Portfolio Issues
2.1
The following discussion highlights some of the major issues canvassed
during the hearings.
Department of the Senate
2.2
During questioning of the Department of the Senate, the President,
Senator the Hon John Hogg, advised the committee that he expected a balanced
budget for the Department of the Senate for the 2008–09 financial year,
following several years of surpluses. The main reason for this change has been
increased committee activity following a lull during the 2007 election period.
According the Clerk of the Senate, Mr Harry Evans, the increased cost of
committee activity was estimated to be about $1.3 million. The establishment of
new select committees accounted for a large proportion of the increased cost.
2.3
Other matters of interest raised during the examination of the
Department of the Senate included the continued use of the Lord's Prayer in the
Senate.
Department of Parliamentary Services
2.4
Issues relating to the increasing cost of electricity were discussed
with Mr Alan Thompson, Secretary of the Department of Parliamentary
Services (DPS). Mr Thompson informed the committee that DPS is expecting a
$700,000 rise in the overall cost of electricity per annum for Parliament House
from 1 July 2009. This represents an increase of just under 30 per cent from
the previous contract.
2.5
The electricity contract which DPS entered into three years ago will
expire on 30 June 2009. The new agreement is part of a whole-of-government
tender. When asked whether DPS could have done better with an individual contract,
Mr Thompson replied that he believed that DPS would get 'the best buying
power by combining our needs with those of other very big agencies like the
Department of Defence'[1].
The increase in cost appears to be the direct result of a decrease in surplus
electricity since the last contract was negotiated.
2.6
The committee inquired into the status of web-casting of Parliamentary
activities. Currently, DPS has the capacity to stream seven events at once. In
a sitting week, this could include both Houses of Parliament and up to five
committees. In response to consumer demand, the system was upgraded on 12 February 2009 to allow 1080 people to access the web-casting service concurrently.
2.7
A discussion of security at Parliament House included two main issues.
Firstly, the committee inquired into the current access arrangements for
Members, Senators and parliamentary staff. DPS was asked if analysis had ever
been undertaken into the security risk posed by Members, Senators and parliamentary
staff. The committee was informed that State Parliaments do not screen elected
members upon entry to the building, as they are not perceived to be a security
risk. DPS agreed to look into the history of the decision to screen elected
members at Parliament House. The committee noted there were extra costs
involved in maintaining separate security entrances for Members and Senators.
2.8
The committee also discussed the security policy in place for the
security bollards situated on the slip roads to Parliament House. DPS confirmed
that they are currently implementing a new policy that is designed to cut down
on the approximately 8000 passes that previously allowed vehicle access to
sensitive parts of the building. The President stated that he was due to
receive a security briefing from DPS in the week following Additional Estimates, and indicated the comments made would be taken on board.
Prime Minister and Cabinet portfolio
The Department of the Prime
Minister and Cabinet
2.9
The Department of the Prime Minister and Cabinet (PM&C) was questioned
as to what steps it had taken to enhance transparency and accountability
following the publication of the Australian National Audit Office (ANAO) report
'CMAX Communications Contract for the 2020 Summit'. Mr Mike Mrdak, Deputy
Secretary of PM&C, indicated an internal audit review of procurement
practices had been undertaken in 2008 in advance of the ANAO report. In
addition:
-
the chief executive's instructions in relation to procurement had
been updated;
-
training courses and information sessions on procurement issues had
been conducted for staff to ensure that staff undertaking procurement are aware
of the regulatory requirements; and
-
the decisions in relation to contract procurement were being
properly documented.
2.10
Mr Mrdak concluded:
Finally, we have taken steps to ensure that all of our senior
management is well aware of the procurement guidelines as they apply and
operate. So we have taken those steps, and we have also implemented a number of
measures which the internal auditor advised in relation to our tracking of
contracts and the central corporate advice and support we provide to our line
areas in relation to procurement.[2]
2.11
Following this discussion of the ANAO report, PM&C was asked for a
costing of consultancy contracts across Government in the first year of the
current Government. An article in the Australian Financial Review had put
this cost at $553 million[3].
