Budget Estimates - Report to the Senate
Introduction
1.1
On 9 May 2006
the Senate referred to the committee for examination and report the following
documents in relation to the Treasury and Industry, Tourism and Resources
portfolios:
-
Particulars of certain proposed expenditure in
respect of the year ending on 30 June
2007;
-
Particulars of proposed expenditure in respect
of the year ending on 30 June 2007;
-
Particulars of proposed expenditure in relation
to the parliamentary departments in respect of the year ending on 30 June 2007;
-
Particulars of certain proposed supplementary
expenditure in respect of the year ending on 30 June 2006; and
-
Particulars of proposed supplementary
expenditure in respect of the year ending on 30 June 2006.
General comments
1.2
The committee received evidence from Senator the Hon
Nick Minchin representing the Treasurer and the Minister for Revenue, Assistant
Treasurer, and the Minister for Industry, Tourism and Resources; Senator the
Hon Helen Coonan, representing the Treasurer and the Minister for Revenue and
Assistant Treasurer; Senator the Hon Richard Colbeck, representing the Minister
for Industry, Tourism and Resources; and officers from the Treasury and
Industry, Tourism and Resources portfolios. The committee thanks the ministers
and officers who attended the hearings for their assistance.
1.3
The committee conducted four days of hearings, from 29
May to 1 June 2006, and
examined the Industry, Tourism and Resources portfolio and the Treasury
portfolio. In total the committee met for 39 hours 46 minutes, excluding
breaks.
Questions on notice
1.4
The committee draws the attention of all
departments and agencies to the deadline of Friday, 28 July 2006 for the receipt of answers to
questions taken on notice from this round. As the committee is required to
report before responses to questions are due, this report has been prepared
without reference to any of these responses. The secretariat has prepared
indexes for questions on notice during and after the hearings and these are
available on the following website http://www.aph.gov.au/Senate/committee/economics_ctte/estimates/bud_0607/index.htm.
1.5
The committee
expressed its concern about the late submission of answers to questions placed
on notice from the previous round of estimates.
1.6
The due date for submitting responses to questions
arising from the consideration of additional estimates in February 2006 was Friday, 31 March 2006.[1] Yet the committee received answers from
the Treasury, Financial Reporting Council, Australian Securities and
Investments Commission, Australian Prudential Regulation Authority, Australian
Competition and Consumer Commission, Corporations and Markets Advisory
Committee, Productivity Commission, Royal Australian Mint, and the Australian
Bureau of Statistics to certain questions as late as 10:09pm on 31
May 2006. This resulted in many of the answers being received after
the agency appeared at this round of estimates.
1.7
A total of 60 answers, which is over 63% of questions
taken on notice at additional estimates, were provided after committee members
raised their concern about not having received responses. A further answer was
provided in relation to a question on notice from the Australian Securities and
Investments Commission on Thursday, 1
June 2006, one day after this agency appeared.
1.8
The committee notes that a similar incident occurred in
relation to answers provided by the Australian Competition and Consumer
Commission during the consideration of the budget estimates 2005-06.[2] The provision of answers to questions
on notice following an agency's appearance, or only a day before an agency's
appearance is not acceptable as it does not give members adequate time to
consider those answers and/or pursue follow-up questions.
1.9
Furthermore, many of the agencies who submitted answers
during the hearings are independent statutory authorities, and therefore the
committee questions why answers to questions from these bodies are forwarded to
Treasury for clearance before being provided to the committee.
1.10
The committee also notes that three answers are still
outstanding from Additional Estimates 2005–06.
Record of proceedings
1.11
This report does not attempt to analyse the evidence
presented over the four days of hearings. However, it does include a brief list
of the issues that were traversed by the committee for both portfolios.
1.12
Copies of the Hansard transcripts are available through
the internet at http://www.aph.gov.au/hansard/senate/commttee/s-econ.htm.
Copies are also tabled with this report for the information of the Senate.
Matters raised - Industry, Tourism and Resources portfolio
1.13
The committee questioned the department, IP Australia, Tourism
Australia and Geoscience
Australia on Monday, 29 May 2006.
1.14
Matters examined included the following:
Department of Industry, Tourism and
Resources[3]
Industry
-
budget and expenditure of various programs
administered by the department (pp. 3–16 and 37);
-
staffing levels; number of full-time, part-time
and contract staff; staff turnover rate; staff morale; breakdown of employee
expenses; number of staff covered by Australian Workplace Agreements (AWAs) and
certified agreements; performance based pay (pp. 16–22 and 35–36);
-
measurement of department's performance against key
performance indicators for output 1.1 Program Management Services (pp. 22–24);
-
external consultants engaged by the department (pp.
