then you are going to tax them. There is inequity in that that it is important to address.1 7 18

4.16 Master Builders Australia were also dissatisfied with the application of any fibre deployment or 'fibre-ready' requirement funded in any way through developer contributions, regardless of whether a price cap or size threshold applies:

As a general rule, we are o f the view that the developer should only be responsible for the provision o f pit and pipe reticulation for fibre within the development that would allow future fibre installation w hen the super-fast broadband service is available. A ll other costs should become the

responsibility o f the Service Provider and/or Government...

The proposed legislation and the Paper are highly likely to adversely affect the com m erciality o f affordable and low-income housing developm ents.19

4.17 Mr Aaron Gadiel, Chief Executive Officer o f the Urban Taskforce Australia, expressed his organisation's attitude to the perceived inequities underlying the Bill and the government's fibre in greenfields policy as follows:

To some extent the federal governm ent has accepted that there is some inequity in [providing different arrangements for the deployment o f fibre infrastructure to new developm ents compared with those for existing premises] and the proposal now is for the cost to new development projects to be capped at $3,000, I assume per residential lot or unit, although the paper does not make this clear. There is also a restriction saying that the

obligation to put optic fibre in, as opposed to fibre ready, would only apply to developments o f 200 building lots or units and larger. This does raise a couple o f issues. Firstly, there is still an expectation from the federal governm ent that some developm ent projects will carry the cost o f backhaul, backhaul being the netw ork infrastructure that is not located on a

developm ent site but m ight be necessary to integrate new homes or business prem ises effectively into a national broadband network. We appreciate the financial costs o f backhaul or head end are to be taken into

17 For example, Mr Bruce Duyshart, Member, Urban Development Institute of Australia, Committee Hansard, Sydney, 19 April 2010, p. 39, Mr Aaron Gadiel, Chief Executive Officer, Urban Taskforce Australia, Committee Hansard, Sydney, 19 April 2010, p. 41.

18 Mr Bruce Duyshart, Member, Urban Development Institute of Australia, Committee Hansard, Sydney, 19 April 2010, p. 39.

19 Master Builders Australia, answer to question on notice, 19 April 2010 (received 28 April 2010), p. 2.

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account in this $3,000 cap, but w e still are o f the view that it is inconsistent for new home owners and businesses to be required to make a direct contribution to off-site network infrastructure through their own property’s purchase price, whilst existing home owners and businesses do not face

these costs, although they are funding it through the taxes that everyone 20 pays.

4.18 Further, Mr Gadiel explained that his organisation dissents from the government's view that a size threshold trigger is appropriate in any case:

We have never been fond o f the suggestion that there should be a size threshold, as such. To us the more relevant consideration should be what is the likely pace of the rollout o f an optic fibre network, including head end and so forth, in the community or area concerned. It seems to us illogical that a developer might be compelled to introduce fibre to a 200 dwelling unit development in an infill location in the absence o f any clear plan to roll out the connecting network to that unit development in the foreseeable

future. It seems to us the obligation should not exist in isolation from clear concrete plans from whatever authorities will be responsible for rolling out this network to existing areas as well as new com m unities.2 0 21

4.19 The Department's evidence to the committee indicated that the premise of the inequity arguments (that new developments will have to pay for fibre infrastructure while existing premises will get it free from NBN Co at a later date) may be incorrect. The Department responded to the inequity argument by saying:

It was noted in the Second Reading Speech that the cost recovery

arrangements that may ultimately apply in greenfields will depend on the commercial arrangements that emerge between all relevant parties as fibre-to-the-premises is deployed more widely. How roll-out costs will be recovered in both brownfields and greenfields will depend on a range o f

factors and it cannot simply be assumed that stakeholders in greenfields will have to meet costs in one way while those in brownfields are expected to meet them in another. In all instances, NBN Co is expected to operate on

a commercial basis and to recover its costs.22

4.20 In contrast to the submissions made by property developers, carriers appeared to be in broad support for the proposed operation and application of the Bill, subject to their concerns that the price threshold may be too low, and the size threshold too high, to capture sufficient developments with the requirement to deploy fibre. Mr Roger McArthur, General Manager of the Universal Communications Group, explained his

20 Mr Aaron Gadiel, Chief Executive Officer, Urban Taskforce Australia, Committee Hansard, Sydney, 19 April 2010, p. 41.

21 Mr Aaron Gadiel, Chief Executive Officer, Urban Taskforce Australia, Committee Hansard, Sydney, 19 April 2010, pp 41-42.

22 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 5, 19 April 2010 (received 28 April 2010), Attachment B, Item 1, p. 1.

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concern that, as drafted, the Position Paper will see subordinate legislation created that has loopholes enabling developers to side-step fibre connection requirements:

[T]he bill, it defines a fram ework, but there is a level o f detail. Some o f those elements are covered o ff in the Position Paper— for example, setting the 200 [lots size threshold] and the financial fram eworks [of the price threshold] and so on— and that goes a long way to actually providing some degree o f certainty. I do feel that in its current form it does provide leverage or capability for developers to sidestep by creating development lots which actually fall below a threshold, so they might have to be forced to meet the fibre-ready requirement but not be forced to build the fibre requirements.23

4.21 In light of that concern, Mr McArthur and Mr Ralf Luna, Chief Executive Officer of the Universal Communications Group, put forward a proposal that local governments aggregate FTTH Greenfield developments in local development plans so as to ensure the cost of backhaul could not be used to manipulate the application of the price cap or the size threshold:

[W]e believe the most likely claim for a developm ent to be exempt under the proposed Bill will be that it is too small to cover the common

development costs, and this will push up the cost per lot to an unacceptable level. To avoid developers sidestepping the legislation, we believe consideration should be given to requiring local councils, maybe under the direction o f N BN Co., to aggregate fibre to the home greenfield

developments in the local developm ent plans. The aggregation o f multiple developments in the same geographic area would allow much smaller developments to be added to the fibre to the home plans o f existing

greenfield developments in the future... [The aggregation element] would prevent individual developers from creating lot sizes w hich would simply m ean that they could avoid adm itting the intent o f the bill.24

4.22 Telstra also submitted that the size threshold will operate as an artificial constraint on the deployment o f fibre to new developments:

Telstra has consistently advocated for a singular m onetary cap as the threshold for the fibre requirem ent. In our view, the 200 lot size threshold is an artificial constraint on the deploym ent o f fibre. There m ay well be m any smaller developments that could be fibred for less than $3000 per lot, especially once the policy and the m arket dynamics are established.

23 Mr Roger McArthur, General Manager, Universal Communications Group, Committee Hansard, Sydney, 19 April 2010, p. 33.

24 Mr Ralf Luna, Chief Executive Officer, Universal Communications Group, and Mr Roger McArthur, General Manager, Universal Communications Group, Committee Hansard, Sydney, 19 April 2010, pp. 29, 33.

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But if the 200 lot threshold is to remain, it should be closely monitored and adjusted downwards as the regulation and the market m atures.25

4.23 In addition, while broadly supportive of the $3000 price threshold, Telstra raised a number o f concerns as to its particular detail. Amongst other concerns and recommendations, Telstra suggested the price cap should be drafted so as not to enable a developer to claim the full value of trenching costs that would be incurred by the developer anyway in order to provide water, sewerage and electricity to the

development.26

4.24 As to the timing of the Bill's application, a number of views were expressed. Most witnesses agreed that discussions about telecommunications infrastructure occur at around a time corresponding with the 'stage 3' outlined in the Position Paper.

Mr Paul Granville o f Telstra explained that:

[generally the negotiations occur before the developers finalise the financing. They need to understand all of their costs reasonably early in the process, so they go out and seek negotiations with various suppliers so that they have clarity about their total costs before they actually go through to

get approvals. So it would be quite early on, probably at around stage 3. Those stages do vary from state to state, but it would be roughly in that sort o f time frame. It could be several years before they actually turn the first sod.27

4.25 Property developers and organisations suggested that there is some fusion between stage 2, 3 and 4 for the purposes of determining when telecommunications infrastructure decisions are made, and that this would complicate the merit of the proposal in the Position Paper as to the timing of the Bill's requirements taking effect:

The government in its paper on Friday had a very neat table with the six stages o f development. That has been reproduced by the National Housing Supply Council. That table rather oversimplifies a process that most developers and planners cannot get their heads around. There is no clear, neat stage 3. The government suggests that all developments that have

progressed to the stage 3 point at 1 July would be subject to these new rules. Trying to work out whether a development is at stage 3 is a challenge because stage 3 is not a statutory process. It is a non-statutory process that can be as long or as short as a piece o f string, if it exists at all. Sometimes

25 Telstra Corporation Ltd, answer to question on notice, 19 April 2010, (received 29 April 2010), 'Response to the "Position Paper" dated 16 April 2010 from the Department of Broadband Communications and the Digital Economy on the proposed subordinate legislation to give effect to fibre in new developments', p. 5.

26 Telstra Corporation Ltd, answer to question on notice, 19 April 2010, (received 29 April 2010), 'Response to the "Position Paper" dated 16 April 2010 from the Department of Broadband Communications and the Digital Economy on the proposed subordinate legislation to give effect to fibre in new developments', p. 5.

27 Mr Paul Granville, Director, Network Standards and Facilities, Telstra Corporation Ltd, Committee Hansard, Sydney, 19 April 2010, p. 8.

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what is described as stage 3 w ould actually happen before stage 2 and sometimes w hat is described as stage 3 would happen after stage 4 7 s

4.26 Telstra was the only organisation to submit that stage 3 may be too early in the development process with the result that there will be 'significant delay in the government's fibre objectives being achieved':

[UJsing Stage 3 as the trigger point means that there will be a significant 'tail' or real estate developments constructed after 1 July 2010 to which the fibre/fibre-ready requirements do not apply-even though the deployment o f fibre in those real estate developm ents may well be feasible.2 8 29

A p plication a n d op era tio n o f th e B ill: co m m itte e view

4.27 The committee supports the general principle adopted by the Bill and the Position Paper which will create a default fibre-ready requirement applying broadly wherever other utilities services are reticulated, and a more limited fibre-deployment requirement additionally applying where the 200 lots size threshold and $3000 price cap threshold are satisfied.

4.28 The committee also supports the intention that the subordinate legislation will result in the Bill's requirements to deploy optical fibre or install fibre-ready facilities taking practical effect for developments which lodge a Stage 3 application after 1 July 2010. The committee believes that, given Telstra's decision to no longer deploy

copper to new developments, if fibre deployment is feasible (logistically and financially) in projects which are not captured by the cut-off date, then property developers may very well enter into commercial arrangements to deploy fibre so as to provide fixed-line infrastructure to end users. The committee does not believe it is necessary to bring forward the cut-off requirement so as to apply to projects which, on

1 July 2010, will be classified as having reached, a later stage.

4.29 The committee believes that the price and size thresholds are appropriately targeted to ensure that, wherever possible, new developments are serviced with fibre technologies and are not left with outdated infrastructure. The committee believes that, in combination, the Bill and the Position Paper represent a reasonable balance between the competing considerations o f financial cost to developers, the interests of end users and the community in the provision of modem telecommunications infrastmcture to new developments, and government policy, which all need to be taken into account. The committee agrees with the Universal Communications Group

28 Mr Aaron Gadiel, Chief Executive Officer, Urban Taskforce Australia, Committee Hansard, Sydney, 19 April 2010, pp 42-43. See also Mr Robert Appleton, National Director. Technical and Regulatory Policy, Master Builders Australia Ltd, Committee Hansard, Sydney, 19 April 2010, pp 51-52.

29 Telstra Corporation Ltd, answer to question on notice, 19 April 2010, (received 29 April 2010), 'Response to the "Position Paper" dated 16 April 2010 from the Department of Broadband Communications and the Digital Economy on the proposed subordinate legislation to give effect to fibre in new developments', p. 7.

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that local government could play an important planning role in the aggregation of new developments for the purposes of backhaul costs, but considers that this is a matter for local governments and that, as a first step, the size threshold remains an appropriate mechanism.

4.30 The committee acknowledges that not having the final version of the proposed subordinate legislation prior to undertaking the inquiry to some extent affected the ability of witnesses to evaluate all the relevant material and to articulate their positions to the committee. The committee appreciates the final version of the subordinate

legislation has not yet been settled and that the Position Paper is subject to a consultation process.

Content and implications of the fibre / fibre-ready requirements

4.31 As drafted, the Bill does not mandate or compel the provision of fibre lines or fibre-ready facilities to specified developments. Rather, it prohibits a person from installing a fixed line or telecommunications facilities unless it is a fibre line or they are fibre-ready facilities.

4.32 However, in answer to a question taken on notice, the Department indicated that the intention is that the effect of complementary state and territory planning arrangements currently being negotiated will be to require that fixed

telecommunications facilities be provided in new developments. The Department explained:

The particular measures will vary because state and territory planning arrangements vary in their structure, but it is envisaged that there would be a requirem ent that fixed telecommunications facilities be provided in new developments, and that those facilities m eet relevant Commonwealth

requirements, thereby interlinking state, territory and Commonwealth arrangements...

In general...it appears that the approach most states and Territories would take is to add fixed telecommunications to the list o f utilities which have to be provided for before a planning application is approved.30

4.33 It should be noted that some reservations were expressed, for example by Master Builders Australia, concerning the fragmentation of fibre connection and fibre- ready facilities installation standards and regulations into a myriad of different state and local government requirements.31

4.34 However, the Department did indicate that proposals to legislatively mandate the deployment of fibre infrastructure at a Commonwealth level had been canvassed but rejected for a number of reasons:

30 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 10, 19 April 2010 (received 28 April 2010).

31 Master Builders Association, Submission 10, p. 1.

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[T]he Bill conditions what is to be done rather than directly requiring the installation o f such facilities.

[The Department] canvassed the possibility o f legislating directly to require developers to ensure pit, pipe and FTTP infrastructure and services are available to consumers in its D iscussion Paper in M ay 2009. It found that this could be done using the Com m onw ealth's corporations pow er under the Constitution but would be lim ited to corporations and w ould have to be enforced by prohibiting the trading o f land where the requirement was breached. This was strongly opposed by developers and w as considered to be intrusive and disproportionate. Developers also put the view their

developments would need to include fixed line infrastructure to be

m arketable.32

4.35 In relation to the issue, it is necessary to bear in mind Telstra's decision to no longer deploy copper to new developments regardless of whether those developments are subject to a legislative prohibition on the installation o f non-fibre fixed-line telecommunications infrastructure. A number of submitters, including the Urban Development Institute of Australia, stressed that the decision may have profound effects on the financing, infrastructure deployment arrangements, and end-user satisfaction with new developments.33 Mr Paul Budde, Managing Director of Paul Budde Communication Pty Ltd, explained his assessment o f the implications of Telstra's conduct as follows:

Perhaps the m ost disruptive developm ent has been not the Bill itself but the subsequent announcement from Telstra that it will no longer deploy its copper-based infrastructure in greenfield developments.

This action, o f course, makes the governm ent’s proposition in the

legislation to be ‘fibre-ready’ a non-issue. There is no longer an alternative. A nd this, then, places a large question mark on how the developers will enable the provisioning o f a telephone service. In most situations they will simply not get planning approval unless they can prove that such a fibre based service will be made available.

A t the same tim e customers w ill not expect ju st a telephone connection - they will demand broadband - but, legally at least, nobody w ill be required to provide such a service since broadband is not a declared

telecom m unications service.34

4.36 Mr Budde went on to elaborate what he believes is likely to happen to fill the vacuum created:

The reality remains - as it always has been - that Telstra is the only

organisation capable o f dealing with the smaller sites (1-500 dwellings), as

32 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 2, Attachment A, Item (1), 19 April 2010 (received 28 April 2010).

33 Urban Development Institute o f Australia, Submission 15, p. 6.

34 Paul Budde Communication Pty Ltd, Submission 14, p. 1.

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it is uneconomical to provide site space, backhaul and a FTTH network for these small sites, since the end cost o f all this has to be recovered from the sale price o f the product (a house or piece o f land).

For these sm all sites a developer would have to rely on a solution that goes back to Telstra’s exchange, as this is the only location they can physically connect back to without massive backhaul costs. And so as a result o f this policy Telstra, by default, wins that entire segment o f the market, which is

significant in terms o f the overall num ber o f sites.35

4.37 However, the committee did receive evidence that there is a competitive market for the supply of fibre services to new developments. In addition to Telstra and the Universal Communications Group, several other companies which currently offer to install fibre for new estates are listed in the EM. They include Arise, Clubcom, OPENetworks, Opticomm, and TransACT.36

4.38 It was also pointed out by the Department that although the Bill supports the continued existence of the competitive market for the supply of fibre-related infrastructure, nothing in the legislation would prevent NBN Co from supplying fibre or installing fibre-ready facilities in the future if it chose to do so.37

4.39 A number of submitters suggested that they believed it would be preferable that all fibre deployment and installation be managed by NBN Co. One of the most vocal proponents o f that proposal was Optus:

In our submission we have argued that NBN Co. should deploy fibre in greenfield sites. If it were to do so then the cost o f that deployment would be taken up as part o f the general costs of running the network and therefore it would be recovered through access fees to wholesale customers such as

Optus and Telstra and ultimately passed on to end users— in exactly the same w ay as the costs o f N BN Co. deploying fibre into brownfield

locations w ould be.38

4.40 The Implementation Study into the NBN was released subsequent to the committee's public consultation process. A key finding of the implementation study was that the 'fibre component of the NBN should be extended from 90 to 93 per cent and cover the 1.3 million new premises expected to be built by 2017-18.39

35 Paul Budde Communication Pty Ltd, Submission 14, p. 1.

36 EM, p. 4.

37 Mr Daryl Quinlivan, Deputy Secretary, Department of Broadband, Communications and the Digital Economy, Committee Hansard, Sydney, 19 April 2010, p. 55.

38 Mr Andrew Sheridan, General Manager, Interconnect and Regulation, Optus, Committee Hansard, Sydney, 19 April 2010, pp 16-17.

39 McKinsey & Company and KPMG, Implementation Study fo r the National Broadband Network, 5 March 2010, p. 8, http://data.dbcde.gov.au/nbn/NBN-Implementation-Studv- complete-report.pdf (accessed 10 May 2010).

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4.41 Recommendation 13 of the Implementation Study is that NBN Co be the provider of last resort for premises within or adjacent to NBN's fibre access network and that developers be required to cover the costs of trenching and the duct, pit and pipe network and that NBN Co would be responsible for the cost of installing all other

fibre infrastructure up to the network boundary.40

4.42 Recommendation 14 is that fibre design standards be developed that align with those being applied by NBN Co across its network. Recommendation 16 is that fibre networks that do not comply with the standards be overbuilt by NBN Co. Recommendation 17 is that all new developments where fixed line infrastructure is deployed be required to provide a duct, pit and pipe network to allow for later fibre deployment by NBN Co.41

4.43 If accepted by the government, these recommendations still leave open the possibility that other providers, besides NBN Co, will provide fibre facilities to new developments provided they meet the necessary standards. As such, the recommendations are not inconsistent with this Bill.

C o m m ittee view

4.44 The approach adopted in the Bill is that, if fixed-line infrastructure is installed in specified development projects, then that infrastructure must be fibre-related infrastructure. The committee believes this legislative approach is appropriate for the policy end sought. That is, the committee does not believe that it is necessary for the Bill to actually mandate that fixed-line infrastructure be installed in those specified developments. As the Department foreshadowed in its evidence to the committee, it is most likely that any such mandatory requirement will be supplied by state and/or local government planning policies.

4.45 The committee notes the concerns expressed regarding the potential for cross-border fragmentation of standards and planning requirements to arise due to the different requirements and obligations o f different local government areas. The different standards could relate both to whether it is mandatory to install fixed-line telecommunications infrastructure in a new development in order to get planning approval, and also to the standards and specifications required for any installation work. However, the committee considers that concern about uniformity of standards and specifications is largely misplaced given the government's clear intention to establish national standards about technical matters and a national accreditation scheme for providers.

40 McKinsey & Company and KPMG, Implementation Study fo r the National Broadband Network, 5 March 2010, p. 93.

41 McKinsey & Company and KPMG, Implementation Study fo r the National Broadband Network, 5 March 2010, pp 94, 95 and 97.

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4.46 The committee believes there is significant scope for the government to continue to lead discussions between state and local government planning organisations to ensure that there is a nationally integrated and consistent set of requirements for the deployment of telecommunications infrastructure in new developments.

Recommendation 1

4.47 The committee recommends that the government continue its work with state and local government planning authorities to ensure a nationally integrated and consistent approach to requirements for telecommunications infrastructure in new developments.

4.48 As to the role of NBN Co, the committee notes that there is nothing in the explanatory material for the Bill or in the Position Paper that would preclude NBN Co from participating in new estates. However, the committee believes the government should make it clear in its response to the Implementation Study its expectations for the involvement of NBN Co in servicing new developments with fibre-related

infrastructure.

Recommendation 2

4.49 The committee recommends that the government clarify, as soon as possible, the role of NBN Co in servicing new development projects.

Ownership, access arrangements, and integration with the NBN

4.50 The matters of who will own the fibre infrastructure once installed, how access to the infrastructure will be regulated, and how standards of service installation will be sufficiently regulated were all prominent concerns in written submissions to the committee.

4.51 A number of submitters merely noted that, in advance of sighting the proposed subordinate legislation, these were matters yet to be resolved.42 Others were more descriptive of the topography of the issues.43

O w n ership o f in frastru ctu re

4.52 The committee asked the Department to clarify who will own any fibre deployed to a project area (including backhaul), any fibre installed in it, and the fibre-ready infrastructure installed or constructed as part of the project. The Department responded that:

42 For example, Engineers Australia, Submission 11, p. 3; Urban Development Institute of Australia, Submission 15, pp. 6-7; ENERGEX Ltd, Submission 5, p. 2; Ergon Energy, Submission 8, p. 2.

43 For example, Telstra Corporation Ltd, Submission 9, pp. 7-8; Optus, Submission 7, pp. 2Ά ; Housing Industry Australia, Submission 3, p. 3.

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A range o f ownership and m anagem ent arrangements already exist when it comes to the operation o f telecom m unications infrastructure in new developments. The governm ent has not seen any reason why these arrangements cannot be left to the market. The governm ent is concerned to ensure, however, that quality facilities are installed in new development and are operated to provide quality services. To a large extent this will be achieved through the setting o f appropriate technical specifications and competitive forces. As a further safeguard, [the Department] is working w ith stakeholders on the developm ent o f a process for accrediting fibre providers and certifying the infrastructure they install.

W hile legislation is not prescriptive as to who can own, manage or operate infrastructure in new developm ents, under section 47 o f the

Telecommunications A ct 1997, a network unit (which would include fibre lines...) m ust not be used w ithout the owner having a carrier licence or a nom inated carrier declaration.44

4.53 While it may be the case that fibre cannot be owned by a person not holding a earner licence or a nominated carrier declaration, the Department's answer does not necessarily address the uncertainty expressed by LandCorp as to ownership of all the fibre infrastructure and assets. LandCorp wrote to the committee that:

As a condition o f subdivision LandCorp is required to build the

infrastructure (roads, power, w ater and drainage) to meet a prescribed set o f specifications. The infrastructure within the estate would be build, inspected and certified as m eeting the technical design specification and after testing, the infrastructure w ould be transferred to the appropriate body, with that subdivision infrastructure becom ing part o f that utilities network. It is presently unclear who L andC orp will transfer fibre infrastructure to once it has been constructed.45

Committee view

4.54 The committee believes there is a need for the Department to clarify with industry and future stakeholders who can own the relevant fibre-related infrastructure. It may be that allowing for a diversity o f ownership arrangements provides scope for the development of innovative cost-sharing arrangements.

Recommendation 3

4.55 The committee recommends that the Department of Broadband, Communications and the Digital Economy give consideration to the variety of ownership arrangements that exist, or might arise, and whether there are good reasons for the government to intervene in these arrangements.

44 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 11, 19 April 2010 (received 28 April 2010).

45 LandCorp, Submission 4, p. 9.

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A ccess a rra n g em en ts

4.56 A number of submitters raised concerns about the lack of detail currently available as to the content of the regulations providing for access to fibre lines and fibre-ready infrastructure deployed in new estates. Optus and Telstra both submitted substantial comment on the importance of the matter to the committee.46

4.57 Proposed subsections 372CA(4) and 372CB(4) provide a high-level framework for regulations to establish a regime for third party access to a fixed-line facility.

4.58 The Position Paper provides little additional detail about the government's intentions for an access regime. It states:

The government envisages that fibre networks in new developments will operate on an open access basis, and that wholesale services like those available on the NBN will be offered. There is scope for the Australian Competition and Consumer Commission (ACCC) under Part XIC o f the

Trade Practices Act 1974 to declare access to services and regulate access pricing. The government will also consider more direct forms of regulation, if necessary, to ensure consistency o f outcomes for service providers and end-users.47

4.59 In response to a question on notice raising the concerns of submitters, particularly carriers such as Telstra, as to the likely arrangements for an access regime, the Department stated:

The regulations will provide all the appropriate guidance and will be developed with regard to existing and proposed telecommunications access arrangements and in consultation with stakeholders. The [EM] to the Bill

notes that one possible model for the regulations is Part 5 o f Schedule 1 to the Telecommunications Act 1997 [the telecommunications access regime provisions].

The Departm ent recognises that the regulations will need to have due regard to carriers' obligations under Part 5 o f Schedule 1 so as not to create

conflicting obligations on carriers.48

Committee view

4.60 The committee acknowledges the critical importance of an effective and open access regime to fibre-related infrastructure for the provision of telecommunications services to the eventual end users in project areas.

__________________________________________________________________________________37_

46 Optus, Submission 7, pp. 2-4; Telstra Corporation Ltd, Submission 9, pp 7-8.

47 Position Paper, p. 1.

48 Department of Broadband, Communications and the Digital Economy, answer to question on notice, Question 10, 19 April 2010 (received 28 April 2010).

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4.61 The committee also notes the access arrangements in place under Part XIC of the Trade Practices Act 1974 will apply to greenfield sites and the government has another Bill in the Senate, (the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009), to strengthen current arrangements. The committee urges the government to clarify its intentions in this regard. The committee notes the government's assurances that the-soon-to-be-released regulations will provide 'all the appropriate guidance' on the proposed telecommunications access arrangements.

Recommendation 4

4.62 The committee recommends that the government ensure that access arrangements, including the genuine equivalence of access of a kind contemplated for the NBN, operate in new developments consistently with those in the rest of the country.

In teg ra tio n w ith th e N B N

4.63 The chief concern of submitters regarding the integration of new fibre lines and fibre-related facilities with the broader NBN related to the clarity of network standards and specifications, and the extent to which further regulation and oversight o f industry operators may be necessary.

4.64 Most submitters who addressed the matter were supportive of NBN Co having a clear role in setting industry standards.

4.65 The Urban Development Institute of Australia submitted that planning decisions will be hampered by there not being:

• a public document detailing NBN Co's deployment plans, that is, when they will be deploying to certain areas;

• a public document detailing NBN Co's technical design solution which will affect spatial planning requirements o f a site to be 'fibre-ready';

• a publicly available NBN Implementation Study;49 and

• an agreed industry standard on compliance thresholds.50

4.66 Mr Paul Budde expressed strong concern that, in the absence of clear guidance and co-ordinated policies, sub-standard work may otherwise be undertaken which will compromise the potential o f the NBN:

49 At the time of the committee's public hearings this document had not been publicly released by the government. It was subsequently released on 6 May 2010. It is available at: http://data.dbcde.gov.au/nbn/NBN-Implementation-Studv-complete-report.ndf (accessed 6 May 2010) .

50 Urban Development Institute of Australia, Submission 15, p. 5.

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This is a recipe for a patchwork outcome - different cabling topologies, different technologies, different construction standards, different services and service pricing, different ownership and operation models. Now that NBN Co is operational there is an obvious role for it to play in this; but, in the current documentation at least, there is no indication as to whether it is to play a role or what its role will b e.51

4.67 Mr Budde recognised that there are a number o f potential ways in which adequate supervision and installation practices may be regulated:

NBN Co doesn’t have to take over all o f this work, it could also, o f course, work very closely with existing bona fide greenfield operators and work out a plan with them. A positive industry policy could see these companies working together with NBN Co to achieve a truly national outcome, whereby the greenfield operators can concentrate on new innovative

services.52

4.68 The Position Paper outlines an intention that 'networks in new developments be subject to clear technical specifications to maximise consistency with the end-use experience to be enjoyed on NBN Co's fibre network'. It also explains that the ministerial power to specify conditions for the deployment of fibre lines and the installation of fibre-ready facilities53 enable the minister to set technical specifications and develop network standards.54 The Position Paper explains that technical specifications to be applied in new developments would be contained in one or more of the following documents:

• A document published by NBN Co for this purpose;

• An industry code published by the Communications Alliance and registered by ACMA for this purpose; or

• Any industry standard that may be prepared by ACMA from time to time for this purpose.

4.69 The Position Paper also notes that Part 6 of the Telecommunications Act 1997 provides a framework for the development of industry codes and standards and that proposed amendments to Part 6 contained in the Bill will 'make it simpler' to make relevant industry codes and standards for optical fibre facilities and services. The Department indicates in the Position Paper that it is currently working with the

Communications Alliance on draft guidelines for the deployment of FTTP in new developments and has also consulted the Stakeholder Reference Group with early

51 Mr Paul Budde, Paul Budde Communication Pty Ltd, Submission 14, p. 2.

52 Mr Paul Budde, Paul Budde Communication Pty Ltd, Submission 14, p. 2.

53 Proposed ss. 372B(4), 372C(4), 372CA(3) and 372CB(3).

54 Position Paper, p. 11.

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drafts of this work. NBN Co has also been developing its own specifications and these have been provided to the Communications Alliance for consideration.55

4.70 Telstra was the only submitter to query the desirability of network standards being made as proposed by the Bill. Telstra argued that the categories for which the Communications Alliance and ACMA may make codes and standards are 'very broad and in particular would allow [the Communications Alliance] and ACMA to determine the characteristics and quality of services provided over Telstra and competitor business fibre networks.’"’6 Telstra submitted this would be inappropriate because:

D irect fibre for businesses is already a highly competitive and dynamic market. There is no case for Government intervention to prescribe

specifications in this market, and the prospect o f M inisterial proclamation could discourage investm ent and innovation in this already competitive m arket.57

Committee view

4.71 The committee believes that nationally consistent network standards and specifications are integral components to ensuring that fibre deployed, and fibre-ready facilities installed, in new developments, are properly designed and adapted to

eventual integration with the NBN. The committee acknowledges the significant work and consultation process the Department is continuing to undertake with relevant stakeholders to ensure that appropriately adapted and targeted standards and specifications are developed.

4.72 The committee did not receive evidence indicating whether the network standards and specifications being developed will also deal with safety and training requirements for the deployment and/or installation o f relevant infrastructure. To the extent that they do not, the committee believes that such matters ought to be specified as a condition of installation, and should be specified in an appropriate legislative instrument made by the minister pursuant to his or her power to specify conditions for

the deployment of fibre lines and the installation o f fibre-ready facilities.58 5 9

Recommendation 5

4.73 The committee recommends that the minister, by legislative instrument, specify that a condition'9 of installation of a line or fibre-ready facility in a project area is that the installation be undertaken in compliance with nationally consistent network safety and training standards.

55 Position Paper, p. 11.

56 Telstra Corporation Ltd, Submission 9, p. 14.

57 Telstra Corporation Ltd, Submission 9, p. 14.

58 See proposed ss. 372B(4), 372C(4), 372CA(3) and 372CB(3).

59 Pursuant to subsections 372B(4), 372C(4), 372CA(3) and 372CB(3).

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Recommendation 6

4.74 The committee recommends that the Bill be passed.

41

Senator Anne McEwen Chair

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Coalition Senators' Additional Comments Coalition Senators support universal access to fast and affordable broadband. However, we are concerned about the impact of the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 on the cost of greenfield housing development and the associated flow on effect for home buyers, particularly first home buyers.

Coalition Senators are also concerned at the wide ranging powers delegated to the Minister under the Bill and the potential for further regulatory imposts on the property development industry.

Cost impact

Coalition Senators note the concerns of the property industry which has cautioned the legislation could add $500 million annually to the cost of new housing.1

For instance, the Housing Industry Association noted that:

costs will inevitably be passed on to new homebuyers together with a number of multiplier costs, for example, stamp duty charges on the final cost of the residence.2

Submitters to the inquiry also noted the Bill discriminated in its treatment of greenfield home buyers as opposed to purchasers of established dwellings.

Connnunications analyst Mr Paul Budde, cautioned:

the cost of FttP solutions in greenfield estates will be funded by the end- users, while their brownfield neighbours will get it all for nothing! Having paid for their own infrastructure, residents are expected to pay the same,

nationally homogenised service prices that are offered by NBN-based providers.

In response to a question on notice, Master Builders Australia suggested;

There should be equitable treatment of both greenfield and brownfield homeowners in relation to the funding of the national fibre deployment and the NBN project should align with and include the greenfields fibre deployment requirements.3

This sentiment was echoed by the Housing Industry Association (HIA) who stated:

1 Australian Financial Review, 22 March 2010, p. 7.

2 Mr Graham Wolfe, Chief Executive Officer, Housing Industry Association, Committee Hansard, Sydney, 19 April 2010, p. 20.

3 Master Builders Australia, Answer to Questions on Notice, p. 2.

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HIA believes the Bill will create an inequitable system and place an additional burden on (new) home buyers. 4

Coalition Senators are concerned that the cost impact o f the Bill will be borne by purchasers of housing in greenfields estates.

Minister Conroy released the long awaited National Broadband Network Implementation Study six days ago and well after the conduct of hearings for this inquiry.

We note the study recommends that NBN Co take responsibility for the rollout of fibre to greenfields estates. The Government has not publicly responded to the study. It is unclear whether the Government intends to adopt this particular recommendation,

and if so. how it will impact the Bill, and its cost implications. 5

To that end, Coalition Senators note a further recommendation by Master Builders Australia that:

the developer should only be responsible for the provision of pit and pipe reticulation for fibre... that would allow future fibre installation when the super-fast broadband service is available. All other costs should become the responsibility of the Service Provider and/or Government.6

In his submission to the Committee, Mr Paul Budde similarly noted:

it would be in the interest of all parties for efforts to be made to align the NBN rollout for brownfield sites with that of the greenfield rollouts.7

Impact on housing affordability and first home buyers

Coalition Senators are particularly concerned at the Housing Industry Association's assertion that the cost impact of the Bill would be disproportionately borne by,

...first home buyers who can least afford those additional imposts at the time of the purchase, placing further negative pressures on housing affordability.8

Coalition Senators note the Government's intent that subordinate legislation provide for the installation o f fibre to be required where it could be installed at a price of $3000 or less.9

4 HIA, Subm ission 3, p. 2.

5 Senator the Hon Stephen Conroy and the Hon Lindsay Tanner MP, 'Landmark Study confirms NBN vision is achievable and affordable Joint media release, 6 May 2010.

6 Master Builders Australia, Answer to Questions on Notice, p. 2.

7 Mr Paul Budde, Paul Budde Communication Pty Ltd, Subm ission 14, p. 3.

8 HIA, Subm ission 3, p. 2.

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Urban Development Institute of Australia Chief Executive, Mr Richard Lindsay, cautioned that buyers may be unable to bear such an increase to housing costs saying:

You will find that $3000... will have a significant impact in the lower income areas. 9 10

And,

The market is extremely sensitive in tenns of affordability. 11

Coalition Senators consider that the imposition of this cost on first home buyers is unreasonable.

Master Builders Australia criticised the assertion that the Bill could be justified by aligning broadband as an essential service alongside water, power and sewerage:

...critical services are essential for health and amenity; high-speed broadband is not.12

Coalition Senators note these criticisms highlight a direct contradiction between the Bill and Prime Minister's promise prior to the 2007 election about housing affordability. Since then the Prime Minister has commented on housing affordability:

It's a problem growing over time", and that "the case for action could not be stronger.1

Well, working families are under financial pressure, and it’s very important therefore that Government is involved in the business of helping them with housing affordability.14

Obviously however, there are real problems in terms of housing affordability. They continue, and we’re going to have to continue to work on this in the future.15

Uncertainty - too much left undone; too little time to do it.

Telstra cautioned that the broad scope of Ministerial discretion provided by the Bill could fuel greater uncertainty and impose further constraints in the housing sector.

9 Department of Broadband, Communications and the Digital Economy, 'Proposed subordinate legislation to give effect to fibre in new developments - Position Paper', 16 April 2010, p. 7.

10 Mr Stephen Albin, CEO, Urban Development Institute of Australia, Committee Hansard, Sydney, 19 April 2010, p. 36.

11 Mr Stephen Albin, CEO, Urban Development Institute of Australia, Committee Hansard, Sydney, 19 April 2010, p. 36.

12 Master Builders, Answer to Questions on Notice, p. 2.

13 'Rudd Determined to Act on Housing Affordability', The Age, 3 March 2008.

14 Transcript, Prime Minister’s Doorstop Interview at Liverpool Hospital, 3 May 2010.

15 Transcript. Prime Minister’s Doorstop Interview at Liverpool Hospital, 3 May 2010.

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In particular, Coalition Senators note comments by Telstra that the Bill:

only provides a framework for the exercise of a series of broad Ministerial discretions which will determine how the policy applies in practice.

The Urban Development Institute o f Australia also noted the lack of certainty:

there is still a significant lack of knowledge in relation to NBN Co‘s Network deployment plans and technical specifications, as well as the ownership and cost implications of the FTTP provision in Greenfield developments.16

In response to a Question on Notice, Master Builders Australia noted:

we were cautious in our submission about the Bill; because the implementation detail is not yet settled and this detail is all-important.17

Master Builders Australia told the Committee that the Bill afforded little time to educate developers on requirements that would be in place on 1 July 2010.

National Director o f Technical and Regulatory Policy at Master Builders Australia, Mr Robert Appleton warned:

July 1 is not far away, and to effectively educate our members as to what their new responsibilities will be in that period of time without knowing what they are going to be, would appear to be pretty difficult.

Coalition Senators are concerned that the Bill will impose a raft of legislative requirements on developers and builders by 1 July 2010, the communication of which is difficult given they are still being developed, and once developed, will leave little-to-no 'lead' time.

In these circumstances, it is unreasonable to expect industry to be ready for a 1 July 2010 start date.

Coalition Senators believe the Government cannot remain intent on 1 July 2010 commencement, without first having addressed the issues outlined by submitters to the inquiry.

Additional regulation

Coalition Senators note several warnings that the Bill will add an additional layer of regulation to an already heavily regulated sector.

Telstra made clear the ramifications o f over-regulation, saying:

16 Urban Development Institute o f Australia, Submission 15, p. 8.

17 Master Builders, Answer to Questions on Notice, p. 1.

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The proposed requirements need careful consideration as unworkable requirements may cause the installation of fibre in new developments to cease altogether.18

Likewise, Master Builders Australia noted they would be concerned if;

local government were to introduce further increased stringency on greenfield and building requirements without adequate justification or proving a cost-benefit to the community.19

Concluding Remarks

Coalition Senators support universal access to fast and affordable broadband, and reiterate comments by Master Builders Australia that developers should provide 'pit and pipe' infrastructure in greenfields estates to facilitate future installation of fibre.

We note evidence by LandCorp that it and other developers are already installing such infrastructure as a matter of course.

Regardless, Coalition Senators remain concerned that the Government has failed to adequately develop the Bill's operational details with industry, or to consult with key stakeholders to ensure awareness of, and preparedness for, a 1 July 2010 start-date.

Coalition Senators do not support Government moves to force developers to pay for the installation of fibre in greenfields estates. Evidence to the Committee suggests such a move would inflate housing prices and be particularly damaging for first-home buyers and those least able to bear any increase in costs.

Recommendation 1

At this stage, for the reasons outlined above, Coalition Senators recommend that debate on the Bill be postponed until the Government:

(1) Publicly issues its response to the Implementation Study for the National Broadband Network;

(2) Adequately consults with industry on the practical and operational issues related to the Bill and any subordinate instruments;

(3) Reduces the scope of the Bill and any subordinate instruments to the provision of 'pit and pipe' infrastructure in greenfields estates (which will facilitate future installation of fibre);

(4) Ensures that neither the Bill nor any subordinate instruments require or effectively force developers to pay for the installation of fibre in

18 Telstra Corporation Limited, Response to the 'Position Paper' dated 16 April 2010 from the Department o f Broadband, Communications and the Digital Economy on the proposed subordinate legislation to give effect to fibre in new developments.

19 Master Builders, Answer to Questions on Notice, p. 1.

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greenfields estates (which costs developers would pass onto homebuyers); and,

(5) Undertakes that neither the Bill nor any subordinate instruments will unduly impact first home buyers, young families and housing affordability generally.

Senator Mary Jo Fisher Senator the Hon. Judith Troeth

Deputy Chair

Senator the Hon. Ian Macdonald

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Appendix 1

Submissions, answers to questions taken on notice and additional information Submissions

1 Dr Kevin Cox

2 Robin Russell & Associates Pty Ltd

3 Housing Industry Association

4 LanaCorp

5 ENERGEX Limited

6 Universal Communications Group

7 Optus

8 Ergon Energy

9 Telstra Corporation Ltd

10 Master Builders Australia

11 Engineers Australia

12 Urban Taskforce Australia

13 Master Builders Queensland

14 Paul Budde Communication Pty Ltd

15 Urban Development Institute of Australia (National)

Answers to questions taken on notice

Master Builders Australia (from public hearing, 19 April 2010, Sydney)

Department of Broadband, Communications and the Digital Economy (from public hearing, 19 April 2010, Sydney)

Telstra (from public hearing, 19 April 2010, Sydney)

Optus (from public hearing, 19 April 2010, Sydney)

Urban Development Institute of Australia (National) (from public hearing, 19 April 2010, Sydney)

Additional information

Department o f Broadband, Communications and the Digital Economy - Position Paper - Proposed subordinate legislation to give effect to fibre in new developments, 16 April 2010 ' ‘

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Telstra - Response to the 'Position Paper' dated 16 April 2010 from the Department of Broadband, Communications and the Digital Economy on the proposed subordinate legislation to give effect to fibre in new developments

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Appendix 2

Public hearings

Monday, 19 April 2010 - Sydney

Telstra

Mr James Shaw, Director Government Relations

Mr Paul Granville, Director Network Standards and Facilities

Ms Yolanda Chorazyczewski, Group Regulatory Manager

Optus

Mr Andrew Sheridan, General Manager, Interconnect & Economic Regulation

Dr Michael Wagg, General Manager, NBN

Housing Industry Association)

Mr Graham Wolfe, Chief Executive, Association

Ms Kristin Tomkins, Senior Executive Director, Building, Development and Environment

Universal Communications Group

Mr Ralf Luna, Chief Executive Officer

Mr Roger McArthur, General Manager

Urban Development Institute of Australia

Mr Richard Lindsay, Chief Executive Officer - National

Mr Stephen Albin, Chief Executive O fficer-N SW

Mr Bruce Duyshart, Member

Urban Taskforce

Mr Aaron Gadiel, Chief Executive Officer

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Master Builders Australia

Mr Robert Appleton, National Director, Technical and Regulatory Policy

Mr Richard Calver, Legal Counsel

Department of Broadband, Communications and the Digital Economy

Mr Daryl Quinlivan, Deputy Secretary, Infrastructure

Miss Pip Spence, First Assistant Secretary, Networks Policy & Regulation

Mr Philip Mason, Assistant Secretary, NBN & Fibre-Rollout Regulation

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Appendix 3

Table 1: DBCDE Summary of Six Stage Generic Development Pipeline for Greenfield Development and Major Brownfield Redevelopment

Stage

__________________

What happens Time

for stage

Time elapsed since start

Time to premises construction

1. Identification and designation of new land release areas

Inclusion in urban zoning or master planning. Initiated by local or state government or private proponent.

2-4 years

2^1 years 6.25-15 years

2. Gazettal of rezoning or change of land use

Rezoning under local planning instruments. Initiated by proponent.

1-3 years

3-7 years 4.25-11 years

3. Negotiation of infrastructure levies and detailed

structure planning

More detailed site planning, possibly determination of developer contributions.

Done by developer. Involves many agencies e.g. roads, water, electricity, sewer and public transport;

also schools etc.

1-3 years

4-10 years 3.25-8 years

4. Statutory subdivision and development approval

Approval of developer- initiated applications on a stage by stage basis - road layouts, sometimes integrated housing projects.

0.5-2 years

4.5-12 years

2.25-5 years

5. Major civil works, servicing of allotments, and issue of new titles

Engineering designs, building, and certification of civil works. Construction done by the developer,

certification by state utilities.

1-2 years

5.5-14 years

1.75-3 years

6. Development approvals and dwelling construction

Housing design, approval and construction including placement of house on block.

9-12 months 6.25-15 years

0.75-1 year

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The Senate

Finance and Public Administration Legislation Committee

Electoral and Referendum Amendment (How­ to-Vote Cards and Other Measures) Bill 2010 [Provisions] Electoral and Referendum Amendment

(Modernisation and Other Measures) Bill 2010 [Provisions]

June 2010

265

© Commonwealth o f Australia 2010

ISBN 978-1-74229-261-8

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: lipa.sen@aph.gov.au Internet: http://www.aph.gov.au/senate/committee/fapa ctte/index.htm

This document was produced by the Senate Community Affairs Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

2 6 6

Membership of the Committee

42nd Parliament

Members

Senator Scott Ryan, Chair

Senator Helen Policy, Deputy Chair

Senator Doug Cameron

Senator Helen Kroger

Senator Jacinta Collins

Senator Rachel Siewert

LP, Victoria

ALP, Tasmania

ALP, New South Wales

LP, Victoria

ALP, Victoria

AG, Western Australia

Participating Member

Senator Bob Brown AG, Tasmania

Secretariat

Ms Christine McDonald, Secretary

Ms Jane Thomson, Principal Research Officer

Ms Sophia Fernandes, Research Officer

Ms Tegan Gaha, Executive Assistant

iii

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Table of Contents

Membership of the Committee............................................................................. iii

Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010 and Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010................................................... 1

INTRODUCTION.......................................................................................................1

BACKGROUND........................................................................................................ 2

THE BITLS.................................................................................................................2

ISSUES........................................................................................................................ 4

Conclusion................................................................................................................... 7

Coalition Senators' Dissenting Report..................................................................9

Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010.................................................................................................... 9

Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010.................................................................................................. 10

Additional Comments: Senator Bob Brown Australian Greens...................15

Lowering the voting age to 16 years of age............................................................15

Restricting the use of postal vote applications for party political purposes........ 16

Polling Day - how to vote cards...............................................................................17

Truth in Political Advertising...................................................................................18

Appendix 1 ............................................................................................................... 21

Submissions received by the Committee............................................................ 21

V

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Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010 and Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 INTRODUCTION

1.1 On 2 June 2010, pursuant to the resolution of the Senate regarding time- critical bills passed on 13 May 2010,1 the provisions of the following bills were referred to the committee for inquiry and report by 15 June 2010 (subsequently extended to 17 June):

• Electoral and Referendum Amendment (Close of Rolls and Other Measures) Bill (No. 2) 2010;

• Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010;

• Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010; and

• Electoral and Referendum Amendment (Pre-poll Voting and Other Measures) Bill 2010.

1.2 The committee agreed, by unanimous decision, that there were no substantive matters that required examination contained in the Electoral and Referendum Amendment (Close of Rolls and Other Measures) Bill (No. 2) 2010 and the Electoral and Referendum Amendment (Pre-poll Voting and Other Measures) Bill 2010 and so

reported to the Senate on 15 June.

1.3 In relation to the Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010 (the How-to-Vote Cards Bill) and the Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 (the Modernisation Bill), the committee invited written submissions from interested organisations and agencies, the Commonwealth Department of Finance and Deregulation, and the Australian Electoral Commission. The list of submissions received is at Appendix 1. The committee did not hold a public hearing in relation to the Bills.

1 On 13 May 2010, the Senate resolved to refer to committees for inquiry and report by 15 June 2010 the provisions of all bills introduced into the House of Representatives after 13 May 2010 and before 3 June 2010 that contain provisions commencing on or before 1 July 2010 (together with the provisions of any related bill).

2

BACKGROUND

1.4 In June 2009, the Joint Committee on Electoral Matters, tabled its report on the conduct of the 2007 federal election and matters related thereto." The report contained 53 recommendations aimed at enabling the franchise, maintaining an effective electoral roll, increasing the participation o f Indigenous and homeless electors, responding to the increased demand for early voting, reducing informal votes, the modernisation and sustainability of electoral administration, and the modernisation of regulatory arrangements. In the second reading speech for the

Modernisation Bill, the Minister commented:

The majority of reforms in this Bill are based on unanimously supported recommendations of the Report of the Joint Committee on Electoral Matters following its inquiry into the 2007 Federal election.2 3

THE BILLS

Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010

1.5 The How-to-Vote Cards Bill aims to amend the Commonwealth Electoral Act 1918 (the Electoral Act) and the Referendum (Machinery Provisions) Act 1984 (the Referendum Act) in relation to electoral advertising in two ways. First, specific and expanded authorisation requirements of how-to-vote cards are proposed. The proposed authorisation requirements are aimed at making clear who will benefit from the preference flow suggested on the how-to-vote card and thus 'reduce the potential for voters to be misled and to give voters the means to make informed decisions by ensuring that the political source o f how-to-vote material is clearly stated'.4 The amendments make it an offence for a person to publish or distribute a how-to-vote card that does not comply the authorisation requirements or includes false authorisation details.

1.6 Secondly, the Electoral Act and the Referendum Act prohibit a person from causing to be printed, published or distributed, anything that may mislead or deceive an elector in relation to how to cast a vote. The Bill aims to expand the definition of the term to 'publish' in both the Electoral Act and Referendum Act to add the terms 'telephone' and 'internet'. By expanding the definition to include the internet, the offence will capture material published overseas by an Australian citizen or resident.

2 Joint Committee on Electoral Matters, R eport on the conduct o f the 2 0 0 7 fed era l election and m atters related thereto, Canberra, June 2009.

3 The Hon Gary Gray, MP, Parliamentary Secretary for Western and Northern Australia, H ouse o f R epresentatives Hansard, 2 June 2010, p. 11.

4 Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010, E xplanatory M em orandum , p. 1.

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Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010

1.7 The Modernisation Bill repeals redundant provisions; gives the Electoral Commissioner flexibility rather than prescription; and places more technological tools at the Australian Electoral Commission's (AEC) disposal so that the AEC can continue to deliver the best enrolment and election practices.5 In order to achieve these aims, the Bill:

• removes the requirement to publish in the Government Gazette enrolment and election-related forms and information such as the location of polling places. The Electoral Commissioner will now be required to publish this information, at a minimum, on the AEC's website in recognition of the trend for people to use technology and websites to interact with government; • amends the evidence of identity requirement for enrolment so that a person

making an application for enrolment or a person changing thier name must provide evidence of identity - either a driver's licence number, passport number or an attestation of identity signed by an enrolled elector — with their enrolment application; • reduces the age at which people may provisionally enrol from 17 years to

16 years, thus allowing the AEC to target enrolment of young people in schools, educational institutions and youth events; • allows for electronic Roll information to be provided to parliamentarians allows for electronic certified lists; • introduces flexibility to print ballot papers at the local level by removing the

technical requirement from ballot-papers to be 'overprinted' and to require that ballot papers contain a feature to be approved by the Electoral Commissioner; • amends the process of authenticating ballot papers by a Divisional Returning Officer;

• introduces one form of mobile polling which may visit anywhere that the Electoral Commissioner determines thus removing inconsistencies that currently exist in the arrangements for visits at various places or institutions;

• enables a person to apply for a postal vote electronically by removing the requirement for an application for a postal vote to be signed and witnessed and requiring an elector making a postal vote to make a declaration that he or she is entitled to make an application; • prohibits written material from being attached to a postal vote application,

however, extraneous material may be included in an envelope along with the postal vote application;

5 The Hon Gary Gray, MP, Parliamentary Secretary for Western and Northern Australia, House of Representatives Hansard, 2 June 2010, p. 11.

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• requires a completed postal vote application be returned directly to the AEC, which is intended to ensure that the application is not returned via a third party, including a political party; • requires that both the elector and the witness of the postal vote application

make a written declaration that the requirements for completing the ballot paper were completed before the close of the poll; • clarifies that a right to inspect the electoral Roll does not include the right to electronically copy or record the Roll; • allows the AEC to provide the postal address of general postal voters to state

and territory electoral commissioners; • introduces specific provisions to facilitate enrolment and continued enrolment for people experiencing homelessness so that a person experiencing homelessness will not lose their itinerant elector enrolment because he or she

has been living in crisis or transitional accommodation for one month or longer or be removed from the Roll if they do not vote at a general election; • expands the grounds upon which a person may apply for a pre-poll or postal vote; and • makes a number of minor technical amendments to remove gender specific

language, amend incorrect cross references and provide for consistent use of terminology.

