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Senate Legislative and General Purpose Standing Committees Consolidated reports on the consideration of bills January-June 2013 Volume 5-Environment and Communications; Finance and Public Administration; Foreign Affairs, Defence and Trade


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Australian Senate

Senate Legislation Committees

Reports on the consideration of bills January-June 2013

Volume 5

Environment and Communications Committee Finance and Public Administration Committee

Foreign Affairs, Defence and Trade Committee

© Parliament of the Commonwealth of Australia 2013

ISSN 1834-4062

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

TABLE OF CONTENTS

Environment and Communications Committee† • Environment Protection and Biodiversity Conservation Amendment (Great Barrier Reef) Bill 2013, dated June 2013 .................................................................................................. 1

• Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012, dated March 2013 .............................................................................................. 79

• Telecommunications Legislation Amendment (Consumer Protection) Bill 2013*, dated June 2013 ......................................... 137

• Water Efficiency Labelling and Standards (Registration Fees) Bill 2013* and Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013*, dated May 2013 ........................... 169

Finance and Public Administration Committee • Citizen Initiated Referendum Bill 2013, dated June 2013 ................................. 187

• Health Insurance Amendment (Medicare Funding for Certain Types of Abortion) Bill 2013, dated June 2013 ................................................. 213

• Parliamentary Service Amendment Bill 2012, dated February 2013 ........................................................................................ 277

• Public Governance, Performance and Accountability Bill 2013, dated May 2013 ............................................................................................... 302

• Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013, dated June 2013 ............................. 303

Foreign Affairs, Defence and Trade Committee† • Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013*, dated June 2013 ................................. 343

• Export Market Development Grants Amendment Bill 2013, dated June 2013 ................................................................................................... 449

† Volume 6 contains further reports of the Foreign Affairs, Defence and Trade Committee

*Provisions of bill referred to committee.

The Senate

Environment and Communications

Legislation Committee

Inquiry into the Environment Protection and Biodiversity Conservation Amendment (Great Barrier Reef) Bill 2013

June 2013

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© Commonwealth of Australia 2013

ISBN 978-1-74229-840-5

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

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Committee membership

Committee members Senator Doug Cameron (ALP, NSW) (Chair) Senator Simon Birmingham (LP, SA) (Deputy Chair) Senator Catryna Bilyk (ALP, TAS) Senator Bridget McKenzie (NATS, VIC) Senator the Hon Lisa Singh (ALP, TAS) Senator Larissa Waters (AG, QLD)

Substitute members Senator Claire Moore (ALP, QLD) for Senator Catryna Bilyk (ALP, TAS) for 23 May 2013

Committee Secretariat Ms Sophie Dunstone, Committee Secretary Ms Toni Matulick, Committee Secretary Ms Sophie Power, Principal Research Officer Mrs Dianne Warhurst, Administration Officer Ms Ruth Edwards, Administration Officer Mr Tim Hillman, Inquiry Officer

Committee address PO Box 6100 Parliament House Canberra ACT 2600 Tel: 02 6277 3526 Fax: 02 6277 5818 Email: ec.sen@aph.gov.au Internet: www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=ec_ctte/ index.htm

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Table of Contents

Committee membership ................................................................................... iii

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

Abbreviations and Acronyms ........................................................................... ix

Chapter 1.............................................................................................................. 1

Introduction .............................................................................................................. 1

Conduct of the inquiry ............................................................................................ 1

Purpose of the bill ................................................................................................... 1

Structure of the report ............................................................................................. 2

Acknowledgements ................................................................................................ 2

Chapter 2.............................................................................................................. 3

Background ............................................................................................................... 3

The Great Barrier Reef ........................................................................................... 3

Relevant legislation ................................................................................................ 3

Background to the bill ............................................................................................ 6

Other recent reports and strategies ....................................................................... 13

Overview of the provisions of the bill .................................................................. 15

Chapter 3............................................................................................................ 17

Key issues................................................................................................................. 17

Committee view .................................................................................................... 43

Coalition Additional Comments ...................................................................... 47

Australian Greens Additional Comments ...................................................... 51

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Appendix 1 ......................................................................................................... 55

Submissions ............................................................................................................. 55

Answers to Questions on Notice ............................................................................ 57

Additional Information .......................................................................................... 57

Appendix 2 ......................................................................................................... 59

Public Hearing ........................................................................................................ 59

Appendix 3 ......................................................................................................... 61

Extracts from key UNESCO documents .............................................................. 61

Extract A - Decision adopted by the World Heritage Committee at its 36th Session (Saint-Petersburg, 2012).......................................................................... 61

Extract B - Recommendations of the UNESCO World Heritage Committee Mission Report (pages 61-64) .............................................................................. 62

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Recommendations

Recommendation 1

3.120 The committee recommends that port development in the Great Barrier Reef region should be confined to existing (already developed) major port areas, pending the outcomes of the strategic assessments currently being conducted by the Commonwealth and Queensland governments.

Recommendation 2

3.121 The committee recommends that, if the minister decides to approve any port developments or port-related activities in existing (already developed) major port areas in the Great Barrier Reef region, these developments and activities should be subject to stringent conditions under the EPBC Act, including robust monitoring and reporting requirements.

Recommendation 3

3.124 The committee recommends that the Commonwealth government review the regulatory regime surrounding sea dumping in the Great Barrier Reef region, with a view to ensuring that dumping of any dredge spoil in the Great Barrier Reef World Heritage Area is subject to the highest scientific and environmental analysis and taken only as an option of last resort.

Recommendation 4

3.127 The committee recommends that the Minister for Sustainability, Environment, Water, Population and Communities publish the report of the Independent Review of the Port of Gladstone as soon as it is made available to him.

Recommendation 5

3.130 The committee recommends the bill not be passed in its current form and calls on the government to closely examine any additional safeguards arising from the strategic assessments and independent review with a view to developing robust regulatory and legslative safeguards to protect the Great Barrier Reef World Heritage Area.

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Abbreviations and Acronyms

AMCS Australian Marine Conservation Society

COAG Council of Australian Governments

EDO Qld Environmental Defenders Office Queensland

EPBC Act Environment Protection and Biodiversity Conservation Act 1999

GBR Great Barrier Reef

GBRMPA Great Barrier Reef Marine Park Authority

LNG liquefied natural gas

OUV Outstanding Universal Values (Criteria used for World Heritage listing)

Sea Dumping Act Environment Protection (Sea Dumping) Act 1981

SEWPAC Department of Sustainability, Environment, Water, Population and Communities

TBT Tributyltin

UNESCO United Nations Educational, Scientific and Cultural Organisation

UNESCO report Mission Report: Reactive Monitoring Mission to Great Barrier Reef (Australia)

WWF World Wide Fund for Nature

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Chapter 1 Introduction

Conduct of the inquiry 1.1 The Environment Protection and Biodiversity Conservation Amendment (Great Barrier Reef) Bill 2013 (the bill) was introduced on 20 March 2013 by Senator Waters (Australian Greens) as a private Senator's bill.1

1.2 On 21 March 2013 the Senate referred the bill for inquiry and report by 16 May 2013 on the recommendation of the Senate Selection of Bills Committee. The Selection of Bills Committee's report stated that the reason for the referral was to provide an important opportunity for the Australian community and relevant experts and industry representatives to give input on the bill's provisions.2

1.3 On 14 May 2013, the Senate granted an extension of time for reporting until 13 June 2013.

1.4 In accordance with its usual practice, the committee advertised the inquiry on its website and in The Australian newspaper. The committee also contacted a number of organisations and individuals and invited them to make submissions.

1.5 The committee received 45 submissions to this inquiry, as shown in Appendix 1. Details of additional information received during the course of the inquiry are also contained in the appendix.

1.6 The committee held a public hearing in Brisbane on 23 May 2013. A list of witnesses who appeared at the hearing may be found at Appendix 2. A copy of the proof Hansard transcript of the hearing was posted to the committee's website. The references to the pages of the Hansard transcript in this report are to the proof Hansard, which may be different from those in the official transcript.

Purpose of the bill 1.7 The purpose of the bill is to amend the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to implement recommendations made by the World Heritage Committee to ensure the Great Barrier Reef is not included in the World Heritage in Danger list. To achieve this, the bill proposes to:

• prohibit development of new ports outside existing port areas and in a number of designated areas along the Great Barrier Reef coastline;

• prohibit developments within existing ports if these developments impact on the world heritage values of the Great Barrier Reef;

• implement a moratorium from 20 March 2013 on approval of developments

impacting on the Great Barrier Reef World Heritage Area until a strategic

1 Senator Larissa Waters, Senate Hansard, 20 March 2013, p. 2211.

2 Senate Selection of Bills Committee, Report No. 4, 21 March 2013, Appendix 5.

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assessment is completed and deemed adequate by the World Heritage Committee; and

• prohibit approval of any developments that do not deliver a net benefit to the Great Barrier Reef World Heritage Area.

Structure of the report 1.8 In the following chapters of this report the committee:

• provides some background to the bill, a summary of relevant Commonwealth

legislation, and summaries of relevant reports (Chapter 2); and

• discusses key issues raised during the inquiry (Chapter 3).

Acknowledgements 1.9 The committee thanks those individuals and organisations who made submissions, and those who gave oral evidence at the committee's hearing. Their input greatly assisted the work of the committee.

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Chapter 2 Background

2.1 This chapter provides some background to the bill and issues relating to port development in the Great Barrier Reef, including a summary of the regulatory system at the Commonwealth level, World Heritage Committee deliberations and an outline of relevant recent reports by the Great Barrier Reef Marine Park Authority.

The Great Barrier Reef 2.2 The Great Barrier Reef World Heritage Area stretches approximately 2300 kilometres along the coast of Queensland from the northern tip of Queensland in north-eastern Australia to just north of Bundaberg. The Great Barrier Reef World Heritage Area was inscribed on the World Heritage List in 1981, and:

• covers 344,400 km

2 in area;

• includes the world's most extensive coral reef ecosystem; and

• includes some 3000 coral reefs, 600 continental islands, 300 coral cays and about 150 inshore mangrove islands.1

2.3 The Great Barrier Reef Marine Park Authority notes that coral reefs 'only comprise about seven per cent of the Marine Park and the World Heritage Area' and the rest is:

…an extraordinary variety of marine habitats, ranging from shallow inshore areas - such as seagrass, mangroves, sand, algal and sponge gardens, and inter-reefal communities - to deep oceanic areas more than 250km offshore.2

Relevant legislation 2.4 There is a range of relevant legislation specific to the Great Barrier Reef. Key Commonwealth legislation relating to port development near the Great Barrier Reef region includes the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act); the Great Barrier Reef Marine Park Act 1975 and also the Environment Protection (Sea Dumping) Act 1981. These Acts are summarised below.

1 Department of Sustainability, Environment, Water, Population and Communities, Fact Sheet - The Great Barrier Reef World Heritage Area, dated September 2012, available at: http://www.environment.gov.au/heritage/places/world/great-barrier-reef/pubs/gbr-factsheet.pdf; and also Great Barrier Reef Marine Park Authority (GBRMPA), Facts about the Great Barrier Reef, at: http://www.gbrmpa.gov.au/about-the-reef/facts-about-the-great-barrier-reef (accessed 21 May 2013).

2 GBRMPA, Facts about the Great Barrier Reef, at: http://www.gbrmpa.gov.au/about-the-reef/facts-about-the-great-barrier-reef (accessed 31 May 2013).

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Environment Protection and Biodiversity Conservation Act 1999

1.1 The EPBC Act is the primary piece of Commonwealth legislation regulating environmental matters,3 and has among its objects:

• to provide for the protection of the environment, especially those aspects

which are a matter of national environmental significance;

• to provide for the protection and conservation of heritage;

• to promote ecologically sustainable development through the conservation and ecologically sustainable use of natural resources; and

• to assist in the co-operative implementation of Australia's international

environmental responsibilities.4

2.5 In general, the EPBC Act prohibits a person from taking an 'action' without approval from the environment minister if the action is likely to have a significant impact on a 'matter of national environmental significance'.5

2.6 Matters of national environmental significance currently covered by the EPBC Act are:

• world heritage properties;

• national heritage places;

• wetlands of international importance (listed under the Ramsar Convention);

• listed threatened species and ecological communities;

• migratory species protected under international agreements;

• Commonwealth marine areas;

• the Great Barrier Reef Marine Park; and

• nuclear actions (including uranium mines).6

2.7 The Great Barrier Reef Marine Park has been recognised as a matter of national environmental significance under the EPBC Act in its own right since 25 November 2009. It is prohibited to take any action in, as well as outside, the Great Barrier Reef Marine Park that will have a significant impact on the environment within the Great Barrier Reef Marine Park, unless the action has previously been approved or the action is being undertaken by the Commonwealth.7

3 The EPBC Act replaced: the Environment Protection (Impact of Proposals) Act 1974, the Endangered Species Protection Act 1992 ; the National Parks and Wildlife Conservation Act 1975; Whale Protection Act 1980 and the World Heritage (Properties Conservation) Act 1983. 4 EPBC Act, subsection 3(1).

5 Section 523 of the EPBC Act defines an 'action' to include a project, development, undertaking, activity or series of activities, or an alteration of any of these.

6 EPBC Act, Part 3, Division 1.

7 Environment Protection and Biodiversity Conservation Act 1999, s. 24B.

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2.8 The Great Barrier Reef Marine Park is also protected under the EPBC Act, for example, as a world heritage area,8 a national heritage place;9 and to the extent that it provides habitat for listed threatened species and listed migratory species. There are also two internationally-listed 'Ramsar' wetlands in the Great Barrier Reef region: Bowling Green Bay and Shoalwater and Corio Bays.10

Great Barrier Reef Marine Park Act 1975

2.9 The Great Barrier Reef Marine Park Act 1975 established the Great Barrier Reef Marine Park and the Great Barrier Reef Marine Park Authority (GBRMPA). It also contains provisions for the protection of the Great Barrier Reef. For example, it sets out a duty to prevent or minimise harm to the environment in the Great Barrier Reef Marine Park that could be caused by a person's entry.11 It is also an offence to discharge waste into the Great Barrier Reef Marine Park unless approved by the appropriate authority, or if waste is discharged for the purpose of preventing a specific incident of pollution and to minimise the damage from pollution.12

2.10 The Great Barrier Reef Marine Park Act 1975 also provides for the preparation of zoning plans in respect of areas in the Marine Park.13 The Great Barrier Reef Marine Park Zoning Plan 2003 is the primary planning instrument for the conservation and management of the Marine Park. It defines what activities can occur in which locations, both to protect the marine environment and to separate potentially conflicting activities.14

Environment Protection (Sea Dumping) Act 1981

2.11 The Environment Protection (Sea Dumping) Act 1981 (Sea Dumping Act) regulates the loading and dumping of waste at sea in waters surrounding Australia's coastlines. Essentially, under the Sea Dumping Act, permits are required from the Department of Sustainability, Environment, Water, Population and Communities for all ocean disposal activities, including dredging operations. The Sea Dumping Act

8 The Great Barrier Reef was inscribed on the World Heritage List in 1981.

9 The Great Barrier Reef was included in the National Heritage List on 21 May 2007. See further: SEWPAC, The Great Barrier Reef, Queensland at: http://www.environment.gov.au/heritage/places/world/great-barrier-reef/index.html (accessed 14 May 2013).

10 GBRMPA, Great Barrier Reef Biodiversity Conservation Strategy 2013, p.7, at: http://www.gbrmpa.gov.au/about-the-reef/biodiversity/biodiversity-conservation-strategy-2013 (accessed 21 May 2013).

11 Great Barrier Reef Marine Park Act 1975, s. 37AA.

12 Great Barrier Reef Marine Park Act 1975, s. 38DE.

13 Great Barrier Reef Marine Park Act 1975, ss. 32-37AC.

14 GBRMPA, Zoning, at: http://www.gbrmpa.gov.au/zoning-permits-and-plans/zoning (accessed 27 May 2013) and GBRMPA, Ports and Shipping Information Sheet - August 2012, p. 1.

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fulfils Australia's international obligations under the London Protocol15 to prevent marine pollution by dumping of wastes and other matter.16

2.12 Some sea dumping projects may require approval under both the EPBC Act and the Sea Dumping Act. In these cases, applications can be assessed concurrently under both Acts. If sea dumping activities are proposed in the Great Barrier Reef Marine Park, they will be assessed by the Great Barrier Reef Marine Park Authority.17

2.13 The SEWPAC website reports that 'port operators account for the majority of sea dumping permit applications.'18

2.14 In 2009, the National Guidelines for Dredging were published, which set out the framework for the environmental impact assessment and permitting of ocean disposal of dredged material. The guidelines set out a framework for:

• evaluating alternatives to ocean disposal;

• assessing loading and disposal sites;

• assessing potential impacts on the marine environment and other users; and

• determining management and monitoring requirements. 19

Background to the bill

UNESCO Reactive Monitoring Mission to Great Barrier Reef Report

2.15 In June 2012, the United Nations Educational, Scientific and Cultural Organisation (UNESCO) completed a Reactive Monitoring Mission Report into the Great Barrier Reef (UNESCO report). This report was requested by the World Heritage Committee to establish the state of conservation of the Great Barrier Reef World Heritage property.20 The report noted that there had been positive trends with regards to managing threats such as oil and gas development, and fishing and tourism in the Great Barrier Reef, however:

15 1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972.

16 SEWPAC, Sea dumping, http://www.environment.gov.au/coasts/pollution/dumping/ (accessed 27 May 2013).

17 SEWPAC, Sea Dumping Act, http://www.environment.gov.au/coasts/pollution/dumping/act.html (accessed 27 May 2013).

18 SEWPAC, Dredged Material, http://www.environment.gov.au/coasts/pollution/dumping/dredge.html (accessed 27 May 2013).

19 SEWPAC, National Guidelines for Dredging, available at: http://www.environment.gov.au/coasts/pollution/dumping/publications/guidelines.html (accessed 27 May 2013).

20 UNESCO, Mission Report: Reactive Monitoring Mission to Great Barrier Reef (Australia), June 2012, p. 2, http://whc.unesco.org/download.cfm?id_document=117104 (accessed 10 April 2013).

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Considering the rapid increase of coastal developments, including ports infrastructure, and the fact that circa 35 new development proposals are awaiting determination by 2013, including in highly sensitive or already pressured areas, the mission concludes that this is of high concern to the conservation of the OUV [Outstanding Universal Values] for which the property is inscribed on the World Heritage List.21

2.16 Due to these concerns the UNESCO report made 14 recommendations designed to keep the Great Barrier Reef off the 'List of World Heritage in Danger' (listed at Appendix 3).22

Recommendations made by the World Heritage Committee

2.17 After considering the UNESCO report, the World Heritage Committee requested that Australia address a number of matters, as set out in Appendix 3. These included to:

• not permit any further port development or associated infrastructure outside

existing major port areas within or adjoining the Great Barrier Reef property, and to ensure that development is not permitted if it would impact on the values of the property;

• complete the strategic assessment for the sustainable development of the Great Barrier Reef World Heritage Area and to ensure that the assessment fully addresses impacts on the reef; and

• undertake an independent review of the management arrangements for

Gladstone Harbour to ensure that port development is consistent with international best practice standards.23

2.18 The World Heritage Committee also requested that the Australian government respond to its recommendations by 1 February 2013, stating that a lack of substantial progress could place the Great Barrier Reef on the 'List of World Heritage in Danger'.24

21 UNESCO, Mission Report: Reactive Monitoring Mission to Great Barrier Reef (Australia), June 2012, p. 4, http://whc.unesco.org/download.cfm?id_document=117104 (accessed 10 April 2013).

22 For further detail on the List of World Heritage in Danger, see: UNESCO, World Heritage in Danger, at: http://whc.unesco.org/en/158/ (accessed 14 May 2013). There are currently 38 properties around the world on the List of World Heritage in Danger - the full list is available at: http://whc.unesco.org/en/danger/ (accessed 17 May 2013).

23 UNESCO, Decisions adopted by the World Heritage Committee at its 36th session (Saint-Petersburg 2012), Decision 36Com 7B.8: Great Barrier Reef Australia (N 154), pp 57-58, http://whc.unesco.org/document/117760 (accessed 10 April 2013).

24 UNESCO, Decisions adopted by the World Heritage Committee at its 36th session (Saint-Petersburg 2012), Decision 36Com 7B.8: Great Barrier Reef Australia (N 154), p. 58, http://whc.unesco.org/document/117760 (accessed 10 April 2013).

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Australian State Party Report

2.19 On 1 February 2013, Australia presented its State Party Report in response to the recommendations made by the World Heritage Committee. The State Party Report identified several key issues affecting the Great Barrier Reef World Heritage Area, including climate change, extreme weather events, ocean acidification, chemicals, and land clearing leading to increased run-off.25 The State Party Report also stated that 'nutrient-rich flood waters arising from the extreme weather events…have created conditions that result in increased numbers of the crown-of-thorns starfish, which preys on coral.'26

2.20 The Australian government outlined several initiatives in response to these challenges, including:

• the Great Barrier Reef Water Quality Protection Plan;

• research and management activities to combat crown-of-thorns starfish;

• a comprehensive zoning plan for the marine park;

• the establishment of the Coral Sea Commonwealth Marine Reserve; and

• the introduction of a carbon price. 27

2.21 The State Party Report also indicated that the Australian government is undertaking a strategic assessment of the Great Barrier Reef World Heritage Area, with the aid of the Queensland government.28

Great Barrier Reef strategic assessment

2.22 The strategic assessment is being undertaken by the Commonwealth government and the Queensland government in accordance with section 146 of the EPBC Act. The Great Barrier Reef strategic assessment has two key components: a marine component and a coastal component. GBRMPA is leading the marine component which will look at the arrangements in place to manage and protect the Great Barrier Reef Marine Park and World Heritage Area. The Queensland

25 Australian government, State Party Report: On the state of conservation of the Great Barrier Reef World Heritage Area (Australia), February 2013, pp 5-6, available at: http://www.environment.gov.au/heritage/publications/gbr/gbr-state-party-report-feb13.html (accessed 14 May 2013).

26 Australian government, State Party Report: On the state of conservation of the Great Barrier Reef World Heritage Area (Australia), February 2013, p. 6.

27 Australian government, State Party Report: On the state of conservation of the Great Barrier Reef World Heritage Area (Australia), February 2013, p. 6.

28 Australian government, State Party Report: On the state of conservation of the Great Barrier Reef World Heritage Area (Australia), February 2013, p. 7.

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government is leading the coastal component which will look at coastal development such as planning for urban, industrial and port development.29

2.23 The assessment will examine whether the appropriate planning processes and management arrangements are in place to ensure development occurs sustainably and does not impact unacceptably on matters of national environmental significance.30

2.24 The terms of reference for the strategic assessment were approved on 30 August 2012 after a period of public consultation. The strategic assessment will reportedly take approximately 12 months to complete, and there will be further

opportunities for public input, including on draft strategic assessment reports.31 Outcomes of the strategic assessment will be presented to the Commonwealth Environment Minister.32

Independent Review of the Port of Gladstone

2.25 As part of the Australian government's response to the World Heritage Committee, the Minister for Sustainability, Environment, Water, Population and Communities has commissioned an Independent Review of the Port of Gladstone.

2.26 The review is focussed on the port of Gladstone but may result in findings that are relevant to other ports adjoining the Great Barrier Reef. The review will be used to inform the strategic assessment outlined above. The review panel will report back to the Commonwealth government by 30 June 2013.33

UNESCO response to State Party report

2.27 The UNESCO World Heritage Committee will consider the State Party Report on the Great Barrier Reef in June 2013. The provisional agenda for that meeting recommends that the Committee welcome progress made with the strategic assessment, and the establishment of an independent review of the management of Gladstone Harbour. However, it notes with concern the limited progress made by Australia in implementing key requests and recommendations made by the Committee. The agenda also proposes that the Committee request that, among other matters, Australia commit to:

29 SEWPAC, Strategic assessment - Great Barrier Reef, at: http://www.environment.gov.au/epbc/notices/assessments/great-barrier-reef.html (accessed 14 May 2013).

30 SEWPAC, Strategic assessment - Great Barrier Reef, at: http://www.environment.gov.au/epbc/notices/assessments/great-barrier-reef.html (accessed 14 May 2013).

31 SEWPAC, Strategic assessment - Great Barrier Reef, at: http://www.environment.gov.au/epbc/notices/assessments/great-barrier-reef.html (accessed 14 May 2013).

32 GBRMPA, Great Barrier Reef Region Strategic Assessment, http://www.gbrmpa.gov.au/outlook-for-the-reef/strategic-assessment/about-the-marine-strategic-assessment (accessed 14 May 2013).

33 SEWPAC, Independent review of the Port of Gladstone, at: http://www.environment.gov.au/coasts/gbr/gladstone/index.html (accessed 14 May 2013).

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Ensure that no port developments or associated port infrastructure are permitted outside the existing and long-established major port areas within or adjoining the property.34

2.28 Finally the agenda proposes that the World Heritage Committee request Australia submit an updated report to the World Heritage Centre on the state of conservation of the Great Barrier Reef World Heritage Area by 1 February 2014. The World Heritage Committee would examine that report at its 38th session in 2014, with a view to considering, in the absence of substantial progress, the inscription of the property on the List of World Heritage in Danger at its 38th session in 2014.35

Queensland Ports Strategy

2.29 On 31 October 2012, the Queensland government released a draft Great Barrier Reef Ports Strategy 2012-2022 for public consultation. The Queensland government's stated aim is to ensure that port development in the Great Barrier Reef region occurs in a 'balanced and incremental way to support economic development while maintaining the outstanding environmental value of the Great Barrier Reef'. The strategy includes a commitment to restrict any significant port development, within and adjoining the Great Barrier Reef World Heritage Area, to within 'existing port limits' until 2022.36

2.30 The Committee notes, however, that on releasing this draft strategy the Queensland government stated that it considered Balaclava Island and Port Alma to be within 'existing major ports'.37 This was despite UNESCO's reactive monitoring mission finding that these areas were in pristine or near pristine areas of importance to the outstanding universal values of the Great Barrier Reef,38 and the World Heritage Committee's 2012 recommendation that Australia should not permit any new port development or associated infrastructure outside of the existing and long-established major port areas within and adjoining the property.39 The draft report being considered by World Heritage Committee at its meeting next week in Cambodia notes that the

34 UNESCO, State of conservation of World Heritage properties Inscribed on the World Heritage List, WHC-13/37.COM/7B, p. 26 at: http://whc.unesco.org/archive/2013/whc13-37com-7B-en.pdf (accessed 17 May 2013).

35 UNESCO, State of conservation of World Heritage properties Inscribed on the World Heritage List, WHC-13/37.COM/7B, pp 26-27 at: http://whc.unesco.org/archive/2013/whc13-37com-7B-en.pdf (accessed 17 May 2013).

36 Queensland Department of State Development, Infrastructure and Planning, Queensland Ports Strategy, at: http://www.dsdip.qld.gov.au/gbr-strategic-assessment/queensland-ports-strategy.html (accessed 17 May 2013).

37 The Hon Jeff Seeney, Queensland Minister for State Development, Infrastructure and Planning, "Great Barrier Reef Ports Strategy released", media statement dated 31 October 2013, at: http://statements.qld.gov.au/Statement/2012/10/31/draft-great-barrier-reef-ports-strategy-released (accessed 11 June 2013).

38 UNESCO, Mission Report: Reactive Monitoring Mission to Great Barrier Reef (Australia), June 2012, pp 51-52, http://whc.unesco.org/download.cfm?id_document=117104 (accessed 10 April 2013).

39 As outlined at paragraph 2.17.

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Queensland government's Great Barrier Reef Port Strategy presents the continued possibility for development outside existing major port areas (for example, Balaclava Island and Port Alma), which would be inconsistent with the World Heritage Committee' s previous recommendations.40

Ports and shipping issues in the Great Barrier Reef region

2.31 GBRMPA is currently in the process of developing a statement outlining its view on the environmental aspects of the development, operation and management of ports in and next to the Great Barrier Reef. Presently, there are 12 ports in the World Heritage Area, including two that are situated within the Marine Park (see figure 1

over).41

2.32 GBRMPA notes that mining and gas industry growth has led to an increase in port developments in the region. This has included proposed expansions in at least four ports along the coastline of the Great Barrier Reef, as well as three proposals for the development of new ports on previously undeveloped sites at Wongai (Bathurst Bay, Cape York), Fitzroy Terminal (in the vicinity of Port Alma) and Balaclava Island (near Curtis island, Gladstone).42 The company involved in the proposed development

at Balaclava Island announced its withdrawal of the project on 13 May 2013, citing among other reasons, 'poor current market conditions', 'excess port capacity in Queensland' and 'specific shipping limitations'.43

2.33 GBRMPA reports that these developments and the activities associated with them, such as dredging and sea dumping, could have negative outcomes for the environment. GBRMPA lists a range of potential environmental impacts such as seabed disturbance, the removal of existing habitats, the degradation of water quality and pollution from port waste.44

40 UNESCO, State of conservation of World Heritage properties Inscribed on the World Heritage List, WHC-13/37.COM/7B, p. 23; at: http://whc.unesco.org/archive/2013/whc13-37com-7B-en.pdf (accessed 11 June 2013).

41 GBRMPA, Outlook for the Reef: Ports and Shipping, http://www.gbrmpa.gov.au/outlook-for-the-reef/Managing-multiple-uses/ports-and-shipping (accessed 16 April 2013). The two ports situated in the Marine Park are the minor ports or Quintell Beach and Cooktown.

42 GBRMPA, Ports and Shipping Information Sheet: Ports—challenges for the Great Barrier Reef, p. 4, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0019/28810/Ports-challenges-for-the-Great-Barrier-Reef.pdf (accessed 27 May 2013).

43 Glencore Xstrata, Glencore Xstrata relinquishes Balaclava Island Coal Export Terminal (BICET) development, media release dated 13 May 2013, available at: http://www.glencorexstrata.com/assets/Uploads/20130513-GlencoreXstrata-relinquishes-Balaclava-Island-Coal-Export-Terminal-development.pdf (accessed 27 May 2013).

44 GBRMPA, Ports and Shipping Information Sheet: Ports—challenges for the Great Barrier Reef, pp 1-2, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0019/28810/Ports-challenges-for-the-Great-Barrier-Reef.pdf (accessed 16 April 2013).

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Figure 1: Map of Queensland ports in the Great Barrier Reef Region.45

45 Source: GBRMPA, Ports in the Great Barrier Reef, p. 2, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0009/28809/Ports-in-the-Great-Barrier-Reef.pdf (accessed 13 June 2013).

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2.34 Due to the increase in port developments, GBRMPA has observed an increase in commercial shipping:

There will be a significant increase in shipping in Reef waters over the next 10 to 15 years as a result of mining and LNG industry growth, port expansions and increases in trade.46

2.35 Ships carrying mining by-products usually contain substances such as sulphuric acid, ammonia, sodium cyanide and caustic soda.47 This can be an issue in the case of an emergency, such as a collision or grounding, in which a chemical spill can have a devastating impact on the reef. Other negative impacts on the Great Barrier Reef include waste disposal and anchor damage.48

Other recent reports and strategies 2.36 In 2009, the Great Barrier Reef Marine Park Authority published the Great Barrier Reef Outlook Report 2009 (Outlook report), which assesses what is known about the reef ecosystem, its use, management, and the pressures it is facing, and its future. The report identifies climate change, continued declining water quality from catchment runoff, loss of coastal habitats from coastal development and remaining impacts from fishing as the priority issues reducing the resilience of the Great Barrier Reef.49 The report concluded that the 'overall outlook for the Great Barrier Reef is poor' and that:

Further building the resilience of the Great Barrier Reef by improving water quality, reducing the loss of coastal habitats and increasing knowledge about fishing and its effects, will give it the best change of adapting to and recovering from the serious threats ahead, especially from climate change.50

2.37 In relation to ports and shipping in the Great Barrier Reef area, the Outlook report stated that:

46 GBRMPA, Ports and Shipping Information Sheet: Shipping—challenges for the Great Barrier Reef, p. 1, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/28811/Shipping-challenges-for-the-Great-Barrier-Reef.pdf (accessed 16 April 2013).

47 GBRMPA, Ports and Shipping Information Sheet: Shipping—challenges for the Great Barrier Reef, p. 1, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/28811/Shipping-challenges-for-the-Great-Barrier-Reef.pdf (accessed 16 April 2013).

48 GBRMPA, Outlook for the Reef: Ports and Shipping, http://www.gbrmpa.gov.au/outlook-for-the-reef/Managing-multiple-uses/ports-and-shipping (accessed 16 April 2013).

49 GBRMPA, Great Barrier Reef Outlook report - in Brief, p. i, at: http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/3872/Outlook_InBrief_Web.pdf (accessed 21 May 2013).

50 GBRMPA, Great Barrier Reef Outlook report - in Brief, p. ii, at: http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/3872/Outlook_InBrief_Web.pdf (accessed 21 May 2013).

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Most routine shipping activities have negligible consequences. Dredging and construction of port facilities can have significant but localised impacts.51

2.38 However, more recent information released by GBRMPA notes that :

Since the release of the Outlook Report in 2009 and as a result of mining and coal seam gas industry growth, there has been a significant increase in development proposals to expand all of Queensland's major trading ports, including several new port development proposals.

These inshore areas of the Great Barrier Reef are where species and habitats critical to the healthy functioning of the Reef's ecosystems are under the greatest pressure from a range of threats, including coastal development.52

2.39 Most recently, GBRMPA published the Great Barrier Reef Biodiversity Conservation Strategy 2013. This strategy identifies that:

….inshore habitat and species continue to be impacted by a range of pressures including: declining water quality due to catchment run-off; loss of habitat because of coastal and port development; some remaining impacts of fishing; and climate change. 53

2.40 The strategy further states that 'there is an urgent need for a systematic approach to addressing the cumulative impacts on inshore biodiversity'. 54 The strategy also warns that:

The scale and scope of the expansion of existing ports, along with proposals for new ports to meet export demands, requires careful consideration of the development of large-scale coastal infrastructure and subsequent increases in dredging activities, shipping movements and the number of ships moored in the Marine Park awaiting loading and offloading…The rapid urban expansion, mining and development or expansion of ports and related infrastructure occurring along the Great Barrier Reef is adding further pressure to inshore biodiversity…55

Overview of the provisions of the bill 2.41 The purpose of the bill is to amend the EPBC Act to implement

recommendations made by the World Heritage Committee to ensure the Great Barrier Reef is not included in the 'world heritage in danger' list.56

51 GBRMPA, Great Barrier Reef Outlook report - in Brief, p. 8, at: http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/3872/Outlook_InBrief_Web.pdf (accessed 21 May 2013).

52 GBRMPA, Ports and Shipping Information Sheet: Ports—challenges for the Great Barrier Reef, p. 1, http://www.gbrmpa.gov.au/__data/assets/pdf_file/0019/28810/Ports-challenges-for-the-Great-Barrier-Reef.pdf (accessed 27 May 2013).

53 GBRMPA, Great Barrier Reef Biodiversity Conservation Strategy 2013, p. 18.

54 GBRMPA, Great Barrier Reef Biodiversity Conservation Strategy 2013, p. 18.

55 GBRMPA, Great Barrier Reef Biodiversity Conservation Strategy 2013, pp 27-28.

56 Explanatory Memorandum, p. 1.

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2.42 Proposed section 24D of the bill seeks to prohibit the construction or development of new ports outside existing port areas. It also prohibits the development or expansion of existing ports in designated areas such as the Fitzroy Delta, Balaclava Island, Port Alma, northern Curtis Island, northern Great Barrier Reef, or any other area that could have a significant impact on the environment in the areas already designated.

2.43 Proposed section 24E would prevent the minister from approving any development after 20 March 2013 within existing port areas located in, or next to, the Great Barrier Reef World Heritage Area, if these developments would impact the world heritage values of the Great Barrier Reef.

2.44 Proposed section 24F aims to put in place a moratorium on all developments impacting on the Great Barrier Reef World Heritage Area until the strategic assessment has been completed and deemed adequate by the World Heritage Committee.

2.45 Finally, proposed section 24G would restrain the minister from approving any developments that do not deliver a net benefit for the Great Barrier Reef World Heritage Area.57

57 Explanatory Memorandum, pp 1-2.

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Chapter 3 Key issues

3.1 Submissions in response to the bill tended to be polarised either in favour of, or against the bill. Opposition to the bill came primarily from industry groups associated with the ports, shipping and resource industries, along with the Queensland government.1 Individuals and organisations supporting the bill included the Law Council of Australia, the Queensland Seafood Industry Association, conservation organisations, and a number of scientific experts.2 The Queensland Tourism Industry Council supported 'the spirit' of the bill.3

3.2 Key issues raised during the committee's inquiry included:

• whether the bill is an appropriate response to the World Heritage Committee's recommendations;

• the impacts of ports and associated activities on the health of the Great Barrier Reef;

• whether existing legislation is sufficient to protect the Great Barrier Reef;

• the need to consider the economic and social implications of the bill; and

• the drafting of the bill.

3.3 These are discussed in turn below.

Responding to the World Heritage Committee

3.4 Those who supported the bill believed that it would facilitate the fulfilment of Australia's international commitments to protect the outstanding universal values of the Great Barrier Reef World Heritage Area, and avoid the property being added to the List of World Heritage in Danger.4 In particular, they believed the bill is an

1 Gladstone Ports Corporation, Submission 1, Ports Australia, Submission 24, Shipping Australia, Submission 26, Queensland Ports Association, Submission 27; Queensland Resources Council, Submission 34; Minerals Council of Australia, Submission 38; Australia Pacific LNG, Submission 37; Queensland Government, Submission 36.

2 Law Council of Australia, Submission 33; WWF-Australia and the Australian Marine Conservation Society (AMCS), Submission 29; Keppel and Fitzroy Delta Alliance, Submission 25; Capricorn Conservation Council, Submission 31; Save Our Foreshore, Submission 32; North Queensland Conservation Council, Submission 35; Mackay Conservation Group, Submission 39; Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, pp 36-42; Save the Reef, Submission 43, p. 1; Distinguished Professor Helene Marsh, Professor Terry Hughes and Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 44.

3 See Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 9.

4 Law Council of Australia, Submission 33, p. 7; Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 16.

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important, efficient, sensible and appropriate way of giving effect to the recommendations of the World Heritage Committee.5 For example, the Law Council of Australia supported the bill as 'an appropriate form of regulatory protection' for an important World Heritage area and an 'appropriate and proportionate response' to the concerns and recommendations of the World Heritage Committee.6

3.5 Ms Jo-Anne Bragg from the Environmental Defenders Office Queensland (EDO Qld) agreed that the bill would efficiently implement the UNESCO recommendations because it imposes clear duties on the minister 'to refuse certain types of developments in certain locations that affect the reef'.7 For example, Ms Bragg told the committee that proposed section 24D is a clear-cut way to implement the World Heritage Committee's request that Australia 'not permit any new port development or associated infrastructure outside of the existing and long-established major port areas'.8

3.6 In particular, it was argued that the bill is needed because port development is continuing near the Great Barrier Reef despite the recommendations of the World Heritage Committee.9 For example, Mr Richard Leck from WWF-Australia expressed the view that there has been 'very little progress' from the Queensland or Australian governments in relation to the core concerns of the World Heritage Committee. He explained:

While there has been some progress on some of the recommendations that the committee made in 2012, particularly in relation to the refunding of Reef Rescue to combat the issues of water quality—which is fantastic and should be welcomed—those core issues relating to coastal development really have not been addressed.10

3.7 In terms of whether Australia is meeting its international obligations to protect the Great Barrier Reef, the Department of Sustainability, Environment, Water, Population and Communities (SEWPAC) advised that 'the EPBC Act is the primary

5 WWF-Australia and AMCS, Submission 29, p. 2; Capricorn Conservation Council, Submission 31, p. 1; North Queensland Conservation Council, Submission 35, p. 2; Law Council of Australia, Submission 33, p. 3; Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 17; Ms Janelle Allen, Keppel and Fitzroy Delta Alliance, Committee Hansard, 23 May 2013, p. 25; Mr Michael McCabe, Capricorn Conservation Council, Committee Hansard, 23 May 2013, p. 25; Ms Wendy Tubman, north Queensland Conservation Council, Committee Hansard, 23 May 2013, p. 25.

6 Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 29; see also Law Council of Australia, Submission 33, p. 3.

7 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 16.

8 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 17; see also WWF and AMCS, Submission 29, p. 48 and the discussion of the World Heritage Committee's decisions in Chapter 2.

9 Keppel and Fitzroy Delta Alliance, Submission 25, p. 1; WWF-Australia and AMCS, Submission 29, p. 1.

10 Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 17 and see also p. 16.

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mechanism through which Australia discharges its international convention obligations' and that the Great Barrier Reef and world heritage areas are already matters of environmental significance under the EPBC Act. A representative of SEWPAC further advised that one port has been approved since the World Heritage Committee made that its 2012 decision and 'that port was in an existing port area'.11

3.8 As to whether Australia has made sufficient progress towards addressing the World Heritage Committee's concerns, the department stated that the Commonwealth government is undertaking a 'range of initiatives' to address the pressures on the Great Barrier Reef, including the strategic assessments.12 The department also noted that there have been:

….a number of announcements made by the Australian

government…including the Prime Minister's announcement of $200 million worth of funding for the additional reef rescue program...the World Heritage Committee have been most concerned about the continuation of that investment. It may be that on further reflection the committee may find that they feel that there has been more than sufficient progress made in this matter.13

3.9 The committee was also advised that the department is funding a number of research projects to:

…inform the comprehensive strategic assessment and provide tools and guidance on how best to manage key threats to the Great Barrier Reef World heritage Area, including dredging, shipping, coastal development and improving resilience to threats such as climate change.14

3.10 While some pointed out the importance of meeting Australia's international obligations, Ports Australia argued that the UNESCO report findings 'should be treated with considerable caution' and that 'the World Heritage Committee, as much as we like to take their advice, does not set Australian government policy.'15 Mr David Anderson from Ports Australia concluded that 'we should not totally abrogate our policy making and the way we go about things to an international agency'.16

11 SEWPAC, Committee Hansard, 23 May 2013, p. 57. That approval was at Abbot Point: see The Hon. Tony Burke, Minister for Sustainability, Environment, Water, Population and Communities, Second stage of Queensland's Alpha Coal project approved, media release dated 10 October 2012 at: http://www.environment.gov.au/minister/burke/2012/mr20121010.html (accessed 4 June 2013).

12 SEWPAC, Committee Hansard, 23 May 2013, p. 50. See chapter 2 of this report for a discussion of the strategic assessment currently underway.

13 SEWPAC, Committee Hansard, 23 May 2013, p. 57.

14 SEWPAC, Answers to questions on notice, 4 June 2013, p. 5. A detailed list of these projects appears at Attachment A2.

15 Ports Australia, Submission 24, p. 2 and Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2.

16 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 8; see also Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, p. 8.

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3.11 In contrast, others stressed the importance of the Australian government honouring its international obligations. For example, the Law Council of Australia told the committee that it expects governments will comply with their international legal obligations:

…states must comply with their international legal obligations whether created by treaty or arising under customary international law. The Law Council supports the proposed amendments on the basis that legislation rather than policy and other executive decisions will better enable Australia to honour its international legal obligations. Australia's obligations under the World Heritage convention to lawfully protect World Heritage areas within our jurisdiction warrants the enactment of the proposed bill.17

3.12 Those opposed to the bill suggested that it goes further than the UNESCO recommendations by seeking to add far greater restrictions on port development rather than the suggested cessation of port development outside already existing port areas.18 For example, Gladstone Ports Corporation pointed out that the bill seeks to prohibit port development 'in areas with existing and lawfully established port designation, such as Port Alma, and to place a moratorium on approvals for future port development in areas, such as the Port of Gladstone'. Gladstone Ports Corporation contrasted this with the World Heritage Committee's recommendation that no approval be issued for any new port development or associated infrastructure outside of the existing long‐established major port areas within and adjoining the Great Barrier Reef World Heritage Area.19

3.13 Ms Jo-Anne Bragg from the EDO Qld disagreed with this analysis, stating that 'this bill definitely does not go further than UNESCO recommended'. In fact, she argued that the bill does not go as far as UNESCO would prefer in its

recommendations, because it sets a date of 20 March 2013, before which actions can be approved. She expressed the view that:

UNESCO would not have wanted that to happen. They would have wanted those development processes stopped pending the completion of the strategic assessment.20

3.14 In response to questioning on this issue, Mr Shane Mead from the Law Council of Australia expressed the view that there is a 'correlation between the recommendations made in the reactive monitoring report and the provisions of this bill'.21

17 Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 29 and also p. 31; see also Law Council of Australia, Submission 33, p. 4; and Dr Matt Landos, Committee Hansard, 23 May 2013, pp 38 and 42.

18 Gladstone Ports Corporation, Submission 1, p. 3.

19 Gladstone Ports Corporation, Submission 1, pp 2-3.

20 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 20; see also Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 20.

21 Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 29.

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The bill pre-empts the strategic assessment and other activities

3.15 Those opposed to the bill were also concerned that the bill pre-empts work being done by the Commonwealth and Queensland governments to implement and respond to the recommendations made by the World Heritage Committee.22 As outlined in chapter 2, this work includes strategic assessments currently being undertaken by both State and Commonwealth agencies, and the Independent Review into the Port of Gladstone.23 Submitters opposed to the bill also pointed to other initiatives, such as the Abbot Point cumulative impact assessment,24 the development of the Queensland Ports Strategy,25 and the North East Shipping Management Plan by the Australian Maritime Safety Authority.26 It was suggested that it would be 'prudent to consider the outcomes of this work before implementing any legislative changes'.27

3.16 For example, Queensland Ports Association submitted that:

The Strategic Assessment is by far the largest, most wide-ranging and most complex strategic assessment ever undertaken….It will result in a range of recommendations regarding 'appropriateness' of development siting and the need for any amendments to existing regulatory protection measures and governance frameworks for development assessment. It is through this process that any necessary legislative amendments must be based…28

3.17 In contrast, others argued that the strategic assessment should be completed before any more port developments that significantly affect the reef are approved, as proposed by the bill.29 For example, Mr Daniel Gschwind from the Queensland Tourism Industry Council told the committee that:

…logic tells me that we should do a strategic and cumulative assessment before we move ahead with significant projects that have the potential to

22 Queensland Ports Association, Submission 27, p. 1; Gladstone Ports Corporation, Submission 1, pp 1 and 3; Shipping Australia, Submission 26, p. 2; Queensland Resources Council, Submission 34, p. 6; Minerals Council of Australia, Submission 38, pp 3 and 7-8; Adani Mining, Submission 44, p. 5; Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2.

23 Queensland Government, Submission 36; Queensland Ports Association, Submission 27, p. 1; Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2.

24 Minerals Council of Australia, Submission 38, Attachment A cf Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, p. 27.

25 Queensland Government, Submission 36, p. 13.

26 Shipping Australia, Submission 26, p. 2.

27 Gladstone Ports Corporation, Submission 1, p. 3; see also Adani Mining, Submission 44, p. 5.

28 Queensland Ports Association, Submission 27, p. 1.

29 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, pp 9 and 13; Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 47; see also Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 16.

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have a significant impact on the reef. It is logic that dictates that rather than international agencies.30

3.18 In terms of the impact of the strategic assessment on existing development proposals in the Great Barrier Reef area, the department stated 'there would be no reason to advise stopping approvals until the strategic assessment was finished'.31

3.19 However, the department did advise that it is 'endeavouring to roll existing referrals in Queensland' into the strategic assessment process.32 At the same time, the department noted that:

The strategic assessment cannot require that those projects restart their assessment processes, but the information that is gathered through the strategic assessment and the work that is done throughout it will inform, necessarily, any decisions that are made between now and its completion.33

3.20 The department further explained that proponents who have already referred projects under the EPBC Act 'have the right to have those referrals assessed'. The department advised that whether those projects are ultimately approved depends on their environmental impacts, but that developments that could negatively affect the reef can be refused, or can be approved with 'robust' conditions.34

Impacts and pressures on the Great Barrier Reef

3.21 Many submissions expressed concern about the current health of the Great Barrier Reef.35 Some submissions pointed to scientific reports and studies warning about the health of the reef, including:

• a recent study by the Australian Institute of Marine Science which showed

that 'in the last 27 years to 2012 the reef has lost a staggering 51% of coral cover';36 and

30 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 13.

31 SEWPAC, Committee Hansard, 23 May 2013, p. 57.

32 SEWPAC, Committee Hansard, 23 May 2013, p. 50; and see also p. 58.

33 SEWPAC, Committee Hansard, 23 May 2013, p. 58.

34 SEWPAC, Committee Hansard, 23 May 2013, pp 50 and 58; see also Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 29.

35 See, for example, WWF-Australia and AMCS, Submission 29, p. 1; North Queensland Conservation Council, Submission 35, pp 1-2; Keppel and Fitzroy Delta Alliance, Submission 25, p. 1; Professor Terry Hughes, Submission 40, p. 1; Save the Reef, Submission 43, p. 1.

36 WWF-Australia and AMCS, Submission 29, p. 1; North Queensland Conservation Council, Submission 35, pp 1-2; Keppel and Fitzroy Delta Alliance, Submission 25, p. 1; Professor Terry Hughes, Submission 40, p. 1; and see also De'ath, Glenn et al, "The 27-year decline of coral cover on the Great Barrier Reef and its causes", 2012 Australian Institute of Marine Science, available at: http://www.pnas.org/content/109/44/17995 (accessed 13 June 2013).

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• the 2009 Great Barrier Reef Outlook Report, which concluded that 'the

overall outlook for the Great Barrier Reef is poor and catastrophic damage to the ecosystem may not be averted.'37

3.22 Indeed, scientific experts told the committee that there has been a decline in the condition of the Great Barrier Reef. Professor Terry Hughes explained that:

That decline is not uniform. The more remote parts of the Great Barrier Reef are still in very good condition, and they still support a very vibrant and economically valuable tourism industry. But south of about Cooktown and inshore along the coastline is being severely degraded…it is very well documented.38

3.23 WWF-Australia expressed the view that the reef is at a 'particularly vulnerable stage' and that the issues associated with the recent rapid industrial development along the reef reflect management failures, especially in relation to cumulative impacts.39

3.24 A representative of SEPWAC told the committee that:

Australia's management of the Great Barrier Reef World Heritage area is considered to be the best practice in many respects. There are a number of threats facing the Great Barrier Reef, like all reefs around the world, that are caused by a mix of man-made and natural pressures. Climate change, cyclones, floods, crown-of-thorns starfish, coastal development and high levels of nutrients are key concerns. The issues are complex and difficult to manage, and the Commonwealth government is undertaking a range of initiatives to address these pressures...40

Impacts of ports

3.25 Discussion about the impacts of ports developments and related activities in the Great Barrier Reef region centred around three areas:

• the relative contribution of port-related activities to the decline in the health of

the Great Barrier Reef when compared to other pressures;

• the impacts of various activities associated with ports, particularly the

consequences of dredging, dumping and increased shipping;41 and

• how the impacts of ports can best be managed and minimised.

37 Professor Terry Hughes, Submission 40, p. 1 and Committee Hansard, 23 May 2013, p. 49; North Queensland Conservation Council, Submission 35, p. 2; and see also GBRMPA, Great Barrier Reef Outlook report - in Brief, p. ii, at: http://www.gbrmpa.gov.au/__data/assets/pdf_file/0020/3872/Outlook_InBrief_Web.pdf (accessed 21 May 2013).

38 Professor Terry Hughes, Committee Hansard, p. 43; see also Distinguished Professor Helen Marsh and Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 43.

39 Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 15.

40 SEWPAC, Committee Hansard, 23 May 2013, p. 50.

41 Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 16; see also Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 42.

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3.26 These issues are discussed in turn below.

Relative contribution of ports to reef pressures

3.27 Those who opposed the bill argued against the assumption that port activity is a major cause of adverse impacts on the Great Barrier Reef. They pointed out that other major issues have been identified that impact on the health of the Great Barrier Reef, including climate change, declining water quality, loss of coastal habitat from development and some fishing activities. Run off from agricultural practices and the crown of thorns starfish were also mentioned as having a greater detrimental impact on the Great Barrier Reef.42

3.28 For example, Mr Michael Roche, Chief Executive of the Queensland Resources Council told the committee:

This bill appears to be based on a false premise that port developments, primarily driven by resource sector growth, have been or will be the cause of decline in the health of the reef. This view is contrary to extensive scientific studies and government pronouncements that make clear that the key issues affecting the reef are crown-of-thorns starfish, water quality and nutrient inflows from coastal rivers and storm damage.43

3.29 Those opposed to the bill argued that port development, including associated dredging, is a 'minor risk'. Some cited the Great Barrier Reef Outlook Report 2009, which recognised port development and operation as a 'medium risk to the reef'.44 For example, Mr David Anderson from Ports Australia argued that:

Discussions around the environmental impacts of dredging and shipping in Queensland ports have been exaggerated, whereas scientific research has indicated that the impacts are low or minimal. We reiterate that port developments and shipping activities are not recognised as the primary impacts upon the reef.45

3.30 Mr Michael Roche from the Queensland Resources Council further argued that 'there are wildly exaggerated estimates out into the community about the extent of port development' as well as the number of vessels using ports in the Great Barrier Reef.46

3.31 GBRMPA advised that, while ports ranked about fourth or fifth on the list of risks in the 2009 Outlook Report:

42 See, for example, Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2; Gladstone Ports Corporation, Submission 1, p. 2; Queensland Resources Council, Submission 34, p. 6; Minerals Council of Australia, Submission 38, p. 4; Ports Australia, Submission 24, p. 2; Adani Mining, Submission 44, pp 3-4.

43 Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, p. 1.

44 See, for example, Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 3; Gladstone Ports Corporation, Submission 1, p. 2; Adani Mining, Submission 44, p. 4.

45 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 3.

46 Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, p. 3 and also p. 2.

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…in recent years the proposals and scale of harbour development has increased, along with the increase in export demand for our products. Our view is that in a risk based system, climate change and catchment quality and water run-off, remain the two greatest risks to the Great Barrier Reef. Coastal development—by that I mean on the land and things in the waterways—is probably third.47

3.32 For those who supported the bill, the key concern was that port and industrial development in and near the Great Barrier Reef is creating additional pressure and negative impacts on the health of the Reef.48 For example, the North Queensland Conservation Council submitted that the argument about whether ports or other activities are the main contributing factors to the stress on the Great Barrier Reef is 'irrelevant and unhelpful': the reef cannot survive additional stresses.49 Professor Terry Hughes similarly observed that, in relation to dredging:

Some of the submissions argued that the impact of dredging was comparatively small compared to existing stresses like run-off from agriculture. I do not think there is much scientific validity in that argument when we look at the issue of cumulative impacts, because the extra insult of something like 60 million cubic metres of dredge spoil added to the pre-existing stresses is something that will simply cause a huge amount of damage.50

3.33 It was pointed out that additional pressures are particularly problematic in the context of climate change. For example, Distinguished Professor Helene Marsh expressed the view the developments that are occurring are not only damaging the outstanding universal value of the Great Barrier Reef, but also 'the capacity of a reef system that is already under considerable pressure. We need to be concerned about increasing its resilience, not decreasing it'.51

3.34 Similarly, Professor Terry Hughes agreed that the resilience of the Great Barrier Reef is a key issue:

…the Great Barrier Reef has evolved for hundreds of thousands of years with recurrent cyclones and floods. It always bounced back before but now it does not. The reason coastal reefs have lost their resilience to those natural events is because of things like the dumping of dredge spoil and run-off from land.52

47 GBRMPA, Committee Hansard, 23 May 2013, p. 50.

48 Capricorn Conservation Council, Submission 31, p. 1; Keppel and Fitzroy Delta Alliance, Submission 25, p. 1; Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 20.

49 North Queensland Conservation Council, Submission 35, p. 2.

50 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 43.

51 Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, p. 44.

52 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 44.

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3.35 Professor Terry Hughes summarised his views:

My opinion, based on the science, is that the Great Barrier Reef is in decline. I think that decline will continue unless we reduce the stressors that are currently happening to the Great Barrier Reef, and it is my opinion, based on the science, that large amounts of dredging will simply hasten the ongoing decline of the Great Barrier Reef.53

3.36 Several submissions also expressed concern that port developments, expansions, and their associated impacts have the potential to undermine other important initiatives to protect the Great Barrier Reef, such as the Great Barrier Reef Water Quality Plan and Reef Rescue program.54

Impacts of dredging, dumping and increased shipping

3.37 The impacts of activities associated with port development, including dredging, dumping and increased shipping, were also outlined during the committee's inquiry. As Mr Scott Wiseman from the Queensland Seafood Industry Association highlighted:

…it is not only the impacts associated with the construction and extension of the infrastructure that need to be considered; it is the impacts associated with ongoing dredging, at-sea spoil dumping, increased vessel traffic and

anchorages and a much wider range of ongoing impacts which must be factored into the cumulative impact assessments.55

3.38 Mr Richard Leck from WWF-Australia told the committee that 'when you look at the latest science and we look at the current declines that are happening, particularly in the inshore areas of the reef', dredging and dredge disposal 'are now no longer considered acceptable'.56

3.39 The committee heard that dredging can cause loss and degradation of habitat, including seagrass beds, which are important as habitat for a range of inshore species, such as turtles, dugongs, dolphins, as well as nurseries of fish.57

3.40 Submitters and witnesses also expressed grave concerns, and indeed opposition to dumping of dredge spoil in the Great Barrier Reef region.58 For

53 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 49.

54 Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 43; Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 9; see also Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 17.

55 Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, p. 36.

56 Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 15.

57 Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18; Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, p. 44.

58 See, for example, Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, p. 24; Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, pp 32-33; Professor Terry Hughes, Submission 40, p. 1.

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example, Professor Terry Hughes called for an outright ban of dumping of dredge spoil within the Great Barrier Reef World Heritage Area.59As Dr Jeremijenko stated:

The Great Barrier Reef is a world wonder, it is a tourism icon, it is a national treasure and a scientific wonderland, and we should not be treating it like a dump zone.60

3.41 The committee heard concerns about the large volumes of dredge spoil from port developments projected be dumped in the Great Barrier Reef World Heritage Area under current proposals. For example, Professor Terry Hughes expressed alarm that:

The volume that is being proposed over the next few years is very, very large...it is actually difficult to get the total number. But my calculation is that it is at least 60 million cubic metres of dredged spoil…it is a huge additional impost on the Great Barrier Reef…61

3.42 Professor Terry Hughes explained the known impacts of dredge spoil:

…added sediment to the marine environment is very destructive. It reduces light levels, which kills off seagrass beds. It can kill corals and it can prevent recovery of coral reefs after natural disasters…depending on where those sediments come from, they can be laced with various toxins.62

3.43 Professor Hughes added that there is a lot not yet known about dredge spoil, particularly in relation to the transport of dredge spoil during cyclones.63 Professor Terry Hughes concluded that 'dredged spoil is detrimental to the marine environment'.64

3.44 The Queensland Tourism Industry Council described any development involving the dumping of dredge spoil in or near the Great Barrier Reef Marine Park as a 'red flag issue' for them:

The evidence that has been presented to us over recent months in particular is very compelling and says that deposit of dredge spoils not just in the park but near the park has a very catastrophic impact upon the reef…the Commonwealth is spending $400 million to address that issue by better management on the land, so it seems somewhat inconsistent that we would

59 Professor Terry Hughes, Submission 40, p. 1.

60 Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, p. 35.

61 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 46, see also p. 48; and also, for example, Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, pp 23-24; Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18.

62 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 46; see also Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18.

63 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 46.

64 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 46.

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even contemplate dumping dredge spoil in or near the reef at the same time.65

3.45 In response to questioning about offshore dumping, GBRMPA acknowledged that there is a 'demand for bigger ships and deeper channels' and that 'the scale of dredge disposal is now greater' than it has been on average in the past.66

3.46 GBRMPA also noted that there is an issue of where, how and whether dredged spoil can be safely disposed of.67 GBRMPA advised that the national guidelines for dredging68 state that:

…first choice should be disposal on land, second choice should be beneficial re-use or reclaim, and the third and least favoured option would be disposal at sea.69

3.47 Both GBRMPA and SEWPAC further advised that, before sea dumping permits are issued, applicants are required to examine alternatives, and that a number of other issues are examined, including the qualities of the material being dumped, sediment size, contamination source, the degree of disturbance, the location and nature of the proposed dumping site.70

3.48 GBRMPA also expressed the view that there is likely to be a re-evaluation and scientific dissection of the impacts of offshore disposal in the next 12 months.71 Finally, GBRMPA noted that the effect of sea dumping of spoil will form part of the strategic assessment, and 'will illuminate further our positions on offshore dumping'.72

Impacts of increased shipping

3.49 The committee also heard a number of concerns related to the potential impacts of increased shipping associated with port developments and expansions, including:

• increased vessel strikes, which mainly affects larger animals, such as

dugongs, dolphins, turtles and whales, and 'has the potential to lead to the

65 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 10 and see also p. 12.

66 GBRMPA, Committee Hansard, 23 May 2013, p. 50.

67 GBRMPA, Committee Hansard, 23 May 2013, p. 60.

68 See Chapter 2 of this report and SEWPAC, National Guidelines for Dredging, available at: http://www.environment.gov.au/coasts/pollution/dumping/publications/guidelines.html (accessed 27 May 2013).

69 GBRMPA, Committee Hansard, 23 May 2013, p. 59; see also SEWPAC, Answers to questions on notice, p. 5.

70 GBRMPA, Committee Hansard, 23 May 2013, p. 59; see also SEWPAC, Committee Hansard, 23 May 2013, pp 59-60; and see also Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 48 for a discussion of some possible alternatives, including building jetties and using dredge spoil to reclaim land.

71 GBRMPA, Committee Hansard, 23 May 2013, p. 60.

72 GBRMPA, Committee Hansard, 23 May 2013, p. 59.

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long-term decline of already depleted populations of long-lived, slow-breeding species';73

• noise and lighting from ships-it was argued, for example, that this can disturb habitat and cause damage to turtles through disorientation if they are heading for their breeding grounds;74

• the risk of ballast water being released from ships moving through the reef,

which can carry contaminants and invasive foreign species;75

• the use of tributyltin (TBT), an antifouling agent used on ships hulls (it was

argued that the cumulative impact on the marine environment of this can be quite significant);76 and

• shipping incidents, accidents and collisions with the reef system itself. 77

3.50 However, submissions opposed to the bill noted that work is being done to minimise the risk of shipping. For example, Australia Pacific LNG submitted that shipping incidents have fallen 'from an average of one a year to one in 10 years and are continuing to decline at the same time as shipping volumes have increased'.78 Shipping Australia also pointed out that the Australia Maritime Safety Authority has taken 'a number of steps to reduce the risk in the Great Barrier Reef and Torres Straits region', including the development of the North East Shipping Management Plan.79

Managing the impacts of ports developments

3.51 It was also suggested that port development can continue in an

environmentally responsible manner while ensuring that the values of the Great Barrier Reef Marine Park are protected.80 Ports Australia argued ports are 'continually striving to be good environmental citizens', fulfil environmental assessments obligations and are 'willing participants in a clear and transparent process'.81

73 Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, p. 44; Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18.

74 Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18.

75 Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18.

76 Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 18; Mr Michael McCabe, Capricorn Conservation Council, Committee Hansard, 23 May 2013, p. 23.

77 See, for example, Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 13; Mr Michael McCabe, Capricorn Conservation Council, Committee Hansard, 23 May 2013, p. 23.

78 Australia Pacific LNG, Submission 37, p. 1.

79 Shipping Australia, Submission 26, p. 2.

80 Ports Australia, Submission 24, p. 3; also Queensland Resources Council, Submission 34, pp 21-23; Shipping Australia, Submission 26, p. 2.

81 Ports Australia, Submission 24, p. 1; Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 3.

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3.52 However, others disagreed that port developments are being well managed. For example, research scientist Mr Jon Brodie argued that 'it is possible to manage these port developments immensely better than what is happening at the moment'.82

3.53 Indeed, the committee received a considerable amount of evidence alleging that port development in Gladstone Harbour has been anything but well managed.83 For example, Mr Jon Brodie described it as 'an absolute environmental management failure with huge ecological effects'.84 Mr Scott Wiseman from the Queensland Seafood Industry Association agreed that:

Unfortunately, the Gladstone port development provides a case example where many things have gone wrong and highlights how sensitive marine environments can easily and significantly be impacted.85

3.54 Dr Matthew Landos argued that dredging in Gladstone harbour was done without any sediment control, which resulted in a 'dredge plume of uncontrolled, re-suspended, toxic sediment going throughout the harbour'.86 The committee heard that this had had impacts on human health, fisheries, seagrasses and wildlife such as turtles in Gladstone Harbour.87

3.55 The committee heard also about three cases of 'shewenella' in fishermen from Gladstone. Dr Jeremijenko explained that 'shewenella' is a rare bacterium associated with heavy metals, and argued that dredging in Gladstone harbour caused these cases of shewenella.88 In contrast, Gladstone Ports Corporation argued that 'shewenella' is a common bacterium normally found in healthy marine animals, and that 'the linkage between shewenella and a metal rich environment caused by dredging is unsubstantiated'.89

82 Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 45 and also pp 44 and 48; see also, for example, Dr Matthew Landos, Committee Hansard, 23 May 2013, pp 36-37; Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, p. 34; Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 48.

83 Save the Reef, Submission 43; Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, p. 34; Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 43; Dr Matthew Landos, Committee Hansard, 23 May 2013, pp 36-37 cf Gladstone Ports Corporation, Submission 1.

84 Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 43.

85 Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, p. 36.

86 Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 37 cf Gladstone Ports Corporation, Correspondence received 5 May 2013, p. 6.

87 See, for example, Dr Matthew Landos, Committee Hansard, 23 May 2013, pp 36-37; Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, p. 41 cf Gladstone Ports Corporation, Correspondence received 5 May 2013, p. 6.

88 Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, p. 32.

89 Gladstone Ports Corporation, Correspondence received 5 May 2013, p. 3.

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3.56 However, the committee notes that there was debate about whether the issues in Gladstone Harbour could be solely attributed to dredging and port development or recent flood events.90

3.57 Gladstone Ports Corporation argued that recent monitoring in Gladstone showed that the impacts of dredging activities are 'not significant in terms of environmental quality and impacts on marine ecology', and are very localised. By comparison, they argued that recent floods in Queensland had 'catastrophic effects on the ecosystem which extended well beyond the immediate harbour'.91 Gladstone Ports Corporation further explained in response to these concerns:

An extensive environmental monitoring program has run since before dredging commenced and will continue well after the completion of dredging operations. Analysis of the data provided by this monitoring program has been undertaken by both independent scientists and government agencies. None of whom have identified any linkage between dredging activities and fish health or human health.92

3.58 Gladstone Ports Corporation argued that the analysis of Drs Landos and Jeremijenko downplays the impacts caused by the significant flood events that occurred in Central Queensland in early 2011:

These events have been shown to have dramatically affected the characteristics of the natural ecosystem of Gladstone Harbour and those effects persisted for a number of months.93

3.59 However, Dr Matthew Landos described the idea that the problems in Gladstone Harbour could be due to floods as 'fanciful':

In Gladstone, the fish did not start getting sick until July. The flood was in January…there was actually a bigger flood running down the Fitzroy River than was in Gladstone—substantially bigger…but nothing died in the Fitzroy delta. Nothing got sick. Turtles were not washing up. Hundreds of them washed up in Gladstone. They washed up immediately after the bund wall was being constructed, in high tidal velocities that caused massive scouring and unprecedented levels of sediment resuspension in the harbour. Floods had nothing to do with it. Floods cannot deliver the contaminants into the harbour that we detected in the bloods of turtles. The turtles were full of heavy metals. They did not come down with the flood.94

90 See, for example, Dr Andrew Jeremijenko, Save the Reef, Committee Hansard, 23 May 2013, p. 34; Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 39 cf. GBRMPA, Committee Hansard, 23 May 2013, p. 51.

91 Gladstone Ports Corporation, Submission 1, p. 2; see also Ports Australia, Submission 24, p. 2.

92 Gladstone Ports Corporation, Correspondence received 5 May 2013, p. 2.

93 Gladstone Ports Corporation, Correspondence received 5 May 2013, p. 2.

94 Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 39.

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3.60 In response to questioning on this issue, GBRMPA responded that it was aware of the problems in the Gladstone Harbour area and had sought briefings.95 However, GBRMPA advised that its scientists were 'satisfied', based on the reports, that the issues in Gladstone Harbour were related to 'floods as opposed to the dredging'. GBRMPA acknowledged that 'the dredging could well have had an effect, but it is swamped by the signal from the biggest floods in a hundred years'.96

3.61 GBRMPA noted that its records:

…show very clearly a massive increase in dugong and turtle deaths from around 2010-11 and 2011-12—the years of the very big floods…the rate of dugong deaths, appearance of onshore strandings, has now decreased to the long-term average, but turtle deaths are still elevated. They seem to take a longer time to recover, sadly.97

3.62 GBRMPA noted that it had conducted monitoring just outside Gladstone harbour, which 'did not show significant exceedances' in terms of water quality. However, GBRMPA further advised that 'it is not our job to monitor and comment on what was happening inside the harbour.' Inside the harbour is 'managed by the port, the Queensland government and the EPBC process.'98

3.63 The committee notes that the World Heritage Committee has requested, and the Minister for Sustainability, Environment, Water, Population and Communities has commissioned, an Independent Review of the Port of Gladstone. The committee notes that there was discussion about the adequacy and transparency of the review process during the committee's hearing in Brisbane.99 The review will report to the Australian government by 30 June 2013.100

Where should ports be located?

3.64 In addition to the importance of good management of ports, the committee heard evidence that ports should be located in the 'right place'.101 In this context, there was strong support for the bill's proposal (and the World Heritage Committee

95 GBRMPA, Committee Hansard, 23 May 2013, p. 53.

96 GBRMPA, Committee Hansard, 23 May 2013, pp 52-53.

97 GBRMPA, Committee Hansard, 23 May 2013, p. 54; see also Dugong and turtle strandings, http://www.gbrmpa.gov.au/outlook-for-the-reef/extreme-weather/dugong-and-turtle-strandings (accessed 31 May 2013).

98 GBRMPA, Committee Hansard, 23 May 2013, p. 51.

99 See Dr Matthew Landos, Committee Hansard, 23 May 2013, pp 40-41; and SEWPAC, Committee Hansard, 23 May 2013, pp 54-55; and SEWPAC, Answers to questions on notice, pp 4-5.

100 SEWPAC, Independent review of the Port of Gladstone, at: http://www.environment.gov.au/coasts/gbr/gladstone/index.html (accessed 14 May 2013); see also Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 40; and SEWPAC, Committee Hansard, 23 May 2013, p. 54.

101 See for example, Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, p. 44.

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recommendations) to contain port development to existing port areas. For example, the Queensland Tourism Industry Council expressed the view that:

…port development should be confined to existing ports and, if there is to be expansion of capacity which may be justified, it should be taking place in the three major ports that already exist in Queensland. Any further development should not take place outside those areas.102

3.65 Mr Michael McCabe, from the Capricorn Conservation Council, agreed that 'we should definitely not expand ports beyond the existing ones. We need a lot more science to understand what is currently going on.'103

3.66 In the same vein, Ms Janelle Allen from the Keppel and Fitzroy Delta Alliance told the committee:

…we should be looking at current infrastructure and expanding that if necessary, rather than developing ports willy-nilly up and down the coast to suit every company that wants to have a port or a facility of its own.104

3.67 Professor Terry Hughes explained his view that it would be a 'huge mistake' to develop new ports or 'ports that are currently really tiny':

…because the reef near them, and associated habitats like seagrass beds, are still in good condition. It would be a big mistake to basically spread the decline all the way along the coast rather than containing it.105

3.68 Distinguished Professor Helene Marsh agreed that 'we should be very cautious indeed about expanding anything in the northern half of the reef'. She expressed the view that there are parts of the Great Barrier Reef, particularly north of Cooktown, that are still in good condition, and that 'we should be defending that to the hilt'. She also expressed concern about the development of new ports in remote areas and the capacity to deal with accidents in those areas.106

3.69 GBRMPA agreed that 'fewer better managed ports gives better outcomes for the sustainability of the ecosystems'.107 However, some also expressed caution about developing existing ports.108 Distinguished Professor Helene Marsh commented that we need to be 'very careful' about location of ports:

102 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 11.

103 Mr Michael McCabe, Coordinator, Capricorn Conservation Council, Committee Hansard, 23 May 2013, p. 22.

104 Ms Janelle Allen, Keppel and Fitzroy Delta Alliance, Committee Hansard, 23 May 2013, p. 24.

105 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 46.

106 Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, pp 44-45; see also Capricorn Conservation Council, Submission 31, p. 2.

107 GBRMPA, Committee Hansard, 23 May 2013, p. 56.

108 See, for example, Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 48.

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Just because there are port boundaries in some of these areas—we should be thinking that those port boundaries were drawn a long time ago and we should be looking very carefully at where they are and where subsequent developments occur.109

3.70 By way of example, Ms Wendy Tubman expressed the view that:

Cleveland Bay, where Townsville port is situated, is a very shallow bay. It is not an appropriate place for a large commercial port these days. It is not necessarily a case of the number of ports. It is a case of where, it is a case of what are the conditions of the surrounding environments….110

3.71 Dr Matthew Landos summed up his views as follows:

Ports are not great for aquatic environments or ecosystems...We have to have them, but we have to have them in areas where we can control them. We should have as few of them as we can get away with. We should make them as efficiently run as possible. And we should ensure that, if we have to undertake dredging, we do so in the safest way that is compatible with the area that we are contemplating dredging.111

Is existing legislation adequate?

3.72 The committee was advised by some submitters that existing legislation, particularly the EPBC Act, already comprehensively covers the activities being regulated by the bill.112 It was suggested that port development and expansion is already subject to a 'stringent approval regime' under the EPBC Act. It was therefore argued that the bill would add another layer of regulation, which could add 'complexity, uncertainty, time delays and unnecessary costs' to development.113

3.73 The Queensland government also argued that the bill fails to recognise the 'the robustness and reliability' of Queensland's current environmental assessment, planning and development assessment systems. They concluded that the bill is 'unnecessary and will not lead to better outcomes', but rather would add to the 'regulatory burden faced by proponents of projects in or adjacent to the Great Barrier Reef World Heritage Area'.114

109 Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, p. 47.

110 Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, pp 23-24.

111 Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 40.

112 Ports Australia, Submission 24, p. 2; Gladstone Ports Corporation, Submission 1, p. 2; Queensland Resources Council, Submission 34, p. 16; Queensland Government, Submission 36, p. 1; Australia Pacific LNG, Submission 37; Minerals Council of Australia, Submission 38, pp 1, 5; Adani Mining, Submission 44, p. 2; Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, pp 3 and 5.

113 Queensland Government, Submission 36, p. 1; see also Shipping Australia, Submission 26, p. 3; and Australia Pacific LNG, Submission 37.

114 Queensland Government, Submission 36, p. 1.

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3.74 Ports Australia argued that 'the Great Barrier Reef is already one of the most highly regulated marine environments in the world'.115 Similarly, the Queensland Resources Council expressed the view that the existing regulatory framework is 'more than sufficient to ensure that leading practice sustainable development can occur within the Great Barrier Reef World Heritage Area without the need for the extreme proposal of a complete moratorium as drafted in the Bill'.116

3.75 Mr Michael Roche of the Queensland Resources Council told the committee:

All port activities, developments and associated shipping are highly managed and conducted in accordance with Queensland and marine park zonings….Where impacts may occur, a rigorous environmental assessment regime and management arrangements are applied to avoid and minimise impacts.117

3.76 Another suggestion was that the bill would 'usurp' other plans and strategies, including the National Ports Strategy, the Great Barrier Reef Port Strategy and the Queensland Ports Strategy;118 as well as state planning legislation, including Port Use Plans under the Transport Infrastructure Act 1994 (Qld).119 For example, Mr David Anderson from Ports Australia told the committee that:

The bill undermines orderly planning. There is no acknowledgement of the national ports strategy or any policy alignment with the GBR ports strategy, the Queensland government's ports strategy or the national land freight strategy.120

3.77 In contrast, those who supported the bill were concerned that current legislation, including the EPBC Act, is insufficient to ensure the protection of the Great Barrier Reef's values.121 For example, Ms Janelle Allen from the Keppel and Fitzroy Delta Alliance expressed the view that:

The addition of specific special designation of protected areas is required in order to prevent the Queensland government and their associated port corporations from planning, facilitating and approving port development

115 Ports Australia, Submission 24, p. 2; see also Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 3.

116 Queensland Resources Council, Submission 34, p. 10.

117 Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, p. 1.

118 Ports Australia, Submission 24, p. 1; Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2; see also Queensland Government, Submission 36, p. 13.

119 Queensland Resources Council, Submission 34, p. 11; Minerals Council of Australia, Submission 38, p. 5.

120 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2.

121 See, for example, Mr Jon Brodie, Committee Hansard, 23 May 2013, p. 44; Save the Reef, Submission 43, pp 2-3; Capricorn Conservation Council, Submission 31, p. 2; Keppel and Fitzroy Delta Alliance, Submission 25, p. 1; Ms Felicity Wishart, AMCS, Committee Hansard, 23 May 2013, p. 20.

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without regard for the protection of Australia's most prized asset, the Great Barrier Reef.122

3.78 Ms Jo-Anne Bragg from EDO Qld also described the Queensland state legislative framework under which ports operate as 'inadequate' in terms of providing protection for the Great Barrier Reef. She pointed out that many laws and policies regulating coastal development have recently been weakened in Queensland.123

3.79 Others were critical of environmental assessment and approval processes for port developments, including the lack of independence in environmental assessments, insufficient conditions on approvals, and inadequate compliance monitoring programs.124 Witnesses also expressed concern about the ability of existing legislation to deal with cumulative impacts.125

3.80 Several witnesses pointed to the scientific evidence of the deterioration of the Great Barrier Reef as an indication that the current regulatory regime is not providing adequate protection. For example, Professor Terry Hughes expressed the view that the declining condition of the Great Barrier Reef 'demonstrates that the current regulations, policies and management practices are struggling to maintain the Great Barrier Reef in reasonable condition.'126

3.81 Similarly, Mr Gschwind from the Queensland Tourism Industry Council noted that the scientific evidence 'clearly demonstrates that the reef has declined over the last 20 years' and therefore suggests that the current regulatory environment may not be adequate:127

Whether or not the current system works has to be assessed on the basis of the evidence. The evidence is that the reef is declining in its quality. There could be an argument about why this is taking place, but I think it is irrefutable that some of it is taking place because of the coastal development that has gone on for decades.128

122 Ms Janelle Allen, Keppel and Fitzroy Delta Alliance, Committee Hansard, 23 May 2013, p. 21.

123 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 16 and also p. 17 and EDO, "Legislative Protection of the Great Barrier Reef World Heritage Area", Document tabled at hearing on 23 May 2013.

124 See, for example, Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, p. 26; Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 36; Mr Jon Brodie, Committee Hansard, 23 May 2013, pp 44, 47 and 49; Distinguished Professor Helene Marsh, Committee Hansard, 23 May 2013, pp 45 and 47-48.

125 See, for example, Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 43; Mr Richard Leck, WWF-Australia, Committee Hansard, 23 May 2013, p. 15.

126 Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 43.

127 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 10.

128 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 13.

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3.82 Mr Shane Mead from the Law Council of Australia noted that the strategic assessment currently underway will consider effectiveness of legislation for protecting the values of the Great Barrier Reef. However, he told the committee that the EPBC Act 'does not currently provide sufficient explicit requirements in relation to World Heritage values to preclude approvals outside existing development footprints'.129

3.83 SEWPAC responded that the Australian government's position is that 'we have a system with integrity that does protect those values' and that the EPBC Act is comprehensive and:

…underpins the protection of the reef through the very, very cautious consideration of the environmental impacts of projects and, where appropriate, their approval with appropriate conditions.130

Need to consider economic and social impacts of the bill

3.84 Submissions opposing the bill were concerned that the economic and social impacts of the bill need to be considered.131 It was argued that ports help to sustain Australia's economy, and any restrictions on their development could have economic consequences.132

3.85 In particular, concern was expressed about the bill's proposed moratorium on any further port development in the Great Barrier Reef region until 2015 (when the strategic assessment will be completed). Adani Mining argued that this was an 'unreasonable restriction on necessary economic development'. 133

3.86 There were also concerns that there has been a lack of rigorous economic evaluation of the ramifications of the proposed amendments.134 Mr Anderson from Ports Australia felt that the bill could have a 'highly disruptive effect' on the economy and jobs in Queensland.135

3.87 Queensland Ports Association argued that the bill would undermine economic productivity and investment confidence.136 For example, it was suggested that the bill would create a disincentive for investment, and may negatively impact on Australia

129 Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 29; see also Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, pp 16-17.

130 SEWPAC, Committee Hansard, 23 May 2013, p. 57.

131 See, for example, Ports Australia, Submission 24, p. 1; Shipping Australia, Submission 26, p. 3; Queensland Government, Submission 36, p. 1 cf. North Queensland Conservation Council, Submission 35, p. 2.

132 Gladstone Ports Corporation, Submission 1; Ports Australia, Submission 24; Queensland Resources Council, Submission 34; Minerals Council of Australia, Submission 38; Adani Mining, Submission 44, p. 4.

133 Adani Mining, Submission 44, p. 6.

134 Queensland Government, Submission 36, p. 2.

135 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 8.

136 Queensland Ports Association, Submission 27, p. 1.

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and Queensland's risk profile globally and with trading partners and investors in Asia.137 Mr David Anderson from Ports Australia told the committee that the bill:

…offers the prospect to severely undermine investment confidence in the minerals, resource and agricultural exports sectors not only in Queensland but nationwide.138

3.88 Indeed, Adani Mining submitted that when it purchased the existing Terminal 1 at Abbot Point, 'stable policies together with the regulatory regime' followed by Australia 'gave a sense of comfort'.139 Adani Mining had attached a 'very significant value' to the expansion potential of the Terminal, and is currently planning to expand the capacity of the port. Adani Mining advised that it is 'well advanced in the assessment process under the EPBC Act' for the development of Terminal 0 at Abbot Point.140 Adani Mining expressed concern that the bill:

…has the potential to seriously jeopardise investment in Queensland and Australia, with substantial consequential impacts on the livelihood of regional coastal communities along the GBR coast.141

3.89 In response to questioning on the economic impacts of the bill, SEWPAC noted that the moratorium on certain developments as proposed by the bill would be imposed 'until after the World Heritage Committee has considered the outcome of the

strategic assessment, which is scheduled to be in 2015'. The department noted that pausing development along the Queensland coast for that period of time would be expected to 'have quite a negative impact on the economy'.142

3.90 The North Queensland Conservation Council noted the importance of ports to Australia's social and economic status, but commented that:

…both the wellbeing of society and financial prosperity are essentially based on a healthy environment. Damage the environment and society and the economy are inevitably diminished.143

Impacts of ports on other industries

3.91 In terms of the economic impacts of the bill, it was pointed out that other industries need to be considered. In particular, it was argued that the expansion of

137 Queensland Government, Submission 36, p. 4; Minerals Council, Submission 38, p. 4.

138 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 2.

139 Adani Mining, Submission 44, p. 1.

140 Adani Mining, Submission 44, p. 2.

141 Adani Mining, Submission 44, p. 3.

142 SEWPAC, Committee Hansard, 23 May 2013, p. 55.

143 North Queensland Conservation Council, Submission 35, p. 2 (as amended during the hearing, see Committee Hansard, 23 May 2013, p. 21); see also Dr Matthew Landos, Committee Hansard, 23 May 2013, p. 42.

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ports and associated activities could have a negative impact on other Australian industries, such as tourism and fishing.144

3.92 For example, the Queensland Seafood Industry Association expressed support for the bill, observing that:

The fishing industry has undertaken significant work to improve fishing practices, technology and research to ensure fisheries are sustainable into the future. As an industry, our impact is categorised as low impact and low risk to the reef and marine environments. Our ongoing success is, however, directly reliant on a wide range of other industries also doing their parts to ensure their sustainability and neutral impacts.145

3.93 The importance of the Great Barrier Reef for Australian tourism was also highlighted by Mr Daniel Gschwind, Chief Executive of the Queensland Tourism Industry Council. He stated that the Great Barrier Reef is a 'key asset' for the tourism industry and is:

…unmatched in its power to attract visitors to Australia and it is consistently pointed out by international visitors that this is the reason they have come to this country.146

3.94 He further told the committee that the Great Barrier Reef 'as a tourism attraction generates between $5 billion and $6 billion of economic expenditure annually' and an estimated '50,000 jobs depend on the activities that are generated through tourism'. He also noted that 'the tourism and hospitality industry actually employs about twice as many people as the resource sector in Queensland'. Finally, he pleaded for the tourism industry to be taken into consideration:

…development proposals should take into account the impacts, both positive and negative, on the entire economy including the tourism industry.147

3.95 The tourism industry's main concerns about port development related to the impacts of dredging and dumping, and to a lesser extent the impacts on the scenic amenity of the Great Barrier Reef.148

144 See, for example, Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 9; Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, p. 36; North Queensland Conservation Council, Submission 35, p. 2; Dr Matt Landos, Committee Hansard, 23 May 2013, p. 38; Mr Michael McCabe, Capricorn Conservation Council, Committee Hansard, 23 May 2013, p. 22; Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 45.

145 Mr Scott Wiseman, Queensland Seafood Industry Association, Committee Hansard, 23 May 2013, p. 36.

146 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 9.

147 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 11 and see also p. 10.

148 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 10.

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3.96 Finally, the committee heard concerns that, if the Great Barrier Reef ends up being placed on the 'World Heritage in Danger' List, that this would cause damage to the tourism industry:

…the perception that would be generated by such a move would be very significant for us and of very grave concern to our industry…it is the very fact that we have such a pristine environment and we have genuinely in the past demonstrated that we can look after it that is one of our greatest assets in remaining competitive in the tourism sector.149

Are more or bigger ports needed?

3.97 In the economic context, there was also discussion during the committee's inquiry as to whether more or bigger ports are needed in the Great Barrier Reef region.

3.98 The committee heard that there has been a recent 'rush' of development proposals for new and expanded ports. 150 At the same time, it was suggested that existing ports in Queensland are not running at capacity.151 For example, Ms Janelle Allen from the Keppel and Fitzroy Delta Alliance told the committee:

…current usage of ports in Queensland is running at between 40 per cent and 65 per cent…what we have been hearing in recent times is that demand more likely than not will not increase too much in the next two to five years…152

3.99 It was noted that 'excess port capacity' was cited in the recent decision to withdraw one port development proposal.153 In response to questioning on this issue, Mr David Anderson from Ports Australia told the committee that a lot of projections in relation to port development are 'aspirational' rather than reality:

I am not quite sure what they mean, to be quite honest, in saying there is 'excess port capacity'…a lot of these proposals just do not depend on port capacity but depend on supply chain capacity, so the rail links, the handling capacity in the port, the depth of water alongside, the number of berths and so on.154

3.100 Mr Michael Roche from the Queensland Resources Council agreed that 'there are excess port development proposals', and stated that '…we do not expect, as the

149 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 11; see also, for example, Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 44; and Save the Reef, Submission 43, p. 3.

150 Mr Daniel Gschwind, Queensland Tourism Industry Council, Committee Hansard, 23 May 2013, p. 10.

151 Ms Janelle Allen, Keppel and Fitzroy Delta Alliance, Committee Hansard, 23 May 2013, p. 24.

152 Ms Janelle Allen, Keppel and Fitzroy Delta Alliance, Committee Hansard, 23 May 2013, p. 24.

153 Glencore Xstrata, Glencore Xstrata relinquishes Balaclava Island Coal Export Terminal (BICET) development, media release dated 13 May 2013 (see discussion in chapter 2 of this report).

154 Mr David Anderson, Ports Australia, Committee Hansard, 23 May 2013, p. 7.

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Queensland government says, to see development outside the existing ports limits over the next 10 years'.155

3.101 Mr Roche also pointed out that the lead times for new port development are quite long and that 'not every single development application will be approved and nor will all proceed to construction'.156

3.102 Adani Mining submitted that 'the increase in development proposals occurred at a time of the resources boom', but that market forces are resulting in:

…an increasing number of planned resource developments being deferred or abandoned. Hence, the urgency for reactive management measures does not appear to have been realised and it could be argued that port related development remains no higher than medium risk to the reef.157

Drafting of the bill

3.103 Several submissions queried the drafting of the bill.158 For example, the Queensland Government submitted that the provisions of the bill are 'vague' and 'poorly drafted'. The Queensland government was concerned that it is difficult to understand how the provisions of the bill are intended to operate individually and together. It also pointed out that there are no definitions for key terminology (such as 'port area' or 'cumulatively').159

3.104 The drafting of proposed section 24G was thought to be particularly problematic by some submitters. Proposed section 24G prohibits approval of any actions that do not deliver a 'net benefit' for the Great Barrier Reef world heritage area. However, it was suggested that the section is too general and potentially reaches much further than intended: it could cover a wide range of activities, not just proposed port development.160

3.105 For example, Mr Colin Trinder, while supporting the intent of the bill, was concerned that proposed section 24G could have 'unintended consequences' as the way it has been framed:

155 Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, p. 6.

156 Mr Michael Roche, Queensland Resources Council, Committee Hansard, 23 May 2013, pp 1-2, 7.

157 Adani Mining, Submission 44, p. 4.

158 See, for example, Shipping Australia, Submission 26, p. 2; Mr Colin Trinder, Submission 28, p. 1; Queensland Resources Council, Submission 34, p. 20; Minerals Council of Australia, Submission 38, p. 5; Adani Mining, Submission 44, pp 6-7.

159 Queensland government, Submission 36, p. 2. Note that EDO Qld suggested that a definition of 'port area' be inserted into the bill, along the lines contained in the Transport Infrastructure Act 1994 (Qld).