However, the Special Minister of State commented that using the figure for
comparison may not be a case of comparing 'apples with apples'.[4]
It was noted that contracts listed on AusTender are maximum contract amounts
and actual expenditure is often lower. For this reason, the most accurate
reporting of contracting expenses is available in annual reports. The figure
listed in an annual report is the actual, rather than proposed, expenditure. It
was also pointed out that as reporting periods in the public sector align with
the financial year, it would be very difficult to establish a figure for the first
year of the new Government.
2.12
The committee sought information on PM&C's response to the Victorian
bushfire disaster and was informed that PM&C 'coordinates the provision of
information and situation reports to the Prime Minister on response, assistance
and recovery issues in relation to natural disasters generally'.[5]
This involved working with the Attorney-General's Department, particularly its
subsidiary, Emergency Management Australia, and the Department of Family,
Housing, Community and Indigenous Affairs (FaHCSIA). Usually, the Commonwealth
Counter-Disaster Task Force, chaired by PM&C and the Australian Government
Disaster Recovery Committee, chaired by FaHCSIA, would look into immediate and
long-term responses to a disaster respectively. However, these committees have
been subsumed by a Commonwealth-Victorian Bushfire Task Force established at
the direction of the Prime Minister from 12 February.
2.13
As a subsidiary matter, the committee heard that while PM&C does not
have a permanent seconded officer in the Victorian Premier's office, it has
developed a close relationship through ongoing emergency management and
counter-terrorism response mechanisms.
2.14
There was a lengthy discussion of the cost of community cabinets and the
method by which communities were chosen. The committee heard that the cost of
the community cabinets, as reported in December 2008,
was almost $2 million and PM&C agreed to provide updated costs on notice.
It was suggested that given the reported total costs, it would appear that the
cost per person consulted was about $400. The Minister refuted this claim,
stating:
Those figures do not take account of the number of one-on-one
meetings that ministers have held with members of the community and
organisations. I believe that there have been nearly 640 of those. You are
aware of the cost of the community cabinets. I respectfully suggest that there
always will be a cost in consultation, but I believe that there is also a very
significant benefit to the community cabinet process. Having attended all of
them to date, there has been a very positive response from the communities in
which they have been held. It is obviously an opportunity for members of the
public in those communities to address issues of concern first hand. Many
people have taken the opportunity to do that in a range of areas around Australia.[6]
2.15
Other issues discussed included consultancies and other links with
Boston Consulting; Ms Julie McCrossin's contract for the National Pandemic
Response Strategy Meeting; the office layout of room MG-8, Parliament House; nation
building energy efficiency measures and the Emissions Trading Scheme;
departmental liaison officers working outside Canberra; the increase in
part-time staff in PM&C and assessments of the security implications of the
global financial crisis.
Office of the Official Secretary to
the Governor-General
2.16
The committee questioned the Office of the Official Secretary to the
Governor-General (OOSGG) in relation to the recent visit to Abu Dhabi by the
Governor-General, Ms Quentin Bryce, for the World Energy Summit. The committee
heard that the Governor-General attended the summit as Australia's representative and made a speech to over 2000 delegates. Her visit was welcomed
by the Crown Prince of Abu Dhabi, by the Minister of Foreign Trade and by the
Mother of the Nation of the United Arab Emirates.
2.17
The committee was informed that the Governor-General appeared as a
representative of Australia, and not as a representative of the Australian
Government. OOSGG indicated that it was not aware of any invitations extended
to the Prime Minister or the Minister for Climate Change before the
Governor-General's invitation. The committee questioned whether the Prime
Minister's or Climate Change Minister's offices had any input into the speech
given by the Governor-General. The committee was informed by the Official
Secretary, Mr Stephen Brady, that he did not recollect any input from these
offices, but agreed to take the question on notice. Mr Brady stated that his
recollection was that the speech was drafted by PM&C under express instruction
that it be strictly non-political. He also pointed out that the speech
referenced achievements by the former Government as well as the current
Government.