1.8 The Hon Gary Gray, MP, Parliamentary Secretary for Western and Northern Australia, stated:

Taken together these amendments provide the AEC with the necessary flexibility and technological tools needed to deliver modem electoral practices for the benefit of all electors.

The reforms are significant, and they are overdue.

This bill demonstrates the government's continuing commitment to update the Electoral Act and the referendum act for the benefit of all electors.6 7

ISSUES

E lecto ra l a n d R eferen du m A m e n d m e n t (H o w -to -V o te C ards a n d O ther M easu res) B ill 2010

1.9 The reforms proposed to how-to-vote cards were welcomed, with Professor Graeme Orr noting that they 'offer neat and bright line mles for the form of the authorisation'. However, some submitters suggested additional improvements are required. Mr Andrew Murray commented that standardisation of regulations in relation to how-to-vote cards across all Australian governments should be introduced.

6 The Hon Gary Gray, MP, Parliamentary Secretary for Western and Northern Australia, House o f Representatives Hansard, 2 June 2010, p. 11.

7 Professor G Orr, Submission 1, p. 1.

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Further, the bill should include a requirement that how-to-vote cards be registered with the AEC. Mr Murray stated that it is a relatively simple measure for how-to-vote cards to be scanned and placed on the ABC's website 'so allowing postal voters and others who use the internet access to HTV guidance'.8

1.10 Professor Orr also supported registration of how-to-vote cards, noting that not only would this have the benefit of educating campaigners, by bringing them into the administrative net ahead of polling day, but also giving the 'Commissioners and parties advanced notice of material, allowing time for a considered challenge to any

dubious material'. Professor Orr went on to comment that the proposed enforcement provisions focus on after-the-event. He commented that the proposed penalty ($1100) was adequate for minor offences but 'clearly' inadequate as a penalty for 'false

authorisation'.9 In conclusion Professor Orr commented that relying on an offence provision is inadequate and he recommended pre-polling day registration.

1.11 The AEC noted that some o f the states (Victoria, Queensland and NSW) have moved to a registration system of how-to-vote cards. In South Australia, how-to-vote cards are submitted to the SA Electoral Commission for inclusion in a poster that will appear at polling places. However, the SA system also allows for other how-to-vote

cards to be handed out to voters near polling places. In Tasmania it is not permissible to hand out how-to-vote cards on polling day itself and in the ACT they may not be handed out within 100 metres of a polling booth.

1.12 The AEC was of the view that how-to-vote card pre-registration systems may be manageable in a single jurisdiction with comparatively small numbers of candidates and in a single time zone. However, for a general election in the federal jurisdiction involving nearly 1,500 candidates for both the Senate and the House of

Representatives, such a system is likely to result in practical difficulties in having how-to-vote cards submitted to the AEC, registered and approved for publication in the short time between the close of nominations for candidates and the

commencement of pre-poll voting. The AEC also noted that:

...the resources necessary to administer such a scheme are currently not available and this runs the risk of diverting the AEC from its primary election activities. Accordingly, the measures contained in Schedule 1 to the How-to-Vote Cards Bill do not include any prior registration requirements.10

1.13 Professor Orr suggested tightening of the term 'authorised...on behalf of, in particular in circumstances where a party supporter may claim to have authorised the material themselves.11

8 M r A M u rra y , Submission 6, p . 1.

9 P r o f e s s o r G O rr, Submission 1, p. 1.

10 A u s tr a lia n E le c to r a l C o m m is s io n , Submission 3, p. 3.

11 P r o f e s s o r G O rr, Submission 1, p. 1.

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1.14 The Proportional Representation Society of Australia also suggested that how­ to-vote cards which urge voters to mark just a Senate party box, be obliged to provide the full numbering(s) for all candidates in a legible font size somewhere on that material. The Society commented that this would allow voters to establish where preferences were flowing on the party ticket and thus allow them to choose to vote below the line if they so wished.12

1.15 The AEC concluded that the amendments in relation to authorisation requirements will 'reduce the potential for voters to be misled and to give voters the means to make informed decisions by ensuring that the political source of How-to- vote material is clearly stated'.13

E lecto ra l a n d R eferen du m A m e n d m e n t (M odern isation a n d O th er M easu res) B ill 2010

1.16 Many of the proposals of the Modernisation Bill were supported, in particular the provisions relating to evidence o f identity;14 and age 16 provisional enrolment15; and at electors experiencing homelessness. In relation to the latter, PILCH Homeless Persons Legal Clinic commented:

We welcome those elements of the legislation that allows homeless voters to better access their human right to vote, and to participate in the public life of Australia.

In particular, we welcome the amendments to section 96 of the Commonwealth Electoral Act 1918 that recognise the difficulties of people who are homeless that may impede their ability to vote. We also welcome the broadening of the application of mobile polling, and recognise that these amendments may further reduce barriers faced by homeless voters in accessing polling places.16

1.17 In relation to the postal voting provisions, some concerns were raised. Professor Orr, for example, commented Ί am equivocal about proposals that weaken safeguards on postal voting, given the history and potential fraud in that form of voting'. He considered that removing witnessing and signatures may weaken

safeguards but 'would defer to AEC advice on whether removing the witnessing requirement will in fact add any weakness to the anti-fraud measure. The deeper issue is the reliability o f the underlying enrolment.'17

12 Proportional Representation Society o f Australia, Submission 4, p. 3.

13 Australian Electoral Commission, Submission 3, p. 6.

14 Professor G Orr, Submission 1, p. 3.

15 Professor G Orr, Submission 1, p. 3; Democratic Audit of Australia, Submission 2, p. 2; Proportional Representation Society o f Australia, Submission 4, p. 4.

16 PILCH Homeless Persons Legal Clinic, Submission 5, p. 1.

17 Professor G Orr, Submission 1, p. 3.

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1.18 Professor Orr commented on the proposal that applications for postal votes shall be made 'directly' to the Divisional Returning Officer thereby stopping their return via a third party. He voiced concern that the provision may be interpretable as forbidding a postal voter relying on a friend to deliver or post their application.18 The committee notes that the AEC's submission and second reading speech indicate that this provision is aimed at the current practice of returning postal vote applications principally via political parties and to ensure that any delays are minimised.19

1.19 The Proportional Representation Society of Australia commented on the provisions in relation to extraneous material included with postal vote applications and recommended that they be extended so that such material be required to 'sit in a separate envelope on which there is a clear authorisation and identification of

candidate or party'. The Society concluded that this 'should stop any abuse of current postage entitlements and minimise occasional campaign claims that the Electoral Commission has included party propaganda in material of this nature: invariably such mailouts criticised on the grounds o f perceived official bias have been from political parties'.20

C onclusion

1.20 The committee notes that many of the provisions contained in the How-to- Vote Bill and the Modernisation Bill are based on the unanimously supported recommendations of the Joint Standing Committee on Electoral Matters Report on the conduct o f the 2007 federal election and matter related thereto. The committee considers that the measures in the Bills will improve voter information in relation to how-to-vote cards, improve administrative processes and decrease the amount of prescription that prevents flexible and up-to-date process being used by the AEC in the conduct o f polling. The committee particularly welcomes the extension of provisional arrangements to 16 year olds and the measures aimed at those

experiencing homelessness.

Recommendation 1

1.21 The committee recommends that the Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010 and the Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 be passed.

Senator Helen Policy Chair

18 P r o f e s s o r G O r r , Submission 1, p . 4.

19 A u s tr a lia n E le c to r a l C o m m is s io n , Submission 3, p . 9.

2 0 P r o p o r tio n a l R e p r e s e n ta tio n S o c ie ty o f A u s tra lia , Submission 4, p . 5.

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Coalition Senators' Dissenting Report

Electoral and Referendum Amendment (How-to-Vote Cards and Other Measures) Bill 2010 It is notable that this Bill arises because of a deliberate scam by the ALP in the 2010 South Australian State Election.

The SA ALP handed out how-to-vote cards which appeared to be official Family First how-to-vote cards, but the preference order favoured ALP candidates.

Labor operatives were brought in, some even from interstate, to wear t-shirts which appeared to indicate that they were Family First booth workers, and to hand out the bogus FITVs.

This is not a one-off.

It is a deliberate scam that the ALP has used before, both in New South Wales and in Queensland, and which was legitimised in the infamous case of Webster v Deahm. It is nice to see that Labor, after only some 17 years, has now admitted that the decision in that case was wrong and is seeking to correct the law.

This Bill would require all HTV cards to place at the top of the card, and in a prominent size, the name and party of the authoriser, or face a fine of $1,100.

A false authorisation would incur a similar fine.

Given the song and dance which the Labor members on the JSCEM made about the unauthorised pamphlet in Lindsay, it seems a rather light penalty for such a serious - in Labor’s own words - offence against the Electoral Act. Clearly, a penalty of at least 50 units would be more appropriate, especially in the instance of deliberate

false authorisation details.

The specification that the authorisation must go at the top seems a little over- prescriptive. Surely the key point is that the authorisation should be large and noticeable, and that this could be achieved at the top or the bottom of the HTV - or

indeed anywhere on the document in a prominent, readable font and a prominent position.

That being said, the Coalition strongly supports the principle o f the Bill.

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Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 This Bill purports to be a series o f uncontroversial, minor amendments arising out of the unanimous recommendations o f the JSCEM Inquiry into the 2007 Federal election. In the main, it is acceptable, but there are some problems which need to be addressed.

Schedule 1 moves the AFC towards a more ‘digital’ system of records management. This measure was not opposed by the Coalition members of the JSCEM.

The only query that presents itself to the Coalition relates to the seemingly unnecessary deletion of s.37 of the Commonwealth Electoral Act. Section 37 states:

37 Keeping of forms

All Divisional Returning Officers and Assistant Divisional Returning Officers shall keep forms o f claim for enrolment and transfer and such other forms as are prescribed, and shall without fee supply them to the public and assist the public in their proper use.

It is not a big issue, but it seems strange that such a basic entitlement - that forms be available and freely given at DROs - should be deemed worthy o f removal. If the argument is that there are no longer physical fonns ‘on hand’, there will still have to be some form of on-demand printing facility in these offices.

Not all individuals have access to the internet. Some people may prefer to just wander into the local DRO and obtain a form. Thus it seems to the Coalition that there is no harm done in retaining this section, and a potential for harm to be done - i.e. the removal of a right to a free service - if s.37 were to be deleted.

Schedule 2 changes the evidence o f identity rules for enrolments. It removes the mandatory need for a witness to attest to the identity of a person and reduces the acceptable identity to a smaller field o f items. This measure was not opposed by the Coalition members o f the JSCEM.

One issue of concern is that s.99A(6) refers to a government department which no longer exists.

Schedule 3 allows for provisional enrolment at age 16, as opposed to the current age of 17. There is one drafting error in this Schedule, at Item 6: there is no reference to “age 17” in s,121(l)(c) ofthe Commonwealth Electoral Act.

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While this measure was not opposed by the Coalition members of the JSCEM, Coalition Senators accept the assurances of the Government that this provision is only directed at provisional enrolment and in no way represents the first step towards reducing the voting age. Coalition Senators remain committed to the electoral roll being as accurate as possible and including all eligible voters, with the franchise being exercised by all eligible voters over the age of eighteen.

Schedule 4 moves the AEC towards a more ‘digital’ system of electoral roll management, distribution and use on polling day. It also allows for a more flexible production o f ballot papers - with appropriate security devices - on polling day.

This measure was not opposed by the Coalition members o f the JSCEM.

Schedule 5 standardises mobile polling booth practices. This measure was not opposed by the Coalition members of the JSCEM.

Schedule 6 has both controversial and non-controversial aspects to it.

The non-controversial aspects include the removal of the need for a witness for a request for a Postal Vote, and allowing the signature date (as opposed to the postmark date) on the Postal Vote to be accepted. The first point makes it easier for some in isolated areas to request a Postal Vote. The second point goes a long way to

addressing the legitimate concerns that postal voters in rural and regional Australia have had, given that they do not have every-day postal services. These parts of the measure were not opposed by the Coalition members o f the JSCEM.

However, Labor has added two controversial aspects: Postal Vote Applications can only be returned directly to the AEC; and a prohibition on the attachment of extra material on a Postal Vote Application form.

The Coalition can see no valid reason for the introduction of these measures by the Government, and strongly suspects that this has been done in a cynical attempt to undermine the extremely successful Postal Voting processes o f the Coalition parties. Even a simple reading of the voter returns shows that the Coalition consistently polls higher with postal votes than with any other type of declaration vote.

Nor have there been any problems raised in relation to fraudulent behaviour or impersonation of voters. If there were such concerns, then why has the ALP avoided tightening the rules in relation to pre-poll and provisional votes? Indeed, one of the other Bills currently before the Parliament (Electoral and Referendum Amendment

(Close of Rolls and other matters) Bill 2010) is explicitly designed to loosen the rules in relation to casting a provisional vote - interestingly, an area where the ALP polls consistently better than the Coalition.

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Thus we have this situation: the Labor government is seeking to make substantial changes to a system of voting where the Coalition does well, despite there being no evidence to support any need for such a change. Simultaneously, it is softening the provisions for a form of voting where the ALP does well, and where there are serious concerns about the integrity of such votes.

It is hard not to be cynical about the motives of the ALP in relation to these particular aspects of the Bill.

Schedule 7 modernises the provisions for homeless voters. In principle, they were not opposed by the Coalition members of the JSCEM.

However, the Coalition has now identified concerns about Item 9. Item 9 seeks to repeal s.96(9)(a) o f the Act. This section states:

(9) A person ceases to be entitled to be treated as an itinerant elector under this section if:

(a) while the person is being so treated, a general election is held at which the person neither votes nor applies for a postal vote;

The implication that flows from any such amendment along the lines of Item 9, is that there is no practical provision to ever remove an itinerant elector from a roll.

It is axiomatic that you cannot do a habitation review on a homeless person.

Unless the itinerant elector is unusually diligent is keeping his or her enrolment details up to date, the only way to determine if they have left the electorate (or died) is if they do not show up on polling day.

This proposed amendment from Labor is an open invitation to abuse the integrity of the electoral roll. Once a person is enrolled as an itinerant elector in a particular division, they may never leave the roll for that particular division, irrespective of their true place of residence.

The opportunity for organising a campaign of fraudulent voting is obvious, and the AEG could never check the bona fides o f any potential roll rorter.

Thus the proposed repeal of 96(9)(a) is bad policy, because it fundamentally weakens the integrity of the electoral roll and provides for no alternative mechanism for ‘roll cleansing’ of itinerant voters.

Schedule 8 broadens and standardises the reasons for claiming a pre-poll vote. In many ways, this legitimises what have been ‘existing practices’ in many DROs.

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It is well known to both Officers and pre-poll polling booth workers that many people have come in to pre-poll because they will be out of the electorate or otherwise engaged in more pleasant activities on polling day.

Rather than go through the rigmarole of contriving one of the legitimate reasons for receiving a pre-poll vote, this measure is a sensible change to make voting easier for those who simply prefer to lodge an early ballot. This measure was not opposed by the Coalition members of the JSCEM.

Schedule 9 is simply a series of minor technical amendments. These do not change policy in any way and, despite not having gone through the JSCEM, will have the support of the Coalition.

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Senator Scott Ryan Australian Liberal Party Senator for Victoria

Senator Helen Kroger Australian Liberal Party Senator for Victoria

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Additional Comments

SENATOR BOB BROWN

Australian Greens

The Australian Greens believe that our democracy will be strengthened by greater participation and broader representation in the electoral process and that the current system militates against both.

We welcome the reforms in the Electoral and Referendum Amendment (How-to-vote Cards and Other Measures) Bill 2010 and the Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010. However I believe that the bills could be improved with additional improvements.

I intend to use these additional comments to highlight some key issues in these bills. These comments are by no means an exhaustive list of improvements which the Australian Greens believe should be made to the Electoral Act.

I submit that the following items be considered by the Government and the Senate as improvements to the bills before their passage through the Senate.

Lowering the voting age to 16 years of age

The Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 reduces the age at which people may provisionally enrol from 17 years to 16 years. The Australian Greens believe that not only the provisional enrolment age should be lowered but the voting age itself.

The Greens believe that all Australian citizens over the age of 16 should be eligible to vote.

Young people pay taxes, live under Australian laws and can leave home, have children, and join political parties. At 16 Ά years, young people can join the Defence forces. The Greens believe that if our Australian society bestows young people with all these responsibilities, it is reasonable to afford young people access to the

opportunity to vote. In its report on the conduct o f the 2007 federal election, the Joint Standing Committee on Electoral Matters noted that by lowering the provisional enrolment age to 16, outreach to potential first time enrollers would be easier, as many

more young people are still in fulltime study at that age. Effective enrolment efforts could then focus on schools and technical colleges to target 16 year olds. This would be an important component in building an effective enrolment strategy over the longer term.

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Restricting the use of postal vote applications for party political purposes

The Electoral and Referendum Amendment (Modernisation and Other Measures) Bill 2010 makes changes to the material which is able to be attached to postal vote applications and requirements for returning postal votes to the AEC.

The Australian Greens support theses changes. In deed, the Greens have previously announced and drafted amendments to introduce in the Senate that would require any PVAs sent out by political parties to be returned directly to the AEC.

Further, we would move to amend the Commonwealth Electoral Act to require that no written material can be attached to the postal voting application form sent to electors by persons or organisations, thereby preventing the distribution of election campaign material by political parties and politicians via this means.

The widespread distribution of postal voting applications (PVAs) by political parties and sitting members has resulted in a marked increase in postal votes at federal elections. Since 1996 there has been an increase in postal votes of approximately 96 per cent - rising from 383,264 in 1996 to 749,566 in 2007 (see Figure 1 below).

800000

600000

400000

200000

Figure 1 Increase in postal vote applications from 1996 - 2007

Source: Australian Electoral Commission (AEC), Election Statistics 1993, 1996, 1998, AEC, Canberra, 1999 (CD-ROM); AEC, Election Results 2001, AEC, Canberra, 2002 (CD-ROM); AEC, Election Results 2004, AEC, Canberra, 2005 (CD- ROM); AEC, ‘Virtual Tally Room: The Official Election Results Election 2007’,

AEC website, viewed 28 September 2009

A recent ANAO Audit Report noted that the AEC produces PVAs for each election, and makes them widely available on announcement of the election at AEC offices, post offices, and the AEC website and to all federal Members and Senators . As a result, it is not necessary for parliamentarians to use their printing entitlement in order to effectively disseminate postal vote applications to constituents. Indeed, prior to 2004, there was no entitlement that allowed parliamentarians to use their printing allowance to produce PVAs.

Currently under the Commonwealth Electoral Act application forms for postal voting can be issued by any person or organisation provided they conform to 'the approved

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form' and are attached to or form part of other written material issued by that person or organisation.

Parliamentarians can use their Printing and Communications Allowance to print and distribute PVA forms with a reply-paid envelope as a service to constituents. The Auditor-General's report released in September 2009 found that parliamentarians from the major parties and the Nationals produced at least 8.23 million PVA documents in 2007-08 using their printing entitlement. This is 2.9 million more postal vote application forms than the number of voters enrolled for the election in 2007 -08 .

The Greens believe there are no grounds from an administrative or participatory democracy perspective for postal vote applications supplied by parliamentarians to be returned to parliamentary offices prior to being forwarded to the AEG. Data from the 2007 election demonstrates a considerable delay of forms returned via reply paid envelopes to parliamentarians arriving at the AEG. Of the PVAs issued by the AEG 69% were returned on the same day as the witness signature, whereas only 27% of PVAs issued by Liberal party were returned within 4 days, and 36% of Labor PVAs were returned within 4 days.

Irrespective of whether deadlines for the close of the electoral roll are extended, this practice of double-handling presents the very real risk of electors not being enrolled prior to the close of rolls. This practice is also being used by political parties to harvest voter information without their knowledge or consent. “Party” PVAs contain

a return address to a local or state-based campaign postal address, where electors’ information is recorded before the information is passed on to the AEG. This diminishes, rather than enhances electors’ enfranchisement.

Polling Day - how to vote cards

The Electoral and Referendum Amendment (How-to-vote Cards and Other Measures) Bill 2010 makes some timely amendments to the Act.

The Greens agree wholeheartedly with the expansion of the definition of the term to 'publish’ to include the telephone and the internet. We had prepared amendments to this effect in response to the recent use of ‘robocalls’ in the Tasmanian election.

The predominance of how-to-vote cards negatively impacts on electors’ capacity to make their voting decision free from interference. The adoption of above-the-line voting in Senate elections, especially in larger states that feature a large field of candidates, means that should voters choose to they can readily make just one mark on

the ballot in order to cast a valid vote. The argument made by the major parties for the necessity of party's how to vote cards to tackle vote informality rates is spurious. If voter education is required, then non-partisan materials and programs should be delivered via the AEG.

Accordingly, the Greens believe that voters’ interests would best be served by the Tasmanian and ACT state election model where how to vote cards are not handed out at polling booths on election day being adopted nationally.

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Truth in Political Advertising

The Australian Greens support the introduction of legislation to ensure truth in political advertising. Legislation to impose controls on political advertising and penalties for breaches would enforce higher standards, improve accountability and promote fairness in political campaigning and the political system generally.

We had prepared amendments to amend the Commonwealth Electoral Act to make it an offence to publish or distribute an electoral advertisement, which is intended to affect voting in an election that contains a statement purporting to be fact that is inaccurate and misleading.

The current provisions in the Electoral Act only extend to statements which are intended to affect the casting of votes and these provisions have been interpreted very narrowly to apply only to how a voter marks their ballot paper.

The Greens amendments would extend the truth in political advertising provisions to apply more broadly to all statements/advertisements which are intended or likely to affect voting in an election. The Electoral Commission, if satisfied that an electoral advertisement contains inaccurate or misleading materials, they may request the advertiser to either withdraw the advertisement or publish a retraction.

Elections are an opportunity for political accountability and it is critical that representations are accurate and honest. Under the current system, it is possible for advertising that contains misrepresentation and outright false statements to go unchallenged and without penalty. This can be particularly damaging in cases where the advertisements are presented by third parties, which under the current system are not required to identify themselves and therefore make known their own political or

ideological position.

Although such legislation was enacted briefly in Commonwealth law in 1983 -1984 it was repealed with the support of both the major parties. Opposition to such legislation relies on the argument that it infringes the right o f free political communication. However tmth in political advertising legislation introduced in South Australia in

1985 was found to be constitutionally valid by the High Court. South Australia’s legislation doesn’t ban all untruths in advertising, but rather relates to inaccurate statements of fact (not opinion) found to be untrue

The Australian Greens advocate an amendment to the Commonwealth Electoral Act to make it an offence to authorise or publish an advertisement purporting to be a statement of fact when the statement is inaccurate and misleading to a material extent,

similar to legislation introduced in South Australia.

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Recommendations

The Australian Greens recommend that the bills be amended so to:

1.1 That the age of eligibility to enrol and vote be 16.

1.2 That the AEC be adequately funded to deliver targeted, effective programs to engage young people in electoral processes, including enrolment.

1.3 That all "party" postal voting applications (PVAs) that have been sent to voters by political parties or politicians are to be returned directly from the elector to the Australian Electoral Commission (AEC) rather than via the political party campaign office or the office of the politician

1.4 That no written material can be attached to the postal voting application form sent to electors by persons or organisations, thereby preventing the distribution of election campaign material by political parties and politicians via this means.

1.5 That effective legislation to ensure truth in political advertising is introduced.

Senator Bob Brown

Leader of the Australian Greens.

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Appendix 1

Submissions received by the Committee

Submissions

1 Professor Graeme Orr

2 Democratic Audit of Australia

3 Australian Electoral Commission

4 Proportional Representation Society of Australia

5 PILCH Homeless Persons' Legal Clinic

6 Mr Andrew Murray

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The Senate

Finance and Public Administration Legislation Committee

Freedom of Information Amendment (Reform) Bill 2009 [Provisions] Information Commissioner Bill 2009 [Provisions]

March 2010

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© Commonwealth of Australia 2010

ISBN 978-1-74229-237-3

The Senate Parliament House Canberra ACT 2600 Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: fpa.sen@aph.gov.au Internet: http://www.aph. gov.au/senate/committee/fana ctte/index.htm

This document was produced by the Senate Finance and Public Administration Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

Membership of the Committee

42nd Parliament

Members

Senator Helen Polley, Chair

Senator Scott Ryan, Deputy Chair

Senator Doug Cameron

Senator Jacinta Collins

Senator Helen Kroger

Senator Rachel Siewert

ALP, Tasmania

LP, Victoria

ALP, New South Wales

ALP, Victoria

LP, Victoria

AG, Western Australia

Participating Member in this inquiry

Senator the Hon George Brandis SC LP, Queensland

Senator Scott Ludlam AG, Western Australia

Secretariat

Ms Christine McDonald, Inquiry Secretary

Ms Nina Boughey, Senior Research Officer

Ms Maria Sarelas, Research Officer

Ms Tegan Gaha, Executive Assistant

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Table of Contents

M em bership o f th e C o m m ittee.........................................................................iii

List of A b b re v ia tio n s.................................................................................... vii

R eco m m en d atio n s................................................................................................ ix

C h ap ter 1................................................................................................................... 1

Introduction...........................................................................................................1

Conduct of the inquiry........................................................................................1

Structure of the report........................................................................................ 2

C h ap ter 2 ..................................................................................................................3

Proposed reform s to freedom of information laws................................. 3

Freedom of Information Amendment (Reform) Bill 2009............................... 4

Information Commissioner Bill 2009..............................................................13

C h ap ter 3 ............................................................................................................... 15

Committee’s consideration of term s of reference..........................................15

Will the measures assist in the creation of a pro-disclosure culture with respect to government and what further measures may be appropriate?...................................................................................................... 16

Do the Bills contain measures effective to ensure that the right of access to documents is as comprehensive as it can b e ? ................................ 19

Are the improvements to the request process efficient and could they be further improved?....................................................................................... 28

Assessment of the functions, powers and resources of the Information Commissioner.................................................................................................. 35

Conclusion........................................................................................................38

Coalition S en ato rs' D issenting R e p o rt.......................................................... 41

A ustralian G reens A dditional C o m m e n ts....................................................55

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APPENDIX 1 .................................................................................................... 57

Submissions and Additional Information received by the Committee....................................................................................................... 57

APPENDIX 2 .................................................................................................... 59

Public Hearings...............................................................................................59

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List of Abbreviations

AAT Administrative Appeals Tribunal

ABC Australian Broadcasting Corporation

ALRC Australian Law Reform Commission

ARC Administrative Review Council

FOI Freedom of Information

FOI Act Freedom o f Information Act 1982 (Cth)

FOI Bill Freedom of Information Amendment (Reform) Bill 2009

FOI Commissioner Proposed new Freedom of Information Commissioner

IC Bill Information Commissioner Bill 2009

PIAC Public Interest Advocacy Centre

SBS Special Broadcasting Service

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Recommendations

Recommendation 1

3.21 The committee recommends that section 49 of the Administrative Appeals Tribunal Act 1975 be amended to provide that the Information Commissioner is an ex officio member of the Administrative Review Council.

Recommendation 2

3.49 The committee recommends that, if and when established, the Information Commissioner give consideration to whether it is necessary and appropriate for entire agencies and organisations to be exempt from the Commonwealth's freedom of information scheme.

Recommendation 3

3.58 The committee recommends that the government give consideration to the issues raised with respect to fees and charges in this inquiry, and particularly to the feasibility of removing processing charges, while retaining application fees, in the context of drafting regulations.

Recommendation 4

3.79 The committee recommends that proposed section 61, in item 42 of Schedule 4 to Part 1 of the Freedom of Information Amendment (Reform) Bill 2009, which provides that whichever party that appeals a decision of the Information Commissioner bears the onus of proof in the Administrative Appeals Tribunal, as well as any other relevant sections of the Bill and Freedom o f Information A ct 1982, be amended to remove the concept of an onus of proof from the Act.

Recommendation 5

3.103 The committee recommends that the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 be amended such that all references to the 'Information Commissioner' are replaced by references to the 'Australian Information Commissioner'.

Recommendation 6

3.111 The committee recommends that, subject to the amendments outlined in Recommendations 4 and 5 being made, the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 be passed by the Senate as soon as practicable.

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Chapter 1 Introduction

1.1 On 30 November 2009 the Senate, on the recommendation of the Selection of Bills Committee (report number 19 of 2009) referred the provisions of the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 to the Finance and Public Administration Legislation Committee for inquiry and report by 16 March 2010.

1.2 According to the Explanatory Memoranda, the purpose of the Freedom of Information Amendment (Reform) Bill 2009 is to make major reforms to the Freedom o f Information Act 1982 to promote a pro-disclosure culture across government and to build a stronger foundation for more openness in government; and the purpose of the Information Commissioner Bill 2009 is to establish three independent statutory office holders (the Information Commissioner, the Freedom of Information Commissioner

and the Privacy Commissioner).

1.3 The reasons given for the Selection of Bills Committee's referral of the bills to the committee were:

• whether the bills contain measures effective to ensure that the right of access to documents is as comprehensive as it can be;

• whether the improvements to the request process are efficient and could be further improved;

• whether the measures will assist in the creation of a pro-disclosure culture with respect to government and what further measures may be appropriate; and

• assessment of the functions, powers and resources of the Information Commissioner.

Conduct of the inquiry

1.4 The committee advertised the inquiry in The Australian and contacted a number of organisations and individuals, inviting submissions to be lodged by 28 January 2010. Twenty seven submissions were received by the committee, and these are listed at Appendix 1.

1.5 The committee held public hearings in Canberra on 5 February 2010, and in Melbourne on 15 February 2010. Details of the public hearings are at Appendix 2. The submissions and Hansard transcript of evidence may be accessed through the committee's website at

http://www.aph.gov.au/Senate/committee/fapa ctte/foi ic/index.htm.

1.6 The committee would like to thank all those who contributed to the inquiry.

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Structure of the report

1.7 Chapter 2 o f the report outlines the provisions of the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009, focussing on the aspects of the bills which make substantive changes to the Freedom o f Information Act 1982.

1.8 Chapter 3 discusses the key issues raised during the inquiry in response to the terms of reference, and makes recommendations as to how the bills might be improved.

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Chapter 2

Proposed reforms to freedom of information laws 2.1 The Freedom of Information Amendment (Reform) Bill 2009 (FOI Bill) and Information Commissioner Bill 2009 (IC Bill) are intended to be complementary, each forming part of the government's proposed reform of Australia's freedom of information (FOI) laws.

2.2 The government's stated purpose for introducing the amendments to the Freedom o f Information Act 1982 (FOI Act) contained in the bills is 'to promote a pro­ disclosure culture across government and to build a stronger foundation for more openness in government'.1

2.3 The FOI Bill contributes to this aim by:

• amending the objects of the FOI Act;

• introducing an information publication scheme;

• decreasing the open access periods for Commonwealth records and Cabinet notebooks;

• amending the public interest test for exemptions;

• adding a new level o f external review of FOI decisions;

• providing that the Information Commissioner can investigate the conduct of agencies in FOI matters;

• introducing a process for declaring a person to be a 'vexatious applicant';

• removing the requirement for FOI application fees; and

• providing for a process by which an agency's time to respond to a request may be increased.

2.4 The IC Bill proposes to establish two new statutory offices: the Information Commissioner; and the Freedom of Information Commissioner. The Office of the Information Commissioner is intended to 'bring together the functions for independent oversight' of the FOI Act and the Privacy Act 1988.

2.5 This chapter sets out the key provisions o f each of the bills.

1 E x p la n a to r y M e m o ra n d u m , F O I B ill, p . 1.

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Freedom of Information Amendment (Reform) Bill 2009

O bjects

2.6 Schedule 1 of the FOI Bill repeals the existing objects in section 3 o f the FOI Act, and replaces it with an objects clause which emphasises that Parliament's intention is to ensure open access to government documents and information in order to enable public participation in and scrutiny of government.2

2.7 Subsection 3 of the proposed objects clause highlights that government information is a 'national resource', and should be managed accordingly. The Explanatory Memorandum notes that proposed subsection 3:

...responds to recommendation 4 of the Open government report that the object clause should acknowledge that the information collected and created by public officials is a national resource.3

P u blication o f in form ation

Publication scheme

2.8 Part two o f Schedule 2 to the FOI Bill introduces a new information

publication scheme. The proposed scheme would require Commonwealth departments and agencies to publish information and documents:

• detailing its organisational structure;

• explaining its functions;

• setting out statutory appointments;

• contained in annual reports;

• explaining how the public may comment on specific policy proposal;

• that are routinely provided to Parliament in response to requests and orders; and

• containing operational information, which is defined in proposed section 8A of Schedule 2 as:

information held by the agency to assist the agency to perform or exercise the agency's functions or powers in making decisions or recommendations affecting members of the public (or any particular person or entity or class of persons or entities).

2.9 Proposed section 8A sets out an example of what may constitute 'operational information', which includes rules, guidelines, practices and precedents.

2 FOI Bill, Schedule 1, section 3.

3 Explanatory Memorandum, FOI Bill, p. 5.

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2.10 In addition, agencies and departments are required to publish 'infonnation in documents to which the agency routinely gives access in response to requests under [the Act]' other than personal information, infomiation about the business, commercial, financial or professional affairs of any person or other information that

the Information Commissioner determines is exempt.4 5 Agencies are also not required to publish exempt information.3 The Explanatory Memorandum states that:

The intention is that information in which there has been a demonstrated level o f interest from the community by way o f access request should be pro-actively made available to the public (without requiring - or at least limiting the need for - applications to be m ade).6

2.11 The provision allowing the Information Commissioner to determine that certain information or documents are exempt from the publication requirement is intended to address situations where there are high resource implications of

proactively publishing certain information on an agency's website.7 In addition, the Information Commissioner would play a role in assisting agencies to comply with the publication scheme8 and in reviewing and investigating agencies' compliance with the scheme.9

2.12 Agencies are under an obligation to ensure that information published under proposed section 8 is up-to-date, complete and accurate.10 Information is to be published 'to members of the public generally',11 and to specific groups of people if appropriate,12 on the agency's website.13

2.13 The government has argued that the purpose of the proposed publication scheme is:

to allow the FOI Act to evolve as a legislative framework for giving access to inform ation through agency driven publication, rather than as a scheme that is only reactive to requests for docum ents.14

2.14 Under the proposed publication scheme agencies would also be required to develop and publish a plan which shows what infomiation it intends to publish to

4 FOI Bill, Schedule 2, paragraph 8(2)(g).

5 FOI Bill, Schedule 2, subsection 8C(1).

6 Explanatory Memorandum, FOI Bill, p. 6.

7 Explanatory Memorandum, FOI Bill, p. 7.

8 FOI Bill, Schedule 2, section 8E.

9 FOI Bill, Schedule 2, section 8F.

10 FOI Bill, Schedule 2, section 8B.

11 FOI Bill, Schedule 2, paragraph 8D(2)(a).

12 FOI Bill, Schedule 2, paragraph 8D(2)(b).

13 FOI Bill, Schedule 2, section 8D(3).

14 Explanatory Memorandum, FOI Bill, p. 6.

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comply with the scheme and how and to whom it proposes to publish that information.15

2.15 The proposed publication scheme will not apply to ministers.

Publication o f documents disclosed under the Act

2.16 The publication scheme is complemented by proposed section 11C, which provides that if a minister or agency gives a person access to documents under the Act, then they must publish those documents on a website within 10 working days of the applicant being given access. The provision does not apply to documents:

• which contain personal information about the applicant;

• about the business, commercial, financial or professional affairs of any person if it would be unreasonable to publish that information;

• determined by the Information Commissioner to be unreasonable to publish; or

• that are not reasonably practicable to be published because of the extent of modifications needed to exclude the above information.

2.17 The agency may impose a charge for accessing these documents, if the agency incurs specific costs in reproducing the documents.16 The provision does not specify how long information must remain on the minister or agency's website.17

D ecrea sin g open a cc ess p e rio d s

2.18 Schedule 3 to the FOI Bill amends various sections of the FOI Act and the Archives Act 1983. The cumulative effect of the proposed amendments is to bring forward the 'open access period' for most government records. The 'open access period' is the time after which a record is made available for public access on request

under the Archives Act.

2.19 The FOI Bill reduces the open access period for most Commonwealth records (all those except Cabinet notebooks, records containing Census information and exempt records under section 33 of the Archives Act) from 30 years to 20 years. The

Bill also reduces the open access period for Cabinet notebooks from 50 years to 30 years.

N e w p u b lic in te rest test

2.20 Part 2 of Schedule 3 to the FOI Bill also proposes a new public interest test to apply to all those exemptions which are proposed to involve a public interest test. The

15 FOI Bill, Schedule 2, subsection 8(1).

16 FOI Bill, Schedule 3, subsections 11C(4) and (5).

17 Explanatory Memorandum, FOI Bill, p. 15.

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exemptions that the Bill proposes this general test will apply to are set out in proposed Division 3 of Part IV, and are called 'public interest conditional exemptions'.

Conditionally exempt documents (exemption conditional on satisfying public interest test)

2.21 Proposed Division 3 of Part IV is at item 33 of Schedule 3 to the Bill, and sets out the categories of documents 'conditionally exempt' from disclosure, which are those which if disclosed:

• would, or could reasonably be expected to, damage Commonwealth-State relations or divulge information communicated in confidence by a State to the Commonwealth (proposed section 47B);

• would disclose a deliberative matter - i.e. opinion, advice or

recommendations prepared for the deliberative processes involved in the functions o f an agency or minister. However, this exemption does not apply to report of experts or agency bodies, or to records or formal statements of reasons for final decisions given in the exercise of an adjudicative function (proposed section 47C);

• would have a substantial adverse effect on the financial or property interests of the Commonwealth or an agency (proposed section 47D);

• would, or could reasonably be expected to, prejudice the effectiveness or the attainment of objects of tests, examinations or audits being conducted by an agency, have a substantial adverse effect on the management or assessment of personnel by the Commonwealth or an agency, or have a substantial adverse effect on the proper and efficient conduct of an agency (proposed section 47E); ‘

• would involve an unreasonable disclosure of personal information about any person (proposed section 47F);

• would disclose information concerning a person or organisation in respect of his/her/its business or professional affairs and would, or could, reasonably be expected to unreasonably affect the person or organisation in conducing their affairs, or could reasonably be expected to prejudice the future supply of

information to the Commonwealth. This exemption does not apply to trade secrets. The trade secrets exemption is not conditional on the fulfilment of a public interest test (proposed section 47G);

• would disclose information about research being, or to be, conducted by an officer of an agency, which would unreasonably expose the agency or officer to disadvantage (proposed section 47H); or

• would or could reasonably be expected to have a substantial adverse effect on Australia's economy by influencing a decision, or giving a person undue benefit (proposed section 47J).

2.22 Proposed subsection 11 A(5) provides that:

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The agency or M inister m ust give the person access to the document if it is conditionally exempt at a particular time unless (in the circumstances) access to the document at that time would, on balance, be contrary to the public interest.

2.23 Proposed section 1 IB sets out factors to be taken into account by agencies and ministers in determining whether the disclosure o f conditionally exempt documents would, on balance, be contrary to the public interest. It sets out 'factors favouring access', and 'irrelevant factors', and also provides any guidelines on the issue by the Information Commissioner must also be taken into account.

2.24 The 'factors favouring access' are, if disclosure of the document would:

• promote the objects of the Act;

• inform debate on a matter o f public importance;

• promote effective oversight of public expenditure; or

• allow a person to access his or her own personal information.

2.25 'Irrelevant factors' that must not be taken into account are that:

• access to the document could result in embarrassment to the Commonwealth Government or cause loss o f confidence in the Commonwealth Government;

• access to the document could result in a person misinterpreting or

misunderstanding the document;

• the author o f the document is of high seniority in the agency to which the request for access to the document was made; and

• access to the document could result in confusion or unnecessary debate.

Exempt documents (not conditional on satisfying public interest test)

2.26 The public interest test does not apply to those exemptions set out in proposed Division 2 of Part IV, which are:

• documents the disclosure of which would, or could reasonably be expected to, cause damage to national security, defence or international relations;

• Cabinet documents;

• documents the disclosure o f which would or could reasonable be expected to prejudice law enforcement or the protection public safety; and

• documents to which secrecy provisions apply.

E x tern a l review b y th e In form ation C om m issio n er

2.27 Schedule 4 to the FOI Bill provides for certain FOI functions of the proposed Information Commissioner. Key amongst these functions is the Information Commissioner's review function.

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2.28 A number of proposed provisions remove the existing requirements for internal review (review of the merits of a decision within the agency) to take place prior to an applicant being able to appeal an FOI decision externally.18 The Explanatory Memorandum states that:

By making internal review optional, agencies should be encouraged to make the best decision at first instance.19

2.29 Proposed new Part VII of the FOI Act sets up a system for review of decisions by the Information Commissioner. Under the part, persons whose application under the FOI Act has been refused, deemed to have been refused because of no decision having been made within the requisite timeframes, or partially refused, as well as

some interested third parties, have a right to seek review of the decision by the Information Commissioner. The Information Commissioner performs merits review in the same way as the AAT, which involves 'standing in the shoes of the original

decision maker' and reconsidering the decision based on all the available facts.20

2.30 Proposed Part VII provides for how applications for review are to be made, notification requirements to affected third parties, time limits, assistance by the Information Commissioner, the conduct of the Information Commissioner's review and other procedural aspects of the Information Commissioner review process.

2.31 Proposed section 55F allows the parties to a review by the Information Commissioner to reach agreement between themselves.

2.32 In conducting reviews, the Information Commissioner will have the powers to require the production of documents, including those claimed to be exempt, except national security or cabinet documents. It is an offence to fail to comply with an order for documents by the Information Commissioner.21 The Commissioner only has the

power to require the production of Cabinet and national security documents if he or she is not satisfied on affidavit or other evidence that the document is exempt.22 The Information Commissioner will not have the power to order that a person be given access to documents he or she finds to be exempt.

2.33 The Commissioner will have the powers to order an agency to undertake further searches for a document, and to compulsorily require people to answer questions.23 However, legal professional privilege is retained before the Information Commissioner.24

18 Including proposed section 51 DA; paragraphs 54L(2)(a) and 54M(2)(a) 19 Explanatory Memorandum, FOI Bill, p. 27.

20 Explanatory Memorandum, FOI Bill, p. 34.

21 FOI Bill section 55R(5).

22 FOI Bill, section 55U.

23 FOI Bill, sections 55V and 55W respectively.

24 FOI Bill, section 55Y.

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2.34 The Explanatory Memorandum states that:

It is intended that Information Commissioner review will provide a simple, expedient and cost efficient system for external merits review. To achieve this, the Information Commissioner is authorised to conduct a review in whatever way considered appropriate (proposed subsection 55(2)) and to use as little formality and technicality as possible (subsection 55(4)).25

2.35 Division 5 o f proposed Part VII provides that the Information Commissioner may decide not to undertake a review if he or she is satisfied that the application is frivolous, vexatious, misconceived, lacking in substance or not made in good faith. The Information Commissioner can also decline to undertake a review if the applicant has not been cooperative, the Commissioner believes review is more suitably undertaken by the Administrative Appeals Tribunal (AAT), or the applicant refuses to comply with the Commissioner's directions. If the Infonnation Commissioner declines to undertake a review, notice must be provided to both parties, and either party may seek review of that decision by the AAT.

2.36 The FOI Bill provides a right o f review from decisions of the Information Commissioner to the AAT (which currently conducts external reviews directly from agencies). The AAT can make decisions directly from agencies if the Information Commissioner determines that is the most appropriate course of action.26

2.37 Item 42 of Schedule 4 to the Bill makes some significant changes to the AAT's jurisdiction when reviewing decisions o f the Information Commissioner. Proposed new section 61 of the FOI Act provides that both agencies and applicants will have a right to appeal decisions o f the Information Commissioner. Subsection 61(1) sets out that whichever party appeals to the AAT will bear the onus of proof.

2.38 Proposed new section 61A makes further amendments to the AAT's jurisdiction, in effect providing that the Information Commissioner is not to 'defend' his or her decisions in the AAT, but instead the relevant department or agency will take on that role.

In vestig a tio n s b y th e In form ation C o m m issio n e r

2.39 Proposed Part VIIB of the FOI Act would give the Information Commissioner the function of investigating actions by an agency relating to the handling of FOI matters. The part sets out the investigation powers of the Commissioner and the investigation process.

2.40 The Information Commissioner may conduct investigations in response to complaints, as well as on his or her own motion, in a similar way to the

25 Explanatory Memorandum, FOI Bill, p. 32.

26 FOI Bill, section 57A.

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Commonwealth Ombudsman. Like the Ombudsman, the Commissioner can only investigate the actions of agencies, not minsters.27

2.41 The Commissioner is empowered to transfer matters to the Ombudsman if appropriate."8 The Ombudsman's powers to conduct investigations under the FOI Act are preserved by the Bill, however, the Explanatory Memorandum states that:

W hile the Ombudsman may still investigate complaints concerning action under the FOI Act, it is intended that the Information Commissioner will deal with m ost complaints o f this kind. The Ombudsman will have capacity to investigate FOI complaints where the Ombudsman could more

effectively or appropriately deal with a complaint (for example, where the FOI complaint forms one aspect o f a wider grievance concerning agency action or relations to action by the Information Commissioner in dealing with an FOI request).29

2.42 Professor John McMillan, the Commonwealth Ombudsman discussed the way he envisages the Ombudsman and Information Commissioner managing this overlapping jurisdiction:

The Ombudsman can still receive complaints about freedom of information and privacy matters. That is important because in m y experience FOI and privacy matters can often be a small component o f a larger administrative problem that a person has with an agency. On the other hand, I have

followed the principle that if the Parliament establishes a specialist body similar in all respects to the Ombudsman’s office then we should defer to the expertise o f that body and to its primary role in oversighting a particular area. So it would be my intention early on to hold discussions with the Inform ation Commissioner and possibly to sign a memorandum of understanding for transfer o f cases between u s .30

D ecla rin g vex a tio u s applican ts

2.43 Proposed section 89K gives the Information Commissioner discretionary power to declare a person a 'vexatious applicant'. This can be done at the request of an agency or minister, or on the Commissioner's own motion.

2.44 The joint Australian Law Reform Commission (ALRC) and Administrative Review Council (ARC) Open government report considered such a power for agencies and recommended against it on the basis that it may be misused.31 The Explanatory Memorandum states:

27 Explanatory Memorandum, FOI Bill, p. 40.

28 FOI Bill, section 74 29 Explanatory Memorandum, FOI Bill, p. 46.

30 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 2.

31 ALRC and ARC, Open government: a review o f the federal Freedom o f Information Act 1982, ALRC Report 77, 1995, paragraph 7.18.

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Under [the Bill], the power is exercised by the Information Commissioner who is an independent statutory office holder. If an agency or Minister makes an application to the Information Commissioner the effect of proposed subsection 89K(3) is that the agency or Minister bears the onus of

establishing that the Commissioner should make the declaration.32

2.45 Proposed section 89L sets out the grounds on which the Information Commissioner may declare a person a 'vexatious applicant', which are that:

• the person has repeatedly engaged in access actions and the repeated

engagement involves an abuse o f the process for the access action;

• a particular access action in which the person engages involves an abuse of the process for that access action; or

• a particular access action in which the person engages would be manifestly unreasonable.

2.46 Proposed subsection 89L(2) defines 'access actions' as:

• making an FOI request;

• making an application for amendment o f records;

• making an application for internal review; and

• making an Information Commissioner review application.

2.47 A declaration that a person is a vexatious applicant has the effect of enabling an agency or minister to refuse to consider requests and applications by the person. Declarations may be subject to any terms and conditions that the Information Commissioner sees fit.33

2.48 Decisions to declare a person a vexatious applicant may be reviewed by the AAT.

R em o va l o f fe e s

2.49 The Explanatory Memorandum explains that:

Upon releasing the exposure draft of this Bill, the Government announced that the first five hours of decision-making time for journalists and not-for- profit community groups would be free of charge.34

2.50 Paragraph 94(2)(a) of Schedule 6 to the Bill amends existing restrictions on the ability of the regulations to apply different charges to different classes of applicants.

32 Explanatory Memorandum, FOI Bill, p. 44.

33 FOI Bill, section 89M.

34 Explanatory Memorandum, FOI Bill, p. 56.

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2.51 In terms o f the financial impact of this change, the Financial Impact Statement in the Explanatory Memorandum states that:

The amendments in this Bill will have minimal financial impact on Governm ent revenue. While the requirement for FOI application fees is proposed to be removed, the total amount o f application fees collected (only $150,771 in 2007-08) represents a very small fraction o f the total cost o f

administering the FOI Act (approximately 0.5% in 2007-08).35

E x ten d in g F O I to co n tractors

2.52 Schedule 6 to the Bill proposes to extend the scope of the FOI Act so that requests for access may be made for documents held by contracted service providers, and subcontractors, delivering services for or on behalf of an agency to the community. The Explanatory Memorandum explains that:

The proposal is tied to recommendation 99 o f the Open government report which was concerned with 'the trend towards government contracting with private sector bodies to provide services to the community' on the basis that it 'poses a potential threat to the government accountability and openness'.36

2.53 The proposed amendments will require agencies to take contractual measures requiring contracted service providers to provide copies o f documents subject to an FOI request on the request of the contracting agency. A document provided under this measure may still be exempt from disclosure if an exemption applies under the Act, however the onus will be on the government agency to make that determination.

2.54 Proposed section 24A provides that a minister or agency may refuse a request if all reasonable steps have been taken to obtain a relevant document in the exercise of a contractual right and the document has not been provided by the contractor.

Information Commissioner Bill 2009

2.55 The IC Bill establishes the Office of the Information Commissioner, which will comprise o f the existing Privacy Commissioner plus the new statutory office of Freedom of Information Commissioner, both overseen by the new statutory office of Information Commissioner.

2.56 The Explanatory Memorandum notes that:

The functions of the Office will be threefold:

• the FOI functions - which are about giving the Australian community access to information Held by the Government in accordance with the FOI Act;

• the privacy functions - which are about protecting the privacy o f individuals in accordance with the Privacy Act and other Acts; and

35 Explanatory Memorandum, p. 3.

36 Explanatory Memorandum, FOI Bill, p. 52.

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• the information com m issioner functions — which are strategic functions concerning advice to Governm ent on information management.37

2.57 Each Commissioner will be appointed by the Governor-General as independent office holders for a term o f up to five years. Each may be reappointed.38 Under subclause 14(3), the FOI Commissioner is to have legal qualifications. Neither the Information Commissioner nor the Privacy Commissioner is required to have legal qualifications.

2.58 The Information Commissioner will be the head of an office for the purposes of the Public Service Act 1999 and the Financial Management and Accountability Act 1997. The Information Commissioner will be empowered to perform all o f the functions of both the FOI Commissioner and the Privacy Commissioner, and each of those offices will be also empowered to perform the other's functions.

2.59 Key powers and functions given to the Information Commissioner under the IC Bill include:

• promoting awareness and understanding o f the FOI Act and its objects (clause 8); • assisting agencies to comply with, and reviewing, the information publication scheme under the FOI Bill (subclauses 8(b) and (c));

• issuing guidelines under the FOI Act (subclause 8(d));

• monitoring, investigating and reporting on compliance with the FOI Act (subclause 8(h));

• undertaking investigations under the FOI Act (subclause 8(j)); and

• conducting all the existing functions of the Privacy Commissioner (clause 9).

2.60 The Financial Impact Statement in the Explanatory Memorandum states that:

Funding for the Office o f the Information Com m issioner was provided in the 2009-10 Budget. An am ount o f $19.5 million over 4 years (post MYEFO) is additional to resources for the existing office o f the Privacy Commissioner, which will be transferred to the office o f the Information Com m issioner.39

37 Explanatory Memorandum, IC Bill, p. 1.

38 IC Bill, clause 14.

39 Explanatory Memorandum, IC Bills p. 2.

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Committee’s consideration of terms of reference 3.1 It is important to note that all witnesses were ultimately supportive of the bills. Professor John McMillan, the Commonwealth Ombudsman and Information Commissioner Designate commented that:

Along w ith all o f the other submissions to this inquiry I commend the reform initiative in the legislation that is under consideration by this committee and, along with all other submissions to this inquiry, I urge parliam ent to enact these reforms at the earliest opportunity.1

3.2 Mr Peter Timmins, an FOI consultant who appeared before the committee in a private capacity agreed, stating that Ί think the legislation is a good and positive move in the direction o f more open and accountable government'.2 Similarly, Dr Johan

Lidberg, the Academic Chair of Journalism at Murdoch University commented:

It is great to see that FOI is on the agenda. Quite often it is not, so it is great that it is up there. I would like to commend the whole process. I think it has been quite terrific thus far.3

3.3 During its inquiry, witnesses and submitters raised a number of issues with the bills, and made various recommendations as to how they might be improved. Many of these were contradictory and, with the exception of one issue—that of the alteration of the onus of proof in proposed section 61 of the FOI Bill—there was little consensus amongst submitters and witnesses as to what aspects of the bills ought to be

amended. Accordingly, and particularly given the significant support that all witnesses ultimately expressed for the bills, the committee considers that, with respect to most aspects of the bills, the government has done an outstanding job of taking competing

interests into account and has developed a new FOI framework which is focused on achieving open and accountable government.