160 For example, Mr Colin Trinder, Submission 28, p. 1; Queensland Government, Submission 36, p. 9; Queensland Resources Council, Submission 34, p. 20; Minerals Council of Australia, Submission 38, pp 4-5.

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… potentially reaches much further than the expressed intent to simply the control port development. It could be viewed as actually potentially prohibiting approval of any developments that do not deliver a net benefit for the Great Barrier Reef world heritage values.161

3.106 He pointed out that most of the EPBC Act refers to 'significant' impact, whereas proposed section 24G does not include any qualifier for the level of impact. He queried, for example, whether the provision could be interpreted to preclude approval of recreational fishing.162

3.107 The Queensland government also expressed concern about proposed section 24G, submitting that 'it is unclear how this section is intended to operate in conjunction with other proposed amendments as it seems to contradict the previous sections'.163

3.108 In contrast, EDO Qld interpreted 24G as 'an additional provision to the prohibitions and restrictions in the earlier parts of the bill', and as 'giving an extra layer of protection to the reef over those earlier provisions'.164

3.109 There was also considerable debate over the term 'net benefit'. For example, it was suggested that 'net benefit' is ambiguous, difficult to define and too general.165 The Queensland Resources Council submitted that 'the concept of a net benefit is a fundamentally flawed concept'.166

3.110 Ms Bragg from the EDO Qld also expressed caution, stating that 'net benefit' needs to be 'very carefully drafted and considered', because it brings to mind the concept of offsets. She explained:

Certainly what springs to mind is the concept of destroying a certain area which has environmental value but allowing money to be contributed to research into ecological issues and so on. That is not an acceptable form of offset if the aim is to properly protect environmental values.167

3.111 In response to questioning on the issue, the Law Council of Australia examined the phrase 'net benefit' in detail, and advised that it 'appears not to have been commonly used in Australian legislation', and 'must be construed as having its

161 Mr Colin Trinder, Submission 28, p. 1.

162 Mr Colin Trinder, Submission 28, pp 1-2.

163 Queensland government, Submission 36, p. 9.

164 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 18; see also WWF-Australia and AMCS, Submission 29, p. 4.

165 See, for example, Shipping Australia, Submission 26, p. 2; Mr Colin Trinder, Submission 28, p. 1; Queensland Resources Council, Submission 34, pp 19- 20; Minerals Council of Australia, Submission 38, p. 5.

166 Queensland Resources Council, Submission 34, p. 19.

167 Ms Jo-Anne Bragg, EDO Qld, Committee Hansard, 23 May 2013, p. 18; see also Ms Wendy Tubman, North Queensland Conservation Council, Committee Hansard, 23 May 2013, p. 27; and Professor Terry Hughes, Committee Hansard, 23 May 2013, p. 45.

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ordinary meaning'. However, the Law Council also agreed that the term is 'inextricably linked with biodiversity offsets', which have been defined as:

…conservation actions intended to compensate for the residual, unavoidable harm to biodiversity caused by development projects, so as to ensure no net loss of biodiversity.168

3.112 Mr Shane Mead from the Law Council of Australia also told the committee that 'the reference to net benefit is consistent with the Commonwealth environmental policy', including the EPBC Act environmental offsets policy released in October 2012.169

Committee view 3.113 The committee recognises the fundamental importance of meeting Australia's international obligations to manage and protect the Great Barrier Reef as a World Heritage Area of Outstanding Universal Value. In this regard, Australia has an obligation to address and respond to the concerns of UNESCO and the World Heritage Committee.

3.114 The committee notes that there are a number of initiatives being undertaken by the Commonwealth and Queensland governments to address the concerns of the World Heritage Committee, including the strategic assessments. There was debate about whether the bill pre-empts the outcomes of this strategic assessment, or whether approval of any port-related developments in the Great Barrier Reef region should wait until after the strategic assessment is completed.

3.115 However, one of the World Heritage Committee's key requests was to not permit any further port development or associated infrastructure outside existing major port areas in or near the Great Barrier Reef, and to ensure that development is not permitted if it would impact on the values of the Great Barrier Reef. In this regard, the committee acknowledges evidence received that the bill is an appropriate response to the recommendations of the World Heritage Committee.

3.116 The committee notes that port development and related activities are already subject to a range of legislation, particularly the approval regime under the EPBC Act. However, the scientific evidence of the deterioration of the Great Barrier Reef, particularly over the past 20 years, seems to be an indication that the existing regulatory framework may not be sufficient to protect the Reef's outstanding universal values.

3.117 The committee acknowledges that there are a number of factors impacting on and contributing the current decline in the health of the Great Barrier Reef. However,

168 Law Council of Australia, Answers to questions on notice, from public hearing 23 May 2013, especially pp 1-2; and see also Law Council of Australia, Submission 33, p. 6.

169 Mr Shane Mead, Law Council of Australia, Committee Hansard, 23 May 2013, p. 30; and SEWPAC, EPBC Act environmental offsets policy, October 2012, at: http://www.environment.gov.au/epbc/publications/environmental-offsets-policy.html (accessed 3 June 2013).

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the committee is not convinced by arguments that the contribution of ports and associated activities is minor and localised. The committee cannot ignore the scientific evidence of the considerable direct and cumulative impacts associated with port development and expansion in the Great Barrier Reef region, including the associated dredging, dumping and increased shipping. The committee considers therefore that port development and related activities in the Great Barrier Reef region should be regarded with great caution.

3.118 The committee notes concerns from the resources and ports industry about the potential economic impacts of the bill, but considers that these concerns need to be balanced against the interests of other important industries in the region that are reliant on the health of the Great Barrier Reef, particularly the tourism, fishing and seafood industries. In this regard the committee acknowledges the evidence of the tourism industry of the potentially negative implications for tourism of the World Heritage Committee adding the Great Barrier Reef to the list of 'World Heritage in Danger'.

3.119 In light of all this evidence, the committee agrees with the UNESCO World Heritage Committee and takes the view that port development in the Great Barrier Reef region should be confined to existing major port areas, pending the outcomes of the strategic assessments. That is, port development should be confined to previously developed major port areas, and there should be no new port development outside currently developed major port areas. Further, the approval of any port developments or port-related activities in those existing major port areas should be subject to stringent conditions under the EPBC Act to ensure that any developments meet best practice environmental standards. This should include robust and transparent requirements for independent monitoring and public reporting.

Recommendation 1

3.120 The committee recommends that port development in the Great Barrier Reef region should be confined to existing (already developed) major port areas, pending the outcomes of the strategic assessments currently being conducted by the Commonwealth and Queensland governments.

Recommendation 2

3.121 The committee recommends that, if the minister decides to approve any port developments or port-related activities in existing (already developed) major port areas in the Great Barrier Reef region, these developments and activities should be subject to stringent conditions under the EPBC Act, including robust monitoring and reporting requirements.

3.122 The committee also heard with concern the impacts of port-related activities, particularly the dredging and dumping of dredge spoil in the Great Barrier Reef. The committee notes the evidence from GBRMPA that dumping in the Great Barrier Reef is only used as a last resort. Nevertheless, the committee was persuaded by evidence that sea dumping of dredge spoil should not occur in the Great Barrier Reef World Heritage Area.

3.123 The committee notes evidence from the Great Barrier Reef Marine Park Authority that this issue is being considered under the Great Barrier Reef strategic

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assessment. However, the committee recommends that the Commonwealth government review the regulatory regime surrounding sea dumping in the Great Barrier Reef region, with a view to ensuring that dumping of any dredge spoil in the Great Barrier Reef World Heritage Area is subject to the highest scientific and environmental analysis and taken only as an option of last resort.

Recommendation 3

3.124 The committee recommends that the Commonwealth government review the regulatory regime surrounding sea dumping in the Great Barrier Reef region, with a view to ensuring that dumping of any dredge spoil in the Great Barrier Reef World Heritage Area is subject to the highest scientific and environmental analysis and taken only as an option of last resort.

3.125 The committee is not convinced by evidence from the ports industry that ports in the Great Barrier Reef region have been well managed to date from an environmental perspective. The committee particularly noted evidence given about Gladstone Harbour, and the considerable debate as to the causes of impacts on the health of the aquatic environment.

3.126 The committee acknowledges that the Minister for Sustainability, Environment, Water, Population and Communities, the Hon Tony Burke MP, has commissioned an independent review of environmental management arrangements and governance of the Port of Gladstone. This independent review is due to report to the minister at the end of June 2013. The committee does not wish to pre-empt the findings of that panel. However, the committee hopes that the inquiry will be conducted in a transparent and impartial manner. In particular, the committee urges the minister to make the review findings public as soon as it is made available to him. This committee will monitor the review's findings with great interest.

Recommendation 4

3.127 The committee recommends that the Minister for Sustainability, Environment, Water, Population and Communities publish the report of the Independent Review of the Port of Gladstone as soon as it is made available to him.

3.128 The committee upholds the principle of the World Heritage Committee recommendation that development be confined to previously disturbed areas such as existing ports. It is the view of the committee that this principle apply not only as part of the strategic assessment process, but as a permanent general approach to the management of development along the Queensland coastline. Without compelling

reasoning to the contrary, this principle is consistent with providing an outcome that promotes the outstanding universal value of the Great Barrier Reef.

3.129 In light of the strong evidence as to the negative environmental effects of industrial and shipping activity on the reef, the committee recommends that the precautionary principle be exercised in relation to current and future development. This should include, but not be limited to, a critical analysis of the outcomes of the strategic assessments and independent review, with the Great Barrier Reef being given the benefit of the doubt where there are any concerns as to the environmental impact

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of industrial and shipping activity. The committee is sympathetic to, and supportive of, the intent of the bill but notes evidence as to the drafting problems with the current bill. On this basis the committee recommends the bill not be passed in its current form and calls on the government to closely examine any additional regulatory and/or legislative safeguards arising from the strategic assessments and independent review.

Recommendation 5

3.130 The committee recommends the bill not be passed in its current form and calls on the government to closely examine any additional safeguards arising from the strategic assessments and independent review with a view to developing robust regulatory and legislative safeguards to protect the Great Barrier Reef World Heritage Area.

Senator Doug Cameron Committee Chair

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Coalition Additional Comments Background

1.1 The Coalition recognises that the Great Barrier Reef is Australia’s greatest natural asset and is a biological ark.

1.2 The Coalition also has a proud track record on environmental stewardship, the former Howard Government having legislated the Environment Protection and Biodiversity Conservation Act 1999 which this bill seeks to amend and having also created the multi-billion dollar Natural Heritage Trust that delivered on-the-ground results, helping to restore and conserve our environment and natural resources including through Landcare.

1.3 The Coalition is committed to protecting the Great Barrier Reef through measures that deliver real outcomes through a Reef 2050 plan, the details of which will be announced prior to the next election.

1.4 Given, as the majority report notes, the bill’s purpose to implement recommendations made by the World Heritage Committee of the United Nations Educational, Scientific and Cultural Organization (UNESCO), Coalition Senators note with some concern recent developments regarding communications with this Committee.

1.5 Specifically, the Queensland Government has expressed a lack of confidence in being able to rely on the current Commonwealth Government ‘to provide unbiased, accurate assessments of the many actions the Queensland government is taking to protect the reef’ and decided instead to engage directly with UNESCO on matters relating to the Great Barrier Reef to protect the international reputation of Queensland and protect the international reputation of the reef.

1.6 Queensland’s Deputy Premier further outlined:

Our record in relation to protecting the Great Barrier Reef will stand up to any reasonable scrutiny. For example, shortly after we were elected we halted progress on the huge development being progressed by the former Labor government that was proposing five new coal terminals and a multicargo facility at Abbot Point. We halted it. In complete contrast, we are progressing a much smaller, balanced, incremental development.1

1.7 Regarding the bill inquiry, whilst having reservations about some of the committee comments in the majority report, Coalition Senators are not opposed to the principles behind its recommendations but make the following additional comments on each of them.

1 Queensland Parliament, Record of Proceedings (Proof), 5 June 2013, p. 1918.

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Majority recommendation 1 The committee recommends that port development in the Great Barrier Reef region should be confined to existing (already developed) major port areas, pending the outcomes of the strategic assessments currently being conducted by the Commonwealth and Queensland governments.

1.8 Coalition Senators believe this recommendation is at least very similar to the Queensland Government’s current approach and highlights that further consideration should be informed by the outcomes of strategic assessments already underway.

1.9 The Queensland Ports Strategy under development by the Queensland Government is being informed by the results of public consultation on the Great Barrier Reef Ports Strategy. The Great Barrier Reef Ports Strategy complements the strategic assessment of the Great Barrier Reef Coastal Zone being undertaken by the Queensland Government under the terms of strategic assessment agreement between the Queensland and Commonwealth Governments, one of two strategic assessments underway.2

1.10 The Great Barrier Reef Ports Strategy, described as presenting the vision and principles guiding future port development and planning in the Great Barrier Reef coastal region to 2022, already includes the commitment to restrict any significant port development, within and adjoining the Great Barrier Reef World Heritage Area, to within existing port limits to 2022.3

Majority recommendation 2 The committee recommends that, if the minister decides to approve any port developments or port-related activities in existing (already developed) major port areas in the Great Barrier Reef region, these developments and activities should be subject to stringent conditions under the EPBC Act, including robust monitoring and reporting requirements.

1.11 As the majority report notes, the Department of Sustainability, Environment, Water, Population and Communities (SEWPAC) advised that the Great Barrier Reef and world heritage areas are already matters of environmental significance under the Act, and that one port has been approved since the World Heritage Committee decision of 2012 and ‘that port was in an existing port area’.4

2 SEWPAC, Strategic assessment - Great Barrier Reef, at: http://www.environment.gov.au/epbc/notices/assessments/great-barrier-reef.html (accessed 12 June 2013)

3 Queensland Department of State Development, Infrastructure and Planning, Queensland Ports Strategy, at: http://www.dsdip.qld.gov.au/gbr-strategic-assessment/queensland-ports-strategy.html (accessed 12 June 2013)

4 SEWPAC, Committee Hansard, 23 May 2013, p. 57.

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1.12 Coalition Senators expect that any Minister would already impose appropriately stringent conditions as part of any approval of such controlled actions referred under the EPBC Act as it exists and are therefore of the view that this recommendation is effectively not necessary.

Majority recommendation 3 The committee recommends that the Commonwealth government review the regulatory regime surrounding sea dumping in the Great Barrier Reef region, with a view to ensuring that dumping of any dredge spoil in the Great Barrier Reef World Heritage Area is subject to the highest scientific and environmental analysis and taken only as an option of last resort.

1.13 Coalition Senators are of the view that, while such a review might have merit, these matters should already be being considered as part of the strategic assessments underway. Coalition Senators accordingly believe any such review or associated reform should be informed by the full strategic assessment and related processes already underway, as referred to above in Coalition Senators’ comments regarding majority committee recommendation 1, or if a separate review is needed it should be undertaken after the completion of these processes.

Majority recommendation 4 The committee recommends that the Minister for Sustainability, Environment, Water, Population and Communities publish the report of the Independent Review of the Port of Gladstone as soon as it is made available to him.

1.14 Coalition Senators support this recommendation.

1.15 Regarding evidence and debate about the health of the Gladstone Harbour aquatic environment, Coalition Senators note that those engaged in debate place blame entirely, or virtually entirely, either with port development or with flood events. Given this apparent polarity of opinion, Coalition Senators opt to rely, at least until the conclusion of the independent review underway, on the conclusions of the independent Great Barrier Reef Marine Park Authority. Coalition Senators note, in this regard, the evidence given by the Authority that problems overwhelmingly appear to be the result of extreme flooding events.5

Majority recommendation 5 The committee recommends the bill not be passed in its current form and calls on the government to closely examine any additional safeguards arising from the strategic assessments and independent review with a view to developing robust regulatory and legislative safeguards to protect the Great Barrier Reef World Heritage Area.

5 Great Barrier Reef Marine Park Authority, Committee Hansard, 23 May 2013, pp 52-53.

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1.16 Coalition Senators support this recommendation, which effectively acknowledges that there are existing processes underway - most significantly the strategic assessments and the independent review of the Port of Gladstone - addressing identified and potential issues and that these processes should inform the need or otherwise for any subsequent legislative reform.

1.17 Coalition Senators note the independent review is due to report to the Government by 30 June 20136 and that the strategic assessments are also anticipated to be completed this year.7

Senator Simon Birmingham Senator Bridget McKenzie Deputy Chair Senator for Victoria

6 SEWPAC, Independent review of the Port of Gladstone, at: http://www.environment.gov.au/coasts/gbr/gladstone/index.html (accessed 12 June 2013)

7 SEWPAC, Strategic assessment - Great Barrier Reef, at: http://www.environment.gov.au/epbc/notices/assessments/great-barrier-reef.html (accessed 12 June 2013)

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Australian Greens Additional Comments 1.1 Our Great Barrier Reef is in serious trouble. The recent Australian Institute of Marine Sciences report shows it has already lost half its coral cover in the last 27 years, and faces extraordinary threats from climate change (both extreme weather events and ocean acidification), pollution and invasive species. The latest threat of rapid industrialisation of the Great Barrier Reef coastline, largely due to massive coal and gas port expansions, could be the last straw. The biggest ever dredging, dumping and shipping program in the Great Barrier Reef's history threatens its integrity directly and also indirectly through facilitating fossil fuel burning to worsen climate change, and will seriously reduce the Reef’s resilience.

1.2 The World Heritage Committee recognised this new threat and in 2012 expressed "extreme concern" for the future of the Reef. After an extensive monitoring mission, clear recommendations were made by the World Heritage Committee to avoid the Great Barrier Reef being placed on the World Heritage In Danger list. Sadly, there has been limited progress in acting on those recommendations, leading the Australian Greens to introduce this bill - which would implement four of the key recommendations of the World Heritage Committee through our national environment laws. In evidence, the Law Council of Australia and the Environmental Defenders Offices accepted that the bill was an accurate reflection of, and an appropriate and proportionate response to, those World Heritage Committee recommendations.

1.3 Yet the Senate Committee’s recommendations partially support acting on only one of these recommendations. While the Senate Committee recommends confining port development to existing ports until the strategic assessment is completed, it fails to recommend acting on the World Heritage Committee’s recommendation to put in place a moratorium on all developments that will impact the Reef until the strategic assessment is complete, to restrict all damaging port expansions, and to ensure that no development is approved where it does not deliver an overall net benefit for the Reef.

1.4 While the Senate Committee’s recommendations are welcome, they fall sadly short of the action we so urgently have to take if we want the Great Barrier Reef to survive this century.

1.5 A more detailed discussion of the Senate Committee’s findings follows.

1.6 The Australian Greens welcome the Senate Committee’s findings on the evidence submitted to the inquiry that:

• the scientific evidence of the deterioration of the Great Barrier Reef, particularly over the past 20 years, seems to be an indication that the existing regulatory framework may not be sufficient to protect the Reef's outstanding universal values [para 3.116]

• the committee cannot ignore the scientific evidence of the considerable direct

and cumulative impacts associated with port development and expansion in the Great Barrier Reef region, including the associated dredging, dumping and increased shipping.. [and] therefore that port development and related

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activities in the Great Barrier Reef region should be regarded with great caution. [para 3.117]

• the concerns from the resources and ports industry about the potential economic impacts of the bill.. need to be balanced against the interests of other important industries in the region that are reliant on the health of the Great Barrier Reef, particularly the tourism, fishing and seafood industries. [para 3.118]

• the committee is not convinced by evidence from the ports industry that ports

in the Great Barrier Reef region have been well managed to date from an environmental perspective. [para 3.126]

• one of the World Heritage Committee's key requests was to not permit any

further port development or associated infrastructure outside existing major port areas in or near the Great Barrier Reef, and to ensure that development is not permitted if it would impact on the values of the Great Barrier Reef. In this regard, the committee acknowledges evidence received that the bill is an appropriate response to the recommendations of the World Heritage Committee [para 3.115]

1.7 We welcome the recommendation that port developments be confined to existing (already developed) major port areas until the strategic assessment currently underway is complete. The communities fighting to protect the Fitzroy Delta and the endangered snubfin dolphin will be thrilled with this recommendation by the Committee. However the Government has previously taken the position that without amending our environment law, a moratorium would not be enforceable and projects for developments anywhere along the Great Barrier Reef coast will continue to go through the assessment process unimpacted by the findings of the strategic assessment. Further, the World Heritage Committee clearly requested that port developments outside existing major port areas be permanently off limits, not just until the strategic assessment is completed - this is reiterated in its draft decision for consideration in Cambodia next week. We implore the Government to act urgently on this issue.

1.8 The Greens position on developments within current major port areas is reflected in this bill, and intends to reflect the World Heritage Committee’s recommendation that no there should be no new developments approved that would impact individually or cumulatively on the OUV of the property, or compromise the Strategic Assessment. As such recommendation two of the Committee’s report, which foresees damaging projects continuing to be approved without any amendments to strengthen protections for the Reef, falls short of what the World Heritage Committee has said is needed. This recommendation also risks entrenching the dangerous culture within Australian environment regulation that all projects must go ahead, and community and expert concerns can be allayed by “stringent conditions” - we urge the Government to urgently reject this culture and entrench protection and conservation, not regulated destruction. The Reef is too precious to lose.

1.9 We welcome the Committee’s finding in para 3.123 that sea dumping of dredge spoil should not occur in the Great Barrier Reef World Heritage Area, and the

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recommendation that regulation of sea dumping be reviewed. This bill does not address sea dumping specifically rather, in line with the World Heritage Committee’s recommendations, the bill proposes to prohibit all developments (including dredging and spoil dumping) that would significantly impact the Outstanding Universal Value of the Reef.

1.10 It needs to be noted, however, that offshore dumping of dredge spoil is, under the current laws already intended to be an option of last resort, yet an extraordinary 22 million cubic metres of dredge spoil has been approved for dumping within the world heritage area since 2000. In light of this, we would hope that how these “last resort” provisions have been applied in the past, and how they need to be urgently tightened is a particular subject of this review.

1.11 Based on the available science it is already the Greens’ policy position that the Reef should be free from the dumping of dredge spoil, and that no more offshore dumping within the world heritage area should be approved.

1.12 We agree with the committee that evidence presented by industry that ports in the Great Barrier Reef region have been well managed from an environmental perspective was far from convincing, and welcome any steps that increase scrutiny of the management of Gladstone harbour, which has been the subject of local and global concern.

1.13 The Senate Committee cited concerns with the drafting of 24G which proposes a process for the established of a net benefit test to ensure that only projects that deliver a net benefit for the Reef are approved. We note that this provision intends to implement a recommendation of the World Heritage Committee, and in fact this is one of the few recommendations made by the World Heritage Committee in its 2012 recommendations that the Government has committed to implementing. In its state party report to the Committee, of February 2013, the Government stated:

1.14 Developments will only be approved subject to robust and best-practice conditions that ensure that the integrity of the property is preserved, that any remaining unavoidable impacts are minimised, and any residual impacts are offset in a way that promotes a net benefit overall.1

1.15 Given the World Heritage Committee’s request, the Government’s commitment, and most particularly the high risks that come with allowing any kind of offsetting of potentially irreplaceable values within the world heritage area, it would seem only appropriate to increase the rigour and transparency with which this commitment to ‘net benefit’ is implemented.

1.16 On World Environment Day two weeks ago, 150 scientists from 33 Australian institutions, along with a number of prominent international researchers from Natural History Museum of London and the University of California, Berkeley issued a statement stating the additional pressures from the expansion of coastal ports and industrial development either immediately adjacent to, or within the Great Barrier

1 Australian Government, State Party Report to the World Heritage Committee on the state of conservation of the Great Barrier Reef World Heritage Area (Australia), February 2013, p. 36.

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Reef World Heritage Area will exacerbate impacts upon an ecosystem already in decline.

1.17 The inquiry into this bill has given the community and our best reef scientists a critical opportunity to put to our nation’s leaders, and on the public record, their serious concerns about the huge threats to the Great Barrier Reef posed particularly by industrialisation of the Reef coast, and the steps we urgently need to take to protect the Reef.

1.18 We would like to thank the Committee Chair, committee members and the secretariat for facilitating such a thorough inquiry process that allowed evidence from the community, experts and industry to be presented and carefully examined by the Committee.

1.19 There are innumerable experts and community members working hard across Australia to secure better understanding and political action to save our Reef. We’d like to warmly acknowledge their tireless work and invaluable contributions to this

inquiry.

1.20 With the World Heritage Committee meeting in Cambodia only a week from the release of this report, it will be interesting to see what the world community, free from the pressures of an excessively influential fossil fuel lobby that too often overshadows long term sustainable decision making in our country, believes is needed to ensure the Reef survives this century.

1.21 The Greens believe our environment laws are failing to protect the Reef. The Reef is too precious to lose - this bill presents the opportunity to lock in the protection the Reef urgently needs, and safeguard the 54,000 people whose jobs rely on a healthy reef - not a World Heritage In Danger reef.

1.22 The Australian Greens commend this bill to the Senate.

Senator Larissa Wate

rs

Senator for Queensland

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Appendix 1 Submissions

1 Gladstone Ports Corporation

2 Philip Edwards

3 Jennifer Brown

4 Name Withheld

5 Anita Delliou

6 Susan Quinnell

7 Helen Lewers

8 Charles Colman

9 Bruce Hallett

10 Cheryl Osborne

11 Jim and Katie Donohoe

12 Eileen May Briggs

13 Robert Byrnes

14 Juanita Johnston

15 Petrina Hendry

16 Laureth Craggs

17 Geoff Watson

18 Anne Lanham

19 John Morison

20 Bernard Atkins

21 Name Withheld

22 Name Withheld

23 Deedre Kabel

24 Ports Australia

25 Keppel and Fitzroy Delta Alliance

26 Shipping Australia

27 Queensland Ports Association

28 Colin Trinder

29 WWF-Australia and the Australian Marine Conservation Society

30 Len Sheldrake

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31 Capricorn Conservation Council

32 Save Our Foreshore Inc

33 Law Council of Australia

34 Queensland Resources Council

35 North Queensland Conservation Council

36 Minister for State Development, Infrastructure and Planning, Government of Queensland

37 Australia Pacific LNG Pty Ltd

38 Minerals Council of Australia

39 Mackay Conservation Group

40 Terry Hughes

41 Centre for Mined Land Rehabilitation

42 Ian Lee

43 Save The Reef

44 Adani Mining Pty Ltd

45 Matthew Landos

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Answers to Questions on Notice 1. Law Council of Australia - Answers to questions taken on notice at public hearing, 23 May 2013, Brisbane.

2. Department of Sustainability, Environment, Water, Populations and Communities Answers to questions taken on notice at public hearing, 23 May 2013, Brisbane.

Additional Information

Tabled Documents

1. Fitzroy Terminal Project: document tabled by Keppel and Fitzroy Delta Alliance at public hearing, 23 May 2013

2. Legislative Protection of the GBR World Heritage Area: document tabled by Environmental Defenders Office Queensland at public hearing, 23 May 2013

3. Proposed expansion of the Port of Townsville: document tabled by North Queensland Conservation Council at public hearing, 23 May 2013

4. Terrestrial pollutant runoff to the Great Barrier Reef: document tabled by Mr Jon Brodie at public hearing, 23 May 2013

5. A critical review of environmental management of the 'not so Great' Barrier reef: document tabled by Mr Jon Brodie at public hearing, 23 May 2013

Written Information submitted to the committee

Information submitted by Distinguished Professor Helene Marsh FTSE

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Appendix 2 Public Hearing

Thursday, 23 May 2013 - Brisbane

Queensland Resources Council Mr Michael Roche, Chief Executive Ms Nicola Garland, Advisor Environment Policy

Ports Australia Mr David Anderson, Chief Executive Officer

Queensland Tourism Industry Council Mr Daniel Gschwind, Chief Executive

WWF-Australia and Australian Marine Conservation Society Mr Richard Leck, Great Barrier Reef Campaign Leader, WWF-Australia Ms Felicity Wishart, Great Barrier Reef Campaign Director, AMCS Ms Jo Bragg, Principal Solicitor, Environmental Defenders Office

Capricorn Conservation Council Mr Michael McCabe, Coordinator

Keppel and Fitzroy Delta Alliance Ms Janelle Allen, Chairman

North Queensland Conservation Council Ms Wendy Tubman, Coordinator

Law Council of Australia Mr Shane Mead, Member, Executive Committee, Australian Environment and Planning Law Group

Save the Reef Dr Andrew Jeremijenko, Co-founder

Queensland Seafood Industry Association Mr Scott Wiseman, Chief Executive Officer

Dr Matthew Landos Director, Future Fisheries Veterinary Service Pty Ltd

Professor Terry Hughes Centre Director, ARC Centre of Excellence for Coral Reef Studies, James Cook University

Mr Jon Brodie Research Scientist, TropWATER, James Cook University

Distinguished Professor Helene Marsh Distinguished Professor of Environmental Science, James Cook University

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Department of Sustainability, Environment, Water, Population and Communities Dr Kimberley Dripps, Deputy Secretary Ms Mary Colreavy, Assistant Secretary, Environment Assessment and Compliance Division

Great Barrier Reef Marine Park Authority Dr Russell Reichelt, Chairman

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Appendix 3

Extracts from key UNESCO documents

Extract A - Decision adopted by the World Heritage Committee at its 36th Session (Saint-Petersburg, 2012)1

36COM 7B.8 Great Barrier Reef (Australia) (N 154)

The World Heritage Committee,

1. Having examined Document WHC-12/36.COM/7B.Add,

2. Recalling Decision 35 COM 7B.10, adopted at its 35th session (UNESCO, 2011),

3. Welcomes the initial positive results of the Reef Plan and associated measures to address major long-term impacts on the property from poor water quality, and requests the State Party, in collaboration with its partners, to maintain, and increase where necessary financial investment and sustain the positive trend beyond 2013;

4. Takes note of the findings of the joint World Heritage Centre/IUCN reactive monitoring mission to the property undertaken in March 2012, and also requests the State Party to address the mission recommendations in its future protection and management of the property;

5. Notes with great concern the potentially significant impact on the property’s Outstanding Universal Value resulting from the unprecedented scale of coastal development currently being proposed within and affecting the property, and further requests the State Party to not permit any new port development or associated infrastructure outside of the existing and long-established major port areas within or adjoining the property, and to ensure that development is not permitted if it would impact individually or cumulatively on the Outstanding Universal Value of the property;

6. Requests furthermore the State Party to complete the Strategic Assessment and resulting long-term plan for the sustainable development of the property for consideration by the World Heritage Committee at its 39th session in 2015, and to ensure that the assessment and long-term plan are completed against a number of defined criteria for success, fully address direct, indirect and cumulative impacts on the reef and lead to concrete measures to ensure the overall conservation of the Outstanding Universal Value of the property;

7. Urges the State Party to establish the Outstanding Universal Value of the property as a clearly defined and central element within the protection and management system

1 UNESCO, Decisions adopted by the World Heritage Committee at its 36th session (Saint-Petersburg 2012), Decision 36Com 7B.8: Great Barrier Reef Australia (N 154), pp 57-58, at: http://whc.unesco.org/en/decisions/4657

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for the property, and to include an explicit assessment of Outstanding Universal Value within future Great Barrier Reef Outlook Reports;

8. Recommends the State Party, in collaboration with its partners, to sustain and increase its efforts and available resources to conserve the property, and to develop and adopt clearly defined and scientifically justified targets for improving its state of conservation and enhancing its resilience, and ensure that plans, policies and development proposals affecting the property demonstrate a positive contribution to the achievement of those targets, and an overall net benefit to the protection of Outstanding Universal Value;

9. Requests moreover the State Party to undertake an independent review of the management arrangements for Gladstone Harbour, that will result in the optimization of port development and operation in Gladstone Harbour and on Curtis Island, consistent with the highest internationally recognized standards for best practice commensurate with iconic World Heritage status;

10. Finally requests the State Party to submit to the World Heritage Centre, by 1 February 2013, an updated report on the state of conservation of the property, including on the implementation of actions outlined above and in the mission report, for consideration by the World Heritage Committee at its 37th session in 2013, with a view to consider, in the absence of substantial progress, the possible inscription of the property on the List of World Heritage in Danger;

11. Decides to also consider a further report from the State Party on the state of conservation of the property, the findings of the second Great Barrier Reef Outlook Report, and the anticipated outcomes of the completed Strategic Environmental Assessment and related long term plan for sustainable development at is 39th session in 2015.

Extract B - Recommendations of the UNESCO World Heritage Committee Mission Report (pages 61-64)2 Based on the assessment of the State of Conservation of the property, considering its values, integrity and protection and management, the mission proposes 14 recommendations.

The mission considers that the State Party should take urgent measures to implement the following recommendations immediately to prevent a further erosion of the OUV and address important threats to the property:

R1: Sustain beyond 2013, and on a long-term basis, the current financial investment in the progressive and highly important Reef Water Quality Protection Plan and associated Reef Rescue measures, and where necessary increase this investment, to address impacts of water quality in the catchments that drain into the Great Barrier

2 UNESCO, Mission Report: Reactive Monitoring Mission to Great Barrier Reef (Australia), June 2012, at: http://whc.unesco.org/download.cfm?id_document=117104

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Reef, and ensure that these programmes and related planning policies consider water quality impacts from all uses within the catchments.

R2: Not permit any new port development or associated infrastructure outside of the existing and long-established major port areas within and adjoining the property. It is essential that development is not permitted if it would impact individually or cumulatively on OUV, including the integrity of the property. This measure should apply both within and in the adjacent areas to the property. This measure should take immediate effect and requires full application until the Strategic Assessment and the resulting long-term plan for the sustainable development of the property has been completed, and has been considered by the World Heritage Committee at its 39th session in 2015.

R3: Commission an independent review of all environmental concerns of consented developments in Gladstone Harbour and on Curtis Island, and the implications of the consented developments in Gladstone Harbour and on Curtis Island for Traditional Owners and the local community dependent on the resources of the area. The review should be undertaken by internationally recognized and widely respected scientific experts and conducted in an independent and transparent manner. The review should:

f) Consider all previous review findings and all information used as a basis for the current approvals for development in Gladstone Harbour and on Curtis Island;

g) Address the current and future planning and management of the Port of Gladstone and development of Curtis Island;

h) Lead to clear recommendations for the optimization of port development and operation, including supporting activities and infrastructure, and according to the highest internationally recognized standards for best practice;

i) Provide lessons learned for the development and operation of other port areas within and adjacent to the property;

j) Lead to the implementation of concrete action to address issues identified in the review, as soon as possible and before any other major port development is commenced.

R4: Ensure that any development, including ports and other types of development, as well as all associated infrastructure and supporting activities are carried out consistent with the highest international standards of best practice, commensurate with status of an iconic World Heritage property, and enabling the State Party to continue to provide global leadership for the conservation and sustainable development of multiple use marine protected areas.

R5: Complete the Strategic Assessment and resulting long-term plan for the sustainable development of the property for consideration by the World Heritage Committee at its 39th session in 2015. The assessment and long-term plan should be completed in a coordinated and fully consultative process, against a number of defined criteria for success, and considering the conclusions and recommendations of the

mission as set out in this report. Expectations of the Strategic Assessment include that it will lead to:

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• A long-term plan with agreed leadership at Federal and State levels, that

addresses the entire property and the adjacent areas where activities can affect the OUV of the property, and ensures that any development that is approved results in an overall net benefit for the property;

• Explicit incorporation of all elements that make up the OUV of the property, and in particular the long-term conservation of the integrity of the property, into the decision making process regarding all development and use that may negatively impact the property, both within the boundaries of the World Heritage area and in areas adjacent to the property;

• Improved effectiveness of the overall protection, planning and management of the OUV of the property as a whole, and the catchments, and coastal and marine areas that are intimately linked to it, including if necessary legal/statutory reforms to strengthen protection and management;

• A clear and target-driven framework to support planning and assessment of development proposals to protect OUV, and restore it where necessary, and to ensure resilience of the site, including the consideration of cumulative impacts;

• A clear analysis and related policies and strategies that will sustain long-term sustainable development, compatible with the protection of OUV, including consideration of the all economic sectors, including sustainable tourism and recreation and commercial fishing, as well as coastal development;

• Spatial policies that will identify appropriate and limited locations and

standards for coastal development, and also identify areas that should not be subject to development, and which will provide greater business certainty regarding development proposals and community confidence and understanding of future development scenarios;

• Increased public confidence in their ability to engage with and influence policy and development decisions, including independent mechanisms to scrutinize and advise on the assessment of impacts of development;

• Support for new and enhanced policies and measures to regulate and manage shipping, and provide appropriate emergency planning and response;

• Appropriate systems to secure that, where development and use is

permitted it will lead to net benefits to the property as a whole, including from contributions from developers to mitigate impacts of development;

• Measures, such as legislative change to enhance compliance, that may

increase the results achieved from the funding available for management, and to also increase overall levels of funding where required to provide for effective protection and management.

R6: Include, in the future editions of the Outlook Report for the Great Barrier Reef, and commencing with the version to be published in 2014, a specific assessment on

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the condition, trends, threats and prospects for the OUV of Great Barrier Reef World Heritage Area. The assessment should be benchmarked at the date of inscription of the property in 1981, and its results should be reported to the World Heritage Committee for consideration at its 39th session in 2015.

R7: Ensure that any determination made for applications under the EPBC Act, considering this is the principal legislation to ensure development does not negatively impact the values and integrity of the property, includes for each application:

d) A thorough assessment, supported by a detailed statement of reasons, and appropriate independent review input, on how the proposal will ensure conservation of each of the components that make up the OUV of the property, and avoid impacts upon it;

e) A thorough consideration of the combined, cumulative and possible consequential impacts of development, infrastructure and associated activities on the OUV as material considerations in determining all applications, benchmarked on the date of inscription of the property in 1981;

f) Detailed assessment of alternative options for all aspects of a development proposal, including supporting infrastructure and activities. This assessment should consider in detail the environmental, social and economic costs and benefits and lead to a clear indication of the net benefit of the development to the values and integrity of the property.

R8: Adopt the highest level of precaution in decision-making regarding development proposals with potential to impact the property, and to Prevent any approval of major projects that may compromise the outcomes of the Strategic Assessment, until the Strategic Assessment is completed and its resulting plan for the long-term sustainable development for the property has been considered by the World Heritage Committee. During this period, the State Party is requested to ensure no developments are

permitted which create individual, cumulative or combined impacts on the OUV of the Great Barrier Reef World Heritage area and its long-term conservation.

The mission considers that the following recommendations to further improve the conservation of the property and strengthen its management should also be implemented as soon as possible, and before the 39th Session of the World Heritage Committee:

R9: Ensure all components of the OUV of the Great Barrier Reef are a clearly defined and form a central element within the protection and management system for the property as well as the catchments and ecosystems that surround it. The OUV of the property should be a principal reference for all plans and legislation relating to the protection and management of the property as a whole, and in particular for legislation in relation to development within or in areas adjacent to the property. All the elements that constitute the OUV of the property should be included in the framework for future monitoring and reporting on the State of Conservation of the property to the World Heritage Committee.

R10: Develop and adopt, at the level of the Ministerial Forum, clearly defined and scientifically justified targets for improving the State of Conservation of the OUV of

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the Great Barrier Reef World Heritage Area, including for enhanced resilience of the property, and in particular for the conservation, and where necessary restoration, of the inshore areas of the property that are under greatest pressure. All plans, policies and development proposals affecting the property should demonstrate a positive contribution to the achievement of those targets.

R11: Commission an independent review, undertaken by internationally recognized and widely respected scientific experts, of the overall institutional and legal mechanisms that provide coordinated planning, protection and management of the Great Barrier Reef World Heritage Area as a whole. The results of the review should be reported to the Great Barrier Reef Ministerial Forum and provide input to the

Strategic Assessment to which the State Party has committed. The review should address enhancement of the implementation of the Great Barrier Reef Intergovernmental Agreement, assessment of the effectiveness of legal protection,

institutional and management planning arrangements for the property, and include specific attention to the areas of the property which are not managed by the Great Barrier Reef Marine Park Authority, as well as all adjacent marine, coastal and land areas. This review should be provided for consideration at the 37th session of the

World Heritage Committee and subsequently lead to the implementation of concrete measures to address identified weaknesses, under the scrutiny of the Great Barrier Reef Ministerial Forum.

R12: Ensure increased resources from both State and Federal Governments for the protection and management of the property, in particular to cover growing costs associated with effective responses to key threats and increasing demand for use of both within the property and its adjacent areas that affect it. Resources allocated to the research, monitoring and surveillance of the property should consistently reflect the actual increase of costs associated with such activities.

R13: Develop a fully integrated approach to the planning, regulation and management of ports and shipping activity affecting the property, including via Shipping Policy for the property, the proposed Ports Strategy of Queensland, and individual Port Plans, that will ensure that ports and shipping activity does not negatively impact the OUV, including the integrity, of the property, and meets the highest international standards in its planning, regulation, assessment and operation.

R14: The mission recommends the State Party to strengthen the sharing of its best practices and success stories, in particular those related to the spatial and temporal management for tourism, recreation and fishing, the framework developed for surveillance, compliance and monitoring of the property as well as the community engagement programmes, with other World Heritage sites facing similar management challenges but lacking the capacity to deal with them. Recognising the excellence of many aspects of the management of the property that is derived from over 35 years of experience, this support should enhance the leadership role of the State Party to support World Heritage Sites to be drivers for positive change globally, and in excellence in marine protected area management in particular.

Finally the mission recalls the obligation of the State Party to report to the World Heritage Centre any new plans and proposals for developments that may impact the

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OUV of the property, consistent with paragraph 172 of the Operational Guidelines to the World Heritage Convention, and prior to their determination. This has been done regularly by the State Party since the 35th Session of the Committee, and the mission notes that in future, and at least until the World Heritage Committee has considered the completed Strategic Assessment and the resulting long-term plan for the sustainable development of the property at its 39th session in 2015, these reports should additionally include an executive summary detailing the outcomes of the assessments mentioned in Recommendation 9 of the mission report and confirming that the proposal will not individually or cumulatively impact on the OUV of the property. The report to the 39th session of the World Heritage Committee should be supported by a further World Heritage Centre/IUCN monitoring mission to the property.

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The Senate

Environment and Communications

Legislation Committee

Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012

March 2013

79

© Commonwealth of Australia 2013

ISBN 978-1-74229-755-2

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

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Committee membership

Committee members Senator Doug Cameron (ALP, NSW) (Chair) Senator Simon Birmingham (LP, SA) (Deputy Chair) Senator Catryna Bilyk (ALP, TAS) Senator Bridget McKenzie (NATS, VIC) Senator the Hon. Lisa Singh (ALP, TAS) Senator Larissa Waters (AG, QLD)

Committee secretariat Ms Sophie Dunstone, Committee Secretary Ms Toni Matulick, Committee Secretary Ms Sophie Power, Principal Research Officer Mr Chris Lawley, Senior Research Officer Ms Jacquie Hawkins, Research Officer Mrs Dianne Warhurst, Administration Officer

Committee address PO Box 6100 Parliament House Canberra ACT 2600 Tel: 02 6277 3526 Fax: 02 6277 5818 Email: ec.sen@aph.gov.au Internet: www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=ec_ctte/ index.htm

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Table of Contents

Committee membership ................................................................................... iii

Chapter 1 - Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012 ........................ 1 Conduct of the inquiry ............................................................................................ 1

Summary of the bill ................................................................................................ 1

Environment Protection and Biodiversity Conservation Act 1999 ........................ 2

COAG reform agenda ............................................................................................. 8

Overview of the provisions of the bill .................................................................. 11

Chapter 2 - Issues arising in relation to the bill ............................................. 13

Submissions .......................................................................................................... 13

Support for the EPBC Act .................................................................................... 13

Improving efficiency ............................................................................................ 14

Managing conflict of interest................................................................................ 18

An incentive to approve ........................................................................................ 18

Lack of evidence that the current process is hampering investment .................... 20

Confidence in the states and territories ................................................................ 22

Securing Australia's natural heritage .................................................................... 25

International obligations ....................................................................................... 25

Committee view .................................................................................................... 26

Conclusion ............................................................................................................ 28

Coalition Additional Comments ...................................................................... 31

Australian Greens - Dissenting Report .......................................................... 37

Appendix 1 - Submissions, form letters and answers to questions taken on notice ................................................................................................... 41

Appendix 2 - Public hearings ........................................................................... 49

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Chapter 1

Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012 Conduct of the inquiry 1.1 The Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012 was introduced on 27 November 2012 by Senator Waters (Australian Greens) as a private Senator's bill.

1.2 On 28 November 2012 the Senate referred the bill for inquiry and report by 25 February 2013. On 25 February 2013, the reporting date was extended to 28 February 2013. On 28 February 2013, the report date was further extended to 12 March 2013.

1.3 The Senate Selection of Bills Committee noted in its report of 29 November 2012:

Referral of this Bill will provide an important opportunity for the Australian community and relevant experts and industry representatives to input on the Bill's provisions.1

1.4 The committee advertised the inquiry on its website and The Australian newspaper and wrote to organisations and individuals to invite submissions. The committee received 175 submissions and a number of form letters (listed at Appendix 1). The committee held two public hearings, both in Canberra, on 8 and 15 February 2013.

Summary of the bill 1.5 The purpose of the bill is to prevent the Commonwealth from delegating its current powers under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) for approving proposed actions that significantly impact on matters of national environmental significance to the states and territories.

1.6 Matters of national significance protected under the EPBC Act are those that would affect:

• world heritage properties

• national heritage places

• wetlands of international importance

• threatened species and ecological communities

• migratory species

• Commonwealth marine areas

1 Senate Selection of Bills Committee, Report No. 16, 29 November 2012, Appendix 8.

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• the Great Barrier Reef Marine Park

• nuclear actions (including uranium mines). 2

Environment Protection and Biodiversity Conservation Act 1999 1.7 The EPBC Act is the Commonwealth's primary piece of environment legislation and was designed to address perceived problems with Australia's approach to environment protection. The Act replaced the Environment Protection (Impact of Proposals) Act 1974, the Endangered Species Protection Act 1992 and a number of other environment related Acts.3

1.8 The objects of the Act include:

• to provide for the protection of the environment, especially those aspects

which are a matter of national environmental significance;

• to promote the conservation of biodiversity;

• to provide for the protection and conservation of heritage;

• to promote ecologically sustainable development through the conservation

and ecologically sustainable use of natural resources;

• to promote a co-operative approach to the protection and management of the environment involving governments, the community, land-holders and indigenous peoples; and

• to assist in the co-operative implementation of Australia’s international

environmental responsibilities.4

Current system of bilateral assessment and approvals processes

1.9 At present, a proposed action that would affect matters of national environmental significance requires referral to the Commonwealth Minister for the Environment. If the minister decides that a proposed action will, or is likely to, have a significant impact on one or more matters protected by the EPBC Act, the action will need to be assessed and approved under the EPBC Act before it can proceed. This is called a controlled action.5

1.10 Proposed actions can be assessed using different methods, including accredited assessment based on information provided by the applicant, assessment on preliminary information, assessment by environmental impact statement or public

2 EPBC Act, Part 3.

3 Acts consolidated in the EPBC Act include: the National Parks and Wildlife Conservation Act 1975; Whale Protection Act 1980 and the World Heritage (Properties Conservation) Act 1983. 4 EPBC Act, subsection 3(1).

5 Department of Sustainability, Environment, Water, Population and Communities, EPBC Act— Environment assessment process, http://www.environment.gov.au/epbc/publications/pubs/assessment-process.pdf (accessed 14 January 2013).

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environment report, and assessment by public inquiry.6 The EPBC Act sets out statutory timeframes for approval decisions for all environmental assessment processes.7

1.11 Part 5 of Chapter 3 of the EPBC Act deals with bilateral agreements and makes provision for the Commonwealth Minister for the Environment to enter into bilateral agreements subject to conditions set out in the Act.

1.12 There are two types of bilateral agreement:

• an assessment agreement - where state or territory processes are used to

assess the environmental impacts of a proposed action but the approval decision is made by the Commonwealth minister under the EPBC Act;8 and

• an approval agreement - where actions that are subject to a bilaterally

accredited management arrangement or authorisation process in place under state or territory law do not require further assessment or approval under the Act.9

1.13 The Commonwealth government has had bilateral agreements with all state and territory governments to accredit environment assessment processes that meet set standards. The Department of Sustainability, Environment, Water, Population and

Communities (the department) has advised the committee that the agreement with New South Wales (NSW) has expired but is expected to be renegotiated in 2013.10 Assessment agreements are in place with all other states and territories.11

1.14 An approval bilateral agreement was in place with the NSW government to protect the National Heritage and World Heritage values of the Sydney Opera House, however this expired in 2010.12 The department advised the committee that this

6 Department of Sustainability, Environment, Water, Population and Communities, EPBC Act— Environment assessment process, http://www.environment.gov.au/epbc/publications/pubs/assessment-process.pdf (accessed 14 January 2013).

7 See EPBC Act, s. 130; and Department of Sustainability, Environment, Water, Population and Communities, Answers to Questions on Notice, received 8 March 2013, pp 5-6.

8 EPBC Act, s. 47.

9 EPBC Act, ss. 29 and 46. See also Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 83, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 14 December 2013).

10 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 3; see also Department of Sustainability, Environment, Water, Population and Communities, Answers to Questions on Notice, received 8 March 2013, p. 2. 11 See further Department of Sustainability, Environment, Water, Population and Communities,

Bilateral Agreements, http://www.environment.gov.au/epbc/assessments/bilateral/index.html (accessed 24 January 2013).

12 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 3.

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agreement was replaced by a conservation agreement for the Opera House as a world heritage site because that was less administratively burdensome and achieved the same outcome.13

1.15 The department advised the committee that if a proposed action is covered by an assessment bilateral, then that action is assessed under the accredited state or territory process. After assessment, the proposed action still requires approval from the minister under the EPBC Act. This arrangement allows a proponent to produce a single set of environmental assessment documentation and to undertake a single public consultation process, thereby reducing duplication of state and Commonwealth requirements.14 Under the EPBC Act the minister is required to provide a decision on a matter referred for approval within 30 days.15

1.16 The department states that assessments for 17 projects were completed under bilateral agreements in 2011-12 and a further 91 projects were under assessment using a bilateral agreement as of 30 June 2012. According to the department, the assessment bilateral approach accounted for 23% of projects approved in 2011-12.16

1.17 If the Commonwealth were to enter into approval bilateral agreements with the states or territories, this would allow projects with significant impacts on matters of national environmental significance to be both assessed and approved by state or territory authorities. The Commonwealth government would then have an oversight role.17 At its public hearing in Canberra on 15 February 2013, the department outlined steps that the Commonwealth has to take should it enter into an approval bilateral agreement:

There are also a number of statutory steps required under the EPBC Act before the Commonwealth can enter into an approval bilateral agreement. Those safeguards include a statutory requirement that the draft approval bilateral agreements be made publicly available for comment for a minimum of 28 days under section 49A and, additionally, that the accreditation of the authorisation process is subject to disallowance within a period of 15 sitting days under section 46.18

13 Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 55. 14 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 3.

15 Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 51. 16 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 3.

17 Professor Lee Godden, Proof Committee Hansard, 8 February 2013, p. 8.

18 Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 50.

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The Hawke Review

1.18 On 31 October 2008, the then Minister for the Environment, Heritage and the Arts, the Hon Peter Garrett AM MP commissioned an independent review of the EPBC Act which was headed by Dr Allan Hawke (the Hawke review).

1.19 The review was undertaken in accordance with section 522A of the EPBC Act which stipulates that an independent review of the operation of the Act and the extent to which the objects of the Act have been achieved must be undertaken within 10 years of the Act's commencement.

1.20 The final report of the Hawke review was published in October 2009. The Australian Environment Act - Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999 (Hawke report) made 71 recommendations over a wide range of areas, all aimed at improving the operation the EPBC Act.19

1.21 The Hawke report discussed a number of issues relating to the relationship between the states and territories and the Commonwealth and their respective roles in assessment and approval processes.

1.22 Relevantly, recommendation four of the Hawke report states:

The Review recommends that the Commonwealth work with the States and Territories as appropriate to improve the efficiency of the Environmental Impact Assessment (EIA) regime under the Act, including through:

(1) greater use of strategic assessments;

(2) accreditation of State and Territory processes where they meet appropriate standards;

(3) accreditation of environmental management systems for

Commonwealth agencies where the systems meet appropriate standards;

(4) publication of criteria for systems and processes that would be appropriate for accreditation;

(5) creation of a Commonwealth monitoring, performance audit and oversight power to ensure that any process accredited achieves the outcomes it claimed to accomplish;

(6) streamlining and simplification of assessment methods, including combining assessment by preliminary documentation and assessment on referral information and removal of assessment by Public Environment Report;

(7) establishing joint State or Territory and Commonwealth assessment panels;

19 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 27 November 2012).

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(8) use of joint assessment panels or public inquiry for projects where the proponent is either the State or Territory or Australian Government; and

(9) greater use of public inquiries and joint assessment panels for major projects.20

1.23 The Commonwealth government agreed to this recommendation.21 In its response to the Hawke report, the Commonwealth noted that the EPBC Act already provides for accreditation of state and territory assessment and approvals processes. The Commonwealth government's response stated:

The government is committed to enhancing the scope and use of these mechanisms to reduce duplication of systems and provide more certainty for business without reducing protection for matters of national environmental significance.22

1.24 Recommendation six of the Hawke report deals with an expanded role for strategic assessments and bioregional plans so that they are used more often; and a strengthened process for creating these plans. The recommendation also calls for changes to allow the Commonwealth to unilaterally develop regional plans, specify mandatory required information for strategic assessments; create a 'call in' power for plans, policies and programs likely to have a significant impact on matters that fall within the definition of national environmental significance, and for creation of a broad performance audit power to assess the performance of accredited systems.23 The government accepted the substance of this recommendation, but not all elements of it.24

1.25 The Hawke report also recommended the appointment of a National Environment Commissioner and the creation of an independent National Environment

20 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 28, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 14 December 2013).

21 Australian Government, Australian Government Response to the Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, August 2011, p. 10.

22 Australian Government, Australian Government Response to the Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, August 2011, p. 11.

23 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 29, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 14 December 2013).

24 Australian Government, Australian Government Response to the Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, August 2011, pp 15-20.

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Commission.25 The Hawke report noted that the EPBC Act has no provision for an expert body to provide routine expert advice on actions referred under the Act,26 and recommended that the National Environment Commissioner be responsible for the provision of advice to the minister for the purposes of making decisions about the environmental impact assessment and approval process under the Act.27

1.26 The report recommended that the primary objective of the National Environment Commissioner should be to promote the adoption of environmentally sustainable practices by providing independent scrutiny, reporting and advice. The Commissioner would also be responsible for:

• providing independent expert advice to the minister for the purposes of evidence based decision-making for environmental impact assessment and approvals processes under the Act;

• monitoring, audit, compliance and enforcement activities under the Act;

• undertaking and reporting on performance audits, for example, to assess the level of compliance with the Act by a particular industry sector or region;

• preparing other reports and providing other advice to the minister when

requested - this could include advice about policies and programs; and

• responsibility for managing the provision of environmental data and

information and reporting on that information.28

1.27 The government did not support this recommendation.29

25 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 336, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 4 March 2013).

26 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 235, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 4 March 2013).

27 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 330, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 4 March 2013).

28 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 333, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 4 March 2013).

29 Australian Government, Australian Government Response to the Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, August 2011, p. 114.

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Australian government response to the Hawke review

1.28 On 24 August 2011, the Minister for Sustainability, Environment, Water, Population and Communities, the Hon. Tony Burke MP announced 'the first major overhaul' of the EPBC Act as part of the government's response to the Hawke report. He stated that the reforms would include:

A more proactive approach to protecting Australia's environment through more strategic assessments and regional environmental plans.

A more streamlined assessment process to cut red tape for business and improve timeframes for decision making, including an option for decisions on proposals within 35 business days, if all required information is provided.

New national standards for accrediting environmental impact assessments and approvals to better align Commonwealth and state systems.30

1.29 At the time of writing, legislation to amend the EPBC Act to implement these reforms had not yet been introduced, however the committee noted that the government is committed to introducing changes to the EPBC Act in 2013 as part of delivering its response to the Hawke report.31

COAG reform agenda 1.30 Since 1997, under the former Howard government's Heads of agreement on Commonwealth and State roles and responsibilities for the Environment, the Council of Australian Governments (COAG) has agreed to the delineation of areas of environmental responsibility between the Commonwealth and the states and territories, with the focus of the Commonwealth on matters of national environmental significance and relevant international treaty obligations.32

1.31 In April 2012 COAG announced that it would reform the administration of national environment regulation in order to 'reduce duplication and double-handling while maintaining high environmental standards.'33 To do this, COAG agreed to prioritise the development of approval bilateral agreements under the EPBC Act.

1.32 The agreement by COAG to streamline environmental assessments and approvals confirmed a proposal by the Business Council of Australia (BCA) published in a discussion paper for the COAG Business Advisory Forum and publicly released on 10 April 2012.

30 http://www.environment.gov.au/minister/burke/2011/mr20110824.html (accessed 21 November 2012).

31 COAG Communique, 7 December 2012, p. 4, http://www.coag.gov.au/node/475 (accessed 4 March 2013).

32 http://www.environment.gov.au/epbc/publications/coag-agreement/index.html (accessed 24 January 2013).

33 Department of Sustainability, Environment, Water, Population and Communities, http://www.environment.gov.au/epbc/publications/accreditation-standards-framework.html (accessed 11 December 2012).

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1.33 The proposal recommended that all jurisdictions work together to ensure environmental impact assessments for all eligible projects are assessed using bilateral agreements under the EPBC Act.34 It also recommended that the Commonwealth commit to a six month timeframe to accredit state environmental approvals to remove the Commonwealth's powers so that state approvals would count for Commonwealth approvals.35

1.34 The Commonwealth government had previously signalled its intention to make amendments to the assessments and approvals processes as part of its response to the Hawke report.36

1.35 Support for increased use of accredited assessments and approvals processes by the states and territories was endorsed by the inaugural Business Advisory Forum to COAG which was convened and chaired by the Prime Minister and attended by state and territory premiers and chief ministers, and business leaders. The communique from this forum announced:

From discussions today, our ambitions are clear: streamlined environmental regulation that delivers strong environmental outcomes and better conditions for business. In delivering these ambitions, the Commonwealth will maintain its capacity for a final approvals responsibility for World Heritage and high risk projects, with a framework to assess risk to be agreed between the Commonwealth and States, including on a bilateral basis.37

1.36 At its 13 April 2012 meeting, COAG also announced its agreement to:

• fast track the development of bilateral arrangements for accreditation of state

and territory assessment and approval processes, with the frameworks to be agreed by December 2012 and agreements finalised by March 2013;

• develop environmental risk and outcomes based standards with states and territories by December 2012; and

34 Business Council of Australia, Discussion Paper for the COAG Business Advisory Forum, 10 April 2012, p. 5.

35 Business Council of Australia, Discussion Paper for the COAG Business Advisory Forum, 10 April 2012, p. 5.

36 Australian Government, Australian Government Response to the Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, August 2011, p. 11.

37 Prime Minister of Australia, The Hon Julia Gillard MP, Press Release, Council of Australian Governments Business Advisory Forum Communiqué, 12 April 2012, http://www.pm.gov.au/press-office/council-australian-governments-business-advisory-forum-communiqu%C3%A9 (accessed 23 January 2013).

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• examine and facilitate removal of unnecessary duplication and reduce

business costs for significant projects.38

Framework of Standards for Accreditation

1.37 Following the COAG meeting of April 2012, in July 2012 the Commonwealth government released to the states a Statement of Environmental Assurance Outcomes and Framework of Standards for Accreditation. These documents were made public in November 2012.

1.38 The Statement of Environmental and Assurance Outcomes lists outcomes for 'improving productivity, environmental outcomes as reflected in the EPBC Act, and associated outcomes for approval and assessment systems and assurance'.39 This document expresses COAG's desire for the development of bilateral agreements which improve productivity outcomes and meet Australia's obligations under the EPBC Act.

1.39 The Framework of Standards for Accreditation sets out:

• standards for accreditation which reflect the specific accreditation

requirements of the EPBC Act;

• requirements of Commonwealth law and policy that are essential for the Commonwealth to be satisfied that relevant environment standards will be maintained; and

• Commonwealth considerations to provide additional guidance to jurisdictions

on areas that the Commonwealth will take into account when determining whether the standards have been met.40

Places You Love Campaign

1.40 Following COAG's announcement that the Commonwealth would consider amendments to the EPBC Act to allow it to enter into agreements with the states and territories to carry out approvals, an alliance of environment protection organisations started the 'Places You Love' campaign. This campaign called upon the Commonwealth to reject the COAG proposal to provide the states and territories with

38 Department of Sustainability, Environment, Water, Population and Communities, Draft Statement of Environmental and Assurance Outcomes, p. 1 http://www.environment.gov.au/epbc/publications/pubs/environmental-assurance-outcomes.pdf (accessed 11 December 2012).

39 Department of Sustainability, Environment, Water, Population and Communities, Draft Statement of Environmental and Assurance Outcomes, p. 1 http://www.environment.gov.au/epbc/publications/pubs/environmental-assurance-outcomes.pdf (accessed 11 December 2012).

40 Department of Sustainability, Environment, Water, Population and Communities, http://www.environment.gov.au/epbc/publications/accreditation-standards-framework.html (accessed 5 February 2013).

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approval powers currently held by the Commonwealth Minister for the Environment.41

COAG's meeting of 7 December 2012

1.41 At its meeting of 7 December 2012 COAG considered issues related to reform of environmental regulation. The communique from this meeting stated that:

...the Commonwealth will introduce legislative reforms to progress its response to the Hawke review of the Environment Protection and Biodiversity Conservation Act 1999 to further streamline and strengthen environmental regulation.42

1.42 The communique advises that COAG is committed to streamlining environmental regulation to deliver 'strong environmental outcomes and better conditions for business'.43 COAG also agreed that all jurisdictions will:

…direct their regulatory and referral agencies to eliminate duplication and to avoid sequential assessments and delayed approval processes and also to utilise common information requirements for both assessments and approvals.44

1.43 While it was anticipated that COAG may have announced its intention to give the states and territories increased powers for approvals, this did not occur.45 In its submission to the inquiry the department advised that:

…significant challenges emerged in developing approval bilateral agreements that provide consistency and certainty for business, and assurance to the community that high standards will be met and maintained.

Consequently, approval bilateral agreements are not being progressed until these challenges can be met by states and territories.46

Overview of the provisions of the bill 1.44 The purpose of the Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012 is to prevent the Commonwealth from delegating its current powers for approving proposed actions

41 Places You Love, http://placesyoulove.org/take-action/ (accessed 23 January 2013).

42 COAG Communique, 7 December 2012, p. 4, http://www.coag.gov.au/node/475 (accessed 10 December 2012).

43 COAG Communique, 7 December 2012, p. 4, http://www.coag.gov.au/node/475 (accessed 10 December 2012).

44 COAG Communique, 7 December 2012, p. 4, http://www.coag.gov.au/node/475 (accessed 10 December 2012); See also: Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 5.

45 Reported by various media outlets, see for example: Babs McHugh, 'Industry says backflip on environmental approvals may be just a bump in the road', ABC Rural News, http://www.abc.net.au/rural/news/content/201212/s3649908.htm (accessed 5 February 2013).

46 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 5.

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that significantly impact matters of national environmental significance to the states and territories.47

1.45 The proposed bill would also prevent the Commonwealth from referring its powers for regulating nuclear activities to state and territory governments.48

1.46 Proposed item 2 of the bill removes bilateral agreements from the list of cases set out in Part 4 where approvals under the EPBC act are not required.

1.47 Proposed item 4 of the bill amends the definition of bilateral agreements so that bilateral agreements under the EPBC Act would include environmental assessment processes, not environmental approvals.49

1.48 Proposed item 5 of the bill removes section 46 of the EPBC Act, and would have the effect of removing the ability for a bilateral agreement to declare actions that do not require approval under the Part 9 of the EPBC Act.50

1.49 Proposed items 6-36 of the bill are consequential amendments to prevent bilateral agreements from declaring that certain actions do not require approval under Part 9 of the EPBC Act.51

47 Under section 29 of the EPBC Act, in circumstances where an action that would ordinarily require approval is taken in a state or territory, and the action is covered by a bilateral agreement, and there is a bilaterally accredited authorisation process or management arrangement in place, then the action is declared by agreement not to need approval.

48 Proposed item 23.

49 Explanatory Memorandum, p. 2.

50 Part 9 of the EPBC Act deals with approval of action.

51 Explanatory Memorandum, p. 2.

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Chapter 2

Issues arising in relation to the bill Submissions 2.1 The committee received a large number of submissions and a number of form letters, with the majority of submissions in support of the bill. Supporters of the bill raised a number of issues and challenged the arguments being made about the need for reduced Commonwealth involvement in approval of matters of national environmental significance. Most submitters expressed grave concern about the risks to the environment associated with granting approval powers to the states and territories.

2.2 Submitters who did not support the bill did so on the grounds that they view the option for states and territories to have approval powers as providing a way of improving business efficiency while at the same time maintaining a high standard of environmental regulation and management. The differing views, and issues raised in the evidence is discussed in further detail below.

Support for the EPBC Act 2.3 As the committee notes later in this chapter, some submitters did make suggestions for improving the operation of the EPBC Act. However the committee has found that there is strong support for the aims and objectives of the Act. At the time of introducing the EPBC legislation in 1999, the former Howard government noted that the bill:

…enables the Commonwealth to join with the states in providing a truly national scheme of environmental protection and biodiversity conservation, recognising our responsibility to not only this but also future generations. It does so by respecting and building upon the strengths of our Federation and the primary responsibility of the states for delivering on-ground natural resource management…By accepting Commonwealth leadership, respecting the role of the states and providing best process for users, the bill provides a framework within which to build public confidence and support for its vitally important objectives.1

2.4 The Minister at the time of introducing the EPBC legislation, former Howard government Minister for the Environment, Robert Hill, noted:

...the new legislation provides for Commonwealth leadership on environmental matters and respects the primary role of the States in relation to on-ground natural resource management. State agencies and areas of local governments are clearly the best places to write on ground delivery of environmental management, with both the practical expertise and the experience of local conditions. There is however also a critically important role for Commonwealth. The Commonwealth is ultimately responsible for ensuring that Australia meets its international environmental

1 Hon Dr Sharman Stone MP, House of Representatives Hansard, 29 June 1999, p. 7772.

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responsibilities and in our view must also demonstrate leadership on environment matters by, for example, working with the States to set national standards. The EPBC Act recognises the need for Commonwealth leadership and the reality that on-ground delivery should be carried out as far as possible by the States…Under this model the Commonwealth and the community can be confident that the matters of national environmental significance are being protected by processes we believe meet best practice.2

2.5 The committee has found that these aims are as relevant today as they were in 1999. During the inquiry Mr Peter Cosier, Director of the Wentworth Group of Concerned Scientists told the committee:

This country faces enormous environmental challenges: past mistakes in overclearing of land, overallocation of water resources, unsustainable fishing practices, the spread of weeds and feral animals, and the future threats of climate change and overdevelopment on our coastal environments. Environmental law can do little to address these past mistakes—we need another policy response for those—but it is a vitally important tool to ensure that future development does not cause further damage to Australia's environmental assets.3

Improving efficiency 2.6 Submitters who did not support the bill advocate the use of approval agreements as a way of reducing inefficiencies in the current arrangements for environmental and development approvals.4 The Business Council of Australia (BCA) says that the current system of assessment and approval under the EPBC Act leads to 'costly double handling'.5 They argue that it is possible to provide a high level of assurance for the protection of Australia's unique environment and heritage values through approval agreements to improve competitiveness for project proponents.6

2.7 The BCA's central argument for rejecting the bill is that it will inhibit long term economic development of the Australian economy, and therefore the broader wellbeing of the community:

2 Senator the Hon Robert Hill, Opening Address, 'A New Green Agenda' Conference, 14 October 1999.

3 Proof Committee Hansard, 15 February 2013, p. 27. 4 These divergent views were discussed in the Hawke report which found that state and territory governments and industry groups were generally supportive of an expanded role for bilateral agreements; however environment groups and non-government organisations were not.

Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 86, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 14 December 2013).

5 Business Council of Australia, Submission 91, p. 1.

6 Business Council of Australia, Submission 91, p. 1.

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The successful delivery of major capital projects is critically dependent on timely regulatory approvals and well-considered and well-managed regulatory conditions upon approval. If Australia takes too long to deliver approvals, or the conditions placed upon approvals are unworkable, major capital projects will not proceed, or will not deliver full value to their owners or to the Australian community.7

2.8 The BCA argues that even though data to support this claim is 'scant'8, there are compelling reasons to allow for approvals to be carried out by the states and territories. This includes improved timeliness and predictability for business and aligning with international standards.9

2.9 While the committee heard claims that the Commonwealth approval process was causing inefficiency, that processes between the Commonwealth and the states and territories were duplicated, and that project proponents were labouring underneath the weight of uncertainty,10 there was no substantive evidence presented to support these claims. These issues are discussed in further detail later in this chapter.

2.10 The option of developing approval agreements with states and territories was presented as a way to harness efficiency.11 The BCA cites a 2009 report by the Productivity Commission which found that 'expediting the regulatory approval process for a major project [related to the upstream petroleum (oil and gas) sector] by one year could increase its net present value by 10-20 per cent'.12

2.11 However, the committee notes that this same report, the Productivity Commission's 2009 Research Report, Review of Regulatory Burden on the Upstream Petroleum (Oil and Gas) Sector, found that the Commonwealth should retain approval powers in relation to matters of national environmental significance:

While effectively consolidating environmental and heritage approval processes would streamline those approval processes, there would also appear to be merit in retaining an independent decision maker of last resort, particularly in relation to matters of potential national environmental significance. This is consistent with the underlying rationale of the Commonwealth's Environment Protection and Biodiversity Conservation Act 1999.13

2.12 The committee was presented with no compelling evidence to show how an approval agreement would improve business efficiency. However, a single submitter,

7 Business Council of Australia, Submission 91, p. 2.

8 Business Council of Australia, Submission 91, p. 2.

9 Business Council of Australia, Submission 91, p. 2.

10 Business Council of Australia, Answers to question on notice, received 15 February 2013, p. 3.

11 VicForests, Submission 42, p. 1.

12 Business Council of Australia, Answers to question on notice, received 15 February 2013, p. 3.

13 Productivity Commission, Review of Regulatory Burden on the Upstream Petroleum (Oil and Gas) Sector, April 2009, p. 145.

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PGV Environmental, claims that Commonwealth processes caused delays to a residential development which added to the cost and reduced the supply of residential housing lots in Western Australia.14

2.13 The Victorian Association of Forest Industries stated that '…the Bill would only reduce the efficiency and effectiveness of the current system and increase green tape, as well as administration and regulatory burden to Australian businesses.'15

2.14 The Australian Coal Association agreed:

Escalating costs and delays are making Australian mining projects less internationally competitive and this is jeopardising a once-in-a-generation opportunity for Australia to capture the benefits of global demand for our resources.16

2.15 The Pyrenees Shire Council in Victoria expressed concern about the ability of the Commonwealth to make timely decisions that reflect local knowledge and experience.17 This view is shared by the Victorian Farmers Federation, who argue that the layers of government regulation at local, state and federal level cause 'major overlaps.'18

2.16 The BCA argues that risks can be adequately managed through the development of increased reporting and audit mechanisms, as recommended by the Hawke review, and existing safeguards under the EPBC Act. These include:

• a statutory requirement that the minister may only enter into an bilateral

agreement if satisfied that it complies with the Act;19

• a statutory requirement that the minister publish a draft agreement with a 28-day consultation period and take into account any comments on the draft agreement;20

• that a draft bilateral agreement accrediting a management plan or

authorisation process under an agreement be tabled in both houses of parliament for 15 sitting days as a disallowable instrument;21

• provisions to suspend or cancel part, or all, of a bilateral agreement if the minister considers that a state government has not complied with the agreement.22

14 PGV Environmental, Submission 115, p. 1.

15 Victorian Association of Forest Industries, Submission 56, p. 2.

16 Australian Coal Association, Submission 104, p. 1.

17 Pyrenees Shire Council, Submission 83, p. 1.

18 Victorian Farmers Federation, Submission 130, p. 1.

19 EPBC Act, s. 50.

20 EPBC Act, s. 49A(a)(ii).

21 EPBC Act, s. 46(5).

22 EPBC Act, ss. 57-62; Business Council of Australia, Submission 91, p. 3.

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2.17 The Minerals Council of Australia suggests that allowing for increased use of approval bilateral agreements in the states and territories could offer enhanced environmental outcomes though harmonisation of national standards, and allow the Commonwealth to:

…put its energies into assuming a more strategic role. Furthermore, the delegation of EPBC Act requirements to the States/Territories allows the Commonwealth to assume a more strategic role including: monitoring and reporting of EPBC listed entities; bio-regional planning (pre-emptive of development); and as standard setter for the harmonisation of State/Territory processes. This would target Commonwealth resources more appropriately and facilitate greater biodiversity outcomes at an overall lower cost to society.23

2.18 The Australian Chamber of Commerce and Industry says that approval agreements would not dilute the current system of legal protection for the environment but rather create efficiencies.24 This view is supported by the BCA's assertion that increasing the use of assessment agreements alone will not create efficiencies, but rather there should be improved and increased use of both assessment and approval agreements. They note that many controlled actions are often approved with conditions attached under both state or territory and Commonwealth legislation:

Bilateral agreements for assessments only cannot reduce the duplication associated with conditional approvals following the assessment phase. In the experience of many of our members, developing secondary assessments and plans and seeking secondary approvals can be at least as costly as the primary assessments and approvals phase.25

2.19 The committee was presented with little evidence from the states and territories. However the Premier of Queensland, the Hon Campbell Newman MP, expressed his desire to continue negotiations that would allow for the states and territories to develop approval agreements with the Commonwealth. He also expressed disappointment with the Commonwealth's announcement that it would not be pursuing approval bilateral agreements at the present time.26

2.20 This disappointment was shared by several other submitters including the Australian Forest Products Association (AFPA) who go so far as to say that the bill 'to preclude such bilateral processes and approvals would be a retrograde step that is totally contrary to the national agenda'.27 The AFPA told the committee that stakeholders can have confidence in the fact that the Commonwealth has always taken

23 Minerals Council of Australia, Submission 102, p. 1.

24 Australian Chamber of Commerce and Industry, Submission 116, p. 1.

25 Business Council of Australia, Answers to question on notice, received 15 February 2013, pp 2-3.

26 The Hon Campbell Newman MP, Premier of Queensland, Submission 134, p. 1. See also Australian Chamber of Commerce and Industry, Submission 116, p. 2.

27 Australian Association of Forest Products, Submission 146, p. 2.

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a 'conservative and precautionary'28 approach to the development of approval bilateral agreements.

Managing conflict of interest 2.21 There is a strong view that providing the states and territories with the power to grant approvals over matters of national environmental significance would create a situation where conflicts of interest are likely to arise. Many submitters expressed concern that this would put state or territory governments in the position where they could be project proponent as well as decision maker:

The absence of the federal government from environmental decision making would result in few, if any, checks and balances on state government processes. This is of particular concern as state governments are often the proponent for, or beneficiary of major development projects that traditionally trigger the EPBC Act, resulting in a significant conflict of interest.29

An incentive to approve 2.22 Even in cases where the state or territory is not the proponent, many submitters raised concerns about the relevant state or territory receiving economic benefits from the development under consideration, acting as an incentive for approval regardless of the environmental impact. Economists at Large described this as a 'disincentive to adequately assess the environmental and social costs of a particular project and to act on this assessment.'30

2.23 In addition, the committee heard that if approval agreements were in place it is likely that state and territory planning departments would exercise decision making powers. Dr Chris McGrath told the committee of the situation in Queensland where the Coordinator-General's department is responsible for state development:

It is already accredited under the Queensland assessment bilateral. I would suspect that, if there were an approval bilateral with Queensland, the decision-making role would be given to that department, which is already a very powerful department. It is also not a department that is particularly concerned about environmental protection; it is all about the development of the state.31

2.24 The committee is concerned about the possibility of state and territory planning departments exercising decision making powers in relation to matters of national environmental significance, and notes that state and territory planning

28 Mr Grant Johnson, Australian Forest Products Association, Proof Committee Hansard, 8 February 2013, p. 2.

29 Latrobe City Council, Submission 59, p. 2; see also Friends of Grasslands, Submission 41, pp 1-2.

30 Economists at Large, Submission 95, p. 1.

31 Dr Chris McGrath, Proof Committee Hansard, 8 February 2013, p. 33.

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departments are responsible for assessment of major economic development and infrastructure projects, not for protecting the environment.32

2.25 Submitters gave prominent examples of state or territory approved projects, which were then found by the Commonwealth to have likely adverse impacts on matters of national environmental significance and were rejected at Commonwealth approval stage:

One of the classic examples of this is the Traveston Dam inquiry in Queensland. There were sufficient significant concerns, both local community concerns of farming communities and about species that were under threat, for the Commonwealth to have to intervene in that process. I will not go into the details of the flaws of that, but that is one clear example that is more recent. Of course, the other examples around the protection of our more iconic areas—be they Kakadu, the Daintree or the Franklin River—go well back. The point here is that this speaks directly to the inherent conflict of interest that exists between what states want to achieve and what might be a robust environmental outcome.33

2.26 Professor John Quiggin, Australian Laureate Fellow at the School of Economics and School of Political Science and International Studies at the University of Queensland, provided examples of how approval powers given to the states and territories were likely to lead to competition to attract projects, encouraging the relaxation of their environmental standards. Professor Quiggin described this as a race to the bottom:34

It is in Australia's national interest that environmental standards for the approval of major projects should be nationally consistent and predictable over time. Attempts by competing state governments to attract investment by offering favo[u]rable treatment under such slogans as ‘fast-tracking’ and ‘cutting green tape’, will undermine this goal.35

2.27 This view is shared by the Conservation Council of South Australia who say:

The competition between states to attract industry puts the environment at risk. There is incentive for the state governments to reduce environmental protection in order to make themselves appear more attractive to industry.36

2.28 The committee is concerned that if the Commonwealth were to lose its oversight and approval power in relation to matters of national environmental

32 See for example, NSW Government of Planning and Infrastructure, 'About Us' available at http://www.planning.nsw.gov.au/SettingtheDirection/OurprioritiesinNSW/tabid/93/language/en -AU/Default.aspx (accessed 4 March 2013); see also Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 2.

33 Mr Graham Tupper, Australian Conservation Foundation, Proof Committee Hansard, 15 February 2013, p. 17. 34 Professor John Quiggin, Submission 146, p. 2.

35 Professor John Quiggin, Submission 146, p. 2.

36 Conservation Council of South Australia, Submission 107, p. 2.

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significance, this may encourage competitive federalism of the kind being advocated by the Premier of Queensland whereby:

…intergovernmental relations should start with every state's right to seek a competitive advantage over each other, using lower taxes and less regulation to attract business and secure investment.37

Lack of evidence that the current process is hampering investment 2.29 The committee heard that there is no empirical evidence to suggest that the current EPBC approval process is hampering investment or imposing unreasonable costs on individual projects. Latrobe City Council expressed the view that as the EPBC Act currently precludes Commonwealth intervention for all decisions except those that are specifically defined as matters of national environmental significance, this already provides a system whereby:

…bilateral assessment agreements can…be used to align the requirements of state and federal environmental assessments without requiring a hand-over of decision making responsibilities.38

2.30 The National Parks Australia Council stated:

Statements by business interests that bilateral agreements will improve efficiencies simply have not been substantiated and appear unlikely to be substantiated in the future. Throughout the extensive reviews of the EPBC Act over the past 6 years, there has been no work done in any sector which identifies specific efficiencies from the devolution of Federal approval powers to the States and Territories.39

2.31 The Wentworth Group of Concerned Scientists contested the BCA's assertion that environmental regulation is putting at investment at risk, stating that the BCA uses only one example to make such a broad claim:

The single example used by the Business Council of why state governments should be given Commonwealth approval powers actually serves to demonstrate precisely why they shouldn't. The Traveston Crossing Dam on the Mary River was proposed by a Queensland Government corporation and was recommended for approval by the Queensland Coordinator General. In 2009 the Commonwealth Environment Minister, Peter Garrett, acted under the EPBC Act to refuse the dam development on the "very clear" scientific evidence that it would cause unacceptable impacts on nationally protected species: the Australian Lungfish, the Mary River Turtle, and the Mary River Cod.40

37 Michael McKenna, 'State against State: Campbell Newman's Competitive Federalism', The Australian, 12 April 2012, available at http://www.theaustralian.com.au/national-affairs/state-politics/state-against-state-campbell-newmans-federalism/story-e6frgczx-1226324307482 (accessed 5 March 2013).

38 Latrobe City Council, Submission 59, p. 2.

39 National Parks Australia Council, Submission 140, p. 2. 40 Wentworth Group of Concerned Scientists, Submission 93, p. 1.

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2.32 Dr Chris McGrath claimed that contrary to arguments that Commonwealth approval processes cause delays, the evidence suggests that state government processes cause greater problems. He presents the Wandoan Coal mine proposal as an example of a project requiring both state and Commonwealth approval. While the Commonwealth process was completed between 23 June 2008 and 21 March 2011,41 in January 2013 the state of Queensland had not yet made a decision under their legislation since it was referred on 27 May 2008. He says:

It is important in this context to recognize that State and local government approvals are far more numerous than EPBC Act approvals and their requirements are typically far more extensive, costly and time-consuming than those imposed by the EPBC Act.42

2.33 Dr McGrath also challenged the claim by the BCA and others that Commonwealth approval powers were leading to a loss of income by project proponents. Even if a project is being delayed, this is not to say that the royalties or income of the project is lost forever, it may just mean that the income is delayed.43

2.34 Dr Martin Taylor from the World Wildlife Fund Australia told the committee that mechanisms for cooperation between the states and territories and the Commonwealth were already in place, and it is these that should be better utilised:

We already have mechanisms for the states and the Commonwealth to cooperate on the assessment of bundles of projects. That is a much better level at which to apply the act so you actually take into account cumulative effects on the environment. You do not just go project by project. That is a far better way. Those provisions are already in the act. We do not see any particular need to delegate approval power to the states or have a system for that when the Commonwealth and the states can already cooperate in applying the EPBC Act.44

2.35 The Wentworth Group of Concerned Scientists point out that since 1999, the EPBC Act has provided for the states and territories to work cooperatively with the Commonwealth through assessment agreements. However, they say that the reasons this is not occurring efficiently is because the states and territories cannot meet the standards required by the Commonwealth.45

41 This timeline for the Commonwealth process was confirmed by the Department of Sustainability, Environment, Water, Population and Communities, although it noted that their records indicated that Commonwealth approval was given on 14 March 2011: Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 6.

42 Dr Chris McGrath, Submission 141, p. 2.

43 Dr Chris McGrath, Submission 141, p. 6.

44 Dr Martin Taylor, World Wildlife Fund Australia, Proof Committee Hansard, 15 February 2013, p. 16. 45 Wentworth Group of Concerned Scientists, Proof Committee Hansard, 15 February 2013, p. 28.

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2.36 In any event, the committee heard that out of 1022 projects referred for Commonwealth approval, only 10 had been rejected, so the proposal for states and territories to have approval powers as a way of reducing inefficiencies is likely to have been overstated.46

2.37 The Wentworth Group of Concerned Scientists suggest that stronger oversight of the current assessment agreements is required, as was recommended by the Hawke review through the creation of an independent National Environment Commission.47

Once you have that independent auditing power not only do you have the safeguards or the possibility of building the safeguards in that you are raising but you also have the ability of the Commonwealth to audit the states in the processes that are either assessment processes or approvals processes that have been delegated down through bilaterals.48

2.38 The committee notes that the Commonwealth government rejected the recommendation of the Hawke report for the establishment of a National Environment Commission.49

Confidence in the states and territories 2.39 Many submitters and witnesses express concern about the ability of the states and territories to make decisions to deliver the best environmental outcomes, and argue that relevant state and territory government departments may not be sufficiently resourced to make decisions based on all available evidence.50

2.40 A number of submitters referred to three examples of proposals that were ultimately rejected by the Commonwealth under the EPBC Act; Traveston Crossing Dam in Queensland; Gunns Pulp Mill in Tasmania; and cattle grazing in the Victorian high country. Submitters claim that it is almost certain that these proposals would have been allowed if an approval bilateral agreement had been in place with the relevant state.51

46 Australian Conservation Foundation, Proof Committee Hansard, 15 February 2013, p. 18. 47 Wentworth Group of Concerned Scientists, Proof Committee Hansard, 15 February 2013, p. 29. 48 Wentworth Group of Concerned Scientists, Proof Committee Hansard, 15 February 2013,

p. 30.

49 Department of the Environment, Heritage and the Arts, The Australian Environment Act: Report of the Independent review of the Environment Protection and Biodiversity Conservation Act 1999, October 2009 (Hawke report), p. 114, available at: http://www.environment.gov.au/epbc/review/publications/final-report.html (accessed 27 February 2013).

50 Ms Rachel Walmsley, Australian Network of Environmental Defenders' Offices, Proof Committee Hansard, 15 February 2013, pp 38-39. See also: Colong Foundation for Wilderness, Supplementary Submission, pp 2-6. 51 Dr Chris McGrath, Submission 141, p. 4.

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2.41 Concerns about the ability for the Commonwealth to cancel or suspend approval bilateral agreements were also raised. Professor Lee Godden makes the following points:

• There is insufficient monitoring and audit of the implementation of

agreements so it is impossible for the Commonwealth to know whether agreements are being complied with;52

• For powers of suspension or cancellation to be invoked, a third party referral to the Commonwealth Minister is required and depends on the community having sufficient knowledge and resources to fulfil this function; and

• There is a lack of procedural clarity on how a state or territory's request to cancel and agreement would be triggered.53

2.42 The committee heard that many submitters and witnesses placed confidence in the Commonwealth to offer sound decision making. The committee heard from two Victorian councils that described the significance of their environmental assets and the view that the discretion involved in decision making about these important assets was best held by the Commonwealth to protect the national interest.54

2.43 There was also considerable discussion in evidence about recent public service job cuts in the states and territories and the ability of the states and territories to adequately carry out additional obligations that may arise under approval agreements.55

2.44 Concerns about the capacity of the states and territories to deliver appropriate enforcement were also raised:

If we are looking for efficiency gains and improving timeliness, not having the staff to do the assessments is obviously going to impact. It also, as we note in our submission, has implications for enforcement. We note that over the last three years the federal environmental department investigated 980 incidents across Australia under the EPBC Act, with 40 court actions, resulting in fines and enforceable undertakings of almost $4 million. If the Commonwealth step out of this space and leave it all to the states there is no guarantee that the states will enforce the laws to the same extent—that

52 Professor Lee Godden, Answers to questions on notice, received 15 February 2013, pp 4-5.

53 Professor Lee Godden, Answers to questions on notice, received 15 February 2013, p. 4.

54 Ms Jane LLoyd, Proof Committee Hansard, 8 February 2013, p. 13.

55 National Parks Australia Council, Submission 140, p. 3; Humane Society International, Proof Committee Hansard, 15 February 2013, p. 16. The committee has considered recent announcements of public service job cuts in states and territories and notes, for example, reports that 220 out of 1117 jobs will be lost from the Queensland Department of the Environment (Koren Helbig and Robyn Ironside, 'Full list of Queensland public service redundancies', Courier Mail, 11 September 2012); see also Senate Environment and Communications References Committee, Inquiry into the Effectiveness of threatened species and ecological communities' protection in Australia, Proof Committee Hansard, 22 February 2013, pp 16-17; and Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 1.

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they can fill the shoes of the federal government in terms of compliance, for example.56

2.45 The department confirmed that there were instances where states and territories could not comply with the standards required under assessment agreements. Dr Kimberley Dripps advised the committee that '…in the operation of some of the assessment bilaterals we find that the assessment provided by the states is inadequate to meet the standards of the EPBC Act.'57 The Green Institute told the committee that as there is no national information system for monitoring and reporting on the state of the environment, there is no objective way of knowing if the states and territories are meeting their existing obligations.58

2.46 The Australian Conservation Foundation cite the findings of state Auditor-Generals which show that states and territories are failing to meet their existing environmental protection obligations.59

2.47 The committee has found that there is a high degree of concern that state and territory governments simply do not have the ability to exercise the standards of decision making required. The committee was advised by the Wentworth Group of Concerned Scientists that this is not to say that they may not have this capacity in the future.60 However the committee does not agree. The committee's view is that it is not appropriate for the states and territories to exercise decision making powers for approvals in relation to matters of national environmental significance. On this point the committee notes that the Premier of Queensland is advocating that the relationship between the states and territories and the Commonwealth should be one of 'competitive federalism'.61 If this approach is taken in relation to assessment and approval for matters of national environmental significance, the committee considers that this would have a detrimental impact on the nation's unique natural heritage.

2.48 In this context, the committee also notes the department's response to questions about proposed changes to assessment processes under the NSW planning system (the NSW Green Paper62). The department advised that the full implications of the Green Paper for accreditation of NSW assessment approaches would not be known

56 Ms Rachel Walmsley, Australian Network of Environmental Defenders' Offices, Proof Committee Hansard, 15 February 2013, p. 39.

57 Dr Kimberley Dripps, Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 56.

58 Green Institute, Submission 129, p. 2.

59 Australian Conservation Foundation, Submission 90, p. 2.

60 Wentworth Group of Concerned Scientists, Proof Committee Hansard, 15 February 2013, p. 28. 61 Chris Uhlmann, 'Federal vs state funding fight escalates', ABC 730 Report, http://www.abc.net.au/7.30/content/2013/s3698073.htm (accessed 26 February 2013).

