Chapter 1


Chapter 1

Annual report of departments

Department of Industry, Innovation and Science [incorporating the annual reports of Geoscience Australia and IP Australia]

1.1        The Department of Industry's 2014–15 annual report was tabled in both the Senate and House of Representatives on 14 October 2015. The 2014–15 annual reports for Intellectual Property Australia, which operates as a non-statutory agency with limited autonomy from the department, and the annual report for the Geoscience Australia, are also contained in this annual report.

1.2        Following the AAO issued on 21 September 2015 and 30 September 2015, the Industry, Innovation and Science portfolio was established. As a result of these AAOs, and as noted in the preface, the former Industry and Science portfolio's responsibility for the renewable energy technology development and the ARENA were transferred to the Department of the Environment. The Industry, Innovation and Science portfolio incorporates elements of the former Industry and Science portfolio as well as responsibility for Northern Australia policy and coordination and national issues relating to the digital economy.[1] Likewise, as a result of the AAO in September 2015, the Treasury portfolio's responsibility for the Clean Energy Finance Corporation was transferred to the Department of the Environment.[2]

1.3        However, for the reporting period at 30 June 2015, the department remains the Department of Industry and Science[3] and its performance reporting framework comprised three outcomes, which reflected the 2014–15 Portfolio Additional Estimates Statements.

Review by Departmental Secretary

1.4        In its review of the reporting period, the department saw responsibility for vocational education and skills policy and programmes transfer to the Department of Education and Training and small business programmes transfer to the Department of the Treasury.

1.5        The Secretary of the Department noted that the department's inclusion of science in the department's title recognises the greater focus on leveraging over $9 billion in investment in science, research and innovation to look for more opportunities to commercialise its ideas and to build on its collaborative work with its stakeholders.

1.6        Throughout this period, the department's efforts were directed towards the delivery of government initiatives, including policies and programmes to support its economic agenda in the following:

  • transitioning industries to a new economy through the $50 million Manufacturing Transition Programme, the $155 million Growth Fund and regional innovation funds in Tasmania and Victoria;
  • building on Australia's competitive and economic strengths through establishing five Industry Growth Centres, delivering the Energy White Paper, and establishing the Exploration Development Incentive to assist small exploration companies to undertake greenfields mineral exploration in Australia;
  • focusing on innovation and entrepreneurship through delivering the flagship programmes of the R&D Tax Incentive, the Entrepreneurs' Programme, and the Cooperative Research Centres Programme; and
  • strengthening the role of science at the heart of industry policy by assisting small and medium businesses to develop new ideas with commercial potential in collaboration with the research sector and encouraging better use by businesses of Australian research mainly in five identified sectors where Australia already has a comparative or competitive advantage.[4]

1.7        The department's direction for the following year will include the following:

  • monitor the transition of Australian industry while rolling out the Growth Funds;
  • focusing on science and commercialisation;
  • consolidating the rollout of the Entrepreneurs' Programme; and
  • the development of the Energy Productivity Plan.[5]

Operational matters

1.8        For the 2014–15 financial year, the department recorded an operating loss of $41.3 million, including depreciation and amortisation of $43.7 million. Excluding depreciation and amortisation, the department recorded an operating surplus of $2.4 million in 2014–15.[6]

1.9        The department reported administered revenue as largely relating to royalty revenue, dividends issued by Snowy Hydro Limited, and levy receipts generated by the National Offshore and Petroleum Safety and Environmental Management Authority and registration fees generated by the National Offshore Petroleum Titles Administrator.[7]

1.10      Some of the department's administered expenses for programmes on behalf of the government included: $225.5 million in grants to facilitate science, research and innovation to deliver improved productivity for Australian Industry; $234 million in grants to support the development and growth of Australian industry; $83.6 million in grants to support the safe and sustainable operations of the resources sector, attract private sector investment and encourage innovative technologies; and $1,222.2 million in payments to the portfolio's corporate Commonwealth entities, Commonwealth Scientific and Industrial Research Organisation, the Australian Renewable Energy Agency, the Australian Nuclear Science and Technology Organisation, the Australian Institute of Marine Science and the National Offshore Petroleum Safety and Environmental Management Authority.[8]

1.11      The department reported a net equity of $228.2 million as at 30 June 2015. According to the annual report, the department has sufficient financial assets to pay its supplier and other payables as and when they fall due. Non-financial assets consist mainly of property (buildings and fit-out), plant and equipment owned by the department.[9]

Geoscience Australia

1.12      In its report, Geoscience Australia recorded the following significant activities for the reporting period 2014–15:

  • Significant data acquisition, including drill holes in Victoria and an airborne electromagnetic survey in New South Wales and Queensland, was undertaken via the UNCOVER initiative, designed to encourage mineral exploration in underexplored regions of Australia.[10]
  • Work to advance the provision of fundamental geographic information for Australia included leading the Intergovernmental Committee on Surveying and Mapping in its decision to modernise the Australian datum. The new datum will underpin more accurate positioning for many applications, including navigation, infrastructure development and environmental monitoring.[11]
  • Continued contribution to the Australian Government's Bioregional Assessment Program, which aimed to better understand the potential impacts of coal seam gas and large coal mining developments on water resources.[12]
  • Significant contribution was made to assisting Australia's Pacific Island neighbours with the provision of a groundwater database and maps for more than 1800 Pacific islands, to help these nations with their decision-making in relation to impacts on groundwater from possible future climates.[13]

1.13      In 2014–15, Geoscience Australia reported an operating deficit of $6.8 million, before adjusting for unfunded depreciation of $11.3 million.[14]

1.14      The entity's total income was $192.0 million for the reporting period, comprising $126.8 million in appropriations, $59.2 million received from the sale of goods and services to related and external entities, and $6.0 million as resources received free of charge and other gains. The $6.0 million other gain is the transfer of antenna assets from the Department of the Environment in June 2015.[15]

1.15      Expenses for Geoscience Australia were $198.8 million, with the major categories: employee expenses of $78.5 million; supplier expenses of $108.6 million; and depreciation of $11.3 million.[16]

1.16      During the reporting period, Geoscience Australia administered one grant on behalf of government worth $20,000, made to the Australian National Committee for the United Nations Educational, Scientific and Cultural International Geoscience Programme.[17]

IP Australia

1.17      In its annual report, Intellectual Property Australia (IP Australia) noted that:

While a range of domestic and international factors contribute to fluctuations in demand for IP rights, the overall trend in recent years has resulted in a growing demand, especially for trade marks.[18]

1.18      IP Australia reported on its close engagement with the administrative body for the global IP system, World Intellectual Property Organisation, as well as other national IP offices, to promote streamlined international IP rights administration and the adoption of global standards. It suggested such developments can assist Australian exporters and facilitate trade and investment.[19]

1.19      IP Australia was also active in multilateral and bilateral IP forums and continued to undertake capacity-building activities with other IP offices in its near region. IP Australia supported relevant negotiations, including the China-Australia Free Trade Agreement, the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership. More generally, IP Australia contributed to a range of IP policy advice.[20]

1.20      IP Australia recorded an operating surplus of $11.7 million for 2014–15 against a planned surplus of $2.2 million, as published in the 2015–16 Portfolio Budget Statements (PBS). Revenue was $5.8 million (3.1 per cent) above plan due to higher than anticipated IP right filings, registrations and renewals. Expenses were $3.7 million (2.0 per cent) below budget as a result of a lower than planned average staffing level, delay in the commencement of IP Australia's new Enterprise Agreement and general savings realised across the organisation.[21]

Reporting requirements

1.21      The Department of Industry's 2014–15 annual report, which incorporates Geoscience Australia and IP Australia, is well presented, with easy to locate information and provides a 'clear read' between information contained in the annual report and the PBS. Information in Key Performance Indicators (KPIs) contains quantitative as well as qualitative information for benchmarking and assessing whether estimates have been achieved over the reporting period.

1.22      The annual report for the Department of Industry, incorporating Geoscience Australia and IP Australia, closely adheres to the compliance index.[22] The committee considers that Department of Industry, Geoscience Australia and IP Australia, have met their reporting obligations under the Acts and the annual report is 'apparently satisfactory'.

Department of the Treasury

1.23      The Department of the Treasury's ('the department' or 'Treasury') 2014–15 annual report was tabled in the Senate on 9 November 2015[23] and in the House of Representatives on 9 November 2015.

Review by Departmental Secretary

1.24      In the Secretary's first departmental review, Mr John Fraser outlined the variety of work the department has undertaken. During the reporting period, the department provided more than 3,500 briefings, supported inquiries into competition policy and financial services, conducted more than 55 consultative processes, developed a tax discussion paper and published the fourth intergenerational report.[24]

1.25      On the international front, Mr Fraser reported Treasury was well represented in international fora, such as the G20, the International Monetary Fund, the World Bank, the Asian Development Bank, and the Financial Stability Board. The Secretary is also the chair to the newly established Global Infrastructure Hub, which is a G20 initiative to lift quality public and private infrastructure investment. This activity builds on the reach Treasury has in driving economic reforms.[25]