3.4 Furthermore, despite the various suggestions for improvement made by many submitters and witnesses, each one ultimately emphasised the point that the reforms proposed by the FOI and Information Commissioner Bills are important reforms, which address the key issues with the current Act. As Mr Michael McKinnon, from Australia's Right to Know summarised:

[WJhile this may not be the best reform o f FOI, it is the best reform since 1982. W e think it is very important that this reform go through before the end o f the first term o f government.4

1 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 1.

2 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 15.

3 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 7.

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3.5 The Australian Press Council commended the government on addressing its main concerns— fees, delays and exemptions—in the bills.4 5 And the President of the Australian Law Reform Commission (ALRC), Professor Rosalind Croucher, signalled that the ALRC is 'very supportive o f many of the reforms in both the bills and that we

consider the proposed amendments will improve the operation of the Freedom of Information Act and represent a very positive step towards open and accountable government'.6

3.6 This chapter sets out the key issues raised in relation to the bills during this inquiry and responds to each o f reasons for referral of the bills. Given the emphasis by witnesses and submitters when discussing the bills, on the need for a fundamental

shift in the way in which government perceives and treats FOI, the term of reference relating to the creation of a pro-disclosure culture is discussed first. The remaining three terms of reference, relating to: the right of access provided in the bills; the FOI application process; and the Information Commissioner are then discussed in turn.

Will the measures assist in the creation of a pro-disclosure culture with respect to government and what further measures may be appropriate?

3.7 One of the key positive aspects of the bills that witnesses emphasised was their potential to bring about a change in the culture of executive government towards infonnation disclosure.

3.8 Witnesses agreed that there is a need for a shift in the way executive

government treats FOI, and the handling of information generally. The committee received submissions from individuals and organisations representing professional groups who use existing FOI laws, many of whom have found the laws to be ineffective as a result of negative attitudes to disclosure within government agencies.7

3.9 Mr Andrew Murray, former Australian Democrats Senator, argued that:

In the last 25 years the ability of individuals and organisations to access information held by Government departments has been slowly eroded. Many agencies are less than supportive of an open approach.8

3.10 Dr Lidberg, Academic Chair of Journalism at Murdoch University, was much more critical, and referred to the current FOI Act as 'severely dysfunctional'.9

4 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 4.

5 Mr Jack Herman, Executive Secretary, Australian Press Council, P roof Committee Hansard, 15 February 2010, p. 20.

6 Professor Rosalind Croucher, President, Australian Law Reform Commission, Proof Committee Hansard. 15 February 2010, p. 23.

7 See for example Name Withheld, Submission 1; Ms Karen Kline, Submission 5; Mr Andrew Murray, Submission 4; and Associate Professor Anne Twomey, Submission 2.

8 Mr Andrew Murray, Submission 4, p. 1.

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Dr Lidberg, explained the results of a study he conducted comparing the attitudes of various governments to information disclosure:

I did a study in 2004-05 that surveyed a number of leading public servants and then government ministers; it clearly showed that the base notion within the Australian Commonwealth administration was that the government owns the information. Compared with the four other countries

in this survey, this stood out clearly. The four other countries surveyed were Thailand, the United States, Sweden and South Africa, and their replies to the survey were very clearly that the government holds information on behalf o f the people. So it is changing that owning o f the information that is

at the absolute core o f this.9 10

3.11 Professor McMillan, the Commonwealth Ombudsman, noted that the proposed reforms 'address the three main deficiencies that have been made of freedom of information law and administration in Australia'.11 Professor McMillan listed the deficiencies which the bills address as:

• the lack of a champion for FOI issues within government;

• the need to revise the terms of the FOI Act to encourage a pro-disclosure culture more clearly, 'give greater recognition to the public interest as a consideration weighing in favour of disclosure of most documents' and reduce of fees; and

• 'the need for a cultural shift within government both at the agency and at the political level'.12

3.12 One of the ways witnesses saw the bills as encouraging a pro-disclosure culture is through the revised objects clause. Mr Herman, the Executive Secretary of the Australian Press Council, expressed the view that:

One o f the reasons [that Australian FOI laws has not worked as well as New Zealand's laws] is that the Australian law has never contained an objects clause that has made it clear that an object o f the legislation is to enable the release o f information. I f for no other reason than that this [Bill]

actually includes an objects clause— one that makes clear what its objects are and m akes clear to officials, to those administering the legislation and to

9 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 9.

10 Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 8.

11 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2 0 1 0 , p. 1.

12 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 1.

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the courts that the aim o f the exercise is to release information—then it has im proved the situation.13

3.13 The ALRC also commented on the objects clause favourably, stating that the proposed new clause 'reflect[s] the democratic principles underpinning freedom of information'.14 Similarly, Associate Professor Moira Paterson explained:

Obviously what you need is a pro-disclosure culture. There are some elements— for example, the additional protection that is given to people who release where the docum ent is exempt. That kind o f thing helps. The rephrasing o f the objects clause helps. Some o f the other changes in terms o f procedures and so on h elp .15

3.14 However, Associate Professor Paterson went on to comment that '[ijdeally, what you would have in the Act would be a stronger statement of that pro­ disclosure'.16 Associate Professor Paterson argued that Queensland's FOI laws go 'much further' than the Commonwealth's bills, and have been successful in changing the culture of the executive with respect to FO I.17

3.15 Dr Lidberg warned that laws alone cannot bring about a cultural change:

The law gives the foundation for change, but it is not the law that will change the culture; it is the people who are applying and administering it who will. That is the key. A nd that is why the com m issioner has become so pivotal in th is.18

3.16 Professor McMillan argued that one of the most important ways in which the proposed laws address the problems with the current regime is by creating an advocate for FOI. He explained to the committee that there have been four major reviews o f FOI laws over the last decade and that '[t]he common theme in all those reports has been a lack of overt cultural support for FOI laws'.19 Professor McMillan argued that having a senior official to champion the FOI cause would go a long way to addressing the cultural issues with FOI that witnesses mentioned.

13 Mr Jack Herman, Executive Secretary, Australian Press Council, Proof Committee Hansard, 15 February 2010, p. 22.

14 Professor Rosalind Croucher, President, ALRC, Proof Committee Hansard, 15 February 2010, p. 23.

15 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

16 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

17 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

18 Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p 8.

19 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 3.

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3.17 Ms Elizabeth Simpson from the Public Interest Advocacy Centre (PIAC) described the problems with the existing FOI regime as 'endemic', however agreed with Professor McMillan's assessment of the bills, and stated that 'having an

information commissioner as an independent body to oversee these kinds of things will make a huge difference'.20 Ms Simpson noted that the powers given to the Information Commissioner in the bills will form a powerful basis on which to begin the necessary cultural shift.21

C onclusion

3.18 The committee is satisfied that the proposed new objects clause and the creation of the office of the Information Commissioner will be strong and effective measures for changing the culture and attitudes towards FOI within government.

3.19 However, the committee notes the substantial and challenging role that will be expected of the Information Commissioner in changing the culture of executive government towards FOI. This role will require significant support, as well as high-level policy input. The Information Commissioner will need avenues through which to ensure that the message of that office is received and implemented by government departments.

3.20 In order to facilitate this aspect of the Information Commissioner's role, the committee recommends that the Information Commissioner be made an ex officio member of the Administrative Review Council (ARC). The ARC is an expert body which provides advice to the Attorney-General and Commonwealth government on strategic the Commonwealth system of administrative law. As freedom of information has long been recognised as an integral aspect of Australian administrative law, adding the Information Commissioner as an ex officio member will also ensure that the ARC has a complete picture of all aspects of Australian administrative law.

Recommendation 1

3.21 The committee recommends that section 49 of the A d m in istrative A p p ea ls T ribu n al A c t 1 9 7 5 be amended to provide that the Information Commissioner is an e x officio member of the Administrative Review Council.

Do the Bills contain measures effective to ensure that the right of access to documents is as comprehensive as it can be?

3.22 The committee has identified three key elements of the FOI Bill which contain measures to ensure a comprehensive right of access to documents. These are: the new publication requirements; changes to exemption provisions; and fees and charges. The committee is satisfied that these changes proposed in the FOI Bill will be

20 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010 p. 31.

21 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010, pp 33-34.

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effective in ensuring that the right o f access under the FOI Act is as comprehensive as it can be.

P u blication req u irem en ts

3.23 Numerous witnesses emphasised to the committee the benefits of the proposed new publication requirements under the FOI Bill. For example, Associate Professor Paterson stated that Ί think they are really, really important'.2" The ALRC also commended this aspect of the FOI Bill which it stated is 'consistent with the pro­

disclosure culture'2 2 23 which the ALRC and Administrative Review Council (ARC) recommended in the Open government report.24

3.24 However, Associate Professor Paterson, who appeared before the committee in a private capacity, commented that publication requirements will only be effective if there are suitable penalties for non-compliance.2" She noted that disclosure requirements are an aspect o f both state and Commonwealth FOI laws that:

...really has not been very strongly complied with in the past and I think it is important to send out that m essage and to fairly clearly spell out what should happen if those requirem ents are not complied with. 26

3.25 In this regard, Associate Professor Paterson argued that:

I think proactive disclosure, w hat could be termed push rather than pull, is a very, very important elem ent o f m odem FOI— that you try and put out as much as possible rather than requiring people to put it in. Therefore that is a very important aspect o f the bill and it would be helpful if those aspects could be further strengthened.27

3.26 Mr Timmins, who appeared before the committee in a private capacity, argued that it should not be left up to agencies to decide what information ought to be published. He explained:

The explanatory memorandum, however, states that agencies are generally best placed to identify inform ation they hold which should be published, taking into account the object o f the act. M y response to that is, with about

22 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

23 ALRC, Submission 9, p. 2.

24 ALRC and ARC, Open government: a review o f the federal Freedom o f Information Act 1982, ALRC Report 77, 1995.

25 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

26 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 4.

27 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 4.

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28 years of experience, I do not think they support the fact that government agencies are best placed to do that.28

3.27 Professor McMillan agreed that he, too would be concerned if the regime relied on agencies to 'gauge its own compliance with the disclosure requirements of the legislation'.29 However, Professor McMillan, pointed out that he:

...would expect that the Information Commissioner and the Freedom of Information Commissioner will play a very active role in ensuring adequate compliance by all agencies with the publication requirements.30

E x em p tio n s

3.28 The FOI Bill makes some significant changes to the exemption provisions within the FOI Act, which attempt to clarify the extent of exemptions, and simplify the exemption provisions. One of the key changes made by the FOI Bill surrounds the new public interest test and its application. Witnesses also raised concerns about the

continued exemption of whole agencies from the scheme.

Application o f public interest test

3.29 Witnesses and submitters raised some concerns about the application of the public interest test to various exemptions. However, the committee notes that there was a distinct lack of consensus between witnesses and submitters as to which

exemptions should attract a public interest test.

3.30 The FOI Bill's proposed application of a public interest test to the business affairs exemption, but not to the trade secrets exemption (clause 47G at item 33 of Schedule 3 to the FOI Bill), was argued by a number of submitters and witnesses to be inconsistent. Telstra noted the 'legal uncertainty' that would result from the different types of commercial information being subject to differing tests.31

3.31 With respect to the lack of public interest test for trade secrets, Associate Professor Paterson argued that:

I think that is very unfortunate because more and more of the information in government is commercial in nature in some way—government is more commercialised and there are a lot more contracted service providers—so a very large proportion of the documents that are held by government have

some sort of commercial flavour to them. To the extent that you allow this

28 Mr Peter Timmins, private capacity, Proof Committee Hansard, 51 February 2010, p. 15.

29 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 2.

30 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 2.

31 Telstra, Submission 10, p. 3.

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exemption you are actually then allowing for a lot of those dealings to be claimed to be trade secrets or commercial information and to be exempt.32

3.32 Telstra33 and the Law Council o f Australia34 also raised this issue, however from a different perspective. The Law Council argued that no public interest test should apply to the business affairs exemption as 'there will rarely be any public interest in releasing documents which record trade secrets or which divulge commercially valuable information'.35

3.33 In relation to the personal privacy exemption, the Victorian Privacy Commissioner, Ms Helen Versey, argued that 'the changes to the protection of personal information were really a step backwards'.36 The issue Ms Versey raised with the bills is that:

The model now being proposed includes not just an exemption based on an unreasonable intrusion into someone's privacy but a threshold decision by the organisation or the minister as to whether the person might want to rely on the exemption.37

3.34 Ms Versey further explained that this is not a mandatory decision that the agency or minister has to make, but involves discretion in deciding whether the person might wish to rely on the exemption, in which case they must, if it is reasonably practical, give notice to that person. Ms Versey argued that if an agency had already decided that information met the condition o f being an unreasonable intrusion on a person's privacy, she did not see how it would be in the public interest to intrude on that person's privacy by releasing the information based on the discretionary question of whether the person might object.38

3.35 On the other hand, the PIAC argued that a public interest test should apply to all exemptions.39 Australia's Right to Know also supported this position, and argued for the application o f a public interest test to Cabinet documents.40

32 Associate Professor Moira Paterson, private capacity, P roof Committee Hansard, 15 February 2010, p. 5.

33 Telstra, Submission 10, p. 3.

34 Law Council of Australia, Submission 12, p. 4.

35 Mr Mark Robinson, Law Council o f Australia, Proof Committee Hansard, 5 February 2010, p. 15.

36 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 29.

37 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 29.

38 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 29.

39 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010, p. 30.

40 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 4.

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3.36 Mr McKinnon, from Australia's Right to Know, compared the situation in Australia with that in New Zealand, where a public interest test applies to Cabinet documents. He explained that in New Zealand Cabinet documents are subject to a very high public interest test, which he described as 'entirely appropriate', given the public interests in 'the solidarity and secrecy of the cabinet process'.41 Yet,

Mr McKinnon stated, the fact that a public interest test applies to Cabinet documents minimises the ability for that exemption to be overused by government in order to avoid FOI.42

3.37 From the above discussion it is evident that there was little consistency or consensus between witnesses as to whether, when and in what form a public interest test should apply to various exemptions. It is the committee's view that in the FOI Bill, the government has successfully dealt with the various, competing views when

formulating the proposed exemption provisions.

Exemption o f whole agencies

3.38 A number of witnesses and submitters questioned the continued exemption of entire agencies from the FOI scheme. Under the current FOI Act, security agencies, such as the Australian Security Intelligence Organisation and the Defence Signals Directorate, are exempt, as are various other agencies listed in Schedule 2 to the FOI Act, including the Australian National Audit Office, parliamentary departments and the Australian Government Solicitor. Other bodies have partial exemptions such as

the ABC and SBS.43

3.39 Associate Professor Paterson submitted to the committee that as a matter of principle, classes and types of documents should be exempted from disclosure under FOI, not entire agencies.44 4 5 She explained that:

I f you look at the [FOI] act you see it has a very good, strong national security exemption provision or if you look at bodies that have commercial inform ation or other information you will see again that there are business affairs and other exemption provisions that would seem to address the issue o f concern. What that means therefore is that these bodies are perceived to be outside o f transparency regimes, when that does not need to be the

41 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 7. 42 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 7. 43 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 16.

44 Associate Professor Moira Paterson, private capacity, Submission 20, p. 4.

45 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 5.

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3.40 Associate Professor Paterson argued that removing an organisation in its entirety from the FOI Act removes that method of public scrutiny. She argued that this should not be necessary, even for security agencies, as:

...the harms that might result from the disclosure of their [the exempt agency's] documents should logically be capable of being dealt with by the exemption provisions.46

3.41 Furthermore, Associate Professor Paterson argued that the increasing powers of security agencies heightens the need to ensure the accountability of those agencies through FOF 47

3.42 Dr Lidberg, the Academic Chair of Journalism at Murdoch University, noted that neither of the 'benchmark' FOI systems—those in the United States and Sweden—exempt any agencies entirely from FOI:

The CIA is not exempt. You would be aware that there were manuals handed out regarding certain interrogation methods, like waterboarding, for instance. Those manuals came from the CIA. That sends a very clear message: when you put any agency at all under general exemptions, it sends a message of secrecy rather than transparency.48

3.43 In addition to security agencies, parliamentary departments are currently exempt from the FOI scheme. A number of witnesses commented on this including Dr Lidberg,49 Mr McKinnon from Australia's Right to Know50 and Ms Simpson from PIAC, who argued that:

[I]f you come back to first principles, that the houses of parliament and parliamentary members are equally part of the government and also produce information and should also equally be accountable to the public. So to simply leave them outside the act leaves a part of government effectively unknowable to the public.51

3.44 Mr Timmins, who appeared in a personal capacity, told the committee that failure of the FOI Bills to:

...act on a law reform recommendation that the act extend to parliamentary departments is a significant gap in the accountability and transparency framework. This year the parliamentary departments had $320 million to

46 Associate Professor Moira Paterson, private capacity Proof Committee Hansard, 15 February 2010, p. 1.

47 Associate Professor Moira Paterson, Submission 20, p. 4 & p. 5.

48 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 7.

49 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 8 50 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 4.

51 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010, p. 32.

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spend. Some of that money goes on payments to members and senators in the form o f allowances and salaries. I think the lack o f accountability in this area, as I detailed in m y submission, is one that we should address.52

3.45 As was pointed out in the submission of the Queensland Information Commissioner,53 this issue was examined by the Senate Standing Committee on Legal and Constitutional Affairs in 1979 when it examined the Freedom of Information Bill 1978. That committee found at the time that:

The total exemption for parliam entary departments conferred by clause 3 o f the Bill appears even less justified than in respect o f the courts. The only official justification is that the Freedom o f Information Bill is concerned with the granting o f access to the documents o f the Executive. Seen as an

exercise in ensuring accountability o f governmental decision making, there clearly is a difference betw een the executive and parliamentary

departments. But that is not to say that there is not a corresponding need to open up for public inspection the activities o f the parliamentary

departments. The public has a legitimate interest in ensuring, first, that its parliam entary representatives are properly going about their tasks o f representation and executive scrutiny, and secondly, that its parliamentary

representatives are properly assisted to fulfil those functions.54

3.46 The ALRC and ARC's Open government report also recommended that parliamentary departments be made subject to the FOI Act,55 and the Queensland Information Commissioner's submission points out that the FOI laws in both New Zealand and the United Kingdom apply to parliamentary departments.56

3.47 Various suggestions were made as to how the decision as to which, if any, agencies should continue to be exempt from FOI should be made. For example, PIAC recommended in its submission that all exempt agencies should be required to demonstrate public interest grounds for their continued exemption from the FOI Act.57

Conclusion

3.48 While the committee accepts the strength of the arguments regarding the inappropriateness of exempting entire agencies or organisations from the FOI regime, it also considers that the issues involved are more complex than can be dealt with by this committee in the timeframe available for report. Furthermore, the committee is of the view that the new Information Commissioner will be best placed to make

52 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 15.

53 Queensland Information Commissioner, Submission 3, pp 3-4.

54 Senate Standing Committee on Legal and Constitutional Affairs, Freedom o f Information, 1979, pp 158-9.

55 ALRC and ARC, Open government: a review o f the federal Freedom o f Information Act 1982, ALRC Report 77, 1995, para 11.8, Recommendation 73.

56 Queensland Information Commissioner, Submission 3, p. 4.

57 PIAC, Submission 24, p. 16.

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decisions about this issue, and recommends that further consideration be given to the issue whether it is appropriate and necessary for entire agencies and organisations to be exempt from the FOI scheme.

Recommendation 2

3.49 The committee recommends that, if and when established, the Information Commissioner give consideration to whether it is necessary and appropriate for entire agencies and organisations to be exempt from the Commonw ealth's freedom of information scheme.

F ees a n d ch arges

3.50 The third aspect of the FOI Bill which the committee identified that effectively improves access under the FOI scheme relates to the proposed removal of certain fees and charges. As noted in chapter 2, the FOI Bill enables different charges to be applied to different groups of people, with the intention that journalists and public interest organisations will be exempt from fees for the first five hours.

Witnesses were generally in favour o f this amendment, although some argued that it did not go far enough.

3.51 For example, Dr Lidberg, the Academic Chair of Journalism at Murdoch University, proposed that processing fees for journalists and public interest groups ought to be waived for the first day of processing.

3.52 The issue o f the fairness o f treating journalists and public interest groups as special, and exempting them from fees when making third party FOI applications, while not exempting other individuals, such as bloggers, from fees, was raised as an issue by the committee. Dr Lidberg commented that:

[T]hat is a good point...it m akes sense to me that non-profit organisations that have few resources and so on should not be slapped with big

processing request...Som e journalists have a lot o f m oney behind them in terms o f m edia organisations...Perhaps, as an individual making a third- party request, you should be given some sort o f provision as well. This all comes back to the ownership again.58

3.53 The Australian Press Council raised similar concerns, with the Executive Secretary, Mr Herman stating that:

The council is always wary about singling out groups, w hether journalists or others. W hen journalists are making applications under FOI for public interest information, they should be in the same position as any other individual or group who is making similar sorts o f applications... So I think

58 Dr Johan Lidberg, private capacity, P roof Committee Hansard, 15 February 2010, p. 12.

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we would rather see it being expressed in terms o f the sorts of information rather than the class o f person making the application. 59

3.54 Furthermore, Mr Timmins pointed out the difficulties in defining 'journalists' and suggested that 'individuals, community or similar groups who individually or on behalf of others seek access to documents for the purpose of participating in government processes' should all get some special concession under the scheme.60 PIAC made similar comments on this issue.61

3.55 However, if free access to documents under FOI is not defined by the class of person applying, then the only other obvious option is to define the type of information that may be freely accessed, for example by distinguishing between information that is in the public interest to be released and that which is simply being requested to make a profit for a media organisation. However, the Australian Press Council noted the difficulties with this approach:

Yes, newspapers, the press and the media generally tend to be profit­ making organisations but they also happen to be organisations that are acting on behalf o f the public in disseminating information that is o f interest to the public, that is o f public interest. To make the distinction between those two things I think is very difficult.62

3.56 Another suggestion was that the government retain application fees but eliminate processing charges.63 This is the approach taken in the new Tasmanian FOI laws,64 and was supported by Ms Simpson from PIAC, who argued that:

From an individual's point o f view, it is really the charges that are

particularly prohibitive. We find that people have two issues with them. One is that sometimes they pay the charges and then discover that all o f the material is exempt. So they pay up to several thousand dollars not to receive very m uch information or any information at all...T he other is th a t...if an

agency, for example, has bad record-keeping measures which mean they have to spend a lot o f time w orking out w hat information is subject to an FOI request we do not believe that the individual should be required to pay for that.65

59 Mr Jack Herman, Executive Secretary, Australian Press Council, Proof Committee Hansard, 15 February 2010, p. 20.

60 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 18.

61 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010, p. 33.

62 Mr Jack Herman, Executive Secretary, Australian Press Council, Proof Committee Hansard, 15 February 2010, p. 22.

63 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 16.

64 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 17.

65 Ms Elizabeth Simpson, PIAC, Proof Committee Hansard, 15 February 2010, p. 32.

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Conclusion

3.57 The committee notes that the issue of fees and charges is dealt with in the Freedom of Information (Fees and Charges) Regulations, and not in the Act itself. The committee urges the government, when drafting the relevant regulations, to give full and serious consideration to the issues raised by witnesses with respect to fees and charges, and particularly to the feasibility of removing processing charges while retaining application fees, as has been done in Tasmania. The committee also urges the government to consider what has been done with respect to fees and charges in other jurisdictions.

Recommendation 3

3.58 The committee recommends that the government give consideration to the issues raised with respect to fees and charges in this inquiry, and particularly to the feasibility of removing processing charges, while retaining application fees, in the context of drafting regulations.

Are the improvements to the request process efficient and could they be further improved?

3.59 There are a number o f aspects of the FOI Bill that, if enacted, will

significantly improve the cost and efficiency of the request process, particularly those relating to the Information Commissioner's new oversight role. The FOI and Information Commissioners will be charged with overseeing the way government agencies are managing FOI, and will have the power to issue directions, make recommendations, and assist in making agencies' processes more efficient. The committee sees this new FOI advocacy role as pivotal to improving the efficiency of the request process under the FOI Act.

3.60 Only one aspect of the proposed changes to the request process attracted any substantial criticism from witnesses and submitters—the appeal process. As noted in chapter 2 of this report, the bills make some significant changes to the structure of internal and external merits review with respect to FOI decisions.

3.61 Currently individuals who are dissatisfied with the decision of an officer o f an agency regarding their FOI claim must request review of the decision internally by a senior officer within the same agency, before they may request external review of the decision. If the applicant is dissatisfied with the decision made by the senior officer, they may then request a review of that decision by the Administrative Appeals Tribunal (AAT).

3.62 Decisions by a minister or principal officer of an agency may be reviewed directly by the AAT.

3.63 The bills add a second level of external review before the AAT's review— by the Information Commissioner. However, in acknowledgment of the time that this change adds to the review process, the bills remove the requirement that internal

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review be undertaken prior to external review. In addition, the FOI Bill amends the format of review in the AAT, altering the onus of proof in AAT reviews, such that the onus will be borne by the applicant. These two issues attracted comment from a range of witnesses.

Onus o f p r o o f in th e A d m in istra tive A p p e a ls T ribu n al

3.64 It was strongly argued in evidence that the alteration of the onus of proof in AAT proceedings would be a retrograde step.

3.65 As outlined briefly in chapter 2, proposed section 61 provides that whichever party appeals a decision of the Information Commissioner—either the applicant, or the agency—bears the onus o f proof in the AAT. This means that if the applicant is denied documents by the Information Commissioner and requests a review of the

decision to the AAT, they will bear the onus o f proving that the Commissioner's decision was not correct or preferable, and that they should be allowed access to the documents on the facts.

3.66 This is a significant change from the status quo, where the concept of an 'onus of proof does not apply in AAT proceedings,66 and the role of a respondent agency is 'to assist the Tribunal to reach the correct or preferable decision; but not simply to seek to uphold the existing decision'.67 In practice this means that the respondent

agency provides the AAT with documents and evidence relevant to the making of the decision, but does not take a partisan role.68

3.67 In a document comparing the main changes between the exposure draft and the FOI and Information Commissioner Bills as introduced, the Department of Prime Minister and Cabinet described the alteration of the onus of proof as a 'minor change to ensure the effective operation of the review process in the AAT'.69

3.68 Mr Mark Robinson, from the Law Council of Australia, responded that 'nothing could be further from the truth'.70 Mr Robinson also noted the Law Council's

66 McDonald v Director-General o f Social Security (1984) 1 FCR 354.

67 The Hon Justice Garry Downes AM, Government Agencies as Respondents in the Administrative Appeals Tribunal, Paper delivered to the Australian Government Solicitor Government Law Group, 3 February 2005, at http://www.aat.gov.au/SpeechesPaDersAndResearch/speeches/downes/govemmentagencies.htm

68 The Hon Justice Garry Downes AM, Government Agencies as Respondents in the Administrative Appeals Tribunal, Paper delivered to the Australian Government Solicitor Government Law Group, 3 February 2005, at http://www.aat.gov.au/SpeechesPapersAndResearch/speeches/downes/govemmentagencies.htm 69 Department of Prime Minister and Cabinet, Summary o f main changes between the exposure

draft and introduced FOI reform Bills, November 2009, available at: http://wwvv.dpmc.gov.au/consultation/foi reform/index.cfm. p.7, tabled by Law Council of Australia, 5 February 2010.

70 Mr Mark Robinson, Law Council of Australia, Proof Committee Hansard, 5 February 2010, p. 19.

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serious concerns about the fairness of AAT appeals if section 61 is amended in the manner proposed in the FOI Bill.71 Mr Robinson gave evidence that the alteration of the onus of proof in the AAT:

It puts the applicant in an impossible position, both practically and as a matter o f fairness, and as a m atter o f law. On one view o f it, that onus could never be discharged, ever.72

3.69 Associate Professor Paterson further explained that:

[I]f a person has been knocked back by the commissioner and then goes to the AAT, they do not know w hat they are looking for. The government knows w hat it is looking for. The person then has to prove something they do not have, and do not have a description of, is in the public interest. This strikes me as an almost im possible burden o f proof to b ear.73

3.70 Mr McKinnon, the spokesperson from Australia's Right to Know coalition, told the committee that his organisation was extremely concerned about this aspect of the bills, and had raised the issue with the Minister.74 Mr McKinnon explained to the committee his personal experiences as a journalist with FOI appeals, and outlined the difficulty that he, as an applicant, would face if the onus of proof in the AAT were reversed:

I have done more than 50 appeals to the A AT because you have a chance given the onus rests o f the governm ent to prove why documents should be secret. That means that the government has to put up its evidence and its witnesses and we are in a position to cross-examine and to develop our arguments from the government. Equally, it is only logical that it is very difficult to prove that docum ents should not be secret w hen you have no access to those documents.75

3.71 Furthermore, Associate Professor Paterson commented that the ability o f the AAT to hear evidence from agencies and ministers without the applicant present 'is a reasonable safety valve to protect confidential information', arguing that the alteration of the onus of proof in the AAT is therefore unnecessary for protecting confidential information held by agencies.76 Professor Zifcak, Vice President of Liberty Victoria

71 Mr Mark Robinson, Law Council o f Australia, Proof Committee Hansard, 5 February 2010, p. 19.

72 Mr Mark Robinson, Law Council o f Australia, Proof Committee Hansard, 5 February 2010, p. 19.

73 Associate Professor Moira Paterson, Proof Committee Hansard, 15 February 2010, p. 3.

74 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 4.

75 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 5.

76 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 3.

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reiterated Associate Professor Paterson's position with regard to this aspect of the bills.77

3.72 The Department of Prime Minister and Cabinet explained the reasons for the alteration of the onus of proof in the AAT to the committee:

The issue behind that is that at present, if you appeal from a decision o f an agency, you appeal straight to the AAT, and you are appealing from the agency's decision, so the agency bears the onus o f defending its position. W ith the interposition o f the Information Commissioner as a new review opportunity for people, if an agency or applicant wishes to appeal from the

Inform ation Commissioner's decision to the AAT, they are actually appealing the Information Commissioner's decision, not the department's decision. So the provision in relation to the onus o f proof was included because it would not be appropriate for the Information Commissioner to be a party in the AAT, having to defend their position.78

3.73 In a response to a question on notice put by the committee, the Department of Prime Minister and Cabinet reiterated this point arguments, stating that:

The introduction o f the IC review before AAT review means that the AAT will be reviewing the decision o f the Information Commissioner not the decision o f the agency or minister. The Information Commissioner will not be a respondent to AAT review proceedings and will not be defending his

or her decision. It is for those reasons that the Bill placed the onus on w hoever applies for AAT review .79

3.74 Ms Lynch explained that the position is analogous to that of appeal from a decision of the AAT to the Federal Court, in which the AAT does not defend its position, but instead, the relevant department does.80

Conclusion

3.75 The department's explanation satisfies the committee with respect to those aspects of item 42 of Schedule 4 to Part 1 of the FOI Bill which give the responsibility for appearing before the AAT in FOI matters to the relevant department or agency instead of the Information Commissioner (proposed section 61 A). This is also

consistent with the role of departments and agencies when the AAT is reviewing the decision of an intermediate external merits review body, such as the Social Security Appeals Tribunal.

77 Professor Spencer Zifcak, Vice President, Liberty Victoria, Proof Committee Hansard 15 February 2010, p. 36.

78 Ms Philippa Lynch, First Assistant Secretary, Department of Prime Minister and Cabinet, Proof Committee Hansard, 5 February 2010, p. 13.

79 Department of Prime Minister and Cabinet, Answer to question on notice, 2 March 2010, PP 1-2. 80 Ms Philippa Lynch, First Assistant Secretary, Department of Prime Minister and Cabinet, Proof Committee Hansard, 5 February 2010, p. 13.

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3.76 However, when questioned on the issue of the applicant bearing the onus of proof in the AAT, legal academic, Associate Professor Paterson, President of the ALRC, Professor Croucher,81 and barrister, Mr Robinson82, were all unaware of examples of the onus of proof being altered in such a way in similar situations.83

3.77 The committee notes that there are other situations where individuals may request review o f decisions of an external merits review body to the AAT, such as social security decisions by the Social Security Appeals Tribunal, and that in those situations government has not considered it necessary to require an individual aggrieved by an administrative decision to bear the onus of proof in the AAT. The committee is not satisfied that there are any reasons for the onus of proof to be altered in this situation, when it is not in others.

3.78 The committee considers that the alteration of the onus of proof such that whichever party applies for review by the AAT bears the onus of proof is inappropriate, unnecessary and unfair to individuals. Accordingly, in order to make the FOI Act consistent with the lack o f onus in the rest o f the AAT's jurisdiction, the committee recommends that proposed section 61 be amended to remove the concept of onus of proof from the FOI Act entirely. The committee recommends that any other amendments required to give effect to the removal of the notion of onus from the FOI Act also be made.

Recommendation 4

3.79 The committee recommends that proposed section 61, in item 42 of Schedule 4 to Part 1 of the Freedom of Information Amendment (Reform) Bill 2009, which provides that whichever party that appeals a decision of the Information Commissioner bears the onus of proof in the Administrative Appeals Tribunal, as well as any other relevant sections of the Bill and F reedom o f In form ation A c t 1982, be amended to remove the concept of an onus of proof from the Act.

3.80 Mr Timmins noted that, while he also has concerns with this aspect of the FOI Bill, he is more concerned with the fact that agencies could appeal decisions from the Information Commissioner to the AAT, and that this may be used as a delaying tactic by departments.84 He argued that there is no reason for agencies or ministers to have a right of appeal to the AAT:

They should have the right to seek review where it is alleged that there is an error o f law in the Information Commissioner's decision. But when it comes

81 Professor Rosalind Croucher, President, ALRC, Proof Committee Hansard, 15 February 2010, p. 25.

82 Mr Mark Robinson, Law Council o f Australia, Proof Committee Hansard, 5 February 2010, p. 22.

83 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 4.

84 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 17.

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to simply asserting that it is wrong and therefore asking for full merit review again, a process that has been undertaken by the Information Com m issioner previously, I think we should be looking closely at that because o f the prospect o f delay.

3.81 Similar concerns regarding delay were raised by the Law Council of Australia.85

3.82 However, while the committee acknowledges Mr Timmins' concerns with respect to this issue, the committee notes that model litigant provisions apply to the behaviour of agencies before the AAT and courts. Model litigant provisions should limit any possibility of the Commonwealth's right of review being used as a delaying tactic. Furthermore, the committee notes that it is not unprecedented for Commonwealth departments and agencies to have a right of review or appeal to a higher tribunal or court.

R em o va l o f com pulsory> in te rn a l re v ie w

3.83 The body charged with advising government with respect to administrative law matters, the Administrative Review Council (ARC) has, in a number of its reports, highlighted the importance of internal review.86 As noted in chapter 2, the FOI Bill proposes to make internal review an optional step, rather than a mandatory step as it currently is under the FOI Act.

3.84 Professor McMillan noted that:

Generally I have been in favour o f internal review as a mandatory stage in all administrative processes. Indeed, even in the Ombudsman's office, we insist that a person first complain to and take up an issue with an agency before com ing to the O m budsm an.87

3.85 However, Professor McMillan also acknowledged that as the bills add multiple appeal stages:

M ultiple appeal stages run the risk o f prolonging disputes and exhaustion o f complainants. So the balance that has been struck is to make internal review optional. M y view is that it is best to go with that balance for the moment and to allow the Information Commissioner to review whether it is

85 Mr Mark Robinson, Law Council of Australia, Proof Committee Hansard, 5 February 2010, p. 16.

86 See for example Administrative Review Council, Internal Review o f Agency Decision-Making, Report No 44, November 2000; and Better Decisions: review o f Commonwealth Merits Review Tribunals 1995, Report No 39, September 1995.

87 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2 0 1 0 , p . 2.

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receiving an undue num ber o f small matters that could more suitably be resolved within an agency.88

3.86 Similarly, Associate Professor Paterson expressed the view with respect to internal review that:

On balance, I favour it being optional. I think an internal review can certainly be o f value in term s o f changing processes within an agency, providing a quick and easy form o f review, but I think there are

circumstances where it is going to slow down the process. Where time is o f the essence and where you have to go through that first, that would be a disadvantage to applicants. So I would favour, on balance, it being optional.89

3.87 Dr Lidberg expressed much stronger support for making internal review optional rather than mandatory:

I find it very good that the change bypassing the internal review was made. I am much harsher in m y judgm ent on that than Professor Paterson, because I think that with internal review, even though the stats say that it does work, that decisions are changed, it does not quite show how those decisions are changed. Very often, internal review does nothing, so it is fantastic that it has been changed and that w e can go straight to the commissioner.90

3.88 Similarly, Mr McKinnon from Australia's Right to Know stated that:

It is rare in my view that im portant policy issues are overturned on internal review...Right to Know argued for that optional internal review even though agencies are bloody m inded and you never win on internal review, so what is the point. W hat an internal review process does do is remove at least to some extent the tim eliness o f the information and in journalism that is all.91

3.89 Therefore, despite the general advice of the ARC regarding the advantages of internal review, it appears that in this instance, there are sufficient review mechanisms and accountability safeguards so as to justify making internal review an optional rather than mandatory step.

88 Professor John McMillan, Commonwealth Ombudsman, Proof Committee Hansard, 5 February 2010, p. 2.

89 Associate Professor Moira Paterson, private capacity, Proof Committee Hansard, 15 February 2010, p. 2.

90 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 10.

91 Mr Michael McKinnon, Australia's Right to Know, Proof Committee Hansard, 5 February 2010, p. 10.

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Assessment of the functions, powers and resources of the Information Commissioner

3.90 As with other aspects of the bills, the establishment of the Information and FOI Commissioners was overwhelmingly regarded as a positive step by witnesses, although a number of suggestions were made regarding the specific aspects of the commissioners' roles.

3.91 It has been contended that FOI and privacy interests often conflict, and accordingly it may be inappropriate to combine both roles within one office.92 However, the Victorian Privacy Commissioner, Ms Helen Versey disagreed with this

argument, and stated:

...m y submission is that there is a close interconnection between the laws. Both laws in effect prom ote transparency o f government. Privacy laws prom ote transparency in that they promote the right o f individuals to know what information governm ent collects about them, how it is used and who it

is disclosed to. Such rights are incorporated in the general right o f access to governm ent information.93

3.92 However, Ms Versey also pointed out in both her submission and in evidence to the committee, that there is a lack of detail in the legislation regarding when the Privacy and FOI Commissioners are to exercise the privacy and FOI functions of the

Information Commissioner respectively.94 Ms Versey also expressed concern that the independence and autonomy of the Privacy Commissioner may be undermined by placing them within the Information Commissioner's office. However, Ms Versey emphasised that this would depend on the practical operation of the bills, and could be

fixed by greater clarity within the Information Commissioner Bill specifically.95

3.93 Other witnesses also raised concerns with the lack of clarity in the

Information Commissioner Bill regarding the roles of the new commissioners. The NSW Privacy Commissioner commented that the model proposed in the Information Commissioner Bill 'appears open to confusion, as the Commissioner's functions are interchangeable and no provision is made for the finality of decisions'.96 The Public

Interest Advocacy Centre argued that 'having an FOI Commissioner who can use or perform the functions of a Privacy Commissioner undemrines the value of having these different subordinate commissioners, who are each meant to be an independent

92 NSW Privacy Commissioner, Submission 6, p. 2.

93 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 26. 94 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 27; Victorian Privacy Commissioner, Submission 15.

95 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 27.

96 NSW Privacy Commissioner, Submission 6, p. 3.

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specialist advocate for their own regime'.97 The ALRC echoed these concerns, however, its President, Professor Croucher, ultimately concluded that the ALRC does not object to the specifics of the proposal in the Information Commissioner Bill as 'that could readily be dealt with in practise'.98

3.94 A second issue that arose during the inquiry regarding the specifics of the Information Commissioner model was the requisite qualifications of each of the commissioners. The Information Commissioner Bill requires that the FOI Commissioner have legal qualifications, but no similar requirement is placed on either the Information Commissioner or the Privacy Commissioner.

3.95 Dr Lidberg argued that the requirement that the FOI Commissioner has legal qualifications99 should be reconsidered.100 In this respect, Dr Lidberg argued that the requirement does not take into account the wider components of the job of an FOI Commissioner. He stated:

It would be good if this person [the FOI Commissioner] had done possibly, research into FOI, had a good knowledge o f the international systems, and was keen on benchmarking and explaining why it is important to

benchmark Australia towards other systems. It would be good if this person understood that this is a long-term thing.101

3.96 The Victorian Privacy Commissioner, Ms Helen Versey, agreed with Dr Lidberg's view on this issue, noting that Ί do not necessarily think that regulators have to have legal qualifications'.102

3.97 On the other hand, Professor Zifcak from Liberty Victoria strongly supported this aspect of the Bill, and argued that the Information Commissioner should also be required to have a legal background.103

3.98 Dr Lidberg also argued that the FOI Commissioner should not be appointed from within the public service, in order to foster the requisite change in culture. He noted:

Unfortunately, because o f the tradition o f secrecy that comes with the W estm inster system and because o f our Public Service to such a great

97 Ms Elizabeth Simpson, PIAC, P roof Committee Hansard, 15 February 2010, p. 31.

98 Professor Rosalind Croucher, President, ALRC, Proof Committee Hansard, 15 February 2010, p. 24.

99 Information Commissioner Bill 2009, clause 14.

100 Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 7.

101 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 9.

102 Ms Helen Versey, Victorian Privacy Commissioner, Proof Committee Hansard, 15 February 2010, p. 28.

103 Professor Spencer Zifcak, Vice President, Liberty Victoria, Proof Committee Hansard, 15 February 2010, p. 38.

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extent being modelled on the UK Civil Service, I do not think the FOI Commissioner should be drawn from the Australian Public Service.104

3.99 Mr Timmins disagreed with Dr Lidberg on this point arguing that Ί do not think anyone should be excluded—we want the best person for the job'.105

Conclusion

3.100 The committee notes that on 26 February 2010, Professor John McMillan was appointed as the Information Commissioner Designate. Despite the varied nature of the numerous suggestions made by witnesses as to what category of person would make an appropriate Information Commissioner, Professor McMillan's appointment manages to fulfil them all. Professor McMillan has a strong background as an advocate for FOI, has done exceptional work as the Commonwealth Ombudsman in improving government administration, and has an outstanding legal credentials. The committee commends the government on this appointment.

3.101 The Commonwealth Ombudsman suggested in his submission that the name of the Information Commissioner be changed to the Australian Information Commissioner, in order to distinguish the position from that of information commissioners in other states and internationally, as well as to identify that the Information Commissioner's role relates to the Australian Government.106 This

suggestion was supported by the Administrative Review Council107 and Dr Lidberg.108

3.102 The committee supports this suggestion, and recommends that the government make the necessary amendments to the Information Commissioner and FOI Bills.

Recommendation 5

3.103 The committee recommends that the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 be amended such that all references to the 'Information Commissioner' are replaced by references to the 'Australian Information Commissioner'.

104 Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 9.

105 Mr Peter Timmins, private capacity, Proof Committee Hansard, 15 February 2010, p. 18.

106 Commonwealth Ombudsman, Submission 8, p. 8.

107 Administrative Review Council, Submission 28, p. 2.

108 Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 8.

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R eso u rces o f th e In form ation C o m m issio n er

3.104 As noted in chapter 2, the Office of the Information Commissioner will be resourced with $19.5 million over four years, in addition to existing resources of the Privacy Commissioner (approximately $6.4 million in 2008-09109).

3.105 The committee raised concerns regarding whether this level of resourcing will be adequate to enable the commissioners to perform the significant role required of them. In this respect, the Department of Prime Minister and Cabinet stated:

The budget process itself requires a very robust process internally and it would be based on the num ber o f cases in the past, the expected number of cases in the future, and current activity levels. It went through our budget process.110

3.106 The Commonwealth Ombudsman pointed out that the amendments to the FOI scheme may result in increased costs to government, as it would likely encourage more requests.111 Specifically, the reduction in fees, and the removal of a requirement of an Australian address remove significant practical barriers to the making of FOI applications. The Ombudsman submitted that, in his experience, 'these are the most common causes o f a request being considered invalid by the receiving agency' and the removal o f these barriers will accordingly result in more valid requests.

3.107 However, there was not unanimity amongst witnesses that an increase in FOI applications would result from the proposed amendments. Dr Johan Lidberg disagreed with the Ombudsman's analysis, explaining that:

In a study done by Greg T en-ill...that drew from the discussions leading up to the 1982 act, it was anticipated that each governm ent agency would deal with tens o f thousands o f requests p er year. This did not happen at all, and I do not think it will happen w ith this change either.112

Conclusion

3.108 The committee is concerned that the Financial Impact Statement for the FOI Bill, and the basis on which resourcing has been determined do not take into account the increase in FOI applications across government that is likely to result from the proposed amendments. The committee urges the government to monitor the funding of the Office of the Information Commissioner on an ongoing basis, and ensure that the commissioners have sufficient resources to undertake the significant and important role that has been designated to them by the proposed legislation.

109 Office of the Privacy Commissioner, Annual Report 2008-09, p. 145 110 Ms Glenys Beauchamp, Deputy Secretary, Department of Prime Minister and Cabinet, Proof Committee Hansard, 5 February 2010, p. 13.

111 Commonwealth Ombudsman, Submission 8, p. 7.

112 Dr Johan Lidberg, Academic Chair o f Journalism, Murdoch University, Proof Committee Hansard, 15 February 2010, p. 8.

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Conclusion

3.109 It is evident from the above discussion that FOI in Australia is in need of significant legislative reforms, and particularly of a cultural shift in the way in which FOI laws are administered. The reform package proposed by the government in the FOI and Information Commissioner Bills has the ability to address the key problems that have been identified with the 1982 FOI Act, including, through its objects clause and the introduction of the FOI and Information Commissioners, to bring about the requisite cultural change.

3.110 The committee commends the government for the consultative approach taken to the development of this legislation, and strongly supports the FOI and Information Commissioner Bills. The committee considers that, but for a few minor suggestions

for amendment, the bills effectively take into account the various competing views on how FOI laws should operate. Accordingly, the committee recommends that the bills be passed by the Senate without delay.

Recommendation 6

3.111 The committee recommends that, subject to the amendments outlined in Recommendations 4 and 5 being made, the Freedom of Information Amendment (Reform) Bill 2009 and the Information Commissioner Bill 2009 be passed by the Senate as soon as practicable.

Senator Helen Policy

Chair

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Coalition Senators' Dissenting Report

INTRODUCTION

The Coalition is committed to responsible and open government.

The Freedom o f Information Act 1982 was introduced by the Fraser Government as a vital measure to ensure that government is accountable and information is available to facilitate this.

Coalition Senators support many of the provisions of these bills, but have substantial concerns with one aspect o f them.

This legislation introduces a substantial change in the onus of proof for appeals to the Administrative Appeals Tribunal. This change has the potential to diminish accountability and transparency, in stark contrast to the stated objectives of this legislation.

In effect, this change demands that applicants must show why secret government documents should not remain secret.

The change in the onus of proof will make it incredibly difficult for applicants to successfully appeal a decision by the Information Commissioner.

The majority report of the Committee recommends that this onus be removed altogether - this recommendation is also opposed by Coalition Senators.

Coalition Senators have further concerns regarding the changes to fees and charges under the proposed legislation. In particular, the possibility of discriminating between individual researchers vis-a-vis those deemed journalists and non-government

organisations.

LABOR’S RECORD ON FREEDOM OF INFORMATION

The Rudd Government’s position on freedom o f information (FOI) has been heavy on rhetoric and short of action. Prior to the 2007 Federal Election, the Rudd Labor Opposition stated that:

“A Rudd Labor Government will restore trust and integrity in the use o f Commonwealth Government information, promoting a pro-disclosure culture and protecting the public interest through genuine reform.” /

1 Government information - Restoring trust and integrity, Election 2007 Policy Document, October 2007.

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Indeed, the Labor Party, when in Opposition, described its approach to making information more accessible to the general public with the colourful (if Orwellian) phrase “Operation Sunlight”.

However, the Freedom o f Information Act 1982 Annual Report 2008-09 provides substantial evidence that the Rudd Government is keeping very tight control over the flow of information.

The report shows that there has been a significant increase in the number o f FOI access requests that have been refused in the first full financial year (2008-09) of the Rudd Government.2

The number of FOI access requests refused increased from 1368, or 4.36 per cent of the total number of requests in 2007-08 to 1530 or 6.09 per cent in 2008-09. The 2008-09 figures represent an 11.8 per cent increase on the total number of refused FOI access requests over 2007-08. This comes despite a 19.8 per cent decrease in the total number of determined FOI access requests - a decrease from 31,367 to 25,139.

This is substantially more than the number of access requests that were refused in 2007-08, and in the last full financial year of the Howard Government. The increase in the number of refusals comes in spite of a substantial decline in the total number of FOI access requests that the Government received in 2008-09, compared to previous years.3

The cost of facilitating FOI requests has also increased substantially under the Labor Government.

From the last full financial year o f the Howard Government, until the first full financial year of the Rudd Government, the cost o f FOI increased from just under $25 million to over $30 million - an increase of 21.7 per cent.4

Given the increasing cost o f facilitating FOI requests and the decline in the number of FOI access requests, there has been an extraordinary increase in the average cost per FOI request from 2006-07 to 2008-09. In 2006-07, the average cost per FOI request was $642.90 and in 2008-09 the cost per request was $1,101.50 - an increase o f 71 per cent over two years.5

These facts contradict the government’s purported commitment to ‘promoting a pro­ disclosure culture and protecting the public interest’.

The government’s commitment to a pro-disclosure culture was put to the test last year, Mike Steketee reported in The Australian on 30 January 2010 of the behaviour of

2 Freedom o f Information Act 1982, Annual Report 2008-09, p. 5. 3 Freedom o f Information Act 1982, Annual Report 2008-09, p. 2. 4 Freedom o f Information Act 1982, Annual Report 2008-09, p. 19.

5 Freedom o f Information Act 1982, Annual Report 2008-09, p. 2 and p. 19.

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public servants in the Department of Climate Change, in their response to an FOI request from Dr Richard Denniss from the Australia Institute:

“Even though the department rang Denniss to confirm that he wanted advice to the minister, and the department's lawyers said this was covered by the request, it was excluded on the instruction o f departmental head Martin Parkinson and his deputy Blair Comley.”

“Not easily deterred, Denniss fired in another request asking for documents prepared to help inform W ong and her advisers o f the details, merits, limitations and criticisms o f the ETS. The response: he may be able to get what he wants if he hands over $256,586.98, although, catch-22, if he

proceeds with his request, the department may decide it involves an unreasonable diversion o f resources.” 6

This example about a prominent public policy issue further illustrates that the Labor Government is not honouring its election commitment to creating a pro-disclosure culture and that Labor’s rhetoric on FOI does not match the reality of continued denial of access to information.

REVERSAL OF THE ONUS OF PROOF FOR APPEALS TO THE AAT

The Government's bills propose a substantive change to the onus of proof for AAT appeals by FOI applicants that will diminish accountability. This clearly undermines the Government’s commitment to creating a ‘pro-disclosure culture’.

The current legislation Freedom o f Information Act 1982 states, in relation to the onus of proof under section 61:

Subject to subsection (2), in proceedings under this Part, the agency or M inister to which or to whom the request was made has the onus o f

establishing that a decision given in respect o f the request was justified or that the Tribunal should give a decision adverse to the applicant.

The proposed legislation repeals this section and replaces it with:

In proceedings under this Part, the person who applied to the Tribunal has the onus of establishing that:

(a) a decision given in respect o f the relevant request or application is not justified; or (b) the Tribunal should give a decision adverse to a party to the proceeding.