62 See further NSW Government, A New Planning System for NSW, at: http://www.planning.nsw.gov.au/a-new-planning-system-for-nsw (accessed 8 March 2013).

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until NSW passes legislation.63 The committee is concerned that this now creates considerable uncertainty about the NSW assessment processes. The committee would therefore be alarmed at the prospect of referring any approval powers to state governments as this is inconsistent with the Commonwealth's international obligations and the intent of the EPBC Act.

Securing Australia's natural heritage 2.49 A number of submitters expressed concern that the desire for continued economic growth brings with it ever-increasing pressure on the natural environment. The Commonwealth government's powers in the EPBC Act were described as an ultimate protection or 'bulwark' to hold back these pressures.64 While it is outside of the scope of this inquiry, several submitters called for strengthened powers of the Commonwealth under the EPBC Act, and broadening of the criteria that would trigger the approvals process.65

2.50 The committee heard from a number of submitters and witnesses who believe the Commonwealth government is in the best position to safeguard Australia's environmental assets. Many submitters noted that ecosystems do not neatly follow

state and territory boundaries, therefore the Commonwealth should be making decisions that affect the national interest.66

International obligations 2.51 The committee has found that matters of national environmental significance and Australia's international obligations are at the heart of the EPBC Act, and for these reasons, submitters and witnesses view the role of the Commonwealth Minister in approvals related to matters of national environmental significance as critical.67 Professor Lee Godden noted that under the Convention Concerning the Protection of the World Cultural and Natural Heritage there is an obligation placed on national governments to ensure the protection, preservation and continuation into the future of the World Heritage areas. 'These are specific obligations that the Commonwealth government enters into and it alone bears the responsibility for discharging those obligations.'68

2.52 The Law Council of Australia urged the Commonwealth to retain its powers for approval of matters of national environmental significance. They express concern that in the absence of guaranteed equivalent environmental protection being offered by states and territories, the Commonwealth should not devolve its approval powers.

63 Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 2.

64 Colong Foundation for Wilderness, Submission 25, p. 1.

65 Blue Mountains Conservation Society, Submission 27, p. 2.

66 See for example: Mr Justin Smyrk, Submission 35, p. 1; Lawyers for Forests, Submission 112, p. 2; Ms Nina Earl, Submission 34, p. 1.

67 Professor Lee Godden, Answers to questions on notice, received 15 February 2013, p. 6.

68 Professor Lee Godden, Proof Committee Hansard, 8 February 2013, p. 11.

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They advocate the application of the principle of non-regression which 'discourages public authorities from amending legislation where the amendments will reduce the available protections.'69

Committee view 2.53 During its deliberations the committee was presented with evidence to show that the EPBC Act is, in the main, working well and that there is overwhelming community support for the Commonwealth to maintain its oversight powers to ensure proper protection of the environment. The committee has found that international obligations compel the Commonwealth to retain its powers for approving matters of national environmental significance in order to deliver strong national coordination and control to protect Australia's biodiversity, to reduce habitat loss and land degradation and to protect the nation from biosecurity risks. The committee rejects the claims made by business interests that Commonwealth powers of approval are the cause of inefficiencies, delays, and loss of income to project proponents.

2.54 The committee considers that there is confusion amongst submitters as to what is actually causing delays or uncertainties in the assessment and approval processes. On this point the committee is persuaded by evidence that it received to indicate that assessment processes at the state and territory level were in some circumstances causing delays, rather than processes at the Commonwealth level. The committee would also like to caution against the assumption that any future approval bilateral agreements would solve all of the problems that are perceived to exist in the current system.70 In fact, the committee was presented with no empirical evidence to substantiate claims that Commonwealth involvement was hampering approval processes.

2.55 This was confirmed by the department at the committee's public hearing on 15 February 2013:

CHAIR: So there has been no evidence from the Minerals Council or the BCA to say: 'Here are the efficiency problems with the EPBC'?

Dr Dripps: Not that I recall.

CHAIR: I find that amazing because of everything you read in the papers. I went to Corrs Westgarth and their environmental lawyers are saying the efficiencies that can be gained by this are unassailable, but you have not heard of that, have you?

Dr Dripps: We are certainly doing some work internally—as I think Mr Knudson said at estimates earlier in the week—to improve our efficiency, but in terms of the problem definition, I am certainly often confronted with generalities and I look forward to receiving any advice on specifics.

69 Law Council of Australia, Submission 92, p. 2.

70 See for example evidence from the Minerals Council of Australia, Proof Committee Hansard, 15 February 2013, p. 12.

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CHAIR: That is interesting, Dr Dripps. That is all we have had. We have not had one hard piece of evidence before this committee that says that a federal government should change the EPBC Act to allow for the states to make assessments and approvals on the basis of these inefficiencies. I have not seen any, and you are saying you have not seen them either.

Dr Dripps: That is right.71

2.56 And:

CHAIR: I just think it is very important. Your evidence tells us that there is no evidence that putting the federal powers back to the states will improve efficiency.

Dr Dripps: I think what I said is that we have the publicly available reports and we have the same anecdotal evidence that has been presented to you—

CHAIR: So no hard evidence.

Dr Dripps: from various industry organisations about the efficiencies and inefficiencies that occur in administration of the act.

CHAIR: That means that there is no hard evidence; there is anecdotal evidence. Is that correct?

Dr Dripps: That is a conclusion from reading the reports, if you like.72

2.57 In response to the committee's questioning on whether any analysis has been undertaken of delays under EPBC Act processes and associated costs, the department noted that a report was presented by Deloitte Access Economics in April 2011.73 Unfortunately, this information was only provided to the committee in answers to questions on notice on 8 March 2013, so the committee has not had time to fully consider this report. However, it appears that the report focusses on a cost-benefit analysis of reforms to the EPBC Act proposed by the Hawke review and concludes that the 'reforms should proceed, with resourcing provided for their implementation'.74

71 Dr Kimberley Dripps, Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 59.

72 Dr Kimberley Dripps, Department of Sustainability, Environment, Water, Population and Communities, Proof Committee Hansard, 15 February 2013, p. 60.

73 See Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 6 referring to Deloitte Access Economics, Cost Benefit Analysis - Reforms to Environmental Impact Assessments under the EPBC Act, 20 April 2011, http://ris.finance.gov.au/2011/09/12/response-to-the-review-of-the-epbc-act-%E2%80%93-regulation-impact-statement-%E2%80%93-department-of-sustainability-environment-water-population-and-communities/ (accessed 8 March 2013).

74 Deloitte Access Economics, Cost Benefit Analysis - Reforms to Environmental Impact Assessments under the EPBC Act, 20 April 2011, p. iii, available at: http://ris.finance.gov.au/2011/09/12/response-to-the-review-of-the-epbc-act-%E2%80%93-regulation-impact-statement-%E2%80%93-department-of-sustainability-environment-water-population-and-communities/ (accessed 8 March 2013).

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It is the committee's view therefore that the Deloitte report does not substantiate claims that EPBC Act processes are causing undue delays and costs to proponents.

2.58 Furthermore, the committee notes that any costs to the proponent associated with meeting EPBC Act requirements are legitimate in the context of meeting Australia's national and international environmental obligations. Further, the committee considers that caution is required when considering cost reduction proposals to ensure they are not counterproductive and do not result in cost cutting reducing the Commonwealth's capacity to meet its national and international environmental obligations.

National Environment Commissioner

2.59 The committee is persuaded by the evidence it received to indicate that Australia's interests would be well served by establishing an independent National Environment Commission and appointing a National Environment Commissioner, as recommended by the Hawke report. The Commissioner would be responsible for improved oversight of environmental protection legislation, and carry out monitoring, data collection, reporting, audit and enforcement functions under the EPBC Act. The Commissioner would also provide advice to the Environment Minister for the purposes of decision making for environmental impact assessment and approvals processes under the Act, including decision making on project assessments, strategic assessments and bioregional plans, as recommended by the Hawke report.

2.60 On this basis the committee believes the Commonwealth government should reconsider its response to this recommendation of the Hawke report.

Conclusion 2.61 The committee notes the Commonwealth acknowledged that 'significant challenges emerged in developing approval bilateral agreements that provide consistency for business and assurance to the community that high standards will be made and maintained'75 and said it 'will introduce legislative reforms to progress its response to the Hawke review of the Environment Protection and Biodiversity Conservation Act 1999 to further streamline and strengthen environmental regulation'.76 The department has confirmed that it is not currently exploring, or negotiating internally, or with states, options for transferring EPBC Act approval responsibilities to the states.77

75 Department of Sustainability, Environment, Water, Population and Communities, Submission 114, p. 5.

76 COAG Communique, 7 December 2012, p. 4, http://www.coag.gov.au/node/475 (accessed 4 March 2013); and see also Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 5.

77 Department of Sustainability, Environment, Water, Population and Communities, Answers to questions on notice, received 8 March 2013, p. 7.

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Recommendation 1

2.62 Given the need to address a range of issues raised with the committee and associated with the reform of the Environment Protection and Biodiversity Conservation Act 1999, the committee recommends that the bill not be passed.

2.63 However, the committee believes that any streamlining and strengthening of environmental regulation must only be undertaken in the context of Australia's national and international obligations. The critically important role of the Commonwealth, and its ultimate responsibility for ensuring national and international environmental responsibilities are met, must be paramount in any legislative review.

Recommendation 2

2.64 The committee recommends that the Minister for Sustainability, Environment, Water, Population and Communities analyses the evidence before the committee and prepares legislation to amend the Environment Protection and Biodiversity Conservation Act 1999 consistent with the issues raised in this report and which are designed to ensure that the Commonwealth's national and international environmental obligations continue to be met.

2.65 In this context, the committee also notes the evidence in relation to the operation of COAG and its reform agenda in relation to national environmental matters.

Recommendation 3

2.66 The committee recommends that COAG deliberations on national environmental regulation must be, at all times, underpinned by Australia's national and international obligations and the objects of the Environment Protection and Biodiversity Conservation Act 1999.

2.67 The committee notes the recommendation from the Hawke review for the appointment of a National Environment Commissioner and the creation of an independent National Environment Commission. The committee is of the view that the Commonwealth should reconsider its position on this recommendation as the evidence in support of the recommendation is strong. The adoption of this recommendation would ensure independent advice to the minister based on environmental priorities as distinct from advice which promotes and prioritises business 'efficiency' at the expense of our national and international environmental obligations.

Recommendation 4

2.68 The committee recommends that the Commonwealth reconsider its position on the recommendation from the Hawke review for the appointment of a National Environment Commissioner and the creation of an independent National Environment Commission.

2.69 The committee expresses concern in relation to the evidence of significant cuts to state government environmental departments as part of austerity measures by a number of state governments.

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Recommendation 5

2.70 The committee recommends that COAG, as a matter of priority, undertakes an assessment of the capabilities of state government environment departments and their capacity to engage effectively with the Commonwealth to protect matters of national environmental significance. The committee further recommends that COAG make an assessment as to the implications for reduced resources in state environmental departments and the dominance of state planning departments and its implications for protecting matters of national environmental significance.

2.71 The committee expresses grave concern at the potential for significant environmental degradation if the policy of competitive federalism results in a 'race to the bottom' on environmental protection in a bid for increased resource exploitation. In this context, the committee is alarmed at the statements on competitive federalism by the Premier of Queensland.78

2.72 The committee is of the view that competitive federalism will result in a diminution of environmental outcomes. The committee believes that COAG should take steps to ensure that competitive federalism does not undermine the effective operation of the EPBC Act nor our national and international environmental obligations.

Recommendation 6

2.73 The committee recommends that COAG urgently consider the implications of competitive federalism in relation to the effective of operation of the Environment Protection and Biodiversity Conservation Act 1999 and our national environmental and international environmental obligations.

Senator Doug Cameron Chair

78 Chris Uhlmann, 'Federal vs state funding fight escalates', ABC 730 Report, http://www.abc.net.au/7.30/content/2013/s3698073.htm (accessed 26 February 2013); and see also Michael McKenna, 'State against State: Campbell Newman's Competitive Federalism', The Australian, 12 April 2012, available at http://www.theaustralian.com.au/national-affairs/state-politics/state-against-state-campbell-newmans-federalism/story-e6frgczx-1226324307482 (accessed 5 March 2013).

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Coalition Additional Comments Government’s backflip on streamlining 1.1 Coalition Senators note with disappointment the majority report’s statement, in relation to the COAG meeting of 7 December 2012 that:

While it was anticipated that COAG may have announced its intention to give the states and territories increased powers for approvals, this did not occur.1

1.2 Coalition Senators highlight that the Government created this expectation, including through the 12 April 2012 COAG Communique statement that the “Commonwealth will work with the States and Territories to improve the process for approvals of these categories [projects within the Commonwealth’s current jurisdiction affecting world heritage sites and specific areas of action, including nuclear actions, defence development and developments affecting Commonwealth waters] ... for consideration by COAG at its next meeting.” 2

1.3 The Government, including the Prime Minister, further fuelled such expectations through statements indicating the Government accepted the case made by business and industry groups regarding the need for delegated assessment and/or approval powers.

Look, what we want to work towards here is a streamlined system, so that projects don’t go through two layers of assessment for no real gain. And so the classic examples that are brought by business is where people have gone through sequential assessments, so it’s double the time, things that have been required for the first assessment are required in a slightly modified form for the second assessment, so they don’t even get the benefits of just uplifting the work and re-presenting it, it’s got to be redone. So clearly that is an inefficient system.3

At the inaugural meeting of the Business Advisory Forum yesterday, business leaders raised delays in environmental approvals and assessments as a major cost. These delays, due to duplicative processes across federal and state systems, can take businesses months or even years to resolve.

Today COAG acted on that concern and the Gillard Government and states and territories agreed to fast track arrangements to use state assessment and approval processes by March 2013.

1 Chair’s draft.

2 COAG Communique, 13 April 2012, pp. 2-3, http://www.coag.gov.au/node/313 (accessed 12 March 2013).

3 Prime Minister, joint press conference, 12 April 2012, http://www.pm.gov.au/press-office/transcript-joint-press-conference-canberra-24 (accessed 12 March 2013).

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The removal of these regulations will protect the environment whilst ending the costly delays that result from double-handling and duplication.4

1.4 Coalition Senators accept the case for streamlining of regulatory processes, including through the use of bilateral agreements for both assessments and approvals, as provided for by the EPBC Act but which would be prevented by the bill, as made in a number of submissions noted in the majority report and backed by a number of reports referenced in the majority report.

1.5 It was for these reasons that the Coalition in April 2012 committed to offer state and territory governments the opportunity to act as a one-stop-shop for environmental approvals as well as seeking to create a single lodgement and documentation process for environmental approvals.5 There is no reason why assessment and approvals procedures cannot be made more efficient without any diminution of environmental or heritage standards.

1.6 Coalition Senators are therefore disappointed at the Government’s backflip as evidenced by COAG’s failure to make the progress the Government was promising in April 2012.

Improving efficiency 1.7 Coalition Senators are disappointed at the majority report’s dismissal, of submissions and evidence taken, as “no compelling evidence to show how an approval agreement would improve business efficiency”.

1.8 Coalition Senators note, for example, that a Deloitte Access Economics report of April 2011, to which the majority report refers only briefly, includes a cost-benefit analysis of reforms to the EPBC Act proposed by the Hawke review. Of particular relevance is recommendation 4 of the Hawke review, as highlighted in the majority report.

1.9 The Deloitte Access Economics report found that:

There would be benefits to project proponents, Australian, state and territory governments and the economy from reducing delays in the assessment process.6

1.10 The Deloitte Access Economics report quantified some of the impacts of delays relating to assessments:

4 Media release, Prime Minister and Minister for Finance and Deregulation, 13 April 2012, p. 1, http://www.pm.gov.au/press-office/coag-signs-proposals-cut-red-tape (accessed 12 March 2013).

5 Leader of the Opposition, address to the Australian Industry Group, 20 April 2012, available at http://liberal.org.au/latest-news/2012/04/20/tony-abbott-speech-australian-industry-group-coalitions-plan-cleaner (accessed 12 March 2013).

6 Deloitte Access Economics, Cost Benefit Analysis - Reforms to Environmental Impact Assessments under the EPBC Act, 20 April 2011, p. 27, available at: http://ris.finance.gov.au/2011/09/12/response-to-the-review-of-the-epbc-act-%E2%80%93-regulation-impact-statement-%E2%80%93-department-of-sustainability-environment-water-population-and-communities/ (accessed 12 March 2013).

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Preliminary data in 2010-11 indicate that the assessment process under the EPBC Act is currently delaying projects as follows:

• Referral decisions - 28% delayed, average delay 8 days (235 decisions

total).

• Assessment approach - 35% delayed, average delay 42 days (94 decisions total).

• Approval decisions - 22% delayed, average delay 69 days (64 decisions total).

Overall, the average length of delay faced (i.e. including those not delayed) was as follows:

• Referral decisions - 2 business days.

• Assessment approach - 15 business days.

• Approval decisions - 15 business days.

On that basis, a project that is determined to be a CA [controlled action] (and undergoes the three stages of assessment) in 2010-11 faces an average delay of 32 business days, or more than six weeks. That does not include time spent by the proponent gathering information while the statutory clock is stopped, or time spent during environmental approval processes in state/territory or local governments.7

1.11 The Deloitte Access Economics report also found that:

The estimated benefit from reduced delays...was thus estimated as $135.1 million in 2012-13 increasing to $288.4 million in 2020-21 (Table 5.15). In NPV [net present value] terms, this represents a total gain to society of $1.19 billion.8

1.12 Among submissions cited by the majority report but disappointingly dismissed as offering “no compelling evidence to show how an approval agreement would improve business efficiency” was that made by the Business Council of Australia.

The community must be assured that under the approvals system, Australia’s unique environment and heritage values will be maintained or enhanced. This can and should be achieved without compromising the competitiveness of project proponents.

7 Deloitte Access Economics, Cost Benefit Analysis - Reforms to Environmental Impact Assessments under the EPBC Act, 20 April 2011, pp 27-28, available at: http://ris.finance.gov.au/2011/09/12/response-to-the-review-of-the-epbc-act-%E2%80%93-regulation-impact-statement-%E2%80%93-department-of-sustainability-environment-water-population-and-communities/ (accessed 12 March 2013).

8 Deloitte Access Economics, Cost Benefit Analysis - Reforms to Environmental Impact Assessments under the EPBC Act, 20 April 2011, p. 33, available at: http://ris.finance.gov.au/2011/09/12/response-to-the-review-of-the-epbc-act-%E2%80%93-regulation-impact-statement-%E2%80%93-department-of-sustainability-environment-water-population-and-communities/ (accessed 12 March 2013).

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Australia’s planning and environmental laws, at all levels of government, must facilitate the efficient approval of major capital projects upon which Australia’s economic wellbeing is increasingly dependent.

The Australian economy is more reliant on the successful delivery of major capital projects than ever before. Business Council of Australia research indicates that by 2013, expenditure on capital investment is likely to grow to 30 per cent of GDP. A large part of all Australian economic activity will therefore be dependent on the success of major capital projects. Given Australia’s increased reliance on major capital projects, it is imperative that all governments configure their environmental approvals processes to ensure decisions are predictable and timely.9

1.13 Another submission, made by the Pyrenees Shire Council in Victoria but cited by the majority report only in passing, expressed concern about the Commonwealth’s ability to make timely decisions reflecting local knowledge and experience:

The Pyrenees Shire Council is committed to protecting and where possible enhancing environmental values within its area of responsibility. The most efficient and effective way of achieving this is to reduce the number of layers and steps involved when submitting a proposal for review and approval. Considerable time and effort goes into providing information, receiving feedback, developing strategies, formulating a submission and negotiating a final outcome. The process can become very cumbersome the more layers and organisations that are involved.10

1.14 The Victorian Farmers Federation also supported the use of bilateral agreements and therefore strongly opposed the bill:

The VFF considers that there are significant advantages to retaining the ability to delegate to state governments the approval of referred actions under the Environment Protection and Biodiversity Conservation Act…Furthermore, bilateral agreements for this delegation will not change the EPBC Act, but rather take a more practical approach to its administration.

State governments are in a stronger position than the Commonwealth to administer the EPBC Act because:

• They have greater experience with administering environmental regulation

• There is a higher level of recognition for state based regulation

• They are closer geographically to the proponents of referred actions. 11

9 Business Council of Australia, Submission 91, p. 1.

10 Pyrenees Shire Council, Submission 83, p. 1.

11 Victorian Farmers Federation, Submission 83, p. 1.

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Labor’s blame game 1.15 Coalition Senators are aghast at the attacks in the majority report on the capacity, conduct and approach of the states.

1.16 While it is no surprise given their own enthusiasm for wasteful, debt driven spending that Labor Senators would attack what they describe as “austerity measures” within the states, Coalition Senators note that such “austerity” is required due to years of Labor waste, deficits and mismanagement at a state level.

1.17 Should expanded use of assessments or approvals bilaterals with states be undertaken, states would have to appropriately resource the relevant agencies to ensure the requirements of such bilaterals were met and standards of assessments and approvals were upheld.

1.18 Coalition Senators find the argument that a state or territory may have “an incentive to approve” proposals because they may receive “economic benefits from the development under consideration” especially perverse. Arguably the federal government has as much if not more to gain from projects proceeding, given the benefits that flow directly to federal finances from increased revenue associated with income tax or company tax receipts generated by a project. Labor’s support for this argument is symptomatic of their general ignorance of the broad benefits that flow from economic development.

1.19 Similarly, Coalition Senators find the attack by Labor Senators on the concept of competitive federalism, which they suggest risks a “race to the bottom on environmental protection” as concerning. Seeking smarter and more efficient ways to deliver environmental regulation without reducing environmental standards should be an objective of all levels of government. Competitive tension between the states should be used to harness this result. Simply having more public servants and more red tape does not guarantee better environmental outcomes, it simply guarantees higher costs.

Conclusion 1.20 Unlike Labor, when the Coalition promises to achieve streamlined approvals processes, as advocated in recommendation four of the Hawke Review, we actually intend to do so.

1.21 Accordingly, we support the majority report’s recommendation that this bill not be passed, but do so without the extensive reservations made by Labor Senators.

Senator Simon Birmingham Senator Bridget McKenzie Deputy Chair

Senator Anne Ruston

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Australian Greens - Dissenting Report 1.1 The Environment Protection and Biodiversity Conservation Amendment (Retaining Federal Approval Powers) Bill 2012 will remove the Commonwealth’s ability to hand its responsibilities for approving developments that significantly impact matters protected under our national environmental laws to a State or Territory.

1.2 As has been demonstrated in evidence throughout this inquiry, the changes proposed by this bill have the support of environmental experts, lawyers and the broader Australian community. In fact, well over 90% of the 175 submissions to this inquiry supported this bill.

1.3 The Australian Conservation Foundation submitted:

The current sections of the EPBC Act which allow the Commonwealth to delegate its powers in relation to Matters of National Environmental Significance (MNES) to the states are contrary to the Commonwealth’s responsibilities to protect the environment, and should be removed.1

1.4 Humane Society International believes it will never be appropriate for the Federal government to hand over their federal approval powers to the States. Accordingly, the power to do so should be removed from the EPBC Act.2

1.5 The New South Wales Conservation Council submitted:

If the Federal Government hands over its approval powers under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to the states, as it is currently legally able to do, important environmental protections, established over 30 years, will be in jeopardy. We are unequivocally opposed to the delegation of approval powers to the states and territories under the EPBC Act and therefore support the Bill.3

1.6 The Australian Law Council submitted:

The Law Council urges the application of the non-regression principle in any assessment of environmental law reform. Consistent with that principle, and in the absence of any assurance that state legislation offers equivalent protections, we support the retention of approval responsibilities under the EPBC Act by the Federal government.4

1.7 The Australian Network of Environmental Defenders Offices submitted that it believes that Commonwealth involvement in environmental regulation in Australia is

1 Australian Conservation Foundation, Submission 90, p. 1.

2 Human Society International, Submission 46, p. 2.

3 NSW Conservation Council, Submission 92, p. 1.

4 Australian Law Council, Submission 92, p. 2.

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vital, and ANEDO does not support the delegation of Commonwealth approval responsibilities under the EPBC Act to States and Territories.5

1.8 Professor John Quiggin, of the University of Queensland’s School of Economics submitted:

It is in Australia’s national interest that environmental standards for the approval of major projects should be nationally consistent and predictable over time. Attempts by competing state governments to attract investment by offering favorable [sic] treatment under such slogans as ‘fast-tracking’ and ‘cutting green tape’, will undermine this goal. Maintenance of federal approval powers under the EPBC Act will promote this goal.6

1.9 Sustainable Business Australia submitted:

The role of our national environmental regulatory system is to ensure that it properly assesses the environmental impact of proposed capital investment on our national natural asset, the environment. This Bill will ensure that important economic development meets the required standards, and achieves a more effective and efficient system of environmental, and reinforce the significant role the Commonwealth Government has to play in securing this asset for all Australians, both for now and for generations to come.7

1.10 The inquiry provided an invaluable opportunity for committee members, and the community at large, to carefully scrutinise whether there should be provisions under our national environment laws for the handover of national responsibilities to states and territories.

Of great note are the findings of the committee:

• Most submitters expressed grave concern about the risks to the environment

associated with granting approval powers to the states and territories. [para 2.1]

• The committee was presented with no compelling evidence to show how an approval agreement would improve business efficiency [para 2.12]

• The committee is concerned that if the Commonwealth were to lose its oversight and approval power in relation to matters for national environmental significance, this may encourage competitive federalism [ para 2.28]

1.11 And most importantly:

• The committee’s view is that it is not appropriate for the states and territories

to exercise decision making powers for approvals in relation to matters of national environmental significance. [para 2.47, underline added]

5 Australian Network of Environmental Defenders Offices, Submission 128, p. 2.

6 Professor John Quiggin, Submission 146, p. 3.

7 Sustainable Business Australia, Submission 174, p. 2

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1.12 Yet, the majority recommendations fall short - failing to act on the committee’s own unequivocal findings, and support this bill that would prevent state and territories from being able to be the sole regulators of our nation’s most environmentally destructive projects.

1.13 Sadly politics appears to have trumped sound evidence based policy.

1.14 Instead the committee recommends a very welcome but oddly unrelated reform - that the government create an independent National Environment Commission. This reflects the position in the Greens’ Too Precious To Lose:

Principles to Protect Australia's Environment released in June 2012, and we urge the Government to act promptly on this recommendation.

1.15 While the independent review of the EPBC Act reported in October 2009, the Government took over 18 months to release its policy position in August 2011, and we are still yet to see any amending legislation come before the parliament. On this trajectory it is unlikely that any national environment commission would be established in a timely manner.

1.16 Sadly, the recommendation for a national environment commission appears to be a gesture to distract the community from the fact that the committee is not prepared to stand with them and act on all the evidence before them; that the committee has failed to recommend that Australia’s environment be permanently protected from the risk of state governments being handed responsibility for our most precious places and species.

1.17 In the face of statements by the Opposition that they will use these provisions to hand off federal powers, and in the face of overwhelming evidence before the committee that the hand-off provisions should be repealed as this bill would do, the Government has a window to remove these provisions. Failure to do so would make the Government complicit when any future government sought to use these provisions. Failure to do so would also undermine the legacy of Commonwealth oversight of our nationally important species and places - which Labor Prime Minister Bob Hawke was instrumental in establishing.

1.18 If the Government has genuinely backed away from its support to hand off federal environment powers to states, it should support this bill. Anything less is an admission that they are not prepared to put the needs of our national environment ahead of vested interest lobby groups.

1.19 This bill provides the opportunity for the government to future proof the EPBC Act, and ensure ongoing national protection for our nationally important species and places.

1.20 The Australian Greens commend this bill to the Senate.

Senator Larissa Waters

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Appendix 1

Submissions, form letters and answers to questions taken on notice

Submissions

1 Ms Joy Ringrose

2 The United Bird Societies of South Australia Inc

3 Ms Lois Katz

4 Mr Carlos Whiley

5 Mr John Tedge

6 Mr Allan McKay

7 Mr Adrian Watkins

8 Mr Peter Sainsbury

9 Ms Eileen Whitehead

10 Ms Mia Dalby-Ball

11 Name Withheld

12 Mr Adam Connell

13 Ms Anne Kotzman

14 Miss Claire Ogden

15 Ms Dereka Ogden

16 Ms Jenny Spragg

17 Dr Lyndon DeVantier

18 Dr Graeme Armstrong

19 Mr Richard Stanford

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20 Mr Albert Mah

21 Mr Ian Rudd

22 Ms Karin Geradts

23 Ms Nita Clifton

24 Ms Pamela Rothfield

25 The Colong Foundation for Wilderness Ltd

26 Mr Doug Campbell

27 Blue Mountains Conservation Society Inc

29 Ms Margeaux Chandler

30 Doctors for the Environment Australia Incorporated

31 Ms Juanita M Johnston

32 Mr Raymond Cox

33 Magnetic Island Community Development Association Inc

34 Ms Nina Earl

35 Mr Justin Smyrk

36 Mr Russell Jones

37 Jonathan Peter and Josephine Prowse

38 Ms Lesley Hook, Birdlife Southern New South Wales

39 Mr Hank Vandepol

40 Mr Jean Dind

41 Friends of Grasslands

42 VicForests

43 Aldershot and District Against Mining

44 Ms Ruby Rosenfield

45 Kingston Conservation and Environment Coalition

46 Humane Society International

47 National Parks Association of NSW

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48 South East Australian Naturalists Association (SEANA) Inc

49 BirdLife Northern Queensland

50 Wellington Shire Council

51 Mr Timothy Bidder

52 Australian Koala Foundation

53 Mr Peter Gillbank

54 Mr Victor Hill

55 Mr Kris Schmah

56 Victorian Association of Forest Industries

57 Mr Shawn Jarvey

58 Ms Imelda Grant

59 Latrobe City Council

60 Fraser Coast Branch of the Wildlife Preservation Society of Queensland

61 Australasian Wader Studies Group

62 Ms Lenore Keough

63 Friends of Shorebirds SE

64 Ms Karen Davis

65 Manduka Cooperative

66 Name Withheld

67 Ms Eve Plant

68 Office of Giz Watson, MLC, Western Australia

69 Mr Kenneth Brown

70 Name Withheld

71 Mr Richard Costin and Annabelle Sandes, Kimberley Media

72 Dr K. Vernon Bailey AOM

73 Wildlife Preservation Society of Queensland, Townsville Branch

74 Dr Geralyn McCarron

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75 Mr David Arthur

76 Ms Caroline Reid

77 Mr Mike Rathbone

78 Ms Janet Harwood

79 Ms Lisa Nicholls

80 Ms Kath O'Brien

81 Name Withheld

82 Ms Marion Shaw

83 Pyrenees Shire Council

84 Ms Kendall Lovett

85 Nature Conservation Council of NSW

86 Wildlife Preservation Society of Queensland

87 Logan and Albert Conservation Association

88 Keppel and Fitzroy Delta Alliance

89 North Queensland Conservation Council

90 Australian Conservation Foundation

91 Business Council of Australia

92 Law Council of Australia

93 Wentworth Group of Concerned Scientists

94 WWF-Australia

95 Economists at Large

96 Birdlife Echuca

97 Birds Queensland

98 Caldera Environment Centre

99 Name Withheld

100 Save the Mary River Coordinating Group Inc

101 Ms Anna Bridle

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102 Minerals Council of Australia

103 Professor Lee Godden and Professor Jacqueline Peel, Centre for Resources, Energy and Environmental Law, Melbourne Law School, The University of Melbourne

104 Australian Coal Association Limited

105 Mr John Renowden

106 Australian Forests and Climate Alliance

107 Conservation Council of South Australia

108 Nature Conservation Society of South Australia

109 BirdLife Australia

110 Wide Bay Burnett Environment Council

111 Australasian Bat Society Inc

112 Lawyers for Forests

113 Hume City Council

114 Department of Sustainability, Environment, Water, Population and Communities

115 PGV Environmental

116 Australian Chamber of Commerce and Industry

117 Anne Layton-Bennett and John Donnachy

118 Conondale Range Committee

119 BirdLife Southern Queensland and Protect the Bush Alliance

120 Mr Dan Monceaux

121 South East Forest Rescue

122 Bimblebox Nature Refuge

123 Central West Environment Council

124 Ms Deedre Kabel

125 Gecko-Gold Coast and Hinterland Environment Council Association Inc

126 Australian Forest Products Association

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127 South East Region Conservation Alliance (SERCA)

128 Australian Network of Environmental Defender's Offices

129 Green Institute

130 Victorian Farmers Federation

131 Ms Monique Filet

132 Name Withheld

133 Prof Ralf Buckley

134 Premier of Queensland

135 Mary River Catchment Coordinating Committee

136 Wildlife Preservation Society of Queensland, Gold Coast and Hinterland

137 Ms Juanita Johnston

138 Ms Adele Maguire

139 Confidential

140 National Parks Australia Council

141 Dr Chris McGrath

142 Fraser Island Defenders Organisation

143 Name Withheld

144 The Wilderness Society WA

145 Confidential

146 Professor John Quiggin

147 Ms Alix Gibson

148 Ms Amanda Rosenfeld

149 Mr Brendan Doyle

150 Dr Chris Johansen

151 Mr Colin Rainbird

152 Mr Craig Heading

153 Ms Debra Edwards

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154 Ms Emma Thomas

155 Mr Frank Di Mascolo

156 Ms Helen Anderson

157 Mr Ian Heath

158 Mr James Bellis

159 Mr James Crawford

160 Mr James White

161 Mr Jason Graham

162 Ms Jenny Stevens

163 Ms Jessica Larkman

164 Ms Jodie Milton

165 Ms Lara Murray

166 Ms Lyn Prowse-Bishop

167 Mr Mark Dowse

168 Mr Mark Wren

169 Ms Natalie Stanton

170 Mr Raymond Dowling

171 Mr Rob Harvey

172 Mr Simon Rowell

173 Ms Susan Morley

174 Sustainable Business Australia

175 Pacific Hydro Australia

Form letters

1 Form letter A - Received from the Cairns and Far North Environment Centre Inc; Birdlife East Gippsland; Lesley Dalziel OAM; Judy and Tom Fenton; Bat Conservation and Rescue Qld. Inc.; Peter C Laws; H.O.P.E. Australia; Lorna Hobbs; The South Australian Ornithological Association Inc.; Dianne Emslie; Birdlife Mornington Peninsula; and Valerie La May

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2 Form letter B - Received from Heather Coombs; Gordon Curtis; Helga Hill; Sarah Moles; Richard Morrow; Susan Cooke; Mark Rich; and Kent Hutton

Answers to questions taken on notice North Queensland Conservation Council - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Wellington Shire Council - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Latrobe City Council - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Economists at Large - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Professor Lee Godden - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Minerals Council of Australia - answers to questions taken on notice (from public hearing, Canberra, 15 February 2013)

Business Council of Australia - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Minerals Council of Australia - answers to further written questions taken on notice (from public hearing, Canberra, 15 February 2013)

Australian Forrest Products Association - answers to questions taken on notice (from public hearing, Canberra, 8 February 2013)

Department of Sustainability, Environment, Water, Population and Communties - answers to questions taken on notice (from public hearing, Canberra, 15 February 2013)

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Appendix 2 Public hearings

Friday, 8 February 2013 - Canberra

Australian Forest Products Association

Mr Peter Grist, Manager, Resources

Mr Grant Johnson, Policy Manager

Centre for Resources, Energy and Environmental Law, Melbourne Law School, University of Melbourne

Professor Lee Godden, Director

Wellington Shire Council

Ms Joanne Caminiti, Coordinator, Sustainability

Latrobe City Council

Ms Jane LLoyd, Coordinator, Environment Sustainability

National Parks Australia Council

Ms Christine Goonrey, President

BirdLife Australia

Ms Samantha Vine, Head of Conservation

Nature Conservation Council of NSW

Mr Pepe Clarke, Chief Executive Officer

The Colong Foundation for Wilderness Ltd

Mr Keith Muir, Director

Dr Chris McGrath - Private capacity

Economists at Large Pty Ltd

Mr Tristan Knowles, Director

Professor John Quiggin - Private capacity

Green Institute

Ms Margaret Blakers

South East Region Conservation Alliance

Ms Heather Kenway, Committee Member

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Business Council of Australia

Mr Matt Garbutt, Principal Adviser

Ms Maria Tarrant, Deputy Chief Executive

Gecko-Gold Coast and Hinterland Environment Council Association Inc

Mrs Mary Anne Adams, Secretary

Wildlife Preservation Society of Queensland

Mr Des Boyland, Policies and Campaigns Manager

Save the Mary River Coordinating Group Inc

Mr Stephen Burgess, Technical Advisor

Ms Glenda Pickersgill, President

Birds Queensland

Dr Richard Noske, President

North Queensland Conservation Council

Ms Wendy Tubman, Coordinator

Mr David Kreutz - Private capacity

Friday, 15 February 2013 - Canberra

Minerals Council of Australia

Mr Christopher McCombe, Assistant Director, Environmental Policy

Ms Melanie Stutsel, Director, Health, Safety Environment and Community Policy

World Wildlife Fund Australia

Dr Martin Taylor, Manager, Protected Areas and Conservation Science

Australian Conservation Foundation

Mr Graham Tupper, National Liaison Manager

Humane Society International

Mrs Alexia Wellbelove, Senior Program Manager

Wentworth Group of Concerned Scientists

Mr Peter Cosier, Director

Ms Claire Parkes, Policy Analyst

Australian Network of Environmental Defender's Offices

Mr Brendan Sydes, Lawyer

Ms Rachel Walmsley, Director, Policy and Law Reform

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Department of Sustainability, Environment, Water, Population and Communities

Dr Kimberley Dripps, Deputy Secretary

Mr Mark Flanigan, First Assistant Secretary. Regulatory Reform Taskforce

Ms Kelly Pearce, Assistant Secretary, Regulatory Reform Taskforce

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136

The Senate

Environment and Communications

Legislation Committee

Telecommunications Legislation Amendment (Consumer Protection) Bill 2013 [Provisions]

June 2013

137

© Commonwealth of Australia 2013

ISBN 978-1-74229-841-2

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

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Committee membership

Committee members Senator Doug Cameron (ALP, NSW) (Chair) Senator Simon Birmingham (LP, SA) (Deputy Chair) Senator Catryna Bilyk (ALP, TAS) Senator Bridget McKenzie (NATS, VIC) Senator the Hon. Lisa Singh (ALP, TAS) Senator Larissa Waters (AG, QLD)

Participating members Senator Scott Ludlam (AG, WA)

Committee secretariat Ms Toni Matulick, Committee Secretary Ms Sophie Power, Principal Research Officer Mrs Dianne Warhurst, Administrative Officer

Committee address PO Box 6100 Parliament House Canberra ACT 2600 Tel: 02 6277 3526 Fax: 02 6277 5818 Email: ec.sen@aph.gov.au Internet: www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=ec_ctte/ index.htm

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Table of Contents

Committee membership ................................................................................... iii

Abbreviations ....................................................................................................vii

Chapter 1 - Introduction .................................................................................... 1

Conduct of the inquiry ............................................................................................ 1

Summary of the bill ................................................................................................ 1

Consultation on the bill .......................................................................................... 2

Reforms to TIO scheme .......................................................................................... 2

Reform of industry code processes......................................................................... 5

Proposed additional amendment to the Telecommunications Act ......................... 7

Amendments to the Do Not Call Register Act ....................................................... 7

Chapter 2 - Key issues ...................................................................................... 11

Reforms to the TIO Scheme ................................................................................. 11

Reform of industry code processes....................................................................... 13

Do Not Call Register Act amendments ................................................................ 16

Amendments proposed by Mr Adam Bandt MP .................................................. 17

Committee view .................................................................................................... 17

Australian Greens - Additional comments ..................................................... 21

Appendix 1 - Submissions and correspondence ............................................. 23

Submissions .......................................................................................................... 23

Correspondence .................................................................................................... 23

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Abbreviations

ACCAN Australian Communications Consumer Action

Network

ACMA Australian Communications and Media Authority

Consumer Protection Act Telecommunications (Consumer Protection and Service Standards) Act 1999

department Department of Broadband, Communications and the

Digital Economy

DIST benchmarks Benchmarks for Industry-based Customer Dispute Resolution Schemes

Do Not Call Register Act Do Not Call Register Act 2006

TIO Telecommunications Industry Ombudsman

TIO report Department of Broadband, Communications and the

Digital Economy, Reform of the Telecommunications Industry Ombudsman Scheme, 2012.

Telecommunications Act Telecommunications Act 1997

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Chapter 1 Introduction

Conduct of the inquiry 1.1 On 21 March 2013, the Senate Environment and Communications Legislation Committee was referred the provisions of the Telecommunications Legislation Amendment (Consumer Protection) Bill 2013 for inquiry and report by 17 June 2013.1

1.2 The provisions of the bill were referred on the recommendation of the Senate Selection of Bills Committee.2

1.3 The committee advertised the inquiry on its website and The Australian newspaper and wrote to organisations and individuals to invite submissions. The committee received six submissions, as well as correspondence from the Telecommunications Industry Ombudsman (listed at Appendix 1). The committee thanks those who made submissions.

Summary of the bill 1.4 The bill proposes to make amendments to telecommunications legislation 'to strengthen consumer protections and improve the telecommunications co-regulatory framework'.3 In particular, the bill proposes to amend three pieces of legislation.

1.5 First, the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Consumer Protection Act), which would be amended to:

• require the Telecommunications Industry Ombudsman (TIO) scheme to

comply with standards determined by the minister; and

• require periodic independent public reviews of the TIO scheme.

1.6 Second, the Telecommunications Act 1997 (Telecommunications Act) would be amended to:

• enable industry codes to be varied (rather than wholly replaced);

• require code developers to publish draft codes, draft code variations and

related public submissions; and

• extend the existing reimbursement scheme to allow code developers to be reimbursed for costs to vary consumer-related industry codes.

1 Journals of the Senate, No. 143, 21 March 2013, pp 3864-3867.

2 Senate Selection of Bills Committee, Report No. 4 of 2013, p. 3, available at: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selection bills_ctte/reports/2013/rep0413.htm (accessed 28 March 2013).

3 Explanatory Memorandum, p. 1.

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1.7 Finally, the Do Not Call Register Act 2006 (Do Not Call Register Act) would be amended to clarify which party is responsible for making telemarketing calls and sending marketing faxes where third parties are carrying out the marketing activities.

1.8 The proposed amendments to each piece of legislation are outlined in further detail below. Mr Adam Bandt MP (Australian Greens) has put forward an amendment to the bill in the House of Representatives.4 This proposed amendment is also discussed below.

Consultation on the bill 1.9 In addition to the reviews mentioned below, the committee notes that the Department of Broadband, Communications and the Digital Economy (the department) has consulted with industry, consumer groups and relevant regulatory bodies, such as the TIO and the Australian Communications and Media Authority (ACMA), in relation to the amendments proposed by the bill.5 This has included the release of an 'exposure draft' of the bill for consultation.6

Reforms to TIO scheme

Context of the proposed amendments

1.10 The TIO was established in 1993 to provide a free and independent alternative dispute resolution scheme for small business and residential consumers in Australia who have complaints about their telephone or internet services. Each telecommunications carrier and eligible carriage service provider is required by law to participate in the TIO scheme. The TIO is able to investigate complaints and, where appropriate, make determinations on the matters raised and/or give directions to carriage services about those matters.7 According to the Explanatory Memorandum, the TIO scheme is not currently required to comply with any regulatory-based standards.8

1.11 The proposed amendments to the Consumer Protection Act are the result of a review of the TIO scheme conducted by the department. On 4 March 2011, the department released a discussion paper seeking views on the effectiveness of the TIO scheme in relation to its:

4 Telecommunications Legislation Amendment (Consumer Protection) Bill 2013, proposed amendments, at: http://parlinfo.aph.gov.au/parlInfo/download/legislation/amend/r5008_amend_ed944caf-54d4-4fb6-9a34-50d99c93bb63/upload_pdf/13065Bandt.pdf;fileType=application%2Fpdf (accessed 17 May 2013).

5 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 4.

6 See, for example, Correspondence from the TIO, dated 2 May 2013.

7 Department of Broadband, Communications and the Digital Economy, Reform of the Telecommunications Industry Ombudsman Scheme, at http://www.dbcde.gov.au/consultation_and_submissions/previous_consultation_and_submissio ns/TIO_reforms (accessed 10 May 2013).

8 Explanatory Memorandum, p. 12.

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• speed, fairness and accuracy;

• consistency with Alternative Dispute Resolution best practice; and

• ability to promote and encourage industry efforts to deliver quality internal complaint resolution prior to outside intervention.9

1.12 The discussion paper was open for public comment from 4 March to 31 March 2011. According to the department's website, submissions made to the ACMA's 'Reconnecting the Customer' Inquiry which raised issues about the operation of the TIO were also considered as part of the review process.10

1.13 On 4 May 2012, the Minister for Broadband, Communications and the Digital Economy announced the release of the Reform of the Telecommunications Industry Ombudsman report (the TIO report).11 The report's main recommendation was that legislative amendments be made to provide greater clarity around the TIO's role and expected standards of operation. This included the establishment of 'framework principles' under the Consumer Protection Act for the operation of the TIO scheme, based on the Benchmarks for Industry-based Customer Dispute Resolution Schemes (DIST benchmarks).12

1.14 The DIST benchmarks were established by the then Department of Industry, Science and Tourism in 1997.13 The department submitted that the DIST benchmarks are regarded as 'better practice' benchmarks for dispute resolution schemes. The department advises that they have, for example, been adopted by the Australian Securities and Investments Commission, which uses them as a guide in structuring its requirements for approving alternative dispute resolution schemes.14

1.15 The TIO report also recommended the introduction of periodic, mandatory, independent and public reviews of the TIO scheme.15 The department's submission explained that:

9 Department of Broadband, Communications and the Digital Economy, Submission 5, pp 5-6.

10 Department of Broadband, Communications and the Digital Economy, Submissions received in response to the TIO discussion paper, at: http://www.dbcde.gov.au/consultation_and_submissions/previous_consultation_and_submissio ns/TIO_reforms/submissions (accessed 10 May 2013).

11 Department of Broadband, Communications and the Digital Economy, Reform of the Telecommunications Industry Ombudsman Scheme, at http://www.dbcde.gov.au/consultation_and_submissions/previous_consultation_and_submissio ns/TIO_reforms (accessed 10 May 2013).

12 Explanatory Memorandum, p. 12; see also TIO report, p. 7. The DIST benchmarks are at: http://ccaac.gov.au/files/2013/04/Benchmarks_DIST1997.pdf (accessed 13 May 2013).

13 Note that the benchmarks are also currently under review: see Commonwealth Consumer Affairs Advisory Council, Review of the Benchmarks for Industry-based Customer Dispute Resolution Schemes, at: http://ccaac.gov.au/2013/04/24/review-of-the-benchmarks-for-industry-based-customer-dispute-resolution-schemes/ (accessed 10 May 2013).

14 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 6.

15 Explanatory Memorandum, p. 12; see also TIO report, p. 9.

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There is currently no formal mechanism by which the TIO is independently reviewed. While the TIO memorandum and articles of association provide that the TIO will conduct a review of its operations every three years, in practice reviews of the TIO have not been regular or public.

For example, the TIO board commissioned a review ahead of the Department’s discussion paper in late 2010. However, no public announcement was made about the review or its terms of reference and no opportunity was provided for public submissions.16

Overview of amendments to the Consumer Protection Act

1.16 The amendments to the Consumer Protection Act in the bill are intended to improve the operation of the TIO scheme, as recommended by the TIO report, by:

• providing greater clarity about the TIO's role and expected standards of

operation by requiring the TIO scheme to comply with standards determined by the minister, following consultation with the TIO and the industry regulator, ACMA; and

• requiring periodic public reviews of the TIO scheme conducted by a person or

body independent of the TIO and the telecommunications industry.17

1.17 Proposed new subsections 128(8) and 128(11) of the Consumer Protection Act will provide the minister with the discretion to determine standards with which the TIO must comply. 18 If the minister makes a determination, he or she must have regard to the matters set out in proposed new subsection 128(10). These matters are derived from the DIST benchmarks, as discussed above. Before making a determination, the minister must consult with the TIO and the ACMA.19 The minister's determination will be a disallowable instrument under the Legislative Instruments Act 2003.20

1.18 The bill also proposes to insert a new section 133A into the Consumer Protection Act to provide for periodic reviews of the TIO scheme. The requirements for reviews of the TIO scheme under section 133A include:

• to complete the first review within 3 years after commencement of the section, and every 5 years thereafter;

• reviews are to be conducted by a person or body independent of the TIO and

the telecommunications industry;

• reviews must provide for consultation with the public, as well as the TIO and

the ACMA;

16 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 7.

17 Explanatory Memorandum, p. 1.

18 See item 31, Part 2, Schedule 1 of the bill.

19 Explanatory Memorandum, p. 13 and proposed ss. 31(11).

20 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 7.

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• review reports must be provided to the minister and published on the TIO's

website; and

• the TIO must respond to any review recommendations within 6 months of receiving a report. A copy of the response must be provided to the minister and be published on the TIO's website.21

Reform of industry code processes

Context of the proposed amendments

1.19 The bill also proposes to amend the process for registering industry codes under Part 6 of the Telecommunications Act. These proposed amendments are in response to a review of consumer related industry code processes in 2010. According to the department, that review identified three connected issues that would strengthen the code development process:

• the ability to vary industry codes;

• greater transparency during the code development process; and

• reimbursement of code development costs for variations to consumer related

industry codes.22

1.20 The department further advised that in developing the proposed amendments to the code development process, industry and consumer groups were consulted and were generally supportive of the proposed amendments.23

Overview of amendments to the Telecommunications Act

1.21 Part 6 of the Telecommunications Act provides for the development of industry codes by bodies or associations representing industry sections (code developers). Codes must be registered with the ACMA.

1.22 The amendments to the Telecommunications Act proposed by the bill 'are intended to streamline and improve the process for developing and amending industry codes under Part 6 of that Act'.24 In particular, the bill proposes to amend Part 6 to require code developers to publish on their websites:

• draft codes and draft variations; and

• any submissions received from industry participants and members of the

public about the draft code or draft variation.25

1.23 The Explanatory Memorandum states that these requirements 'are intended to improve transparency and accountability in relation to the development of a code'.26

21 Explanatory Memorandum, p. 13 and proposed new s.133A: see item 32, Part 2, Schedule 1.

22 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 3.

23 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 3.

24 Explanatory Memorandum, p. 1.

25 See items 8-11, Part 1, Schedule 1.

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1.24 Further, section 120 of the Telecommunications Act currently requires changes to an industry code to be made by replacing the code. The bill therefore proposes to enable industry codes to be varied following a process similar to that for developing industry codes, rather than requiring them to be wholly replaced.27 The Explanatory Memorandum states that this will 'enable code developers to be more responsive to emerging issues'.28

1.25 A new section 119A would be inserted into Part 6 of the Telecommunications Act to set out the requirements for varying a registered industry code. These requirements would include requiring a code developer to consult with required stakeholders in relation to the code variation.29 More specifically, the ACMA must approve the draft variation if it is satisfied that:

• the code variation provides appropriate community safeguards or deals with matters in an appropriate way (depending on the nature of the matters);

• the code developer has published the draft code variation on its website, invited participants in the relevant industry section and members of the public to make submissions within at least 30 days, considered any such submissions received and published those submissions on its website;

• the Australian Competition and Consumer Commission, the TIO 30 and at least

one consumer representative body or association have been consulted about the draft variation; and

• where the draft variation relates to privacy issues, the Information

Commissioner has been consulted about, and is satisfied with, the draft variation.31

1.26 Where a draft variation is of a 'minor nature', the requirements for consultation with industry and the public will not apply to the code variation approval process. The EM states that this is 'similar to the current arrangements for making minor changes to registered industry codes'.32

1.27 Division 6A of Part 6 of the Telecommunications Act provides a scheme where an industry body or association may seek reimbursement from the ACMA of certain costs incurred by that body or association in developing consumer-related industry codes. The bill proposes to amend Division 6A to extend the application of

26 Explanatory Memorandum, p. 8.

27 See items 12-15, Part 1, Schedule 1.

28 Explanatory Memorandum, p. 9.

29 Proposed paragraphs 119A(1)(e) to 119A(1)(k).

30 Note there is no requirement to consult the TIO where the code variation deals with telemarketing or fax marketing matters: see proposed paragraph 119A(1)(h).

31 Explanatory Memorandum, pp 9-10.

32 Explanatory Memorandum, p. 10. The current arrangements are set out in subsection 120(2) of the Telecommunications Act, which is to be repealed by the bill.

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the reimbursement scheme for developing consumer-related industry codes to variations of consumer-related industry codes.33

Proposed additional amendment to the Telecommunications Act 1.28 Mr Adam Bandt MP (Australian Greens) has put forward an amendment to the bill in the House of Representatives. This amendment would insert a proposed section 61A into the Telecommunications Act to provide that a carrier licence held by Telstra is subject to the condition that any work undertaken by, or at the request of, Telstra or its subsidiaries to produce a Telstra directory must be undertaken in Australia.34 A 'Telstra directory' is defined to include, for example, the White Pages or the Yellow Pages.35

1.29 Telstra is required to produce an alphabetical public number directory annually (the White Pages) as part of its Carrier Licence Conditions.36 Sensis, a Telstra subsidiary, produces the Yellow Pages and White Pages directories. This proposed amendment follows concerns that Sensis is planning to relocate up to 700 jobs to India.37

Amendments to the Do Not Call Register Act

Context of the proposed amendments

1.30 Parts 2 and 2A of the Do Not Call Register Act prohibit making telemarketing calls and sending marketing faxes to a number registered on the Do Not Call Register, subject to certain exceptions. In addition, agreements for the making of telemarketing calls, or the sending of marketing faxes, must require compliance with the Do Not Call Register Act. The ACMA is responsible for the enforcement of the Do Not Call Register Act.

1.31 The amendments to the Do Not Call Register Act were prepared in response to feedback received by the department from the ACMA about the operation of that Act.38 The Explanatory Memorandum explains that the ACMA has:

….encountered difficulty in establishing evidentiary links between the first person and the other party providing the telemarketing and/or fax marketing

33 Explanatory Memorandum, p. 1. See also items 17-30, Part 1, Schedule 1.

34 http://parlinfo.aph.gov.au/parlInfo/download/legislation/amend/r5008_amend_ed944caf-54d4-4fb6-9a34-50d99c93bb63/upload_pdf/13065Bandt.pdf;fileType=application%2Fpdf (accessed 17 May 2013).

35 See proposed subsection 61A(2).

36 Carrier Licence Conditions (Telstra Corporation Limited) Declaration 1997, clause 9.

37 Mr Adam Bandt MP, Greens moves to halt offshoring of Sensis jobs, media release, 9 April 2013, at: http://adam-bandt.greensmps.org.au/content/media-releases/greens-move-halt-offshoring-sensis-jobs-bandt (accessed 17 May 2013) and Peter Cai and Glenda Kwek, Better service offshore: Telstra, Sydney Morning Herald, 21 February 2013, at: http://www.smh.com.au/business/better-service-offshore-telstra-20130221-2esmj.html (accessed 17 May 2013).

38 Explanatory Memorandum, pp 1-2.

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services. This has commonly arisen because agreements between the parties relate to the sale and/or marketing of the first person's goods or services without any specific reference to the means by which the goods or services are to be sold and/or marketed.39

Overview of amendments to the Do Not Call Register Act

1.32 Currently, subsection 11(1) of the Do Not Call Register Act provides that a person must not make, or cause to be made, an unsolicited telemarketing call to an Australian number registered on the Do Not Call Register. Subsection 11(9) extends the meaning of 'cause' to ensure a person remains responsible for the telemarketing calls, even if they have made arrangements for another party to provide the actual telemarketing services. Section 12 of the Do Not Call Register Act prohibits a person from entering into an agreement with another party to undertake telemarketing calls where the agreement contains no express provision that requires the other party to comply with the Do Not Call Register Act.40

1.33 The proposed amendments to the Do Not Call Register Act are designed to capture instances where unsolicited telemarketing calls are likely to be made, or unsolicited marketing faxes are likely to be sent, to fulfil an agreement,41 rather than as a result of a specific undertaking to do so under an agreement.42

1.34 The bill proposes to clarify that there is no requirement for an agreement to expressly provide for the making of telemarketing calls before the first person will be taken to have 'caused' a telemarketing call to be made. This is achieved by amending section 12 and repealing paragraph 11(9)(b) of the Do Not Call Register Act.43 In particular, the amendments provide that it will be sufficient if there is a reasonable likelihood that the other person will give effect to the agreement by making telemarketing calls (or causing employees or agents to make the calls).44

1.35 The bill also proposes to replace the reference in the Do Not Call Register Act to telemarketing calls being 'covered by' the agreement with a requirement that the calls be 'made in order to give effect to' the agreement.45

1.36 Finally, the bill proposes to make similar amendments to equivalent provisions for the sending of unsolicited marketing faxes under sections 12B and 12C of the Do Not Call Register Act.

39 Explanatory Memorandum, p. 6.

40 Explanatory Memorandum, p. 6.

41 Note that the bill refers to a 'contract, arrangement or understanding'.

42 Explanatory Memorandum, p. 6.

43 Items 2-4, Part 1, Schedule 1.

44 Proposed para. 12(1)(a) at item 6, Part 1, Schedule 1.

45 Proposed para. 12(1)(c) at item 4, Part 1, Schedule 1. A definition of 'give effect to' would be inserted into section 4 of the Do Not Call Register Act by item 1 of Part 1 of Schedule 1 of the bill.

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Parliamentary Joint Committee on Human Rights comment on Do Not Call Register Act

1.37 The Parliamentary Joint Committee on Human Rights has functions to examine bills for compatibility with human rights, as defined in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. That committee noted in its report in May 2013 that it intended to write to the Minister for Broadband, Communications and the Digital Economy to seek clarification as to whether the bill limits the right to freedom of expression in the amendments to the Do Not Call Register Act and whether that Act is compatible with the right to freedom of expression.46

1.38 The Senate Standing Committee for the Scrutiny of Bills made no comment on the bill.47

46 Parliament Joint Committee on Human Rights, Sixth report of 2013, May 2013, pp 84-85. 47 Senate Standing Committee for the Scrutiny of Bills, Alert Digest, No. 5, 2013, p. 98.

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Chapter 2 Key issues

2.1 The department submitted that the amendments in the bill are supported by industry and consumer advocates.1 This was reflected in submissions received by the committee during the inquiry.

2.2 This chapter discusses the comments received in relation to each of the three measures contained in the bill.

Reforms to the TIO Scheme 2.3 Submitters were largely supportive of the reforms to the TIO scheme contained in the proposed amendments to the Consumer Protection Act.

2.4 For example, Vodafone acknowledged the fundamental role of the TIO 'in providing an alternative dispute resolution scheme for consumers and industry to resolve complaints on a case-by-case basis'.2 Vodafone stated that it was 'largely comfortable' with the proposed amendments to the TIO scheme. It believed that the changes will 'help to further clarify the TIO's role and the standards by which it should operate'.3

2.5 The Australian Communications Consumer Action Network (ACCAN) was also supportive of the amendments to the TIO scheme, expressing the view that 'they improve the clarity around the TIO and its expected standards of operation'.4

2.6 Both Vodafone and the TIO provided the committee with the comments that they had submitted to the department on the exposure draft of the bill. In those comments, they were both concerned that the Explanatory Memorandum accompanying the bill should make it clear that the intention is for the ministerial standard to reflect the Benchmarks for Industry-based Customer Dispute Resolution Schemes (DIST benchmarks).5 The committee notes that the Explanatory Memorandum does mention the DIST benchmarks in two places. In particular, the Explanatory Memorandum states that:

If the Minister decides to exercise the power to make a legislative instrument under subsection 128(9), he or she must have regard to the

1 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 4.

2 Vodafone Hutchinson Australia, Submission 3, p. 1.

3 Vodafone Hutchinson Australia, Submission 3, p. 1.

4 ACCAN, Submission 2, p. 1.

5 Vodafone Hutchinson Australia, Submission 3, p. 1; Correspondence from the TIO, dated 2 May 2013, p. 2.

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matters set out in new subsection 128(10), which are derived from the Benchmarks for Industry-based Customer Dispute Resolution Schemes.6

2.7 The only other submission to raise any issue with the TIO scheme reforms was from iiNet. While supporting the 'high level principles' behind the amendments, iiNet was concerned that, in making a TIO Determination, the minister is not required to consult with industry, nor have regard to the administrative and financial burden that may be imposed on participants of the TIO scheme.7

2.8 iiNet pointed out that, under proposed subsection 128(11) of the Consumer Protection Act, the Minister is required to consult with the TIO and the ACMA. iiNet argued that, given that the TIO scheme is funded by industry, and a TIO Determination has the potential to have onerous administrative and financial impacts on industry, it would be 'reasonable and appropriate' for the minister to be required to consult with industry before making a TIO determination.8

2.9 iiNet noted that the Telecommunications Act states that parliament's intention is that telecommunications be regulated in a manner that 'does not impose undue financial and administrative burdens on participants in the Australian telecommunications industry'.9 iiNet therefore suggested that the criteria for the minister to consider when determining the TIO scheme standards (as set out in proposed subsection 128(10)) should be expanded. They suggested the criteria include a mandatory requirement for the minister to have regard to the financial and administrative burden on participants in the Australian telecommunications industry.10 iiNet noted that the minister could have regard to this matter under the last criterion; that is, 'such other matters (if any) as the Minister considers relevant'. iiNet were nevertheless concerned that the minister could 'simply ignore the effect that a TIO Determination would have on the financial and administrative burden on participants in the Australian telecommunications industry'.11

2.10 However, the department submitted that:

There are clear boundaries on the determination making power in the proposed amendment:

• before making a determination, the Minister must consult with the ACMA and the TIO;

• when making a determination, the Minister must have regard to the DIST benchmarks, and any other relevant matters; and

6 Explanatory Memorandum, p. 13 and see also p. 12.

7 iiNet, Submission 4, p. 2.

8 iiNet, Submission 4, p. 2.

9 iiNet, Submission 4, p. 2 and see also paragraph 4(b) of the Telecommunications Act.

10 iiNet, Submission 4, p. 4.

11 iiNet, Submission 4, pp 3-4.

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• if a determination is made, it will be disallowable pursuant to section 42 of the Legislative Instruments Act 2003 and subject to scrutiny by the Senate Standing Committee on Regulations and Ordinances.12

2.11 The department submitted that the amendments to the Consumer Protection Act will 'make the TIO scheme more effective and transparent, and compatible with other industry dispute resolution schemes in Australia'.13 The department explained that, at present, the Consumer Protection Act:

…provides no guidance about the expected standards for the operation of the TIO scheme. While the TIO Constitution refers to the DIST benchmarks, there are currently no framework principles set out in legislation or regulation to which the TIO must abide.

This gives rise to a perception that the TIO is not bound by any particular regulatory standards, and there is some uncertainty as to the status and binding nature of the DIST benchmarks in respect to telecommunications services.14

2.12 The department further explained that the proposed amendments will enable the minister to establish framework principles to underpin the TIO's operations which are both consistent with best practice for other external dispute resolution schemes and relevant to the telecommunications industry.15 The department suggested that:

Any such determination by the Minister will provide clarity and reassurance to end users, industry and other stakeholders that the principles in the benchmarks are reflected in the operations of the TIO.16

2.13 The department also submitted that the provisions for statutory review of the TIO scheme will 'strengthen the TIO's public accountability and ensure that the scheme remains in step with public expectations'.17

2.14 Finally, the department advised that, in developing the amendments to reform the TIO scheme, it consulted broadly with industry and consumer groups, including the Communications Alliance and ACCAN. The department submitted that the TIO, industry and consumer groups support the proposed amendments.18

Reform of industry code processes 2.15 Submitters were also supportive of the proposed amendments to the Telecommunications Act to allow for the variation of industry codes of practice. It

12 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 7.

13 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 6.

14 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 6.

15 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 6.

16 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 7.

17 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 7.

18 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 6.

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was thought that the changes would enable industry codes to be more responsive and to adapt to changing circumstances.

2.16 For example, the Communications Alliance considered that the amendments will 'enhance and strengthen the telecommunications self-regulatory framework'.19 In particular, the Communications Alliance considered that the ability to vary codes will:

• allow industry's self-regulatory framework to be more responsive to changing

consumer priorities, industry circumstances and technologies;

• allow industry to amend code provisions that may be ambiguous or confusing

and to correct minor editorial issues without the need to undertake wide public consultation; and

• allow the inclusion of additional consumer protections within codes as

necessary.20

2.17 The Communications Alliance also expressed support for the requirements to publish draft codes and submissions received during code development. The Alliance believed that this will ensure transparency in code development.21

2.18 Finally, the Communications Alliance supported the extension of the reimbursement scheme in the Telecommunications Act, stating that:

It is reasonable to expect that industry bodies will be reimbursed for the costs associated with the variation of industry Codes. Given that the changes to allow the variation of Codes is anticipated to be minor issues, the costs associated should be significantly less than that of a

comprehensive revision.22

2.19 ACCAN similarly welcomed the amendments, suggesting they will improve the flexibility and responsiveness of industry codes. It submitted that:

Allowing for variations to be made to Codes, instead of requiring whole of Code replacement, is a welcome move that will allow for faster incorporation of new consumer protection provisions and enable the consumer protection regime to be more responsive to new issues. We also acknowledge the requirement for consultation with consumers when a draft variation is being proposed.23

2.20 Vodafone was also in favour of the amendments, expressing its view that they will ensure that industry codes 'can be adapted to respond to changes to telecommunication technologies, consumer priorities and industry circumstances, strengthening the Codes to better achieve their objectives into the future'.24

19 Communications Alliance, Submission 1, p. 1.

20 Communications Alliance, Submission 1, p. 2.

21 Communications Alliance, Submission 1, p. 2.

22 Communications Alliance, Submission 1, p. 3.

23 ACCAN, Submission 2, p. 1.

24 Vodafone Hutchinson Australia, Submission 3, p. 1.

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2.21 iiNet agreed that the proposed amendments are 'sensible and pragmatic', and would 'allow industry codes to adapt to changing circumstances in a much more efficient and transparent manner than under the current legislation'.25

2.22 While expressing support for the amendments, the Association for Data-driven Marketing (ADMA) requested clarification on one point. ADMA noted that code developers will be required to publish submissions received about the draft code or draft variations. However, ADMA were concerned that:

The issue of responsibility for material on websites is currently the subject of debate. ADMA requests that the Committee seek clarification that the ACMA has the discretion to provide an exemption from that requirement in the case of submissions which are defamatory, obscene or contain other material which if published may cause harm to the organisation legally responsible for the website.26

2.23 The TIO raised a similar issue in its comments on the exposure draft of the bill.27 The TIO noted that some submissions may contain confidential or sensitive information, and it is not clear that the proposed amendments allow for any exceptions to the publication of such submissions:

The party making the submission may not wish to have parts or all of their submission published for this reason, or alternatively may not provide a submission if a guarantee of confidentiality cannot be given.28

2.24 The department did not address this issue in its submission. In terms of the consultation requirements for draft codes and code variations, the department advised that:

Transparency and accountability are important for stakeholders in the development or review of industry codes. At present, code developers are not required to publish submissions to a code development process.

Consultation by the Department identified that while code developers have not previously published submissions they received during consultation, as a matter of course, code developers do provide submissions to interested parties on request.

There is a strong view amongst stakeholders that requiring code developers to publish submissions will improve the transparency and accountability of the code development and review processes.29

2.25 The department further noted that the existing code development process requires codes to be wholly replaced. There is currently no existing mechanism for variations of codes. The department explained that:

25 iiNet, Submission 4, p. 1.

26 ADMA, Submission 6, p. 2.

27 as provided to the TIO by the department in February 2013.

28 Correspondence from the TIO, dated 2 May 2013, p. 2.

29 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 5.

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This places an administrative burden on code developers and reduces the responsiveness of the code process. It has also led some consumer stakeholders to criticise the length of time taken for industry codes to react to changes in technology and the telecommunications market.30

2.26 The department submitted that the proposed amendments will allow codes to be varied through a streamlined process, which is 'particularly important in the telecommunications industry where changes in market structure and technology can be rapid'.31

2.27 In relation to the extension of the reimbursement scheme for variation of industry codes, the department advised that both the key parties involved in industry code development, ACMA and the Communications Alliance, supported the

amendments to extend the reimbursement scheme. The department further submitted that 'the proposed extension of the reimbursement scheme will continue to only be available for refundable costs approved by the ACMA regarding consumer related industry codes'.32

2.28 Finally, the department noted that it had consulted broadly with industry and consumer groups in developing the proposed amendments to the code development process, and these groups 'were generally supportive of the proposed amendments'.33

Do Not Call Register Act amendments 2.29 As outlined in Chapter 1, the Do Not Call Register Act amendments are a response to problems encountered by the ACMA, which is responsible for enforcing the Do Not Call Register Act. The department submitted that ACMA had advised that:

…it has encountered difficulties in establishing evidentiary links between the first person (the telemarketer or fax marketer) and the other party providing the telemarketing or fax marketing services.

This has commonly arisen because agreements between the parties relating to the marketing of the first person’s goods or services without any specific reference to the means by which the goods or services are to be marketed.34

2.30 The department continued:

The proposed amendments will enhance the operational efficiency of the DNCR Act by allowing the ACMA to more readily establish an evidentiary link between a telemarketer or fax marketer and a third party providing telemarketing or fax marketing services on their behalf.35

30 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 4.

31 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 4.

32 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 5.

33 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 4.

34 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 8.

35 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 8.

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2.31 Submitters that commented on the amendments to the Do Not Call Register Act were supportive. For example, ACCAN welcomed the amendment, which it thought would allow the ACMA to 'perform more rigorous enforcement including where telemarketing calls are made by firms acting on behalf of clients'.36

2.32 ADMA also supported the amendment, stating an understanding that it:

…aims to correct a potential failure of the legislation to ensure that a company cannot evade responsibility for compliance with the DNCR, using third parties (located overseas) to carry out marketing activities on their behalf in Australia.37

2.33 ADMA further submitted that the amendment 'will ensure that all marketers using this channel of marketing communication do so on an equal basis'.38

2.34 The department advised that it had approached the ADMA for comment on the proposed amendment, with ADMA advising 'that it does not oppose the proposed amendment'.39

Amendments proposed by Mr Adam Bandt MP 2.35 The committee received no evidence on the amendments to the bill proposed by Mr Adam Bandt MP, as outlined in Chapter 1. These amendments would require Telstra, and its subsidiaries, to perform all of the work relating to the production of the White and Yellow Pages, both print and online, in Australia.

2.36 Telstra's carrier licence currently requires them to produce the White Pages and make them accessible to the public, generally as a printed directory. They are not required under their carrier license to produce either the Yellow Pages, or the online version of the White or Yellow Pages.

Committee view 2.37 In relation to the amendments proposed by Mr Adam Bandt MP, the concern for local jobs is shared by the committee. However, in the committee's view, the Bandt amendments are inconsistent with the scheme of this bill and ought to be subject of a stand-alone bill directed to the purpose proposed by the amendments.

2.38 The committee acknowledges that submitters to this inquiry were supportive of all aspects of the amendments proposed by the bill. Most submitters considered the amendments to be an improvement on the current legislative regimes for industry codes, the Telecommunications Industry Ombudsman scheme and the Do Not Call Register.

2.39 In particular, submitters believed that reforms to the TIO scheme would provide greater clarity about the TIO's role and its expected standards of operation.

36 ACCAN, Submission 2, p. 1.

37 ADMA, Submission 6, p. 1.

38 ADMA, Submission 6, p. 1.

39 Department of Broadband, Communications and the Digital Economy, Submission 5, p. 8.

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Submitters also welcomed the increased transparency and responsiveness provided by the amendments to industry code processes under the Telecommunications Act.

2.40 Only one concern was raised in relation to the amendments to the Telecommunications Act to allow for the variation of industry codes of practice. The issue was whether code developers would need to publish submissions that are offensive or defamatory, or that contained confidential or sensitive information. On the face of the bill, it seems that code developers would be obliged to publish such submissions. The committee therefore suggests that the department consider

amendments to the bill to clarify that code developers are not required to publish submissions containing comments or information that is offensive, defamatory or confidential.

2.41 One submitter also raised a concern in relation to the changes to the TIO scheme. This concern was that the minister, in making a TIO determination, is not required to consult with industry, nor have regard to the administrative and financial burden that may be imposed on participants of the TIO scheme.

2.42 However, the committee notes that the minister is required to consult with the TIO and the ACMA. The committee further notes that the minister is not precluded from consulting industry, nor from considering other relevant matters. Under proposed subsection 128(10), the minister can have regard to 'such other matters' as the minister considers relevant. The committee considers that the impact on industry, if any, would be a relevant matter that the minister would be likely to consider.

2.43 The committee also recognises the department's evidence that there are a number of other safeguards in the legislation. In particular, the minister's determination is disallowable under the Legislative Instruments Act 2003. Finally, the

committee notes that the TIO scheme will be reviewed three years after the commencement of the new provisions. As such, any problems with the TIO scheme that may arise in terms of administrative and financial burden on industry participants could be considered during these reviews.

2.44 The committee welcomes this bill as an improvement to the existing telecommunications regulatory framework. The committee believes it will help to strengthen consumer safeguards in telecommunications legislation, while providing certainty and clarity for industry. Given the strong support for the amendments, the committee recommends that the bill be passed.

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Recommendation 1

2.45 The committee recommends that the Department of Broadband, Communications and the Digital Economy consider amending the bill to clarify that, under Part 6 of the Telecommunications Act 1997, code developers are not required to publish submissions containing comments or information that is offensive, defamatory or confidential.

Recommendation 2

2.46 Subject to the above recommendation, the committee recommends that the bill be passed.

Senator Doug Ca

meron

Chair

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Australian Greens - Additional comments

1.1 The Greens support the bill and the committee's report, but have a different view on the important amendments moved by Mr Bandt discussed by the Committee at 2.35 and 2.36.

1.2 The Parliament has an opportunity to protect hundreds of local jobs by supporting these amendments.

1.3 Following privatisation, obligations were imposed on Telstra to produce a national directory (the White Pages) and to make it available to phone users.

1.4 Sensis, a wholly owned subsidiary of Telstra, now produces the White Pages, as well as the Yellow Pages, and performs a number of other functions for Telstra. These directories are available in print form and online.

1.5 Sensis has indicated that it intends to cut over 600 jobs and move most of the work associated with the online directories overseas. This includes customer service work as well as work associated with the design and printing of the directories.

1.6 The proposed amendments would require work associated with the online and print directories to be performed locally.

1.7 The Greens believe in protecting local jobs.

1.8 Telstra exists because of the investment of the Australian public over many generations in a national telecommunications carrier.

1.9 The privatisation of Telstra came with strings attached: Telstra was required to continue with certain minimum levels of social obligation to the Australian public. Keeping jobs onshore should be part of those obligations.

1.10 The amendments would not extend the legal obligations on Telstra to produce directories. The effect would simply be to preserve the status quo and the hundreds of jobs that come with it.

1.11 The Greens do not accept that a separate private members' bill is required and note the absence of any advice from the Clerk to this effect. The Greens' amendments are in order.

1.12 The old parties, Labor and Liberal, talk loudly about protecting local jobs. Here's a chance for them to do something about it.

1.13 A job in graphic design or in a call centre should be worth as much as a job making a car or digging up ore. Governments spend billions supporting the latter, yet seem unwilling to extend the same help to those in the services sector.

1.14 The simple move of requiring onshore production would - at no cost to the Government - protect hundreds of jobs.

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1.15 The Greens amendments should be supported by the Parliament.

Senator Scott Ludla

m

Senator for Western Australia

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Appendix 1

Submissions and correspondence

Submissions

1 Communications Alliance

2 Australian Communications Consumer Action Network (ACCAN)

3 Vodafone Hutchison Australia Pty Limited

4 iiNet

5 Department of Broadband, Communications and the Digital Economy

6 Association for data-driven marketing and advertising (ADMA)

Correspondence

Letter from the Telecommunications Industry Ombudsman, dated 2 May 2013

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168

The Senate

Environment and Communications

Legislation Committee

Water Efficiency Labelling and Standards (Registration Fees) Bill 2013 [Provisions]

Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013 [Provisions]

May 2013

169

© Commonwealth of Australia 2013

ISBN 978-1-74229-835-1

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

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Committee membership

Committee members Senator Doug Cameron (ALP, NSW) (Chair) Senator Simon Birmingham (LP, SA) (Deputy Chair) Senator Catryna Bilyk (ALP, TAS) Senator Bridget McKenzie (NATS, VIC) Senator the Hon. Lisa Singh (ALP, TAS) Senator Larissa Waters (AG, QLD)

Committee secretariat

Mr Tim Watling, Committee Secretary Ms Toni Matulick, Committee Secretary Ms Bonnie Allan, Principal Research Officer Mrs Dianne Warhurst, Administrative Officer Ms Ruth Edwards, Administrative Officer

Committee address PO Box 6100 Parliament House Canberra ACT 2600 Tel: 02 6277 3526 Fax: 02 6277 5818 Email: ec.sen@aph.gov.au Internet: www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=ec_ctte/ index.htm

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v

Table of Contents

Committee membership ................................................................................... iii

Chapter 1.............................................................................................................. 1

Introduction .............................................................................................................. 1

Reference ................................................................................................................ 1

Conduct of inquiry .................................................................................................. 1

Background and purpose of the bill ....................................................................... 1

Provisions of the bill ............................................................................................... 2

Provisions of the amendment bill ........................................................................... 3

Human Rights implications .................................................................................... 4

Scrutiny of Bills Committee comment ................................................................... 4

Chapter 2.............................................................................................................. 5

Issues .......................................................................................................................... 5

Conclusion .............................................................................................................. 8

Coalition Senators Additional Comments ........................................................ 9

Appendix 1 ......................................................................................................... 11

Submissions ............................................................................................................. 11

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Chapter 1 Introduction

Reference 1.1 On 14 March 2013, the Senate referred the Water Efficiency Labelling and Standards (Registration Fees) Bill 2013 [Provisons] (the bill) and the Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013 [Provisons] (the amendment bill) to the Environment and Communications Legislation Committee for inquiry and report by 17 June 2013.

Conduct of inquiry 1.2 The committee advertised the inquiry in The Australian newspaper and called for submissions by 11 April 2013. Details of the inquiry were also made available on the committee's website.

1.3 The committee contacted a number of organisations inviting submissions to the inquiry. Submissions were received from 9 individuals and organisations, as listed in Appendix 1.

Background and purpose of the bill 1.1 The Explanatory Memorandum (EM) to the bill provides that the Water Efficiency Labelling and Standards (Registration Fees) Bill 2013 (the bill) would furnish legislative power to recover costs of the administration of the Water Efficiency Labelling and Standards (WELS) scheme through taxes, in the form of fees for applying for registration.1

1.2 The WELS scheme was established by the Water Efficiency Labelling and Standards Act 2005 (Cth) (WELS Act) and corresponding state and territory legislation. The objectives of the WELS Act are to:

• conserve water supplies by reducing water consumption;

• provide information for purchasers of water-use and water-saving products;

and

• promote the adoption of efficient and effective water-use and water-saving

technologies.

1.3 The scheme aims to address these objectives by requiring registration and labelling of specified products to show their water efficiency for the purposes of supply, and setting minimum water efficiency standards which products must meet if they are to be supplied.

1.4 The committee is also examining the Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013 (the amendment bill) which

1 Explanatory Memorandum, Water Efficiency Labelling and Standards (Registration Fees) Bill 2013, p. 1.

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would make consequential amendments to the WELS Act.2 Together, these bills would provide the legal basis for implementation of the November 2011 decision by the COAG Standing Council on Environment and Water that the scheme should recover 80 per cent of its costs from registrants. This decision reiterated the intention of governments at the scheme’s inception.3

1.5 The bill would enable the minister to set fees for applications for registration under the WELS scheme, taking into account all costs of the scheme. In the absence of this bill and the consequential amendments to the WELS Act, the scheme would be limited to charging a fee for service, which may only take into account scheme costs associated with product registration, but not other costs such as standard setting, compliance monitoring, enforcement or communications.4

Provisions of the bill 1.6 The bill provides that the minister may, by legislative instrument, specify one or more registration fees per application for registration.5 The EM provides that, at the present time, there is no intention to charge multiple fees, but that this subclause has been included to allow future flexibility in the design of the scheme.6

1.7 As the scheme is administered by the Commonwealth on behalf of the States and Territories, and each contributes funding to the scheme, the Act places consultation obligations on the minister before specifying registration fees. The minister would be required to provide a draft of the instrument (specifying the registration fees) to each participating state or territory (subclause 7(4)). If the minister receives comments from the states or territories, he or she would be able to take them into account only to the extent that they are related to the cost of administering the WELS scheme (as provided in subclause 8(2)).7

1.8 Subclause 8(1) would provide that a legislative instrument made under subclause 7(1) to specify registration fees may do so by nominating an amount as the fee or by providing a formula for calculating the amount of the fee.

1.9 Subclause 8(2) would provide that before setting the fee the minister must be satisfied that the fee is not intended to recover more than 100 per cent of the costs of administering the scheme. It is proposed that the fee would be intended to recover 80

2 Explanatory Memorandum, Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013, p. 1.

3 Department of Sustainability, Environment, Water, Population and Communities, Submission 9, p. 1.

4 Department of Sustainability, Environment, Water, Population and Communities, Submission 9, p. 2.

5 Subclause 7(3).

6 Explanatory Memorandum, Water Efficiency Labelling and Standards (Registration Fees) Bill 2013, p. 5.

7 Explanatory Memorandum, Water Efficiency Labelling and Standards (Registration Fees) Bill 2013, p. 5.

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per cent of the costs of the administering the scheme. As governments may wish to change this policy in the future, this clause provides flexibility as to the extent of cost recovery which is to be achieved, so long as the fee is not intended to raise revenue for purposes which are not costs of the scheme.

1.10 Additionally, as the cost of administering corresponding state and territory laws is included in the costs of administering the scheme, the bill would provide that the minister may, when setting the fee, have regard to relevant decisions made by the participating jurisdictions in relation to the budget for the scheme. For example, the minister may consider the agreements on the annual cost of the scheme made by ministers in relation to each three-year WELS strategic plan.8

Provisions of the amendment bill 1.11 The amendment bill would preserve the ability of the minister to charge application fees under the existing provisions of the WELS Act.9 However, the EM makes clear the Government's intention that a new regime of charges (via an instrument authorised under the bill) would replace the existing WELS Act charges. This is intended to provide future flexibility in the design of the WELS registration arrangements.10

1.12 The amendment bill adds to the matters the minister may include in the legislative instrument made under section 26 of the WELS Act.11 These additional matters may require or permit the WELS Regulator to refuse, or refuse to consider, an application where the fee imposed under the Water Efficiency Labelling and Standards (Registration Fees) Act 2013 (assuming it receives Royal Assent) has not been paid, or is not paid within the specified time. Such requirements would ensure that registration fees are paid prior to applications being accepted, ensuring that applicants for registration may not benefit from product registration without having paid for it.

1.13 Item 3 of the amendment bill also provides that the legislative instrument promulgated under section 26 of the WELS Act may also require or permit the Regulator to waive or refund, in whole or part, a fee imposed by the Water Efficiency Labelling and Standards (Registration Fees) Act 2013. It is intended that any matters so included in a legislative instrument made under section 26 would be included for the purposes of assisting the regulator to administer the registration fees in a fair and efficient manner. It is not intended that these matters would contribute to the registration fees being administered in an inconsistent or arbitrary manner. The scheme formulated would specify any considerations or circumstances under which a waiver or refund of the application fee would be considered by the regulator.

8 Explanatory Memorandum, Water Efficiency Labelling and Standards (Registration Fees) Bill 2013, p. 5.

9 Schedule 1, Item 2.

10 Explanatory Memorandum, Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013, p. 3.

11 Item 3.

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Examples of instances where such rules might assist the appropriate administration of the WELS scheme are provided in the EM.12

1.14 Other matters addressed in the amendment bill include the resolution of inconsistencies between schemes formulated under the WELS Act and state and territory legislation; and the requirement fees received under the proposed Act to be paid into a Special Account.13

Human Rights implications 1.15 The Explanatory Memoranda for each bill reports that they have been assessed against the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, and that neither engages any of the applicable rights or freedoms.14

Scrutiny of Bills Committee comment 1.16 While the Senate Standing Committee for the Scrutiny of Bills noted that it is preferable for fees to be set in primary legislation, they considered that sufficient constraints were imposed by the bill to recommend that:

In light of the explanation for the approach contained in the explanatory memorandum and the existence of some constraints on the setting of the fees, the committee makes no further comment and leaves the question of whether the proposed approach is appropriate to the consideration of the Senate as a whole.15

12 Explanatory Memorandum, Water Efficiency Labelling and Standards Amendment (Registration Fees) Bill 2013, p. 4.

13 Item 3.

14 Explanatory Memorandum, p. 2 (in each case).

15 Alert Digest, No. 5, 2013, p. 105.

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Chapter 2 Issues

2.1 Submissions to the inquiry focussed broadly on the potential for the bills to impact on costs to industry, as well as consequential effects on price, competition and choice for consumers. A number of submitters focussed on the effectiveness of the WELS scheme in general, rather than on the specific provisions contained in the bills before the committee.

2.2 These included the Master Plumbers Australia, as well as the Master Plumbers Association of Queensland. These bodies did not make specific comment on the bills, but expressed in-principle support for the objectives of the Act. They expressed frustration at what they saw as the Act's failure to achieve its stated objectives due to a number of factors, including the relationship between WELS and other schemes, codes and bodies, and a lack of general awareness and understanding of WELS in the plumbing profession and the general community.1

2.3 This view was broadly supported by Mr Keith Burbridge, who submitted that:

Since the introduction of WELS to the Water use in the Australian market several issues have become clear, and need to be addressed along with the very obvious point of why WELS was formed and what purpose and function it was meant to have and was that intention/purpose achieved.2

2.4 Mr Burbridge went on to cite the certification of 'testing approval bodies', and the costs associated with compliance, as a major impost on industry, especially smaller players. Mr Philip Doust also took issue with increased compliance costs.3

2.5 Conversely, other submitters considered that the scheme has been a success:

[The Australian Water Association (AWA)] recognises the significant contribution that the WELS Scheme has made in achieving the stated objectives since its establishment in 2005. The scheme was a key/valuable part of the success of the government funded rebates during the Millennium drought. The WELS scheme continues to be relevant and important, even though the rebates have been wound back. The Productivity Commission recognised the schemes characteristics of a public good in its 2011 report on Australia’s Urban water Sector stating that: 'The WELS scheme has been successful at providing the public with an objective set of information with which to make informed decisions, and should continue.'4

1 Master Plumbers Association of Queensland, Submission 2; Master Plumbers Australia, Submission 5, p. 1.

2 Mr Keith Burbridge, Submission 8, p. 1.

3 Mr Keith Burbridge, Submission 8, p. 1; Mr Philip Doust, Submission 7, p. 1.

4 Australian Water Association, Submission 4, p. 1.

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2.6 While supporting the stated intention of the bills to recover 80 per cent of the WELS costs, the AWA expressed concern that the fee structure may generate a higher proportion of the overall administration costs than envisaged, and that:

…an unintended consequence of setting a registration fee too high and creating a barrier, may be inflated product costs as manufacturers pass on the fees. This, in turn could lead to reduced competition and less consumer choice…AWA recommends that a review of the impact of the revised fee structure be conducted to ensure that any unintended consequences are taken into consideration, protecting the interests of manufacturers, suppliers/distributers and consumers.5

2.7 In a similar vein, the Plumbing Products Industry Group was supportive of the WELS scheme but expressed concern that the bills would allow the Minister to set the cost recovery percentage in the future 'without reference to either Parliament or Industry', and that:

The Explanatory Memorandum indicates the current intended position is 80%, but there are no safeguards to require agreement before changing this position. [We have] a number of…concerns relating to changes being imposed on industry without the WELS personnel being cognisant of the impact of the changes or understanding the industry with enough depth to

see implications which would arise from their independent decisions.6

2.8 the Australian Industry Group (Ai Group) was not supportive of the bills, arguing that:

Imposition on manufacturers and suppliers of regulated equipment of increased costs in the form of higher registration fees will necessarily result in these costs being passed through to purchasers of regulated equipment via increased equipment costs. At the margins, some consumers will be deterred from or delay purchasing new equipment because of the higher costs. New equipment will tend to be more efficient, in part because of the requirements imposed by the WELS Scheme. Because of this marginal effect, there will be an impact on efficiency, even though purchasers of new equipment enjoy the direct benefits of efficiency. Manufacturers and suppliers may also be deterred from introducing new, more efficient equipment due to the increased costs of bringing such products to market.7

2.9 Rather, the Ai Group called for the administration costs to be recovered, at least partly, from water utilities, on the basis that:

If the Scheme administration costs were to be partly recovered from water utilities, those costs would be passed on to all water users (including broader industry). Less cost to bring products to market will broaden access to newer, more efficient equipment. Ai Group further notes that water utilities and their customers are a major beneficiary from the WELS

5 Australian Water Association, Submission 4, p. 1.

6 Plumbing Products Industry Group, Submission 6, pp 1-2.

7 Australian Industry Group, Submission 3, p. 2.

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Scheme, given that utility infrastructure costs will be permanently offset by reduced consumption due to enhanced water efficiency, and these savings will benefit all water users within the utility area of service. Ai Group contends that passing WELS Scheme administration costs to water users more generally would align costs with these broader benefits and avoid a disincentive for the use of newer, more efficient products.8

2.10 Ai Group also argued that the Explanatory Memoranda disclose a misunderstanding of the real costs of the WELS scheme, and that:

Ai Group research conducted amongst member businesses has identified that industry currently pays a much higher percentage of the entire Scheme costs than 80 per cent by virtue of the fact that the costing of the Scheme does not factor in the full costs impact on industry of involvement in the WELS Scheme. The costs to industry of involvement in the scheme are estimated at in excess of $7 million per year. This can be broken down into tasks per product:

• product design and in-house manufacturer testing (engineering specification to WELS requirements);

• testing (administration and laboratory testing time, checking test reports. A shower test is around $2000 and mixer around $1000 );

• quality assurance (ongoing production sample in-house testing);

• marketing resources (catalogue and price list information, label printing and application);

• product registration onto the WELS database; and

• sales team market surveillance to determine if 'run-out' products are still in the market in order to maintain, yet minimise registrations.9

2.11 While supportive of the WELS scheme, the Water Services Association of Australia (WSAA) would prefer that it be fully government funded, submitting that:

WSAA advises that the impacts on customers through implementation of these Bills could include limited competition and less choice for customers if the fees prove prohibitive for smaller manufacturers [and/or] higher prices for water efficient appliances if manufacturers choose to ‘pass through’ costs to consumers.10

2.12 However, the WSAA also submitted that:

WSAA understands that upon reading the two Bills this is purely an administrative process to confirm arrangements following a Determination made on the 15 January 2013 (the WELS Determination) to adjust the registration fees so that 80% of the cost of administering the WELS Scheme is recovered from product registration fees…which WSAA and its members

8 Australian Industry Group, Submission 3, pp 2-3.

9 Australian Industry Group, Submission 3, p. 3.

10 Water Services Association of Australia, Submission 1, p. 2.

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had the opportunity to contribute to through public consultation sessions and providing advice to the National WELS Advisory Group.