2.18
Other issues discussed included an account of the Governor-General's
activities since her appointment; the cancellation of the proposed
$6.5 million renovations to the official residences; and problems with
invitations to the Victoria Cross investiture.
Inspector-General of Intelligence
and Security
2.19
The Inspector-General reported to the committee that he had investigated
files on serving federal Parliamentarians held by the Australian Security
Intelligence Organisation. The Inspector-General assessed the files of a 10 per
cent sample of Members and Senators, and found that 'there was not, in relative
terms, a large amount of material, and what was there was entirely legitimate
for ASIO within its legislative charter to be holding'.[7]
The Inspector-General commented that he had found some minor problems with
recordkeeping, which he had raised with the agency.
2.20
The committee also discussed the Inspector-General's concerns regarding the
possible addition of the role of independent terrorism inspector to the Office
of the Inspector-General of Intelligence and Security (IGIS). The
Inspector-General reconfirmed his opinion previously provided to the Senate Legal
and Constitutional Affairs Committee, that the proposal would politicise the
IGIS and place considerable strain on the office's limited resources. However,
the Inspector-General noted that the Attorney-General had announced in December
2008 that a fresh, independent statutory position would be created, perhaps to
be referred to as national security legislation monitor. When asked whether the
establishment of this position could lead to duplication of activities with the
IGIS or the Commonwealth Ombudsman, the Inspector-General replied:
I see a relationship between my role and, for that matter,
that of the ombudsman—although perhaps I should not attempt to speak for him—and this new monitor position, but I do not see it as
essentially duplicating or overlapping. I do think that there is an area which
neither the ombudsman nor I cover and that is really a criminal law policy
area. So the key questions are about the nature of the criminal offence provisions
in the Criminal Code, how those are handled in terms of prosecutions being laid
and how classified material is handled in court. I think there is plenty of
meat for the monitor to look at in that area.[8]
Australian National Audit Office
2.21
In response to committee questions on the oversight of advertising
material, the Australian National Audit Office (ANAO) stated that it continued
to provide reports on federal government advertising campaigns, and that it had
recently reported on approximately 24 campaigns. The review process can take
one to several weeks and involves ongoing discussion with the relevant
government department. The rationale for assessment was summarised by the
Auditor-General, Mr Ian McPhee:
As you appreciate the guidelines cover a range of matters. We
are looking to see what level of support there is for adherence to the
guidelines by the department. Typically and importantly we look at the basis
for their decisions around the nature of the campaign. We are looking for
research that they may have done to justify the nature of the campaign that is
proposed.[9]
2.22
Mr McPhee stated that no campaign had been rejected by the ANAO.
However, ANAO had suggested modifications in line with advertising guidelines in
place for government departments. This led to the question of subjectivity when
applying the guidelines, and whether this warranted attention. The
Auditor-General agreed that there were some areas where the guidelines could be
improved. These areas had become apparent through the ongoing experience of
applying the guidelines. He stated that he had expressed this view to the
Minister in relation to a number of areas in the guidelines. He then noted that
the Joint Committee of Public Accounts and Audit was presently conducting an
inquiry into the subject, and that the matter continued to be under
consideration.
Australian Privacy Commission
2.23
The committee discussed the Privacy Commission's consultation with
government over the Fair Work Bill. The Privacy Commissioner, Ms Karen Curtis, stated that discussions had taken place with the Department of Employment,
Education and Workplace Relations in late 2008. The Privacy Commission had also
expressed its view in a submission to the Senate inquiry on the bill. The
submission outlined the Commission's concern that 'greater clarification could
be put into the legislation to ensure that it was clearer on the right of entry
and the protected ballot provisions–that privacy was indeed being protected'.[10]
2.24
Ms Curtis noted that there was nothing unusual in providing a submission
to a Senate inquiry, and that the Commission had made about 20 submissions in
2008, including many to parliamentary inquiries.