Astonishingly, the Government attempted to pass this change off as a “minor change”,7 which was relegated to the section dealing with trivial and technical

6 S te k e te e , M ik e . “ L a b o u rs in th e m in is try o f tr u th ” , The Australian, 3 0 J a n u a ry 2 0 1 0 . R e trie v e d 1 M a rc h 2 0 1 0 : h ttp : w w w .th e a u s tra lia n .c o m .a u /n e w s /o p in io n /la b o u rs -in -th e -m in is trv -o f-tru th /s to rv -e 6 frg 6 z o -l 2 2 5 8 2 4 6 3 8 7 8 8

7 Summary of main changes between the exposure draft and introduce FOI reform Bills, Department of Prime Minister and Cabinet, November 2009, p. 7.

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amendments in the comparative table produced by the Department (which, it should also be noted, was not provided to the Committee until specifically requested).

The sincerity of the Rudd Government’s commitment to freedom of information may be gauged from the fact that it actually sought to conceal, by burying it among the miscellany of technical amendments and passing it off as a minor change, a provision which, as we will see from the evidence o f experienced expert witnesses, will “undermine” the entire scheme of the Freedom o f Information Act and make successful applications for the review o f refusals “impossible.”

In contrast, Coalition Senators believe that this is not a minor change, and creates a barrier to accessing government information. Associate Professor Moira Paterson agreed with Senator Ryan that the changes to the onus of proof, would be a ‘retrograde step":

Senator RYAN— Would reversing the onus o f proof be a ‘retrograde’ step, a term I think you used earlier in your verbal submission?

Prof. Paterson— Yes, I think it would be. How serious that turns out to be really depends on to what extent applicants need to go on to the AAT. But if you are going to have an A A T review and you are going to reverse the onus, then you are going to make it very difficult for applicants to make use o f that.*

In practice, the applicant will have to justify to the Administrative Appeals Tribunal why secret documents should not remain secret. Applicants will only be able to make their case for access in the most general way, while the government will have complete access to the information and are in a substantially stronger position than the

applicant to defend their denial of access.

Coalition Senators believe that the change in the onus o f proof from the Minister or agency to the applicant will place an insurmountable barrier to government information that will make the FOI applicant quest for information virtually impossible.

Ms Philippa Lynch, First Assistant Secretary Government Division, Department of the Prime Minister and Cabinet, outlined the reasoning behind the change to onus of proof:

Ms Lynch— 1 can explain to you a little the reasons why that provision was put in the bill. The issue behind that is that at present, if you appeal from a decision o f an agency, you appeal straight to the AAT, and you are

appealing from the agency’s decision, so the agency bears the onus o f defending its position. W ith the interposition o f the Information 8

8 Hansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 15 February 2010, p. 2.

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Com m issioner as a new review opportunity for people, if an agency or applicant wishes to appeal from the Information Commissioner’s decision to the AAT, they are actually appealing the Information Commissioner’s decision, not the department’s decision. So the provision in relation to the

onus o f p ro o f was included because it would not be appropriate for the Inform ation Commissioner to be a party in the AAT, having to defend their position.9

Mr Mark Robinson, who appeared on behalf of the Law Council of Australia, is one of Australia’s most experienced Freedom of Information practitioners, having appeared in hundreds of applications, both for and against governments, in the course of 17 years, having sat as a judicial officer hearing applications under the New South Wales Freedom o f Information Act, and in fact having been the draftsman of the NSW Act. He said in response to the Department of Prime Minister and Cabinet’s argument

for the change that:

Mr Robinson— It is an irrelevant assertion. I say this because the applicant does not normally know what document it is that he or she is seeking, and he or she does not normally know what it contains. They may think they do but they may be wrong. And how can an applicant meaningfully assist the

tribunal by presenting his or her case first and by bearing the onus o f proving something? You only have to think about it logically, I submit. As an applicant I can stand up and say: ‘I put an FOI application in. I don’t

have to tell you why I did it, because that’s irrelevant. I don’t have to tell you who I am, because that’s irrelevant. 1 do n ’t have to tell you what I’m going to do with the document when I get it, because that’s often

irrelevant— and I want the docum ent.’ And I sit down. Now, how is that possibly going to discharge the onus o f proof? It puts an applicant in an impossible position, both practically and as a m atter o f fairness, and as a m atter o f law. On one view o f it, that onus could never be discharged,

ever.10

Mr Robinson went on to offer the following observations:

Senator BRANDIS— ... I put it to you, was that where a refusal o f an FOI application is before the tribunal it is the governm ent which knows what is in the document and which has the monopoly o f knowledge. In those circumstances ... it is almost impossible to imagine how an applicant could

succeed if he bears the onus o f p roof since he has no means o f knowing what is in the document.

Mr Robinson— What are they going to say?

Senator BRANDIS— Do you agree with that proposition that I have just put to you?

9 Hansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 5 February 2010, p. 13.

10 Ibid. p. 19.

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M r Robinson—Absolutely, if they are self represented then they will talk. They will make submission after submission after submission about what they think the document will be, and if they do not w ant know w hat it is then about what it should be. All o f that will o f course waste the tribunal’s time.

Senator BRANDIS— Yes.

M r Robinson— An applicant w ho has a legal representative hopefully would not do that and ordinarily would not do that. It is a recipe for disaster in the sense that it is giving them a platform and giving them a burden and telling them to discharge an onus that in ordinary circumstances they cannot.

Senator BRANDIS— If I may say so, with respect, I think that is

absolutely right. You w ould be aware, M r Robinson, as a lawyer, that in fact the very set o f circum stances in which you find reversals o f onus in statutes is where one party has the monopoly o f knowledge o f the relevant facts so that it is appropriate that it bear the onus o f supporting its decision rather than the party which is information deprived seeking to discharge an onus.

M r Robinson— I would accept that, but, more fundamentally, in this case the FOI legislation makes it clear that the identity o f an applicant is not relevant; and the reason an applicant wants the material is not relevant. The wording o f the legislation is ‘every Australian has a right’. The wording of

the new objects clause in section 3 is ‘to give to the Australian community access to information by Com m onwealth publishing’ but also by providing a right o f access to the docum ents and combined w ith subsection 4 o f section 3 o f the new objects clause ‘the parliament intends that the

functions and powers given by the act to be performed and exercised as far as possible— and here is the important part— to facilitate and promote public access to information prom ptly and at the lowest reasonable cost’.

Senator BRANDIS— That is the objects clause. W hat effect will the proposed new section 61 have on that?

M r Robinson— It will not facilitate and prom ote the flow o f public access to information. How can you put an applicant up and say, ‘Prove the case against the Commonwealth,’ w hen you do not know the case against the Commonwealth; or, ‘Prove why we should release the document,’ when they do not know what the docum ent is. Often a b rief bullet point or a cryptic statement o f reasons from the Commonwealth is the only document they have to comment on let alone attack. You can only make submissions on those things. You cannot discharge an onus o f p ro o f by adducing evidence; you can only make oral submissions. You cannot put on evidence to fight reasoning, let alone brief, cryptic or incomplete reasoning. It is only when a m atter gets to the A A T or possibly, hopefully, before the

information commissioner under this new system, that the Commonwealth reasons will become more expensive because the information commissioner will have, hopefully, extracted more detailed reasoning out o f them. Only then will things be a little more clear.

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Senator BRANDIS— What impact does the proposed new section 61 have?

Mr Robinson— It will undermine it.

Senator BRANDIS— So what we see is declarations o f intent in the objects clause saying one thing, but, w hen one drills into the details o f the

legislation, in this particular case the reversal o f the onus of proof, the substance is at variance with the declaration o f intent.

Mr Robinson—The most stark way to appreciate this is to accept that, in most FOI cases since the beginning o f the FOI Act, in the AAT the

Commonwealth goes first. The Commonwealth agency has presented its case first in every case I have been involved in and in almost every case that I am aware of. I think there m ay be one or two cases where it has been reversed in very unique circumstances. For example, third parties who want

to preserve their trade secrets m ay sometimes come in. They are called reverse FOI applications by other people. The situation is different there, but in the ordinary FOI case o f an FOI applicant wanting a document from the Commonwealth the Com m onwealth goes first. This w ill change that.

Senator BRANDIS— Would you agree with my characterisation that the effect o f section 61 is at variance with the declaration o f intent in the objects clause?

Mr Robinson—Yes

A number of other witnesses at the inquiry stated that the change in the onus of proof will make it virtually impossible for applicants to succeed. Mr Jack Herman, the Executive Secretary of the Australian Press Council also criticised the change in the onus of proof:

Mr Herman— If, however, the Senate decided to have two levels o f merit review, first by the information com m issioner and then by the AAT, the council would suggest that the onus o f p ro o f in either m erit review should rest with the officials who are contending that the information should not be

released. The objects clause o f the act m akes it clear that the object o f freedom o f information is the release o f information. Therefore, the onus to show that the information should not be released should always rest with the official trying to forestall release.7''

Professor Spencer Zifcak, the Vice-President of Liberty Victoria also expressed his concern with the change to the onus of proof:

Senator RYAN— 1 should add that that onus o f proof is only reversed for appeals from the Information Commissioner to the AAT. But with all your expertise that would be an almost impossible onus to surmount given the information, as you mentioned, resides with the person or the agency or

government. 1 1

11 H ansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 15 February 2010, p. 21.

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Prof. Zifcak— I agree with that.12

Under the current legislation, Ministers and agencies have the onus o f showing why secret government documents should remain secret. The proposed change to the onus of proof places a virtually impossible burden for applicants to show that secret government documents should not remain secret. There is a substantial asymmetry of

information between the government and the applicant and the change in onus will place an insurmountable barrier to some FOI requests.

As Mr Robinson - who was more acquainted with FOI practice than any other witness - was at pains to stress, that asymmetry is the very reason why it is, from a functional point of view, necessary to reverse the onus. Since it is the applicant, who is not possessed of the information whose disclosure the government has refused, it is not possible for an applicant to mount a positive argument about material of which he is ex hypothesis ignorant.

These are the very circumstances - i.e. where one of the two adverse parties possesses a monopoly of information - that Parliament routinely casts the onus on that party to defend its position, since it is not, from an evidentiary point of view, practically possible for the other party to attack it.

COALITION SENATORS OPPOSE RECOMMENDATION 4 OF THE MAJORITY REPORT - THE PROPOSAL TO REMOVE OF THE ONUS OF PROOF FOR APPEALS TO THE AAT

Government Senators recommend, by Recommendation 4, that relevant sections of the Bill and of the Freedom o f Information Act itself, “be amended to remove the concept of an onus of proof from the A ct/’ The only rationale of this recommendation appears to be the following statement in para. 3.146:

“The committee considers that the alteration o f the onus o f proof such that whichever party applies for review by the AAT bears the onus o f proof is inappropriate, unnecessary and unfair to individuals. Accordingly, in order to make the FOI A ct consistent with the lack o f onus in the rest o f the

AA T’s jurisdiction, the committee recommends that proposed section 61 be amended to remove the concept o f onus o f p ro o f from the FOI Act entirely. The committee recommends that any other amendments required to give effect to the removal o f the notion o f onus from the FOI Act also be made.”

That statement reveals a lamentable ignorance of the structure and functioning of the FOI Act. Under the terms of the existing s. 61(2), the onus “of establishing that a decision refusing the request [for access] is justified” lies upon “the party to the proceedings that opposes access being given to a document in accordance with a

request”. Consistency with the merits review procedures elsewhere in the Administrative Appeals Tribunal Act, which appears to be the only consideration resembling a rationale for the Government Senators’ recommendation, ignores the fact

12 Ibid, p. 36.

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that, in a typical merits review, both parties will have access to the relevant facts, of which review is sought.

The peculiarity o f applications for review of refusals of access under the FOI Act is that, ex hypothesi, the party seeking review cannot know of the contents and substance of the document, the refusal of access to which is sought to be overturned. In those circumstances, as we have pointed out, there is an asymmetry of information - an asymmetry so absolute that, but for the provisions of s. 61(2), the unsuccessful applicant for access is literally helpless in bringing its review application. Since it cannot be made aware of the contents o f the disputed document, how is it to advance arguments that the document should have been released? It is for these reasons that experienced practitioners before the hearing warned that removal of the reverse onus of proof would effectively destroy the scheme o f the FOI Act.

The expedient recommended by Government Senators is no better. Just as surely as the Government amendment which they criticize, the Government Senators’ proposal (Recommendation 4) would remove the mechanism of the reverse onus. The same

mischief, which the Government Senators criticize as “inappropriate, unnecessary and unfair to individuals” would remain. It is only by retaining the status quo in s. 61(2) that an applicant for review is able to be ensured a reasonable opportunity to put forward his case.

Opposition Senators point out that the reversal of the onus in review proceedings before the AAT has been a feature of the FOI Act since its inception. Indeed, it was a feature each of the two Bills which were precursors of the existing Act - the Freedom o f Information Bill 1978 and the Freedom o f Information Bill 1981, where it appeared

in substantially similar form in ell. 41 and 51 respectively.

The Explanatory Memorandum to the current Act explains the point which Opposition Senators are now making:

“Clause 61 places the onus o f establishing that a decision given in respect o f a request was justified on the agency or M inister to whom the request was made. This is because the applicant does not have access to the document concerned, and so it is not necessarily in a position to argue that

the decision was wrong. ” 13

So clear was the understanding of the drafters of the current FOI Act and its predecessors that the reverse onus was essential, and so uncontroversial was it, that in the course of the 526-page report of the Senate Standing Committee on Constitutional and Legal Affairs into the Freedom o f Information Bill 1978, tabled on 6 November

1979,14 that the matter was not even adverted to.

13 Freedom o f Inform ation B ill 1981 Explanatory Memorandum Circulated by the Honourable Ian Viner M.P., n.d., p. 51.

14 Parliamentary Paper 272/1979

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For the reasons well understood by the framers o f Australia’s freedom o f information laws, well understood by all of the expert practitioners who appears before the Committee, and which Opposition Senators have explained - but which seem to have escaped the comprehension of Government Senators - both the proposed amendment to s. 61, and the Government Senators’ alternative proposal, would equally deal a mortal blow to freedom of information in Australia.

No amendment to s. 61 should be countenanced.

THE POTENTIAL FOR BUREAUCRATIC MANIPULATION AND RECALCITRANCE

It is clear that the substantive change to place the onus o f proof on the applicant will make it extraordinaiy difficult for applicants to get the information they are looking for, there are a number of related concerns that were raised during the hearings.

In particular, there is the potential for departments and agencies to instigate time wasting strategies in order to delay the release of politically sensitive information beyond its use by date.

Mr Timmins— My point is really that, under proposed section 60, an agency, an applicant or a third party may seek further review o f an

Information Commissioner decision simply on the basis that they assert that decision is wrong. I think this opens up the prospect o f delaying tactics from an agency or a m inister who is not happy with an Information

Commissioner decision and seeking to delay disclosure by simply lodging an application with the A AT.

A further concern was raised by Mr Mark Robinson of the Law Council o f Australia, who said that as a consequence of the asymmetry o f information between the applicant and the government, there is the potential for an endless cycle of applicant submissions.

Mr Robinson— Absolutely, if they are self represented then they will talk. They will make submission after submission after submission about what they think the document will be, and if they do not want know what it is then about what it should be. A ll o f that will o f course waste the tribunal’s

tim e /6

While the Information Commissioner does have the capacity to declare a person to be a vexatious applicant for the purposes o f the FOI Act,17 the point raised by Mr 1 5 1 6

15 Ibid. p. 17.

16 Hansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 5 February 2010, p. 20.

1 Freedom of Information Amendment (Reform) Bill 2009, Explanatory Memorandum, 2008-09, p. 2.

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Timmins suggests that the public servants and Ministers could frustrate the FOI process - in contrast to the stated objectives of the legislation.

FEES AND CHARGES

In his second reading speech on the Freedom of Information Amendment (Reform) Bill 2009, the Parliamentary Secretary to the Prime Minister, the Hon Anthony Byrne MP said, that “The First five hours o f decision-making time for application from journalists and not-for-profit organisations will be free, and fo r all other applications

the first hour o f decision-making time will be free. ” 18 1 9

Some of the changes to fees and charges will be made through changes to regulations. Additionally, the Information Commissioner will be tasked with reviewing all charges within 12 months of their appointment. Mr Peter Timmins raised expressed some concerns relating to the special concession for journalists and not-for-profits.

Mr Timmins— But I have suggested that one hour free for John and Mary Citizen, w hich is what it am ounts to, and five hours free for anyone an agency reasonably believes to be a journalist or anyone an agency

reasonably believes to be a non-profit organisation are both unsatisfactory. There is no definition o f journalists, and o f course it is very hard to define. In my submission I suggested that individuals, community or similar groups who individually or on behalf o f others seek access to documents for the purpose o f participating in governm ent processes, or the purpose o f scmtiny

and review o f government activities that impact on members of the public generally, or in a particular instance, should get some special concession if we are going to maintain this idea o f special concession for charges under the act.79

Coalition Senators have concerns that someone who is making a third party application for government documents will not be treated in the same way as a journalist or an applicant associated with a not-for-profit organisation.

In effect, ordinary Australian citizens will be treated in a different manner to those from selected organisations or occupations. This will undermine independent research and scrutiny by individuals, purely on the basis of a lack of association with favoured organisations.

A further issue raised by the Australian Press Council was that the structure of fees and charges proposed in the legislation will “encourage administrative inefficiency” :

“If there is no search fee nor a decision-making fee, then agencies have an incentive to make production and assessment o f information efficient,

18 Byrne, Anthony. “Freedom of Information Amendment (Reform) Bill 2009”, Second Reading Speech, 26 November 2009.

19 H ansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 15 February 2010, p. 18,

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whereas fees applied on the basis o f time simply encourage administrative inefficiency.” ’9

JURISDICTION SHOPPING

The Privacy Advisory Committee (PAC) raised issues relating to ‘Commissioner shopping’. If all three Commissioners: the Privacy Commissioner, the Information Commissioner and the FOI Commissioner; have the same powers over information

and privacy, there is the potential for different interpretations of the legislation and inconsistent mlings by the different commissioners.* 21 2 2 2 3

A further issue raised by Ms Philippa Lynch from the Department of Prime Minister and Cabinet was the issue o f ‘forum shopping’ between the Information Commissioner and the Ombudsman.

M s Lynch—I heard a little bit o f that evidence before we came up. There is always some potential for there to be some degree o f fomm shopping and overlapping o f jurisdictions, and I think the Ombudsman mentioned this morning that he will be subject to Information Commissioner investigation in cases and vice v ersa."

Thus there are at least two layers of bureaucracy where some degree of ‘forum shopping’ or ‘Commissioner shopping’ could take place - between the Information Commissioner and the Ombudsman, and between the Information Commissioner, the FOI Commissioner and the Privacy Commissioner.

As a consequence of the overlapping jurisdictions relating to government information, there is a potential for conflicting or inconsistent decisions regarding the release of information, increased paper shuffling between the Commissioners and unnecessary bureaucracy, and the corresponding inefficiency and delays. As the PAC states:

“ ...w e also believe this tri-part “sharing” o f functionality in a practical setting will rely on extraordinarily close working relationships between all three information officers. The potential for duplication o f effort,

inconsistency in application and confusion around role responsibility is significant.”2·5

D isn e y , J u lia n . “ A u s tr a lia n P re s s C o u n c il s u b m is s io n to th e S e n a te S ta n d in g C o m m itte e o n F in a n c e a n d

P u b lic A d m in is tra tio n o n its In q u iry in to t h e Freedom o f Infoimation Amendment (Reform) Bill 2 0 0 9 a n d Information Commissioner Bill 2 0 0 9 ” , A u s tr a lia n P re s s C o u n c il. 21 Privacy Advisory Committee, “Comments on Information Commissioner Bill 2009”, Submission to the Senate Finance and Public Administration References Legislation Committee, Freedom of Information Amendment (Reform) Bill 2009.

22 Hansard, Finance and Public Administration Legislation Committee, Reference: Freedom of Information Amendment (Reform) Bill 2009, 5 February 2010, p. 12.

23 Privacy Advisory Committee, “Comments on Information Commissioner Bill 2009”, Submission to the Senate Finance and Public Administration References Legislation Committee, Freedom of Information Amendment (Reform) Bill 2009.

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This point is confirmed by the Commonwealth Ombudsman, Professor John McMillan, who said in his submission to the inquiry that:

“The combined impact o f the proposed changes will be a greater workload for agencies in providing access to information, formally and informally. Dealing with access requests is likely to be a larger agency function than at present.” 24 2 5

The Ombudsman also expressed concern that the number of FOI requests could increase creating administrative bottlenecks and time delays. More time could be spent on resolving disputes, rather than processing requests. Prof. McMillan said:

“Our experience is that when delays become entrenched in FOI, it can take considerable time and resources for them to be resolved.”22

PRIVACY CONCERNS

Both the Australian Privacy Foundation and the Cyberspace Law and Policy Centre (CLPC) expressed reservations about the universal application of the public interest test to all government information.

Their particular concern is that departments and agencies could misapply the public interest test to “information which has traditionally been freely available, or to information which under the new regime should be made freely available.”26

The CLPC acknowledges that the application of the public interest test applies to formal requests under section 11A, however the CLPC notes that there is a need for explanatory and guidance material from the Information Commissioner that would “head o ff' any misunderstanding.

The CLPC is concerned that the public interest test allows departments and agencies some discretion to apply “strict ‘gatekeeper’ processes to all decisions to public or otherwise proactively

The CLPC also outlined its concerns regarding the application of privacy provisions:

“In my view, and I suspect the view o f most privacy regulators and experts, the proposed change would weight the scales too heavily against privacy - personal information would have to pass the double test to qualify for withholding. Firstly its disclosure would have to be ‘unreasonable’ and

then "contrary to the public interest’. It is difficult to see why a disclosure

24 McMillan, John. “Submission by the Commonwealth Ombudsman”, Senate Finance and Public Administration Legislation Committee, Freedom of Information Amendment (Reform) Bill 2009 and Information Commissioner Bill 2009, January 2010.

25 Ibid. 26 Waters, Nigel. “Commonwealth FOI amendments shouldn’t miss the opportunity for real reform”, Submission on the Freedom of Information Amendment (Reform) Bill 2009 and Information Commissioner Bill 2009 to the Senate and Finance Public Administration Committee, Cyberspace

Law & Policy Centre, January 2010, p. 5.

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of personal information could be ‘unreasonable’ and yet in the public interest.”27

The CLPC also expressed grave concerns with the fact that commercial interests receive greater protection than personal information. O f concern to the CLPC was that there could be a substantial increase in the number of FOI requests that are refused on the basis that commercially valuable information ‘could reasonably be expected to be, destroyed or diminished if the infonnation were disclosed’. The CLPC believes that the threat o f diminished value of commercial information due to exposure could lead to more FOI access requests being refused despite meeting the public interest test.

RECOMMENDATIONS

Coalition Senators are strongly opposed to the burden of the onus of proof for appeals to the AAT lying with the applicant. The Government has not provided sufficient grounds for this drastic step, which would represent the first known occasion where the onus of proof has been so reversed in relation to Freedom of Information regimes.

Coalition Senators recommend that onus of proof for appeals from the Information Commissioner to the AAT should remain with Government - it must establish why a document or information should not be released. The bills should be amended to reflect this.

Accordingly, Coalition Senators oppose both the bill in its current form and the proposal at recommendation 4 of the majority report of the Committee.

Coalition Senators are also opposed to the potential for discrimination by the government between individuals and those deemed to be journalists or non­ government organisations through the application o f different cost regimes.

As there is no definition of 'journalist' outlined in the bill, and given the increasing fragmentation of media and evolving technology, Coalition Senators believe the government should ensure that no such discrimination based on costs occurs if these bills are enacted.

Senator Scott Ryan Senator the Hon George Brandis SC

Deputy Chair

27 Ibid. p. 6.

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Australian Greens Additional Comments

The Australian Greens support reform of the Freedom o f Information Act and welcome the arrival of these long awaited amendments. Reform to the current Act is long overdue. The effectiveness of the regime, and the ability of Australian citizens to access information about government decision-making, has been greatly diminished.

The Greens believe open and transparent government is a prerequisite to an effective democracy. We believe that creating a culture of openness at all levels of government is essential if the Australian people are to have any faith at all in the parliament.

Response to Committee Recommendations

With regard to the Committee's report the Australian Greens wish to provide the following additional comments on each o f the Committee's Recommendations.

Committee Recommendation 1

The Australian Greens support the amendment of section 49 of the Administrative Appeals Tribunal Act 1975 to provide that the Information Commissioner is an ex officio member of the Administrative Review Council.

Committee Recommendation 2

The Australian Greens believe that the issue of exemption from the Act are central to the successful operation of the Act and these issues are more appropriately dealt with by the Parliament rather than by a statutory officer. We also advocate that it is beyond the scope o f the role of the Information Commissioner to decide such fundamental aspects of the legislation, after the bill has been passed.

The Greens do not believe that, simply because a document originated in a security agency, it automatically has implications for national security and therefore should receive automatic exemption from the freedom o f information act. An extract from my second reading speech on the Freedom of Information (Removal of Conclusive Certificates and Other Measures) Bill 2008, and our subsequent amendments moved in committee of the whole, illustrates our concerns:

"In fact, m any documents pass through any number o f agencies, including some security and intelligence agencies, before they reach a minister. It is ludicrous simply to tick a box and say that if it has come through a certain department then it is in the national interest and should be excluded...

It was put to me in a conversation with a very senior legal counsel who has worked on many o f the terror cases where these sorts o f laws might come into effect that the security intelligence agencies need to be tightly circumscribed under law and not be exempt from the sorts of provisions that we see under the Freedom o f Information Act. This is partly to their

own protection, so that the laws and the boundaries within which they

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operate are made clear. We m ust have a freedom o f information regime that gives us the power to review the work o f these agencies where possible, within the provisions as they exist to protect national security. We must have an FOI regime that gives us the flexibility to weigh the public interest

in national security against the public interest in accountability and transparency because sometimes the latter will outweigh the former."

Committee Recommendation 3

The Australian Greens will seek that the government respond to this issue before the bill is voted on in the Senate. We request that the government give consideration to the issues raised with respect to fees and charges and we do not support leaving consideration of this matter, which was o f particular interest to many witnesses in this inquiry, to the drafters of the regulations.

Committee Recommendation 4

The Australian Greens strongly support this recommendation that the proposed section 61, in item 42 of Schedule 4 to Part 1 of the Freedom of Information Amendment (refonn) Bill 2009 be amended to remove the concept of an onus of proof from the Act. We take this opportunity to emphasise the Committee's view that this recommendation must be adopted before the passage of this bill.

Committee Recommendation 5

The Australian Greens support the recommendation changing all references to the 'Information Commissioner' to the 'Australian Information Commissioner'.

Additional Areas of Interest

In addition to these recommendations made by the Committee I would like to indicate additional areas of interest to the Australian Greens:

• the application of the public interest test to all exemptions, in particular to Cabinet notebooks and the exemption of whole agencies from the scheme;

• the fee and charges structure;

• leadership from the government and the culture of disclosure embodied in the Rudd Government including the proposed publication scheme not applying to ministers;

• the application of freedom o f information laws to the parliament.

These areas will be examined in light o f the Australian Greens desire to promote further accountability and transparency in government decision-making and activities.

Senator Scott Ludlam Australian Greens

3 5 8

APPENDIX 1

Submissions and Additional Information received by the Committee

1 2 3 4 5 6 7

8 9 10 11

12

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Name Withheld Twomey, Dr Anne Kinross, Ms Julie Murray, Mr Andrew Kline, Ms Karen

Office of the NSW Privacy Commissioner Lidberg, Dr Johan Office of the Commonwealth Ombudsman Australian Law Reform Commission Telstra Australian Network of Environmental Defender's Office

Law Council of Australia Additional Information Table of main changes to draft Bills - tabled 5 February 2010 Community and Public Sector Union

Australia’s Right to Know Office of the Victorian Privacy Commissioner Cyberspace Law & Policy Centre Liberty Victoria Jones, Mr David Timmins, Mr Peter Paterson, Ms Moira

Australian Privacy Foundation Commonweath Human Rights Initiative Australian Press Council Public Interest Advocacy Centre Ltd

New South Wales Council for Civil Liberties Privacy Advisory Committee Barber MLC, Mr Greg

Additional Information

Department of the Prime Minister and Cabinet Information provided following hearing of 5 February 2010

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APPENDIX 2 Public Hearings

Friday, 5 February 2010 P a r lia m e n t H o u s e , C a n b e r r a

Committee Members in attendance: Senator Helen Polley (Chair) Senator Scott Ryan (Deputy Chair) Senator Doug Cameron Senator Jacinta Collins Senator Helen Kroger Senator the Hon George Brandis Senator Scott Ludlarn

Witnesses

Commonwealth Ombudsman Professor John McMillan AO

The Right to Know Coalition Mr Michael McKinnon

Department of Prime Minister and Cabinet Ms Joan Sheedy, Assistant Secretary, Privacy & FOI Policy Branch Ms Maia Ablett, Senior Advisor, Privacy & FOI Policy Branch

Law Council of Australia Mr Mark Robinson, Committee Member Ms Tea Paris, Policy Lawyer

Monday, 15 February 2010 V ic to ria n P a r lia m e n ta r y C o m m itte e R o o m s , M e lb o u r n e

Committee Members in attendance: Senator Helen Polley (Chair) Senator Scott Ryan (Deputy Chair) Senator Doug Cameron

Senator Helen Kroger Senator Scott Ludlarn (via teleconference)

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Witnesses

Associate Professor Moira Paterson

Dr Johan Lidberg, Academic Chair of Journalism, Murdoch University

Mr Peter Timmins, Managing Director, Timmins Consulting (via teleconference)

Australian Press Council Mr Jack Hermann (via teleconference)

Australian Law Reform Commission Professor Rosalind Croucher (via teleconference)

Victorian Privacy Commissioner Ms Helen Versey, Privacy Commissioner Ms Felicity Wright, Policy and Compliance Officer

Public Interest Advocacy Centre Ms Elizabeth Simpson, Solicitor (via teleconference)

Liberty Victoria Professor Zifcak

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The Senate

Finance and Public Administration Legislation Committee

Governance of Australian Government Superannuation Schemes Bill 2010 [Provisions]

ComSuper Bill 2010 [Provisions]

Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010 [Provisions]

March 2010

363

© Commonwealth of Australia 2010

ISBN 978-1-74229-280-9

The Senate Parliament House Canberra ACT 2600 Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: fpa.sen@aph.gov.au Internet: http://www.aph.gov.au/senate/committee/fapa ctte/index.htm

This document was produced by the Senate Finance and Public Administration Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

364

MEMBERSHIP OF THE COMMITTEE

42nd Parliament

Members

Senator Helen Policy, Chair

Senator Scott Ryan, Deputy Chair

Senator Doug Cameron

Senator Jacinta Collins

Senator Helen Kroger*

Senator Rachel Siewert

Substitute Member for this inquiry

Senator David Bushby to replace Senator Helen LP, Tasmania Kroger

Participating Member in this inquiry

Senator Steve Fielding FFP, Victoria

ALP, Tasmania

LP, Victoria

ALP, New South Wales

ALP, Victoria

LP, Victoria

AG, Western Australia

Secretariat

Ms Christine McDonald, Inquiry Secretary

Ms Maria Sarelas, Research Officer

Ms Tegan Gaha, Executive Assistant

iii 365

3 6 6

Table of Contents

MEMBERSHIP OF THE COMMITTEE..........................................................iii

Governance of Australian Government Superannuation Schemes Bill 2010, the ComSuper Bill 2010 and the Superannuation Legislation

(Consequential Amendments and Transitional Provisions) Bill 2010............1

THE INQUIRY......................... 1

THE BILLS................................................................................................................. 1

Governance o f Australian Government Superannuation Schemes Bill 2010........ 2

ComSuper Bill 2010................................................................................................... 3

The Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010.................................................................................................. 4

ISSUES........................................................................................................................ 4

Special needs of military schemes............................................................................. 4

Composition of the CSC Board..................................................................................8

Benefits arising from the proposed amalgamation................................................. 10

Consultation............................................................................................................... 14

CONCLUSION AND RECOMMENDATION..................................................... 15

Coalition Senators' Dissenting R eport............................................................... 17

Family First Dissenting Report............................................................................ 23

APPENDIX 1 ........................................................................................................... 25

Submissions and Additional Information received by the Committee..............25

APPENDIX 2 ........................................................................................................... 31

Public Hearing...................................................................................................... 31

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Governance of Australian Government Superannuation Schemes Bill 2010, the ComSuper Bill 2010 and the Superannuation Legislation (Consequential Amendments and Transitional

Provisions) Bill 2010

THE INQUIRY

1.1 On 24 February 2010, the Senate, on the recommendation of the Selection of Bills Committee (Report No 2 of 2010) referred the Governance of Australian Government Superannuation Schemes Bill 2010, the ComSuper Bill 2010 and the Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010 for inquiry and report by 15 March 2010. The reasons for the referral were:

To determine whether it is necessary to retain a separate board to administer the military superannuation schemes and whether these schemes differ markedly from other Commonwealth Government administered schemes.

1.2 The Committee received 197 public submissions and three confidential submissions, as well as 188 form letters, relating to the Bills and these are listed at Appendix 1. The Committee considered the Bills at a public hearing in Canberra on 11 March 2010. Details of the public hearing are referred to in Appendix 2. The

submissions and Hansard transcript o f evidence may be accessed through the Committee's website at http://www.aph.gov.au/senate/committee/fapa_ctte/index.htm.

THE BILLS

1.3 In October 2008, the Government announced plans to merge the boards of Australian Reward Investment Alliance (ARIA), the Military Superannuation and Benefits Scheme (MSBS) and the Defence Force Retirement and Death Benefits Scheme (DFRDB) to form a single trustee board from 1 July 2010. The Hon Lindsay

Tanner MP, Minister for Finance and Deregulation, in announcing further reforms to the administration of Australian Government superannuation schemes, stated:

Consolidation will bring more than 650,000 members and pensioners under a single trustee board, establish a greater pool of assets for investment purposes and apply best practice management approaches across all schemes.

The introduction of these changes reflects the ongoing work within the Government to review and where necessary, reform its own business operations, internal governance and structures just like anybody else.

The Rudd Government will continue to work on reforming the Australian Government superannuation schemes to ensure that they are best placed to

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deliver more sustainable and cost-effective superannuation services in the best interests of their members and ultimately, better value to the taxpayer.1

Governance of Australian Government Superannuation Schemes Bill 2010

1.4 This Bill establishes a single trustee body from 1 July 2010 to be responsible for most Commonwealth Government superannuation schemes. The new entity will be known as the Commonwealth Superannuation Corporation (CSC).

1.5 The CSC will be responsible for the following schemes:

• the scheme established under the Superannuation Act 1922 (the 1922 scheme);

• the Commonwealth Superannuation Scheme (CSS);

• the Public Sector Superannuation Scheme (PSS);

• the Public Sector Superannuation Accumulation Scheme (PSSAP);

• the Military Superannuation and Benefits Scheme (MSBS);

• the Defence Force Retirement and Death Benefits Scheme (DFRDB);

• the Defence Forces Retirement Benefits Scheme (DFRB);

• the scheme provided for under the Papua New Guinea (Staffing Assistance) Act 1973 (PNG Scheme); and

• the Parliamentary Contribution Superannuation Scheme (PCSS).2

1.6 In order to implement the merger and to set out the governance framework of the single entity, the Bill:

• continues the existence o f the board established by the Superannuation Act 1990, currently called ARIA, and establishes it as the Commonwealth Superannuation Corporation (CSC);

• prescribes that CSC is a Commonwealth authority for the purposes of the Commonwealth Authorities and Companies Act 1997 (CAC Act) and provides for some modifications o f the application of the CAC Act in relation to managing and investing scheme funds;

• sets out the powers and the functions of CSC;

• establishes a governing body o f CSC consisting of the chair and ten directors, all appointed on a part-time basis;

1 The Hon Lindsay Tanner MP, Minister for Finance and Deregulation, Media Release, 'Government Superannuation Reforms', 26.11.09.

2 The transfer is provided for in the Superannuation Legislation (Consequential Amendments and Transition Provisions) Bill 2010.

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• sets out the procedures for meetings of the board, including requirements for a quorum;

• allows CSC to employ staff and engage consultants on terms and conditions determined by the governing board;

• sets out financial and reporting requirements in relation to the superannuation schemes for which CSC is responsible; and

• deals with a number of miscellaneous issues relating to the operation of CSC including the source of funds for remuneration of the chair and directors and the delegation arrangements for CSC.

1.7 It is stated in the Bill's explanatory memorandum that the outcome of the proposed consolidation of trustee arrangements will:

...provide an opportunity for benefits to all scheme members and the Commonwealth through lower costs and potentially, higher investment returns. It will also provide a more sustainable and cost-effective platform for delivering Commonwealth superannuation in the future.

Under the broader superannuation framework, the single trustee has a responsibility to act in the best interests of all members. Accordingly, civilian and military interests are represented on its governing body.3

ComSuper Bill 2010

1.8 The purpose of the Bill is to establish a statutory agency, to be known as ComSuper, for the purposes of the Public Service Act 1999. ComSuper will consist of the Chief Executive Officer (CEO) and staff.

1.9 The Bill sets out the CEO's functions as providing administrative services to CSC in the performance o f its functions in relation to a superannuation scheme administered by CSC. The CEO will be subject to any reasonable direction from CSC regarding administrative services and will be required to comply, where possible, with

any policies, guidelines and standards regarding administrative services determined by CSC. In the Explanatory Memorandum it is stated:

This provides a capacity for CSC to influence the quality of administration services and priorities underpinning those services. This recognises that CSC is responsible for the general administration of each Superannuation

Act, and therefore each superannuation scheme, for which its has legislative responsibility. Consequently, it is envisaged that the CEO will work in partnership with CSC to ensure administrative services are delivered efficiently and effectively.4

3 Governance o f Australian Government Superannuation Schemes Bill 2010, Explanatory Memorandum, p. 4.

4 ComSuper Bill 2010, Explanatory Memorandum, p. 3.

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1.10 The CEO is to be appointed by the Minister for Finance and Deregulation with remuneration determined by the Remuneration Tribunal.

The Superannuation Legislation (Consequential Amendments and Transitional Provisions) Bill 2010

1.11 The purpose of the Bill is to make consequential amendments to a range of Commonwealth Acts to take account o f the changes to governance arrangements for the Commonwealth superannuation schemes.

1.12 The Bill proposes to:

. make the management o f the 1922 scheme and the Papua New Guinea scheme the responsibility of the CSC;

• put in place transitional arrangements to facilitate the transfer of assets and liabilities o f the MSB Board and the DFRDB Authority to the CSC;

• enable CSC to transfer the assets of the MSBF to the existing ARIA

Investments Trust without creating a situation whereby Capital Gains Tax would be payable provided the transfer occurs before 1 July 2011; and

• amend the Superannuation Act 2005 to facilitate public sector employees being able to consolidate their superannuation savings under the management of one trustee.

ISSUES

1.13 The Committee received many submissions from individuals and organisations representing defence force personnel. Some of the submissions raised matters outside the Committee's inquiry into the Bills, in particular, matters relating to indexation of pensions. The Committee's report is limited to the issues specifically raised in relation to the Bills. These issues centred on:

• differences between military and civilian service and the need for these differences to be recognised;

• composition of the CSC Board;

• lack of perceived benefits for defence force members; and

• lack of consultation.

Special needs of military schemes

1.14 Many submitters argued that because of the unique nature of military service their conditions should not be subsumed by civilian conditions and thus they did not

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support the proposed merger of the military and civilian trustees.1 Mr A Mumford submitted:

ADF service, as the Government has stated in the past, is the highest calling our country can ask of its citizens. Surely then, it is the Government's responsibility to recognise the uniqueness of military service and ensure that all ADF personnel, past, present and future are fairly recompensed in retirement for the unique role they play in the security of our nation. In particular, their retirement remuneration should not be tampered with on political or bureaucratic whim.5 6

1.15 The Defence Force Welfare Association (DFWA) stated ADF personnel are members while civilians are employees with different rules applying to each.7 It was argued that the unique nature of military service has been recognised in the past by Government. However, as stated by Colonel David Jamison (Retd), National President of DFWA, it is thought:

...that the provisions of this intended legislation are such that they will diminish and compromise this important philosophical foundation to the detriment of present and future members of the ADF and also that of those whom these members leave behind when they pass on.8

1.16 Similarly, the Vietnam Logistic Support Veterans' Association Queensland commented that the circumstances of former members of the ADF are quite different from those of former public servants and 'they have a right to have their superannuation benefits made without reference to the regimes of others'.9 The Australian Veterans and Defence Services Council commented that there was a perception that the proposed changes result from 'a reluctance to recognise the uniqueness of military service that sets the Defence Force service apart from all civilian employment whether it be in the Public Service or in the private sector'. The merger was seen to submerge ADF interests 'in a culture that would have difficulty in accepting the circumstances of military life in the structure of conditions of service'. The Council concluded:

Until there is a clear change in attitude the protection of Defence Force interests needs structures that permit the military view to receive its due recognition. This perception is strongly held in the military and veteran communities. For their confidence that provisions for their wellbeing will

5 See for example, Korea Veterans Association of Australia, Submission 10, p. 1; Royal Australian Air Force Association, Submission 13, p. 1; Vietnam Veterans' Federation, Submission 16, p. 1; Jimboomba RSL Sub Branch, Submission 17, p. 1; Integrated Servicepeople's Association of Australia, Submission 19, p.l.

6 Mr A Mumford, Submission 52, p. 2.

7 DFWA, Submission 18, p. 5.

8 Colonel David Jamison (Retd), Committee Hansard , 11.3.10, p. 2.

9 Vietnam Logistic Support Veterans' Association Queensland, Submission 3, p. 3.

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be safeguarded they need to perceive that the organisational structures are in place for this purpose.

1.17 The Defence Force Retirement and Death Benefits Scheme (DFRDB)

Authority responded to the issue of a separate board for the military schemes. The Authority noted that While anecdotal evidence indicated that having a majority of ADP members on the DFRDB Authority gave some confidence to scheme members that the unique nature of their employment was taken into account, in practice it is the schemes rules that provide for the uniqueness of military service.11 The Authority concluded:

In the context of the above, the DFRDB Authority accepts the assurances of the Australian Government that the interests of DFRB and DFRDB

members will be appropriately represented by the CSC. Therefore it is the View of the DFRDB Authority that it is not necessary to retain a separate

board to administer the military superannuation schemes.l

1.18 The Authority also noted that it is expected that the ministers in the Defence pofifolio will be consulted regarding the appointment of the five employee/employer nominated directors. In addition, all CSC directors will have an obligation to act in the interests of all members, and the existing Australian government provider of

Australian administration services to the military schemes, ComSuper, will be retained and will continue to apply scheme rules to initial benefit decisions.13

1.19 Mr Tony Hyams, Chairman of ARLA and the MSB Boards, commented that it is sometimes difficult to discern exactly the nature of the concerns in relation to the distinctive qualities of the military funds and that 'most of the concern is about

perception, frankly'.14 In addition, Mr Hyams commented that:

I gain great comfort from the fact that the government has stated that its

policy is not to change any of the benefits or entitlements of any of the

members of either or any of the funds under the new board, and the draft

legislation bears that out. So I am comfortable to the extent that the rights and entitlements of the members do not change. 15

1.20 The joint Department of Finance and Deregulation (Finance) and Department of Defence (Defence) submission noted that ‘while there are particular features of the military schemes that recognise the special nature of military service, there are many similar design concepts between the schemes’. The similarities in design include that

10 Australian Vetérans and Defence Services Council, Submission 6, p. 1.

1 1 DFRDB Authority, Submission 7, p. 7.

12 DFRDB Authority, Submission 7, p. 11; see also Mr Leo Bator, DFRDB Authority, Committee

Hansard 11.3.10, p. 18.

13 Mr Leo Bator, DFRDB Authority, Committee Hansard 11.3.10, p. 18.

14 Mr Tony Hyams, Chairman of ARIA and the MSB Boards, Committee Hansafd, 11.3.10, p. 9.

15 Mr Tony Hyams, Chairman of ARIA and the MSB Boards, Committee Hansard, 11.3.10, p. 10.

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retirement benefits of the CSS and DFRDB are based on the percentage of the

member's final salary, with the percentage depending on length of service. A major difference between the military and civilian schemes is the recognition of. the risks of military 1sgrvice in the rate of accrual of benefits and the design of death and disability benefits.

1.21 The Departments went onto note that:

Notwithstanding the differences in benefit design, the MSB Board and

ARIA perform broadly similar filnctions. One of their primary functions is to manage the investment of member funds. They also manage, and oversee ComSuper‘s administration of, the superannuation schemes for which they are responsible according to the legislated scheme rules and manage

governance and regulatory requirements. 17

1.22 Dr Stein Helgeby, Deputy Secretary, Department of Finance and

Deregulation, outlined to the Committee the recognition of the special nature of military service contained within the Bills. Thisprincipally goes to the military representation on the trustee governing board as well as the ability for the board to

establish dedicated committees to review military death and disability benefits and invalidity classifications. The Defence Force Case Assessment Committee will undertake the functions currently performed by the DFRDB Authority to reconsider decisions by ComSuper in relation to invalidity benefits. The Defence Force Case Assessment Committee will have representation from each of the Army, Navy and Air Force as is currently the case for the DFRDB Authority. The joint submission from Finance and Defence also added:

This recognises that the special nature of military service warrants special treatment and also acknowledges the role that the DFRDB Authority

currently has in overseeing the operation of the DFRDB and DFRB, and

particularly its primary role of reviewing decisions of its delegates,

ComSuper staff, in relation to invalidity benefits. 18

1.23 Dr Helgeby, Finance, commented that 'the inclusion of these features in the bills recognises the fact that unique service does indeed require unique solutions‘.19 Mr Steve Grzeskowiak, Department of Defence, added:

We are confident that the primary area, in my View a very important area,

where the special nature of military service does need to be recognised is in that assessment process for people who have disagreement with the

decision that has been made primarily on invalidity pensions. By having the Army, Navy and Air Force representation in that case assessment

16 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 3.

17 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 4.

18 Department of Finance and Deregulation and Department of Defence, Submission 9, pp 10—1 1.

19 Dr Stein Helgeby, Deputy Secretary, Department of Finance and Deregulation, Committee

Hansard, 11.3.10, p. 24. ‘

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committee—and that is in addition to the two military members on the board—we are confident that we will be able to get that military voice, that military opinion, into that process.20

1.24 The Finance and Defence concluded:

Overall, the Bills seek to recognise the special nature of military service (noting that this principle is relevant to all aspects of military conditions of service) without taking away from a superannuation trustee's essential function of managing the superannuation schemes for which it is responsible on behalf of all scheme members and safeguarding members’ benefits until they retire."1

1.25 In evidence, Colonel David Jamison (Retd), DFWA, commented that while not fully satisfying all its concerns, the establishment of the Committee would be a partial step to resolving them.22

Composition of the CSC Board

1.26 Under the proposed legislation, the CSC Board will consist of a chair and ten members. Three members may be nominated by the President of the Australian Council of Trade Unions (ACTU) and two members may be nominated by the Chief of the Defence Force. Before nominating any member, the President of the ACTU must consult relevant organisations representing retired members. All directors must meet the fitness and propriety standards specified in the Superannuation Industry

(Supervision) Act 1993 (SIS Act).

1.27 The Board may also establish a Defence Force Case Assessment Committee (DFCAC) to review decisions referred by CSC. The DFCAC, if established, will include three members nominated by the Chiefs o f the three Services (similar to the current membership of the DFRDB Authority).

1.28 Many submitters did not support the composition of the proposed board."3 Of particular concern was the restriction o f members representing ADF interests to two, while the ACTU would be able to nominate three board members.24 This was viewed as a diminution of the voice o f the ADF and could lead to the overruling of the two members nominated by the Chief o f the Defence Force. Rear Admiral Doolan (Retd) stated, for example, that:

...if you are increasing the number of board members and you are decreasing the percentage of military representatives on the board, then the

20 Mr Steve Grzeskowiak, Department of Defence, Committee Hansard, 11.3.10, p. 25.

21 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 10.

22 Colonel David Jamison (Retd), Committee Hansard, 11.3.10, p. 5.

23 Royal Australian Air Force Association, Submission 13, pp 2-3.

24 See for example, Colonel David Jamison (Retd), DFWA, Committee Hansard, 11.3.10, pp 3-4.

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m ilitary voice must be more muted. It follows, in any board, if you have 11 members on the board and only two military, then their influence on that board is much, much smaller than if you have a smaller board where they are either in the majority or at least are even with the numbers of the rest o f the board. It is a straight m athematical equation. If a board splits and the majority rules, then the m ilitary voice is muted.25

1.29 Mr Peter Thornton commented that the composition of the board was flawed as there are no representatives from retiree organisations and that it was dominated by political appointees. He suggested that the legislation be amended to include representatives from Superannuated Commonwealth Officers' Association (SCOA) and the DFWA/RSL on the board.26

1.30 Other submitters indicated support for the composition of the board and argued that military interests would be preserved. The DFRDB Authority considered that the membership arrangements for the new CSC, and those for the new DFCAC, adequately reflect the needs of military representation in these matters. The Authority also noted that the Department of Defence will continue to be closely involved in setting administration service standards and ComSuper will continue to be the provider of those services (albeit with some changes to its agency status).27

1.31 SCOA considered that the proposed legislation provided the opportunity to have appropriate board representation of all members of Australian Government superannuation schemes. SCOA noted that military members will be well represented and as the Chief of the Defence Force will nominate two of the five member representatives and the present Chairperson of the Military Superannuation Benefits Board of Trustees, Mr Tony Hyams, is to be appointed as the Chair of the new trustee board The ACTU must also consult with organisations representing retired members.28

1.32 The Community and Public Sector Union (CPSU) commented that the composition of the board will provide a balance between the military and civilian representatives. The CPSU saw this as important as the trustees 'will be representing different constituents in some complex and very different superannuation schemes'. The CPSU also noted that the proposed structure is consistent with current arrangements of ARIA and military super. Further, that for the equal representation to be genuine, it is important that influence cannot be exerted by either employers or employees in regard to appointments from the 'other side' onto the board. It was noted that this is an important principle underpinning the operation of Industry Funds.29

25 Rear Admiral Ken Doolan (Retd), RSL, Committee Hansard, 11.3.10, p. 13.

26 Mr Peter Thorton, Submission 165, pp 3-4.

27 DFRDB Authority, Submission 9, p. 16.

28 SCOA, Submission 4, p. 2.

29 CPSU, Submission 11, p. 2.

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1.33 Mr Alan Greenslade, Department of Finance and Deregulation, commented on the composition of the board and noted that it is consistent with the SIS legislation that employee representatives are nominated by a union representative. This is mirrored for defence through the two nominees of the Chief o f the Defence Force.30

1.34 Mr Greenslade went on to emphasise that:

Tmstees, including all the directors on the board, have an overarching duty to act in the best interests of all scheme members, whether they are civilian or military. That is an obligation. I am aware of broad industry experience, and that is that exactly what individual tmstees do: they act on behalf of all their members. I noted there was a submission by the Australian Institute of

Superannuation Tmstees—I cannot remember the number of the submission—where they actually made the point that they had done some research and that research confirmed that that is exactly the behaviour of

individual tmstees: they act on behalf of all members.31

Benefits arising from the proposed amalgamation

1.35 Many submissions voiced doubts that benefits for defence force

superannuants would arise from the proposed merger o f the tmstees under a single tmstee. The RSL submission, for example, argued that the prospective improvements resulting from the merger 'are not substantiated', that benefits to military superannuants are 'ephemeral' and that bigger financial institutions are not always better at delivering savings or benefits as evidence by the global financial crisis. Rather, the merger appeared to provide greater savings to the Commonwealth through outsourcing administrative services.32 The RSL argued:

...it appears that the legislated right of military superannuants to their own boards of governance for their military superannuation schemes is to be traded away for an unquantified and uncertain efficiency in "tmstee operation and improved service delivery to members".33

1.36 Rear Admiral Ken Doolan (Retd), National President of the RSL, in evidence, provided further comment:

I reiterate that the Returned and Services League is not opposed to a sensible benefit for our members if it can be demonstrated that that is the likely outcome or, should I say, that we can be persuaded that that will be the outcome. We have been left completely in the dark on this particular issue. We were not consulted, our members were not consulted and they are the people who are actually drawing these benefits every fortnight. They

30 Mr Alan Greenslade, Department of Finance and Deregulation, Committee Hansard, 11.3.10, p. 26; also see Committee Hansard, 11.3.10, p. 29.