Conclusion 2.13 While not strictly a matter for this inquiry, the committee notes that most submitters consider the WELS scheme to be well conceived, and on the whole, successful. Where concerns have been raised about duplication of testing and certification processes, the committee would hope that they are taken into account by the Government in assessing and adjusting the scheme going forward.

2.14 More directly relevant for this inquiry are concerns about increased compliance costs, and the potential for the Minister to increase the proportion of costs that are met by industry.

2.15 In relation to the decision to recover 80 per cent of costs, the committee notes the Department's evidence that it undertook a substantial program of consultations as part of the review process and subsequently, including consulting on implementation options. The committee was informed that, in response to a January discussion paper released by the Department in early 2012, 119 submissions were received from manufacturers, retailers, industry and consumer groups, and that forums were held in Melbourne, Sydney and Brisbane.11 The committee is satisfied that, while not all stakeholders may agree with the decision to move to 80 per cent cost recovery, adequate consultation about the change did occur.

2.16 In relation to concerns about changes to the level of cost recovery in the future, the committee notes that the bill requires the Minister to supply a draft of any amending instrument to each participating state and territory before any change can take place.12

Recommendation

2.17 The committee recommends that the Senate pass the bills.

Senator Doug Cameron Chair

11 Department of Sustainability, Environment, Water, Population and Communities, Submission 9, pp 2-3.

12 Water Efficiency Labelling and Standards (Registration Fees) Bill 2013, subsection 7(4).

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Coalition Senators Additional Comments 1.1 The Coalition is committed to the Water Efficiency Labelling and Standards (WELS) scheme, indeed it was under the Coalition that this world-first reform was established with the passing of the Water Efficiency Labelling and Standards Act 2005. We support the need to conserve water supplies by reducing water consumption, to provide information to purchasers of water-use and water-saving products and to promote the adoption of efficient and effective water-use and water-saving technologies.

1.2 While always mindful of the importance of minimising costs to consumers and industry, the Coalition believes it is reasonable that part of the accreditation cost to ensure the accurate promotion of water saving technologies is recovered from the sector.

1.3 The bills seek to set registration fees to be collected from manufacturers and suppliers of regulated equipment, however the Australian Industry Group (Ai Group) believes that:

If the Scheme administration costs were to be partly recovered from water utilities, those costs would be passed on to all water users (including broader industry). Less cost to bring products to market will broaden access to newer, more efficient equipment. Ai Group further notes that water utilities and their customers are a major beneficiary from the WELS Scheme given that utility infrastructure costs will be permanently offset by reduced consumption due to enhanced water efficiency, and these savings will benefit all water users within the utility area of service. Ai Group contends that passing WELS Scheme administration costs to water users more generally would align costs with these broader benefits and avoid a disincentive for the use of newer, more efficient products.1

1.4 The Coalition shares the concern of Ai Group that:

Imposition on manufacturers and suppliers of regulated equipment of increased costs in the form of higher registration fees will necessarily result in these costs being passed through to purchasers of regulated equipment via increased equipment costs. At the margins, some consumers will be deterred from or delay purchasing new equipment because of the higher costs. New equipment will tend to be more efficient, in part because of the requirements imposed by the WELS Scheme. Because of this marginal effect, there will be an impact on efficiency, even though purchasers of new equipment enjoy the direct benefits of efficiency. Manufacturers and suppliers may also be deterred from introducing new, more efficient equipment due to the increased costs of bringing such products to market.2

1 Australian Industry Group, Submission 3.

2 Australian Industry Group, Submission 3.

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1.5 The Coalition is also mindful of the concerns of the Water Services Association of Australia regarding the potential impact of fees on smaller manufacturers and subsequently consumers.3

1.6 Whether by the proposed methodology or by the method recommended by the Ai Group, the costs of this scheme are passed on to consumers, either consumers of new water products or consumers of water generally.

1.7 As the benefits of this scheme are shared broadly, Coalition Senators believe it is preferable for those costs to be shared broadly rather than solely adding to the costs of newer and most likely more efficient water products. Accordingly, we recommend that governments consider whether fees would be better collected to cover part of the accreditation costs of the WELS scheme from water utilities.

1.8 The Coalition also shares the concerns of the Australia Water Association (AWA) that, if fees are imposed on manufacturers, there may be unintended consequences.

…an unintended consequence of setting a registration fee too high and creating a barrier, may be inflated product costs as manufacturers pass on the fees. This, in turn could lead to reduced competition and less consumer choice…AWA recommends that a review of the impact of the revised fee structure be conducted to ensure that any unintended consequences are taken into consideration, protecting the interests of manufacturers, suppliers/distributers and consumers.4

1.9 Therefore the Coalition recommends that the Bills be amended to provide for a review of the registration fees if the Bills are not amended to collect part of the accreditation costs of the WELS scheme from water utilities.

Recommendation 1

1.10 Coalition Senators recommend that government consider whether fees to be collected to cover part of the accreditation costs of the WELS scheme would be better collected from water utilities.

Recommendation 2

1.11 Coalition Senators recommend that the Bills be amended to provide for a review of the registration fees if the Bills are not amended to collect part of the accreditation costs of the WELS scheme from water utilities.

Senator Simon Birmingham Senator Bridget McKenzie Deputy Chair Senator for Victoria

Senator for South Australia

3 Water Services Association of Australia, Submission 1.

4 Australian Water Association, Submission 4.

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Appendix 1 Submissions

1 Water Services Association of Australia

2 Master Plumbers' Association of Queensland

3 The Australian Industry Group

4 Australian Water Association

5 Master Plumbers Australia Limited

6 PPI Group

7 Doust Plumbing Products

8 Mr Keith Burbridge, Gro Agencies Pty Ltd

9 Department of Sustainability, Environment, Water, Population and Communities

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The Senate

Finance and Public Administration

Legislation Committee

Citizen Initiated Referendum Bill 2013

June 2013

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ii

© Commonwealth of Australia 2013

ISBN 978-1-74229-843-6

Senate Finance and Pu

blic Administration Committee Secretariat:

Ms Christine McDonald (Secretary)

Mr David Sullivan (Director of Research)

Dr Jon Bell (Principal Research Officer)

Ms Margaret Cahill (Research Officer)

Ms Marina Katic (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: fpa.sen@aph.gov.au Internet: www.aph.gov.au/senate_fpa

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

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MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair ALP, Tasmania

Senator Scott Ryan, Deputy Chair LP, Victoria

Senator Richard Di Natale AG, Victoria

Senator the Hon. John Faulkner ALP, New South Wales

Senator Arthur Sinodinos LP, New South Wales

Senator the Hon. Ursula Stephens ALP, New South Wales

Participating Members for this inquiry

Senator John Madigan DLP, Victoria

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TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

Citizen Initiated Referendum Bill 2013 ............................................................ 1

Reference ................................................................................................................ 1

Conduct of the inquiry ............................................................................................ 1

Overview of the bill

................................................................................................ 1

Provisions of the bill ............................................................................................... 2

Background ............................................................................................................. 3

Issues ................................

...................................................................................... 3

Committee view .................................................................................................... 10

Dissenting Report by Senator John Madigan ................................................ 13

APPENDIX 1 ..................................................................................................... 17

Submissions received by the Committee .............................................................. 17

APPENDIX 2 ..................................................................................................... 19

Public Hearing ........................................................................................................ 19

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Citizen Initiated Referendum Bill 2013 Reference 1.1 On 14 March 2013, on the recommendation of the Senate Selection of Bills Committee, the Senate referred the Citizen Initiated Referendum Bill 2013 (the bill) to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 24 June 2013. The reasons for referral were for the committee to consider whether:

 Citizens' Initiated Referendum (CIR) promotes greater openness and accountability in public decision-making;

 laws instituted as a result of a CIR are more clearly derived from the popular expression of the people's will;

 government authority flows from the people and is based upon their consent;

 citizens in a democracy have the responsibility to participate in the political

system; and

 the Inter Parliamentary Union's call on member states to strengthen democracy through constitutional instruments including the citizen's right to initiate legislation.1

Conduct of the inquiry 1.2 The committee invited submissions from interested organisations and individuals, and government bodies. The inquiry was advertised in the Australian on 27 March 2013 and on the committee's website.

1.3 The committee received 28 submissions. A list of individuals and organisations which made public submissions to the inquiry is at Appendix 1. The committee held one public hearing in Melbourne on 29 April 2013. A list of the witnesses who gave evidence at the public hearing is available at Appendix 2. Submissions and the Hansard transcript of evidence may be accessed through the committee's website at www.aph.gov.au/senate_fpa.

1.4 The committee thanks those organisations and individuals who made submissions and gave evidence at the public hearing.

Overview of the bill 1.5 The private senator's bill proposes a new Act to be cited as the Citizen Initiated Referendum Act 2013. The purpose of the CIR Bill is to enable the citizens of Australia to initiate the introduction of legislation into Parliament that provides for the holding of a referendum to alter the Constitution.2 The Explanatory Memorandum (EM) outlines the reasons for the bill:

1 Senate Selection of Bills Committee, Report No. 3 of 2013, Appendix 2, 14 March 2013.

2 Citizen Initiated Referendum Bill 2013, Explanatory Memorandum, p. 1.

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The cores of the Democratic principle are that it is each citizen’s right (and duty) to participate in the political system and each citizen’s right to be heard. This Bill takes a small, long overdue, step along that path.3

1.6 The EM notes that Citizen Initiated Referenda (CIR) had been contemplated previously, including prior to federation of the colonies. The EM also summarises how CIR could operate within constitutional requirements and with several steps and criteria to govern their operation:

This Bill expands and strengthens Australia's democracy in an extremely tempered fashion. Once an Elector's application for a referendum to take place has been approved by the Electoral Commission, the application will be written into a Bill, which will then be introduced into Parliament by the Minister. Once the Bill passes one or both Houses of Parliament, as required by section 128 of the Constitution, the Governor-General will then be able to issue a writ for a referendum to take place. This Bill allows for full compliance with the current requirements in the Constitution for undertaking a referendum to amend the Constitution.4

1.7 The EM predicts that the bill would have limited financial impacts and asserts that it is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Provisions of the bill 1.8 The EM of the CIR Bill provides a guide to the parts of the proposed Act:

 Part 2 sets out the process that must be followed and processes which must be

met in order for CIR to be held. This includes registration with, and review by, the Electoral Commission; signatures of at least one per cent of Australian electors; and checks of signatures by the Electoral Commission; and

 Part 3 sets out the rules that apply to holding a CIR. The Minister is

responsible for introducing a bill to Parliament to initiate legislation to have a referendum to amend the Constitution. Once the bill has been passed by an absolute majority of one House, or both Houses, of the Parliament, in accordance with section 128 of the Constitution, the Governor-General may issue a writ for the CIR. A CIR may only be held once every four years.5

1.9 In terms of the arrangements for conducting referenda, the CIR Bill provides that the current Referendum (Machinery Provisions) Act 1984, would apply and that the Governor-General may make regulations to ensure the necessary or convenient functioning of the Act.6

3 Explanatory Memorandum, p. 1.

4 Explanatory Memorandum, p. 1.

5 Explanatory Memorandum, pp 2-4.

6 Explanatory Memorandum, pp 4, 5.

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Background 1.10 CIR are distinguished from other referendums initiated by parliaments or governments in that the referendums would occur at the request of a required number of electors. Parliaments or governments may have little or no choice in the matter, depending on the nature of the arrangements for conducting CIR.7

1.11 Proponents of CIR argue that law-making power has been captured by entrenched political parties and that CIR would reform the political process by giving a wide group of people an opportunity to participate in the political process. Three main types of CIR have been proposed previously in Australia:

1. the direct initiative, under which voters can put a proposal to referendum without any intervention by Parliament;

2. the indirect initiative, by which Parliament is given a specified time in which to enact the measure proposed by the citizen initiative before it is submitted to a referendum; and

3. the voters’ veto, also known as the legislative referendum, under which voters may petition for a referendum to repeal an existing law which has been passed by Parliament (Walker 1987, 11-14).8

1.12 It was noted in 2008 that bills for CIR had been introduced in most Australian Parliaments, including several proposals in the Australian Parliament, but none had been passed. In 1987, CIR was considered and rejected by the Constitutional Commission. Reasons suggested for the failure of past CIR bills include a lack of political commitment to the idea, no common agreement on the appropriate form of CIR, and failure to gain popular support. CIR has been used in other countries, including Switzerland, Italy, New Zealand and over 20 states in the United States, most notably in California.9

Issues 1.13 The bill received qualified support from a number of private citizens, organisations and academics, with the exception of Electoral Reform Australia which is opposed to any form of CIR.10 The Gilbert and Tobin Centre of Public Law, while generally not favourable to CIR, saw merit in the bill which it described as offering a 'hybrid model':

7 Harry Evans, Citizen Initiated Referendums: Adjunct or Antithesis of Constitutional Government?, Proceedings of the Sixth Conference on The Samuel Griffith Society, November 1995, Chapter 9.

8 George Williams and Geraldine Chin, 'The Failure of Citizen's Initiated Referenda Proposals in Australia: New Directions for Popular Participation?', Australian Journal of Political Science, Vol. 35, No. 1, February 2008, pp 28-29, 36.

9 George Williams and Geraldine Chin, 'The Failure of Citizen's Initiated Referenda Proposals in Australia: New Directions for Popular Participation?', Australian Journal of Political Science, Vol. 35, No. 1, February 2008, pp 29-30, 38-40.

10 Mr Stephen Lesslie, Vice President, Electoral Reform Australia, Proof Committee Hansard, 29 April 2013, p. 6.

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It retains the deliberative aspects of parliament while also giving people the ability to initiate what may or may not be a referendum. And, personally, we support that, because we think it is very important to broaden out the scope for the community to put issues on the agenda, on the table, for constitutional discussion while also retaining the role of parliament to sift through those suggestions in order to determine which ones ultimately should go to a referendum.11

1.14 There was agreement that the bill, because it requires the Parliament to approve any proposal before a constitutional amendment would be put to a popular vote, contains an important safety valve. It was suggested that the elements of representative government that promote openness and accountability are likely to be preserved and possibly enhanced. This is because the Parliament would need to provide open and accountable justifications for preventing a proposal from proceeding to referendum. The key issue here is that the mechanism described in the bill is fundamentally different to what is usually contemplated by conventional CIR processes where citizens and not elected representatives initiate change.12

1.15 There was also support for the bill on the basis that CIR provide an avenue to reverse what is sometimes referred to as the 'decline of Parliament', caused by the rise of

political parties and their vested interests, and the rising level of cynicism and political disengagement with the political process among the general populace. CIR Australia Inc, for example, submitted:

We do need to do something to counteract the decline of Parliament brought on by the ascent of political parties…Parliament today very rarely acts as the body we all hoped it would be. Political power now resides with the currently dominant faction of the currently dominant political party. This means more and more power in fewer and fewer hands.13

1.16 Notwithstanding the qualified support for the bill's objectives contained in submissions, the committee noted a number of concerns about CIR processes in general and aspects of the bill in particular that relate to qualifying requirements, cost implications, special interests and technical deficiencies.

1.17 These areas of concern are addressed in turn.

Qualifying requirements

1.18 A number of submissions suggested an alteration to the main qualifying requirement for an applicant to successfully initiate a process. The bill stipulates that if a proposal is registered by the Electoral Commissioner, the applicant must lodge with the Electoral Commission a document containing the signatures of one per cent of the total of all electors. In evidence to the committee, the President of CIR Australia Inc argued that three per cent of all electors would be a better figure for a proposal to amend the Constitution. The United States has CIR to amend general

11 Professor George Williams, Proof Committee Hansard, 29 April 2013, p. 10.

12 Professor George Williams, Gilbert and Tobin Centre of Public Law, Submission 18, pp 2-3.

13 CIR Australia Inc, Submission 7, p. 1; see also Australia Protectionist Party, Submission 11.

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legislation in 24 of the 50 states, many of which have a two per cent threshold of electors. Anything less than three per cent threshold to amend the Constitution, it was argued, is too low:

We are concerned that you might get too many requests and that will spoil the whole thrust of the bill, if too many things come before parliament. The parliament might get a bit angry with that, so three per cent might make it a bit better.14

Cost implications

1.19 The bill in its current form stipulates that should the requirements for a CIR be met, it would be held on the first Saturday in October 2016 and subsequently every four years on the same date. The committee was told that such a process would be needlessly expensive to run because referendums and federal elections would be out of kilter. It would be more cost effective to hold them both at the same time. One submitter argued that referendums and federal elections held concurrently would enhance citizen participation and minimise logistical difficulties and cost to taxpayers.15

1.20 The Australian Electoral Commission (AEC) also commented on costs associated with the mechanism proposed in the bill and stated that it did not agree that implementation of the bill would have limited financial impact. In particular, the AEC argued that costs would be incurred in relation to processing applications, including verification, and development of appropriate systems. The AEC also identified elements in the bill which would require ongoing funding.16

Special interests

1.21 The committee noted the concern that was raised in evidence relating to the CIR process in the Unites States, and particularly in California, which empowers lobby groups and other special interest with the resources to gather the sizeable

number of petitions required to proceed with a referendum proposal. It was put to the committee that there have been occasions in California where organisations have decided not to invest money in directly lobbying members of parliament but in gathering the signatures for a proposal to be put on a CIR ballot paper. The Gilbert and Tobin Centre of Public Law submitted:

…organised and well-funded special interest groups frequently dominate conventional CIR processes. Individuals and less wealthy community groups, by contrast, experience significant logistical difficulties in getting a CIR proposal off the ground. Indeed, this has been the experience in California, where signature-gathering firms are engaged (at price) to

14 Mr Ronald Evans, President, CIR Australia Inc., Proof Committee Hansard, 29 April 2013, p. 1.

15 Liberal Democratic Party, Submission 6, p. 2.

16 Australian Electoral Commission, Submission 27, p. 3.

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assemble the necessary signatures required to initiate a referendum in that state.17

1.22 This corporatisation of the CIR process can undermine the genuine expression of community attitudes. Professor Williams told the committee:

It does mean that it provides an avenue for strong, well-financed interests, particularly insurance companies, in California to take advantage of the process. It is where I think the claims of it being a popular democratic process unfortunately do break down and too often you see these other interests hijacking these processes.18

1.23 The concern was echoed by Professor Graeme Orr and Dr Ron Levy who submitted:

The likely impact of this bill will not be rational constitutional reform. Rather, it would permit particular segments of the population (especially those marshalled by value and interest groups, whether civic, union or religious movements, or activist groups like Get Up!) to use it as a specialist petitioning process to pressure governments and politicians to get their issues onto the parliamentary agenda.19

1.24 Dr Levy contended that a bill of this nature carries the risk to the holistic and deliberative approach that representative and cabinet government brings to law-making. It is possible that the negotiated process of law making where bills are subject to parliamentary scrutiny would be bypassed in favour of financial self-interest of attention-seeking by minority interests:

The potential problem with citizen initiated reform is…essentially being in isolation outside of the parliamentary process [which] means we are no longer necessarily taking account of the larger complex diversity of public interest in Australia. So we might simply end up legislating for one set of interests without adequately taking considering the costs or any countervailing interests. You could call this legislating out of context.20

Matters raised by the Australian Electoral Commission

1.25 The committee received a submission from the AEC which addressed a number of aspects of the bill.

The Register

1.26 The AEC noted that in clause 6 of the bill, there is reference to the register, applications being on an approved form and accompanied by a prescribed fee which in some (as yet specified) circumstances may be refunded. The AEC went on to comment that it is not apparent what the purpose of the register is or how it is to be

17 Professor George Williams, Gilbert and Tobin Centre of Public Law, Submission 18, p. 3.

18 Professor George Williams, Proof Committee Hansard, 29 April 2013, p. 11.

19 Professor Graeme Orr and Dr Ron Levy, Submission 19, p. 1.

20 Dr Ron Levy, Proof Committee Hansard, 29 April 2013, p. 13.

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assessed and maintained and the bill does not provide details concerning the application fee including how its quantum is to be established.21

Role of the Electoral Commission and Electoral Commissioner

1.27 Clauses 7 and 8 provide a role for the Electoral Commissioner in reviewing an application to register a proposal for a referendum to determine if it contains a proposal to amend the Constitution. While acknowledging that there may merit in the assessment being conducted by an independent arbiter, the AEC stated that it is not apparent why it should be undertaken by the AEC, let alone the Electoral Commissioner. Further, a proposal to amend the Constitution would inevitably involve matters of significant legal complexity and require expertise in constitutional law. Neither the AEC nor the Electoral Commissioner have such expertise and 'more notably, neither are responsible for advising the Government or the Parliament on constitutional matters'. The AEC suggested that this falls within the responsibility of the Attorney-General's Department.

1.28 The AEC recommended that 'sections 7 and 8 of the Bill should be reviewed to establish whether or not it is appropriate to require the Electoral Commissioner, and indeed the AEC itself, to decide whether or not an application submitted contains a proposal to amend the Constitution'.

1.29 Other clauses in the bill provide for a role for the AEC or the Electoral Commissioner to be responsible for certain functions. This would require the AEC and the Electoral Commissioner to perform functions other than those which relate directly to the conduct of the referendum event itself. The AEC commented that there was a need to consider the appropriateness of such a role.22

Impact of an election on proposed timeframes

1.30 The bill proposes a timeframe for the AEC to make a decision about an application for a proposal for a referendum. The AEC commented that, in relation to processes proposed to be conducted by the AEC, it is possible that relevant timeframes may not be met should they overlap with the conduct of an election. The AEC stated that, should the AEC remain responsible for certain activities under the bill, consideration should be given to inserting a provision which suspends the obligation of the AEC to meet these timeframes from the issue to the return of the writ for a Senate or House of Representatives election. Such a provision already exists in the Electoral Act in relation to applications for the registration of a political party between the day of the issue of the writ and the day of the return of the writ for a Senate or House of Representatives election.23

21 Australian Electoral Commission, Submission 27, pp 1-2.

22 Australian Electoral Commission, Submission 27, p. 2.

23 Australian Electoral Commission, Submission 27, p. 4.

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Technical aspects

1.31 The Gilbert and Tobin Centre of Public Law submission identified a number of technical shortcomings with the bill, some of which relate to issues that are not adequately covered while others relate to issues that are not addressed at all. The main issues identified are as follows:

 the bill does not set out or limit the subject matters on which a referendum

proposal could be made. It would be possible for proposals to be raised in areas that are the exclusive domain of the executive, such as foreign policy and the armed forces, and for which informed public debate would be impossible;

 the bill does not specify the formal criteria required of the initial proposal or

require proposals to demonstrate awareness of their constitutional significance or impact on other constitutional provisions. The bill also does not address the drafting process for a proposal once it has been accepted by the Electoral Commission but before it has been introduced and considered by the Parliament;

 the bill, at section 12, does not specify which minister would introduce a referendum proposal into the Parliament, and it remains unclear whether any member or senator other than a minister may introduce a proposal; and

 the bill does not specify whether electronic or handwritten signatures meet the

registration requirements, which has implications for the proposal's accessibility especially in geographically remote areas.24

1.32 The committee was told that these technical deficiencies are not superficial and have the potential to significantly affect the way in which the bill impacts upon democratic processes in Australia. Professor George Williams argued that it is for this reason that further consideration should be given to these issues before the bill proceeds any further:

…significant questions are left unanswered, such as the nature of the involvement of the initiators in the drafting process and the mechanisms for resolving any disputes that might arise. The answers to these questions have the potential to greatly impact on whether the final proposal that is put to referendum accurately reflects the will of the people who have initiated it.25

1.33 The AEC also pointed to a number of technical considerations:

 Clause 6: the bill does not contain a requirement for an elector to demonstrate

any form of popular support for the application to the AEC to register a proposal for a referendum to alter the Constitution. This is in contrast to the approach in relation to the registration of parties and nomination of candidates;

24 Professor George Williams, Gilbert and Tobin Centre of Public Law, Submission 18, pp 5-7.

25 Ms Shipra Chordia, Proof Committee Hansard, 29 April 2013, p. 10.

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 Clause 8: subclauses 8(1) and 8(2) should be redrafted to ensure a clear basis

for the acceptance or rejection of applications to register a proposal. The nature of the opportunity given to applicants pursuant to subclause 8(3) to be heard before the Electoral Commissioner can reject an application is unclear;

 Clause 9: it is unclear as to the basis for the inclusion of the time period for the provision of statements of reasons following the making of a decision under clause 8;

 Clause 10: the AEC stated that it might be desirable that the document

referred to in this clause is in an approved form so as to provide greater certainty that signatories are provided with consistent information concerning the proposal, the information they are required to provide, and notification of how that information may be used. The clause appears to impose an obligation on the AEC to establish that the document contained signatures from at least one per cent of electors at the time of lodgement. The AEC stated that it may take time to ascertain the number of electors on the role on a given day because of processing requirements. It therefore may be desirable that the one per cent threshold is linked to the total number of electors

enrolled in each Division, based on the determination by the Electoral Commissioner (under subsection 58(1) of the Electoral Act) at the end of the month prior to the month in which lodgement occurs;

 Clause 11: the method of verification of signatures contained in the bill would require significant allocation or diversion of AEC resources. Further, the mere provision of a signature would not enable the AEC to undertake any verification that a person was an elector. Although an address is required for the signatory, the AEC would need to contact the elector at that address to verify that the signature was validly obtained. This would involve considerable time and expense. If the AEC finds that signatures were not validly obtained, pursuant to clause 12, the proposal must be rejected. There appears to be no mechanism by which an applicant may vary or resubmit the document containing signatures;

 Clause 12: the clause does not make clear which minister is to cause the proposed law that will alter the Constitution in accordance with the proposal to be introduced into Parliament; and

 Clause 14: the AEC drew the committee's attention to the existing

requirements in section 128 of the Constitution, that proposed laws to change the Constitution passed by each House of Parliament shall be submitted to the vote 'not less than two nor more than six months after its passage through both Houses'. The AEC noted that bill appears to provide that a CIR proposal could not be submitted to a vote earlier than one year from the day the proposal to change the Constitution passed Parliament, or any more than five years from the day the proposal to change the Constitution passed Parliament.26

26 Australian Electoral Commission, Submission 27, pp 4-9.

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Committee view 1.34 The committee accepts that the bill in its current form is a very modest proposal that would in no way threaten Australia's robust constitutional system. Indeed it accepts the view that the bill is not even a clear illustration of how CIR operate in other countries such as the United States, and in particular in California. The bill would only provide for popular initiation of debate in the Parliament that may or may not lead to a referendum. According to Professor Williams, the bill is not proposing a true CIR, but rather a citizen initiated debate in the Parliament which may lead to a referendum.27

1.35 While the committee is generally supportive of the view that citizens in a democracy have a responsibility to participate in the political system, it does not believe CIR are the most effective way to encourage active participation by citizens in the political process. At best, the process proposed in the bill would promote only a very narrow form of political participation. The committee is of the view that proponents of CIR overstate the potential benefits to society of direct democracy and underplay the stability and robustness of the system of representative democracy.

1.36 Nor does the committee accept the view that laws derived from CIR are more clearly the popular expression of the will of the people than those derived from elected representative government. The committee notes the argument provided in evidence by the Gilbert and Tobin Centre of Public Law that CIR mechanisms cut against some of the strengths of representative democracy where citizens choose their elected representative to make decisions and to act on their behalf and in the best interests of the nation.

1.37 While the bill represents a modest proposal for CIR, the committee is of the view that bill may compromise the integrity of the current method of proposing referenda in Australia by encouraging citizens into signing petitions in the mistaken belief they will automatically lead to a referendum. The committee also accepts the argument that complex social and economic issues within the political process should not be reduced to simple yes or no answers, especially if they were to hamper successive governments facing unforseen political and economic circumstances.

1.38 The committee accepts that while the bill may avoid some of the pitfalls of conventional CIR processes by deliberately retaining Parliament's central role in approving citizen-initiated proposals, it nonetheless involves significant risk. In particular, the committee cannot ignore the fact that the CIR process contained in the bill may provide an unwelcome platform for extreme and divisive political agendas, engage parliamentarians in protracted debates over issues which have little chance of success, and result in policy debate in Australia being hijacked by well-resourced professional lobby groups. These potential shortcomings, which have long been associated with CIR processes in the United States, particularly in California, are of concern to the committee. When combined with the bill's numerous technical shortcomings, the committee concludes that it is unable to support this bill.

27 Professor George Williams, Proof Committee Hansard, 29 April 2013, p. 11.

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1.39 The committee also notes the comments made by Australian Electoral Commission particularly in relation to the role of the AEC and the Electoral Commissioner envisaged by the bill as well as the costs that it would impose on the AEC.

Recommendation 1

1.40 The committee recommends that the bill not be passed.

Senator Helen Polley Chair

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Dissenting Report by Senator John Madigan

1.1 While the committee's report raises a number of reasonable concerns it fails to address the basic principle of the right of citizens to have a direct voice in decision making.

1.2 This dissenting report agrees with some statements made by the committee but disagrees with its final recommendation.

1.3 The committee makes reference to the fact that bills for CIR have been raised in a number of Australian parliaments but that none have passed. It states that among the reasons for their failure was a lack of political will. In this I agree, but it is this very lack of political will that drives the call for a CIR to be introduced. The desire by many Australians to have a voice in the decisions being made by parliament is strengthened by the fact that the 'political will that dominates parliament prefers the population to have as little voice in parliamentary matters as possible. It is in fact the intention of political parties to maintain as much control of the decision making as possible that drives the recurring call for CIR.

1.4 As stated by the committee the Bill received 'qualified support' from a number of citizens, organisations and academics and specifically addresses what is probably the most important difference between this Bill and the failed bills of the past. This Bill differs in that it does not take the final decision for a referendum out of the hands of the Parliament. Instead it suggests a partnership between the people and their parliament. While many would expect a call for a CIR to be a desire to bypass the parliament and force the holding of a referendum based solely on the calling of an accepted percentage of the population this Bill clearly states that once the signatures of an accepted percentage of the population have been received the minister must put a bill before parliament. It is then up to the parliament to decide whether to accept the bill or not.

1.5 An aspect of the Bill that received a lot of attention, rightly so, was the percentage of electors required to sign a call for a referendum. The Bill gives a nominal but substantial figure of 1% of the current voting population. On current AEC figures this would require about 146,000 signatures to be collected; certainly not an easy task. It is my opinion that anything that drew the support of at least 1% of the Australian population could be seen as an issue of considerable national interest.

1.6 While the figure of 1% is naturally open for amendment any percentage decided upon should not be so high as to prohibit a group of concerned citizens from being able to obtain the required number of signatures within the set 12 month period. Percentages ranging from 1% to 5% have been touted for CIR in the past. One suggestion in a previous inquiry mentioned a 10% figure (approximately 1,460,000 signatures) which frankly would be impossible to collect in a 12 month period without an army at your disposal.

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1.7 Another aspect that drew concern was the suggestion that any CIR that met with the criteria to have a bill put before parliament and which was subsequently passed by parliament would be held on a set date every 4 years. This was specifically put into the Bill to exclude, where possible, the politicising of any CIR for electoral purposes. Generally the comments in the submissions do not support this idea but rather than remove it from the Bill I would prefer to see the addition of a discretionary power by which the Minister could choose to hold it at the next Federal election, should that be earlier than the pre-established date. It should also be remembered that CIRs would not necessarily be held every 4 years and would only incur this cost once a bill for a CIR was passed by parliament.

1.8 The argument that specific 'interest groups, whether civic, union, religious' etc… could use the CIR to 'pressure governments and politicians' is spurious. At present, parliamentarians and politicians are bombarded by interest groups; lobbyists etc… who claim support from exorbitant percentages of the population and often quote rubbery figures from polling done in a less than impartial setting. A CIR would in fact reduce that pressure by guaranteeing that there was a substantial percentage of the population who supported the proposal rather than an estimated and often imaginary percentage suggested by a lobbyist. A document that has been physically signed by one or two per cent of the population carries substantially more weight and merit than a suggested figure of 5 or 10%.

1.9 The suggestions of technical shortcomings with the Bill refer to areas such as intrusion into the exclusive domain of the executive such as the defence forces, the process by which the proposal would be drafted and whether electronic signatures would be accepted.

1.10 As with other legislation, any bill put by the minister would be scrutinised by parliamentary committee in the same way as this present Bill has been.

1.11 The report states it 'remains unclear whether any member or senator other than a minister may introduce a proposal'. However the Bill clearly states 'the Minister' which excludes not ministerial parliamentarians from introducing a proposal.

1.12 I agree that the Bill does appear to have left open the definition of 'signature'. The intention of the Bill was that written signatures, not electronic signatures would be collected and as such the Bill could be amended to clarify this matter.

1.13 While the AEC points out that there is no requirement for an elector to demonstrate any popular support before registering a proposal the intention of this Bill is to give an elector the opportunity to demonstrate substantial support by setting a period of 12 months within which to supply a document of support to the AEC that contains the signatures of 1% of the population within 12 months.

1.14 I note that the committee accepts that this Bill is modest in its proposal and would not threaten 'Australia's robust Constitutional system'. The committee understands that rather than introducing a bill that would assault our parliamentary system this Bill simply provides for 'popular initiation of debate in Parliament that may or may not lead to a referendum'. In this I agree with the committee.

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1.15 This Bill, rather than remove the powers of the Parliament to hold a referendum, is aimed at involving the electors more closely with their elected representatives in the parliamentary process and in the structure of their constitution. Increasing the involvement of the electors in the democratic process should be the aim of any truly representative parliament.

Recommendation

1.16 That this Bill be passed, subject to amendments correcting aspects relating to the collection of signatures and a discretionary power for the Minister to hold a CIR to coincide with a Federal election.

Senator John Madigan

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APPENDIX 1

Submissions received by the Committee

1 Mr William Mildren

2 Lt Col Charles Mollison

3 Dr Geoff Mosley

4 Mrs Susan Lamplugh

5 Mr Gary Patton

6 Liberal Democratic Party

7 CIR Australia

8 Name Withheld

9 Name Withheld

10 Mr Richard Adams

11 Australian Protectionist Party

12 Mr Luke Beck

13 Ms Beverley Hutchison

14 Mr Robert Farmer

15 Mr Max Bolte

16 Electoral Reform Australia

17 Queensland Council for Civil Liberties

18 Professor George Williams

19 Professor Graeme Orr

20 Mr Daniel Black

21 Mr Andrew Oliver

22 Ms Susan Beveridge

23 Confidential

24 Confidential

25 Confidential

26 Mr John Bates

27 Australian Electoral Commission

28 Name Withheld

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APPENDIX 2 Public Hearing

Monday, 29 April 2013

Mantra Hotel, 222 Russell Street, Melbourne

Witnesses

CIR Australia (via teleconference)

Mr Ronald Evans, President

Electoral Reform Australia (via teleconference)

Mr Stephen Lesslie, Vice President

Gilbert and Tobin Centre of Public Law (via teleconference)

Professor George Williams

Ms Shipra Chordia

Dr Ron Levy (via teleconference)

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The Senate

Finance and Public Administration

Legislation Committee

Health Insurance Amendment (Medicare Funding for Certain Types of Abortion) Bill 2013

June 2013

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ii

© Commonwealth of Australia 2013

ISBN 978-1-74229-845-0

Senate Finance and Pu

blic Administration Committee Secretariat:

Ms Christine McDonald (Secretary)

Dr Jon Bell (Principal Research Officer)

Ms Margaret Cahill (Research Officer)

Ms Marina Katic (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: fpa.sen@aph.gov.au Internet: www.aph.gov.au/senate_fpa

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

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MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair ALP, Tasmania

Senator Scott Ryan, Deputy Chair LP, Victoria

Senator Richard Di Natale AG, Victoria

Senator the Hon. John Faulkner ALP, New South Wales

Senator Arthur Sinodinos LP, New South Wales

Senator the Hon. Ursula Stephens ALP, New South Wales

Participating Members for this inquiry

Senator John Madigan DLP, Victoria

Senator Lee Rhiannon AG, New South Wales

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TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

Chapter 1.............................................................................................................. 1

Introduction ............................................................................................................ 1

Conduct of the inquiry ............................................................................................ 1

Overview and provisions of

the Bill ....................................................................... 2

Background provided in the Explanatory Memorandum ....................................... 2

Chapter 2.............................................................................................................. 5

Evidence in support of the Bill ................................................................................ 5

Introduction ............................................................................................................ 5

The unacceptability to Australians of the use of Medicare funding for gender selection abortions ................................................................................ 5

The prevalence of gender selective abortion .......................................................... 7

The use of Medicare funded gender

selection abortions for the purpose

of family balancing ............................................................................................... 10

Support for United Nations Campaigns ............................................................... 14

Concern from medical associations ...................................................................... 15

Chapter 3............................................................................................................ 17

Evidence not supportive of the Bill ....................................................................... 17

Introduction .......................................................................................................... 17

The ineffectiveness of the Bill .............................................................................. 17

The unacceptability to Australians of the use of Medicare funding for gender selection abortions .............................................................................. 20

The prevalence of gender selection by abortion ................................................... 21

The use of Medicare funded gender

selection abortions for the purpose

of family balancing ............................................................................................... 23

Support for United Nations campaigns ................................................................ 24

Concern from

medical associations ...................................................................... 27

Additional Comments by the Australian Greens ........................................... 29

Additional Comments by Senator John Madigan ......................................... 31

APPENDIX 1 ..................................................................................................... 37

Submissions and Form Letters received by the Committee ............................... 37

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Chapter 1

Introduction 1.1 On 21 March 2013, on the recommendation of the Senate Selection of Bills Committee, the Senate referred the Health Insurance Amendment (Medicare Funding

for Certain Types of Abortion) Bill 2013 (the Bill) to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 25 June 2013.1 The reasons for referral were for the committee to consider:

 The unacceptability to Australians of the use of Medicare funding for the purpose of gender selection abortions;

 The prevalence of gender selection - with preference for a male child - amongst some ethnic groups present in Australia and the recourse to Medicare funded abortions to terminate female children;

 The use of Medicare funded gender selection abortions for the purpose of

'family-balancing';

 Support for campaigns by United Nations agencies to end the discriminatory practice of gender selection through implementing disincentives for gender-selection abortions'; and

 Concern from medical associations in first world countries about the practice

of gender-selection abortion, viz. Canada, USA, UK.2

Conduct of the inquiry 1.2 The committee acknowledges that there is a wider debate within the Australian community about abortion. Notwithstanding this debate, the committee has confined its deliberations to the evidence provided about the Bill. In addition, the committee has not made a recommendation in relation to the Bill; the committee has undertaken its inquiry into the Bill in order to provide information for senators on the arguments received about the proposed amendment to Medicare funding.

1.3 The committee invited submissions from interested organisations and individuals, and government bodies. The inquiry was also advertised on the committee's website and in the Australian newspaper.

1.4 The committee received 919 submissions and 239 form letters. A list of individuals and organisations which made public submissions to the inquiry is at Appendix 1. Submissions may be accessed through the committee's website at www.aph.gov.au/senate_fpa. The committee thanks those organisations and the large number of individuals who made submissions.

1 Journals of the Senate, No. 143, 21 March 2013, pp 3864-3865.

2 Senate Selection of Bills Committee, Report No. 4 of 2013, Appendix 8, 21 March 2013.

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Overview and provisions of the Bill 1.5 The Bill is a private Senator's bill that seeks to remove Medicare funding for abortions procured on the basis of gender.3

1.6 Schedule 1 of the Bill proposes to amend the Health Insurance Act 1973 by inserting proposed new section 17A. Proposed new subsection 17A(1) provides that a Medicare benefit is not payable if:

 a medical practitioner performs a medically induced termination on a pregnant

woman, or provides a service that relates to or is connected with performing such a medically induced termination (proposed new paragraph 17A(1)(a)); and

 the termination is carried out solely because of the gender of the foetus (proposed new paragraph 17A(1)(b)).4

1.7 The Explanatory Memorandum (EM) suggests that the Bill would have limited financial impacts. The EM also states that the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.5

Background provided in the Explanatory Memorandum 1.8 The United Nations (UN) has drawn attention to the practice of gender selective abortion. It is noted in the EM that the 1994 Cairo Population Conference identified that gender selective abortions occur in countries such as China, India, Afghanistan, Pakistan, Taiwan, South Korea, Bangladesh, Azerbaijan, and Armenia. At the Cairo Conference a range of commitments were made to 'take the necessary measures to prevent infanticide, prenatal sex selection, trafficking in girl children'. The EM also notes that the UN Population Fund (UNFPA) has urged governments to fulfil the commitments made.6

1.9 In 2011, an interagency statement entitled 'Preventing gender-biased sex selection' was issued by UN agencies and the World Health Organisation (WHO). The statement:

…reaffirms the commitment of United Nations agencies to encourage and support efforts by States, international and national organizations, civil society and communities to uphold the rights of girls and women and to address the multiple manifestations of gender discrimination including the problem of imbalanced sex ratios caused by sex selection. It thus seeks to highlight the public health and human rights dimensions and implications of

3 Explanatory Memorandum, p. 1.

4 Explanatory Memorandum, p. 6.

5 Explanatory Memorandum, p. 3.

6 Explanatory Memorandum, p. 1.

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the problem and to provide recommendations on how best to take effective action.7

1.10 The EM notes that determining the sex of a foetus may be necessary in the pre-natal diagnosing of certain gender specific disorders. If such a disorder is diagnosed, a decision may be taken to terminate the pregnancy rather than continue the pregnancy which may result in a child with a debilitating disorder. The EM goes on to state that:

The policy intent of this Bill is to provide that a termination of a pregnancy on the grounds of a gender specific disorder, and not solely for reasons of sex selection, would not fall within the ambit of this Bill.8

7 The Office of the United Nations High Commissioner for Human Rights (OHCHR); the UNFPA; the United Nations Children's Fund (UNICEF); the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women); and the WHO, Preventing gender-biased sex selection, 2011, p. vi.

8 Explanatory Memorandum, p. 1.

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Chapter 2

Evidence in support of the Bill Introduction 2.1 This chapter covers evidence supporting the Bill and is structured to address each of the terms of reference. Submitters supported the Bill on the grounds of the lack of support for gender selective abortion, the associated discrimination by gender, the infringement of human rights of unborn children, particularly female children, and problems arising from imbalanced sex ratios caused by gender selective abortion.1

2.2 Submitters argued that the occurrence of gender selective abortion in other countries, and in immigrant communities in other western countries, means there is a reasonable likelihood that it also occurs in Australia. Mrs Rita Joseph submitted that the lack of data from the Medicare funding is central to the gender selective abortion debate in Australia. Mrs Joseph explained that this lack of data prevents the determination of the prevalence of gender selective abortion in Australia:

…Medicare funding is provided indiscriminately, without any legal restrictions or requirements for medical establishments to ascertain and record those terminations that are being carried out on the grounds of gender 'preference'. ('Gender preference' of course is a euphemism for lethal discrimination against an unborn child on the grounds that it has been prenatally determined that the child is of the 'wrong gender'.)2

The unacceptability to Australians of the use of Medicare funding for gender selection abortions 2.3 Submitters supporting the Bill argued that studies and surveys conducted in Australia had identified the unacceptability of gender selective abortion.

Surveys and studies

2.4 The results of one survey cited3 in submissions suggested that although there was a high percentage of respondents strongly in favour of abortion generally, that group considered that gender selective abortion was morally unacceptable (85 per cent) and should be illegal (82 per cent). The research also showed that of the group that was 'somewhat pro-abortion', the majority were opposed to sex selection abortions being legal, holding the view that the practice is morally unacceptable.4

1 Ms Jane Munro, Submission 178, p. 1; Australia Christian Lobby, Submission 186, p. 1; Dr Maged Peter Mansour, Mrs Lily Mansour, Mr John Mansour, Submission 174, pp 2-3.

2 Rita Joseph, Submission 69, p. 10.

3 This survey was undertaken for the Southern Cross Bioethics Institute by the Adelaide Sexton Marketing Group.

4 Australian Family Association, Submission 195, p. 2; Salt Shakers, Submission 161, p. 3.

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2.5 A February 2013 Galaxy poll of 300 Tasmanians cited by submitters showed that 92 per cent of respondents disapproved of gender selective abortion.5 A further study noted in evidence was the December 2010 study released as part of the Australian Survey of Social Attitudes. This showed that 80 per cent of respondents disapprove of gender selective abortion.6 Information from other surveys and studies also showed that gender selective abortions are not considered acceptable to Australians:

 a survey by the Sexton Marketing Group in 2007, found that only seven per

cent of Australians approved of abortion as a way to choose a child's sex;7

 the Australian Federation of Right to Life Association's survey found that 82 per cent of respondents did not support late term (after 20 weeks) abortions for non-medical reasons;8 and

 an Adelaide Now media survey also found that 82 per cent of Australians felt

that parents should not be given the right to choose the gender of their baby.9

2.6 Submitters concluded that the above study and survey findings indicate that gender selective abortions are unacceptable to most Australians. Submitters therefore argued that, Medicare funding of gender selective abortions would also be unacceptable to most Australians.10

Providing a clear signal regarding gender selective abortion

2.7 Submitters supporting the Bill considered that for as long as Medicare funding is available for gender selective abortion, it gives the practice 'legitimacy'.11 It was argued that gender selective abortion is discriminatory in essence and hence should not be allowed:

Medicare funding of gender-selective abortion is an inappropriate way of spending the money of taxpayers. The Medicare system is set aside specially for health reasons. Funding of sex-selective abortions can reinforce a value judgement based on antiquated prejudices, which devalue

5 Australian Federation for the Family, Submission 151, p. 1; NSW Right to Life, Submission 185, p. 1; Reformed Resources, Submission 173, p. 2; Australian Christian Lobby, Submission 186, p. 1; Catholic Women's League Australia Inc. Submission 853, p. 2.

6 Australian Family Association, Submission 195, p. 2; The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 2; Australian Catholic Bishops Conference, Submission 187, p. 3; Catholic Women's League Australia Inc. Submission 853, p. 2.

7 Real Talk Australia, Submission 165, pp 1-2.

8 Introfish Inc., Submission 136, p. 2.

9 Life Network Australia, Submission 246, p. 1.

10 Australian Family Association, Submission 195, p. 2; Salt Shakers Submission 161, p. 3.

11 Doctors for the Family, Submission 133, p. 2.

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the life of female babies based on inheritance and property ownership laws and the ability to work and support the family.12

2.8 Submitters contended that it was important for the Bill to be passed, in order to send a clear signal that gender selective abortions were not acceptable and should be discouraged.13

2.9 There were mixed views on whether banning Medicare funding would be effective in substantially deterring gender selective abortion.14 It was argued however that even if the Bill did not have a direct practical effect on the number of gender selective abortions, it was important to provide a clear signal that the practice is unacceptable.15

2.10 Submitters argued that the Bill's symbolic importance will shape community attitudes, and serve notice on anyone who seeks to pressure a woman toward a gender selective abortion.16 It was also noted that the ban set out in the Bill should be part of a broader package of measures to address gender selective abortion.17

The prevalence of gender selective abortion 2.11 This section addresses evidence from submitters supporting the Bill on the second term of reference for the inquiry-the prevalence of gender selection, with preference for a male child, amongst some ethnic groups present in Australia and the recourse to Medicare funded abortions to terminate female children.

Prevalence in other countries

2.12 Many submitters drew attention to large numbers of girls and women (up to 200 million) that are 'missing' from the world population due to gender selective abortion.18 For example, it was noted that in China, the sex ratio is estimated to be 1.06.19 Although this is within the 'normal' range there are still over 30 million more men than women in China. In India, the sex ratio is 112.20 Despite being illegal in

12 Dr Maged Peter Mansour, Mrs Lily Mansour, Mr John Mansour, Submission 174, p. 2.

13 The Office for Justice and Peace, Catholic Archdiocese of Melbourne, Submission 173, pp 1, 2; Doctors for the Family, Submission, 133, p. 2; Australian Catholic Bishops Conference, Submission 187, p. 4.

14 Knights of the Southern Cross (NSW) Inc, Submission 194, p. 1; Australian Catholic Bishops Conference, Submission 187, p. 4.

15 Australian Catholic Bishops Conference, Submission 187, p. 4.

16 Social Issues Executive, Anglican Diocese of Sydney, Submission 170, p. 1.

17 Australian Catholic Bishops Conference, Submission 187, p. 3.

18 National Alliance of Christian Leaders, Submission 14, p. 1; See also Catholic Women's League of Victoria and Wagga Wagga Inc., Submission 134, p. 1; Women's Forum Australia, Submission 169, p. 2; Wilberforce Foundation, Submission 177, p. 1; Dad 4 Kids, Submission 180, p. 1; Ms Melinda Tankard Reist, Submission 181, p. 1.

19 Australia Christian Lobby, Submission 186, p. 2.

20 Jane Munro, Submission 178, p. 1; Endeavour Forum Inc., Submission 135, p. 3.

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both India and China, the sex ratios at birth in these countries suggest the occurrence of gender selection.21 Other places where gender selection appears to be affecting the sex ration at birth include Vietnam, Pakistan, Taiwan and Southeast Europe.22

Occurrence in western countries

2.13 Submitters also pointed to evidence for gender selective abortion in western countries.23 Research in England and Wales shows that among India-born women, the sex ratio at birth for all third children was 114.4 boys per 100 girls for births between 2000 and 2005.24 A 2008 US National Academy of Science report found that sons outnumbered daughters by 50 per cent for third children if there was no previous son in US-born children of Chinese, Korean and Asian Indian parents.25 FamilyVoice Australia submitted information from studies of Canadian and United States' birth rates that indicated some evidence of gender selective abortion occurring in some communities including immigrate communities from India, China, Korea and Vietnam.26

2.14 The Catholic Women's League Australia Inc. provided information collated by the UK in response to the request from the Council of Europe to collect data on the sex ratios at birth:

While the overall United Kingdom birth ratio is within normal limits, analysis of birth data for the calendar years from 2007 to 2011 has found the gender ratios at birth vary by mothers’ country of birth.

For the majority of groups, this variation is the result of small numbers of births and does not persist between years. However, for a very small number of countries of birth there are indications that birth ratios may differ from the UK as a whole and potentially fall outside of the range considered possible without intervention.27

Prevalence in Australia

2.15 Submitters argued that the evidence that gender selective abortion is occurring in immigrant communities in western countries indicates that it is therefore likely to also be occurring in Australia.28 Cherish Life Queensland went further and argued that the ideas about gender selective abortion may be picked up by the wider community.29

21 Ms Jane Munro, Submission 178, p. 1.

22 The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 4.

23 Coalition for the Defence of Human Life, Submission 75, p. 4.

24 Coalition for the Defence of Human Life, Submission 75, p. 4.

25 Salt Shakers, Submission 161, p. 4.

26 Family Voice Australia, Submission 73, pp 2-3.

27 Catholic Women's League Australia Inc., Submission 853, pp 3-4.

28 Women's Forum Australia, Submission 169, p. 3.

29 Cherish Life Queensland Inc. Submission 189, p. 2.

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2.16 The Office for Justice and Peace of the Catholic Archdiocese of Melbourne commented that the number of gender selective abortions is not the key issue, rather, any occurrence of gender selective abortion is an attack on human rights:

…it is difficult to determine the extent to which any of the estimated 80,000 abortions which occur annually in Australia are carried out for the purpose of gender selection.

Notwithstanding, it is clear and undisputed that this abhorrent practice is being carried out in Australia and that under the current legislative framework, the procedure is funded by Medicare.

It must be emphasised that all current human rights instruments make no distinction between human rights abuses of the few and human rights abuses of the many. Any denial of human rights is an attack on the Common Good.

The attack on the human rights of unborn females amongst certain ethnic groups within Australia is an attack on the human rights of all Australians.30

2.17 Submitters also commented that there is some evidence from doctors that gender selective abortions are occurring, noting a case that has been referred by a Victorian doctor to the Medical Board of Australia. It was submitted that the same doctor had been approached twice for gender selective abortion. In both instances the preference was for a male child.31

2.18 It was acknowledged that as Australia does not collect data which identifies and records the reasons for Medicare funded abortions, the actual prevalence of gender selective abortions in Australia cannot be quantified. In addition, there is limited regulatory scrutiny of abortions as statistics are generally not collected or collated by states and territories, although South Australia and Western Australia maintain some data.32

2.19 Submitters suggested that relevant data should be collected on the reasons for abortion, so that the frequency of gender selective abortion can be determined.33 The Catholic Archdiocese of Sydney also argued for the collection of such data and noted that past federal inquiries had recommended that this data be collected.34

30 The Office for Justice and Peace, Catholic Archdiocese of Melbourne, Submission 173, p. 3.

31 Australian Family Association, Submission 195, pp 2-3.

32 Australian Family Association, Submission 195, p. 2. See also, Catholic Archdiocese of Sydney, Submission 155, p. 2; The Office for Justice and Peace, Catholic Archdiocese of Melbourne, Submission 173, p. 3; Social Issues Executive, Anglican Diocese of Sydney, Submission 170, p. 1.

33 Social Issues Executive, Anglican Diocese of Sydney, Submission 170, p. 1. See also, The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 2.

34 Catholic Archdiocese of Sydney, Submission 155, p. 2.

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2.20 Mrs Joseph submitted that:

Objections to this Bill that rely on the facile claim that that gender prenatal selective terminations do not occur here in Australia have no substance in fact. For many years now those in the abortion industry who are involved in gender selection have successfully stymied the introduction of even the most minimal requirements to enable the gathering of statistics on this appalling practice. Such resistance to transparency on this human rights issue should no longer be acceptable, especially in the light of the promises made by our Australian Government to introduce protective legislation against this inhumane practice.

Australian domestic law provides no human rights protection for children at risk of termination for such discriminatory reasons as the unborn child’s gender and this results in the terrible and fundamental injustice of arbitrary deprivation of human life. Such violations should no longer be permitted to remain hidden behind doctor-patient confidentiality.35

The use of Medicare funded gender selection abortions for the purpose of family balancing 2.21 In addressing this term of reference, submitters supporting the Bill strongly disapproved of abortions for family balancing and pointed to restrictions on the use of technology for family balancing and state and territory laws relating to abortion.

Abortions for family balancing

2.22 Submitters argued strongly against the use of Medicare funded gender selective abortions to achieve family balancing. For example, Dads 4 Kids submitted that:

Every child, whether male or female, should have the chance to live. Gender Selective Abortion or 'family balancing' is known to take place in Australia, as disclosed informally by doctors, but is a detestable practice. It should not be supported by taxpayer funding. Terminating unborn boys or

girls depletes our society of potential fathers and mothers, leaders, doctors, teachers, parliamentarians, trades people and the list goes on. No child should be discriminated against because of its sex and no government should condone or support terminations on the basis of gender.36

2.23 The use of Medicare funding for such services was considered by submitters to be improper and abhorrent as it did not constitute a health service and violated the child's human rights.37 FamilyVoice Australia submitted that:

35 Mrs Rita Joseph, Submission 69, p. 11.

36 Dads 4 Kids, Submission 180, p. 1. See also, Presbyterian Church of Tasmania, Submission 10, p. 1.

37 FamilyVoice Australia, Submission 73, p. 1. See also, Rabbinical Council of Victoria, Submission 116, p. 1; Catholic Women's League of Victoria and Wagga Wagga, Submission 134, p. 1.

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Given the availability of ultrasound technology for determining the gender of an unborn child, the ready availability of abortion on demand in several Australian states and the known existence of a social phenomenon of Australian couples desperate to have children only of a certain sex either for 'family balancing' or, in some sense, to 'replace' a deceased child of that sex it would be naïve to assume that sex selection abortions for these reasons were not occurring in Australia.38

Evidence for family balancing by gender selective abortion in Australia

2.24 The evidence for the use of gender selective abortions for family balancing was thought to be largely anecdotal.39 Submitters asserted that abortions undertaken for gender selection to achieve family balancing are not appropriate and should be banned.40

2.25 One case was cited by submitters as purporting to show that gender selective abortion for family balancing may be occurring in Australia. Submitters claimed that twin boys were aborted because the parents already had three sons and wished for a girl.41 However, no evidence was submitted to the committee that substantiated the claim that the abortion had been undertaken on the basis of gender selection.

2.26 The Rabbinical Council of Victoria took the view that abortion as a method of family balancing is abhorrent and should not be subsidised by the government under any circumstance. The Council submitted that:

Even in such case where there is a clear medical indications for gender selection, such as X-linked recessive disorders, we would submit that offering pre-implantation genetic diagnosis (PGD) would offset the demand for so drastic a step as abortion.42

Restrictions on gender selection

2.27 The Australian Family Association submitted that the twins case cited above highlights the anomaly with the Assisted Reproductive Technology Guidelines of the National Health and Medical Research Council (NHMRC) of Australia. The guidelines restrict the use of gender selection through pre-implantation genetic

diagnosis while there is no scrutiny of Medicare funding.43 The NHMRC guidelines

38 FamilyVoice Australia, Submission 73, p. 4.

39 Coalition for the Defence of Human Life, Submission 75, p. 5; see also, Salt Shakers, Submission 161, p. 5.

40 FamilyVoice Australia, Submission 73, p. 3. See also, Salt Shakers, Submission 161, p. 3.

41 Coalition for the Defence of Human Life, Submission 75, p. 5; see also, Endeavour Forum Inc., Submission 135, p. 1; Catholic Archdiocese of Sydney, Submission 155, p. 3; Salt Shakers, Submission 161, p. 5; Real Talk Australia, Submission 165, p. 1; Women's Forum Australia, Submission 169, p. 3; Australian Family Association, Submission 195, p. 3.

42 Rabbinical Council of Victoria, Submission 116, p. 1.

43 Australian Family Association, Submission 195, p. 3.

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state that 'sex selection (by whatever means) must not be undertaken except to reduce the risk of transmission of a serious genetic condition'.44

2.28 Submitters noted that the NHMRC guidelines also state that:

Sex selection is an ethically controversial issue. The Australian Health Ethics Committee believes that admission to life should not be conditional upon a child being a particular sex.

Therefore…sex selection (by whatever means) must not be undertaken except to reduce the risk of transmission of a serious genetic condition.45

2.29 However, while these restrictions are in place for invitro fertisation (IVF), there is no legal scrutiny of taxpayer funding, via Medicare, of gender selective abortion of naturally conceived children.46

2.30 In addition, the committee heard of cases where Australians have travelled overseas to access Prenatal Gender Diagnosis (PGD) for gender selection.47 The Coalition for the Defence of Human Life submitted that:

In order to circumvent this ban couples are travelling to places such as Thailand that provide preimplantation genetic diagnosis (PGD) of gender allowing gender selection of embryos for ART [Assisted Reproductive Technology] procedures. In 2011 some 72 couples travelled to Thailand to have PGD and ART at Thai Superior ART in Bangkok 2012. In 2012 this increased 30% to 106 couples.48

State and territory abortion laws

2.31 The Commonwealth has responsibility for Medicare funding. The Australian Catholic Bishops Conference noted that 'there is a variety of laws and restrictions on abortion in Australia, depending on state or territory'.49 Knights of the Southern Cross (NSW) submitted that:

Abortion is the subject of criminal law in all Australian States and Territories, except the ACT. Abortion is legal in the ACT up to full term if it is provided by a medical doctor.

Victoria, South Australia, Western Australia, Tasmania and the Northern Territory have legislation in place that provides a statutory explanation of when an abortion is not unlawful.

44 FamilyVoice Australia, Submission 73, p. 3; see also, Salt Shakers, Submission 161, p. 2; ACT Right to Life Association, Submission 244, p. 1.

45 Australian Catholic Bishops Conference, Submission 187, p. 2.

46 Australian Family Association, Submission 195, p. 3.

47 The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 3. See also, FamilyVoice Australia, Submission 73, p. 4.

48 Coalition for the Defence of Human Life, Submission 75, p. 5.

49 Australian Catholic Bishops Conference, Submission 187, p. 4; see also, FamilyVoice Australia, Submission 73, p. 4; Introfish Inc., Submission 136, p. 3.

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In NSW and Queensland, lawful abortion is available under common law interpretations of the Crimes Act or Criminal Code. An abortion is legal when the doctor believes a woman’s physical and/or mental health is in serious danger.50

2.32 The Australian Catholic Bishops Conference questioned the effectiveness of the state and territory laws stating its opinion that there is 'little inclination from the states and territories to enforce what laws there are'.51 The Catholic Archdiocese of Melbourne submitted that:

In most Australian jurisdictions, access to abortion is now available without the need for supporting medical oversight up until at least 26 weeks of gestation. The position adopted by most State legislatures is that abortion is afforded the status of most other medical procedures. Despite this position, the collection of data on this one particular medical procedure, (including the reason or reasons occasioning the termination) is almost non-existent. As such, it is difficult to determine the extent to which any of the estimated 80,000 abortions which occur annually in Australia are carried out for the purpose of gender selection.52

Withholding gender information

2.33 One of the suggestions put to the committee was that where gender-linked genetic disorders were not found, information on the gender of a child could be withheld until 20 or 30 weeks gestation when it was less likely that gender selective abortions would occur.53

2.34 The Catholic Archdiocese of Sydney noted that the Canadian Medical Association has published evidence that gender selection is taking place in Canada and called for gender information to be withheld until 30 weeks of pregnancy. However, the Catholic Archdiocese of Sydney noted that such a restriction was problematic:

Although we recognise the good intentions behind such a proposal, withholding legitimate information from parents is problematic and such a response does not address the underlying issue. The principal problem is not the sharing of the knowledge of the baby's gender, but the ready acceptability of abortion as a 'response' to that knowledge. Discouragement of abortion, community education and the changing of parents’ hearts and minds are the keys to encouraging a more welcoming attitude towards life and baby girls.54

50 Knights of the Southern Cross (NSW) Inc, Submission 194, p. 2.

51 Australian Catholic Bishops Conference, Submission 187, p. 4.

52 The Office for Justice and Peace, Catholic Archdiocese of Melbourne, Submission 173, pp 2-3.

53 Salt Shakers, Submission 161, pp 1, 7-8. See also, The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 3; Australian Catholic Bishops Conference, Submission 187, p. 3.

54 Catholic Archdiocese of Sydney, Submission 155, p. 3.

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2.35 While the National Association of Specialist Obstetricians and Gynaecologists did not support or oppose the Bill in their submission, they echoed suggestions that it may be worth considering withholding gender information until after 20 weeks if there are no gender linked genetic disorders.55

Support for United Nations Campaigns 2.36 This section addresses evidence from submitters supporting the Bill on the fourth term of reference for the inquiry: 'support for campaigns by United Nations agencies to end the discriminatory practice of gender-selection through implementing disincentives for gender selective abortions'.

2.37 The campaigns against gender selective abortion by UN agencies were supported by many submitters.56 Gender selective abortion was seen as a very significant human rights issue and was described as abhorrent, a crime against humanity, cruel and inhumane, morally unacceptable, and evil.57

2.38 Several submitters indicated that by implementing the policy proposed by the Bill, Australia would be supporting the UN campaigns.58 Introfish Inc, for example, noted that both the WHO and the UNPFA are working toward eliminating gender

selective abortion and stated:

Both of these Organisations call for legislation, amongst other measures, to be enacted to eliminate the discriminatory practice. Australia must eliminate deadly discriminatory gender selection abortion by enacting legislation, including the Health Insurance Amendment (Medicare Funding for Certain Types of Abortion) Bill 2013.59

2.39 Similarly, The Australian Family Association stated:

The present bill if passed would certainly implement a disincentive for sex selection abortion and would protect girls from the violence of prenatal selection, thus honouring Australia's obligation to do so.60

2.40 The Coalition for the Defence of Human Life noted that Australia had shown some support for UN campaigns, by banning gender selection through other

55 National Association of Specialist Obstetricians and Gynaecologists, Submission 1, p. 1.

56 See for example, Australian Christian Values Institute, Submission 151, p. 1; Catholic Archdiocese of Sydney, Submission 155, p. 3;

57 See, Rabbinical Council of Victoria, Submission 116, p. 1; Doctors for the Family, Submission 133, p. 1; Endeavour Forum Inc, Submission 135, p. 2, Salt Shakers, Submission 161, p. 3; The Life, Marriage and Family Office, Catholic Archdiocese of Melbourne, Submission 168, p. 4.

58 Presbyterian Church of Tasmania, Submission 10, p. 1. See also, Rita Joseph, Submission 69, pp 1-2; Catholic Women's League of Victoria and Wagga Wagga, Submission 134, p. 1; The Office for Justice and Peace, Catholic Archdiocese of Melbourne, Submission 173, p. 4.

59 Introfish Inc., Submission 136, p. 5.

60 Australian Family Association, Submission 195, p. 4.

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reproductive technologies such as prenatal genetic diagnosis and assisted reproductive technology.61

2.41 Real Talk Australia submitted its view on finding an appropriate balance between the rights of the child and the rights of parents, stating that:

All human beings are the 'subject' of rights not the 'object' of rights. Parents do not have the right to choose what child they get, or terminate pregnancy based on desires for a 'type' of person. If this becomes a widespread practice

parents will become more like owners of children not caregivers. On the issue of gender selection, our focus can be shifted ever so slightly from the rights of a child, to upholding the wishes of a parent. In doing that the rights and the welfare of children get relegated to second place.

Society expresses respect for the dignity of each person, by recognising him or her as a person and not as an object.62

Concern from medical associations 2.42 The last term of reference for the inquiry sought consideration of the concern from medical associations about gender selective abortion in developed countries such as Canada, the United States and the United Kingdom. Submitters noted that the Society of Obstetricians and Gynaecologists of Canada, the American College of Obstetricians and Gynaecologists, the Chief Medical Officer of the UK, Professor Dame Sally C. Davies, and the British Medical Association generally opposed gender selective abortion except for preventing serious sex-linked genetic diseases.63

61 Coalition for the Defence of Human Life, Submission 75, p. 6.

62 Real Talk Australia, Submission 165, p. 2.

63 Australian Family Association, Submission 195, pp 4-6; National Association of Specialist Obstetricians & Gynaecologists, Submission 1, p. 1.

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Chapter 3

Evidence not supportive of the Bill Introduction 3.1 This chapter canvasses evidence from submitters who did not support the Bill. The committee notes that most submitters who opposed the Bill made it clear that they were also opposed to gender selective abortion.1

The ineffectiveness of the Bill 3.2 Many submitters questioned whether the Bill would be effective in removing Medicare funding for gender selective abortion. It was also argued that there may be undesirable consequences if the Bill were to be passed. Issues that were identified included that:

 the arrangements to implement the Bill would be easily circumvented as

Medicare items cover more than one service;

 the approach taken by the Bill has been shown to be ineffective in other countries;

 if heavily enforced, the Bill would risk causing discrimination; and

 the Bill does not address the root causes of gender selective abortion.

Medicare items cover multiple services

3.3 Submitters argued that a restriction on Medicare funding of gender selective abortion would not be effective as the Medicare item numbers for abortion do not distinguish between the reasons for that procedure being undertaken.2 There are many reasons why these item numbers are used including fetal death, miscarriage and unintended pregnancy endings.3 In addition, it was noted that the Bill does not provide for a mechanism to separate gender selective abortion from other types of abortion. The Women's Abortion Action Campaign commented:

[The Medicare] rebate is payable for a group of services, including induced termination of pregnancy. There is no mechanism within the Medicare system to determine the reasons for induced terminations of pregnancy. Therefore, any 'estimate' of the prevalence of gender selective abortions (or other reasons for termination of pregnancy) can only be based on anecdotal data.

1 Children by Choice, Submission 160, p. 2; Women's Health Victoria, Submission 2, p. 1; Women's Centre for Health Matters, Submission 157, p. 2; Professor Diane Bell, Submission 175, p. 1; Australian Women Against Violence Alliance, Submission 191, p. 1; Women's Legal; Services NSW, Submission 192, p. 1.

2 Women's Centre for Health Matters, Submission 157, p. 3.

3 Women's Centre for Health Matters, Submission 157, p. 3; Children by Choice, Submission 160, p. 3.

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Neither the proposed Bill nor the Explanatory Memorandum make clear the mechanism by which sex selective abortions would be separated from other types of termination of pregnancy, or indeed other medical procedures covered by Medicare Benefits Schedule items 16525 and 35643.4

3.4 Women's Health Victoria indicated that there would be substantial practical difficulties in implementing the Bill, submitting that:

Restrictions of this nature would be untenable because of the practical difficulties they impose on both health professionals and women. For example:

 How would health professionals ascertain whether the abortion being sought was based on the sex of the foetus?  How would this be done without discriminating against and stigmatising certain groups of women, thereby jeopardising the

health services that they receive?5

Ineffectiveness of similar restrictions in other countries

3.5 The type of approach set out in the Bill to address gender selective abortion has been tried in other countries but submitters commented that it has not been effective.6 Women's Health Victoria, for example, pointed to a study of practices in China and India and found that restrictions were not successful as:

…enforcement is extremely difficult, affordable ultrasound services are widely available and fetal sex information can be relayed to potential parents without even saying a word. Moreover, an ultrasound may be performed in one location and an abortion obtained in another, where a woman can provide alternative reasons for the procedure.7

3.6 The Young Women's Christian Association (YWCA) Australia also noted that the UN agencies and WHO interagency statement indicated that such restrictions had been ineffective:

Governments in affected countries have undertaken a number of measures in an attempt to halt increasing sex-ratio imbalances. Some have passed laws to restrict the use of technology for sex-selection purposes and in some cases for sex-selective abortion. These laws have largely had little effect in

4 Women's Abortion Action Campaign, Submission 182, pp 1-2.

5 Women's Health Victoria, Submission 2, p. 3; see also Public Health Association of Australia, Submission 72, pp 7-8;

6 Women's Health Victoria, Submission 2, p. 1; Women's Health West, Submission 71, p. 2; Public Health Association of Australia, Submission 72, p. 4; Women's Centre for Health Matters, Submission 157, p. 5; Professor Diane Bell, Submission 175, p. 3; Australian Women Against Violence Alliance, Submission 191, p. 4.

7 Women's Health Victoria, Submission 2, p. 3; see also Women's Health West, Submission 71, p. 2; Australian Women Against Violence Alliance, Submission 191, p. 3.

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isolation from broader measures to address underlying social and gender inequalities.8

3.7 Liberty Victoria stated that legislation to restrict abortions based on sex selection had been unsuccessful in the United States and Canada. In the United Kingdom some members of parliament had suggested that legislation was needed to monitor abortions by gender to protect girls. Liberty Victoria went on to note that the Health Minister, Lord Howe, in rejecting government monitoring of abortions stated that 'introducing testing to determine the sex of the foetus would require new laboratory tests, which would have a cost implication and require consent' and would cause women distress 'during what is already a difficult time'.9

Failure to address root causes

3.8 A further reason that restrictions on gender selective abortions were not viewed as being effective in other countries is because they do not address the reasons why they are being sought, such as poverty, social attitudes, entrenched gender inequality and discrimination.10 Professor Diane Bell pointed to the UN interagency which states:

The rise in sex ratio imbalances and normalization of the use of sex selection is caused by deeply embedded discrimination against women within institutions such as marriage systems, family formation and property inheritance laws…

Although the relatively recent availability of technologies that can be used for sex selection has compounded the problem, it has not caused it.11

Undesirable consequences of the Bill

3.9 Submitters argued that there is potential for discrimination, stereotyping and stigmatisation of certain groups of women if the Bill is passed.12 YWCA Australia suggested that the Bill may encourage discrimination against women from some South Asian, East Asian and Central Asian communities when they are seeking access to reproductive health services.13

3.10 In addition, Children by Choice submitted that the aims of the Bill:

…would contravene Australia's domestic and international obligations to uphold women's human rights.

8 YWCA Australia, Submission 167, pp 1-2; see also Women's Health Victoria, Submission 2, p. 4; Women's Health West, Submission 71, p. 2.

9 Liberty Victoria, Submission 164, pp 5-6.

10 Women's Health Victoria, Submission 2, p. 3; Women's Health West, Submission 71, pp 3-4; Liberty Victoria, Submission 164,pp 3-4; Australian Women Against Violence Alliance, Submission 191, p. 4.

11 Professor Diane Bell, Submission 175, p. 5.

12 Women's Health Victoria, Submission 2, pp 1, 3; Women's Health West, Submission 71, pp 2, 4; Public Health Association of Australia, Submission 72, p. 4.

13 YWCA Australia, Submission 167, p. 2.

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Such scrutiny by government and health authorities of women's decision making as may be required by the Bill would constitute unnecessary intrusion and surveillance into a woman's personal life and health care decision-making. Surveys of Australian community attitudes have shown that a large majority support legal abortion and believe that it should be private matter between a woman and her doctor.14

3.11 Professor Bell argued that, if the Bill was passed, it may limit the information sought and provided in the doctor/patient relationship and therefore may be a restriction of women's rights. Such a restriction would not align with the empowerment envisioned by the interagency statement and the Convention on the Elimination of All Forms of Discrimination Against Women.15 Women's Legal

Services NSW had similar concerns, submitting that:

The Bill purports to limit gender selective discrimination and enhance human rights. However, the Bill fails to identify and address the potential for erosion of human rights, for example, the risk of such legislation obstructing access to safe, affordable, legal reproductive health options, including abortion.16

3.12 Submitters also noted that restrictions on Medicare funding for gender selective abortion would potentially compromise access to abortion more generally, thereby limiting a vital health service for women in Australia and an important reproductive health right.17

The unacceptability to Australians of the use of Medicare funding for gender selection abortions 3.13 As noted earlier, most submitters who opposed the Bill, made it very clear that they were also opposed to gender selective abortion.18 However, submitters noted that there was no comprehensive or reliable evidence to suggest that gender selective abortion was unacceptable to Australians. Thus, submitters stated that they were unable to accept the proposition concerning the unacceptability to Australians of the use of Medicare funding for gender selective abortions at face value.19 For example, the National Foundation for Australia Women (NFAW) stated that:

14 Children by Choice, Submission 160, p. 3.

15 Professor Diane Bell, Submission 175, p. 7.

16 Women's Legal Services NSW, Submission 192, pp 1-2.

17 Woman's Health Victoria, Submission 2, p. 1; see also Women's Health West, Submission 71, p. 2.

18 Children by Choice, Submission 160, p. 2; Women's Health Victoria, Submission 2, p. 1; Women’s Centre for Health Matters, Submission 157, p. 2; Professor Diane Bell, Submission 175, p. 1; Australian Women Against Violence Alliance, Submission 191, p. 1; Women's Legal; Services NSW, Submission 192, p. 1.

19 Women's Health Victoria, Submission 2, p. 2; Women's Health West, Submission 71, p. 2; Public Health Association of Australia, Submission 72, p. 5; Women's Centre for Health Matters, Submission 157, p. 3.

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NFAW is unable to accept at face value or agree entirely with the proposition inherent in the first Term of Reference, while deploring terminations of pregnancies solely for cultural reasons.20

3.14 Several submitters provided information from the Australian Survey of Social Attitudes which provides evidence on attitudes of Australians towards abortion generally. Women's Health Victoria stated:

According to the Australian Survey of Social Attitudes in 2003, 81% of Australians agree that women should have the right to choose an abortion. This was independent of their gender or religious affiliation. Only 9% of the 5000 adults questioned disagreed with a woman's right to choose, and the remaining 10% were undecided.21

The prevalence of gender selection by abortion 3.15 It was acknowledged that gender selective abortion is prevalent in other countries.22 The NFAW commented it 'is aware of the existence in some countries of such practices, and finds such practices abhorrent'.23

3.16 However, it was argued that there is no evidence that gender selective abortion is being undertaken in Australia or that the use of Medicare funding for gender selection abortion was prevalent.24 Liberty Victoria stated:

We believe that changing access to Medicare for abortions in Australia because of cultural biases and practices occurring in other countries is inexcusably bad public policy.25

3.17 Reproductive Choice stated that evidence that gender selective abortion 'cannot be disguised' and pointed to the skewed gender ratios in China and India.26 However, it was submitted that there is no such evidence of a skewed gender ratio in

20 National Foundation for Australia Women, Submission 74, p. 2.

21 Women's Health Victoria, Submission 2, p. 2; see also Women's Health West, Submission 71, p. 3; Public Health Association of Australia, Submission 72, p. 5; Women's Centre for Health Matters, Submission 157, p. 3.

22 Liberty Victoria, Submission 164, p. 2; National Foundation for Australian Women, Supplementary Submission 74, p. 2; Family Planning NSW, Submission 171, p. 4; Professor Diane Bell, Submission 175, p. 3; Australian Women Against Violence Alliance, Submission 191, p. 2.

23 National Foundation for Australian Women, Supplementary Submission 74, p. 2.

24 Women's Centre for Health Matters, Submission 157, p. 2; Children by Choice, Submission 160, p. 2; Liberty Victoria, Submission 164, p. 2; YWCA Australia, Submission 167, p. 1; Family Planning NSW, Submission 171, p. 4; Professor Diane Bell, Submission 175, p. 1; Health Consumers Alliance of SA Inc, Submission 176, p. 1; Women's Abortion Action Campaign, Submission 182, p. 1; Women's Legal Service Australia, Submission 190, p. 1; Australian Women Against Violence Alliance, Submission 191, p. 2; Women's Legal Service NSW, Submission 192, p. 1.

25 Liberty Victoria, Submission 164, p. 4.

26 Reproductive Choice, Submission 3, p. 2.

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Australia. Several submitters point out that Australia's sex ratio at birth is 105.7 male births per 100 female births and therefore within the normal range of 102 and 106.27 Family Planning NSW also argued that the sex ratio in Australia has remained stable and provided data on the sex ratio for each state and territory for children aged zero to six which showed that all states were in the range 1.04 to 1.08.28

3.18 The Australian Women Against Violence Alliance concluded that, in its view, 'Australia continues to exhibit one of the healthiest sex ratios in the world and lowest maternal mortality rates, both strong indicators of gender health and well-being'.29

3.19 Submitters provided further evidence which indicated that gender selective abortion is not occurring in Australia. Family Planning NSW, for example, stated that:

Last financial year we had around 28,000 client visits and in the 85 years we have been operating we have no evidence to suggest that pregnancy terminations occur solely on the basis of gender selection.30

3.20 Several submitters also pointed to a 2008 Melbourne study of 578 patients having pre-natal diagnosis, which found that none of the patients had a pregnancy termination for gender selection.31

3.21 In addition, submitters noted that in Australia most abortions occur before the gender is known at around 18-19 weeks gestation.32 Children by Choice submitted information from the Australian Health and Welfare Institute indicating that almost 95 per cent of pregnancy terminations occur in early pregnancy, that is, before 14 weeks gestation, 4.7 per cent between 13 and 20 weeks, and 0.7 per cent after 20 weeks.33

3.22 Submitters also commented on the argument that, because gender selective abortion is occurring in some countries overseas, communities from those countries are seeking gender selective abortions in Australia.34 Submitters argued that there are no studies or evidence-base to show that this occurs. The Australian Women Against Violence Alliance pointed a study undertaken in Australia in 2000 which 'provided evidence to show that immigrants adapt to the fertility patterns and behaviours of the Australian population'. A similar study in Canada found that the fertility of immigrant

27 Women's Centre for Health Matters, Submission 157, p. 3; Women's Health Victoria, Submission 2, p. 2.

28 Family Planning NSW, Submission 171, p. 4.

29 Australian Women Against Violence Alliance, Submission 191, p. 2.

30 Family Planning NSW, Submission 171, p. 4.

31 National Foundation for Australia Women, Submission 74, p. 2; Children by Choice, Submission 160, p. 2; Reproductive Choice Australia, Submission 3, p. 1.

32 National Foundation for Australian Women, Submission 74, p. 4; Children by Choice, Submission 160, p. 3.

33 Children by Choice, Submission 160, p. 3.

34 National Foundation for Australian Women, Submission 74, p. 2; Women's Abortion Action Campaign, Submission 182, p. 3.

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women tended to increasingly resemble and converge with that of Canadian-born women, the longer they resided in Canada.35

3.23 The NFAW stated that from its analysis of population statistics by ancestry and religious affiliation it can be concluded that 'there is no widespread practice of abortions leading to skewing of the sex ratio'.36 In addition, Liberty Victoria noted:

Even amongst migrant groups where the country of origin has a son-preference and sex-selection problem, the same social pressures do not exist in Australia. Indeed, all academic research as well as UN and [non-government organisations] research indicates that it is confined to only a few regions of the world, namely East and South Asia, Korea, China and parts of India.37

3.24 It was also noted that Australia has a very different society and approach to gender equality than some other countries. Children by Choice drew attention to existing initiatives in Australia aimed at gender discrimination and submitted that:

…in Australia today, women and girls have more social, cultural and economic equality with their male counterparts compared to many other nations. While gender discrimination still exists in our society and must be addressed, there is robust government legislation, regulations and many other programs and education campaigns that aim to advance, monitor and promote the status of women and girls living in our community. Some examples of these include anti-discrimination legislation, a national Sex Discrimination Commissioner, initiatives to promote girls' education and participation in non-traditional areas, and campaigns to educate and discourage practices such as Female Genital Mutilation.38

3.25 The Women's Legal Services NSW also argued that should the Bill be passed, 'there could be disproportionate scrutiny of women and girls from particular ethnic, race, cultural and religious backgrounds when they access sexual and reproductive health services'.39

The use of Medicare funded gender selection abortions for the purpose of family balancing 3.26 Submitters noted that there are legal barriers to the use of gender selection technologies, anonymous egg donation, with or without payment, and commercial surrogacy and that gender selection technology is only allowed for reducing the risk of transmission of sex-linked disorders.40 For example, in Victoria the Assisted

35 Australian Women Against Violence Alliance, Submission 191, pp 2-3.

36 National Foundation for Australian Women, Supplementary Submission 74, p. 2.

37 Liberty Victoria, Submission 164, p. 2.

38 Children by Choice, Submission 160, p. 4.

39 Women's Legal Services NSW, Submission 192, p. 3.

40 National Foundation for Australian Women, Submission 74, p. 1; see also Women's Health Victoria, Submission 2, p. 3; Women's Health West, Submission 71, p. 4; Public Health Association of Australia, Submission 72, p. 6.

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Reproduction Treatment Act 2008 bans gender selection except to avoid the transmission of a genetic abnormality or a genetic disease to the child or it is approved by the Patient Review Panel.41

3.27 Submitters also noted that gender selective abortion for non-medical purposes is constrained by the National Health and Medical Research Council's Ethical Guidelines on the use of Assisted Reproductive Technology in Clinical Practice.42 The Victorian Council for Civil Liberties quoted the guidelines as follows:

Sex selection is an ethically controversial issue. The Australian Health Ethics Committee believes that admission to life should not be conditional upon a child being a particular sex. Therefore, pending further community discussion, sex selection (by whatever means) must not be undertaken except to reduce the risk of transmission of a serious genetic condition.43

3.28 The NFAW argued that 'it is unlikely that an Australian medical practitioner (eligible to raise a charge on the Medical Benefits Schedule) would act in breach of this prohibition'.44

3.29 Where abortions are undertaken, the reasons for doing so are varied and complex but gender selection is not a reason given.45 Submitters cited a study by the University of Melbourne's Key Centre for Women's Health in Society which reported that the reasons for an abortion usually relate to the woman herself, the potential child, existing children, the woman's partner and other significant relationships, and what it means to a woman to be a good mother.46 Other issues relating to violence, completed family size, educational aspiration, age and medical issues were also identified.47

Support for United Nations campaigns 3.30 Submitters opposing the Bill were critical of the term of reference relating to UN campaigns as they did not consider that the UN agencies and WHO supported the approach envisaged in the Bill. The Bill's statement on human rights was also criticised as not accurately representing relevant human rights documents.

3.31 Liberty Victoria submitted that:

41 Liberty Victoria, Submission 164, pp 4-5.

42 Women's Health Victoria, Submission 2, p. 3; Woman's Health West, Submission 71, p. 7; National Foundation for Australian Women, Submission 74, p. 3.

43 Victorian Council for Civil Liberties, Submission 164, p. 5.

44 National Foundation for Australian Women, Submission 74, p. 3.

45 Women's Health Victoria, Submission 2, pp 3-4; Women's Health West, Submission 71, p. 4; Public Health Association of Australia, Submission 72, p. 5; National Foundation for Australian Women, Submission 74, p. 2; Women's Abortion Action Campaign, Submission 182, p. 4; Australian Women Against Violence Alliance, Submission 191, p. 3.

46 Women's Health Victoria, Submission 2, pp 3-4; Women's Health West, Submission 71, p. 4; Children by Choice, Submission 160, p. 3; Women's Centre for Health Matters, Submission 157, p. 4.

47 Children by Choice, Submission 160, p. 5.

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The phrasing of this 'Term' misleadingly implies that UN agencies are advocating limiting abortion as a means of solving the problem of sex-selection. This is untrue. Indeed, although states have an obligation to address the issue of gender biased sex selection, the UN interagency statement makes clear, that it must be addressed:

without exposing women to the risk of death or serious injury by denying them access to needed services such as safe abortion … Such an outcome would represent a further violation of their rights to life and health as guaranteed in international human rights treaties, and committed to in international development.48

3.32 Submitters supported campaigns by UN agencies to implement disincentives for gender selection by abortion. However, they argued that the WHO was not advocating the type of restrictions proposed in the Bill, as such measures have not been found to be effective.49 The Public Health Association of Australia submitted

that it:

…is strongly supportive of the role of the United Nations and its agencies in promoting changes in social values, and of the role of the Australian Overseas Aid Agency in promoting and financing sexual and reproductive health programs in developing nations. Access to safe abortion services is a necessary part of any comprehensive system of reproductive health services. To deny these services is to breach a woman's right to health.50

The Bill's statement on human rights

3.33 Concerns were raised about the human rights statement in the Bill and whether it adequately addressed the human rights of both mother and child. The Women's Abortion Action Campaign stated that the reports cited in the Bill's human rights statement:

…have been used in a way which does not acknowledge their full context, and obscures the fact that the United Nations' World Health Organisation recognises access to safe abortion as an important marker for women's health and publishes a technical and policy guide for (national) health systems to assist in this.51

3.34 Submitters also stated that a number of UN human rights instruments were omitted from the Bill's statement including the Beijing Declaration, which stemmed from the Fourth UN Conference on Women.52 The declaration unequivocally affirms that 'the right of all women to control all aspects of their health, including their own

48 Liberty Victoria, Submission 164, p. 3.

49 Women’s Health Victoria, Submission 2, p. 4; Women's Health West Submission 71, pp 4-5; YWCA Australia, Submission 164, p. 2.

50 Public Health Association of Australia, Submission 72, p. 7.

51 Women's Abortion Action Campaign, Submission 182, p. 2.

52 Women's Centre for Health Matters, Submission 157, p. 6; see also Women's Health Victoria, Submission 2, p. 5; Women's Health West, Submission 71, p. 5.

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fertility, is basic to their empowerment'. In addition it was noted that the UN Factsheet on the Right to Health asserts that:

States should enable women to have control over and decide freely and responsibly on matters related to their sexuality, including their sexual and reproductive health, free from coercion, lack of information, discrimination and violence.53

3.35 It was also noted that Australia has an obligation to implement the principles of the Convention on the Elimination of All Forms of Discrimination Against Women, which includes access to health services, including those related to family planning. In addition, sexual and reproductive health rights and freedoms are enshrined in the International Covenant on Economic, Social and Cultural Rights.54

3.36 Professor Bell concluded that the amendment contained in the Bill is a restriction of women's rights and not the empowerment envisaged by the interagency statement or the Convention on the Elimination of All Forms of Discrimination Against Women.55

3.37 The Parliamentary Joint Committee on Human Rights (Joint Committee) has examined the Bill. The Joint Committee noted that restrictions on Medicare benefits proposed in the Bill potentially restrict rights to health and rights to social security. Those rights are provided for under articles twelve and nine of the International Covenant on Economic, Social and Cultural Rights. In its concluding remarks, the Joint Committee indicated that:

Before forming a conclusion on the human rights compatibility of the bill, the committee intends to write to Senator Madigan to seek further information about the prevalence of gender selective abortions in Australia and whether the limitations on the right to health and the right to social security seek to address a legitimate objective (being one that addresses an area of public or social concern that is pressing and substantial enough to warrant limitations on these rights).56

3.38 At the time of tabling of this report, no response had been published by the Joint Committee.

53 Woman's Health Victoria, Submission 2, p. 5.

54 Women's Legal Services NSW, Submission 192, p. 3.

55 Professor Diane Bell, Submission 175, pp 6-7; see also Health Consumers Association of SA, Submission 176, p. 1; Women's Legal Services NSW, Submission 192, p. 1.

