Report to the Senate

Introduction

1.1 On 11 May 2010, the Senate referred to the committee for examination and report the following documents:

Particulars of certain proposed budget expenditure in respect of the year ending 30 June 2011 relating to the Defence portfolio and the Foreign Affairs and Trade portfolio, and
Particulars of proposed budget expenditure in respect of the year ending 30 June 2011.

1.2 The committee has considered the proposed budget expenditure for the year ending 30 June 2011. It has received evidence from the Minister for Defence representing the following ministers: the Minister for Veterans' Affairs; the Minister for Foreign Affairs and the Minister for Trade and officers of the departments and agencies concerned.

1.3 The committee met in public session on 31 May and 1, 2, and 3 June 2010. Further written explanations provided by departments and agencies will be presented separately in volumes of additional information. This information will also be placed on the committee’s internet site (www.aph.gov.au/senate_fadt).

Questions on notice

1.4 The committee resolved, under Standing Order 26, that written answers and additional information should be submitted to the committee by close of business on Friday, 30 July 2010.

Late return of answers to questions on notice

1.5 During the hearings the committee commented on the late return of answers to questions on notice from the additional round. In particular, the committee questioned the Department of Veterans' Affairs and the Department of Foreign Affairs as to why their answers were not received by the due date of 1 April 2010.[1]

1.6 The committee received the last of the additional estimates answers from both departments, just before, and during, the budget estimates hearings.

1.7 DVA's most recent performance shows that of the 51 answers, 50 were received on Friday 28 May and one on Monday 1 June; the very day that DVA were to appear before the committee and 8 weeks past the due date of return.

1.8 The Secretary apologised for the tardiness and asked the committee to have a look at the department's record. He explained that the department's workload had caused the delay in providing answers to the questions. It should be noted, however, the DVA has a recent history of delay.

1.9 In the last three financial years of estimates, across eight rounds, DVA has been late with answers on seven occasions, with delays ranging from 14 days to several months. The average time delay was approximately 5 weeks.

1.10 The committee also raised the matter of late return of answers to question on notice with the Department of Foreign Affairs and Trade. It was noted that not one answer was received by the due date of 1 April and two answers were 62 days late. This late lodgement of answers is not new. To make this point about the late responses, the committee produced the following statistics for previous rounds of estimates:

Supplementary 2009–10 12 days late
Budget 2009–10 13 days late
Additional 2008–09 8 days late
Supplementary 2008–09 50 days late
Budget 2008–09 35 days late.

The Secretary apologised for the delays, stating that the department would deliver in time this current round. The committee notes that both secretaries have undertaken to provide the questions to the budget round within the timeframe set down by the committee.

Reason for prompt return of answers

1.11 It should be noted that after the conclusion of the estimates hearings, the committee allows approximately seven weeks for departments and agencies to return their answers. This time frame is intended to provide sufficient time for departments to prepare and lodge their answers and for committee members to then consider these responses in time for the following round of estimates hearings. Committee members are unable to give answers due consideration if they are received just before the commencement of the next round.

1.12 The committee understands the work that goes into preparing the answers to questions on notice and is particularly appreciative of the departments and agencies that endeavour to meet the date set for the return of answers.

Defence portfolio

Department of Defence

1.13 The committee acknowledged the attendance of Air Chief Marshal Angus Houston AC, AFC, Chief of the Defence Force (CDF), Dr Ian Watt AO, Secretary of the Department of Defence, and officers of the Defence organisation.[2]

Secretary's opening statement

1.14 Dr Ian Watt made a statement to the committee, which focused on the 2010-11 Defence budget. Other topics covered included the strategic reform program, Defence workforce numbers, Defence payroll remediation task force, and, the ANAO report on the lightweight torpedoes project, JP 2070.^{^[3]}

1.15 Dr Watt stated that in the 2009-10 budget, the government implemented a new funding model for Defence, which resulted in an additional $146 billion over the 21-year period to 2029-30:

This model funds the cost of delivering Force 2030, provided those funds are managed efficiently and effectively, and the Strategic Reform Program cost reductions and reinvestments are achieved...In the 2010-11 budget, the government's commitment to Defence's new funding model and the funds needed to deliver Force 2030 has been maintained.[4]

1.16 With regard to the Defence payroll processes and the attention it sometimes attracts, Dr Watt stated:

Since February 2010, the Vice Chief of the Defence Force and the Deputy Secretary of Defence Support have been co-chairing the Defence Payroll Remediation Task Force, which was established by the government to improve the management of the ADF pay and allowances system, particularly for troops deployed. The CDF and I issued a joint directive on 15 February this year to give the task force executive authority within the department...With a salary and allowance structure as complex as this, errors arise from time to time; it would be unexpected and unlikely if they did not.

...The Defence payroll Remediation Task Force is addressing these issues. Over the coming 12 to 18 months, the task force will concentrate on the root causes of the problems: poor administration, poor execution of delegated authority, process and procedural weaknesses and inconsistent record keeping. To that end, a payroll assurance framework is being developed, which will ultimately lead to a more robust set of controls, greater visibility and better accountability. The task force, via the central Defence service contact centre, has also facilitated increased access for ADF members' families and dependants to members' pay details to allow them to better monitor and understand the fortnightly payments that they receive.[5]

Chief of the Defence Force's opening statement

1.17 Air Chief Marshal Houston addressed the committee about Australia's progress in Afghanistan, giving particular detail to our military strategy, engineering projects, the mentoring task force and force protection for Australian troops.[6]

1.18 In terms of general progress in Afghanistan, Air Chief Marshal Houston commented that he had some pleasing statistics:

You are aware that I think the tide is turning in Afghanistan and these statistics reinforce that belief. In a recent ISAF nationwide survey 59 percent of Afghans polled believed their country was 'heading in the right direction'. Across Oruzgan, in the last three years the number of schools has more than doubled. There are approximately 43,000 children registered in school, including 4,100 girls, with a further 7,000 students attending secondary or higher education.

In 2006, there was no provincial hospital, surgeons or specialists. Presently, these positions are filled and the Tarin Kowt district hospital has been upgraded to a provincial hospital with a separate women's ward, a new outpatient clinic, a mortuary and blood bank, and a cholera ward. The women's hospital currently assesses and treats 200 patients a day. The number of basic health centres across the province has increase from one to six, and immunisation for children under the age of one has increased from 37 percent in 2006 to 91 percent in 2009. [7]

1.19 A copy of both statements and accompanying documentation were provided to the committee at the hearing.

1.20 Other topics examined during the hearing included:

Portfolio overview and budget summary

Anticipated ADF scheduled commitment for the deployments in Afghanistan, Solomon Islands and East Timor. (pp. 13-14, 56).
Remote locality leave travel entitlements (pp. 14-18).
East Timor (pp. 13, 18-19, 56).
Reservists (pp. 19-20, 56, 77-82).
Integrated approach to Australia’s approach in Afghanistan (pp. 14, 20-23).
Australia’s contribution to the leadership role in Afghanistan and the future of national and coalition forces (pp. 23-28).
Australian Defence Force on patrol in Afghanistan and building community projects (pp. 28-29, 87. Also 01Jun10, p. 81).
Defence personnel welfare and communication with families (pp. 29-30).
Recognition of the service of elite personnel (pp. 30-31).
Defence budget (pp. 31-41).
Strategic reform program (SRP) and the white paper (pp. 31-33, 34, 35-38); and submarines (pp. 31-33, 34, 35-38, 57-59); SRP and the Rand report (pp. 34-35); and the Pappas report (p. 38).
Force protection for Australian troops (pp. 41-46, 56-57. Also, 01Jun10, pp. 6-7).
New funding measures (pp. 45-46).
Capital equipment program (pp. 46-50).
Consolidated budget for Defence and DMO—DMO special account (pp. 50-53).
Strategic reform program (SRP) and delivery of ‘Force 2030’ (pp. 53-56, 59-69).
Civilian personnel travel allowance (pp. 69-71, 80).
Military and civilian positions (pp. 72-73, 77. Also 01Jun10, p. 103).
Removal entitlements (pp. 73-77. Also 01Jun10, pp. 80-81).
Use of Army vehicles for Anzac Day parades (p. 82).
Defence pay arrangements and the international campaign allowance overpayments (pp. 82-87, 117).
Joint Logistics Command at Victoria Barracks—non-deployable contractors (pp. 87-91, 103, 104. Also 01Jun10, p. 64-65).
Acquisition and cross-service agreement (ACSA) with Japan (pp. 91-92).
Proposed new military court of Australia (pp. 92-95, 103, 117; and 01Jun10, p. 6).
VIP, No 34 Squadron (pp. 95-104, 117. Also 01Jun10, pp. 6, 41).
Death of Mrs da Costa in East Timor (pp. 104-106, 117. Also 01Jun10, pp. 82-83).
Activities of operational analysts in East Timor (pp. 106. Also 01Jun10, pp. 5-6).
HMAS Success and the commission of inquiry (pp. 107, 117).
Health studies—ADF personnel and the SIEV36 (p. 109).
Mental health funding (pp. 110-113).
Freedom of information activities (pp. 113-117. Also 01Jun10, p. 82).