31 Mr Alan Greenslade, Department of Finance and Deregulation, Committee Hansard, 11.3.10, p. 26.

32 RSL, Submission 1, p. 5.

33 RSL, Submission 1, p. 5.

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wish to know, with some degree o f certainty, that this m erger will in fact be beneficial.34

1.37 Rear Admiral Doolan went on to state that because of a lack of information from Government, the RSL 'cannot make an informed decision at this stage. In the lack of the ability to make an informed decision we are opposed to the merger.'35

1.38 The DFWA also commented that it saw no tangible or intangible benefits to military superannuation contributors or beneficiaries.36 In relation to the advantages of scale arising from the proposed merger, Colonel David Jamison (Retd), commented that 'small funds available to the military scheme are still significant and they still can

grow if the right investment decisions are made'.37 In addition, Colonel Jamison commented that while there may be some reduction in costs through amalgamation, the major concern was that the distinction between the ADF and others was important and in any case, 'because of the nature of these funds, the administration and the way that the costs are spread over mainly the government with some smaller costs flowing to the members, that is not an issue that is a defining one'.38

1.39 Mr Bator, DFRDB Authority, commented on the benefits that he saw as arising from the proposed merger:

I think the main benefit I see is that there will be a governance

im provem ent insofar as there are currently four bodies responsible for adm inistering the Australian government superannuation schemes: the DFRDB Authority for the DFRB and the DFRDB schemes; the Military Superannuation and Benefits Board for the MSB scheme; ARIA for the

CSS, PSS and PSSAP schemes; and the Commissioner for Superannuation, which is another role I hold for the 1922 A ct and the PNG schemes. As I noted in m y submission to you, that will obviously improve governance

arrangem ents so that is one thing. I think, two, as I mentioned, one clear benefit would be the removal o f any potential conflict that currently exists where the Commissioner o f Superannuation— m yself—is the chair o f the

authority. Whilst I am certainly not aware o f any conflict that has arisen, that perception will be removed and the perception would be around me defending the administration over the member benefit.

As I mentioned, given what I understand, the new Defence Force Case A ssessm ent Committee will largely operate in terms o f DFRDB cases as the authority does, and that gives me some assurance. So I am talking about governance improvements, removal o f conflict and interest and the fact that in m y understanding and the understanding o f the authority there will be

34 Rear Admiral Ken Doolan, National President, RSL, Committee Hansard, 11.3.10, p. 12.

35 Rear Admiral Ken Doolan, National President, RSL, Committee Hansard, 11.3.10, p. 14.

36 DFWA, Submission 18, p. 7; see also Royal Australian Air Force Association, Submission 13, p. 4.

37 Colonel David Jamison (Retd), Committee Hansard, 11.3.10, p. 4.

38 Colonel David Jamison (Retd), Committee Hansard, 11.3.10, p. 5.

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very similar arrangements in terms of case consideration for DFRDB authority members.39

1.40 SCOA welcomed the proposal for a single trustee as it considered that the expanded board will enhance decision making in relation to the military schemes, as well as the civilian schemes. In addition, the single trustee will provide greater investment opportunity.40

1.41 The CPSU also supported the proposed changes and maintained that the smaller military superannuation funds could potentially gain economies of scale via proportionally reduced fees and charges by merging with the larger civilian superannuation schemes. Any savings would benefit military personnel and by providing better returns could potentially reduce the Government's ongoing unfunded

liability in these schemes.41

1.42 The joint submission from Finance and Defence clearly stated that the proposed legislation would not change the member benefits, death or disability arrangements or entitlements, such as indexation of pension. These are legislated arrangements and cannot be changed by the scheme trustee.42 Finance and Defence went on to outline the benefits arising from the proposed changes.

1.43 The Departments noted that there is trend towards rationalisation of superannuation funds in Australia, particularly by the consolidation of funds. There have been significant examples o f consolidation of funds over the last decade. This is in line with what is considered to be industry best practice and the view of some fund advisers that funds need to be o f sufficient size and to have more than $5 billion in funds under management to survive. Large consolidated funds will be able to compete in the future, particularly in an environment of lower investment returns.43

1.44 The Departments saw the proposed changes as bringing the management of all of the Commonwealth's superannuation schemes more into line with modem industry practice and to secure a sustainable platform for delivering Commonwealth superannuation into the future. Benefits will be gained through improved governance and administration and access to the benefits of scale advantage.44

1.45 Other benefits noted by the Departments included:

• a better spread of age profiles amongst members of all schemes which would allow the tmstee the capacity for a better spread o f assets across age bands,

39 Mr Leo Bator, DFRDB Authority, Committee Hansard, 11.3.10, pp 21-22.

40 SCOA, Submission 4, p. 1.

41 CPSU, Submission 11, p. 2.

42 Department of Finance and Deregulation and Department of Defence, Submission 9, pp 1, 6.

43 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 5.

44 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 7.

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enabling better fund longevity and reduction of investment risk to older members;

• scale advantage enjoyed by larger superannuation funds is substantial and research has indicated that scale offers the potential for reduced operation and investment costs and higher investment returns;

• Finance's actuarial service provider, Mercer, has considered the potential improved net investment return as a result of merging the military and civilian fund assets. Based on 2008 figures, it estimated that the potential improvement in net investment returns would have been $10 million in 2008, would be $15 million in 2018 and $19 million in 2028;45 and

• improved service delivery by ComSuper by better defining ComSuper's role and providing a clearer relationship with a single trustee, thus removing pressures associated with ComSuper responding to multiple boards. With one board, there will be an ability to drive improvements in administration.46

1.46 The Departments concluded that military members will benefit most from the reforms. As there is a significant degree of similarity between the MSBS and the civilian schemes for their operational arrangements and investment structures, the present structure results in duplicated effort. Members of the MSBS, a significantly

smaller fund, have the potential to gain substantial benefits from the merger as research has shown that small funds appear to benefit the most from a merger as scale reward is better.47 Dr Helgeby went on to note that Finance's actuarial service provider, Mercer, had estimated that $7 million of $10 million improvement in net investment return in 2008, or 70 per cent of the benefit, would relate to the MSBS and to military members. Further that:

This level o f benefit to M SBS members can only be achieved by bringing the funds together under management o f a single tm stee, something that a separate military board could not achieve on its own. Indeed, if the MSBS

trustee remained separate it would be disadvantaged in the future as it would become relatively sm aller compared with other funds. In other words, maintaining the existing arrangements would carry a price for m ilitary members.48

1.47 Mr Greenslade went on to comment:

There is a really strong trend within the industry to consolidate, to do the things these bills are seeking to do to protect m em bers’ interests, to protect their returns. It is not just to give them better opportunities in the future; there is a downside risk as well. The risk is, particularly for MSBS

45 Department of Finance and Deregulation and Department of Defence, Submission 9, pp 7-9.

46 Mr Steve Grzeskowiak, Department of Defence, Committee Hansard, 11.3.10, p. 27.

47 Department of Finance and Deregulation and Department of Defence, Submission 9, p. 9.

48 Dr Stein Helgeby, Department of Finance and Deregulation, Committee Hansard, 11.3.10, p. 24.

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members, that in future they will become relatively smaller in size

compared with an industry which is consolidated. This would reduce their ability to obtain good investm ent value and good fees. As we say in our submission, one o f the industry advisors is o f the view that the trend is so strong that funds need to be at least $5 billion to avoid that downside risk. In a sense there is a danger to standing still. It is perhaps a false assumption that one can stand still and the world will stay unchanged. There can be a down escalator if you try and stand still.49

1.48 Mr Greenslade concluded:

In terms o f the benefits from the consolidation o f the funds and the trustees, the benefits essentially flow through to members. Improved returns and reduced expenses on investm ent managem ent flow through to members.50

Consultation

1.49 The Committee was told that there had been no consultation about the proposed changes.51 Rear Admiral Doolan indicated that the Government had provided the RSL with some details of the proposals and commented that 'it was insufficient for the national executive of the Returned Services League to make a judgment about these matters. If all o f the matters had been disclosed to us and we had

been able to make a detailed examination of it, we may have come to a different conclusion.'52

1.50 The Finance and Defence submission noted that the development o f the legislation had been undertaken in partnership between the Finance and Defence Ministers and their respective Departments as well as in consultation with the MSB Board, the DFRDB Authority and ARIA. Mr Bator, DFRDB Authority, noted that one of its authority members had attended the discussions about the merger and had kept the Authority informed.53

1.51 The Departments also stated that a range o f views 'expressed over time', by a number of other stakeholders were also taken into account and:

This includes the priority o f m aintaining and protecting the features o f m ilitary superannuation that reflect the special nature o f military service.54

49 Mr Alan Greenslade, Department o f Finance and Deregulation, Committee Hansard, 11.3.10, p. 28.

50 Mr Alan Greenslade, Department o f Finance and Deregulation, Committee Hansard, 11.3.10, p. 27.

51 DFWA, Submission 18, p. 3; Rear Admiral Ken Doolan, National President, RSL, Committee Hansard, 11.3.10, p. 13.

52 Rear Admiral Ken Doolan (Retd), Committee Hansard, 11.3.10, p. 13.

53 Mr Leo Bator, DFRDB Authority, Committee Hansard, 11.3.10, p. 18.

54 Department o f Finance and Deregulation and Department of Defence, Submission 9, p. 1.

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1.52 In addition, Dr Helgeby commented that the bodies consulted provided a range of information to their members, for example, ARIA and the MSBS informed members through their annual reports.”

CONCLUSION AND RECOMMENDATION

1.53 The Committee considers that it is important to note that the proposed reforms do not change member benefits, death and disability benefits or any other entitlements such as indexation of pensions. The individual military schemes will remain under their own legislative basis and with their own identity. ComSuper will remain responsible for administering the schemes.

1.54 The intent of the legislation is to introduce reforms which will improve governance and administration of both military and civilian superannuation funds. These funds provide benefits to thousands of former ADF personnel and public sector employees and their dependants. It is therefore imperative that industry best practice is the basic standard for trustee operation, structure and governance, that there are continued improvements to reduce costs and that the potential to improve investment returns is available for the benefit o f all members. The reforms proposed by this legislation will ensure that Commonwealth superannuation arrangements are strong and sustainable into the future.

Recommendation 1

1.55 The committee recommends that the bills be passed.

Senator Helen Polley Chair

March 2010

55 Dr Stein Helgeby, Department of Finance and Deregulation, Committee Hansard, 11.3.10, p. 24.

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Coalition Senators' Dissenting Report INTRODUCTORY COMMENTS

These bills represent a significant change to the management of superannuation arrangements for the Australian military and veteran community.

In the short period allowed for this inquiry, many veterans' groups and individuals have made plain their opposition to the amalgamation of the military superamiuation boards with civilian management boards.

This opposition has been based on several factors, including the failure of the Government's proposal to recognise the unique nature of military service, the lack of consultation, the fear that it will dilute the representation of defence members and the composition of the new board.

Coalition Senators oppose the recommendation of the Government majority of the Committee to support passage of these bills in their current form.

THE UNIQUE NATURE OF MILITARY SERVICE

One of the issues raised by many veteran groups was that this proposal undermined the longstanding commitment to and understanding of the unique nature of military service. As outlined by Colonel David Jamison (Retd), National President of Defence Force Welfare Association (DFWA):

... the provisions o f this intended legislation are such that they will

diminish and compromise this important philosophical foundation to the detrim ent o f present and future members o f the ADF and also that o f those whom these members leave behind when they pass on1 2

This understanding is particularly important to veterans and their beneficiaries and has underpinned the fact that there have been distinct boards and schemes for the military and veterans for many years. As submitted by the Returned and Services League:

The Parliament has thrice legislated for separate m ilitary superannuation schemes, and has thrice decided to include in this legislation the need for a separate military board o f governance for the schemes. No reasons have been advanced as to why this will o f Parliament should be overturned."

LACK OF CONSULTATION

The above issue is compounded by the distinct lack of consultation undertaken by the Government regarding this proposal.

1 Colonel David Jamison (Retd), Committee Hansard , 11.3.10, p. 2

2 Returned and Services League, Submission 1 (att), p. 6

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This claim was substantiated by the Returned and Services League as well as the Defence Force Welfare Association.

The Defence Force Welfare Association submitted:

Noting that the Government chose not to consult with DFW A or other Ex­ Service Organisations on this issue...3

Representing the DFWA at the hearing into the bills, Col David Jamieson (retired) stated:

I will go to our specific concerns. Firstly, there was no consultation with the m em berships o f the schem es.4

The RSL submitted that:

The Government did not consult the RSL about these proposed changes to the governance o f m ilitary superannuation schemes affecting many RSL m em bers.5

Representing the RSL at the hearing into the bills, Rear Admiral Doolan (retired) stated that:

W e have been left com pletely in the dark on this particular issue. We were not consulted, our members were not consulted and they are the people who are actually drawing these benefits every fortnight.6

Such a lack o f consultation with veteran groups is of significant concern to Coalition Senators. Given the unique nature of military service, Coalition Senators believe that such consultation should have been a priority for Government in developing this proposal.

Membership o f the Defence Forces is not comparable to a normal employee-employer relationship, and the extremely high degree of concern that exists regarding this proposal within in the military and veteran community, as expressed by groups that represent significant numbers of them, provides a strong argument to not proceed with these bills in their current form.

The amalgamation o f military and civilian Commonwealth superannuation and benefit boards represents a significant shift from Australia's historical approach. Such a shift must, at a minimum, involve substantial and meaningful consultation with military and veterans and their representative organisations.

3 Defence Force Welfare Association, Submission 18, p.3

4 Colonel David Jamison (Retd), Committee Hansard , 11.3.10, p. 2

5 Returned and Services League, Submission 1 (att), p. 1

6 Rear Admiral Kenneth Doolan (Retd). Committee Hansard, 11.3.10. p. 12

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LACK OF DEMONSTRATED BENEFIT

The lack of consultation is compounded by the concern of veteran groups that the purported benefits of these bills have not been demonstrated.

Just as amalgamation of military and civilian Commonwealth superannuation and benefit boards should involve substantial consultation, it must also demonstrate a benefit to affected members.

The RSL submitted that:

"...assertions about prospective improvements resulting from the proposed m erger are not substantiated;"7

And:

"A review o f the four sources o f information about the proposed merger o f the superannuation boards made available to the RSL has failed to find any factually based reason why the m erger must take place"8

And:

"There were lots o f reassuring w ords...but no hard facts backing up the need for change."9

In its submission, the Defence Force Welfare Association stated:

Noting that the Government chose not to consult with DFWA or other Ex­ Service Organisations on this issue, DFW A can find no evidence o f any benefit, tangible or intangible, to serving or former members o f the ADF. N or can DFWA identify any material or financial benefit to the wider

Australian community.10

Coalition Senators are of the view that the Government has failed to clear two hurdles in this regard:

■ It has specifically failed to demonstrate the value of the amalgamation proposal to military and veteran superannuants and beneficiaries; and,

■ That it has generally failed to demonstrate the need for this amalgamation to the wider community, many of whom share the concerns raised by veterans' groups.

Assertions about the proposed benefits are not sufficient to meet Coalition Senators' concerns about this proposal and these bills.

7 Returned and Services League, Submission 1 (att), p. 4

8 Returned and Services League, Submission 1 (att), p. 5

9 Returned and Services League, Submission 1 (att), p. 5

10 Defence Force Welfare Association, Submission 18, p.3

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Coalition Senators share the concerns of affected groups and remain to be convinced of the benefit of amalgamating the management boards of military and other forms of Commonwealth superannuation.

COMPOSITION OF PROPOSED BOARD

Coalition Senators do not consider that the interests of serving and former ADF members are well served by the proposed board composition of the Commonwealth Superannuation Corporation.

The committee was presented with evidence that the composition of the proposed new entity would undermine the understanding and reflection of the unique nature of military service.

The 2007 Military Superannuation Review states:

For m ilitary superannuation, as well as these skills and integrity standards, the board needs a blend o f experience and knowledge to best serve the military environment, including understanding the unique nature o f military service. Therefore, a central consideration o f the Review Team is to ensure m ilitary superannuation trustees collectively have the legislated skills, knowledge and abilities, as well as an appropriate knowledge o f members,

ex-members and Defence interests. 11

The concern surrounding the relative reduction in the proportion of military and ex­ military interests is echoed in evidence given to the committee by the Returned and Services League:

Rear Adm. Doolan — Prima facie, if you are increasing the number o f board members and you are decreasing the percentage o f m ilitary representatives on the board, then the m ilitary voice must be more m uted.12

Similarly, at the hearing into the bills, the National President o f the DFWA stated that:

"the representation on that board w ill not give adequate voice to the military superannuants, whether they are contributing m em bers or recipient m em bers."13

This flaw in the bills is exacerbated by the proposal for the Australian Council of Trade Unions to have the power to appoint three members o f the new board, as opposed to only two coming from the military community. Coalition Senators do not support the provisions relating to the role of the ACTU in this bill.

11 Department of Defence, Report of the Review into Military Superannuation Arrangements, p.45

12 Rear Admiral Kenneth Doolan (Retd). Committee Hansard, 11.3.10. p. 13

13 Colonel David Jamison (Retd), Committee Hansard , 11.3.10, p. 3

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This diminution in the voice of military members further undermines the historic commitment to understanding the unique nature of military service and potentially sees the reduction in serving board members who come from the defence forces.

Given the concerns within the veteran community, this further undermines the case for the bills proceeding in their current form.

POSITION OF EX-SERVICE ORGANISATIONS

Given the failure of the Government to undertake detailed consultation with affected military and veteran members, it is important to note the position of relevant representative groups in this regard.

The proposed amalgamation is opposed by the Returned and Services League, as illustrated at the hearings into the bills:

Senator RYAN— With the information you have at hand now, with the committee having to make a determination upon this legislation, what is your position as it stands now?

Rear Adm. Doolan— It follows from what I have said before that at this point in time the Returned and Services League would oppose the merger.14

The RAAF Association recommends that the bills:

...b e deferred until the ESO community is afforded an opportunity to engage with the Government on the issues identified by the RAAF A ssociation.15

The Defence Force Welfare Association recommends that:

The Government not proceed with its proposal to merge military and civilian superannuation boards 16

Recommendation 1

Coalition Senators recommend that the bills not be supported in their present form.

Senator Scott Ryan (Deputy Chair) Senator David Bushby

14 Rear Admiral Kenneth Doolan (Retd). Committee Hansard, 11.3.10. p. 12-13

15 Royal Australian Air Force Association, Submission 13, p. 5

16 Defence Force Welfare Association, Submission 18, p. 10

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Family First Dissenting Report

The Rudd Government's plan to merge the boards of the two military superannuation schemes, the Military Superannuation and Benefits Scheme (MSBS) and the Defence Force Retirement and Death Benefits Scheme (DFRDB), with the board of the civilian superannuation scheme, Australian Reward Investment Alliance (ARIA), is a policy that clearly does not have the support of the members of the MSBS and DFRDB.

The enormous number of submissions received by the committee in such a short period of time demonstrates that this is an issue of great importance to the members of these military superannuation funds.

There is clearly widespread member dissatisfaction with the proposed changes by members of the MSBS and DFRDB, as highlighted by National President of the Defence Force Welfare Association, Colonel David Jamison (Retired) who stated:

"We are getting com m unication from our members and other elements within the veteran community strongly opposing this initiative."

Family First is also concerned about the lack of consultation with military representative groups in regards to merging the military superannuation schemes with a non-military superannuation scheme.

Rear Admiral Kenneth Doolan (Retired) National President, Returned and Services League of Australia stated:

"We were not consulted about this m erger before the proposal was put forward. W e do not have the details available to us and we would seek to have those details so that w e can make a more considered decision about the very point that you raise".

The real concern is that this legislation as a policy undermines the well regarded and long standing principal that military service is unique and should not be blurred with civilian service.

For these reasons, Family First does not support the bill.

Recommendation 1

Family First recommends that the bill not be passed.

Senator Steve Fielding

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APPENDIX 1

Submissions and Additional Information received by the Committee

1 Returned and Services League of Australia 2 Vietnam Veterans' Association of Australia, Redcliffe Sub-Branch Inc 3 Vietnam Logistical Support Veteran's Association 4 Superannuated Commonwealth Officers' Association (Federal Council)

Inc.

5 Military Superannuation and Benefits Board of Trustees 6 Australian Veterans and Defence Services Council Incorporated 7 ComSuper (DFRDB)

8 The Australian Council of Trade Unions 9 Department of Defence and the Department of Finance and Deregulation Additional Information • Answers to Questions on Notice, 12 March 2010

10 Korea Veterans Association of Australia Inc 11 Community and Public Sector Union 12 Australian Institute of Superannuation Trustees 13 Royal Australian Air Force Association 14 The Australian Government Employees Superannuation Trust (AGEST) 15 Australian Reward Investment Alliance (ARIA)

Additional In formation Answers to Questions on Notice, 12 March 2010 16 Vietnam Veterans Federation 17 Jimboomba RSL Sub-Branch 18 Defence Force Welfare Association 19 Integrated Servicepeople's Association of Australia Inc 20 Turner, Mr Denis

21 Dillon, Mr Terry

22 Braby, Mr Allan

23 Ring, Mr Peter

24 Weyling, Mr Peter

25 Giampino, Mr Michael

26 Krause (Retd), Lieutenant Commander Bill 27 Belford, Mr Gary

28 Elogg, Mr Robert

29 Reading, Mr Warwick

30 Annett, Mr Geoffrey

393

26_

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71

Widermanski, Mr Echo Cannard, Ms Patricia Weston (Retd), Air Vice-Marshal Brian Long, Mr John Jobson, Mr Christopher Chapman, Major Michael Tate, Mr Donald Borrett, Mr Mick Ney, Mr Bob Macnaughtan, Mr John Warrener, Mr G A Lewis, Mr Adrian Dunlop, Mr Moose Campbell, Mr Angus Marsh, Mr Chris Peterkin (WgCdr Retd), Mr Geoffrey Cameron-Jackson (Major Retd), Dr Karl Payne, Mr Cedric Magner, Mr Michael Neugebauer (Retd), Major Bemie Weekes, Mr Gregory Mumford, Mr A McCrohan, Mr Paul Lewis, LCDR Tom Chambers, Mr Richard Lunney, Mr Neil Currie, Mr Michael Forsyth, Mr Paul Frazer, Mr Frank Lange, Mr Bob Brittain, Mr Richard Davies (Retd) AM, Brig Phil Ryan, Mr Rick Harrison, Mr William Bovill, Mr Kevin Henry, Mr Graham Larkins, Mr Steve Pritchard, Mr John Hayden, Mr Phillip Clark, Mr John Langridge, Mr Brian

3 9 4

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

100 101 102 103

104 105 106 107

108 109 110 1 1 1 112

27

Wilmot, Mr Paul Krikke, Mr Augustinus Perandis, Mr Kevin Oakden, Mr Chris

Lawrence, Mr Ken May, Mr Peter Myors, Mr Glen

Burgess, Mr Mick Foulds, Mr Wayne Larard, Mr Peter Robertson, Mr Dennis Murray, Sqnldr (Retd) William Denner, Mr Robert Chesterfield, Air Commodore (Retd) John

Snowden, Colonel (Retd) Peter Condon.Wing Commodore (Retd) Peter Leach, Air Commodore (Retd) David Petty, Mr Hugh Neenan, Major John

McDougall (Retd), Colonel Peter Confidential Aldenhoven, Mr John Rowe, Maurie

Caligari, Mr Barry Scott, Colonel Peter Hoebee, Mr Bert Gunder, Mr Warren Holliday, Mr Tony

Shakespeare, Ms Sandra Powell, Mr Ray Wright, Dr Mark Stuart, Mr Ian

Hoffman, Mr Graham Zajer, Ms Gay Wallace (Retd), Major William Gordon, Mr Lindsay

Farquhar, Mr Wal Hislop (Retd), Lt Col John Lenard, Mr Hilton McDonagh, Mr John Frazer, Mr Michael

395

28

113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153

de Haas (Retd), Lieutenant Colonel Robert Walding (Retd), Major Trevor Mularczyk, Mr Bruno Simpson (Retd), Flight Lieutenant James Golla, Mr Werner

Shakespeare, Mr William Morris, Mr James Wade, Mr Russell Bell, Mr David Hurditch, Mr Alan Whinfield, Mr Brian

Shortridge, Mr Robert Anderson, Mr Robert Porter, Mr R M Bartrop, Mr Owen Freeman, Mr H R Beckwith, Mr William Tet, Mr John Hetherington, Mr John

Smith, Mr Robert O’Neill, Mr Brian Holmes, Mr Martin Wass (Retd), Major Tony Linwood, Lt Col Russell Black, Mr Adrian Watson, Mr Kevin Opray, Mr Geoff Skene (Retd), Commander Arthur Railton, Mr Kenneth Proctor, Ms Brenda Welford (Retd), Commander Michael Graham, Mr Dennis Clarke, Mr Charles Chitham, Mr Edward Whisker (Retd) AM, Air Cdre Ian

Sly, Mr Kenneth Confidential Collins, Mr Roger Holmes (Retd), Major Jim

Wilson, Mr Terry Ezzy, Mr Jack

396

154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188

189 190 191 192

193 194

29

Watts, Mr Victor Mawson, Mr Ian Tyson, Mr Paul Schmidtchen, Mr John

Pendergast, Mr John Lynch, Mr Peter White, Major Stephen Anderson, Mr Mark

Smith, Mr Ian Lascelles, Mr D N Benson, Mr Colin Thorton, Mr Peter Hearder (Retd), Lt Col Simon Dollisson, Mr V F Denny AM, Mr Bill Confidential Chignell, Mr Rodd Howard, Mr Zane Harvey, Mr Andrew Warren, Ms Diance

O'Neill, Mr L Hawkins, Major T C Gibson AM, Mr Ray Thomas, Mr Michael Nixon, Mr Michael

Canham, Mr Ian Cowley, Mr Martin Matters, Mr Arthur Lakey, Mr John Butler, Reverend Trevor Jacobsen, Mr John Gibbons, Mr P D English, Mr Barry Martin. R

Thoms, Dr Gavin Phillips (Retd), Brigadier Ken Crose, Mr Barry Plunkett-Cole, Mr Peter

Tangier, Mr John Wallace, Mr Len Sappelli, Mr Con

397

30

Woolrych, CMDR R H Macfarlane, Mr Bruce Vietnam Veterans Association of Australia, Queensland Branch Inc.

195 196 197

398

APPENDIX 2

Public Hearing

Thursday, 11 March 2010 P a r lia m e n t H o u s e , C a n b e r r a

Committee Members in attendance: Senator Helen Policy (Chair) Senator Scott Ryan (Deputy Chair) Senator Doug Cameron Senator Jacinta Collins Senator David Bushby Senator Steve Fielding

Witnesses

Defence Force Welfare Association Colonel David Jamison (Retd), National President

Australian Reward Investment Alliance Board and Military Superannuation and Benefits Board Mr Tony Hyams, Chairman

Returned and Serv ices League of Australia Rear Admiral Kenneth Doolan (Retd), National President

Defence Force Retirement and Death Benefits Authority Board Mr Leo Bator, Chairman Ms Cindy Briscoe, Deputy Chief Executive Officer, ComSuper

Department of Finance and Deregulation Dr Stein Helgeby, Deputy Secretary, Financial Management Group Mr Alan Greenslade, First Assistant Secretary, Funds and Superannuation Division Mr George Sotiropoulos, Assistant Secretary, Funds and Superannuation Division

Department of Defence Mr Steve Grzeskowiak, Head, People Policy, People Strategies and Policy Group Mr Brian Paule, Director, General Personnel Policy and Employment Conditions

399

400

The Senate

Finance and Public Administration

Legislation Committee

Preventing the Misuse of Government Advertising Bill 2010

June 2010

401

© Commonwealth of Australia 2010

ISBN 978-1-74229-329-5

The Senate Parliament House Canberra ACT 2600 Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: fpa.sen@aph.gov.au Internet: http://www.aph.gov.au/senate/committee/fapa ctte/index.htm

This document was produced by the Senate Finance and Public Administration Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

402

Membership of the Committee

42nd Parliament

Members

Senator Helen Polley, Chair

Senator Scott Ryan, Deputy Chair

ALP, Tasmania

LP, Victoria

ALP, New South Wales Senator Doug Cameron

Senator Helen Kroger

Senator Jacinta Collins

LP, Victoria

ALP, Victoria

AG, Western Australia Senator Rachel Siewert

Participating Member for this inquiry

Secretariat

Ms Christine McDonald, Secretary

Ms Jane Thomson, Principal Research Officer

Ms Sophia Fernandes, Research Officer

Ms Tegan Gaha, Executive Assistant

Senator Bob Brown AG, Tasmania

iii 403

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Table of Contents

M em bership o f the C o m m itte e ................................................................................. iii

C h a p te r 1 ...........................................................................................................................1

PREVENTING THE MISUSE OF GOVERNMENT ADVERTISING BILL 2010....................................................................................................................... 1

Introduction.................................................................................................................1

Purpose of the bill........................................................................................................1

Conduct of the inquiry................................................................................................4

Evidence before the inquiry....................................................................................... 4

Acknowledgement...................................................................................................... 5

Structure o f the report................................................................................................. 5

C h a p te r 2 ...........................................................................................................................7

OVERVIEW OF THE GUIDELINES ON CAMPAIGN ADVERTISING.......7

2008 Guidelines on Campaign Advertising............................................................. 7

Independent Review of Government Advertising Arrangements........................... 8

2010 Changes to the Guidelines on Campaign Advertising................................. 11

C h a p te r 3 ........................................................................................................................ 13

ISSU ES..........................................................................................................................13

Evidence supporting the bill.....................................................................................13

Evidence not supporting the bill.............................................................................. 16

Other m atters.............................................................................................................19

Committee comments and recommendation.......................................................... 19

D issenting R e p o rt: C oalition S e n a to rs...................................................................21

Background & Overview.............................................. 21

The Role o f the Auditor-General............................................................................. 21

The Current Crisis - Labor's Spectacular Backflip.................................................22

Conclusion.................................................................................................................24

D issenting R e p o rt: S enator Bob B ro w n .................................................................25

A PP E N D IX 1 ................................................................................................................. 27

Submissions received by the Com m ittee.................................................................27

V

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Chapter 1

PREVENTING THE MISUSE OF GOVERNMENT ADVERTISING BILL 2010 Introduction

1.1 On 16 June 2010, the Senate referred the Preventing the Misuse o f

Government Advertising Bill 2010 (the bill) to the Senate Standing Legislation Committee on Finance and Public Administration (the committee) for inquiry and report by 21 June 2010.

Purpose of the bill

1.2 The purpose of the bill is to establish a legislative framework for

accountability o f expenditure on information and advertising campaigns undertaken by Australian government departments and agencies to 'ensure that the campaign advertising does not contain electoral matter’.1

1.3 The framework to be established by the bill:

(i) provides the Auditor-General with the powers and functions to review and report on government infomiation and advertising campaigns;

(ii) establishes a process by which ministers and the Auditor-General report to the Parliament; and

(iii) outlines the principles and guidelines governing the use of public funds for government information and advertising.2

1.4 The framework also provides for exemption from the guidelines in cases of national emergency.

1.5 The guidelines contained in the bill are based on the 2008 Guidelines on Campaign Advertising by Australian Government Departments and Agencies (introduced by the current government but superseded by new guidelines in 2010) whilst incorporating key recommendations made by the Auditor-General in relation to the review of the guidelines conducted in early 2010.

F u n ction s o f th e A u d ito r-G e n e ra l

1.6 The bill provides the Auditor-General with new functions of reviewing government information and advertising campaigns with a cost in excess of $250 000

1 Preventing the Misuse of Government Advertising Bill 2010, Explanatory Memorandum, Outline.

2 Preventing the Misuse o f Government Advertising Bill 2010, clause 3.

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and reporting whether they comply with the principles and guidelines set out in the bill. The bill allows the Auditor-General to use the powers available under the Auditor-General Act 1997 to undertake these new functions.3

1.7 A minister responsible for a campaign with expenditure of $250 000 or less may ask the Auditor-General to review that campaign's compliance with the guidelines where the campaign is of a sensitive nature or the minister considers that such a review is appropriate.

1.8 The provisions of the bill also provide that the Auditor-General report to the minister and to the Parliament on each campaign. While the minister retains ultimate responsibility for the approval or rejection of a campaign, the process seeks to ensure that the public are fully informed o f review and decision-making processes.

1.9 Clause 8 of the bill details the functions of the Auditor-General which include:

(a) considering campaigns as specified in the guidelines;

(b) reporting on compliance o f campaigns with the guidelines;

(c) reporting to each House o f Parliament on matters connected to those guidelines;

(d) providing advice to the minister and the Parliament on the operation of the guidelines and on any proposal by the minister to revise the guidelines; and

(e) any other function necessary or convenient to enable the Auditor- General to undertake a function assigned to the Auditor-General.4

A d m in istra tive p ro c e s s

1.10 Agencies subject to the Financial Management and Accountability Act 1997 must comply with the guidelines provided in the act 'whether delivered by the agency, third parties or jointly delivered’, where the Commonwealth has committed to expenditure of $250 000 or more.5

1.11 Government campaigns can be approved for launching by a minister when the chief executive of the involved agency certifies that the campaign complies with the guidelines and relevant government policy and, in case of campaigns in excess of $250 000, the Auditor-General provides a report to the minister responsible for the

3 Preventing the Misuse of Government Advertising Bill 2010, Explanatory Memorandum, Outline.

4 Preventing the Misuse of Government Advertising Bill 2010, clause 8.

5 Preventing the Misuse of Government Advertising Bill 2010, Guidelines on campaign advertising, administrative process, clause 5.

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agency undertaking the campaign on the proposed campaign's compliance with the guidelines.

1.12 The chief executive's certification will be published on the relevant department's website when the campaign is launched. Chief executives are responsible for ensuring that research reports for advertising campaigns worth $250 000 or more are published on the agency's website following the launch of the campaign where appropriate, and details of advertising campaigns undertaken will be published in agency annual reports.6

1.13 The requirements for review and certification of campaign advertising are determined by the value of the campaign. The bill defines the value of the campaign as the budget for all campaign elements across all financial years and includes:

• market or social research consultants, public relations consultants, advertising agencies and/or other specialist consultants commissioned in the development of advertising material;

• production and placement of advertising in print, radio, digital, cinema, television or out-of-home media; and

• production and dissemination of other campaign materials.7

E x em p tio n fr o m th e g u id e lin es

1.14 The bill also provides for the exemption of information and advertising national emergencies from the guidelines. Subclause 6(2) of the bill provides that, in the event o f a national emergency, the minister may seek to have the advertising campaign exempted by the Cabinet Secretary in accordance with clause 9 of the guidelines. The exemption for that advertising campaign will expire when the national emergency has ended. Subclause 6(5) sets out the requirement that the minister seek a review by the Auditor-General in relation to national emergency campaigns 'as soon as practicable' following the exemption.8

1.15 In his second reading speech, Senator Bob Brown stated the following in relation to the exemption process:

This provision removes all room for subjective interpretation and political expediency in the exercise of exemptions from compliance. The current guidelines which allow exemptions on the basis of 'a national emergency, extreme urgency or other compelling reason' allows broad interpretation

6 Preventing the Misuse of Government Advertising Bill 2010, Guidelines on campaign advertising, clause 8.

7 Preventing the Misuse of Government Advertising Bill 2010, Guidelines on campaign advertising, clause 14.

8 Preventing the Misuse of Government Advertising Bill 2010, Explanatoiy Memorandum, Outline.

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which demonstrably results in campaign which breach the clear and stated intention. This Bill closes that loophole.9

L eg isla ted p ro c e s s o f revision o f g u id e lin e s

1.16 The bill also provides for a legislated process for the revision of the guidelines governing government advertising campaigns. Under provisions of the bill, the guidelines can only be revised by regulations following a process of public consultation. The proposed process would require the Finance Minister to publish a draft of the revised guidelines on the department's website; call for public submissions on the draft; consult with the Auditor-General; and, table a report on the consultation in each House of Parliament.

1.17 In the second reading speech, Senator Bob Brown stated that this provision:

...makes sure that the revision process and the changes themselves are subject to public and parliamentary input and approval.10

Conduct of the inquiry

1.18 The committee advertised the inquiry on the Internet and invited submissions from interested organisations and individuals.

1.19 The committee received four public submissions. A list o f individuals and organisations who made submissions to the inquiry together with other information authorised for publication is at Appendix 1. Submissions may be accessed through the committee's website at: http://www.aph.gov.au/senate/committee/fapa ctte/index.htm.

Evidence before the inquiry

1.20 The committee was faced with an exceptionally short reporting timeframe, a fact reflected in the small number of submissions received. For this reason, and in acknowledging the wider contemporary debate around government advertising, the committee chose to consider all relevant public evidence on the matter.

1.21 Central to the bill, and debate which surrounds it, are concerns about the appropriateness or otherwise of the Auditor-General undertaking the oversight functions of proposed government advertising campaigns. Much of the debate has taken place in a number of different contexts, most recently, the Budget Estimates

2010-11 hearings of the Senate Finance and Public Administration Legislation Committee. The 2010 Independent Review o f Government Advertising Arrangements addressed these matters as did the Auditor-General in a number o f reports. The Joint

Standing Committee of Public Accounts and Audit is currently conducting an inquiry

9 Senator B Brown, Senate Hansard, 16 June 2010, p. 56.

10 Senator B Brown, Senate Hansard, 16 June 2010, p. 56.

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into the role of the Auditor-General in scrutinising government advertising campaigns.11 Given this fact, the report considers all such material where relevant.

Acknowledgement

1.22 The committee thanks those organisations and individuals who made a submission.

Structure of the report

1.23 The committee's report is structured as follows:

• Chapter 2 provides a brief historical overview of the guidelines governing government advertising and amendments to them; and

• Chapter 3 considers the evidence in support of and against the bill and provides the committee's concluding comments and recommendation.

11 Joint Standing Committee of Public Accounts and Audit, Role o f the Auditor-General in scrutinising government advertising campaigns, http://www.aph.gov.au/house/committee/ipaa/govtad/index.htm (accessed 16.6.10)

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Chapter 2

OVERVIEW OF THE GUIDELINES ON CAMPAIGN ADVERTISING 2.1 This chapter provides an overview of the 2008 Guidelines on Campaign Advertising by Australian Government Departments and Agencies, the 2010

independent review of the guidelines, and the changes to the guidelines announced in March 2010.

2008 Guidelines on Campaign Advertising

2.2 Prior to the November 2007 Federal election, government advertising and information activities were coordinated by the Special Minister of State, who chaired the Ministerial Committee on Government Communications (MCGC). The MCGC approved the design and implementation of major and sensitive advertising and information campaigns.1

2.3 On 2 July 2008, the current Government released new advertising guidelines to govern the content and presentation of Commonwealth Government campaign advertising. The Guidelines on Campaign Advertising by Australian Government Departments and Agencies (the 2008 guidelines), were based on those developed in

1998 by the Auditor-General which were later refined in a Joint Committee of Public Accounts and Audit (JCPAA) report of 2000. For the first time, government advertising on party lines was explicitly banned.

2.4 In line with the recommendations of the Senate Finance and Public Administration Committee's 2005 report on government advertising and accountability, the 2008 guidelines required that campaigns with expenditure in excess of $250 000 (or other campaigns if requested by a minister) be reviewed by the

Auditor-General before approval.

2.5 Under the guidelines, each advertising campaign had to be certified by the chief executive o f the commissioning department or agency, and major campaigns had to be reviewed by the Auditor-General before the campaign was allowed to progress.2

2.6 Agencies subject to the Financial Management and Accountability Act 1997 (the FMA Act) were required to comply with the guidelines which required that:

1 Australian National Audit Office, Campaign Advertising Review July 2009 - March 2010, ANAO Report No.38. 2009— 10, pp. 19-20.

2 Senator the Hon John Faulkner, Special Minister of State and the Hon Lindsay Tanner MP, Minister for Finance and Deregulation, New Advertising Guidelines, Joint Media Release, 2 July 2008, 22/2008.

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• the chief executive of the agency undertaking the campaign has certified that it complies with the guidelines and relevant government policies; and

• for campaigns with expenditure in excess of $250 000, the Auditor-General provided a report to the minister on the proposed campaign's compliance with the guidelines.

2.7 There were five guidelines, prefaced by a number o f overarching principles and underpinned by supporting statements. The 2008 guidelines stated that:

1. campaign material should be relevant to government responsibilities;

2. campaign material should be presented in an objective, fair and accessible manner;

3. campaign material should not be directed at promoting party political interests;

4. campaign material should be produced and distributed in an efficient, effective and relevant manner, with due regard to accountability; and

5. advertising must comply with legal requirements.3

2.8 The Special Minister of State, Senator the Hon Joe Ludwig, commented during the 2010-11 Budget estimates:

I think the salient points are that before the last election we promised to cut the expenditure on government advertising, which we did significantly, and introduce new and higher accountability and transparency standards, which we have. We have a strong record in doing just that. We have introduced tough guidelines which banned political advertising, removed the ministers

oversight of the framework, increased the reporting requirements and significantly reduced the cost.4

2.9 When approving the guidelines, the Government also agreed to review their arrangements in relation to the initiation, development and implementation of government advertising campaigns before July 2010. An independent review was subsequently commission by the Department of the Prime Minister and Cabinet and

Department of Finance and Deregulation. Dr Allan Hawke was appointed on 27 January 2010 to conduct the review.5

Independent Review of Government Advertising Arrangements

2.10 The terms of reference of the Independent Review o f Government Advertising Arrangements (the Hawke review) included consideration of the effectiveness of the

3 Guidelines on Campaign Advertising by A ustralian Government Departments and Agencies, June 2008, p. 1.

4 Special Minister of State, Senator the Hon Joe Ludwig, Estimates Hansard, 17.5.10, pp F&PA 22-23.

5 Special Minister of State, Senator the Hon J Ludwig, Estimates Hansard, 25.5.10, p. F&PA 5.

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current Government arrangements for government advertising including the role of the Auditor-General in reviewing proposed advertising material.

2.11 Dr Hawke was responsible for considering the effectiveness and efficiency of the current approval process for proposed advertising campaigns, including the administrative effort, timeframes and cost of current approval processes as well as the adaptability of the guidelines and associated arrangements to emerging issues.6

2.12 The Hawke review published its report on 26 February 2010. The eight findings of the review focused on concerns including the need for greater clarification in relation to definitions to assist in streamlining arrangements; greater flexibility to enable departments to deliver communications flexibly; and, the current governance arrangements which 'place the Auditor-General in a very difficult position in respect of conflict of interest’.7

2.13 The Hawke review provided eight recommendations to the Government including the:

• simplification and clarification o f the guidelines to ensure appropriate checks and balances and revision of the threshold upwards to $3.5 million;

• consideration o f amendments to the guidelines be undertaken by a new review body;

• abolition of the Auditor-General’s role in reviewing proposed advertising campaigns before their launch with the Auditor-General requested to conduct a performance audit on at least one campaign a year or the administration of the campaign advertising framework;

• establishment o f an Independent Government Communications Unit or Inter­ Departmental Committee on Communications to oversee operation of the guidelines to ensure compliance;

• establishment of a Strategic Communications Unit in the Department of the Prime Minister and Cabinet (PM&C) to provide whole-of-govemment professional communications policy advice and expertise to agencies;

• adoption o f a number of reporting, accountability and transparency

mechanisms including a request that the Auditor-General undertake a performance audit on at least one campaign a year, or the administration of the campaign advertising framework, and report to the Parliament;

• details of the transfer o f functions and funding to be settled on a cost neutral basis between PM&C and the Department of Finance and Deregulation; and

6 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, pp 6-7, http://www.finance.gov.au/adveitising/docs/Independent-Review-of- Govemment-Advertising-Arrangements.pdf (accessed 15.6.10).

Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 21.

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• timing and handling of the proposed changes to the guidelines and governance framework to be settled between the Prime Minister, Minister for Finance and Deregulation, and the Cabinet Secretary.8

2.14 The Hawke review proposed that the role of the Auditor-General revert to 'traditional areas o f performance audit and review of government advertising campaigns'.9 Dr Hawke offering two models of an alternative review mechanism to that of the Auditor-General for consideration:

In both models, Secretaries and CEOs would be responsible and

accountable for decisions in relation to advertising campaigns, informed by the independent advice o f an external review body on compliance with relevant aspects o f the Guidelines. One model would establish an

Independent Government Com m unications Committee (IGCC) o f independent and reputable individuals (e.g. former senior public servants) with responsibility to oversee the operation o f the Guidelines, review campaign development and advise ch ief executives on com pliance with the Guidelines. U nder this model, the existing Interdepartmental Committee on

Communications (IDCC) would be abolished.

The second model would retain the IDCC, but it would be chaired by an independent person.10

2.15 The Hawke review stated that either of the proposed models would ensure that responsibility and accountability for campaigns would lie with chief executive officers (CEOs) and that in combination with a revision of the guidelines, the proposed arrangements would 'closely align with the directions of the Blueprint for the Reform of Australian Government Administration in relation to the responsibilities of

Secretaries and the need to reduce internal red tape'.11 Recommendation 4 stated that the proposed body would be responsible for:

(a) overseeing the operation of the Guidelines to ensure compliance with their integrity and spirit;

(b) providing advice to chief executives on compliance of proposed advertising activities with relevant aspects of the Guidelines, noting that there will be a degree of reliance on external expert advice;

(c) providing publicly an assessment of a campaign’s compliance with relevant aspects of the Guidelines;

8 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, pp 5-6.

9 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 3.

10 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 4.

11 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 4.

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(d) reporting on activities undertaken under the Guidelines, including any trends or emerging issues; and

(e) considering and proposing revisions to the Guidelines as necessary in light o f experience.12

2.16 In terms of the role of the ANAO, the Hawke review recommended (Recommendation 6(g)) that the ANAO undertake a performance audit on at least one campaign a year, or the administration of campaign advertising framework, and report its findings to Parliament.13

2010 Changes to the Guidelines on Campaign Advertising

2.17 On 31 March 2010 the Government announced changes to the 2008 guidelines in response to recommendations of the Hawke review. The changes reflected the Government's outright support for six of the Hawke review recommendations and support for parts of two recommendations. The Government did not support Recommendation 5 regarding the establishment of a Strategic Communications Unit in PM&C, noting that the Communications Advice Branch in the Department o f Finance and Deregulation currently provides the same functions.14

2.18 The primary changes to the 2008 framework announced by the Government on 31 March 2010 included:

• replacing the 2008 guidelines with a revised set of guidelines;

• establishing an Independent Communications Committee (ICC) to replace the role of the Auditor-General, to review proposed advertising campaigns over $250 000;

• a proposal that government request the Auditor-General to consider annual performance audits in this area; and

• abolition o f the role o f the Interdepartmental Committee on Communications (IDCC) in reviewing campaigns from a whole-of-govemment perspective.15

12 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 5.

13 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 5.

14 Department of Finance and Deregulation, Summary o f Hawke Recommendations and Government Response, undated, p. 2, http://www.finance.gov.au/advertising/docs/Hawke- recommendations-and-Govemment-response.pdf (accessed 17.6.10).

15 Australian National Audit Office, Campaign Advertising Review July 2009-March 2010, ANAO Report No. 38 2009-10. p. 12.

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In d ep en d en t C o m m u n ication s C o m m ittee

2.19 The Independent Communications Committee (ICC) was established to take over the role o f reviewing compliance with the guidelines previously undertaken by the Auditor-General.16

2.20 Whilst the Hawke review had recommended (Recommendation 1(d)) that the threshold for chief executive certificates and independent review of proposed campaigns be revised upwards, the Government maintained the $250 000 threshold

contained in the 2008 guidelines.17 Under the new guidelines, therefore, the ICC is now responsible to review all government advertising campaigns over $250 000.

2.21 The ICC is responsible for considering proposed advertising campaigns for compliance with Principles 1 to 4 o f the 2010 guidelines. The ICC is to provide a report on those considerations to the agency chief executive. The chief executive is then responsible for certifying that the campaign complies with the 2010 guidelines in full. This certification will be provided to the minister who may decide to launch the campaign. Under the 2010 changes, the ICC's report and the chief executive's certification are made publicly available via websites following the launch of the relevant campaign.18

E x em p tio n s

2.22 Guideline 5, regarding exemptions, was also amended. Whereas the 2008 guidelines stated that campaigns can be exempted on the basis of a 'national emergency, extreme urgency or other extraordinary reasons the Cabinet Secretary considers appropriate', the 2010 guidelines state rather that:

The Cabinet Secretary can exem pt a campaign from com pliance with these Guidelines on the basis o f a national emergency, extreme urgency or other compelling reason.19

16 Special Minister of State, Senator the Hon Joe Ludwig, New arrangements fo r government advertising, Media Release, 31 March 2010, 20/2010.

17 Department of Finance and Deregulation, Summary o f Hawke Recommendations and Government Response, undated, p. 1.

18 Australian National Audit Office, Campaign Advertising Review July 2009-March 2010, ANAO Report No. 38 2009-10. p. 30.

19 Guidelines on Information and Advertising Campaigns by Australian Government Departments and Agencies, March 2010.

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Chapter 3

ISSUES

3.1 The primary focus of evidence in relation to the bill concerned the proposed scrutiny function performed by the Auditor-General. Whilst the 2010 Guidelines on Campaign Advertising by Australian Government Departments and Agencies (the 2010 guidelines) replaced the Auditor-General as the scmtiny body with that of the Independent Communications Committee (ICC), the bill reinstates the Auditor- General in this role.

Evidence supporting the bill

L egislative fr a m e w o r k

3.2 Professor Graeme Orr supported the 'legislating of government advertising', underscoring that 'it is advisable to enact principled legislation to guide and restrain executive discretion'. He noted that the bill 'in essence, will give binding statutory force to the administration regime which the Rudd Government applied until early 2010'.1 Adjunct Professor Tim Smith and Associate Professor Ken Coghill also commented that it is 'highly desirable that there be clear legislative provisions as to acceptable limits to the use of public funds for advertising by the executive

government'.2

R ole o f th e A u d ito r-G e n e ra l

3.3 In his submission, Professor Orr stated that Guideline 2 refers to the Auditor- General's report on a proposed campaign and noted that it would be wise 'in any principles-based legislation, to ensure that some independent vetting mechanism is required during the development of large campaigns'.3

3.4 The following discussion in support of the role o f the Auditor-General as envisaged in the bill is drawn from comments made in other arenas. In a submission to the current JCPAA inquiry on the role of the Auditor-General in scmtinising government advertising campaigns, the Auditor-General acknowledged the risk in

'providing assurance in relation to campaigns ahead of their commencement' and that the Australian National Audit Office (ANAO) was 'conscious of these risks and have been managing them through our review procedures including specific inquiries of

1 Prof G Orr, Submission /, p. 1.

2 Prof T Smith & Prof K Coghill, Submission 2, p. 1.

3 Prof G Orr, Submission 1, p. 2.

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departments and agencies, examination of documents, and by seeking the representation from Chief Executives'.4 The Auditor-General further argued that:

From my perspective, there is no doubt that the involvem ent o f the ANAO in reviewing the campaign arrangem ents prior to its launch has resulted in better outcomes than would have been the case had the ANAO not been involved in undertaking review s at this stage.5

3.5 Indeed, the Auditor-General has argued that the involvement of the ANAO has resulted in "better targeted and supported campaigns'.6 In his submission to the committee, the Auditor-General commented that 'the framework introduced by the Government in June 2008 has been demonstrated to work effectively, albeit with scope for some improvement'.7

3.6 In response to the view that the Auditor-General's involvement in undertaking reviews of advertising campaigns made it difficult to then undertake performance audits, the Auditor-General argued that:

The benefit o f our review activity is that it is much more timely than a performance audit in gaining access to information and personnel, and in providing feedback to agencies individually and collectively; on the other hand, reviews focus only on the Government's Guidelines and provide

limited assurance due to time and resource constraints, and do not address issues that have even problem atic under former arrangements, such as contract management and perform ance issues. Reviews and audits are complementary however, and perform ing reviews does not exclude the conduct o f subsequent perform ance audits. Rather, the reviews provide information which allow better targeting o f decisions.8

3.7 Moreover, in response to the Hawke review claim that the role the Auditor- General was given 'has undermined the proper accountabilities of Secretaries for managing their departments and the Auditor-General's proper place [in] the scheme of

4 Australian National Audit Office, Submission No. 2, Joint Standing Committee on Public Accounts and Audit, Inquiry into the role of the Auditor-General in scrutinising government advertising campaigns, March 2009, p. 2. http://www.aph. gov.au/house/committee/ipaa/govtad/sub2.ndf (accessed 16.6.10).

5 Australian National Audit Office, Submission No. 2, Joint Standing Committee on Public Accounts and Audit, Inquiry into the role of the Auditor-General in scrutinising government advertising campaigns, March 2009, p. 2.

6 Australian National Audit Office, Campaign Advertising Review 2008-09, Overall conclusion, http://www.anao.gov.au/director/publications/auditreports/2009-2010.cfm?item id=91 ACB58D1560A6E8AA2EC4FBC83E784B#91 B1323B1560A6E8AAFA 6A10C8F8445A (accessed 17.6.10).