Australian Public Service
Commission
2.25
The committee examined the causes of increasing absenteeism in the
Australian Public Service, noting that the annual rate had risen from 9.4 days
per employee in 2006–07 to 10.1 days in 2007–08. The Public Service
Commissioner outlined several identified patterns to absenteeism and noted that
rates were higher in larger agencies and were apparently influenced by the
general ageing of the Public Service workforce. Other causes discussed included
particularly virulent strains of influenza in 2008 and the level of engagement
employees have with their employer.
Department of Climate Change
2.26
The committee spent some time examining the costs to Australian industry
that would be incurred under the proposed Carbon Pollution Reduction Scheme
(CPRS). The Department of Climate Change (DCC) explained that to establish an
accurate figure of cost to Australian industry, subsidies would need to be
taken into account. Dr Martin Parkinson, Secretary of the department,
explained:
Essentially, what we are engaging in here is attempting to
pass up an amount, which needs to be thought up holistically, into a whole
series of little buckets with different names on them. If you do that, you can
take any one particular element. For example, you could take the fact that
assistance to emissions intensive trade-exposed industries of $3.1 billion in
2011-12 was seen as a very large handout to them—if you just took that in
isolation. But if you consider the total amount conceptually that could be
raised if everything was auctioned—how much goes to the EITEIs; how much goes
to the strongly affected industries; how much goes to households, a significant
proportion of which will be recycled back to business; how much goes to the
recipients of funding under the Climate Change Action Fund, again which is
going to be predominantly business—you do get back to saying that the sensible
way to think about this is in terms of the macroeconomic costs to the
Australian economy, and if all you are doing there is focusing on the cost of
action, on average over the period it is around one-tenth of one per cent of GDP. But, again, even that is only a partial estimate, because that does not take into account
the cost that you avoid from having attempted to achieve mitigation.[11]
Thus, while the estimated revenue (if all emissions permits
were auctioned to industry at a carbon price of $25 per tonne) is $11.5
billion, this remains a conceptual figure only, as in reality there would be
issuance of free permits and other return payments to industry.
2.27
The committee asked DCC what effect the global financial crisis may have
on carbon emissions. Dr Parkinson responded that although slowing GDP growth would also lead to slower emissions growth, emissions prior to the global financial
crisis had been growing much faster than projected:
We know that the growth rate of emissions has exceeded the
IPCC [Intergovernmental Panel on Climate Change] scenarios. They have for some
time been growing at around or above the top end of the IPCC scenario range,
and because they will continue to grow even though the global economy slows—and
it is the level effect that is important, the stock of CO2 in the atmosphere
that is important, not the flows in—the flows in are going to remain positive.
So you are going to continue to get rising stock levels, and that is going to
lead you to a situation where, whatever you might define as dangerous, you are
going to be closer to it over the next couple of years than you are today. The
only way you would not get that is if emissions essentially either went
negative globally or grew more slowly than the stock disappeared out of the atmosphere.[12]
2.28
Another question from the committee focused on the effect the downturn
may have on the price of carbon under the proposed emissions trading scheme.
Reference was made to the European experience, where the price of carbon
permits had suffered a dramatic decline, with flow-on effects to the incentive
to invest in green technologies. DCC told the committee that the Australian
trading scheme had been informed by the European experience. In order to strike
a balance between price stability and target flexibility, the CPRS adopts a
series of five-year gateways, which were explained by Dr Parkinson:
One of the key lessons we took out of Europe was the problem
of short commitment periods and the volatility that that could potentially
induce; but, more important than that, the uncertainty it created and so it
dampened behavioural responses. If I had been an investor sitting in Europe
running up to the end of the trial period—end of 2007, beginning of 2008—I
would not have been prepared to take major investment decisions because
essentially I was dealing with things that were effectively an option rather
than a permit, so the option value dropped to zero when the option expired—that
is, 31 December 2007. Looking at that, we wanted a long time period. How have
we done it? We have given five years of fixed targets and then gateways out to
another five years and another 10 years. So firms at any point in time have a
maximum of 15 years; it concertinas down to 11 and then goes back out to 15...[13]
2.29
Other issues discussed with the department included the potential for
'carbon leakage' if carbon-intensive industries relocated off-shore and the
legality of support to Emissions-Intensive Trade Exposed Industries under World
Trade Organisation rules.