Defence Materiel Organisation (heard 01Jun10)

Ammunition pouches, intellectual property rights and controlled exports (pp. 7-9, 51).
Contracts to manufacture equipment and ADF combat equipment (pp. 9-13).
Defence Export Control Office (DECO), intellectual property and export controlled products (pp. 13-17, 51).
Contracts for manufacture of uniform fabrics (pp. 15-27; 49, 51, 80).
Priority industry capabilities (pp. 21-22, 25).
Harding review recommendations (pp. 27-31).
Restructuring of Clothing SPO in Victoria (pp. 32, 51).
Issued and non-issued equipment: webbing and ammunition pouches, boots and parade shoes, backpacks and protective equipment, combat fleece jackets, backpack frames and related health issues, helmets (pp. 33-50, 57-64, 65-68, 79).
Modular load carriage tender process (pp. 52-57, 68-77). Reports relating to the process (pp. 57).
Report of defects (RODUM) (pp. 67, 78-79).
Capability projects update (pp. 83-85).
Echidna program (p. 85).
Collins submarines (pp. 85-86).
Land 121 phase 4 (pp. 86-87).
Cyber Security Operations Centre (pp. 87-88).

Defence Housing Australia (heard 01Jun10)

1.21 The committee acknowledged the attendance of Mr Peter Howman, Chief Operating Officer and Mr Robert Groom, Chief Financial Officer, from Defence Housing Australia (DHA).

1.22 Matters raised by the committee included:

Housing stock numbers in Darwin (pp. 88-89).
Housing in Townsville (pp. 90-91).
Housing in Cairns, Adelaide and Western Australia (pp. 91-92).
Housing in Victoria (pp. 92-93, 95).
Construction costs in each state (pp. 93-94).

Department of Veterans' Affairs (heard 01Jun10)

1.23 The committee acknowledged the attendance of Mr Ian Campbell PSM, Secretary, and officers of the Department of Veterans' Affairs (DVA).

1.24 Matters raised by the committee during the hearing included:

Portfolio overview/Corporate and general matters

Possible freeze on public service positions and the effect on DVA service delivery (pp. 95-96).
The questions-on-notice process and timeliness (pp. 96-97).
Dunt review—single claim form trial; claims relating to chronic mental conditions (pp. 97-98).
Board members on the Veteran’s Review Board (pp. 98).
Dunt review—primary application process and supporting documentation (pp. 98-99).
DVA staff and various DVA administered acts (pp. 99-100).
Expected decline in the number of claims (pp. 100-101).
Expected claims under the deseal/reseal scheme (pp. 101-102, 107-108). Use of statutory declarations in applications for tier classification (pp.108-111).
Claims assisted by ex-services organisation (ESOs) (pp. 102-103).
Widow/widower entitlements legislation as part of the Harmer review (pp. 103-105).
British Nuclear test Program—lump sum compensation to veterans (pp. 105-106).
Removal of war widow status and de facto relationships (pp. 106-107).
Building excellence in support of training (BEST) (p. 107).
Veterans’ children education scheme (p. 111).
Processing times under SRCA and MRCA schemes (p. 111).
White card and gold card entitlements (pp. 111-112).
Veterans health week (p. 112).
Centenary of Gallipoli activities (pp. 113-115).
Creation of a commission on the Centenary of Anzac (p. 113).
Possibility of the discovery of remains of WWI Australian solders (pp. 115-116).