7 Australian National Audit Office, Submission 3, p. 1.

8 Australian National Audit Office, Submission No. 2, Joint Standing Committee on Public Accounts and Audit, Inquiry into the role of the Auditor-General in scmtinising government advertising campaigns, March 2009, p. 3.

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things'9, the Auditor-General held that the Hawke review 'seriously misunderstands the role of the Secretaries and the Auditor-General'.10 In a letter to the Cabinet Secretary in March 2010, the Auditor-General argued that:

Secretaries have sole responsibility for certifying compliance with the Government's advertising guidelines; the role o f m y office is to report to the responsible M inister on whether anything has come to attention from our review o f the certificate, and information supporting the certificate, to

suggest that the relevant campaign does not comply in all material respects with the requirements o f the advertising guidelines. The final decision on whether a campaign proceeds appropriately rests with the responsible

M inister.11

3.8 Under the 2008 guidelines, Secretaries did have sole responsibility for certifying compliance (as they do under the 2010 guidelines). The evidence heard by Dr Hawke and by the JCPAA has revealed that secretaries may not have considered this to be the case in reality, despite what the guidelines state. Professor Orr stated that the ICC was appointed to take over the scrutiny role of the Auditor-General:

Possibly because the Auditor-General was building up too much expertise and it m ay have been felt that by some heads o f departments that the Auditor-General was having too much weight and too much say in the crafting o f cam paigns.12

G u idelines

3.9 The guidelines proposed in the bill counter some of the concerns raised by the Auditor-General in relation to the 2010 guidelines of which the ANAO argued that a number of principles were 'less specific' than the guidelines contained in the 2008

version.13 In his submission to the committee, the Auditor-General noted:

The Schedule to the Bill draws on the experience o f the operation o f earlier arrangements by addressing some o f the practical issues that have arisen in areas such as the need for a clear definition o f campaign advertising, that campaign information included the Chief Executives' certificate be

9 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 3.

10 Mr Ian McPhee, Auditor-General of Australia letter to Special Minister of State dated 29 March 2010, Campaign Advertising Review July 2009-March 2010, ANAO Report No. 38 2009-10, Appendix 1, p. 42.

11 Mr Ian McPhee, Auditor-General of Australia letter to Special Minister of State dated 29 March 2010, Campaign Advertising Review July 2009-March 2010, ANAO Report No. 38 2009-10, Appendix 1, p. 42.

12 Heather Ewert, 'Rudd grilled over mining advertisements', The 7.30 Report. ABC TV, 31 May 2010, http://www.abc.net.aU/7.30/content/2010/s2914442.htm (accessed 16.6.10).

13 Australian National Audit Office, Campaign Advertising Review July 2009-March 2010, ANAO Report No. 38 2009-10, p. 30.

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published on the agency's website, and that campaigns include those conducted by third parties.14

3.10 The Auditor-General concluded:

W hile necessarily there will be judgm ents involved in assessing campaigns against the proposed bill and guidelines, the draft legislation builds on experience to date, and subject to [certain matters] provides a sound basis for Parliam entary consideration.15

Evidence not supporting the bill

3.11 The Government's 2010 guidelines define campaign advertising, advertising campaign compliance and ICC reports must be published on the agency and ICC websites.

3.12 Clause 10 of the bill is an attempt to bind this Senate, any future Senate, and the House of Representatives, and any future House of Representatives, in relation to its plenary power over government advertising for all time. The Greens' bill purports to limit the powers o f the Senate. The rights o f the Senate cannot be given away. The Australian Constitution says that only the Australian people may determine, by peaceful referendum, whether the legislative powers of the Parliament including of this Senate, may be limited. To seek to pass a bill that strips this and all future Senates

and Houses of Representatives has questionable Constitutional validity, threatening the doctrine of the sovereignty of the Parliament that underpins our entire system of democracy. This power, that the bill seeks to strip away, can only be given away with a referendum bill on this issue.

R o le o f th e A u d ito r-G en era l

3.13 The bill provides for the Auditor-General to review government information and advertising campaigns in excess of $250 000. Concerns regarding the Auditor- General fulfilling the scrutiny function in relation to proposed government advertising were raised in the Hawke review. Dr Allan Hawke stated in the review that the 2008 arrangements drew into question the 'independence of the Auditor-General and potential create conflicts of interest'.16 He took the view that:

In order to protect its position, the Australian N ational A udit Office (ANAO) has had to adopt a highly risk-averse approach, placing a heavy (and unnecessary) bureaucratic and administrative burden on departments. In essence, the role that the Auditor-General has been given has

14 Australian National Audit Office, Submission 3, p. 1.

15 Australian National Audit Office, Submission 3, p. 1.

16 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 3, http://www.finance.gov.au/advertising/docs/Indenendent-Review-of-Govemment- Adverti sing-Arrangements.pdf (accessed 15.6.10).

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undermined the proper accountabilities of Secretaries for managing their departments and the Auditor-General’s proper place the scheme of things.17

3.14 Dr Hawke argued that whilst the primary role of the Auditor-General is to reach a view on whether the proposed campaign complies with the guidelines, 'the processes established by the ANAO result in intervention in areas clearly outside its expertise'.18

3.15 Findings of the review in relation to the role of the Auditor-General upheld the view that the current governance arrangements 'place the Auditor-General in a very difficult position in respect to conflict o f interest'. In this regard, Dr Hawke stated that:

(a) mechanisms to protect the independence of the Auditor-General (through processes and internal guidelines) have resulted in a highly risk-averse and conservative approach to Government advertising activity;

(b) whether the Auditor-General can conduct regular performance audits of Government advertising effectively when he is bound up in the process of developing and approving campaign advertising;

(c) the ANAO is venturing into areas outside its expertise and over-riding expert advice and communications research; and

(d) the Auditor-General's role has the potential to undermine the proper accountabilities of Secretaries and CEOs for the management of their departments and agencies.19

3.16 Dr Hawke noted that in 2007 following the federal election, the Auditor- General raised concerns with the Prime Minister that 'whoever administers the guidelines could be drawn into a policy and political debate as an active participant in, and possible defender of, the processes of executive government'.20 The Auditor- General proposed that a small independent committee assess proposals of compliance with the guidelines and that the ANAO conduct periodical audits to report on whether the arrangements were operating as intended.

3.17 In relation to the manner in which the ANAO approached its role, the Hawke review stated that:

17 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 3.

18 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 15.

19 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, pp 21-22.

20 Mr Ian McPhee, Auditor-General, letter to the Hon Kevin Rudd MP, Prime Minister, 26 November 2007 cited in Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 15.

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There is a school o f thought that it is not the Guidelines that are the

problem, but rather the way in w hich the ANAO has chosen to interpret them. So removing the Auditor-General from the decision-making process and substituting an independent review body may be sufficient to address

the concerns that have been raised.21

3.18 Indeed, the Hawke review stated its support for the Auditor-General's proposal of an independent scrutiny committee whilst recommending that the ANAO focus on core areas of ANAO expertise, thereby removing the Auditor-General from the 'current position of actual or perceived conflict o f interest'.22

3.19 The Special Minister of State, Senator the Hon Joe Ludwig, commented on the changes to the guidelines during the committee's estimates hearing of 25 May 2010 and stated:

The Auditor-General is also free to undertake an audit o f any campaign or aspect o f the government advertising framework and has been asked to consider undertaking at least one audit per year on a campaign or the administration o f the framework. So the short answer is: it is not, no, and, yes, the Auditor still has a role.23

3.20 Professor Tim Smith and Professor Ken Coghill also commented that the 'role of the Auditor-General must be confined to auditing the process and must not extend to the approval of content'.24

3.21 Professor Charles Sampford noted that whilst the 'ANAO did a very good job for almost two years', his preference was that of an independent committee certifying the accuracy and non-partisan nature of the advertising. Professor Sampford took the view that such a body would give 'the advertising campaign greater credibility and increase the likelihood that it will be accepted'.25 He further argued that:

It w ill also make it far less likely that the campaigns w ill be attacked as false - and if it is so attacked, the government can brandish the independent arbiter’s decision. This oversight will save time and m oney and increase the efficiency and effectiveness o f the government advertising.26

21 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 4.

22 Dr A Hawke, Independent Review o f Government Advertising Arrangements, 26 February 2010, p. 15.

23 Special Minister of State, Senator the Hon Joe Ludwig, Estimates Hansard, 25.5.10, p. F&PA 4.

Prof T Smith & Prof K Coghill, Submission 2, p. 1.

Prof C Sampford, Submission 4, p. 5.

Prof C Sampford, Submission 4, p. 4.

24

25

26

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Other matters

3.22 Professor Orr commented on the problem of the unlimited capacity or size of campaigns and selectivity which create obstacles. He noted that 'a bill like this' may only indirectly address those problems 'to the extent that the Auditor-General may unfavourably comment on the need for a campaign or the estimated cost and choice of media'.27

3.23 Professors Smith and Coghill noted a number of matters:

• that legitimate government advertising (for example, advertising job vacancies, invitations to tender) should not be interfered with and should be exempted from the provision of the bill, except for those special categories subject to regulation;

• the bill should provide a clear definition of those special categories subject to regulation;

• the bill should provide a clear definition of those special categories of

government advertising which are not permitted to be funded by government; and

• the bill should provide a clear definition of the process to be followed to determine whether the content of particular proposed advertising falls within the definition of those special categories o f government advertising subject to regulation;

• in relation to the national emergency exemption, approval process provisions but not the content provisions, should be restricted for a limited, reasonable and non-renewable period during which the Parliament can be called to sittings to debate the emergency and give specific authority for further related

government advertising; and

• the guidelines should not be liable to amendment by regulation, only by act of Parliament.28

Committee comments and recommendation

3.24 The Preventing the Misuse in Government Advertising Bill 2010 inquiry received only four submissions from involved stakeholders and individuals. In the committee's view, this number is more a reflection of the short reporting timeframe

rather than that of the level or scope of public interest in the issues surrounding government advertising and the use o f public funds therein.

27 Prof G Orr, Submission 1, p. 1.

28 Prof T Smith & Prof K Coghill, Submission 2. pp 1-2.

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3.25 The committee appreciates that advertising by government has long been a sensitive issue and notes the comments by Professor Orr that 'the threat of excessive promotional advertising to political equality is clear'.29

3.26 The committee recognises the importance of independent and transparent mechanism to oversee and report on compliance with the Guidelines on Campaign Advertising by Australian Government Departments and Agencies. The committee appreciates that the independent review of Dr Allan Hawke was commissioned to

consider the appropriateness and clarity of the 2008 guidelines and the effectiveness and efficiency of the current approval process.30 It acknowledges that the 2010 guidelines enact recommendations o f the Hawke review, notably the introduction of an alternate, independent and transparent process for oversight of and reporting on compliance to the guidelines, thereby enabling the Auditor-General to revert to traditional areas of performance audit and review of government advertising campaigns.

3.27 The committee considers that the 2010 guidelines meet the requirements of transparency and rigour with regard to the oversight of proposed government advertising.

Recommendation 1

3.28 The committee reports to the Senate that it has considered the Preventing the Misuse of Government Advertising Bill 2010 and recommends that the bill not proceed.

Senator Helen Policy Chair

29 Dr G Orr, Government Advertising, Parliament and Political Equality, Senate Occasional Lecture, 11 November 2005, p. 3, http://www.aph.gov.au/Senate/pubs/occa lect/transcripts/111105.pdf (accessed 18.6.10).

30 Dr A Hawke, Independent Review o f Government Advertising Arrangements, Terms of Reference for this Review, 26 February 2010, p. 6.

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REPORT OF COALITION SENATORS

BACKGROUND & OVERVIEW

In 1998, the Auditor General issued a set of draft Guidelines for Government Advertising.

These Guidelines were the subject of a review by the Joint Committee of Public Accounts and Audit in 2000.

They were further revised in 2008 as Government policy and were revised again in March 2010.

This Bill seeks to codify advertising guidelines, based on the 2008 iteration. Importantly, the changes which have taken place between the original 1998 draft Guidelines and the current Bill are quite significant.

The Bill also seeks to require the Auditor-General to assess all advertising material (above a spending threshold o f $250,000) prior to its publication or broadcast.

THE ROLE OF THE AUDITOR GENERAL

This requirement upon the Auditor-General is both the core requirement of this Bill and its most contentious element.

Coalition Senators have genuine concerns with placing the Auditor-General in such a role.

Proponents of this Bill have not sufficiently addressed the concern that it may not be appropriate for the Auditor-General to be involved in the creation of a campaign, to approve a campaign and then retrospectively assess such campaigns through the

process of performance audits.

The Auditor-General himself outlined these risks. Immediately after the election, in a letter to the Prime Minister, dated 26 November 2007, the Auditor-General wrote:

"Given the sometimes controversial history o f government advertising there is a real risk that w hoever administers the guidelines could be drawn into the policy and political debate as an active participant in, and possible

defender o f the processes o f executive government. To preserve both the real and perceived independence o f this office, I and my predecessors have actively sought placing the ANAO in such a situation."

We know from evidence in the JCPAA that the Prime Minister could not even be bothered to respond to this letter and, instead, pushed ahead with the 2007 Labor policy.

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Instead, the Auditor-General proposed:

"a model involving a small independent committee with an executive or advisory role in relation to government advertising."

This would leave the Auditor-General free to pursue the traditional role of post­ publication assessment of campaigns via regular performance audits.

The fundamental problem, however, remains unresolved. The Auditor General, under this Bill, is both decision-maker and auditor.

Furthermore, the use of the Auditor-General in this role does not necessarily guarantee the outcomes desired by the proponents o f this bill.

In the JCPAA hearings regarding the 2008 Guidelines, the Audit-Office officials could only guarantee a ‘limited’ level of assurance, not even a ‘reasonable’ level of assurance of compliance with the Guidelines.

To more forensically investigate the advertising would put them in the position of being a decision-maker and thus voiding their own ability to engage in post-campaign performance audits!

THE CURRENT CRISIS - LABOR'S SPECTACULAR BACKFLIP

This inquiry arises out of revelations that the Labor Party decided to bypass the Independent Communications Committee (ICC) in favour of a highly-politicised framework in the final months before an election.

In March and April 2010, the Government had engaged a research company to undertake fieldwork to identify understanding of tax reform in the context of the forthcoming release of the Henry Tax Review.

On 21 April 2010, the ICC was provided with a Communications Strategy for a proposed campaign. There was no indication, at any stage, that there was a particular urgency to this campaign. The ICC approved the Strategy and a Brief was issued to a number of advertising agencies, who were due to present their creative executions on

10 May 2010.

In the first week o f May, the Government announced its response to the Henry Tax Review. At this stage there was only muted criticism of the Government’s response in the media, with only two full-page advertisements critical o f the Government’s proposal appearing on consecutive days in the West Australian. There was no other paid advertising or no campaign of misinformation that justified seeking an exemption

from the Guidelines.

However, the Treasurer, Mr Swan, hit the ‘panic’ button. On 10 May 2010, he wrote to the Cabinet Secretary, seeking exemption from the advertising Guidelines. That same day, the advertising agencies were scheduled to present their creative pitches to the Department of the Treasury officials. The agency selected, Shannon's Way, has a

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long and close association with the Labor Party, including being the agency for Labor election campaigns.

The following day, in the Federal Budget, the Treasurer announced that the communications campaign would have an appropriation of $38.5m.

On 14 May 2010, the Department provided a brief to the Minister which included a draft letter to the Treasurer and a draft Statement to Parliament. The Cabinet Secretary then ‘sat’ on this brief for ten days.

On 24 May 2010, the Cabinet Secretary approved the request for exemption, citing ‘extreme urgency’ and ‘compelling reasons’. Mr Hawke has made it clear that the ‘compelling reasons’ justification was never intended to be used in this manner.

However, the notification to Parliament was deliberately delayed for another four days. It was only tabled on 28 May 2010 which was, notably, the day after the Senate Estimates hearing into government advertising had concluded.

However, the Cabinet Secretary laid an unintentional trap for the Treasurer. In his letter of 24 May 2010 to the Treasurer, he stated:

Despite the exemption, there are associated campaign processes which can be applied w ithout any impact on the ability o f the Government to quickly comm unicate important inform ation relating to Tax Reform. I expect the Treasury to adhere to the intent o f the Guidelines...

In that context, the Government Mining Tax advertising campaign fails to meet the conditions set. In the current Guidelines, it is clear:

18. The subject m atter o f campaigns should be directly related to the G overnm ent’s responsibilities. As such, only policies or programs underpinned by:

• legislative authority; or

• appropriation o f the Parliament; or

• a C abinet Decision which is intended to be implemented during the current Parliament should be the subject o f a campaign.

The Mining Tax campaign does not meet any of the three criteria. It is not yet legislated for; there has been no appropriation for the Mining Tax; and the decision is not intended to be implemented in the current Parliament.

As such, the Treasurer is in breach of the Cabinet Secretary’s own conditional approval for exemption.

What appears clear is that the Guidelines, which had already been weakened by the March 2010 changes, were still too restrictive for Labor’s wish to use taxpayers' funds for partisan political advertising.

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The Labor Government clearly felt that, in the run up to an election, they needed to run an aggressive, partisan campaign and wanted complete control over the nature and content of that advertising.

C O N C LU SIO N

While the conduct of the Labor Party in regard to government advertising has shown an unparalleled hypocrisy and disregard for honesty and integrity as well as the Parliament (particularly the Senate Estimates process), the proposal to place the Auditor-General at the centre of approval for future campaigns does not address the problems outlined.

The Auditor-General's independence is o f paramount importance to the statutory responsibilities of that office.

To place the Auditor-General at the centre o f decision-making will potentially risk the perceived independence of the office and also put at risk the ability of the Auditor- General to undertake performance audits on behalf of the Parliament.

Coalition Senators believe the Auditor-General's paramount role is as outlined in the Audit Act, to audit the finances and performance of the Commonwealth. This includes advertising campaigns, and the assessment of compliance with the Guidelines. This role can potentially be strengthened with a requirement for such an assessment within

a short time period from the commencement of the relevant campaign.

Coalition Senators do not support the proposed Bill.

Senator Scott Ryan The Liberal Party of Australia Senator for Victoria

Senator Helen Kroger The Liberal Party of Australia Senator for Victoria

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SENATOR BOB BROWN AUSTRALIAN GREENS

DISSENTING REPORT

The Committee, in its concluding comments and recommendation on The Preventing the Misuse of Government Advertising Bill 2010 fails to acknowledge the widespread community concern about this critical issue. The report documents the historical concerns and various attempts to address the issue of transparency and accountability in the expenditure o f public funds through government information and advertising campaigns. The recent public outcry over the government's $38 million mining tax advertising campaign is testament to the depth of concern on this issue. This Bill is a necessary step in enshrining accountability and integrity mechanisms in law, to provide certainty and clarity to governments and to assurance and confidence in the community that these practices will be properly implemented and scmtinised.

The recommendation by the Committee that the Bill not proceed contradicts the evidence of the four expert submissions which all welcomed the Bill for establishing clear legislative provisions around the use of public funds for government advertising. Each submission noted that the Bill incorporated important changes to strengthen the original 2008 guidelines based on experience of the past two years in which the process had been operational.

While the submissions varied in their view of the role of the Auditor-General in the Bill, there is agreement that the Auditor General had a key role to play in the review of government information and advertising campaigns and their assessment against the guidelines.

The Auditor- General's submission in particular made a number of relatively minor technical amendments to the Bill for greater clarity and transparency in the process, which the Greens will move when the Bill is debated in the Senate. Other submissions have identified minor elements of the Bill which require rewording for clarity which will also be incorporated.

I draw attention to the important issue of corporate 'political' advertising and the use of tax-deductibility claims by corporate advertisers. I have raised concerns elsewhere that under the current arrangements tax payers are effectively funding both the government and corporate advertising campaigns on the mining tax to the tune of millions of dollars. I argue that under these circumstances, corporate advertisers

should be subjected to the same regime of accountability and scrutiny that is required of government advertising expenditure.

I note that Professor Charles Sampford highlighted the need for a similar legislative approach as outlined in this Bill to apply to corporate advertising. On pages 3-4 of his submission, Professor Sampford noted that:

"The answer is not to weaken the accountability regime for governments but to:

• Recognise the issue in the government accountability regime; and

• Ensure that corporations and others are also subject to the same or different but relevant accountability regimes."

He further adds:

“there are strong arguments for such communication to be subject to some form of vetting or oversight...[that] corporations claim deductions for corporate advertising and are, in a sense, spending public money” in addition to expending the assets of their shareholders. And that "unbalanced funding of different sides of a debate leads to distortions in the democratic process."

Professor Sampford proposed that oversight of the corporate advertising could be provided in the following ways:

1. Both government and corporate advertising are vetted by the same process (on the basis that public funds are involved in both through deductions and direct expenditure)

2. Disclosure rules and/or TPC (trade practices code) are amended to void the distinction between political comment and comment in the course of trade or commerce)

3. Business is covered by disclosures to market and the TPC

4. Limit advertising of both kinds. Some might argue the value the public gets for its direct expenditure and tax deductions are not great.

5. Provide funding for both

26__________________________________________________________________________________

I propose that the Bill is adopted and the issue of corporate advertising is given urgent consideration by the Government to ensure that democracy is not undermined by the continuation of business as usual.

Senator Bob Brown Leader of the Australian Greens

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APPENDIX 1

Submissions received by the Committee

Submissions

1 Associate Professor Graeme Orr

Adjunct Professor Tim Smith and Associate Professor Ken Coghill 3 Australian National Audit Office

4 Professor Charles Sampford

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The Senate

Foreign Affairs, Defence and Trade Legislation Committee

Defence Amendment (Parliamentary Approval of

Overseas Service) Bill 2008 [No. 2]

February 2010

435

© Commonwealth o f Australia 2010

ISBN 978-1-74229-231-1

Printed by the Senate Printing Unit, Parliament House, Canberra.

436

Members of the committee Core members

Senator Mark Bishop, ALP, WA (Char) Senator Russell Trood, LP, QLD (Deputy Chair) Senator Don Farrell, ALP, SA Senator Michael Forshaw, ALP, NSW Senator Helen Kroger, LP, VIC Senator Scott Ludlam, AG, WA

Secretariat

Dr Kathleen Dermody, Committee Secretary Ms Angela Lancsar, Executive Assistant

Senate Foreign Affairs, Defence and Trade Committee Department o f the Senate PO Box 6100 Parliament House

Canberra ACT 2600 Australia

Phone: +61 2 6277 3535 Fax: +61 2 6277 5818 Email: fadt.sen@aph.gov.au Internet: www.aph.gov.au/Senate/committee/fadt_ctte/index.htm

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Table of contents

Members of the committee................................................................................................iii

CHAPTER 1 INTRODUCTION.......................................................................................................1

Background.................................................................................................................. 1

Purpose of the B ill.......................................................................................................1

Submissions................................................................................................................. 1

Scope and structure of inquiry....................................................................................1

Scrutiny o f Bills Committee...................................................................................... 2

Acknowledgements....................................................................................................2

CHAPTER 2 THE PROPOSAL FOR PARLIAMENTARY APPROVAL................. 3

Defence Amendment Bill 1985................................................................................. 3

Purpose of the Bill and core provision..................................................................... 4

Provisions o f the Bill..................................................................................................9

Informed decision making; use o f classified material..............................................9

Constraints on deployment...................................................................................... 13

Definitions and scope o f the legislation................................................................. 17

Other concerns— position of Governor-General, summoning parliament, joint sitting and consequential amendments........................................................... 24

Long standing government policy.......................................................................... 26

Conclusion................................................................................................................ 26

AUSTRALIAN GREENS—DISSENTING REPORT........................................... 29

Addendum— Forum on the Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008, Friday 12 February 2010.................................... 35

APPENDIX 1 PUBLIC SUBMISSIONS......................................................................................... 81

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Chapter 1 Introduction

Background

1.1 On 17 September 2008, Senator Scott Ludlam introduced in the Senate the Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008 [No. 2], On 20 August 2009, the Senate referred the bill to the Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report by 19 November 2009. On 17 November, the Senate granted the committee an extension to its reporting date to 25 February 2010.1

Purpose of the Bill

1.2 The stated purpose o f the bill is 'to ensure that, as far as is constitutionally and practically possible, Australian Defence Force (ADF) personnel are not sent overseas to engage in warlike actions without the approval o f both Houses of Parliament'.2 Its main provision stipulates clearly that members of the Defence Force may not serve beyond the territorial limits of Australia except in accordance with a resolution

authorising the service. This resolution must be agreed to by both the Senate and the House of Representatives. By proclamation, the Governor-General may declare that an emergency exists requiring such service. The bill makes provisions for both Houses to meet after such a proclamation is made.

Submissions

1.3 The committee advertised the inquiry on its website and in The Australian on 22 September and on subsequent occasions. The committee wrote to the Minister for Defence and the Attorney-General inviting them or their departments or related agencies to make a submission. A number of other organisations, commentators,

academics were also contacted and invited to make submissions to the inquiry.

1.4 The committee received 31 submissions, which are listed in Appendix 1.

Scope and structure of inquiry

1.5 The proposal that Australian Defence Force personnel cannot serve overseas in warlike service unless both Houses of Parliament have approved the deployment is not new. Over the past half century, bills designed to confer on the Parliament this authority have been presented to the Senate. The matter has been debated in the chamber at least twice and on each occasion both major parties rejected the proposal.

1.6 The bill before the committee shows that it has not yet addressed the problems identified with earlier versions of the legislation. Further, after close consideration of the submissions supporting the bill, the committee is of the view that they repeat the

1 Journals o f the Senate, 17 November 2009, p. 2736.

2 E xplanatory M em orandum , Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008 [No. 2], p. 2.

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opinions and arguments put forward previously and bring nothing new to the debate. With that in mind, the committee decided that little would be gained from holding public hearings that would rework old ground. Instead, in this report, the committee provides an account of the consideration given to the previous proposals; the concerns and objections raised over the years; and the efforts made to rectify the identified problems. It hopes that by doing so, it will focus on the major concerns impeding progress with this type of legislation and contribute to moving the debate forward.

Scrutiny of Bills Committee

1.7 The Senate Standing Committee for the Scmtiny of Bills considered the bill but had no comments to make.3

Acknowledgements

1.8 The committee thanks those who assisted with the inquiry, especially the many people who made submissions. The committee appreciates their contribution.

3 Senate Standing Committee for the Scrutiny of Bills, Alert Digest, no. 1 of 2009, 4 February 2009, p. 17.

Chapter 2

The proposal for parliamentary approval 2.1 Australian legal experts generally acknowledge that while the power to declare war and deploy troops overseas is not specified in the Constitution, it currently forms part of the executive power under section 61 of the Constitution.1 Professor

Geoffrey Lindell noted, however, that under the Westminster system of government, Parliament may legislate to regulate or limit the exercise of prerogative powers. He concluded:

...it is likely that the Australian parliament possesses such power under, for example, the power to make laws with respect to defence under s51(vi) of the Constitution.2

2.2 In this chapter, the committee considers a private senator's bill that is intended to confer on the Australian Parliament the authority to curb the power of the executive to send members o f the Defence Force to serve outside Australian territories. The committee starts by tracing the history of this bill.

Defence Amendment Bill 1985

2.3 For decades now, a group o f Australian citizens and politicians have actively canvassed the possibility of Parliament having a say in the decision to commit ADF personnel to an overseas conflict. In April 1985, Senator Colin Mason, Australian Democrats, took the first major step toward achieving this objective by introducing the Defence Amendment Bill 1985. This bill stipulated that members of the Defence Force 'may not be required to serve beyond the territorial limits of Australia except in

accordance with a resolution agreed to by each House of the Parliament authorizing the service'. He explained:

The purpose of this Bill is to place the responsibility for the decision to send Australian troops overseas with both Houses of Federal Parliament subject to exceptions covering the movement of personnel in the normal course of their peacetime activities and the need to take swift action in an emergency.3

1 See for example, Geoffrey Lindell, 'Authority for war', About the House, May-June 2003, p. 23. George Williams, 'Comments', 'The Power to go to war: Australia in Iraq", editor Fiona Wheeler, PLR, vol. 15, no. 5, 2004, p. 5 and 'Now to say, never again', Canberra Times, 7 June 2008.

2 Geoffrey Lindell, 'Authority for war', About the House, May— June 2003, p. 23. See also Charles Sampford and Margaret Palmer, 'The Constitutional Power to Make War: Domestic Legal Issues Raised by Australia's Action in Iraq', Griffith Law Review, vol. 18, no. 2, 2009, p. 350.

3 Senator Colin Mason, Senate Hansard, 18 April 1985, p. 1186.

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2.4 In his view, the legislation if enacted would ensure that both Houses of Parliament would have the opportunity to debate fully any move to involve ADF personnel in a war-like situation. He contended that this debate, followed by a vote of

all elected federal representatives, would result in 'a more reasoned basis for sending defence force personnel overseas'.4 Debate on the bill was held in 1986 but was adjourned.

2.5 Senator Paul McLean, Australian Democrats, introduced the same bill in the Senate in 1988. In his second reading speech, he repeated, in many cases word-for- word, the purpose of, and reasons for, passing the proposed legislation.5 It was restored at the second reading stage to the Notice Paper in 1993 and 1996.

2.6 On 27 March 2003, similar legislation, the 'Defence Amendment

(Parliamentary approval for Australian involvement in overseas conflicts) Bill 2003', was introduced jointly by Senator Andrew Bartlett and Senator Natasha Stott Despoja (Australian Democrats). It was restored to the Notice Paper on 17 November 2004 and debated in the Senate on 10 February 2005. The arguments in favour of, and in opposition to, the legislation built on those of 1986. A number of senators participated in the debate which was then adjourned.

2.7 On 13 February 2008, Senator Bartlett presented the Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008. The same bill was introduced in the Senate by Senator Scott Ludlam (Australian Greens) on 17 September 2008.

Purpose of the Bill and core provision

2.8 Almost a quarter of a century has elapsed since a bill was introduced in the Senate similar in content to the one now before the committee. The core provision of the proposed legislation remains unaltered (with minor word changes) from the 1985 and 2003 versions of the bill. The current bill stipulates that members of the Defence Force may serve within the territorial limits of Australia but may not serve beyond these limits except in accordance with a resolution, which is in effect and agreed to by each House of the Parliament, authorising this service.6

2.9 Throughout the history of this legislation, those engaged in debate on its provisions have acknowledged the seriousness of the decision to commit Australian forces overseas. Although agreeing on the gravity of the decision, they have very different views on who should make this decision.

4 Senator Colin Mason, Senate H ansard, 18 April 1985, p. 1186.

5 Senate H ansard, 22 February 1988, p. 387.

6 Subsections 50C(1) and (2), Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008.

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2.10 In 1986, Senator Don Chipp, Australian Democrats, supported the 1985 bill designed to strengthen the authority of Parliament over the exercise of the executive's prerogative power to deploy Australian troops abroad. He expressed concern that the executive—the Prime Minister and Cabinet—could commit Australia to 'a disastrous course of action without Parliament and Australian people knowing what the arguments for and against were, and what the potential hazards might be'. He argued that an important measure would be to require 'a full and free debate in both Houses of Parliament'.7

2.11 When introducing the 2003 bill, Senator Bartlett reinforced this view about the need to obtain parliamentary approval before Australian ADF personnel could serve abroad. He explained:

The Executive should not be able to involve Australian troops in an overseas conflict if they have not been able to successfully make their case at least to the Parliament. What the Democrats are seeking is for the Parliament, as the voice of the people, to have some control over the

situation.8

2.12 During debate on the bill in 2005, he noted the legislation would create:

...a simple mechanism to provide the check that would require the government to make to the parliament the case for sending Australian men and women in the Defence Force to put their lives on the line. To suggest that the parliament should have no role in such a fundamental decision is an approach that does not recognise the fundamental importance of the parliament.9

2.13 At this time, those in support of the bill cited the government's decision to send troops to Iraq as an example o f why the legislation was needed. Senator Lyn Allison stated:

Being accountable to the will of the people through the parliament will restrain democratic leaders and help prevent them from initiating foolhardy and risky wars. Committing the lives of citizens to an overseas conflict is no small decision. It requires that leaders be particularly cautious both when

starting wars and in joining coalition with others. They must be able to persuade others by the strength of the augment and by the evidence.10

2.14 When presenting this bill to the Senate in 2008, Senator Ludlam argued that 'the responsibility of sending Australian men and women into danger and quite possibly to their deaths should not be solely on the shoulders of a handful of leaders'. In his view, the lack of proper mechanisms 'saw the Australian Prime Minister rapidly

7 Senator Don Chipp, Senate Hansard, 17 April 1986, p. 1916.

8 Senate H ansard, 27 March 2003, p. 10320.

9 See Senator Andrew Bartlett, Senate H ansard, 10 February 2005, p. 126.

10 Senate H ansard, 10 February 2005, p. 106.

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deploy troops to an illegal war in Iraq in 2003 without consulting the people's representatives in Parliament'. He said:

A lesson can and must be learned from this kind of mistake, which is more easily made when a handful of people take closed and secret decisions on behalf of a nation without due consultation or participation. The Howard government was the first government in Australia's history to go to war without the support of both houses of Parliament. This bill provides an opportunity to ensure this never happens again.11

2.15 He also noted that there were appropriate exemptions made in the bill that would not interfere with the non-warlike overseas service in which Australian troops engage.12

2.16 In advancing their argument, those supporting the proposed legislation cited countries where parliamentary consent for military personnel to serve in war was needed or where countries were considering introducing such a requirement. For example, Senator Ludlam informed the Senate that the bill would bring Australia into conformity with principles and practices used in democracies such as Denmark, Finland, Gennany, Ireland, Slovakia, South Korea, Spain, Sweden, Switzerland and Turkey.13

2.17 The majority of the 31 submissions to the committee's inquiry were in favour of the bill. Unequivocally, they endorsed the principle that the executive should not be able to make such an important decision without reference to, or endorsement by, the Australian Parliament: that such a decision should 'not be left in the hands of one person or a select few'.14 1 5 In general, they held that the proposal to require parliamentary approval for an overseas deployment was a positive move that would

strengthen Australian democracy by improving the transparency and accountability of important decisions by the executive government. It would promote an open system of decision-making and parliamentary involvement and confer 'more credibility and political force' on the decision.13 For example, Mr Robert O'Neill wrote:

A wider Parliamentary debate could lead to wider national consultation, resulting in much better decisions on war and peace.16

11 Senate H ansard, 17 September 2008, p. 4982.

12 Senate H ansard, 17 September 2008, p. 4982.

13 Senate H ansard, 17 September 2008, p. 4982.

14 See for example, Subm ission 14. See also Subm issions 3, 4, 5, 9, 10, 11, 13, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 26, 27 and 30.

15 Paul Barratt AO, Andrew Farran and Garry Woodard, Subm ission 21, p. 2. See also Subm ission 3 and 23. The Civil Liberties Association argued that 'the current system does not provide an effective level o f accountability and scrutiny necessary for the significant decision to send troops', p. 6.

16 Robert O'Neill, Subm ission 5, p. 3.

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2.18 The Women's International League for Peace and Freedom (Australian Section) believed that:

...it is im portant that Australia's parliament should have oversight o f any decision to commit our country's troops to a war. Without such

parliam entary oversight, the possibility exists for an Executive (or indeed for an influential leader acting virtually alone) to make a rash or

overzealous decision that has little or no backing from the electorate.17

2.19 Many suggested that the current arrangements were outdated, 'an anachronism and an anomaly'.18

2.20 Unfortunately, while many o f the submissions supporting the bill gave their strong in-principle support for the legislation, they did not refer to the provisions of the bill. This meant that they did not assist the committee in its analysis of the

practical application of the provisions and their implications for the safety and success of operations. Their opinions expressed in submissions were at the level of broad principle without close considerations of the consequences should specific provisions of the bill be enacted.

2.21 During the 2005 date, those in favour of the executive retaining the authority to deploy troops, referred to the long standing Westminster convention that the executive government has the discretion to commit forces to operations overseas.19 Some cited the Commonwealth Constitution as the legal basis or authority to validate the legitimacy o f this prerogative.20 They argued that the executive branch of

government is elected by the people to make hard decisions and is answerable to the people for those decisions.21 Senator Sandy Macdonald asserted that 'Governments are elected to govern, and it would be a gross act of irresponsibility to abandon that responsibility'.22

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17 Subm ission 13, p. [2], The Human Rights Council of Australia was of the view that: Ά decision of such seriousness perforce deserves and requires a decision-making process equal to the most serious that our constitutional system provides and that is a decision of the Parliament'. Subm ission 10, pp. 1-2. Just Peace found 'it incomprehensible that there is not a strict parliamentary process in place underpinned by law such as that proposed in the Bill, so as to prevent the Government of the day from committing the country to war without parliamentary

debate and approval', Subm ission 15, p. 2.

18 Paul Barratt AO, Andrew Farran and Garry Woodard, Subm ission 21, p. 1.

19 See Senator Linda Kirk and Senator Marise Payne, Senate H ansard, 10 February 2005, pp. 118, 130.

20 See Senator Linda Kirk, Senator Sandy Macdonald and Senator Marise Payne, Senate H ansard, 10 February 2005, pp. 118, 122, 130. See also Senator Alan Ferguson and Senator John Hogg, Senate H ansard, 10 February 2005, pp. 109, 113.

21 See Senator Marise Payne, Senate H ansard, 10 February 2005, p. 130. Also see Senator Sandy Macdonald, Senate Hansard, 10 February 2005, p. 122.

22 See Senator Sandy Macdonald, Senate H ansard, 10 February 2005, p. 122.

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2.22 In response to concerns about the lack of accountability, those rejecting the bill argued that parliamentary processes already exist that allow for debate and scrutiny—media, question time, parliamentary committees and ultimately by the Australian people at the ballot box.23 For example, the Minister for Defence, Senator the Hon John Faulkner, recently noted that the opportunities for debate are not limited to ministerial statements. He cited 'matters of public importance, urgency motions, general business—all of which provide senators with the opportunity to debate important issues'. He then referred to Australia's engagement in Afghanistan which has:

...been canvassed in detail during the Chief o f the Defence Force’s opening statements at Senate estimates. H ere the CDF, the secretary o f defence and other departmental and A D F representatives are ready, willing and available to answer any questions about the issue from senators.24

2.23 In response to the examples o f countries that require prior parliamentary approval for deployments, Senator John Hogg and Senator Marise Payne listed the countries in 2005 where such approval was not necessary. They included Canada, Belgium, France, Poland, Portugal and the United Kingdom.25 In this regard, Senator Payne noted that 'different parliamentary systems, different parliamentary chambers, make different arrangements'.

2.24 A House o f Commons Research Paper also highlighted the difficulty dividing countries into two distinct categories because of their unique political histories and constitutional frameworks. Furthermore, it showed that approval has different meanings or applications in various countries. For example, it noted that in some cases parliamentary approval may be needed to declare war but not to deploy troops and

certain military service may not require approval.26 The debates in the UK reflect the complexities in legislating for parliamentary approval. Although supporting the principle of such approval, the UK Government recognised that the main challenge was to formulate a process that would be 'sufficiently adaptable to be able to respond quickly and flexibly to the variety o f situations that could arise'. It pointed to difficult issues that needed to be resolved such as allowing for exceptional circumstances, the need for urgent deployment, potential dangers of a retrospective approval process,

23 Senator John Hogg, Senate H ansard, 10 February 2005, p. 113. See also Senator Alan Ferguson, Senator Sandy Macdonald and Senator Marise Payne, Senate Hansard, 10 February 2005, pp. 109, 122, 130.

24 Senate Hansard. 2 February 2010, pp. 2-3.

25 Senate Hansard, 10 February 2005, pp. 113, 130.

26 Claire Taylor and Richard Kelly, P arliam entary A pproval f o r D eploying the A nn ed Forces: A n Introduction to the Issues, House of Commons Library, Research Paper 08/88, 27 November 2008. p. 41-55.

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security implications from the release of information, the timing of the vote and definitional issues such as 'armed conflict'.27

Committee view

2.25 The committee accepts that the authority of the government to make decisions regarding the commitment o f Australian forces overseas follows a long established convention. It understands, however, as noted by Professor Lindell, that if the parliament so wished it could impose limitations on the executive's prerogative to

deploy troops. The committee also notes that some countries, to varying degrees, require parliamentary approval before their military forces can be deployed.

2.26 The main question before the committee, however, is not about the principle of parliamentary debate or approval but whether the bill before it provides an effective and credible alternative to the current practice. The committee is concerned with how the provisions o f this bill would operate in practice.

2.27 In the following section, the committee considers the provisions of the bill; key issues that have arisen during debates in relation to these provisions; and the extent to which the drafters of the legislation have responded to matters raised during these debates.

Provisions of the Bill

2.28 During the two debates on predecessor bills, senators have had the opportunity to place on the public record their support for, or opposition to, the proposed legislation and to explain their reasons. As early as 1986, and through to the present day, some senators have identified what they believe are serious deficiencies in the proposed legislation. Their concerns have centred on the disclosure of classified material, the constraints that the bill may impose on Defence activities, unclear, misunderstood or inappropriate definitions and the scope of the bill.

Informed decision making; use of classified material

2.29 In 1986, Senator Mason told the Senate that if passed the bill would ensure a full debate in both Houses on sending Australian forces overseas. The then Minister for Resources and Energy, Senator Gareth Evans, sympathised with the underlying philosophy of the proposed legislation but raised a number of problems with its practical implementation. He expressed concerns about the disclosure of intelligence,

noting:

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27 Government response to the report o f the Public Administration Select Committee on the Draft Constitutional Renewal Bill, Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty the Queen, July 2009, pp.l 1-12 and Government response to the report o f the Joint Committee on the Draft Constitutional Renewal Bill,

Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty the Queen. July 2009. pp. 46-47.

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... situations may develop where there is a need to determine measures to be taken without the publicity associated with debate in the Parliament; situations where public knowledge could limit our strategic options and indeed put our forces at risk.28

2.30 Senator David MacGibbon also identified a problem with the use of classified material. He argued that a decision to commit troops could be made 'only in the full knowledge of all the circumstances—knowing the diplomatic circumstances that are involved, the strategic involvement and all the military and economic factors'. In his view, these must, 'be weighed up in the light of a careful assessment of all the options that are open to the government of the day. That simply cannot be done in open debate in any chamber of this parliament'.29

2.31 Nearly two decades later, senators opposing the 2003 version of the bill raised similar concerns. Representing both major parties, they argued that the executive is the only body that has 'full and proper knowledge of military and strategic decisions and the one-on-one contact with Australian allies' to be able to make a considered and well informed decision.30 In their view, Parliament does not have access to all

available intelligence and the complete range of advice from the Public Service.31 Thus, they concluded that the usefulness of public debate would be limited because information critical to making a sound decision is only within the province of the executive.32

2.32 These senators similarly rejected the alternative of providing Parliament with all available intelligence to enable a fully informed debate. In their assessment, such an arrangement would be both impractical and detrimental to security. In particular, they were concerned that the disclosure of classified material, such as specific details on a deployment or intelligence advice given to governments on a confidential basis, would compromise the safety and security of an operation. Senator Linda Kirk explained:

There will often be cases where information simply cannot be made public. If it were to be made public it could very much undermine our strategic position when we are about to embark on a war. This could not even be overcome by holding a secret session of parliament, or something of the

like, because that is contrary to our system of government and it would not be the proper manner in which to do this.33

28 Senate Hansard, 17 April 1986, p. 1912.

29 Senator MacGibbon, Senate Hansard, 17 April 1986, p. 1913.

30 See Senator Kirk, Senator Sandy Macdonald and Senator Marise Payne, Senate Hansard, 10 February 2005, pp. 118, 122, 130.

31 Senator Alan Ferguson, Senate Hansard, 10 February 2005, p. 109.

32 See for example, Senator Sandy Macdonald, Senate Hansard, 10 February 2005, p. 122.

33 Senator Linda Kirk, Senate Hansard, 10 February 2005, p. 118. See also Senator Payne, p. 130.

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For the major parties, the problems were serious—the inability of Parliament to have access to all the information needed to make critical decisions concerning the deployment o f Australian ADF members or disclosing information that could jeopardise the safety and success of a military operation.

2.33 While the 2008 proposed legislation resembles closely its predecessor bills, it does include additions that relate directly to the release of information. Subsection 50C(5) requires the publication of the Governor-General's proclamation within 24 hours after it is made with the accompanying advice from the Prime Minister that explains the circumstances of emergency which rendered it inexpedient to seek a resolution from the Parliament. Subsection 50C(6) stipulates that the Governor- General's proclamation be laid before each House of the Parliament within two days after it is made together with a report setting out:

(a) the Prime Minister's advice to the Governor-General as noted above;

(b) the reasons for the proposed deployment;

(c) the legal authority for the proposed deployment;

(d) the expected geographical extent of the proposed deployment;

(e) the expected duration of the proposed deployment; and

(f) the number of members o f the Defence Force proposed to be deployed.

2.34 The bill would also impose reporting obligations for the duration of the deployment.34 This regular written report to both Houses of Parliament is to include information on:

(a) the status of each such deployment, including its legality, scope and anticipated duration;

(b) what efforts have been, are being, or are to be, made to resolve the circumstances which required such deployment; and

(c) whether there is any reason why the Parliament should not resolve to terminate such deployment.

2.35 In a submission to the inquiry, Paul Barratt AO, Andrew Farran and Garry Woodard rejected the contention that sensitive information which is known to the Government could not be disclosed to the Parliament. They argued:

...there has been a long tradition in this country, and other countries

governed under a W estm inster system, o f briefing the Leader o f the Opposition at times o f national peril. If the Prime M inister were unable to convince the Leader o f the Opposition o f the merits o f a proposed

34 The report is to be made on the first sitting day of that House after the commencement of each of the months o f February, April, June, August, October and December. The Minister is to commence reporting within 2 months after the deployment.

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deployment, then we would submit that the need for the proposed

deploym ent would be by definition less than com pelling.35

2.36 They did not mention how classified information would then be conveyed to all parliamentarians including independents and members o f minor parties and then discussed publicly without increasing the risk of some form of disclosure of security sensitive material.

2.37 The Australian Anti-Bases Campaign Coalition noted that:

To argue that the prime m inister and cabinet are likely to be closer to, and have greater insight into, a given international situation is to admit that the governm ent has failed to keep parliament and the public adequately inform ed.36

2.38 Mr Tim Wright wanted to go further with the reporting provisions. He suggested that the executive be required to provide information additional to that stipulated. For example, he cited estimates of the likely number of Australian troops to be killed and seriously injured in the conflict and the same information for the citizens

of the invaded country as a result of Australia's participation.37

2.39 Interestingly, although only two submissions expressed reservations about the use of classified material, both were in a position to have sound knowledge about the nature and extent of such information and the likely security implications should it be

disclosed. The Submarine Institute o f Australia explained:

The submarine's greatest strength is its ability to operate undetected in sea areas controlled by a potential adversary. It goes without saying, therefore, that the success of submarine operations relies on strict security— disclosure o f submarine operational plans negates the submarines primary advantage, potentially putting the submarine at greater risk and leading to a deterioration in strategic circum stances.38

2.40 It recommended that the bill be amended to make provision for the Prime Minister to determine that covert operations be excluded from the requirement to have parliamentary approval. The Navy League of Australia also drew attention to the possibility that advice provided by the Prime Minister to the Governor-General 'may

contain classified material'. It therefore suggested that subsection 50C(6) may have to be altered.39

35 Paul Barratt AO, Andrew Farran and Garry Woodard, Submission 21, p. 5.

36 Submission 26, p. [3],

37 Submission 25, p. 2.

38 Submission 6, p. 1.

39 Submission 12, p. [2],

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2.41 The committee's inquiry into peacekeeping operations looked closely at the decision-making process before Australia commits personnel to an overseas operation. It became aware of the high level and extensive discussion and consultation that takes place within and between the Department of Defence, the Australian Federal Police, the Department o f Foreign Affairs, the Attorney-General's Department, the Department o f Prime Minister and Cabinet and other agencies such as the Office of National Assessments. Other agencies would be included in this process as required until the National Security Committee of Cabinet considers all submissions and makes a final decision. Generally such a decision would be taken after close consultation with other countries. Much of the information under consideration would be classified, for example risks to personnel, Defence or AFP assets, their strength and location, their force readiness, as well as the level of commitment and capabilities of likely allies, and the compatibility and complementarity of their forces. Clearly much of this information could not be disclosed and, if so, would have the potential to compromise the safety and security of any proposed operation or adversely affect diplomatic relations with potential allies.40

Committee view

2.42 The concern about the disclosure of sensitive or classified information was raised in 1986 and again in 2005 and 2009. Based on observations made during debates and by submitters, the committee is not yet convinced that the bill fully appreciates security implications and the need to take account of the appropriate and

secure use o f classified material. The committee also believes that without a full understanding and appreciation of the complex and interrelated security, strategic and diplomatic circumstances, members of parliament would lack the institutional ability to make important decisions on Australia's engagement in overseas conflicts.

Constraints on deployment

2.43 In 1986, Senator MacGibbon feared that if enacted, the legislation would affect the effective mobilisation of Australia's Defence Forces.41 It should be noted, however, that the bill contemplated situations requiring an immediate or prompt response. It provides for the Governor-General by proclamation to declare that an

emergency exists that requires overseas service. The bill did not define 'emergency'.

2.44 It also made provision for situations when the Parliament was not in session or either House was adjourned for a period of time. At the time of the Governor- General's proclamation, if the Parliament were not in session, it was to be summoned to meet within two days after the making of the proclamation. Similarly, when a House was adjourned, it was to be summoned to meet within two days after the

40 The committee devoted a number of chapters to the decision-making process. See chapters 3-8, Senate Standing Committee on Foreign Affairs, Defence and Trade, Australia's involvement in peacekeeping operations', August 2008.

41 Senate Hansard, 17 April 1986, p. 1913.

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proclamation. In 2005, Senator Hogg, however, noted practical difficulties when Parliament was not in session:

It implies that everyone is close at hand and able to be summoned to participate in the debate within two days. Meanwhile, very strategic issues are passing us by, and that might not be in our interest. There are no

grounds for the delay under such circumstances.42

2.45 Again those joining Senator Hogg in opposing the bill on this issue represented both the major parties. They referred to the importance of the government and ADF having the flexibility to respond to an emergency. Both Senator Payne and Senator Sandy Macdonald noted that currently the government has the ability to respond to emerging threats quickly and decisively, an approach that has served

Australia well in the past.43 Senator Kirk was of the view that the bill would restrict the option of a government to deploy ADF personnel overseas at short notice which could 'very much disadvantage the position of our troops and also disadvantage Australia strategically'.44 Both she and Senator Hogg cited Solomon Islands and the shooting of Adam Dunning as instances requiring a prompt response.45 Senator Kirk stated:

If this legislation had been in force, parliament would have been required to be recalled before troops could be despatched to the Solomon Islands. That would have been most difficult and inconvenient. Similarly, when troops were deployed to Aceh, following the Boxing Day tsunami, the provisions

of this relief assistance would also have required the approval of the parliament.46

2.46 In this regard, Lieutenant General Ken Gillespie told the committee during its inquiry into peacekeeping that the situation in Timor Leste in May 2006 required an immediate response. He said action 'also necessitated a significant number of meetings at various levels...to work out the dynamics and the response that was required from a number of agencies'.47 Indeed, the committee's report into Australia's

42 Senate Hansard, 10 February 2005, p. 113.

43 See Senator Sandy Macdonald and Senator Marise Payne and, Senate Hansard, 10 February 2005, pp. 122, 130.

44 See Senator Kirk, Senate Hansard, 10 February 2005, p. 118.

45 On 22 December 2004, Australian Federal Police Protective Service Officer Adam Dunning, was shot and killed in Solomon Islands, while performing a routine patrol in Honiara, protecting the residences of the Prime Minister and Governor General. AFP Media release, 'Police Arrest James Tatau in relation to the murder of Adam Dunning and the attempted murder of another three PPF Officers in Solomon Islands', 11 January 2005, http://www.afb.iJov.au/ data/assets/pdf flle/l 971/mrl 10105arresttatau.pdf and ’AFP remembers one its fallen', 22 December 2005, http://www.afp.gov.au/ data/assets/pdf file/1970/mr 05122 dunninganniversary.pdf

46 Senate Hansard, 10 February 2005, p. 118.

47 Senate Standing Committee on Foreign Affairs, Defence and Trade, Australia's involvement in peacekeeping operations, August 2008.