Office of the Renewable Energy
Regulator
2.30
The Office of the Renewable Energy Regulator appeared before the
committee, however the questions directed to it were referred to the Department
of Environment, Water, Heritage and the Arts.
Finance and Deregulation Portfolio
Department of Finance and
Deregulation
2.31
The committee sought information on the cost of proposed consultancies
across the forward estimates, but was advised that the Department of Finance
and Deregulation (Finance) does not estimate such a figure. This led to a
discussion of the methodology used to cost consultancies. Finance explained
that the use of consultants was a decision of the relevant agency. Finance only
becomes involved where the activity associated with the hiring of consultants
requires the agency to seek additional funding. There are no specific
benchmarks for consultancies. Rather, Finance makes an assessment on a
case-by-case basis, though it may make comparisons based on similar consultancy
contracts that were previously accepted. The Secretary, Dr Ian Watt, explained further:
The way the costing process works is that an agency will put
something forward. They will say, 'Here is what my minister wants to take to
government,' or 'Here is what we want to take to government,' and Budget Group
and Finance will scrutinise the cost. I will not say it is a completely
adversarial process, but it is a pretty tough process. Some of the things our
people always look at are: firstly, whether there is a good case for using a
consultant rather than public servants; secondly, whether there is a case for a
consultant at all; and, thirdly, whether the consultancy looks reasonable in
terms of the amount of work being done, the expertise sought and so forth. So
that would be tested backwards and forwards; but to say that we are experts on
the cost of consultants would be incorrect.[14]
2.32
The committee was informed that the agencies which were the largest
users of consultants change year by year. In 2008, FaHCSIA and Finance were the
largest users, with a combined total expenditure of $45 million for
consultancies. Finance informed the committee that recent changes to the reporting
of spending on consultancies meant that it was difficult to obtain historical
data.
2.33
The committee discussed the Government's ability to keep track of consultancy
spending across the public sector and to implement the Minister for Finance's
promise to cut consultancy costs. The committee was informed that that Finance
does not currently have the resources to maintain an ongoing assessment of
actual expenditure, that AusTender tracks contracted amounts only, and that
actual expenditure is reported in agencies' annual reports. Senator Nick Sherry, the Minister for Superannuation and Corporate Law, representing the Finance
Minister, agreed to take on notice the question of how the Cabinet is able to
judge the level of cuts to the use of consultants.
2.34
Later in the hearing, when asked again how the Finance Minister's
promise was being implemented in the absence of accurate tracking of
expenditure, Dr Paul Grimes, General Manager of the Budget Group said: 'I think
the focus is very much on considering new policy proposals and making sure that
there is a rigorous and robust assessment of those new policy proposals that are
presented to the Government'.[15]
2.35
Senators sought information on whether there had been any change to the new
Government's commitment to deregulation. The Secretary stated that there had
been no change, and it remained a goal of Finance to 'deregulate, to improve
regulation and to ensure that there is better regulation'. [16]
The Secretary also stated:
...what this government has tried to do and we in response have
tried to help them to do is to make sure there is an institutionalised approach
to reviewing regulation regularly and as it is made and developed and so forth.
So you have got the COAG process where 27 regulatory hotspots have been
identified and steps made to remove some of those regulations. You have got the
regulatory partnerships between, for example, the minister and the Minister for
Finance and Deregulation. You have got an ongoing commitment from the
government—this was done as part of UEFO—to continue the emphasis on
competition and better regulation or reducing regulation.[17]
2.36
Other issues discussed with the Department of Finance and Deregulation
included the use of airlines other than Qantas by public servants; superannuation
entitlements for same-sex couples; pay levels for Ministerial staff; and the
provision of Personal Digital Assistants to Senators.