24–25);
-
current major research projects, including the
R&D tax offset, the pre-seed fund program and the innovation investment
fund (pp. 25–27);
-
review of the Pharmaceuticals Partnerships
Program (P3) by the Centre for International Economics (pp. 27–28);
-
department's work on potential changes to the
Pharmaceutical Benefits Scheme (pp. 28–29);
-
establishment of a small-scale mammalian cell
production facility in Australia
(pp. 29–33);
-
Asia Pacific Space Centre
(pp. 33–37);
-
special assistance package to Ford Australia
(pp. 37–39);
-
Automotive Competitiveness and Investment Scheme
(ACIS) (pp. 40–44 and 47–48);
-
programs to provide support for the textile,
clothing and footwear industry, in view of an expected increase in the movement
of garment manufacturing offshore (pp. 40–47);
-
modelling to look at the effect of the resources
boom on manufacturing; changes in the manufacturing sector and strategies to
increase competitiveness (pp. 48–52);
-
review of the Venture Capital Industry; Venture
Capital programs: VCLP and IIF (pp. 53–58);
-
government's payment policy to small business
for products and services; monitoring by the Office of Small Business (pp.
58–60);
-
Australian
Building Codes Board – update on
the progress of the access to premises standard; consultancy report on
accessible housing; standards for hearing augmentation in the Building Code (pp.
67–71); and
-
update on the nanotechnology task force (pp.
71–76).
Resources
-
LNG Action agenda (pp. 90–91);
-
condensate excise exemption for the North West
Shelf joint venture; other industry assistance measures (pp. 91–93 and 95);
-
potential for gas to liquids projects in Australia
(pp. 94–95);
-
update on the depreciated Syntroleum technology
licence (p. 96);
-
work of the uranium industry framework steering
group; measures to promote Indigenous employment in the industry; uranium
royalties for the Northern Territory
(pp. 96–98);
-
current status of: the proposed oil code and
petrol retail reform legislation; Low-emission Technology Fund; Solar Cities
program; energy reform implementation group (pp. 98–99);
-
status of nuclear power in the 2004 energy white
paper; economics of nuclear power compared to coal; consultation about possible
sites for nuclear power stations (p. 99);
-
discussion of safety issues between the National
Offshore Petroleum Safety Authority (NOPSA) and Diamond Offshore, a US based
company, following its decision to eliminate marine crew from its Ocean Bounty drilling rig (pp. 99–100);
and
-
progress on developing an oil and gas industry
strategy (pp. 101–102).
IP Australia
-
agency's performance against its key performance
indicators; recruitment of additional staff; fee changes; comparison of fees
with other countries (pp. 60–63); and
-
agency's workload, including reasons for the decline
in the number of patents granted, international work carried out for domestic
customers, work for other patent offices, average processing times and
insufficient number of examiners (pp. 63–66).
Tourism Australia
-
commercial-in-confidence arrangements
surrounding the departure of the head of Tourism Australia's
London office (pp. 76–77);
-
market testing of the international marketing
campaign 'Where the bloody hell are you?' (pp. 77–78);
-
budget allocation for Tourism Events Australia (pp.
78–80);
-
industry feedback relating to the Cairns
tourism industry; update on the agency's role in Indigenous tourism (pp.
80–82);
-
review of the passenger movement charge (pp.
82–83);
-
response to the National Tourism Investment
Strategy which identified future labour shortages in the tourism industry;
government initiatives to address training and skills issues (pp. 83–86);
-
monitoring of inbound tour operators under the
Approved Destinations Scheme (p. 86);
-
industry concerns about an ATO ruling requiring
up-front GST payments on deposits held for future tourism activities by
international purchasers (pp. 86–87); and
-
expenditure relating to the Minister's overseas visits
(pp. 89–90).
Geoscience Australia
-
program priorities in relation to pre commercial
data gathering and the evaluation of new frontiers for oil and gas exploration
(pp. 102 and 104); and
-
funding for the year 2 geoscience component of
the Australian tsunami warning system (pp. 103–104).
Matters raised - Treasury portfolio
1.15
On 30 May 2006,
the committee questioned:
- Treasury – outcome 3: effective taxation and
retirement income arrangements; and
-
Australian Taxation Office.
1.16
On 31 May 2006,
the committee examined:
-
Takeovers Panel;
-
National Competition Council;
-
Australian Office of Financial Management;
-
Australian Securities and Investments Commission;
-
Australian Prudential Regulation Authority;
-
Productivity Commission;
-
Treasury – outcome 2: effective government
spending arrangements; and
-
Treasury – outcome 4: well functioning markets, together
with the Financial Reporting Council.