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involvement in peacekeeping provided some insight into the complexities of peacekeeping and the speed with which circumstances of an operation could change markedly and unexpectedly. For example, it found that Australia's experience in peacekeeping operations that respond to intra-state conflicts such as those in East Timor and Solomon Islands 'demonstrated the spectrum of security responses required'. It referred to the essential need for the ADF and AFP to be able to move 'in and out of different security levels'.48 It also highlighted decisions needed to be made on the ground dealing with self defence and the emerging military doctrine including responsibility to protect.

2.47 During the committee's current inquiry, a number of submissions elaborated further on the response needed when time is critical. Some were of the view that the bill does not remove the power that may be needed in an emergency.49 Paul Barratt AO, Andrew Farran and Garry Woodard stated their belief that:

...it will in almost all circumstances be the fact that there is no pressure of time such as to prevent adequate consultation with and debate within the Parliament, and we believe that the provisions o f the draft Bill are adequate to deal w ith situations o f genuine emergency where the need for a response

is instant, overwhelm ing and leaving no choice o f m eans.50

The Australian Anti-Bases Campaign Coalition supported this argument, stating that the bill:

...m itigates any concerns about the possible impracticality of seeking parliam entary resolutions by providing for deployment in genuine em ergency circumstances without prior parliamentary authority.51

2.48 To ensure that this provision was not misused, Civil Liberties Australia wanted to limit the situations in which an exemption for urgent deployment could be used. It suggested that the explanatory memorandum provide additional guidance as to what constitutes an emergency.52 As noted earlier, the bill offers no definition whatsoever o f an emergency.

2.49 As in 2005, a number of those opposing the proposed legislation in 2008 were concerned not only with defining the meaning of emergency but, from an operational point of view, the practical application of the provisions of the bill.

2.50 The Australian Association for Maritime Affairs noted that modem military operations tend to reflect escalating or de-escalating political developments as evident

48 Senate Standing Committee on Foreign Affairs, Defence and Trade, Australia's involvem ent in peacekeeping operations, August 2008.

49 Marrickville Peace Group, Subm issions 19, p. 1 and also Subm issions 21 and 26.

50 Paul Barratt AO, Andrew Farran and Garry Woodard, Subm ission 21, p. 5.

51 The Australian Anti-Bases Campaign Coalition, Subm ission 26, p. [3],

52 Subm ission 23, p. 7.

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in maritime operations, 'where a routine peacetime deployment to a geographic region may change from being an opportunity to exercise with friendly (and potentially friendly) forces to:

• an operation to evacuate Australian citizens, with or without the cooperation of whatever local government may exist; to

• the interdiction of weapons deliveries either to the local government or to its internal opponents; to

• strikes, or threats, against selected targets; to

• the insertion of Australian or allied land forces; and

• operations in defence of Australian trade, resources, facilities or even homeland which may flow from the initial incident.53

The Association explained:

...in the real world, depending on the aims and calculations o f the foreign forces involved, incidents can escalate to the brink o f all-out hostilities, and then may de-escalate again in a m atter o f hours. This B ill... seeks to insert a parliam entary approval process requiring up to two days notice, or perhaps not at all if Parliament has been prorogued, into an already complex

diplomatic and operational environm ent.54

2.51 Brigadier (retired) Adrian D'Hage supported the proposal requiring parliamentary approval before 'committing the country to war'. But he also recognised the need in some instances for quick and decisive action to deploy troops overseas. He

stated:

For smaller deployments such as company size groups to the Solomon Islands, the Fiji crises et al, decisions need to be m ade in a timely and effective manner, and will often be made by the security committee o f Cabinet, or the full Cabinet itself, without the need for debate in parliament. That flexibility is essential to m eet situations which arise w ith little or no warning, are relatively small in nature, and do not involve the country in a major w ar (the definition o f which and in itself is not easy). 55

2.52 The Navy League of Australia raised a number of related pertinent matters such as whether the proclamation would have retrospective effect. It noted the possibility o f situations arising where 'actions intended to be covered by the Bill would have occurred before either the Governor-General, Prime Minister or the Parliament could act'.56 Hie Australian Association for Maritime Affairs noted that

53 Subm ission 8, pp. 3— 4.

54 Subm ission 8, p. 4.

55 Arian D'Hage to lan Maguire, 20 December 2007, additional information from Mr Maguire subm ission 31.

56 Subm ission 12, p. [2].

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the bill fails 'to address the legal or military practicalities if Parliament is not recalled, or if Parliament does not approve the deployment'.57

Committee view

2.53 The committee recognises that extensive consultation with a range of organisations and agencies and robust analysis by defence, foreign affairs, and related strategic experts is required before making a decision to deploy Australian forces overseas. Inevitably, this process will involve classified material and continuing access to advice and intelligence from a range of government departments. At times, it may require intense and clearly focused consideration of matters followed by quick and decisive action.

2.54 The committee recognises that in many cases there would be ample opportunity for the Parliament to debate overseas developments likely to draw Australia into military action. On such occasions, the committee fully endorses the involvement o f Parliament in debates about possible Australian deployment. It is of the view, however, that in some cases, engaging the two Houses of Parliament in the decision making process may well deny the government and its defence and security organisations the flexibility and adaptability needed to undertake operations safely and effectively. The bill should allow for these rare occurrences. In this regard, the committee notes that while the bill provides for emergency situations it does not define what is meant by the term emergency.

2.55 Finally, there are unanswered questions about situations where Parliament may not approve, or delay approval of, a deployment when ADF personnel, because of the need for urgent action, have already deployed. In the committee's view, the bill

does not adequately address problems associated with the disclosure of classified material, the definition of emergency situations and the ability to respond quickly and effectively to emerging threats.

Definitions and scope of the legislation

2.56 During its inquiry into peacekeeping, the committee found that today's international environment is not only very different from that experienced after the Second World War, but is also more fluid. Traditional boundaries between military and civilian roles have blurred as the scope of operations have expanded to include, for example, a focus on helping to create long term stability in fragile states.

2.57 Thus, one of the main challenges in formulating a bill governing war-like service is defining activities that would come under the legislation. The 1985 bill did so by specifying service that would be exempt from the provisions, which meant service:

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57 Submission 8, p. 1.

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• pursuant to their temporary attachment to the forces of another country as provided by section 116B o f the Defence Act 1903; or

• as part of an Australian diplomatic or consular mission; or

• on an Australian vessel or aircraft not engaged in hostilities or in operations during which hostilities are likely to occur; or

• for the purpose of their education or training; or

• for the purposes related to the procurement of equipment or stores. 58

2.58 In 1986, Senator Evans noted that at the time Australia faced no identifiable military threat. He informed the Senate that:

It is lower level challenges to our sovereignty such as harassment, sabotage and small scale raids that are regarded as most credible.59

2.59 In his view, such threats 'would develop, at least initially, in the maritime environment and in the northern approaches to Australia'. He stated further that to require the proclamation of a state o f emergency and the recall of Parliament to enable effective countering of low level threats would not be 'a practical basis for defence planning'.60

2.60 Furthermore, he argued that, if passed, the bill would severely hamper Defence in the protection of the country and in carrying out normal duties across a range of activities. He was concerned that the legislation would not exempt such activities and would:

• preclude defensive activity such as protection of Australian shipping;

• severely constrain the operational effectiveness of the Defence Force in such routine circumstances as hot pursuit in the Australian fishing zone beyond territorial limits;

• complicate arrangements for the employment of Defence Force personnel in other countries under the defence co-operation program; and

• in other instances where the Australian defence forces may be involved in providing humanitarian or disaster relief assistance.

2.61 He accepted that even though the exemptions could be expanded, 'it would be difficult to arrive at a list in the legislation which is both comprehensive and clear in its coverage o f routine peacetime activities'. Senator Evans also observed the

58 Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008 [No. 2], ss 50C(11).

59 Senate Hansard, 17 April 1986, p. 1912.

60 Senate Hansard, 17 April 1986, p. 1912.

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difficulty, even after hostilities have begun, of deciding, 'in advance, the limits of required deployments'.61

2.62 In 2005, a number of senators were also troubled by what they saw as definitional ambiguities and problems associated with possible interpretations of Defence activities that would be covered by the requirement for approval. For example, Senator Kirk noted that the vague definitions 'make it most unclear how the

legislation would operate'.6" Senator Hogg argued that 'when one talks about overseas conflicts one needs to be very careful about what one means'. He said:

One needs to be careful about the word 'war'. We had a role in East Timor. There w as clearly an overseas conflict; there was clearly a w ar taking place in East T im or between some dissident forces and those people who ultim ately achieved their personal freedom. In my view, the same could be

said to have been the case in the Solomons. There are other cases as well: Bougainville, Sudan, Rwanda and so on. In that sense, it is very important to see w hat the definitions actually are.63

2.63 The confusion created by inconsistencies between the explanatory memorandum, the second reading speech and the wording of the bill add another layer of uncertainty about the exact meaning and intention of the proposed legislation.

Warlike and non-warlike operations

2.64 As far back as 1985, those supporting the bill conveyed the impression that the movement o f personnel in the normal course o f their peacetime activities would be exempt from the requirement for parliamentary approval. They relied on the provision

listing exemptions to provide that assurance. This assertion was repeated in 1988, 2003 and 2005. Furthermore, the language used by the sponsors of the proposed legislation suggested that the bill applied to warlike service and that 'classifying service into warlike and non-warlike service is straightforward'. For example, Senator Bartlett told the Senate in February 2005:

This bill sim ply says that, if Australia is going to send our men and women to engage in a war overseas, it should get the support o f both houses o f parliam ent before doing so. That is all it says.64

2.65 But the debates in 1986 and 2005 show that the list of exemptions was far from adequate. This failure was not rectified by the 2008 bill. Indeed, despite the criticism levelled at the potential for routine military activities to be captured by the approval requirement, the provision exempting specific service remained unaltered.

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61 Senate H ansard, 17 April 1986, p. 1912.

62 Senate H ansard, 10 February 2005, p. 118.

63 Senate H ansard, 10 February 2005, p.l 13.

64 Senate H ansard, 10 February 2005, p. 126.

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The exemptions are listed in subsection 50C(11) of the bill and are identical to those given in 1985.

2.66 Today, many of those supporting the bill continue to assert that non-warlike activity would not be subject to the approval process. The explanatory memorandum to the 2008 legislation states clearly that the service of members of the ADF beyond the territorial limits of Australia in warlike actions would require the approval of both Houses of the Parliament'. It also explains that the bill provides that the requirement for parliamentary approval of overseas deployment of forces does not apply to normal, non-warlike overseas service. Likewise, when introducing the bill, Senator Ludlam maintained that the exemptions were appropriate and would not interfere with the non­ warlike overseas service of Australian troops.65

2.67 A number o f submitters picked up on these statements and assumed that the bill required that only war or 'warlike service' would need Parliament's approval. For example, the Women's International League for Peace and Freedom was pleased that the bill 'does not apply to normal, non-warlike overseas service':

Thus,...appropriate exemptions would exist to ensure that no impediments would interfere with overseas service for Australian troops in such missions as a peacekeeping operation, and emergency deployment or disaster relief.®6

2.68 The Australian Anti-Bases Campaign Coalition understood that overseas deployments that 'come under the rubric of "peacekeeping"; and deployments that are part of humanitarian and disaster relief efforts' were exempted from the bill.67

2.69 The committee notes that although the explanatory memorandum refers to warlike actions, the bill does not. Indeed, the words 'war' or 'warlike' do not appear in the proposed legislation. As discussed previously, the bill relies on subsection

50C(11) to determine what is and is not covered by the proposed legislation. Thus parliamentary approval is needed unless the service outside Australian territory is part o f a temporary attachment of an ADF member to the forces of another country; part of an Australian diplomatic or consular mission; on an Australian vessel or aircraft not

engaged, or unlikely to be engaged, in hostilities; or for the purposes of their education, training or procuring equipment or stores.68

2.70 For some submitters the exemptions were too narrow. The Australian Association for Maritime Affairs noted that Australia's seaborne trade interests extend

65 Senate H ansard, 17 September 2008, p. 4982.

66 Subm ission 13, p. [2],

67 Subm ission 26, p. [3], For further examples see also, Campaign for International Co-operation and Disarmament, Subm ission 14; Shelley Booth, Subm ission 16; Stop the War Coalition, Subm ission 20, p. 2; and Bill Fisher and Miriam Tonkin, Subm ission 30, p. [1].

68 Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008, subsection 50C(11).

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well beyond Australia's territorial limits and 'may require the assistance of Australian defence assets or by other friendly nations'. In its submission, it posed a range of queries about the classification of Defence activities and used the current anti-piracy operations off Somalia to illustrate its concerns. For example, it asked whether participation in the international anti-piracy operation was considered 'service' under the terms of the bill meaning that:

...R A N units could not even be committed to such an operation without a resolution o f the Parliament or could be committed but only with the proviso that they might be unilaterally withdrawn 48 hours later?69

2.71 The Navy League of Australia voiced similar concerns about what is considered warlike. It noted that recently two RAN ships in transit to the United States and Europe were unexpectedly called on to deal with Somali pirates. It asked the same question—'was the RAN ships' action a warlike act?' It contended that it would be undesirable to have commanders of Australian ships in doubt as to the legality of their

actions: that ADF members must have clarity as to what may be done legally.70

2.72 Although Australia is a maritime country with an extensive exclusive economic zone and relies heavily on sea routes for its trade, concerns about defining military action were not confined to maritime operations. The Australian Association for Maritime Affairs referred to the use of the 'vague term "service" in the bill'. It

stated:

There are m any fairly precisely defined forms o f 'service' undertaken by ADF personnel— war service, war-like service, hazardous service, etc— forming a spectm m of'service' which require specific determinations by the M inister. A t which level o f defined 'service' does the Bill apply?71

2.73 According to General (retired) Peter Oration, there 'are plenty of non-warlike deployments beyond the territorial limits' other than those excluded in subsection 50C(11). As examples, he cited—official visits, attendances at conferences and the like, rescue or extraction o f Australian citizens from threatening situations overseas, peace keeping under UN and combined exercises with the forces of other countries.72 Although he supported the principle of obtaining parliamentary approval for non­ routine deployment of Australian forces into armed conflict or situations likely to result in armed conflict, he was of the view that the bill as drafted was unsatisfactory. He explained:

The prim ary operative clause should address what the Bill actually aims at— Parliamentary approval o f participation in foreign wars. There are m ajor issues o f national security involved, and drafting would need careful

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69 Subm ission 8, p. 4.

70 Subm ission 12, p. [1].

71 Subm ission 8, p. 2.

72 Peter Oration to Ian Maguire, 15 February 2008, additional information from Mr Maguire subm ission 31.

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consideration and consultation, not only with interest groups and retired people like me, but with the ADF and Departments who would be involved in implementation.73

2.74 Ms Melissa Parke MP noted that the bill should also provide for 'service in United Nations missions to be included in the definition of "normal, non-warlike overseas service'".74 People for Nuclear Disamiament (Western Australia) noted the importance of ensuring that the ADF's humanitarian roles in responding to disasters

such as earthquakes and tsunamis were not impaired.75

2.75 In his submission, Mr Ian Maguire, who has long been interested in the legislation, proposed a redrafted and expanded subsection 50C(11). In his list of 8 exemptions, he included service 'as part of United Nations-sponsored peacekeeping activities which have not changed their predominant character to that of peace- enforcement and/or open warfare between or among States'. He also included 'the rescue and/or extraction of Australian citizens and dependent and non-combatant persons associated with them from disasters and threats from civil strife overseas'.76

2.76 General Oration has commented on the difficulties drafting this subsection. He noted 'the potential to impose unnecessary administrative restraints on the ADF in going about its day-to-day non-warlike business'.77 7 8

Territorial limits o f Australia

2.77 The committee also notes another problem associated with definitions in the bill. The Australian Association for Maritime Affairs sought clarification on the meaning of 'the territorial limits of Australia' as used in the proposed legislation. It

asked does it mean the 12 nautical mile Territorial Sea limit, or the 200 nautical mile Exclusive Economic Zone, or even the vaster area of seabed resources claimed by Australia. It stated further:

I f it is only the Territorial Sea limit, then the Bill may be perceived as inhibiting the power o f the Governm ent to take immediate and decisive action to protect Australian interests...

I f the Bill is intended to cover the full geographic range o f Australia's m aritime interests then considerable clarification appears to be needed.

73 Peter Oration to Ian Maguire, 21 February 2008, additional information from Mr Maguire subm ission 31.

74 Subm ission 11, p. 2.

75 Subm ission 22, p. [2],

76 Subm ission 31.

77 Peter Oration to Ian and Claire Maguire, 7 October 2009, additional information to Subm ission 31.

78 Subm ission 8, p. 2.

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2.78 According to the Association, the difficulties do not stop with determining the sea boundary. It explained that under international law Australian warships as well as 'public vessels' enjoy sovereignty and 'represent an extension of the sovereignty of the state to which they belong’. Thus, the Association informed the committee that:

A rguably the 'territorial limits o f Australia' include the actual vessels themselves and therefore such vessels, and their personnel serving onboard, take the 'territorial limits o f Australia' with them w herever they go and no m atter w hat operations they undertake.79

2.79 In its overall assessment, the legislation 'suggests a lack of appreciation of the realities of modem military operations and, particularly, the flexibility provided by maritime power, as well as the needs of the defence of Australia's worldwide maritime

interests'.80

2.80 General Gration also referred to the meaning attached to the 'territorial limits of Australia'. He presumed that this term was intended to allow use of Australian forces in defence o f Australia without the approval of Parliament. In his view, however, any defence of Australia would 'almost certainly involve the deployment of forces beyond the territorial limits—mainly naval and air, but possibly land as well'. He concluded:

It would also weaken the deterrent value o f forces such as our F i l l s and submarines i f a potential enemy knew that they could not be used without the fanfare o f Parliamentary debate.81

Imposing conditions or requirements

2.81 By 2005, concern about the scope of the bill had expanded considerably beyond definitions of warlike to include matters such as the extent to which Parliament's approval would involve details of, or impose conditions on, a

deployment. Senators opposing the legislation raised questions such as would the resolution o f the Parliament go as far as including the mles of engagement. These rules are concerned with the laws of armed conflict and prescribe the types of force that may be used by a deployment in different circumstances. Although the mles must be consistent with international law and Australian domestic law, their adequacy and

appropriateness is related to the main objectives of the operation and the level of force protection deemed necessary. They are extremely important to those engaged in any military operation. Senator Payne said:

I have a greater regard and respect for the Australian Defence Force doing those things with professionals, expertise and a regard for operational

79 Subm ission 8, p. 3.

80 Subm ission 8, p. 5.

81 Peter Oration to Ian Maguire, 15 February 2008, additional information to Subm ission 31.

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security than to even contem plate that that should be part o f the process o f the parliam ent.82

2.82 Senator Hogg also asked whether the resolution by both Houses would go to issues such as rules of engagement which in his view were 'most important':

I f they are left at the beck and call o f a parliam ent which m ight not be fully informed or have at its disposal all the information, then our forces may well be adversely affected by a resolution o f the parliam ent as to their engagement. W ould such a resolution include the strategy to be involved in such an engagement. W ould it have time limits. W hat tim e limits would there be? W hat other conditions m ight apply?83

2.83 Clearly, the proposed legislation should be clear on the extent to which Parliament's resolution to approve the deployment of troops is able to impose circumstances or conditions on that deployment.

Committee view

2.84 The committee has identified a number o f shortcomings in the proposed legislation that date back to 1986. These deficiencies relate to the uncertainty and confusion around the use and application of terms such as war and non-warlike service and assumptions made about their application. The committee is also concerned about the nature of the resolution to be agreed to by both Houses of the Parliament and the extent to which it could impose conditions on the deployment.

2.85 Before completing its consideration of the bill, however, the committee touches briefly on a number of procedural or technical questions. The committee will not provide a detailed discussion on these matters as it has already identified serious

deficiencies in the bill.84

Other concerns— position of Governor-General, summoning parliament, joint sitting and consequential amendments

2.86 In 1986, Senator Evans referred to more technical difficulties with the bill but did not elaborate except for citing the operation o f the amendment when Parliament has been dissolved. In 2005, some senators also noted possible procedural impracticalities with summoning parliament.85

82 Senate Hansard, 10 February 2005, p. 130.

83 Senate Hansard, 10 February 2005, p. 113.

84 Senator Evans, Senate H ansard, 17 April 1986, p. 1912 and Senator Hogg, Senate Hansard, 10 February 2005, p. 113.

85 Senator Evans, Senate H ansard, 17 April 1986, p. 1912, Senator Hogg, Senate Hansard, 10 February 2005, p. 113.

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2.87 Additional provisions were inserted in the 2008 bill dealing with possible procedural matters associated with summoning the Houses of Parliament.

2.88 New subsections (8) and (9) take account of circumstances when the Parliament is not in session at the time the Governor-General makes a proclamation about an emergency requiring the deployment of members of the ADF. Under the proposed legislation, when the Parliament is not in session or has been prorogued within 7 days after the proclamation, the proclamation shall cease to have effect 7 days after it was made. Furthermore no proclamation, the same in substance, shall be made until the day on which the Parliament next meets. The legislation also allows for situations where the House of Representatives has been dissolved or has expired and the day for the return of writs for the general election has not occurred or the House has expired within 7 days after the making of the proclamation. In such cases, the Governor-General's proclamation shall cease to have effect at the expiration of 7 days after the day appointed for the return of the writs for the general election.

2.89 The former Clerk o f the Senate, Mr Harry Evans, informed the committee that the main constitutional problem sought to be overcome was 'the ability of the Parliament to statutorily regulate the constitutional power of the Governor-General to prorogue and summon the two Houses'. He was of the view that 'the attempt by the

bill to deal with this and related problems is reasonably clear'.86

2.90 In 2005, a number of senators expressed concerns about the position of the Governor-General and whether he was to act on the advice of the executive government or whether he or she was to 'take counsel from other parliamentary

representatives'. As noted earlier, subsection 50C(4) stipulates that the Governor- General's proclamation declaring that an emergency exists 'shall not be made except on the written advice of the Prime Minister to the Governor-General'.

2.91 Some senators were very concerned about the political consequences for the office o f the Governor-General. Senator Payne and Senator Macdonald argued that the proposal 'would place the Governor-General in an unacceptable position'. They suggested that the office of the Governor-General could be politicised' and that the bill

runs counter to the fundamental premises of our constitutional system of government.87

2.92 On another matter, Professor George Williams said that the bill should not be enacted in its current form. He favoured a joint sitting of Parliament as opposed to separate sittings by each House.88 Just Peace had also entertained the notion of a joint sitting.89

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86 Mr Harry Evans to Chair of Foreign Affairs, Defence and Trade Legislation Committee, 24 August 2009.

87 Senate Hansard, 10 February 2005, pp. 122 and 130.

88 Submission 1, p. 1.

89 Submission 15, p. 4.

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2.93 Finally, the Australian Association for Maritime Affairs drew attention to the need for consequential amendments to the Navy, Army and Air Force Acts.90 For example section 33 of the Naval Defence Act 1910 states that 'Members of the Navy may be required to serve either within or beyond the territorial limits of Australia'. Section 4F of the Air Force Act 1923 has a similar provision which states 'Members of the Air Force may be required to render air-force service on land or sea or in the air, and either within or beyond the territorial limits of Australia'.91 This need for consequential amendments could be easily rectified.

Long standing government policy

2.94 The Department of Defence did not make a submission to the inquiry. The Minister for Defence, the Hon John Faulkner, however, recently made clear that the government is opposed to any such legislation and that 'committing troops to war should remain the prerogative of the Prime Minister and Cabinet'. A spokesperson for the Minister stated, 'the Government maintains— as have governments past of both

political persuasions—that the power to deploy the Australian Defence Forces beyond Australian territorial 1 units is a matter for the executive branch o f government'.92

Conclusion

2.95 Those involved in the 1986 and 2005 debates or in making submissions to this inquiry recognised the seriousness o f the decision to send members of the Defence Force abroad on warlike service. Those supporting the bill believed that any such decision required debate and approval by Parliament. While also acknowledging the

critical importance of parliamentary debate, most opponents of the bill stopped short in accepting the requirement for both Houses o f the Parliament to approve the deployment of Australian troops. They held misgivings about the practical application of some provisions.

2.96 Since 1986, when the Defence Amendment Bill 1985 was debated, a number of shortcomings in the proposed legislation have been raised consistently. Aside from revising the provisions governing procedures when Parliament is not in session, the

bill before the committee shows little evidence that it has addressed deficiencies that were apparent in earlier versions o f the legislation. They include issues around the treatment of classified material; constraints on the ability of Defence, in some cases, to mobilise its forces safely and effectively; and serious problems with definitions.

Classified materialinformed decision-making

2.97 The committee is of the view that the disclosure of classified or sensitive intelligence may well compromise an operation and the safety of Australian forces or

90 Submission 8, p. 2.

91 See section 33, NavaI Defence Act 1910, and section 4F, Air Force Act 1923.

92 Quote taken from the Age, 'Labor MP says Parliament should approve war', 23 December 2009.

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those of their allies. On the other hand, the committee contends that if such information were necessarily withheld from the Parliament, then those required under the proposed legislation to make critical decisions about the deployment of forces would not be fully informed—an equally concerning situation for the security of the nation and its forces. The committee finds that the legislation does not address these

concerns adequately.

Requirement for flexibility and adaptability

2.98 Although the proposed legislation allows for emergency situations, the committee is concerned that the process of seeking Parliamentary approval may, in some circumstances, cause difficulties for the effective and safe deployment of Australian forces. The committee is concerned about the possible delay especially should debate in Parliament become prolonged. It also has concerns about possible unintended consequences that may arise including implications for the Defence Force should approval not be forthcoming after forces have been dispatched in response to an emergency.

Scope o f bill— extent ofparliament's involvement in deployment, military activities over which parliament exercises authority, and the definition o f territorial limits

2.99 The committee believes that a major flaw in the proposed legislation is its failure to take account of military service such as peacekeeping, capacity building in other countries, humanitarian assistance, anti piracy, responses to maritime incidents such as harassment, sabotage, small scale raids and illegal fishing and covert

operations such as those involving submarines. This list is not exhaustive. Furthermore, the committee notes an inconsistency between the explanatory memorandum with its use of the words non-warlike overseas service and subsection 50C(11) which makes no reference to peacekeeping or humanitarian or disaster relief

operations.

2.100 In this regard, the committee is of the view that critical terms should not be used in the explanatory memorandum without reference and clear definition in the bill. The committee is of the view that subsection 50C(11) as currently drafted is unsatisfactory and requires thorough revision, after exhaustive consultation with Defence and, if required, the AFP.

Complex legislation

2.101 The committee suggests that any proposal to limit or remove the power of the executive to decide on the commitment of Australian troops to overseas service needs to be examined carefully by the Department of Defence, Attorney-General's and relevant security agencies. They must be an integral part of any consideration to change the current process for committing troops to overseas service. Such agencies

are best placed to understand and advise on matters such as the disclosure of classified material and of the contents of diplomatic consultations, of the complexities of formulating rules of engagement and the safety and operational implications

associated with public debate on such matters. Defence have a sound understanding of

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the complexities in pre-deployment preparation and readiness, the location and strength of Australia's military assets, the strategic importance of covert actions, responding to incidents such as piracy, and the complicated and changing nature of peacekeeping operations. This list indicates some of the complex circumstances that any legislation dealing with the deployment of troops must recognise. Clearly, those most knowledgeable about such matters need to be involved in the formulation and drafting of legislation governing the commitment of Australian forces to overseas service.

Overall assessment

2.102 The committee is not in any way against the involvement of both Houses of Parliament in open and public debates about the deployment of Australian service personnel to warlike operations or potential hostilities. It agrees with the views of most submitters that the Australian people, through their elected representatives, have a right to be informed and heard on these important matters. But, while

wholeheartedly supporting debate in Parliament on any anticipated, proposed or actual deployment to overseas warlike operations, the committee cannot endorse this proposed legislation. It is of the view that the bill leaves too many critical questions unanswered to be considered a credible piece of legislation. It believes that, while well

intended, the bill may have unforseen and unfortunate consequences that need to be identified and resolved before further consideration could be given to proposed legislation.

Recommendation

2.103 The committee recommends that the bill not proceed.

SENATOR MARK BISHOP CHAIR

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Australian Greens - Dissenting Report

The d eb ate on w h o sh o u ld b e e m p o w e re d to send A u stralian m e n and w o m e n to w a r is, as the C o m m ittee's rep o rt attests, an e n d u rin g and p ersisten t one. W hile u n d e rw a y 'for decades now ', each decade h as b ro u g h t lessons a n d experiences to inform an d d e e p e n this debate. The sequence of u n fo rtu n a te decisions lead in g A u stralian D efence Force personnel to be en g a g e d in an illegal w a r in Iraq h a s p ro m p te d a renew ed sense of its urgency an d relevance.

The m o st serio u s flaw in the co m m ittee's m ajority re p o rt is th e assu m p tio n th at h av in g all d im en sio n s of security a n d d ip lo m atic intelligence at its disposal, the executive arm of g o v e rn m e n t alo n e sh o u ld b e e n tru ste d w ith sen d in g A u stralian s into w ar.

If ev en the co m p reh en siv e debacle of th e invasion of Iraq is insufficient to shake this u n fo u n d e d faith, it is h ard to conceive of w h a t it w ill take to d o so.

The C om m ittee n o te s that a con sid erab le p ro p o rtio n of su b m issio n s w ere d ev o ted to the prin cip le in q u e stio n rath er th a n the detail. This is surely d u e to the fact th a t the m ajor parties have n o t y e t conceded the p rin cip le that dem ocratic d eb ate by those w ho rep resen t A u stra lia n s is a p p ro p ria te in sen d in g tro o p s to w ar.

Both of the m ajo r p a rtie s are u n ite d in th eir refusal to even d iscu ss the principle, let alone the details. S ho u ld the m ajor p arties begin to give m ore value to dem ocratic p rin cip les of co n su ltatio n , tran sp a re n c y a n d accountability, detailed atten tio n can be paid to clarifying a n d refining the v a rio u s thresholds a n d definitions th at w ill be req u ired for th is p rin cip le to b e m ore practically g ro u n d ed . The m ajority rep o rt does an excellent job of id en tify in g th ese p ro b lem areas a n d th resh o ld questions, an d a d ism al job of p ro p o sin g th e obvious w ay s fo rw ard .

The relative m a tu rity of th e d eb ate in th e U K on th e w a r p o w e r h as resu lted in several th o ro u g h in q u iries a n d a n e w co n v en tio n w hereby the executive com m its to trig g er a d ebate lead in g to a reso lu tio n of the p arliam en t before a d ep lo y m en t is u n d ertak en .

In sta rk contrast, th e im m a tu rity of the d eb ate in A ustralia h as seen this C om m ittee decline to even co n d u ct a h e a rin g in to th is Bill. T hat is, an in q u iry into the m erits of dem ocratic d e b a te w as u n a b le to h e a r th e evidence of fo rm er senior ADF personnel, defence secretaries, U N p eacekeepers, am b assad o rs an d advocates, w ho ap p a re n tly co u ld "bring n o th in g new to th e debate".

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The Australian Greens disagreed that these experts had nothing to offer and therefore organised a forum bringing together those with divergent views, the transcript of which is provided as an addendum to this dissenting report.

This dissent answers the key arguments raised in the majority report, addressing appeals to 'tradition', the disclosure of sensitive information into the public domain, and the ability to maintain flexibility and rapidity of deployment.

Westminster tradition Those opposed to enhancing the accountability and transparency of government in sending troops to kill and die often cite 'long standing Westminster conventions' as argument. Ironically, the Iraq debacle has actually prompted Westminster to revisit the 'war power'.

Rather than blindly maintaining tradition in maintaining the prerogative only in the hands of the Executive, the government in Westminster recognised the limitations and pitfalls of this tradition. It also recognised that democratic institutions evolve and modernise over time as lessons are learned. Not all 'long standing Westminster conventions' have merit and many have changed: to reverse the bigotry inherent in conventions that, for example, did not recognise women or people of colour as human beings with democratic rights and responsibilities.

The expertise offered by Professor Colin Warbrick was particularly insightful on the debate in Westminster as he served as an adviser to the House of Lords Committee on the Constitution. Professor Warbrick detailed many of the unanticipated complexities

encountered by the UK Committee, including the progress made on some of the issues raised in the Committee's report, regarding appropriate exemptions and the definitions of terms like 'emergency' and 'war-fighting capacities.'

The Professor made an important point about the decision-making processes used in the Security Council wherein the concept of operations, mandate and regular reporting is a routine part of the UN's peacekeeping function.

"...there are standard features of these arrangements which states do comply with. There is an identifiable mandate, there is a reporting obligation and there is the possibility of time limited deployment. If we can manage that for the Security Council, I fail to see why there is a principled objection, there may be pragmatic ones, but why you can't do this domestically as well."

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Disclosure of sen sitive information into the public domain An argument made by opponents of the Bill is repeated in the Committee's report implying that a parliamentary debate necessarily involves the disclosure of classified military and strategic information. Proponents of this argument miss the point that it is not a military decision to go to war, it is a political decision. This Bill calls for the government of the day to make the case as to why peaceful diplomatic efforts are exhausted and force is the only option. This is a political debate, not a military one. Arguments, clear goals, a risk and cost benefit analysis is envisaged, not the disclosure of classified military information about the placement of military assets or personnel that would compromise the country's security.

Professor Helen Ware spoke from her considerable experience in war zones as a government official and as someone who now teaches peacekeepers and members of the ADF. She relayed the incredulity she noted in rural Australia at the democracy deficit inherent in Prime Minister Howard's unilateral decision to enter Iraq,

"1 was in Armidale at the time when it was announced that we would join the coalition of the willing in Iraq and I can remember one of the most common reactions on the street was some amazement that the Prime Minister could just do this without having to go and consult the parliament...Because if something as important as warfare in which Australians are at risk and indeed are killed

overseas is not a matter for consideration by the parliament on a regular basis, it becomes rather an interesting kind of democracy. If we think about if, we might be quite shocked for example say if one of our northern neighbours, perhaps I'd better not name one, went to war and their parliament was not in anyway

involved, we would probably say their president was a dictator.”

Flexibility and rapid deployment Submissions made to the Committee and participants in the forum reflected on the need for flexibility and rapid deployment of troops. The Bill does provide for exemptions and procedures for emergency deployment, aspects of which will be strengthened and further elaborated in amendments informed by this inquiry. Insights were provided by military experts regarding the occasional need for haste in deploying troops in peacekeeper capacities to prevent the onset, escalation or renewal of violence.

Opponents of the Bill who utilise the East Timor example as their strongest case in point were rebutted by both Brigadier (retired) Adrian D'Hage and former Defence Secretary Paul Barrett AO, both of whom had senior responsibilities for Australia's engagement in

East Timor. Brigadier D'Hage:

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"...planning for major deployments like Iraq and even East Timor involves a lot of logistics, you need a lot of time to do that, and there is ample time within that military gearing up, when you put forces on alert, for the debate to take place."

Paul Barrett AO concurred,

" an example with which I have first hand knowledge, ...is the decision to prepare troops for deployment to Timor. The timescale of that was that in the National Security Committee of Cabinet, following the then Prime Minister 19 December 1998 letter to President Habibi of Indonesia and his response. Admiral Barry and I recommended to National Security Council of Cabinet in February that before the year was out the government might find it desirable to have raised another brigade group to 28 days readiness. That means given 28 days notice to deploy they would be able to deploy. Now, it took us about 6 months and between two and three hundred million dollars to achieve that effect of having

another brigade group ready to deploy out 28 days notice. And when there was decided to deploy troops to East Timor there was another 28 days to get them on their way. So for most of 1999, between February and September 1999 there was an opportunity to debate the issue in parliament. There were sensitivities involved in that because the Department of Foreign Affairs was understandably concerned about what signal all of this training of military forces was sending to Indonesia when we were in a sensitive situation. So it's not necessarily a debate you would have wanted to have had had in March 1999, but as you can see when that was evolving, we were in discussions with the Indonesians and the UN about whether our troops could deploy. There was plenty of time to have a debate in parliament about what we were doing and why, but to actually get the approval of parliament not simply to inform the parliament."

Conclusion

The Committee cites Minister John Faulkner as listing various opportunities for parliament to debate the war like situations in which Australia is involved, such as Matters of Public Importance, urgency motions, questions and general business. However, every time a motion is used to raise concerns about a foreign policy issue, the government provides a bland and condescending admonition about the inappropriateness of using such instruments to discuss delicate and complex foreign affairs matters. Similarly, MPIs and ministerial statements on conflicts with which we are engaged offer little opportunity for a debate or exchange, rather they are a one way communication with no recourse for input to actual decision making.

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The Committee’s report notes that various sections of the Bill, 'require thorough revision after exhaustive consultation with Defence, and if required, the AFP’. The Committee also suggests that 'any proposal to limit or remove the power of the executive to decide on the commitment of Australian troops to overseas service needs to be examined carefully by the Department of Defence, Attorney General's and relevant security agencies’.

The Committee states that 'Clearly those most knowledgeable about such matters need to be involved in the formulation and drafting of legislation governing the commitment of Australian forces to overseas service’. Given the Committee has identified the utility of consultation and engagement with relevant agencies, the Greens recommend that the Committee continue to engage with this issue by organising off the record briefings, round tables and forums on the matter.

The Committee's report notes that the unequivocal support for the principle that the Executive should not be able to make such an important decision without reference to or endorsement by the Australian parliament. Through such statements, it appears the Committee agrees with the spirit of the Bill and should therefore engage more thoroughly in the process of refining its provisions.

The virtues of living in a democracy extend beyond delegating responsibility to government through the act of voting once every three years. Democracy is an evolving art and our democratic practices and institutions like the parliament should also evolve to support an ever more engaged and empowered citizenship.

As other democracies have evolved, subjecting the war power to a democratic process has become routine. As one of this Bill's strongest and most prominent advocates recently said of this Bill, "Its chances may appear to be slim at present, but its time will

come!"

SENATOR SCOTT LUDLAM A U ST R A L IA N G REEN S

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Addendum to dissenting report

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Forum on the Defence Amendment (Parliamentary Approval of Overseas Service) Bill 2008 Friday 12 February 2010 Room 1S5, Parliament House, Canberra

NOTE: This is not a strict verbatim transcript but rather tries to capture the main points of participants

Senator Ludlam opened the meeting at 9.06 am.

Senator Ludlam: I would like to welcome you all. I’m just going to do some very brief formalities. I'm aware that it is very late in London where the Professor has had the good grace to stay up to join us. Professor, in welcoming you to this forum today, I need to remind you that this is not an official parliamentary meeting; you are therefore not protected by parliamentary privilege. I'm emphasising this point to you now and to everyone that has joined us this morning that we are fully responsible for anything we say here, and the normal rules of defamation apply.

So this meeting is not being conducted by the normal rules of parliamentary hearings. If that is clear can I ask each o f the participants in the room to very briefly introduce themselves, so you know who you are talking to, and then I'll ask you to make and opening statement.

The following participants introduced themselves:

Neil James, Executive Director, Australia Defence Association Ruth Corrigan, representative, Women's International League for Peace and Freedom, Australian Section Professor Helen W are, Professor University o f New England in Armidale, teaches peace studies Dr. Sue Wareham, Immediate Past President, MAPW, Australian affiliate of IPPNW Dr. Kris Klugman, President o f Civil Liberties Australia Bill Rowlings, CEO, Civil Liberties Australia Nick Deane, Marrickville Peace Group

Jo Eirie, M arrickville Peace Group Andrew Barlett (former senator) Felicity Hill (transcribing) Secretariat, Senate Standing Committee on Foreign Affairs Defence and Trade

Senator Ludlam: Professor I'll give you the floor to make an opening statement and then if you are willing, to take questions.

Professor Colin Warbrick: Sure. My involvement in this is process was because I was the adviser to the House o f Lords Committee on the Constitution, which looked at what turned out to be the power prerogative to deploy troops abroad. This was part o f several initiatives; mainly it has to be said, driven by the decision to go to war in Iraq, which have sought to find some way of

calling to account the otherwise unaccountable powers over the prerogative of the government to decide effectively when to go to war. I think it was fair to say that the Committee found it a far more complex question than they expected. There was legislation proposed on more than one occasion to deal with this matter, some o f it I have to say I thought was quite sound. But the

Committee in the end decided that they would recommend an instant parliamentary convention, that there ought to be a statement by the government about what it was going to do in the future

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whenever it sought to deploy troops abroad in, I will put it very generally, war-fighting capacities. We have to come back to some o f these questions as we go on.

There was some resistance I think it is fair to say, by the government. It was still Tony Blair's government then when this report was issued. But when Gordon Brown became Prime Minister, practically the first initiative he took was to propose quite an elaborate programme of constitutional reform very broadly based to try to make, that was willing to make, the Executive more accountable to parliament and the people through various acts o f power, including the war power. There was a consultation about what should be done and as a result of that, the government produced a Green Paper in which it effectively accepted in principle, as its preferred position, something close to the proposal o f the House o f Lords Committee, that there should be an instant convention, a parliamentary statement, a House of Commons statement which would regulate future decision to go to war.

I will say two things about this. First o f all, that the proposal o f the government is so weak and under the control o f the Executive that it hardly amounts in my view to an advance at all. The second thing is that the way in which the m atter has been handled has been partly effected, there is no question, by the subsequent Inquiry into Iraq by the Chilcott Committee. Claims of one kind or another, that either the matters ought to be left completely alone, or there is some kind of ex post facto accountability for these kinds o f decision is the right way to proceed. But not that you make crucial decisions about war and peace subject to parliamentary and still less judicial

control.

I will just make one final point, when the House of Lords Committee was dealing with the question the government said consistently that there would never be another recourse to war without consultation and approval by the House o f Commons. At that time and since, the government has a new, entirely new deployment, has upped the deployment of troops to Afghanistan, as though they made no such commitment, it has adopted it's powers and policies under the existing provisions, which effectively have left it free to decide when it will send troops, how many troops it will send, and so on.

Senator Ludlam: Thank you very much for that. I should acknowledge that I was very remiss in not introducing former Senator Andrew Bartlett who is on the phone and was the initiator o f the Bill we are discussing today.

Andrew Bartlett: I am remiss in not being with you, apologies to everyone. Thank you for all of your participation today.

Senator Ludlam: Professor, can you describe for us the process o f consultation the Green Paper went through? Who did you speak to?

Professor Colin Warbrick: It was published on the web. Certain people were contacted directly by the justice department which was responsible for this. It was a very broad consultation on more than the war power, and I was very surprised at how very few people did in fact reply on the war power question. The most amazing thing o f all was the question about whether the Union Jack should be flown in public places obtained ten times as many responses as the power to go to war. There was quite useful and relatively wide ranging responses, and o f course there

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was House o f Lords Committee material to go on, and other Committees had been looking at this question in greater or lesser detail, so there was quite a bit o f information on which the government could rely.

Senator Ludlam: Can you sketch for us the different models then that were put forward?

Professor Colin Warbrick: The first proposal was that there should be legislation. And there were models already available, because there were private members bills which had successively distilled what was required if there was to be legislation. There was room for argument about what a legislative scheme should contain. One o f the big questions that you might want to

consider is what overseas deployments should be included? Is it the case that every time an Australian soldier crosses the Australian and international border there should be a debate in parliament? It needs some threshold decisions and standard settings. The House of Lords

Committee were reluctant to accept that for two reasons I think. One was that they thought it was politically difficult to accomplish, and secondly, and this will always be a problem, there was concern about judicialising the war decision, and turning what was essentially seen by some people as essentially a political decision into a judicial one.

The second proposal was that there should be this parliamentary statement, a House o f Commons statement, effectively it means in the UK that it is the House of Commons we are talking about. There should be a statement by the government, or adopted by the House of Commons which would say that for a future deployment the government would bring a proposal to the House of Commons on a substantive motion which would be a condition for deployment o f troops and with that statement there would be certain information. That is partly why the difficulties arise because many people think that it’s the information question, at least in relation to Iraq which is the crucial question, rather than the fact o f the consultation itself, because parliament did vote on the decision to go to war in Iraq - the question is what was the authenticity of the information which was provided to it. And thirdly there was the suggestion that we stay as we are, I mean what was there w rong with the constitutional arrangements that we have in place, they had served us well enough and should continue.

Senator Ludlam: Thanks very much, I would like to open up the floor to others who might wish to ask a question.

Neil James: I have one question. It's not so much the matter o f principle of whether parliament should have this power or not but the practicality of how it will be exercised. I understand that the British service chiefs, the retired British Service chiefs now sitting in the House of Lords had a lot to say on this matter and I would be interested in your views on the matter of practicality of how the legislation would be written.

Professor Colin Warbrick: Well they did, and I think one of the striking things about it was that they were not at all agreed about what the right solution would be. There were actually some very conservative views that anything that got in the way o f Executive decision making in matters of war and peace was to be deprecated. I think something has changed, and what that is, is recognition that decisions about going to war may involve the individual responsibility at least of senior members o f the armed services and that they need to be assured that there is a sound legal basis for the action they are taking. That is quite separate of anything that might go on in the

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conflict, whether lawful or unlawful. The rules of war will apply and I am perfectly aware o f that. But this was a different question; it was a question, to put it bluntly, if this was a war of aggression, if the deployment was a w ar o f aggression, what would be the consequences for the commanders who ordered their troops to war in those circumstances?

If, as it is in the UK, the decision to deploy the troops is purely a prerogative power, there are no legal standards to apply to the decision to use force. The only standards are international legal standards, and those standards are relatively, relatively clear. If the decision to go to war, if the

war is in self defence, and there is an overwhelming necessity to act, no body suggests that whatever legislative scheme or other scheme is adopted, that there should not be an emergency power in the government and the armed forces to respond.

But many deployments of force these days are of course wars o f choice. They are in support of the United Nations, they are humanitarian interventions, and there is time for reflection about matters, it is necessary to get troops together to deploy them all around the world. It's not instant responses o f self defence today. And so, the Service Chiefs, or some of them, recognised that there was a gap, a time gap when it would be possible if we wanted to obtain parliamentary

authorisation, and there was a feeling that this would increase the legitimacy, and that the armed forces would feel better if they knew that this was a considered decision that has the support of the people's representatives. That seems to me to be quite a powerful argument in a democracy.

Bill Rowlings: W hen you looked at the W ar Powers in Britain, did you look at Australia's powers at all? Did you do any comparison with other countries?

Professor Colin Warbrick: Yes, we did, because you were at the same time having problems and were considering whether to send troops to Afghanistan, or whether to increase rather, you were considering to increase the troop deployments there. The mechanism in Australia were very similar to the ones in the UK, and what perhaps was interesting is that we did look at other states as well. In Canada, for instance, which is in constitutional terms Australia and the UK have similar identities there was a requirement o f parliamentary support, and it took the government quite a good deal o f effort before that support was gained. And it may now be, we will have to see the events in Canada, that parliament will assert again about the continuing participation of Canada in the conflicts in Afghanistan, either its overall commitment, or what it is the troops are entitled to do.

My view is that comparative constitution investigation is o f rather limited value, because the constitutional and political differences between states mean that you can't really transplant one model from one jurisdiction to another. It can give you some ideas; it can give you some o f the kinds o f questions you ought to ask. And I would say that the two great questions are the question o f the threshold and the question o f what information government should be obliged to supply. How those questions are to be managed, what the relationship should be between say the Executive and Parliamentary I think depends on the constitutional traditions and expectations o f each polity itself.

Kris Klugman: Thank you for your contribution I am finding it extremely interesting. In the legislative model that you outlined, was there any requirement that there be reporting back to parliament on the progress of the war?

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Professor Colin War brick: Yes there was and I think that is an important consideration. Something I have not mentioned, it is difficult to deal with, is what in United Nations terms is called mandate drift, where the operation takes on almost a life o f its own and the surge in Afghanistan o f course is a very typical example o f it. An operation gets started with certain

limited parameters and limited commitment, troops have maybe a clear legal base, and then as time goes on these decisions change, more troops are sent, the rules of engagement are changed, the mandate o f the operation is changed, in Afghanistan the question o f whether there should be action across the Pakistan/ Afghanistan border for instance. In these circumstances you can

imagine a government that wants to do this will argue that this is the same deployment, it's just operational decisions and not the big decision about war and peace itself. But if there is a regular reporting process then the government will have to give an account o f what is going on. And there is a case for saying, and I'm not utterly convinced o f it, that the decision to go to war should need to be renewed every 12 months or so, you can fix your own date for this, rather than saying that the operation should go on, but parliament ought to address the question again and give the Executive a renewed authorisation. Now you can imagine this didn't go down very well with the military. But I do think that some kind o f continuing overview is a crucial part o f the operation. I don't think this is quite as bad sometimes as some of the miliary spokespersons might suggest. Because if forces participating in a UN authorised operations, like Afghanistan, there are standard features o f these arrangements which states do comply with. There is an identifiable mandate, there is a reporting obligation and there is the possibility o f time limited deployment. If we can manage that for the Security Council, I fail to see why there is a principled objection, there may be pragmatic ones, but why you can't do this domestically as well.

Senator Ludlam: There is time perhaps for one last question.

Neil James: I am interested in your views on whether it should be both houses o f parliament or just one. The situation in Britain and Canada and NZ is a bit different to Australia, because Britain and Canada have an appointed upper house and NZ doesn't have one at all. I’d just be interested in your views on if Parliamentary approval would be required in both Houses and if

this would matter if the house is elected or appointed?

Professor Colin Warbrick: Well, I think it does matter; absolutely it matters if the house is elected or appointed. As things stand in the UK at the moment where we have had an appointed house, even the House of Lords itself, the Committee that I sat on was House o f Lords Committee, did not suggest that the House o f Lords should be part o f the decision making process in the sense that its positive support would be required for a lawful or legal deployment.

They would leave that to the Commons. The question was whether there should be any part for the House o f Lords. And people were concerned that there is in the House of Lords very considerable expertise of a political and military and legal kind, which would be relevant to any

decision to deploy the troops abroad. And what was suggested by the Committee and which has accepted by the Committee on the Constitutional Bill, is that there should be a House o f Lords debate but without a vote. So theirs would be a deliberative process, the results of that deliberation, if time allowed, would be fed in to any decision that the Commons took. But it would be Common's decision, either in this convention system that has been proposed, or if we had legislation, which would be the crucial instrument. And although there is this democratic

legitimacy problem o f the upper house, I think this is the right thing to do.

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Senator Ludlam: We need to leave it there. On behalf o f us all I would like to thank you for staying up and lending us your expertise. I think it has been a really great jumping off point and place for us to begin and thanks for joining us.

Professor Colin Warbrick: I am pleased to help. Thank you. Goodnight.

Senator Ludlam: I might now go through some of the formalities and make some remarks. The proximate cause o f meeting is the discussion of a Bill which I've had most recent carriage of, but I am going to ask Andrew to provide some context in a short while. It's a bill that amends the Defence A ct 1903, to provide for parliamentary approval for deployment which is one way of

opening up the conversation about the war power, who decides and what recent history can tell us about who should. The bill has been around in various iterations for a very long time, certainly since long before I was around, there is currently in Australia a bi-partisan consensus against this proposal or any proposal like it. I get the sense that the debate in Australia, certainly what we have heard this morning, is relatively immature compared to the state o f the debate in other parts o f the world. The Bill is currently under consideration by the Senate Standing Committee on Foreign Affairs, Defence and Trade, Legislation Committee which chose not to hold a hearing, which is the reason why I thought it would be worth convening this meeting. The views that are expressed will be submitted in transcript as a Minority report to that Committee’s deliberation. I believe we are still on schedule for reporting on the 25th o f Februaty.

I encourage all o f you to test the opinions o f each of the people we have here today, there is a lot o f expertise in the room and coming in on the phone. We deliberately did not invite only people who would agree with each other or the proposal - it wouldn’t be a very interesting morning if we had. I am encouraging people to think, "If not this bill, then what?", if we can look for creative solutions and proposals. It is a really complex proposition that we are putting. So I hope that we can move the debate forward in some way and set ourselves up for the next stage so we are actually making a contribution to the public debate. Andrew, do you want to offer some brief comments on the history of the Bill?

Andrew Bartlett: Yes, sure. Basically as you said it goes back in various forms a long way. The Bill that you are looking at now is fairly similar to a Bill that I put in, in the previous Senate after the last election. It was re-tabling a bill I'd had before, but that one in turn had built on previous Bills by previous Democrats Senators. In tracing it back as far as I could tell, it really first appeared in the early 1980s, former NSW Senator Colin Mason, one o f the first two Democrats elected, moved a similar sort o f thing, the same principle anyway, as amendments from time to time as a Defence Act Amendment Bill would come through the Senate he would move this amendment. So it was amending a Bill going through rather than a bill in its own right. That was obviously not ever supported by any of the major parties, but it did mean there was some debate in the Hansard in the Committee stages o f those various debates. After a while

it did get formalised into a Private Senator's Bill. I know the earlier version of mine was, in the second reading stage, debated on the General business session on a Thursday afternoon; it’s a time when non-government bills get debated. It never came to a vote but there was some speeches on the record, from other senators apart from myself, again both major parties not supporting it.