56 Parliamentary Joint Committee on Human Rights, Examination of legislation in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, Bills introduced 18-21 March 2013, Legislative Instruments registered with the Federal Register of Legislative Instruments 16 February - 19 April 2013, Sixth Report of 2013, 15 May 2013, p. 39.

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Alternatives to the Bill

3.39 Reproductive Choice Australia submitted that 'if Parliament is inclined to utilise resources to better understand and positively respond to issues surrounding pregnancy terminations to best support the rights of Australian women', the following approaches could be considered:

 a national curriculum for comprehensive, evidence-based sexual and

reproductive health in Australia schools;  the inclusion of referral obligations for conscientious objection into the registration of health professionals and subsequent enforcement mechanisms;  a requirement that university undergraduate medical training includes

pregnancy termination related procedures;  provision of the full range of reproductive health services, including abortion and emergency contraception for assault victims, in all federally funded

hospitals regardless of faith-based affiliations; and  lowered cost of contraception for low-income women via the Pharmaceutical Benefits Scheme.57

Concern from medical associations 3.40 Submitters opposing the Bill indicated that in their view, abortion was regarded as an important health service for women by medical associations including The Royal Australian College of Obstetricians and Gynaecologists; The Royal College of Obstetricians and Gynaecologists; and The American College of Obstetrics and Gynaecologists.58

3.41 Several submissions supported statements by medical associations that they support gender selective abortions for gender-linked genetic diseases, but not for personal or cultural reasons.59 The Australia Medical Association (AMA) did not support the Bill, submitting that in its view the Medicare benefits arrangements should not be used to address social issues. The AMA went on to note that the interagency statement offers a range of recommendations for addressing the issues and does not recommend denying financial assistance for legal medical procedures.60

Senator Helen Polley Chair

57 Reproductive Choice Australia, Submission 3, p. 3.

58 Women's Health Victoria, Submission 2, p. 4; Women's Health West, Submission 71, p. 5; Public Health Association of Australia, Submission 72, p. 8.

59 Public Health Association of Australia, Submission 72, p. 8; Women's Health West, Submission 71, p. 5; Women's Health Victoria, Submission 2, p. 4; National Federation for Australian Women, Submission 74, p. 5; Women's Centre for Health Matters, Submission 157, pp 5-6.

60 Australian Medical Association, Submission 130, p. 1.

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Additional Comments by the Australian Greens Overview

1.1 The Australian Greens do not support sex selective abortion as it is indicative of entrenched gender inequality. However, we assert that restricting health services for women and restricting women’s reproductive rights through this bill is not an appropriate or useful way to address that inequality. A woman's right to be treated equally and with dignity and respect must not be infringed by placing restrictions on abortion services.

Comments

1.2 The Australian Greens are extremely disappointed that the majority of the Committee did not put forward any recommendations on this bill. Analysing submissions and putting forward recommendations is a key purpose of the Senate Committee process.

1.3 Submissions from Reproductive Choice Australia and other organisations repeatedly emphasised that there is no evidence that this practice occurs in Australia or that Medicare is being used to fund such procedures. This is supported by looking at Australia's population figures.

1.4 Senator Madigan himself admits he has no evidence to suggest that sex selective abortions are systematically occurring in Australia. In countries where this does occur, such as China and India, there is clear gender-skewing in population numbers.

1.5 International human rights agreements support a women's right to control their own fertility. The Beijing Declaration affirms that 'the right of all women to control all aspects of their health, including their own fertility, is basic to their empowerment.' Further, the Convention on the Elimination of All Forms of Discrimination Against Women - Article 12 requires that measures be taken to ensure 'on a basis of equality of men and women, access to health care services, including those related to family planning.' Women's Health Victoria state in their submission that 'Restrictions on abortions restrict this access' and that restrictions on abortion jeopardise a women's right to choose if, when and how many children she will have.

1.6 Submissions which indicate they do not support the passage of the bill include: Women's Health Victoria, Public Health Association Australia, Australian Medical Association, Women's Centre for Health Matters, NSW Council for Civil Liberties, Children by Choice, Liberty Victoria, Women’s Abortion Action Campaign, Women’s Legal Services NSW, Women’s Legal Services Australia, and Reproductive Choice Australia.

1.7 In the 2008 paper, "From Sorting Sperm to Sorting Society" Edgar Dahl noted that a follow-up study of 578 patients having prenatal diagnosis at one Melbourne clinic found that 'none of the women had a termination for foetal sex' and that in countries where social, religious or economic conditions do not support a preference

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for male or female children, including USA, Britain and Australian, there is no evidence that such a preference exists.

1.8 There is also the practical question of how such a law would ever be enforced without risking the broader reproductive rights of Australian women.

1.9 Without any evidence for the practice, this bill is a waste of government time and is a red herring to allow Senator Madigan to promote his anti-abortion agenda. Senator Madigan and Democratic Labor Party are opposed to safe and legal abortion. This bill addresses a non-existent problem.

1.10 The large number of submissions from individuals in support of this bill, may do significant damage in raising fear and stigmatising women having an abortion without a basis in fact.

1.11 The Reproductive Choice Australia submission notes: 'The tactic of chipping away at women's reproductive rights by those who oppose safe abortion for any woman for any reason - under the guise of a feminist concern about the survival of female foetuses - is an anti-choice approach borrowed from the United States. In America, the accumulation of small "victories" from such unconscionable tactics has placed the reproductive autonomy of women in many US states under sustained and serious threat'.

1.12 The Australian Greens do not support sex selective abortion, as it is representative of entrenched gender inequality but there is no evidence that this practice is occurring in Australia.

Recommendation

1.13 That the Health Insurance Amendment (Medicare Funding for Certain Types of Abortion) Bill 2013 not be passed.

Senator Lee Rhiannon Senator Richard Di Natale

Australian Greens spokesperson for Women Senator for Victoria

Senator for New South Wales

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Additional Comments by Senator John Madigan 1.1 In response to the Report from the Committee on Finance and Public Administration Legislation Committee on the Health Insurance Amendment (Medicare Funding for Certain Types of Abortion) Bill 2013, I wish to comment on a number of issues.

These include:

 The lack of consultation through the common practice of public hearings;

 The absence of any recommendations based on common ground evident in

submissions both for and against the Bill in the areas of data collection and opposition to gender-selection procedures; and

 Selective interpretation of UN Convention commitments.

Absence of broad consultation through Public Hearings

1.2 Public hearings are a normal feature of Senate Committee inquiries yet, despite the broad community interest as evidenced in the receipt of 919 submissions and 239 form letters, the Finance and Public Administration Legislation Committee did not allow for public hearings. The absence of such hearings are a departure from regular process and the selective application could be interpreted as a bias against particular issues and a departure from democratic procedure especially when significant amounts of time are given to public hearings for issues which attract far less community comment.

Public hearings would have allowed for clarification of a number of issues raised by the submissions received.

1.3 Public hearings would have obtained more information and clarification from key organisations. Submissions were received by two peak medical specialist bodies: The Royal Australian and New Zealand College of Obstetricians and Gynaecologists (RANZCOG), and the National Association Specialist Obstetricians and Gynaecologists.1 The RANZCOG, in a brief one-page submission, stated: 'The College does not support termination of pregnancy for the reason of family balancing or gender preference'. They indicated: 'The college would be pleased to participate further in this inquiry as deemed appropriate by the Committee.'2 Clearly, they would have contributed further insights had the possibility of a public hearing been available. Similarly, would have been possible to ask the National Association of Obstetricians and Gynaecologists as to the reasons for their recommendation for withholding information relating to the gender of the fetus until 20 weeks.3 As this was the first submission received, it appears the Association was clear on their policy but the

1 National Association of Specialist Obstetricians and Gynaecologists, Submission 1; see also, The Royal Australian and New Zealand College of Obstetricians and Gynaecologists, Submission 137.

2 The Royal Australian and New Zealand College of Obstetricians and Gynaecologists, Submission 137.

3 National Association of Specialist Obstetricians and Gynaecologists, Submission 1.

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submission was brief and the Committee may have gained some understanding of that policy if an opportunity for public hearings had been made available.

1.4 Public hearings would have provided the opportunity for in camera evidence for participants who felt vulnerable in giving their identity as in the following example: Media reports of evidence of sonographer's experience in revealing the gender of the fetus emerged during the period of enquiry.4 'I gave her a death sentence,' she told the journalist. The sonographer in question was not prepared to reveal her identity for fear of jeopardizing her employment, but claimed that revealing the gender of the fetus was becoming a source of unease amongst her colleagues.

1.5 Public hearings would have demonstrated fairness in the Committee's dealings with this contentious issue.

Common Ground: opposition to Gender-selection abortion

1.6 According to the Committee’s Report, many submissions both for and against the Bill (2.3-10; 3.13) were clearly opposed to gender selection abortions and in a number of submissions studies and surveys were quoted which demonstrated the unacceptability of gender-selection abortion to Australians.5 One submission which argued against the Bill used the term 'abhorrent' to describe gender-selection abortion.6 Other submissions opposed to the Bill also opposed gender-selection abortion in principle.7 If gender-selection abortions are 'abhorrent' and objectionable, then surely it warrants some sanctions.

Common Ground: data collection

1.7 The Committee's Report notes in both Chapter 2 and Chapter 3 that there is insufficient data collection in the Medicare process to accurately determine the number of abortions executed for gender selection. (2.2; 3.3) It is not disputed that this is the case. Abortion is legal in some Australian jurisdictions regardless of the reasons for abortion. There is a practice in the provision of abortion of: 'Don't ask; don't tell'. If women are not asked for the reasons they seek abortion then there is no reason to tell.

1.8 Family Planning NSW outlines the 'glaring inadequacies' in the data available on pregnancy terminations and details some of these gaps as follows:

 There is no mandatory reporting of pregnancy terminations in some states and

territories;

4 http://www.heraldsun.com.au/news/opinion/gender-bias-cannot-start-in-the-womb/story-e6frfhqf- 1226635210990

5 Australian Federation for the Family, Submission 151, p. 1; see also, Reformed Resources, Submission 173, p. 2; Australian Christian Lobby, Submission 186, p. 1; Catholic Women's League Australia Inc. Submission 853, p. 2.

6 National Foundation for Australian Women, Supplementary Submission 74, p. 2.

7 Women's Health Victoria, Submission 2, p. 1; see also, Public Health Association of Australia, Submission 72, p. 4.

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 Only South Australia, Northern Territory and Western Australia have routine

notifications and published reports;

 Australian Institute of Health and Welfare (AIHW) pregnancy termination estimates date back to 2003 and 2004;

 Changes have been made to abortion legislation in some states, yet there is no way of measuring the impact of those changes. The recent TGA listing of Mifepristone is an example;

 There is no single Medicare item number for abortion related services;

 Medicare items apply to procedures which are not specifically pregnancy

terminations, but include procedures such as those undertaken as a result of miscarriage or foetal death. It is therefore impossible to gain a precise figure for the number of abortions performed; and

 This data does not report on important associated variables describing the

geographic, social and economic situation of the women who present for a pregnancy termination.8

This submission urges the Committee 'to address the gaps that exist in data and research around pregnancy terminations to support future evidence based legislation and policy.'

The glaring inadequacies of data collection in terms of pregnancy terminations requires redress. The absence of such significant data must have consequences for the quality of health services offered to women.

Commitment to United Nation Conventions

1.9 Australia is a signatory to the International Conference on Population and Development, Cairo 1994 (ICPD) which means Australia agreed to take all necessary action to achieve its objectives. These include action 4.23:

Governments are urged to take the necessary measures to prevent infanticide, prenatal sex selection, trafficking in girl children and use of girls in prostitution and pornography.9

The Committee Report identifies many submissions that referred to Australia's international obligations (2.36-2.41 and 3.30-3.32). Yet many of these submissions failed to take the obligation to prevent sex selection seriously. Mrs. Rita Joseph's submission almost exclusively addressed Australia's obligation as a signatory to UN Conventions.10 Her submission is quoted twice by the Committee Report but only in relation to the collection of data (2.2) and again in reference to 'prevalence in Australia' (2.20) but never in relation to Australia's international obligation that is her substantive concern.

8 Family Planning NSW, Submission 171, p. 5.

9 http://web.unfpa.org/icpd/icpd-programme.cfm#ch4b retrieved 22 June 2013

10 Rita Joseph, Submission 69.

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Australia unequivocally voted in favour of action to eradicate pre-natal sex selection at both Cairo (1994) and Beijing (1996).11

An Interesting Parallel

1.10 Many of the arguments against the Bill suggested that the Bill was ill conceived because:

 it is difficult to determine that gender selection abortion takes place (evidence

of one concrete case was provided to the Committee);

 that there was no evidence that certain cultural groupings where such a

practice is common were engaging in the gender-selection abortion in Australia (evidence of one case provided); and

 that a restriction on gender selection abortion might restrict women's access to

abortion (the Bill is clear that it is only aimed at Medicare funded gender selection abortions).

An interesting parallel may be drawn between gender selection abortion and Female Genital Mutilation (FGM) where similarities and differences may be noted in legislative and educational approaches:

 it is difficult to determine the prevalence of FGM; 12

 prosecutions are rare; 13 and

 it is practiced among certain cultural groups.

1.11 In the case of FGM a number of educative and legal initiatives have been put into place through the Government’s National Compact on Female Genital Mutilation. There is no ambiguity in the Compact regarding FGM. It states clearly that FGM is unacceptable. The Compact also declares Australia’s commitment to stand by its obligations to the UN, which include taking action to end the practice of FGM for women and girls living in Australia, settling in Australia and throughout the world, who are or may be in the future affected by FGM.14

The commitment is to:

 take action to end the practice of FGM for women and girls;

 living in Australia;

 settling in Australia; and

11 Beijing Platform for Action Chapter VI L. The Girl Child, http://web.unfpa.org/icpd/icpd- programme.cfm#ch4b retrieved 22 June 2013

12 http://www.health.gov.au/internet/ministers/publishing.nsf/Content/mr-yr13-tp-tp027.htm retrieved 22 June 2013

13 http://www.helenkroger.com.au/Parliament/SenateSpeeches/tabid/92/articleType/ArticleView/articleId/ 18/Female-Genital-Mutilation.aspx retrieved 22 June 2013

14 http://www.health.gov.au/internet/ministers/publishing.nsf/Content/mr-yr13-tp-tp027.htm retrieved 22 June 2013

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 throughout the world who are or may be in the future affected by FGM. 15

The National Compact on FGM is unswerving in its commitment: 'We will not excuse or ignore the practice of FGM.'16 It aims to educate migrants and refugees where such practices are culturally acceptable that such a practice is not acceptable in Australia. FGM is illegal in all states and territories, despite the fact that it is difficult to detect.

1.12 In their 11 December 2012 press release entitled 'Gillard Government to act on Female Genital Mutilation in Australia'17 Prime Minister Gillard and Health Minister Plibersek referred to the practice of FGM as 'barbaric' and 'horrific'. The joint statement continues: 'We do not know how widespread this practice is in Australia but we know there have been instances, and anecdotal evidence suggests these are not isolated.'18

1.13 The Prime Minister and Health Minister state that although there was only limited apparently anecdotal evidence that this practice has been occurring in Australia, 'One such procedure in this country is one too many'.19

1.14 The joint statement announced that the government would, on the strength of worldwide condemnation of this practice and 'anecdotal evidence' that it was occurring in Australia, immediately implement the following measures:

 Provide $500,000 in grants to fund organisations to run education and

awareness activities and support change within communities, as we know public education and awareness is key to change.

 New research and data collection on female genital mutilation will be undertaken as a priority. This will help us build the evidence needed to support women and girls affected by female genital mutilation.

 Minister Plibersek will hold a national summit on this subject early next year, bringing together community, health, legal and policing experts to discuss how we can increase awareness and support and reduce incidence in Australia.

 The Attorney-General will review the current legal framework in Australia, and provide advice on whether any changes are required to ensure full protection against female genital mutilation, at home or abroad.20

1.15 It is evident that both FGM and gender selection abortions are abhorrent practices; that both are condemned by the UN and other international bodies; that Australia has made a commitment to oppose both practices.

15 ibid.

16 ibid.

17 http://www.pm.gov.au/press-office/gillard-government-act-female-genital-mutilation-australia retrieved 24 June 2013

18 ibid.

19 ibid.

20 ibid.

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1.16 Furthermore, it is evident that both FGM and gender selection abortions are practiced among certain cultural groups and that there is anecdotal and other evidence of both being practiced in Australia.

1.17 Yet, despite the direct similarities between the two practices one is utterly condemned and the other conveniently ignored.

1.18 I note that the committee has chosen not to make a recommendation on this Bill. Despite this I feel there are a couple of recommendations I would like to make.

Recommendation 1

1.19 That this Bill be passed without amendment or delay.

Recommendation 2

1.20 That in passing this Bill the Senate would call for the Prime Minister and Health Minister to throw their support behind a program of measures to oppose Gender Selection Abortion that would mirror the program they have implemented to oppose Female Genital Mutilation.

Senator John Madigan

Senator for Victoria

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APPENDIX 1

Submissions and Form Letters received by the Committee

1 National Association of Specialist Obstetricians and Gynaecologists 2 Women's Health Victoria 3 Reproductive Choice Australia 4 Name Withheld

5 Name Withheld

6 Mrs Mary Rofe

7 Mr Andrew Jackson 8 Mrs Sabina Prinzen-Wood 9 Mrs Roslyn Heywood 10 Presbyterian Church of Tasmania 11 Dr Timothy Coyle 12 Name Withheld 13 Name Withheld 14 National Alliance of Christian Leaders 15 Name Withheld 16 Mr and Mrs Victor and Crystal Soo 17 Name Withheld 18 Mrs Joan Apthorp 19 Ms Clara Curtis 20 Mr Gavan Duffy 21 Mrs Erica Grace 22 Mrs Ruth Allison 23 Name Withheld 24 Mr Bruce Nickel 25 Ms Adriana Vanderven 26 Mr Ian Kilminster 27 Mrs Judith Lumsdaine 28 Ms Angela Phillips 29 Mr Christopher Stokes 30 Dr Michael Pearcy 31 Mrs Bernadette Duffy 32 Mr Steven Patrick 33 Mrs Suellen Milham 34 Mr Phillip Heyne 35 Mr Michael McAuliff 36 Mr Stephen Stavrinou 37 Mrs Lynette Miller 38 Mr Timothy Bartlett 39 Mrs Samantha Bryan 40 Mr Hudson Watts

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41 Name Withheld 42 Name Withheld 43 Name Withheld 44 Name Withheld 45 Name Withheld 46 Name Withheld 47 Name Withheld 48 Name Withheld 49 Mr Gerard Madden 50 Ms Jasmine Yow 51 Ms Jennifer Madden 52 Mr Lance and Ms Fiona Drum 53 Mr Michael and Ms Leanne Casanova 54 Mr John Kennedy 55 Mr Robert Hayward 56 Ms Kayla Roatch 57 Mr Dave McCarthy 58 Mr Callan Leach 59 Ms Hazel Cooper 60 Mr John Calleja 61 Mr and Mrs Terry and Cheryl Young 62 Mr and Mrs Peter and Diane Newland 63 Ms Beth Burns 64 Ms Marion Isham 65 Confidential 66 Name Withheld 67 Confidential 68 Confidential 69 Ms Rita Joseph 70 Name Withheld 71 Women's Health West 72 Public Health Association of Australia 73 FamilyVoice Australia 74 National Foundation for Australian Women 75 Coalition for the Defence of Human Life 76 Confidential 77 Confidential 78 Confidential 79 Confidential 80 Name Withheld 81 Name Withheld 82 Name Withheld 83 Name Withheld 84 Name Withheld 85 Name Withheld

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86 Name Withheld 87 Name Withheld 88 Name Withheld 89 Name Withheld 90 Name Withheld 91 Name Withheld 92 Name Withheld 93 Name Withheld 94 Mr Kelvin Goodhew 95 Mrs Cherith Nelson-Milnes 96 Mr Peter Dolan 97 Mr Peter Opie 98 Mrs Glennis Mullavey 99 Mrs Caitlin Taylor 100 Mr Matthew Owen 101 Mr Gregory Fraser 102 Ms Alice Palmer 103 Mr Alan Lewis 104 Mr Andrew van Burgel 105 Ms Gail Harrison 106 Dr David Hopkins 107 Mrs Jacqui Paulson 108 Mr John O'Regan 109 Mrs Helen McKenna 110 Mrs Anita Toner 111 Name Withheld 112 Name Withheld 113 Confidential 114 Confidential 115 Name Withheld 116 Rabbinical Council of Victoria 117 Name Withheld 118 Mr Dirk Jackson 119 Pastor Barrie Ryan 120 Ms Helen Gordon 121 Mr Edward and Ms Kathleen Pitt 122 Mr Matthew Williams 123 Mrs Makala Williams 124 Mr Rod Manning 125 Mr Jeremy and Ms Rachel Hopwood 126 Mr Giulio di Somma 127 Mrs Suzanne Strates 128 Mr Fred Bramich 129 Dr and Mrs Christopher and Katharina Hopwood 130 Australian Medical Association

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131 Dr Louis Rutman, Dr Kathy Lewis, Dr Greg Levin and Dr Susie Allanson 132 Natural Surrender Unity-Advocacy-Action (NSUAA) 133 Doctors for the Family 134 Catholic Women's League of Victoria and Wagga Wagga Inc 135 Endeavour Forum Inc 136 Introfish Inc 137 The Royal Australian and New Zealand College of Obstetricians and

Gynaecologists 138 Social Questions Committee on behalf of the Catholic Women's League of Victoria and Wagga Wagga Inc 139 Dr Jereth Kok 140 Clinical Associate Professor John York 141 Mr Michael Sichel 142 Pastor Melanie Lynam 143 Dr Nick and Dr Natalie Blismas 144 Helen Green 145 Dr Mansel Rogerson 146 Rev Warwick Davidson 147 Dr Natalie Bennett 148 Dr Susan Reibel Moore 149 Dr John Moody 150 Dr Marie Tarabay 151 Australian Christian Values Institute 152 Australian Federation for the Family 153 Mrs Nicole Fisher 154 Human Rights for the Unborn, Tasmania 155 Catholic Archdiocese of Sydney 156 Institute for Judaism and Civilization Inc 157 Women's Centre for Health Matters 158 Hellenic Orthodox Community of Parramatta and Districts 159 New South Wales Council for Civil Liberties 160 Children by Choice 161 Salt Shakers 162 Catholic Women's League State of Queensland Inc 163 Name Withheld 164 Liberty Victoria 165 Real Talk Australia 166 Evangelicals for Life 167 YWCA Australia 168 Catholic Archdiocese of Melbourne (The Life, Marriage and Family Office) 169 Wo

men's Forum Australia 170 Social Issues Executive, Anglican Diocese of Sydney 171 Family Planning New South Wales 172 Reformed Resources 173 Catholic Archdiocese of Melbourne (The Office for Justice and Peace)

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174 Dr Maged Peter Mansour, Mrs Lily Mansour and Mr John Mansour 175 Professor Diane Bell 176 Health Consumers Alliance of South Australia Inc 177 Wilberforce Foundation 178 Ms Jane Munro 179 Family Council of Queensland, Inc 180 Dads 4 Kids 181 Ms Melinda Tankard Reist 182 Women's Abortion Action Campaign 183 Ms Josie Nancarrow 184 Rev. Fr Jean Mawal 185 Right to Life (NSW) 186 Australian Christian Lobby 187 Australian Catholic Bishops Conference 188 Right to Life Australia Inc 189 Cherish Life Queensland Inc 190 Women's Legal Service Australia 191 Australian Women Against Violence Alliance 192 Women's Legal Services NSW 193 Catholic Women's League Australia (NSW) Inc, Diocese of Parramatta 194 Knights of the Southern Cross (NSW) Inc 195 Australian Family Association 196 Mr and Mrs Lawrence and Gill Rutherfurd 197 Mr David Forster 198 Mr Joel van der Horst 199 Mrs Anne O'Dwyer 200 Mr Keith Tiller 201 Mr Alan Alford 202 Mr Hendrik and Ms Belinda Terpstra 203 Mr Charles Morton 204 Mrs Linasari Lean 205 Mr John Wright 206 Ms Lesley Parker 207 Mr Jeff Ball 208 Ms Elizabeth McNaughton 209 Mr John Shaw 210 Ms Sheila Shannon 211 Ms Elizabeth Oaten 212 Mr Craig and Ms Jade Marshall 213 Ms Anne Love 214 Ms Kathryn Edwards 215 Ms Hannah Tuton 216 Mrs Robin Madill 217 Ms Rosa Pasquale 218 Mrs Lynelle Robb

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219 Mrs Lyn Saunders 220 Ms Rebekah Chandler 221 Mr Frank Reale 222 Mrs Lisa Wieske 223 Ms Ruth Rismanto 224 Mr Brian Hogan 225 Mrs Marian Watson 226 Mr Nathan Murphy 227 Mrs Trish Inderbitzin 228 Ms Dorothy Bradley 229 Mr Dan King 230 Mr Paul Worthington 231 Ms Carlene Strauss 232 Ms Lorna Robinson 233 Leigh Austin 234 Joan Lewis 235 Dr James Athanasou 236 Ms Merlene O'Malley 237 Name Withheld 238 Name Withheld 239 Ms Karen Webb 240 Ms Stephanie Mitchell 241 Mrs Carol Phillips 242 Mr Steve McNeilly 243 Mr Michael Treacy 244 Right to Life Association (ACT) 245 Name Withheld 246 Life Network Australia 247 Mr Andrew Calder 248 Name Withheld 249 Ms Alexandra Harrison 250 Mrs Sharan Hall 251 Name Withheld 252 Mr Dennis Morrissey 253 Ms Amanda Williamson 254 Mr David Rowsome 255 Name Withheld 256 Ms Nicole King 257 Ms Sophia Cassimatis 258 Confidential 259 Mr Michael Charles 260 Mr Peter MacGinley 261 Mr Matthew Prince 262 Ms Jacqui Halpin 263 Ms Ann Walker

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264 Nives Zerafa 265 Name Withheld 266 Ms Jennifer Wake 267 Esther Dourado 268 Mr Matthew Grinter 269 Mrs Heather Robinson 270 Mr Steve Cruickshank 271 Ms Narelle Christie 272 Mr Peter Watson 273 Maudy Tiemens 274 Ms Margaret and Mr Dunstan Hartley 275 Mrs Rowan Shann 276 Olwyn Shay 277 Mrs Helen Drew 278 Mrs Loraine Twentyman 279 Mr Henk Knol 280 Mr Nick Crowther 281 Mr Melvin Swee Kee Ang 282 Ms Susan McGuire 283 Mrs Victoria Smith 284 Ms Amanda Leaw 285 Ms Fiona Witcomb 286 Ms Kristy Johnston 287 Mr Paul Barnes 288 Ms Carolyn Heyward 289 Ms Anna Cook 290 Ms Kim Furst 291 Mr Joseph Curtis 292 Name Withheld 293 Name Withheld 294 Mr Daniel Secomb 295 Mr David and Ms Taryn Price 296 Mr Leighton and Ms Diana Thew 297 Warnar Spyker 298 Ms Tina Vartis 299 Name Withheld 300 Name Withheld 301 Mr Bradley Taylor 302 Name Withheld 303 Mr Keith Harcus 304 Yvonne and Geraldine Murray 305 Mrs Catharine Seymour 306 Mr Stephen Hatton 307 Name Withheld 308 Mr John Hibble

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309 Mrs Ruth Whale 310 Name Withheld 311 Ms Emma Thompson 312 Mrs Pauline Hatch 313 Name Withheld 314 Mrs Mary and Mr Fred Mauloni 315 Name Withheld 316 Name Withheld 317 Name Withheld 318 Mr Peter Kotsiris 319 Mrs Sarah Backholer 320 Name Withheld 321 Name Withheld 322 Confidential 323 Mr Marcus Anderson 324 Rev Ian Clarkson 325 Name Withheld 326 Mrs Susanna Dunne 327 Mrs Tricia Harding 328 Name Withheld 329 Mrs Kylie Anderson 330 Name Withheld 331 Mr Lyndon Vincent 332 Karin Åkerrén 333 Fr George Liangas 334 Name Withheld 335 Ms Elinora Fragoso 336 Name Withheld 337 Name Withheld 338 Mr James Drougas 339 Name Withheld 340 Dr Noel Weeks 341 Name Withheld 342 Mr Paul McCormack 343 Name Withheld 344 Name Withheld 345 Ms Abigail Valenzuela 346 Ms Carol Jack 347 Ms Ruth Ferguson 348 Ms Carol O'Leary 349 Mr Jason Pelling 350 Mr Dennis Hewitt 351 Mr Earle Mason 352 Ms Helen Curtis 353 Kay Newnham

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354 Ms Michelle Mazzantini 355 Ms Dorothy Long 356 Mr Ross McPhee 357 Mrs Leigh Marvin 358 Mr Jim Hanrahan 359 Ms Gail Vine 360 Mr Peter Evans 361 Mr Nickolai Porublev 362 Mr Levi and Ms Katie Marsh 363 Mr Peter and Ms Margaret Barritt 364 Ms Carol Powell 365 Ms Pia Horan 366 Ms Christine Spicer 367 Miss Marie Bottiell 368 Ms Joan McArthur 369 Ms Audrey Chan 370 Mrs Sheila Harrison 371 Leigh Greatorex 372 Ms Ronda Roy 373 Mr Klaus Clapinski 374 Mr Robin Johnson 375 Liang Seow 376 Ms Mary Paine 377 Mr Euan McDonald 378 Cecily Wilson 379 Mrs Pamela Stead 380 Leslie Clarke 381 Ms Fiona Reeves 382 Ms Pamela van Oploo 383 Ms Andrea Lane 384 Ms Penelope Renner 385 Sr Margaret Duncan 386 Ms Rita Short 387 Ms Jacqueline Ramsey 388 L.M. Morrison 389 Ms Kathryn Sheridan 390 Confidential 391 Mrs Margaret Bonsor 392 Name Withheld 393 Ms Margaret Martin 394 Mr Haydn McCormick 395 Mr Michael and Ms Diane Zerafa 396 Name Withheld 397 Ms Linda Gelding 398 Ms Sue Miller

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399 Name Withheld 400 Name Withheld 401 Name Withheld 402 Ms Sally Keller 403 Name Withheld 404 Name Withheld 405 Name Withheld 406 Dr George Mangan 407 Name Withheld 408 Mrs Tamarin Marchant 409 Name Withheld 410 Name Withheld 411 Name Withheld 412 Mr Tyson King 413 Ms Jenny Smith 414 Mr Mark Rabich 415 Name Withheld 416 Name Withheld 417 Mr Marinos Christofi 418 Name Withheld 419 Mrs Ali Lavis 420 Mr Grant Chandler 421 Name Withheld 422 Confidential 423 Mrs Irene Skinner 424 Dr Terrence Kent 425 Mr Socrates Dokos 426 Confidential 427 Mr Kane Shaw 428 Mr John Tsourdalakis 429 Ms Flora Varitimos 430 Name Withheld 431 Name Withheld 432 Mr Gregory Tall 433 Mr Peter Feltoe 434 Miss Therese Schaefer 435 Mr Brendan Moon 436 Name Withheld 437 Name Withheld 438 Name Withheld 439 Name Withheld 440 Mr Peter Fanous 441 Confidential 442 Name Withheld 443 Mrs Elizabeth Eckhardt

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444 Name Withheld 445 Name Withheld 446 Mrs Maureen Lisbon 447 Mr Miguel Ribeiro 448 Name Withheld 449 Name Withheld 450 Name Withheld 451 Ms Clare Bonner 452 Dr Carole Ford 453 Mr Colin Johnston 454 Name Withheld 455 Name Withheld 456 Mr Simon Taylor 457 Name Withheld 458 Name Withheld 459 Dr Andrew and Mrs Cynthia Lothian 460 Dr Philippa Martyr 461 Mr and Mrs Shann and Jennifer Kellaway 462 Confidential 463 Name Withheld 464 Name Withheld 465 Confidential 466 Mrs Jeanette West 467 Les Ross 468 Mr Rod Vladich 469 Confidential 470 Mr Graham Rose 471 Ms Helen Smith 472 Mr John Casanova 473 Mrs Doreen Gestier 474 Miss Diana Fox 475 Mr James and Ms Patricia Grieshaber 476 Confidential 477 Mr Paul Ritchie 478 Ms Anne O'Brien 479 Ms Bette Lyra 480 Mr Harold Hume 481 Ms Joan Neuendorf 482 Ms Juliette Francis 483 Ms Theresa Coleman 484 Ms Fran McHughes 485 Mr Ben McGinnity 486 Confidential 487 Mr Andrew Campbell 488 Mr Reuben Campbell

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489 Mr Eric Frater 490 Mrs Graham Sofatzis 491 Ms Helena Knox 492 Mrs Fiona Campbell 493 Mr Joshua Anderson 494 Miss Tavia Seymour 495 Name Withheld 496 Dr Eliana Freydel Miller 497 Name Withheld 498 Name Withheld 499 Name Withheld 500 Name Withheld 501 Name Withheld 502 Confidential 503 Confidential 504 Mr Shane and Ms Jane Foreman 505 Mr John Wigg 506 Name Withheld 507 Confidential 508 Confidential 509 Confidential 510 Name Withheld 511 Confidential 512 Confidential 513 Confidential 514 Name Withheld 515 Confidential 516 Confidential 517 Confidential 518 Name Withheld 519 Name Withheld 520 Confidential 521 Confidential 522 Ms Joanne Dilorenzo 523 Confidential 524 Mr Shane Marsh 525 Mrs Carmen Zammit 526 Ms April Schoenmaker 527 Ms Mary Baldwin 528 Mr David Jackson 529 Mr Peter Curtis 530 Robin Sharry 531 Mr Dennis and Ms Ann Outred 532 Ms Jessica Lambert 533 Mr Dominic and Ms Carmel Sorbara

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534 Mr David Perrin 535 Ms Sophia Karatsinidis 536 Ms Victoria Kasapidis 537 Pastor Peter Pellicaan 538 Dr David Squirrell 539 Dr David Roberts 540 Mr David Miller 541 Mr Evangelos Callipolitis 542 Mr Mark Spencer 543 Sister Mary Ruth Bayard 544 Ms Kristy Phanartzis 545 Ms Debbie Pluck 546 Ms Mary Collier 547 Mr John Angelico 548 Ms Sylvia Huxham 549 Mr Brian and Ms Judith Magree 550 Ms Darlene Cox 551 Confidential 552 Mr Trevor Harvey 553 Ms Sandra Caddy 554 Mr Tim Macdonald 555 Ms Barbara Hockley 556 Mr Shawn McLindon 557 Mr John and Ms Maggie O'Keeffe 558 Ms Simone Frankel 559 Mrs Christina Rookes 560 Mr Dwayne Ballast 561 Mr John Morrissey 562 Ms Angela McAllister 563 Ms Evie Parol 564 Mr Kent Hodgson 565 Ms Jacqueline Nair 566 Confidential 567 Confidential 568 Confidential 569 Confidential 570 Confidential 571 Confidential 572 Ms Lacey Shelton 573 Mr Basil Worner 574 Ms Catherine Gordon and Ms Janet Van Haeften 575 Mr Des and Ms Josephine Kenneally 576 Mr Keith Kowald 577 Mr Kevin Begaud 578 Ms Kathleen O'Connell

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579 Ms Christine Taouk 580 Ms June Johnston 581 Ms Noelene Hunt 582 Ms Gwenda Waddington 583 Mr Patrick Koo 584 Ms Philippa deHaan 585 Ms Margaret Jude 586 Robyn Gooden 587 Ms Kara Moseley 588 Mr Garry Davies 589 Ms Elizabeth Ridley 590 Ms Julie James 591 Mr Anthony Bozicevic 592 Mrs Anna Greener 593 Ms Laurian Whyte 594 Ms Louise Zinkel 595 Ronelle Melvill 596 Mr Brian Curtis 597 Ms Anne Marie Smith 598 Mr Patrick Murphy 599 Confidential 600 Ash Belsar 601 Mrs Brenda Harvey 602 Ms Anne Buchan 603 Mr Lynton Taylor 604 Ms Gretchen Wittenmyer 605 Ms Jennifer Avery 606 Confidential 607 Mr Ray and Ms Daisy Peters 608 Ms Mary Pritchett 609 Mr Bruce Lanagford 610 Ms Kathryn Funnell 611 Rev Stefan Slucki 612 Dr Damon Richardson 613 Ms Stella Collins 614 Mrs Julie Roberts 615 Ms Elisa Bentley 616 Ms Patricia Taylor 617 Ms Margaret Guy 618 Ms Janny Dijkman 619 Ms Catherine Carolan 620 Father Blasco Fonseca 621 Ms Janice Burdinat 622 Mr Brendan Powell 623 Ms Madeleine Goiran

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624 Mr Ross Walker 625 Name Withheld 626 Mrs Rose Harrington 627 Mr Patrick Pekin 628 Ms Rebecca Albury 629 Ms Nicole Stockings 630 Dr Robert Pollnitz 631 Rev Les Percy 632 Ms Margaret Farley 633 Mr Mark Buscumb 634 Mr Greg Brien 635 Mr John Woodard 636 Mr Alexander Witham 637 Ms Deb Acason

638 Ms Helen Long 639 Mr and Mrs Nevil and Gloria Knell 640 Mr Ron Powell 641 Mr Jim Lyons 642 Mr Steven Candy 643 Mr Gary Baxter 644 Ms Rhonda Blunt 645 Miss Ivey Panicker 646 Mrs Maureen van der Linden 647 M.J. and G.M. Gonzalez 648 Ms Maryse Usher 649 Mr Wayne Williams 650 Ms Josephine Ansell 651 Mr Gary Morgan 652 Ms Roslyn Marshall 653 Frances Azzopardi 654 Mr Paul de la Garde 655 Spero Katos 656 Denis Colbourn 657 Mrs Jane West 658 Mr Patrick Long 659 Ms Carolyn Campbell 660 Mr David Rees 661 Mr Arnold Joppich 662 Jia Yek

663 Mr Zachary Bavas 664 Mr Ray El Fakhry 665 Mr Chris Peers 666 Terry Harding 667 Mr Lance Jangala 668 Mrs Ruth Cummings

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669 Mrs Ruth Bosveld 670 Mr William Burrell 671 Ms Kate Murphy 672 Mr Christopher Blackburn 673 Mr Peter John Magee 674 Lee Zeakis 675 Mr Brendan Clarke 676 Mr Marcaus Muller 677 Mr Joseph Rillera 678 Mr Roger Valmadre 679 Mr Peter Horton 680 Eong Sow 681 Mr James Wong 682 Mr Luke McCormack 683 Ms Thelma Tantalos 684 Mrs Judith Bond 685 Ms Jeanne Robertson 686 Mr John Kelly 687 Ms Jenny Stephens 688 Mr Sebastian James 689 Ms Janice Hodgson 690 Mr Lou Di Lorenzo 691 Ms Maria O'Connell 692 Mr Richard Jardine 693 Ms Nektaria Agoroudis 694 Ms Litsa Kirkis 695 Mr Steven and Ms Fotini Kalfas 696 Mr Andrew Koureas 697 Mr Con Kefalianos 698 Mrs Alison Stanley 699 Mr Bartley and Ms Betty Phillips 700 Ms Mary Collins 701 Ms Joy Boyiazis 702 Ms Paula Qwek 703 Spiro Georgiou 704 Mr Bill Kirkis 705 Ms Theresa Ford 706 Ms Catriona McKeown 707 Ms Isobel Gifford 708 Mr Keith Savvas 709 Ms Andrea Day 710 Fr Jeremy Krieg 711 Stame George 712 Eleni Samios 713 Lea Sieders

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714 Mr Bill Gioutlou 715 Mr Evan Peters 716 Mr Damian Trebilco 717 Ms Elizabeth Golingi 718 Mr Paul Sheeran 719 Mr Aidan Williams 720 Ms Margaret Kelly 721 Mr Steven Ktenas 722 Mr John Comino 723 Mr Matthew Pearson 724 Ms Helen White 725 Fr Thomas Casanova 726 Ms Katherine Prefol 727 Mr Frankie Conias 728 Dr Greg Roditis 729 Mrs Tina Roditis 730 Ms Margaret Airoldi 731 Mr Denis and Ms Helen Bowman 732 Michele Vieira 733 Ms Margaret Sonnemann 734 Nayia Theodorou 735 Mr Laurence and Ms Beverley Trigg 736 Mr Paul Harrold 737 Mr Peter Baade 738 Ms Brenda Rudolph 739 Ms Evelyn Feltoe 740 Mr Jeffrey Byerley 741 Mr Charles Lewicki 742 Ms Elizabeth Portelli 743 Dr Christina Naylor 744 Mircea and Georgeta Pop 745 Mr Stan Giaouris 746 Name Withheld 747 Ms Veronica Schenck 748 Mr John and Ms Effie Fildissis 749 Mr Theo, Ms Maria, Ms Sophia and Ms Helen Cassimatis 750 Mr Stanislaw Parol 751 Mr Steven Flanagan 752 Mr Arthur, Ms Hilde and Ms Chantelle Kleyn 753 Mr Peter and Ms Kerrie Edwards 754 Mrs Kathrin and Dr Thras Triantopoulos 755 Ms Gina Alexiou 756 Mr Arthur Alexiou 757 Mr Con Katsoulas 758 Ms Michelle Fraser

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759 Mr Michael Karris 760 Mr Frederico Merlo 761 Mr Andrew Zahra 762 Mr Paul and Ms Sandra Koufalas 763 Mr Andrew Stagg 764 Mr and Mrs Bob and Margaret Lineage 765 Mr Arthur Rabavilas 766 Ms Emma Bax 767 Ms Deborah Zahra 768 Moana Raukawa 769 Mrs Joan Blackburn 770 Mr Eric and Ms Sonja Dobbe 771 Ms Julie Lawson 772 Mr James Hayes 773 Ms Emily Hunter 774 Mr Adrian and Ms Donna Bradbury 775 Ms Emily McKenna 776 Mr Simon Craig 777 Ms Shelley Ann Reaney 778 Ms Glenice and Mr Denis Vladich 779 Mr Jeffrey Reaney 780 Ms Anna Castrissios 781 Ms Suza Petrova 782 Mr Michael Evans 783 Mr Leo Schoof 784 Ms Heather Kraus 785 Sofroni Eglezos 786 Mr Nick Williams 787 Ms Paula Giaouris 788 Ms Loretta Coffey 789 Mr Gareth and Ms Jessica Stafford 790 Mr Snjezan Bilic 791 Ms Maria Michael 792 Mr Nicholas Zafiropoulos 793 Ms Veronica Herrera 794 Mr Peter Phillips 795 Ms Marie Slyth 796 Mr Stefan Kos 797 Ms Susan Kirk 798 Mr Rob and Ms Anthea Patterson 799 Ms Johanna Sawyer 800 Ms Moira Kirkwood 801 Ms Nichita Gavrilescu 802 Ms Vicky Kotsiris 803 Ms Margaret Chambers

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804 Ms Kellie Cook 805 Eris Smyth 806 Mr Peter Stokes 807 Ms Stephanie Kasapidis 808 Mr Adrian Nyhuis 809 Ms Madeleine Swart 810 Brother Francis Donohoe 811 Mr Hugh Thomas 812 Mr Marc Venter 813 Confidential 814 Ms Karen Vesper 815 Ms Margaret Colman 816 T K Colman 817 Mr Neil and Ms Barbara Harvey 818 Mr Dimitrios Kasapidis 819 Ms Helen Samootin 820 Ms Elizabeth Linden 821 Mrs Marie Srdarev 822 Frances McKenna 823 Mr Philip and Ms Lynnette Dornan 824 Warwick, Kathy, Cole, Jesse and Isaiah Vincent 825 Mr Jeff Eacersall 826 Ms Hannah McKerrow 827 Mrs Imelda Mary Aslett 828 Ms Louise Bayley 829 Ms Jennifer Brenner 830 Mr Robert Stove 831 Ms Angela Hoggett 832 Ms Manuela Moore 833 Ms Anna Matuszek 834 Mr Greg Wallace 835 Mr Joseph Devitt 836 Ms Karen Harrison 837 Lesley Radbron 838 Dr David and Ms Isobel Gawler 839 Mrs Christine Tirimacco 840 Ms Therese McLinden 841 Ms Cynthia Arndt 842 Erophylia Castrissios 843 Mrs Heather Cambridge 844 Mr Ted Cameron 845 Ms Teresa Strach 846 Mr Peter Bartolo 847 Ms Kathleen Mary Pearce 848 Mr Stanislaus Hurley

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849 Ms Fotiny Solis 850 Dr John Williams 851 Mr Mostyn George Edwards 852 Ms Jane Suranyi 853 Catholic Women's League Australia 854 Name Withheld 855 Mr Kevin Butler 856 Mr Ronald McMillan 857 Women's Electoral Lobby (Australia) 858 Confidential 859 Mr Bill Tsoukalas 860 A. Deverala 861 Mr Brett Bylsma 862 Mrs Natalie Lorenz 863 Name Withheld 864 Name Withheld 865 Confidential 866 Dr David van Gend 867 RV and PJ Barbero 868 Mr Roger Marks 869 Mr Ian and Ms Heather Hartley 870 Mrs Mieke deVries 871 Mr John Higginson 872 Mr Peter Murray 873 Mrs HC Saibu 874 Mr Benedict Curtis 875 Ms Anna Magdas 876 Ms Bronwyn Binns 877 Ms Christina Makrides 878 Mr Clive Beilby 879 Name Withheld 880 Name Withheld 881 Mr Ian Angliss 882 Ms Jacqueline Sarros 883 Ms Jane Ruthy 884 Ms Joanne Bourtsouklis 885 Mr John Skoubourdis 886 Ms Josie Whitehead 887 Name Withheld 888 Mr Matthew Mulvaney 889 Mr Michael Sloan 890 Name Withheld 891 Name Withheld 892 Myree Waters 893 Name Withheld

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894 Name Withheld 895 Mr Peter Sergis 896 Mr Philip Peterson 897 Name Withheld 898 Name Withheld 899 Mr Steve Young 900 Mr Victor Malikoff 901 Name Withheld 902 Mr Peter Filladites 903 Family Council of Victoria 904 Ms Pauline Hayes 905 Ms Suzanne Baker 906 Mrs Glenda Furness 907 Mrs Patricia Ride 908 Mr John and Ms Jannet Wieske 909 Confidential 910 Ms Melanie Zambelli 911 Name Withheld 912 Ms Fiona Arnott 913 Mr Michael and Ms Anneliese Sullivan 914 Name Withheld 915 Name Withheld 916 Ms Pam Finch 917 Jzarmazin Marchant 918 Ms Lyn Pohlmann 919 Mataele Taufa

Form Letters received

1 Example of form letter 1. Received from 4 individuals (this number includes variations of the form letter)

2 Example of form letter 2. Received from 13 individuals (this number includes variations of the form letter)

3 Example of form letter 3. Received from 5 individuals (this number includes variations of the form letter)

4 Example of form letter 4. Received from 138 individuals (this number includes variations of the form letter)

5 Example of form letter 5. Received from 79 individuals (this number includes variations of the form letter)

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The Senate

Finance and Public Administration

Legislation Committee

Parliamentary Service Amendment Bill 2012

February 2013

277

ii

© Commonwealth of Australia 2013

ISBN 978-1-74229-745-3

Senate Finance and Public Ad

ministration Committee Secretariat:

Ms Christine McDonald (Secretary)

Dr Jon Bell (Principal Research Officer)

Ms Margaret Cahill (Research Officer)

Ms Marina Katic (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: f

pa.sen@aph.gov.au

Internet:http://aph.gov.au/Parliamentary_Business/Committees/Senate_Commit tees?url=fapa ctte/index.htm

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

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MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair ALP, Tasmania

Senator Scott Ryan (Deputy Chair) LP, Victoria

Senator Richard Di Natale AG, Victoria

Senator the Hon. John Faulkner ALP, New South Wales

Senator Arthur Sinodinos LP, New South Wales

Senator the Hon. Ursula Stephens ALP, New South Wales

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TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

Parliamentary Service Amendment Bill 2012 ........................................................ 1

Introduction ............................................................................................................ 1

Conduct of inquiry .................................................................................................. 1

Overview of the Bill ............................................................................................... 1

Comparison of provisions of the Parliamentary Service Amendment Bill 2012 with the Public Service Amendment Bill 2012 ...................................................... 4

Other matters raise

d .............................................................................................. 15

Conclusion ............................................................................................................ 17

APPENDIX 1 ..................................................................................................... 19

Submissions received by the Committee .............................................................. 19

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Parliamentary Service Amendment Bill 2012

Introduction

1.1 On 29 November 2012, on the recommendation of the Senate Selection of Bills Committee, the Senate referred the Parliamentary Service Amendment Bill 2012 (the Bill) to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 5 February 2013. The reason for referral was to compare the provisions of the Bill with the Public Service Amendment Bill 2012.1

Conduct of inquiry

1.2 The inquiry was advertised in The Australian on 5 December 2012 and through the Internet.

1.3 The committee received four submissions relating to the Bill and these are listed at Appendix 1. The submissions may be accessed through the committee's website at: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=fapa_ct te/psa bill2012/submissions.htm

1.4 The committee did not hold a public hearing for this inquiry.

Overview of the Bill

Purpose of the Bill

1.5 The Bill proposes to amend the Parliamentary Service Act 1999 (ParlS Act) to reflect, where relevant to the Parliamentary Service, those changes to the Public Service Act 1999 (PubS Act) which are contained in the Public Service Amendment Bill 2012 (PubS Bill). The proposed amendments will maintain alignment of the two services. The Bill also contains a small number of amendments relating to the Parliamentary Service only; amendments to bring the ParlS Act into alignment with existing provisions of the PubS Act; and amendments to clarify existing sections of the ParlS Act where necessary.

1.6 The President

of the Senate, Senator the Hon. John Hogg, in his second reading speech stated that the Bill:

…ensures that the Parliamentary Service will continue to provide professional support of the highest calibre to all parliamentarians, independent of the executive government of the day.

In a number of sections, provisions have been strengthened and clarified to ensure that this continues. A number of items have been clarified and, where appropriate, brought into line with the revised Public Service Bill.

1 Senate Selection of Bills Committee, Report No.16 of 2012, Appendix 13, 29 November 2012.

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All parliamentarians depend on a professional, non-partisan parliamentary service. After more than a decade since the Parliamentary Service was first created, this bill will ensure that the service can continue to provide a high level of support and advice which will ultimately benefit the wider Australian community.2

Background to the Bill

1.7 As noted by the President, the Parliamentary Service was created over a decade ago. In 1999, a new Public Service Act was passed to replace the Public Service Act 1922. At that time, it was considered that the Parliamentary Service should be established by its own legislation. The Clerk of the Senate noted that 'separate legislation was seen as an important recognition of the independence of the Parliament from the executive government'.3 The ParlS Act was passed with provisions following, as far as possible, the provisions of the new PubS Act but reflecting the unique character of the Parliamentary Service and its differing role in serving the Parliament. The Clerk of the Senate noted:

The principal area of commonality between the two services is the employment framework, while the principal differences are in the orientation and values of the two services and the independence of the various statutory offices created. The independence of such offices as the Clerks and the Parliamentary Librarian, in turn, reflects the independence of the Houses and the constitutional functions of members of Parliament.4

1.8 In March 2010, the Advisory Group on Reform of Australian Government Administration published the report of its review of the Australian Public Service (APS) entitled Ahead of the game: Blueprint for the reform of Australian Government administration. The report outlined a reform agenda to strengthen APS performance and identified four components of a high-performing public service as:

 meeting the needs of citizens;

 providing strong leadership and strategic direction;

 containing a highly capable workforce; and

 operating efficiently and at a consistently high standard.5

1.9 The Blueprint report recommended nine interdependent reforms, supported by 28 specific action areas, to provide a strategy to achieve a high performing APS. On

2 Senator the Hon. John Hogg, President of the Senate, Senate Hansard, 28 November 2012, p. 10077.

3 Clerk of the Senate, Submission 1, p. 1.

4 Submission 1, p. 2.

5 Advisory Group on Reform of Australian Government Administration, Ahead of the game: Blueprint for the reform of Australian Government administration, 2010, pp viii-ix.

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8 May 2010, the Government accepted all of the recommendations of the report.6 The PubS Bill, which passed the House of Representatives on 20 August 2012 and was introduced into the Senate on 22 August 2012, amends the PubS Act to implement recommendations of the report which require legislative change as well additional amendments including whistleblower provisions.

1.10 The Bill was introduced in the Senate on 28 November 2012 and, as noted above, the Bill amends the ParlS Act to reflect, as far as it is relevant to the Parliamentary Service, some of the proposed changes contained in the PubS Bill. The committee notes that the Bill also contains a small number of proposed amendments which are not directly related to the PubS Bill changes. The Bill was developed jointly by the Parliamentary Service departments (prior to the establishment of the Parliamentary Budget Office) in consultation with the Parliamentary Service Commissioner.7

Provisions of the Bill

1.11 The Explanatory Memorandum (EM) to the Bill provides a detailed summary of the proposed amendments, which include:

 strengthening the Parl

iamentary Service Values and Parliamentary Service Code of Conduct, and the establishment of a set of Employment Principles for the Parliamentary Service;

 inclusion of a statement setting out the role of the Parliamentary Service;

 revision of the role for the Senior Executive Service and expansion of the role and responsibilities of Secretaries;

 establishment of provisions for making, and dealing with, whistleblower

reports;

 clarifying that the Parliamentary Service Merit Protection Commissioner

(ParlS MPC) will be able to personally conduct a review of a Parliamentary Service action;

 introduction of new provisions for the protection of information relating to the Parliamentary Service Commissioner's and ParlS MPC's functions, including protections for a Secretary or Parliamentary Service employee who provides information in relation to those functions;

 moving the provisions relating to immunity from suit for the Parliamentary

Service Commissioner and the ParlS MPC from determinations to the ParlS Act;

6 The Hon. Kevin Rudd, MP, Prime Minister and Senator the Hon. Kim Carr, Minister for Innovation, Industry, Science and Research, Joint media release, 8 May 2010.

7 Submission 1, p. 1; Department of the House of Representatives, Department of Parliamentary Services and Parliamentary Budget Office, Submission 2, p. 1.

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 amending relevant provisions to reflect the requirements of the Legislative

Instruments Act 2003;

 revision of provisions dealing with acting arrangements for statutory office holders;

 enabling the Parliamentary Service Commissioner and the ParlS MPC to delegate powers and functions;

 enabling the Presiding Officers' determinations to vary the scope or application of the Parliamentary Service Values and Parliamentary Service Employment Principles; and

 miscellaneous amendments which update, clarify and strengthen existing, and remove redundant provisions, and remove ambiguity.

Financial impact and regulation impact

1.12 The financial impact statement included in the EM states that the proposed amendments in the Bill 'are either cost-neutral or are expected to be met from the existing resources of the parliamentary departments'.8

1.13 The EM advises that no regulation impact statement is required for the Bill.9

Statement of compatibility with human rights

1.14 In accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the EM includes a statement of the Bill's compatibility with human rights and freedoms recognised or declared in relevant international instruments. This statement includes a comprehensive discussion of the human rights implications of the Bill and concludes that:

This Bill is compatible with human rights because the Bill promotes a number of human rights and, to the extent that the Bill limits human rights, it does so in a reasonable, necessary and proportionate way.10

Comparison of provisions of the Parliamentary Service Amendment Bill 2012 with the Public Service Amendment Bill 2012

Scrutiny of Bills Committee

1.15 The Bill was introduced in the Senate eight months after the PubS Bill was introduced and after amendments were made to the PubS Bill in the House of Representatives. The Senate Scrutiny of Bills Committee, in its Fifth and Twelfth Reports of 2012, commented on provisions of the PubS Bill. The Clerk of the Senate

8 Explanatory Memorandum, p. 3.

9 Explanatory Memorandum, p. 3.

10 Explanatory Memorandum, p. 8.

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noted that the parliamentary departments had the benefit of the comments of the Scrutiny of Bills Committee in the preparing explanatory materials for the ParlS Bill for approval by the Presiding Officers. The Clerk stated that consideration had been given to addressing some other matters in the ParlS Bill, but the Bill eventually proceeded without them. The Clerk concluded:

It therefore covers the same territory as the PubS Bill, but the opportunity has been taken to provide a more comprehensive explanatory memorandum in an attempt to address the issues raised...11

1.16 The Scrutiny of Bills Committee examination of the PubS Bill pointed, in its Fifth Report, to concerns about inappropriate delegation of legislative power in relation to Items 70, 75, 76 and 79 and, in its Twelfth Report, the retrospective effect of Item 44 of Schedule 1 of the PubS Bill. The following provides an outline of the concerns raised and the response from the Minister.

Inappropriate delegation of legislative power

1.17 Item 70 of the PubS Bill inserts new Part 10A into the PubS Act that provides for the protection of information provisions relating to the Public Service Commissioner's and the Public Service Merit Protection Commissioner's functions. The Scrutiny of Bills Committee raised concerns that under proposed section 72E regulations may authorise the use or disclosure of personal information. The EM to the PubS Bill notes that the circumstances for the release of such information are authorised by law for the purposes of the Privacy Act 1988.12 The Scrutiny of Bills Committee was concerned with the delegation of legislative power in this provision and sought advice as to why the primary legislation could not deal with this issue.

1.18 In responding to this concern, the Minister noted that disclosure of personal information in specific circumstances is authorised by regulations under current section 76 of the PubS Act. The proposed new section 72E, inserted by Item 70, largely replicates section 76 and also broadens the regulation-making provision to encompass regulations authorising the 'use' as well as the 'disclosure' of personal information in specific circumstances.13 The Minister further elaborated on why regulations were appropriate in specifying the circumstances for the use and disclosure of personal information including that the provision could be amended more easily by the Parliament and provide flexibility to deal with unforseen needs more effectively than if these provisions were in the primary legislation.14

11 Submission 1, p. 3.

12 Public Service Amendment Bill 2012, Explanatory Memorandum, p. 32.

13 Senate Standing Committee for the Scrutiny of Bills, Fifth Report of 2012, 9 May 2012, p. 186.

14 Senate Standing Committee for the Scrutiny of Bills, Fifth Report of 2012, 9 May 2012, pp 186-187.

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1.19 Items 75, 76 and 79 contain notes to clarify that the disallowance and sunsetting provisions of legislative instruments do not apply to the legislative instruments referred to. As the explanatory memorandum did not address why this is appropriate, advice was sought by the Scrutiny of Bills Committee. The Minister responded that the instruments referred to in those Items are all currently exempt from the disallowance and sunsetting provisions of the Legislative Instruments Act and the inclusion of these notes is 'simply intended to clarify the current situation by including cross references to the relevant provisions' of the Legislative Instruments Act.15

1.20 The Scrutiny of Bills Committee requested that key information relating to Items 70, 75, 76 and 79 be included in the EM.

Retrospective effect

1.21 The Scrutiny of Bills Committee addressed the retrospective effect of Item 44 of Schedule 1 of the PubS Bill in its Twelfth Report. This item inserts proposed subsection 15(2A) into the PubS Act to make it a breach of the Code of Conduct for an APS employee to fail to 'behave honestly and with integrity' before being engaged as an APS employee in connection with the person's engagement. The proscribed conduct includes providing false or misleading information and wilfully failing to disclose relevant information. The EM to the PubS Bill notes that this provision is intended to be dealt with in the same way as a suspected breach of the Code of Conduct.16

1.22 The Scrutiny of Bills Committee commented that the 'policy justification for the proposed requirement is apparent to the Committee', but it was concerned that the provision could have an unfair detrimental retrospective effect. In particular, that conduct that did not amount to a breach of the code at the time of a person's engagement as an APS employee may, by the operation of proposed subsection 15(2A), be taken to be a breach of the code. The Scrutiny of Bills Committee concluded 'thus sanctions for a breach of the code may be imposed on the basis of an obligation which was not part of the code at the time of the impugned behaviour'. Advice was sought from the Minister as to the justification for applying this requirement retrospectively as this matter was not addressed in the EM.17

1.23 The Minister responded that it was:

It is essential to the delivery of government services that the public has trust in the public service and confidence in the way public servants exercise the authority given to them by the Government on behalf of the public. Hence, the standards of conduct and character expected of APS employees are high. In this regard included within section 13 of the Public Service Act 1999 is the requirement to behave with honesty and integrity in the course

15 Senate Standing Committee for the Scrutiny of Bills, Fifth Report of 2012, 9 May 2012, p. 188.

16 Public Service Amendment Bill 2012, Explanatory Memorandum, p. 23.

17 Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2012, p. 427.

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of APS employment and, in section 10 of that Act, to demonstrate the highest ethical standards.

Given that, there is no strong argument to protect current employees of the APS who have attained that employment through an act of dishonesty from an action under the Code of Conduct.18

1.24 The Minister noted that the proposed provision is also consistent with elements of the Criminal Code and concluded that 'it would be extraordinary for an employee to be able to be found guilty of a criminal offence for providing false or misleading information on recruitment, while an agency head is unable to take misconduct action for the same reason'.19

1.25 The Minister also advised that additional material describing the justification for, and scope of, retrospectivity of the proposed provision would be included in the EM to the PubS Bill.20

1.26 Notwithstanding the Minister's detailed response, the Scrutiny of Bills Committee remained concerned about the retrospective operation of this provision. While acknowledging the importance of public confidence in the integrity of APS employees, the Scrutiny of Bills Committee maintained the view that:

…neither the belief that impugned conduct was or should have been recognised as inappropriate at the time of the conduct, nor the possible applicability of criminal offences concerning the provision of false or misleading statements to the Commonwealth, are sufficient reasons to retrospectively impose an additional penalty.21

1.27 The committee notes that the matters raised by the Scrutiny of Bills Committee have been addressed, where applicable, in the EM to the Bill. The reasoning for the application of retrospectivity for Item 30 of Schedule 1 of the ParlS Bill (the equivalent provision to Item 44 of the PubS Bill) is provided in the EM.22 The provisions of Item 70 of the PubS Bill are reflected in Item 44 of the Bill. Item 44 provides that the Presiding Officers' determinations may specify the circumstances in which personal information may be used or disclosed. The EM to the Bill provides an explanation of why delegated legislation is considered an appropriate framework for the handling of personal information.23

1.28 Item 75 of the PubS Bill has no direct counterpart in the Bill while Items 51 and 53 of the Bill make similar clarifications to those contained in Items 76 and 79 of

18 Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2012, p. 428.

19 Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2012, pp 428-429.

20 Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2012, p. 429.

21 Senate Standing Committee for the Scrutiny of Bills, Twelfth Report of 2012, p. 430.

22 Explanatory Memorandum, pp 18-19.

23 Explanatory Memorandum, p. 29.

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the PubS Bill. A note is provided in the Bill at the end of the relevant subsection to indicate that the Classification Rules/instruments made under that subsection are not subject to disallowance and sunsetting provisions under the Legislative Instruments Act. The EM to the Bill provides further explanation of the notes.24

Comparison of the bills

1.29 In comparing the bills, the committee notes that many of the provisions of the PubS Bill are reflected in the Bill. However, there are a range of provisions in the Bill which are not reflected in the PubS Bill as the provisions:

 relate specially to the Parliamentary Service;

 were included in earlier amendments to the Public Service Act and are now being inserted in the ParlS Act; and

 clarify existing provisions of the ParlS Act.

1.30 There are also a range of provisions contained in the PubS Bill which are not replicated in the Bill including provisions relating to transitional arrangements for the PubS Bill. The following discussion highlights the more significant matters raised in submissions which compared the provisions of Schedule 1 of the Bill with the PubS Bill.

Provisions in the Bill not reflected in the Public Service Amendment Bill

1.31 Part 12, Items 56-67, of the Bill does not reflect provisions in the PubS Bill. Part 12 repeals provisions dealing with acting arrangements for statutory office holders under the ParlS Act. Acting appointments will continue to be authorised under the ParlS Act but the rules for such appointments are already contained in the Acts Interpretation Act 1901 and have general application. The proposed amendment inserts a cross reference to the Acts Interpretation Act. The offices concerned are the Acting Parliamentary Service Commissioner, the Acting ParlS MPC, Acting Secretary, Acting Parliamentary Librarian and Acting Parliamentary Budget Officer. Submissions noted that similar amendments have already been made to the PubS Act and that this approach reflected a more efficient drafting approach.25

1.32 The Bill also contains miscellaneous amendments which are not reflected in the PubS Bill, but are required to ensure consistency with relevant sections of the PubS Act. Item 68 provides for an extension of the definition of Parliamentary Service employee to include persons moved to the Parliamentary Service under section 72 of the PubS Act, and provides consistency with the existing definition of 'APS employee' in the PubS Act. Item 76 of the Bill extends to the Parliamentary Librarian the provisions for forfeiture of non-Commonwealth remuneration for performing the

24 Explanatory Memorandum, p. 32.

25 Submission 1, p. 4; Submission 2, p. 11, Parliamentary Service Commissioner, Submission 3, p. 6.

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duties of a Parliamentary Service employee, and rectifies a drafting omission from the ParlS Act.26

Provisions in the Public Service Amendment Bill not reflected in the Bill

1.33 The PubS Bill contains a number of provisions which are not replicated in the Bill and include:

 Annual review of performance of secretaries: Item 2 of the PubS Bill provides

for an annual review of the performance of a secretary in the APS. No similar provision is included in the ParlS Bill for a similar annual review for secretaries in the Parliamentary Service;27

 Secretaries Board: Items 3 and 4 of the PubS Bill establishes the Secretaries Board to replace the existing Management Advisory Committee and provides for a range of stewardship, leadership and development functions for the APS. The Bill does not provide for a similar body for the Parliamentary Service 'in recognition of the different constitutional status of that service and the independence of the two Houses';28

 Special Commissioner: Items 25 and 26 of the PubS Bill inserts provisions for

the appointment of Special Commissioners by the Governor-General to assist the Public Service Commissioner in undertaking specified systems review or special reviews. Such reviews are not proposed for the Parliamentary Service as 'there is no comparable requirement…given its small size relative to the public service';29

 Machinery of government changes: Items 64-69 of the PubS Bill insert

provisions relating to machinery of government changes which are not applicable to the Parliamentary Service;30

 Repeal of the Public Employment (Consequential and Transitional)

Amendment Act 1999: This Act is not relevant to the Parliamentary Service;31 and

 Amendment of other Acts: Schedule 3 of the PubS Bill amends a number of the Acts which do not appear to be relevant to the Parliamentary service.32

26 Submission 1, p. 9; Submission 2, pp 11-12; Submission 3, pp 6-7.

27 Submission 3, p. 1.

28 Submission 1, p. 5.

29 Submission 1, p. 5.

30 Submission 1, p. 5.

31 Submission 1, p. 5.

32 Submission 1, p. 5.

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Provisions in the Bill comparable to provisions in the PubS Bill

Secretaries and Senior Executive Service

1.34 Part 1 of Schedule 1 of the Bill expands the description of the roles and responsibilities of secretaries in the Parliamentary Service. It is comparable to Item 1 of the PubS Bill but has been adapted to the Parliamentary Service to reflect the principle that the Parliamentary departments serve the Parliament rather than the Executive Government.33 The equivalent item in the PubS Bill also includes provisions dealing with appointments and termination of secretaries in the APS to provide a role for the Governor-General. As Secretaries of Parliamentary departments are appointed and terminated by the Presiding Officers, the current ParlS Act remains unchanged in this regard.34

1.35 Part 2 of Schedule 1 of the Bill expands the definition of Senior Executive Service (SES) role to include strategic leadership of the highest quality and the promotion and cooperation within and between departments. Part 2 also clarifies the application of section 37 of the ParlS Act, which provides a framework for incentive to retire to Parliamentary Service SES employees whether or not they have reached minimum retiring age, reflecting Schedule 1, Part 3 of the PubS Bill.35

Parliamentary Service Commissioner and Parliamentary Service Merit Protection Commissioner

1.36 Part 3 of Schedule 1 of the Bill, provides additional functions for the Parliamentary Service Commissioner:

 to inquire into whistleblower reports after notifying the Presiding Officer;

 other functions as are conferred on the Commissioner by the Act, the

determinations or any other law; and

 anything incidental to or conducive to performance of any of the

Commissioner's functions.

1.37 These provisions are similar to those provided for in Part 4 of the PubS Bill which expand the role of the Public Service Commissioner. However, the proposed changes under the PubS Bill are more extensive than those contained in the Bill, and include the power for the Public Service Commissioner to conduct system reviews or special reviews at the direction of the Prime Minister, and allow the Public Service Commissioner to inquire into an alleged breach of the Code of Conduct by an agency head, and more generally, allowing the Prime Minister to request that a breach of the Code be investigated.36 It was noted in submissions that much of the new framework

33 Submission 1, p. 6; Submission 2, p. 4; Submission 3, p. 1.

34 Submission 2, p. 4; Submission 3, p. 1.

35 Submission 1, p. 6; Submission 2, p. 5; Submission 3, p. 1.

36 Submission 1, pp 6-7.

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for the Public Service Commissioner contained in the PubS Bill is not required/appropriate for the Parliamentary Service Commissioner.37 Thus, as is currently the case, the functions of the two commissioners under the amended provisions will not be identical.38 The Clerk of the Senate further noted that 'the existing Parliamentary Service Act already provides widely-framed functions for the Parliamentary Service Commissioner'.39

1.38 Items 8 and 9 of Schedule 1 of the Bill enable the Parliamentary Service Commissioner and the ParlS MPC to delegate certain powers and functions. These provisions are bro

adly consistent with Item 23 of the PS Bill with respect to the Public Service Commissioner, and with existing provisions in the PubS Act in respect to the Public Service Merit Protection Commissioner.40

Parliamentary Service values and employment principles

1.39 Part 4 of Schedule 1 of the Bill amends the Parliamentary Service Values to replace the existing 15 values with a more concise set of five values which provide that the Parliamentary Service is committed to service, is ethical, is respectful, is accountable and is impartial. Part 4 also provides a statement of the role of the Parliamentary Service in serving the Parliament. The revised Parliamentary Service Values are consistent with those contained in Item 28 of the PS Bill with some variation to reflect the different roles of the two services.41

1.40 The introduction of a set of Parliamentary Service Employment Principles in Item 15 of the Bill which incorporate a number of the existing Values, to govern employment in the Parliamentary Service, replicates the APS Employment Principles contained in Item 28 of the PubS Bill.42

1.41 Item 16 of the Bill amends section 11 of the ParlS Act and adds new section 11A to enable (rather than require) the Parliamentary Service Commissioner to give advice to the Presiding Officers on the Values and to enable (rather than require) the Presiding Officers to make determinations on the Values. This amendment reflects Item 29 of the PubS Bill which makes the Public Service Commissioner's directions on the Values discretionary, rather than mandatory. Item 16 also allows the Presiding Officers to make determinations to vary the scope or application of the Values and Employment Principles. This change will reflect an existing power of the Public Service Commissioner.43

37 Submission 2, p. 5.

38 Submission 3, p. 2.

39 Submission 1, p. 7.

40 Submission 3, p. 2.

41 Submission 1, p. 7; Submission 2, p. 6; Submission 3, p. 3.

42 Submission 1, p. 7; Submission 2, p. 6; Submission 3, p. 3.

43 Submission 2, p. 7.

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Code of Conduct

1.42 Both Bills contain a number of parallel amendments relating to the Code of Conduct. Item 23 of the Bill replicates Item 37 of the PubS Bill by broadening the application of the first four elements of the Code of Conduct by amending those elements to apply where there is a 'connection with' employee's employment rather than in 'the course of' their employment.44

1.43 Item 24 of the Bill is consistent with Item 38 of the PubS Bill and adds the requirement that Parliamentary Service employees uphold the integrity and good reputation of their department and the uphold the new Parliamentary Service Employment Principles, in addition to the existing requirement under subsection 13(11) to behave in a way that upholds the integrity and good reputation of the Parliamentary Service and the Parliamentary Service Values.45

1.44 Both Bills clarify the application of the Code of Conduct to include statutory office holders, in addition to Secretaries and Agency Heads. In the case of the Parliamentary Service, this would include the Parliamentary Librarian. Items 25 and 26 of the Bill reflect Items 39 and 40 of the PubS Bill respectively in this regard.46

1.45 Section 20 of the ParlS Act, dealing with general directions to Secretaries, is amended by Item 31 of the Bill which clarifies that a Secretary is not subject to direction by the Presiding Officers in relation to matters concerning breaches of the Code of conduct and whistleblower reports. This amendment reflects Item 45 of the PubS Bill.47

1.46 Items 32 and 33 of the Bill will add to the ParlS MPC functions the ability to conduct a Code of Conduct investigation at the request of a Secretary and with the agreement of the Parliamentary Service employee, or former employee. The supporting provisions for this amendment will require the ParlS MPC to establish procedures for inquiry and may include different provisions for different categories of employees. These proposed changes are consistent with Items 46 and 47 of the PubS Bill.48

1.47 As discussed above, Item 30 of the Bill substantially reflects Item 44 of the PubS Bill to allow for action to be taken against a Parliamentary Service employee or former employee, who may have knowingly provided false or misleading information, wilfully failed to disclose relevant information, or otherwise failed to behave honestly and with integrity in connection with engagement as a Parliamentary Service

44 Submission 2, p. 7; Submission 3, p. 3.

45 Submission 2, pp 7-8; Submission 3, p. 3.

46 Submission 2, p. 8; Submission 3, p. 4.

47 Submission 2, p. 8; Submission 3, p. 4.

48 Submission 2, p. 8; Submission 3, p. 4.

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employee. The retrospective application of this amendment in the PubS Bill raised concern from the Scrutiny of Bills Committee and the Minister subsequently amended the PubS Bill's EM to address those concerns. The Bill's EM includes a justification for the retrospectivity of the proposed provision:

When enacted, this provision will cover all current and former Parliamentary Service employees and will apply to conduct which is alleged to have occurred before or after the commencement of time of the provision. This element of retrospectivity is necessary in light of the serious nature of the proscribed conduct. It is imperative that Senators, Members and the public have confidence in the way Parliamentary Service employees carry out their duties, and the standards of conduct expected of a Parliamentary Service employee are correspondingly high.

Given this, it is appropriate that this provision operate to apply to existing Parliamentary Service employees who may have acted dishonestly or without integrity during the employment process. Noting the current and long-standing standards required of a Parliamentary Service employee (see section 10 and section 13 of the Act), it would be anomalous to protect current employees of the Parliamentary Service who had attained their employment through dishonesty from action under the Code of Conduct. Further, this provision is consistent with section 137.1 of the Criminal Code Act 1995, which provides that it is an offence for a person to provide false or misleading statements to the Commonwealth. It would seem incongruous for an employee to be able to be found guilty of a criminal offence for providing false or misleading information during his or her recruitment process, but for the head of a parliamentary department to be unable to take action for the same reason under the Code of Conduct. In practice, it is likely that the proposed provision will affect only a limited number of employees, and it is consistent with changes made to the framework for the Australian Public Service in the PS Bill.49

1.48 The Clerk of the Senate reiterated 'the element of retrospectivity is necessary to make sure that action can be taken in respect of the serious nature of the alleged conduct'.50

Whistleblower reports

1.49 Items 37 to 39 revise the provisions for receiving and dealing with whistleblower reports and substantially reflect Items 52 to 54 of the PubS Bill.51 These provisions provide for the Secretary to establish procedures for whistleblower reports.

They also provide that Presiding Officers' determinations may prescribe procedures for a Parliamentary Service employee to make a whistleblower report to the Parliamentary Service Commissioner or the ParlS MPC, or a person authorised by

49 Explanatory Memorandum, pp 18-19.

50 Submission 1, p. 7.

51 Submission 1, p. 8; Submission 2, p. 9; Submission 3, p. 4.

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either to receive such a report, and provide for discretion to decline to conduct a whistleblower inquiry.52

Review of actions

1.50 The proposed amendment under Item 40 of the Bill allows the ParlS MPC to review a Parliamentary Service action personally. Currently, only a person nominated by the ParlS MPC or a three member committee may conduct such a review. This amendment reflects Item 55 of the PubS Bill.53 The PubS Bill also provides a further amendment to this section of the PubS Act to expand the definition of an 'APS action' to include action by the Public Service Commissioner when the Public Service Merit Protection Commissioner is inquiring into whether a person has breached the APS Code of Conduct.54

Non-ongoing employees

1.51 Items 41 to 43 of the Bill make minor changes to provisions in the ParlS Act dealing with non-ongoing employment and replicate Items 61 to 63 of the PubS Bill. The Clerk of the Senate in her submission notes that, although the drafting approach is different, the intention of the proposed amendments is the same, that delegated legislation will be able to prescribe grounds for the termination of the employment of non-ongoing employees.55

Confidentiality of information

1.52 Item 44 of the Bill introduces new provisions in the ParlS Act for the protection of information relating to the Parliamentary Service Commissioner's and ParlS MPC's functions, rather than in the determinations where they are currently located.56 The proposed amendments are consistent with Items 70 and 71 of the PubS Bill. However, the Clerk of the Senate noted that there are d ifferences between the Bills in regard to the purpose for which information may be sought, recognising that, if amended, there will be more inquiry powers under the PubS Act than the ParlS Act.57

Immunity from suit

1.53 Item 46 of the Bill moves provisions dealing with immunity from suit from the determinations to the ParlS Act. The provisions provide protection for the Parliamentary Service Commissioner and ParlS MPC, and those assisting them, from civil proceedings in relation to anything done, or not done, in good faith by the person

52 Explanatory Memorandum, p. 22.

53 Submission 1, p. 8; Submission 2, p. 9; Submission 3, p. 5.

54 Submission 1, p. 8.

55 Submission 1, p. 8.

56 The Hon John Hogg, President of the Senate, Senate Hansard, 28 November 2012, p. 57.

57 Submission 1, p. 8.

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in connection with the performance of their duties.58 These amendments are broadly consistent with Item 72 of the PubS Bill. The Parliamentary Service Commissioner however noted that the Bill contains does not include immunity from suit for a delegate of the ParlS MPC, which is provided for in relation to the Public Service Merit Protection Commissioner in the PubS Bill.59

Legislative instruments

1.54 Items 47 and 48 of the Bill deal with the Parliamentary Service

Commissioner's advice and the Presiding Officers' determinations in relation to employment matters. The provisions are similar to those contained in Item 74 of the PubS Bill, with the difference being that the Public Service Commissioner 'may issue directions' but the Parliamentary Service Commissioner 'may give advice' to the Presiding Officers.60

Miscellaneous amendments

1.55 The Bill's provisions dealing with miscellaneous amendments in Part 13 of Schedule 1 reflect some of those contained in the PubS Bill, while some are specific to the Parliamentary Service. The items which are similar in both Bills concern the clarification that a Secretary/Agency Head may reduce the classification of an employee in specified circumstances, provisions linking the amounts payable by the Presiding Officers in certain circumstances to the amount prescribed by PubS Act regulations for that purpose, and provisions to allow the Parliamentary Service Commissioner and ParlS MPC to engage consultants.61

Application, saving and transitional provisions

1.56 The application, saving and transitional provisions contained Schedule 2 of the Bill and Schedule 4 of the PubS Bill are broadly consistent with the differences as a result of the different frameworks established by the two Acts.62

Other matters raised

1.57 In its submission to committee, the Department of Parliamentary Services (DPS) proposed an additional amendment to the ParlS Act relating to how DPS is referred to in the ParlS Act.63

58 Submission 1, p. 8; Submission 2, p. 10; Submission 3, p. 5.

59 Submission 3, p. 5.

60 Submission 1, p. 9; Submission 2, p. 10; Submission 3, p. 5.

61 Submission 1, p. 9.

62 Submission 1, p. 9.

63 Department of Parliamentary Services, Submission 4.

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1.58 DPS was established in 2004 by resolution of both Houses of Parliament in accordance subsection 54(2) of the ParlS Act. The following year, the ParlS Act was amended to define 'joint Department' as meaning:

(a) the Department of the Parliamentary Services; or

(b) if another Department is designated as the joint Department by the Presiding Officers - that other Department.64

1.59 In addition, section 54 of the ParlS Act was amended to provide for the joint Department to include the Parliamentary Librarian, who is neither a Secretary nor a Parliamentary Service employee. Further references to the 'joint Department' are used in the ParlS Act where appropriate.

1.60 DPS argued in its submission that it would be desirable, both for clarity and to reflect arrangements in place since 2004, if references to 'joint Department' in the current provisions where amended to 'Department of Parliamentary Services'.65 DPS further commented that the proposed amendment:

…would not alter the existing powers or reporting arrangements of DPS or limit the administrative flexibility in the existing section 54 of the Act to create additional parliamentary services as required.66

1.61 The committee notes that the definition of 'joint Department' in section 7 of the ParlS Act includes DPS. The committee considers that the current provisions of the ParlS Act provide the Parliament with great flexibility to alter the joint Departments by resolution of both Houses to ensure that the best administrative arrangement is available to support the Parliament. Were 'Department of Parliamentary Services' substituted for 'joint Department' in the ParlS Act, any new arrangements for DPS, including a change of name, could not be implemented until the Act was amended.

1.62 The committee also notes that the explanatory memorandum for the Parliamentary Service Bill 2005 states, in relation to the proposed amendments to section 7, that:

This amendment inserts a definition of joint Department. The joint Department is the department in which the Parliamentary Librarian will be located. Currently the Department of Parliamentary Services is the only joint Department in the Parliamentary Service, but this amendment ensures that the location of the Parliamentary Librarian after any reorganisation of the Parliamentary departments would be addressed without further amendment to the PS Act.67

64 Parliamentary Service Act 1999, section 7.

65 Submission 4, p. 1.

66 Submission 4, p. 2.

67 Parliamentary Service Amendment Bill 2005, Explanatory Memorandum, p. 3.

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1.63 The committee considers that the amendment proposed by DPS is counter to the flexibility currently provided in the Act and therefore does not support any additional amendments to the ParlS Act at this time.

Conclusion

1.64 The Committee considers that the amendments proposed in the Bill make the necessary changes to the Parliamentary Service Act to maintain its alignment with the relevant provisions of the Public Service Act as amended. The proposed amendments will ensure that the framework of both services, particularly in relation to employment conditions and professional standards, are comparable but appropriate modifications have been incorporated to ensure that the independence of the Parliamentary Service in serving the Parliament is preserved.

Recommendation 1

1.65 The committee recommends that the Parliamentary Service Amendment Bill 2012 be passed.

Senator Helen Polley

Chair

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APPENDIX 1

Submissions received by the Committee

Submissions

1 Clerk of the Senate

2 Department of the House of Representatives, Department of Parliamentary Services and Parliamentary Budget Officer

3 Parliamentary Service Commissioner

4 Department of Parliamentary Services

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THE SENATE

STANDING COMMITTEE ON FINANCE AND PUBLIC ADMINISTRATION Legislation Committee

Report on the inquiry into the Public Governance, Performance and Accountability Bill 2013

On 16 May 2013. the Senate, on the recommendation of the Selection of Bills Committee, referred the Public Governance, Performance and Accountability Bill 2013 (the Bill) to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 3 June 2013.

On the same day, the House of Representatives also referred the Bill for inquiry and report to the Joint Committee of Public Accounts and Audit.

Following consideration of matters in relation to the Bill, the Committee determined not to proceed with a separate inquiry to that being undertaken by the Joint Committee of Public Accounts and Audit.

Senator Helen Polley Chair

30 May 2013

302

The Senate

Finance and Public Administration

Legislation Committee

Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013

June 2013

303

© Commonwealth of Australia 2013

ISBN 978-1-74229-844-3

Senate Finance and Public Ad

ministration Committee Secretariat:

Ms Christine McDonald (Secretary)

Ms Margaret Cahill (Research Officer)

Dr Jon Bell (Principal Research Officer)

Ms Marina Katic (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: f

pa.sen@aph.gov.au

Internet: www.aph.gov.au/senate_fpa

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

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MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair ALP, Tasmania

Senator Scott Ryan, Deputy Chair LP, Victoria

Senator Richard Di Natale AG, Victoria

Senator the Hon. John Faulkner ALP, New South Wales

Senator Arthur Sinodinos LP, New South Wales

Senator the Hon. Ursula Stephens ALP, New South Wales

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Table of Contents

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013 Introduction ............................................................................................................ 1

Conduct of the inquiry ............................................................................................ 1

Overview of the Bill ................................................................

............................... 1

Provisions of the Bill .............................................................................................. 2

Background ............................................................................................................. 5

Overseas experience .............................................................................................

12

Issues .................................................................................................................... 13

Conclusion ................................

............................................................................ 24

Australian Greens Dissenting Comments ....................................................... 25

APPENDIX 1 ..................................................................................................... 31

Submissions and Additional Information received by the Committee .............. 31

APPENDIX 2 ..................................................................................................... 33

Public Hearing ........................................................................................................ 33

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Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013 Introduction 1.1 On 21 March 2013, on the recommendation of the Senate Selection of Bills Committee, the Senate referred the Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013 (the Bill) to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 17 June 2013. The reason for referral was to receive evidence on the need for regulation of pharmaceutical industry conduct with regards to interactions with the medical profession, and the appropriateness of the provisions in the Bill that place restrictions on these interactions.1

Conduct of the inquiry 1.2 The committee advertised the inquiry in The Australian newspaper on 27 March 2013, and invited submissions by 19 April 2013. Details of the inquiry, the Bill and associated documents were placed on the committee's website.

1.3 The committee received 25 submissions, which are listed in Appendix 1. A public hearing was held in Melbourne on 29 April 2013. A list of witnesses who appeared at the hearing is at Appendix 2. Submissions and the Hansard transcript are available on the committee's website at www.aph.gov.au/senate_fpa.

Overview of the Bill 1.4 The Bill is a private Senator's bill and proposes to amend the Therapeutic Goods Act 1989 to place restrictions on the interactions between pharmaceutical companies and medical practitioners with the aim to minimising the opportunity to provide inducements and therefore unduly influence prescribing behaviours.2 The Bill's Explanatory Memorandum (EM) outlines the current deficiencies in the level of regulation of, and lack of transparency in, relationships between the pharmaceutical industry and medical practitioners which the Bill proposes to address:

Currently the marketing of regulated pharmaceuticals to consumers is banned under the Therapeutic Goods Act 1989. However, drug companies are free to communicate with the doctors that prescribe medicines. While doctors need up-to-date information on new therapies, drug companies have the added incentive of maximising the number of prescriptions written for some medicines. This can lead to aggressive marketing and lobbying of doctors under the guise of education.

In the past this has included flying doctors to events in tropical locations overseas, paying for them to attend congresses and seminars held at 5-star resorts next to golf courses and hosting lavish lunches and dinners for

1 Senate Selection of Bills Committee, Report No. 4 of 2013, Appendix 17, 21 March 2013.

2 Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013, Explanatory Memorandum, p. 2.

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prescribers. Other pharmaceutical company largesse includes appointing influential doctors to advisory boards and lucrative speaking engagements, including at overseas events.3

1.5 The EM summarises the Bill's intended effect on the interactions between pharmaceutical companies and medical practitioners as:

 forbidding payment for doctors to travel or attend education seminars and scientific conferences domestically and overseas;

 banning the sponsorship of educational meetings intended for Australian doctors outside Australia;

 limiting gifts and lavish hospitality; and

 requiring full reporting of any fees paid to prescribers outside the company. 4

1.6 The pharmaceutical industry has acknowledged that there are perceptions of undue influence on the prescribing behaviour of medical practitioners. In response, self-regulated industry codes have been established by the pharmaceutical industry representative bodies. The Medicines Australia code of conduct (MA Code) sets the standards for the ethical marketing and promotion of prescription pharmaceutical products by pharmaceutical companies in Australia. The MA Code includes provisions which address the behaviour of medical representatives and relationships with healthcare professionals. The EM notes that the measures contained in the Bill are intended to replace the MA Code.5

Provisions of the Bill 1.7 Item 1 of the Bill amends the title of Chapter 5 of the Therapeutic Goods Act to include the reference to 'inducements', amending the heading to 'Advertising, inducements, counterfeit therapeutic goods and product tampering'.

1.8 Item 2 of the Bill inserts new sections into the Act which place restrictions on interactions between pharmaceutical companies and medical practitioners and define new offences in relation to the provision of money, services, or other possible inducements.6

Civil penalties for prohibition of certain inducements

1.9 Proposed subsection 42DR(1) makes it an offence for a pharmaceutical company to arrange or sponsor a conference, convention, educational seminar or other event to be held overseas, where it would be expected that the majority of the people attending the event are registered medical practitioners. The EM elaborates on the application of this proposed subsection:

3 Explanatory Memorandum, p. 2.

4 Explanatory Memorandum, p. 2.

5 Explanatory Memorandum, p. 2.

6 Explanatory Memorandum, p. 4.

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It does not prohibit companies from hosting events within Australia, or for hosting events overseas that are not aimed primarily at Australian prescribers (doctors), nor does it prohibit Australian doctors from attending events outside Australia. This is intended to curtail the possibility of hosting an educational event in a tropical or otherwise exotic location which may act as an inducement.7

1.10 Under this subsection, a pharmaceutical company found to contravene this subsection would be penalised a maximum civil penalty of 600 penalty units.