Australian War Memorial

1.25 The committee acknowledged the attendance of Ms Nola Anderson, Acting Director, and officers of the Australian War Memorial (AWM). Matters raised by the committee included:

Final volume of the history of the Vietnam war (p. 116).
Gallipoli Victoria Cross medals tour (pp. 116-117).
Staffing at the AWM (p. 117).
Corporate and private funding (p. 117).

Foreign Affairs and Trade portfolio

Department of Foreign Affairs and Trade

1.26 The committee acknowledged the attendance at the hearings of Mr Dennis Richardson, Secretary, and officers of the Department of Foreign Affairs and Trade.[8]

1.27 The committee questioned the Secretary about an additional $212 million over the next four years, and a projected increase in staff. Mr Richardson explained:

Essentially in the areas where we have additional funding we have received $73 million over four years or $101 million over six years for improving passports integrity, in other words, enhancing the passport system. We have received $85 million over two years for the enhanced civilian engagement in Afghanistan and $52 million over two years to accommodate the transitional security arrangements for the Australian Embassy in Baghdad moving from ADF provided security to our own security contractors. We have received $14 million over four years for a continuation of the Smartraveller information program. There are a couple of other very minor matters, but they are the four major contributors to that overall increase in funding.[9]

1.28 The committee acknowledged that these allocations are for important specific purposes, but sought information on funding in relation to program 1.1, where the activity of policy-making and representation is undertaken.

1.29 In particular, the committee noted that program 1.1 deliverables 'are essentially maintaining an existing level of activity', but there are also in these deliverables 'a large numbers of references to activities which suggest a dynamic and expanding agenda'. It cited a number of examples: promoting non-proliferation and disarmament, an advanced role in the Asia-Pacific, further deepening our relationship with New Zealand, and, expanding activity in areas such as the Gulf, the Middle East and Latin America.[10]

1.30 The Secretary responded that in a number of those areas there are some specific increases in funding. He also stated that:

In other areas where you are doing more, you can sometimes do more without it costing any more, you can enhance a relationship without spending more money on that relationship by the level of attention that you devote to it and the like. You mentioned Latin America. You will be aware it has been previously announced that this year we will be opening a mission in Lima; that has already been funded and factored in. But, in some of these areas where we are talking about enhanced engagement and doing more, sometimes it is the level at which we are doing it that we are referring to, and not all of these matters cost money. You can also move your priorities around. Organisations do that all the time.[11]

1.31 Other matters raised by the committee during the hearings included:

Portfolio overview

Timeliness of answers to questions on notice from the previous round (p. 5).
Budget funding increase for the department—use of the additional resources and areas where there is no additional funding (pp. 5-10).
Future funding pressures (p. 10).
Consular services and consular staff numbers (pp. 10-11). Consular services in South Africa during the World Cup (pp. 11-12).
Passport demand and the new passport security system (pp. 12-14).
Security arrangements for the Commonwealth Games (pp. 14-16).
Answers to questions on notice from the previous round of estimates about staffing matters (pp. 16-18).
Staffing: DFAT staff waiting on security clearances (pp. 18-19); departures from the department (p. 19); new staffing allocations (pp. 19-20).
Smartraveller program (pp. 20-21).
Terrorism white paper (pp. 21-22).
National Security Committee (pp. 22-25).