1.17
On 1 June 2006,
the committee heard from:
-
Corporations and Markets Advisory Committee;
-
Australian Accounting Standards Board;
-
Australian Competition and Consumer Commission; and
-
Treasury – outcome 1: sound macroeconomic
environment.
1.18
Matters examined included the following:
Treasury[4]
Outcome 3: Effective taxation and
retirement income arrangements
-
forecasting of revenue, and income from taxation
(pp. 5-12);
-
petroleum resource rental tax and the
inflationary impact of petrol prices (pp. 13-17);
-
analysis undertaken by the department into
income tax -v- petrol tax cuts (pp. 17-19);
-
abolition of the Fuel Sales Grants Scheme (pp.
21-22);
-
impact of personal income tax cuts announced in
the budget with respect to revenue (pp. 23-27);
-
whether the department has estimated changes in
wages, income and tax raised as a result of the implementation of the Work
Choices legislation (pp. 27-29);
-
Treasury's budget superannuation package (pp.
29-33);
-
Superannuation: taxation changes, abolition of
the exit tax, limits on superannuation contributions (pp. 43-60); and
-
number of people over the age of 60 in existing
pension annuity products (pp. 60-63).
Australian Taxation Office
-
ATO change program (pp. 67-68);
-
auditing of self managed superannuation funds
(pp. 69-72);
-
employer superannuation guarantee (pp. 75-78);
-
lodgement with the ATO of insufficient employer
contributions paid to Ms Sue
Underwood (pp. 78-80);
-
superannuation contribution splitting (p. 86);
-
State superannuation funds (pp. 90-92);
-
lost superannuation (pp. 96-99);
-
choice of superannuation fund (pp. 101-102);
-
origin of paper used in the ATO (pp. 107-110);
-
relationship between the ATO and the Department
of Public Prosecutions for prosecution guidelines (pp. 110-113);
-
facilitation payments and whether the ATO has
launched a crackdown on corporate tax deductibility payments made on
international contracts (pp. 114-116);
-
cash economy high risk industries (pp. 120-122);
and
-
simplified tax system (pp. 122-124).
Takeovers Panel[5]
-
number of personnel on Takeovers Panel (pp. 3-4).
National Competition Council (NCC)
-
procedural delays in dealing with matters before
the NCC (pp. 6-8).
Australian Office of Financial
Management (AOFM)
-
details of excepted Treasury bond insurance by
the AOFM (pp. 12-13).
Treasury
Outcome 2: Effective government
spending arrangements
-
Australian government sector underlying cash
balance estimate (pp. 17-20);
-
Dr Henry's
address in Sydney
to Australian business economists on Australia's
fiscal and economic outlook (pp. 23-26); and
-
Treasury officials' evidence to a housing
inquiry by University of Sydney
economist Professor Patricia
Apps (pp. 29-32).
Outcome 4: Well functioning markets;
and
Financial Reporting Council
-
foreign investment trade policy (pp. 33-37);
-
reports from the superannuation industry to the department
on entry and exit fees in superannuation products (pp. 49-50);
-
budget estimates for actuarial services (pp.
55-56);
-
abolition of the urgent issues group (p. 38);
-
establishment of the Audit Quality Review Board
(pp. 38-39);
-
audit independence provisions (pp. 39-43); and
-
FRC's review of the retention of separate public
sector accounting standards (pp. 43-46).
Australian Securities and
Investments Commission (ASIC)
-
whether funding for enforcement activities and
the investigation of exceptional matters of public interest is sufficient (pp.
58-59);
-
Westpoint scheme: when concerns about
Westpoint's operations were first raised; how many Westpoint projects were
established between the initial concerns being raised and its eventual collapse;
the current level of monies owed by Westpoint and the number of people
affected; (pp. 60-65);
-
advertising of high risk financial products (p.
65-67);
-
Westpoint: financial planners associated with
Westpoint; size of commissions paid to financial planners who sold Westpoint
investments; online superannuation advertising campaigns run in metropolitan
areas; changes to the way that the Westpoint
Group conducted fundraising activities and dealt with investors; compensation
from auditors of Westpoint for negligence (pp. 68-80);
-
Paridian Property Development Fund (pp. 80-81);
-
Sovereign Capital Ltd (pp. 81-82);
-
tactics used for targeting individuals into investing
monies into self managed superannuation funds (pp. 84-85);
-
effectiveness of product disclosure statements
(pp. 91-93);
-
progress of the James
Hardie investigation (pp. 94-97);
-
PJC corporate responsibility inquiry (pp.