1.11 Proposed subsection 42DR(2) intends to limit overly lavish hospitality by pharmaceutical companies which may be seen as a possible inducement.8 This subsection would make it an offence for a pharmaceutical company to provide hospitality, including paying for meals or entertainment, to registered medical practitioners while they are attending an educational seminar or event where the value of the hospitality provided is more than $100 per head, or if a higher amount is prescribed in regulations, that amount. A maximum civil penalty of 1200 penalty units is prescribed for contravening this subsection.

Civil penalties for unreported inducements

1.12 Proposed subsection 42DS(1) specifies that a pharmaceutical company cannot pay a medical practitioner to attend a conference, convention, educational seminar or other event, including paying for travel or accommodation costs, if the medical practitioner is not representing the company or a sponsor of the event. Pursuant to proposed subsection 42DS(2), a company is taken to have made a payment to a medical practitioner if it does one or more of the following in exchange for the practitioner to attend an event:

 pays a fee to the practitioner or the practitioner's employer;

 pays for medical research;

 makes a donation to a charity; or

 gives a gift of more than $25 in value to the practitioner or to the practitioner's

employer.

1.13 Contravention of this subsection carries a maximum civil penalty of 1200 penalty units.

Reporting requirements

1.14 Under proposed new section 42DT, pharmaceutical companies are required to prepare and make public a report which provides details for each reportable payment made by the company for each financial year. The EM states that:

The

reporting requirements in section 42DT do not apply to payments made to any individual who is not a registered medical practitioner. These provisions are intended, in the public interest, to discourage payments and

7 Explanatory Memorandum, p. 4.

8 Explanatory Memorandum, p. 4.

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other incentives that may unduly influence prescribing behaviour, but not to otherwise place restrictions on commerce between drug companies and individuals in the normal course of affairs.9

1.15 For each reportable payment made by the company, the report is required to provide detail of the amount or value, the name of the recipient, the date the payment was made, and the nature of and reasons for making the payment. Under subsection 42DT(2)(b), if a company does not make a reportable payment during the financial year, it is still required to prepare a report with a statement to that effect.

1.16 Under proposed subsection 42DT(3), the report must be made available on the company's website within one month after the end of the financial year to which it relates, and remain available for five years. Reportable payments by a pharmaceutical company to a medical practitioner, who is not an employee or consultant of the pharmaceutical company, are specified in subsection 42DT(4):

 payment for attending a conference, convention, educational seminar or other

event on behalf of the corporation;

 payment of to a medical practitioner or the practitioner's employer;

 provision of a service to a medical practitioner or to the practitioner's employer;

 payment for the travel or accommodation costs or related services for a

medical practitioner or to the practitioner's employer;

 payment used for medical research;

 a donation to a charity on behalf or in relation to the medical practitioner; or

 a gift of more than $25 in value to the medical practitioner or the practitioner's

employer.

1.17 The failure of pharmaceutical companies to prepare and make public a report under section 42DT attracts a maximum civil penalty of 3000 penalty units.

Drafting errors in the Bill

1.18 The committee notes two errors in the Bill. To avoid any ambiguity in the intention of the Bill, the word 'or' should be inserted at the end of clauses 42DT(4)(a) and 42DT(5)(b).

Statement of compatibility with human rights

1.19 In accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the EM includes a statement of the Bill's compatibility with human rights and freedoms recognised or declared in relevant international instruments, declaring that the Bill does not negatively impact on any human rights. The statement further acknowledges that:

Although it places some small constraints on how pharmaceutical companies my compensate doctors, most interactions continue to be

9 Explanatory Memorandum, p. 5.

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allowed under new transparency rules and there are no restrictions on the actions of individuals. These restrictions do not conflict with any of the rights enumerated in the applicable treaties.10

Background 1.20 The professional relationship between healthcare professionals and therapeutic goods companies is currently governed by industry and professional codes of conduct, not by government regulation.11 Over recent years, the Government has acknowledged public concern about the promotion of therapeutic goods to healthcare professionals and the potential to influence medical practitioners' management of health needs of patients. In response, the Government has instigated consultation processes on these matters to seek the views of relevant stakeholders and the public.

Position paper on the Promotion of Therapeutic Goods

1.21 On 30 June 2010, the then Parliamentary Secretary for Health, the Hon Mark Butler MP, released the Government's Position Paper on the Promotion of Therapeutic Goods. The paper addressed public concern about the promotion of therapeutic goods to healthcare professionals and the level of coverage of, and inconsistency between, self-regulatory codes of conduct across the therapeutic goods sector. The paper stated the Government's policy objective as aiming:

…to ensure that decisions on management (including treatment) options for health needs are based on sound clinical advice evidence, not driven by incentives or other influences, and that self-regulatory codes of conduct are effective in minimising the potential for any promotional activities to compromise the quality use of medicines and to increase cost pressures on the health system.12

1.22 Government consultation with stakeholders from industry, health profession organisations and consumer groups revealed the following key issues:

 the need for high level principles underpinning sector specific codes;

 ensuring compliance of both member and non-member companies of industry

bodies with relevant codes of conduct; and

 the structure of the complaints system.

1.23 While the paper stated that it was the Government's position to continue to support self-regulation of industry conduct, including promotional activities, it was found that reform of the existing arrangements was needed. This was broadly accepted

10 Explanatory Memorandum, p. 6.

11 Department of Health and Ageing website: http://www.health.gov.au/internet/main/publishing.nsf/Content/Consultation%3A+Position+Pa per+on+the+Promotion+of+Therapeutic+Goods (accessed 11 April 2013).

12 Department of Health and Ageing, Position paper on the promotion of therapeutic goods, 30 June 2010, p. 1.

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by the industry.13 The paper proposed that, in the first instance, 'industry strengthen and standardise self-regulation through developing an industry framework for universal adherence to consistent industry-wide codes based on a common set of high level principles'. If these reforms were not implemented, a legislative option would be considered by Government. The paper also noted the need to ensure that the codes of

conduct which apply to healthcare professionals align with the standards expected of the therapeutic goods industry.14

Working group on promotion of therapeutic products - Report to Parliamentary Secretary Catherine King

1.24 A working group comprising industry stakeholders, representatives of health professional organisations and consumers was established to consider responses to the position paper. The working group was also tasked with developing a set of high level principles as a basis for strengthening and aligning industry codes of conduct.15 The subsequent report, entitled Working group on promotion of therapeutic products - Report to Parliamentary Secretary Catherine King, was released on 18 March 2011.

1.25 The working group considered the coverage of the industry codes, the mechanisms for extending code compliance to non-members of associations, and the need for alignment of the codes of conduct governing healthcare professionals with industry codes, recognising the mutuality of these relationships. The working group made 18 recommendations for government, industry and professional health organisations.

1.26 The working group developed a high level statement of principles to be incorporated into each industry code, as well as a statement of the obligations on companies operating in the industry covered by the code. The statement of principles provides that:

The Australian therapeutic products industry promotes the concept of good health incorporating the quality use of therapeutic products based on genuine consumer health needs and supported by the ethical conduct of all parties. In this context the quality use of therapeutic products means:

 Selecting diagnostic and treatment options wisely based on the best available evidence and the consumers' needs;

 Choosing suitable therapeutic products if this is considered necessary; and

13 Department of Health and Ageing, Position paper on the promotion of therapeutic goods, 30 June 2010, p. 1.

14 Department of Health and Ageing, Position paper on the promotion of therapeutic goods, 30 June 2010, pp 1-2.

15 Department of Health and Ageing website: http://www.health.gov.au/internet/main/publishing.nsf/Content/Consultation%3A+Position+Pa per+on+the+Promotion+of+Therapeutic+Goods (accessed 22 April 2013).

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 Using therapeutic products safely and effectively. 16

1.27 The working group specified the areas to be covered by the provisions of therapeutic industry codes, as well as the obligations of companies operating under the code. It was recommended that, as a condition of inclusion of a product on the Australian Register of Therapeutic Goods, all applicants, including those not a member of an industry association, be required to nominate the relevant code of practice to which it will subscribe.17

1.28 To address the issue of bringing professional codes of conduct into alignment with industry codes, the working group recommended ongoing engagement with health professional organisations. The working group also recommended the establishment of an advisory body comprised of representatives from industry, healthcare professional organisations and consumer groups to oversee the implementation of the recommendations of the working group report.18

TGA Reforms: A blueprint for TGA's future

1.29 The Government incorporated its response to the working group's report in the publication, TGA Reforms: A blueprint for TGA's future, which was released in December 2011. Of the 18 recommendations made by the working group, the Government supported five, did not support three, noted seven, and referred three recommendations to relevant external bodies. The Government did not support recommendations 5 to 7 which would have required new regulation and hence departed from the self-regulatory model. The Government also did not support recommendation 18 relating to a review of the National Medicines Policy.19

1.30 The TGA Reforms report acknowledged that the promotion of therapeutic goods, including pharmaceutical products, to medical practitioners through offering inducements, has the potential to influence clinical decisions on grounds other than the best interest of the patient. It further noted that industry codes of conduct are effective in limiting unethical behaviour on the part of companies, but that currently there is inconsistency across codes and that companies which are not members of associations are not bound by these codes.20

1.31 The report stated that the Government's preferred position was to maintain the self-regulatory framework and that it strongly supported the harmonisation of codes across sectors through the incorporation of the high-level principles developed by the working group on promotion of therapeutic products.

16 Working group on promotion of therapeutic products - Report to Parliamentary Secretary Catherine King, p. 5.

17 Working group on promotion of therapeutic products - Report to Parliamentary Secretary Catherine King, p. 7.

18 Working group on promotion of therapeutic products - Report to Parliamentary Secretary Catherine King, p. 7.

19 Department of Health and Ageing, Submission 24, p. 4.

20 TGA Reforms: A blueprint for TGA's future, December 2011, p. 11.

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The inclusion of these high-level principles into industry specific codes of conduct is a continuing process and the Government will consider the feasibility of establishing a committee to evaluate the work of industry bodies. Further changes will be considered if it is found that there is a need to provide greater encouragement to non-members of industry associations to nominate and sign up to an appropriate industry code, including the TGA seeking notification of a sponsor's nominated code of conduct at the point of including a product on the ARTG [Australian Register of Therapeutic Goods].21

Implementation of the working group's recommendations

1.32 The Government allocated $1.4 million in funding over four years to support the implementation of the working group's recommendations which the Government had previously noted would benefit from some support. These included:

...supporting stronger self-regulation, better communication and shared systems for complaints reporting, and establishing an implementation advisory group to guide further work on implementing the

recommendations.22

1.33 In July 2012, the Government released the paper, Delivering reforms - Implementation plan for TGA Reforms: A blueprint for TGA's future, which provided a high-level overview of the implementation of the working group's recommendations.

1.34 The Government established a Codes of Conduct Advisory Group in January-February 2013. The Advisory Group has representatives from industry associations, health professional and consumer organisations. The advisory group is responsible for overseeing a number of projects including:

 an independent review of the uptake of the high level principles set out by the Working Group in industry's codes of conduct;

 development of shared information systems and a common complaints portal;

 liaison and discussion with health professional organisations in relation to

alignment of industry and health professional codes;

 mechanisms to improve the coverage of codes of conduct; and

 an independent evaluation of the effectiveness of the overall self-regulatory

framework.23

National Medicines Policy

1.35 The Government's National Medicines Policy was launched in 1999 to bring about better health outcomes for all Australians, particularly in regard to people's access to, and wise use of, prescription and non-prescription medicines. Its framework is based on partnerships between Governments, health educators, health practitioners,

21 TGA Reforms: A blueprint for TGA's future, December 2011, p. 12.

22 Department of Health and Ageing, Submission 24, p. 4.

23 Department of Health and Ageing, Submission 24, p. 5.

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and other healthcare providers and suppliers, the medicines industry, healthcare consumers, and the media, working together to promote the objectives of the policy.

1.36 The National Prescribing Service is described as the implementation arm of the National Medicines Policy to assist prescribers and patients in the quality use of medicines through education and prescriber feedback.24

Pharmaceutical industry self-regulation

1.37 Two main industry groups represent the pharmaceutical industry in Australia: Medicines Australia and the Generic Medicines Industry Association (GMiA). Medicines Australia has 54 member companies which supply 86 per cent of the medicines that are available to Australians through the Pharmaceutical Benefits Scheme.25 GMiA is a representative body of generic medicine suppliers in Australia. GMiA member companies predominantly manufacture and/or sell generic medicines in the Australian market and/or manufacture generic medicines for export.26 GMiA has 18 members, including five full members who supply approximately 90 per cent of the non-original generic medicines to the Australian market.27

1.38 The following outlines the codes of conduct for both Medicines Australia and GMiA.

Medicines Australia

1.39 Medicines Australia has established a code of conduct (MA Code) which sets out the standards of conduct for the activities of companies when engaged in the promotion of prescription pharmaceutical products used under medical supervision as permitted by Australian legislation. Established in 1960, the MA Code has undergone regular review by Medicines Australia 'to ensure it continues to reflect current community and professional standards and current government legislation.'28

1.40 The most recent update of the MA Code, Edition 17, was authorised by the Australian Competition and Consumer Commission (ACCC) for two years on 20 December 2012 and came into effect on 11 January 2013.29 During the authorisation consultation process, the ACCC noted that the MA Code provides public benefits by providing greater transparency on the relationships between pharmaceutical companies and healthcare professionals. The ACCC stated that the

24 Department of Health and Ageing, Submission 24, pp 5-6.

25 Medicines Australia website: http://medicinesaustralia.com.au/about-us/ (accessed 26 March 2013).

26 Generic Medicines Industry Association website: http://www.gmia.com.au/about-gmia/gmia- members/ (accessed 24 April 2013).

27 Generic Medicines Industry Association, Submission 20, p. 4.

28 Medicines Australia website: http://medicinesaustralia.com.au/code-of-conduct/ (accessed 26 March 2013).

29 Medicines Australia website: http://medicinesaustralia.com.au/code-of-conduct/code-of- conduct-review/ (accessed 26 March 2013).

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MA Code could go further in ensuring that community expectations now, and in the future are met. The ACCC further noted that:

The ACCC encourages Medicines Australia to look for ways to address the concerns that have been raised during the ACCC's consultation process. These include improving the accessibility of reports and the complaints process and considering disclosure of payments made to individual healthcare professionals.30

1.41 To ensure the MA Code is amended in a timely manner, the ACCC only granted authorisation of the Code for two years, and not the five year period sought by Medicines Australia. On authorising31 the code, the ACCC stated that it had given member companies of Medicines Australia two years to improve transparency of payments and sponsorship made by pharmaceutical companies to individual healthcare professionals. Commissioner Sarah Court further advised that:

Improving transparency around payments to individual doctors will play an important role in promoting community confidence in the integrity of these payments to healthcare professionals.32

1.42 Significant changes to Edition 17 of the MA Code include the requirement that companies are now to provide:

 aggregate amounts of all payments made to healthcare professionals for

advisory boards and consultancy arrangements;

 attendance and speaking at medical conferences and educational events; and

 sponsorships for consumer organisations including the value of non-monetary support.33

1.43 Complaints and appeals under the MA code are overseen by the Code of Conduct Committee and the Code Appeals Committee which are responsible to the Medicines Australia Board.34 The monitoring of member companies is undertaken by the Medicines Australia Monitoring Committee. This committee proactively monitors selected promotional material and conduct of companies on a regular and ongoing basis. At the end of each financial year, the Monitoring Committee also reviews the educational meetings and symposia provided by member companies. Medicines

30 Australian Competition and Consumer Commission, Media release NR 229/12, 26 October 2012.

31 Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment. Australian Competition and Consumer Commission, Media release NR 278/12, 20 December 2012.

32 Australian Competition and Consumer Commission, Media release NR 278/12, 20 December 2012.

33 Dr Ken Harvey, Submission 4, p. 4.

34 Medicines Australia, Code of Conduct Edition 17, p. 65.

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Australia makes the companies' completed reports available on its website within three months of the end of each six month period.35

1.44 The MA Code only covers members of Medicines Australia and membership of the organisation is voluntary.

Transparency Working Group

1.45 Following its adoption of Edition 17 of the MA Code, Medicines Australia established the Transparency Working Group comprising representatives of industry, professional medical bodies and consumers groups, to develop measures and policies to further enhance transparency of payments and other transfers of value between healthcare professionals and the pharmaceutical industry.36 The Transparency

Working Group expects to present its final recommendations by June 2013.37

1.46 Dr Ken Harvey, the CHOICE representative on the Transparency Working Group, provided an update on the group's progress:

It has developed principles applicable to all therapeutic goods companies and all health professions, not just doctors. These include providing access to information in a single, public repository, enabling the information to be audited and validated by healthcare professionals and companies, and supported by an educational process to assist all parties to interpret the information in context. It is envisaged that member companies could commence recording payments made to individual health care professionals from Jan 1, 2015 with public reporting in 2016.38

Generic Medicines Industry Association (GMiA)

1.47 GMiA introduced its Code of Practice on 1 March 2010 and was granted authorisation by the ACCC on 3 November 2010. GMiA stated that:

The Code formalises the commitment to GMiA members to a system of best practice self-regulation and ethical supply of generic medicines to the Australian community in compliance with applicable laws and standards.39

1.48 In addition to covering relationships with stakeholders and promotional and marketing activities, the GMiA Code also covers the manufacture, supply and distribution, safety, product availability, research and regulatory activities, and corporate governance. Under section 15 of the Code, the Code Administration Committee prepares an annual report which reviews the operation of the Code.

1.49 In comparison to the MA Code, GMiA further advised on the effectiveness of the Code:

35 Medicines Australia, Code of Conduct Edition 17, pp 62, 66.

36 Medicines Australia, Submission 16, p. 8.

37 Transparency Working Group Communiqué of meeting held on 13 March 2013.

38 Dr Ken Harvey, Submission 4, p. 1.

39 Generic Medicines Industry Association, Submission 20, p. 3.

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GMiA rejects any suggestion that its Code is any less rigorous or capable of self-regulation than the Medicines Australia Code. The GMiA Code specifically reflects the unique operating environment of suppliers of generic medicines and sets out the best practice standards, aligned with that unique operating environment required of all members…during the three years that GMiA has administered the Code, GMiA has received only five complaints.40

Medical practitioners' professional standards

1.50 The medical profession is currently regulated by the Medical Board of Australia, supported by the Australian Health Practitioner Regulation Agency (AHPRA). AHPRA supports 14 national health professional boards in their primary role of protecting the public and managing the registration processes for health practitioners and students. On behalf of the Boards, AHPRA also manages investigations into the professional conduct, performance or health of registered health practitioners, except in NSW where this is undertaken by the Health Professional Councils Authority and the Health Care Complaints Commission.

1.51 The professional conduct of health practitioners and students is guided by the Codes and Guidelines and Registration Standards of their relevant health profession. The conduct of medical practitioners is governed by the Medical Board of Australia's Good Medical Practice: A Code of Conduct for Doctors in Australia. Section 8.11 of the code deals with conflicts of interest. In relation to interactions with pharmaceutical companies, it specifies that good medical practice involves:

8.11.4 Recognising that pharmaceutical and other medical marketing influences doctors, and being aware of ways in which your practice may be being influenced.

8.11.6 Not asking for or accepting any inducement, gift or hospitality of more than trivial value, from companies that sell or market drugs or appliances that may affect, or be seen to affect, the way you prescribe for, treat or refer patients.

8.11.7 Not asking for or accepting fees for meeting sales representatives.

8.11.8 Not offering inducements to colleagues, or entering into arrangements that could be perceived to provide inducements.

1.52 Any person can notify AHPRA with concerns relating to the conduct of a registered health practitioner or student on the Medical Board of Australia's Code.

1.53 A number of professional medical bodies have also established guidance for members on ethical relationships with industry.

Overseas experience 1.54 The committee was provided with examples of recent developments overseas where the interactions between therapeutic goods companies and healthcare professionals have undergone reform.

40 Generic Medicines Industry Association, Supplementary Submission 20, p. 3.

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1.55 In the United States, the Physician Payment Sunshine Act was passed in 2010 by the US Congress as part of the Patient Protection and Affordable Care Act and became operational earlier this year. It requires pharmaceutical and device companies to report to the Centers for Medicare and Medicaid Services all payments, or other transfers of value, made to individual doctors and teaching hospitals that total more than US$100 per year. The first instalment of transparency reports will be published by the Centers to a public website on 30 September 2014.41

1.56 The Dutch have established a central register (managed by an independent foundation) to record the financial relationships between healthcare professional, healthcare institutions and the pharmaceutical industry. All financial relationships exceeding €500 are entered in the register and this will be open to the public on 25 April 2013.42 In Denmark, companies have been required to declare their payments to doctors since 2008, while doctors in Scotland have to declare payments received from companies themselves.43

Issues raised during the inquiry 1.57 While supporting the broad intent of the Bill, most submitters did not support its passage through the Parliament in its current form. The Department of Health and Ageing (DoHA), pharmaceutical companies, industry and health professional bodies were generally opposed to the Bill and advocated for continuing with the self-regulation model. However, it was conceded by some opposed to the Bill, that the current self-regulation model could be strengthened by some legislative reform, for example, to require companies to adhere to an industry code through the product registration process.

1.58 Some submitters also indicated that consideration of the Bill provided an opportunity to canvass a number of issues in regard to the current arrangements and possible models to govern the interactions between health professionals and pharmaceutical companies which may impact on prescribing behaviour.44

Importance of ethical relationships between pharmaceutical companies and medical practitioners

1.59 The potential effects of inducements from pharmaceutical companies, such as funding for travel and conference attendance, payment for consultancies, and sponsored lectures, on the behaviour of medical practitioners was outlined by Dr Ken Harvey. The effects included uncritical uptake of newer, expensive and less-well evaluated products and underutilisation of more cost-effective drugs and medical devices; distortion of published medical evidence by influencing how clinical studies

41 Dr Ken Harvey, Submission 4, p. 1.

42 Dr Ken Harvey, Submission 4, p. 1.

43 Dr Mary Osborn, Submission 3, p. 3.

44 See for example, Dr Ken Harvey, Submission 4, p. 6; Consumers Health Forum of Australia, Submission 14, p. 2; and The University of Sydney, Submission 23, p. 1.

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are designed and conducted and which studies are published. Dr Harvey concluded that:

This can have the overall result of "stacking the deck" in favour of new and expensive treatments and has been shown to lead "key opinion leader" doctors to advocate such treatments despite the lack of robust evidence about their safety. These influences can cause rapid take-up of new treatments with disastrous consequences when adverse effects (followed by product withdrawal) become apparent on much larger scale than would have occurred by more prudent use. The cost and safety implications of these distortions for our health system, which are under ever-increasing pressure to continue to meet the aspirations and expectations of an ageing population, are significant.45

1.60 The importance of transparency about relationships between pharmaceutical companies and medical practitioners for patients was noted by the Australian Medical Association (AMA) which commented:

Patients need to make well-informed decisions about their healthcare that includes taking account of their healthcare provider's involvement with pharmaceutical companies. This is enshrined in medical practitioner regulation in Australia.46

1.61 The committee also received evidence from a number of pharmaceutical companies and industry bodies which also acknowledged the importance of transparency in their relationships with parties they engage with and the community expectation for increased transparency.47 For example, Pfizer Australia advised:

We recognise that transparency and the trust it cultivates is essential in both the development and delivery of healthcare and is the cornerstone which fosters trust between government, industry, healthcare professionals and patients.48

1.62 Medicines Australia stated that it strongly supported the policy objective of safeguarding the integrity of health care professionals' interaction with patients. It further stated that providing greater transparency about companies' interactions with healthcare professionals 'will give the community greater confidence that the independence of health professionals in making recommendations and decisions about treatment is not compromised by those interactions'.49

1.63 Consumers Health Forum of Australia (CHF) advised that there was strong support for the objectives of the Bill among its members and that it had long held

45 Dr Ken Harvey, Submission 4, p. 2.

46 Australian Medical Association, Submission 7, p. 1.

47 See for example, Medicines Australia, Submission 16; Vifor Pharma, Submission 9, pp 1-2; MSD, Submission 10, pp 1-2; and Amgen Australia Pty Ltd, Submission 11, p. 1.

48 Pfizer Australia, Submission 8, p. 1.

49 Medicines Australia, Submission 16, p. 5.

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concern with regard to the promotion of therapeutic goods to health professionals by industry. CHF noted that:

…the ethical promotion of therapeutic goods is essential if consumers are to be confident that their health professionals' decisions are based only on the consumers' best interests, rather than on inappropriate incentives or marketing strategies.50

1.64 The Government has acknowledged public concern about the promotion of therapeutic goods and DoHA commented that the 'Government's objective is to ensure health needs decisions are based on sound clinical evidence rather than incentives, promotions or other influences that might compromise the quality use of therapeutic products as well as increasing costs to the health system'.51

1.65 Although there was generally consensus among submitters to the inquiry on the need to safeguard the prescribing practices of medical practitioners by ensuring that pharmaceutical companies do not impose undue influence through their interactions with practitioners, there was some divergence of views on the most effective way to achieve this. A number of submissions raised concerns with the regulatory approach proposed by the Bill. Most submissions supported continuation of the self-regulation model which was considered to be effective, and particularly pointed to current reforms processes underway to further strengthen the current model. There was also some support for moves toward a co-regulation approach to deal with some weaknesses identified with the current model.

Concerns about the Bill

1.66 Evidence received addressed concerns with the timing of the legislation, its limited application, possible restrictions of appropriate interaction between companies and medical practitioners and lessening of existing requirements under the MA Code.

Timing of the legislation

1.67 A number of submitters argued that the timing of the Bill is not appropriate as there are reform processes currently underway. These processes are aimed at addressing some of the concerns which have been raised with the current self-regulation model and include reforms arising from reviews sponsored by the Government, and the expected reforms to the MA Code arising from the work of its Transparency Working Group.

1.68 Following recent consultation processes, the Government has confirmed its approach to continue with the self-regulation model at this stage. Considerable progress has been made following the release of the report of the Working Group on Promotion of Therapeutic Products. As noted earlier, the Government supported a

number of recommendations from this report and has allocated funding to assist industry in the implementation of these reforms to support stronger self-regulation, better communication and shared systems for complaints reporting. Further support

50 Consumers Health Forum of Australia, Submission 14, p. 1.

51 Department of Health and Ageing, Submission 24, p. 9.

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has been provided by the establishment of the Codes of Conduct Advisory Group, as noted earlier, to oversee the implementation of a number of the reforms.

1.69 Following its most recent code authorisation process through the ACCC, Medicines Australia has been responsive to suggestions that its Code needs to provide for more transparency. It formed the Transparency Working Group to undertake a consultative process to further implement changes to provide for greater transparency. The committee was advised that this Group's work is well advanced and is expected to report by June 2013. Group member, Dr Ken Harvey provided a copy of the principles drafted which, if adopted in the final report, will apply to reporting transfers of value between all therapeutic industry groups and all health professionals, which include:

 reporting the monetary transactions and transfers of value by individual,

identified healthcare professional and company in a form that is readily accessible and meaningful to the public;

 providing access to the information in a single, public repository, that is readily searchable;

 enabling the information to be audited and validated by healthcare

professionals and companies; and

 support through an educational process to assist all parties to interpret the

information in context.52

1.70 Medicines Australia advised that the final transparency model is expected to be incorporated into Edition 18 of the MA Code which will be submitted to the ACCC in July 2014 for authorisation. Medicines Australia also noted that implementing a

transparency model was complex, but progress was well advanced and the agreed model should be implemented within the next year and a half.53

1.71 The AMA highlighted the importance of the Transparency Working Group processes in the design and implementation of a public register. It asserted that the Transparency Working Group's recommendations, which will feed into the ACCC

authorisation process, should continue unimpeded to:

 Ensure that any public register is designed to provide patients with access to useful information that is relevant to their healthcare decisions;

 Evaluate how patients access and use the information;

 Measure the cost of public reporting against the benefits to patients; and

 Revise the reporting arrangements if required. 54

1.72 While acknowledging the importance ensuring public confidence in the prescribing practices of medical practitioners, the DoHA argued that the Government did not consider that there is substantial evidence to demonstrate that interactions

52 Dr Ken Harvey, Submission 4, p. 5.

53 Medicines Australia, Submission 16, p. 9.

54 Australian Medical Association, Submission 7, p. 3.

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between parties are negatively impacting on prescribing practices and patient care in Australia at present. Mr Peter Woodley, DoHA, commented:

I guess we are aware of anecdotal evidence. I am not sure that it amounts to a substantial body of coherent evidence. Nevertheless, the government has chosen to respond. It recognises that this is an issue that needs to be addressed and at this point has chosen to go down a self-regulatory route with the prospect, if you like, that if by 2015-16 it does not work it will consider other options. So, on that basis, I guess there are some concerns that the consequences may, ultimately, be to the detriment of the consumer.55

1.73 Dr Steven Hambleton, Federal President, AMA, confirmed that the AMA was not aware of particular instances of pharmaceutical companies having undue influence over medical practitioners at present. However, he went on to comment that because of reports of overseas instances, the AMA supported increased transparency around that relationship to ensure confidence is maintained.56

Limited application of the Bill

1.74 Submitters commented that the application is limited to interactions between pharmaceutical companies and registered medical practitioners. DoHA noted that the amendments would apply to 'regulated corporations' that import, manufacture or supply 'regulated pharmaceutical products'. Under Part 3-2 of the Therapeutic Goods Act these are listed or registered medicines included on the Australian Register of Therapeutic Goods. This means that the relationships between other therapeutic goods companies and health professionals are excluded from coverage:

It does not include medical devices or biologicals on the Register, thus excluding promotional activity undertaken by companies that import, manufacture or supply these therapeutic goods.57

1.75 A number of submitters were of the view that other companies in the therapeutics sector should also be subject to similar disclosure.58 It was suggested that other industries, such as medical device companies, should be subject to similar restrictions and disclosure requirements to those imposed on pharmaceutical companies in regard to their interactions with healthcare professionals. Similarly, the Bill fails to recognise the importance of a regulatory model which applies to other healthcare professionals who may be subject to possible inducement through

55 Mr Peter Woodley, Assistant Secretary, Blood, Organ and Regulatory Policy Branch, Department of Health and Ageing, Proof Committee Hansard, 29 April 2013, p. 35.

56 Dr Steven Hambleton, Federal President, Australian Medical Association, Proof Committee Hansard, 29 April 2013, p. 11.

57 Department of Health and Ageing, Submission 24, p. 7.

58 Dr Ken Harvey, Submission 4, p. 1; Consumers Health Forum of Australia, Submission 14, p. 4; Ms Lisa Maguire, Associate Director, GlaxoSmithKline, Proof Committee Hansard, 29 April 2013, p. 15.

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relationships with therapeutic companies. These included, for example, pharmacists, laboratory scientists, theatre nurses, and radiographers.59

1.76 Pfizer Australia noted that, if passed, the narrow focus of the Bill 'has the danger of leading to a piecemeal, inconsistent combination of self-regulation and government regulation', where some therapeutic goods sectors and healthcare professions would not be covered under the proposed regulations.60

1.77 The AMA also commented on the limited application of the Bill and stated that if it was a 'genuine attempt to safeguard patients and maintain the integrity of Australia's health system and the sustainability of health expenditure', then the Bill should apply to all health practitioners and all industry organisations involved in the sale or promotion of health related products.61 Dr Hambleton explained the importance of a broad application further:

There are lots of other relationships that warrant transparency. Thinking about pharmacy, for example, the Department of Health and Ageing, in 2006, advised the AMA that only three per cent of PBS prescriptions had the 'do not substitute' box ticked by the doctor on the prescription, yet there are a lot of products going into particular brands. So it is true; the pharmacist does make the most decisions about which brand of medicine is to be dispensed…It may well be that brand decisions are not made by the practitioner, and we do need to make sure that we are spending appropriately. If there is a reason a particular brand needs to be prescribed, the medical practitioners are not indicating that except in very small circumstances.

So, yes, transparency would be important on a broader basis.62

1.78 The University of Sydney suggested that definitions of the parties to which the Bill applies may be problematic and unintentionally exclude or include certain groups. It was explained that the definition of 'registered medical practitioner' does not necessarily cover all prescribing professionals:

The bill as drafted is not aligned with the current relationship between medical registration and the authority to prescribed. Not all "registered medical practitioners" have that authority; and not all prescribers are "register medical practitioners" - for example, dentists also prescribe.63

1.79 The University of Sydney also raised concern with the definition of 'regulated corporation' in the Bill suggesting that it may capture universities that import regulated pharmaceuticals for medical research or to conduct clinical trials on behalf

59 See for example, Dr Ken Harvey, Submission 4, p. 1; Allegan Australia Pty Ltd, Submission 12, p. 1.

60 Pfizer Australia, Submission 8, p. 3.

61 Australian Medical Association, Submission 7, p. 3.

62 Dr Steven Hambleton, Federal President, Australian Medical Association, Proof Committee Hansard, 29 April 2013, p. 10.

63 The University of Sydney, Submission 23, p. 3.

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of international pharmaceutical companies, exposing them to the penalties and regulatory requirements intended for that industry. If the Bill is not intended to apply to universities in this way, it was recommended in the submission that consideration be given to specifically exclude these parties.64

Publication of transaction details

1.80 Some submitters who supported improved transparency suggested that the requirement under proposed section 42DT for publication of reports on company websites was unhelpful to consumers. While having this additional information available to the public would be an improvement to transparency, a far more helpful mechanism for consumers would be for all information to be available in a single public repository.65

1.81 The proposal for a single repository was also supported by pharmaceutical companies. For example, Pfizer noted that through the current Medicines Australia review process of the MA Code, consumers had expressed a preference for access to information about interactions between healthcare professionals and companies on one centrally located website in an accessible and searchable format.66

1.82 Ms Deborah Monk, Medicines Australia, commented that a single repository was being considered:

Certainly one of the principles that the transparency working group has developed is the concept that the repository of the data needs to be centralised…that could be on the Medicines Australia website, the TGA website or APRA's website. The concept is that it needs to be centralised, so that it is the one place that you go to find that information.67

1.83 Pfizer also noted that the Bill failed to provide a mechanism for doctors to check the validity of the details of reports which are required to be provided on company websites under section 42DT of the Bill.68

1.84 DoHA also raised concern with the lack of detail in the Bill with regard to the monitoring and enforcement of section 42DT:

The assumption may be that the TGA would have a supervisory role in enforcement. The TGA's current enforcement powers are not designed or adapted to detect, enforce and prosecute contraventions of the type proposed. As well as requiring additional amendments to the Act, development and implementation of such a monitoring and enforcement role would require significant resources and would result in additional costs to industry through TGA's cost recovery arrangements.

64 The University of Sydney, Submission 23, p. 3.

65 Dr Ken Harvey, Submission 4, p. 2.

66 Pfizer Australia, Submission 8, p. 3.

67 Ms Deborah Monk, Director Innovation and Industry Policy, Medicines Australia, Proof Committee Hansard, 29 April 2013, p. 29.

68 Pfizer Australia, Submission 8, p. 3.

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While the TGA could ascertain whether the required report had been published on the company's website within the statutory timeframe, it would not be within the current powers of the Secretary of the Department of Health and Ageing under the Act (and therefore the TGA) to require the company to provide information that might demonstrate the accuracy of the report or whether it had been prepared "in accordance with" proposed section 42DT (as required by proposed subsection 42DU).69

Appropriate interaction between companies and medical practitioners

1.85 Submitters argued that the Bill would preclude appropriate interaction between companies and medical practitioners with Ms Maguire, GlaxoSmithKline stating that:

The measures outlined in the bill will have a detrimental impact on the pharmaceutical company's ability to support valuable medical education for healthcare professionals. Medical education is critical to ensure quality use of medicines in the best interests of patients. Patients want to their doctors to know how medicines work and how to use them.70

1.86 As a consequence, it was argued that medical education provided by pharmaceutical companies should be continued.71 The Australian Medical Association endorsed this position:

It is equally important to recognise that interactions between medical practitioners and pharmaceutical and medical companies are a necessary and legitimate part of ensuring that patients have access to new and improved medicines, treatments and medical devices that save lives and improve the quality of life for Australians with illness.

Australians enjoy world class health care because medical practitioners are actively engaged in the development of, and fully informed about, new or improved medicines, treatments and devices. Australian medical practitioners' engagement with international colleagues and experiences improve patient outcomes in Australia.72

1.87 It was further noted by some submitters that the current MA Code already provides a number of restrictions on the hospitality provided at these events to ensure they are conducted in an ethical and professional manner. Mr McDonald commented, for example, 'when a new medicine is being launched or there is an update on the medicine there is a proper educational process that follows the code and meets the requirements of the code'.73

69 Department of Health and Ageing, Submission 24, p. 8.

70 Ms Lisa Maguire, Associate Director, GlaxoSmithKline, Proof Committee Hansard, 29 April 2013, p. 14.

71 See for example, Medicines Australia, Submission 16, p. 11; MSD, Submission 10, p. 1; Amgen Australia, Submission 11, pp 1-2; Lundbeck Australia, Submission 13, p. 1.

72 Australian Medical Association, Submission 7, p. 1.

73 See for example, Mr Geoff McDonald, General Manager, GlaxoSmithKine, Proof Committee Hansard, 29 April 2013, p. 24.

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1.88 A number of pharmaceutical companies also noted their belief that healthcare professionals who they work with should be fairly compensated for the service and expertise they provide.74 Ms Maguire commented further:

We believe it is appropriate to fairly compensate healthcare professionals for the legitimate and important insights and expertise into the medical care that they provide. While some might argue that healthcare professionals should fund their own education, it is not realistic in practice. Doctors come from all walks of life and it is appropriate that we support them to continue to gain new knowledge in an incredibly complex and evolving field.75

1.89 Two other areas where it was considered that the Bill may impact on appropriate interactions were in relation to clinical trials and university partnerships. Mr Geoff McDonald, GlaxoSmithKine, noted that clinical trials involve meetings with participants that usually do not take place in Australia. Mr McDonald added:

The ability for them to interact and talk about where the research is going, what modifications they have to make et cetera is important. Out of that, as a medicine progresses, because we are not able to do any promotion until we have approval, those individuals who have been involved and working closely with those drugs over x number of years are the people we would use for education locally.76

1.90 While the University of Sydney supported the broad intent of the Bill, it raised concern that, in its current form, it will impact on the legitimate activities of Australian universities in partnership with pharmaceutical companies. It was noted that the quality of Australia's health and medical research relies on the engagement and collaboration between universities, medical research institutes, clinicians, and industry partners. However, the Bill may effect this engagement:

We are concerned that the Bill will unintentionally diminish industry's capacity and willingness to collaborate with Australian universities, and to sponsor legitimate university-led education and research initiatives. Ultimately this would affect the capacity of universities to disseminate the findings of their researchers and to provide training to health professionals.77

Comparison with the existing MA Code

1.91 A number of submitters observed that some aspects of the Bill imposed restrictions that were less stringent than those currently in place under the MA Code.78

74 See for example, Vifor Pharma, Submission 9, p. 2; Amgen Australia Pty Ltd, Submission 11, p. 2.

75 Ms Lisa Maguire, Associate Director, GlaxoSmithKline, Proof Committee Hansard, 29 April 2013, p. 14.

76 Mr Geoff McDonald, General Manager, GlaxoSmithKine Proof Committee Hansard, 29 April 2013, p. 28.

77 The University of Sydney, Submission 23, p. 2.

78 For example, see Medical Technology Association of Australia and IVD Australia, Submission 6, p. 6.

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For example, Pfizer Australia noted that section 43DS(2) which relates to the forms of payment to a doctor had a higher threshold than the current MA Code. The Bill stipulates that a gift of less than $25 is acceptable and is not reported, however the existing MA prohibits any form of gift, whatever the value.79

1.92 The submission from Janssen-Cilag Pty Ltd presented a table comparing selected amendments proposed in the Bill with the existing standards set out in the MA Code which they believe already address a number of the concerns raised in the Bill. For example, the submission states that the existing provisions in the MA Code relate to the interactions with healthcare professionals, including the content of promotional materials; whereas the Bill seeks to regulate just one aspect of pharmaceutical companies' interactions with physicians, that is financial interactions.80

Efficiency and cost effectiveness of self-regulation

1.93 A number of submissions raised concern about the additional costs that would be imposed on companies to comply with, and the government to administer, the proposed regulations under the Bill. It was suggested to the committee that self-regulation is both more efficient and cost effective.81

1.94 Medicines Australia noted that self-regulation is self-funded. It pointed out that industry currently funds the education, training, monitoring and enforcement mechanisms that underpin the MA Code and no tax payer funds are required for support.82

1.95 The Medical Technology Association of Australia (MTAA) and IVD Australia submission also noted that an industry code is more efficient and effective than one dealt with under a regulatory regime:

All compliance processes bring with them an added cost which, in the case of companies working in the health sector, will result in additional burdens to sponsors of therapeutic products. These costs will be passed on to health product purchasers, thereby adding cost to the health system with no perceivable additional benefit.83

1.96 This view was endorsed by Dr Hambleton who commented that the AMA did not support the introduction of any mechanism which increased costs:

…any extra regulation, if it increases red tape, is something the AMA has stood against in many fora. We have a first-rate health system. We have some of the best outcomes in the world. We do not want to tie up the doctors at the front line of care in red tape…There are other health professions which warrant transparency measures because at the end of the day if there are increased costs because of red tape or increased costs

79 Pfizer Australia, Submission 8, p. 4.

80 Janssen-Cilag Pty Ltd, Submission 15, pp 4-5.

81 SANOFI, Submission 5, p. 1.

82 Medicines Australia, Submission 16, p. 8.

83 Medical Technology Association of Australia and IVD Australia, Submission 6, p. 1.

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because of education expenses which are not covered by other avenues, as we have discussed earlier, there is going to be an input cost of the medical care and that input cost will ultimately be transferred to the patients.84

1.97 The University of Sydney also noted in its concern about the increased regulatory burden on affected parties if the Bill proceeds, including universities. It also raised whether a regulatory impact assessment had been conducted to assist in the consideration of the proposed reforms under the Bill.85

1.98 However, not all evidence supported self-regulation. It was noted that those companies which did not belong to an industry association were not subject to the relevant industry codes of conduct. Dr Harvey provided the committee with an example in the generic industry in relation to a new generic companies, particularly from India. Dr Harvey stated:

…the particular company concerned has not joined an industry association. They did not join the Generic Medicines Industry Association.

They were offering a substantial inducement of free stocks to pharmacists to preferentially dispense their product, which is against some of the principles—and, indeed, the letters of the law—in the Medicines Australia code and the GMiA code: thou shalt not induce a practitioner to influence their prescribing or dispensing of a particular drug. So a complaint was put in. The company concerned were asked if they would be happy with the GMiA adjudicating and, not surprisingly, they declined to have it heard. That is the problem with self-regulation of industry codes: those outside it are not touched at all.86

Support for co-regulation model to strengthen existing industry codes

1.99 The committee received evidence from a number of individuals and organisations which proposed a co-regulatory approach in some areas to strengthen the existing self-regulation model.87 In particular, a number of submitters endorsed Recommendation 5 of the Working Group on the Promotion of Therapeutic Products:

The Working Group recommends that TGA include on its application forms (whether electronic or paper) a requirement for an applicant to nominate the relevant code of practice to which it will subscribe, as a condition of registration/listing on the ARTG.

1.100 In its response to the Working Group's report, the Government did not support this recommendation, noting the preference to maintain an emphasis on self-regulation. However, it further noted that:

84 Dr Steven Hambleton, Federal President, Australian Medical Association, Proof Committee Hansard, 29 April 2013, p. 11.

85 The University of Sydney, Submission 23, p. 2.

86 Dr Ken Harvey, Proof Committee Hansard, 29 April 2013, p. 4.

87 See for example, Medicines Australia, Submission 16, p. 3; Medical Technology Association of Australia and IVD Australia, Submission 6, p. 1; Dr Ken Harvey, Submission 4, p. 6.

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If after codes have been updated, further encouragement is required for non-members to nominate a code, the Government will consider further legislative measures including the TGA seeking this information.88

1.101 Medicines Australia stated that it supported a hybrid model: that the Therapeutic Goods Act is amended to provide that it should be a condition of registration that a particular company follow a self-regulatory code. In addition, Medicines Australia further stated that all of these self-regulatory codes should come up to the standard of the Medicines Australia code of conduct.89

1.102 Dr Ken Harvey suggests there is a precedent for this approach with regard to the sponsors of prescription generic medicines must agree to comply with certain parts of the MA Code when they sign the TGA letter of marketing approval.90

Conclusion 1.103 The committee acknowledges that it is important that health consumers are confident that the medical practitioner, from whom they are seeking assistance and advice, maintains an ethical and transparent relationship with pharmaceutical companies. The committee notes that since 2010 this relationship has been the subject of examination and consideration. Recommendations have been made to the Government to improve transparency of this relationship. The Government has responded by funding the implementation of some of the recommendations including the strengthening of self-regulation through industry codes of conduct.

1.104 The committee considers that it is appropriate that the relationship between medical practitioners and pharmaceutical companies be regulated through industry codes. Further, the committee notes that some aspects of the Bill are weaker than the existing Medicines Australia code of conduct. The committee therefore does not support the Bill.

Recommendation 1

The committee recommends that the Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013 not be passed.

Senator Helen Polley Chair

88 TGA Reforms: A blueprint for TGA's future, 2011, p. 25.

89 Dr Barnes, Medicines Australia, Proof Committee Hansard, 29 April 2013, pp 23-24.

90 Dr Ken Harvey, Proof Committee Hansard, 29 April 2013, p. 2.

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Australian Greens Dissenting Comments Introductory 1.1 The Australian Greens wish to provide dissenting comments to the report by the Senate Standing Committee on Finance and Public Administration into Senator Di Natale's Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013.

1.2 The integrity of the professional relationships between pharmaceutical companies and medical practitioners is of paramount importance in maintaining the quality of health care in Australia. This Bill intended to safeguard the integrity of those professional relationships through regulation and transparency. This inquiry provided a good opportunity for the community to discuss this important issue. The inquiry attracted a good range of submissions and quality evidence which helped to inform this discussion.

1.3 The question at hand was whether there is a problem of undue influence by pharmaceutical companies over the prescribing habits of medical practitioners. While some of the submissions raised substantive issues with the scope of the Bill, there was a general agreement amongst submitters and witnesses that the problem of undue influence either exists, or that there is a perception in the broader community that such undue influence exists. Industry is aware of this perception and appears to be moving in the direction of transparency to address it. The Australian Greens believe that the clearest and most effective way to address these concerns is through legislation.

1.4 The Greens have considered the substantive issues that were raised throughout the inquiry and accept the need to amend the Bill.

Applicability to other industries 1.5 While this Bill was premised on the need to preserve the integrity of the professional relationships between pharmaceutical companies and medical

practitioners, the inquiry has made clear the fact that the need for transparency within the field of therapeutic goods is broader than just this one industry. Comment submitted by the Department of Health and Ageing points out that the Bill in its current form will exclude other relationships between therapeutic goods companies and health professionals.1 The Greens accept that the broader community will benefit by the transparency envisaged by this Bill being extended to other therapeutic goods companies such as those that sell medical devices.

1.6 Therapeutic goods are currently covered by eight codes of conduct. Simplifying this situation would be consistent with a decades-long trend towards more efficient and harmonised regulation of industry. The Greens note concerns regarding the potential for overly complex regulation to create an uneven playing field, but feel that this Bill presents an opportunity to overcome the existing patchwork of regulations, and deliver a consistent regulatory environment for therapeutic goods and services in this country.

1 Department of Health and Ageing, Submission 24, p. 7.

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Recommendation 1

1.7 That the bill be amended to include interactions between health professionals and vendors of other therapeutic goods besides pharmaceuticals.

Voluntary Codes 1.8 Both the Australian Government and therapeutic goods industry noted a preference for self-regulation. The inquiry heard that while this decreases the cost to the Australian taxpayer, there are many well-documented problems with self-regulation, including that:2

 Multiple codes of conduct, the content of which vary significantly across industry sectors, creating an uneven playing field;  It is difficult to improve standards due to industry oversight and veto;  Codes can represent lowest common denominator standards by requiring

majority sign off;  Numerous codes can increase complexity for consumers trying to navigate the regulations when filing a complaint; and  Voluntary codes don't apply to non-members, greatly reducing their reach and

effectiveness.

1.9 The voluntary nature of codes of conduct is a key concern. There is no legal obligation for industry actors to join a trade association and become bound under a code of conduct. Industry actors who have no intention of conducting themselves in a responsible manner simply choose not to submit themselves to an association's code of conduct. The inquiry heard that the Generic Medicines Industry Association of Australia (GMiA) provides an option for non-members to voluntarily sign up to the GMiA code of conduct without joining the association, and that to date, no company had chosen to do so. The inquiry further heard that in 2012, Ranbaxy Australia offered pharmacists $14,648 worth of free Trovas stock (a generic atorvastatin) and a 90% discount for subsequent orders. This offer appeared to breach the Codes of Conduct of both GMiA and Medicines Australia. A complaint was submitted to GMiA but Ranbaxy declined to participate in an investigation of this complaint as it was not a member of any self-regulated industry association.3 Such is the nature of voluntary self-regulation that a company facing action under an industry association Code of Conduct could simply leave the association to avoid the sanction.

1.10 Several submissions called for a move to a co-regulation model to strengthen existing industry codes.4 This co-regulation model would require that each company should agree to abide by an applicable industry self-regulatory code in its entirety as

2 Dr Ken Harvey, Submission 4, p. 3.

3 Dr Ken Harvey, Submission 4, p. 4.

4 See for example, Medicines Australia, Submission 16, p.3; MTAA and IVDA, Submission 6, p. 1; Dr Ken Harvey, Submission 4, p. 6.

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part of registering a product on the Australian Register of Therapeutic Goods (ARTG). The Australian Greens note that such a model was also a recommendation of the Government’s own Working Group on the Promotion of Therapeutic Products. The Australian Greens further note that the Government chose not to support that recommendation in their response to the 2011 report, but adopted a “wait and see” attitude.5

1.11 The Australian Greens note that various submissions to the inquiry were informed by other work currently underway in this field, including the work of the Codes of Conduct Advisory Group established in early 2013. That there are positive developments occurring by other means does not preclude the relevance of this Bill. This Bill will create a broad, consistent and enforceable context in which Codes of Conduct can operate more effectively. Legislation will not supplant industry Codes of Conduct, but will deliver a minimum level of compulsory regulation in this field. The Australian Greens consider a co-regulatory model requiring mandatory industry participation in a Code of Conduct system would be preferable to the current regime, but that legislation targeted to address existing deficiencies in regulation would deliver a better result.

Transparency Working Group 1.12 The Australian Greens note that Medicines Australia have establishment the Transparency Working Group (TWG), that intends to report in June 2013. We find it encouraging that the TWG contains members (such as Dr Ken Harvey of the School of Public Health at La Trobe University) who made submissions to this inquiry in support of greater transparency in the therapeutic goods industry. While the TWG's recommendations will still be voluntary, they will no doubt contribute to the ongoing discussion around adequate regulation of this sector and will hopefully progress improvements in Codes of Conduct in line with the intentions of this Bill.

Training for doctors 1.13 Evidence presented to this inquiry raised concerns regarding the proposed regulations preventing Doctors from obtaining further professional education. The Australian Greens appreciate the need for legitimate and appropriate educational interaction between healthcare professionals and those who supply the products they prescribe. These interactions ensure Australian healthcare professionals are engaged and informed about medical developments. The Australian Greens also appreciate that many doctors are subsidised to attend sponsored events and that they attend in good faith to engage and information share with peers, ultimately improving health outcomes.

1.14 The inquiry heard evidence that non-transparent inducements such as funded travel and sponsored attendance at conferences can encourage conscious or unconscious reciprocity by the recipients of largesse. This reciprocity can manifest itself in uncritical uptake of newer, expensive and less well-evaluated products; and underutilisation of more cost effective drugs and devices. These relationships have

5 TGA Reforms: A blueprint for TGA's future, 2011, p. 25.

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also been shown to distort published medical evidence by influencing how studies are designed and conducted, as well as which studies are published and which are not.

1.15 Evidence suggests that such patronage by commercial entities of medical practitioners has the capacity to skew doctors’ ongoing education towards areas where industry chooses to invest and that sponsored education may unduly focus on the newest and most expensive therapies. Given this tension between the need for the ongoing education of doctors and the commercial imperative of sponsored education, the Greens note that it would be better if ongoing education was provided through a neutral agency like the National Prescribing Services (NPS). A non-aligned clearing house of information would allow Australia’s medical practitioners to remain up-to-date with developments in their field without the lens of commercial interest distorting their view. This might include the use of cutting-edge medicines but also, for instance, new uses for existing therapies.

1.16 Evidence submitted to the inquiry by GlaxoSmithKline suggests that medical practitioners can struggle to find the time and money to undertake further education and profession development.6 Given this circumstance and the potential for industry sponsorship to result in skewed medical application, it would make sense to provide practitioners with assistance from a neutral party like the NPS rather than leaving such facilitation to industry.

Online publication in central place 1.17 Evidence was presented regarding the publication of transparency reports which raised concerns regarding the Bill’s provisions for reporting on the websites of industry entities. It was pointed out that transparency reporting on numerous commercial websites would be difficult for consumers to access effectively and that the information would be more easily accessed via a single, public repository. The Australian Greens note that Medicines Australia’s Transparency Working Group also supports such a centralised portal, enabling the information to be audited and validated by healthcare professionals and companies, and supported by an educational process to assist all parties to interpret the information in context.7 The Australian Greens agree that such a central repository of information would be superior to the reporting provisions originally proposed, and that the Bill should be amended to reflect that improvement.

Recommendation 2

1.18 That the bill be amended so that reporting requirements are satisfied with publication to a searchable central repository, rather than on the web sites of individual companies.

Other issues with the Bill 1.19 Submissions received by the inquiry raised other concerns with the Bill which should be taken into consideration. The University of Sydney suggested that

6 GlaxoSmithKline, Submission 17, p. 4.

7 Dr Ken Harvey, Submission 4, p. 1.

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definitions of the parties to which the Bill applies may be problematic and unintentionally exclude or include certain groups based on their ability to prescribe.8 The Australian Greens accept this criticism and would see the definition of ‘registered medical practitioner’ improved in an amended Bill.

1.20 The University of Sydney also raised concern with the definition of 'regulated corporation' in the Bill suggesting that it may capture universities that import regulated pharmaceuticals for medical research or to conduct clinical trials on behalf of international pharmaceutical companies, exposing them to the penalties and regulatory requirements intended for that industry.9 The Bill is not intended to apply to universities in this way, and the Australian Greens would see such parties specifically excluded in an amended Bill or the Explanatory Memorandum amended to make it clear that such cases were excluded.

1.21 Pfizer also noted that the Bill failed to provide a mechanism for doctors to check the validity of the details of reports which are required to be provided on company websites under section 42DT of the Bill.10 The Australian Greens accept this criticism and note that the proposal by the Medicines Australia Transparency Working Group for "a single, public repository, enabling the information to be audited and validated by healthcare professionals and companies" provides an effective remedy to the Bill’s original lack of facility.

Conclusion 1.22 The inquiry made it clear that there are serious concerns regarding the transparency and integrity of the therapeutic goods sector in Australia. This Bill would address those concerns by bringing Australia up to world’s best practice in terms of transparent disclosure and reduction of conflicts of interest arising in the medical profession as a result of their interactions with industry.

Recommendation 3

1.23 That the bill be passed.

Senator Richard Di Natale Senator for Victoria

8 The University of Sydney, Submission 23, p. 3.

9 The University of Sydney, Submission 23, p. 3.

10 Pfizer Australia, Submission 8, p. 3.

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APPENDIX 1

Submissions and Additional Information received by the Committee

1 Abbvie Pty Ltd

2 Associate Professor Ian Haines

3 Dr Mary Osborn

4 Dr Ken Harvey

5 SANOFI

6 Medical Technology Association of Australia and IVD Australia

7 Australian Medical Association

8 Pfizer Australia

9 Vifor Pharma

10 MSD

11 Amgen Australia Pty Ltd

12 Allergan Australia Pty Ltd

13 Lundbeck Australia Pty Ltd

14 Consumers Health Forum of Australia

15 Janssen-Cilag Pty Ltd

16 Medicines Australia

17 GlaxoSmithKline

18 Merck Serono

19 Australian Self-Medication Industry Inc

20 GMiA (Generic Medicines Industry Association Pty Ltd)

21 Bristol-Myers Squibb

22 Abbott Australasia Pty Ltd

23 University of Sydney

24 Department of Health and Ageing

25 Australian Dental Industry Association

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Tabled Documents

1 Dr Ken Harvey, Opening statement, tabled at public hearing, 29 April 2013

2 Dr Ken Harvey, Media article "U.S. sues Novartis over kickbacks", tabled at public hearing, 29 April 2013

3 Dr Ken Harvey, "The Great Pill Pu$h: Tracking the marketing of medicines in Australia", The Global Mail, tabled at public hearing, 29 April 2013

4 GlaxoSmithKline, Opening statement, tabled at public hearing, 29 April 2013

5 Medicines Australia, Code of Conduct (edition 17), tabled at public hearing, 29 April 2013

Answers to Questions on Notice

1 Answer to Question on Notice, GlaxoSmithKline, 29 April 2013, received 30 April 2013

2 Answer to Question on Notice, Department of Health and Ageing, 29 April 2013, received 22 May 2013

3 Answer to Question on Notice, Department of Health and Ageing, 29 April 2013, received 22 May 2013

4 Answer to Question on Notice, Department of Health and Ageing, 29 April 2013, received 22 May 2013

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APPENDIX 2 Public Hearing

Monday, 29 April 2013

Mantra Hotel, 222 Russell Street, Melbourne

Witnesses

Dr Kenneth Harvey

Australian Medical Association (via teleconference)

Dr Steven Hambleton, Federal President

Medicines Australia

Ms Deborah Monk, Director Innovation and Industry Policy Dr Dominic Barnes, Chair, Transparency Working Group

GlaxoSmithKline

Mr Geoff McDonald, General Manager and Board Member, Medicines Australia Ms Lisa Maguire, Associate Director, Corporate Affairs

Department of Health and Ageing

Mr Peter Woodley, Assistant Secretary, Blood, Organ and Regulatory Policy Branch, Regulatory Policy and Governance

Therapeutic Goods Administration

Ms Philippa Horner PSM, Principal Legal Adviser

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The Senate

Foreign Affairs, Defence and Trade

Legislation Committee

Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 [Provisions]

June 2013

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 Commonwealth of Australia 2013

ISBN 978-1-74229-825-2

Printed by the Senate Printing Unit, Parliament House, Canberra

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Members of the committee Core Members Senator the Hon Ursula Stephens, ALP, NSW (Chair) Senator Alan Eggleston, LP, WA (Deputy Chair) Senator Mark Bishop, ALP, WA Senator David Fawcett, LP, SA Senator Anne McEwen, ALP, SA Senator Scott Ludlam, AG, WA

Participating Members Senator L Rhiannon, AG, NSW

Secretariat Dr Kathleen Dermody, Committee Secretary Mr Owen Griffiths, Principal Research Officer Miss Jedidiah Reardon, Senior Research Officer Ms Penny Bear, Research Officer Ms Jo-Anne Holmes, Administrative Officer

Senate Foreign Affairs, Defence and Trade Legislation Committee Department of 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: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Commit tees?url=fadt_ctte/index.htm

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Table of Contents

Members of the committee ............................................................................... iii

Chapter 1

Introduction .............................................................................................................. 1

Background ............................................................................................................. 1

Scrutiny by other committees ................................................................................. 2

Conduct of inquiry .................................................................................................. 2

Acknowledgements ................................................................................................ 2

Chapter 2

Purpose of bill ........................................................................................................... 3

Export Finance and Insurance Corporation (EFIC) ............................................... 3

Productivity Commission inquiry........................................................................... 5

Chapter 3

Amendments to EFIC Act ........................................................................................ 7

Governmen

t Response to the Productivity Commission's recommendations ........ 7

Am

endments to EFIC legislation ........................................................................... 7

Small to Medium Enterprise (SMEs) and market failure .................................... 8

Market failure ................................

.................................................................... 11

Removal of Public Service Personnel from EFIC Board .................................. 13

Application of competitive neutrality principles to EFIC ................................. 14

EFIC support in domestic supply chains ........................................................... 15

Productivity Commission recommendations not implemented through legislation .............................................................................................................................. 16

Productivity Commission recommendations noted/not agreed ............................ 16

National Interest Account .................................................................................. 17

EFIC's exemption from FOI requirements ........................................................ 19

Future Review ................................................................................................... 21

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Chapter 4

Social and environmental responsibility .............................................................. 23

Productivity Commission's findings and recommendations ................................ 23

Environme

ntal and social standards .................................................................. 23

Government's response ...................................................................................... 25

Human rights ..................................................................................................... 26

Concerns raised in evidence ................................................................................. 27

Environmental standards ................................................................................... 27

Human rights ..................................................................................................... 30

EFIC's environmental and social policy ............................................................ 32

Transparency ..................................................................................................... 34

Summary ............................................................................................................ 35

Response to concerns-DFAT and EFIC .............................................................. 35

Requirement for legislative change ................................................................... 36

International standards....................................................................................... 37

Exemption from Environment Protection and Biodiversity Conservation Act 1999 ................................................................................................................... 37

Environmental and social policy ....................................................................... 39

Multi-stakeholder forum .................................................................................... 42

Need for legislative amendment ........................................................................... 43

Chapter 5

Conclusion ............................................................................................................... 45

Additional Comments by Senator Lee Rhiannon

Australian Greens Senator for New South Wales ............................................... 47

Appendix 1

Public submissions .............................................................................................. 51

Appendix 2

Public hearings and witnesses ........................................................................... 53

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Appendix 3

Tabled documents, answers to questions on notice and additional information .............................................................................................................. 55

Appendix 4

Department of Foreign Affairs and Trade, Submission Number 4 ............... 57

Appendix 5

Government Response to Productivity Commission Review of Australia's Export Credit Arrangements ............................................................................ 65

Appendix 6

Minister for Trade and CompetitivenessExport Finance and Insurance Corporation Statement of Expectations ........................................................... 81

Appendix 7

Export Finance and Insurance CorporationStatement of Intent .............. 87

Appendix 8

Department of Foreign Affairs and Trade answer to question on notice ..... 93

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Chapter 1 Introduction

Background 1.1 The Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 (the bill) was introduced into the House of Representatives on 20 March 2013.

1.2 On 21 March 2013, pursuant to the Senate Selection of Bills Committee report, the provisions of the bill were referred to the Senate Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report by 14 May 2013. The committee was asked to give particular consideration to the numerous matters that were raised in relation to the Productivity Commission's report on Australia's Export Credit Arrangements.1 The Productivity Commission's report followed its public inquiry into arrangements for the provision of export credit through Australia's export credit agency, the Export Finance and Insurance Corporation (EFIC).2

1.3 On 16 May 2013, the bill was debated in the Federation Chamber and then passed without amendment. The bill was introduced into the Senate on 16 May 2013 and debate was adjourned to a later day. The Senate granted an extension to the inquiry's reporting date to 17 June 2013. The bill has no accompanying regulations.

1.4 The bill implements the government's response to the Productivity Commission's Report on Australia's Export Credit Arrangements. The Productivity Commission report was released on 26 June 2012.3 The government response was published in January 2013. The bill will also give new powers to the Export Finance and Insurance Corporation (EFIC) to support Australian small and medium sized businesses participating in global and regional value chains.4

1 Selection of Bills Committee, Report No. 4 of 2013, 21 March 2013, Appendix 6.

2 Productivity Commission, Australia's Export Credit Arrangements, Productivity Commission Inquiry Report, No. 58, 31 May 2012.

3 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 2.

4 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 2.

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Scrutiny by other committees Scrutiny of Bills Committee Inquiry

1.5 The Scrutiny of Bills Committee considered the bill according to its usual scrutiny process and did not have comments in relation to the scrutiny principles outlined in Senate Standing Order 24.5

Parliamentary Joint Committee on Human Rights

1.6 The Parliamentary Joint Committee on Human Rights examined the bill and considered that the bill does not give rise to any human rights concerns.6

Conduct of inquiry 1.7 The committee advertised the inquiry on its website. It also wrote to relevant ministers and departments calling for written submissions, and contacted over 130 organisations and commentators inviting them to make submissions to the inquiry, including individuals and organisations that had made submissions to the Productivity Commission's inquiry.

1.8 The committee received 11 submissions. All submissions are listed at Appendix 1 and published on the committee's website. The committee held a public hearing on 17 May 2013. Witnesses who appeared at the public hearing are listed at Appendix 2.

Acknowledgements 1.9 The committee thanks all those who assisted with the inquiry, particularly witnesses who attended the hearing at short notice.

5 Scrutiny of Bills Committee Alert Digest No. 5 of 2013, 14 May 2013, p. 47.

6 Parliamentary Joint Committee on Human Rights, Sixth Report of 2013, p. 107.

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Chapter 2 Purpose of bill

Export Finance and Insurance Corporation (EFIC) 2.1 The Department of Foreign Affairs and Trade's (DFAT) submission described EFIC as Australia's export credit agency, a self-funded statutory authority which was established by the Export Finance and Insurance Corporation Act 1991 (EFIC Act). DFAT explained that the EFIC Act gives EFIC four functions:

 to facilitate and encourage Australian export trade by providing insurance and financial services and products to persons involved directly or indirectly in export trade;

 to encourage banks and other financial institutions in Australia to finance or assist in financing exports;

 to manage the Australian Government's aid-supported mixed credit program; and

 to provide information and advice regarding insurance and financial arrangements to support Australian exporters.1

2.2 EFIC describes its role as helping 'Australian-based businesses to win and finance export, offshore investment and onshore export-related opportunities' when private sector financing is unavailable.2 EFIC uses one of two accounts to provide financial support to businesses: the Commercial Account and the National Interest Account. The Commercial Account is controlled by EFIC's board, which determines whether or not to support transactions. The Australian Government manages the National Interest Account, with proposals on this account being referred to the Minister for Trade and Competitiveness for consideration.3

2.3 EFIC is part of the Foreign Affairs and Trade Portfolio and is accountable to the Minister for Trade and Competitiveness (the Minister). As a Commonwealth authority, EFIC is subject to the Commonwealth Authorities and Companies Act 1997 and produces an annual report.4

2.4 The Minister for Trade and Competitiveness has a number of powers in relation to EFIC. For example, he or she may give written directions to EFIC in regards to the performance of its function. However the Minister for Trade and

1 Submission 4, p. 1.

2 Export Finance and Insurance Corporation, 'About EFIC', http://www.efic.gov.au/about/Pages/aboutefic.aspx, (accessed 4 June 2013).

3 Submission 4, pp. 1-2.

4 Export Finance and Insurance Corporation, 'Principal accountabilities', http://www.efic.gov.au/about/governance/Pages/Principalaccountabilities.aspx (accessed 4 June 2013).

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Competitiveness cannot require EFIC to 'obtain ministerial approval for a particular transaction or direct EFIC to enter into a particular transaction'.5

2.5 EFIC is managed by a board (which includes one government

representative—the Secretary of DFAT). The board is responsible for corporate governance of EFIC, and 'establishing EFIC’s strategies, defining risk appetite, monitoring performance, making decisions on capital usage, including large exposures, and making dividend recommendations to the Australian Government'.6 The board is appointed by the Minister for Trade and Competitiveness, with the exception of the Managing Director.

2.6 The Review of the Corporate Governance of Statuary Authorities and Office Holders (the Uhrig Review) recommended, among other things, that ministers should issue Statements of Expectation to their portfolio bodies to outline their expectations for that body, in line with its governing legislation.7 The Minister for Trade and

Competitiveness last issued a Statement of Expectations for EFIC in 2011 (a copy is at Appendix 6).

2.7 In addition to noting the requirements EFIC has under the EFIC Act, the Minister's Statement of Expectation also asked that EFIC:

 monitor the capacity of commercial markets to provide credit and take this

into account when determining the scope of its activities;

 manage its activities so as not to compete directly with existing commercial

providers of financial services and products;

 ensure that its pricing does not undercut the private sector when private

support is present;

 provide a range of information services;

 effectively manage social and environmental risks relating to transactions and

comply with international standards;

 have a Service Level Agreement in place with DFAT for the management and

administration of the National Interest Account; and

 work closely with Austrade on delivering services to Australian businesses. 8

5 Export Finance and Insurance Corporation, 'Principal accountabilities', http://www.efic.gov.au/about/governance/Pages/Principalaccountabilities.aspx (accessed 4 June 2013).

6 Export Finance and Insurance Corporation, 'EFIC Board', http://www.efic.gov.au/about/EFICBoard/Pages/EFICBoard.aspx (accessed 4 June 2013).

7 Mr John Uhrig AC, Review of the Corporate Governance of Statutory Authorities and Office Holders, (June 2003), p. 11.

8 The Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness, 'Statement of Expectations', http://www.efic.gov.au/about/governance/Documents/Minister-for-Trade- Statement-of-Expectations-19-July-2011.pdf?utm_source=seo&utm_medium=EFIC- Board&utm_campaign=seo-efic-expectations-PDF-110824 (accessed 4 June 2013).

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2.8 EFIC responded to the Minister's Statement of Expectations with a Statement of Intent, undertaking to work to the expectations outlined by the Minister.9 (A copy of the EFIC Statement of Intent is at Appendix 7.)

Productivity Commission inquiry 2.9 On 1 September 2011, the Government asked the Productivity Commission to undertake an inquiry into EFIC. The impetus for the inquiry came from a review of EFIC undertaken by DFAT in 2006 which recommended a more detailed and independent inquiry be made at a later stage.10

2.10 The Productivity Commission's terms of reference focused on Australia's arrangements for the provision of export credit through EFIC. This included:

 reviewing the rationale for government involvement in the provision of export finance and insurance, and assessing current arrangements against the requirements of the EFIC Act;

 assessing EFIC's management of credit and funding risks;

 reviewing EFIC's pricing and service arrangements and assessing their impact on incentives for Australian exporters to access private sector providers of export finance and insurance products;

 reviewing EFIC's exemption from competitive neutrality policy; and

 assessing the interactions between EFIC and other government programs and considering alternatives that would achieve EFIC's objectives.11

2.11 The Productivity Commission's inquiry included four public hearings12 and received 116 submissions from industry, interest groups, businesses, individuals, and government departments.13 It made 22 recommendations in relation to its inquiry into the arrangements for the provision of export credit through EFIC.14 The government

9 Mr Andrew Mohl, Chairman, Export Finance and Insurance Corporation Board, 'Statement of Intent', http://www.efic.gov.au/about/governance/Documents/Statement-of-Intent-August- 2011.pdf?utm_source=seo&utm_medium=EFIC-Board&utm_campaign=seo-efic-intent-PDF- 110824 (accessed 4 June 2013).

10 The Hon. Craig Emerson MP, Minister for Trade and Competitiveness and the Hon Bill Shorten, Assistant Treasurer, 'Productivity Commission inquiry into the Export Finance and Insurance Corporation', Media release, 1 September 2011, http://www.trademinister.gov.au/releases/2011/ce_mr_110901a.html (accessed 4 June 2013).

11 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 48.

12 Productivity Commission, 'Australia's Export Credit Arrangements-Public hearings', http://www.pc.gov.au/projects/inquiry/export-credit/public-hearings (accessed 4 June 2013).

13 Productivity Commission, 'Australia's Export Credit Arrangements-Submissions', http://www.pc.gov.au/projects/inquiry/export-credit/submissions (accessed 4 June 2013).

14 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, pp. 33-43.

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response to the Productivity Commission's report, including a list of the Productivity Commission's recommendations, is at Appendix 5.

2.12 The committee will refer only to the Productivity Commission's recommendations covered in the bill or which were raised in evidence. They dealt with:

 definition of small and medium enterprise (SMEs) (recommendation 5.1);

 competitive neutrality (recommendation 6.2);

 replacing market gap with market failure (recommendation 7.1);

 excluding Australian public servants from the EFIC board

(recommendation 9.1); and

 transactions not based on an export contract (recommendation 10.1).

2.13 Some submissions to the committee's inquiry raised concerns about omissions from the Act or the inadequacy of the proposed amendments as far as the amendments purport to implement the recommendations of the Productivity Commission's report. The concerns include:

 transparency around the decision-making in relation to investments made

through the National Interest Account;

 disclosure requirements for projects with potentially significant environmental

and social effects;

 transparency of EFIC's adherence to international obligations; and

 EFIC's exemptions from Freedom of Information (FOI) legislation.

2.14 In the following chapter, the committee considers the amendments to the bill that were generally supported and some concerns relating to the need to strengthen the current Act, particularly in relation to transparency on decisions made regarding National Interest Account and EFIC's exemption from the FOI Act. The final chapter of the committee's report examines the concerns submitters raised regarding the transparency of reporting on EFIC's environmental and human rights obligations, and EFIC's compliance with these in regard to its investment decisions.

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Chapter 3

Amendments to EFIC Act

Government Response to the Productivity Commission's recommendations 3.1 The government response agreed or agreed in part with 16 of the Productivity Commission's recommendations and noted the other six recommendations.1 The bill implements the main part of the government's response to the Productivity Commission recommendations. Mr Gerovich, DFAT, explained:

…the bill does not propose a major overhaul of EFIC but rather a reorientation of its operations towards those exporters who face genuine market failures in accessing finance, particularly small and medium sized enterprises operating in emerging markets.2

3.2 DFAT explained the process for formulating the government response to the Productivity Commission's report:

In the second half of 2012, DFAT chaired an inter-departmental committee process (IDC) to formulate a whole-of-government response to the PC's [Productivity Commission's] report. Central agencies (Treasury, Finance and Prime Minister and Cabinet) participated in the process along with others including the Department of Industry and Innovation, the Department of Resources, Energy and Tourism, the Department of Infrastructure and Transport, the Department of Regional Development, Austrade, and the Department of Defence. EFIC was invited to participate in several IDC meetings to provide a commercial perspective and to ensure the Government response would be workable for EFIC. The committee also took into account views of industry when considering the PC's recommendations.3

3.3 Both the government response and DFAT's submission focus on the Productivity Commission's recommendations regarding reorienting EFIC's operations to support for SMEs and to limit EFIC's provision of export finance to situations of market failure.4

Amendments to EFIC legislation 3.4 The explanatory memorandum describes the bill as necessary to introduce the new mandate for EFIC: support of SMEs. The bill contains the following broadly grouped amendments to the EFIC Act in order to:

1 Submission 4, p. 4.

2 Committee Hansard, 17 May 2013, p. 12.

3 Submission 4, p. 4.

4 Submission 4, p. 4; see also Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 1, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

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 reorient EFIC's focus on SMEs and its operations through the Commercial

Account towards supporting commercially viable SMEs in situations in which products and services would be unlikely to be provided by the private sector through a new market failure definition;5

 remove public service representatives from the EFIC Board, in line with both the Productivity Commission's recommendations and the findings of the Uhrig Review;6

 apply competitive neutrality principles to EFIC; 7 and

 ensure EFIC support in domestic supply chains can only be provided when it

involves a contract integral to final exports of capital and non-capital goods and services.8

3.5 Amendments to the EFIC Act correspond directly to five of the Productivity Commission's recommendations. This chapter concludes with the committee's consideration of the Productivity Commission's recommendations that were raised in submissions but are not covered by legislative amendments.

Small to Medium Enterprise (SMEs) and market failure

3.6 In its report, the Productivity Commission noted that the definition of SME varies across government agencies—in fact it cited Treasury's evidence to the Parliamenta

ry Joint Committee on Corporations and Financial Services:

There is no single universally accepted definition of a small or medium-sized enterprise. A variety of definitions are used by industry participants. These are generally based on the size of a business's annual turnover, number of its employees, the size of its borrowings, or a combination of these characteristics.9

3.7 The Productivity Commission's report lists the various definitions of SMEs across government:

 To be eligible for small business tax concessions, a business must have annual

turnover of less than $2 million.

 The Fair Work Act 2009 defines 'small business employer' as an employer that employs fewer than 15 people.

 The Treasury definition of SME is based on total business income.

5 Amendments to subsections 3(1), 3(5), section 3A, section 13A, section 16 (heading), paragraph 16(1)(a), section 16, section 17 (heading), section 23A, consequential amendments to the Corporations Act 2001 and the Insurance Contacts Act 1984.

6 Amendments to paragraph 34(1)(e), paragraph 34(1)(f), subsection 34(4), subsections 35(1) and (1A), subsection 35(2), subsection 37(1), subsection 39(1), subsection 39(2).

7 Amendments to subsections 61A(1) and 62A(1), subsection 63A(2), subsection 63A(3).

8 Amendment to paragraph 19(1)(c).

9 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, pp. 65.

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 AusIndustry's Enterprise Connect program for SMEs provides assistance to

businesses with annual turnover between $2 million and $100 million.

 Austrade, in its Export Market Development Grants scheme, defines and SME as an exporter with annual revenue of less than $50 million.10

3.8 According to the Productivity Commission, EFIC defined an SME as a firm with an annual turnover of up to $150 million. It observed that EFIC's definition allows EFIC:

…to classify larger businesses as SMEs than the definitions used by other Australian Government agencies and private sector providers. This figure is three times higher than the upper limit turnover figure that the National Australia Bank uses to define medium-sized businesses.11

3.9 The Productivity Commission noted further that this definition:

…encompasses substantial firms whose challenges in securing financial services are not the result of market failures that should be corrected by government intervention through EFIC.12

3.10 In its report, the Productivity Commission recommended that the Minister for Trade and Competitiveness should amend the Statement of Expectations to require EFIC to define an SME as:

…an entity, including any related entities, with fewer than 100 full-time equivalent employees or annual turnover of less than $50 million.13

3.11 The government agreed in part to this recommendation but decided to require the Minister to prescribe the definition of an SME through regulation.14 It indicated further that the definition would be based on an annual turnover of less than $100 million, rather than the $50 million turnover recommended by the Productivity Commission, and fewer than 100 Full Time Equivalent (FTE) employees.15

3.12 The bill inserts a new section to define the term SME for the purposes of the EFIC Act which is to be based on the annual turnover and FTE specific figures which will be set by the Minister in a legislative instrument. The explanatory memorandum noted that a legislative instrument will be used to facilitate adjustment of the

10 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 65.

11 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 66.

12 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 29.

13 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 34.

14 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 2.

15 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 1, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

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definition so that 'it continues to capture companies most likely to face information related market failures.'16 It indicated that the combination of the market failure test and the new requirement for EFIC to focus on SMEs, will:

…reorient EFIC's operations on its Commercial Account towards supporting commercially viable export-focused SMEs seeking access to export finance.17

Issues raised by submissions

3.13 In its submission, the Department of Resources, Energy and Tourism (DRET) noted that the definition of SME in the amendments is key as 'a 'small' resources sector company is likely to exceed small to medium sized enterprises (SME) caps relevant to other industries'.18 These companies are still likely to have problems with

which EFIC may be able to assist.

Benefits for SMEs - support for the amendments from submissions

3.14 A number of submissions were supportive of the bill. For the most part, they described the bill's key benefit as enabling EFIC to focus on supporting SMEs to increase their export potential.

3.15 The Tasmanian Government supported the amendments, observing that Tasmania has a large number of small to medium businesses which would benefit from EFIC's new focus on supporting export-focused SMEs. It had two caveats: that support for export-focused SMEs was subject to market failure testing; and that EFIC's guarantee loans to foreign-based subsidiaries of Australian-based SMEs were for the purpose of supporting Australian export trade.19 Amendments relating to EFIC's guarantee loans to foreign-based subsidiaries of Australian-based SMEs are examined at paragraph 3.28 below.

3.16 DRET supported the amendments to the EFIC Act provided that resources sector SMEs would be included in the SME definition. DRET comment that they were comfortable with the provision allowing ministerial approval for EFIC services to include larger businesses, and noted that approval time should add no more than two additional weeks to any process.20 It noted that DRET have been a participant in an interdepartmental process to consider the Productivity Commission's recommendations. In particular DRET have been keen to ensure that EFIC's services will continue to be able to be provided to all companies, regardless of size.21

16 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 5.

17 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 1.

18 Submission 5, p. 1.

19 Submission 2, p. 1.

20 Submission 5, p. 1.

21 Submission 5, p. 1.

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Market failure

3.17 The 'market gap' in which EFIC is to provide its services is defined in the Minister for Trade and Competitiveness's Statement of Expectations:

The Australian Government has provided EFIC with a mandate to perform these functions [being the provision of financial services] only in circumstances where the credit and insurance sectors are not able or are unwilling to provide credit and insurance services to financially viable Australian export transactions or overseas projects.22

3.18 The Productivity Commission noted that EFIC's 'market gap' mandate is necessary to ensure that its activity complements rather than competes with the private sector.23 Under its terms of reference, the Productivity Commission's inquiry into Australia's Export Credit Arrangements reviewed the 'market gap' in which EFIC's services were provided and looked at whether this gap was an actual market failure.24

3.19 In its report, the Productivity Commission found that the concept of 'market gap' was very broad and could:

…cover circumstances where there is no market failure that would warrant government intervention through EFIC.25

3.20 The Productivity Commission listed a number of the ways in which operation on the basis of 'market gap' did not constitute a market failure. It found no evidence that there were problems regarding the provision of capital to large Australian resource-related projects or their suppliers which would need EFIC's financial intervention.26

3.21 Further, the Productivity Commission warned that when EFIC's activities are not going towards correcting a market failure, these activities can distort the allocation of resources. For example, effects may include 'potential crowding out of other sources of finance, other projects or competitors of EFIC's clients.'27

22 The Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness, 'Statement of Expectations', p. 1, http://www.efic.gov.au/about/governance/Documents/Minister-for-Trade- Statement-of-Expectations-19-July-2011.pdf?utm_source=seo&utm_medium=EFIC- Board&utm_campaign=seo-efic-expectations-PDF-110824 (accessed 4 June 2013).

23 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 18.

24 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. V.

25 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 35.

26 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, pp. 35-36.

27 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 36.

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At present, EFIC's relatively small size limits the economy-wide consequences of this. However, some facilities are of sufficient magnitude to pose non-trivial financial risks to the Commonwealth.28

3.22 The Productivity Commission recommended that the 'market gap' mandate be removed from the Minister's Statement of Expectations 'as it lacks rigour and does not ensure that EFIC's activities generate a net benefit to the economy'.29

3.23 In its response, the government agreed with the Productivity Commission's recommendation and stated that a 'market failure test' would replace assessments on 'market gap', the details of which would be prescribed in regulations.30 However the government's response advised that EFIC's support for exporters should be based on evidence of the following:

 inadequate information about the credit risk and standing of an Australian exporter (or SMEs 'integral' to the domestic supply chain for export-focused projects), foreign buyer or the foreign buyer's bank, which has resulted in private financial providers employing rigid generalised rules and not forming an assessment on the merits of the transaction;

 inadequate information about the value of some tradeable capital goods or the existence of liquid secondary markets for these goods, which has resulted in private sector financial providers refusing to provide services for transactions involving such goods; or

 inadequate information about the risk associated with emerging and frontier country export markets or emerging and frontier country outward investment destinations, which has resulted in private sector financial providers refusing to provide products or services for transactions in those markets.31

3.24 The government indicated further that the Minister for Trade and Competitiveness's Statement of Expectations would note the expectation that EFIC's use of the market failure test would result in a reduced level of support for non-SMEs 'involved in domestic export-focused projects, but continued support for non-SMEs exporting to, and investing in, emerging and frontier markets.'32

3.25 Proposed subsection 3(1) in the bill defines 'market failure' as:

28 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 36.

29 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 36. Recommendation 7.1.

30 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 2, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

31 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 2, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

32 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 3, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

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…a failure, relating to the provision of insurance or another financial service or product, of a kind specified in a legislative instrument made by the Minister for the purposes of this definition.33

3.26 At the committee's public hearing, Ms Angela McGrath, DFAT, confirmed that the detail of the market failure test would be set out in a legislative instrument.34 The explanatory memorandum explains that:

…the use of a legislative instrument is to facilitate adjustment of the test over time in response to the evolution of international financial practices and market characteristics.35

Issues raised by submissions

3.27 Noting that 'market failure' will be defined via a legislative instrument, to be made by the Minister, General Electric asked that the Minister consult with stakeholders on the definition of 'market failure' to ensure its workability for SMEs.36

Reorienting EFIC's activities towards supporting SMEs

3.28 Other amendments in the bill are also geared towards reorienting EFIC's activities towards supporting SMEs. For example, amendments to sections 16 and 17 broaden EFIC's guarantee powers to enable it to guarantee loans of foreign-based subsidiaries of Australian-based SMEs.37 Ms McGrath, DFAT, advised the committee that this would provide EFIC with more flexibility in its provision of services to SMEs.38

Removal of Public Service Personnel from EFIC Board

3.29 The Productivity Commission recommended that, consistent with the findings of the Uhrig Review:

…the Australian Government should amend the Export Finance and Insurance Corporation Act 1991 to exclude Australian Public Service personnel from the EFIC Board. Where the EFIC Board considers departmental advice beneficial, officials from the Department of Foreign Affairs and Trade should be invited to present to board meetings for the relevant agenda items and to answer questions relating to those items.39

33 Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, Schedule 1, item 2.

34 Committee Hansard, 17 May 2013, pp. 17-18.

35 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 4.

36 Submission 1, pp. 2-3.

37 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, pp. 5-6.

38 Committee Hansard, 17 May 2013, p. 18.

39 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 38.

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3.30 The Government agreed with this recommendation and amendments to sections 34, 35, 37 and 39 in the bill implement the recommendation.40

3.31 Submitters made no comment in regard to these amendments to the EFIC Act.

Application of competitive neutrality principles to EFIC

3.32 Under its terms of reference, the Productivity Commission's inquiry into Australia's Export Credit Arrangements reviewed EFIC's exemption from competitive neutrality.41 The Minister for Trade and Competitiveness's Statement of Expectations directs EFIC to ensure that it does not compete directly with the private sector, as it is on this basis that it is exempt from Competitive Neutrality legislation.42 The Productivity Commission argued that:

…if demand for EFIC's services occurs only because those services are subsidised, this would indicate that the export transactions are not commercially viable.43

3.33 The Productivity Commission noted that as not all of EFIC's facilities are priced to earn a commercial rate of return, these facilities are 'effectively being subsidised by taxpayers'.44 If EFIC's services are chosen over those of the private sector due to lower cost, then EFIC is competing with the private sector and potentially crowding out other sources of finance.45 The Productivity Commission recommended that:

The Australian Government should amend the Export Finance and Insurance Corporation Act 1991 (the Act) to ensure EFIC’s activity on the Commercial Account complies with competitive neutrality arrangements. This will require EFIC to pay a tax-equivalent charge and a debt neutrality fee.46

40 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 6.

41 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. VI.

42 The Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness, 'Statement of Expectations', p. 2, http://www.efic.gov.au/about/governance/Documents/Minister-for-Trade- Statement-of-Expectations-19-July-2011.pdf?utm_source=seo&utm_medium=EFIC- Board&utm_campaign=seo-efic-expectations-PDF-110824 (accessed 4 June 2013).

43 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 29. (emphasis in original).

44 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 35.

45 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 36.

46 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 35.

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3.34 The government agreed in part to this recommendation (6.2), recognising that without competitive neutrality, 'EFIC's activities may discourage market entry by potential competitors or the provision of more marginal financial products.'47

3.35 Amendments to sections 61, 62, and 63 in the bill relate to the application of competitive neutrality principles to EFIC and implement in part the Productivity Commission's recommendation 6.2.48 These amendments remove EFIC's exemption from competitive neutrality and require EFIC to pay a debt neutrality charge or guarantee fees and a tax equivalent. The explanatory memorandum notes that the arrangements for these payments are to be determined by the Minister in writing to EFIC.49

3.36 Submitters made no comment in regard to this amendment to the EFIC Act.

EFIC support in domestic supply chains

3.37 The Productivity Commission recommended in subsection (a) of its recommendation 10.1 that the 'Minister should direct EFIC to cease providing financial services for transactions that are not based on an export contract'.50 While the government did not agree with this subsection, it did agree with subsection (b): that the EFIC Act should not be amended to allow EFIC to enter into loans for the export of non-capital goods.51

3.38 The explanatory memorandum describes the amendment to paragraph 19 (1)(c) in the bill as amending the EFIC Act to:

…require a stronger link between a contract supported by EFIC in a domestic supply chain and exports. It replaces "associated with such a transaction" with "integral to an export contract or an eligible export transaction" to ensure EFIC support is only provided to domestic suppliers where their product or service is integral to exports of goods and services from Australia.52

Onshore investment - an issue raised by General Electric's submission

3.39 General Electric had made a submission to the Productivity Commission's inquiry. In its submission to the committee's inquiry, General Electric gave its support

47 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 3, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

48 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 6.

49 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 6.

50 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 41.

51 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, pp. 10-11, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

52 Explanatory Memorandum, Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013, p. 6.

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for the Government's rejection of the Productivity Commission's recommendation that 'EFIC's support for onshore resource projects should cease, as there is no clear market failure affecting access to finance for these projects'.53

Productivity Commission recommendations not implemented through legislation 3.40 The government response identified a number of Productivity Commission recommendations which would not be implemented through legislation. These included outlining changes to the scope of EFIC's mandate in the Minister for Trade and Competitiveness's Statement of Expectations (which will now be published annually54) and transparency and accountability measures such as the tabling of EFIC's corporate plan and requiring EFIC to provide quarterly reports to the Minister for Trade and Competitiveness against the corporate plan.55

3.41 The government response noted that some recommendations, such as those regarding enhancements in EFIC's internal governance arrangements, would be left to the EFIC board to implement.56

Productivity Commission recommendations noted/not agreed 3.42 The committee asked DFAT and EFIC witnesses to explain further the practical effect of the government noting and agreeing in part to the Productivity Commission's recommendations. In answer to a question on notice, DFAT advised that 'agreed in part' meant that the government 'agreed with some, but not all, of what the PC had recommended'.57 DFAT provided a breakdown of the 'agreed in part' recommendations and which parts had been agreed and which not agreed. This list is at Appendix 8.