1.26      According to Mr Fraser, on the domestic front, to ensure Treasury continued to provide quality advice, Treasury sought to engage across the broadest spectrum of stakeholders—government, non-government, think-tanks, academia, business, the social welfare sector, industry, the financial sector, peak organisations and the community.[26] The 2015 Intergenerational Report outlined some of the challenges which require well-designed, productivity-enhancing reforms.[27]

1.27      The following were among some of the Secretary's listed highlights for the reporting period:

  • hosting the G20 Finance Ministers' meetings;
  • supporting the first comprehensive review of Australia's competition laws and policy in more than 20 years;
  • developing the government's responses to the Financial System Inquiry (FSI);
  • reforming Australia's foreign investment framework; and
  • enabling Australia to be a founding member of the Asian Infrastructure Investment Bank.[28]

Operational matters

1.28      The annual report noted that Treasury received an unqualified audit report on the 2014–2015 financial statements from the Australian National Audit Office.[29]

1.29      In 2014–15, Treasury reported a surplus of $4.6 million, which is an increase from $0.3 million in 2013–14. Employee expenses were $102 million lower compared to 2013–14, primarily reflecting lower staffing levels. Supplier expenses increased by $12.1 million, mainly as a result of an increase in the number of secondees from a range of government agencies ($2.0 million of which was received free of charge) and an increase in contractors for various information communication technology projects.

1.30      Treasury's net asset position increased by $1.3 million in 2014–15, partially as a result of the reduction in payables. Treasury reported it has sufficient cash reserves to fund its debts as and when they are due.[30]

1.31      The department incurred $83.8 billion in administered expenses over the reporting period. This this outcome represents a decrease of $10 billion from the $93.8 billion incurred in the 2013–14 period. This difference is attributed to the one-off grant of $8.8 billion in 2013–14 to the Reserve Bank of Australia to strengthen its financial position to the level considered appropriate by the bank's board.[31]

1.32      Treasury's administered net assets increased by $7.6 billion in 2014–15, driven by an increase in the value of the Treasury's investments in Australian Government Entities.[32]

1.33      During the reporting period, Treasury undertook the following activities:

  • advised on macroeconomic policy, domestic and international forecasts;
  • provided economy-wide modelling analysis for the Tax Discussion Paper;
  • advised on and began processes for Australia's membership of the Asian Infrastructure Investment Bank;
  • contributed to broader and deeper engagement with key Asian and Pacific economies through bilateral and regional forums, including the Asia-Pacific Economic Cooperation Finance Ministers' Meeting;[33]
  • coordinated the government's consultation on the recommendations of the FSI;
  • developed a package of reforms to strengthen the foreign investment framework;
  • provided advice to government on competition policy and in response to the Competition Policy Review;
  • developed and introduced the new Franchising Code of Conduct and the Food and Grocery Code of Conduct;
  • extended the consumer unfair contract term protections to small businesses;[34]
  • established Treasury's Sydney office to build capability, improved stakeholder engagement and enhance Treasury advice;[35]
  • assisted the government to develop its tax white paper;
  • developed the international tax framework as part of the G20 tax agenda;
  • represented Australia's interests at the OECD within the Base Erosion and Profit Shifting Action Plan process; and
  • advised the government on the implementation of its taxation and retirement income reform agenda including decisions in the Government's 2014–15 Budget.

Reporting requirements

1.34      The committee commends the Department of the Treasury for the quality of its annual report. The department's coverage of its operations and performance over the reporting period is both informative and comprehensive. The annual report's layout and format is user-friendly, especially with its inclusion of graphics, trend information and relevant visuals to break up the block of information presented in text form. This arrangement enhances the presentation of complex information. Furthermore, the list of requirements is closely adhered to, making information easy to locate and accessible. The committee is pleased to note the inclusion of suggested information such as: factors, events or trends influencing departmental performance; contribution of risk management in achieving objectives; and how the nature and amount of remuneration for SES officers is determined.[36]

1.35      In relation to external scrutiny, the committee notes that Treasury has included a range of reviews and inquiries in which it has participated, including a list of parliamentary committees and ANAO reports.[37] Treasury also reported that following a merits review under the Freedom of Information Act 1982, it complied with the Privacy Commissioner's finding to set aside Treasury's decision not to release documents in The Age and Department of the Treasury [2014] AlCmr 141.[38]

1.36      The committee considers the Department of Treasury's 2013–14 annual report 'apparently satisfactory'.

1.37      The committee would like to express its appreciation to the Treasury for regularly appearing at estimates and contributing to the committee's inquiries in 2014–15, as well as to other parliamentary inquiries. However, as previously noted, the committee is disappointed in the significant number of late answers to questions on notice.

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