Outcome 1

North Asia

China, the Uygur activists, and Tibet (pp. 26-28).
The trial of Mr Stern Hu (pp. 27, 35-44).
The visit to Australia by the Dalai Lama (pp. 27, 28-34).
Australia-China human rights dialogue (pp. 34-35, 47). Sentencing of Chinese dissident, Mr Sun Xiaodi and his daughter (pp. 47, 48). Tibetan filmmaker, Mr Dhondup Wangchen (pp. 47-48).
Australian government visits to Taiwan (p. 45).
Google’s withdrawal from mainland China (p. 45).
Autonomous Regional People’s Congress (pp. 46-47).
Ms Giddens in Yemen (p. 48).
Sinking of South Korean Navy vessel (pp. 48-50).

South East Asia

Update on the situation in Bangkok, Thailand, and the currency of travel advice (pp. 50-53, 63).
Burma and the proposed election (pp. 53-57).
Indonesia and the Sri Lankan asylum seekers from the vessel, Jaya Lestari (pp. 57-60, 63).
Australian-Indonesian memorandum of understanding on people smuggling (pp. 60-63).

Americas

Australian Prime minister’s proposed visit to summit on non-proliferation (pp. 65-66).
Australian relations with Latin America (pp. 63-65).

Africa

Australia’s relations with Africa (pp. 67-69).
Australia’s aid contribution to Africa (pp. 69-71).
United Nations Security Council votes in Africa (pp. 69-71).
Australia Africa Mining Industry Group and mining interests (pp. 71-72).
Mr Brennan and his release from Somalia (pp. 72-73).

Europe

Appointment of Mr Ritchie as Australian Ambassador to Italy (pp. 81-85).

South and West Asia, the Middle East

Update on the blockade of Gaza and the flotilla in international waters (pp. 76-79).
Israeli use of Australian passports and the relevant protocols (pp. 79-81, 85-87).
Ejection of an Israeli official from Australia (pp. 85-87, 89-91).
Afghanistan and funding of the upgrade of the embassy (p. 87). Security arrangements in Kabul for DFAT personnel (pp. 88-89).
Detention of Mr Langdon in Afghanistan (pp. 91-92).
Australia’s Ambassador to the Holy See and the new chancery project (pp. 74-75).

International organisations, legal and environment

Australian initiation of proceedings in the international court of justice in relation to Japanese whaling (pp. 93-105).
Asia-Pacific community (pp. 105-107).
Australian government statement on the NPT conference (p. 108).
Future of the ICND (pp. 108-109).
Australian government’s policy on uranium sales to India or other NPT signatories (p. 109).
ASNO and discussions with its international counterparts (pp. 109-110).
Renewal of the Australia-US nuclear safeguard agreement (pp. 110-111).
Sanctions against North Korea (p. 111).

National security, nuclear disarmament and non-proliferation

Australian government statement on the NPT conference (p. 108).
Future of the ICND (pp. 108-109).
Australian government’s policy on uranium sales to India or other NPT signatories (pp. 109).
ASNO and discussions with its international counterparts (pp. 109-110).
Renewal of the Australia-US nuclear safeguard agreement (pp. 110-111).
Sanctions against North Korea (p. 111).

Bilateral, regional and multi–lateral trade negotiations

Trade development/policy coordination (heard 03Jun10)

Status of the New Zealand WTO challenge to Australia’s biosecurity arrangements for apples (pp. 76-77).
ACTA treaty negotiations and the TRIPS agreement (pp. 77-78).
Update on the progress on free trade agreements with South Korea, China, Japan and India (pp. 79-82).

Outcome 2

Consular and passport services (heard 03Jun10)

Passport demand and the new passport security system (pp. 12-14).

Outcome 3

Overseas property

ANAO report on DFAT’s property management (pp. 112-114).

Australian Centre for International Agricultural Research (ACIAR) (heard 03Jun10)

1.32 The committee acknowledged the attendance of ACIAR officials, Dr Nick Austin, Chief Executive Officer and Dr Simon Ahearn, Principal Adviser, Strategy and Policy. The matters raised by the committee during the hearing included:

Research collaborations in Papua New Guinea and the Torres Strait (pp. 5-6).
Challenges working in PNG, and partnerships in the community (p. 6).
Scholarships for further study to PNG nationals (pp. 6-7).
Aquaculture and smallholder livelihoods (p. 7).
Land settlement activities (pp. 7-8).
Implications of climate change on food security (p. 8).