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I suppose the only other thing I'd say in context, as the Professor said, what seems in principle a very simple idea, that Parliament should approve sending troops overseas rather than the Executive on its own, how you actually do that has always been a bone of contention. But even leaving the technicalities aside there has never been agreement, or even its been hard to detect a

lot o f support o f individuals from time to time in the major parties have supported the idea in principle, but the parties themselves at Cabinet, or Shadow Cabinet or Ministerial, Shadow Ministerial level have always been pretty cool on it, and I guess that’s probably as a significant a thing, rather than the fine print, the principle has been supported.

The only other two contextual things I will say, as far as I can tell from when it was put forward by Democrats Senators in the early 1980s, it wasn't in response to a particular situation, it w asn’t in response to use o f troops or anything like that, I think it was part of a broader range o f measures that Democrats coming into the Senate at the time were pushing, that tried to give more of a role o f the parliament on key decisions. Another issue that was pushed in the 1980s was to give parliament, or the Senate or both houses was to give them more of a role in approving Treaties for example, as happens in the US Senate. That obviously was never agreed to either, although we do have the Joint Standing Committee in Treaties, which gives the parliament a role

in scrutinising treaties, without having a say over whether or not they get agreed to. And that is perhaps the other aspect to put in, listening to the professor again is that issue o f a mechanism for parliament to scrutinise the progress or what is happening beyond Estimates Committees and those sorts of things. I would think to some extent in the politics o f the situation, if you did actually have today the Senate passed a motion saying Australian troops should be withdrawn from Afghanistan, for example, that would create a lot o f political pressure. The government may or may not respond to it, but there are no mechanisms for encouraging the parliament to continue look at these things. That to me that is sometimes surprising, that we have as something as significant as Australian troops in conflict as we do in Afghanistan, and have had for a number of years and there is really not a lot of debate about it. To some extent, that underlying principle, whether or not the parliament has the power to approve is one thing but it's also how much extra role should there be in parliament to have to scrutinise and express opinions and those sorts of

things, because that doesn't happen much either.

Senator L udlam : Thanks very much for that background. Some o f those propositions have been put in a num ber o f submissions, both formal and informal, to the Committee. I will now introduce Professor Helen Ware. Helen is a former diplomat, she was an Australian High Commissioner to Zambia in the last 1980s when this role involved being the unofficial Ambassador to the Southern Africa Liberation Movements. She was formerly Director of

Projects to the Human Rights Commissioner and she was a senior official with AusAID for many years. Currently she is a Professor of Peace Studies at the University o f New England in Armidale, where she researches peace building and post conflict studies by distance education

across the world including to members o f the ADF. So welcome Helen if you want to offer some opening statements.

Professor Helen Ware: Thank you very much. My interest in this area comes from two sets of interests. One is pretty obviously in the whole area of war and particularly peacekeeping. I suppose I have something o f a split personality. I don't want Australian to go to war but I do want Australian troops to be involved in peacekeeping. Obviously it's not possible to draw a simple

line between the two activities. I think also there are major questions involved as to the kind of

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democracy that we think Australia should be. The model which says that the Prime Minister of the day can effectively decide whether Australia is going to war or not, seems to be a model that says you have an election and 51% o f the population or 53% or whatever votes in the government and then you just let them do whatever they like. Because if something as important as warfare in which Australians are at risk and indeed are killed overseas is not a matter for consideration by the parliament on a regular basis, it becomes rather an interesting kind o f democracy. If we think about if, for example we might be quite shocked for example say if one of our northern neighbours, perhaps Td better not name one, went to war and their parliament was not in anyway involved, we would probably say their president was a dictator.

So I also in passing raise the interesting issue, if at some future date Australia gets an elected president, a popularly elected President, and he/she is against a w ar that the government o f the day promotes, that would raise some interesting issues I think. In thinking about this I find myself even thinking that we are all familiar with the slogan 'no taxation without representation', what about 'no war without representation', or without a greater democratic involvement than there is currently.

That, as I say, there are we have already talked or referred to some o f the technical issues about how you actually define war as opposed to being in the UN peacekeeping efforts, and I might note for example that in America there is a standing provision under the legislation that Americans can commit up to 1000 troops to a peacekeeping operation without further referral to

Congress. We might think of a smaller number in the Australian context, but that might be one way of dealing with that particular issue as opposed to a major exercise such as involvement in Iraq or Afghanistan.

I was in Armidale at the time when it was announced that we would join the coalition o f the willing in Iraq and I can remember one o f the most common reactions on the street was some amazement that the Prime Minister could just do this without having to go and consult the parliament. W hen I say amazement I don't mean just among what you might call the ordinary objectors, the people who are well known for prior objection to military involvement, just talking to the ordinary farmers and retired soldiers on the streets o f Armadale, it was quite clear that they were quite surprised that it didn't require anything more under the Australian Constitution which o f course doesn’t say anything about how we decide whether we are going to war or not, its not a provision of the Constitution. It just morally shocks me that if you are going to have democracy, and I spend a lot o f my time teaching about democracy in developing countries, one o f the things democracy must be regarded as having a central role in is indeed the question about whether the country becomes involved in war. Fortunately these days we can assume wars will be overseas, w e’re going to go and fight in someone elses country, and the question o f what that country thinks about us going and joining in is another question about democracy. Are we prepared to invade other democracies? History would suggest that that is actually one constraint by and large that does operate. It always interests me when you are discussing any aspects o f human rights in Australia that people are quite reluctant to look at what the precedents are overseas. The Canadian one has been referred to, in this case, it is necessary for parliament to approve deployments overseas in war like situations. Again, as has been referred to, there are some quite interesting debates you can have about the actual terminology and this again is quite important in thinking about the differences in being involved in peacekeeping or peace enforcement as opposed to a situation such as Iraq and Afghanistan where

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it is quite clear that what is involved is actual w ar fighting from the start. There is a requirement in Canada, and it is difficult to see that Canada is so different from Australia that we couldn’t adapt something to what they already have.

On the issue o f whether we actually need legislation, I think if we could get agreement, a convention as now appears to be the case in the UK, that would be performed, it isn't that there is an absolute necessity that you would need legislation to go to war, it is more that it should be a clear convention that it is necessary to consult in particular with the House of Representatives, also to consult, but I assume that given the reality of the politics of the Senate, not necessarily to secure the agreement o f the Senate, otherwise we might become a pacifist country as of tomorrow.

So I think that the details are something we can look at and indeed would need to be looked at, but I think the principle that a democracy needs to have a much greater oversight than the Australian government and parliament in particular currently has o f sending off troops. Let us imagine that as has already been indicated you get mission creep from Afghanistan into one of Afghanistan's neighbours. I think any Australian involvement in that neighbour should, and I think that the ordinary person on the street in rural Australia would also agree if actually asked the question, that this should be a matter for parliamentary debate before it went ahead.

Senator Ludlam: I really enjoyed reading your submission. I have two quick questions. The first one is you do go into in some detail the process that has been followed in the UK in the recent past. Why do you think the debate there is so much more mature, or happening at all, than

it is in Australia?

Professor Helen Ware: I think obviously part of this relates to what happened in Iraq, the controversy in the U K about whether indeed the UK should be involved at all and on what terms. Sadly, I think it is actually related to the number of deaths overseas. We were extraordinary lucky

in Iraq in terms o f being very fortunate that our troops did not sustain major casualties. Had they not done so I think that the public debate would not have been through the roof, but that is what has happened in the UK.

Senator Ludlam: M y second question, and I suppose I have a bit o f an interest in this being in the Senate at the moment in shared balance o f power, so I want to pick you up on your point that any such vote should only be submitted to the House o f Representatives, which is effectively controlled unilaterally by the Executive in Australian politics, where the structure o f the party

system is much more disciplined than it is in the UK. To pass a vote in the Senate the government or the Executive would have to persuade not just the balance of power Senators, but more than half, so obviously the main opposition parties and the swing senators. What is your

hesitance and reluctance to put a vote to the Senate which isn't dominated by the governing party? To pass a vote in the Senate, the balance o f power only comes into play if the opposition is against deployment. Your point in your submission is that you don’t necessarily want this

decision to come down to one random individual, when in fact for that individual's vote to brought into play, then the opposition party has to be opposing as well.

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Professor Helen Ware: Yes, I can see that. One of the other thought experiments I ask people to try is to imagine where it really became a question o f the government saying that we have to go into this conflict because the Americans have asked us and if we are going to keep them on side, we have to go. I think you might be able to envisage a situation where one political party

says no, then it is not a valid argument.

Senator Ludlam: To my view that is parliament's role and prerogative in saying no, we are not going there.

Bill Rowlings: The professor was commenting on an unelected upper house, whereas we have an elected Upper House, which changes the view, I think, on whether an Upper House should have a vote.

Professor Helen Ware: With both houses, another issue is whether it would be a conscience vote. You could envisage a situation where you had a significant number of senators who vote on conscience grounds.

Senator Ludlam: Which was I suppose the most recent experience in the UK where the parties fractured. Any other questions?

Neil James: A couple o f quick points I'd make. The first one is simply that the Canadian example is an interesting one because it an appointed upper house. But you can't understand how Canada debates war until you understand the Quebecois. Canada is unique in the Westminster system in that it has a large minority that did not support Canada being involved in WW1 or WWII, and that actually affects the Canadian debate and the way the Canadians approach these things. I agree with Helen that it's important to look at the role o f democracies. The last war between democracies was the war o f 1812 and neither were perfect democracies at the time. But there are some very interesting things when we start talking about who we have approval, either or both houses o f parliament, because one o f the problems that we have at the moment that out of 226 parliamentarians, only 1 who has been in a war, 1 other who has been on a peacekeeping mission and only 12 others who have any kind o f military services, and a lot of that is a long time

ago in the army reserves in the 1960s for example. Unlike the British Upper House or the American Senate, we don't have a lot o military expertise in our parliament and this has a big role in the debate and we see this just by reading Hansard because a lot o f the debate is not terribly well informed about what is involved in warfare and military and diplomatic action. We only have two ex diplomats in parliament too. It's always important in discussing this to recognise that we are almost unique in the western world with a parliament with virtually no experience in military or diplomatic matters.

Bill Rowlings: The number of politicians with military experience, I would say that that is disproportionately representational to the military people we have in our community. So they appear to be overrepresented from my viewpoint. The other issue, a point of principle, is that it is not a military decision to go to war, it is a political decision. The military can advise on tactics and strategy and equipment but they have no special expertise in the political decision.

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Neil James; I resent the fact that you make that insinuation. I wasn't saying that it was a military decision. I was saying is that if the parliament is to have a proper deliberative role, it helps to have expertise in the question in person. Please do not put words in my mouth.

Bill Rowlings: I did not put words in your mouth. I interpreted what you said, I think it is clear what the inference you were trying to suggest.

Professor Helen Ware: If the parliament is debating fish quarantine, I think there is a problem if there isn't expertise available on for that particular topic, there is a problem. When I was talking to some o f my students, one o f the issues they wanted to have raised, which isn't exactly about how we have commitment, but it is about in relation to the training of defence personnel. If we are going to commit them, for example, to UN peacekeeping exercises there should be more appropriate training as well.

Dr. Sue Wareham: If I could add a comment. The issue that has been raised of expertise in the parliament, perhaps that is an additional reason why the decision to go to war shouldn't be taken by the Executive, or even worse, a single person who in recent instances hasn't had personal

experiences o f war.

Senator Ludlam: You make a really interesting point in your paper which I want to draw out a bit more, that form er major colonial powers that were at war incessantly in that period o f time didn't have parliamentary oversight, but also that former colonies, o f which Australia is obviously one, were more likely to be asked at short notice to participate in wars at the behest of the colonial power, which is one reflection historically o f the different degrees to which parliaments have oversight in different countries o f the world. Has that been formally studied and if we moved this bill, where would that put us in the range o f degrees o f power over deployment?

Professor Helen Ware: Then we would be one of the stronger control countries. An increasing number, as quite frequently happens in the case of Australia, we are slowly catching up with a trend that has developed elsewhere, particularly in Europe. Obviously there were issues following WWII particularly in Europe for people who had reason to think very seriously about the question of how w ar comes about. I'm quite sure that in the Australian case, the reason why there is nothing about it in our constitution, is that there was an assumption that we would go with the mother country

Senator Ludlam: The other example I can think of, actually in the other direction is Japan where in the Constitution under Article 9 they cannot go to war at all. Obviously that was put there for them, but it is an enormously popular article o f the Constitution.

Professor Helen Ware: There is I am very sad to say a movement in Japan to amend the constitution on that point. I was at an Asian peace studies conference late last in Taiwan when that was one o f the issues we were discussing.

Senator Ludlam: One thing we could do is to introduce an article 9 into the constitution of Australia to give them a bit o f back up. One of the issues or complexities or grey areas is the environment in which we have deployed peacekeepers into a place that becomes a conflict zone. Do you want to speak more about how we might resolve those types of concerns?

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Professor Helen Ware: If you had a situation where our peacekeepers were being significantly attacked, whatever government o f the day would have to make an immediate decision about what to do about it, clearly whether to withdraw, to change the rules o f engagement or whatever else. In the short term you would have to make an immediate response. Then if you had a system where there was an agreement or a convention as in the UK, that it had to be debated by parliament then you would have a parliamentary debate I think, but you couldn't leave the troops there without a clear mandate and in an impossible position.

Kris Klugman: The point being that there should be a parliamentary debate about this question, not an executive decision about it.

Senator Ludlam: But retrospectively in that case, were they forced into a situation that wasn’t envisaged?

Prof Helen Ware: Well again I think it should be at least a Cabinet decision, not a purely Prime Ministerial one, and hopefully a Parliamentary decision. It's possible to make Parliamentary decisions in a short space of time.

Ruth Corrigan: Helen, you touched on training for our defence personnel if they are going to be deployed as peacekeepers. Would you see that as a statutory requirement that they do have training before they are deployed? I know there is some training and there is controversy about gender issues, the way peacekeepers actually involve the community that they go to, not just in a military way but maybe in capacity building that sort o f thing?

Professor Helen Ware: I should start by saying that I think that Australia peacekeepers have a very good reputation overseas. I have been on both sides o f watching that, I was indeed in Rwanda to see. There is an extreme example. I saw Australian troops out of Townsville on duty, burying 3000 bodies a day. These were very young men who have never seen a corpse before. That is very difficult for anybody. I don't think you need legislation but if there was more parliamentary debate about what we do in these areas then I think one o f the things that would

come up would be a debate about the doctrine o f training for war and adapting for peace. In the case of the defence forces, I know the argument that you have to train people for war, because if they are ever going to do that they have to be trained for that but I do think that there needs to be far more looking at what Australian troops actually do in the field, and train people to do what they spend 90% o f their time doing.

Neil James: I have served overseas in several peacekeeping operations and in a past life I was the author of the defence forces training manual in peacekeeping. The defence force has some o f the most extensive experience in the world on peacekeeping; we have been in some thirty-five missions over the years. You really have to look at what peacekeeping involves. Peacekeeping is not necessarily peaceful. It does require the application o f armed force on many occasions; we

have had 7 people killed in peacekeeping missions since the 1960s. It's actually more than that if you count the Federal Police, they have lost two too. It is a particularly difficult thing to do, our soldiers, and generally it's done by soldiers, but our service people are very, veiy good at it, as can be seen as our reasonable amount o f success in this regard. But the problem you have in the area of peacekeeping is that the situation can change quite dramatically, and as Helen points out, the case o f Rwanda is a good case. There are some long term implications. Three out of every

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four soldiers at the Kabaya refugee camp in Rwanda had post traumatic stress disorder, it's something you have to consider very seriously about because there are long term implications. We need to avoid the delusion that peacekeeping is always peaceful, because often its not. You actually have to apply force sometimes to restore peace. It's a difficult moral and operational dilemma.

Senator Ludlam: I think we will be discussing this further as the day continues. Thank you, Professor Ware for you very much. I will now introduce our next speaker. Brigadier Adrian D'Hage served as a platoon commander in Vietnam where he was awarded the Military Cross. His service in the Australian Army included command o f an infantry battalion, Director o f Joint

Operations and Head o f Defence Public Relations. In 1994 he was made a Member of the Order of Australia for services to communications. In his last appointment as a Brigadier, he worked with Commissioner Peter Ryan and the NSW Police, heading the Defence team that planned the

counter terrorism security strategy for the Sydney Olympics, including security against chemical, biological and nuclear threats. Brigadier, before we get underway, I need to remind you that this forum is not a parliamentary meeting, so comments and questions are not protected by parliamentary privilege today. We are all fully responsible for what we say today.

Brigadier Adrian D'Hage: Good morning Senator. I will try to not be too defamatory! I base my comments I guess on some 37 years military service and at the outset I would acknowledge the problems in drafting legislation, and I think this Bill is as fraught with difficulty as any other. But it doesn't excuse us from debating the issue and I welcome your initiative. As a principle having seen combat at first hand, I think the country should only be committed to a major war when all other avenues have been exhausted and unfortunately over the last decade or so, that has not always been the case. It goes without saying that it is the most serious decision any government can take not least because the lives of some o f our finest young people are put on the

line, the young men and women who serve in our defence forces. I note that the Australian constitution is silent on who can declare war for Australia and in practice its left to the Prime M inister and Cabinet o f the day and that follows from the Westminster system. But I also note that Gordon Brown is, as a result of the Iraq War, perhaps proposing an amendment where the UK can only go to w ar after its been voted on with a binding vote in parliament.

The discussions in Cabinet are obviously withheld from the public and there are good reasons for that, but it is incumbent in my view on any government to provide honest and open reasons for committing this country to a major war. I'll get onto the minor issues later and I think that’s probably the biggest sticking point from my perspective in defining what a major war is, but there is now little doubt that the American, British and Australian people were people were deceived as to the basis of the war in Iraq, and I guess the Chilcott Inquiry will be watched in the UK with some interest both over there and in this country. But I think the Iraq war provides some

salient lessons which we ignore at our peril. Some of them we learned in Vietnam and had to learn again in Iraq and I note that we probably in some quarters still haven't learned the lessons from the Iraq war. One of your colleagues, I was in a little village in Austria a couple o f weeks ago when an Austrian asked me why an Australian minister was suggesting that we bomb Iran. Now leaving aside the international media's inability to get the designation right, one o f your colleagues indeed suggested, I think, on the Dateline programme that airpower be used to take out nuclear facilities. Well, only after all other diplomatic negotiations have been exhausted. Iran had until recently two declared nuclear facilities, one at Isfahan which converts yellowcake into

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uranium hexafluoride, the other at Natanz which has the high speed centrifuges but deep inside a mountain complex near the ancient city o f Qom they have now admitted to a third, but that is under solid rock, and no amount of airpower which seems to be lost on the Senator in question, would remove that. They have also successfully tested a number of missiles, particularly those with a range o f 2000 km, and any attempt to invade Iran and open a third front in the Middle East

in my view would be disastrous. That is the sort of international commitment that most certainly needs a debate and a binding vote in parliament.

Now I think I saw an email from Neil James which addressed the issues of the upper and lower houses. I tend to take the side o f Prof. George Williams that such an important vote ought to be taken by a joint sitting of both houses o f parliament after a debate by the people's representatives. But if you had a situation where perhaps Sarah Palin for example was the next President o f the US, and we took the view that we should bomb Iran, 87% of the world's oil supplies flow through the straights of Hermoz. They have the missile capability to hit any American military base in that area. Ultimately we might overwhelm them as we did in Iraq but that would further destabilise the M iddle East, so I think this is a very, very important issue, leaving aside the appalling military planning that was the hallmark of Iraq, it's some 430,000 square km, I think, yet we expected to overcome a country 4/5 the size of France with only 144,000 troops. I won't go into the plethora o f errors on the part o f politicians, some politicians and some generals involved in this disaster, but it has destabilised the Middle East for years to come. One of the unintended consequences is that it has promoted a Shiite crescent o f power and one o f George Bush's Ambassadors claimed that George Bush just before we went into Iraq, where our foreign policy was indistinguishable from that o f the United States, had little idea that there was a

difference between Sunnis and Shiites. We now have a Shiite power block in Iraq, admittedly the Iranians are Persians not Arabs, but they are overwhelmingly Shiite, as is Hezbollah, and that crescent of power has not gone unnoticed in the overwhelming Sunni dominated Arab states. So we wade into this complex area o f the Middle East without parliamentary debate at our peril. Senator, I think I'll leave it there.

Senator Ludlam: Thanks so much for those comments. We will use your expertise at actually having spent time at the sharp end of things. In your experience, can you tell us the speed at which these deployments, at least in modem history, are planned and executed? How much salience is there to the argument that military planners don't have time to put these questions to parliament?

Brigadier Adrian D'Hage: Well, I think that we get onto this very important point of a major international war with very high consequences for Australia, versus deployments to places like Fiji. During the Fiji Crisis in the late 80s when Rambuka stormed into the parliament, I was the director o f joint operations and I was responsible with my staff obviously for putting the plans together that would essentially be able to evacuate 5000 Australians off 3000 odd islands. Now when a country erupts like that with no warning, and we had no warning, you do have to operate very quickly and you don't have time for a lengthy parliamentary debate. That can be left in my view to the Prime M inister and Cabinet, and the Security Committee of Cabinet with advice from

the Service Chiefs and it has to be done very quickly. From memory I think we put those plans together within 48-72 hours. We had basic plans for the evacuation o f citizens around the world and we applied those to Fiji although I think one o f the lighter moments was the fact that we didn't have any Fiji maps, Fiji not being high on our list o f areas o f concern. When I briefed the

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then Minister Kim Beasley and his then wife, we used a travel map from the travel agency down the road. So these things are done on a very quick basis, but planning for major deployments like Iraq and even East Timor involves a lot o f logistics, you need a lot o f time to do that, and there is ample time within that military gearing up, when you put forces on alert, for the debate to take place.

Senator Ludlam: Can you take us back to 1991,1 believe at the time you were the head of Defence Public Relations. The parliament was recalled by the Hawke government to debate the first G ulf W ar where Australians were sent into Kuwait, and the majority of parliament in that case supported the decision to commit troops to the first Gulf War. Can you talk us back through the reasoning and the significance for the government and for the people deployed that the government sought and received the support o f the parliament at the time?

Brigadier Adrian D'Hage: To the defence force, I think we have an unfortunate history here and I'm going a little further back to the Vietnam years. Soldiers, sailors, airmen and women got blamed or targeted by section o f the media and other interest groups whereas the decision was taken by government without the normal declaration o f war. That had a horrendous effect on returning Vietnam veterans. In the case o f the First Gulf War and I was brought in to run public relations for that, it did make a difference that the public support was there. I was at pains in various interviews to just make the point quietly that regardless o f the outcome o f the conflict, the nation must never again go through what we went through in Vietnam and the nation must always be behind their service men and women because they have no say in this decision. So yes is the shorter answer to your question. It did make a difference and again, there was adequate warning for that particular involvement that there was public support, as there was indeed for the war in Afghanistan. Unfortunately the political capital has been eliminated by the subsequent deployment to Iraq.

Dr. Sue Wareham: Can I comment on question that you've just raised about 1991 on the first G ulf W ar and the Brigadier's comments. I believe in 1991 Prime Minister Hawke had already sent Australian vessels to the G ulf before this matter was considered in parliament and it was more or less presented as a fait a compli. Now in that situation a parliament would be highly unlikely to vote against that sending o f ships or personnel because it would be seen as disloyal to

our troops. No parliament would do that. Similarly the Australian public, there was a significant degree of resistance to the 1991 Gulf W ar but again, a lot of the public feel that once a decision has been made to send troops, we don't want to be disloyal, we don't want a repeat of the experience of the Vietnam veterans, which was an awful experience for them, very destructive for them psychologically. I think this emphasises the importance of debating before a decision to send troops or vessels is taken, rather than after. Once the decision is taken, any vote or debate against that is seen as being disloyal to the troops.

Brigadier Adrian D'Hage: I think that is right, and in fact in the Iraq war they got around this with a pre-deployment and the then Prime Minister o f the day, Prime Minister Howard brought on a debate in parliament but only after some troops had been deployed. I think those comments also highlight this issue of major and minor conflicts. In cases like the Solomons or Bougainville or Fiji, to a lesser extent Timor, it is notoriously difficult for legislators to define what sort o f conflict ought to be decided on quickly without a lengthy debate. You could say anything above

1500 troops requires mandatory debate but that would in my view not work in my view because

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then you have a cap on the military planers and they start cutting things according to a parliamentary dictate. That is not the way military planning ought to work. In my view, if you go into a major or minor skirmish you go in with a sledgehammer to crack a walnut. I might get

some criticism for that analogy, but ultimately it shortens the length o f the conflict and it saves lives. But politicians o f all hues are often very wary of what the public will tolerate in terms of troop numbers. I think a parliament debate for a major deployment would remove a lot of that squeamishness because by the time you commit to a major conflict, that ought not be subject to public opinion. When General Eric Shinseki went into see Rumsfeld, and said going to war in Iraq is a very bad idea for a whole range o f reasons that have now unfortunately unfolded, he said he would need 500,000 troops to do i t Rumsfeld promptly sacked him. These things are emotionally charged but I think trying to define a major or minor conflict is probably one o f the most difficult parts o f this legislation. But it must do that because you can't hamstring military planners when they are trying to rescue Australian citizens that might be in peril because Suva is going up in flames, or whatever the circumstances might be.

Neil James: Back in 1991,1 was the head o f Intelligence Plans at headquarters ADF, and if I could just correct something Sue said then. We actually deployed the frigates to enforce the UN sanctions, we didn't deploy the frigates to fight a war, and as the situation deteriorated the rules of engagement changed. The other way o f looking at it is, the Iraqi invasion of Kuwait in July 1990 is the only example since the UN Charter was signed in 1945 that one UN member attacking, conquering and purporting to attack another U N Member. So it is actually unique in international law terms and in fact every signatory o f the UN Charter was required to send in troops to liberate Kuwait. That is why one third o f all UN members did. And so I think we have got to be really careful here o f just assuming that the ships were sent off to fight a war, when in fact they weren’t, they were sent off originally to help the UN impose trade sanctions, and only as Iraq refused to withdraw from Kuwait were they actually used to apply more force.

Adrian D'Hage: Yes, that is very true. Again it highlights the difficulty of actually getting this legislation written so that it is workable from both the point o f view o f the defence planners, and you were a part of that system, and from the point of view of public support. I have to say that I think the Australian government of the day was very stubborn on the second Iraq invasion because unprecedented numbers of Australians demonstrated in the streets, hundreds of thousands o f them. I think a letter from 43 Australians, certainly far more distinguished than I, wrote to the government and pointed out all o f these issues that a second deployment to Iraq, would arise and they were brushed aside as daiquiri drinking doddery diplomats, and I mean they had hundreds o f years o f experience between them. So we ignore this problem, the Middle East is very complex, but we ignore this problem o f leaving it to the Prime Minister and Cabinet o f the day at our peril, because I don’t think the Middle East is going get any less complex any time soon.

Dr. Sue Wareham: Perhaps if I could ju st comment on that particular issue again which Neil James about the transition of the role o f the Australian vessels in 1990/1991 from enforcing sanctions to actually executing war, and that is the mission creep or mandate creep, which I think reinforces again the need for debate in parliament and review of our war like actions, perhaps more frequently than annually, because annually in that instance everything was dead and over by

then.

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Senator Ludlam: Perhaps if I could turn that into a question. How well do you think the Bill as its drafted at the moment strikes a balance between the accountability we are trying to achieve and also the flexibility the sometimes ADF will need in terms of small deployments or rapid changes o f circumstances.

Brigadier Adrian D'Hage: To be honest I was overseas until a couple of days ago. I have perused the latest emails of Mr. Maguire. Unless things have changed I don't think it strikes the right balance. Certainly it would have my strongest support for deployments of international significance. United Nations involvement o f a war like nature such as the invasion of Iraq, even Afghanistan, with all tis international support, and the one that I flagged where some people see a

third front being opened up in Iran. But where it doesn't give enough flexibility I think is for the defence planners and the intelligence staff and all of the staff in defence for these minor deployments. They must be able to operative very quickly where Australian lives are a risk. You cannot lay it down on the length o f deployment, because that's very difficult to lay down. You can't lay it down on troop numbers. I think the only way that you can do that is on a statement of principle. The legislators would somehow have to define what a major warlike operation which has significance would be, and I'm using words that people have different interpretation of, but significant impact for Australian foreign policy and standing in the world, versus things like the Solomons, Bougainville where we are doing peacekeeping operations or extraction operation. It's a minefield. I think unless that can be tightened up to the satisfaction of the Defence Force Chief and service chiefs. They and their staff have to be involved and give their imprimatur I believe. If you are going to ask them to deploy, you can't tie one hand behind their back. So it has to be tightened up to the point where Defence can live with it.

Senator Ludlam: On behalf o f us all, I thank you for sharing your views with us.

Brigadier Adrian D'Hage: My pleasure Senator, and thank you for the interest you are taking in this Bill because I think it is a very, very important Bill that is the most serious decision a government can take and I wish you all the best with it.

Senator Ludlam: Thank you very much. We have three people up now speaking from a variety of groups. Seeing as he has been mentioned and we are having this transcribed, I am just going to say that Ian M aguire, who I am sure we have all had contact with, is probably the staunchest advocate in the country on this bill, is not able to be here because he cannot travel, but thought I would put that on the record.

Dr Sue Wareham first became involved in MAPW over 20 years ago out of a "horror at the destructive capacity o f a single nuclear weapon." Sue notes that "millions of innocent people are still threatened by these weapons". Sue believes that her work with MAPW is fundamental to her commitment to the protection o f human life and the improvement of human well-being. In 2007

Dr Wareham co-authored a MAPW report on the use o f cluster munitions in Lebanon. She has been awarded the Order of Australia Medal for her work for peace.

Joining you will be Nick Deane, a public servant, working for the Australian Taxation Office and has a degree in Sociology and Economics from Southampton University (UK), where he graduated in 1969. He also has a Postgraduate Diploma in Environmental Studies from Macquarie University. In 2002, in the lead up to the invasion of Iraq, he became active in the

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peace movement and has remained active since then, playing a key role within the Marrickville Peace Group, which is composed o f a small number o f extremely moderate individuals from one of Sydney's inner Western suburbs.

Also Ruth Corrigan has been a member o f the Women's International League for Peace and Freedom for 15 years and has represented the organisation at a number o f occasions.

Dr. Sue Wareham: MAPW appreciates the opportunity to present this submission in favour of this Bill, and I'd like to present MAPW's reasons for supporting it today. As we have heard no decision for a nation carries with it greater responsibility than the decision to go to war, and for governments there can be no greater burden than dispatchment o f the nations troops, some of whom will most certainly will die and many more of whom will be maimed, physically and psychologically, often for life. In modem warfare the number o f civilians killed - children, women and men - generally far outweigh military deaths. Even larger numbers o f civilians are maimed, often in circumstances where there is no aid available for them. Now whether or not the civilians are Australian, their lives cannot be regarded as dispensable if Australia's reasons for going to war are to be honourable.

Economically the decision to go to war has profound implications, with economic resources diverted from essential civilian programmes at home. It is estimated that Australia's participation in the war in Afghanistan alone has cost us well over 2 billion dollars. I just want to say a little more about the health costs paid by Australian service personnel. The obvious health costs are of course death and physical injury. In the Vietnam War nearly 500 Australian soldiers died, and about 2500 were wounded. And this conflict Australia helped perpetuate without initial debate in parliament killed well over a million people and maimed many more. The most obvious costs, except to the families of the veterans, are the psychological costs of warfare which are often crippling. In the Australian government's Vietnam veterans health study, released in 1998, 41% Vietnam veterans reported anxiety and 45% depression. Even more alarming was the suicide rate among the children o f veterans which was about 3 times the expected rate. These affects pale by comparison to the toll taken on the communities where our recent wars have actually been conducted. In both cases, for the Australians involved and for those who live in war zones, the effects continue for generations, long after most of us have by and large forgotten the war and its victims.

The environmental impacts of warfare may be even more long lasting and severe. This subject is vast in itself. One example, the Vietnamese people are still paying the price of the 80 million litres o f Agent Orange that was sprayed on their land during the war there, with the Australian government support for that bombing. As the environmental crisis humanity faces slowly registered on our decision makers, the effects o f warfare should no longer be dismissed as the concerns o f a few green extremists. They are important to our security and survival as a species. The environmental impacts of warfare are unlikely to be a decisive factor in a decision regarding warfare under current circumstances, but they should nevertheless be part of the debate, a debate which is the responsibility of our parliament.

Politically and strategically warfare carries many unknowns, its outcome can never be known with certainty, and the wisdom or folly o f engaging Australia in a particular war must take into account many factors, perspectives and areas o f expertise. Neither of the current wars in Iraq or

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Afghanistan is proceeding according to original expectations, and they show no sign of being concluded with their goals being achieved, and even the nature o f the goals is unclear. Parliament can best provide this diversity o f perspectives that's needed. It is unlikely that a rushed decision or a decision made by small number o f cabinet ministers, or worse a single Prime Minister will be a good decision.

It is theoretically possible that there could be where a swift declaration of war appears warranted, namely if Australia came under sudden military attack. However this hypothetical situation is not that which has confronted us in recent times and nor is it likely, as confirmed in the 2009 Defence White paper. The recent wars to which Australians have been sent have presented no such urgency that precluded deliberation by our parliament. The only sense of urgency has been created by our leaders. And we should remember that if a decision regarding warfare is made in haste, then the consequences will be just as long lasting, continuing for decades and longer.

The best recent example for the need for this Bill is Australia's response to the terrorist attacks of 11 September 2001. On that occasion Prime Minister Howard abrogated his responsibility as our Prime Minister. W ithin days o f the attack he stated that Australia would be involved in any military action that US President Bush chose to order. Australia would contribute whatever we

could. He didn't qualify this offer and he set no limits to it. In other words, Australia would not consider our response, we would simply follow our ally. Howard played out the role not of the leader o f a sovereign nation but o f a servant to another nation. As long as the possibility of

another such Prime Minister remains, Australians are entitled to have matters as weighty as a decision to go to w ar carefully considered and debated, rather than authorised by a man who will never know the terrible cost to be paid by others for his decision. The proper place for that debate

is our parliament with the expectation that parliaments will be attuned to public feeling either for or against warfare.

A decision to go to w ar should also fulfil Australia's international legal obligating, in particular our obligation to uphold the United Nations Charter. The primary purpose of the UN as set out in the Charter is to save succeeding generations from the scourge o f war. The gravity of this responsibility demands the serious deliberations of both houses o f our Parliament. There have

been few military actions in recent years that were more damaging to the mle o f law, and therefore to our own security, than the violation of the Charter by the 2003 invasion o f Iraq by the US and its allies, including Australia. Had Australia's participation in this war required approval by both houses of parliament, our support for this catastrophic exercise could have been

avoided.

The Australian parliament considers a wealth of issues, it considers internet broadband access, how our old folk are look after, tourism, sport, child care, work place relations, and a long list goes on. These are all veiy important issues, but it's extraordinary that we allow a decision with

such far reaching consequences as to whether or not our country is at war to rest with possibly ju st one person or a Cabinet, a small number o f people whose judgement or motives may or may not be sound.

Regarding the provision in the Bill that a decision to go to war should be approved by not only the House but also the Senate, a vote in the House is likely to be controlled by the government, with the possibility of fundamentally important questions remaining unanswered. A declaration

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of war stands out as one matter where approval from both house and bipartisan support should be imperative. If bipartisan support is lacking, it is very likely that support of a significant proportion of the population is lacking also. This is an iniquitous situation in which to place Australian troops. It is also likely in that situation that there are serious concerns about that war in question.

An overwhelming and sound case for war would not be threatened by the need for approval by both houses. On the contrary, the case would be self evident. In addition, governments come and go and a war can be inherited by a government that opposed it while in opposition. Again, this is an iniquitous situation for Australia's troops if a change of government means that their role is suddenly questioned. If parliamentary approval by both houses had been a prerequisite for participation in war before now, Australia may well have avoided conflicts which have since been widely acknowledged to have been wrong, conflicts in which many hundreds of our soldiers have died, along with countless other combatants and civilians. In no recent situation, nor any foreseeable situation can one reasonably argue that such approval would have hampered our military response by causing delay. Such approval would have hampered our response by causing delay. On the contrary, Australia could have been an agent for peace in such situations rather than an agent for war.

Nick Deane: I would like to endorse what Dr. Wareham has been saying. Our view is that the decision to commit the nation to armed conflict is an extremely serious one, I contend it is the most serious decision a nation can make. As the Brigadier pointed out, the ramifications of war reverberate for a very long time after hostilities cease.

We have heard John Howard quoted as describing the decision as one that goes to the heart of the nation. Our own local member, Mr. Anthony Albanese has been reported as saying there is no more important a decision. I believe there is a consensus any decision of committing troops to armed conflict overseas is a matter of the gravest concerns and it is tmly a monumental one. With most matters of grave concern it is considered prudent to allow all of the arguments for and against the decision to be put forward, we encourage this process, we call it debate, and it's fundamental to our system of democratic government. The very building we are in is devoted to that democratic process.

So I was left totally bewildered at the time of the invasion of Iraq about a question to which I still have no reasonable answer. The question goes something like this. If democracy is something that we truly value and rely upon to bring us good governance, why in the name of democracy, is the decision to go to war taken without democratic debate? From my point of view the hypocrisy of deciding to wage war without raising the idea in parliament while simultaneously espousing democratic ideals is utterly breathtaking, hence our group's submission to your Bill. The essence of which is that the decision of the weight of war must be subject to debate and this which is why we found your bills so very sensible and its proposition so obvious.

I want to raise another area attached to the reasons for your bill being so important. I believe we should look at it in the context of unfolding global events. In particular I would ask us to consider it in the light of environmental problems: climate change, peak oil, rising sea levels, retreating glaciers, expanding populations with expanding aspirations to greater wealth. We know

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that for every person on earth to live at the standard of living we all enjoy would require several planets, an utterly absurd and impossible proposition.

Faced with this, I believe that we are entering an era of increasing instability. I'm taking care not to argue that war is an inevitable consequence of the constraints I'm talking about but unfortunately humankind has a poor reputation, and history has some vivid examples of civilisations that have outstripped the environments capacity to support them that have collapsed into violence While war is not inevitable I see it as a strong possibility that the environmental problems we see may be the source of the sort of political instability that can lead to violence and war.

In that context it becomes even more important that level headed decisions are made so even more important that decisions are only made after proper debate. We need to push the prospect of going to war far way from us. We need to think long and hard before taking up arms. I put it to you that in a world that is becoming less stable, as the natural environment comes under more and more stress globally, the need to deliberate before deciding to go to war becomes more and more pressing. We teach our children to restrain themselves and think before they lash out in violence. If there was ever a time for nations to do the same, it is now. If your bill can take us a

step on that path, then that's the very best direction for us to follow.

Ruth Corrigan: I endorse what has been said by Sue and Nick. The Women's International League for Peace and Freedom (WILPF) has as its core aim to study and make known the causes of war and to work to bring into the world a more just and equitable society. One of the issues that I think goes to the heart of this question is that, as the Brigadier said, war should only be embarked upon as an absolute last result after all avenues have failed. The avenues that could be brought about are the debate and discussion the dialogue that is sure, long term but it is

something that has to be a continual process that happens not as consequence of threat but something that is an ongoing thing. In an environment where that is a continual process, war is much less likely, a country would be much less likely to take its citizens to that decision.

This Bill gives us time to think, before we make a choice, in the parliament, there has to have been a long process of dialogue, discussion, debate and diplomacy in a whole range of ways. You highlight the climatic changes, the threat of instability in food and water security across the world

and we can't say that nations impoverished, starving, with health problems that we can't imagine in this country due to our great overwhelming greed in a way, are not going to somehow work to destabilise the world and we are contributing to it by our own way of looking at things.

Our group definitely endorses this Bill and encourages the parliament to think about it seriously, to maybe look again at the issues raised by various people about how safe it is to get people quickly out of situations where they need to be taken away quickly. Those things are something that you could build into the bill that that would be able to happen easily.

Senator Ludlam: Thank you to all of you for those thoughts. We were drawn into Iraq by two countries where votes were taken in parliament or Congress, either through convention or the Constitution, and it didn't stop the flight to war.

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I'm wondering, compared to the strengthen of an Article 9 that says we don't do overseas aggression, to a War Powers bill that does put a vote to parliament, how important is this instrument really when our two key allies did have such an instrument in place?

Bill Rowlings: I would suggest to you that anything that causes Australians to think and follow like sheep the USA or the UK is a very good thing. A Bill of this nature would force us to go through a regulated process that would ensure that we had independent thinking and input. That wasn't the case in recent situations were there was a follow the leader, where we were committed by a PM who spoke publicly before any debate had occurred.

Dr. Sue Wareham: To address that issue Senator, I think debate in the Australian parliament in 2002-2003 could have made a difference. It certainly wouldn't have been a foregone conclusion that Australia would join the invasion of Iraq had that debate occurred. I think there was a reasonable chance that Australia would not have joined the invasion, that Australia in that

instance would not have followed the United States and the United Kingdom. There has been talk that Australia's contribution has been of marginal significance anyway, militarily and in Australia we would probably be deflated if we realised how small the military contribution we have made as seen through the eyes of the US military. Nevertheless I think an Australian decision to not join the invasion would have decreased the legitimacy of the war, and that would have been extremely significant internationally. It would have preserved the reputation of Australia being a law abiding international citizen. That in itself is valuable. I think that the example of a democracy saying we will not join the invasion because it is illegal would have reduced the legitimacy and that would have been of great value.

Nick Deane: Had there been parliamentary debate before the invasion of Iraq, I think as you suggest that it was quite possible the decision would have gone with embarking on the invasion. Nevertheless I would still see value in having those arguments presented in the parliament had being recorded for us.

Ruth Corrigan: I think there are actually large cultural difference between us and the US and UK. I believe that if that debate had have happened, and we know from the public disagreement with the decision, that it was quite evident that many, many Australians disagreed, and I think that could have carried through in the parliament.

I think there are very big cultural differences, although we like to think of ourselves as similar to the US and the UK, I think we would have voted against it. It certainly would have given us time to have that debate publicly the issues put before us. That is part of the issue. We shouldn’t be pushed into a situation without adequate information. Governments shouldn't be able to hide behind "in the national interest" phrases; they should be required to put some information at least into the public arena.

Senator Ludlam: There was one vote against the war in the US Congress as I recall, a woman named Barbara Lee from California.

Neil James: I would just caution us to be a little bit careful about conflating the interventions in Iraq and Afghanistan because they have different legal basis. The intervention in Afghanistan was authorised by the United Nations right from the start, and in fact it was a graduated series of

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steps where the UN said to the Taliban regime controlling part of Afghanistan that they were required to hand people over for international trial, and when the Taliban refused to do that the UN then authorised the intervention to capture and arrest those people. It's an entirely different legal case to the intervention in Iraq where the jury is still out whether that was illegal or not.

The bulk of international lawyers think that it was illegal; a substantial minority of international lawyers think that it was covered by Iraq's violation of United Nations Security Council resolutions governing the end of Iraq's attack on Kuwait. I don't think we are ever going to ever resolve this issue. Howard in his statements in Washington about backing the United States over the Afghanistan issue, need to be looked at from the point of view that he was backing a UN endorsed operation. When he made that statement the UN Security Council had already met and passed the first resolution. It's a different kettle of fish, I agree, with the argument over Iraq.

The other thing I would point out, particularly in this group, was that the opinion polling at the time of the intervention in Afghanistan showed overwhelming support, and continued to do so until very recently. The Iraq intervention also enjoyed majority popular support too at the time. It was only later that popular opinion swung. Whether this would have had much of an affect on parliamentary debate would be an interesting one. We have to be careful when we used historical examples. Sue said there was no debate on the Vietnam commitment in parliament when in fact there was extensive debate and a national election fought on that issue.

Dr. Sue Wareham: Not before the troops were committed.

Neil James: Menzies made a statement in parliament in 1965 and there was an extensive debate in parliament. It is actually one of the reasons why Gough Whitlam replaced Arthur Caldwell, because the ALP at the time reckoned Caldwell had made the wrong call on the issue.

Professor Helen Ware: Another issue about having a debate would focus attention on what the objective is. In the old days, we want to win the war. In Afghanistan exactly what would that entail, what does it mean? I think a very important thing is to have a public debate which would then raise the whole question of whether it is a good idea to go there at all, about what the objective is, what we would be trying to achieve. Particularly as statistically the great majority of wars are civil and internal wars; it is not Country A versus Country B. When it is groups fighting each other within a country, the whole thing becomes much more messy and much more difficult to define what a victory would entail.

Kris Kulgman: Australia is a sovereign country, we are a democracy and despite what the US or the UK do, it is for our own moral integrity that there should be a public debate on such a crucial questions as to whether we should go to war or not.

Senator Ludlam: Can I throw one more cat among the pigeons. The three NGOs are effectively pro-peace, you are anti war groups or have peace in your name. That is your mandate. And presumably you are not likely to support any arguments for going to war. What would parliamentary approval do?

I was one of the people organising rallies against the deployment to Afghanistan many years ago, and if that vote had been put to parliament, I think Neil is right; there would have been bipartisan

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support for deployment to Afghanistan. What does that do to the peace movement? What if the parliament lends it legitimacy, where do the peace movement or these groups stand in that case?

Dr. Sue Wareham: I think the legitimacy is key there Senator. If parliament has at least addressed an issue, if there has been debate and a vote, a democratic decision is made, then yes groups can accept that is what parliament has provided. I think it's the lack of democracy, the lack of debate has been the major problem and obviously the reason for this bill, so I think the

issue of legitimacy is key there.

To address the matter you raise that we three represent peace groups. Yes we do. Speaking for MAPW, MAPW is not a pacifist group, we haven't canvassed our members on this, but we do not hold pacifist principles. What we do state is that war has changed over the course of the last century. War is a different exercise than from the sort of exercise it was say 100 years ago, even a shorter period than that. I think that's one of the reasons that this Bill is so important. Seriously addressing the issues surrounding war fare is even more imperative than it was 100 years ago.

The human and civilian impacts are far, far greater than they were 50 or 100 years ago. The environmental impacts are a relatively new dimension to warfare which really seriously needs to be addressed: this wasn't around at the time of the forming of our constitution. The changing nature of warfare is something that deserves the scrutiny that parliament can give it, and the legitimacy of a parliamentary vote at least addresses the democratic needs.

Ruth Corrigan: Our group began during WWI as a response to the situation in Europe at the time. Women there could see the great devastation that was going to occur and was already occurring not only to the population but to the environment; already there were environmental issues that have continued from there to this day. The women at the time saw the issue at the time to bring people to the table of consultation, to discuss rather than to use arms to solve things. That doesn't mean there are not instances and situations where sometimes that is not the last resort.

Nick Deane: If there were a decision that was legitimate we would have to accept that of course. It would just put us in the position of being a minority group out there in the wilderness waving the flag of peace.

Neil James: There are very few groups in society that are not actually for peace. We are merely squabbling in most cases about the best way of getting it. The ADA is and organisation inherently interested in peace, but we have a different idea of how we get there than some of the groups represented at the table. If I can add personally, and I'm not speaking for the ADA here,

I'm an historian by academic training, by training I'm a soldier and by profession I'm a strategist.

Sue's point about civilian deaths is an interesting one, because in effect it is cyclical. Basically the wars until the Peace of Westphalia of 1648 killed enormous civilian casualties, far more than soldiers. The wars from Westphalia to WWI killed more soldiers than civilians. And the wars

from WWII onwards, the cycle has swung the other way. This is the unfortunate nature of war and weapons and politics. War is not different, it is still the extension by politics by other means, it occurs when there is a failing of the human condition. We are unlikely to ever successfully

eradicate it.

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We are going through a phrase where intrastate war and interstate wars that involved intrastate wars are far more common than interstate wars. We really have to look at this in a very broad historical canvas. I'll add one more point. Since the UN Charter was signed in 1945, no one has legally declared war.

There is no such thing as declared and undeclared wars and there hasn't been under international law since 1945. One of the problems about how this issue is talked about in public is that people talk of declared and undeclared war. Under international law, war exists as a material fact, and this means that if someone like George Bush says its not a war, and someone says it's not, IHL kicks in automatically as it starts, so everyone is protected by the Geneva and Hague Conventions, even though someone on either side of the war may say it is or is not a war. That

war is a material fact is often missed in some of the debate.

Professor Helen Ware: The nuclear argument clearly that is something new and different. I grew up at a time when that was the cloud over even children in school, we worried about nuclear war. But the argument that current wars are much more likely to affect civilians than previous wars, as Neil has already said, it changes from time to time. Also the question of who is a civilian

and who is not is difficult. As someone who has been involved, at least peripherally, and has studied many of the civil wars in Africa, the question of who is a civilian and who is not really doesn't have a great deal of meaning in many of those contexts. You have women coopted as soldiers in Sierra Leone, or something like that, it probably isn't a very helpful distinction, a death is a death to some extent.

Dr. Sue Wareham: I think it would be tme to say that war now is different from war 100 years ago looking particularly at WWI, and it's been documented that the percentage of the victims of WWI that were civilians was small, compared to modem war when it is very large. The impact of modem warfare on civilian society, the effect of aerial bombing drones, the destructiveness on

civilian society is far greater than the effects of a war such as WWI even though that was terribly destmctive in terms of soldiers lives lost.

Nick Deane: We are all in favour of peace, I share that with you. My question is why if we all favour peace, why do we constantly prepare for war? We don't seem to be preparing for peace; we always seem to be prepared for war. You say that it's part of the human condition. I have to call that into question otherwise what my group does would be pointless. I believe particularly with the modem technology which is so much more destmctive than it's ever been before, we have to get past the idea of it being part of the human condition. We have to start looking at ways of controlling the technology and putting it to peaceful purposes.

Neil James: I suppose the answer to your argument Nick is that we don't prepare for war, we prepare for the possibility of war to make sure we don't have one. And I agree it's an interesting esoteric example and getting back to Scott's Bill this is one of the problems.

The example of the 1997 deployment to Kuwait, where Saddam Hussein was going through another period of disobeying the UN resolutions on WMD, I was actually a UN weapons inspector in Iraq and I can assure you there were WMD. That preliminary deployment stopped the war breaking out. Because Saddam Hussein backed down and the inspectors went back in and continued the inspections and the disarmament of Iraq; if we hadn't done the preliminary

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deployment, there may have indeed been a war. The difficulty of a bill like this that is if you have a debate that says we won't have a deployment because we might have mission creep and a war might break out. Yes, that's quite a valid argument in one half. The other half of the argument is that the deployment did stop the war breaking out because it forced Sadaam Hussein go back and comply with international law. It's a really nuanced area and that's the problem with the Bill.

Senator Ludlam: I just got the sense that this is a conversation that is hundreds and hundreds of years old. Mr. James, can we hear from you now please. Neil James: [Mr James spoke to a powerpoint presentation which is available on request from the ADA; verbal transcript only is included here].

If I can just start off by saying, the Defence Association isn't against the bill in principle. We have some concerns with the practicalities of how it might work in practice. As we said in our article in Defender, in Spring 2007, which means it was published in September, we said we shouldn't rush into this, obviously if we're going to do this there should be a Parliamentary inquiry and it needs to be vigorously debated, because its not quite as simple as it first looks.

I thought I'd start by quickly rushing through where we've come from to get where we are. Most of you don't know what the Defence Association is. I won't read it out because people read five times faster than they listen. I'll just point out we don't only handle defence matters but also

intelligence and security agencies, and we aim for informed public debate.

We have three golden rules, the first one is independence. We're very careful who we take money from, and if you sell weapons to the defence force we don't accept money from you more than $5000 a year, it doesn't matter who you are. Most of our money in fact comes from our individual members, spread around Australia. We don't take any government consultancies or grants funding, which makes us unique in the defence arena; all the other think tanks do.

Our second golden rule is we're genuinely apolitical, we always have been. Right from the beginning we've had equal numbers of senators and former MPs from both sides of parliament, and we still do. Our council of elders of course has lots of retired diplomats and military people

and judges, and those type of people too.

Lastly, we have a community base. We're not an ex-services organisation, we're not the military's trade union. Historically, nine out of ten of our members have never served in the military. It's been creeping up since the East Timorese intervention since the defence debate's picked up again. At the moment seven out of ten of our members have never served in the military, or ASIO or ASIS or the Federal Police or anything like that. They're Australians