3.43 DFAT explained that when a recommendation was 'noted', this meant that the government would give further consideration as to whether future action could or should be taken. Further, DFAT considered that in some cases the Productivity Commission's recommendations were matters which were the responsibility of the EFIC board. DFAT believed that recommendation 9.8, regarding EFIC's FOI Act exemptions, was a matter for the Attorney-General to consider under Dr Allan Hawke's review of the FOI legislation.58

53 Submission 1, p. 2.

54 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 2, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

55 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, pp. 3-4, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

56 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 4, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

57 DFAT, answer to question on notice, 17 May 2013 (received 5 June 2013).

58 DFAT, answer to question on notice, 17 May 2013 (received 5 June 2013).

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3.44 The Productivity Commission recommendations which were noted or not agreed included recommendations relating to:

 transparency around the decision-making in relation to investments made through the National Interest Account;

 EFIC's exemptions from FOI legislation;

 future review of the amendments made to the EFIC Act;

 disclosure requirements for projects with potentially significant environmental and social effects; and

 transparency of EFIC's adherence to international obligations.

The last two issues are examined in chapter 4 of this report.

National Interest Account

3.45 Part 5 of the EFIC Act deals with the national interest account. This provision allows the Minister for Trade and Competitiveness to direct EFIC to enter into a transaction, 'whether or not EFIC would be authorised to enter into the transaction and whether or not EFIC would enter into the transaction in the ordinary course of business'.59 The Minister for Trade and Competitiveness may only give such a direction if he or she considers it is in the national interest to do so.60 According to EFIC, national interest transactions tend to involve:

 financial commitments that are too large for EFIC's balance sheet; or

 risks that EFIC considers are too high for it prudently to accept on its

Commercial Account; or

 transactions that would be commercially acceptable if EFIC did not already

have significant exposures to a country or entity.61

3.46 The Productivity Commission took the view that 'analysis of national interest account facilities should include an assessment of whether the proposal is the most cost-effective way of meeting the outcomes intended by the Australian Government.'62 It also recommended that the Minister for Trade and Competitiveness should publicly articulate the justification for a national account facility after its approval and information on the performance of national interest account facilities should be collated and publicly reported by the Australian Government.63

59 Section 29, Part 5, Export Finance and Insurance Corporation Act 1991.

60 Section 27, Part 5, Export Finance and Insurance Corporation Act 1991.

61 EFIC website, 'EFIC ACT', http://www.efic.gov.au/about/governance/Pages/EFICact.aspx (accessed 4 June 2013).

62 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 11.

63 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 40. Recommendation 9.5.

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3.47 The government response stated that the government currently:

...undertakes a detailed assessment of the risks and benefits of proposed transactions on the National Interest Account (NIA) and provides clear public explanations of the reasons for providing facilities on the NIA.64

3.48 Information about the performance of the National Interest Account is published in the DFAT Portfolio Budget Statements. The government response cited an example of disclosure to Parliament noting that in 2009 the then Trade Minister provided detailed explanation of the provision of a loan on the National Interest Account in support of the LNG project in PNG.65 The government response agreed in part to the Productivity Commission's recommendation 9.5 regarding the public disclosure of justification for provision of a loan on the National Interest Account.66

3.49 A number of witnesses supported greater transparency for national interest transactions. Jubilee Australia noted that such transactions can involve large scale projects. For example, it pointed out that:

EFIC’s support for the PNG LNG project was funded primarily from the National Interest Account. The EFIC Act does not define 'national interest'. The Minister for Trade was, therefore, neither able nor required to stipulate how the 'national interest' was assessed.67

3.50 Jubilee Australia explained further that the EFIC Act 'does not stipulate a process by which the Minister must justify the national interest decision, only requiring such a direction from the Minister of EFIC to be in writing and the basic particulars of the transaction to be published in the Gazette'.68 It stated further:

The Minister is not required to disclose how the 'national interest' has been assessed, nor the reasons for the approval. A ministerial direction to apply taxpayer funds for finance or insurance of risky business overseas could be as simple as a minute from a confidential Cabinet meeting.

Any substantive information used to justify this decision is protected by cabinet-in-confidence and the validity of the decision is not open for debate by elected members of Federal Parliament. There are no checks and balances in this system and, in an environment of minimal transparency, intended or unintended abuses of the policy might occur and go undetected.69

64 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 4, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

65 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 4, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

66 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, pp. 9-10, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

67 Supplementary Submission 3B, p. 2.

68 Submission 3, p. 8.

69 Submission 3, pp. 8-9 (emphasis in original).

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3.51 Jubilee Australia fully endorsed the Productivity Commission's recommendation (9.5) and recommended that the government be required to release a National Interest Statement for National Interest Account transactions.70 Oxfam supported this recommendation.71

3.52 To strengthen its argument for disclosure, Jubilee Australia noted that the National Interest Account decisions carry the Australian Government's endorsement to projects and involve a direct outlay of taxpayer money. It stated that it was 'absolutely clear then that greater scrutiny of these decisions is needed; scrutiny that involves more engagement with the public and the Federal Parliament'.72

EFIC's exemption from FOI requirements

3.53 The Productivity Commission's report makes a recommendation in relation to EFIC and FOI:

The Australian Government should remove EFIC's special exemption in relation to matters done under Parts 4 and 5 of the Export Finance and Insurance Corporation Act 1991 from the Freedom of Information Act 1982 (while retaining protection for Cabinet and commercial-in-confidence material).73

3.54 Further, the report states that 'the FOI Act exemptions reduce the ability of the public and the Australian Parliament to examine facilities for their environmental, social and human rights impacts.'74 The Productivity Commission noted EFIC's arguments against removal of the FOI exemptions on the grounds of protecting commercial-in-confidence material:

The costs of publicly releasing material that may compromise a firm's commercial advantage must ultimately be weighed against the reputational risks to the Australian Government of supporting projects with potential significant environmental and social impacts. As public sector entities have stewardship of public funds, they are subject to different forms of operational accountability than private sector entities. The requirement for such transparency could reasonably be thought of as a cost of dealing with a government-owned entity.75

70 Submission 3, p. 2.

71 Submission 9, p. 2.

72 Jubilee Australia, answer to written question on notice, 27 May 2013 (received 31 May 2013).

73 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 41. Recommendation 9.8.

74 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 298.

75 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 299.

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3.55 The Productivity Commission goes on to note that, if EFIC were subject to the FOI Act then exemptions exist under the EFIC Act to protect Cabinet and commercial-in-confidence material.76

3.56 The government made no comment in relation to this recommendation other than to note it.77

3.57 Submissions from Jubilee Australia, Corporate Analysis Enhanced Responsibility (CAER), Human Rights Law Centre (HRLC), Oxfam Australia and Greenpeace Australia Pacific argued in favour of the removal of FOI exemptions for EFIC. Jubilee Australia maintained that:

EFIC's business is risk; financial risk as well as environmental, social and human rights risk. EFIC has a responsibility to inform the public adequately of these risks and to manage them on behalf of the Government and taxpayers, the ultimate bears of these risks.78

3.58 In its submission, Jubilee Australia maintained that EFIC's transparency is less than that of its international peers, comparing EFIC to the export credit agencies of the US and UK.79 Jubilee Australia noted, and agreed with, EFIC's previously stated concerns about the release of commercial-in-confidence information.80

3.59 In its answers to questions on notice, EFIC explained that as its operations occur in commercial markets, it is required to give undertakings with respect to commercial-in-confidence information. The removal of the FOI exemption for Parts 4 and 5 of the EFIC Act, essentially EFIC's core business, would in EFIC's view:

…undermine [EFIC's clients'] confidence that EFIC can keep information confidential and in turn reduce the quality of information provided to EFIC. This will impair EFIC’s ability to prudently make informed decisions on the credit, environmental and social risks of the transactions it supports and potentially result in adverse implications for project outcomes and financial

losses for EFIC. Australian exporters may also suffer a competitive disadvantage from the publication of such information, as a firm tendering for goods and services may be unwilling to award a contract to a party that is unable to maintain transactional information on a confidential basis.81

3.60 Mr Patrick Lawless, DFAT, noted that EFIC is not the only agency with an exemption from the FOI Act. He further noted that when the FOI legislation was reviewed in 2009, the EFIC exemption was retained.82 Ms Angela McGrath, DFAT,

76 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 299.

77 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 10, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

78 Submission 3, p. 3.

79 Submission 3, p. 4.

80 Submission 3, p. 5.

81 EFIC, answers to questions on notice, 17 May 2013 (received 31 May 2013).

82 Committee Hansard, 17 May 2013, p. 13.

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noted that the FOI framework is currently the subject of a review by Dr Allan Hawke and that DFAT believes that this is the appropriate process for considering EFIC's exemption to the FOI Act.83

3.61 The committee notes that Dr Allan Hawke's 'Review of the Freedom of Information Act 1982 and the Australian Information Commissioner Act 2010' began work in October 2012 and was due to report by 30 April 2013.84 Dr Hawke was tasked

with reviewing the effectiveness of the government's recent FOI law reforms, and to 'consider how [the FOI Acts] and related laws continue to provide an effective framework for access to government information'.85 The terms of reference include direction for Dr Hawke to review 'the appropriateness of the range of agencies covered, either in part or in whole by the FOI Act'.86

Future Review

3.62 The Productivity Commission's report recommended (10.7) an independent review of the implementation of its recommendations-whether the implementation was through changes to the Minister for Trade and Competitiveness's Statement of Expectations or legislative amendment. The recommendation advised that the independent review should consider:

…whether the rationale for government intervention remains valid, and whether the provision of financial services through EFIC is the most effective and efficient way of addressing any failures in financial markets that are impeding otherwise commercially viable export transactions. This review should also include examination of alternative arrangements for post-approval administration of the national interest account.87

3.63 The government response agreed in part to recommendation 10.7.88 The committee notes that the government, the explanatory memorandum, and DFAT's

83 Committee Hansard, 17 May 2013, pp 13-14.

84 Attorney-General's Department website, 'Review of Freedom of Information laws', http://www.ag.gov.au/Consultations/Pages/ReviewofFOIlaws.aspx (accessed 4 June 2013).

85 The Hon Nicola Roxon MP, Attorney-General, 'Review of the FOI Act', Media release, 31 October 2012. http://pandora.nla.gov.au/pan/132822/20130204- 0704/www.attorneygeneral.gov.au/Media- releases/Pages/2012/Fourth%20Quarter/31October2012ReviewoftheFOIAct.html (accessed 4 June 2013).

86 Review of the Freedom of Information Act 1982 and the Australian Information Commissioner Act 2010 - Terms of Reference, p. 1, http://www.ag.gov.au/Consultations/Documents/ReviewofFOIlaws/Signed%20terms%20of%2 0reference%20-%20FOI%20Act%20review%20-%2029%20October%202012.pdf (accessed 4 June 2013).

87 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 43.

88 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 13, http://www.dfat.gov.au/publications/efic/. (accessed 4 June 2013).

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submission to this bill inquiry, did not discuss the independent review in recommendation 10.7.

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Chapter 4

Social and environmental responsibility 4.1 Seven of the eleven submissions expressed serious concerns about the proposed legislation failing to take account of social and environmental effects of EFIC's support for projects. In this regard, the committee considers the Productivity Commission's findings and recommendations; the government's response as reflected in the legislation; and finally the witnesses' and submitters' views on the bill.

Productivity Commission's findings and recommendations 4.2 The Productivity Commission made a number of findings in respect of environmental and social matters.

4.3 To start with, EFIC classifies each new project associated with a proposed transaction as:

 Category A—projects with potential significant adverse social and/or

environment effects;

 Category B—projects with potential limited adverse social or environmental

effects that are less adverse than those in Category A; and

 Category C—minimal or no adverse environmental and/or social effects. 1

4.4 To meet its commitment to uphold best practice environmental and social standards in the transactions it supports, EFIC has incorporated two globally-recognised approaches in its assessments—OECD Common Approaches on the Environment and Officially Supported Export Credits (the Common Approaches) and the Equator Principles.2 EFIC also benchmarks overseas Category A and B projects against relevant International Finance Corporation (IFC) Performance Standards and host country standards.3 The IFC is a member of the World Bank Group.

Environmental and social standards

4.5 The Productivity Commission noted that the risks facing EFIC, including reputational risk, are ultimately borne by the Australian Government. In order to avoid or mitigate risks, the Productivity Commission suggested that the government should make clear to EFIC what its obligations are under international agreements.4 In this

1 EFIC website, 'Procedure for environmental and social review of transactions', http://www.efic.gov.au/corp-responsibility/envr-responsibility/Pages/Procedure.aspx, (accessed 4 June 2013).

2 EFIC, Procedure for environmental and social review of transactions, 30 August 2012. This publication noted that EFIC voluntarily applies the Equator Principles, a globally recognised benchmark used by many financial institutions to manage the environmental and social risks of project finance transactions.

3 EFIC, Procedure for environmental and social review of transactions, 30 August 2012.

4 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 41.

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regard, the Minister for Trade and Competitiveness's Statement of Expectation dated July 2011 stipulates that the Minister 'expects EFIC to fully comply with the OECD Common Approaches on the Environment and Officially Supported Export Credits, the Equator Principles and any other relevant international standards'.5

4.6 The Common Approaches sets down approaches or guidelines for 'identifying and evaluating the environmental impacts of projects and exports of capital goods and services destined to projects'. They include matters such as the impact on involuntary settlement, indigenous peoples and cultural property.6 The Equator Principles is a

credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. Currently, 79 financial institutions world-wide have adopted the principles including EFIC.7

4.7 The Productivity Commission acknowledged the specific reference in the Minister's Statement of Expectation to the Common Approaches and the Equator Principles. It noted, however, that the vague reference to 'any other relevant standard' may not provide EFIC with sufficient clarity on the international obligations it is supposed to observe. The Commission was also concerned about a number of exceptions to the disclosure of prospective involvement in transactions with potential environmental and social effects. It cited EFIC's policy not to disclose potential involvement in new projects classified as category B or category A that are located in Australia; have a repayment term of less than two years; and are valued at less than $15 million unless in sensitive areas such as national parks.

4.8 In addition, the Productivity Commission was concerned that EFIC was not required to disclose prospective involvement in 'non-projects' and bonds that have significant potential environmental impacts. Non-projects are those where a transaction is not associated with an identified location.8 For example, a corporate

5 The Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness, 'Statement of Expectations', p. 3, http://www.efic.gov.au/about/governance/Documents/Minister-for-Trade- Statement-of-Expectations-19-July-2011.pdf?utm_source=seo&utm_medium=EFIC- Board&utm_campaign=seo-efic-expectations-PDF-110824 (accessed 4 June 2013). The full title is Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence. The Equator Principles are a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing.

6 Recommendation on Common Approaches on Environment and Officially Supported Export Credits.

7 The founders of the Equator Principles wanted the adoption of the principles to be a globally applicable to financial institutions in the northern and southern hemispheres and 'the equator seemed to represent that balance perfectly—hence the name, Equator Principles'. http://www.equator-principles.com/index.php/about-ep/about-ep/history-of-the-eps/42- about/frequently-asked-questions/31

8 Productivity Commission, Australia's Export Credit Arrangements, Inquiry Report No. 58, 31 May 2012, p. 364.

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loan to an equipment manufacturer where the equipment will have many different purchasers or users.9 The Commission found that:

Increased public disclosure of information relevant to environmental and social impact assessments, including contractual terms to manage and mitigate risk, would enhance the transparency of EFIC's operations to the public and to the Australian Government.10

4.9 The Productivity Commission recommended that:

The Minister should amend the Statement of Expectations to require EFIC to publicly disclose its prospective involvement in any facility with potentially significant environmental or social impacts. This includes all category A projects, and 'non-projects' and bonds where it has been determined that there is potential for significant environmental and social impacts.

Information relating to the environmental and social classification of projects and the reasons for their approval should be predictable and disclosed in the annual report and on EFIC's website. This information should include assessment benchmarking and processes, conditions of approval and consequences for non-compliance. Information that is relevant to EFIC’s assessment of environmental and social impacts should be made public.

EFIC should make public its involvement in supporting projects that are subject to environmental assessment in Australia.11

Government's response

4.10 The government agreed in part to this recommendation. In its response, the government argued that EFIC's environmental and social policy and procedures for review of transactions provided 'a sound framework for ensuring that EFIC upholds best-practice environmental and social standards in the transactions it supports'.12 It noted:

EFIC already discloses its prospective involvement in a transaction associated with a project that has potentially significant adverse environmental or social impacts (a category A project) when the transaction is of a minimum size (Special Drawing Rights (SDR) 10 million) and duration (minimum two years) and the project is located outside Australia.

9 EFIC website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Pages/Procedure.aspx, (accessed 4 June 2013).

10 Productivity Commission, Australia's Export Credit Arrangements, Inquiry Report No. 58, 31 May 2012, p. 40.

11 Productivity Commission, Australia's Export Credit Arrangements, Inquiry Report No. 58, 31 May 2012, p. 40.

12 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, pp. 4-5, http://www.dfat.gov.au/publications/efic/, (accessed 4 June 2013).

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That approach is consistent with EFIC's international obligations and guidelines.13

4.11 With regard to projects located in Australia, the government's response stated that EFIC makes public its support for such projects after a transaction is signed. It explained further:

EFIC does not disclose its potential involvement in transactions associated with a category A project in Australia as such projects are subject to the approval requirements of the relevant State or Territory government and, where required, the Commonwealth Government. Commonwealth and State and Territory assessment processes already provide for extensive public consultation on domestic projects with environmental consequences.14

4.12 It explained that EFIC's approach not to disclose its potential involvement in transactions associated with non-projects and bonds is consistent with its international obligations and the practices of OECD export credit agencies. The government noted also that EFIC's risk management for non-projects and bonds involves undertaking 'an environmental and social risk evaluation'. Where necessary, EFIC will use the IFC Performance Standards to benchmark the transaction. According to the government's response, EFIC would decline transactions if it determined that the environmental and/or social impacts did not satisfy relevant benchmarks. 15

Human rights

4.13 The Productivity Commission noted the importance of giving certainty to the international obligations that EFIC is required to observe, particularly as they are 'likely to change over time'. As noted earlier, the Minister's Statement of Expectation refers to the Minister expecting that EFIC would comply with 'other relevant international standards'. The Commission drew attention to the Australian Treaties Database which includes hundreds of treaties, including 50 relating to human rights. It argued that there was a lack of clarity about the exact obligations applying to EFIC's operations and how 'it ensures EFIC is complying with these obligations'. The Commission recommended that, by way of a direction under the EFIC Act, the Minister should:

…articulate which international obligations, including human rights obligations, EFIC is required to comply with. EFIC's compliance with those

13 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, http://www.dfat.gov.au/publications/efic/ The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. See IFM website, http://www.imf.org/external/ns/search.aspx (accessed 27 May 2013).

14 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, http://www.dfat.gov.au/publications/efic/

15 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, http://www.dfat.gov.au/publications/efic/

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obligations should be included in its internal audit program with outcomes publicly reported, including in EFIC's annual report.16

4.14 The government noted this recommendation. It maintained that EFIC incorporates Australia's international obligations and guidelines into its commercial decision-making framework and, as part of its due diligence, EFIC examines human rights issues. In this regard, it stated that EFIC's decisions are informed by the:

 World Bank's IFC Performance Standards;

 OECD Guidelines on Multinational Enterprises;

 United Nations Guiding Principles for Business and Human Rights;

 Equator Principles; and

 OECD Common Approaches. 17

Concerns raised in evidence 4.15 The government's response to the Productivity Commission's findings and recommendations disappointed a number of witnesses who took the view that the proposed legislation ignored the concerns raised about the importance of ensuring that EFIC adheres to environmental and human rights standards.18 They argued that the need for reform goes 'beyond those captured in the proposed legislation'.19

Environmental standards

4.16 Jubilee Australia's interest in the proposed legislation was almost exclusively concerned with designated Category A projects that have significant social and environmental impacts and tend to be associated with extractive industries. It wanted to ensure better decision-making around such projects.

4.17 It noted that although the vast majority of EFIC-financed export transactions do not fall into this category, the extractive industry sector projects represented, historically, approximately one quarter of EFIC's portfolio in dollar terms. EFIC's annual report 2012 shows that EFIC supported two Category A transactions in 2011-12—Santos Finance Limited, mining (oil and gas extraction) for $245.70 million; and Wiggins Island Coal Export Terminal mining (coal) for $94.20 million. Together, they accounted for $333.90 million out of a total $1,003.48 million or just under one third of the value of IFIC's transactions.

4.18 Jubilee Australia noted that EFIC's decisions with respect to Category A projects can have a tremendous effect on poor communities overseas.20 It referred to

16 Productivity Commission, Australia's Export Credit Arrangements, Inquiry Report No. 58, 31 May 2012, pp. 40-41.

17 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, http://www.dfat.gov.au/publications/efic/ (accessed 4 June 2013).

18 See Jubilee Australia, Submission 3, p. 1.

19 See for example, Oxfam, Submission 9, pp. 1-2; CAER, Submission 10.

20 Committee Hansard, 17 May 2013, p. 2.

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'mega-projects' that EFIC has supported and cited EFIC as a major financier of the Papua New Guinea Liquefied Natural Gas Project. It stated that not only was this '$19 billion project the largest development project in the history of the Pacific region, it has also completely transformed the PNG economy'. Jubilee Australia pointed to 'very strong evidence that all EFIC decisions on the National Interest Account and those that involve Category A projects should be subject to proper, prior public and Parliamentary scrutiny.21

4.19 While these extractive industries projects can have significant social and environmental impacts, Jubilee Australia suggested that EFIC, like other export credit agencies, has 'not always demonstrated the capacity to accurately or effectively weigh

the potential benefits of such projects against potential harmful consequences'.22

4.20 Aid/Watch also referred to EFIC supporting numerous projects with disastrous outcomes such as the Ok Tedi and Panguna mines in PNG. It stated that EFIC's history of funding big mining projects in vulnerable communities that generate suboptimal outcomes for people and the environment is well-documented.23

4.21 Oxfam likewise referred to EFIC's history of providing significant support for Australian extractive industry projects overseas—directly through mining, oil and gas projects and indirectly through extractive industry related services such as construction. It joined a number of other submitters by noting that some projects have poor social and environmental records citing the Ok Tedi and Porgera mines in Papua New Guinea as two high profile examples. It stated further:

The P

NG LNG project (for which EFIC made a USD$350 million loan in 2009) is another project that poses considerable risk. Research conducted by Oxfam concludes that a majority of people feel that the benefits of the PNG LNG project are not fairly shared and that if this is not addressed, human development is likely to stagnate for many people while the risk of instability and violence is likely to increase.24

4.22 According to Oxfam, EFIC is currently considering providing support for the Oyu Tolgoi Copper-Gold mine in Mongolia. It explained that the scale of Oyu Tolgoi means that local communities would be affected acutely by its many impacts— positive and negative. Oxam stated that the IFC had given its support to the project, which was currently the subject of two complaints filed with the Compliance Advisor Ombudsman, the independent recourse mechanism for the IFC. According to Oxfam, these complaints relate to concerns that the Oyu Tolgoi mine would have negative impacts on land and water, and indigenous culture and livelihoods.25

21 Supplementary Submission 3B, p. 2.

22 Committee Hansard, 17 May 2013, p. 2.

23 Submission 7, p. 1.

24 Submission 9, pp. 1-2.

25 Submission 9, p. 2.

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Greenhouse gases

4.23 Greenpeace argued that EFIC is an organ of the Australian Government, which provides subsidised credit to domestic exporters. In light of this status, there was a strong basis for expecting that it would operate in a fashion that upholds the public interest. To determine whether it does so, Greenpeace argued that consideration must be taken of the specific projects to which EFIC provides its financial services. It recommended:

 A carbon audit of all project proposals to be a key component and determinant

of the decision to provide financial services. These audits should be conducted in the context of Australia’s policy commitment to reduce emissions 80 per cent by 2050.

 EFIC's Annual report to Parliament should directly address steps taken to contribute to that policy goal.

 An independent audit of previous environmental assessments to determine their rigour, effectiveness and utility.

4.24 Greenpeace suggested that 'perpetuating the absence of adequate ecological safeguards within the structure of EFIC inherently biases the financing system towards established and dirty industries'. For these reasons, Greenpeace argued that it was imperative that EFIC become sensitive to the ecological implications of its activities. It recommended that:

 subsection 8(1) of the EFIC Act be amended so that EFIC must perform its functions in the public interest.26

4.25 Under the section 8—Primary duties of EFIC—subsection 8(1) provides for EFIC to perform its functions in such a manner as will best assist the development of Australian export trade. It should be noted that in doing so EFIC must comply with Ministerial directions.27

4.26 Aid/Watch was also particularly concerned about projects in protected areas and crucially, 'all phases of the fossil fuel and mining cycles—prospecting, exploration, test drilling, exploitation, as well as the construction of related infrastructure such as pipelines and roads'.28 It supported Greenpeace's recommendation that a carbon audit of all project proposals should be a key component and determinant of the decision to provide financial services and should be conducted in the context of Australia's policy commitment to reduce emissions by 80 per cent by 2050.29

26 Submission 8, attachment, p. 5.

27 See subsection 8(1) and 8(2) and section 9.

28 Submission 7.

29 Committee Hansard, 17 May 2013, p. 3.

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Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act)

4.27 Jubilee Australia submitted the EFIC was exempt from the Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) but that other export credit agencies such as the US's Ex-Im30 bank were not exempt from equivalent domestic environmental national legislation. It recommended that the EFIC Act, and if necessary the EPBC Act, be amended so that the EPBC Act applied to EFIC.31 Greenpeace also noted that EFIC was currently exempt from the provisions of the EPBC Act relating to actions, controlled actions and impact assessment.32 It supported the recommendation that EFIC's exemption from the EPBC Act be removed.33 Oxfam Australia similarly advocated removing EFIC's exemption from the operation of environmental legislation.34

Human rights

4.28 Oxfam also maintained that examples, such as Ok Tedi and Panguna mines in PNG and Oyu Tolgoi Copper-Gold mine in Mongolia, illustrate the need for EFIC to have in place a robust due diligence framework that adequately considers the human rights implications of projects it supports. It stressed the importance of EFIC being subject to adequate transparency and accountability requirements, which would allow Australian tax payers and people affected by the projects to better understand the nature of EFIC's involvement. Such requirements would also ensure that EFIC meets environmental and social standards which align with international best practice.

4.29 Human Rights Law Centre (HRLC) referred to EFIC's practice of funding large-scale projects that have the potential for grave human rights impacts. Based on its participation in the Multi-Stakeholder Forum, the Centre formed the view that issues raised in the forum suggested an 'urgent need for reforms to EFIC operations and procedures that go beyond those captured in the Bill'.35

4.30 Mr Gareth Bryant, Aid/Watch, was particularly concerned that the bill completely ignored the Productivity Commission's recommendation that the Minister, by way of a direction under the EFIC Act, 'should articulate which international obligations, including human rights obligations, EFIC is required to comply with'.36

4.31 Jubilee Australia argued that Category A projects, especially in extractive industries can be associated with human rights violations.37 It cited the United Nations Guiding Principles on Business and Human Rights, which has as its foundation

30 The Export-Import Bank of the United States.

31 Submission 3, p. 20.

32 Submission 8, attachment, p. 3.

33 Submission 8.

34 Submission 9, pp. 1-2.

35 Submission 6.

36 Committee Hansard, 17 May 2013, p. 3.

37 Submission 3, p. 15.

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principle that 'States must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises'.38 This principle also holds that States should 'set out clearly the expectation that all business enterprises domiciled in their territory and/or jurisdiction respect human rights throughout their operations'. One of the UN's operational principles refers specifically to export credit agencies:

States should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence.39

4.32 The commentary accompanying this principle notes:

Where a business enterprise is controlled by the State or where its acts can be attributed otherwise to the State, an abuse of human rights by the business enterprise may entail a violation of the State's own international law obligations. Moreover, the closer a business enterprise is to the State, or the more it relies on statutory authority or taxpayer support, the stronger the State's policy rationale becomes for ensuring that the enterprise respects human rights.40

4.33 Jubilee Australia endorsed the Productivity Commission's recommendation that the EFIC Act be amended to identify which international obligations, particularly human rights obligations, EFIC will comply with.41 It considered that a statutory requirement would be the best way of incorporating assessment of human rights effects into EFIC's work.42 Jubilee Australia noted that the UN guiding principles do not prescribe the human rights obligations that should apply to business enterprises. It recommended that the EFIC Act be amended to refer to compliance with any human rights treaties or conventions to which Australia is a party. It proposed that an appropriate body, such as the Australian Human Rights Commission, should identify the international human rights obligations, to be included in the legislation.43 The HRLC supported Jubilee Australia's recommendations especially for a statutory

38 The Guiding Principles seek to provide an authoritative global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. They were developed by the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises.

39 United Nations, Guiding Principles on Business and Human Rights, Implementing the United Nations 'Protect, Respect and Remedy' Framework, Principle 4—The State-Business Nexus.

40 United Nations, Guiding Principles on Business and Human Rights, Implementing the United Nations 'Protect, Respect and Remedy' Framework, Commentary—Principle 4—The State- Business Nexus.

41 Committee Hansard, 17 May 2013, pp. 2- 3.

42 Submission 3, p. 17.

43 Submission 3, pp. 17-18.

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recognition of EFIC's international and human rights obligations. It strongly endorsed the Productivity Commission's recommendation that:

EFIC's compliance with its international obligations, including human rights obligations, should be included in its internal audit program with outcomes publicly reported, including in EFIC's annual report.44

4.34 The Australian Lawyers for Human Rights also supported the incorporation of legislative amendments, citing in particular that the Act be amended to refer to compliance with 'any human rights treaties or convention to which Australia is a party'.45

Indigenous rights

4.35 Aid/Watch also endorsed Jubilee Australia's recommendation that EFIC comply with international treaties and human rights obligations.46 It gave special mention to projects affecting indigenous lands which do not have the free prior and informed consent of the indigenous occupants. It recommended that EFIC should not finance such projects and argued for a requirement that:

…would ensure that Australia's commercial interests being promoted by EFIC do not undermine the right of Indigenous people to collectively determine their own futures, as has been the case with the PNG LNG project, which has fuelled conflict between landowners. The principle governing this are outlined in, for example, the United Nations Declaration on the Rights of Indigenous Peoples, which Australia has signed up to. That is another obligation that EFIC must be governed by.47

4.36 Mr Bryant, Aid/Watch, argued that the requirement for EFIC to comply with all international human rights and environmental obligations that the Australian government has signed up to needs to be legislated—in relation to climate, debt, development practice and indigenous rights and many others, including those relating to gender, food security, labour rights and other civil and political rights. He argued that:

It is not good enough that EFIC voluntarily has regard for them and it is also not good enough that the recommendation by the Productivity Commission for these rights to be enshrined in legislation was simply noted by the government in its response to the Productivity Commission inquiry report and, furthermore, has been completely ignored in this bill.48

EFIC's environmental and social policy

4.37 As noted earlier, the government stated that EFIC incorporates Australia's international obligations into its commercial decision-making framework. Mr Bryant

44 Submission 6.

45 Submission 11, pp. 1-2.

46 Submission 7.

47 Committee Hansard, 17 May 2013, p. 4.

48 Committee Hansard, 17 May 2013, p. 4.

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argued, however, that the current social and environmental protocols were clearly not strong enough and were not being enforced. In his opinion, even the Equator principles, which EFIC voluntarily applies do not go far enough. Aid/Watch recommended that the incorporation of a series of other safeguards drawn primarily from relevant national conventions would go some way to ensuring that the Productivity Commission's recommendation on identifying international obligations in the EFIC Act is realised.49

4.38 Jubilee Australia was also of the view that the performance benchmarks used by EFIC were inadequate. It cited what it perceived as deficiencies in the IFC Performance Standards framework such as not addressing crucial weaknesses such as the 'lack of independent verification or adequate disclosure of project monitoring and supervision reports'.50

4.39 Greenpeace suggested that EFIC's Environmental Policy reflected an overall lack of accountability and was inadequate in a number of ways—an absence of sound ecologically sustainable development principles and a lack of compulsion/weak language.51 Greenpeace recommended a review of the adequacy of EFIC's Social and Environment Policy and Procedure documents by an independent corporate social responsibility expert.52

4.40 Ms Carmelan Polce, Jubilee Australia, suggested that the policy could be better: that it was 'a good start' but should be clarified in the EFIC Act, which would give the public a better opportunity to understand it and EFIC would be held legally accountable.53 She acknowledged that EFIC's environmental and social impact assessments for proposed transactions were published with the public given the opportunity to provide comment. Ms Polce stressed, however, that while this was EFIC's practice, it was not a policy enshrined in the EFIC Act. She also stated:

It has been troubling to us that the very interesting, enlightening, critically important feedback that the public provides into that process is not disclosed. We have observed that the submissions tell EFIC things that their client is not telling them. It would be important for that information also to be available to the public…there is no reason why this information about important risk assessment should not be made available to the public by EFIC.54

4.41 Furthermore, according to Ms Polce, there were no requirements for the disclosure of environmental and social risk assessments, and presently these processes occurred behind closed doors. She argued that the Australian public and project

49 Committee Hansard, 17 May 2013, p. 3.

50 Supplementary Submission 3C, p. 2.

51 Submission 8, attachment, p. 4.

52 Submission 8, attachment, p. 3.

53 Committee Hansard, 17 May 2013, p. 11.

54 Committee Hansard, 17 May 2013, p. 5.

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affected communities have no way to determine the accuracy of EFIC's assessments or its compliance with the international standards it says it is obligated to uphold.55

Transparency

4.42 Jubilee Australia maintained that the EFIC Act and the bill contain no requirements for project disclosure prior to transaction approval or for public participation or for the disclosure of instruments of public participation, which should be addressed. It recommended the EFIC Act be amended to include a mechanism that would require prior disclosure, stakeholder participation and assessment for category A projects, proposed to be financed through the commercial account or the national interest account and located either in Australia or overseas.56

4.43 CAER endorsed Jubilee Australia's recommendation that the EFIC Act be amended to include processes that would guarantee transparency, public participation and accountability and that the key features of the Environmental and Social Policy should be formally recognised in the EFIC Act. Jubilee Australia and CAER would like to see statutory requirements for project disclosure, public participation and assessment.57 CAER submitted:

Transparent project benchmarking against environmental and social standards committed to by EFIC will ensure the Australian public and project-affected communities understand how EFIC determined that projects it supports do not stand in violation to its principles. EFIC (and the project sponsors it supports) will then be able to better demonstrate how they are ensuring that there are no violations of EFIC’s social and environmental safeguards.

4.44 Oxfam Australia also supported Jubilee Australia's recommendations that the bill should be amended to ensure adequate assessment and disclosure of human rights impacts and environmental damage; and disclose its intentions to finance Australian based projects.58 Finally, Australian Lawyers for Human Rights argued that improved transparency and disclosure requirements would better enable the government and civil society 'to hold EFIC accountable to human rights standards'.59

Committee of experts

4.45 Jubilee Australia would like EFIC to have as much expertise as possible when considering its transactions. Mr David Barnden, Jubilee Australia, explained that EFIC does its assessments in-house, so 'we do not know what international standards EFIC applies in terms of wider environmental and human rights standards; how it treats individual submissions; and how EFIC applies these benchmarks and arrives at their decisions'. In his view, it would be great if such decision making were made

55 Committee Hansard, 17 May 2013, p. 2.

56 Committee Hansard, 17 May 2013, p. 2.

57 Submission 3, p. 14 and Submission 10.

58 Submission 9, pp. 1-2.

59 Submission 11, p. 2.

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public and if EFIC had the expertise of perhaps the department of the environment or an independent expert committee.60 Mr Barnden, noted that one way to ensure that EFIC had the appropriate expertise to decide about entering into larger transactions was to have an expert committee assess major environmental and human rights impacts. He argued that they would then know the benchmarks against which projects were assessed. He stated further that any report would 'take into account submissions from affected communities or any stakeholders and be made public before EFIC were to decide to provide finance'. In his view, this proposal would be a good safeguard which could be legislated.61

Summary

4.46 Strongly endorsed by Oxfam, Jubilee Australia was seeking to ensure that EFIC's decisions regarding projects, which are supported by taxpayers' money, are subject to adequate risk management, transparency and accountability requirements. It supported the Productivity Commission's findings, and recommended that the bill be amended to:

 ensure adequate assessment and disclosure of human rights impacts and

environmental damage,

 remove its exemption from the operation of environmental legislation, and

 disclose its intentions to finance Australian based projects. 62

4.47 Aid/Watch similarly supported the detailed recommendations submitted by Jubilee Australia that would increase the transparency of EFIC’s assessment of the risk to communities and the environment posed by projects it proposes to support. It particularly recommended the establishment of a statutory requirement for project disclosure, public participation and project assessment prior to the approval of funding arrangements.63 Greenpeace wanted EFIC to be under a statutory requirement 'to integrate principles of ecologically sustainable development into its operations, including full disclosure of environmental risk assessments prior to the approval of funding proposals'.64

Response to concerns-DFAT and EFIC 4.48 As noted earlier in its response to the Productivity Commission's recommendations on environmental and social issues, the government believed that EFIC was already meeting environmental and social obligations under international standards: that there was no need to amend the EFIC Act. Departmental officers from DFAT and EFIC appearing before the committee elaborated on the arguments already

60 Committee Hansard, 17 June 2013, p. 6.

61 Committee Hansard, 17 May 2013, p. 11.

62 Submission 3, p. 2 and Submission 9, pp. 1-2.

63 Submission 7.

64 Submission 8.

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put by the government and clarified some matters where they thought misunderstandings existed.

Requirement for legislative change

4.49 Mr Jan Parsons, EFIC, rejected the observations that EFIC was not a transparent organisation. He told the committee that EFIC was probably one of the most transparent agencies among OECD export credit agencies. According to Mr Parsons, EFIC provides more information and more certainty through its published policy and procedure.65

4.50 Ms Angela McGrath, DFAT, questioned the need for amendments to the EFIC Act. She explained that a number of Jubilee Australia's recommendations advocating a need for legislative change would not be required. She stated that the fact that they are not contained in this bill does not mean that they will not happen.66 She gave some examples:

For instance EFIC will be tabling its corporate plan in the parliament from now on and there are a number of other things that we are working through in terms of reporting and disclosure requirements that will be covered in a statement of expectation as well. We have certainly taken note of the recommendations that the Productivity Commission has made and, where we can, we are looking at improvements. But they do not necessarily require legislative change.67

4.51 Mr Patrick Lawless, DFAT, noted that the EFIC Act already required EFIC, in discharging its function, to have regard to more of Australia's international obligations and cited section 8 of the EFIC Act.

4.52 In this regard, section 8 of the EFIC Act states that one of EFIC's primary duties when performing its functions is to have regard to 'Australia's obligations under international agreements'. The EFIC Act also allows the Minister for Trade and Competitiveness to give written directions to EFIC with respect to the performance of its functions or the exercise of its powers if the minister is satisfied that it is desirable in the public interest that the directions be given. Such directions are to be included in EFIC's annual report and EFIC must comply with them. It should be noted that the authority to give directions does not, for example, give the Minister for Trade and Competitiveness power to determine that EFIC is or is not to enter into a particular contract, give a particular guarantee or make a particular loan.

4.53 According to Mr Lawless, the Minister for Trade and Competitiveness's Statement of Expectations reminds EFIC that it has to operate in compliance with Australia's international obligations. Mr Lawless explained that while it is a general, blanket obligation to operate, it is 'all our international obligations'.68

65 Committee Hansard, 17 May 2013, p. 16.

66 Committee Hansard, 17 May 2013, p. 17.

67 Committee Hansard, 17 May 2013, p. 17.

68 Committee Hansard, 17 May 2013, p. 21.

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International standards

4.54 Mr Parsons elaborated on the benchmark EFIC uses when it undertakes an environmental and social review of a project. He noted that EFIC uses the IFC's Performance Standards—a set of international performance standards for international projects which cover a whole range of environmental and social issues. He informed the committee that they are regarded as 'the best practice for international projects'.69 IFC is part of the World Bank and sets down eight Performance Standards. For example the objectives of Performance Standard 7—Indigenous Peoples—include:

 ensuring that the development process fosters full respect for the human

rights, dignity, aspirations, culture, and natural resource-based livelihoods of Indigenous Peoples;

 anticipating and avoiding adverse impacts of projects on communities of Indigenous Peoples in a culturally appropriate manner; and

 ensuring the free, prior and informed consent of the affected communities of Indigenous Peoples.70

Greenhouse gases

4.55 Mr Parsons informed the committee that EFIC uses the IFC Performance Standard, which sets out a system and a process for examining greenhouse gases and then there are guidelines which are attached to that for various industries.71 IFC Performance Standard 3 deals with greenhouse gas emissions and how projects deal with those. Mr Parsons explained that depending on the quantum of emissions, one of the requirements for projects with high emissions is to consider alternatives in the way they are managed, which is part of the environmental assessment process.72

4.56 Currently, according to Mr Parsons, the OECD export credit agencies have a small working group looking at how, as a group, they are 'addressing greenhouse gas emissions and what sorts of limits could apply on how these emissions should be examined'. So, in his words, 'there is a whole OECD-ECA general approach being considered for that'.73

Exemption from Environment Protection and Biodiversity Conservation Act 1999

4.57 As noted earlier, a number of witnesses argued that EFIC should not be exempt from the EPBC Act. The Productivity Commission considered EFIC's obligations under the EFIC Act and found:

69 Committee Hansard, 17 May 2013, p. 15.

70 International Finance Corporation, IFC Performance Standards on Environmental and Social Sustainability, effective 1 January 2012.

71 Committee Hansard, 17 May 2013, p. 14.

72 Committee Hansard, 17 May 2013, p. 14.

73 Committee Hansard, 17 May 2013, p. 14.

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The provision of products by EFIC to support export projects are neither actions which are subject to s. 28 of the EPBC Act, nor actions under s. 160 of the Act that would require EFIC to obtain and consider advice from the Minister for the Environment prior to granting governmental authorisation. There is no mechanism under the assessment processes of the EPBC Act that requires EFIC to disclose its involvement in onshore and offshore projects. This is with the potential exception of those transactions which have a significant foreign aid component that would constitute EFIC making an authorisation to enter into a contract, agreement or arrangement under s. 160(2) of the Act.74

4.58 Subsection 160(2) of the EFIC Act means that before a Commonwealth agency gives an authorisation under Australia’s foreign aid program to enter into a contract, agreement or arrangement for the implementation of a project that has, will have, or is likely to have a significant impact on the environment anywhere in the world, the agency must obtain and consider advice from the Minister for Trade and Competitiveness.

4.59 Mr Parsons' understanding was that EFIC was not exempt from the EPBC Act. Mr Lawless and Ms McGrath were also of the view that there was no exemption for EFIC. Ms McGrath explained that the EPBC Act focuses on activities rather than entities.75 Mr Parsons noted that the EPBC Act applies only in Australia and cannot apply to foreign jurisdictions. He explained that for EFIC's international work, the IFC performance

standards covers biodiversity, so EFIC is not using the EPBC Act but the international IFC performance standards. As noted earlier, the IFC standards 'cover off a whole range of environmental and social issues' and are regarded as the best practice for international projects.76 Mr Parsons informed the committee that EFIC is committed to using them as a usual benchmark. He stated further:

If there are higher standards, such as in some of the EU countries, we will use those standards but we have committed to use them as our benchmark and, if the projects which we are looking at do not meet those benchmarks, we have said we will decline support to those transactions.77

4.60 According to Mr Parsons, there were two separate benchmarks—the host country standards, which are generally whether it has an approval within the country, and then the IFC performance standards, which may be more stringent or less stringent than the host country's. He stated that in either case EFIC would apply the more stringent of the two standards.78

74 Productivity Commission, Australia's Export Credit Arrangements, Inquiry Report No. 58, 31 May 2012, p. 371.

75 Committee Hansard, 17 May 2013, p. 15.

76 Committee Hansard, 17 May 2013, p. 15.

77 Committee Hansard, 17 May 2013, p. 15.

78 Committee Hansard, 17 May 2013, p. 15.

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Environmental and social policy

4.61 Mr Parsons informed the committee that EFIC has had an environmental and social policy since about 2000. The current one, adopted by the board in 2011, is the result of several iterations.79 EFIC has registered its intention to review this policy 'as and when necessary' but would commence a review no later than five years from the adoption date'.80

4.62 As noted earlier, EFIC incorporates two globally recognised approaches in its environmental and social assessment of transactions. EFIC's procedure policy makes clear that it is bound by the OECD Common Approaches and voluntarily applies the Equator Principles. These principles are a globally recognised benchmark used by many financial institutions to manage the environmental and social risks of project finance transactions. EFIC explained:

These global standards were developed by the OECD and the Equator Principles Financial Institutions respectively for their roles. As a result, they apply to only some of the transactions that EFIC could be asked to consider. EFIC chooses to extend the principles they embody to all transactions it considers.81

4.63 According to its policy, EFIC screens and, where relevant, classifies all transactions to identify the type and degree of environmental and social risk evaluation necessary. The process considers:

 an exporter or investor's role in a transaction, which can determine their

responsibility and ability to manage environmental and/or social impacts;

 the potential environmental and social issues associated with a transaction;

 Australia's obligations under international agreements; and

 the above mentioned global standards. 82

4.64 When EFIC's screening and classification process identifies potential environmental or social impacts, it benchmarks the project associated with the transaction, typically against relevant IFC performance standards.

79 Committee Hansard, 17 May 2013, p. 15.

80 EFIC's website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Documents/EFIC-Policy-Environmental-Social-Review-August- 2012.pdf?utm_source=seo&utm_medium=EFIC-policy-PDF&utm_campaign=seo-efic-enviro- social-policy-PDF-120920 (accessed 4 June 2013).

81 EFIC's website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Documents/EFIC-Policy-Environmental-Social-Review-August- 2012.pdf?utm_source=seo&utm_medium=EFIC-policy-PDF&utm_campaign=seo-efic-enviro- social-policy-PDF-120920 (accessed 4 June 2013).

82 EFIC's website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Documents/EFIC-Policy-Environmental-Social-Review-August- 2012.pdf?utm_source=seo&utm_medium=EFIC-policy-PDF&utm_campaign=seo-efic-enviro- social-policy-PDF-120920 (accessed 4 June 2013).

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4.65 EFIC's procedure policy states that the IFC Performance Standards were selected as its usual benchmark because they are 'a widely used and understood global standard'. It indicated that where 'a higher benchmarking standard is applicable to a

particular transaction, EFIC applies that higher standard'. EFIC considers that, for projects located within Australia, where relevant Australian government approvals have been obtained, the environmental and social benchmark has been met.83

4.66 EFIC publicly discloses its potential involvement in each transaction which:

 is associated with a project that has potential for significant adverse

environmental and/or social impacts Category A project) located outside Australia;

 has a repayment term or policy length of two years or more; and

 has a value of SDR10 million or more. The monetary limit does not apply to projects in sensitive areas.

4.67 In accordance with the Common Approaches, where a transaction involves EFIC reinsuring another OECD export credit agency (ECA), EFIC may rely on the disclosure undertaken by that ECA. According to its procedure policy, EFIC declines transactions if it determines that the environmental and/or social impacts do not satisfy relevant benchmarks. The EFIC Board's approval is required for EFIC to support on its Commercial Account a transaction associated with a Category A project located outside Australia.

4.68 The screening, classification, evaluation and disclosure process for transactions undertaken on the Australian Government's National Interest Account is the same as for transactions on EFIC’s Commercial Account.

Audit of policy

4.69 Mr Parsons explained that EFIC's environmental and social policy and protocols contain a commitment to engage an independent environmental and social expert every two years to audit how EFIC has applied and used its policy. The audit reports are provided to EFIC's Board and to the public.84

4.70 EFIC underwent its first audit in 2012, which was published in December and is available on EFIC's website. According to Mr Parsons, the audit found that EFIC

83 EFIC's website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Documents/EFIC-Policy-Environmental-Social-Review-August- 2012.pdf?utm_source=seo&utm_medium=EFIC-policy-PDF&utm_campaign=seo-efic-enviro- social-policy-PDF-120920, (accessed 4 June 2013) Last reviewed: 30 August 2012 when a change to the title of the Common Approaches was made.

84 EFIC's website, http://www.efic.gov.au/corp-responsibility/envr- responsibility/Documents/EFIC-Policy-Environmental-Social-Review-August- 2012.pdf?utm_source=seo&utm_medium=EFIC-policy-PDF&utm_campaign=seo-efic-enviro- social-policy-PDF-120920, (accessed 4 June 2013).

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had 'applied the policy and procedure appropriately'.85 He explained that the audit team had access to all EFIC's projects and all its files. The audit report concluded that:

Based on our reasonable assurance procedures…the environmental and social review of transactions and, where relevant, their associated projects completed by EFIC, between 17 February 2011 and 16 August 2012, is properly completed and presented fairly, in all material respects, in accordance with the requirements the EFIC Policy for environmental and social review of transactions and the EFIC Procedure for environmental and social review of transactions.86

4.71 The committee notes, however, that the audit contained a number of suggestions. For example, it recommended:

…where EFIC considers the IFC Performance Standards do not provide adequate guidance and additional review measures are warranted, an appropriate standard for assessment of the project is selected as best practice and to provide an objective and transparent basis for the review.87

4.72 In this instance, the audit identified transactions involving live animal exports where in its opinion the IFC Performance Standards did not address some risk issues. The audit recorded that EFIC provided oral and written advice that, in such cases, additional review measures were implemented.88

4.73 Another suggestion stemmed from the audit's findings regarding the initial screening and evaluation process and the classification decision, which then informs the environmental and social evaluation. It found that this process did not record:

 the primary reason for classification of a transaction as Category A or B for a project; or

 some potential environmental and/or social impact for a non-project; or

 the primary reason for classifying a project as Category C; or

 a non-project as no potential environment and/or social impact. 89

85 Committee Hansard, 17 May 2013, p. 15.

86 Netbalance, Audit of EFIC's application of its Policy and Procedure for environmental and social review of transactions, Export Finance and Insurance Corporation, Report, 29 October 2012, p. 6.

87 Netbalance, Audit of EFIC's application of its Policy and Procedure for environmental and social review of transactions, Export Finance and Insurance Corporation, Report, 29 October 2012, p. 18.

88 Netbalance, Audit of EFIC's application of its Policy and Procedure for environmental and social review of transactions, Export Finance and Insurance Corporation, Report, 29 October 2012, p. 18.

89 Netbalance, Audit of EFIC's application of its Policy and Procedure for environmental and social review of transactions, Export Finance and Insurance Corporation, Report, 29 October 2012, p. 15.

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4.74 While the audit suggested that EFIC update its process to document the primary reason for its classifications, it noted that EFIC had made an amendment to its checklist and commenced its response to the audit's recommendation.90

Multi-stakeholder forum

4.75 The development of EFIC's policy and procedure had external input from civil society organisations, particularly through the external independent audit.91 A number of submitters are members of EFIC's multi-stakeholder forum—Jubilee Australia,

Oxfam and CAER. The EFIC Multi-Stakeholder Forum is a formal process that facilitates dialogue between EFIC and civil society organisations on matters related to upholding best-practice environmental and social standards in EFIC-supported transactions.92

4.76 Mr Parsons told the committee that the forum grew out of the consultation EFIC had when it was reviewing its policy. He explained that at that time EFIC and the Civil Society Organisations (CSOs) decided that the process was working well and they should consult more frequently on a more formal basis. Consequently, they decided to hold the forum every six months and have since held three.93

4.77 The committee strongly supports the multi-stakeholder forum and the constructive work that can come out of consultation with civil society organisations. For example Jubilee Australia was involved in lengthy discussions in consultation with EFIC which led to the EFIC posting on its website the environmental and social policies and procedures that it applies in the assessment of potential transactions.94

Grievance mechanisms and OECD peer review

4.78 EFIC drew the committee's attention to other measures that subject its activities to improved scrutiny and accountability. For example, in 2012 EFIC introduced a grievance mechanism, formulated in consultation with civil society organisations, to complement its existing feedback channels. This measure allows 'any party concerned about, affected, or likely to be affected, by EFIC's activities, including a project supported by an EFIC transaction,' to use this procedure to register their concerns with EFIC. EFIC also informed the committee that, as a participant to the OECD Common Approaches, EFIC is subject to peer review.95 It explained further that the OECD Export Credit Group monitors the measures its members take to meet

90 Netbalance, Audit of EFIC's application of its Policy and Procedure for environmental and social review of transactions, Export Finance and Insurance Corporation, Report, 29 October 2012, p. 16.

91 Committee Hansard, 17 May 2013, p. 16.

92 See also submissions from Oxfam and Corporate Analysis Enhanced Responsibility.

93 Committee Hansard, 17 May 2013, p. 16.

94 Committee Hansard, 17 May 2013, p. 2.

95 EFIC, written response to evidence given during public hearing, 17 May 2013.

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their commitments by undertaking surveys with the results published on the OECD website.96

Need for legislative amendment 4.79 All witnesses recognised the importance of EFIC complying with robust environmental and social standards. Indeed, they were strong advocates for transparency and accountability when it came to EFIC's assessment of projects for environmental and social risks. The committee heard, however, two distinct arguments on the need for legislative change to ensure that EFIC complies with Australia's international obligations. The key difference between witnesses was that those seeking amendments wanted guarantees written into the legislation—they wanted EFIC to be under statutory requirements.

4.80 Ms Polce,

Australia Jubilee, noted that the EFIC Act and the bill contain no guidance for assessing transactions risk, including environmental and social risk, though these are currently noted in the Minister for Trade and Competitiveness's Statement of Expectations.97 She argued that the instruments themselves provide no guarantee of compliance or due process for stakeholders. She explained that currently the Statement of Expectations was vulnerable to the political whims and will of the day: that it provided no guarantee because it could be 'withdrawn and replaced at will':

They are subject to change by EFIC and the minister and there are no safeguards to ensure EFIC complies with them, including the international standards they reference.98

4.81 For this reason, Jubilee Australia, with the support of six other civil society organisations, argued that the reforms needed to be codified in law rather than just embodied in a renewed statement of expectations.99

4.82 Ms Polce explained further that the guarantee of transparency and the ability to hold EFIC to account was missing from the legislation and needed to be codified in the EFIC Act. Jubilee Australia, and the numerous submissions supporting its recommendations, would like to see these requirements appear in the EFIC Act. They wanted transparency, public participation and accountability to be guaranteed by legislation. 100

4.83 DFAT and EFIC argued that legislative guarantees were unnecessary. Their representatives referred to the international obligations that EFIC observes, including IFC's performance standards described as best practice; the Minister for Trade and Competitiveness's Statement of Expectations; EFIC's environmental and social policy which is a public document; the two yearly independent audit of the policy which is also made public; and EFIC's multi-stakeholder forum. Indeed, all indications from

96 EFIC, written response to evidence given during public hearing, 17 May 2013.

97 Committee Hansard, 17 May 2013, p. 2.

98 Committee Hansard, 17 May 2013, p. 2.

99 Committee Hansard, 17 May 2013, p. 1.

100 Committee Hansard, 17 May 2013, pp. 4-5.

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the independent audit report support the contention that EFIC is aware of the importance of adhering to international environmental and social standards and is willing to improve its procedures to ensure such compliance.

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Chapter 5 Conclusion

5.1 The bill is intended to give effect to the Government's commitment to assist exporters, particularly SMEs to overcome the financial barriers they may face when seeking to engage in the international economy. No evidence came before the committee that raised concerns about the provisions in the bill. Some witnesses, however, took the opportunity to express their views on what they regarded as omissions from the proposed legislation, particularly in respect of EFIC's environmental and social obligations.

5.2 Seven organisations were seeking to strengthen, improve and give greater certainty and transparency to EFIC's transactions including its assessments of projects. In this regard, the committee notes that EFIC already has measures in place to ensure that it complies with Australia's international obligations relating to the environment and human rights.

5.3 Even so, the committee is of the view that there is scope for further improvement in the areas of transparency and accountability. It suggests that the Government consider appropriate measures to open up EFIC to greater parliamentary and public scrutiny. For example, further consideration could be given to whether the current scope of the FOI exemption is absolutely necessary, and how to improve disclosure on decision-making and assessments associated with national interest transactions.

5.4 The committee is of the view that the Minister for Trade and

Competitiveness's Statement of Expectation could be more explicit on the standards and guidelines that EFIC is to observe. For example, the government's response to the Productivity Commission's report named:

 World Bank's International Finance Corporation Performance Standards;

 OECD Guidelines on Multinational Enterprises;

 United Nations Guiding Principles for Business and Human Rights;

 Equator Principles; and

 OECD Common Approaches. 1

5.5 At the very minimum, the committee proposes that the Minister consider including the key standards and guidelines as listed above in the Minister's Statement of Expectation. The Government may also consider including them in paragraph 8(2)(iii) of the Act as an indicative list. The committee also suggests that the Minister consider including in the Statement of Expectation that EFIC would ensure that an independent audit of its implementation of the environmental and social policy is

1 Australian Government Response, Productivity Commission Review Australia's Export Credit Arrangements, p. 5, http://www.dfat.gov.au/publications/efic/, (accessed 4 June 2013).

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conducted by independent and recognised experts in the field every two years and the audit report is made public.

5.6 Otherwise, the committee encourages EFIC to continue its endeavours to give greater transparency to its decision-making and to be more accountable to parliament and the public in relation to its compliance with Australia's international obligations. It strongly supports the multi-stakeholder forum; the independent audit of EFIC's environmental and social policy; its adoption of the Equator Principles and membership of IFC.

Recommendation 1

5.7 The committee recommends that, as recommended by the Productivity Commission,2 the government make provision for an independent review of EFIC's performance to be conducted three years after the bill has been passed.

Recommendation 2

5.8 The committee recommends that the bill be passed.

Senator the Hon Ursula Stephens

Chair

Senate Foreign Affairs, Defence and Trade Legislation Committee

2 Productivity Commission Inquiry Report, Australia's Export Credit Arrangements, No. 58, 31 May 2012, p. 43, Recommendation 10.7.

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Additional Comments by Senator Lee Rhiannon Australian Greens Senator for New South Wales Introduction

1.1 The Australian Greens referred the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 to the Senate Foreign Affairs, Defence and Trade Legislation Committee because we were concerned that the Bill in its current form does not put in place sufficient transparency and public participation mechanisms for Export Finance and Insurance Corporation (EFIC) decisions or provide enough accountability to ensure EFIC adheres to robust human rights and environmental standards.

1.2 The decisions and processes of EFIC are rarely in the public spotlight or subject to reform, despite the fact that EFIC is responsible for lending significant amounts of public money, and to this end the Australian Greens are grateful that this inquiry has shone a spotlight on EFIC.

1.3 EFIC has a troubling record of approving financing arrangements for controversial projects that have risen to the public's attention because of serious environmental and human rights concerns. These include EFIC's support for ExxonMobil's liquefied natural gas (LNG) project in the Southern Highlands of PNG, as well as the Ok Tedi and Porgera mines in the 1980s and 1990s. The Australian Greens are particularly interested in focusing our additional comments on improving EFIC's processes and transparency as they relate to 'Category A' projects approved by EFIC that are often large-scale extractive industry projects.

1.4 The Australian Greens thank the Committee Secretariat, participating Senators and in particular the community organisations that made submissions to this inquiry. It is important to note that, excluding submissions from government departments, seven of the eight remaining submissions came from community organisations concerned that the EFIC Amendment (New Mandate and Other Measures) Bill 2013 did not go far enough to ensure transparency, accountability and adherence with international standards on human rights and the environment.

1.5 In light of the consistency of recommendations from the public submissions and the strength of the evidence given at the public hearing, the Australian Greens are surprised that the Committee's Report does not take up any of the recommendations in these submissions. Accordingly the Australian Greens submit additional recommendations in these comments.

1.6 This EFIC Amendment (New Mandate and Other Measures) Bill 2013 implements the government's response to the Productivity Commission's Report on Australia's Export Credit Arrangements, released on 26 June 2012. The Australian Greens would like to note that it is disappointing that the government did not take up more of the Productivity Commission's recommendations in this bill. For example, recommendation 10.1 (a) of the Productivity Commission report which urges EFIC to

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cease providing financial services for transactions that are not based on an export contract, including for resource projects located in Australia.

1.7 It is also concerning that during this Inquiry it appears that EFIC moved to grant finance to Rio Tinto's controversial Oyu Tolgoi mine in Mongolia. The approval of finance for this mine arguably goes against at least the spirit of the EFIC Amendment (New Mandate and Other Measures) Bill 2013, which seeks to reorient EFIC's focus to small and medium enterprises. The Australian Greens are concerned that approving Oyu Tolgoi was pre-emptive of this bill's passage and that EFIC should have waited until this bill, and any amendments, passed both houses of parliament.

Recommendations

1.8 EFIC's decision making as it relates to projects which are backed by public money must be subject to adequate transparency and accountability requirements. As such the Australian Greens support the inclusion of the following recommendations. Recommendations 1 to 4 below largely pick up on recommendations from the Productivity Commission report and seek to improve transparency and accountability.

Recommendation 1: That EFIC's exemption from Freedom of Information legislation be removed and EFIC be made subject to the general provisions of the Freedom of Information Act

1.9 This was recommendation 9.8 of the Productivity Commission Report and it was reiterated in seven of the submissions to this Inquiry. The Australian Greens believe there is no justification for EFIC to have a blanket exemption from Freedom of Information laws. There are sufficient protections in the EFIC Act to cover, for example, commercial in confidence concerns. It is also worth noting that exempting an export credit agency from freedom of information requirements is out of step with standards in other countries and the UN Guiding Principles on Business and Human Rights.

Recommendation 2: That EFIC's exemption from the provisions of the Environment Protection and Biodiversity Conservation (EPBC) Act be removed.

1.10 The Australian Greens cannot see a justification for allowing this exemption to continue. It is out of step with requirements placed on export credit agencies in other countries such as Canada and the United States.

Recommendation 3: That the bill impose a statutory requirement for Category A and National Interest funding proposals on EFIC to:

 disclose proposals under consideration

 solicit public comment

 disclose public submissions and

 disclose, prior to approval, EFIC's assessments and benchmarking of the

environmental and human rights impacts.

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1.11 The Australian Greens are concerned that EFIC's approval of Category A and National Interest funding proposals are not sufficiently transparent or open to public participation. This recommendation is codified in the UN Guiding Principles on Business and Human Rights and similar processes are in place for export credit agencies in Canada and the United States.

Recommendation 4: That the bill require that the Minister release a National Interest Statement to be tabled in parliament for all Ministerial Directions for transaction on the National Interest Account

1.12 This echoes recommendation 9.5 of the Productivity Commission's Report. It refers to a situation where the Minister for Trade directs EFIC to arrange funding "in the national interest." There is currently no requirement for the Minister to justify how the decision is in the national interest and therefore no transparency for the public - or the parliament - to enable scrutiny of the Minister's discretion.

Recommendation 5: That EFIC be required to undertake a carbon audit of all project proposals and that the bill articulate that a specific climate change criteria for approving projects that is consistent with Australia's domestic and international commitments on reducing greenhouse gas emissions, including the United Nations Framework Convention on Climate Change (UNFCCC) and has the objective of stabilising greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.

1.13 The Australian Greens believe that EFIC should not be financing projects which will contribute to dangerous climate change, both at home and abroad. This recommendation will assist the government to meet its policy commitment to reduce greenhouse gas emissions by 80 per cent by 2050. The International Energy Agency has warned that two-thirds of known fossil fuel reserves must be kept in the ground for the planet is to avoid two degrees of warming. Nicholas Stern from the London School of Economics, has found that the gearing of the finance system towards fossil fuel projects will trigger the next financial crisis. Australia has signed up to the G20 commitment to phase out fossil fuel subsidies and this should also extend to coal gas and oil projects that EFIC finances.

Recommendation 6: That the bill articulate which international human rights and environmental obligations that EFIC is required to comply with.

1.14 The Australian Greens can identify no justification for EFIC to be immune from similar obligations that apply to other public agencies as they relate to human rights and the environment.

Senator Lee Rhiannon Australian Greens

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Appendix 1

Public submissions

1 General Electric

2 Tasmanian Government Department of Economic Development, Tourism and the Arts

3 Jubilee Australia

3A Supplementary Submission

3B Supplementary Submission

3C Supplementary Submission

4 Department of Foreign Affairs and Trade

5 Department of Resources, Energy and Tourism

6 Human Rights Law Centre

7 AIDWATCH

8 Greenpeace

9 Oxfam Australia

10 CAER - Corporate Analysis. Enhanced Responsibility

11 Australian Lawyers for Human Rights

12 Export Finance and Insurance Corporation

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Appendix 2

Public hearings and witnesses

Friday 17 May 2013—Canberra

AIDWATCH

Mr Gareth Bryant, Member, Committee of Management

Jubilee Australia

Mr David Barnden, Volunteer Board Member

Ms Carmelan Polce, Executive Director

Department of Foreign Affairs

and Trade

Mr Sam Gerovich, First Assistant Secretary, Trade and Economic Policy Division

Mr Patrick Lawless, Assistant Secretary, Resources, Competitiveness and Trade Analysis Branch

Ms Angela McGrath, Director, Trade Finance Section

Export Finance and Insurance Corporation

Mr Dougal Crawford, Senior Adviser Government, Industry and International Relations

Mr Jan Parsons, Director, Environmental and Technical Review

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Appendix 3

Tabled documents, answers to questions on notice and additional information

Answers to Questions on Notice

17 May 2013 Public Hearing

1 Jubilee Australia

2 Export Finance and Insurance Corporation

3 Department of Foreign Affairs and Trade

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Appendix 4

SUBMISSION

Department of Foreign Affairs and Trade, Submission Number 4

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Submission of the Department of Foreign Affairs and Trade to the Inquiry into the provisions of the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill2013 by the Senate Foreign Affairs, Defence and Trade Committee

Introduction

In September 2011, the Government commissioned the Productivity Commission (PC) to review Australia's export credit arrangements. The Export Finance and Insurance Corporation Amendment Bill2013 (the Bill) is the culmination of that review process.

In its response to the PC review in January 2013, the Government agreed that some adjustments should be made to the mandate, powers and governance and financial arrangements of the Export Finance and Insurance Corporation. A number of those changes require amendments to the Export Finance and Insurance Corporation Act 1991, which is why this Bill is being introduced. .

The Export Finance and Insurance Corporation

The Export Finance and Insurance Corporation (EFIC) was established by the Export Finance and Insurance Corporation Act 1991 (the 'EFIC Act') to act as Australia's export credit agency. It is a self-funding statutory authority under the Commonwealth Authorities and Companies Act1997 (the 'CAC Act'). EFIC exists to supportthe

growth of Australian businesses internationally. It does this by providing financial solutions, risk management options and professional advice when the private market is unable or unwilling to do so.

. . .

EFIC operates in the market gap, where the credit and insurance sectors are not able or are unwilling to provide credit and insurance services to financially viable Australian export transactions or overseas projects. It should not compete with commercial sector providers.

The EFIC Act charges EFIC with four key functions:

• to facilitate and encourage Australian export trade by providing insurance and financial services and products to persons involved directly or indirectly in export trade;

• to encourage banks and other financial institutions in Australia to finance or assist in financing exports; • to manage the Australian Government's aid-supported mixed credit program; and • to provide information and advice regarding insurance and financial

arrangements to support Australian exporters.

EFIC provides financial support to exporters on one of two accounts: the Commercial Account (CA) and the National Interest Account (NIA). TheCA operates on a commercial basis; with EPIC's Board determining whether or not to support particular transactions. The NIA is managed by EFIC on behalf of the Australian

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Government. Decisions about transactions on the NIA are made by Government and then managed by EFIC. If EFIC is unwilling or unable to provide support to a proposal on its Commercial Account, it may refer the proposal to the Minister for Trade for possible inclusion on the National Interest Account. The Minister must be

satisfied that a transaction is in the national interest before approval can be granted for the transaCtion to be supported on the NIA. As at 30 June2012, EFIC had CA exposures of$1.41 billion, the largest proportion (35.4 per cent) ofwhich was to the Australia/Pacific region, and NIA exposures of $692.9 million, the largest proportion

(61.3 per cent) of which was to Indonesia.

The EFIC Board currently consists of nine members, including a government member, the Secretary of the Department of Foreign Affairs and Trade. All Board members, apart from the Managing Director, are appointed by the Trade Minister. The Managing Director is appointed by the Board. The majority of members have

private sector experience in the finance or related fields. For example, the current Chairman of the Board, Nr Andrew Mohl, is a former CEO of AMP Limited.

EFIC was established in its original form in 1957 as the Export Payments Insurance Corporation, to 'provide Insurance against certain Risks arising out of Trade not normally insured with Commercial Insurers'. The activities and international obligations of export credit agencies (ECAs) in Australia and internationally, as well

as the trade financing role of multilateral development banks, have undergone considerable transformation since government export credit arrangements were established. ECAs now offer a wide range of products including bonds, various types

of guarantees, political risk insurance and in some cases direct loans. Most OECD member countries, including Australia, are participants in the OECD Arrangement on Officially Supported Export Credits, a framework for the orderly use of officially supported export credits that seeks to foster a level playing field.

The Productivity Commission Inquiry

In September 2011, the Government directed the PC to undertake a review of Australia's export arrangements. This was in line with a recommendation from the previous review ofEFIC, undertaken by the Department of Foreign Affairs and Trade in 2006, which proposed that EFIC be reviewed by an independent consultant in

around four years' time.

Inquiry terms of reference

The PC was asked to: review the rationale for government involvement in the provision of export finance, insurance and other financial services; assess the management by EFIC of its functions under the EFIC Act; review EPIC's pricing and service arrangements and assess their impact on incentives for Australian exporters to

access private sector providers of export finance and insurance products; and review EPIC's exemption from competitive neutrality policy.

Consultation process and submissions received

The PC's review involved a thorough public consultation proc.ess. Interested parties and the public had the opportunity to provide written submissions and feedback on an

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issues paper and a.draft report. A total of 116 written submissions were received by the PC, 27 initial submissions and 89 in response to the draft report. Public hearings were held in Sydney, Canberra, and Perth.

Most public submissions were supportive ofEFIC's management and role, although some questioned EFICs involvement in large onshore projects. The banks were supportive ofEFIC's so-called 'market gap' mandate whereby EFIC constrains its activities to parts of the market in which the private sect.or is unable or unwilling to operate. They said EFIC was commercial in its price setting and complemented rather than 'crowded out' private sector operators.

In our submission to the inquiry, DFAT noted that most of Australia's trading partners have gove:mment supported ECAs and EFIC may help level the playing field for Australian exporters. We said EFIC sits in the middle ofthe global spectrum of private to fully public ECA institutional arrangements and is conservative in terms of its risk appetite. We made the point that the controls governing EFIC's operations were designed to ensure that EFIC was not competing with the private sector.

In its written submission on the draft PC report, EFIC raised concerns about all but two draft recommendations. EFIC was particularly concerned about the suggestion that it focus on supporting small and medium-sized enterprises (SMEs) while also being required to earn a rate of return comparable to an Australian bank. EFIC argued that such a narrow focus would make it unprofitable. EFIC also opposed the recommendation to stop supporting domestic resource projects and argued that large projects were increasingly reliant on finance from export credit agencies (ECAs) and that EFIC helped to 'crowd in' other ECAs and private investors.

Final PC Report and its recommendations

The PC's final Inquiry Report was provided to the Government on 31 May and tabled in Parliament on 26 June 2012.

The PC's report, which focused on EFIC's Commercial Account operations, recommended a significant reorientation ofEFIC's Commercial Account mandate to address market failures resulting from inadequate information for SMEs seeking export finance. It argued that the market gap mandate lacked rigour and distorted the

allocation of resources within the economy. It said a market failure test was more appropriate. Market gap is a broader concept than market failure as market gap includes transactions that cannot attract private sector support for sound commercial reasons, whereas market failure occurs when transactions that are commercially viable do not take place, or do not take place efficiently, because of inadequate inforrilation. The PC argued that Government intervention in export finance markets

should be targeted at failures in those markets that impede otherwise commercially viable export transactions and generate a net economic benefit.

The PC found that EFIC did not always price its facilities to fully cover costs. It recommended that EFIC be required to apply competitive neutrality principles (ie, pay fees and charges to remove any net competitive advantage it may have over potential competitors) and the Minister's Statement of Expectations require EFIC to price its facilities to cover the full cost of provision and to earn an appropriately benchmarked rate of return. The PC recommended EFIC restrict its products to guarantees and bonds, only provide support for transactions based on an export contract and cease

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support for domestic resource projects, related infrastructure and suppliers of goods and services to those projects. There were also a number of recommendations around transparency and governance, including the removal of the government member from the EFIC Board.

Development of the Government's response

In the second half of2012, DFAT chaired an inter-departmental committee process (IDC) to formulate a whole-of-government response to the PC's report. Central agencies (Treasury, Finance and Prime Minister and Cabinet) participated in the process along with others including the Department of Industry and Innovation, the Department of Resources, Energyand Tourism, the Department of Infrastructure and

Transport, the Department of Regional Development, Austrade, and the Department of Defence. EFIC was invited to participate in several IDC meetings to provide a commercial perspective and to ensure the Government response would be workable for EFIC. The committee also took into account views of industry when considering the PC's recommendations.

The Government response (Australian Government Response to the Productivity Commission Review Australia's Export Credit Arrangements - Australian Government Department of Foreign Affairs and Trade) agrees or agrees in part with 16 of the PC's recommendations and notes the remaining six. The Government's response to the PC Review introduces an overarching market failure test for EFIC's

Commercial Account operations, which is broadly consistent with the PC's key finding that the only potential rationale for government involvement in export finance through EFIC is information-related market failure. The Government response is intended to reorient EFICs operations on the Commercial Account towards supporting

commercially viable export-focused SMEs seeking to access export finance.

The response allows for EFIC to continue to provide a full range of products (guarantees, insurance, reinsurance, bonds and loans) according to the ·existing eligibility criteria in the EFIC Act.. It does not preclude EFIC from supporting non­ SMEs, provided a market failure can be dearly demonstrated and stricter reporting requirements are met. It agrees to apply competitive neutrality disciplines to EFIC through a tax-equivalent payment and a debt neutrality charge. It also allows EFIC to

continue to provide support to firms/SMEs in the domestic supply chain for export­ focused projects provided they are 'integral to' export contracts and that the market failure criteria are satisfied. EFIC's guarantee powers are to be·expanded to allow it to support offshore subsidiaries of Australian business seeking to establish or participate in global supply chains subjectto a 'no net job loss' test and demonstrated

support for Australian export trade.

The Bill

The Bill implements those parts of the Government's response to the PC Review of Australia's Export Credit Arrangements that require legislative amendments to bring them into effect. These are summarised below.

This Bill will introduce a new mandate for EFIC under Item 7. This will only allow EFIC to provide insurance and other financial services or products on its Commercial

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· Account where a market failure exists, making it unlikely the products or services would be provided by the private sector. Furthermore, Item 13 of the Bill will require EFIC to focus on providing its products and services to SMEs. The Bill does not limit EFIC to supporting SMEs only, but rather obliges EFIC to focus more of its resources

on SMEs.

The term 'market failure' will be defined through a legislative instrument. This will allow the definition to be adjusted if necessary over time to respond to changing international financial practices and market characteristics.

SMEs will be defined (under item 6) with reference to legislative instruments to be made by the Minister. The legislative instruments will set thresholds for the revenue value and number of employees to satisfy the SME definition. The thresholds for SMEs can be adjusted to ensure the definition continues over time to capture

exporters most likely to face information-relatedmarket failures.

Items 22-24 provide that EPIC's activities on the Commercial Account should comply with competitive neutrality arrangements, requiring EFIC to pay a tax-equivalent payment and a debt neutrality charge. This will ensure that EFIC does not have a net competitive advantage over potential competitors. The EFIC Act currently provides

for EFIC to pay titx-equivalent payments and a debt neutrality charge 'in respect of short-term insurance', following amendments made to the EFIC Act in 2000. In 2003 the Government determined that there was sufficient capacity in the private market to meet exporters needs and EFIC divested its short-term insurance business and has not

offered short-term insurance products since then. Therefore, the introduction of competitive neutrality for EPIC's current operations requires simple amendments to Sections 61A, 62A and 63A to remove the reference to 'short-term insurance'. This will allow the Minister, in consultation with other relevant ministers, to determine an · appropriate tax-equivalent payment and debt neutrality charge or guarantee fee for

EFIC to pay to achieve competitive neutrality in its current operations. While the PC did not recommend a guarantee fee, we recognised that a guarantee fee is an alternative to a debt neutrality charge and an option the Government may want to exercise if it is simpler or more efficient for EFIC to pay than a debt neutrality charge.

The Government also agreed to recommendation 9.1, to amend the EFIC Act to exclude Australian Public Service personnel from the EFIC Board. Items 14-21 of the Bill remove all references to a government member on the Board of EFIC. The Bill also includes adjustments to the minimum and maximum number of Board members specified under the EFICAct to ensure that, once the government member is removed from the Board, the overall number of Board members allowed under the EFIC Act remains unchanged.

The Government did not agree to recommendation 10.1(a), for EFIC to cease providing financial services for transactions that are not based on an export contract. However, it did decide in its response to the PC Review to ensure that, where EFIC provides tender guarantees or performance guarantees under section 19 to transactions that are not based on an export contract, they must be 'integral to' an export contract

or an eligible export transaction. Currently the EFIC Act only requires that they be 'associated with' an eligible export transaction. Therefore, the amendments at item

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12 will allow EFIC to support suppliers in domestic supply chains for major export projects where those suppliers are integral to the export project.

The Government agreed to a limited expansion ofEFIC's guarantee powers to allow EFIC to be more flexible in meeting the needs of Australian businesses in global value chains. Therefore, item 9 ofthe Bill allows EFIC to provide a guarantee to a foreign subsidiary of an SME carrying on business in Australia. Currently, EFIC can only provide support to the Australian based parent company and cannot deal directly with the foreign subsidiary. This limited expansion of powers is further limited by the caveats set out in item 10 of the Bill. Specifically, EFIC's ability to provide a guarantee to a foreign subsidiary is only possible if the SME parent in Australia certifies that the guarantee will not result in a net reduction in the immber of employees of the SME in Australia. Furthermore, through the new definition of

'Australian export trade' at item 5, EFIC can only provide a guarantee for a loan to finance an increase in exports, access to new markets or an increase in dividend flows to Australia.

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Appendix 5

Government Response

Government Response to Productivity Commission Review of Australia's Export Credit Arrangements

(Including a list of Productivity Commission recommendations)

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GOVERNMENT RESPONSE

Productivity Commission Review Australia’s Export Credit Arrangements

The Export Finance and Insurance Corporation’s mandate and scope of operations

The Government considers that the Export Finance and Insurance Corporation (EFIC) plays an important role in facilitating exports and it has performed this role very well, but that some adjustment of its mandate and powers is necessary in light of the changing international environment and resulting challenges to the Australian economy and exporters. The Government is committed to assisting exporters, particularly small and medium

-sized enterprises (SMEs), overcome the financial

barriers they may confront when seeking to engage in the international economy. To help achieve this objective the EFIC mandate will be refocused towards addressing credit market f

ailures (particularly failures relating to inadequate information) that may impede Australian exporters. In particular, EFIC’s operations on the Commercial Account will be focused on:

 SMEs with annual turnover of less than $100 mill ion or fewer than 100 FTE employees; and

 non-SMEs undertaking transactions in emerging and frontier markets (where information-related market failures are most likely to affect larger exporters).

The Export Finance and Insurance Corporation Act 1991 (the Act) will be amended to better align EFIC’s operations with the revised policy mandate, including to:

 specify that EFIC is to facilitate and encourage Australian export trade (including through global value chains) by addressing information-related market failures that may impede commercially viable export transactions; and  to do this through the provision on the Commercial Account of insurance

and financial services and produc

ts to persons involved directly or, in

some cases indirectly, in such trade;

 specify that EFIC’s operations on the Commercial Account should be focused on, but not limited to, supporting export-focused SMEs, particularly SMEs seeking to engage in global value chains;

 tighten the definition of ‘Australian export trade’ to cover transactions resulting in an increase in exports from Australia, access to new markets for Australian exports or dividend flows from overseas or other benefit as specified in regulation;

 remove Australian Public Service personnel (the DFAT Secretary) from the EFIC Board;

 ensure that the provision of tender guarantees and performance bonds by EFIC for contracts associated with an export contract or eligible export transaction require the contract to be an integral part of such a transaction or contract;

 require the Trade Minister to prescribe through regulation the detailed scope of EFIC’s operations, including:

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 the definition of an SME (annual turnover of less than $100 million or fewer than 100 FTE employees); and  a new market failure test.

The market failure test will replace assessments based on the ‘market gap’. The test would specify that EFIC support for exporters (on the basis of export contracts, eligible export transactions or Australian export trade) should be based on evidence of:

 inadequate information about the credit risk and standing of an Australian exporter (or SMEs ‘integral’ to the domestic supply chain for export-focused projects), foreign buyer or the foreign buyer’s bank, which has resulted in private financial providers employing rigid generalised rules and not forming an assessment on the merits of the transaction;

 inadequate information about the value of some tradeable capital goods or the existence of liquid secondary markets for these goods, which has resulted in private sector financial providers refusing to provide services for transactions involving such goods; or

 inadequate information about the risk associated with emerging and frontier country export markets or emerging and frontier country outward investment destinations, which has resulted in private sector financial providers refusing to provide products or services for transactions in those markets.

EFIC may continue to provide the financial products currently prescribed in the Act (which are linked to the eligibility criteria in the Act). The provision of loans and insurance by EFIC may continue to be appropriate in some circumstances where the provision of a guarantee is not sufficient to attract the private sector to support the transaction, particularly where long tenors are involved.

The Trade Minister’s Statement of Expectations (SOE) of EFIC, which will be issued annually, will outline EFIC’s revised policy mandate. Additional changes will be made to the SOE to ensure that EFIC’s operations align with the revised policy mandate, including:

 specifying that the EFIC Board must outline to the Trade Minister through quarterly progress reports evidence of information-related market failure as the basis for EFIC’s support for particular transactions (with more detailed analysis for non-SME transactions);

 outlining the Trade Minister’s expectations about the nature of contracts that are an integral part of the domestic supply chain for export-focused projects and thereby eligible for EFIC support;

 requiring non-SMEs involved in domestic export-focused projects to have an Australian Industry Participation Plan (AIPP) in place to be eligible for EFIC assistance;

 outlining the Trade Minister’s expectation that a limit of three facilities per client should normally apply to EFIC’s future operations on the Commercial Account and that where EFIC exceeds the limit some justification should be provided to the Board and Trade Minister (through the quarterly reports);

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 noting that the Trade Minister expects the use of a market failure test to result in a reduced level of EFIC support for non-SMEs involved in domestic export-focused projects, but continued support for non-SMEs exporting to, and investing in, emerging and frontier markets; and

 noting that EFIC’s support should not be based on temporary imbalances in the demand for, and supply of, capital where balance is typically restored in the short run through changes in the market price or on meeting the credit preferences of a firm’s owners.

EFIC’s pricing arrangements

The pricing of EFIC’s products should reflect their full expected economic costs. This is central to EFIC meeting its policy objective of helping commercially viable exporters overcome financial barriers (resulting from information-related market failures) while also encouraging private sector participation.

Given the sensitivity of economic profit (and pricing) to EFIC’s methodology for pricing risk, EFIC could benchmark how actual rates of default for its facilities compare to expected losses. This could also help to determine if EFIC is evaluating risk appropriately and meeting its policy objectives. The EFIC Board will give consideration to implementing the Commission’s recommendation to review its risk score assessment process.

The objective of competitive neutrality (CN) policy is to ensure that significant government businesses do not have a net competitive advantage over other businesses (or potential competitors) simply by virtue of their government ownership.

Given that EFIC is required to provide assistance to commercially viable exporters (albeit exporters affected by information-related market failures) without CN EFIC’s activities may discourage market entry by potential competitors or the provision of more marginal financial products. To ensure that EFIC does not have a commercial advantage over potential providers of export finance and export insurance and that EFIC does not use its government-granted guarantee to borrow excessively, the Government will amend the Act to remove EFIC’s current exemption from CN principles. EFIC will be required to pay a tax-equivalent charge and debt neutrality fee.

EFIC’s governance and risk management

Sound governance arrangements and procedures are central to the effective management of public sector organisations and can also help to ensure that an agency’s public policy goals are achieved efficiently and effectively.

Improved clarification of EFIC’s objective (based on a market failure test) would improve EFIC’s internal and external governance, and would better enable the Trade Minister to evaluate EFIC’s performance. The Government will also implement a number of measures to enhance EFIC’s external governance framework, including:

 tabling EFIC’s Corporate Plan in the Parliament;

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 removing Australian Public Service personnel (the DFAT Secretary) from the EFIC Board; and

 requiring EFIC to provide quarterly reports to the Trade Minister against the Corporate Plan, including categorisation of market failures for each SME export transaction, and more detailed analysis of market failure for each non-SME export transaction.

The Productivity Commission recommends enhancements in EFIC’s internal governance arrangements. The Government considers decisions to create or amend internal prudential benchmarks, establish internal audit programs or establish performance management frameworks are the responsibility of the EFIC Board.

The Government undertakes a detailed assessment of the risks and benefits of proposed transactions on the National Interest Account (NIA) and provides clear public explanations of the reasons for providing facilities on the NIA. In addition, information on the performance of the NIA is disclosed in the Department of Foreign Affairs and Trade’s Portfolio Budget Statements.

 For example, on 8 December 2009 the then Trade Minister provided a detailed explanation of the Government’s reasons for providing a loan on the NIA in support of the Liquefied Natural Gas project in Papua New Guinea.

EFIC currently provides information on the facilities signed during a financial year in its on-line register and Annual Report. This information includes the name of the firm, the facility type, the amount of the facility and the environmental category.

While it may not be appropriate for EFIC to publish detailed information about individual transactions (i.e. price and other terms of provision), the Government proposes EFIC consider the costs and benefits of developing an online calculator (similar to the German and Danish export credit agencies) in the context of EFIC’s ‘Navigator’ initiative. ‘Navigator’ is an online tool to help exporters understand their export finance options through the various stages of exporting. At each stage, ‘Navigator’ identifies the financial challenges a company may face.

EFIC’s capital and treasury operations

The Treasury and the Department of Finance and Deregulation have commenced a review of the need for, and the scope of, EFIC’s treasury function to ensure that the size of treasury operations is commensurate with the size and product offering of the origination business it supports.

The Act will specify that the Trade Minister can direct EFIC to pay a special dividend after seeking the views of the EFIC Board and the agreement of the Minister for Finance and the Treasurer.

Environmental and social responsibility

The Government considers that EFIC’s Policy and Procedure for environmental and social review of transactions provides a sound framework for ensuring that EFIC

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upholds best-practice environmental and social standards in the transactions it supports.

EFIC already discloses its prospective involvement in a transaction associated with a project that has potentially significant adverse environmental or social impacts (a category A project) when the transaction is of a minimum size (SDR 10 million) and duration (minimum two years) and the project is located outside Australia. That approach is consistent with EFIC’s international obligations and guidelines.

EFIC does not disclose its potential involvement in transactions associated with non-projects and bonds, an approach consistent with its international obligations and the practices of OECD export credit agencies. EFIC’s risk management approach for non-projects and bonds is to undertake an environmental and social risk evaluation and, where necessary, benchmark the transaction using the International Finance Corporation Performance Standards. EFIC will decline transactions if it determines that the environmental and/or social impacts do not satisfy relevant benchmarks.

EFIC makes public its support to projects located in Australia after a transaction is signed. EFIC does not disclose its potential involvement in transactions associated with a category A project in Australia as such projects are subject to the approval requirements of the relevant State or Territory government and, where required, the Commonwealth Government. Commonwealth and State and Territory assessment processes already provide for extensive public consultation on domestic projects with environmental consequences.

EFIC incorporates Australia’s international obligations and guidelines into its commercial decision-making framework. It examines human rights issues as part of its due diligence process. EFIC is informed in this regard by the World Bank’s International Finance Corporation Performance Standards, the Organisation for Economic Co-operation and Development (OECD) Guidelines on Multinational Enterprises, the United Nations Guiding Principles for Business and Human Rights, the Equator Principles and the OECD Common Approaches.

Limited expansion of EFIC’s guarantee powers

In addition to its response to the Productivity Commission’s recommendations, the Government has also decided to provide EFIC with a limited expansion of its powers to provide EFIC with greater flexibility to support Australian SMEs participating in global value chains. The manufacturing taskforce and the Asian Century White Paper both emphasised the gr

owing importance of global value chains.

EFIC is currently constrained in its ability to assist SMEs in global value chains, which can result in sub-optimal financing structures.

The Government has decided to broaden EFIC’s guarantee powers to enable it to provide effective assistance to subsidiaries of Australian-based SMEs that are incorporated in a foreign country, where:

 the subsidiary is majority owned by an SME based in Australia;

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 the SME can demonstrate the guarantee will support ‘Australian export trade’ (as defined in the Act);

 the SME meets the definition prescribed by the Minister in regulation (annual turnover of less than $100 million or fewer than 100 FTE employees);and

 the SME certifies that there would be no net reduction in the number of its employees in Australia during the term of EFIC’s guarantee facility as a result of it undertaking the activity for which it seeks EFIC’s support.