AusAID (heard 03Jun10)

1.33 The committee acknowledged the attendance of Mr Peter Baxter, Director General, and officers representing AusAID. The matters of most significance raised by the committee during the hearing included:

Agenda for the 41^st Pacific Islands Forum in August, 2010 (pp. 8-9).
China and aid to the Pacific region (p. 9).
Australia’s participants in the forum (p. 10).
AusAID contracts and the tendering process (pp. 10-11).
Contracts over $500,000 (p. 11).
Former AusAID staff members who have won contracts (p. 11).
Mr Peter Kelly and road works in Vanuatu (pp. 11-13, 35-36).
Cost-effectiveness of the technical assistance in the aid program and an ANAO report (pp. 13-14).
Highest average monthly salary of a technical adviser and salaries of advisers in general (pp. 14-15, 35-36).
Number of technical advisers employed by AusAID (pp. 15-16).
Review of technical advisers (pp. 39-42).
International funding for climate mitigation and adaptation initiatives (pp. 16-17).
Australia’s climate change budget and its commitment to reducing emissions from deforestation and degradation (REDD) (p. 17).
Revision in the methodology used to calculate GNI (pp. 17-18).
Aid budget money allocated to managing irregular migration flows in Indonesia (p. 18).
Health expenditure (pp. 18-19).
‘Call to Action’ pilot program and Millennium Development Goals (MDGs) (pp. 19-20).
Recipients of grants from the ‘Call to Action’ program (pp. 20-30).
Accountability mechanisms for use of the ‘Call to Action’ grant money (pp. 23, 25-26, 33).
ACTU Organising, Education and Campaign Centre (pp. 22-24, 29-30).
Addressing gender equality in the aid program, (pp. 30-31).
Progress to meet specific targets within the MDGs by 2015 (pp. 31-32).
Allocation of funding for family planning and womens’ health in the out years (pp. 32-33).
Fraud prevention program and any current investigation of suspected fraud (pp. 33-34, 55).
PNG-Australia targeted training facility (PATTAF) (p. 35).
Independent assessments and evaluations of programs (pp. 36-37, 39).
New family planning activities by non-government organisations (pp. 37-39).
Tides Advocacy Fund (pp. 42, 55-57).
Framework in relation to government departments applying to AusAID for the delivery of programs overseas: the Development Effectiveness Steering Committee (pp. 42-43).
Global Fund to Fight AIDS, Tuberculosis and Malaria (p. 43).
Swine flu vaccinations in Pacific Island countries (p. 44).
Projected increase in the Australian aid budget to Burma and where it will be spent (pp. 44-45).
Australia-Indonesia Partnership for Reconstruction (pp. 45-46).
Update on AusAID staff working in Afghanistan (pp. 47-50, 57).
Aid budget for Afghanistan and planned activities (pp. 51-52).
Australia Africa Mining Industry Group and mining interests (02Jun10, pp. 71-72. Also, 03Jun10, pp. 52-53).
Humanitarian aid program in Africa (pp. 54-55).

Austrade (heard 03Jun10)

1.34 The committee acknowledged the attendance of Mr Peter Grey, Chief Executive Officer, and officers representing Austrade.

1.35 Matters raised by the committee at the hearing included:

Austrade’s relationship with Securency and Note Printing Australia (pp. 58-66).
Government response to the Mortimer review: EMDG, Brand Australia and the TradeStart program (p. 66).
TradeStart program (pp. 66-70).
Brand Australia (p. 70).
EMDG (pp. 70-74).
Austrade customers who have invested in Australia (pp. 74-75).
Staff who have recent foreign direct investment attraction experience (pp. 75-76).

Acknowledgements

1.36 For their assistance during its hearings, the committee thanks Senator the Hon John Faulkner, Senator the Hon Ursula Stephens and Senator the Hon Stephen Conroy. The committee also acknowledges the attendance and cooperation of the many departmental and agency officers and the services of various parliamentary staff involved in the estimates process.

Senator Mark Bishop

Chair

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