97-99); and
-
hedging of executive remuneration options (pp.
99-102).
Australian Prudential Regulation
Authority (APRA)
-
staff increases and staff turnover (pp.
104-106);
-
regulatory oversight into self managed superannuation
funds (pp. 108-110);
-
proposed implementation of the Basel II recommendations
(pp. 111-114); and
-
APRA licensing process (pp. 115-121.)
Productivity Commission (PC)
- The
Commission's investigation into Tasmanian freight (pp. 127-128).
Corporations and Markets Advisory Committee
(CAMAC)[6]
-
CAMAC's current inquiries: long-tail liabilities
(which arose from the Jackson
report into James Hardie Industries); corporate social responsibility;
corporate duties below board level; and personal liability for corporate fault
(pp. 3–5, 6 and 7–8); and
-
consideration of the business judgement rule
(pp. 5–7).
Australian Accounting Standards
Board (AASB)
-
adoption of international accounting standards
by Australia
(pp. 8 and 12–14);
-
accounting standards of not-for-profit
organisations (pp. 8–9) and small and medium enterprises (pp. 14–15);
-
abolition of the Urgent Issues Group (pp. 9–10);
-
disclosure of executive remuneration, in
particular, options (pp. 10–12); and
-
how Australia's
public sector accounting standards fit into the international framework,
including the treatment of heritage assets (pp. 15–18).
Australian Competition and Consumer
Commission (ACCC)
-
development of guidance on the commission's
approach to cross-media mergers and media markets, in the context of the
government's media ownership reform proposals (pp. 21–24 and 31–44);
-
ACCC's legal powers in relation to mergers that
it believes breach section 50 of the Trade Practices Act (TPA); differing
interpretations of the courts, the Australian Competition Tribunal and the
ACCC; difference between a total welfare test and a consumer welfare test to
assess the benefits of a merger (pp. 24–31);
-
performance of the Telecommunications
Competition Regulatory Regime administered by the ACCC; number of active access
disputes (pp. 44–46);
-
status of ACCC's negotiations with Telstra on
its proposal to roll-out a fibre-to-the-node network in the five mainland
capital cities (pp. 46–56);
-
ACCC's cartel policy (pp. 56–57);
-
monitoring of guidelines for the publication of
newspaper and magazine circulation figures following allegations of deceptive
practices (p. 57);
-
failure of half of the babies' dummies tested by
the Australian Consumer Association to meet Australian standards and whether
the government is planning to issue a recall of these products (pp. 57–60);
-
streamlining of the authorisation process for
smaller businesses to bargain collectively with one or more larger businesses
(pp. 61–62);
-
sale of Telstra (p. 62);
-
the use of peel-off health warnings and colour
coding on cigarette packets (pp. 62–63);
-
the merger between the Stock Exchange and the
Sydney Futures Exchange (pp. 63–66);
-
amendments to section 46 of the Trade Practices
Act (pp. 66 and 68); and
-
the Toll-Patrick merger (pp. 67–68).
Treasury
Outcome 1: Sound macroeconomic
environment
-
the government's superannuation plan and whether
it is sustainable in the long term (pp. 70–79);
-
modelling of the effects of the government's
workplace relations reforms (pp. 79–81);
-
staffing levels and funding for the Business Tax
Base Unit (p. 81);
-
measurement of the stance of fiscal policy and
changes in stance (pp. 81–83);
-
labour market participation rate (pp. 83–86);
-
effect of increased crude oil prices on
inflation forecasts and profit margins (pp. 86–88);
-
Treasury's indicators of a recession; planning
for and modelling of a recession (pp. 88–90);
-
the relationship between education and
productivity (pp. 90–92);
-
the Treasury Secretary's duties as a member of
the Reserve Bank board (pp. 92–94);
-
the work of the Macrodynamic Unit, including the
wellbeing framework and the three Ps framework for economic
growth—productivity, participation and population (pp. 94–100);
-
the role of the Domestic Economy Division in
revenue forecasting (pp. 100–101);
-
implications for the manufacturing sector, if
the terms of trade remain at present high levels (pp. 101–103);
-
inability of the resources sector to respond to
increased demand for resource exports, including skills shortages (pp.
103–104);
-
reasons for significant variations between
export budget forecasts and outcomes over the last six years (p. 105);
-
Australia's
current account deficit, including comparative analysis with the performance
with other countries (pp. 105–8); and
-
the trend in national saving (p. 109).
Senator George Brandis
Chair
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