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PC Recommendation Government

response

Recommendation 5.1

The Minister should amend the Statement of Expectations to require EFIC to define a small and medium-sized enterprise as an entity, including any related entities, with fewer than 100 full-time equivalent employees or annual turnover of less than $50 million.

Agreed in part

Recommendation 6.1

The Minister should amend the Statement of Expectations to require EFIC to commission an independent review of the process it follows to allocate an EFIC risk score (ERS) to a facility. This review should include a comparison of the ERS of each facility at signing and at maturity to examine any changes over time. Evaluating the forecasting accuracy of expected losses compared to actual losses will help ensure that EFIC prices risk appropriately. EFIC should report the results of this review to the Minister.

Noted

Recommendation 6.2

The Australian Government should amend the Export Finance and Insurance Corporation Act 1991 (the Act) to ensure EFIC’s activity on the Commercial Account complies with competitive neutrality arrangements. This will require EFIC to pay a tax-equivalent charge and a debt neutrality fee.

The Minister should amend the Statement of Expectations to:

 Require the pricing of EFIC’s Commercial Account facilities to reflect the expected full economic cost of provision, including the opportunity cost of capital, taxes paid by private sector participants and the benefit that EFIC obtains from the government guarantee.

 Set an appropriately benchmarked rate of return on equity following consultation with the Treasurer and the Minister for Finance.

 Require EFIC to identify in its annual report and corporate plan that part of its revenue that relates to not having to pay a tax-equivalent charge and debt neutrality fee, until the Act is amended to apply competitive neutrality

Agreed in part

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arrangements. Recommendation 7.1

The Minister should remove the ‘market gap’ mandate from the Statement of Expectations as it lacks rigour and does not ensure that EFIC’s activities generate a net benefit to the economy.

Agreed

Recommendation 8.1

EFIC should revise its risk management policies to include a limit on exposures to particular industries.

Noted

Recommendation 8.2

The Treasury and the Department of Finance and Deregulation should regularly review the need for, and the scope of, EFIC’s treasury function to ensure that the size of treasury operations is commensurate with the size and product offering of the origination business it supports.

The first review of this type should include an assessment of EFIC’s capital requirements and dividend policy, and be completed by June 2013.

Agreed in part

Recommendation 8.3

The Act should be amended to allow the Minister to direct the Board of EFIC to return capital to the Australian Government when the Minister determines that EFIC has surplus capital, after seeking the views of the Treasurer and the Minister for Finance.

Agreed

Recommendation 9.1

Consistent with the findings of the Uhrig Review, the Australian Government should amend the Act to exclude Australian Public Service personnel from the EFIC Board. Where the EFIC Board considers departmental advice beneficial, officials from the Department of Foreign Affairs and Trade should be invited to present to board meetings for the relevant agenda items and to answer questions relating to those items.

Agreed

Recommendation 9.2

The Minister should amend the Statement of Expectations to require EFIC to include in its regular internal audit program an assessment of its

Noted

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compliance with the operational restrictions, as set out in the Statement of Expectations, any relevant directions from the Minister, and Part 4 of the Act. Board papers should be sufficiently robust to ensure that they can be used in EFIC’s internal audit program to confirm that EFIC is complying with its mandate.

Recommendation 9.3

The Minister should table EFIC’s corporate plan in Parliament and, in due course, the Act should be amended to require this.

EFIC should provide quarterly progress reports to the Minister against its corporate plan, including information about facilities on the Commercial Account executed during that quarter.

Agreed

Recommendation 9.4

The Minister should amend the Statement of Expectations to require the EFIC Board to establish a performance management framework, based on a more clearly defined and rigorous objective under the Act, directed at market failures affecting small and medium-sized enterprises. The framework should be developed in consultation with other Australian Government agencies, and use relevant performance benchmarks and indicators for EFIC’s business units, including treasury operations.

EFIC should report its performance against this framework in its annual report and corporate plan.

Noted

Recommendation 9.5

Proposed facilities with national interest objectives should only be considered in the context of the National Interest Account.

The Australian Government’s assessment of National Interest Account facilities should include analysis of whether the proposal is the most cost-effective way of achieving intended outcomes.

The Australian Government should clearly and publicly articulate the justification for a National Interest Account facility after it has been approved by the Minister.

Information on the performance of National Interest Account facilities should be collated and publicly

Agreed in part

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reported by the Australian Government.

Recommendation 9.6

The Minister should amend the Statement of Expectations to require EFIC to publicly disclose its prospective involvement in any facility with potentially significant environmental or social impacts. This includes all category A projects, and ‘non-projects’ and bonds where it has been determined that there is potential for significant environmental and social impacts.

Information relating to the environmental and social classification of projects and the reasons for their approval should be predictable and disclosed in the annual report and on EFIC’s website. This information should include assessment benchmarking and processes, conditions of approval and consequences for non-compliance. Information that is relevant to EFIC’s assessment of environmental and social impacts should be made public.

EFIC should make public its involvement in supporting projects that are subject to environmental assessment in Australia.

Agreed in part

Recommendation 9.7

The Minister, by way of a direction under the Act, should articulate which international obligations, including human rights obligations, EFIC is required to comply with.

EFIC’s compliance with those obligations should be included in its internal audit program with outcomes publicly reported, including in EFIC’s annual report.

Noted

Recommendation 9.8

The Australian Government should remove EFIC’s special exemption in relation to matters done under Parts 4 and 5 of the Act from the Freedom of Information Act 1982 (while retaining protection for Cabinet and commercial-in-confidence material).

Noted

Recommendation 10.1

a) As soon as possible, the Minister should direct EFIC to cease providing financial services for transactions that are not based on an export contract as defined in

Agreed in part

Not agreed

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section 3 of the Act. This includes resource projects located in Australia, and related infrastructure, and suppliers of goods and services to those projects.

b) The Australian Government should not broaden the eligibility criteria under Part 4 of the Act. Specifically, the Act should not be amended to allow EFIC to enter into loans for the export of non-capital goods.

Agreed

Recommendation 10.2

Until it is next reviewed by an independent body, EFIC’s role on the Commercial Account should be limited to demonstrating to the private sector that providing export finance to newly exporting small and medium-sized enterprises (SMEs) can be commercially viable. This demonstration role should be articulated in the Minister’s Statement of Expectations.

EFIC should demonstrate that the provision of financial services to newly exporting SMEs can be done on the same basis as the private sector - with price covering the expected full economic cost of provision.

Agreed in part

Recommendation 10.3

In respect of the Commercial Account, the Australian Government should make amendments to the Act to:

(a) Reorient EFIC’s objective to addressing information-related market failures in financial markets affecting newly exporting small and medium- sized enterprises (SMEs) seeking access to export finance

(b) Specify that EFIC is to demonstrate to the private sector that providing export finance to newly exporting SMEs can be commercially viable

(c) Clarify that assistance is only to be provided in respect of export contracts as currently defined in the Act

(d) Remove references to EFIC providing support to persons indirectly involved in Australian export trade

(e) Limit the financial products offered by EFIC to guarantees and bonds falling within the definition of ‘guarantee’ under section 3 of the Act

(f) Allow for the product range to include the provision of reinsurance cover for sovereign and country risk

Agreed in part

Agreed in part

Noted

Not agreed

Not agreed

Not agreed

Noted

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insurance provided by the private sector in times of disruption in particular markets, subject to ministerial direction

Recommendation 10.4

A limit of three facilities per client should normally apply to EFIC’s future operations on the Commercial Account. Proposals to exceed this limit should be subject to at least one of the two conditions below:

 the export transaction is in an emerging export market or

 the facility has been explicitly approved by the EFIC Board (and not by a delegate), is notified to the Minister and is included in EFIC’s internal audit program and independent review of EFIC’s operations.

The limit of three facilities should not apply to political risk reinsurance facilities provided pursuant to the direction by the Minister.

Agreed in part

Recommendation 10.5

EFIC should publish information on the facilities it approves on the Commercial Account within a month of execution, including the name of the firm, price and other terms of provision.

Agreed in part

Recommendation 10.6

Where possible, the Minister should give effect to the proposed changes to EFIC’s operations through a ministerial direction or a revised Statement of Expectations, until such time as the Act can be amended.

Agreed in part

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Recommendation 10.7

EFIC’s performance against the more clearly defined and rigorous objective should be independently reviewed three years after a revised Statement of Expectations is issued by the Minister or the amendments to the Act have been passed by Parliament, whichever occurs first.

This independent review should consider whether the rationale for government intervention remains valid, and whether the provision of financial services through EFIC is the most effective and efficient way of addressing any failures in financial markets that are impeding otherwise commercially viable export transactions. This review should also include examination of alternative arrangements for post- approval administration of the National Interest Account.

Agreed in part

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Appendix 6

Minister for Trade and CompetitivenessExport Finance and Insurance Corporation Statement of Expectations

19 July 2011

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432

433

434

435

436

Appendix 7

Export Finance and Insurance CorporationStatement of Intent

August 2011

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439

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Appendix 8

Department of Foreign Affairs and Trade answer to question on notice

- public hearing 17 May 2013

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Question on Notice from Senator Rhiannon

Witness: Department of Foreign Affairs and Trade

Committee Hansard Transcript p 13

Question

Senator RHIANNON: Considering the shortness of time, would you take on notice to supply us with what you agree with in part and what bits you do not—for example, 6.2 you have agreed in part. Would you take it on notice for that table to tell us which bits you agree with and which bits you do not agree with. I am just conscious of time.

Ms McGrath: Yes. I guess the 'noted' is—

Senator RHIANNON: That you are not going to do anything?

Ms McGrath: No, it does not necessarily mean that. It means that we note the

recommendation, and very often that means that we need to think about the detail of how we could take on board what some of the Productivity Commission has said.

Senator RHIANNON: If you could expand on the noted, if it is possible.

Answer

In its response to the Productivity Commission report on Australia’s export credit arrangements the Government agreed or agreed in part to 16 of the recommendations and noted the remaining six.

Where the Government ‘agreed in part’ to a particular recommendation, this meant that the Government agreed with some, but not all, of what the PC had recommended. The following table sets out what was agreed and not agreed within the recommendations agreed in part:

Recommendation Agreed Not agreed

5.1 Agree to define small and

medium sized enterprise. Do not agree to the thresholds

proposed by the PC of 100 full-time equivalent (FTE) employees or annual turnover of $50 million, deciding instead on 100 FTE or $100 million annual turnover.

6.2 Agree to amend the Act to

ensure EFIC’s activities on the Commercial Account

Do not agree to set a benchmarked rate of return.

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complies with competitive neutrality arrangements. The Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013 provides for EFIC to pay a tax-equivalent charge and a debt neutrality fee to achieve this.

Agree the Statement of

Expectations will require EFIC pricing on its

Commercial Account to reflect the expected full economic cost of provision.

Do not agree to require EFIC to identify in its annual report and corporate plan that part of its revenue that relates to not paying a tax- equivalent payment and debt

neutrality fee, as the Bill will require these payments to be made.

8.2 Agreed to Treasury and

Finance undertaking a review of EFIC’s Treasury function. The review is currently

underway.

Do not agree to do such a review regularly.

9.5 Agree that the Government’s

assessment of National

Interest Account (NIA)

facilities should include detailed analysis and that this be done as part of the Cabinet process.

Agree the Government should publicly announce any

significant NIA facilities, including the rationale for approving. This is usually done through a press release. EFIC also includes details of NIA transactions in its annual report and on its on-line

register.

Agree that information on the performance of the NIA

Do not agree that facilities with national interest objectives should only be considered in the context of the NIA. In some cases, EFIC will also support a facility with national interest objectives on its Commercial Account.

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should be publicly reported. This is already done through the EFIC annual report and also DFAT annual financial statements.

9.6 Agree that the Statement of

Expectations should require EFIC to publicly disclose its prospective involvement in projects with significant environmental or social impacts. i.e. Category A projects.

Agree that the environmental and social classification of projects should be disclosed in EFIC’s annual report and on its website. It already does this.

Agree that the classification and the process for approval should be predictable and disclosed in the annual report and on EFIC’s website. EFIC does this by making public its Policy and Procedure for Environmental and Social Review of Transactions. EFIC also already provides brief reasons for Category A

categorisation.

Agree that EFIC should make public its involvement in supporting Category A

projects in Australia.

We are considering how all of these requirements may be reflected in the Minister’s

Do not agree that EFIC should publicly disclose its prospective involvement in ‘non projects’ and bonds.

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Statement of Expectations. They do not required changes to the legislation.

10.1 Part (b) is agreed. That is, that

the Act should not be amended to allow EFIC to enter into loans for the export of non- capital goods.

Part (a) is not agreed. That is, that the Minister should direct EFIC to cease providing financial services for transactions that are not based on an export contract.

10.2 Agree that EFIC should have a

demonstration role, in

particular that the provision of financial services to newly exporting SMEs can be done on the same basis as the

private sector. This will be reflected in the Statement of Expectations.

Do not agree that EFIC’s role should be limited to supporting newly exporting SMEs.

10.3 Part (a) agree that EFIC’s

objective should be to address market failures and that its operations should focus on SMEs. This is reflected in the Bill.

Do not agree that EFIC should be limited to supporting newly exporting SMEs.

Do not agree with parts (c), (d) and (e), that assistance is only to be provided in respect of export

contracts, not to persons indirectly involved in trade and that EFIC’s products are to be limited to

guarantees and bonds.

10.4 Agree that a limit of three

facilities per client should normally apply on the

Commercial Account. Where EFIC provides more than three facilities, justification will need be provided to the EFIC Board and reported to the Trade Minister in its regular reporting. This requirement will be included in the

Statement of Expectations.

Do not agree with the proposed conditions for allowing support for more than three facilities.

10.5 Agree EFIC should make Do not agree that EFIC should

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public the information on the facilities it approves on the Commercial Account,

including the name of the client, the sector, the

goods/services involved, the country, the type of facility and the value of the facility. EFIC already does this

through its on-line register. EFIC will in the future be required to publish this

information within 2 months of execution. This

requirement will be included in the Statement of

Expectations.

disclose commercially sensitive information such as pricing details.

10.6 Agree to make necessary

amendments to the EFIC Act. Do not agree to issue Ministerial directions or a revised Statement of Expectations before the changes to the legislation commence, as the changes are expected to commence very soon.

10.7 Agree to a review of EFIC

three years after the

amendments to the Act

introducing the new mandate have commenced, but the terms of reference will be determined in the future by the Government.

Where the Government noted recommendations, this meant that it took on board the PC’s recommendations and would give further consideration to whether any further action could or should be taken. In some cases, the recommendations concerned matters for others to consider, such as the EFIC Board. In particular, recommendations 6.1, 8.1, 9.2 and 9.4 are matters for the EFIC Board. Recommendation 9.8 is a matter for the Attorney-General to consider as part of the review of the FOI Act.

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The Senate

Foreign Affairs, Defence and Trade

Legislation Committee

Export Market Development Grants

Amendment Bill 2013

June 2013

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 Commonwealth of Australia 2013

ISBN 978-1-74229-870-2

Printed by the Senate Printing Unit, Parliament House, Canberra

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iii

Members of the committee Core members Senator the Hon Ursula Stephens, ALP, NSW (Chair) Senator Alan Eggleston, LP, WA (Deputy Chair) Senator Mark Bishop, ALP, WA Senator David Fawcett, LP, SA Senator Anne McEwen, ALP, SA Senator Scott Ludlam, AG, WA (until 16.05.2013) Senator Peter Whish-Wilson (from 16.05.2013)

Participating members who contributed to the inquiry Senator Nick Xenophon, IND, SA

Secretariat Dr Kathleen Dermody, Committee Secretary Mr Owen Griffiths, Principal Research Officer Ms Jedidiah Reardon, Senior Research Officer Ms Penny Bear, Research Officer Ms Jo-Anne Holmes, Administrative Officer

Senate Foreign Affairs, Defence and Trade Committee Department of 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:http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committ ees?url=fadt_ctte/index.htm

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v

Table of Contents

Members of the committee ......................................................................................... iii

Chapter 1

Introduction .............................................................................................................. 1

Background ............................................................................................................. 1

Purpose of the bill ................................................................................................... 1

Conduct of the inquiry ............................................................................................ 2

Acknowledgem

ents ................................................................................................ 3

Chapter 2

Background to the EMDG scheme ......................................................................... 5

Export Market Development Grants ...................................................................... 5

Scheme's performance ......................................................................................... 6

Support for scheme

.............................................................................................. 7

Review of Austrade ................................................................................................ 8

Savings ................................

.............................................................................. 10

Industry's response to the proposed changes to EMDG scheme .......................... 10

Chapter 3

Grants and exclusions ............................................................................................ 13

Eligibility—increasing grants with exclusions ..................................................... 13

Grants—USA, Canada and European Union Member States .............................. 13

Key markets ....................................................................................................... 14

Complexity ........................................................................................................ 18

Austrade's resp

onse .............................................................................................. 20

Businesses affected ............................................................................................ 21

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Chapter 4

Fit and proper person test, joint ventures, events promoter, payments and administration costs ................................................................................................ 25

Fit and proper person test ..................................................................................... 25

Industry concerns ............................................................................................... 28

Joint ventures ........................................................................................................ 32

Industry concerns ............................................................................................... 34

Austrade's response ........................................................................................... 35

Events promoter .................................................................................................... 35

Payments directly by applicant ............................................................................. 37

Disbursement of payment of grant ....................................................................... 38

Administration costs ............................................................................................. 39

Reader's guide ....................................................................................................... 40

Chapter 5

Consultation ............................................................................................................ 41

Announcing changed priorities for the EMDG scheme ....................................... 41

Consultation .......................................................................................................... 42

Industry's perspective ........................................................................................ 42

Austrade's perspective ....................................................................................... 44

Review of EMDG ................................................................................................. 45

Conclusion ............................................................................................................ 45

Reduce grants to mature markets ...................................................................... 45

Complexity ........................................................................................................ 46

Fit and proper Test............................................................................................. 46

Consultation ................................

....................................................................... 47

Joint ventures ..................................................................................................... 47

Dissenting Report by Senator Nick Xenophon

Independent Senator for South Australia ............................................................ 49

Additional comments by Senator David Fawcett

Liberal Party Senator South Australia................................................................. 55

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Appendix 1

Public submissions .................................................................................................. 57

Appendix 2

Answers to questions on notice .............................................................................. 59

Appendix 3

Public hearings and witnesses ............................................................................... 61

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Chapter 1 Introduction

Background 1.1 On 13 February 2013, the Hon Dr Craig Emerson MP, Minister for Trade and Competitiveness and Minister Assisting the Prime Minister on Asian Century Policy (the minister), introduced the Export Market Development Grants Amendment Bill 2013 (the bill) into the House of Representatives. The bill passed the House on 14 March 2013 and was introduced in the Senate on 18 March 2013.

1.2 On 16 May, the Senate referred the bill to the Senate Foreign Affairs, Defence and Trade Legislation Committee (committee) for inquiry and report by 17 June 2013.

Purpose of the bill 1.3 The bill amends the Export Market Development Grants Act 1997 (EMDG Act) in relation to the Export Market Development Grants (EMDG) scheme. The changes to the scheme stem from the Mid-Year Economic and Fiscal Outlook (MYEFO) decision to concentrate the EMDG scheme 'more heavily on small businesses exporting to East Asian and frontier and emerging markets.'1 The MYEFO

decision and associated policy changes were expected to deliver annual savings of $25 million. The reduction of funding by $25 million, will reduce the total amount available for EMDG grants from some $150 million to $125 million.2 Overall, this

measure will save $100 million over four years, which will be redirected to support other Government priorities.3

1.4 The 2013-2014 Portfolio Budget Paper confirmed that the scheme would be realigned and that savings of $25 million would be made 'to reflect the Government’s emphasis on East Asian and emerging and growth markets, while returning an on-going saving to the budget of $25 million per annum'.4

1.5 According to the minister, the number of grants available in East Asian and frontier and emerging markets would increase from seven to eight, which would 'better help Australian exporters maximise the potential of the Asian century'. He

explained that this increase would offer 'Australian small- and medium-size exporters a slightly longer and more commercially realistic period to become established in these markets'. To offset these additional grants, however, the number of grants to the United States (USA), Canada, United Kingdom and the European Union, would be

1 Dr Craig Emerson, Second Reading, House of Representatives Hansard, 13 February 2013, p. 1126.

2 Mr Bruce Gosper, Committee Hansard, Estimates, 14 February 2013, p. 104.

3 Mid-Year Economic and Fiscal Outlook, p. 226, http://www.budget.gov.au/2012- 13/content/myefo/download/2012-13_MYEFO.pdf (accessed 17 June 2013).

4 Portfolio Budget Statements 2013-2014, Australian Trade Commission (Austrade), Agency Resources and Planned Performance, p. 66.

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reduced from seven to five.5 The minister explained that in such mature markets the Australian brand was 'already well known and accepted and small business typically face less barriers to doing business.' He stated:

The increased focus of the EMDG scheme on emerging and frontier markets brings EMDG into closer alignment with Austrade's broader trade priorities following its review in 2011 and the government's Asian century policy agenda.6

1.6 While the bill's intention is to increase the maximum number of grants from seven to eight and reduce the number of grants from seven to five for expenses incurred promoting exports to markets in the USA, Canada and the European Union member states, it also provides for a number of other changes to the EMDG scheme. They include amendments that would:

 prevent the payment of grants to applicants engaging an EMDG consultant

assessed as not a fit and proper person;

 prevent further approval of joint ventures after 30 June 2013;

 remove event promoters from the scheme;

 require applicants to acquit claims by paying for claimed expenses;

 enable a grant to be paid more quickly where a grant is determined before 1 July following the balance distribution; and

 enable the minister to make a determination to specify a percentage of the

scheme’s appropriation to fund administration for a financial year.7

1.7 According to the Hon Mr Kelvin Thomson MP, Parliamentary Secretary for Trade, these proposed changes 'address a number of administrative issues reducing compliance costs for several types of applicants and increasing the public's confidence in the probity of the applications prepared by consultants'.8

Conduct of the inquiry 1.8 The committee advertised the inquiry on its website and in the Australian on 22 May 2013. It wrote to relevant ministers and departments calling for written submissions and also contacted a number of other organisations, including exports consultants, commentators and academics inviting them to make submissions to the inquiry. The committee received 21 submissions including two confidential and two supplementary ones, which are listed at Appendix 1. The committee held a public

5 Dr Craig Emerson, Second Reading, House of Representatives Hansard, 13 February 2013, p. 1126.

6 Dr Craig Emerson, Second Reading, House of Representatives Hansard, 13 February 2013, p. 1126.

7 Explanatory Memorandum, Export Market Development Grants Amendment Bill 2013, (Explanatory Memorandum), Outline.

8 Submission 9, p. [5].

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hearing on 7 June 2013. Witnesses who appeared at the hearing are listed at Appendix 2.

1.9 In undertaking the inquiry, the Senate asked the committee to consider in particular the following matters:

 the consultation process with industry and other stakeholders;

 the possible impact on exporters, particularly small exporters; and

 the structure of the 'fit and proper person' test. 9

1.10 In the following chapters, the committee considers the seven main changes that the bill introduces. It starts by providing some background on the EMDG scheme and then looks at:

 the proposed increase in the number of grants and the offsetting reduction in

grants in respect of USA, Canada, UK and the European Union States;

 the proposed fit and proper test for EMDG consultants;

 joint ventures no longer eligible;

 events promoters no longer eligible;

 payments to be made directly by the applicant;

 Austrade's administrative costs; and

 disbursement of payments.

1.11 The committee also examines the nature and extent of the consultation process that took place before the announcement of the changes and the introduction of the legislation.

Acknowledgements The committee thanks all those who assisted with the inquiry

9 Selection of Bills Committee, Report No. 5 of 2013, 16 May 2013.

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Chapter 2

Background to the EMDG scheme Export Market Development Grants 2.1 The Export Market Development Grants Act 1997 provides for the Australian Trade Commission (Austrade) to grant financial assistance to small and medium Australian enterprises as an incentive for them to develop export markets.1 The legislation is meant to 'bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian goods, services, intellectual property and know-how'.2 It does so through an assistance scheme for 'aspiring and current exporters'—the Export Market Development Grants (EMDG) scheme.

2.2 This scheme is a major Australian Government financial assistance program under which small and medium Australian exporters 'committed to and capable of seeking out and developing export business are repaid part of their expenses incurred in promoting those products.'3 The scheme supports 'a wide range of industry sectors

and products, including inbound tourism and the export of intellectual property and know-how outside Australia'.4 Administered by Austrade, the scheme:

 encourages small and medium sized Australian businesses to develop export

markets;

 assists small and medium-sized Australian businesses to address the

challenges associated with undertaking promotion in export markets and achieve international business growth by reimbursing up to 50 per cent of expenses incurred on eligible export promotion over $20,000;5 and

 provides up to seven grants to each eligible applicant. 6

2.3 One submitter described the scheme as a 'true incentive' for Australian businesses to take on the export challenge.7 The scheme's underpinning principle is that incentives are provided only to export businesses that can return significant benefit to Australia because they are:

1 Reader's guide, Export Market Development Grants Act 1997, p. 3.

2 Section 3, Export Market Development Grants Act 1997.

3 Section 3, Export Market Development Grants Act 1997.

4 Austrade website, http://www.austrade.gov.au/Export/Export-Grants/What-is-EMDG (accessed 17 June 2013)

5 Portfolio Budget Statements 2013-2014, Australian Trade Commission (Austrade), Agency Resources and Planned Performance, p. 66.

6 Austrade website, http://www.austrade.gov.au/Export/Export-Grants/What-is-EMDG (accessed 17 June 2013)

7 Submission 15, p. 1.

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 Australian businesses;

 seeking to export products that are substantially Australian; and

 being encouraged to undertake additional promotional activities. 8

2.4 EMDG grants are not discretionary—there is legislated eligibility.9 To be eligible, companies must have an annual turnover of not more than $50 million and spend a certain amount of promotional expenditure ($20,000) before they can apply for a grant.10

2.5 The legislation sets out the eligibility criteria against which companies apply. If companies meet those criteria, then they can apply for a rebate against their export promotional expenditure—their marketing, an overseas agent, attendance at an exhibition or a trade fair. Austrade has an EMDG audit team to assess applications.11 The EMDG is unique. According to one export consulting company, Sandilands Export, the EMDG:

 is a partial reimbursement on selected marketing expenses (not a grant in the true sense of the word);

 is assessable income in the year of receipt, providing some drawback to the

Government;

 fosters an environment to encourage small to medium sized Australian

businesses to look beyond our shores for trade;

 produces an identifiable return on investment for the Australian economy

through the receipt of foreign revenue; and

 generates jobs in Australia. 12

Scheme's performance

2.6 Mr Michael Vickers, Austrade, argued that the effectiveness of the grant program is the extent to which exporters go on to become sustainable self-supporting exporters in the long-term. He explained:

The goal of the scheme is to take exporters who are starting out in exporting and support their marketing efforts so they become established in a market. They graduate from the scheme. They no longer receive grants and they go on to become successful exporters earning income and creating employment for Australians.13

8 Reader's guide, Export Market Development Grants Act 1997, p. 3.

9 Committee Hansard, Estimates, 14 February 2013, p. 109.

10 Austrade website, http://www.austrade.gov.au/Export/Export-Grants/What-is-EMDG/Who- can-apply (accessed 17 June 2013).

11 Mr Peter Yuile, Committee Hansard, Estimates, 14 February 2013, p. 109.

12 Submission 1, p. 2.

13 Committee Hansard, Estimates, 14 February 2013, p. 108.

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2.7 Austrade's 2011-12 Annual report showed that 3,277 grant applications were received in 2011-12 which represented a 28.5 per cent decrease on the 4,585 applications received in 2010-11. Of this number 2,993 grants were received

representing a 30.5 per cent decrease on the 4,306 grant recipients in 2010-11. The cost of grants paid was $125.6 million.14 The following table shows the trend in EMDG payments since 2007.

Table 2.1 Payments to EMDG recipients15

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Variance 2010-

11 to 2011-

12(%)

Total grant recipients 3,933 4,105 4,675 4,306 2.933* -30.5

Value of

grants ($million)

150.3 185.9 198.1 143.1 125.6** -12.2

* Includes 2,874 recipients for the 2010-11 grant year and 119 recipients over from previous grant years. ** Includes the value of grants for the 2010-11 grant year of $120.2 million plus the value of 119 grants from previous years and supplementary payments to grant recipients from previous years. A total of $125.6 million was paid from the 2011-12 appropriation.

2.8 Mr Vickers informed the committee that for the 2010-2011 grants year, which is export expenditure undertaken by companies in the financial year 2010 to 2011, the 3,277 applicants reported export sales of $3.2 billion and the employment of 103,557 Australians.16

Support for scheme

2.9 Overall, and for a long period time, Australian businesses have strongly supported the EMDG scheme. A 2008 review of the scheme conducted by Mr David Mortimer (the Mortimer review), found that the scheme had been helpful in introducing smaller Australian businesses and new exporters to the global market. It noted both the scheme's effectiveness and efficiency in supporting the development of Australia's exports and recommended that the scheme should continue.17

2.10 Indeed, Mr Vickers told the committee that Austrade had done econometric studies that looked at the effect of $1 of grant money and the return to the national interest. That was done in the Mortimer review, and some work was done in 2009

14 Australian Trade Commission, Annual Report 2011-2012, p. 86.

15 Taken from Australian Trade Commission, Annual Report 2011-2012, p. 87.

16 Committee Hansard, Estimates, 14 February 2013, p. 108.

17 David Mortimer, Winning in World Markets: Meeting the competitive challenge of the new global economy, Review of the Export Market Development Grants scheme, 1 September 2008, p. 1.

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following the Mortimer review. Mr Vickers recollected that, for every $1 of grant that is paid, there is $5.38 in benefits achieved by the national economy if the effect of tax and spill overs and productivity gains by the exporters are taken into account.18

2.11 Many witnesses supported the finding of the Joint Standing Committee on Foreign Affairs, Defence and Trade in 2011 that:

…in view of the benefits arising from the Export Market Development Grants Scheme, it should continue indefinitely and be fully funded to provide certainty for exporters seeking to widen their overseas market focus.19

2.12 One witness, Exportise (NSW) Pty Ltd, noted that all the reviews, research, economic studies and feedback support the finding that the scheme is effective and benefits the Australian economy.20 Mr Ian Murray, Executive Director, Export Council of Australia, similarly noted the number of EMDG reviews with every one finding the scheme to be 'highly successful'. Based on the Council's research, Mr Murray informed the committee that 60 per cent of companies currently in export, particularly among the small to medium sized enterprise (SME) sector, have said that the EMDG scheme has been 'a very strong support for getting them into export'. Twenty-three per cent of people said that 'if it had not been for EMDG they would not have gone into export'. Mr Murray accepted that the 23 per cent may be a relatively small number, but noted that when taken from start of the scheme in the 1970s, the overall number of companies is significant.21 The Export Consultants Group stated that the EMDG scheme had. 'made a real difference to Australia's performance in the past and at this time'.22

Review of Austrade 2.13 During 2010-2011, Austrade undertook a comprehensive review of Austrade's 'strategy, operating model and structure'. It drew on the views of stakeholders from governments, industry, business and Austrade staff.23 The CEO initiated the review in order to 'put Australia on a more contemporary, more sustainable footing'. The conclusions of the review were to 'fundamentally reshape Austrade’s strategy, operating model and structure'. The core elements of the new operating model are:

A realigned international network—with a different focus in different markets reflecting the commercial potential as well as the nature and scale

18 Committee Hansard, Estimates, 14 February 2013, p. 106.

19 See Joint Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into Australia’s Trade and Investment Relations with Asia, the Pacific and Latin America, July 2011, Recommendation 8, p. 42 and Submission 1, p. 2.

20 Submission 11, p. 2.

21 Committee Hansard, 7 June 2013, p. 2.

22 Supplementary Submission 7A, p. 1.

23 Australian Trade Commission, Annual Report 2010-2011, p. i.

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of impediments to business in those markets and the optimal role for Government.24

2.14 According Austrade's review it made sense for:

…Austrade’s efforts in the more established markets of North America and Europe to be focused predominantly on inward investment and education services, with greater reliance on partners, referrals and online information and services to support Australia’s exporters in these markets.25

2.15 It found that a smaller proportion of Australian firms were making use of Austrade export services in these markets when compared with major growth markets. The review then referred to the closure of several small posts in North America and Europe, the reduction of some staff primarily in North America and Europe as well as a rationalisation and redirection of effort in Australia. It suggested that such measures would:

…release resources to strengthen Austrade’s trade and investment representation in growth and emerging markets with high commercial potential, where there is strong interest from Australian business and importantly, where the challenges faced by firms are greatest.26

2.16 The review indicated that this reorientation was important as Austrade’s limited resources were 'currently thinly spread or absent from a number of locations where it could clearly add value'. It concluded that these markets would have 'a strong focus on trade development, the marketing of international education and, increasingly, over time, on investment'.27 Although the review stated that the EMDG scheme would continue unchanged, the realignment of Austrade's focus toward new and emerging markets have influenced the proposed changes to the EMDG scheme as contained in the bill. The MYEFO explained:

The Government will retarget the Export Market Development Grants program towards emerging and frontier markets, with a focus on Asian markets. This measure complements the recent review of Austrade, which recommended that Austrade’s export promotion work be undertaken in the world’s emerging and frontier markets, where the commercial opportunities are the greatest and where Australian businesses can benefit most from Government support.28

2.17 Mr Bruce Gosper, CEO Austrade, also referred to the rebalancing of grants that would increase the number of grants to eight for applicants to emerging and growth markets and reduce to five the number of grants that might be given to

24 Austrade, Reform of the Australian Trade Commission: Maximising our Value, May 2011, p. 3.

25 Austrade, Reform of the Australian Trade Commission: Maximising our Value, May 2011, p. 4.

26 Austrade, Reform of the Australian Trade Commission: Maximising our Value, May 2011, p. 4.

27 Austrade, Reform of the Australian Trade Commission: Maximising our Value, May 2011, p. 4.

28 Mid-Year Economic and Fiscal Outlook 2012-2013, pp. 189 and 226, http://www.budget.gov.au/2012-13/content/myefo/download/2012-13_MYEFO.pdf (accessed 17 June 2013).

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applicants for the so-called 'mature markets'—Europe, the United States. He argued that this particular measure was consistent with the recent review of Austrade and the desire to rebalance resources towards those growth and emerging markets, particularly in Asia.29

Savings

2.18 The changes to the EMDG Act are also in the context of the Government's intention to achieve a budget reduction as 'a contribution to balancing the budget'.30

2.19 The Explanatory Memorandum states that expenditure under the Act is set through annual appropriations acts. A capping mechanism ensures that expenditure under the scheme is limited to the amount appropriated.31 As noted in the previous chapter, the MYEFO for 2012-2013 recorded an anticipated savings of $25 million from changes to the scheme.

2.20 The 2013-2014 Portfolio Budget Paper confirmed that the scheme would be realigned and that savings of $25 million would be made:

The scheme has been realigned to reflect the Government’s emphasis on East Asian and emerging and growth markets, while returning an on-going saving to the budget of $25 million per annum. This closer alignment involves increasing the number of grants available in East Asian and emerging and growth markets to eight and reducing the number of grants available in certain developed markets to five.32

2.21 The reduction of funding by $25 million, will reduce the total amount available for grants under the EMDG scheme from some $150 million to $125 million.33 Overall, this measure will save $100 million over four years, which will be redirected to support other Government priorities.34 Mr Gosper informed the committee that the $25 million saving 'represents, amongst other things, a contribution to fiscal consolidation'.35

Industry's response to the proposed changes to EMDG scheme 2.22 Some witnesses were concerned that the proposed amendments would 'further erode the benefits of the scheme particularly for SMEs'.36 Exportise (NSW) argued

29 Committee Hansard, Estimates, 14 February 2013, p. 104.

30 Mr Michael Vickers, Committee Hansard, 7 June 2013, p. 12.

31 Explanatory Memorandum, Outline.

32 Portfolio Budget Statements 2013-2014, Australian Trade Commission (Austrade), Agency Resources and Planned Performance, p. 66.

33 Mr Bruce Gosper, Committee Hansard, Estimates, 14 February 2013, p. 104.

34 Mid-Year Economic and Fiscal Outlook, p. 226, http://www.budget.gov.au/2012- 13/content/myefo/download/2012-13_MYEFO.pdf (accessed 17 June 2013).

35 Committee Hansard, Estimates, 14 February 2013, p. 104.

36 See for example, Sandilands Export, Submission 1, p. 2; Export Consultants Association, Submission 7, p. 1 and Export Council of Australia, Submission 12, p. 1.

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that the changes would 'effectively reduce the benefits available for Australian exporters'.37 It asked 'why limit a program that has had a positive net benefit for the Australian economy?'38 Mr Stuart Mitchell, Mitchell and Co Chartered Accountants, argued that the reduction in funding for the scheme would be counterproductive especially in light of possible lost export sales resulting in lost government revenue and reduced employment in Australia.39 The Australian Chamber of Commerce and Industry (ACCI) was of the view that the proposed legislation was 'unnecessary'.40 The Export Consultants Group likewise, informed the committee that the changes were 'unnecessary'.41 Similarly, the Export Council of Australia would like to see the scheme 'untouched'.42

2.23 In the following chapters, the committee considers in detail the particular concerns raised about the proposed changes to the EMDG Act contemplated in the bill.

37 Submission 11, p. 1.

38 Submission 11, p. 2.

39 Submission 15, p. 4.

40 Committee Hansard, 7 June 2013, p. 3.

41 Committee Hansard, 7 June 2013, p. 2.

42 Committee Hansard, 7 June 2013, p. 4.

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Chapter 3 Grants and exclusions

Eligibility—increasing grants with exclusions 3.1 Under the current legislation, applicants (other than approved entities) are eligible to receive a maximum of seven grants. Proposed changes increase the maximum number of grants payable to an applicant from seven to eight, including trustees for trust estates businesses.1 Non-profit export focused industry bodies granted special approval by Austrade, known as Approved Bodies, will continue to be entitled to receive an unlimited number of grants.2 The amendments apply to grants relating to grant years commencing on or after 1 July 2013.3

3.2 Submissions raised no objections to the proposed increase of the maximum number of grants to eight.4 One witnesses, Sandilands Export, fully concurred with the proposed increase while another suggested that there was universal acceptance that the

number of years that the grant could be claimed should be increased.5

Grants—USA, Canada and European Union Member States 3.3 The current EMDG Act lists the types of expenses that are excluded as claimable expenses in respect of eligible promotional activities and include, for example, expenses related to trade with New Zealand and expenses incurred in breach of trade sanctions (presently applying to Iran and North Korea). The bill inserts new section 43A that stipulates that the expenses of an applicant are excluded if:

 the applicant is a grantee in respect of five or more previous grant years; and

 the applicant is not an approved body; and

 the expenses were incurred in respect of an eligible promotional activity related to trade with the United States of America, Canada or a Member State of the European Union.

1 Explanatory Memorandum, Items 2 and 3 amend paragraphs 7(1)(c) and 7(4)(b).

2 See subsection 6(1) of the EMDG Act and Explanatory Memorandum, Items 2 and 3. The purpose of Approved Body status is to allow an industry body to promote on behalf of the entire membership that it represents. It is not for the purpose of funding industry bodies in relation to activities which promote specific members' products. Members of the Approved Body who wish to promote their specific products may be eligible to apply for a grant themselves. Approval is granted for five years. Further terms of approval may be applied for. Australian Trade Commission, Website, Approved body status, Last Modified 13 Feb 2012.

3 Subsection 23(1) of the bill.

4 See for example, Sandilands Export, Submission 1, p. 2.

5 Sandilands Export, Submission 1, 1-2; Export Solutions, Submission 10, p. 1; Canberra Busine ss Council, Submission 16, p. 1. Confidential Submission 14 also supported the increase in grants to eight.

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3.4 This provision means that applicants claiming for their sixth to eighth grants will not be eligible for expenses incurred prompting exports to markets in the USA, Canada and European Union Member States. This provision does not apply to Approved Bodies, which are entitled to claim expenses in all markets except New Zealand, Iran and North Korea.6

Key markets

3.5 While most witnesses expressly endorsed the increase in grants to eight, the majority of submissions objected strongly to the reduction in the number of grants to five for established markets. Mr Bryan Clark, ACCI, told the committee that businesses see all exports as equal in all countries and of equal value. He was of the view that dividing markets into groups was 'an inappropriate way to go in terms of structure for the scheme'.7 Many submitters not only saw the change as unnecessary8 but damaging to smaller exporters 'already struggling against the effects of the strong dollar, increased competition from China and other developing countries and the on-going effects of the GFC [global financial crisis]'.9 Export Solutions could not understand what the change 'sets out to achieve'.10 It submitted:

The premise that the change supports Australia's push into Asia does not make sense. The change may indeed be counterproductive in that exporters will tackle the restricted zones first and receive 5 years of assistance and then move on to Asia in years 6, 7 and 8. If they begin marketing in Asia then support for marketing to restricted zones in later years will not be available.11

3.6 The Canberra Business Council felt that this decision was 'unreasonable'. It noted that countries such as the US and Canada are key markets for many companies in the Australian Capital Territory that offer complex government services. It noted:

Government procurement markets like the US have long procurement cycles and timeframes, and require a significant investment over time to bear fruition.12

3.7 Mr Stuart Mitchell, Acting Chairperson, Export Consultants Group, also noted that the scheme is intended to be an incentive to 'get exporters on the hard road to try and make those sales' and that generally the market determines where the demand will originate. He noted that in some cases, such as soil remediation, the Asian market has

6 Explanatory Memorandum, Items 7 and 8.

7 Committee Hansard, 7 June 2013, pp. 1 and 3.

8 Mr Stuart Mitchell and Mr Bryan Clark, Committee Hansard, 7 June 2013, pp. 2 and 3.

9 Submission 1, p. 2.

10 Submission 10, p. 1.

11 Submission 10, p. 1.

12 Submission 16, p. 1.

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no interest.13 Overall, Mr Mitchell believed that the changes were not only unnecessary but would:

…damage Austrade's export efforts from the SME level. It will move people away to markets that may be of some opportunity, but that will be in the longer term. So there will be a reduction in the number of people accessing the scheme and a reduction in the number of exports driven by those people that access the scheme.14

3.8 AusBiotech informed the committee that approximately 90 per cent of Australian biotech and medtech export markets are located in the US, Canada and the European Union. It argued that established markets are as important as emerging ones and it should be left to the individual businesses 'as to where they see fit to establish and build their export markets'.15

3.9 Current statistics show that Australia's main export markets for EMDG recipients, who tend to target more than one country, are—USA, 55 per cent; and the UK and Germany, 54 per cent. Mr Mitchell suggested that this importance of developed markets supports exporters' observation that most EMDG recipients, who currently access the seven grants, would be limited to a maximum of five grants.16

3.10 According to Exportise (NSW), the established USA, Canada and the European Union markets are the main export markets into which 'the majority of Australian exporters are striving to achieve success'.17 It argued that removing them

from the program in grant years six to eight would only serve to limit the effectiveness of the program.18 It stated that:

Cutting off access to support will result in exporters reducing their marketing and exports to these countries, and these are the markets where Australia generates the majority of its export revenue.19

3.11 Exportise (NSW) concluded that the proposed amendments would 'reduce the benefits for exporters in the established markets where the return is great, and may only marginally increase the benefits in markets where the return is least'.20 It stated further:

The argument that the Australia brand is well established in these established markets may hold weight for large exporters, but the small

13 Committee Hansard, 7 June 2013, p. 3.

14 Committee Hansard, 7 June 2013, p. 2.

15 Submission 18, p. 1.

16 Submission 15, p. 5 and Australian Trade Commission, Annual Report 2011-2012, p. 92. Keeping in mind that recipients may promote to more than one country the top six countries targeted by EMDG recipients for 2010-2011 grant year.

17 Submission 11, p. 1.

18 Submission 11, p. 1.

19 Submission 11, p. 1.

20 Submission 11, p. 1.

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exporter must persist with their marketing activities to maintain their hold in these markets. These are some of the most competitive markets in the world and the proposed amendments will serve only to negatively impact on exporters' success in those markets.21

3.12 According to Sandilands Export, this change would have a huge effect on smaller exporters who are already struggling under difficult market conditions particularly in the USA and Europe.22 It argued that Australian businesses with potential in established markets 'should not be penalised'. It explained:

As the US is recovering from the GFC [Global Financial Crisis], there is increased opportunity for quality Australian products and services in that region, and our exporters should be encouraged to exploit these.23

3.13 A number of exporters cited the success they had already achieved under the scheme but were concerned about losing the grant after five years. One company, Who-Rae Australia, reported that with assistance from the grant it had grown from a staff of eight with a turnover of over $7 million in 2008 to employing 18 people in 2013 with an expected turnover of $21 million. The support provided through EMDG grants over the past six years had enabled the business to increase its exports to the USA and Canada with the largest rewards beginning in the 2013 financial year. It highlighted the importance of the grants being available 'over at least the seven year period to enable businesses to reach a firm hold in the export market'.24

3.14 Sullivans Cove, a Tasmanian distillery, which produces single malt whisky was just one of many companies to voice opposition to the proposed reduction in grants to five years for the USA, UK, Canadian and European markets. It stated that it had taken 17 years to build its stock of maturing whisky, gain credibility for its brand and capture the interest if its international markets. It stated further:

We have recently started applying for EMDG support after several years of Tasmanian State Government support. We have found it takes many years to establish a brand in any export market. For a small business like ours with limited funds EMDG grants can make the difference between entering new markets and not.25

3.15 Sandilands Export also pointed out that some companies have diligently planned their promotional activities and budgeted for EMDG support in their long-term plans. The proposed changes could well have a detrimental effect on them. It explained:

Those exporters currently in the fifth year of the program who have recently appointed representatives on a minimum contract of 12 months (as required

21 Submission 11, p. 2.

22 Submission 1, p. 2.

23 Submission 1, p. 2.

24 Submission 6, p. 1.

25 Submission 3, p. 1.

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by Austrade) suddenly find that they will not qualify for EMDG support for this substantial commitment.26

3.16 Ocean Freedom, Ocean Free, Cairns Premier Reef & Island Tours, provided the committee with such an example:

In order to survive we started 5 years ago to actively market the inbound market and employed an international marketing consultant to assist us. With any small to medium sized tourism business one must choose what specific market to actively pursue. It is impossible and outside any small medium business financially and time wise to pursue both a Western and Asian Market so one must choose which market to pursue—we have always had a Western market. When we started to actively target the European, USA, Canadian market we were informed by more longstanding tourism companies and also by our marketing consultant that to make any inroads into any international market requires dedication and persistence over many years—many quoting 5-8 years just to start to be successful in these markets.

In the last year (our 5th year) we have just started to consolidate some of the European markets and are only now starting to see increased support from this market—it takes many years of establishing contacts and convincing them to trust and support a product.

We had expected another 2 years of assistance to continue and cement all our new contacts and bookers. A stop in the financial assistance to continue our Western marketing over the next few years would be devastating to our company and a wasted 5 years of hard work where all our 'ground work' over the last 5 years was to be consolidated over the next few years.27

3.17 This company felt that it is would be a 'gross injustice' to take the grant off those companies that did not have an Asian market and whose European, USA and Canadian market was essential to their survival.28 Another small company, Compupool Products, based on the Gold Coast, Queensland, has also 'carefully planned' its use of the EMDG grants in order to grow its markets in the USA and Europe with smaller ones throughout Asia and the Middle East. It noted that it was approaching its fifth year of claiming grants and would not be able to receive any more grants indicating that its expenditure in the emerging markets would not be sufficient to meet the minimum level of expenditure of $20,000 to access EMDG grants.29

3.18 With the assistance from EMDG grants, Illumination Physics has already been able to expand its product overseas and now has a well-established client base in Asia. Currently it is in its fourth year of claiming grants but is looking to expand its product into the European market, the Middle East and beyond. It informed the

26 Submission 1, p. 2.

27 Submission 2, p. 1.

28 Submission 2, p. 2.

29 Submission 4, p. 1.

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committee that it has completed works in Croatia and Dubai which 'would not have been possible without the assistance and support' from the EMDG scheme. It stated that, if passed, the proposal to reduce the grant assistance relating to the US, Canada and the European Union to five years would be detrimental to its business.30 It explained:

Over the past few years, we have been budgeting and planning promotional activities so as to make inroads into these international markets—all of which will be to no avail if we do not receive the much needed and welcome assistance provided by the EMDG. Just this month our company displayed its products at an international lighting show in London by way of extending our business into the European market.31

3.19 Put bluntly, the company stated that it would not be able to continue 'consolidating relationships in these new markets'.32

Complexity

3.20 Recipients of EMDG grants may promote to more than one country. Indeed, the Export Council of Australia (ECA) noted that many expenses claimed by exporters cover various countries. It explained that the expenses include 'travel to more than one country, participation in trade shows where buyers attend from all over the world, a website targeting all countries, production of brochures and advertising for many markets'.33 The proposed changes mean that applicants promoting their export in countries from both regions will need to apportion their expenditure accordingly. The Explanatory Memorandum gave the following example:

In deciding whether claimed expenses are to promote exports to one market or another, Austrade will deem expenses to be for the market where export sales are to be made. For example, an applicant will be entitled to claim expenses of attending a USA trade show in its sixth grant year application to the extent that its expenses were for promoting sales to, for example, Mexico and South American countries (that is, to any other markets other than USA, Canada and a member state of the European Union).34

3.21 Many submissions objected strongly to splitting the globe into two regions for the purposes of the EMDG scheme, which, in their view, would increase the complexity.35 Mr Mitchell informed the committee that having two market categories

30 Submission 8, p. 1.

31 Submission 8, p. 1.

32 Submission 8, p. 1.

33 Submission 12, p. 2.

34 Explanatory Memorandum, Items 7 and 8.

35 Export Consultants Group, Submission 7, p. [1]; Export Solutions, Submission 10, p. [1]; Export Council of Australia, Submission 12, p. [1]; Mitchell & Co., Submission 15, p. 5; ACCI, Submission 17, p. [1].

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'would cause more administrative burden to the client and to Austrade', and, to his mind, generate 'more areas of dispute'.36

3.22 As noted earlier, exporters will only be eligible for grants years in six to eight, in respect of countries other than USA, Canada, UK and the European Union States. The Export Council of Australia explained that, for grants six to eight, exporters would be required to apportion their expenses, such as travel, trade shows, websites brochures and advertising, between the excluded and eligible countries. In its view, this apportionment would be 'more complex than it appears as exporters would be required to maintain records or provide other evidence to justify any such apportionment. It maintained that under the proposed legislation:

 exporters claiming for grant years six to eight will be required to maintain

records to substantiate apportionment of most expenses;

 subjective apportionments are more likely to be used in applications by

exporters and will be difficult for Austrade to substantiate; and

 smaller businesses will be discouraged from applying in grant years six to

eight as they will find the complexity too onerous for the likely grant amount that could be received.37

3.23 Export Solutions agreed that the change would 'make it very difficult to administer in grant years six, seven and eight will be time consuming and frustrating for applicants'.38 It pointed out that the applicant always bears the onus of proof and will be required to demonstrate the percentage, for example, of a trade fair held in the USA that relates to marketing to countries outside the restricted zones.39 It explained that the trade fair organisers do not have records that provide this level of detail and even if they did, the records 'would be difficult to get hold of'. It argued that 'trying to apportion travel costs where the client visits numerous regions around the world will be near impossible and again add to the time and complexity of the application and the audit'.40

3.24 The Exports Consultants Group gave the example of a company that attends a trade fair in the USA that is the only fair for that company's product. It then noted:

The company has already secured distributors in their only export market the USA but is attending to meet potential distributors in South America. Austrade would naturally expect that this expense would not be eligible in years 6-8 as it relates to the USA.

The company would be required to satisfy Austrade that the travel costs, trade show costs and any brochures were for the purpose of marketing to South America. The problem for the company is how to substantiate the

36 Committee Hansard, 7 June 2013, p. 11.

37 Submission 12, p. 2.

38 Submission 10.

39 Submission 10.

40 Submission 10.

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purpose of attending the trade show when the USA is their main export market.41

3.25 In Export Solutions' view, this example is one of the simple ones.42 The Exports Consultant Association provided another example of where a company attends three trade shows, one each in USA, Germany and Hong Kong. It elaborated on the complexity under the proposed changes:

All costs associated with these trade shows would be eligible for years 1-5, but in years 6-8 only the costs for Hong Kong would appear to be eligible. However, if the company was able to substantiate that buyers from different parts of the world attended these trade shows, they would be able to claim some portion of the trade shows in USA and UK. It is likely in this case that

Austrade would require an apportionment for the Hong Kong trade show as buyers from USA, UK and the EU would be attending the trade show.

If the company was able to obtain details of buyers attending the trade shows from the organizers they would have the basis for apportioning the costs. It is highly likely that the apportionment for each trade show would be different so all costs including trade show participation costs; travel and marketing materials would need to be apportioned differently for each trade show. In lodging an EMDG application all expenses are itemised on separate schedules (up to 9 schedules) so that each trip would be listed and apportioned differently for each trade show, likewise each trade show expense and each marketing material expense.43

3.26 The Export Consultants Group was concerned that incorrect apportionment that does not agree with Austrade's methodology at audit, lack of substantiation and issues as claimed expenditure not being for an 'approved promotional purpose' would create problems. In its view, the change would produce a higher level of complexity, dispute and appeal resolution and hence administration costs for both applicants and Austrade.44

Austrade's response 3.27 Mr Vickers explained that apportionment is a longstanding feature of the EMDG scheme.45 According to Mr Vickers the arguments put forward by business 'sound very reasonable' from a more general level, but, he argued, 'if we look at the practical experience of EMDG applicants the situation is somewhat different'.46 He explained:

We already have a portion that buy markets, in that if you go into the South Pacific markets and New Zealand you have to apportion out your New

41 Submission 7, p. 2.

42 Submission 10, 1.

43 Submission 7, p. 2.

44 Supplementary Submission 7A, p. 5.

45 Committee Hansard, 7 June 2013, p. 19.

46 Committee Hansard, 7 June 2013, p. 13.

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Zealand expenditure. New Zealand is an extremely popular market with their senior exporters. If you are going to a trade show and you are both marketing to new applicants—to new clients—and you are servicing existing clients, you have to apportion out the service you provide to existing clients. So apportionment is not new. Equally if you have a website, the website portion that deals with marketing is eligible. That part that accepts payments and delivers products or services—either digitally or in some other way—is not. So apportionment is a bread-and-butter part of the EMDG scheme, and has always been.47

3.28 He did not think it was reasonable to suggest that by breaking up parts of the world so that some qualify or do not qualify for certain periods would add another level of complexity. In his assessment, the new requirements for grants six to eight would 'be more apportionment of a similar type that occurs at the moment'.48 He agreed that in a sense it would mean more work, but reasoned:

…if a business has sufficient records to deal with apportionment now, it is a relatively small increment to deal with the additional apportionment'. Once you have the systems in place to allocate expenditure, it is a relatively simple matter to put it into three buckets as opposed to two…49

3.29 With regard to travel costs, Mr Vickers noted that they would be apportioned in much the same way as they are now:

If you are going to New Zealand and Noumea, you have to apportion your travel costs between the two markets. One is eligible and one is not. If you go to the United States and visit a prospective client one day and then the next day you visit an existing client to service equipment or provide post-sale service you have to apportion those days differently. You have to apportion your travel costs. As I said, there is nothing in these changes which is conceptually different from what applies currently.50

3.30 As noted earlier, the Export Consultants Group stated that apportionment is 'relatively simple' when on a country by country basis.51

Businesses affected

3.31 In the view of the Export Consultants Group, 'the number of exporters accessing the scheme will drop as will the average grant which has a multiplier effect on the level of export sales that would not otherwise happen without it'. Overall, it predicted that the 'end users of the scheme will be in a worse position than if the changes did not happen'.52

47 Committee Hansard, 7 June 2013, p. 13.

48 Committee Hansard, 7 June 2013, p. 19.

49 Committee Hansard, 7 June 2013, p. 19.

50 Committee Hansard, 7 June 2013, p. 13.

51 Supplementary Submission 7A, p. 4.

52 Supplementary Submission 7A, p. 2.

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3.32 Mr Vickers conceded that the change would have a negative effect on some, arguing that 'there is just less money to go around' and that people who 'focus only on the Americas may be disadvantaged'.53 He noted, however, that only a 'very, very, very small number' would be affected. Under the proposed legislation and based on current applicants, Austrade estimated that, of the 3,123 applicants who would hypothetically be able to claim an EMDG grant:

 154 applicants (4.9 per cent) would be able to claim an additional grant in East Asian emerging and frontier markets;

 366 applicants (11.7 per cent) would only be able to claim a reduced grant in

years six, seven and eight, limited to their expenditure in East Asian and emerging and frontier markets and excluding the developed markets.

3.33 Further, that from the current applicant population, 81 applicants (2.7 per cent) claimed only in developed markets in years six, seven and eight and would be ineligible to claim for grants after year five. Austrade anticipated that the net result of the changes would be an overall increase in the number of claims by about 80 (2.6 per cent) per annum.54

3.34 Mr Vickers explained that the Government was of the view that 'there are greater opportunities and that it is a better investment of taxpayers' funds to focus somewhat more on East Asian emerging and frontier markets and that Austrade's job was to make the Government's investment 'as efficient as possible'.55

3.35 The committee asked Austrade to release its internal modelling on the effect of proposed changes to the number and allocation of grants on the performance of the scheme. On 13 June 2013, Austrade provided the committee with further information on its analysis. Austrade informed the committee that an error had occurred in its calculations. Its revised findings indicated that of the 2,971 applicants that 'would hypothetically be able to claim an EMDG grant under the proposed changes':

 107 applicants (3.6 per cent) would be year-eight applicants able to claim an

additional grant in the emerging and developing markets;

 237 applicants (8.0 per cent) would be able to claim a reduced grant in years

six, seven and eight limited to their expenditure in the emerging markets.56

3.36 Austrade explained that based on the current (FY2012-2013) applicant population, 169 applicants (5.6 per cent) have not claimed a sufficient value of expenditure in East Asian, frontier and emerging markets to qualify for a grant. They

would, therefore, be ineligible to claim any grant after year five. According to Austrade, this figure includes applicants who only claim in developed markets. It concluded:

53 Committee Hansard, 7 June 2013, p. 12.

54 Submission 9, p. 2.

55 Committee Hansard, 7 June 2013, pp. 12 and 13.

56 Austrade, Answer to question on notice taken at public hearing 7 June 2013, p. 7.

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The nest result of the changes is that overall numbers are expected to decrease by about 74 (2.4 per cent) per annum.57

3.37 In Austrade's view, this correction 'does not materially change the estimated impact of the legislation on the population of some 3,000 applicants':

Australia's experience is that changes in eligibility tend to influence future export marketing expenditure by the claimant population. It is likely, therefore, that marketing expenditure in East Asia, emerging and frontier markets will increase leading to a lesser number of claimants negatively affected and increased claim amounts and therefore grants for those claiming in the East Asia, emerging and frontier markets.58

3.38 Despite Austrade's assurances that the changes in the number and eligibility for grants will lead to an increased expenditure in East Asian and emerging markets and hence to

fewer applicants being affected negatively, the committee now understands that the original estimate of those ineligible to claim after year five has more than doubled. Furthermore, the proposed legislation was based on a miscalculation, which does not inspire confidence in Austrade' s internal modelling.59

57 Austrade, Answer to question on notice taken at public hearing 7 June 2013, p. 7.

58 Austrade, Answer to question on notice taken at public hearing 7 June 2013, p. 7.

59 Austrade, Answer to question on notice taken at public hearing 7 June 2013, p. 7.

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Chapter 4

Fit and proper person test, joint ventures, events promoter, payments and administration costs 4.1 The bill also introduces changes to the EMDG scheme that would affect directly export consultants by imposing a fit and proper person test; joint ventures by removing their eligibility for EMDG grants; and event promoters who would no longer be an eligible claim. In this chapter, the committee considers each change.

Fit and proper person test 4.2 An export market development grants consultant is a person who asks for, or receives, any fee for any work relating to the preparation of an application for a grant.1 Under the existing scheme, where applicants have engaged a consultant to prepare or help to prepare an EMDG claim, there is no provision governing a 'fit and proper person' test for consultants. The bill will now apply a fit and proper person test to a consultant who has helped prepare an EMDG application.

4.3 Such a test already exists for an EMDG applicant. Under section 87AA of the EMDG Act, the CEO of Austrade may form an opinion, in accordance with guidelines determined by the minister by legislative instrument, that the person is not a fit and proper person to receive a grant. The same applies if the person has an associate who is not a fit and proper person to receive a grant. In such cases, a grant or an advance of a grant is not payable to the person.2

4.4 Under the existing scheme, where applicants have engaged a consultant to prepare or help to prepare an EMDG claim, there is no provision governing a 'fit and proper' test for consultants, Hence, consultants are not subject to the provisions of subsection 87AA. The only existing provision where an applicant may be affected by the actions of its EMDG consultant is under section 75 of the EMDG Act. This provision stipulates that an application is taken not to have been made where an individual who helped to prepare an application was, at the time the application was made, disqualified from preparing applications. The same condition applies where such an individual became disqualified at any time from when the application was made to before Austrade determined whether the applicant was entitled to a grant.3

4.5 Austrade informed the committee that EMDG consultants are prevented from lodging claims on behalf of applicants if they have been convicted of an offence under the Corporations Act 2001 or the Crimes Act 1914.4 According to the Parliamentary

1 Section 107 of the EMDG Act.

2 Subsection 87AA(1) and section 101 of the EMDG Act.

3 Paragraph 75(a) and 75(b).

4 Submission 9, p. [4]. For full details, see section 78 of the EMDG Act—Disqualified Individual.

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Secretary for Trade, the Hon Kelvin Thomson MP, the high cost of prosecution often results in matters not being pursued due to resource constraints. He added:

…there are issues which may arise, as they have arisen in connection with applicants, outside of the Corporations Act or the Crimes Act where the public would expect that the level of dishonesty or unacceptable behaviour was such that the continued participation of the consultant would tend to reduce the perceived probity of the scheme. These issues may include, for example, serial bankruptcy and the promotion of grant application schemes which are illegal under the EMDG Act. In addition, in the overwhelming majority of grant applicants from consultants, Austrade is requested to pay the grant to the consultant on trust for the application. It would potentially reduce public confidence in the probity of the EMDG scheme for Austrade to continue to deal with, and forward grant monies to, consultants where Austrade was aware that those consultants had an unacceptable reputation.5

4.6 In his submission, the Parliamentary Secretary for Trade informed the committee that EMDG consultants prepare more than half (56 per cent) of all EMDG applications. He explained further:

As a result, the professional standards applied to the services they provide are a very significant influence on the public's perception of the integrity of the EMDG scheme. Public confidence in the integrity of the EMDG scheme is a significant factor in maintaining the support of government to continue the scheme's assistance to the 3,000 to 4,000 exporters who apply each year.6

4.7 According to the Parliamentary Secretary, EMDG consultants are not licenced registrants. He explained that overwhelmingly, they work on a success fee basis calculated as a percentage of the EMDG grant paid. The Parliamentary Secretary stated that the average was estimated at 10 per cent across the EMDG consulting industry. He surmised that EMDG consultants, therefore, would have a 'significant financial interest in maximising the payment of grants to their clients'. Mr Thomson stated that unlike other agents such as tax, customs, migration and real estate agents, their 'obligations to clients are not balanced by formal obligations to a regulatory body'.7 He noted:

In the absence of any regulation or effective self-regulation of the EMDG consulting industry, there does need to be some mechanism to protect the integrity of the scheme from those few cases where the actions of an EMDG consultant may bring the entire scheme into disrepute.8

4.8 The Code of Practice Administration Committee, comprising EMDG Consultants representatives and Austrade, currently administer a Consultant Code of Practice. But, according to Mr Thomson, approximately only 23 per cent of practising

5 Submission 9, p. [4].

6 Submission 9, p. [3].

7 Submission 9, pp. [3-4].

8 Submission 9, p. [4].

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consultants are signatories to the code. He explained that those in breach of the code can have their participation suspended or cancelled but such action does not affect their ability to act as an EMDG consultant and lodge claims. Mr Thomson argued:

The limited coverage of the code, and the lack of any effective sanction, results in the code having very little ability to protect the integrity of the EMDG scheme.9

4.9 As noted previously, if passed the bill would apply a fit and proper person test to a consultant who has helped prepare an EMDG application. Under Part 7 of the EMDG Act, (Application for, and payment of, grant), the bill inserts a new Division— Fit and proper person test for export market development grants consultants. Under proposed section 79A, an application is deemed not to have been made if the grants consultant is not a fit and proper person. For the purposes of the EMDG Act, an application under section 79A is not made if it meets the following criteria:

 an application for a grant is made to the CEO of Austrade; and

 an export market development grants consultant prepared, or helped to prepare, the application; and

 the CEO of Austrade forms the opinion, in accordance with guidelines determined by the minister and complied with by the CEO,10 that the export market development grants consultant is not a fit and proper person.

4.10 Under the above section, if the application is taken not to have been made, proposed section 79B requires the CEO of Austrade, as soon as practicable after forming the opinion referred to in that section, to give to the applicant a written notice:

 stating that the application is taken not to have been made; and

 setting out the effect of section 79C.

In such cases, proposed section 79C provides for an applicant to make a fresh application. To do so, the fresh application must be made within:

 90 days after the applicant receives the notice referred to in section 79B; or

 5 months after the end of the grant year;

whichever is the later.

4.11 In forming an opinion as to whether an EMDG consultant is a fit and proper person, the CEO of Austrade must comply with guidelines made by the Minister for Trade and Competitiveness. The CEO may, by written notice to the applicant, ask the applicant to give to the CEO a written consent of the EMDG consultant to enable the CEO to obtain information to determine whether the EMDG consultant is a fit and

9 Submission 9, p. [4].

10 Determined under proposed paragraph 101(1)(bc) which states 'guidelines to be complied with by the CEO in forming, for the purposes of section 79A, an opinion whether an export market development grants consultant is a fit and proper person; and'

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proper person. According to the Explanatory Memorandum, if consent is not provided, under section 73, Austr ade may refuse to consider the application. 11

4.12 Mr Vickers stated that the application of the fit and proper person test for EMDG consultants is consistent with the Government's intention to improve transparency and safeguard the good reputation of the scheme. He stated:

The public is entitled to expect that the government will administer the scheme in a way which has a high level of probity. I think the government is really responding to community expectations in that way.12

Industry concerns

4.13 One submitter interpreted this measure to have consultants subject to a fit and proper person test as a 'tool to enable the removal of consultants who might disagree with Austrade's assessments or who make errors in their applications.'13 In his view, the amendment would 'allow Austrade to be the accuser, judge, jury and executioner' and is a denial of natural justice.14

4.14 While Exportise (NSW) recognised that the application of a fit and proper test was fairly common to all government programs and departments, it was troubled by the structure of the proposed test for the EMDG program. It identified the following concerns:

 the test would be applied and administered by the Government department

responsible for the administration of the program—presents issues with conflicts of interests noting that tax agents have a similar test but it is administered by the Tax Practioners Board rather than the Australian Taxation Office; and

 the penalties—automatic suspension and required notification to clients, with no opportunity for counselling, training and supervision—were draconian and bordering on a denial of natural justice.15

4.15 A confidential submission from an established consultant business that specialises in the EMDG scheme suggested that the not fit and proper provision be removed from the bill.16 It argued that the provision is not required and that existing regulations are appropriate. The submission was of the view that section 78 of the EMDG Act makes adequate provision that only a 'fit and proper person' prepare or assist with the preparation of an EMDG claim. As noted earlier, section 78 provides for the disqualification of individuals from preparing applications if they have been convicted of an offence under the Corporations Act and the Crimes Act.

11 Explanatory Memorandum. Item 10.

12 Committee Hansard, 7 June 2013, p. 14.

13 Name withheld, Submission 5, p. 2.

14 Name withheld, Submission 5, p. 2.

15 Submission 11, p. [2].

16 Confidential Submission 14, p. 2.

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4.16 The Export Consultants Group also noted that the fit and proper person requirement applies to many other government programs and companies. Mr Mitchell had no difficulty with a similar test applying to EMDG consultants. He acknowledged that the rationale for a fit and proper test for EMDG applicants had been in existence since 2004. Mr Mitchell said that export consultants understood that there should be a fit and proper provision for them: that they support it 'in concept'. He was concerned, however, with the practical application of this provision. He stated that together with his peers:

We feel we are really heading into unchartered waters here. We need a lot more discussion and consultation with Austrade to bed these proposed changes down and reduce the current level of angst in our community.17

4.17 The Export Consultants Group informed the committee that past experience shows that where Austrade has applied the fit and proper test to its clients that 'issues take months if not years to work through'. It stated further:

We are concerned with the practice of this section and believe that there are not sufficient internal checks and balances to ensure that the extra effort to increase the probity of the scheme that Austade requires actually happens'.18

4.18 Mr Mitchell noted that the actual Ministerial Determination criteria to be used to administer the fit and proper rules are yet to be made public.19 According to Mr Mitchell, at the export consultants conference in February 2013, which had 'probably 80 per cent or even 90 member representation', concerns were raised about what this measure could do to destroy their business. They were concerned about not knowing what the fit and proper rules that would apply from 1 July would be. He stated further:

If the rules are modelled on the self-prepared or a client of the schemes rules they are all quite satisfactory, other than the last one. It says, in essence, that Austrade can look at a client in terms of fit and proper—and I am saying that they could do it for a consultant—for anything Austrade considers; any other matter. So for the rules of determination in the ministerial determination: we are happy with all of them, but the last one just too broad. It is too catch-all. It could be anything that Austrade considers.20

4.19 The committee notes that the export consultants were particularly concerned about the possibility that the guidelines to be complied with by Austrade in forming an opinion on whether a consultant was a fit and proper person would require

17 Submission 15, p. 6 and Committee Hansard, 7 June 2013, p. 6.

18 Supplementary Submission 7A, p. 3.

19 Submission 15, p. 6.

20 Committee Hansard, 7 June 2013, p. 6.

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Austrade to have regard 'to any matter that it considered relevant to the personal, commercial, financial or professional character, status or reputation of the person.21

4.20 Mr Mitchell pointed out further that when an applicant has a not fit and proper person decision go against them, they can choose to walk away and not get their grant paid—they make a commercial decision. The situation is different for a consultant:

A fit and proper issues brought against a consultant will destroy their business, and they go out of business. So the concerns that we have are at a higher level. We are quite happy to work with Austrade as an industry group to resolve these issues and these concerns, and to look at the ministerial determination, but we have had none of that dialogue. And I do not believe this bill should be passed with that uncertainty that would impact on our business.22

4.21 According to Mr Mitchell, the Export Consultants Group already has a mechanism in place to safeguard the integrity of their industry—the Code of Practice Administration Committee, a joint action committee with Austrade. He explained:

If Austrade had a concern with a consultant—for example, on behaviour not being fit and proper—it could be brought to the committee and, just as with accountants or lawyers and their professional societies, we have steps to counsel those people and deal with it. We have had no issue brought to that committee by Austrade in my memory, and I am sure Austrade can confirm it if they are questioned further in 13, 14 or 15 years.23

4.22 According to Mr Mitchell, the consultancy industry would like to work with Austrade to resolve any issues with the existing mechanism and to make it work better. He stressed, however, that, over the years, Austrade had not brought any concerns to the industry's attention.24 Mr Clark added that if there were questions about the probity of the scheme then 'let us look at it properly and do it via a complete review rather than this legislative tinkering that is going on at the present time'.25

4.23 Mr Mitchell also argued that a body independent of Austrade should conduct the fit and proper test and there appeared to be no appeal process for consultants.26

4.24 The Parliamentary Joint Committee on Human Rights also drew attention to the proposed fit and proper person test for EMDG consultants. It stated:

A finding that a person is not a fit and proper person to be involved in the process of preparing an application for a government grant is a finding that is likely to have an adverse impact on a person's business reputation. Given

21 Export Market Development Grants (Associate and Fit and Proper Person) Guidelines 2004, paragraph 3.6.

22 Committee Hansard, 7 June 2013, p. 6.

23 Committee Hansard, 7 June 2013, p. 7.

24 Committee Hansard, 7 June 2013, p. 7.

25 Committee Hansard, 7 June 2013, p. 8.

26 Submission 15, p. 7.

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the existence of an encroachment on the right to reputation, the onus is on the government to identify why the provisions are a necessary and proportionate measure to achieve a legitimate objective (including details of any less intrusive measures that were considered and the procedural and other safeguards that apply in making such a determination). 27

4.25 As noted above, however, the guidelines are yet to be released. It should be noted that the guidelines are required to be made under proposed new paragraph 101(1)(bc) as legislative instruments.

4.26 Austrade acknowledged that finding a consultant not a fit and proper person would 'have a significant commercial impact on the consultant'. Even so, Mr Vickers stated it was important that:

…the scheme and its reputation be protected—because if the scheme comes into disrepute, there will not be government support for it and there will be no scheme. That would disadvantage many thousands of EMDG applicants.28

4.27 The Parliamentary Secretary for Trade noted that with this in mind, a number of safeguards would apply:

 natural justice—Austrade would provide any consultant it considered may be a not fit and proper person with the reasons for suspecting so and provide them with the opportunity to respond;

 privacy rules;

 right of review—if a consultant is found to be a not fit and proper person, they

may request that the CEO of Austrade review the decision;

 right to independent review—if they are unhappy with the CEO of Austrade's

decision, they may request a merits review at the Administrative Appeals Tribunal (AAT); and

 right to judicial review they are also able to pursue action under the

Administrative Decisions (Judicial Review) Act in the Federal Court.29

27 Parliamentary Joint Committee on Human Rights, Examination of legislation in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011, Bills introduced 5-28 February 2013, Legislative Instruments registered with the Federal Register of Legislative Instruments 5 January-15 February 2013, p. 15.

28 Committee Hansard, 7 June 2013, p. 14.

29 Submission 9, p. [4] and Mr Vickers explained further about natural justice applying to this new section. He stated, 'Natural justice is a requirement of the Administrative Decisions (Judicial Revi

ew) Act (AD(JR)) Act and there is no way Austrade can escape providing natural justice. Ther e are also issues here which arise out of the Privacy Act. The EMDG Act specifies that there is a right of appeal to the Administrative Appeals Tribunal and the AD(JR) Act applies as well…So I think there are quite a number of safeguards here—safeguards in fact in depth—to protect consultants'. Committee Hansard, 7 June 2013, p. 14. The Reader's guide to the EMDG Act clearly states that the Administrative Appeals Tribunal Act 1975 and the Adm inistrative Decisions (Judicial Review) Act 1977 apply.

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4.28 The Australian Government Solicitor has provided advice to Austrade that the proposed provisions are consistent with Australia's international human rights obligations.30

4.29 The Parliamentary Secretary for Trade explained that Austrade had been administering the 'not fit and proper person' provisions applying to EMDG applicants for nine years.31 Over this period, it has reviewed 75 cases resulting in:

 nine applicants being deemed not fit and proper persons to receive a grant, with decisions on four matters confirmed by Austrade following a Request for Review;

 16 cases where the applicant failed to respond to Austrade's requests for information and Austrade applied section 73 of the EMDG Act to refuse to consider the matter further;

 27 matters currently under consideration; and

 no applicant appealing an Austrade decision under the not fit and proper test to the Administrative Appeals Tribunal.32

4.30 Considering these results, the Parliamentary Secretary concluded that Austrade brings 'a significant level of experience to the assessment of whether or not a consultant is a fit and proper person'.33

Joint ventures 4.31 Austrade may grant a special approval to groups of small to medium sized Australian businesses which co-operate or collaborate in a joint venture style marketing arrangement to pursue specific export activities. This Joint Venture status enables the group, which would normally be ineligible, to access the EMDG scheme.34 At the moment, joint ventures that satisfy assessment criteria are eligible to receive up to five grants for a specified project or activity.35

4.32 An approval of a group of persons as a joint venture must: specify the activity, project or purpose for which the group is approved; and specify the member of the group who is the nominated contact member for the purposes of applications and payments of grant. Only a resident of Australia may be specified as a nominated

30 Submission 9, p. [4].

31 Submission 9, p. [4].

32 Submission 9, p. [4].

33 Submission 9, p. [4].

34 Austrade website, Approved Joint Venture status http://www.austrade.gov.au/search.aspx?ModuleID=8367&keywords=joint%20venture&multi Site=False

35 Explanatory Memorandum, Item 2. See subsections 7(2) and 89(4) of the EMDG Act.

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contact member. A grant, or an advance on account of a grant, that is payable to an approved joint venture is to be paid to the nominated contact member.36

4.33 The following table provides an indication of the number of approved joint ventures since 2012.

Table 4.1: Approved joint ventures

Approved Joint Ventures FY 2009-10 to FY 2012-1337

Year Number of Joint Ventures Number of members

2012-13 10 49

2011-12 10 49

2010-11 15 88

2009-10 18 107

4.34 Under the proposed legislation a joint venture will no longer be eligible for an EMDG grant.38

Low numbers

4.35 Mr Vickers acknowledged that the joint venture provisions have existed for a very long time. But, he explained that after many years, only a few joint ventures apply for grants—ten—which 'has even gone down from what it used to be four years ago'. In Mr Vicker's opinion, the joint venture was 'just not an acceptable provision for many small businesses'.39

4.36 Austrade suggested that only a few consultants promoted joint ventures. In its experience, the consultants specialising in promoting the joint ventures do 'not adequately enable Austrade to assess their eligibility'.40 Mr Vickers said:

There are many times when Austrade has difficulty getting the evidence that that is, in fact, the case. We get very generalised statements back— things which are inconclusive. Once it is established that they are not operating jointly, the grant is not payable. So it can become a difficult issue. As we have noted, a number of these joint ventures are either promoted or managed by consultants. The responsiveness is not always there.41

4.37 The Parliamentary Secretary for Trade explained that increasingly Austrade has found that some joint ventures were being used as a vehicle to attempt to allow companies that 'have exhausted their allowed number of EMDG grants to enter an

36 Subsection 89(4) of the EMDG Act.

37 Submission 9, p. [3].

38 Item 24 and 27 of the bill, which repeals paragraph 6(1)(e) and subsection 7(2).

39 Committee Hansard, 7 June 2013, p. 15.

40 Submission 9, p. [3].

41 Committee Hansard, 7 June 2013, p. 15.

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arrangement primarily to attempt to re-qualify for further grants.'42 Mr Vickers stated that Austrade had detected some 'increase in the number of joint ventures which seek to recycle applicants—to bring back in people who have already received their grants'. He indicated that Austrade was concerned about the implications of that recycling for 'the probity of the scheme'.43

Industry concerns

4.38 Mr Mitchell argued that joint ventures do work with majority of these clusters of exporters in regional areas.44 He noted that smaller exporters who, under the EMDG joint venture provisions, band together to share common overseas marketing costs would be 'taken out of the equation'.45 According to Mr Mitchell some 'will have to stop exporting as the medium spend level of $20,000 will be too high'.46 He maintained that no consultation or external study was undertaken about the EMDG and joint ventures.47

4.39 Mr Mitchell accepted the proposition that administratively there may be extra work involved or issues with the approval of the joint ventures. He, however, saw the measure as 'an opportunity lost'.48 He explained that while Austrade's concerns may be real, they 'should not preclude there being this good vehicle for small exporters'.49 According to Mr Mitchell the effect on small exporters would be immediate:

Small exporters will be excluded from the scheme, because to access the scheme at this time—and it goes up and down left, right and centre—the current spend level is $20,000. If you are a small exporter and only spending $12,000, you will not be able to access the scheme. You will not be able to get critical mass. You might want to go to China and go to a wine show; you might want to share the cost of a trade show. You are being encouraged by the Austrade to do so. You bond as a group and go together. But therefore you will not be able to recoup some of your expenditure, so people will not go.50

4.40 The Canberra Business Council noted that although there have been only a small number of joint ventures, their removal 'does limit the early stage capacity

42 Submission 9, p. [3]. Mr Vickers told the committee that based on the history of joint ventures, many of the members of such enterprises are previous EMDG applicants. Committee Hansard, 7 June 2013, p. 15.

43 Committee Hansard, 7 June 2013, p. 15.

44 Submission 15, p. 6.

45 Submission 15, p. 6.

46 Submission 15, p. 6.

47 Submission 15, p. 6.

48 Committee Hansard, 7 June 2013, p. 9.

49 Committee Hansard, 7 June 2013, p. 9.

50 Committee Hansard, 7 June 2013, p. 9.

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building that can assist microbusiness and SME's to develop export markets'.51 The Council informed the committee that:

In recent months there have been several groups in the Arts and Screen industry within the ACT that have indicated this joint venture model, where businesses cooperate in a marketing arrangement, would assist them to develop the local industry.52

4.41 It stated that joint ventures are an 'invaluable tool for building capacity, both from the direct dollar benefits generated from EMDG, but also from learning from each other'.53 Mr Clark agreed with this view. Referring to the scale of overseas markets, noting that some Asian markets are enormous with populations the size of Australia's, Mr Clark spoke of the need for joint ventures.54 He stated:

The capacity for Australian exporters to service the market need is increasingly challenged unless they are getting together and forming a critical mass to be able to supply at the level, speed and frequency that is required by the market. We need to think deeply. Let's do it properly, not by this type of process.55

4.42 The Export Consultants Group argued that the removal of the joint venture provisions was being done only for 'administrative expediency'. It stated further that it appeared as though Austrade did not undertake any work 'to look at the loss of overall export impact from the removal of such a provision and the impact of the regional areas where most of the joint venture applications are based.56

Austrade's response

4.43 Overall, Mr Vickers told the committee that from Austrade's perspective, the change was 'fundamentally about the efficiency of the scheme and about streamlining and reducing red tape'.57 He said

A straightforward claim is not a difficult thing to process. Some of these joint ventures do take a considerable amount of time to get adequate information to satisfy ourselves that the money is being appropriately invested in the joint venture.58

Events promoter 4.44 Under the current legislation 'an event' may be included as an eligible product for EMDG purposes if it satisfies a number of conditions such the event is held in

51 Submission 16, p. [2].

52 Submission 16, p. [2].

53 Submission 16, p. [2].

54 Committee Hansard, 7 June 2013, p. 10.

55 Committee Hansard, 7 June 2013, p. 10.

56 Supplementary Submission 7A, p. 4.

57 Committee Hansard, 7 June 2013, p. 15.

58 Committee Hansard, 7 June 2013, p. 16.

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Australia and there is an events promoter for the event.59 An events promoter is a person that markets the event, under a written contract between the person and the event holder, to persons outside Australia.60 The EMDG Act provides that 'event promoters promoting a range of Australian events, including conferences, meetings, conventions and exhibitions, are able to receive EMDG grants'. The Explanatory Memorandum states:

They are able to receive grants for spending to maximise their Australian clients' delegate or audience number, notwithstanding the fact they are paid by these clients to undertake the event promotion work.61

4.45 Under proposed amendments, the promotion of events by an events promoter ceases to be an eligible product category under the EMDG Act from grant year 2013-14.62 As a consequence of this amendment, the bill makes changes to remove relevant references to an events promoter.63

4.46 The Parliamentary Secretary for Trade described event promoters as 'agents for event holders, the body that actually owns the event being promoted'.64 Event holders have always been and will remain, eligible to claim EMDG grants. With regard to event promoters, he explained that very few grants are paid to them with an estimated six grants paid 2012-13, which has been consistent over the last five years.65

Table 4.2: Event promoters66

Event Holders and Event Promoters FY 2009-10 to 2012-13 (Electronically Lodged Claims)* Year Event Promoters/agents

(proposed not eligible)

2012-13 to date 3

2011-12 2

2010-11 3

2009-10 6

2008-09 11

59 Section 25A of the EMDG Act.

60 Section 107 of the EMDG Act.

61 Explanatory Memorandum, Item 4.

62 Explanatory Memorandum, Item 5 repeals section 25A Eligible Events.

63 See for example amendments to subsections 37(2), 37(3) of the EMDG Act—Items 5 and 6 of the bill.

64 Submission 9, p. [3].

65 Submission 9, p. [3].

66 Submission 9, p. [3].

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* Figures are for electronically lodged claims which are approximately 50 per cent of all claims lodged. Other claims do not identify this category of claimant.

4.47 According to Austrade, this small number of event promoters generates 'a disproportionate amount of red tape for the larger number of event holders', who 'need to be able to satisfy Austrade that the expenditure they are claiming has not also been claimed by an event holder'.67

4.48 Subsection 37 of the EMDG Act, however, still applies. It states that in relation to an applicant, an eligible promotional activity is for an approved promotional purpose if it is 'carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country'. Thus, according to the Explanatory Memorandum, applicants promoting eligible Australian events as principal will continue to be eligible for EMDG support under the eligible services product category. Also, 'applicants promoting venues and associated facilities for meetings, conventions and exhibitions as principal' will continue to be eligible for EMDG support.68

4.49 The Association of Australian Convention Bureaux argued that the removal of event promoters from the EMDG scheme would 'reduce the assistance and support provided to an important part of the business events sector'.69 In its view, the proposed amendment:

…would have a significant impact resulting in fewer international delegates for Australia and therefore reduced export revenue, and a reduction in all indirect benefits to the economy by business events.70

4.50 Drawing attention to the current global economic conditions and the high Australian dollar, which makes Australia a less attractive long haul destination, the Convention Bureaux argued that it was not the time to 'be reducing support for delegate boosting activities'.71

Payments directly by applicant 4.51 According to Export Solutions, in the past Austrade had 'allowed expenses whereby a third party (director or shareholder) pays for marketing costs using their own funds and charges this as a loan against the company'. Under the proposed amendments such a practice will no longer be accepted and expenses paid for in this manner will not be eligible.72

67 Submission 9, p. [4].

68 Explanatory Memorandum, Item 4.

69 Submission 13, p. 2.

70 Submission 13, p. 2.

71 Submission 13, p. 2.

72 Export Solutions, website, 'Rule changes to the EMDG Program effective 01July 2013', http://www.exportsolutions.com.au/rule-changes-to-the-emdg-program-effective-01-july-2013/

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4.52 The bill amends paragraph 58(2)(a) to make clear that applicants will be required to pay for expenses incurred either directly or by credit card. This change is intended to simplify the scheme and 'confirms the scheme's principle that the applicant itself (rather than its associates or any other party) should incur a real cost and "bear the risk" in developing international businesses'.73 Generally, witnesses did not raise concerns with the proposed amendment.74 Mr Mitchell noted that the decision was in order to make it easier for Austrade to audit transactions. He indicated that the Export Consultants Group would support the change but was of the view that there would be some practice interpretations. He outlined one complication where a parent company in a group has the bank account in subsidiaries within that group. He explained further:

With no bank accounts, the transaction may go through the parent company and be allocated in correct accounting terminology and practice to a subsidiary and that subsidiary is the applicant under the scheme.75

4.53 He noted that there had been an industry group meeting with Austrade where the Export Consultants Group raised concerns that 'in practice it may be difficult and cause concerns, particularly with group structures'. Austrade is yet to respond to the Export Consultants Group.76

Disbursement of payment of grant 4.54 Applicants entitled to a grant of less than the 'initial payment ceiling amount (IPCA) are paid their grant at the time the claim is determined'. The IPCA amount, in relation to a grant year, means the amount determined by the Minister to be the initial payment ceiling amount for that grant year.77

4.55 Applicants entitled to an amount that exceeds the IPCA are paid the initial amount and then, following the setting of the balance distribution, are paid the balance of their entitlement often 'many months later'. The Explanatory Memorandum notes:

Under the EMDG Act's current two-tranche payment arrangements, Austrade is unable to pay the full amounts of assessed grants to applicants as quickly as desirable when the scheme demand is lower than expected or where additional money is appropriated for the scheme.78

4.56 According to the Explanatory Memorandum, this inability to pay the full amounts as quickly as desirable arises from the interaction of two EMDG provisions, namely

73 Explanatory Memorandum, Item 9.

74 Mr Norris, Committee Hansard, 7 June 2013, p. 10.

75 Committee Hansard, 7 June 2013, p. 10.

76 Committee Hansard, 7 June 2013, p. 10.

77 Section 107. The minister makes such a determination under section 68 of the Act.

78 Explanatory Memorandum, Item 13.

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 grant amounts that exceed the IPCA are determined after the 'balance

distribution date': and

 current paragraph 82(a) provides that grants determined after the 'balance distribution date' for a grant year and before the following 1 July cannot be paid until that date.79

4.57 The bill amends section 82 to provide that 'if Austrade determines the amount of a grant before the 1 July following the "balance distribution date", the grant becomes payable on the day the grant is determined'.80

4.58 The Association of Australian Convention Bureaux supported this amendment for grants to be paid more quickly. It recommended, however, that this measure could be taken further to ensure that 'both the grant determination for Approved Body submissions and full payment of the subsequent grant be made within the financial year following the grant'.81 It noted that many EMDG applications made by the Convention Bureaux for the grant year 2010-11 were not determined or paid until 2012-13 which, in its experience, created great difficulties when planning for future international marketing activities.82

Administration costs 4.59 Currently the administration costs of the EMDG scheme are paid out of the money appropriated by the Parliament for meeting payments under the EMDG Act but must not exceed 5 per cent of the appropriation amount in any financial year.83

4.60 The proposed legislation would remove this cap and confer on the minister the power to set the budget for administrative expenses from time to time. The Parliamentary Secretary for Trade explained that the Minister for Finance must agree to the change which brings the EMDG scheme 'into line with other similar programs'.84 He stated further:

The assessment of EMDG claims is inescapably a labour-intensive task: some 8