Australian Electoral Commission
2.37
The committee questioned the Australian Electoral Commission (AEC) on the issue of protected ballots conducted for trade unions. The AEC stated that it had
conducted 611 protected ballots since they were first introduced in the 2005–06
financial year and 3 February 2009. 80 per cent of the cost of protected
ballots is paid through the AEC, while 20 per cent is paid by the relevant
union. The AEC agreed to supply figures on the cost of protected ballots on
notice.
Future Fund
2.38
The committee heard that approximately 28 per cent of the Future Fund is
invested in equities. Given the deterioration of equity markets due to the
financial crisis, the Fund has experienced a net loss of 7.5 per cent in the
first half of this financial year. Currently, equity holdings continue to yield
negative returns, in part balanced by positive returns from cash, property and
other holdings. The committee was informed that the Future Fund's holdings
remain 'defensively invested'.[18]
2.39
The committee went on to examine the Future Fund's ability to meet
superannuation liabilities in the future, which was $101.9 billion as of 31 December 2008. The committee heard that an updated figure for unfunded liabilities
would be released in the next few months. It was believed that the Future Fund
would be able to meet the legislated annualised long-term minimum return of 4.5
per cent plus the rate of inflation.
Medibank Private
2.40
Mr George Savvides, Managing Director of Medibank Private, detailed
several threats facing the company in the current economic climate. Firstly,
cooling economic conditions will lead to slowing membership growth. This will
result in lower margins, given that 87 per cent of the contribution income is
paid out in claims, while the company also has to pay business operating costs
from the remaining funds.
2.41
Secondly, Medibank expects that there will be a negative impact on
membership as a result of the increase in the Medicare levy surcharge. In
October 2008, Medibank advised that it was expecting a membership decrease of
between seven and ten per cent. Subsequent amendments to the proposed
surcharge increase will most likely lessen the effect previously predicted. Finally,
Medibank has experienced negative returns from its investment fund in the last
year. The 2008 annual report recorded a negative investment income of $16
million, following positive results in excess of $100 million for the previous
year.
2.42
Other matters discussed included the process used in deciding Medibank's
proposed rate change; the private health insurance rebate; and Medibank's acquisition
of Australian Health Management and Health Services Australia.
Human Services Portfolio
Department of Human Services
2.43
The committee inquired into the apparent decrease in staff numbers
within the Department of Human Services (DHS) and whether this was due to the
efficiency dividend. The committee heard that the major reason behind this
staffing decrease was the scrapping of the Access Card program, which had
involved over 120 staff. Following the termination of the program, DHS found
alternate employment inside and outside the department for affected staff, whilst
some left DHS voluntarily, and five staff accepted voluntary redundancies.
2.44
Other issues discussed with DHS included coordination of Human Services
Portfolio agencies, policy departments and Centrelink; use of consultancies in
DHS; and the definition and breakdown of debt owed by non-compliant parents used
by the Child Support Agency.
Centrelink
2.45
The main issue arising in discussion with Centrelink was how the agency
handles complaints. The committee heard that Centrelink is now developing a
'post-complaint survey' that captures complaint data that was missing under
previous systems. This is partially in response to an Australian National Audit
Office report that noted deficiencies in Centrelink's complaint handling
system. The upgraded system will allow the collection of all complaints,
compliments and suggestions in a single database. It is hoped that system
development will be completed by the middle of this year.
2.46
Other issues discussed included the impact of the Economic Security
Strategy payments on Centrelink's resources, and the process through which
Centrelink works with policy departments in providing services.
Medicare Australia
2.47
Issues arising from the discussion with Medicare included problems with
Medicare's IT and online reporting systems and ongoing operating deficits.
Senator Helen Polley
Chair
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